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.
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(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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 17, 1999, 11,572,802 shares of the Registrant's Common Stock, $0.01
par value per share, were outstanding.
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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 (Unaudited). .................................. 3
Consolidated Balance Sheets as of March 31, 1999 and as of
December 31, 1998 .................................................. 4
Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998 ...................................... 5
Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998 ...................................... 6
Notes to Consolidated Financial Statements ......................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. ............................................. 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk. ........ 14
PART II: OTHER INFORMATION ................................................. 14
Item 1. Legal Proceedings. ................................................. 14
Item 2. Changes in Securities and Use of Proceeds. ......................... 14
Item 3. Defaults Upon Senior Securities. ................................... 15
Item 4. Submission of Matters to a Vote of Security Holders. ............... 15
Item 5. Other Information. ................................................. 15
Item 6. Exhibits and Reports on Form 8-K. .................................. 15
Signatures .................................................................. 17
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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 March 31, 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.
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<CAPTION>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Par Value Amounts)
(Unaudited)
Assets March 31, 1999 December 31, 1998
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Cash and cash equivalents.............................................. $ 902 $ 1,065
Accounts receivable.................................................... 620 379
Notes receivable....................................................... 1,836 3,486
Reimbursable development costs......................................... 9,426 9,815
Prepaid expenses and other............................................. 5,321 4,752
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Total current assets............................................. 18,105 19,497
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Property, plant and equipment.......................................... 118,721 115,801
Accumulated depreciation............................................... (6,657) (5,689)
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Property, plant and equipment, net..................................... 112,064 110,112
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Property under development............................................. 13,805 11,221
Cash and investments - restricted...................................... 8,589 8,226
Investment certificates - restricted................................... 23,142 15,951
Letter of credit deposits.............................................. 14,077 13,919
Lease security deposits................................................ 65,384 55,453
Other.................................................................. 10,454 10,254
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Total assets..................................................... $ 265,620 $ 244,633
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Liabilities and Stockholders' Equity
Liabilities
Current portion of long-term debt...................................... $ 3,316 $ 3,310
Unsecured line of credit............................................... 24,097 10,997
Current portion of deferred gain on sale of property................... 806 806
Accrued interest payable............................................... 943 968
Accounts payable and accrued expenses.................................. 13,278 9,234
Tenant refundable entrance fees and security deposits.................. 6,360 5,838
Other.................................................................. 1,387 629
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Total current liabilities........................................ 50,187 31,782
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Long-term debt, less current portion................................... 92,489 92,570
Deferred lease liability............................................... 2,956 2,849
Deferred gain on sale of property, less current portion................ 15,915 16,116
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Total liabilities................................................ 161,547 143,317
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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 March 31, 1999 and December 31, 1998 ..... 116 116
Additional paid-in-capital............................................. 94,101 94,101
Accumulated earnings................................................... 9,856 7,099
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Total stockholders' equity....................................... 104,073 101,316
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Total liabilities and stockholders' equity....................... $ 265,620 $ 244,633
============= =============
See accompanying notes to consolidated financial statements.
</TABLE>
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three months ended March 31,
1999 1998
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Revenue
Resident fees............................................... $ 23,778 $ 15,657
Development fees............................................ 1,666 1,188
Management fees............................................. 73 53
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Total revenue........................................ 25,517 16,898
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Expenses
Facility operating.......................................... 12,792 8,587
General and administrative.................................. 1,158 1,292
Lease expense............................................... 6,288 3,851
Depreciation and amortization............................... 1,362 1,226
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Total operating expenses............................. 21,600 14,956
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Income from operations............................... 3,917 1,942
Interest income............................................. 1,546 705
Interest expense............................................ (1,127) (922)
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Income before income tax expense..................... 4,336 1,725
Income tax expense.......................................... (1,579) (614)
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Net income........................................... $ 2,757 $ 1,111
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Basic earnings per common share............................. $ 0.24 $ 0.12
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Weighted average shares used for computing basic earnings
per common share......................................... 11,572 9,408
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Diluted earnings per common share........................... $ 0.24 $ 0.12
============== =============
Weighted average shares used for computing diluted earnings
per common share......................................... 11,720 9,646
============== =============
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three months ended March 31,
1999 1998
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Cash Flows from Operating Activities
Net income........................................................... $ 2,757 $ 1,111
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 1,362 1,226
Deferred income taxes............................................. 1,477 366
Change in deferred lease liability................................ 107 704
Deferred gain on sale of property................................. (201) (201)
Changes in:
Accounts receivable............................................ (241) 80
Prepaid expenses and other..................................... (2,223) (1,586)
Accrued interest payable....................................... (25) (136)
Accounts payable and accrued expenses.......................... 1,797 1,428
Tenant refundable entrance fees and security deposits.......... 30 (65)
Other current liabilities...................................... 107 (332)
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Net cash provided by operating activities.................. 4,947 2,595
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Cash Flows from Investing Activities
Lease security deposits and acquisitions............................. (9,942) (5,597)
Decrease (increase) in cash and investments - restricted............. 130 (242)
Increase in investments - restricted................................. (7,191) -
Property under development, net of related payables.................. (730) (3,780)
Proceeds from sale of property under development, net................ 140 -
Payments received on notes receivable................................ 1,903 -
Additions to property, plant and equipment and reimbursable leasehold
improvements....................................................... (1,878) (1,111)
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Net cash used in investing activities...................... (17,568) (10,730)
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Cash Flows from Financing Activities
Repayment of long-term debt.......................................... (75) (54)
Proceeds from unsecured lines of credit.............................. 27,700 -
Repayment of unsecured line of credit................................ (14,600) -
Increase in letter of credit deposit................................. (158) (428)
Payment of deferred financing costs.................................. (409) (1,375)
Proceeds from issuance of common stock, net.......................... - 4,635
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Net cash provided by financing activities.................. 12,458 2,778
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Net decrease in cash and cash equivalents.................. (163) (5,357)
Cash and cash equivalents at beginning of period........... 1,065 13,292
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Cash and cash equivalents at end of period................. $ 902 $ 7,935
============= ==============
See accompanying notes to consolidated financial statements.
</TABLE>
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three months ended March 31,
1999 1998
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Supplemental Disclosure of Cash Flow Information:
Interest paid, net of amounts capitalized............................. $ 1,152 $ 1,023
============= ===============
Income taxes paid..................................................... $ 3 $ 16
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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 $ 5,831
Less: Cash consideration paid.................................... 10,911 4,352
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Liabilities assumed.............................................. $ 493 $ 1,479
============= ===============
See accompanying notes to consolidated financial statements.
</TABLE>
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BROOKDALE LIVING COMMUNITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Amounts)
(Unaudited)
1. Organization
Brookdale Living Communities, Inc. and subsidiaries (the "Company") was
incorporated in Delaware on September 4, 1996 and commenced operations upon the
completion of its initial public offering (the "IPO"), on May 7, 1997.
The consolidated financial statements of the Company include the properties
owned or leased by the Company. The Company operates in the senior independent
and assisted living segment. Its properties, which are owned, leased, managed or
under development by the Company (collectively, the "Properties"), are located
throughout the United States as indicated on the following table as of March 31,
1999:
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Property Name Date Owned or Leased Location
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Owned Facilities:
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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:
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The Island on Lake Travis Lago Vista, TX
The Kenwood Minneapolis, MN
Development Projects Under Construction (1):
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Austin, Texas
Southfield, Michigan
Raleigh, North Carolina
Glen Ellyn, Illinois
New York (Battery Park City), New York
(1) The Company is developing these projects for third party owners.
</TABLE>
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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.
Significant intercompany accounts 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 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 January 19, 1999, the Company entered into an agreement to lease the
River Bay Club, a 285-unit senior independent and assisted living facility
located in Quincy, Massachusetts. The lease is an operating lease with an
initial five-year term and five one-year renewal option periods with annual
payments of approximately $2,500 through the initial lease term. The Company has
an option to acquire this facility at the end of the lease term.
On January 25, 1999, the Company entered into a $5,000 unsecured loan
agreement bearing interest at 12% payable interest only and maturing May 21,
1999 (original maturity was April 26, 1999). The loan is subordinated to the
Company's existing unsecured line of credit (see Note 7) and prohibits the
Company from paying any dividends. This loan was repaid on May 14, 1999.
On February 11, 1999, construction financing of $29,900 was put into place
for the Raleigh, North Carolina project. In connection with the construction
financing, the third party owner repaid the $1,903 promissory note, plus accrued
interest, to the Company.
Effective February 28, 1999, the Company entered a letter agreement with
Battery Park City Authority ("BPCA") pursuant to which the Company was granted
the right to complete construction of the facility in Battery Park City, New
York upon the condition that Brookdale deliver to BPCA a Guaranty of Completion.
On March 31, 1999, the Company sold certain development rights to a
development site in Austin, Texas to an unaffiliated third party at cost. The
sales price was $393 of which $140 was received in cash and $253 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 and recognized
a gain of $19. The balance of the notional amount of the construction loans
being hedged is $53,500 and the approximate current value of the liability under
such hedging contracts is less than $250.
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.
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5. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share for the three months ended March 31, 1999 and 1998.
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Numerator for basic and diluted earnings per common share $ 2,757 $ 1,111
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Denominator:
Denominator for basic earnings per common share - weighted-average shares 11,572 9,408
Effect of dilutive securities:
Employee stock options 148 238
Warrants - -
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Denominator for diluted earnings per common share-adjusted
weighted-average shares and assumed conversions 11,720 9,646
=========== ===========
Basic earnings per common $ 0.24 $ 0.12
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Diluted earnings per common share $ 0.24 $ 0.12
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</TABLE>
6. Pro Forma Information
The following unaudited pro forma condensed and consolidated 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 at the beginning of each period presented,
nor do they purport to represent the results of operations of the Company for
future periods.
Three Months
Ended March 31,
---------------
1999 1998
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Revenue $25,822 $23,654
Net income 2,800 1,778
Basic earnings per share 0.24 0.15
Diluted earnings per share 0.24 0.15
7. Subsequent Events
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. Borrowings under the line of credit bear interest at prime plus 1/2% per
annum (8.25% at March 31, 1999) and a fee of 1/4% is charged on the unused
amount available under the line of credit. At March 31, 1999, the Company had
$5,400 of outstanding letters of credit which reduces the amount available under
the line of credit. The letters of credit expire December 31, 1999. The line of
credit was repaid on May 14, 1999.
On April 28, 1999, the Company executed a definitive agreement in a private
transaction to issue $100,000 of 5.5% convertible subordinated notes due May 14,
2009 that are convertible into 5,479 shares of the Company's common stock at
$18.25 per common share subject to certain adjustments. The transaction closed
on May 14, 1999. The notes are callable by the Company at any time after the
third anniversary at a price of 103%, declining ratably to par after the fifth
anniversary. In connection with the issuance, the agreement allows the purchaser
to be granted two seats on the Company's Board of Directors, increasing the
Board's size from seven to nine.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion is based on the Consolidated Financial Statements
of the Company as of March 31, 1999 and December 31, 1998 and for the three
months ended March 31, 1999 and 1998. 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)
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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 which the Company has under contract, 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, 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. 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
As of March 31, 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, thirteen 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 plans to expand its 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 March
31, 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, 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 three months ended March 31, 1999 to three months ended March 31,
1998
For the three months ended March 31, 1999, results reflect the operations of
the Company's 19 facilities. For the three months ended March 31, 1998, results
reflect the operations of 14 facilities.
Revenue. Total revenue increased by $8.6 million, or 51.0%, to $25.5 million
for the three months ended March 31, 1999 when compared to the three months
ended March 31, 1998. Resident fees increased by $8.1 million, or 51.9%, to
$23.8 million. Of this increase, approximately $0.6 million (or a "same store"
increase of 4.0%) 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 $7.5 million of
such increase reflects revenue from facilities leased of which commenced
December 31, 1997. The remaining $0.5 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 $6.6 million, or
44.4%, to $21.6 million for the three months ended March 31, 1999 when compared
to the three months ended March 31, 1998. Facility operating expenses increased
by $4.2 million, or 49.0%, to $12.8 million primarily due to the addition of the
expenses of the additional facilities first leased since the beginning of 1998.
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Lease expense increased by approximately $2.4 million, or 63.3%, to $6.3
million for the three months ended March 31, 1999 when compared to the three
months ended March 31, 1998 due primarily to the addition of lease expense for
the facilities first leased after December 31, 1998. Depreciation and
amortization increased by approximately $0.1 million, or 11.1%, to $1.4 million
for the three months ended March 31, 1999 when compared to the three months
ended March 31, 1998. This increase primarily reflects the depreciation of
additional furniture, fixtures and equipment at the corporate office.
Interest income increased by approximately $0.8 million, or 119.3% to $1.5
million for the three months ended March 31, 1999 when compared to the three
months ended March 31, 1998 due to an increase in various deposits and
restricted investments.
Net Income. For the three months ended March 31, 1999, the Company generated
net income of approximately $2.8 million, as compared to a net income of $1.1
million for the three months ended March 31, 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 $8.6 million, the letter of credit deposit of $14.1
million, investment certificates of $23.1 million and lease security deposits of
$65.4 million) decreased by $0.2 million to $0.9 million at March 31, 1999 as
compared to December 31, 1998 primarily due to cash utilized for the
acquisition, leasing and development of facilities offset in part by the
proceeds from borrowings under the unsecured lines of credit.
Net cash provided by operating activities for the three months ended March
31, 1999 totaled approximately $4.9 million as a result of increased property
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 $17.6 million
for the three months ended March 31, 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 offset by a $1.0 million increase in existing
lease security deposits, payments received on notes receivable of $1.9 million,
an increase in investment certificates-restricted of $7.2 million, an increase
in property under development of $0.7 million, and other net uses of $0.7
million.
Net cash provided by financing activities was approximately $12.5 million
for the three months ended March 31, 1999. Financing activities included
proceeds from unsecured lines of credit of $27.7 million offset by repayments of
$14.6 million on the unsecured lines of credit and other net uses of
approximately $0.6 million.
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 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 $35.0 million, or approximately $159,000 per unit. At March 31,
1999, the Company had five facilities under construction and several sites under
development for new senior independent and assisted living facilities. The
Company's estimated capital expenditures relating to sites under development
aggregate to approximately $10.0 million to $15.0 million remaining in 1999.
Capital expenditures related to the Company's existing facilities including
renovation projects are estimated to be approximately $8.0 million to $12.0
million in the aggregate remaining in 1999. 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. The Company issued $100.0 million of
5.5% convertible subordinated debt on May 14, 1999 and has a $100.0 million
commitment from The Capital Company of America (successor to Nomura Asset
Capital Corporation) for development projects of which approximately $51 million
is committed to the Austin, Texas and Southfield, Michigan development projects.
The Company expects to be able to fund its acquisition and development programs
for at least the next 12 months.
As of March 31, 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 3.04%
during the three months ended and were 3.18% as of March 31, 1999. 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.
As of March 31, 1999, the Company also had $24.1 million outstanding under
its unsecured lines of credit of which $19.1 million was at a floating rate of
prime plus 1/2%. The entire line was paid down on May 14, 1999.
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
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<PAGE>
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.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
FASB 133, "Accounting for Derivative Investments and Hedging Activities" which
is effective for fiscal years beginning after June 15, 1999. FASB 133 provides
guidance for the recognition and measurement of derivatives and hedging
activities. Adoption of FASB 133 is not anticipated to affect the financial
position or results of operations of the Company.
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 resident agreements
allow for adjustments in the monthly fees payable thereunder not less frequently
than every 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, as
of March 31, 1999, approximately $84.1 million in principal amount of the
Company's indebtedness bore interest at floating rates (including $65.0 million
at the tax-exempt bond floating rate of approximately 3.04% for three months
ending March 31, 1999 and $19.1 million under an unsecured line of credit which
was repaid on May 14, 1999) and future indebtedness may bear floating rate
interest. 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 assess, remediate and 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 began the process of upgrading its accounting, human resources,
property management and marketing systems prior to the assessment of its Year
2000 Issue. The Company expects that the replacement of its current system 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 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 is not Year 2000
compliant. The Company is in the process of selecting replacement software at
the facilities it owns or operates and is currently negotiating a contract for
replacement software which the Company expects to sign in May 1999.
Facilities
The Company has commenced 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 expects to
complete the update assessment by June 30, 1999. As of May 14, 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 is in the
process of negotiating a contract to purchase replacement software which the
Company expects to sign in May 1999. The Company anticipates that the
implementation is expected to commence in June 1999 with an expected completion
date of November 1999. The Company has undertaken contingency planning for each
of its facilities as necessary.
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<PAGE>
Third-Party Vendors and Suppliers
The aforementioned 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 is expected to be completed in the third quarter of 1999.
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 $2.5 million to $3.0 million
through December 31, 2000 of which approximately $1.5 million has been incurred
through March 31, 1999. The Company's costs include 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's
plan includes an assessment of third-party vendors and suppliers to identify
Year 2000 compliance issues and 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 its 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" on
page 10.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is exposed to interest rate risk primiarily through its
borrowing and leasing activities. There is inherent risk from borrowings and
leasing as they mature and are renewed at current market rates. The extent of
the 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 March 31, 1999 the Company had $95,805,000 of
long-term debt at a weighted average interest rate of 4.90% of which $3,000,000
matures May 1, 1999. Mortgages notes of $27,805,000 bear interest of 8.0% to
8.525% through maturity in 2027 when the loans are fully repaid. Two facilities
are financed with variable rate tax-exempt bonds of $33,000,000 and $32,000,000
which are payable interest only until maturity in 2025 and 2019, respectively.
Lines of credit - As of March 31, 1999 the Company had $24,097,000
outstanding on its unsecured lines of credit of which $19,097,000 was at
floating rate of prime plus 1/2%. The lines of credit were repaid on May 14,
1999.
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 $50,189,000 was terminated as of May 14,
1999. The notional amount of construction loans being hedged is $53,500,000 and
the approximate value of the liability is less than $250,000. The Company is to
be reimbursed by the third party for any payments made pursuant to the
agreements.
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 $650,000. The Company's remaining variable debt was
repaid on May 14, 1999.
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 the properties prior to or at the end of the lease.
Four of the facilities' lease requires the payment of additional rent of 10% of
the excess each year's revenue compared to 1998.
The Company does not enter into financial instruments transactions for
trading or other speculative purposes.
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
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<PAGE>
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3.1 Restated Certificate of Incorporation of the Company, 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 the Company, 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 the Company, 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 Lease, dated as of December 18, 1998, by and between Brookdale
Living Communities of California-RC, Inc., as lessee, and The
Woodside Business Trust, as lessor-owner, as filed with the
Securities and Exchange Commission on January 6, 1999 as Exhibit
10.1 to the Company's Form 8-K dated December 22, 1998 (File No.
0-22253) and incorporated herein by reference
10.2 Multifamily Note, dated December 18, 1998, from The Woodside
Business Trust, as maker, payable to the order of Glaser Financial
Group, Inc., as filed with the Securities and Exchange Commission on
January 6, 1999 as Exhibit 10.2 to the Company's Form 8-K dated
December 22, 1998 (File No. 0-22253) and incorporated herein by
reference
10.3 Multifamily Guaranty Agreement, dated as of December 18, 1998,
issued by Brookdale Living Communities of California-RC, Inc. in
favor of Glaser Financial Group, Inc., as filed with the Securities
and Exchange Commission on January 6, 1999 as Exhibit 10.3 to the
Company's Form 8-K dated December 22, 1998 (File No. 0-22253) and
incorporated herein by reference
10.4 Multifamily Leasehold Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing, dated as of December 18, 1998, issued
by Brookdale Living Communities of California-RC, Inc. in favor of
Chicago Title Company, as trustee, for the benefit of Glaser
Financial Group, Inc., as filed with the Securities and Exchange
Commission on January 6, 1999 as Exhibit 10.4 to the Company's Form
8-K dated December 22, 1998 (File No. 0-22253) and incorporated
herein by reference
10.5 Certificate A Pledge Agreement, dated as of December 22, 1998, by
Brookdale Living Communities of California-RC, Inc. in favor of The
Woodside Business Trust, Wilmington Trust Company, as valuation
agent, and LaSalle National Bank, as collateral account bank, as
filed with the Securities and Exchange Commission on January 6, 1999
as Exhibit 10.5 to the Company's Form 8-K dated December 22, 1998
(File No. 0-22253) and incorporated herein by reference
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<PAGE>
Exhibit
Number Description
- ------- -----------
10.6 Certificate B Pledge Agreement, dated as of December 22, 1998, by
Brookdale Living Communities of California-RC, Inc. in favor of The
Woodside Business Trust, Wilmington Trust Company, as valuation
agent, and LaSalle National Bank, as collateral account bank, as
filed with the Securities and Exchange Commission on January 6, 1999
as Exhibit 10.6 to the Company's Form 8-K dated December 22, 1998
(File No. 0-22253) and incorporated herein by reference
10.7 Exceptions to Non-Recourse Guaranty, dated as of December 18, 1998,
from Brookdale Living Communities, Inc. in favor of Glaser Financial
Group, Inc., as filed with the Securities and Exchange Commission on
January 6, 1999 as Exhibit 10.7 to the Company's Form 8-K dated
December 22, 1998 (File No. 0-22253) and incorporated herein by
reference
10.8 Indemnity Agreement, dated as of December 22, 1998, from Brookdale
Living Communities, Inc. in favor of Wilmington Trust Company and
SELCO Service Corporation, as filed with the Securities and Exchange
Commission on January 6, 1999 as Exhibit 10.7 to the Company's Form
8-K dated December 22, 1998 (File No. 0-22253) and incorporated
herein by reference
10.9 Sixth Amendment to Loan Agreement and Documents, dated as of January
15, 1999, by and between the Company and LaSalle National Bank
10.10 Fourth Amended and Restated Note dated January 15, 1999 issued by
the Company payable to the order of LaSalle National Bank
10.11 Seventh Amendment to Loan Agreement and Documents, dated as of
January 25, 1999, by and between the Company and LaSalle National
Bank
10.12 Eighth Amendment to Loan Agreement and Documents, dated as of March
24, 1999, by and between the Company and LaSalle National Bank
10.13 Subordination Agreement, dated as of January 25, 1999, by FBR Asset
Investment Corporation in favor of LaSalle National Bank
10.14 Loan Agreement dated as of January 25, 1999 by and between the
Company and FBR Asset Investment Corporation
10.15 Note dated January 25, 1999 issued by the Company payable to the
order of FBR Asset Investment Corporation
10.16 Guaranty of Completion dated as of February 28, 1999 from Brookdale
Living Communities, Inc. in favor of Battery Park City Authority
12 Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
27 Financial Data Schedule
(b) Reports on Form 8-K:
On January 6, 1999, the Company filed a Current Report on Form 8-K dated
December 22, 1998 with the Securities and Exchange Commission announcing
pursuant to Item 2 of Form 8-K the lease of The Woodside Terrace which commenced
on December 22, 1998.
On January 29, 1999, the Company filed a Current Report on Form 8-K dated
January 19, 1999 with the Securities and Exchange Commission announcing pursuant
to Item 5 of Form 8-K the lease of the River Bay Club which commenced on January
19, 1999.
On March 8, 1999, the Company filed a Current Report on Form 8-K/A dated
December 22, 1998 with the Securities and Exchange Commission including pursuant
to Item 7 of Form 8-K/A the audited statements of The Woodside Terrace which was
leased by the Company on December 22, 1998 and the unaudited pro forma
statements of the Company reflecting all acquisitions and leases through The
Woodside Terrace.
On March 10, 1999, the Company filed a Current Report on Form 8-K dated
March 4, 1999 with the Securities and Exchange Commission announcing pursuant to
Item 5 of Form 8-K the Company's fourth quarter 1998 results.
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<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: May 17, 1999 /s/ Mark J. Schulte
---------------------- ----------------------------------
Mark J. Schulte
President and
Chief Executive Officer
Date: May 17, 1999 /s/ Darryl W. Copeland, Jr.
---------------------- ----------------------------------
Darryl W. Copeland, Jr.
Executive Vice President and
Chief Financial Officer
-17-
SIXTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS
THIS SIXTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS, dated as of
January 15, 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 (the Original Loan Agreement, as amended by
the First Amendment, the Second Amendment, the Third Amendment, the Fourth
Amendment and the Fifth Amendment is herein referred to as the "Loan
Agreement");
WHEREAS, subject to the terms and conditions of this Amendment,
Borrower has requested the Bank to increase the principal amount of the Loan and
of the Maximum Revolving Loan Commitment by $10,000,000.00, from $15,000,000.00
to $25,000,000.00, to which the Bank is willing to agree 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. Use of Loan Proceeds. Borrower reaffirms and covenants that the Loan
has been used and will continue to be used by Borrower solely for
working capital or in connection with the acquisition, leasing or
development of Real Property. Borrower further covenants that the
$10,000,000.00 increase in the principal amount of the Loan and Maximum
Revolving Loan Commitment granted pursuant to this Amendment shall be
used solely (a) for the purposes aforesaid, (b) to fund expenses
relating to Borrower's Real Property located in New York, New York
(Battery Park City), (c) to support Borrower's acquisition of real
property located in Quincy, Massachusetts, the facility located thereon
and the leasing of the real property and facility to a Subsidiary, and
(d) to fund other working capital needs of Borrower and its operations
and its Subsidiaries.
3. Outstanding Principal Balance of Loan. For purposes of this Amendment
and the Loan Agreement, the outstanding principal balance of the Loan
at any time shall be the sum of (a) all amounts of the Loan Advances
made under the Loan Agreement remaining unpaid plus (b) all outstanding
LC Reserves (as defined in the First Amendment and herein).
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<PAGE>
4. 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) April 26, 1999, (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.
5. Increased Loan Commitment; Reduction. 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
$15,000,000.00 to an amount not to exceed $25,000,000.00 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, and (b) the
Maximum Revolving Loan Commitment shall be permanently reduced to an
amount not to exceed $15,000,000.00. The Maximum Revolving Loan
Commitment shall also be permanently reduced to an amount not to exceed
$15,000,000.00 upon a Voluntary Permanent Reduction (as defined herein)
by Borrower pursuant to Section 12. Notwithstanding the foregoing, in
the event the Interim Maturity Date is the same date as 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 shall be due and paid in full on such date.
6. Letters of Credit. Provided Borrower is otherwise in compliance with
all terms and conditions of the Loan Agreement, the Documents and this
Amendment, the Bank agrees to issue from time to time from the date of
this Amendment to and including April 1, 1999, standby letters of
credit (a "Letter of Credit" and, collectively, the "Letters of
Credit") for the account of Borrower to and for the benefit of
municipalities and other units of government in order to guarantee
Borrower's completion of public improvements required by those entities
in connection with Borrower's development projects, all subject to the
conditions of this Section 6 and which, when added to: (a) the
aggregate amount of all other Letters of Credit outstanding, issued or
approved by the Bank as of the proposed issuance date, and (b) the
aggregate amount of Loan Advances outstanding as of the proposed
issuance date, will not exceed the Maximum Revolving Loan Commitment in
effect as of the proposed issuance date. The Letters of Credit shall
also be subject to the following conditions:
a. Application and Agreement. As a condition of the Bank's
obligation to issue a particular Letter of Credit, Borrower, through
the Authorized Borrower Representative, shall notify the Bank of the
particulars of the Letter of Credit not less than three (3) business
days in advance, and Borrower shall provide such borrowing resolutions
and information, and execute such applications, documents and
agreements as are required by the Bank, including without limitation,
the Bank's standard form of application and credit agreement. ("LC
Documents").
b. Reserve. The stated amount of each Letter of Credit issued
by the Bank shall reduce the amount of the Maximum Revolving Loan
Commitment then in effect in accordance with the terms of this
Agreement on a dollar for dollar basis ("LC Reserve").
c. Expiry. The Bank shall not issue any Letter of Credit with
an expiry date later than April 1, 1999.
- 3 -
<PAGE>
d. Fee. Borrower shall pay the Bank a fee in the amount of one
percent (1%) per annum of the stated amount of each Letter of Credit
issued by the Bank at the request of Borrower, fully earned and payable
quarterly in advance. If the Letter of Credit expires during the
quarter, the fee shall be pro-rated based upon the number of days in
the quarter that the Letter of Credit is outstanding. As a condition to
the issuance of each Letter of Credit, Borrower shall pay the Bank the
quarterly portion of the Letter of Credit fee stated in the preceding
sentence.
e. Payment. Each drawing under the Letter of Credit (an "LC
Drawing") shall constitute a Loan Advance under the Loan Agreement and
shall be payable in accordance with the terms and provisions of the
Loan Agreement with respect to other Loan Advances. Borrower's
obligation to pay all LC Drawings shall be absolute, irrevocable,
unconditional and without setoff under any and all circumstances
whatsoever, including, without limitation, any of the following,
whether or not with notice to, or the consent of, Borrower:
(i) Any lack of validity or enforceability of a Letter of
Credit, the Loan Agreement, or any of the LC Documents;
(ii) The existence of any claim, set-off, defense or
other right which Borrower may have at any time against the
beneficiary of a Letter of Credit, the Bank or any other
person or entity, whether in connection with the transactions
contemplated herein or therein or any unrelated transaction;
(iii) Any statement or any other document presented under
a Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect whatsoever;
(iv) Payment by the Bank under a Letter of Credit against
presentation of a draft or certificate which does not comply
with the terms of the Letter of Credit;
(v) Any failure, omission, delay or lack on the part of
the Bank or any party to any of the LC Documents to enforce,
assert or exercise any right, power or remedy conferred upon
the Bank or any such party under the LC Documents, or any
other acts or omissions on the part of the Bank or any such
party;
(vi) The voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or
substantially all the assets of Borrower, the receivership,
insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition with
creditors or readjustment or other similar proceedings
affecting Borrower or any of the assets of Borrower, or any
allegation or contest of the validity of this Amendment, the
Loan Agreement, the Letter of Credit or any of the LC
Documents, in any such proceeding; or
(vii) Any other event or action that would, in the
absence of this clause, result in the release or discharge by
operation of law of Borrower from the performance or
observance of any obligation, covenant or agreement contained
in this Amendment, the Loan Agreement, the Letter of Credit
or any of the LC Documents.
f. LC Documents. Each Letter of Credit shall be governed by
and subject to the LC Documents required to be executed by Borrower for
each such Letter of Credit. In the event of any conflict between any of
the terms of the LC Documents and any of the terms of this Amendment,
the terms of this Amendment shall control.
- 4 -
<PAGE>
7. Interest Rate. Except as provided in Section 8 of this Amendment, Loan
Advances under the Loan Commitment shall bear interest at the Prime
Rate plus one-half of one percent (0.50%) per annum. As set forth in
the Fifth Amendment, the Interim Interest Rate is no longer applicable
and accordingly, all references to Interim Interest Rate in the Loan
Agreement are hereby deleted.
8. Default Rate. The Loan Agreement is hereby amended to provide that any
Obligation of the Borrower under this Amendment, the Loan Agreement or
any of the other Documents which is not paid when due, whether at
stated maturity, by acceleration or otherwise, shall, without notice,
bear interest payable on demand at the then Prime Rate plus four
percent (4.0%). In addition, after the occurrence of any other Event of
Default and delivery to the Borrower of the Bank's notice to charge
post-default interest, all Obligations of the Borrowers hereunder shall
bear interest at the rate provided for in the immediately preceding
sentence. The Revised Default Rate, Preliminary Default Rate and
Modified Rate are no longer applicable and accordingly, all references
to Revised Default Rate, Preliminary Default Rate and Modified Rate in
the Loan Agreement are hereby deleted.
9. Decrease of Loan Commitment Based on Stock Price. If at any time that
any portion of the loan remains outstanding and the closing price of
Borrower's publicly traded shares of stock as quoted on the NASDAQ (the
"Stock Price") (the date of the occurrence described herein is
hereafter referred to as the "Trigger Date") is:
a. Less than $12.50 per share but not less than $10.00, the
principal amount of the Loan and the Maximum Revolving Loan Commitment shall,
without further notice, be decreased to $5,000,000.00 and Borrower shall pay
within one business day of the Trigger Date, without further notice or demand,
amounts necessary to reduce the outstanding principal balance of the Loan to
$5,000,000.00.
b. Less than $10.00 per share, the principal amount of the
Loan and the Maximum Revolving Loan Commitment shall, without further notice, be
decreased to zero ($0.00) and Borrower shall pay within one business day of the
Trigger Date, without further notice or demand, amounts necessary to reduce the
outstanding principal balance of the Loan to zero ($0.00). If any amount of the
outstanding principal balance of the Loan is comprised of LC Reserves, Borrower
shall provide the Bank with cash collateral in an amount equal to the
outstanding LC Reserve to secure the amount of the outstanding principal balance
comprised of the LC Reserve.
If the outstanding principal balance of the Loan is not reduced to the
applicable amount by the close of the next business day immediately
following the Trigger Date or if Borrower fails to provide the Bank
with sufficient cash collateral as required in subsection (b) herein,
Borrower shall be considered in default under the Loan Agreement and,
in addition to all other rights and remedies available to the Bank
under the Loan Agreement, the Documents, at law or equity, any and all
amounts outstanding under the Loan Agreement shall, without notice,
bear interest payable on demand at the default rate of interest set
forth in Section 8 of this Amendment.
10. Maturity Date. The term "Maturity Date" is hereby amended and restated
to mean (a) the Interim Maturity Date as to any and all amounts of the
outstanding principal balance of the Loan in excess of $15,000,000.00,
and (b) April 26, 1999 as to the outstanding principal balance of the
Loan at or below $15,000,000.00 together with any accrued but unpaid
interest thereon and any other costs or amount owed to the Bank under
the Loan Agreement as amended hereby.
- 5 -
<PAGE>
11. Execution Note. Contemporaneous with the execution of this Agreement,
the Borrower has executed and delivered a Fourth Amended and Restated
Note in the principal sum of up to $25,000,000.00 evidencing the Loan
as amended by this Amendment, which Fourth Amended and Restated Note
shall replace and supersede the Third Amended and Restated Note.
12. 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 $100,000.00 (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. If the outstanding principal balance
of the Loan and the Maximum Revolving Loan Commitment is reduced to
$15,000,000.00 or less on or prior to April 1, 1999, regardless of
whether such reduction is made voluntarily or pursuant to Section 5,
and if the Borrower is not otherwise in default under the Loan
Agreement or the Documents, fifty percent (50%) of the Fee shall be
refunded to Borrower; provided that if the reduction to $15,000,000.00
by Borrower is made voluntarily, in order for Borrower to obtain the
refund, Borrower must provide Bank with written notification that
Borrower desires to effectively reduce the Maximum Revolving Loan
Commitment to $15,000,000.00 or less (the "Voluntary Permanent
Reduction"). Upon receipt by Bank of Borrower's written notice of a
Voluntary Permanent Reduction, the Maximum Revolving Loan Commitment
shall be permanently reduced to an amount not to exceed $15,000,000.00.
If Borrower fails to provide Bank with such written notification, the
Maximum Revolving Loan Commitment shall remain at $25,000,000.00 and
Borrower shall not be entitled to the refund set forth in the preceding
sentence. 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 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.
13. NASDAQ Registration. If at any time that any portion of the loan
remains outstanding and Borrower's publicly traded shares of stock
cease to be quoted on the NASDAQ, Borrower shall be considered to be in
default under the Loan Agreement.
14. Information. Borrower shall provide Bank, upon request, with copies of
all documentation and information concerning the Subordinated Note and
the outside financing referred to in this Amendment.
15. Year 2000 Problem. Borrower reaffirms and covenants that Borrower and
its Subsidiaries have reviewed the areas within their business and
operations which could be adversely affected by, and have developed or
are developing a program to address on a timely basis, the "Year 2000
Problem" (that is, the risk that computer applications used by Borrower
and its Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), and have made related appropriate inquiry of
material suppliers and vendors. Based on such review and program,
Borrower believes that the "Year 2000 Problem" will not have a material
adverse effect on Borrower. From time to time, at the request of the
Bank, Borrower and its Subsidiaries shall provide to the Bank such
updated information or documentation as is requested regarding the
status of their efforts to address the Year 2000 Problem.
16. 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
- 6 -
<PAGE>
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.
17. 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.
18. 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 approving this Amendment and the
incumbency and signatures of the officers of Borrower signing this
Amendment.
19. 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.
20. 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.
21. 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.
- 7 -
<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
- 8 -
FOURTH AMENDED AND RESTATED NOTE
$25,000,000.00 Chicago, Illinois
January 15, 1999
FOR VALUE RECEIVED, BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation (the "Maker"), with its principal place of business at 77 West
Wacker Drive, Suite 4400, Chicago, Illinois 60601, hereby promises to pay to the
order of LaSALLE NATIONAL BANK, a national banking association (the "Bank"), at
its office at 135 South LaSalle Street, Chicago, Illinois 60603, or such other
place as Bank may direct from time to time, in lawful money of the United States
and in available funds, the principal amount of TWENTY-FIVE MILLION DOLLARS
($25,000,000.00), or such lesser amount as Bank advanced to Maker hereunder
which is outstanding as of the Maturity Date, as defined in that certain Sixth
Amendment to Loan Agreement and Documents dated January 15, 1999 by and between
Maker and the Bank (the "Sixth Amendment").
Maker previously executed and delivered to the Bank a certain Note
dated April 27, 1998 in the original principal amount of $15,000,000.00 (the
"Original Note") pursuant to a Loan Agreement dated April 27, 1998 (the
"Original Loan Agreement") evidencing a Loan made by the Bank to the Maker
pursuant to such Original Loan Agreement. Maker subsequently executed and
delivered to the Bank a certain Amended and Restated Note dated July 16, 1998 in
the principal amount of $25,000,000.00 (the "Restated Note") pursuant to a
certain First Amendment to Loan Agreement and Documents of the same date (the
"First Amendment"), as amended by a Second Amendment to Loan Agreement and
Documents (the "Second Amendment") with the Bank dated October 14, 1998, as
amended by a Third Amendment to Loan Agreement and Documents (the "Third
Amendment") with the Bank dated October 20, 1998, as amended by a Fourth
Amendment to Loan Agreement and Documents (the "Fourth Amendment") with the Bank
dated November 3, 1998, as amended by a Fifth Amendment to Loan Agreement and
Documents (the "Fifth Amendment") with the Bank date December 21, 1998, and
further evidenced by a Third Amended and Restated Note of the same date (the
"Third Amended and Restated Note") (the Original Loan Agreement, as Amended by
the First Amendment, the Second Amendment, the Third Amendment, the Fourth
Amendment, the Fifth Amendment and the Sixth Amendment, is herein referred to as
the "Loan Agreement"). The Third Amended and Restated Note is amended, restated
and superseded in its entirety by this Fourth Amended and Restated Note, and any
amounts outstanding under the Third Amended and Restated Note are transferred to
this Fourth Amended and Restated Note.
The Loan evidenced by this Fourth Amended and Restated Note constitutes
a revolving credit under applicable Laws and Maker may repay and reborrow
hereunder subject to the terms and conditions of the Loan Agreement and
Documents. All advances under this Fourth Amended and Restated Note shall bear
interest in accordance with and be governed by the terms and provisions of the
Loan Agreement. All payments received from the Maker hereunder shall be applied
by the Bank in accordance with the terms of the Loan Agreement.
The Borrower may prepay the outstanding amounts of the Loan from time
to time in whole or in part on any business day without penalty or premium.
-1-
<PAGE>
This Fourth Amended and Restated Note is issued under the Loan
Agreement, and this Fourth Amended and Restated Note and the Bank are entitled
to all of the benefits, rights and remedies provided for by the Loan Agreement
or referred to therein, to which Loan Agreement reference is made for a
statement thereof. All capitalized terms used herein which are not defined
herein, but which are defined in the Loan Agreement, shall have the meaning
prescribed in the Loan Agreement.
All unpaid amounts owing on this Fourth Amended and Restated Note or on
any other Obligations under the Loan Agreement or the other Documents
immediately shall become due and payable at the option of the Bank, without
notice or demand, upon the occurrence of any Event of Default.
In the event of default in the payment of any sums due under this
Fourth Amended and Restated Note, the Maker hereby agrees that the Bank may
offset all of Maker's money, bank or other deposits or credits now or hereafter
held by the Bank or owed by the Bank to the Maker against all amounts due under
this Fourth Amended and Restated Note or against any other amounts which may be
due the Bank from the Maker.
No clause or provision contained in this Fourth Amended and Restated
Note or any documents related hereto shall be construed or shall so operate (a)
to raise the interest rate set forth in this Fourth Amended and Restated Note
above the lawful maximum, if any, in effect from time to time in the applicable
jurisdiction for loans to borrowers of the type, in the amount, for the
purposes, and otherwise of the kind contemplated, or (b) to require the payment
or the doing of any act contrary to law, but if any clause or provision
contained shall otherwise so operate to invalidate this Fourth Amended and
Restated Note, in whole or in part, then (i) such clauses or provisions shall be
deemed modified to the extent necessary to be in compliance with the law, or
(ii) to the extent not possible, shall be deemed void as though not contained
and the remainder of this Fourth Amended and Restated Note and such document
shall remain operative and in full force and effect.
All makers and any endorsers, guarantors, sureties, accommodation
parties and all other persons liable or to become liable for all or any part of
the indebtedness evidenced by this Fourth Amended and Restated Note, jointly and
severally waive, to the extent permitted by law, except as otherwise provided in
the Loan Agreement or the other Documents, diligence, presentment, protest and
demand, and also notice of protest, of demand, of nonpayment, of dishonor and of
maturity and also recourse or suretyship defenses generally; and they also
jointly and severally hereby consent to any and all renewals, extensions or
modifications of the terms of this Fourth Amended and Restated Note, including
time for payment, and further agree that any such renewals, extension or
modification of the terms of this Fourth Amended and Restated Note or the
release or substitution of any security for the indebtedness under this Fourth
Amended and Restated Note or any other indulgences shall not affect the
liability of any of the parties for the indebtedness evidenced by this Fourth
Amended and Restated Note. Any such renewals, extensions or modifications may be
made without notice to any of said parties.
The Maker shall be liable to the Bank for all costs and expenses
incurred in connection with collection, whether by suit or otherwise, of any
amount due under this Fourth Amended and Restated Note, including, without
limitation, reasonable attorneys' fees, as more fully set forth in the Loan
Agreement.
-2-
<PAGE>
This Fourth Amended and Restated Note shall be governed by and
construed in accordance with the laws of the State of Illinois.
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By: /s/ Darryl W. Copeland, Jr.
-------------------------------------
Print Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
-3-
SEVENTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS
THIS SEVENTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS, dated as of
January 25, 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 (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 and this Amendment is herein
referred to as the "Loan Agreement");
WHEREAS, subject to the terms and conditions of this Amendment,
Borrower has requested the Bank to consent to the Borrower's proposed execution
of that certain Loan Agreement between Borrower and FBR Asset Investment
Corporation ("FBR") dated January 25, 1999 (the "FBR Loan Agreement") and that
certain Promissory Note dated January 25, 1999 in favor of FBR pursuant to which
Borrower will become indebted to the FBR in the original principal amount of
$5,000,000.00 (the "FBR Promissory Note") [the FBR Loan Agreement and the FBR
Promissory Note are referred to collectively as the "FBR Loan Documents" and the
loan made pursuant thereto is referred to as the "FBR Loan"];
WHEREAS, Borrower would otherwise be prohibited from entering into the
FBR Loan under the existing Loan Agreement and Documents but for the consent of
the Bank; and
WHEREAS, the Bank is willing to consent to the FBR Loan, subject to and
conditioned upon the terms and conditions set forth in this Amendment.
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 -
<PAGE>
2. Consent to FBR Loan. The Bank consents to the Borrower's execution
of the FBR Loan Documents in form and content as set forth as Exhibit A and
Exhibit B to the Subordination Agreement (as defined herein), and acknowledges
that the FBR Loan shall not constitute a breach of a negative covenant or an
Event of Default under the Loan Agreement upon the condition that (a) the FBR
Loan shall be and remain at all times subordinate to the Loan in accordance with
the terms of the Subordination Agreement and no violation or breach of the
Subordination Agreement occurs, (b) FBR shall execute and Borrower shall in
writing acknowledge the Subordination Agreement between the Bank and FBR dated
January 25, 1999 (the "Subordination Agreement") in the form attached hereto as
Exhibit A, and (c) the Borrower herein acknowledges the Subordination Agreement
and herein agrees (i) that it will make no payment to FBR which is prohibited by
the terms of the Subordination Agreement and (ii) that it will on request by the
Bank execute and deliver all documents which may be deemed necessary or
desirable by the Bank to evidence and protect the Bank's rights under the
Subordination Agreement.
3. Permanent Reduction. Effective as of January 15, 1999 and pursuant
to the Sixth Amendment, the principal amount of the Loan and Maximum Revolving
Loan Commitment has been increased from $15,000,000.00 to an amount not to
exceed $25,000,000.00 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, and (b) the
Maximum Revolving Loan Commitment shall be permanently reduced to an amount not
to exceed $15,000,000.00 (the "Mandatory Permanent Reduction"). In addition to
(but not to the exclusion of) the circumstances comprising the Interim Maturity
Date which results 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 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, 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 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 and replace the provision of Paragraph 5 of the Sixth Amendment.
4. Bank Fees. Contemporaneous with and as a condition to the
execution of the Sixth Amendment, Borrower paid the Bank a fee in the amount of
$100,000.00 (the "Fee"), which Fee was and is deemed fully earned by the Bank at
the time Borrower and the Bank executed the Sixth Amendment, as additional
consideration for increasing the amount of the Loan and Maximum Revolving Loan
Commitment to $25,000,000.00. If the outstanding principal balance of the Loan
and the Maximum Revolving Loan Commitment are reduced to $15,000,000.00 or less
on or prior to April 1, 1999, regardless of whether such reduction is a
Mandatory Permanent Reduction or a Voluntary Permanent Reduction, and if the
Borrower is not otherwise in default under the Loan Agreement or the Documents,
fifty percent (50%) of the Fee shall be refunded to Borrower. Borrower shall
also pay the reasonable legal fees of Bank counsel in connection with the
preparation of this Amendment and all prior amendments and matters related
thereto. In addition to the Fee, Borrower shall continue to be obligated to pay
the Bank the Unused 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. As of the date of this Amendment, the provisions of
this paragraph are intended to supersede and replace the provision of Paragraph
12 of the Sixth Amendment.
5. Information. Borrower shall provide Bank, upon request, with
copies of all documentation and information concerning the FBR Loan.
- 3 -
<PAGE>
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 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
SUBORDINATION AGREEMENT
- 6 -
EIGHTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS
THIS EIGHTH AMENDMENT TO LOAN AGREEMENT AND DOCUMENTS, dated as of
March 24, 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) (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 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 (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
hereof to be a date not later than December 31, 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 -
<PAGE>
2. Letters of Credit. Provided Borrower is otherwise in compliance
with all terms and conditions of the Loan Agreement, the Documents and this
Amendment, the Bank agrees to issue or renew from time to time from the date of
this Amendment to and including December 31, 1999, standby letters of credit (a
"Letter of Credit" and, collectively, the "Letters of Credit") for the account
of Borrower to and for the benefit of municipalities and other government and/or
quasi-governmental units or to and for the benefit of Battery Park City
Authority in order to guarantee Borrower's completion of improvements required
by those entities in connection with Borrower's development projects, all
subject to the conditions of this Section 2 and which, when added to: (a) the
aggregate amount of all other Letters of Credit outstanding, issued or approved
by the Bank as of the proposed issuance date, and (b) the aggregate amount of
Loan Advances, if any, outstanding, excluding Loan Advances made as a result of
LC Drawings (as defined herein), as of the proposed issuance date, will not
exceed the Maximum Revolving Loan Commitment in effect as of the proposed
issuance date; provided, however, that after the Maturity Date, the Bank shall
permit Letters of Credit not in excess of $6,000,000 in the aggregate to be
issued, reissued and remain outstanding until the LC Maturity Date. All such
Letters of Credit shall expire on or before December 31, 1999 and shall at all
times be governed by and subject to the terms and conditions of this Amendment
and the Loan Agreement. The Letters of Credit shall also be subject to the
following conditions:
a. Application and Agreement. As a condition of the Bank's
obligation to issue a particular Letter of Credit, Borrower, through
the Authorized Borrower Representative, shall notify the Bank of the
particulars of the Letter of Credit not less than three (3) business
days in advance, and Borrower shall provide such borrowing resolutions
and information, and execute such applications, documents and
agreements as are required by the Bank, including without limitation,
the Bank's standard form of application and credit agreement. ("LC
Documents").
b. Reserve. The stated amount of each Letter of Credit issued
by the Bank shall reduce the amount of the Maximum Revolving Loan
Commitment then in effect in accordance with the terms of this
Agreement on a dollar for dollar basis ("LC Reserve"). The aggregate
amount of the LC Reserve outstanding at any time shall not exceed
$6,000,000.00.
c. Expiry. The Bank shall not issue any Letter of Credit with
an expiry date later than December 31, 1999, on which date all such
Letters of Credit shall expire (the "LC Maturity Date"). Upon written
request by Borrower, the Bank shall execute and deliver to any holders
of Letters of Credit existing as of the date of this Amendment such
documents as are necessary to extend the expiry date of such Letters of
Credit to a date not later than the LC Maturity Date.
d. Fee. Borrower shall pay the Bank a fee in the amount of one
percent (1%) per annum of the stated amount of each Letter of Credit
issued by the Bank at the request of Borrower, fully earned and payable
quarterly in advance. If the Letter of Credit expires during the
quarter, the fee shall be pro-rated based upon the number of days in
the quarter that the Letter of Credit is outstanding. As a condition to
the issuance of each Letter of Credit, Borrower shall pay the Bank the
quarterly portion of the Letter of Credit fee stated in the preceding
sentence.
e. Payment. Each drawing under the Letter of Credit (an "LC
Drawing") shall constitute a Loan Advance under the Loan Agreement and
shall be payable in accordance with the terms and provisions of the
Loan Agreement with respect to other Loan Advances. Borrower's
obligation to pay all LC Drawings shall be absolute, irrevocable,
unconditional and without setoff under any and all circumstances
whatsoever, including, without limitation, any of the following,
whether or not with notice to, or the consent of, Borrower:
(i) Any lack of validity or enforceability of a
Letter of Credit, the Loan Agreement, or any of the LC
Documents;
- 3 -
<PAGE>
(ii) The existence of any claim, set-off, defense
or other right which Borrower may have at any time against the
beneficiary of a Letter of Credit, the Bank or any other
person or entity, whether in connection with the transactions
contemplated herein or therein or any unrelated transaction;
(iii) Any statement or any other document presented
under a Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever;
(iv) Payment by the Bank under a Letter of Credit
against presentation of a draft or certificate which does not
comply with the terms of the Letter of Credit;
(v) Any failure, omission, delay or lack on the
part of the Bank or any party to any of the LC Documents to
enforce, assert or exercise any right, power or remedy
conferred upon the Bank or any such party under the LC
Documents, or any other acts or omissions on the part of the
Bank or any such party;
(vi) The voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially
all the assets of Borrower, the receivership, insolvency,
bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors or
readjustment or other similar proceedings affecting Borrower
or any of the assets of Borrower, or any allegation or contest
of the validity of this Amendment, the Loan Agreement, the
Letter of Credit or any of the LC Documents, in any such
proceeding; or
(vii) Any other event or action that would, in the
absence of this clause, result in the release or discharge by
operation of law of Borrower from the performance or
observance of any obligation, covenant or agreement contained
in this Amendment, the Loan Agreement, the Letter of Credit or
any of the LC Documents.
f. LC Documents. Each Letter of Credit shall be governed by
and subject to the LC Documents required to be executed by Borrower for
each such Letter of Credit. In the event of any conflict between any of
the terms of the LC Documents and any of the terms of this Amendment,
the terms of this Amendment shall control.
As of the date of this Agreement, the provisions of this paragraph are intended
to and shall supersede and replace the provisions of Paragraph 6 of the Sixth
Amendment.
3. Permanent Reduction. Effective as of January 15, 1999 and pursuant
to the Sixth Amendment and the Seventh Amendment, the principal amount of the
Loan and Maximum Revolving Loan Commitment was increased from $15,000,000.00 to
an amount not to exceed $25,000,000.00 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, and (b) the Maximum Revolving Loan Commitment shall be permanently reduced
to an amount not to exceed $15,000,000.00 (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 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
- 4 -
<PAGE>
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,
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 3 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 and
replace the provisions of Paragraph 5 of the Sixth Amendment and Paragraph 3 of
the Seventh Amendment.
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.
5. Bank Consents.
a. The Bank hereby acknowledges that the Bank has been
provided copies of the commitment letter dated October 23, 1998 (a true
and correct copy of which is attached hereto as Exhibit B) setting
forth the terms and conditions of the financing for the construction of
a facility in Glen Ellyn, Illinois and commitment letter dated February
2, 1999 (a true and correct copy of which is attached hereto as Exhibit
C) setting forth the terms and conditions of the financing for the
construction of a facility in Raleigh, North Carolina, and has approved
the terms and conditions of such financings.
b. The Bank hereby consents to the execution and delivery by
Borrower to Battery Park City Authority ("BPCA") of a Guaranty of
Completion dated as of February 28, 1999 (a true and correct copy of
which is attached hereto as Exhibit D) (the "BPC Completion Guaranty")
in connection with the agreement by BPCA to permit the continuation of
the construction of the facility in Battery Park City.
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.
- 5 -
<PAGE>
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 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.
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:
- 6 -
<PAGE>
EXHIBIT A
CONSENT
- 7 -
<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 the Eight Amendment to Loan
Agreement and Documents dated March 24, 1999 by and between Brookdale Living
Communities, Inc. and LaSalle National Bank, a copy of which is attached hereto
as Exhibit A.
Dated: March 25, 1999.
FBR ASSET INVESTMENT CORPORATION
By: /s/ Elaine M. Clancy
-----------------------------------
Name: Elaine M. Clancy
Title: Chief Financial Officer
- 8 -
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Agreement") is entered into as of the
25th day of January, 1999 by FBR ASSET INVESTMENT CORPORATION, a Virginia
corporation (referred to herein as the "Subordinator"), in favor of LaSALLE
NATIONAL BANK ("Bank").
W I T N E S S E T H:
WHEREAS, Brookdale Living Communities, Inc., a Delaware corporation
(the "Borrower"), and Bank have entered into that certain Loan Agreement, dated
April 27, 1998, which Loan Agreement has been amended by that certain First
Amendment to Loan Agreement and Documents dated July 16, 1998, that certain
Second Amendment to Loan Agreement and Documents dated October 14, 1998, that
certain Third Amendment to Loan Agreement and Documents dated October 20, 1998,
that certain Fourth Amendment to Loan Agreement and Documents dated November 3,
1998, that certain Fifth Amendment to Loan Agreement and Documents dated
December 21, 1998, and that certain Sixth Amendment to Loan Agreement and
Documents dated January 15, 1999, and that certain Seventh Amendment to Loan
Agreement and Documents dated January 25, 1999 (as amended to date and as
hereafter supplemented, modified or amended, and including any promissory notes
executed in connection therewith, including that certain Fourth Amended and
Restated Note dated January 15, 1999, the "Loan Agreement"; capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to them
in the Loan Agreement). A true, correct and complete copy of the Loan Agreement
is attached hereto as Exhibit A;
WHEREAS, the Subordinator and the Borrower have entered into that
certain Loan Agreement, dated January 25, 1999 (as hereafter supplemented,
modified or amended, the "Subordinated Loan Agreement"), a true, correct and
complete copy of which is attached hereto as Exhibit B;
WHEREAS, the provisions of the Loan Agreement prohibit the Borrower
from entering into the transactions contemplated by the Subordinated Loan
Agreement without the consent of Bank;
WHEREAS, Bank has required, as a condition precedent to consenting to
the arrangements contemplated by the Subordinated Loan Agreement, that the
Subordinator deliver this Agreement to Bank; and
WHEREAS, the Subordinator is willing to deliver this Agreement to Bank
in order to induce Bank to consent to the arrangements contemplated by the
Subordinated Loan Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and of other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Subordinator hereby agrees with Bank as follows:
1. Reliance. The Subordinator acknowledges that Bank is consenting to
the arrangements contemplated by the Subordinated Loan Agreement in reliance
upon the Subordinator's agreement to subordinate all amounts that are now or
hereinafter become owing by the Borrower to the Subordinator (including
principal, interest, fees, and expenses) in connection with the Subordinated
Loan Agreement and that certain Promissory Note, dated January 25, 1999 in the
original principal amount of $5,000,000.00 (the "Subordinated Note"), a true,
correct and complete copy of which is attached hereto as Exhibit C. The
Subordinator represents and warrants to Bank that the Borrower currently has no
obligations to the Subordinator other than the principal amount of (and interest
on) the Subordinated Note.
-1-
<PAGE>
2. Subordination. The Subordinator covenants and agrees that the
payment of all amounts which are due or payable from the Borrower to the
Subordinator in connection with the Subordinated Loan Agreement and/or the
Subordinated Note (including principal, interest, fees, and expenses) and all
extensions, modifications, refinancings and renewals thereof (collectively, the
"Subordinated Debt"), together with all rights to receive proceeds of collateral
or other security therefor, are hereby expressly subordinated, to the extent and
in the manner hereinafter set forth, to the performance and payment of the
Obligations (as defined in the Loan Agreement) of the Borrower, including,
without limitation, all amounts (including principal, interest, fees and
expenses) owing pursuant to the Loan Agreement (collectively, the "Senior
Obligations"). The Subordinator further agrees and acknowledges that, subject to
the terms set forth herein, the Subordinated Loan Agreement, the Subordinated
Note, and the Subordinator's rights under each shall in all cases be subordinate
to the Loan Agreement and the rights of Bank thereunder.
3. Payment Restrictions. Notwithstanding anything to the contrary set
forth in the Subordinated Loan Agreement and the Subordinated Note, the Borrower
shall not make and the Subordinator shall not receive any payments of principal
(including without limitation proceeds of collateral or any other security) with
respect to the Subordinated Debt unless and until Bank has notified Subordinator
that the outstanding principal balance of the Senior Obligations and the Maximum
Revolving Loan Commitment (as defined in the Loan Agreement) have been
permanently reduced to an amount not in excess of $15,000,000.00 as a result of
the Mandatory Permanent Reduction or the Voluntary Permanent Reduction (as
defined in the Seventh Amendment) [in either case, the "Permanent Reduction"],
and the Subordinator further agrees that, if any such payment is received by the
Subordinator prior to the aforestated notice from Bank to the Subordinator, the
Subordinator will forthwith pay the same to Bank to be applied to the Senior
Obligations in such manner as Bank may elect; provided, however, that Borrower
shall not make and Subordinator shall not receive any payments of principal or
interest with respect to the Subordinated Debt if an Event of Default under the
Loan Agreement then exists or if such payment shall cause the occurrence of such
Event of Default, or if payment of the Subordinated Debt has been accelerated by
the Subordinator. Bank shall promptly notify the Subordinator in writing of the
Permanent Reduction, if any, and of any Event of Default declared by Bank under
the Loan Agreement. With respect to payments of interest on the Subordinated
Debt prior to the expiration of any Standstill Period (as defined herein), the
Borrower may make and the Subordinator may receive and retain payments of
interest on the Subordinated Debt so long as (i) the same are made only on or
after the dates when due under the Subordinated Note and (ii) at the time of
such payment, and after giving effect thereto, Subordinator has not been
notified by Bank that an Event of Default has been declared by Bank under the
Loan Agreement. Subordinator agrees to provide Bank with prompt written notice
of all events of default under the Subordinated Loan Agreement and the
Subordinated Note.
4. Standstill. Except as specifically permitted in this paragraph,
until the Senior Obligations are paid in full, Subordinator shall not, without
the prior written consent of Bank, (i) demand, sue for, take or receive from or
on behalf of the Borrower or any guarantor of the Subordinated Debt, by setoff
or in any other manner, in the whole or any part of any moneys which may now or
hereafter be owing by the Borrower with respect to the Subordinated Debt; (ii)
initiate or participate with others in any suit, action or proceeding against
the Borrower to (A) enforce payment of or to collect the whole or any part of
the Subordinated Debt, or (B) commence or intervene or join in any judicial
enforcement of any of the rights and remedies under the Subordinated Loan
Agreement or applicable law with respect to the Subordinated Debt or the
Subordinated Loan Agreement (including the filing of any proof of claim in a
bankruptcy proceeding); or (iii) accelerate any Subordinated Debt (the foregoing
referred to herein as "Collection Action"); provided, however, upon the passage
of 90 days from the occurrence of any Event of Default under the Subordinated
Loan Agreement or Subordinated Note (the "Standstill Period"), Subordinator may,
upon 5 business days prior written notice to Bank, accelerate the Subordinated
Debt or take any other Collection Action, further
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<PAGE>
provided that (x) upon receipt of Subordinator's notice that it intends to
pursue Collection Action against the Borrower, Bank will promptly thereupon and
from time to time thereafter notify Subordinator of the amount of the Senior
Obligations, and (y) any amounts collected by the Subordinator directly or
indirectly through such Collection Action shall be promptly paid over to Bank
and applied to the payment of the Senior Obligations until the Senior
Obligations have been paid in full, and only thereafter may such amounts be
applied to the Subordinated Debt.
5. Bankruptcy. In the event of any receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization (whether or
not pursuant to bankruptcy laws), sale of all or substantially all of the
assets, dissolution, liquidation or any other marshaling of the assets and
liabilities of the Borrower (any one or more of the foregoing referred to as a
"Proceeding"):
a. All Senior Obligations first shall be paid in full before any
payment of or with respect to the Subordinated Debt is made.
b. Until all Senior Obligations have been paid in full, any payment
or distribution, whether in cash, property or securities which, but for
the terms hereof, otherwise would be payable or deliverable in respect
of the Subordinated Debt, shall be paid or delivered directly to Bank,
to be held or applied by Bank in accordance with the terms of the Loan
Agreement. Subordinator irrevocably authorizes, empowers and directs
all receivers, trustees, liquidators, custodians, conservators and
other Persons (as defined in the Loan Agreement) having authority to
effect all such payments and distributions, and further irrevocably
authorizes, empowers and directs Bank to demand, sue for, collect and
receive, every such payment or distribution.
c. Subordinator agrees not to initiate or prosecute or encourage
any other Person to initiate or prosecute any claim, action or other
proceeding challenging the enforceability of the Senior Obligations or
any liens and security interests securing the Senior Obligations.
d. Subordinator agrees to execute, verify, deliver and file any
proofs of claim in respect of the Subordinated Debt reasonably
requested by Bank in connection with any such Proceeding and hereby
irrevocably authorizes, empowers and appoints Bank their agent and
attorney-in-fact to (i) execute, verify, deliver and file such proofs
of claim upon the failure of Subordinator promptly to do so (and, in
any event, prior to 30 days before the expiration of the time to file
any such proof); and (ii) vote such claims in any such Proceeding upon
the failure of Subordinator to do so prior to 10 days before the
expiration of the time to vote any such claims; provided, however, that
Bank shall have no obligation to execute, verify, deliver or file any
such proof of claim or to vote any such claim. In the event that Bank
votes any such claim in accordance with the authority granted hereby,
Subordinator shall not be entitled to change or withdraw such vote.
e. The Senior Obligations shall continue to be treated as Senior
Obligations and the provisions of this Agreement shall continue to
govern the relative rights and priorities of Bank and Subordinator even
if all or part of the Senior Obligations or the security interests, if
any, securing the Senior Obligations are subordinated, set aside,
avoided or disallowed in connection with any such Proceeding and this
Agreement shall be reinstated if at any time any payment of any of the
Senior Obligations is rescinded or must otherwise be returned by any
holder of the Senior Obligations or any representative of such holder.
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<PAGE>
6. No Modification of Subordinated Debt. The Subordinator covenants
and agrees that the Subordinator will not amend the terms of any of the
Subordinated Debt, and will not sell, assign or otherwise transfer or encumber
any right to any Subordinated Debt, any interest therein, or any collateral or
other security therefor, without the prior written consent of Bank, which shall
not be unreasonably withheld.
7. No Security. The Subordinator represents and warrants to Bank, as
a material inducement to Bank to consent to the transactions contemplated by the
Subordinated Loan Agreement and Subordinated Note, that all amounts owing from
the Borrower to the Subordinator are unsecured and that no collateral has been
pledged by the Borrower in any fashion as security for said amounts owing from
the Borrower to the Subordinator. Notwithstanding the foregoing and
notwithstanding the order of filing of financing statements or any other matter,
Bank's liens and security interests in assets of the Borrower, if any, shall at
all times be prior and senior to each and every lien and security interest held
by the Subordinator, if any, and the Subordinator hereby expressly subordinates
all of its liens and security interests in assets of the Borrower, if any, to
each and every lien and security interest now or hereafter held by Bank, if any.
8. Modifications of Senior Obligations. Bank covenants and agrees
that it will not amend the terms of any of the Senior Obligations without the
prior consent of Subordinator, which consent shall not be unreasonably withheld,
conditioned or delayed. The Subordinator hereby waives and agrees not to assert
against Bank any rights which a guarantor or surety with respect to any
indebtedness of the Borrower could exercise.
9. Legend. So long as this Agreement is in effect, the Subordinator
Agrees to insert on the Subordinated Note in a conspicuous manner the following
legend:
This Note and the indebtedness evidenced hereby are subordinate in
the manner and to the extent set forth in that certain Subordination
Agreement (the "Subordination Agreement") dated January 25, 1999,
among FBR Asset Investment Corporation, Brookdale Living
Communities, Inc. (the "Borrower"), and LaSalle National Bank
("Bank"), to the indebtedness owed by the Borrower to the holders of
all of the notes issued pursuant to that certain Loan Agreement,
dated April 27, 1998 as amended through the date hereof, between the
Borrower and Bank, as such Loan Agreement may be amended,
supplemented, or otherwise modified from time to time; and each
holder of this Note, by its acceptance hereof, shall be bound by the
provisions of the Subordination Agreement.
Further, the Subordinator covenants and agrees that it will upon request by Bank
execute and deliver such documents and take all such other actions, as Bank may
require to more fully effectuate the subordination intended by this Agreement
and to carry out the transactions intended hereby.
10. Further Assurances. Subordinator at any time, and from time to
time, after the execution and delivery of this Agreement, shall promptly execute
and deliver such further documents and do such further acts and things as Bank
reasonably may request that may be necessary in order to effect fully the
purposes of this Agreement.
11. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and may be personally served,
telecopied or sent by overnight courier service or United States certified or
registered mail and shall be deemed to have been given (a) if delivered in
person, when delivered; (b) if delivered by telecopy, on the date of
transmission if transmitted on a business day before 4:00 p.m., Chicago Time,
or, if not, on the next succeeding business day; (c) if delivered by overnight
courier, two business days after delivery to such courier properly addressed; or
(d) if by United States mail,
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<PAGE>
four business days after deposit in the United States mail, postage prepaid and
properly addressed. Notices shall be addressed to the parties at the addresses
set forth on the signature page or to such other address as the party addressed
shall have previously designated by written notice to the serving party given in
accordance with this paragraph.
12. Severability. In the event that any provision of this Agreement is
deemed to be invalid, illegal or unenforceable by reason of the operation of any
law or by reason of the interpretation placed thereon by any court or
governmental authority, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby, and the affected provision shall be modified to the minimum
extent permitted by law so as most fully to achieve the intention of this
Agreement.
13. Relative Rights. The provisions of this Agreement are solely for
the purpose of defining the relative rights of Subordinator and Bank and shall
not be deemed to create any rights or priorities in favor of any other Person,
including, without limitation, the Borrower.
14. Conflict. In the event of any conflict between any term, covenant
or condition of this Agreement and any term, covenant or condition of any of the
Subordinated Note or Subordinated Loan Agreement, the provisions of this
Agreement shall control and govern. For purposes of this paragraph, to the
extent that any provisions of the Subordinated Note or Subordinated Loan
Agreement provide rights, remedies and benefits to Bank that exceed the rights,
remedies and benefits provided to Bank under this Agreement, such provisions of
the Subordinated Note and/or Subordinated Loan Agreement shall be deemed to
supplement, and not to conflict with, the provisions hereof.
15. Term of Agreement. This Agreement shall constitute a continuing
agreement of subordination and shall continue in effect until all Senior
Obligations of the Borrower shall be paid and satisfied in full and Bank's
obligations under the Loan Agreement shall have been terminated.
16. Governing Law. This Agreement shall be deemed to be a contract
made under and shall be construed in accordance with and governed by the laws of
the State of Illinois.
17. Jurisdiction and Venue. For the purposes of any action or
proceeding involving this Agreement or the subject matter of the transactions
contemplated by this Agreement, the Subordinator hereby expressly submits to the
jurisdiction of all federal and state courts located in the State of Illinois
and consents that any order, process, notice of motion or other application to
or by any of said courts or a judge thereof may be served within or without such
court's jurisdiction by registered mail or by personal service, provided a
reasonable time for appearance is allowed. To the extent permitted by applicable
law, the Subordinator hereby irrevocably waives any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement brought in any federal or state court
sitting in Cook County, State of Illinois, and, to the extent permitted by law,
hereby further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
18. Waiver of Jury. THE SUBORDINATOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS
AGREEMENT OR THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY.
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<PAGE>
19. Successors; Assigns. This Agreement shall be binding upon and
inure to the benefit of each party hereto, its successors and assigns.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
FBR ASSET INVESTMENT CORPORATION
Address: Potomac Tower
1001 Nineteenth Street North, 18th Floor
Arlington, Virginia 22209
Attention: Ms. Elaine M. Clancy
By: /s/ Elaine M. Clancy
-------------------------------------------
Its: Chief Financial Officer
LASALLE NATIONAL BANK
Address: 135 South LaSalle Street
Chicago, Illinois 60603
Attention: Jeffrey B. Steele
By: /s/ David E. Heise
-------------------------------------------
Its: Commercial Banking Officer
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<PAGE>
ACKNOWLEDGMENT AND AGREEMENT
The undersigned hereby acknowledges the matters set forth in the
foregoing Subordination Agreement, and agrees for the benefit of Bank (i) that
it will make no payment which is prohibited by the terms of such Subordination
Agreement and (ii) that, to the extent permitted by applicable law, it will on
request by Bank execute and deliver all documents which may reasonably be deemed
necessary or desirable by Bank to evidence and protect Bank's rights under such
Subordination Agreement.
Dated: January 25, 1999.
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ Darryl W. Copeland, Jr.
-------------------------------------------
Its: Executive Vice President
<PAGE>
EXHIBIT A
LOAN AGREEMENT
<PAGE>
EXHIBIT B
SUBORDINATED LOAN AGREEMENT
<PAGE>
EXHIBIT C
SUBORDINATED NOTE
================================================================================
FBR ASSET INVESTMENT CORPORATION, as Lender,
and
BROOKDALE LIVING COMMUNITIES, INC., as Borrower
-------------------------------------------
LOAN AGREEMENT
-------------------------------------------
January 25, 1999
================================================================================
<PAGE>
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into this 25th day of
January 1999, by and between Brookdale Living Communities, Inc., a Delaware
corporation (the "Borrower"), and FBR Asset Investment Corporation, a Virginia
corporation (the "Lender"), and the parties hereto agree to the following:
WHEREAS, the Borrower wishes to obtain a $5,000,000 unsecured loan as a
source of funds from the Lender to be used solely for the purposes described in
Schedule 3.03A, and the Lender wishes to extend a short-term $5,000,000 loan to
the Borrower subject to the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and promises made herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Unless otherwise specified, the following
terms shall have the meanings assigned to them in this Section 1.01 when used in
this Agreement.
"Accrual Period" means, (a) with respect to the initial Accrual Period,
the period commencing on the Closing Date and ending at the close of business on
the next 24th day of a month and, (b) with respect to any subsequent Accrual
Period, the period commencing on the 25th day of the month in which the
preceding Accrual Period ended and ending on the earlier of (i) the close of
business on the 24th day of the following month or (ii) the Maturity Date.
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, such Person; (b)
which directly or indirectly beneficially owns or holds ten percent (10%) or
more of the voting securities of such Person; or (c) ten percent (10%) or more
of the voting stock of which is directly or indirectly beneficially owned or
held by such Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
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<PAGE>
"Balance Sheet" means the balance sheet of the Borrower and its
consolidated subsidiaries as of September 30, 1998 which has been supplied to
the Lender as described in Section 3.03(b).
"Borrower" means Brookdale Living Communities, Inc., a Delaware
corporation.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday, nor a day on which banking institutions are authorized
or required by Law or regulation to close, in the Commonwealth of Virginia or
the city of Chicago, Illinois.
"Closing Date" means January 25, 1999.
"Commitment Fee" shall have the meaning assigned to such term in
Section 2.01(b) hereof.
"Default" means a Monetary Default, a Non-Monetary Default, or any of
the other events described in Section 7.01 hereof, which may become an Event of
Default in accordance with Section 7.01.
"Default Rate" means 25.00% per annum.
"Event of Default" has the meaning set forth in Section 7.01 hereof.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Indemnified Party" has the meaning ascribed thereto in Section 6.01(a)
of this Agreement.
"Interest Rate" means, with respect to the first two Accrual Periods,
12.00% per annum, and, with respect to the third and final Accrual Period,
15.00% per annum.
"Law" means any federal, state or local statute, law, rule, regulation,
ordinance, order, code, policy or rule of common law, now or hereafter in
effect, and in each case as amended, and any judicial or administrative
interpretation thereof by a Governmental Authority or otherwise, including any
judicial or administrative order, consent, decree or judgment.
"Lender" means FBR Asset Investment Corporation, a Virginia
corporation, its successors in interest and its permitted assigns.
2
<PAGE>
"Loan" means the $5,000,000 loan loaned by the Lender to the Borrower,
together with accrued and unpaid interest thereon.
"Material Adverse Effect" means a material adverse effect on (a) the
financial condition or business operations of the Borrower and its subsidiaries
taken as a whole or (b) the ability of the Borrower to perform its obligations
under, or the validity or enforceability of, this Agreement or the Note.
"Maturity Date" means the earlier to occur of (i) April 26, 1999 or
(ii) the date of any declaration of acceleration by the Lender pursuant to
Section 7.02.
"Monetary Default" means a failure by the Borrower to pay interest due
on any Payment Date or the Maturity Date or principal or other amounts due on
the Maturity Date.
"Non-Monetary Default" means a breach of any of the representations,
warranties, covenants or other agreements contained herein, other than a
Monetary Default.
"Note" has the meaning set forth in Section 2.06.
"Obligations" means any and all indebtedness, obligations and
liabilities of the Borrower to the Lender (whether now existing or hereafter
arising, voluntary or involuntary, regardless of whether jointly owed with
others, direct or indirect, absolute or contingent, liquidated or unliquidated,
and regardless of whether from time to time decreased or extinguished and later
increased, created or incurred), arising out of or related to this Agreement or
the Note or the indebtedness evidenced hereby or thereby.
"Payment Date" means, with respect to any Accrual Period, the 24th day
of the month in which such Accrual Period ends; provided that if such day is not
a Business Day, then such Payment Date shall be the Business Day immediately
following such day.
"Person" means an individual, general partnership, limited partnership,
limited liability partnership, corporation, business trust, joint stock company,
limited liability company, trust, unincorporated association, joint venture,
Governmental Authority, or other entity of whatever nature.
"subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
subsidiaries or by such Person and one or more of its subsidiaries, or (b) any
partnership, limited liability company, association, joint venture or similar
business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so
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<PAGE>
owned or controlled by such Person. Unless otherwise expressly provided, all
references to a "subsidiary" shall mean a subsidiary of the Borrower.
ARTICLE II
THE LOAN
Section 2.01. The Loan; Commitment Fee.
(a) Subject to the terms and conditions of this Agreement, the Lender
agrees to make a loan (the "Loan") in the principal amount of up to $5,000,000
to the Borrower on the Closing Date.
(b) To compensate the Lender for making the Loan hereunder, the
Borrower shall pay to the Lender, contemporaneously with the Lender's
disbursement of the Loan, a commitment fee (the "Commitment Fee") equal to 0.5%
of the amount of the Loan, or $25,000.
Section 2.02. Loan Conditions Precedent. The Lender's obligation to
make and disburse the Loan on the Closing Date is subject to the fulfillment to
the Lender's satisfaction, on or before the Closing Date, of all of the
following conditions:
(a) the Borrower shall have executed this Agreement and the Note;
(b) the Lender shall have received a certificate of the proper
officers of the Borrower certifying (i) a copy of the Borrower's organizational
documents and (ii) a copy of minutes of a meeting or a unanimous written consent
of the executive committee of the Borrower's board of directors authorizing the
Borrower to enter into this Agreement;
(c) the Lender shall have received an opinion of counsel to the
Borrower in form and substance satisfactory to the Lender;
(d) all of the representations and warranties of the Borrower in this
Agreement shall be true and correct in all material respects as of the Closing
Date; and
(e) no Default or Event of Default shall have occurred and be
continuing.
Section 2.03. Interest Payments.
(a) Interest shall accrue daily on each day during each Accrual Period
on the outstanding principal balance of the Loan (the "Loan Principal Balance")
from and
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<PAGE>
including the Closing Date at a rate equal to the product of (i) 1/365, (ii) the
Interest Rate, and (iii) the Loan Principal Balance at the beginning of such
day. Such accrued interest for any Accrual Period shall be due and payable on
the related Payment Date and the Borrower shall pay such interest on such date.
(b) If any payment of principal or interest with respect to the Loan
which is due under the terms of this Agreement is not paid when due, or if any
Event of Default has occurred hereunder, then all interest that accrues under
this Agreement from and including the day such payment was due but not made or
on which such Event of Default occurs and continuing until the day such payment
is finally made or the Event of Default is waived or all Obligations have been
paid in full, shall be calculated at the Default Rate rather than the Interest
Rate.
(c) It is intended that the rate of interest on the Loan hereunder
shall never exceed the maximum rate, if any, which may be legally charged on
this Loan, and if the provisions for interest hereunder would result in a rate
higher than such maximum rate, interest shall nevertheless be limited to such
maximum rate and any amounts which may be paid toward interest in excess of such
maximum rate shall be applied to the reduction of principal, or, at the option
of the Lender, returned to the Borrower.
Section 2.04. Principal Payments.
(a) The Loan shall mature and the outstanding principal balance of the
Loan shall be due and payable, together, without duplication, with all interest
accrued and unpaid thereon, on the Maturity Date, and the Borrower shall pay
such principal and interest on such date.
(b) In the event that the outstanding principal balance of the Loan is
not repaid in full on the Maturity Date, the outstanding principal balance of
the Loan shall immediately become due and payable and the Lender may exercise
all rights and remedies available to it under applicable Law.
(c) The Borrower may prepay the Loan in whole or in part at any time
and from time to time prior to the Maturity Date without premium or penalty.
Section 2.05. Application of Payments. Any payment made under this
Agreement shall, unless otherwise specified herein, be applied (i) first, to pay
any unpaid fees, costs, expenses or obligations (A) which arise hereunder, (B)
which are to be paid by the Borrower, and (C) which are due and payable, (ii)
second, to pay any accrued and unpaid interest on the Loan pursuant to Section
2.03 which is due and payable on or prior to the date of such payment, and (iii)
finally, to reduce the outstanding principal balance of the Loan.
5
<PAGE>
Section 2.06. Note. The Borrower's Obligations shall be evidenced by
the promissory note of the Borrower (the "Note") dated as of the date of this
Agreement and substantially in the form of Exhibit A attached hereto. The term
"Note" shall include all extensions, renewals and modifications of the Note and
all substitutions therefor. All terms and provisions of the Note are expressly
incorporated into this Agreement.
Section 2.07. Transfer of Debt.
(a) The Borrower may neither assign its rights nor delegate its
obligation under this Agreement without the prior written consent of the Lender.
(b) The Lender may assign its rights and delegate its obligations
under this Agreement to an Affiliate of the Lender or to a third party without
the consent of the Borrower.
ARTICLE III
BORROWER REPRESENTATIONS AND WARRANTIES
The Company makes the following representations and warranties, as of
the date of this Agreement, as of the Closing Date, and continually throughout
the term of this Agreement.
Section 3.01. Organization, Standing, Capitalization, etc. The
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to own and operate its properties and to carry on the business
described in the Borrower's Report on Form 10-Q for the quarter ended September
30, 1998 ("Form 10-Q"), and to enter into this Agreement. Attached hereto as
Schedule 3.01A is a complete and correct copy of the Restated Certificate of
Incorporation of the Borrower, and all amendments thereto, substantially as the
Restated Certificate of Incorporation, as amended, will be in effect at the
Closing Date, and attached hereto as Schedule 3.01B is a complete and correct
copy of the Amended and Restated Bylaws of the Borrower as they will be in
effect at the Closing Date.
Section 3.02. Qualification. The Borrower and each of its
subsidiaries is duly qualified and in good standing as a foreign corporation
authorized to transact business in each jurisdiction where the conduct of its
business or the ownership of its properties requires such qualification, or, if
not so qualified, the failure so to qualify will not have a Material Adverse
Effect and will not materially and adversely impair the right of the Borrower or
the applicable subsidiary to enforce any material agreement to which it is a
party.
6
<PAGE>
Section 3.03. Financial Statements; Use of Proceeds; Indebtedness.
The Borrower has furnished to the Lender the following financial statements:
(a) balance sheets of the Borrower and its consolidated subsidiaries
as of December 31, 1997, and statement of operations and cash flows of the
Borrower and its consolidated subsidiaries for the period commencing on May 7,
1997 and ending on December 31, 1997, and the combined statement of operations
of the "Predecessor Properties" for the period commencing on January 1, 1997 and
ending on May 6, 1997, with all appropriate footnotes, audited by the Borrower's
certified public accountants; and
(b) balance sheets of the Borrower and its consolidated subsidiaries
as of September 30, 1998 and 1997, and statements of operations and cash flows
of the Borrower and its consolidated subsidiaries for the nine-month period
ended September 30, 1998 and the period commencing on May 7, 1997 and ending on
September 30, 1997, and the combined statement of operations of the "Predecessor
Properties" for the period commencing on January 1, 1997 and ending May 6, 1997,
with all appropriate footnotes, certified by the President and the chief
financial officer of the Borrower.
Such balance sheets of the Borrower fairly present the condition of the
Borrower and its consolidated subsidiaries as at the respective dates indicated,
and in each case, to the extent required by GAAP, reflect all liabilities,
contingent or other, as at the respective dates indicated. All such financial
statements have been prepared in accordance with GAAP.
Attached hereto as Schedule 3.03A is a detailed statement of the
purposes, including dollar amounts, to which the Borrower proposes to apply the
proceeds of the Loan. The Borrower shall use the Loan proceeds only for the
purposes identified on such Schedule 3.03A.
Attached hereto as Schedule 3.03B is a detailed and complete list of
all material indebtedness for borrowed money of the Borrower, contingent or
otherwise, and any subsidiary of the Borrower for which the related creditor has
recourse to the Borrower.
Section 3.04. Changes, etc. Since September 30, 1998, there has been
no material adverse change in the business operations or financial condition of
the Borrower and its consolidated subsidiaries.
Section 3.05. Authorization; No Conflicts. All corporate action on
the part of the Borrower, its directors and stockholders necessary for the
authorization, execution, delivery and performance by the Borrower of this
Agreement and the Note and the consummation of the transactions contemplated
herein and therein has been taken. Each of this Agreement and the Note is the
valid and binding obligation of the Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy and other laws
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affecting the rights of creditors generally, and rules of law governing specific
performance, injunctive relief or other equitable remedies. The execution,
delivery and performance by the Borrower of this Agreement and the Note and
compliance herewith and therewith, will not result in any violation of and will
not conflict with, or result in a breach of any of the terms of, or constitute a
default under, any provision of federal or state law to which the Borrower or
any of its subsidiaries is subject, the Borrower's Restated Certificate of
Incorporation, the Borrower's Amended and Restated Bylaws or any mortgage,
indenture, agreement, instrument, judgment, decree, order, rule or regulation or
other restriction to which the Borrower or any of its subsidiaries is a party or
by which it is bound or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Borrower or
any of its subsidiaries pursuant to any such term.
Section 3.06. Governmental Approval. No consent, approval or
authorization of or qualification, designation, declaration or filing with any
governmental authority on the part of the Borrower or any of its subsidiaries
which has not been obtained or completed is required in connection with the
execution, delivery and performance by the Borrower of this Agreement or the
Note or the consummation of any other transactions contemplated hereby or
thereby.
Section 3.07. Title to Properties; Liens. The Borrower or a
subsidiary of the Borrower has good and marketable title to all of its
respective properties and assets, including all properties and assets reflected
in the Balance Sheet, subject only to (i) liens securing indebtedness reflected
on the Balance Sheet, (ii) liens securing the liability of subsidiaries of the
Borrower under financing lease or so-called "synthetic lease" transactions
entered into by subsidiaries of the Borrower which do not constitute liabilities
on the Balance Sheet, and (iii) other liens that do not adversely affect the
value of the properties and assets. Neither the Borrower nor any subsidiary is
in violation of any law, regulation or ordinance (including laws, regulations or
ordinances relating to building, zoning, environmental, city planning, land use
or similar matters) relating to its property or assets which violation would
have a Material Adverse Effect. All personal property and assets material to the
business, operations or financial condition of the Borrower and its
subsidiaries, and all buildings, structures and fixtures used by any of them in
the conduct of their business, are in good operating condition and repair.
Section 3.08. Litigation, etc. There is no action, proceeding or
investigation pending or, to the knowledge of the Borrower, threatened, that
questions the validity of this Agreement or the Note, or any action taken or to
be taken pursuant hereto or contemplated hereby, or that is reasonably likely to
result, either in any case or in the aggregate, in a Material Adverse Effect.
The foregoing includes, without limiting its generality, actions pending or
threatened involving the previous employment of any employees or prospective
employees or their use in connection with the business of the
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Borrower and its subsidiaries of any information or techniques allegedly
proprietary to their former employer(s).
Section 3.09. Compliance with other Instruments, etc. Neither the
Borrower nor any subsidiary is in violation of any provision of its certificate
of incorporation or bylaws, or of any loan agreement or other material agreement
to which it is a party. Neither the Borrower nor any subsidiary is in violation
of any instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to it, including without limitation, federal or state
securities laws, zoning laws and ordinances, federal labor laws and regulations,
the federal Occupational Safety and Health Act and regulations thereunder, the
federal Employees Retirement Income Security Act, and federal, state and local
environmental protection laws and regulations, the violation of which will have
a Material Adverse Effect.
Section 3.10. Tax Returns and Payments. All of the tax returns and
reports of the Borrower and its subsidiaries required by Law to be filed have
been accurately prepared and timely filed and all taxes shown as due thereon
have been paid or adequately reserved on the Borrower's books and reflected on
the Balance Sheet.
Section 3.11. Disclosure. None of (a) the Borrower's Report on Form
10-K for the period ended December 31, 1997, (b) the Borrower's Report on Form
10-Q for the quarter ended September 30, 1998, (c) this Agreement and any
Schedule hereto or (d) any certificate or other document referenced herein or
therein and furnished to the Lender by the Borrower contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein or herein, in light of the
circumstances under which they were made, not misleading. There is no material
fact known to the Borrower relating to the business, affairs, operations,
condition or prospects of the Borrower that materially adversely affects the
same and that has not been disclosed to the Lender in writing by the Borrower.
Section 3.12. Brokers, Intermediaries and Finder's Fees. The Borrower
(i) represents that no finder, broker, agent, financial adviser or other
intermediary has acted on behalf of the Borrower in connection with the Loan or
the negotiation or consummation of this Agreement or any of the transactions
contemplated hereby, and (ii) hereby agrees to indemnify and to hold the Lender
harmless of and from any liability for commission or compensation in the nature
of a finder's fee to any broker or other person or firm representing or
allegedly representing the Borrower in this transaction and the costs and
expenses of defending against such liability or asserted liability, for which
the Borrower, or any of its employees or representatives, are responsible.
Section 3.13. Insurance. The Borrower and its subsidiaries have
commercial general liability insurance, products liability insurance (if
applicable) and workers'
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compensation insurance in such amounts as are commercially reasonable for
businesses of a similar type and size as the Borrower or the applicable
subsidiary. The Borrower and each subsidiary have fire and casualty insurance
policies with extended coverage sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed.
Section 3.14. Commercial Loan. The proceeds of the Loan will be used
solely for business and commercial purposes; accordingly, the Note evidences the
Borrower's obligation to repay a loan made solely to acquire or carry on a
business or commercial enterprise.
Section 3.15. Survival of Representations and Warranties. The
Borrower agrees and acknowledges that each of the representations and warranties
set forth in subsections 3.01 through 3.14 hereof (i) is important to the Lender
and being relied upon by the Lender, (ii) is true in all respects as of the date
of this Agreement, and (iii) shall survive the execution, termination and
expiration of this Agreement.
ARTICLE IV
ACCOUNTING; FINANCIAL STATEMENTS AND OTHER INFORMATION
Section 4.01. Accounting. The Borrower will maintain a system of
accounting established and administered in accordance with GAAP consistently
followed, and will set aside on its books all such proper reserves as shall be
required by GAAP.
Section 4.02. Financial Statements. For so long as the Lender holds
the Note, the Borrower will deliver to the Lender:
(a) within 45 days after the end of each of the first three quarterly
fiscal periods in each fiscal year of the Borrower, (i) a consolidated balance
sheet of the Borrower and its consolidated subsidiaries as at the end of such
period and consolidated statements of operations and cash flows of the Borrower
and its consolidated subsidiaries for each period and, in the case of the second
and third quarterly periods, for the period from the beginning of the then
current fiscal year to the end of such quarterly period, setting forth in each
case in comparative form the figures for the corresponding period of the
previous fiscal year, all in reasonable detail and certified, subject to changes
resulting from normal year-end audit adjustments and (ii) a certificate of the
President or chief financial officer stating that, to the best knowledge of such
Person after reasonable investigation, the Borrower is in compliance with the
covenants set forth in Article V herein;
(b) promptly upon the filing thereof, all reports and statements, if
any, filed by the Borrower with the Securities and Exchange Commission (or any
governmental authority
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succeeding to any of its functions) (the "Commission") or with any securities
exchange; and
(c) with reasonable promptness, such other information and data with
respect to the Borrower and its consolidated subsidiaries as from time to time
may be reasonably requested by Lender.
ARTICLE V
OTHER COVENANTS
Section 5.01. Other Covenants. The Borrower further covenants and
agrees that, so long as any Obligations are outstanding :
(a) The Borrower shall and shall cause each of its subsidiaries (as
applicable) to:
(1) promptly make all payments or accruals of interest on the
Note and under this Agreement when due, and comply with the other
provisions hereof and the provisions of the Note;
(2) comply with all applicable federal, state and local Laws,
ordinances and regulations, to the extent failure to do so has a
Material Adverse Effect;
(3) conduct its business in the usual and ordinary course;
(4) maintain its corporate existence and right to carry on
its business and duly procure all necessary renewals and extensions
thereof and use, its best efforts to maintain, preserve and renew all
such rights, powers, privileges and franchises, to the extent failure
to do so has a Material Adverse Effect;
(5) keep and maintain all buildings, plants and other
property owned by Borrower or any subsidiary in such good condition,
repair, and working order and supplied with all such necessary
equipment as in the judgment of its Board of Directors or executive
officers may be necessary, so that the business carried on in
connection therewith may be properly and advantageously conducted at
all times; provided, however, that nothing in this paragraph (5) shall
prevent the Borrower or its subsidiaries from selling, abandoning or
otherwise disposing of any building, plant or property whenever in the
opinion of their respective Boards of Directors or executive officers
the retention thereof is inadvisable or not necessary to its business;
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(6) pay and discharge promptly, or cause to be paid and
discharged promptly, all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or upon any part thereof,
as well as all claims of any kind (including claims for labor,
materials and supplies) that, if unpaid, might by law become a lien or
charge upon its property or would have a Material Adverse Effect;
provided, however, that neither the Borrower nor any subsidiary shall
be required to pay any such tax, assessment, charge, levy or claim if
the amount, applicability or validity thereof shall be contested in
good faith by appropriate proceedings and if it shall have set aside
on its books reserves (segregated to the extent required by sound
accounting practice) deemed by it adequate with respect thereto;
(7) provide or cause to be provided for itself commercial
general liability insurance, products liability insurance (if
applicable) and workers' compensation insurance in such amounts as are
commercially reasonable for businesses of similar type and size as the
Borrower and fire and casualty insurance policies with extended
coverage sufficient in amount (subject to reasonable deductibles) to
allow it to replace any of its properties that might be damaged or
destroyed;
(8) notify the Lender in writing promptly upon the occurrence
of any Event of Default as hereafter defined or any event that would
become an Event of Default upon notice or the lapse of time, or both;
and
(9) permit the Lender or any authorized representatives of
the Lender, at the Lender's expense, to visit and inspect any of the
properties of the Borrower including its books of account (and to make
copies thereof and to take extracts therefrom) and to discuss its
affairs, finances and accounts with its officers, all at such
reasonable times and upon reasonable prior notice and as often as may
be reasonably requested. The rights set forth herein shall be
exercised solely in furtherance of the proper interests of the Lender
as a Lender to the Borrower, and the Lender exercising its rights of
inspection hereunder shall maintain, and shall procure that its agents
and representatives maintain, the confidentiality of all financial and
other confidential information of the Borrower acquired by them in
exercising such rights.
(b) For so long as there are Obligations outstanding, without the
Lender's prior written consent;
(i) the Borrower shall not declare, pay or set aside for
payment any dividend or other distribution with respect to its common
stock or any other class
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of securities, or purchase or otherwise acquire any common stock or
any other class of securities, or contract for such purchase or
acquisition; and
(ii) neither the Borrower nor any subsidiary of the Borrower
shall incur, assume, guarantee or otherwise become obligated for in any
way any indebtedness for borrowed money for which the creditor has
recourse to the Borrower except as set forth in Schedule 3.03B.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Indemnification by the Borrower.
(a) If, in connection with the matters that are the subject of this
Agreement, the Lender becomes involved in any capacity in, or incurs any cost,
damage, expense or liability in connection with, any action or legal proceeding,
actual or threatened, involving claims by any third party, or to enforce any of
the Lender's rights under this Agreement or to collect any amount under this
Agreement, the Borrower shall reimburse the Lender, its Affiliates and their
respective directors, officers, employees, agents and controlling persons (each,
an "Indemnified Party") promptly upon request for all expenses (including the
reasonable fees and disbursements of legal counsel, the allocated reasonable
costs of in-house counsel acting as litigators, and the reasonable cost of
investigation and preparation) in connection with or related to such action or
legal proceedings as they are incurred.
The Borrower shall indemnify and hold each Indemnified Party harmless
against all losses, claims, damages or liabilities of any kind, joint or
several, to which such Indemnified Party may become subject in connection with,
or relating to, or arising out of, this Agreement or the Note, or any
transactions contemplated hereby; provided, however, that the Borrower shall not
be liable under the foregoing indemnity agreement in respect of any loss, claim,
damage or liability to the extent that a court having jurisdiction shall have
determined by a final judgment (not subject to further appeal) that such loss,
claim, damage or liability resulted primarily and directly from the willful
misconduct or gross negligence of such Indemnified Party. The Borrower also
shall reimburse the Lender for all the Lender's costs and expenses incurred in
connection with the enforcement or the preservation of the Lender's rights under
this Agreement and the Note, including, without limitation, the reasonable fees
and disbursements of its counsel and additional due diligence expenses incurred
after the occurrence of an Event of
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Default or in connection with any action, claim or proceeding described in this
subsection for which the Lender is entitled to indemnification.
(b) The agreements of the Borrower in this Article VI shall be in
addition to any liabilities that the Borrower may otherwise have and shall apply
whether or not the Lender or any other Indemnified Party is a formal party to
any lawsuit, claim or other proceeding. Solely for purposes of enforcing such
agreements, the Borrower hereby consents to personal jurisdiction, service and
venue in any court in which any claim or proceeding which relates to the
services or matters that are the subject of this Agreement is brought against
the Lender or other Indemnified Party.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01. Occurrence of an Event of Default. An "Event of
Default" shall occur:
(a) immediately upon the occurrence of a Monetary Default; provided,
however, that if the Borrower fails to pay the interest due on any Payment Date
or fails to make a payment required under Section 2.04, an "Event of Default"
shall occur only if the Borrower has not paid such interest or other payment
within one Business Day following such Payment Date or the date on which the
obligation to make such payment arose provided further, that as to any monetary
obligation other than the payment of principal or interest on the Loan, an Event
of Default shall occur if the Borrower has not made such payment within five (5)
Business Days of the date on which such payment was demanded by the Lender;
(b) except as otherwise specifically provided in this Section 7.01, 10
days after the receipt by the Borrower of written notice of a Non-Monetary
Default which is not cured within such 10-day period; provided, however, that if
it is not possible or practicable within 10 days to cure a particular material
Non-Monetary Default, an "Event of Default" shall be deemed to have occurred on
the tenth (10th) day after the occurrence of such Non-Monetary Default; except
that, if, during such 10-day period, the Borrower has commenced to cure such
Non-Monetary Default, is proceeding diligently to cure such Non-Monetary
Default, has informed the Lender of any steps it is taking to cure such
Non-Monetary Default and a likely date of cure, the Lender may consider in its
sole and absolute discretion an extension of such 10-day cure period.
(c) immediately upon, and simultaneously with, the occurrence of an
event of default (meaning a default or breach and the passage of any grace or
cure period provided
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in such agreement without the default having been cured or waived) by the
Borrower under any agreement or other document relating to any indebtedness for
borrowed money of the Borrower or subsidiary of the Borrower or under any other
material agreement of the Borrower or subsidiary of the Borrower;
(d) immediately upon the Borrower's breach of a covenant described in
Section 5.01(b);
(e) the occurrence of any Material Adverse Effect;
(f) immediately upon the appointment of a receiver, conservator,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Borrower or of any substantial part of its property, the
ordering of the winding-up or liquidation of its affairs, or the entry of a
decree or order for relief by a court having jurisdiction in the premises in
respect of the Borrower in any involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect which such order
remains undischarged or unstayed, as the case may be, for 45 days;
(g) immediately upon commencement by the Borrower of a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by the Borrower to the entry of an order for
relief in an involuntary case under any such law or to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Borrower or of any substantial
part of the Borrower's property, or the making by the Borrower of any general
assignment for the benefit of creditors, or the failure of the Borrower
generally to pay its debts as such debts become due, or the taking of action by
the Borrower in furtherance of any of the foregoing; or
(h) this Agreement or the Note shall be terminated or cease to be in
full force and effect in any material respect (other than upon the expiration
thereof in accordance with the terms thereof or termination by the Borrower in
accordance with the terms thereof), or the enforceability thereof shall be
challenged by the Borrower or any Affiliate of the Borrower.
Section 7.02. Effect of Event of Default.
(a) If any such Event of Default shall occur and be continuing, the
Lender may, at the Lender's option, declare the Note to be due and payable,
whereupon the maturity of the then unpaid balance of the Note shall be
accelerated and the principal and all interest accrued thereon shall forthwith
become due and payable without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the Note to the contrary notwithstanding, and the Lender may exercise and shall
have any and all remedies accorded the Lender by applicable Law.
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(b) In case any one or more Events of Default shall occur and be
continuing, the Lender may proceed to protect and enforce its rights or remedies
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provisions contained herein, in
the Note or in any document or instrument delivered pursuant to this Agreement,
or proceed to enforce the payment of the Note or any other legal, equitable or
statutory right or remedy.
(c) No right or remedy herein conferred upon the Lender is intended to
be exclusive of any other right or remedy contained herein, therein or in any
instrument or document delivered in connection with or pursuant to this
Agreement, and every such right or remedy contained herein and therein or now or
hereafter existing at law or in equity or by statute or otherwise may be
exercised separately or in any combination.
(d) No course of dealing between the Borrower and the Lender or any
failure or delay on the Lender's part in exercising any rights or remedies
hereunder shall operate as a waiver of any of the Lender's rights or remedies
and no single or partial exercise of any rights or remedies hereunder shall
operate as a waiver or preclude the exercise of any other rights or remedies
hereunder.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01. Cooperation, Confidentiality, Etc.
(a) Upon reasonable notice the Borrower shall furnish the Lender with
all information and data reasonably requested by the Lender in connection with
its activities on the Borrower's behalf to carry out the terms of this
Agreement, and shall provide the Lender reasonable access to the Borrower's
officers, directors, employees and professional advisers.
(b) Subject to Section 8.01(c) below, the Borrower recognizes and
confirms that the Lender in acting pursuant to this Agreement may use
information in reports and other information provided by others, including,
without limitation, information provided by the Borrower, and that the Lender
does not assume responsibility for and may rely, without independent
verification, on the accuracy and completeness of any such reports and
information. The Borrower agrees that any advice or information rendered by the
Lender in connection with this Agreement is for the confidential use of the
Borrower only and, except as otherwise required by Law, the Borrower will not,
and will not permit any third party to, disclose such advice or information to
others or summarize or refer to such
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advice or information or to the Lender's role hereunder without, in each case,
the Lender's prior written consent.
(c) Each party shall use commercially reasonable efforts to keep
confidential the existence and terms of this Agreement and the transactions
contemplated hereby except (1) such written or oral information as shall be
consistent with information approved by the other parties hereto as permissible
to be so communicated or information that has become public through other
disclosure, (2) oral or written information to the disclosing party's lawyers,
accountants, lenders and other Persons with a need to know such information by
reason of their relationship or prospective relationship to the disclosing
party, (3) to the extent disclosure thereof is required by court order or other
legal process or by law (provided that, prior to disclosure pursuant to such an
order or legal process, the disclosing party shall notify the other parties
hereto so that such other parties may pursue a protective order with respect to
such information), and (4) to the extent disclosure thereof is required in
conjunction with the filing of applications, responses, reports, statements or
other documents and compilations with any governmental entities, including the
Securities and Exchange Commission.
Section 8.02. Waiver of Trial by Jury. Each party hereto waives the
right to trial by jury in any action, suit, proceeding or counterclaim of any
kind arising out of or related to this Agreement. In the event of litigation,
this Agreement may be filed as a written consent to a trial by the court.
Section 8.03. Amendment; Waivers. This Agreement may be amended from
time to time only by written agreement of the parties. No failure on the part of
the Lender to exercise, and no delay in exercising, any right, power, or remedy
under this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under this Agreement preclude any other or further
exercise thereof or the exercise of any other right. No term or provision of
this Agreement may be waived or modified unless such waiver or modification is
in writing and signed by the party against whom such waiver or modification is
sought to be enforced.
Section 8.04. Other Transactions. The Borrower acknowledges that the
Lender and its Affiliates may now or in the future have business dealings with
parties other than the Borrower, which parties compete, directly or indirectly,
with the Borrower. Although the Lender and its Affiliates may, in their normal
course of business, acquire information about the housing market, particular
transactions or such other parties, the Lender shall have no obligation to
disclose such information to the Borrower. The Borrower acknowledges that the
Lender and its Affiliates may engage in their businesses and otherwise compete
with the Borrower without regard to their relationship to the Borrower
hereunder.
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Section 8.05. Costs and Expenses. The Borrower will be responsible
for and bear all of the reasonable fees and expenses incurred in connection with
the preparation, negotiation, and execution of this Agreement and the Note and
any amendments thereof and any reasonable expenses incurred in the enforcement
hereof or thereof and the transactions contemplated thereby, including, without
limitation reasonable fees and expenses of legal counsel for the Lender.
ARTICLE IX
CONSTRUCTION
Section 9.01. Entire Agreement. This Agreement, together with the
Note, including the Exhibits and the Schedules hereto, contains the entire
agreement of the parties with respect to the subject matters thereof, and
supersedes all prior agreements between them, whether oral or written, of any
nature whatsoever with respect to the subject matter hereof.
Section 9.02. Severability Clause. Any part or provision of this
Agreement that is prohibited or that is held to be void or unenforceable shall
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any part or provision of this
Agreement that is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall be ineffective, as to such jurisdiction,
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable Law, the parties
hereto waive any provision of Law that prohibits or renders void or
unenforceable any provision hereof. If the invalidity of any part or provision
of this Agreement shall deprive any party of the economic benefit intended to be
conferred by this Agreement, the parties shall negotiate, in good-faith, to
develop a structure, the economic effect of which is as close as possible to the
economic effect of this Agreement, without regard to such invalidity.
Section 9.03. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts. Each counterpart shall be deemed
to be an original, and all such counterparts shall constitute one and the same
instrument.
Section 9.04. Governing Law; Consent to Forum; Immunities. This
Agreement and the Note shall be governed by and construed in accordance with the
Laws of the Commonwealth of Virginia, without giving effect to the conflict of
laws rules therein. The parties hereto hereby consent and agree that the Circuit
Court of Arlington County, Virginia, or, at the Lender's option, the United
States District Court for the Eastern
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District of Virginia, shall have exclusive jurisdiction to hear and determine
any claims or disputes between the parties hereto pertaining to this Agreement
and the Note or to any matter arising out of or related to this Agreement and
the Note. The parties hereto expressly submit and consent in advance to such
jurisdiction in any action or suit commenced in any such court, and hereby waive
any objection which it may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens and hereby consent to the granting of
such legal or equitable relief as is deemed appropriate by such court. Each
party hereto irrevocably consents to the service of process by registered or
certified mail, postage prepaid, to it at its address given pursuant to Section
10.01 hereof. Nothing in this Agreement or the Note shall be deemed or operate
to affect the right of the Lender to serve legal process in any other manner
permitted by applicable Law, or to preclude the enforcement by the Lender of any
judgment or order obtained in such forum or the taking of any action under this
Agreement or the Note to enforce same in any other appropriate forum or
jurisdiction.
To the extent that the Borrower has or may hereafter acquire any
immunity from the jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to the Borrower or the
Borrower's property, the Borrower hereby irrevocably waives such immunity in
respect of its obligations under this Agreement.
To the extent permitted by applicable Law, each party hereto
irrevocably waives any right such party may have to consequential or punitive
damages from any other party and hereby agrees not to assert any claim for such
damages.
Section 9.05. No Agency; No Partnership; No Joint Venture. Neither
the Lender nor the Borrower is the agent or representative of the other, and
nothing in this Agreement shall be construed to make either the Lender or the
Borrower liable to any third party for services performed by such third party or
for debts or claims accruing to such third party against either the Lender or
the Borrower. This Agreement is intended by the parties hereto to constitute a
loan agreement and nothing contained herein nor the acts of the parties hereto
shall be construed to create a partnership, agency, equity investment, profit
sharing agreement, joint venture or sale of receivables between the Lender and
the Borrower. The parties agree that they will not file any federal, state or
local income tax return that is inconsistent with such intended treatment.
Section 9.06. Judicial Interpretation. Should any provision of this
Agreement or the Note require judicial interpretation, it is agreed that a court
interpreting or construing the same shall not apply a presumption that the terms
hereof shall be more strictly construed against any Person by reason of the rule
of construction that a document is to be construed more strictly against the
Person who itself or through its agent prepared the
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same, it being agreed that all the parties hereto have participated in the
preparation of this Agreement.
Section 9.07. Recitals. The recitals of this Agreement are not
intended to constitute substantive provisions hereof.
Section 9.08. Rules of Interpretation. Except as otherwise expressly
provided in this Agreement, the following rules shall apply hereto:
(a) the singular includes the plural and the plural includes the
singular;
(b) "include" and "including" are not limiting;
(c) a reference to any agreement or other contract includes permitted
supplements, amendments and other modifications;
(d) a reference to a law (or Law) includes any amendment or
modification of such law (or Law) and the rules or regulations issued
thereunder;
(e) a reference to a Person includes its permitted successors and
assigns in the applicable capacity;
(f) a reference in this Agreement to an Article, Section, clause,
recital or Exhibit is to the Article, Section, clause, recital or Exhibit of
this Agreement unless otherwise expressly provided;
(g) words such as "hereunder", "hereto", "hereof", and "herein" and
other words of like import shall, unless the context clearly indicates to the
contrary, refer to the whole of this Agreement and not to any particular
Article, Section or clause hereof;
(h) any right in this Agreement may be exercised at any time and from
time to time in accordance with the terms of this Agreement;
(i) the headings of the Articles and Sections are for convenience and
shall not affect the meaning of this Agreement; and
(j) time is of the essence in performing all obligations.
20
<PAGE>
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. All demands, notices, requests for consent and
other communications hereunder shall be in writing and personally delivered,
mailed by certified mail, return receipt requested, and telecopied, and shall be
deemed to have been duly given upon transmission and confirmation of receipt;
if to the Borrower:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Mr. Darryl W. Copeland, Jr.
Executive Vice President
and Chief Financial Officer
Telephone Number: (312) 977-3692
Telecopier Number: (312) 977-3699
with a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 4400
Chicago, Illinois 60601
Attn: Mr. Robert J. Rudnik
Telephone Number: (312) 977-3760
Telecopier Number: (312) 977-3769
and to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
Telephone Number: (312) 558-5882
Telecopier Number: (312) 558-5700
if to the Lender:
21
<PAGE>
FBR Asset Investment Corporation
Potomac Tower
1001 Nineteenth Street North, 18th Floor
Arlington, VA 22209
Attention: Ms. Elaine M. Clancy
Telephone Number: (703) 312-9627
Telecopier Number: (703) 312-9602
with a copy to:
Thomas Y. Hiner, Esq.
Hunton & Williams
Riverfront Plaza - East Tower
951 East Byrd Street
Richmond, VA 23219
Telephone Number: (804) 788-8279
Telecopier Number: (804) 788-8218
or, as to any party, at such other address or telecopy number as shall be
designated by such party in a written notice to each other party.
Section 10.02. Further Agreements. The Borrower and the Lender each
agree to execute and deliver to the other such additional documents, instruments
or agreements as may be necessary or appropriate to effectuate the purposes of
this Agreement.
Section 10.03. Third-Party Rights. This Agreement is for the exclusive
benefit of the parties hereto and their respective successors and assigns and
shall not be deemed to give any legal or equitable right to any other Person.
Section 10.04. Advice from Independent Counsel. The parties hereto
understand that this Agreement and the Note are legally binding agreements that
may affect such party's rights. Each party represents to the other that it has
received legal advice from counsel of its choice regarding the meaning and legal
significance of this Agreement and the Note and that it is satisfied with its
legal counsel and the advice received from it.
Section 10.05. Reproduction of Documents. This Agreement and all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, (b) documents received by any
party at the closing, and (c) financial statements, certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties agree that any such
22
<PAGE>
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
THE BORROWER: BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ Darryl W. Copeland, Jr.
-----------------------------------
Name: Darryl W. Copeland, Jr.
Title: Executive Vice President
THE LENDER: FBR ASSET INVESTMENT CORPORATION
By: /s/ Elaine M. Clancy
------------------------------------
Name: Elaine M. Clancy
Title: Chief Financial Officer
24
<PAGE>
EXHIBITS AND SCHEDULES
Exhibit A Note
Schedule 3.01A Restated Certificate of Incorporation
Schedule 3.01B Amended and Restated Bylaws
Schedule 3.03A Use of Loan Proceeds
Schedule 3.03B Indebtedness
THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER
AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT (THE
"SUBORDINATION AGREEMENT") DATED JANUARY 25, 1999, AMONG FBR ASSET INVESTMENT
CORPORATION, BROOKDALE LIVING COMMUNITIES, INC. (THE "BORROWER"), AND LASALLE
NATIONAL BANK ("BANK"), TO THE INDEBTEDNESS OWED BY THE BORROWER TO THE HOLDERS
OF ALL OF THE NOTES ISSUED PURSUANT TO THAT CERTAIN LOAN AGREEMENT, DATED APRIL
27, 1998 AS AMENDED THROUGH THE DATE HEREOF, BETWEEN THE BORROWER AND BANK, AS
SUCH LOAN AGREEMENT MAY BE AMENDED, SUPPLEMENTED, OR OTHERWISE MODIFIED FROM
TIME TO TIME; AND EACH HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE
BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.
PROMISSORY NOTE
$5,000,000 January 25, 1999
FOR VALUE RECEIVED, the undersigned, BROOKDALE LIVING COMMUNITIES,
INC., a Delaware corporation, whose address is 77 West Wacker Drive, Suite 4400,
Chicago, Illinois 60601 (the "Borrower"), promises to pay to the order of FBR
ASSET INVESTMENT CORPORATION, a Virginia corporation, whose address is Potomac
Tower, 1001 Nineteenth Street North, 18th Floor, Arlington, Virginia 22209 (the
"Lender") on or before the Maturity Date, in lawful money of the United States
of America, the principal sum of FIVE MILLION DOLLARS ($5,000,000) plus interest
at the times and in the amounts and manner as provided in the Loan Agreement
(the "Agreement"), dated as of January 25, 1999, between the Borrower and the
Lender.
MAXIMUM RATE OF INTEREST: It is intended that the rate of interest
hereon shall never exceed the maximum rate, if any, which may be legally charged
on the Loan evidenced by this Note ("Maximum Rate"), and if the provisions for
interest contained in this Note would result in a rate higher than the Maximum
Rate, interest shall nevertheless be limited to the Maximum Rate and any amounts
which may be paid toward interest in excess of the Maximum Rate shall be applied
to the reduction of principal, or, at the option of the Lender, returned to the
Borrower.
DUE DATE: All indebtedness evidenced hereby not paid before the
Maturity Date shall be due and payable on the Maturity Date.
PLACE OF PAYMENT: All payments hereon shall be made, and all notices to
the Lender required or authorized hereby shall be given, at the office of the
Lender at the
<PAGE>
address designated in the heading of this Note, or to such other place as the
Lender may from time to time direct by written notice to the Borrower.
PAYMENT AND EXPENSES OF COLLECTION: All amounts payable hereunder are
payable by wire transfer in immediately available funds to the account number
specified by the Lender, in lawful money of the United States. Payments remitted
by the Borrower via wire transfer initiated after 3:00 p.m. New York City time
shall be deemed to be received on the next Business Day. The Borrower agrees to
pay all costs of collection when incurred, including, without limiting the
generality of the foregoing, reasonable attorneys' fees through appellate
proceedings and allocated cost of in-house counsel, and to perform and comply
with each of the covenants, conditions, provisions and agreements contained in
every instrument now evidencing or securing said indebtedness. If any suit or
action be instituted to enforce this Note, the Borrower promises to pay, in
addition to the cost and disbursements otherwise allowed by applicable Law, such
sums as the court may adjudge reasonable attorneys' fees in such suit or action.
DEFAULTS: Upon the happening of an Event of Default (as defined in the
Agreement), the Lender shall have all rights and remedies set forth in the
Agreement.
The failure to exercise any of the rights and remedies set forth in the
Agreement shall not constitute a waiver of the right to exercise the same or any
other option at any subsequent time in respect of the same event or any other
event. The acceptance by the Lender of any payment hereunder which is less than
payment in full of all amounts due and payable at the time of such payment shall
not constitute a waiver of the right to exercise any of the foregoing rights and
remedies at that time or at any subsequent time or nullify any prior exercise of
any such rights and remedies without the express consent of Lender, except as
and to the extent otherwise provided by applicable Law.
WAIVERS: To the extent permitted by applicable Law, the Borrower waives
diligence, presentment, protest and demand and also notice of protest, demand,
dishonor and nonpayment of this Note, and expressly agrees that this Note, or
any payment hereunder, may be extended from time to time, and consents to the
acceptance of collateral, the release of any collateral for this Note, the
release of any party primarily or secondarily liable hereon, and that it will
not be necessary for the Lender, in order to enforce payment of this Note, to
first institute or exhaust Lender's remedies against the Borrower or any other
party liable hereon or against any collateral for this Note. None of the
foregoing shall affect the liability of the Borrower and any endorsers or
guarantors hereof. No extension of time for the payment of this Note, or any
installment hereof, made by agreement by the Lender with any person now or
hereafter liable for the payment of this Note, shall affect the liability under
this Note of the Borrower, even if the Borrower is not a party to such
agreement; provided, however, the Lender and the Borrower, by written agreement
between them, may affect the liability of the Borrower.
TERMINOLOGY: Any reference herein to the Lender shall be deemed to
include and apply to every subsequent holder of this Note. Capitalized terms
used but not defined
<PAGE>
herein shall have the meanings assigned to such terms in the Agreement. Words of
masculine or neuter import shall be read as if written in the neuter or
masculine or feminine when appropriate.
AGREEMENT: Reference is made to the Agreement for provisions as to
payments, collateral and acceleration.
THIS NOTE IS GOVERNED BY THE PROVISIONS OF THE AGREEMENT WHICH IS INCORPORATED
HEREIN BY REFERENCE, AND IN THE EVENT ANY TERMS OF THIS NOTE ARE INCONSISTENT
WITH THE TERMS OF THE AGREEMENT, THE TERMS OF THE AGREEMENT SHALL GOVERN THIS
NOTE. NOTWITHSTANDING THE FOREGOING SENTENCE, NO REFERENCE HEREIN TO THE
AGREEMENT AND NO PROVISION OF THIS NOTE OR OF THE AGREEMENT SHALL ALTER OR
IMPAIR THE OBLIGATION OF THE BORROWER, WHICH IS ABSOLUTE AND UNCONDITIONAL, TO
PAY THE PRINCIPAL OF AND INTEREST ON THIS NOTE AT THE RESPECTIVE TIMES AND AT
THE RATES HEREIN PRESCRIBED.
GOVERNING LAW; CONSENT TO FORUM; IMMUNITIES: This Note and the
Agreement shall be governed by and construed in accordance with the Laws of the
Commonwealth of Virginia, without giving effect to the conflict of laws rules
therein. The parties hereto hereby consent and agree that the Circuit Court of
Arlington County, Virginia, or, at the Lender's option, the United States
District Court for the Eastern District of Virginia, shall have exclusive
jurisdiction to hear and determine any claims or disputes between the parties
hereto pertaining to the Note or the Agreement or to any matter arising out of
or related to the Note or the Agreement. The parties hereto expressly submit and
consent in advance to such jurisdiction in any action or suit commenced in any
such court, and hereby waive any objection which it may have based upon lack of
personal jurisdiction, improper venue or forum non conveniens and hereby consent
to the granting of such legal or equitable relief as is deemed appropriate by
such court. Each party hereto irrevocably consents to the service of process by
registered or certified mail, postage prepaid, to it at its address given
pursuant to Section 10.01 of the Agreement. Nothing in the Agreement or the Note
shall be deemed or operate to affect the right of the Lender to serve legal
process in any other manner permitted by applicable Law, or to preclude the
enforcement by the Lender of any judgment or order obtained in such forum or the
taking of any action under the Agreement or the Note to enforce same in any
other appropriate forum or jurisdiction.
To the extent that the Borrower has or may hereafter acquire any
immunity from the jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to the Borrower or the
Borrower's property, the Borrower hereby irrevocably waives such immunity in
respect of its obligations under the Agreement.
<PAGE>
To the extent permitted by applicable Law, each party hereto
irrevocably waives any right such party may have to consequential or punitive
damages from any other party and hereby agrees not to assert any claim for such
damages.
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ Darryl W. Copeland, Jr.
----------------------------------
Name: Darryl W. Copeland, Jr.
Title: Executive Vice President and
Chief Financial Officer
================================================================================
GUARANTY OF COMPLETION
made by
BROOKDALE LIVING COMMUNITIES, INC.
as guarantor,
in favor of
BATTERY PARK CITY AUTHORITY
Effective as of February 28, 1999
================================================================================
<PAGE>
GUARANTY OF COMPLETION
This GUARANTY OF COMPLETION (this "Guaranty"), effective as of
February 28, 1999, made by BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation ("Guarantor"), in favor of BATTERY PARK CITY AUTHORITY, a body
corporate and politic constituting a public benefit corporation of the State of
New York (together with its successors and assigns, "BPCA").
R E C I T A L S:
A. Pursuant to that certain Ground Lease (undated) (the
"Lease") by and between Brookdale Living Communities of New York-BPC, Inc., a
Delaware corporation and wholly owned subsidiary of Guarantor, as lessee
("Operator"), and BPCA, as lessor, BPCA has agreed to lease the land commonly
known as 455 North End Avenue, New York, New York (the "Land") to Operator or
its permitted assignee subject to the satisfaction of the conditions contained
in that certain Agreement Regarding Lease and Escrow dated July 14, 1998 (the
"Original Escrow Agreement")by and among BPCA, Operator and Windels, Marx,
Davies & Ives, as escrowee, as amended by those certain letter agreements dated
as of September 30, 1998, December 29, 1998, and February 28, 1999 (as amended,
the "Escrow Agreement").
B. As a condition to BPCA's allowing Operator to construct the
Buildings (as defined in the Lease) on the Land prior to satisfying the
condition contained in Section 3(ii)(w) of the Original Escrow Agreement, BPCA
is requiring that Guarantor execute and deliver to BPCA this Guaranty.
NOW, THEREFORE, in consideration of the premises set forth
herein and as an inducement for and in consideration of the agreement of BPCA to
allow Operator to construct the Buildings on the Land prior to satisfying the
condition contained in Section 3(ii)(w) of the Original Escrow Agreement,
Guarantor hereby agrees and covenants to BPCA as follows:
1. Definitions.
(a) All capitalized terms used and not defined herein
shall have the respective meanings given such terms in the Lease.
(b) The term "including" means including without
limitation.
(c) "Guaranty Termination Date" means the earlier of:
(i) the date on which Substantial Completion of the Buildings has occurred and
all costs, expenses and liabilities incurred in connection therewith (including,
without limitation, for labor, materials and services) have been paid in full
(except to the extent to be paid for from retainage), or (ii) the date upon
which Guarantor has satisfied the condition contained in Section 3(ii)(w) of the
Escrow Agreement, or (iii) the date on which BPCA draws on the Pre-Lease Letter
of Credit (as such term is defined in that certain letter agreement, dated as of
February 28, 1999, between BPCA and Operator).
<PAGE>
2. Guaranty.
(a) Subject to the terms and conditions contained
herein, Guarantor hereby irrevocably, absolutely and unconditionally guarantees
to BPCA the completion of the Buildings by Operator in accordance with that
certain letter agreement, dated as of February 28, 1999, between BPCA and
Operator. The obligations which are the subject of the guaranty referred to in
this Section 2(a) are hereinafter collectively referred to as the "Guarantied
Obligations".
(b) Subject to the terms and conditions contained
herein, Guarantor hereby irrevocably, absolutely and unconditionally guarantees
to BPCA that Operator shall, in accordance with the terms of the Lease, fully
and punctually pay and discharge (i) any and all costs, expenses and liabilities
for or incurred in connection with the Guarantied Obligations; (ii) all claims
and demands for labor, materials and services used or incurred in connection
with the Guarantied Obligations which are or may become due and payable, or, if
unpaid, are or may become liens on the Premises or any part thereof; and (iii)
any liens in favor of any and all Persons furnishing materials, labor or
services for or in connection with the Guarantied Obligations such that the
Premises shall be and remain free and clear of any and all liens other than the
Title Matters, subject, however, to Operator's rights, if any, set forth in the
Lease with regard to the contesting of liens and obtaining a Mortgage.
(c) If Operator does not perform the Guarantied
Obligations as provided in paragraphs (a) and (b) of this Section 2, then upon
receipt of a written demand from BPCA:
(i) Guarantor shall, upon receipt of a written
demand by BPCA, promptly perform and complete the Guarantied Obligations or
cause the Guarantied Obligations to be performed and completed, in accordance
with the requirements of that certain letter agreement, dated as of February 28,
1999, between BPCA and Operator; and
(ii) if Guarantor fails to perform the Guarantied
Obligations in accordance with this Guaranty, then, to the extent that BPCA
shall (A) cause any Guarantied Obligations to be performed, (B) pay any costs,
expenses or liabilities in connection with the Guarantied Obligations, or (c)
cause any lien, claim or demand to be released or paid or bonded, Guarantor
shall, upon demand by BPCA, reimburse BPCA for all sums paid and all costs,
expenses or liabilities incurred by BPCA in connection therewith. All such sums
shall be payable by Guarantor to BPCA on demand.
(d) Notwithstanding anything to the contrary contained
herein or in any other document, and subject to the provisions of Section 4(i)
below, all of Guarantor's obligations under this Guaranty (including the
Guarantied Obligations hereunder) shall terminate on the Guaranty Termination
Date, provided that Guarantor's obligations under clauses (ii) and (iii) of
Section 2(b) above relating to labor, materials and services provided, furnished
or performed at or to the Premises shall continue with respect to any claims,
demands and liens referred to therein, whether asserted before or after the
Guaranty Termination Date.
<PAGE>
(e) Notwithstanding anything to the contrary contained
herein, BPCA shall be free to elect any remedy contemplated by the provisions of
the Escrow Agreement without regard to any other rights or remedies set forth
herein.
3. Representations and Warranties. Guarantor hereby represents
and warrants to BPCA as follows (which representations and warranties shall be
given as of the date hereof and shall survive the execution and delivery of this
Guaranty):
(a) Organization, Authority and Execution. Guarantor is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all necessary power and authority to own
its properties and to conduct its business as presently conducted or proposed to
be conducted and to enter into and perform this Guaranty and all other
agreements and instruments to be executed by it in connection herewith. This
Guaranty has been duly executed and delivered by Guarantor.
(b) Enforceability. This Guaranty constitutes a legal,
valid and binding obligation of Guarantor, enforceable against Guarantor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
(c) No Violation. The execution, delivery and
performance by Guarantor of the Guarantied Obligations has been duly authorized
by all necessary action, and do not and will not violate any law, regulation,
order, writ, injunction or decree of any court or governmental body, agency or
other instrumentality applicable to Guarantor in effect on the date hereof, or
result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any
mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the
assets of Guarantor pursuant to the terms of Guarantor's certificate of
incorporation or by-laws, or any mortgage, indenture, agreement or instrument to
which Guarantor is a party or by which it or any of its properties is bound.
(d) No Litigation. There are no actions, suits or
proceedings at law or at equity, pending or, to Guarantor's best knowledge,
threatened against or affecting Guarantor or which involve the validity or
enforceability of this Guaranty or with respect to which an adverse decision is
reasonably likely which would materially adversely affect the financial
condition of Guarantor or the ability of Guarantor to perform any of the
Guarantied Obligations. Guarantor is not in default beyond any applicable grace
or cure period with respect to any order, writ, injunction, decree or demand of
any Governmental Authority which would materially adversely affect the financial
condition of Guarantor or the ability of Guarantor to perform any of its
obligations under this Guaranty.
(e) Consents. All consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, all
Governmental Authorities that are required in connection with the valid
execution, delivery and performance by Guarantor of this Guaranty have been
obtained or will be obtained when required.
<PAGE>
4. Unconditional Character of Obligations of Guarantor.
(a) Subject to Section 2(d) above, the obligations of
Guarantor hereunder shall be irrevocable, absolute and unconditional. This
Guaranty is a guaranty of performance and not a guaranty of collection.
(b) The Guarantied Obligations, and the rights of BPCA
to enforce the same by proceedings, whether by action at law, suit in equity or
otherwise, shall not be in any way affected by any of the following:
(i) any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, receivership,
conservatorship, winding up or other similar proceeding involving or affecting
Operator or Guarantor;
(ii) the sale, transfer or conveyance of the
Premises or any interest therein to any Person, whether now or hereafter having
or acquiring an interest in the Premises or any interest therein and whether or
not pursuant to any foreclosure, trustee sale or similar proceeding against
Operator, or the Premises or any interest therein;
(iii) the release of Operator from the performance
or observance of any of the agreements, covenants, terms or conditions contained
in the Lease or the Escrow Agreement by operation of law or otherwise; or
(iv) any remedy elected by BPCA under the terms of
the Escrow Agreement.
(c) Except as otherwise specifically provided in this
Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an
action brought by BPCA arising hereunder to enforce this Guaranty based on
claims of waiver, release, surrender, alteration, compromise or equitable
discharge.
(d) BPCA may deal with Operator, and affiliates of
Operator in the same manner and as freely as if this Guaranty did not exist and
shall be entitled, among other things, to grant Operator or any other Person
such extension or extensions of time to perform any act or acts as may be deemed
advisable by BPCA, at any time and from time to time, without terminating,
affecting or impairing the validity of this Guaranty or the Guarantied
Obligations.
(e) No compromise, alteration, amendment, modification,
extension, indulgence, renewal, release or other change of, or waiver,
suspension, consent, compromise, delay, omission, failure to act, forbearance or
other action with respect to, any liability or obligation under or with respect
to, or of any of the terms, covenants or conditions of, the Lease shall in any
way alter, impair or affect any of the Guarantied Obligations or BPCA's rights
hereunder, and Guarantor agrees that if any provisions in Article 11 of the
Lease relating to the construction of the Buildings are modified with BPCA's
consent, the Guarantied Obligations shall automatically be deemed modified
<PAGE>
to include such modifications without the necessity of notice to Guarantor
except as may otherwise be required under the Lease.
(f) BPCA may proceed to protect and enforce any or all
of its rights under this Guaranty by suit in equity or action at law, whether
for the specific performance of any covenants or agreements contained in this
Guaranty or otherwise, or to take any action authorized or permitted under
applicable law, and shall be entitled to require and enforce the performance of
all acts and things required to be performed hereunder by Guarantor. Each and
every remedy of BPCA shall, to the extent permitted by law, be cumulative and
shall be in addition to any other remedy given hereunder or under the Escrow
Agreement or now or hereafter existing at law or in equity. No single exercise
of BPCA's power to bring any action or institute any proceeding shall be deemed
to exhaust such power, but such power shall continue undiminished and may be
exercised from time to time as often as BPCA may elect until the earlier of the
Guaranty Termination Date or the date that all the Guarantied Obligations have
been satisfied. BPCA shall be under no obligation to take any action and shall
not be liable for any action taken or any failure to take action or any delay in
taking action against Guarantor, Operator, or any other Person or otherwise with
respect to the Guarantied Obligations.
(g) No waiver shall be deemed to have been made by BPCA
of any rights hereunder unless the same shall be in writing and signed by BPCA,
and any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of BPCA or the obligations of
Guarantor to BPCA in any other respect or at any other time.
(h) At the option of BPCA, Guarantor may be joined in
any action or proceeding commenced by BPCA against Operator in connection with
or based upon the Guaranteed Obligations and recovery may be had against
Guarantor in such action or proceeding or in any independent action or
proceeding against Guarantor, but only to the extent of Guarantor's liability
hereunder, without any requirement that BPCA first assert, prosecute or exhaust
any remedy or claim against Operator or any other Person, or any security for
the obligations of Operator, or any other Person.
(i) Guarantor agrees that this Guaranty shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
payment is made by Operator or Guarantor to BPCA with respect to the Guaranteed
Obligations and such payment is rescinded or must otherwise be returned by BPCA
(as determined by BPCA in its reasonable discretion) upon insolvency,
bankruptcy, liquidation, reorganization, readjustment, composition, dissolution,
receivership, conservatorship, winding up or other similar proceeding involving
or affecting Guarantor, all as though such payment had not been made.
5. Entire Agreement/Amendments. This instrument represents the
entire agreement between the parties with respect to the subject matter hereof.
The terms of this Guaranty shall not be waived, altered, modified, amended,
supplemented or terminated in any manner whatsoever except by written instrument
signed by BPCA and Guarantor.
<PAGE>
6. Successors and Assigns. This Guaranty shall be binding
upon Guarantor, and Guarantor's successors and assigns, may not be assigned or
delegated by Guarantor and shall inure to the benefit of BPCA and its successors
and assigns.
7. Applicable Law and Consent to Jurisdiction. This Guaranty
was partially negotiated in the State of New York, and accepted by BPCA in the
State of New York, which State the parties agree has a substantial relationship
to the parties and to the underlying transaction embodied hereby, and in all
respects, this Guaranty shall be governed by, and construed in accordance with,
the substantive laws of the State of New York. Guarantor irrevocably (a) agrees
that any suit, action or other legal proceeding arising out of or relating to
this Guaranty may be brought in a court of record in the City and County of New
York or in the Courts of the United States of America located in the Southern
District of New York, (b) consents to the jurisdiction of each such court in any
such suit, action or proceeding and (c) waives any objection which it may have
to the laying of venue of any such suit, action or proceeding in any of such
courts and any claim that any such suit, action or proceeding has been brought
in an inconvenient forum. Guarantor irrevocably consents to the service of any
and all process in any such suit, action or proceeding by service of copies of
such process to Guarantor at its address provided in Section 10 hereof. Nothing
in this Section 7, however, shall affect the right of BPCA to serve legal
process in any other manner permitted by law or affect the right of BPCA to
bring any suit, action or proceeding against Guarantor in the courts of any
other jurisdictions.
8. Section Headings. The headings of the sections and
paragraphs of this Guaranty have been inserted for convenience of reference only
and shall in no way define, modify, limit or amplify any of the terms or
provisions hereof.
9. Severability. Any provision of this Guaranty which may be
determined by any competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, Guarantor hereby
waives any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.
10. Notices. All notices, demands, requests, consents,
approvals or other communications (collectively called "Notices") required or
permitted to be given hereunder to BPCA or Guarantor or which are given to BPCA
or Guarantor with respect to this Guaranty shall be in writing and shall be (a)
sent by United States registered or certified mail, return receipt requested,
postage prepaid, addressed as set forth below, (b) sent by a national overnight
courier or delivery service or (c) personally delivered with receipt
acknowledged to such address, or in either case, to such other address(es) as
the party in question shall have specified most recently by like Notice.
<PAGE>
If to BPCA, to:
Battery Park City Authority
One Financial Center, 24th Floor
New York, New York 10281-1097
Attn: President
with a copy to:
Battery Park City Authority
One Financial Center, 24th Floor
New York, New York 10281-1097
Attn: Carl Jaffee, Esq.
If to Guarantor, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Darryl W. Copeland, Jr.
with a copy to:
Brookdale Living Communities, Inc.
77 West Wacker Drive, Suite 4400
Chicago, IL 60601
Attention: Robert J. Rudnik, Esq.
Notices which are given in the manner aforesaid shall be deemed to have been
given or served for all purposes hereunder (i) on the date on which such notice
shall have been personally delivered as aforesaid, (ii) on the date of delivery
by overnight carrier or mail as evidenced by the return receipt therefor, or
(iii) on the date of failure to deliver by reason of refusal to accept delivery
or changed address of which no Notice was given.
11. Expenses. Guarantor hereby agrees to pay all costs, charges
and expenses, including, without limitation, reasonable attorneys' fees and
disbursements, that may be incurred by BPCA in enforcing the covenants,
agreements, obligations and liabilities of Guarantor under this Guaranty.
[Remainder of page intentionally left blank; signature page follows.]
<PAGE>
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of
the date first above written.
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware Corporation
By: /s/ Darryl W. Copeland, Jr.
-------------------------------
Darryl W. Copeland, Jr.
Executive Vice President
<PAGE>
AGREED AND ACKNOWLEDGED:
BATTERY PARK CITY AUTHORITY
By: /s/ Johnthan Mura
-----------------------
Exhibit 12
<TABLE>
<CAPTION>
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 March 31,
1999 1998
---- ----
EARNINGS
- --------
<S> <C> <C>
Income before income tax, expense per consolidated financial
statements ................................................. $ 4,336 $ 1,725
Interest cost................................................... 7,486 4,914
Interest cost (capitalized)..................................... (400) (203)
Amortization of debt expense.................................... 383 303
Preferred stock dividends....................................... -- --
------------ -----------
Earnings ....................................................... $ 11,805 $ 6,739
============ ===========
FIXED CHARGES
- -------------
Interest cost .................................................. $ 7,486 $ 4,914
Amortization of debt expense.................................... 383 303
Preferred stock dividends....................................... -- --
------------ -----------
Total fixed charges ............................................ $ 7,869 $ 5,217
============ ===========
Ratio of earnings to combined fixed charges and preferred
stock dividends ............................................ 1.50 1.29
============ ===========
Excess of earnings to combined fixed charges and preferred
stock dividends ............................................ $ 3,936 $ 1,522
============ ===========
</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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 902
<SECURITIES> 0
<RECEIVABLES> 2,456
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,105
<PP&E> 118,721
<DEPRECIATION> 6,657
<TOTAL-ASSETS> 265,620
<CURRENT-LIABILITIES> 50,187
<BONDS> 92,489
0
0
<COMMON> 116
<OTHER-SE> 103,957
<TOTAL-LIABILITY-AND-EQUITY> 265,620
<SALES> 23,778
<TOTAL-REVENUES> 25,517
<CGS> 12,792
<TOTAL-COSTS> 21,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,127
<INCOME-PRETAX> 4,336
<INCOME-TAX> (1,579)
<INCOME-CONTINUING> 2,757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,757
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
