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 or 1934
For the quarterly period ended September 30, 1999
[ ] Transition report under Section 13
or 15(d) of the Securities Exchange Act of 1934
Commission file number 1-13445.
CAPITAL SERNIOR LIVING CORPORATION
----------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-2678809
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14160 Dallas Parkway, Suite 300, Dallas, Texas 75240
----------------------------------------------------
(Address of principal executive offices)
972-770-5600
------------
(Registrant's telephone number, including area code)
Indicate by check 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
--- ---
As of November 11, 1999, the Registrant had outstanding 19,717,347 shares of its
Common Stock, $.01 par value.
1
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<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING CORPORATION
INDEX
PAGE
NUMBER
------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - -
September 30, 1999 and December 31, 1998 3
Consolidated Statements of Income - -
Three and Nine Months Ended September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows - -
Nine Months Ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 20
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Part II. Other Information
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports on Form 8-K 21
Signature
</TABLE>
2
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PART 1. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, December 31,
1999 1998
------------------- -----------------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................. $ 21,879,628 $ 35,827,270
Accounts receivable, net............................................... 3,583,493 2,955,507
Accounts receivable from affiliates.................................... 17,113,975 7,217,127
Interest receivable.................................................... 1,332,998 189,482
Federal and state income taxes receivable.............................. 1,321,720 --
Deferred taxes......................................................... 287,040 287,040
Prepaid expenses and other............................................. 223,182 448,790
-------------- -------------
Total current assets............................................. 45,742,036 46,925,216
Property and equipment, net.................................................. 115,256,536 118,943,953
Deferred taxes............................................................... 9,805,985 10,108,715
Notes receivable from affiliates............................................. 36,730,837 11,728,162
Investments in limited partnerships.......................................... 13,641,754 14,536,972
Management contract rights, net.............................................. 159,685 195,631
Goodwill, net................................................................ 1,181,087 1,213,876
Deferred financing charges, net.............................................. 742,037 530,531
Other assets................................................................. 2,403,148 1,083,679
------------- -------------
Total assets..................................................... $ 225,663,105 $ 205,266,735
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 1,388,863 $ 2,780,513
Accrued expenses....................................................... 2,552,620 2,231,895
Current portion of notes payable....................................... 1,052,781 48,419,050
Customer deposits...................................................... 880,044 851,375
Federal and state income taxes payable................................. -- 1,668,602
------------- -------------
Total current liabilities........................................ 5,874,308 55,951,435
Deferred income from affiliates.............................................. 1,912,300 792,240
Deferred income.............................................................. 4,848 115,062
Notes payable, net of current portion........................................ 58,315,251 13,696,797
Line of credit............................................................... 30,895,275 18,974,186
Minority interest in consolidated partnership................................ 11,923,269 11,220,836
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value:
Authorized shares 15,000,000; no shares issued or outstanding.... -- --
Common stock, $.01 par value:
Authorized shares 65,000,000; issued and outstanding
19,717,347 at September 30, 1999 and December 31, 1998........... 197,173 197,173
Additional paid-in capital............................................. 91,740,251 91,740,251
Retained earnings...................................................... 24,800,430 12,578,755
------------- -------------
Total shareholders' equity....................................... 116,737,854 104,516,179
------------- -------------
Total liabilities and shareholders' equity....................... $ 225,663,105 $ 205,266,735
============= =============
</TABLE>
See accompanying notes.
3
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<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
--------------- ----------- ---------------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Resident and healthcare revenue.............. $ 10,304,371 $ 5,443,695 $ 30,815,664 $ 15,942,900
Rental and lease income...................... 992,832 1,073,421 3,187,874 3,204,391
Unaffiliated management services revenue..... 640,789 604,333 1,983,042 1,812,136
Affiliated management services revenue....... 113,661 374,698 340,926 1,191,782
Unaffiliated development fees................ 354,604 153,529 1,202,103 931,800
Affiliated development fees.................. 4,154,094 2,906,262 10,455,429 5,061,244
------------ ------------ ------------ ------------
Total revenues........................... 16,560,351 10,555,938 47,985,038 28,144,253
Expenses:
Operating expenses........................... 6,270,523 3,644,611 18,261,530 10,957,025
General and administrative expenses.......... 2,130,434 1,433,166 6,486,385 4,858,546
Depreciation and amortization................ 1,142,619 571,996 3,396,820 1,695,494
------------ ------------ ------------ ------------
Total expenses........................... 9,543,576 5,649,773 28,144,735 17,511,065
------------ ------------ ------------ ------------
Income from operations............................. 7,016,775 4,906,165 19,840,303 10,633,188
Other income (expense):
Gain on sale of assets......................... 759,869 -- 759,869 --
Interest income................................ 1,797,880 1,207,146 5,190,252 3,403,035
Interest expense............................... (1,898,749) (187,836) (4,867,279) (547,724)
------------ ------------ ------------ ------------
Income before income taxes and minority interest in
consolidated partnership.................. 7,675,775 5,925,475 20,923,145 13,488,499
Provision for income taxes...................... (2,792,573) (2,289,103) (7,781,066) (5,185,848)
------------ ------------ ------------ ------------
Income before minority interest in consolidated
partnership.................................. 4,883,202 3,636,372 13,142,079 8,302,651
Minority interest in consolidated partnership...... (496,926) (130,380) (920,404) (359,912)
------------ ------------ ------------ ------------
Net income......................................... $ 4,386,276 $ 3,505,992 $ 12,221,675 $ 7,942,739
============ ============ ============ ============
Net income per share:
Basic and diluted............................ $ 0.22 $ 0.18 $ 0.62 $ 0.40
------------ ------------ ------------ ------------
Weighted average shares outstanding - basic.. 19,717,347 19,717,347 19,717,347 19,717,347
============ ============ ============ ============
Weighted average shares outstanding - diluted 19,870,532 19,717,347 19,834,982 19,717,347
============ ============ ============ ============
</TABLE>
See accompanying notes.
4
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<TABLE>
<CAPTION>
CAPITAL SENIOR LIVING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------
1999 1998
----------------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................. $ 12,221,675 $ 7,942,739
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 3,396,820 1,695,494
Amortization of deferred financing charges........................ 474,526 27,883
Gain on sale of assets............................................ (759,869) --
Minority interest in consolidated partnership..................... 920,404 359,912
Deferred tax expense.............................................. 302,730 302,730
Deferred income from affiliated................................... 1,120,060 --
Deferred income................................................... (110,214) 465,507
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable.......................................... (627,986) (1,676,749)
Accounts receivable from affiliates.......................... (9,896,848) (4,495,877)
Interest receivable.......................................... (1,143,516) --
Prepaid expenses and other................................... 225,608 (449,310)
Other assets................................................. (1,322,135) (50,064)
Federal and state income taxes............................... (2,990,322) 283,293
Accounts payable and accrued expenses........................ (1,070,925) 844,723
Customer deposits............................................ 28,669 37,267
------------ ------------
Net cash provided by operating activities.............................. 768,677 5,287,548
INVESTING ACTIVITIES
Capital expenditures................................................... (1,607,015) (5,119,177)
Proceeds from the sale of assets....................................... 2,727,301 --
Cash paid for acquisition of NHP assets................................ -- (8,246,007)
Advances to affiliates................................................. (25,002,675) (7,354,617)
Distribution from (investments in) limited partnership................. 895,218 (2,204,083)
------------ ------------
Net cash used in investing activities.................................. (22,987,171) (22,923,884)
FINANCING ACTIVITIES
Proceeds from notes payable and line of credit......................... 56,873,274 4,558,651
Repayment of notes payable............................................ (47,700,000) --
Repurchase of HCP limited partnership interests........................ (216,389) (144,791)
Deferred loan charges paid............................................. (686,033) (524,673)
------------ ------------
Net cash provided by financing activities.............................. 8,270,852 3,889,187
------------ ------------
Decrease in cash and cash equivalents.................................. (13,947,642) (13,747,149)
Cash and cash equivalents at beginning of period....................... 35,827,270 48,125,225
------------ ------------
Cash and cash equivalents at end of period............................. $ 21,879,628 $ 34,378,076
============ ============
Supplemental disclosures:
Cash paid during the period for:
Interest........................................................ $ 3,940,335 $ 516,745
============ ============
Income taxes.................................................... $ 10,473,437 $ 4,600,487
============ ============
</TABLE>
See accompanying notes.
5
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CAPITAL SENIOR LIVING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
Capital Senior Living Corporation, a Delaware corporation (the "Company"), was
incorporated on October 25, 1996. The accompanying consolidated financial
statements include the financial statements of Capital Senior Living Corporation
and its subsidiaries and limited partnerships owned and controlled by it or
under common ownership prior to the transfer of ownership in connection with the
November 5, 1997 public offering and formation transactions. All intercompany
balances and transactions have been eliminated in consolidation.
The accompanying consolidated balance sheet, as of December 31, 1998, has been
derived from audited consolidated financial statements of the Company for the
year ended December 31, 1998, and the accompanying unaudited consolidated
financial statements, as of September 30, 1999 and 1998, have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in the annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations. For further information, refer to the financial statements and
notes thereto for the year ended December 31, 1998 included in the Company's
Annual Report on Form 10- K filed with the Securities and Exchange Commission on
March 31, 1999, as amended by the Company's Annual Report on Form 10-K/A filed
with the Securities and Exchange Commission on November 8, 1999.
In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (all of which were normal recurring accruals)
necessary to present fairly the Company's financial position as of September 30,
1999 and 1998, results of operations for the three and nine months ended
September 30, 1999 and 1998, respectively, and cash flows for the nine months
ended September 30, 1999 and 1998. The results of operations for the three and
nine month periods ended September 30, 1999 are not necessarily indicative of
the results for the year ending December 31, 1999.
2. TRANSACTIONS WITH AFFILIATES
The Company has entered into development and management agreements with the
partnerships set out below (the "Triad Entities") for the development and
management of new senior living communities. The Triad Entities own and finance
the construction of the new communities. These communities are primarily
Waterford communities. The development of senior living communities typically
involves a substantial commitment of capital over a 12-month construction period
during which time no revenues are generated, followed by a 12 to 14-month lease
up period.
6
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CAPITAL SENIOR LIVING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
The following table sets forth the limited partnership percentage ownership the
Company has in each of the Triad Entities, the capital invested for that
ownership interest, information related to loans committed by the Company to
each Triad Entity and information on deferred income related to each Triad
Entity (dollars in thousands):
<TABLE>
<CAPTION>
NOTES RECEIVABLE DEFERRED INCOME
-------------------------------------------------- --------------------------
BALANCE AT
OWNERSHIP CAPITAL COMMITTED SEPT. 30, INTEREST DEVELOPMENT
ENTITY INTEREST INVESTMENT AMOUNT 1999 MATURITY RATE INTEREST FEES
- -------------- ------------- ------------ ------------- -------------- ------------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Triad Senior
Living I, March 12,
L.P. 19.0% $330 $15,000 $12,345 2003 8.0% $194 $347
(Triad I)
Triad Senior
Living II, September
L.P. 19.0 74 10,000 9,743 25, 2003 10.5 83 170
(Triad II)
TriadSenior
Living III, February 8,
L.P. 19.0 143 10,000 7,031 2004 10.5 66 328
(Triad III)
TriadSenior
Living IV, December
L.P. 19.0 143 10,000 5,689 30, 2003 10.5 36 164
(Triad IV)
TriadSenior
Living V, June 30,
L.P. 10.0 -- 10,000 1,923 2004 12.0 3 138
(Triad V)
</TABLE>
In addition to the deferred developmemt fees income listed in the table above,
the Company has additional deferred development fees of $383,000 relating to
future Triad developments.
The Company typically receives from each Triad Entity a development fee of 4% of
project costs, as well as reimbursement of expenses and overhead not to exceed
4% of project costs. The Company typically receives management fees in an amount
equal to the greater of 5% of gross revenues or $5,000 per month per community,
plus overhead not to exceed 1% of gross revenue. The Company has the option to
purchase the partnership interests of the other parties in each Triad Entity for
an amount equal to the amount paid for the partnership interest by the other
partners, plus a noncompounded return of 12% to 20% per annum. In addition, each
Triad Entity provides the Company with an option to purchase the communities
developed by the applicable partnership upon
7
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CAPITAL SENIOR LIVING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
their completion for an amount equal to the fair market value (based on a
third-party appraisal but not less than hard and soft costs and lease-up costs)
of each community. The Company has made no determination as to whether it will
exercise any of these purchase options.
3. NET INCOME PER SHARE
Basic net income per share is calculated by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted net
income per share considers the dilutive effect of outstanding options calculated
using the treasury stock method.
The following table set forth the computation of basic and diluted earnings per
share (in thousands except for per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- ------------------------------------
1999 1998 1999 1998
------------- --------------- --------------- -----------------
<S> <C> <C> <C> <C>
Net income $ 4,386 $ 3,506 $ 12,222 $ 7,943
========= ========== ========== ========
Weighted average shares outstanding - basic 19,717 19,717 19,717 19,717
Effect of dilutive securities:
Employee stock options 154 -- 118 --
--------- ---------- ---------- --------
Weighted average shares outstanding - dilutive 19,871 19,717 19,835 19,717
========= ========== ========== ========
Basic earnings per share $ 0.22 $ 0.18 $ 0.62 $ 0.40
========== =========== ========== ========
Diluted earnings per share $ 0.22 $ 0.18 $ 0.62 $ 0.40
========== =========== ========== ========
</TABLE>
Options to purchase 805,500 shares of common stock at prices ranging from $10.19
to $13.50 per share were not included in the computation of diluted earnings per
share because the average daily price of the common stock during the first nine
months of 1999 did not exceed the exercise price of the options, and therefore,
the effect would be antidulitive.
4. CONTINGENCIES
On or about October 23, 1998, Robert Lewis filed a putative class action
complaint on behalf of certain holders of assignee interests (the "Assignee
Interests") in NHP Retirement Housing Partners I Limited Partnership ("NHP") in
the Delaware Court of Chancery against NHP, the Company, Capital Senior Living
Properties 2-NHPCT, Inc. and Capital Realty Group Senior Housing, Inc.
(collectively, the "Defendants"). Mr. Lewis purchased ninety Assignee Interests
in February 1993 for $180. The complaint alleges, among other things, that the
Defendants breached, or aided and abetted a breach of, the express and implied
terms of the NHP Partnership Agreement in connection with the sale of four
properties by NHP to Capital Senior Living Properties 2-NHPCT, Inc. The
8
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CAPITAL SENIOR LIVING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
complaint seeks, among other relief, rescission of the sale of those properties
and unspecified damages. The Company believes the complaint is without merit and
is vigorously defending itself in this action. The Company has filed a Motion to
Dismiss in this case, which is currently pending.
The Company has pending claims incurred in the normal course of business, which,
in the opinion of management, based on the advice of legal counsel, will not
have a material effect on the financial statements of the Company.
5. PENDING MERGERS
On October 19, 1999, the Company executed Amended and Restated Agreements and
Plans of Merger with each of ILM Senior Living, Inc. and ILM II Senior Living,
Inc. for a combined transaction value of approximately $176 million, including
approximately $4 million of net liabilities. The primary assets of ILM Senior
Living, Inc. and ILM II Senior Living, Inc., collectively, are 13 senior living
communities that have been managed by the Company under management agreements
since 1996. Under the two amended merger agreements, both ILM Senior Living,
Inc. and ILM II Senior Living, Inc. will separately merge with and into a
wholly-owned direct subsidiary of the Company with the aggregate issued and
outstanding shares of ILM Senior Living, Inc. and ILM II Senior Living, Inc.
common stock receiving 100% of the merger consideration in cash. The Amended and
Restated Agreements and Plans of Merger amend and restate the Agreements and
Plans of Merger dated February 7, 1999 among the parties. The outside
termination date of the amended merger agreements has been extended to September
30, 2000. Both mergers had been previously approved by the boards of directors
of each company. Each transaction requires the approval of two-thirds of the
applicable shareholders of either ILM Senior Living, Inc. or ILM II Senior
Living, Inc. The mergers are also subject to certain other customary conditions
including regulatory approvals and are expected to be completed during the first
half of 2000. Form 8-K's were filed by the Company on October 25, 1999 with
copies of the Amended and Restated Agreements and Plans of Merger attached
thereto.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion and analysis addresses (i) the Company's results of
operations for the three and nine months ended September 30, 1999 and 1998,
respectively, and (ii) liquidity and capital resources of the Company and should
be read in conjunction with the Company's consolidated financial statements
contained elsewhere in this report.
The Company generates revenue from a variety of sources. For the three months
ended September 30, 1999, the Company's revenue was derived as follows: 62.2%
from the operations of eleven owned senior living communities that are operated
by the Company; 6.0% from lease rentals for triple net leases of three skilled
nursing communities and four physical rehabilitation centers (one of which was
sold in the third quarter of 1999); 4.6% from management fees arising from
management services provided for three affiliate owned and operated senior
living communities and fifteen third party owned and operated senior living
communities; and 27.2% derived from development fees earned for managing the
development and construction of new senior living communities for affiliated and
unaffiliated third parties, including the Triad Entities.
For the nine months ended September 30, 1999, the Company's revenue was derived
as follows: 64.2% from the operation of eleven owned senior living communities
that are operated by the Company; 6.6% from lease rentals from triple net leases
of three skilled nursing communities and four physical rehabilitation centers
(one of which was sold in the third quarter of 1999); 4.8% from management fees
arising from management services provided for three affiliate owned and operated
senior living communities and fifteen third party owned and operated senior
living communities; and 24.3% derived from development fees earned for managing
the development and construction of new senior living communities for third
parties, including the Triad Entities.
The Company believes that the factors affecting the financial performance of
communities managed under contracts with third parties do not vary substantially
from the factors affecting the performance of owned and leased communities,
although there are different business risks associated with these activities.
The Company's third-party management fees are primarily based on a percentage of
gross revenues. As a result, the cash flows and profitability of such contracts
to the Company are more dependent on the revenues generated by such communities
and less dependent on net cash flow than for owned communities. Further, the
Company is not responsible for capital investments in managed communities. While
the management contracts are generally terminable only for cause, in certain
cases the contracts can be terminated upon the sale of a community, subject to
the Company's rights to offer to purchase such community.
The Company's triple net leases extend through the year 2000 for three of its
owned communities and through the year 2001 for four of its owned communities.
The base payments under these leases are fixed and are not subject to change
based upon the operating performance of these communities. Certain of these
leases have additional rent based on operating performance. Following
termination of the lease agreements, the Company may either convert and operate
the communities as assisted living and Alzheimer's care communities, sell the
communities or evaluate other alternatives.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company's current management contracts expire on various dates between
December 1999 and September 2010 and provide for management fees based generally
upon rates that vary by contract from 4% of net revenues to 7% of net revenues.
In addition, certain of the contracts provide for supplemental incentive fees
that vary by contract based upon the financial performance of the managed
community.
The Company's development fees are generally based upon a percentage of
construction costs and are earned over the period commencing with the initial
development activities and ending with the opening of the community. As of
September 30, 1999, development fees have been earned for services performed on
46 communities under development or expansion for third parties.
11
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Results of Operations
The following tables set forth for the periods indicated, selected statements of
income data in thousands of dollars and expressed as a percentage of total
revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------- ---------------------------------------
1999 1998 1999 1998
---------------- ---------------- ----------------- -------------------
$ % $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Resident and healthcare revenue.... $10,304 62.2 $5,444 51.6 $30,816 64.2 $15,943 56.6
Rental and lease income............ 993 6.0 1,073 10.2 3,188 6.6 3,204 11.4
Unaffiliated management service revenue 641 3.9 604 5.7 1,983 4.1 1,812 6.4
Affiliated management service revenue 114 0.7 375 3.5 341 0.7 1,192 4.2
Unaffiliated development fees...... 354 2.1 154 1.5 1,202 2.5 932 3.3
Affiliated development fees........ 4,154 25.1 2,906 27.5 10,455 21.8 5,061 18.0
------- ----- ------ ----- ------- ----- ------- -----
Total revenue.................. 16,560 100.0 10,556 100.0 47,985 100.0 28,144 100.0
Expenses:
Operating expenses................. 6,271 37.9 3,645 34.5 18,262 38.1 10,957 38.9
General and administrative expenses 2,130 12.9 1,433 13.6 6,486 13.5 4,859 17.3
Depreciation and amortization...... 1,143 6.9 572 5.4 3,397 7.1 1,695 6.0
------- ----- ------ ----- ------- ----- ------- -----
Total expenses................. 9,544 57.6 5,650 53.5 28,145 58.7 17,511 62.2
------- ----- ------ ----- ------- ----- ------- -----
Income from operations.................. 7,017 42.4 4,906 46.5 19,840 41.3 10,633 37.8
Other income (expense):
Gain on sales of assets............ 760 4.6 -- -- 760 1.6 -- --
Interest income.................... 1,798 10.9 1,207 11.4 5,190 10.8 3,403 12.1
Interest expense................... (1,899) (11.5) (188) (1.8) (4,867) (10.1) (548) (1.9)
------- ----- ------ ----- ------- ----- ------- -----
Income before income taxes and
minority interest in
consolidated partnership...... 7,676 46.4 5,925 56.1 20,923 43.6 13,489 47.9
Provision for income taxes.......... (2,793) (16.9) (2,289) (21.7) (7,781) (16.2) (5,186) (18.4)
------- ----- ------ ----- ------- ----- ------- -----
Income before minority interest in
consolidated partnership........ 4,883 29.5 3,636 34.4 13,142 27.4 8,303 29.5
Minority interest in consolidated
partnership..................... (497) (3.0) (130) (1.2) (920) (1.9) (360) (1.3)
------- ----- ------ ----- ------- ----- ------- -----
Net income.............................. 4,386 26.5 3,506 33.2 12,222 25.5 7,943 28.2
======= ===== ====== ===== ======= ===== ======= =====
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1998
Revenues. Total revenues were $16,560,000 in the three months ended September
30, 1999 compared to $10,556,000 for the three months ended September 30, 1998,
representing an increase of $6,004,000 or 56.9%. The primary components of this
increase were increases in resident and healthcare revenue of $4,860,000 and
development fee revenue of $1,448,000, offset by a decrease in affiliated
management services revenue of $261,000. The increase in resident and healthcare
revenue reflects revenue from six communities that were acquired in the third
and fourth quarters of 1998. The increase in development fee revenue reflects
the addition of 18 development contracts for managing the development and
construction of new senior living communities owned by third parties.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Expenses. Total expenses of $9,544,000 in the third quarter of 1999 compared to
$5,650,000 in the third quarter of 1998, representing an increase of $3,894,000
or 68.9%. This increase is primarily due to the acquisition of six communities
in 1998.
Other income and expense. Other income and expense decreased $360,000 due to an
increase in interest expense of $1,711,000 partially offset by a gain on the
sale of one community owned by Healthcare Properties, L.P. ("HCP") of $760,000
and an increase in interest income of $591,000. Interest income increased
primarily as a result of an increase in interest earned from loans to Triad
Entities along with investment income from NHP notes due to the partial
redemption of the NHP notes and payment of deferred interest. Interest expense
increased due to the financing of the acquisition of the six communities
acquired in 1998 and the funding of loans to Triad Entities.
Provision for income taxes. Provision for income taxes in the third quarter of
1999 was $2,793,000 or 38.9% of income before taxes, compared to $2,289,000 or
39.5% of income before taxes in the third quarter of 1998. The effective tax
rates for the third quarter of 1999 and 1998 differ from the statutory tax rates
because of state income taxes and permanent tax differences.
Minority interest. Minority interest increased $367,000 primarily due to the
sale of one of the HCP communities and an increase in net income at HCP. The
sale of the one HCP community increased minority interest by approximately
$329,000.
Net income. As a result of the foregoing factors, net income increased $880,000
to $4,386,000 for the three months ended September 30, 1999, as compared to
$3,505,000 for the three months ended September 30, 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1998
Revenues. Total revenues were $47,985,000 in the nine months ended September 30,
1999 compared to $28,144,000 for the nine months ended September 30, 1998,
representing an increase of $19,841,000, or 70.5%. The primary components of
this increase were increases in resident and healthcare revenue of $14,873,000
and development fee revenue of $5,664,000, offset by a decrease in affiliated
management services revenue of $851,000. The increase in resident and healthcare
revenue reflects revenue from six communities that were acquired in the third
and fourth quarters of 1998. The increase in development fee revenue reflects
the addition of 18 development contracts for managing the development and
construction of new senior living communities owned by third parties.
Expenses. Total expenses of $28,145,000 in the nine months ended September 30,
1999 compared to $17,511,000 in the nine months ended September 30, 1998,
representing an increase of $10,634,000 or 60.7%. This increase is primarily due
to the acquisition of six communities in 1998.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Other income and expense. Other income and expense decreased $1,772,000 in
the first nine months of 1999 due to an increase in interest expense of
$4,319,000 offset by an increase in interest income of $1,787,000 and a
$760,000 gain relating to the sale of the one HCP community. Interest
income increased primarily as a result of an increase in interest earned
from loans to Triad Entities along with investment income from NHP notes
due to the partial redemption of the NHP notes and payment of deferred
interest. Interest expense increased due to the financing of the
acquisition of the six communities acquired in 1998 and the funding of
loans to Triad Entities.
Provision for income taxes. Provision for income taxes for the first nine
months of 1999 increased to $7,781,000 or 38.9% of income before taxes,
compared to $5,186,000 or 39.5% of income before taxes in the first nine
months of 1998. The effective tax rates for the first nine months of 1999
and 1998 differ from the statutory tax rates because of state income taxes
and permanent tax differences.
Minority interest. Minority interest increased $560,000 primarily due to an
increase in net income at HCP and the gain on the sale of one of the HCP
communities. The sale of the one HCP community increased minority interest
by approximately $329,000.
Net income. As a result of the foregoing factors, net income increased
$4,279,000 to $12,222,000 for the nine months ended September 30, 1999, as
compared to $7,943,000 for the nine months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
In addition to approximately $21,880,000 of cash balances on hand as of
September 30, 1999, the Company's principal sources of liquidity are
expected to be cash flows from operations and amounts available for
borrowing under its revolving line of credit, which has a commitment of $34
million. The Company expects the funds available under its line of credit
along with its net income and cash flow from operations to be sufficient to
fund its short-term working capital requirements. The Company's long-term
capital requirements, primarily for acquisitions, development and other
corporate initiatives, will be dependent on the Company's ability to access
additional funds through the debt and/or equity markets. There can be no
assurance that the Company will continue to generate cash flows at or above
current levels or that the Company will be able to obtain the capital
necessary to meet its long-term capital requirements.
The Company had net cash provided by operating activities of $769,000 and
$5,288,000 in the first nine months of fiscal 1999 and 1998, respectively.
In fiscal 1999, the net cash provided by operating activities was primarily
derived from net income of $12,222,000 along with net noncash charges of
$5,344,000 offset by increases in accounts and interest receivables of
$11,668,000, an increase in other assets of $1,322,000 and a reduction in
federal and state income taxes and accounts payable of $2,990,000 and
$1,071,000, respectively. In fiscal 1998, the net cash provided by
operating activities was primarily derived from net income of $7,943,000,
noncash charges of $2,852,000 and an increase in accounts payable of
$845,000 offset by increases in accounts receivable of $6,173,000.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company had net cash used in investing activities of $22,987,000 and
$22,924,000 in the first nine months of fiscal 1999 and 1998, respectively.
In the first nine months of fiscal 1999, the Company's net cash used in
investing activities was primarily the result of advances to Triad Entities
of $25,003,000 and capital expenditures of $1,607,000 offset by the
proceeds from the sale of the HCP property of $2,727,000 and a distribution
from a limited partnership of $895,000. In the first nine months of fiscal
1998, the Company's net cash used in investing activities was primarily
from the acquisition of the NHP assets for $8,246,000, advances to Triad
Entities of $7,355,000, investments in a limited partnership of $2,204,000
and capital expenditures of $5,119,000.
The Company had net cash provided by financing activities of $8,271,000 and
$3,889,000 in the first nine months of fiscal 1999 and 1998, respectively.
For the first nine months of fiscal 1999 and 1998, the net cash provided by
financing activities was primarily the result of increases in debt
outstanding under the Company's line of credit and notes payable.
The Company derives the benefits and bears the risks attendant to the
communities it owns. The cash flows and profitability of owned communities
depends on the operating results of such communities and are subject to
certain risks of ownership, including the need for capital expenditures,
financing and other risks such as those relating to environmental matters.
The cash flows and profitability of the Company's owned communities that
are leased to third parties depend on the ability of the lessee to make
timely lease payments. At September 30, 1999, HCP was operating one of its
properties and had leased seven of its owned properties under triple net
leases to third parties until year 2000 or 2001. Four of these properties
are leased until year 2001 to HealthSouth Rehabilitation Corp.
("HealthSouth"), which provides acute spinal injury intermediate care at
the properties which are still operating. HealthSouth closed one of these
communities in 1994 and closed another community in February of 1997 due to
low occupancy. HealthSouth has continued to make lease payments on a timely
basis for all four properties. Effective August 5, 1999, HealthSouth agreed
to transfer control of the two closed communities to HCP. In the Company's
third quarter, one of these properties was sold for $2,727,000, net of
closing costs, resulting in a gain from sale of approximately $760,000.
HealthSouth has agreed to continue making its full lease payments to HCP on
all four properties with no reduction in payment. HCP will continue to
explore its options with regard to the other community, including the
possibility of a sale. Should the operators of the leased properties
default on payment of their lease obligations prior to termination of the
lease agreements, six of the seven lease contracts contain a continuing
guarantee of payment and performance by the parent company of the
operators, which the Company intends to pursue in the event of default.
Following termination of these leases, the Company will either convert and
operate the communities as assisted living and Alzheimer's care
communities, sell the communities or evaluate other alternatives. HCP's
communities' lessees are all current in their lease obligations to HCP,
except the lessee for one community that has not been able to make its
lease payment since July 1999. The lessee for another property (other than
HealthSouth) continues to fund a deficit between the required lease payment
and operator's cash flow.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The cash flows and profitability of the Company's third-party management
fees are dependent upon the revenues and profitability of the communities
managed. While the management contracts are generally terminable only for
cause, in certain cases contracts can be terminated upon the sale of a
community, subject to the Company's rights to offer to purchase such
community.
The Company plans to continue to develop and acquire senior living
communities. The development of senior living communities typically
involves a substantial commitment of capital over a 12-month construction
period during which time no revenues are generated, followed by a 12 to
14-month lease up period.
The Company has entered into development and management agreements with the
Triad Entities for the development and management of new senior living
communities. The Triad Entities will own and finance the construction of
the new communities. These communities are primarily Waterford communities.
The Company typically receives a development fee of 4% of project costs, as
well as reimbursement of expenses and overhead not to exceed 4% of project
costs. The Company typically receives management fees in an amount equal to
the greater of 5% of gross revenues or $5,000 per month per community, plus
overhead not to exceed 1% of gross revenue. The Company holds 10% to 19%
limited partnership interests in each of the Triad Entities and has the
option to purchase the partnership interests of the other parties in each
Triad Entity for an amount equal to the amount paid for the partnership
interest by the other partners, plus a noncompounded return of 12% to 20%
per annum. In addition, the Triad Entities provide the Company with an
option to purchase the communities developed by the applicable partnership
upon their completion for an amount equal to the fair market value (based
on a third-party appraisal but not les than hard and soft costs and
lease-up costs) of each community. The Company has made no determination as
to whether we will exercise any of these purchase options.
Each Triad Entity finances the development of new communities through a
combination of equity funding, traditional construction loans and permanent
financing with institutional lenders secured by first liens on the
communities and unsecured loans from the Company. The Company loans may be
prepaid without penalty. The financings from institutional lenders are
secured by first liens on the communities as well as assignment to the
lenders of the construction contracts and the development and management
agreements with the Company. Each development and management agreement
assigned to an institutional lender is also guaranteed by the Company and
those guarantees are also assigned to the lenders. In certain cases, the
management agreements contain an obligation of the Company to fund
operating deficits to the Triad Entities if the other financing sources of
the Triad Entities have been fully utilized. These operating deficit
funding obligations are guaranteed by the Company.
The chart below sets forth information about Company loans committed to the
Triad Entities and financings from institutional lenders obtained by the
Triad Entities (dollars in thousands):
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
NOTES RECEIVABLE CONSTRUCTION LOAN FACILITIES
--------------------------------------------- -------------------------------
BALANCE AT
COMMITTED SEPT. 30, INTEREST
ENTITY AMOUNT 1999 MATURITY RATE AMOUNT TYPE LENDER
- --------------- -------------- -------------- ---------------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Triad Senior
Living I, March 12, $50,000 construction Bank One
L.P. $15,000 $12,345 2003 8.0% 50,000 take-out GMAC
(Triad I)
Triad Senior
Living II, September construction; Key
L.P. 10,000 9,743 25, 2003 10.5 27,000 mini-perm Bank
(Triad II)
Triad Senior
Living III, February 8, construction; Guaranty
L.P. 10,000 7,031 2004 10.5 56,000 mini-perm Bank
(Triad III)
Triad Senior
Living IV, December 30, construction; Compass
L.P. 10,000 5,689 2003 10.5 27,000 mini-perm Bank
(Triad IV)
Triad Senior
Living V, June 30,
L.P. 10,000 1,923 2004 12.0 27,000 construction; Bank of
(Triad V) mini-perm America
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's computer programs or hardware that have date-sensitive software
or embedded chips may recognize the year 2000 as a date other than the Year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar
normal business activities.
Based on ongoing assessments, the Company has developed a program to modify
or replace significant portions of its software and certain hardware, which
are generally PC-based systems, so that those systems will properly
recognize and utilize dates beyond December 31, 1999. The Company has
substantially completed software reprogramming and software and hardware
replacement as of June 30, 1999, with 100% completion targeted for December
31, 1999. The costs of the completed and future modifications and
replacement of hardware and software is expected to result in expenditures
of approximately $100,000. The Company expects to spend approximately
$50,000 in the fourth quarter to complete its Year 2000 initiative. All of
the Company's systems have been upgraded with the exception of its general
ledger program. The general ledger program is Year 2000 compliant, however,
some of the reporting tools used in conjunction with the general ledger
will not work properly with the current version of the Company's general
ledger after December 31, 1999. As a result of this issue, the Company is
currently in the process of upgrading its current general ledger and
reporting software and expects this process to be completed by December 31,
1999. The Company presently believes that these modifications and
replacement of existing software and certain hardware will mitigate the
Year 2000 Issue. However, if such modifications and replacements are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Company.
The Company has completed a survey requiring written responses from its
critical service providers in 1999. Based on the responses from the
Company's critical service providers, 90 to 95% of the respondents
indicated that they are currently Year 2000 compliant and the remaining
respondents indicate that they will be Year 2000 compliant by the end of
the year. The Company is therefore not aware of any external critical
service provider with a Year 2000 Issue that would materially impact the
Company's results of operations, liquidity or capital resources. However,
the Company has no other means of determining whether or ensuring that its
critical service providers are or will be Year 2000-ready. The inability of
critical services providers to complete their Year 2000 resolution process
in a timely fashion could materially impact the Company.
The Company has assessed its exposure to operating equipment, and such
exposure is not significant due to the nature of the Company's business.
The Company operates in a relatively low technology dependent industry and
does not anticipate any industry or Company specific Year 2000 risks beyond
those discussed above.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Significant Year 2000 problems could result in the Company not having
timely the operating information necessary to efficiently manage and
monitor its business activities. This could result in disruptions in
operation, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business
activities. The Company does not foresee Year 2000 issues affecting the
day-to-day operations of its senior living communities due to their limited
use of technology and the Company's evaluation of its operating equipment.
The Company considers the possibility of significant Year 2000 problems,
based on the evaluation of its internal systems and the response from its
critical service providers, to be remote.
Management of the Company believes it has an effective program in place to
resolve the Year 2000 Issue in a timely manner. As noted above, the Company
has completed most but not all necessary phases of its Year 2000 program.
In the event that the Company does not complete the current program or any
additional phases, the Company could incur disruptions to its operations.
In addition, disruptions in the economy generally resulting from Year 2000
Issues could also materially adversely affect the Company. The Company
could be subject to litigation or computer systems failure. The amount of
potential liability and cost cannot be reasonably estimated at this time.
The Company currently has no contingency plans in place in the event it
does not complete all phases of its Year 2000 program. The Company plans to
continue to monitor the status of completion of its Year 2000 initiatives
to determine whether such a plan is necessary.
FORWARD-LOOKING STATEMENTS
Certain information contained in this report constitutes "Forward-Looking
Statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate" or
"continue" or the negative thereof or other variations thereon or
comparable terminology. The Company cautions readers that forward-looking
statements, including, without limitation, those relating to the Company's
future business prospects, revenues, working capital, liquidity, capital
needs, interest costs and income, are subject to certain risks and
uncertainties that could cause actual results to differ materially from
those indicated in the forward-looking statements, due to several important
factors herein identified, among others, and their risks and factors
identified from time to time in the Company's reports filed with the
Securities and Exchange Commission.
19
<PAGE>
CAPITAL SENIOR LIVING CORPORATION
SEPTEMBER 30, 1999
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk is exposure to changes in interest rates
on debt instruments. As of September 30, 1999, the Company had $90,263,000
in outstanding debt comprised of various fixed and variable rate debt
instruments of $59,174,000 and $31,089,000, respectively.
In the third quarter of fiscal 1999, the Company repaid $47,700,000 in
outstanding short-term variable rate debt and replaced it with $45,970,000
of long-term fixed rate loans. These fixed rate loans are non-recourse
loans secured by certain properties owned by the Company. These loans are
for a 10-year term, bear interest at 8.2% with the principal being
amortized over a 25-year period.
Changes in interest rates would affect the fair market value of the
Company's fixed rate debt instruments but would not have an impact on the
Company's earnings or cash flows. Fluctuations in interest rates on the
Company's variable rate debt instruments, which are tied to either the
LIBOR or the prime rate, would affect the Company's earnings and cash flows
but would not affect the fair market value of the variable rate debt. For
each percentage point change in interest rates the Company's annual
interest expense would increase by approximately $311,000 based on its
current outstanding variable debt.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On or about October 23, 1998, Robert Lewis filed a putative class action
complaint on behalf of certain holders of assignee interests (the "Assignee
Interests") in NHP Retirement Housing Partners I Limited Partnership
("NHP") in the Delaware Court of Chancery against NHP, the Company, Capital
Senior Living Properties 2-NHPCT, Inc. and Capital Realty Group Senior
Housing, Inc. (collectively, the "Defendants"). Mr. Lewis purchased ninety
Assignee Interests in NHP in February 1993 for $180. The complaint alleges,
among other things, that the Defendants breached, or aided and abetted a
breach of, the express and implied terms of the NHP Partnership Agreement
in connection with the sale of four properties by NHP to Capital Senior
Living Properties 2-NHPCT, Inc. The complaint seeks, among other relief,
rescission of the sale of those properties and unspecified damages. The
Company believes the complaint is without merit and is vigorously defending
itself in this action. The Company has filed a Motion to Dismiss in this
case, which is currently pending.
The Company has pending claims incurred in the normal course of business,
which, in the opinion of management, based on the advice of legal counsel,
will not have a material effect on the financial statements of the Company.
20
<PAGE>
CAPITAL SENIOR LIVING CORPORATION
SEPTEMBER 30, 1999
Item 2. CHANGES IN SECURITIES (And use of proceeds)
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits:
3.1 Amendment to Amended and Restated Certificate of
Incorporation of Capital Senior Living Corporation
3.2 Amendments to Amended and Restated Bylaws off Capital
Senior Living Corporation
10.1 Draw Promissory Note dated July 1, 1999 of Triad Senior
Living V, L.P. in favor of Capital Senior Living
Properties, Inc.
10.2 First Amendment to Amended and Restated Employment
Agreement of James A. Stroud, dated March 22, 1999, by
and between James A. Stroud and Capital Senior Living
Corporation
10.3 Second Amendment to Amended and Restated Employment
Agreement of James A. Stroud, dated May 31, 1999, by
and between James A. Stroud and Capital Senior Living
Corporation
10.4 Employment Agreement, dated May 26, 1999, by and
between Lawrence A. Cohen and Capital Senior Living
Corporation
21
<PAGE>
CAPITAL SENIOR LIVING CORPORATION
SEPTEMBER 30, 1999
27.1 Financial Data Schedule
(B) Reports on Form 8-K
(i) The Registrant filed a report on Form 8-K, dated
October 25, 1999 to report entering into an Amended and
Restated Plan of Merger dated October 19, 1999, by and
among the Registrant, Capital Senior Living
Acquisition, and ILM Senior Living, Inc.
(ii) The Registrant filed a report on Form 8-K, dated
October 25, 1999 to report entering into an Amended and
Restated Plan of Merger dated October 19, 1999, by and
among the Registrant, Capital Senior Living
Acquisition, and ILM II Senior Living, Inc.
22
<PAGE>
CAPITAL SENIOR LIVING CORPORATION
SEPTEMBER 30, 1999
Signature
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.
Capital Senior Living Corporation
(Registrant)
By: /s/ Ralph A. Beattie
----------------------------------------------
Ralph A. Beattie
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
Date: November 15, 1999
23
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF CAPITAL SENIOR LIVING CORPORATION
Capital Senior Living Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions proposing and declaring advisable the following amendment to
the Amended and Restated Certificate of Incorporation of the Corporation:
Paragraph A of the FIFTH Article of the Amended and Restated
Certificate of Incorporation of the Corporation is hereby amended to read
in its entirety as follows:
"The number of directors of the Corporation (exclusive of
Directors, if any, entitled to be elected by the holders of one or
more series of the Preferred Stock of the Corporation which may be
outstanding, voting separately as a series or class) shall be
fixed from time to time by action of not less than two-thirds of
the members of the Board of Directors then in office, though less
than a quorum, but in no event shall be less than three nor more
than fifteen."
SECOND: That, at an annual meeting and vote of stockholders held on May
20, 1999, the Corporation's stockholders duly approved the amendment, in
accordance with the provisions of the General Corporation Law of the State
of Delaware, by the following vote: 18,638,619 shares voted for the
amendment, 88,784 shares voted against the amendment and 9,195 shares
abstained from voting.
THIRD: That the foregoing amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment has been duly
executed as of the 27th day of August, 1999.
CAPITAL SENIOR LIVING CORPORATION
/s/ Lawrence A. Cohen
------------------------------------------
Lawrence A. Cohen, Chief Executive Officer
ATTEST:
/s/ James A. Stroud
--------------------------
James A. Stroud, Secretary
EXHIBIT 3.2
AMENDMENTS TO AMENDED AND RESTATED BYLAWS OF
CAPITAL SENIOR LIVING CORPORATION
The amendments to Sections 6.7-6.15 of Article Six of the Amended and
Restated Bylaws (the "Bylaws") of Capital Senior Living Corporation (the
"Corporation") set forth below were duly adopted by the Board of Directors
of the Corporation at a special meeting of the Board of Directors held
March 22, 1999.
A new Section 6.7 shall be inserted between current Sections 6.6 and 6.7
of the Bylaws to read as follows:
"6.7 Chairman. Subject to the supervision of the board of
directors, the chairman of the Corporation shall have general
executive charge, management, and control of the properties and
operations of the Corporation in the ordinary course of its
business, with all such powers with respect to such properties
and operations as may be reasonably incident to such
responsibilities. The chairman shall have such other powers and
duties as may be prescribed by the board of directors."
The Sections of Article Six numbered 6.7-6.15 shall be renumbered
6.8-6.16 respectively and follow immediately after newly inserted Section
6.7.
The foregoing amendments to the Bylaws were effective as of March 22,
1999.
CAPITAL SENIOR LIVING CORPORATION
By: /s/ James A. Stroud
-------------------------
James A. Stroud, Secretary
EXHIBIT 10.1
DRAW PROMISSORY NOTE
Amount: $10,000,000.00 Date: July 1, 1999
----------------
FOR VALUE RECEIVED, the undersigned, promises to pay to Capital Senior
Living Properties, Inc., a Texas corporation, the sum draw down up to Ten
Million and No/100 Dollars ($10,000,000.00), the principal due five (5)
years from the date of the first draw down and interest due quarterly at
the rate of twelve percent (12%) per annum, both principal and interest
payable at office at 14160 Dallas Parkway, Suite 300, Dallas, Texas 75240.
The accrued interest on this note is payable quarterly after the first
draw down.
All past due principal and interest shall bear interest from maturity at
the rate of sixteen percent (16%) per annum.
This note may be prepaid without penalty.
Failure to pay any installment of principal and interest, or any other
part thereof, when due shall, at the election of the holder and without
notice, mature the whole note and it shall at once become due and payable.
It is hereby specifically agreed that if this note is placed in the
hands of an attorney for collection, or if collected by suit or through
the Probate Court or any other legal proceedings, the undersigned agrees
to pay reasonable attorneys' fees.
All makers, endorsers, sureties and guarantors hereby waive presentment
for payment of this note, notice of nonpayment, protest, notice of
protest, diligence, or any notice of, or defense on account of, any
extension, extensions, renewal, renewals, or change in any manner of or in
this note, or in any of its terms, provisions or covenants, or of any
delay, indulgence or other act of any holder of the aforesaid note.
TRIAD SENIOR LIVING V, L.P.,
a Texas limited partnership
By: Triad Partners V. L.L.C.
Its General Partner
BY: /s/ Blake N. Fail
----------------------------
TITLE: President of General Partner
EXHIBIT 10.2
FIRST AMENDMENT TO AMENDED AND RESTATED
EMPLOYMENT AGREEMENT OF JAMES A. STROUD
This first amendment (the "First Amendment") to the Amended and
Restated Employment Agreement of James A. Stroud (the "Employment
Agreement") is entered into effective as of March 22, 1999, by and between
Capital Senior Living Corporation (the "Company") and James A. Stroud
("Stroud").
WHEREAS, the Company and Stroud entered into the Employment Agreement
dated October 8, 1997, whereby the Company employed Stroud in the capacity
of Chief Operating Officer, Co-Chairman of the Board and a member of the
Executive Committee of the Board, and
WHEREAS, the Board of Directors of the Company on March 22, 1999,
amended the By-Laws and added the new office of Chairman of the Company
and elected Stroud to that office, and
WHEREAS, the Company and Stroud desire to amend the Employment
Agreement to reflect Stroud's election to the office of Chairman of the
Company,
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
of the parties hereto and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. The Employment Agreement shall be amended so that the phrase or any
portion of the phrase "Chief Operating Officer, Co-Chairman of the Board
and a member of the Executive Committee of the Board" shall be deleted and
shall be replaced with the phrase "Co- Chairman and a member of the
Executive Committee of the Board, Chairman of the Company, Chief Operating
Officer and Secretary."
2. Except as expressly provided herein, all of the terms and provisions
of the Employment Agreement shall remain in full force and effect and
unchanged. All capitalized terms used herein which are not otherwise
defined herein shall have the meaning ascribed to such terms in the
Employment Agreement.
IN WITNESS WHEREOF, this First Amendment has been duly executed on the
6th day of April, 1999.
COMPANY:
CAPITAL SENIOR LIVING CORPORATION
By: /s/ David R. Brickman
----------------------------------
David R. Brickman,
Vice President and General Counsel
STROUD:
By: /s/ James A. Stroud
----------------------------------
James A. Stroud
EXHIBIT 10.3
SECOND AMENDMENT TO AMENDED AND RESTATED
EMPLOYMENT AGREEMENT OF JAMES A. STROUD
This second amendment (the "Second Amendment") to the Amended and
Restated Employment Agreement of James A. Stroud is entered into effective
as of May 31, 1999, by and between Capital Senior Living Corporation (the
"Company") and James A. Stroud ("Employee").
WHEREAS, the Company and Employee entered into the Amended and Restated
Employment Agreement dated October 8, 1997, as amended on March 22, 1999
(the "Employment Agreement"), and
WHEREAS, the Company and Employee desire to amend the Employment
Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
of the parties hereto and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. The first and second sentence of Paragraph 4, shall be deleted and
the following shall be added:
CSL shall pay to Employee a base salary at an annual rate of not less
than Two Hundred and Fifty Thousand ($250,000.00) per annum, paid in
approximately equal installments no less frequently than semi-monthly.
An annual bonus of thirty-three and one-third percent (33-1/3%) of
Employee's base salary shall be paid in quarterly installments, subject
to increase by the Compensation Committee and subject to meeting
performance standards that the Company's reported quarterly earnings
per share is not less than the First Call consensus earnings per share
for that quarter. The Compensation Committee will use its reasonable
discretion to determine the amount of the quarterly bonus to be paid if
the reported quarterly earnings per share are lower than the First Call
consensus earnings per share.
2. The last sentence of Paragraph 5 shall be deleted and the following
added: "The number of shares and approximate vesting schedule of such
options shall be at least as favorable to Employee as those contained in
options granted to any other officer of the Company and its subsidiaries.
3. The phrase "annual minimum bonus" in Paragraph 6(C), "minimum annual
bonus" in Paragraph 7(A)(i), and "minimum base bonus" in Paragraph 7(B)(i)
shall be deleted and the following shall be added: "annual bonus paid
during the term of this Agreement in the past twelve (12) months."
4. In Paragraph 7(D)(i), the last word ", and" shall be deleted and be
replaced with a period. In addition, Paragraph 7(D)i(B) shall be amended
to form a new paragraph as follows:
a) The parenthetical "(i)(B)" shall be deleted and the new
parenthetical "(ii)" shall be added at the beginning of the paragraph.
<PAGE>
b) The parenthetical "(D)(i)(B)" shall be deleted and the new
parenthetical "(D)(ii)" shall be added in the last sentence of the
paragraph.
c) The last sentence starting with "The Company shall..."
shall be deleted.
The remaining parentheticals "(ii) through (v)" shall be
deleted and the new parentheticals "(iii) through (vi)" shall be added. In
new paragraph 7(D)(iii), the parenthetical "7(D)i(B)" shall be deleted and
the new parenthetical "7(D)(ii)" shall be added.
In new Paragraph 7(D)(vi), the phrase ", family partnership or
other family entity" shall be added after the word "trust".
5. The phrase "Paragraphs 7, 8, 9, and 10" in the second sentence of
Paragraph 14 shall be deleted and the following shall be added,
"Paragraphs 7, 8, 9, 10, and 17".
6. A new paragraph 17 shall be added:
17. INDEMNIFICATION BY COMPANY. The Company shall and hereby
does indemnify Employee to the extent and in accordance with
the terms of Attachment I to this Agreement.
7. Except as expressly provided herein, all of the terms and provisions
of the Employment Agreement shall remain in full force and effect and
unchanged. All capitalized terms used herein which are not otherwise
defined herein shall have the meaning ascribed to such terms in the
Employment Agreement.
IN WITNESS WHEREOF, this Second Amendment has been duly executed on the
28th day of May, 1999.
COMPANY:
CAPITAL SENIOR LIVING CORPORATION
By: /s/ David R. Brickman
-------------------------------
EMPLOYEE:
By: /s/ James A. Stroud
-------------------------------
James A. Stroud
<PAGE>
ATTACHMENT I
INDEMNITY
1. CAPITAL SENIOR LIVING CORPORATION (the "Corporation") will indemnify
JAMES A. STROUD ("Indemnitee") in accordance with the following terms.
2. DEFINITIONS. As used in this Indemnity:
(a) The term "Proceeding" shall include any threatened,
pending or completed investigation, claim, action, suit or proceeding,
whether of a civil, criminal, administrative or investigative nature
(including without limitation any action, suit or proceeding by or in the
right of the Corporation or Other Entity to procure a judgment in its
favor), in which Indemnitee may be or may have been or may be threatened
to be made or to become involved in any manner (including without
limitation as a party or a witness) by reason of the fact that Indemnitee
has advised the Corporation (as an officer, director or consultant of the
Corporation) with respect to any matter, is alleged to have advised Other
Entities with respect to any matter in which the Corporation was involved
or related or by reason of anything actually or allegedly done or not done
by Indemnitee in any of such capacities, and whether such advice, action
or inaction occurred in the past or occurs after the date hereof. It is
expressly agreed that "Proceeding" shall include any claim, action, suit
or proceeding arising out of or related to the Corporation's business
relationships with and proposed mergers with ILM Senior Living, Inc. and
ILM II Senior Living, Inc., in connection with which the Corporation's
Board of Directors in considering this Agreement has determined
Indemnitee's actions and advice were in good faith and in the best
interests of the Corporation. It is also expressly agreed that
"Proceeding" shall include any claim, action, suit or proceeding arising
out of allegations that Indemnitee's affiliates have engaged in
transactions with the Corporation in which Indemnitee had a financial or
conflicting interest.
(b) The term "Expenses" includes, without limitation,
reasonable attorneys' fees and disbursements and all other reasonable
costs, expenses and obligations actually and reasonably incurred by
Indemnitee in connection with (i) investigating, defending, being a
witness in or otherwise participating in, or preparing to defend, be a
witness in or participate in, any Proceeding, or (ii) establishing a right
to indemnification under Paragraph 6 of this Indemnity, but shall not
include the amount of any judgments, fines or penalties entered or
assessed against Indemnitee or any amounts paid or payable in settlement
by Indemnitee.
(c) The term "Other Entity" includes, without limitation, any
subsidiary or affiliate of the Corporation and any entity with which
Indemnitee has served or is serving as an officer or director or otherwise
in the general interest of the Corporation's business. It is expressly
agreed that Indemnitee's (i) service with Capital Realty Group Senior
Housing, Inc., a Texas corporation, and with its subsidiaries and
partnerships in which it is a general partner, (ii) service with Capital
Senior Living Communities, LP, and its general partner, Retirement Living
Communities, L.P. and (iii) service with Tri-Point Communities, L.P. were
all undertaken by the Indemnitee for the benefit of the Corporation, and
all such entities and their affiliates are hereby agreed to be Other
Entities within the meaning of this definition.
<PAGE>
3. SCOPE OF INDEMNIFICATION. Subject to Paragraph 7 of this Indemnity,
the Corporation shall indemnify Indemnitee in accordance with the
provisions of this Paragraph 3 if Indemnitee is or was or is threatened to
be made or to become involved in any manner, including without limitation
as a party or witness, in any Proceeding (including a Proceeding by or in
the right of the Corporation or Other Entity to procure a judgment in its
favor) against any and all Expenses and any and all judgments, fines and
penalties entered or assessed against Indemnitee, and any and all amounts
reasonably paid or payable in settlement by Indemnitee, in connection with
such Proceeding, but only if Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the
Corporation's best interests and without gross negligence. THIS INDEMNITY
EXPRESSLY INDEMNIFIES INDEMNITEE AGAINST HIS OWN NEGLIGENCE. The
termination of any Proceeding by judgment, order of court, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption for purposes of any provision of this
Indemnity that Indemnitee did not act in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the
Corporation's best interests, or with gross negligence.
4. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY; NO ADVERSE
PRESUMPTION. Notwithstanding any other provisions of this Indemnity, to
the extent that Indemnitee has been successful on the merits or otherwise,
in defense of any Proceeding or in defense of any claim, issue or matter
therein, including the dismissal of an action without prejudice,
Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
5. ADVANCES OF EXPENSES. The Expenses incurred by Indemnitee pursuant
to Paragraph 3 in any Proceeding shall be paid by the Corporation in
advance, promptly upon the written request of the Indemnitee, if
Indemnitee shall undertake to repay such amount to the extent that it is
ultimately determined that Indemnitee is not entitled to indemnification.
No security for the performance of any such undertaking shall be required
and any such undertaking shall be accepted by the Corporation without
regard to the financial capacity of Indemnitee to perform his obligations
thereunder.
6. RIGHT OF INDEMNITEE TO INDEMNIFICATION UPON APPLICATION: PROCEDURE
UPON APPLICATION. Without limiting the obligation of the Corporation to
promptly make payments in respect of Expenses in accordance with Paragraph
5, any indemnification under Paragraph 3 shall be made no later than 45
days after receipt by the Corporation of the written request of
Indemnitee, unless a determination is made within said 45-day period by
(1) the Board of Directors of the Corporation by a majority vote of a
quorum consisting of Directors who are not and were not parties to the
relevant Proceeding, or (2) independent legal counsel in a written opinion
(which counsel shall be appointed if such a quorum is not obtainable) that
the Indemnitee has not met the relevant standards for indemnification set
forth in Paragraph 3.
The right to indemnification or advances as provided by this Indemnity
shall be enforceable by Indemnitee in any court of competent jurisdiction.
The burden of proving that indemnification is not appropriate shall be on
the Corporation. Indemnitee's Expenses reasonably incurred in connection
with successfully establishing his or her right to indemnification, in
whole or in part, in any such proceeding shall also be indemnified by the
Corporation.
<PAGE>
7. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE; CONSTRUCTION. The
indemnification provided by this Indemnity shall not be deemed exclusive
of any other rights to which Indemnitee may be entitled under the General
Corporation Law of the State of Delaware, the Amended and Restated
Certificate of Incorporation and/or Bylaws of the Corporation, any other
indemnity, any vote of stockholders or disinterested Directors, or
otherwise, either as to action in his official capacity on, prior or after
the date hereof or as to action in any other capacity. The corporation
hereby agrees and acknowledges that it will continue to honor its
indemnification obligations to Indemnitee set forth in its Amended and
Restated Certificate of Incorporation and/or Bylaws with respect to any
existing or future lawsuit against the Corporation and any other actions
pursuant to which Indemnitee would be entitled to indemnification.
8. PARTIAL INDEMNIFICATION. In the event that Indemnitee is entitled
under any provision of this Indemnity to indemnification by the
Corporation for a portion but less than the entire amount of any Expenses,
judgments, fines, penalties and/or amounts paid or payable in settlement,
the Corporation shall fully indemnify Indemnitee in accordance with the
applicable provisions of this Indemnity for such portion of such Expenses,
judgments, fines, penalties and/or amounts paid in settlement.
9. SUBROGATION. In the event that the Corporation provides any
indemnification or makes any payment to Indemnitee in respect of any
matter in respect of which indemnification or the advancement of expenses
is provided for herein, the Corporation shall be subrogated to the extent
of such indemnification or other payment to all of the related rights of
recovery of Indemnitee against other persons or entities. Indemnitee shall
execute all papers reasonably required and shall do everything that may be
reasonably necessary to secure such rights and enable the Corporation
effectively to bring suit to enforce such rights (with all of Indemnitee's
reasonable costs and expenses, including attorneys' fees and
disbursements, to be reimbursed by or, at the option of Indemnitee,
advanced by the Corporation).
10. NO DUPLICATION OF PAYMENTS. The Corporation shall not be obligated
under this Indemnity to provide any indemnification or make any payment to
which Indemnitee is otherwise entitled hereunder to the extent, but only
to the extent, that such indemnification or payment hereunder would be
duplicative of any amount actually received by Indemnitee pursuant to any
insurance policy, the General Corporation Law of the State of Delaware,
the Amended and Restated Certificate of Incorporation and/or the Bylaws of
the Corporation or otherwise. With respect to the Corporation's indemnity
obligations concerning Other Entities, the Corporation shall have no
obligation hereunder until and unless Indemnitee has first sought all
available insurance coverage benefitting such Other Entities and indemnity
available from such Other Entities and such insurance coverage and
indemnity has been exhausted or has been denied.
11. SAVING CLAUSE. If any provision of this Indemnity or the
application of any provision hereof to any circumstance is held illegal,
invalid or otherwise unenforceable, the remainder of this Indemnity and
the application of such provision to any other circumstance shall not be
affected, and the provision so held to be illegal, invalid or otherwise
unenforceable shall be reformed to the extent (but only to the extent)
necessary to make it legal, valid and enforceable.
<PAGE>
12. NOTICE. Indemnitee shall give to the Corporation notice in writing
as soon as practicable of any claim made against him or her for which
indemnification will or could be sought under this Indemnity, provided,
however, that any failure to give such notice to the Corporation will
relieve the Corporation from its obligations hereunder only if, and to the
extent that, such failure results in the forfeiture of substantial rights
and defenses. Notice to the Corporation shall be directed to the
Corporation (to the attention of the Chief Executive Officer, with a copy
to the General Counsel) at its principal executive office or such other
address as the Corporation shall designate in writing to Indemnitee.
Notice shall be deemed received when hand delivered or dispatched by
electronic facsimile transmission (with receipt thereof orally confirmed),
or three calendar days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
or one business day after having been sent for next-day delivery by a
nationally recognized overnight courier. In addition, Indemnitee shall
give the Corporation such information and cooperation as it may reasonably
require and shall be within Indemnitee's power. The Corporation shall give
prompt notice to Indemnitee of any potential claims against Indemnitee of
which the Corporation becomes aware.
13. APPLICABLE LAW. This Indemnity shall be governed by and construed
in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
14. SUCCESSORS. This Indemnity shall be binding upon the Corporation
and its successors, including without limitation any person acquiring
directly or indirectly all or substantially all of the business or assets
of the Corporation whether by purchase, merger, consolidation,
reorganization or otherwise (and such successor will thereafter be deemed
the "Corporation" for purposes of this Indemnity), but will not otherwise
be assignable, transferable or delegable by the Corporation. The
Corporation shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business or assets of the Corporation, to assume
and agree in writing to perform this Indemnity, expressly for the benefit
of Indemnitee, in the same manner and to the same extent the Corporation
would be required to perform if no such succession had taken place.
Dated: May 28, 1999 CAPITAL SENIOR LIVING
CORPORATION
By: /s/ David R. Brickman
---------------------
Title: Vice President
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on the
26th day of May, 1999, by and between Capital Senior Living Corporation, a
Delaware corporation ("CSL" or "the Company"), and Lawrence A. Cohen, an
individual residing in the State of New York ("Employee"). The term of this
Agreement shall be deemed to have commenced as of June 1, 1999 ("Employment
Commencement Date").
1. APPOINTMENT, TITLE AND DUTIES. CSL hereby employs Employee to serve
in the positions as assigned to him by its Board of Directors, which currently
shall be as its Chief Executive Officer and as the Vice Chairman of its Board
of Directors and a member of the Executive Committee of the Board. In such
capacity, Employee shall report to the Chairman of the Company of CSL and
shall have such powers, duties and responsibilities as are customarily
assigned to the Chief Executive Officer and Vice Chairman. In addition
Employee shall have such other duties and responsibilities as may reasonably
be assigned to him by the Board of Directors, including serving with the
consent or at the request of CSL on the board of directors of affiliated
corporations.
2. TERM OF AGREEMENT. The initial term of this Agreement shall be for a
three (3) year period ending on May 31, 2002, however, the term of this
Agreement shall automatically be extended for a one (1) year term on a
consecutive basis. The term of this Agreement may be extended by the mutual
written consent of the Employee and Company. This Agreement shall terminate
upon the earlier of: (i) the date of the voluntary resignation of Employee,
(ii) the date of Employee's death or determination of Employee's disability
(as defined in Paragraph 6 below), (iii) the date of notice by CSL to Employee
that this Agreement is being terminated by CSL whether "for cause" (as defined
in Paragraph 6 below) or without cause, (iv) upon the date a notice of intent
to resign for "good reason" (as defined in Paragraph 6 below) is delivered to
the Company by Employee, or (v) expiration of the term.
3. ACCEPTANCE OF POSITION. Employee hereby accepts the positions
assigned by the Board of Directors, and agrees that during the term of this
Agreement he will faithfully perform his duties and will devote substantially
all of his business time to the business and affairs of CSL and will not
engage, for his own account or for the account of any other person or entity,
in any other business or enterprise except with the express written approval
of the Board of Directors of CSL. Employee may, at his sole discretion, (i)
serve as a director on the boards of directors of other entities, businesses
and enterprises he currently serves on, and (ii) make personal, passive
investments. Employee agrees to perform his duties faithfully, diligently and
to the best of his ability, to use his best efforts to advance the best
interests of the Company at all times, and to abide by all moral, ethical and
lawful policies, guidelines, procedures, instructions and orders given to him
by the Company from time to time; PROVIDED, HOWEVER, that in no event shall
Employee be required to move from the New York City, New York area. The
Company will provide an office either in New York City or the immediate area.
Employee shall spend a reasonable amount of time in Dallas to conduct the
affairs of the Company.
4. SALARY AND BENEFITS. During the term of this Agreement:
<PAGE>
A) CSL shall pay to Employee a base salary at an annual rate of
not less than $300,000 per annum, paid in approximately equal installments no
less frequently than semi-monthly. An annual bonus of thirty-three and
one-third percent (33-1/3%) of Employee's base salary shall be paid in
quarterly installments, subject to meeting performance standards that the
Company's reported quarterly earnings per share is not less than the First
Call consensus earnings per share for that quarter, and subject to increase by
the Compensation Committee. The Compensation Committee will use its reasonable
discretion to determine the amount of the quarterly bonus to be paid if the
reported quarterly earnings per share are lower than the First Call consensus
earnings per share. The Company shall deduct from Employee's compensation and
bonus all applicable local, state, Federal or foreign taxes, including, but
not limited to, income tax, withholding tax, social security tax and pension
contributions (if any).
B) Employee shall participate in all health, retirement,
Company-paid insurance, sick leave, disability, expense reimbursement and
other benefit programs, if any, which CSL makes available, in its sole
discretion, to its senior executives; however, nothing herein shall be
construed to obligate the Company to establish or maintain any employee
benefit program. The Company may purchase and maintain in force a death and
disability insurance policy in an amount at all times equal to not less than
an amount equal to Employee's annual base salary multiplied by three (3). The
Company shall be the beneficiary of said policy and shall use said policy for
the purposes described in Paragraph 7(A)(i), below. Reimbursement of
Employee's reasonable and necessary business expenses incurred in the pursuit
of the business of the Company or any of its affiliates shall be made to
Employee upon his presentation to the Company of itemized bills, vouchers or
accountings prepared in conformance with applicable regulations of the
Internal Revenue Service and the policies and guidelines of the Company.
C) Employee shall be entitled to reasonable vacation time in
an amount of four (4) weeks per year pursuant to the Company's Corporate
Policies and Procedures Manual.
5. STOCK OPTIONS. If the Company adopts a stock option plan or other
incentive compensation plan, Employee shall receive options to purchase
Company Common Stock. The number of shares of Common Stock of the Company
covered by options to be granted to Employee and the exercise price of the
options shall be determined by the Compensation Committee, if it exists, and
in the absence of a Compensation Committee, by the Board of Directors. The
number of shares and approximate vesting schedule of such options shall be at
least as favorable to Employee as those contained in options granted to any
other officer of the Company and its subsidiaries.
6. CERTAIN TERMS DEFINED. For purposes of this Agreement:
A) Employee shall be deemed to be disabled if a physical or
mental condition shall occur and persist which, in the written opinion of two
(2) licensed physicians, has rendered Employee unable to perform the duties of
Chief Executive Officer, Vice Chairman and member of the Board of Directors of
CSL for a period of ninety (90) calendar days or more, and which condition, in
the opinion of such physicians, is likely to continue for an indefinite period
of time, rendering Employee unable to return to his duties for CSL. One (1) of
the two (2) physicians shall be selected in good faith by the Board of
Directors of CSL, and the other of the two (2) physicians
<PAGE>
shall be selected in good faith by Employee. In the event that the two (2)
physicians selected do not agree as to whether Employee is disabled, as
described above, then said two (2) physicians shall mutually agree upon a
third (3rd) physician whose written opinion as to Employee's condition shall
be conclusive upon CSL and Employee for purposes of this Agreement.
B) A termination of Employee's employment by CSL shall be
deemed to be "for cause" if it is based upon (i) a final, nonappealable
conviction of Employee for commission of a felony involving moral turpitude,
(ii) Employee's willful gross misconduct that causes material economic harm to
the Company or that brings substantial discredit to the Company's reputation,
or (iii) Employee's material failure or refusal to perform his duties in
accordance with this Agreement, if Employee has failed to cure such failure or
refusal to perform within thirty (30) days after the Company notifies Employee
in writing of such failure or refusal to perform.
C) A resignation by Employee shall not be deemed to be
voluntary, and shall be deemed to be a resignation for "good reason" if it is
based upon (i) a material diminution in Employee's duties which is not part of
an overall diminution for all executive officers of the Company, or (ii) a
material breach by CSL of the Company's obligations to Employee under this
Agreement or under the Company's Stock Option Plan, if adopted.
D) A Fundamental Change shall be defined as any of the
following: (A) a merger, consolidation, statutory share exchange or sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company that
requires the consent or vote of the holders of the Company's Common Stock,
other than a consolidation, merger or share exchange of the Company in which
the holders of the Company's Common Stock immediately prior to such
transaction have the same proportionate ownership of Common Stock of the
surviving corporation immediately after such transaction; (B) the stockholders
of the Company approve any plan or proposal for the liquidation or dissolution
of the Company; (C) the cessation of control (by virtue of their not
constituting a majority of directors) of the Board of Directors of the Company
by the individuals (the "Continuing Directors") who (x) at the date of this
Agreement were directors or (y) become directors after the date of this
Agreement and whose election or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors
then in office who were directors at the date of this Agreement or whose
election or nomination for election was previously so approved; (D) the
acquisition of beneficial ownership (within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934) of an aggregate of 20% or more of the
voting power of the Company's outstanding voting securities by any person or
group (as such term is used in Rule 13d-5 under the Securities Exchange Act of
1934) who beneficially owned less than 15% of the voting power of the
Company's outstanding voting securities on the date of this Agreement, or the
acquisition of beneficial ownership of an additional 5% of the voting power of
the Company's outstanding voting securities by any person or group who
beneficially owned at least 15% of the voting power of the Company's
outstanding voting securities on the date of this Agreement; provided,
however, that notwithstanding the foregoing, an acquisition shall not
constitute a Fundamental Change hereunder if the acquiror is (x) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company and acting in such capacity, (y) a wholly-owned subsidiary of the
Company or a corporation owned, directly or indirectly, by the stockholders of
the Company in the same proportions as their ownership of voting securities of
the Company or (z) any other person whose acquisition of shares of voting
securities is approved in
<PAGE>
advance by a majority of the Continuing Directors; or (E) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a
case involving the Company to a case under Chapter 7.
7. CERTAIN BENEFITS AND OBLIGATIONS UPON TERMINATION.
A) In the event that Employee's employment terminates (i)
because of death or disability, (ii) because CSL has terminated Employee
other than "for cause," as described above, or (iii) because Employee has
voluntarily resigned for "good reason," as described above, then,
i) CSL shall pay Employee in accordance with its
Corporate Policies and Procedures Manual his base salary plus his annual
bonus paid during the term of this Agreement in the past twelve (12) months
for the balance of the term of this Agreement (not including any future
extensions), but not less than two (2) years (base salary plus annual bonus
paid during the term of this Agreement in the past twelve (12) months for
three (3) years if termination due to a Fundamental Change) from the date
of the notice of termination, and Employee shall retain all his Company
stock options that are vested; provided, however, the benefits described in
this Paragraph 7(A)(i) shall terminate at such time as Employee materially
breaches the provisions of Paragraphs 7(D), 8, or 9 hereof.
ii) All accrued but unpaid or unused vacation,
sick pay and expense reimbursement shall be calculated in accordance with
CSL's Corporate Policies and Procedures Manual and shall be promptly paid
to Employee upon such termination.
B) In the event that Employee's employment terminates for any
other cause other than those set forth in Paragraph 7(A), which can include
but not be limited to voluntary resignation without good reason,
termination by CSL "for cause," expiration of the term of the Agreement,
etc., then,
i) CSL shall promptly pay Employee his base
salary and pro-rated annual bonus up to and through the date of termi-
nation;
ii) All accrued but unpaid or unused vacation,
sick pay and expense reimbursement shall be calculated in accordance with
CSL's Corporate Policies and Procedures Manual and shall be promptly paid
to Employee upon such termination.
C) In the event that Employee's employment terminates by
reason of his death, all benefits provided in this Paragraph 7 shall be paid
to Employee's estate or as his executor or personal representative shall
direct, but payment may be deferred until Employee's executor or personal
representative has been appointed and qualified pursuant to the law in effect
in Employee's jurisdiction of residence at the time of his death;
D) Following the termination for any reason of Employee's
employment, Employee shall not for himself or any third party, directly or
indirectly (i) divert or attempt to divert from the Company or its affiliated
companies any business of any kind in which it is or has been engaged,
including, without limitation, the solicitation of, interference with, or
entering into any
<PAGE>
contract with any of its past or then existing customers, and (ii) employ,
solicit for employment, or recommend for employment any person employed by the
Company or its affiliated companies during the period of such person's
employment and for a period of two (2) years thereafter.
8. CONFIDENTIALITY. Employee hereby acknowledges his understanding that
as a result of his employment by CSL, he will have access to, and possession
of, valuable and important confidential or proprietary data, documents and
information concerning CSL, its operations and its future plans. Employee
hereby agrees that he will not, either during the term of his employment with
CSL, or at any time after the term of his employment with CSL, divulge or
communicate to any person or entity, or direct any employee or agent of CSL or
of his to divulge or communicate to any person or entity, or use to the
detriment of CSL or for the benefit of any other person or entity, or make or
remove any copies of, such confidential information or proprietary data or
information, whether or not marked or otherwise identified as confidential or
secret. Upon any termination of this Agreement for any reason whatsoever,
Employee shall surrender to CSL any and all materials, including but not
limited to drawings, manuals, reports, documents, lists, photographs, maps,
surveys, plans, specifications, accountings and any and all other materials
relating to the Company or any of its business, including all copies thereof,
that Employee has in his possession, whether or not such material was created
or compiled by Employee, but excluding, however, personal memorabilia
belonging to Employee and notes taken by him as a member of the Board of
Directors. With the exception of such excluded items, materials, etc.,
Employee acknowledges that all such material is solely the property of CSL,
and that Employee has no right, title or interest in or to such materials.
Notwithstanding anything to the contrary set forth in this Paragraph 8, the
Provisions of this Paragraph 8 shall not apply to information which: (i) is or
becomes generally available to the public other than as a result of disclosure
by Employee, or (ii) is already known to Employee as of the date of this
Agreement from sources other than CSL, or (iii) is required to be disclosed by
law or by regulatory or judicial process.
9. NON-COMPETITION. Employee hereby agrees that during the term of his
employment with the Company and for a period of one (1) year after any
termination for any reason whatsoever of this Agreement, he will not and will
cause his Affiliates not to, directly or indirectly, acquire, develop or
operate senior living facilities anywhere in the United States, other than
through the Company and its subsidiaries except as otherwise requested by the
Company. CSL hereby acknowledges and agrees that Employee's ownership of a
class of securities listed on a stock exchange or traded on the
over-the-counter market that represents five percent (5%) or less of the
number of shares of such class of securities then issued and outstanding shall
not constitute a violation of this Paragraph 9.
10. WORK PRODUCT. The Employee agrees that all innovations,
improvements, developments, methods, designs, analyses, reports and all
similar or related information which relates to the Company's or any of its
subsidiaries' or affiliates' actual or anticipated business, or existing or
future products or services and which are conceived, developed or made by the
Employee while employed by the Company ("Work Product") belong to the Company
or such subsidiary or affiliate. The Employee will promptly disclose such Work
Product to the Board and perform all actions reasonably requested by the Board
(whether during or after the employment period) to establish and to confirm
such ownership (including, without limitation, assignments, consents, powers
of attorney and other instruments).
<PAGE>
11. LEGAL ACTION. In the event that any action or proceeding is brought
to enforce the terms and provisions of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys' fees and costs. In the
event of a breach or threatened breach by Employee of the provisions of
Paragraph 7(D), 8, 9, or 10, Employee and the Company agree that the Company,
shall, in addition to any other available remedies, be entitled to an
injunction restraining Employee from violating the terms of the applicable
Paragraph and that said injunction is appropriate and proper relief for such
violation.
12. NOTICES. All notices and other communications provided to either
party hereto under this Agreement shall be in writing and delivered by hand
delivery, overnight courier service or certified mail, return receipt
requested, to the party being notified at said party's address set forth
adjacent to said party's signature on this Agreement, or at such other address
as may be designated by a party in a notice to the other party given in
accordance with this Agreement. Notices given by hand delivery or overnight
courier service shall be deemed received on the date of delivery shown on the
courier's delivery receipt or log. Notices given by certified mail shall be
deemed received three (3) days after deposit in the U.S. Mail.
13. CONSTRUCTION. In construing this Agreement, if any portion of this
Agreement shall be found to be invalid or unenforceable, the remaining terms
and provisions of this Agreement shall be given effect to the maximum extent
permitted without considering the void, invalid or unenforceable provision. In
construing this Agreement, the singular shall include the plural, the
masculine shall include the feminine and neuter genders, as appropriate, and
no meaning or effect shall be given to the captions of the paragraphs in this
Agreement, which are inserted for convenience of reference only.
14. CHOICE OF LAW; SURVIVAL. This Agreement shall be governed and
construed in accordance with the internal laws of the State of Texas without
resort to choice of law principles. The provisions of Paragraphs 7, 8, 9, 10
and 17 shall survive the termination of this Agreement for any reason
whatsoever.
15. INTEGRATION; AMENDMENTS. This is an integrated Agreement. This
Agreement constitutes and is intended as a final expression and a complete and
exclusive statement of the understanding and agreement of the parties hereto
with respect to the subject matter of this Agreement. All negotiations,
discussions and writings between the parties hereto relating to the subject
matter of this Agreement are merged into this Agreement, and there are no
rights conferred, nor promises, agreements, conditions, undertakings,
warranties or representations, oral or written, expressed or implied, between
the undersigned parties as to such matters other than as specifically set
forth herein. No amendment or modification of or addendum to, this Agreement
shall be valid unless the same shall be in writing and signed by the parties
hereto. No waiver of any of the provisions of this Agreement shall be valid
unless in writing and signed by the party against whom it is sought to be
enforced.
16. BINDING EFFECT. This Agreement is binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns; PROVIDED, HOWEVER, that Employee
shall not be entitled to assign his interest in this Agreement (except for an
assignment by operation of law to his estate), or any portion hereof, or any
rights hereunder, to any
<PAGE>
party. Any attempted assignment by Employee in violation of this Paragraph 16
shall be null, void, ab initio and of no effect of any kind or nature
whatsoever.
17. REGISTRATION RIGHT.
A) If the Company at any time proposes to register any of its
securities under the Securities Act for sale to the public, whether for its
own account or for the account of other security holders or both (except with
respect to registration statements on Forms S-4 or S-8 or another form not
available for registering the Registrable Securities for sale to the public),
each such time it will give written notice to Employee of its intention so to
do. Upon the written request of Employee, received by the Company within 30
days after the giving of any such notice by the Company, the Company will
cause the Registrable Securities as to which registration shall have been so
requested to be included in the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition by Employee (in accordance with its
written request) of such Registrable Securities so registered; provided,
however, that if the managing underwriter of the Company's offering delivers
in good faith a written opinion to Employee that either because of (A) the
kind of securities which the Employee or the Company intends to include in the
offering or (B) the size of the offering which Employee or the Company intend
to make, the success of the offering or the market for the Company's common
stock would be materially and adversely affected by the inclusion of the
Registrable Securities requested to be included (I) in the event that the size
of the offering is the basis for the managing underwriter's opinion, the
amount of the securities to be offered for the account of the Employee and
each other person registering securities of the Company pursuant to similar
incidental registration rights shall be reduced pro rata to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount reasonably recommended by such managing underwriter;
and (II) in the event that the combination of securities to be offered is the
basis of such managing underwriter's opinion, 1) the Registrable Securities
and other securities to be included in such offering shall be reduced as
described in clause (I) above or, 2) if the actions described in clause (I)
would, in the reasonable judgment of the managing underwriter, be insufficient
to substantially eliminate the material and adverse effect that inclusion of
the Registrable Securities requested to be included would have on such
offering, such Registrable Securities will be excluded from such offering.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Paragraph 17(A) without thereby
incurring any liability to Employee. The Company shall not be required to
register shares of Registrable Securities of Employee after the Company has
filed two (2) registration statements which included Registrable Securities
and such registration statements have become effective, remained effective for
the period of distribution, and the transaction described therein were closed.
B) If and whenever the Company is required by Paragraph 17(A)
to effect a piggy back registration, the Company shall as expeditiously as
possible:
i) prepare and file with the Securities and Exchange
Commission ("Commission") a registration statement (which, in the case of an
underwritten public offering shall be on Form S-1, Form S-2, Form S-3, any
successor forms thereto, or other form of general applicability satisfactory
to the managing underwriter selected as therein provided) with respect to such
securities and use its best efforts to cause such registration statement to
become and remain
<PAGE>
effective for the period of the distribution contemplated thereby ( as
determined hereinafter ); provided, however that the Company may postpone
the filing, effectiveness, supplementing or amending of the registration
statement for up to 90 days if, in the good faith opinion of the Company's
Board of Directors, the registration or sale of Registrable Securities
would adversely affect a material financing, acquisition, disposition of
assets or stock, merger or other comparable transaction or would require
the Company to make public disclosure of information the public disclosure
of which would have a material adverse effect upon the Company. During any
time that the Company defers amending or supplementing the registration
statement, the holders of Registrable Securities shall discontinue
disposing of Registrable Securities;
ii) subject to the proviso in subparagraph (i),
prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for the
period of distribution and comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by
such registration statement in accordance with the intended method of
disposition set forth in such registration statement for such period;
iii) furnish to Employee and to each underwriter
such number of copies of the registration statement and the prospectus
included therein (including each preliminary prospectus) as such persons
reasonably may request in order to facilitate the public sale or other
disposition of the Registrable Securities covered by such registration
statement;
iv) use its best efforts to register or qualify
the Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Employee or, in
the case of an underwritten public offering, the managing underwriter
reasonably shall request, provided however, that the Company shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction;
v) use its best efforts to list or qualify for
quotation the Registrable Securities covered by such registration statement
with any securities exchange or inter-dealer quotation system on which the
common stock of the Company is then listed or quoted;
vi) notify Employee at any time when a prospectus
relating to Registrable Securities is required to be delivered under the
Securities Act or the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of Employee, the
Company will prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an untrue statement of a material fact or
omit to state any fact necessary to make the statements therein not
misleading, provided that the 180-day period described below will be tolled
from the time a prospectus contains such a statement or omission until a
prospectus correcting such statement or omission has been delivered to the
Employee and may be delivered to the purchasers of such Registrable
Securities in compliance with the Securities Act;
vii) notify the Employee immediately, and confirm
the notice in writing,
<PAGE>
(1) when the registration statement becomes effective, (2) of the issuance
by the Commission of any stop order or of the initiation, or the
threatening, of any proceedings for that purpose, (3) of the receipt by the
Company of any notification with respect to the suspension of qualification
of the Registrable Securities for sale in any jurisdiction or of the
initiation, or the threatening, of any proceedings for that purpose, and
(4) of the receipt of any comments, or requests for additional information,
from the Commission or any state regulatory authority. If the Commission or
any state regulatory authority shall enter such a stop order or order
suspending qualification at any time, the Company will promptly use its
best reasonable efforts to obtain the lifting of such order; and
viii) otherwise use its best efforts to comply with
-all applicable rules and regulations of the Commission, and make available
to its security holders as soon as reasonably practicable, but not later
than 15 months after the effective date of the registration statement, a
statement covering a period of at least 12 months beginning after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act.
For purposes hereof, the period of distribution of Registrable
Securities in a firm commitment underwritten public offering shall be
deemed to extend until each underwriter has completed the distribution of
all securities purchased by it, and the period of distribution of
Registrable Securities in any other registration shall be deemed to extend
until the earlier of the sale of all Registrable Securities covered thereby
or 180 days after the effective date thereof.
In connection with each registration hereunder, Employee will furnish
to the Company in writing such information with respect to it as a
stockholder as reasonably shall be necessary in order to assure compliance
with federal and applicable state securities laws.
In connection with each registration pursuant to Paragraph 17 hereof
covering an underwritten public offering, the Company and Employee agree to
use their best efforts to select a managing underwriter (and any
co-managers) and to enter into a written agreement with the managing
underwriter selected in the manner herein provided in such form and
containing such provisions as are customary in the securities business for
such an arrangement between such underwriter and companies of the Company's
size and investment stature.
C) All expenses incurred by the Company in complying with
Paragraph 17 hereof, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of
Securities Dealers, Inc., transfer taxes, fees of transfer agents and
registrars, costs of insurance, and fees and disbursements of one counsel
for the Employee but excluding any Selling Expenses, are called
"Registration Expenses." All underwriting discounts and selling commissions
applicable to the sale of Registrable Securities are called "Selling
Expenses."
i) The Company shall pay all Registration Expenses
attributable to the shares of Registrable Securities included in the
registration in connection with each registration statement under Paragraph
17 hereof.
<PAGE>
ii) All Selling Expenses in connection with each
such registration statement applicable to Registrable Securities sold by
Employee shall be borne by the Employee.
D) Subject to applicable law, the Company will indemnify each
underwriter, the Employee and each person controlling any of them, against all
claims, losses, damages and liabilities, including legal and other expenses
reasonably incurred, arising out of any untrue statement of a material fact
contained in the registration statement, or any omission to state a material
fact required to be stated in the registration statement or necessary to make
the statements not misleading, or arising out of any violation by the Company
of the Securities Act, any state securities or "blue-sky" laws or any
applicable rule or regulation. This indemnification will not apply to any
claims, losses, damages or liabilities to the extent that they may have been
caused by an untrue statement or omission based upon information furnished in
writing to the Company by such underwriter, the Employee or controlling
person, respectively, expressly for use in the registration statement. With
respect to such untrue statement or omission in the information furnished in
writing to the Company by the Employee, the Employee will indemnify the
underwriters, the Company, its directors and officers, and each person
controlling any of them against any losses, claims, damages, expenses or
liabilities to which any of them may become subject as a result of such untrue
statement or omission.
E) The registration rights of the Employee under this
Agreement may be transferred to any trust, family partnership or other family
entity formed by Employee to hold shares of common stock and to any member of
the family of the Employee.
F) In the event of any merger, consolidation or share exchange
pursuant to which the Company is not the surviving or resulting corporation,
the Company's obligations under this Paragraph 17 shall be assumed by such
surviving or resulting corporation.
18. CANCELLATION OF PRIOR EMPLOYMENT AGREEMENT. Employee and Company
hereby agree that the Employment Agreement, dated November 1, 1996, between
Employee and Company shall be, upon execution and delivery of this Agreement,
canceled and of no further force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth above to be effective as of the date specified in the preamble
of this Agreement.
CAPITAL SENIOR LIVING CORPORATION,
a Delaware corporation
Address:
14160 Dallas Parkway, #300
Dallas, TX 75240 By: /s/ James A. Stroud
-----------------------------
James A. Stroud, Chairman
EMPLOYEE
Address:
41 Willow Road
Woodsburgh, NY 11598 /s/ Lawrence A. Cohen
----------------------------------
Lawrence A. Cohen
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule for Capital Senior Living Corporation
</LEGEND>
<CIK> 0001043000
<NAME> Capital Senior Living Corporation
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 21,879,628
<SECURITIES> 0
<RECEIVABLES> 18,086,664
<ALLOWANCES> (972,689)
<INVENTORY> 0
<CURRENT-ASSETS> 45,742,036
<PP&E> 133,298,581
<DEPRECIATION> (18,096,399)
<TOTAL-ASSETS> 225,663,105
<CURRENT-LIABILITIES> 5,874,308
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 116,737,854
<TOTAL-LIABILITY-AND-EQUITY> 225,663,105
<SALES> 0
<TOTAL-REVENUES> 16,560,351
<CGS> 0
<TOTAL-COSTS> 9,543,576
<OTHER-EXPENSES> 496,926
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,898,749
<INCOME-PRETAX> 7,178,849
<INCOME-TAX> 2,792,573
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,386,276
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
