<PAGE>
REGISTRATION NO.
------------
==================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement Under The Securities Act of 1933
FRONT RANGE ASSISTED LIVING, L.L.C.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
Kansas 8261 48-1171755
--------------- --------------- ---------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
</TABLE>
260 North Rock Road
Suite 260
Wichita, Kansas 67206
(316) 682-4650
-----------------------
(Address and telephone number
of principal executive offices)
220 South 1200 East Street
St. George, Utah 84770
-----------------------
(Address of principal place of business
or intended principal place of business)
Robert A. Brooks
260 North Rock Road
Suite 260
Wichita, Kansas 67206
(316) 682-4650
-----------------------
(Name, address and telephone
number of agent for service)
Copies of communications to:
Michael G. Quinn, Esq.
154 North Topeka Street
Wichita, Kansas 67202
(316) 267-0377
-----------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
==============================================================================
<TABLE>
<S> <C> <C> <C> <C>
Proposed Proposed
Title of Dollar maximum maximum
securities amount offering aggregate Amount of
being to be price per offering registration
registered registered unit price (1) on fee
- ---------- ---------- ---------- ---------- ----------
Co-First $2,500,000 100% $2,500,000 $863
Deed of
Trust
Bonds
</TABLE>
==============================================================================
(1) The securities to be offered may be purchased in amounts of $250 or more.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
==============================================================================
<PAGE>
FRONT RANGE ASSISTED LIVING, L.L.C.
CROSS-REFERENCE SHEET PURSUANT TO PART I OF FORM SB-2
<TABLE>
<CAPTION>
FORM SB-2 ITEM PROSPECTUS CAPTION
--------------- ------------------
<S> <C>
1. Front of Registration Statement Front of Registration Statement;
and Outside Front Cover Page of Outside Front Cover Page
Prospectus. . . . . . . . . . . . .
2. Inside Front and Outside Back Inside Front and Outside Back Cover
Cover Pages of Prospectus . . . . . Pages
3. Summary Information and Risk Prospectus Summary; Risk Factors
Factors . . . . . . . . . . . . . .
4. Use of Proceeds . . . . . . . . . . Prospectus Summary; Use of Proceeds
5. Determination of Offering Price . . Not Applicable
6. Dilution. . . . . . . . . . . . . . Not Applicable
7. Selling Security Holders. . . . . . Not Applicable
8. Plan of Distribution. . . . . . . . Prospectus Summary; Underwriting
9. Legal Proceedings . . . . . . . . . Legal Proceedings
10. Directors, Executive Officers,
Promoters and Control Persons . . . Management
11. Security Ownership of Certain
Beneficial Owners and Management. . Principal Owners of the Company
12. Description of Securities . . . . . Description of Bonds
13. Interest of Named Experts and
Counsel . . . . . . . . . . . . . . Legal Matters; Experts
14. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities. . . . . Not Applicable
15. Organization within Last Five
Years . . . . . . . . . . . . . . . Not Applicable
16. Description of Business . . . . . . Prospectus Summary; Risk Factors; Use
of Proceeds; Business; Management;
Certain Transactions; Principal
Owners of the Company; The Company's
Plan of Operation; Financial
Statements
17. Management's Discussion and
Analysis of Plan of Operation . . . The Company's Plan of Operation
18. Description of Property . . . . . . Description of Property
19. Certain Relationships and
Related Transactions. . . . . . . . Certain Transactions
20. Market for Common Equity and
Related Stockholder Matters . . . . Not Applicable
21. Executive Compensation. . . . . . Management - Compensation of Managing
Member
22. Financial Statements. . . . . . . . Financial Statements
23. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure. . . . . . Not Applicable
</TABLE>
==============================================================================
<PAGE>
PROSPECTUS Dated , 1997
[LOGO HERE] ------
FRONT RANGE ASSISTED LIVING, L.L.C.
(d/b/a EVERGREEN GARDENS AT ST. GEORGE)
$2,500,000 Co-First Deed of Trust Bonds, Series 1997-I
Front Range Assisted Living, L.L.C. (the "Company") is offering for sale
$1,566,000 Co-First Deed of Trust Bonds bearing simple interest payable
semiannually and $934,000 Co-First Deed of Trust Bonds bearing compound
interest payable at maturity (hereinafter collectively referred to as the
"Bonds"). See "Maturity Schedule". Interest will accrue on the Bonds from
the date of issue. The Bonds are secured by a pledge of the land and
building constituting the 38-unit assisted living facility (the "Residence")
and a pledge of the gross income of the Company pursuant to the terms of the
Trust Indenture (the "Trust Indenture") between the Company and Colonial Trust
Company (the "Trustee"). The Bonds are subject to redemption prior to their
respective maturities, in whole or in part, as more fully described herein.
Subject to acceptance and delivery of the Bonds, proceeds from subscriptions
will be held by the Trustee as Escrow Agent. There is no established
trading market for the Bonds offered hereby and the Company does not
anticipate that an active trading market will be established.
See "Risk Factors" beginning on page 6 for a discussion of certain factors
that should be considered by purchasers of the Bonds. Such risks include: (i)
no assurance of sale of all the Bonds, (ii) if only $300,000 in principal
amount in Bonds are sold, such funds will only pay expenses and reserves
associated with the Offering and (iii) if sufficient Bonds are not sold to
fully repay the Construction Loan, there is a risk of foreclosure by the
Construction Lender.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE BONDS ARE NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public (1) Commissions (2) (3) Company
<S> <C> <C> <C>
Minimum Purchase ...... $250 $16.25 $233.75
Total Minimum ......... $300,000 $19,500 $280,500
Total Maximum ......... $2,500,000 $162,500 $2,337,500
</TABLE>
(1) Bonds will sold in registered form at par in denominations of $250 or
integral multiples thereof.
(2) Subject to the sale of all Bonds and any adjustments, the Underwriter will
receive a maximum sales commission of $162,500. See "Underwriting". The
Company has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act").
(3) Before deducting expenses payable by the Company estimated at $56,250,
including $31,250 paid to the Underwriter for its unaccountable expenses
associated with the Offering and miscellaneous expenses estimated to be
$25,000 for registration fees, legal fees, accounting fees and other costs
associated with the Offering.
Subject to the sale of $300,000 in principal amount of the Bonds, the
underwriter is offering the Bonds on a "best efforts" basis as agent for the
Company. The Bonds are subject to prior sale, acceptance of offers to purchase
and to approval of certain legal matters by counsel for the Underwriter and the
Company. The Underwriter reserves the right to reject any order, in whole or
in part, and to withdraw, cancel or modify the Offering of the Bonds without
notice. It is expected that the Bonds will be ready for delivery, subject to
the sale of minimum Bonds, within 30 days from the date subscription for the
Bonds are received.
MMR INVESTMENT BANKERS, INC.
<PAGE>
MATURITY SCHEDULE
Series 1997-I Simple Interest Bonds Series 1997-I Compound Interest Bonds
Maturity Bonds Interest Maturity Bonds Interest
Date Retired Rate Date Retired Rate
04/01/1998 $46,500 7.00% 10/01/2000 $64,500 8.00%
10/01/1998 $48,000 7.00% 10/01/2002 $67,000 9.00%
04/01/1999 $62,500 7.50% 04/01/2005 $63,000 9.50%
10/01/1999 $64,750 7.50% 10/01/2006 $60,000 9.75%
04/01/2000 $78,750 8.00% 04/01/2008 $55,000 10.00%
04/01/2001 $91,250 8.50% 10/01/2008 $51,750 10.00%
10/01/2001 $94,750 8.50% 04/01/2009 $49,500 10.00%
04/01/2002 $100,000 9.00% 10/01/2009 $47,000 10.00%
04/01/2003 $104,000 9.25% 04/01/2010 $44,500 10.00%
10/01/2003 $109,000 9.25% 10/01/2010 $41,750 10.25%
04/01/2004 $115,500 9.50% 04/01/2011 $39,000 10.25%
10/01/2004 $118,750 9.50% 10/01/2011 $37,500 10.25%
10/01/2005 $122,500 9.75% 04/01/2012 $35,500 10.25%
04/01/2006 $130,750 9.75% 10/01/2012 $33,500 10.25%
04/01/2007 $135,500 10.00% 04/01/2013 $31,250 10.50%
10/01/2007 $143,500 10.00% 10/01/2013 $29,750 10.50%
04/01/2014 $28,000 10.50%
10/01/2014 $26,500 10.50%
04/01/2015 $25,250 10.50%
10/01/2015 $23,000 10.75%
04/01/2016 $21,750 10.75%
10/01/2016 $20,750 10.75%
04/01/2017 $19,750 10.75%
10/01/2017 $18,500 10.75%
[PICTURE HERE]
Artist's rendering of Evergreen Gardens Assisted Living at St. George, Utah
The Company intends to furnish annual reports containing audited financial
statements to its bondholders.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including risk factors, financial statements and notes thereto
appearing elsewhere in this Prospectus.
The Company
Front Range Assisted Living, L.L.C. (d/b/a Evergreen Gardens of St.
George) is a development stage limited liability company formed under the laws
of the State of Kansas for the purpose of developing and operating a 38-unit
assisted living facility in St. George, Utah (the "Residence"). The Company's
executive offices are located at 260 North Rock Road, Suite 260, Wichita,
Kansas 67206, and the Company's telephone number is (316) 682-4650. See
"Business".
The Offering
Bonds Offered
Subject to the sale of $300,000 in principal amount of the Bonds, the
Underwriter is offering the Bonds on a "best efforts" basis, without any
commitment to sell any of the Bonds as agent for the Company. The Bonds will
be dated October 1, 1997. The aggregate principal amount of the Series 1997-I
Bonds is $2,500,000. Bonds in the principal amount of $1,566,000 ("Simple
Interest Bonds") will mature serially and bear simple interest payable by check
mailed to the registered owners each April 1 and October 1 until maturity.
Bonds in the principal amount of $934,000 ("Compound Interest Bonds") will
mature serially and bear interest payable at maturity. The interest on the
Compound Interest Bonds will be compounded semiannually each April 1 and
October 1 until maturity. Interest on the Bonds is includable in gross
income for federal tax purposes. See "Description of Bonds".
Denominations
$250 or integral multiples thereof.
Maturity
See Maturity Schedule on page 2 hereof.
Operating Fund
Under the Trust Indenture, the Company must establish an Operating Fund Account
and make monthly deposits into the Operating Fund Account in amounts
predetermined to be sufficient at all times to pay the principal and interest
of the Bonds. See "Description of Bonds - Operating Fund Requirements".
Redemption
The Company has reserved the right to redeem all or a portion of the Bonds
prior to their stated maturity on any semiannual interest payment/computation
date. The Bonds are subject to redemption without premium at the principal
amount thereof plus accrued interest. See "Description of Bonds - Prepayment".
3
<PAGE>
Covenants
In addition to its obligation to remit the principal and interest payments
when due, the Company has agreed to at its own cost and expense, maintain the
properties in good repair and condition and pay or discharge all taxes,
assessments and any mechanic's or materialmen's liens that may become payable.
Furthermore, the Company covenants to keep all property pledged under this Bond
issue properly insured against loss by fire, windstorm and explosion in an
amount equal to the outstanding balance of the Bonds. See "Description of
Bonds".
Bond Reserve Fund
The Company has agreed to establish a Ten Year Bond Reserve Account from bond
proceeds. The Ten Year Bond Reserve Account will be funded in the amount of
$130,000 and will remain in place for a period of ten years from October 1,
1997. The purpose of the Ten Year Bond Reserve Account is that in the event
the Company has not deposited the necessary funds to pay the principal and
interest due on any semiannual payment date, the Trustee may apply available
funds to the principal and interest due on the Bonds. At the end of the ten
year period said reserve funds will be used to call any outstanding Bonds,
provided the Company is current on all operating fund payments. See
"Description of Bonds - Ten Year Bond Reserve Account".
Trustee
Colonial Trust Company of Phoenix, Arizona, has agreed to serve as Trustee for
the Bonds pursuant to the Trust Indenture entered into between the Company and
the Trustee. The Trustee has also agreed to serve as Paying Agent, Registrar,
Disbursing Agent and Escrow Agent. The Trustee is not a guarantor or surety,
does not in any way guarantee or act as surety for payment of the Bonds and may
not be held liable under any conditions, except for its own negligence. See
"Description of Bonds".
Trust Indenture
The Company pledges, transfers and assigns to the Trustee, in trust, to secure
the payment of the Bonds, all of its rights, title and interest to the first
receipts of any and all revenues of the Residence, the real property of the
Company and the furnishings and equipment of the Company and all monies and
securities held by the Trustee under the terms of the Trust Indenture. The
Bonds will be secured by a Co-First Deed of Trust with Colonial Trust Company
and Emprise Bank, N.A. of Hays, Kansas ("Emprise"). The property securing the
Bonds is located at 220 South 1200 East Street in St. George, Utah. See
"Description of Bonds".
Lienholders Agreement
The rights of Colonial Trust Company acting as Trustee on behalf of the Series
1997-I bondholders are subject to a certain Lienholders Agreement between the
Trustee and Emprise dated as of June 20, 1997, which, among other things,
provides for the allocation of proceeds from the sale of the Residence based on
the principal balance of the debts as calculated under the Lienholders Agreement
in the event of foreclosure on the Construction Loan or the Bonds. See
"Description of Property - Financing of Residence".
4
<PAGE>
Proceeds Escrow
If $300,000 has not been deposited in the escrow account from the sale of the
Bonds by April 1, 1998, the Company shall promptly pay to the Escrow Agent
such sum of money as shall be necessary, if any, when added to the amount of
the escrow property and interest earned thereon to pay to the subscribers of the
Bonds the principal amount of such subscriptions together with the interest from
the date of issue through the escrow termination date at the rate attributable
to the Bonds subscribed. During the escrow period, the subscriber has no
access to funds held in the escrow account by the Escrow Agent. All funds from
the sale of the Bonds will be deposited with Colonial Trust Company (the
"Registrar" and "Escrow Agent"). See "Underwriting".
Use of Proceeds
The net proceeds will be used to fund a small portion of the operating fund
payments on the Bonds, fund a reserve fund, provide permanent financing for the
construction, furnishing and equipping the Residence and payoff the existing
construction financing on the Residence. See "Use of Proceeds".
Risk Factors
An investment in the Bonds is speculative and involves a high degree of risk.
Among such risks are the following: no assurance of sale of Bonds; sale of the
minimum offering will only pay expenses and reserves associated with the
Offering; and if sufficient Bonds are not sold to repay the construction loan,
there is a risk of foreclosure. Potential investors should carefully consider
the factors set forth under "Risk Factors".
Financial Summary
As of June 30, 1997, the Company had total assets of $248,793, total
liabilities of $261,287 and total member's deficit of ($12,494). The members
of the Company have contributed a total of $200 in capital to the Company.
Since the Company's inception on July 18, 1995 through June 30, 1997, the
Company has generated no revenues and has incurred cumulative expenses of
$12,694. See "Financial Statements" beginning on page F-1 of the Prospectus.
(This space is intentionally left blank)
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the Bonds
offered by this Prospectus. An investment in the Bonds is speculative and
involves a high degree of risk. Certain of these risks are set forth below and
should be considered by investors, among others, as a part of their overall
evaluation before making a decision to purchase Bonds.
No Commitment to Purchase Bonds; Deposit of Subscriptions
The Underwriter, in selling the Bonds, is acting of agent of the Company
on a "best efforts" basis. The Underwriter is only obligated to use its best
efforts to sell the Bonds, and the Company will not receive any proceeds of this
Offering unless the Underwriter sells Bonds equal to $300,000 in principal
amount by April 1, 1998. If $300,000 in principal amount is not sold within
such period, the Company shall promptly pay to the Escrow Agent such sum of
money as shall be necessary, if any, when added to the amount of the Escrow
Property and interest earned thereon to pay to the subscribers of the Bonds the
principal amount of such subscriptions together with the interest from
October 1, 1997 through the escrow termination date at the rate attributable to
the Bonds subscribed. All subscriptions funds will be deposited with the
Trustee, as Escrow Agent. See "Description of Bonds - Escrow and Disbursement
of Bond Proceeds".
Risk of Default of Existing Construction Loan
The Company obtained a construction loan (the "Construction Loan") on
June 20, 1997 with Emprise Bank, N.A. of Hays, Kansas (the "Construction
Lender") in the amount of $2,000,000. The Construction Loan is due September
1, 1998 (the "Maturity Date"), unless mutually extended by the Construction
Lender and the Company. As indicated under "Description of Bonds - Escrow and
Disbursement of Bond Proceeds" and "Use of Proceeds", the Construction Loan may
be the last item to be paid from the proceeds of this Offering. Accordingly,
if all of the Bonds are not sold by the Maturity Date, the Construction Loan
may go into default and the Construction Lender may exercise its rights,
including the Construction Lender's right under the Deed of Trust to sell the
Residence without the necessity of complying with a formal foreclosure
proceeding. There is no assurance that the Company would be able to secure
alternative financing to replace the Construction Loan on a timely basis.
Notwithstanding the fact that the security for the Bonds is in parity with the
Construction Loan, there can be no assurance that the proceeds arising from any
sale of the Residence, even though the construction has been fully completed,
would be sufficient to fully repay the Construction Loan and the then
outstanding Bonds. Under the terms of the Lienholders Agreement all receipts
from collection and foreclosure are to be allocated between the Construction
Loan and the Bonds in proportion to the respective principal balances
outstanding. See "Description of Property - Financing of Residence,"
"Description of Bonds - Escrow and Disbursement of Bond Proceeds," "Use of
Proceeds" and "The Company's Plan of Operation".
Presence of Debt
The Company is newly formed and without any operating history. The
financing activities of the Company have only been made through debt. As a
result, the Company is highly leveraged and will initially be highly dependent
upon the proceeds received as a result of the issuance of the Bonds in order to
service the debt incurred under the Bonds and, thereafter, the payment of debt
will be based upon income from the Company's operation of the Residence. There
is no assurance that such operations will be successful. Other than a pledge of
the land and building constituting the Residence and a pledge of the gross
income for the benefit of the Bonds, there are no other credit enhancements to
secure the payment of the Bonds such as personal guarantees of members, letters
of credit or other additional forms of security for the Bonds. The obligations
for the payment of principal and interest of the Bonds are entirely the
obligation of the Company. Such obligations are without recourse to the members
of the Company.
No Assurance of Operating Fund Payments
Proceeds of this Offering, in part, will be used to fund the first monthly
operating fund payments up to $125,000. This amount is equivalent to slightly
more than the first six month operating fund payments assuming all of the Bonds
are sold. There is no assurance that the Company will have sufficient funds to
pay the operating fund payments after the $125,000 has been expended. Failure
of the Company to make the operating fund payments constitutes an event of
default upon which the Trustee may accelerate the Bonds. Additionally, upon
written request of the bondholders of not less than 25% of the Bonds
outstanding, the Trustee is obligated to accelerate the maturity of the Bonds in
an event of default. See "Description of Bonds - Events of Default" and
"Description of Bonds - Remedies of Default."
6
<PAGE>
Proceeds of this Offering also will used to fund a reserve fund (the "Ten Year
Bond Reserve Account") in the amount of $130,000 to be applied by the Trustee to
pay the principal and interest due on the Bonds only in an event of default.
The Trustee will maintain the Ten Year Bond Reserve Account. The Ten Year Bond
Reserve Account will be in effect for a period of ten years from October 1,
1998. Should the Company fail to make the required deposits into the operating
fund account necessary to pay the principal and interest due on the payment
dates, and should the Ten Year Bond Reserve Account be entirely expended for
said purposes, there may not be sufficient funds available to repay bondholders
in a timely manner. At the end of the ten year period, any funds remaining in
the Ten Year Bond Reserve Account must first be used to call any outstanding
Series 1997-I Bonds. If there are no bonds outstanding, the Ten Year Bond
Reserve Account will then be released to the Company. See "Description of
Bonds - Ten Year Bond Reserve Account".
If only a portion of the Bonds are sold, the operating fund payment may be
adjusted to correspond with the principal and interest then outstanding, but at
no time be less than the required amount to pay any principal and/or interest
that would be due on any interest computation date.
Experience of the Underwriter
The Underwriter does not have substantial experience in acting as a lead
underwriter in an initial public offering. The Underwriter's experience has
primarily been in the underwriting of nonprofit debt securities, intrastate debt
offerings and Regulation A debt offerings. There can be no assurance that the
Underwriter's lack of experience will not adversely affect the Offering. See
"Underwriting".
Possible Withdrawal of Underwriter
The Underwriter is subject to civil litigation brought by the Securities
Commissioner of Kansas on behalf of the State of Kansas requesting a permanent
injunction against the Underwriter, its control person and others from directly
or indirectly employing any device which would operate as a fraud or deceit on
any person; and/or making any untrue statements of material facts; and/or
omitting to state material facts in order to make such statements not
misleading. The civil action also requests restitution by the Underwriter and
the other defendants in the amount of $4,825,665.24, which is the amount in
default on the last two issues of church bonds issued on behalf of the church.
This action arises out of the Underwriter's participation in an underwriting of
church bonds for a church located in Wichita, Kansas. In the event the action
brought by the Securities Commissioner of Kansas is successful, the Underwriter
may be required to withdraw from the offering of the Bonds. At the date of this
Offering, arrangements have not been made for a substitute Underwriter if, in
fact, the Underwriter is required to withdraw from this Offering.
Lack of Secondary Market
The Underwriter does not intend to make a market in the Bonds. There is
no quoted market for the Bonds and there is no assurance a market will develop.
There is no guarantee that all or a substantial portion of the Bonds will be
sold. The marketability of the Bonds may also be influenced by other general
market conditions, such as the overall strength of the bond market, which is
influenced by a number of factors, such as changes in prevailing interest rates
which may have an adverse effect on the price of the Bonds upon their sale and
which are beyond the control of the Company. In addition, the Bonds have not
received any credit rating by a Nationally Recognized Statistical Rating
Organization. The absence of any such rating could adversely affect the ability
of an investor to sell the Bonds or the price at which the Bonds are sold.
Therefore, the likelihood of a market developing may be remote at best. A
decision to purchase Bonds should be made with the understanding the Bonds most
likely will have to be held until maturity, as there is no quoted secondary
market for the Bonds, nor is there the likelihood one will develop. Purchasers
of the Bonds should consider their ownership of the Bonds as an illiquid
investment.
Enforcement of Trust Indenture
The enforceability of the terms of the trust Indenture is qualified to the
extent that enforcement of the rights and remedies created by it is subject to
bankruptcy, fraudulent conveyance, moratorium, insolvency, reorganization, and
similar laws of general application affecting the rights and remedies of
creditors and secured parties. The remedy of specific enforcement or of
injunctive relief is subject to the discretion of the court for which any
proceedings may be brought. To the extent the enforceability of the Trust
Indenture is affected by such bankruptcy, insolvency, reorganization or similar
laws, the rights of the Trustee or the Bondholders, and their ability to make
recovery, in whole or in part, could be adversely affected.
7
<PAGE>
Additional Bonds
The terms of the Trust Indenture enable the Company to further encumber the
Residence securing the Bonds by permitting the issuance of additional bonds at a
future date. To the extent any additional bonds are issued, these additional
bonds would be issued on parity with the Bonds and would, in turn, share
proportionately with the Bonds in any proceeds that might arise from a
foreclosure or similar proceeding following a default by the Company, thereby
diminishing the proceeds available for repayment of the Bonds. See "Description
of Bonds".
Notification of Bonds Maturing
Semiannual notifications of Bond maturity may not be forwarded; each
Bondholder who has received a printed bond certificate is responsible to present
his/her Bonds for redemption at maturity. No interest will accrue or be payable
from or after the respective payment date upon any matured installment of
principal or interest. Further, the failure to present any Bond within three
years of its maturity may result in the principal and interest due being subject
to the laws of escheat in particular states.
Early Redemption of Bonds
The Bonds are subject to redemption, in whole or in part, prior to maturity
as more particularly set for herein. If the Bonds are redeemed prior to
maturity, the owners thereof will not receive the yield to maturity indicated,
and, if so redeemed, the owners may not be able to reinvest the proceeds thereof
at comparable rates.
Lack of Independent Feasibility Study
An independent feasibility study has not been performed for the Company for
its intended operations of the Residence. The Company has relied upon the past
experience of its Managing Member in analyzing the business opportunities of the
Company. The Company has secured an appraisal of the Residence partly as a
result of requests of the Construction Lender and Underwriter and for its own
purposes. See "Business - Appraisal".
Lack of Operating History
The Company is newly formed and was organized in July of 1995.
Construction of the Residence commenced on June 23, 1997, and the Residence is
not scheduled to be completed and open for business until January of 1998.
Therefore, the Company has no substantial operating history. However, the
Managing Member of the Company, Robert A. Brooks, has previous experience in the
development and operation of five assisted living facilities, three of which are
located in Kansas and two in Colorado. There is no assurance, that once open,
the Residence will generate income sufficient to service the Bonds.
Lack of Company Liability
Under the Kansas Limited Liability Company Act, all members and managers of
a limited liability company have limited liability without regard to their
participation in the management in the Company's business. A member is only
liable for his contribution and improper return of capital. Accordingly, in the
event of default in the payment of principal and interest on the Bonds occurs,
in all likelihood, the bondholders could look only to the assets of the Company
for satisfaction of such indebtedness.
Risks Arising from Operations
Any business entity which operates an assisted living residence may be
affected by adverse changes in general or local economic and market conditions,
increased costs of labor or energy, competition from other similar businesses,
poor management, limited alternative uses for the building and improvements,
changing consumer tasks and habits, changing demographics, and other factors.
The Residence will be subject to various requirements, restrictions, and
regulations imposed by governmental authorities affecting the frail and elderly
housing and care industry, the violation or claimed violation of which could
have a material adverse impact upon the Company's ability to meet its business
and financial obligations. More specifically, these risks include the
following:
General Economic Conditions: The financial success of the Company's
operations may be sensitive to adverse changes in general economic conditions,
such as inflation and unemployment. These changes could cause the cost of
the Residence's operations to increase in a manner that would create serious
economic hardship. These changing conditions could also restrict the amount of
income which potential customers have available for funding housing and
8
<PAGE>
care requirements such as residing at the Residence. The Company and its
management have no control over any of these changes.
General Risks in Property Ownership: The Company will be subject to risks
generally applicable to the ownership of real estate, including changes in (i)
general economic conditions; (ii) supply of, or demand for, similar or competing
properties; (iii) interest rates and the availability of permanent mortgage
funds which may render the refinancing of the Residence difficult or
unattractive; and (iv) tax, real estate, environmental and zoning laws.
Competition: The Company will experience competition from other elderly
housing and care providers. The Company will compete principally on the basis
of perceived quality and service, ambiance and price-value relationship.
While the Company believes that the Residence will be distinctive in design and
operating concept, it is aware of other companies with similar or competitive
concepts. The long-term care industry is highly competitive and the Company
expects that the assisted living industry, in particular, will become more
competitive in the future. The Company competes with numerous other companies
providing similar long-term care alternatives, such as home health agencies,
life care at home, community-based service programs, retirement communities and
convalescent centers. Nursing facilities that provide long-term care services
are also a potential source of competition to the Company. While there
presently is only one assisted living facility providing substantially the same
services as those proposed by the Company in St. George, the Company expects
that, as assisted living becomes increasingly recognized as an alternative form
of long-term care, competition will grow from new market entrants focusing
primarily on assisted living. After diligent research, the Company discovered
that two assisted living facilities may be built in the St. George area during
the next 12 months. However, no new building permits for assisted living
facilities have been submitted to the city planning department and building
department of St. George. There is no assurance that the Company will not
encounter increased competition in the future which could limit its ability to
attract residents and could have a material adverse effect on the Company's
financial condition, results of operations and prospects. See "Business -
Competition."
Rental Risk: One of the principal risks being taken by the Company is the
possibility that the Residence will not generate sufficient cash flow to cover
operating expenses and debt service payments, and the Company may be unable to
meet its obligations. The cash flow derived from the Residence may be affected
by a variety of factors, including but not limited to, the following: (i) a
reduction in rental income due to the Residence's inability to maintain high
occupancy levels at favorable rates; (ii) adverse changes in local market
conditions, such as over building, reduced employment opportunities, population
shifts due to demographic changes, adverse changes in the residential quality of
the surrounding neighborhood, or unfavorable zoning law changes; (iii) rent
control legislation; and (iv) the destruction of part or all of the Residence
due to fire, flooding, tornados or other natural disasters.
Environmental Considerations: Certain Federal and state laws impose
liability on a landowner for the presence on the premises of improperly disposed
of hazardous substances. This liability is without regard to fault for, or
knowledge of, the presence of such substances and may be imposed jointly or
severally upon all succeeding landowners from the date of the first improper
disposal. While state law is less onerous, the practical consequences may be
the same. If in the future it is ever determined that hazardous substances are
present, the Company could be required to pay all costs of any necessary clean
up work, although under certain circumstances claims against other responsible
parties could be made by the Company. A phase one environmental assessment was
conducted on the property in November 1996. Research and visual observation
undertaken did not reveal any former or current environmental conditions,
problems or situations impacting the site.
Construction Risks
Construction of the Residence is not completed, and delays are common in
the construction industry. The Company anticipates the construction of the
Residence to be complete by January of 1998. Disruptive events may include
shortages of, or inability to obtain, labor or materials, the inability of the
general contractor or subcontractors to perform under their contracts, strikes,
adverse weather conditions, changes in Federal, state or local laws or
regulations, and other factors or circumstances presently unknown to or
unanticipated by the Company. The Company may have little control over such
events, and such events may adversely affect the cost and completion time of the
Residence. See "Business - Construction of the Residence".
9
<PAGE>
Residence Location
The Residence is being constructed in St. George, Utah. However, the
Company's executive offices are located in Wichita, Kansas. Adequate oversight
of the construction and operations of the Residence may prove difficult for the
Company considering the distance between the location of the Residence and the
Company's executive offices. As a result, there can be no assurance that such
distance will not have a material adverse effect on the Company's financial
condition or results of operations.
Dependence on Management
The success of the Company's business will be highly dependent upon the
services of Robert A. Brooks, Managing Member of the Company. The loss of his
services of the Company would adversely affect the Company's business
operations. The Company has obtained a key employee insurance policy covering
the life of Mr. Brooks in the amount of $500,000 payable to the Construction
Lender. Once the Construction Loan has been retired, this policy will be
payable to the Trustee. See "Business - Residence Operations".
Employees
Prior to the commencement of operations of the Residence, the Company
intends to employ up to 15 full and/or part time employees at the Residence.
There is no assurance that the Company will be able to obtain and maintain an
adequate number of competent personnel, including entry-level and skilled
positions, or that a shortage of operating personnel will not present a serious
problem to the Company in the future.
Conflicts of Interest
Robert A. Brooks, the Managing Member of the Company, is also the Managing
Member of Brooks Development Company, L.L.C. and Colorado Springs Assisted
Living, L.L.C. Accordingly, Mr. Brooks will not be able to devote his
time exclusively to the operations of the Company. The Company acknowledges
that the conflicts of interest are real and ongoing, and there is no assurance
that the best interest of the Company will prevail. See "Certain Transactions".
Government Regulations
At present there are no applicable federal regulations affecting the
operation of the Residence. The facility will be built to conform with state
regulations governing residential care for the elderly in the State of Utah.
The management is confident all state regulations regarding the size of the
facility, health care and environment will be met. The assisted living project
is designed for full compliance with the Americans with Disabilities Act,
including, but not limited to areas such as parking, ramps, entrances, door and
corridor widths, and public toilet facilities. The Residence will not be
required to be licensed as a nursing home, due to the fact that no 24-hour
skilled medical care will be provided to residents by the staff. However, the
Residence will be required to be licensed by the Utah Department of Health
prior to the commencement of operations of the Residence. The Company has
applied for a license with the Utah Department of Health and anticipates getting
the license upon completion of construction of the Residence. In the Company's
opinion, the facility and management practices and operations will meet or
exceed all residential care for the elderly regulations of the State of Utah.
Failure of the Company to receive and maintain the required licensing would have
a material adverse effect on the Company's financial condition and its ability
to repay the Company's debt.
10
<PAGE>
USE OF PROCEEDS
The estimated net proceeds to the Company from the sale of the Bonds
offered by it will be $255,500 if the minimum amount of bonds offered is sold
and $2,312,500 if the maximum amount of bonds offered pursuant to the Offering
is sold. If the minimum amount of bonds offered pursuant to the Offering is
sold, the Company intends to use the net proceeds of this Offering in the
following order and preference: (i) to fund $125,000 to pay for the first
monthly operating fund payments (this amount is equivalent to slightly more
than the first six month operating fund payments assuming all of the Bonds are
sold) and (ii) to fund the Ten Year Bond Reserve Account in the amount of
$130,000. The balance of the proceeds, if any, will be used to payoff a portion
of the Construction Loan due the Construction Lender.
As additional Bonds are sold beyond the minimum offering amount, the
Company intends to use these net proceeds as follows: to reimburse the Company
for costs associated with the development, marketing and pre-opening of the
Residence up to $57,500 and concurrently to payoff the Construction Loan due the
Construction Lender in the amount of up to $2,000,000 (should the Construction
Loan be used in its entirety). If the maximum amount of bonds are sold prior to
the Construction Loan being used in its entirety, then the $2,000,000 of the net
proceeds available to payoff the Construction Loan will be used to retire the
Construction Loan and to complete construction of the Residence including the
furnishing and equipping of the Residence in the amount of the unfunded portion
of the Construction Loan. The balance of the proceeds from this Offering, if
any, will be used for the repayment of unsecured notes due the Managing Member
and Brooks Development Company ("Unsecured Notes").
The Construction Loan bears interest at a variable rate of 1% over the
Prime Rate and matures on September 1, 1998, unless mutually extended by the
Construction Lender and the Company. Proceeds from the $2,000,000 Construction
Loan will be used by the Company to pay $1,800,000 for construction of the
Residence, to pay approximately $63,000 in "soft costs" associated with the
development of the Residence and to purchase furniture and appliances in an
amount of approximately $137,000. See "Description of Property - Financing of
Residence".
The Unsecured Notes bear interest at 9% and are due at various dates
through 1997 and 1998 with automatic extension provisions if not paid in full
on their maturity dates. Proceeds from the Unsecured Notes were used by the
Company for the acquisition of land from the Managing Member and the purchase of
architectural plans and development services from Brooks Development Company, an
affiliate of the Company. See "Certain Transactions".
BUSINESS
The Company
The Company, a limited liability company formed under the laws of the
State of Kansas, was organized on July 18, 1995 for the purpose of developing
and operating a 38-unit assisted living facility in St. George, Utah. Since its
inception, the Company has acquired unimproved land in St. George, Utah and
commenced construction of the Residence on this land on June 23, 1997.
A limited liability company is a relatively new form of business
organization designed to allow its owners, known as members, to allocate,
participate and account for the profits, losses, and items of credit and
deduction as if the business were a partnership, but which also provides its
owners with the limited liability protection comparable to that enjoyed by the
shareholders of a corporation. The members of the Company are not personally
liable for the debts of the Company, absent their execution of a personal
guaranty of those debts, nor can the members of the Company be held liable for
the negligent actions of the Company. The responsibility for overseeing the
operations of the Company is vested in the Managing Member.
Business Concept
Assisted living care is an emerging segment of the long-term care industry
serving the rapidly growing elderly population who may require assistance with
the activities of daily living ("ADLs"), such as dressing, bathing and eating.
In addition to providing assistance with ADLs, the Company will also offer a
range of routine and skilled nursing services (as permitted by government
regulation). The Company's business concept is based on providing elderly
residents in Southwest Utah with a broad range of cost-effective health care and
personal support services, on a 24-hour basis, enabling them to maintain an
independent and dignified lifestyle in a residential setting.
11
<PAGE>
The Residence is intended to provide privacy and companionship in a
comfortable, secure, non-institutional living environment which is also designed
to promote interdependence between the Residence's staff and the residents, all
with the intent of providing a more positive lifestyle environment than that
which has been historically available from other congregate care providers.
Specifically, the Residence is designed to house elderly persons who do not
require 24-hour skilled nursing care. For example, typical residents might
include persons suffering from occasional memory loss, poor diet habits,
arthritis, or other infirmities by reason of which they would benefit from daily
assistance and supervision.
Residence Operations
Format. The services provided to residents will include meals, laundry,
housekeeping and physical assistance. In addition, preventive health care
programs, transportation, organized social activities, 24-hour security and
medication monitoring will also be provided as well as the services of a
registered nurse who is available on an "on call" basis. The residents will be
responsible for their own personal purchases such as toothpaste, medical
prescriptions, etc. Unlike nursing homes, however, contemplated services do not
include around-the-clock skilled nursing care. The Residence will also provide
limited social activities for residents.
Expenses of operating the Residence will be made up of "fixed" costs and
"variable" costs. "Fixed" costs will include debt service, management and core
staff, essential utilities, insurance, and taxes. "Variable" costs will include
food costs, staffing, utilities and supplies to a small extent.
The Residence will be able to handle emergencies only to the extent of
calling a doctor or hospital in behalf of the resident. Should a resident
require health care beyond that which the Residence can reasonably provide or
assist, then a resident may be forced to move from the Residence.
Residence Clientele. The types of residents the Company intends to attract
are those who need the physical and emotional assistance to preserve the level
of comfort that they are no longer able to maintain at home. The Company has
currently restricted the size of the Residence to 38 units. By limiting its size
to only 38 units, the Company feels the residents will probably be happier than
if they lived in a large facility which may tend to be less personal. The
Residence will not be operated as a nursing home. There will be activities
offered which would be typical to a senior citizen community.
Cost of Living. The Residence will have 38 rooms priced at an average of
$2,200 per month per room. Residents are billed monthly for the services
rendered. Medicare/Medicaid will not pay for a resident's stay at the
Residence. Additional costs may be realized by the residents if they require
certain health supervision/services and meals for visitors. As the cost of
living may increase, charges to the residents may also need to be adjusted.
Resident's Lease Requirements. The residents will be required to pay a one
time entrance fee of $2,000 to reserve their apartment. The lease of the
apartments by the residents will be on a month-to-month basis. Resident will be
required to pay only for the months in which they are residents of the facility.
Competition
The long-term care industry generally is highly competitive with respect to
price, service, quality of care and level of services, and the Company expects
that the assisted living business in particular will become increasingly
competitive in the future. The Company competes with numerous other companies
providing similar long-term care alternatives, such as home health agencies,
life care at home, community-based service programs, retirement communities and
convalescent centers. Nursing facilities that provide long-term care services
are also a potential source of competition to the Company. While there
presently is only one assisted living facility providing substantially the same
services as those proposed by the Company in St. George, the Company expects
that, as assisted living becomes increasingly recognized as an alternative form
of long-term care, competition will grow from new market entrants focusing
primarily on assisted living. After diligent research, the Company discovered
that two assisted living facilities may be built in the St. George area during
the next 12 months. However, no new building permits for assisted living
facilities have been submitted to the city planning department and building
department of St. George. There is no assurance that the Company will not
encounter increased competition in the future which could limit its ability to
attract residents and could have a material adverse effect on the Company's
financial condition, results of operations and prospects. In St. George, there
are
12
<PAGE>
currently approximately 80 beds providing assisted living services and four
approximately 396 beds providing nursing home care. The Company's market area
includes the population of St. George, Utah, which is approximately 45,000.
Employees
Currently, the Company does not have any full time employees. Prior to the
commencement of operations of the Residence, the Company intends to employ up
to 15 full and/or part time employees to work at the Residence. There is no
assurance that the Company will be able to obtain and maintain an adequate
number of competent personnel, including persons seeking entry-level and skilled
positions, or that a shortage of operating personnel will not present a serious
problem to the Company in the future.
Government Regulation
Currently, assisted living residences are not specifically regulated as
such by the federal government. However, the Residence will be subject to
certain state regulations and licensing requirements. To conform with Utah's
regulations governing residential care for the elderly, the Residence will be
required to be licensed by the Utah Department of Health prior to the
commencement of operations of the Residence. The Company has applied for a
license with the Utah Department of Health and anticipates getting the license
upon completion of construction of the Residence. In the Company's opinion, the
Residence and management practices and operations will meet or exceed all
residential care for the elderly regulations of Utah. Failure of the Company to
receive and maintain the required licensing would have a material adverse effect
on the Company's financial condition and its ability to repay the Company's
debt.
The Company is subject to the Fair Labor Standards Act, which governs such
matters as minimum wage, overtime and other working conditions. A portion of
the Company's personnel will be paid at rates related to the federal minimum
wage, and, accordingly, increases in the minimum wage will increase the
Company's labor costs. The Company is also subject to the Americans With
Disabilities Act. In general, this law requires businesses to accommodate the
special needs of persons with certain types of disabilities. As regulations are
promulgated to enforce this law, the Company may be required in the future to
adapt the design and format of the Residence or otherwise incur additional
capital costs to comply with such law. Such costs could have an adverse effect
on the operation of the Residence and its ability to function successfully.
Environmental Matters
Federal law imposes liability on a landowner for the presence on the
premises of improperly disposed of hazardous substances. This liability is
without regard to fault for, or knowledge of, the presence of such substances
and may be imposed jointly or severally upon all succeeding landowners from the
date of the first improper disposal. While state law is less onerous, the
practical consequences may be the same. If in the future it is ever determined
that hazardous substances are present, the Company could be required to pay all
costs of any necessary clean up work, although under certain circumstances
claims against other responsible parties could be made by the Company.
In November 1996, a phase one environmental assessment was conducted on the
property on which the Residence is being constructed. Research and visual
observation undertaken did not reveal any former or current environmental
conditions, problems or situations impacting the site.
DESCRIPTION OF PROPERTY
The Residence
The Residence will be located in St. George, Utah. Selection of the
Residence's site was based upon a location that was within an affluent
residential neighborhood, with limited assisted living services. This
demographic information was gathered from the Company's review of the "1990
CENSUS OF POPULATION AND HOUSING" for the Southwest Utah area. St. George
appeared to offer a market for this type of assisted living facility.
The Residence encompasses approximately 22,811 square feet and is located
on 1.99 acres of land located in the eastern portion of St. George, Utah east of
I-15 and south of St. George Boulevard. The Residence is designed and
constructed to include a beauty shop, kitchen and laundry. The residents' rooms
each have a private bathroom, closet and sitting and bedroom areas. All include
small kitchenettes. The Bonds in parity with the Construction Loan are
secured by a co-first deed of trust on the Residence (both real and personal
property). See "Description of Property - Financing of Residence" and
"Description of Bonds - Co-First Deed of Trust". The Company has title
insurance on this
13
<PAGE>
1.99 acres of land insuring good and marketable title to the property.
Furthermore, in the Company's opinion, the Residence is adequately covered by
insurance.
Appraisal
In an appraisal dated April 7, 1997, Keith D. Callison, SRA, of Keith
Callison and Associates, 840 S. Broadway, #700, Wichita, Kansas 67211 (the
"Appraiser"), estimated a value of $2,650,000 for the Residence based upon the
"Market Value" derived from the income approach (highest and best use) procedure
for estimating real property values. Upon completion of construction and
lease-up, the Appraiser, who is independent of the Company, estimated the value
of the Residence to increase to $3,266,500 based upon the income approach. The
income approach is an analysis which converts anticipated benefits to be derived
from the ownership of property into a value estimated, with consideration given
to the gross income, expense, net income, vacancy rate and capitalization.
Furthermore, the income approach is not, for example, a valuation based upon the
Appraiser's estimate of the price that would be arrived at by a willing buyer
and a willing seller in an arms-length sales transaction. Accordingly, it is
questionable that, in the event of default, the Residence can be sold, whether
voluntarily or at judicial sale, for the appraised value.
Assuming all Bonds are sold, the Bond indebtedness of $2,500,000 will equal
approximately 94% of the Market Value of the Residence based on the income
approach ($2,650,000), which is prior to the lease-up of the Residence. The
Trust Indenture allows the Company to issue additional subsequent bond issues,
however, so long as the aggregate debt (new and old) does not then exceed 100%
of the value of the Residence.
A decision to invest in the Bonds should not be made based solely on the
appraisal. Moreover, a purchaser of the Bonds should realize and take into
consideration the fact the Residence, if it should have to be sold, may bring
less than is necessary to pay principal and interest due on the Bonds. This
could result in the investor losing all or a portion of his original investment,
which the investor should take into consideration before making the purchase.
Construction of Residence
Construction of the Residence commenced on June 23, 1997. The Residence is
expected to be completed and begin operations in January of 1998. However,
delays are common in the construction industry, and unforseen events may
adversely affect the cost and completion time of the Residence. The Company
estimates the capitalized cost of the Residence to be approximately $2,510,725
upon completion of the Residence.
Financing of Residence
Construction Financing. The Company has secured a construction loan (the
"Construction Loan"), in the amount of $2,000,000 from Emprise Bank, N.A. of
Hays, Kansas ("Emprise") for the construction of the Residence. The Company
has paid a loan origination fee in the amount of $30,000. The loan is due
September 1, 1998 (the "Maturity Date"), unless mutually extended by both
parties. The Construction Loan bears interest at a variable rate which is
equivalent to 1% per annum in excess of the lowest rate designated as the
"Prime Rate" of interest published by the Wall Street Journal (Southwest
Edition) under the heading "Money Rates". The minimum rate of interest will be
not less than 2.0%. The maximum rate of interest will not exceed 25%. The
Construction Loan was guaranteed by Robert A. Brooks, Managing Member of the
Company, to the extent of $340,000, and the Construction Loan is secured by
additional collateral furnished by Mr. Brooks and the other principal of the
Company. The Trustee and the holders of the Bonds will not benefit, directly
or indirectly, from the guarantee of Mr. Brooks or the additional collateral.
Mr. Brooks will receive no consideration for acting as guarantor. The loan will
be secured by a Co-First Deed of Trust with the Series 1997-I Bonds.
This loan closed on June 20, 1997, and the Deed of Trust and Security
Agreement setting forth the terms of the Construction Loan has been filed of
record.
The Construction Loan is secured by a Co-First Deed of Trust on the
Residence (both real and personal property) in parity with the Series 1997-I
Bonds. Colonial Trust Company acting as Trustee on behalf of the Series 1997-I
bondholders and Emprise have entered into a certain Agreement Between
Lienholders (the "Lienholder Agreement") dated as of June 20, 1997, with regard
to the Deed of Trust and Security Agreement, and the rights of the holders of
the Bonds are subject in all respects to the rights of Emprise under the
Lienholder Agreement. The Lienholder Agreement states, among other things, (i)
that the Deed of Trust, Security Agreement and other collateral documents
covering the Residence shall name both Emprise and the Trustee as lienholder and
shall secure ratably as provided in the Lienholder Agreement the Construction
Loan and the indebtedness under the Bonds, and (ii) that proceeds of the Bonds
will be used, subject to the Trust Indenture, to pay down or retire the
Construction Loan. The Lienholder Agreement also states that
14
<PAGE>
in the event of a default, if either Emprise or the Trustee elects to accelerate
its loan, the other party agrees to accelerate its loan to the extent permitted
under the other party's loan documents.
In the event the Company were to default, the Lienholder Agreement provides
that Emprise and the Trustee will conduct collection and foreclosure actions and
proceedings jointly to the extent possible. In the event Emprise and the
Trustee are unable to agree, however, Emprise is given the right, in its
discretion, to direct and make decisions, binding on the Trustee and the holders
of Bonds, concerning maintenance, protection or disposition of the Residence and
enforcement of the terms of the Deed of Trust and Security Agreement. Emprise
may cause the Residence to be sold in its then current condition or may make
renovations to, or compete construction of, the Residence. Emprise is not
required to advance any funds except by its agreement, but in the event Emprise
elects to advance funds, proceeds of foreclosure will be applied first to
reimburse any such funds advanced. Either Emprise or the Trustee may purchase
the Residence at any foreclosure sale free and clear of the claims of the other.
If the Residence is sold or otherwise disposed of at foreclosure, the
Lienholder Agreement provides that the proceeds of disposition, after
reimbursement of Emprise's fees and expenses as provided above, be applied to
the Construction Loan and the payment of the Bonds on a pro-rata basis. The
"pro-rata" distribution of funds mean that after reimbursement of Emprise's fees
and expenses as provided above, Emprise and the Bonds will each receive funds
from any disposal on foreclosure of the Residence according to their respective
percentage of the total principal balance (including both the Construction Loan
and Bonds) on the property. Thus, depending on the net proceeds from a
foreclosure sale, each entity would receive proceeds from the sale of property
equal to the entire amount due them, or any amount equal to their percentage of
the total indebtedness against the Residence, whichever is lesser.
In addition to requiring the timely payment of the Construction Loan and
the Bond payments required under the terms of the Trust Indenture, the Deed of
Trust obligates the Company to maintain proper books and records, and refrain
from certain activities (such as altering the premises) without prior written
consent, and it also dictates in part the permitted financial relationships
between the Company and the residents.
Permanent Financing. The Company has chosen to issue bonds to provide the
permanent financing for the Residence. The first revenues of the Residence have
been pledged to repay the principal and interest on the Bonds. See "Use of
Proceeds" and "Description of Bonds".
PRINCIPAL OWNERS OF THE COMPANY
The following table sets forth certain information with respect to the
beneficial ownership of Membership Interests in the Company.
<TABLE>
<CAPTION>
Name & Address of Title of Class Percent of
Beneficial Owner Class Owned
<S> <C> <C>
Robert A. Brooks Membership Interest 94%
220 S. 1200 East Street
St. George, UT 84770
Carol M. Brooks (1) Membership Interest 6%
220 S. 1200 East Street
St. George, UT 84770
</TABLE>
Management and officers of the Company as a group are the beneficial owners of
94% of the Membership Interests of the Company. Presently, only Robert A.
Brooks serves in these capacities for the Company.
(1) Carol M. Brooks is the wife of Robert A. Brooks.
15
<PAGE>
MANAGEMENT
Managing Member
The day to day operation of the Residence will be performed by the Managing
Member of the Company, Robert A. Brooks, (hereinafter referred to as the
"Managing Member"). The Managing Member shall have full and complete authority
and discretion in the management and control of the business of the Company and
shall make all decisions affecting the business of the Company, subject to the
restrictions set forth in the Operating Agreement. More specifically, the duties
of the Managing Member include (i) acquiring, improving, developing,
maintaining, leasing and selling the Residence, (ii) expending the capital and
revenues of the Company in furtherance of the Company's business, (iii) seeking
zoning changes, plat approval, CPU approval and other similar administrative
actions, (iv) entering and executing agreements and any or all documents in
connection with the Residence, (v) borrowing money for the Company, (vi)
employing agents, employees, managers, accountants, consultants and other
persons necessary to carry out the business and operations of the Company,
(vii) exercising the option of the Company to redeem any Member's interest,
(viii) maintaining adequate records and accounts of all operations and
expenditures, (ix) selling assets of the Company, (x) purchasing insurance on
behalf of the Company, (xi) performing any and all other acts or activities
customary or incident to the acquisition, ownership, financing, improvement,
development, sale or lease of the Residence, (xi) obtaining all necessary
governmental licenses, franchises, approvals and consents on behalf of the
Company, (xii) electing either the cash or accrual method of accounting for the
Company, (xiii) performing other acts not prohibited by law or the Operating
agreement and (xiv) executing valid and binding resolutions of the Company to
accomplish any of the foregoing.
Restrictions of the Managing Member include (i) any act in contravention
of the Operating Agreement of the Company; (ii) any act that would make it
impossible to carry on the ordinary business of the Company; (iii) the
confession of any judgment against the Company; (iv) possessing Company property
or assigning the rights of the Company in specific Company property for other
than a Company purpose; (v) admitting a person as a Member except as provided in
the Operating Agreement and (vi) acquiring any property other than in connection
with the acquisition, ownership, improvement, development, leasing or sale of
the Company's assisted living property in the St. George area.
Mr. Brooks shall serve as the Managing Member of the Company until his
resignation or until he is removed by majority vote of all the Members of the
Company. Upon the resignation of the Managing Member, a successor shall be
elected by a vote of the Members.
Robert A. Brooks, 52 years old, has been the Managing Member of the Company
since its inception in July of 1995. Mr. Brooks has senior executive experience
in business management, personnel, finance and international start-ups. His
professional experience includes serving in the following capacities: Research
Geologist for Conoco; a team leader for U.S. Geological Survey in Denver, Utah;
Vice President of Energy Reserves Group of Golden, Utah; Vice President of BHP
Petroleum (Americas) Inc. of Wichita, Kansas; President and Director of Team
Resources Corporation (an oil and gas exploration and production company) of
Wichita, Kansas; and President and Director of Masters Operating Company (an oil
and gas exploration and production company) of Wichita, Kansas. Mr. Brooks also
previously developed three assisted living facilities in Kansas and two in
Colorado. Mr. Brooks is presently the Managing Member of Colorado Springs
Assisted Living, the company that operates the two assisted living facilities in
Colorado. He is also the Managing Member of Brooks Development Company, a
company formed to assist in the development of assisted living properties.
Mr. Brooks received a Bachelor of Science degree in Geology from the University
of Illinois, Champaign-Urbana, Illinois, and a Masters and Doctorate degree from
the Louisiana State University in Baton Rouge, Louisiana.
Mr. Brooks will be the person primarily responsible for overseeing the
actual operation and management of the Company. Accordingly, the success of the
Company will be dependent upon his efforts. Mr. Brooks will delegate most
of the daily operational responsibilities of the Company to the On-Site Program
Director, whom will be hired prior to the commencement of operations of the
Residence. The On-Site Program Director's salary and employee benefits will be
an expense of operation of the Residence. All other employees will also be
recruited by Mr. Brooks. The Company anticipates employing a total of 15 full
and/or part time employees to work at the Residence upon completion of the
assisted living facility. Mr. Brooks will devote approximately 25% of his time
to the affairs of the Company but is willing to devote additional time if
necessary.
16
<PAGE>
Compensation of Managing Member
The Managing Member may receive the following compensation: (i) a
development fee in the amount of $100,000, (ii) a management fee equal to 7% of
the gross rental income of the Company (this fee shall be computed and paid 45
days after the date on which the gross rental income was earned) and (iii)
reimbursement for reasonable costs incurred by the Managing Member including but
not limited to automobile mileage, office rental, telephone and facsimile
machine expenses, expenses associated with computer and other office equipment
usage, clerical expenses and other expenses related to the Company's business.
See "Certain Transactions".
Limitation of Members' Liability Indemnification
Under the Kansas Limited Liability Company Act, all Members and Managers of
a limited liability company have limited liability without regard to their
participation in the management of the Company's business. A Member is only
liable for his contribution and improper return of capital.
The Company's Operating Agreement provides that the Company shall indemnify
the Managing member against all claims and liability incurred or imposed upon
the Managing Member in the good faith exercise of his judgement relative to the
business of the Company, provided; however, that the Managing Member is not
guilty of willful misconduct or gross negligence. The Company has also agreed
to indemnify its members against all claims or liability incurred or imposed
upon such members solely as a result of the members having an interest in the
Company.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to members or controlling
persons of the Company pursuant to the foregoing provisions or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
THE COMPANY'S PLAN OF OPERATION
The Company intends to complete construction of the Residence by January
1998, employ up to 15 full and/or part time employees to work at the Residence
upon completion of the Residence, operate the Residence as an assisted living
facility and reach approximately 95% occupancy of the Residence within four to
eight months upon completion of the Residence. There is no assurance that the
Company will be able to accomplish any or all of these objectives.
If only the minimum offering amount is sold, no proceeds from the sale of
the Bonds would be available to repay the Construction Loan. This could result
in default and foreclosure on the Residence, unless the Company is able to
obtain additional financing to retire the Construction Loan from other sources.
However, there is no assurance that the Company could obtain additional
financing if needed to avoid default and foreclosure.
In order for the Company to fund all of its objectives of this Offering,
the maximum offering amount must be sold by the termination date of this
Offering. In the Company's opinion, if all of the Bonds are sold, the proceeds
from this Offering will satisfy the Company's cash requirements, and the Company
will not need to raise additional funds during the next twelve months following
the commencement of this offering.
(This space is intentionally left blank)
17
<PAGE>
PRIOR PERFORMANCE OF THE MANAGING MEMBER
The Managing Member of the Company, Robert A. Brooks, has prior experience
in the development, operation and disposition of comparable assisted living
facilities to that of the Residence. He has developed and operated five
assisted living facilities, three in Kansas and two in Colorado. Each of these
facilities were formed as a franchise of Sterling House Assisted Living.
Sterling House Corporation is publicly traded on the American Stock Exchange
under the symbol "SGH". Since its inception in 1991, SGH has been a long-term
care provider offering a wide range of assisted living care services through the
ownership, operation, management and franchising of Sterling House assisted
living residences. SGH is in the process of merging with Alternative Living
Services, a publicly traded assisted living company listed on the American Stock
Exchange. The Residence is not a franchise of SGH, or in no way is connected
with SGH.
In October 1993, Mr. Brooks formed Masters Associates, L.L.C. for the
purpose of developing and operating a 26-unit assisted living facility in Derby,
Kansas. The facility was completed in April 1994, reached stabilized occupancy
(considered 95% occupancy) within eight months of opening and was sold to SGH in
March 1996. Mr. Brooks served as the Managing Member of Masters Associates
until its sale to SGH. This limited liability company terminated shortly after
the sale of the facility.
In December 1993, Mr. Brooks formed Wellington Partners, L.L.C. for the
purpose of developing and operating a 26-unit assisted living facility in
Wellington, Kansas. The facility was completed in September 1994, reached
stabilized occupancy within ten months of opening and was sold to SGH in March
1996. Mr. Brooks served as the Managing Member of Wellington Partners until
its sale to SGH. This limited liability company terminated shortly after
the sale of the facility.
In October 1994, Mr. Brooks formed Hays Assisted Living, L.L.C. for the
purpose of developing and operating a 33-unit assisted living facility in Hays,
Kansas. The facility was completed in April 1995, reached stabilized occupancy
within five months of opening and was sold to SGH in March 1996. Mr. Brooks
served as the Managing Member of Hays Assisted Living until its sale to SGH.
This limited liability company terminated shortly after the sale of the
facility.
In August 1995, Colorado Springs Assisted Living, L.L.C. was formed for the
purpose of developing and operating up to three 37-unit assisted living
facilities in Colorado Springs, Colorado. Two facilities were built; no plans
for the third facility are presently being contemplated. The first facility
was completed in September 1996 and reached stabilized occupancy within four
months of opening. The second facility was completed in April 1997 and
presently is at 67% occupancy. Mr. Brooks is currently serving as the Managing
Member of Colorado Springs Assisted Living.
Each of the five aforementioned assisted living facilities were financed by
the issuance of bonds under terms similar to that of the Offering. The table on
the following page sets forth pertinent information regarding such financings,
the status of such offerings and of the facilities financed. Each of such
financings were offered and sold by the Underwriter on terms similar to the
Offering. An investor must realize that prior performance is in no way to be
construed as a guarantee of future performance.
(This space is intentionally left blank)
18
<PAGE>
<TABLE>
<CAPTION>
PRIOR PERFORMANCE TABLE OF OTHER OFFERINGS BY THE MANAGING MEMBER
Masters Wellington Hays Assisted
Associates, Partners,L.L.C. Living, L.L.C.
<S> <C> <C> <C>
Dollar Amount of Bonds
Offered for Sale: $1,000,000 $1,150,000 $1,700,000
Dollar Amount Raised: $1,000,000 $1,150,000 $1,700,000
Issue Date of the Bonds:03/01/1994 08/01/1994 03/01/1995
Primary Use of Net Retire Retire Retire
Proceeds: construction loan construction loan construction loan
and construct 26 and construct 26 and construct 33
unit assisted unit assisted unit assisted
living facility living facility living facility
How are the Offerings Co-first mortgage Co-first mortgage Co-first mortgage
Similar? bonds issued on a bonds issued on a bonds issued on a
"best efforts" "best efforts" "best efforts"
basis basis basis
How Long was the 12 months 12 months 12 months
Offering Period?
What was the Term of 12 months 12 months 10 months
the Offering?
What was the Total $870,950 $870,950 $1,400,000
Amount of the
Construction Loan to be
Paid?
Was the Company Able No Yes Yes
to Retire the
Construction Loan in
Full before its
Maturity Date?
What were the The Company Not applicable Not applicable
Consequences of was able to
Failing to Pay the extend the note
Construction Loan by and paid it off by
the Maturity Date? the date required.
What was the Cost to Interest costs Not applicable Not applicable
the Company to Extend only
the Construction Loan?
Are the Bonds Still No, the Bonds No, the Bonds No, the Bonds
Outstanding? were called on were called on were called on
October 1, 1996. August 1, 1996. October 1, 1996.
Has the Property Been Yes Yes Yes
Sold by the Company?
Is each Assisted Not Applicable Not Applicable Not Applicable
Living Home Open and
Producing Cash Flow
at a Rate that is
Adequate to Cover
Operating Expenses and
Debt Service on the Bonds?
</TABLE>
<TABLE>
<CAPTION>
PRIOR PERFORMANCE TABLE OF OTHER OFFERINGS BY THE MANAGING MEMBER CONT...
Colorado Colorado
Springs Springs
Assisted Assisted
Living Living
L.L.C. L.L.C.
<S> <C> <C>
Dollar Amount of Bonds
Offered for Sale: $2,400,000 $2,400,000
Dollar Amount Raised: $2,400,000 $2,400,000
Issue Date of the Bonds: 07/01/1996 09/01/1996
Primary Use of Net Retire Retire
Proceeds: construction loan construction loan
and construct 37 and construct 37
unit assisted unit assisted
living facility living facility
How are the Offerings Co-first deed of Co-first deed of
Similar? trust bonds issued trust bonds issued
on a "best on a "best
efforts" basis efforts" basis
How Long was the 12 months 12 months
Offering Period?
What was the Term of 10 months 9 months
the Offering?
What was the Total $1,900,000 $1,900,000
Amount of the
Construction Loan to be
Paid?
Was the Company Able to Yes Yes
Retire the Construction
Loan in Full before its
Maturity Date?
What were the Not applicable Not applicable
Consequences of
Failing to Pay the
Construction Loan by
the Maturity Date?
What was the Cost to Not applicable Not applicable
the Company to Extend
the Construction Loan?
Are the Bonds Still Yes Yes
Outstanding?
Has the Property Been No No
Sold by the Company?
Is each Assisted Yes The facility is
Living Home Open and open but not yet
Producing Cash Flow producing
at a Rate that is sufficient cash
Adequate to Cover flow to cover debt
Operating Expenses and service.
Debt Service on the Bonds?
</TABLE>
19
<PAGE>
CERTAIN TRANSACTIONS
Robert A. Brooks, the Managing Member and control person of the Company,
will have certain transactions with the Company that are not a result of arms
length negotiations. Prospective purchasers of the Bonds must rely on the
ability and integrity of Mr. Brooks and his operation of the Company.
Management Fees
In return for certain on-going management and administrative services,
including primary responsibility for the day-to-day operation of the Residence,
the Managing Member may receive 7% of the gross rental income of the Company.
This fee shall be computed and paid 45 days after the date on which the gross
rental income was earned. In general, "gross rental income" means all amounts
actually collected by the Company, as tenants' rents, vending and laundry
income, income from commercial space, but excluding: (i) income derived from
interest on investments, (ii) discounts and dividends on insurance, and (iii)
security deposits. This management fee would approximately equal $5,800 per
month assuming 100% occupancy of the units and collection of 100% rents and fees
due associated with the Residence. The Managing Member may be reimbursed for
reasonable costs incurred by the Managing Member including but not limited to
automobile mileage, office rental, telephone and facsimile machine expenses,
expenses associated with computer and other office equipment usage, clerical
expenses and other expenses related to the Company's business. For example, the
Managing Member may be reimbursed for automobile mileage between his home in
Wichita, Kansas and the Residence in St. George, Utah. The Company may also
reimburse the Managing Member for the cost of flying between these two locations
and for his temporary lodging in St. George. The Company does not have a cap on
expenses that can be reimbursed to the Managing Member. See "Management -
Managing Member."
Development
Mr. Brooks has been responsible for various development services associated
with the Residence including: land acquisition, zoning, and licensing; obtaining
financing; site planning; general contractor selection; construction oversight;
and initial accounting system and organizational setup. In return for these
development services, Mr. Brooks may receive a development fee in the amount of
$100,000 solely from the operations of the Residence. Mr. Brooks has not been
paid a development fee as of the date of this Offering.
Unsecured Notes
The Company has entered into financing arrangements in the form of
unsecured notes payable to the Managing Member and also an affiliated company of
the Managing Member. As of June 30, 1997, the Company had an aggregate of
$252,726 in unsecured notes payable to the Managing Member, due at various dates
through 1997 and 1998 with automatic extension provisions if not paid in full on
the maturity dates, at interest of 9%. As of July 17, 1997, the Company had
$88,142 in unsecured notes payable to the Brooks Development Company (an
affiliated company of the Managing Member) bearing interest at 9% and due at
various dates through 1997 and 1998 with automatic extension provisions if not
paid in full on the maturity dates.
Real Estate Conveyance
In June of 1997, Robert A. Brooks, Managing Member of the Company, conveyed
the property securing the Bonds (1.99 acres at 220 S. 1200 East Street in St.
George, Utah) to the Company in exchange for an unsecured note payable to Mr.
Brooks. This unsecured note is included in the total amount of unsecured notes
payable to the Managing Member as disclosed in "Certain Transactions - Unsecured
Notes". This property was conveyed at Mr. Brooks' original cost basis of
approximately $206,000.
DESCRIPTION OF BONDS
The Bonds will be issued in book-entry form (unless the purchaser requests
a printed bond certificate) pursuant and subject to the provisions of a certain
Trust Indenture (the "Trust Indenture") between the Company and Colonial Trust
Company of Phoenix, Arizona, as Trustee, Bond Registrar and Paying Agent (the
"Trustee"). The Trust Indenture will be filed for record in the Washington
County Courthouse in Utah. Copies of the Trust Indenture will be deposited with
the Trustee, the Company and the Underwriter. The following is a summary of the
provisions of the Trust Indenture.
20
<PAGE>
Co-First Deed of Trust
The Series 1997-I Bonds will be secured by a Co-First Deed of Trust with
Emprise Bank on the Residence. A co-first deed of trust allows each lien holder
(Colonial Trust Company acting as Trustee on behalf of the Series 1997-I
bondholders, and Emprise), in the event of a default, to share in the proceeds
form the sale of the Residence. The rights of Colonial Trust Company acting as
Trustee on behalf of the Series 1997-I bondholders are subject to a certain
Lienholders Agreement between the Trustee and Emprise dated as of June 20, 1997,
which, among other things, provides for the allocation of proceeds from the sale
of the Residence based on the principal balance of the debts as calculated under
the Lienholders Agreement. See "Description of Property - Financing of
Residence". The total liabilities against the Residence between the Series
1997-I Bonds and the Construction Loan should at no time exceed the aggregate
amount of the Series 1997-I Bonds ($2,500,000).
Types of Bonds
There are two types of bonds being offered: Simple Interest Bonds and
Compound Interest Bonds.
Simple Interest Bonds begin accruing interest from October 1, 1997 whether
or not the bonds have been purchased. Interest on the Simple Interest Bonds is
payable to the investor semiannually until the bonds mature. Upon maturity the
bonds will cease to accrue interest.
Compound Interest Bonds begin accruing interest from October 1, 1997
whether or not the bonds have been purchased. Interest on the Compound Interest
Bonds will compound semiannually, and will pay both principal and accrued
interest upon maturity of the bond. Upon maturity the bonds will cease to
accrue interest.
Tax Consequences
Interest paid on the Bonds is not exempt from federal or state income
taxes. Interest on Simple Interest Bonds is paid by check semiannually. While
Compound Interest Bonds pay the interest earned only at the maturity of the
Bond, a portion of the interest must be reported as income each year even though
no interest will be paid until maturity. The interest to be reported each year
is the amount of interest accruing on the Bond that year. For further
information concerning the tax consequences of purchasing or holding the Bonds,
the investor should consult his or her tax advisor.
General
The Bonds will be dated October 1, 1997. The Bonds will be issued in book-
entry form (unless the purchaser requests a printed bond certificate) as
registered Bonds without coupon in denominations of $250 each or any integral
multiple thereof. Both Simple Interest Bonds and Compound Interest Bonds will
be issued to mature serially. To "mature serially" means the bonds will mature
according to a predetermined maturity date, beginning six months from the issue
date of the bonds and continuing to mature each six months thereafter through 20
years. The Simple Interest Bonds will pay interest to the registered owner each
six months until the bond matures. The Simple Interest Bonds mature serially
and bear simple interest payable by check mailed to the registered owner each
April 1 and October 1 until the Bonds mature. The Simple Interest Bonds mature
serially and will begin earning interest on the issue date of October 1, 1997,
whether or not they have been purchased. The Compound Interest Bonds bear
compound interest from the date of issue payable at maturity compounded
semiannually each April 1 and October 1 until the Bonds mature. Compound
Interest Bonds will pay both principal and interest upon maturity of the bond.
The Compound Interest Bonds will begin accruing interest as of October 1, 1997,
whether or not they have been purchased. See "Maturity Schedule". If any
Compound Interest Bonds are purchased after the Issue Date, the purchaser will
nevertheless be entitled to receive the accrued interest on the Bond from the
date of issuance. Both types of bonds are sold at face value with the accrued
interest going to the investor. Each year the purchaser of a Compound Bond will
receive a form 1099 O.I.D. from the Trustee/Paying Agent showing the interest
earned on the Bond(s) for that tax year. The purchaser of either a Simple
Interest Bond or a Compound Bond should understand that in the event he/she
should need to sell the bond, the Underwriter does not make a secondary market
for the Bonds, nor is there the likelihood a secondary market will develop.
Principal and interest are payable in lawful money of the United States by the
Trustee, acting in its capacity as Paying Agent. The Issue Date of all the
Bonds will be the same regardless of when each individual Bond is sold.
Subject to the sale of a minimum of $300,000 in principal amount of the
Bonds, the Offering will terminate one year from the date hereof.
21
<PAGE>
Trust Estate
The Company pledges, transfers and assigns to the Trustee, in trust, to
secure the payment of the Bonds, all of its rights, title and interest to the
first receipts of any and all revenues of the Residence, the real property of
the Company and the furnishings and equipment of the Company and all monies and
securities held by the Trustee under the terms of the Trust Indenture. Under
the terms of a certain Lienholders Agreement which the Trustee is subject to,
all receipts from collection and foreclosure are to be allocated between the
Construction Loan and the Bonds in proportion to their then respective
outstanding balances. If a substantial amount of the Bonds are not timely sold,
the recovery of each Bondholder would then be substantially diminished if a
default were to occur.
Trust Funds Established Under the Trust Indenture
The Trust Indenture provides for the creation of the Bond Proceeds Fund,
into which the proceeds from the sale of Bonds will be deposited. The Trust
Indenture also creates the Bond Operating Fund, into which all payments of the
Company are collected prior to payment being made to the Bondholders.
Payment of Bonds
Principal and interest on the Bonds is payable at the office of the Trustee
in lawful currency of the United States of America. Payment of interest shall
be made to the registered owners of the Bonds and paid by check or draft mailed
to the registered owners at the address appearing on the Bond register of the
Trustee. Each holder who has received a printed bond certificate must send his/
her matured Bonds to the Paying Agent in order to obtain payment of the
aggregate principal amount.
Events of Default
The term "event of default" when used in the Trust Indenture means the
occurrence of any one of the following events:
a) Failure or refusal to pay when due the principal and/or interest on any
Bond;
b) Failure or refusal to timely pay into the Operating Fund Account any
installment(s) required;
c) Failure or refusal to pay when due any taxes, assessments, insurance,
claims, liens or encumbrances upon the Residence, or to maintain the Residence
in good repair, or to cure the breach of any other covenant set forth in the
Trust Indenture;
d) Failure or refusal to pay when due any loan or advance by or the fees
and expenses of Trustee or of any depository or escrow agent;
e) Failure or refusal, upon written request of the Trustee, (i) to furnish
Trustee with such insurance policies, financial reports and information
concerning Company as may be reasonably required by Trustee, or (ii) to grant
unto Trustee, its agents, accountants and attorneys access during normal
business hours to Company's offices for the purpose of examining and, within
reasonable limits, photocopying such records;
f) Making an assignment for the benefit of creditors; or should a receiver,
liquidator, or trustee be appointed to assist in the payment of Company's debt;
or should any petition for bankruptcy, reorganization, or arrangement of Company
be filed; or should Company be liquidated or dissolved, or its charter expire or
be revoked.
Remedies of Default
Upon the occurrence and continuation of an event of default, the Trustee
may accelerate the Bonds and declare the principal of all Bonds outstanding
immediately due and payable. Additionally, upon written request of the holders
of not less than 25% of the Bonds outstanding, the Trustee is obligated to
accelerate the maturity of the Bonds in an event of default.
Additional Covenants
In addition to its obligation to remit the principal and interest payments
when due the Company has agreed to at its own cost and expense, maintain the
properties in good repair and condition and pay or discharge all taxes,
assessments and any mechanic's or materialmen's liens that may become payable.
22
<PAGE>
Casualty
With respect to insurance, the Company has agreed to maintain in full force
and effect at all times fire and extended coverage insurance insuring against
losses in an amount at least equal to the balance then due on the outstanding
Bonds. The proceeds of any such insurance are to be applied for the replacement
or repair of the property damaged, to purchase additional property secured by
the Trust Indenture as originally acquired with Bond proceeds, for construction
of additional improvements on the Residence, to redeem outstanding Bonds, or a
combination of the foregoing. If the proceeds from the sale of the Bonds are to
be used to finance the construction of improvements, the Company agrees to
furnish and maintain in full force builder's risk insurance during the period of
construction. In addition, the Company has agreed to maintain in full force and
in effect at all time general liability insurance in such amount and with such
insurers as shall be approved by the Trustee. The Trustee is authorized to
withdraw funds from the Bond Operating Fund and to apply funds for the account
of the Company of such obligations as aforementioned, and the Company is
obligated to immediately restore the proper balance of the Bond Operating Fund.
Periodic Reporting
The Company has agreed to furnish to the Trustee, at least annually,
audited financial statements, including a balance sheet, statement of activity
and statement of changes in financial position and to permit the Trustee to
examine the books or records of accounts of the Company and the Residence at all
reasonable times. Audited annual financial statements will also be supplied to
the investors.
Additional Bond Issues/Additional Indebtedness
The Company reserves the right to issue additional parity Bonds or incur
additional debt obligations ("additional Bonds") in any amount for any lawful
purpose, including refunding any outstanding Bonds. Such additional Bonds along
with the Bonds offered hereby shall be deemed "Bonds" for all purposes and as
defined in the Trust Indenture. When issued and delivered the additional Bonds
will be secured under the terms of the Trust Indenture and shall be on a parity
with all then outstanding Bonds of the Company offered hereby. The additional
Bonds may be offered in one or more series or issues, in various principal
amounts, bearing interest, maturing, and having such redemption features and
other provisions as may be provided in any supplemental indenture or other
instrument authorizing their issuance. However, no series or issue of
additional Bonds shall be issued unless:
a) Any default or event which would result in default by Company under the
Trust Indenture has been first cured;
b) Any real property acquired from the proceeds of Additional Bonds must be
subjected to and become a part of the lien of the Trust Indenture and any
mortgage or deed of trust upon the Residence;
c) The ratio of the total of outstanding Bonds, as compared to the
appraised value of the property securing the payment of the Bonds, must not
exceed 100% of the then appraised market value of the property securing the
payment of the Bonds as derived from the Income Approach Appraisal Method; and
Substitution of Collateral
If the Company is not then in default, the Trustee may execute partial
releases, accept substitution of collateral, or subordinate its lien; provided,
however, that in every such instance the Trustee must receive from some
disinterested person a certificate stating that the value of the property to be
substituted is of equal or greater value to the original property.
Successor Trustee
If the Trustee resigns or is removed or dissolved or if any court or
administrative body takes control over the property or affairs of the Trustee
because of insolvency or financial difficulty or for any other reason, the
Company must appoint a Successor Trustee. If the Company fails to make such an
appointment, the majority in principal amount of Bondholders may appoint a
Successor Trustee. The Successor Trustee must then mail notice of its
appointment to the registered owners but no other notice is required
Modification of Trust Indenture
The Trust Indenture may be amended or supplemented from time to time by the
parties thereto without the consent of or notice to the Bondholders for any of
the following purposes:
23
<PAGE>
a) To cure any ambiguity, omission, formal defect or inconsistency; or
b) To issue additional Bonds within the guidelines described above; or
c) To make any change which, in the judgement of the Trustee in reliance
upon any opinion of counsel does not adversely affect the rights of the holders
of any Bond.
The Trust Indenture may be amended or supplemented for purposes other than
those set forth above with the consent of the holders of 66 2/3% of the Bonds
then outstanding; provided, however, that no such amendment or supplement
without the consent of the holder of any Bond affected thereby shall:
a) Reduce the percentage of the principal amount of Bonds the holders of
which must consent to for any such amendment, supplement or waiver;
b) Reduce the rate or extend the time of payment of interest on any Bonds;
or
c) Reduce the principal or premium, if any, on any Bond or extend the time
or times of payment thereof whether at maturity, upon redemption or otherwise.
Prepayment
The Company has reserved the right to redeem all or a portion of the Bonds
prior to their stated maturity on any semiannual interest computation date.
The Bonds are subject to redemption without premium at the principal amount
thereof plus accrued interest. The registered owner will be given written
notice of such redemption at the owner's address as it appears on the Bond
Register. It is the owner's responsibility to notify the Paying Agent of any
change of address. Any Bond not redeemed by its owner within three years after
its maturity date is deemed to have been paid and the funds will escheat to the
benefit of the appropriate state authority.
Security and Source of Payment for the Bonds
The Bonds will be payable primarily from the first revenues of the
Residence. These Bonds are an obligation of the Company and will be secured by
a co-first deed of trust on the Residence, the Residence being more fully
described in the Trust Indenture.
The Company covenants to keep all property pledged under this Bond issue
properly insured against loss by fire, windstorm and explosion in an amount
equal to the outstanding balance of the Bonds. A copy of such policy, payable
jointly to the Company and the Trustee, will be on file with the Company and the
Trustee.
Operating Fund Requirements
Under the Trust Indenture, the Company must establish a Operating Fund
Account and make monthly deposits into the Operating Fund Account in amounts
predetermined to be sufficient at all times to pay the principal and interest
of the Bonds. The required monthly deposits will be as follows:
Series 1997-I ($2,500,000)
$19,573.19 per month for one year (12 Payments) beginning October 1, 1997
$21,668.49 per month for one years (12 Payments) beginning October 1, 1998
$23,583.95 per month for one years (12 Payments) beginning October 1, 1999
$25,260.00 per month for sixteen and one half years (198 Payments) beginning
October 1, 2000
$22,461.32 per month for six months (6 Payments) beginning April 1, 2017
Payments do not include the Paying Agent fee of $625 per month.
The Company will fund from the proceeds of this Offering operating fund
payments in the amount of $125,000. This amount is equivalent to slightly more
than the first six month operating fund payments assuming all of the Bonds are
sold. The $125,000 in operating fund payments funded from bond proceeds will be
applied for the initial operating fund payments. After the $125,000 has been
used for the initial operating fund payments, the remaining operating fund
payments will be payable primarily from the first revenues of the Residence.
If the Company is unable to make the required operating fund payments to pay the
principal and interest due on the bonds, then an event of default will occur.
See "Description of Bonds - Events of Default" and "Description of Bonds -
Remedies of Default."
The Trustee must first draw, from the Operating Fund Account, the charges
due for paying agency and trustee services. Thereafter, the amounts in the
Operating Fund Account shall be used solely for the payment of interest
24
<PAGE>
becoming due or principal becoming payable on the Bonds or for the redemption of
Bonds; provided however, that the Trustee may in the event the Company fails to
maintain or insure its properties, apply such funds as may be available in the
Operating Fund Account to perform the Company's obligations. The Company is
obligated to immediately replenish such funds so applied.
Ten Year Bond Reserve Account
The Company has agreed to establish a Ten Year Bond Reserve Account from
bond proceeds. The Ten Year Bond Reserve Account will be funded in the amount
of $130,000 and will remain in place for a period of ten years from the issue
date of the Bonds. The purpose of the Ten Year Bond Reserve Account is that
in the event the Company has not deposited the necessary funds to pay the
principal and interest due on any semiannual payment date, the Trustee may
apply available funds to the principal and interest due on the Bonds. All
interest earned on the funds in the Ten Year Bond Reserve Account will remain as
a part of the Ten Year Bond Reserve Account to be used for said purposes. At
the end of the ten year period said reserve funds will be used to call any
outstanding Bonds, provided the Company is current on all operating fund
payments.
Escrow And Disbursement Of Bond Proceeds
Proceeds from the sale of the Bonds shall be payable to and deposited with
Colonial Trust Company of Phoenix, Arizona ("Escrow Agent" and "Registrar"). No
fees still due the Broker shall be paid out of the escrow account until the
Minimum Escrow Amount ($300,000) is met. The funds shall be used only for the
purposes set forth under the "Use of Proceeds." If $300,000 has not been
deposited in the Escrow Account from the sale of the Bonds by April 1, 1998, the
subscribers to the Bonds will receive the return of their subscription amount
plus interest. In the event that the Offering is not successful and is
terminated, the Company shall promptly pay to the Escrow Agent such sum of money
as shall be necessary, if any, when added to the amount of the Escrow Property
and interest earned thereon to pay to the subscribers of the Bonds the principal
amount of such subscriptions together with the interest from October 1, 1997
through the escrow termination date at the rate attributable to the Bonds
subscribed. The Investor has no access to funds held in the Escrow Account by
the Escrow Agent. See "Underwriting".
Escrow Agent
The Company has appointed Colonial Trust Company of Phoenix, Arizona, as
Escrow Agent. The duties and responsibilities of the Escrow Agent are set forth
in the Escrow agreement between the Company and the Escrow Agent, the provisions
of which are summarized under "Description of Bonds - Escrow And Disbursement Of
Bond Proceeds."
Trustee
Colonial Trust Company of Phoenix, Arizona, has agreed to serve as Trustee
for the Bonds pursuant to the Trust Indenture entered into between the Company
and the Trustee. The Trustee has also agreed to serve as Paying Agent,
Registrar, Disbursing Agent and Escrow Agent. The Trustee is not a guarantor
or surety, does not in any way guarantee or act as surety for payment of the
Bonds and may not be held liable under any conditions, except for its own
negligence.
The Underwriter and Trustee are separate corporations, organized under the
laws of the states of Kansas and Arizona respectively. The Trustee and
Underwriter share no common officer or directors. The Underwriter will however
receive a fee not to exceed $50,000 to be paid in installments over the term of
the Bond Issue from the Trustee for its technical assistance pertaining to the
Bond Issue. This assistance normally includes, but is not limited to, (1)
helping ensure that all legal documents are recorded; (2) making sure that
proper documentation is forwarded to the Trustee, including such documents as
the Articles of Organization, appraisal, financial statements and annual
reports; (3) due diligence documentation of the progress of the project and bond
sales; and (4) follow-up with the Company in the event of delinquent payments.
This assistance offered by the Underwriter presents a conflict of interest, in
that the Underwriter has underwritten other offerings for affiliates of the
Company, and therefore may not want to alienate the Company (and possibly lose
future business) by aggressively pursuing elinquent payments that are due to
investors. Dependence by the Trustee on the Underwriter to provide certain
information to the Trustee restricts the Trustee's ability to function
independently as a Trustee. This assistance offered by the Underwriter, for
which it is compensated by the Trustee, does in no way relieve the Trustee of
its duties.
25
<PAGE>
Registrar
The Bonds are being issued as fully registered Bonds in book entry form
(unless the purchaser requests a printed bond certificate). The Trustee is also
acting as Registrar and Transfer Agent for the Bonds. As Bond Registrar, the
Trustee will receive and record all proceeds from the sale of the Bonds,
maintain a permanent bond register, authenticate and mail all Bonds to their
registered holders that have requested a printed Bond, cancel and reissue Bonds
which are transferred by the original holders, and replace lost, stolen and
mutilated bond certificates. All Bonds will be registered in the owner's name.
Upon registration, a bond confirmation certificate or, if the purchaser
requests, a printed Bond will be mailed directly to it's owner.
Paying Agent
The Company has also appointed the Trustee to act as Paying Agent for the
Bonds. As paying agent the Trustee will receive and hold all payments remitted
by the Company into the Operating Fund Account and will disburse therefrom all
payments of principal or interest on the Bonds, Trustees fees and such other
sums as provided in the Trust Indenture. The Paying Agent holds the funds in
trust, commingled with similar operating funds of other companies, but must
maintain detailed records to reflect the balances attributable to each Company.
The Paying Agent may invest the funds in any form of account or deposit insured
by depository insurance or in interest bearing obligations issued by the United
States Government or any political subdivision thereof, or any funds comprised
of the same.
As Paying Agent, the Trustee is required to furnish periodic statements to
the Company and to the Underwriter reflecting all receipts and disbursements
from the Operating Fund Account.
UNDERWRITING
Underwriting Agreement
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement"), a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part, between the Company
and MMR Investment Bankers, Inc. (the "Underwriter"), the Company has retained
the services of the Underwriter to offer and sell the Bonds offered hereby on a
"best efforts" basis. There is a minimum escrow of $300,000 on the Bonds. The
Bonds will be sold on an "as available" basis without regard to the various
maturity dates and the type of Bond. The minimum investment amount is $250.
The offering price for the Bonds has been arbitrarily determined by negotiations
between the Company and the Underwriter.
The Underwriter will receive a concession from the Company for the sale of
the Bonds. The concession will be paid in one of the following manners: (1)
the Underwriter will receive 6.5% of the face amount of each Bond sold by
another NASD member firm through a selling group agreement with the Underwriter;
(2) the Underwriter will receive a concession of 5% of the face amount of each
bond sold by the Underwriter to clients of the Underwriter; or (3) the
Underwriter will receive a processing fee of 2.5% of the face amount of each
Bond sold to a purchaser referred to the Underwriter by the Company, provided
such investors are not currently a client of the Underwriter. The Underwriter
will also receive a fee not to exceed $50,000 to be paid in installments over
the term of the Bond Issue from the Trustee for services rendered to the Trustee
including the review of the financial and operating condition of the Company on
a continuing basis. In addition, the Underwriter has received an investment
banking fee of $31,250 for its unaccountable expenses associated with the
Offering. The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The sale of the Bonds will be for a period of one year from the date of
this Prospectus. The Underwriter will not receive any unpaid fees due until
the minimum escrow of $300,000 has been met. All offerings are subject to prior
sale.
The Underwriter has the first right of refusal on any other financing needs
of the Company involving the Residence for the next three years following the
offering.
In addition, the Company may not contact any person listed in the records
of the Underwriter as a customer of the Underwriter for any reason whatsoever
without obtaining the prior written consent of the Underwriter. However, this
provision is not to be construed to prohibit the Company from providing any
reports or notifications to bondholders that may be mandated by any federal or
state laws or regulations.
Each person who wishes to purchase a Bond must execute a subscription
agreement covering the Bond(s) being purchased. Checks should be made payable
to Colonial Trust Company as Escrow Agent and Registrar. Completion of
the subscription agreement, including proper signature thereon is essential
prior to any sale of the Bonds to potential
26
<PAGE>
investors. However, the Company and Underwriter reserve the right to reject any
subscription for any reason whatsoever, in which event all monies will then be
refunded to the prospective investor without interest, deduction or credit
thereon.
Experience of the Underwriter
The Underwriter has not acted as a principal underwriter of debt securities
such as the Bonds offered hereby. During the last ten years, the Underwriter's
experience has primarily been in the underwriting of nonprofit debt securities,
intrastate debt offerings and Regulation A debt offerings.
Possible Withdrawal of Underwriter
In June 1997, the Securities Commissioner of the State of Kansas filed a
Petition in the District Court of Shawnee County, Kansas, Case No. 97-CU-755,
styled State of Kansas, ex. rel. David R. Brant, Securities Commission of the
State of Kansas v. William Gerald Martin, Thomas Gene Trimble, and MMR
Investment Bankers, Inc. This case stems from the Underwriter's participation
in a series of church bond offerings of a single church located in Wichita,
Kansas. The Securities Commissioner of Kansas seeks a permanent injunction
restraining and enjoining each of the defendants from directly or indirectly
employing any device, scheme, or artifice to defraud; engaging in an act,
practice or course of business which would operate as a fraud or deceit upon
any person; and/or making any untrue statements of material fact and/or omitting
to state material facts necessary in order to make other statements made not
misleading, and, seeking restitution jointly and/or severely from each of the
defendants in the amount of $4,825,665.24, which is the amount in default on the
last two issues of church bonds issued on behalf of the church. It is likely
that during the offering of the Bonds, that this matter may be adjudicated,
settled, or otherwise, and the authority of the Underwriter to engage in the
securities business may be suspended, revoked or limited. Currently, this
litigation is in its discovery stage, and the Underwriter has determined to
vigorously defend the case. However, in the event the Underwriter is unable to
continue its business as a broker dealer of securities, it will have to withdraw
from its participation in this offering and, in all likelihood, the offering
will be terminated unless and until the Company is successful in finding another
Underwriter willing to participate in the sale of the Bonds.
LEGAL MATTERS
The Company's counsel, Roger L. Theis, of Morris, Laing, Evans, Brock &
Kennedy, Chartered, Attorneys At Law, Wichita, Kansas, has opined upon certain
legal matters pertaining to the Bonds. In addition, David Gee of Kimball, Parr,
Waddoups, Brown & Gee, Salt Lake City, Utah, has opined upon certain legal
matters pertaining to the Bonds for the Company. Certain legal matters have
been passed upon for the Underwriter by Michael G. Quinn, Esq., Wichita, Kansas.
To the best knowledge of the Company, there are no pending legal
proceedings nor any known to be threatened or contemplated to which the Company
is a party or to which any of its property may be subject.
EXPERTS
The following experts have consented to their names and to references to
their reports appearing in this Prospectus: Keith D. Callison, SRA, Wichita,
Kansas, has provided an appraisal of the Residence. The financial statements
dated December 31, 1996 and 1995 have been audited by George, Bowerman, Osborn
and Company, P.A., independent certified public accountants, Wichita, Kansas.
(This space is intentionally left blank)
27
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement (which term
shall include all amendments, exhibits and schedules thereto) on Form SB-2
under the Securities Act with respect to the Bonds offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, omits
certain of the information contained in the Registration Statement and the
exhibits and financial schedules thereto. Reference is hereby made to the
Registration Statement and related exhibits and schedules for further
information with respect to the Company and the Bonds offered hereby. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and in each such instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference. For further
information with respect to the Company and the Bonds, reference is made to the
Registration Statement and such exhibits and schedules, copies of which may be
examined or copied at the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at 7 World Trade Center, Suite 1300,
New York New York 10048 and at CitiCorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511.
(This space is intentionally left blank)
28
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Accountant's Compilation Report with Reference
to the Company's Audited Financial Statements. . . . . . . . . . . . F-2
Balance Sheets at December 31, 1995 and 1996
and June 30, 1997 (Unaudited). . . . . . . . . . . . . . . . . . . . F-3
Statements of Operations for the Years Ended December 31, 1995 and 1996
and the Twenty-Six Weeks Ended June 30, 1997 (Unaudited) . . . . . . F-4
Statements of Members' Equity (Deficit) for the Years Ended
December 31, 1995 and 1996 and the Twenty-Six Weeks Ended
June 30, 1997 (Unaudited). . . . . . . . . . . . . . . . . . . . . . F-5
Statements of Cash Flows for the Years Ended December 31, 1995 and 1996
and the Twenty-Six Weeks Ended June 30, 1997 (Unaudited) . . . . . . F-6
Notes to Financial Statements (Unaudited) . . . . . . . . . . . . . . . . F-7
(This space is intentionally left blank)
F-1
<PAGE>
[GEORGE, BOWERMAN, NOEL & DEUTSCH, P.A. LETTERHEAD HERE]
ACCOUNTANT'S COMPILATION REPORT
To the Members
Front Range Assisted Living, L.L.C.
Wichita, Kansas
We have compiled the accompanying balance sheet of Front Range Assisted Living,
L.L.C. (a development stage company) as of June 30, 1997 and the related
statements of operations, members' equity and cash flows for the period from
January 1, 1997 to June 30, 1997 and for the period from July 18, 1995
(inception) to June 30, 1997, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements at June 30, 1997 and for the
period from January 1, 1997 to June 30, 1997 and for the period from July 18,
1997 (inception) to June 30, 1997 and, accordingly, do not express an
opinion or any other form of assurance on them.
The financial statements for the year ended December 31, 1996 and for the period
from July 18, 1995 to December 31, 1995, were audited by us and we expressed an
unqualified opinion on them in our report dated January 8, 1997, but we have not
performed any auditing procedures since that date.
/S/George, Bowernam, Noel & Deutsch, P.A.
July 18, 1997
Wichita, Kansas
F-2
<PAGE>
FRONT RANGE ASSISTED LIVING, L.L.C.
A LIMITED LIABILITY COMPANY
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 3l, December 3l,
June 30, 1997 1996 1995
(Unaudited) (Audited) (Audited)
ASSETS
Current assets:
Cash $ 143 $ 273 $ 402
---------- --------- --------
Property assets:
Land 206,213 - -
Site development 6,796 - -
---------- --------- --------
213,009 - -
---------- --------- --------
Other assets:
Organizational costs 1,943 1,260 1,260
Financing costs 33,698 15,000 -
---------- --------- --------
Total other assets 35,641 16,260 1,260
Total assets $ 248,793 $ 16,533 $ 1,662
========== ========= =========
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 100 $ 100 $ -
Accrued interest payable 3,383 799 187
Notes payable 257,804 21,560 6,460
---------- --------- --------
Total current liabilities 261,287 22,459 6,647
---------- --------- --------
Members equity (deficit):
Capital contributions 200 200 200
Deficit accumulated during the (12,694) (6,126) (5,185)
development stage ---------- --------- --------
Total members' deficit (12,494) (5,926) (4,985)
---------- --------- --------
Total liabilities and
members' deficit $ 248,793 $ 16,533 $ 1,662
========== ========= ========
See accompanying notes and Accountant's Compilation Report.
F-3
<PAGE>
FRONT RANGE ASSISTED LIVING, L.L.C.
A LIMITED LIABILITY COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Cumulative For The
During Period
Development Beginning
Stage July 18, 1995
From July 18, 1995 Year (Inception)
January 1, 1997 (Inception) Ended To
To To December 31, December 31,
June 30, 1997 June 30, 1997 1996 1995
(Unaudited) (Unaudited) (Audited) (Audited)
Revenues $ - $ - $ - $ -
--------- --------- ------- -------
Expenses:
Office rent - 4,400 - 4,400
Advertising 2,303 2,303 - -
Professional fees 1,350 1,789 150 289
Interest expense 1,075 1,874 612 187
Travel and
entertainment 1,309 1,501 - 192
Telephone 393 393 - -
Office supplies 124 178 - 54
Bank charges 14 173 96 63
Licenses and permits - 83 83 -
--------- --------- ------- -------
Total expenses 6,568 12,694 941 5,185
--------- --------- ------- -------
Net loss $ (6,568) $ (12,694) $ (941) $(5,185)
========= ========== ======= =======
See accompanying notes and Accountant's Compilation Report.
F-4
<PAGE>
FRONT RANGE ASSISTED LIVING, L.L.C.
A LIMITED LIABILITY COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF MEMBERS' EQUITY
From July 18, 1995 (Inception) To June 30, 1997
Contributed Accumulated
Capital deficit Total
Balance at July 18, 1995 $ - $ - $ -
Member contributions 200 - 200
Net loss - (5,185) (5,185)
------- -------- ------
Balance at December 31, 1995(audited) 200 (5,185) (4,985)
Net loss - (941) (941)
------- -------- ------
Balance at December 31, 1996(audited) 200 (6,126) (5,926)
Net loss - (6,568) (6,568)
------- -------- ------
Balance at June 30, 1997(unaudited) $ 200 $(12,694) $(12,494)
======= ========= ========
See accompanying notes and Accountant's Compilation Report.
F-5
<PAGE>
FRONT RANGE ASSISTED LIVING, L.L.C.
A LIMITED LIABILITY COMPANY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Cumulative For The
During Period
Development Beginning
Stage July 18, 1995
July 18,1995 Year (Inception)
January 1, 1997 (Inception) Ended To
To To December 31, December 31,
June 30, 1997 June 30, 1997 1996 1995
(Unaudited) (Unaudited) (Audited) (Audited)
Cash flows from
operating activities:
Net loss $ (6,568) $ (12,694) $ (941) $ (5,185)
Adjustments to
reconcile net loss
to net cash used for
operating activities:
Increase in
accounts payable - 100 100 -
Increase in accrued
interest payable 2,584 3,383 612 187
Accrued interest
capitalized $ (1,509) (l,509) - -
--------- --------- -------- --------
Net cash used
for operating
activities (5,493) (10,720) (229) (4,998)
--------- --------- -------- --------
Cash flows used for
investing activities:
Site development assets (6,500) (6,500) - -
Purchase of other assets (19,381) (35,641) (15,000) (1,260)
--------- --------- -------- --------
Net cash used
for investing
activities (25,881) (42,141) (15,000) (1,260)
--------- --------- -------- --------
Cash flows from
financing activities:
Member contributions - 200 - 200
Loan proceeds 31,244 52,804 15,100 6,460
--------- --------- -------- --------
Net cash provided by
financing activities 31,244 53,004 15,100 6,660
--------- --------- -------- --------
Increase (decrease) in cash (130) 143 (129) 402
Cash at beginning of period 273 - 402 -
--------- --------- -------- --------
Cash at end of period $ 143 $ 143 $ 273 $ 402
========= ========= ======== ========
Noncash transactions:
Land acquisition from
issuance of notes payable $ 205,000 $ 205,000 $ - $ -
Capitalized interest
from accrued interest
payable 1,509 1,509 - -
See accompanying notes and Accountant's Compilation Report.
F-6
<PAGE>
FRONT RANGE ASSISTED LIVING, L.L.C.
A LIMITED LIABILITY COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997, December 31, 1996 and December 31, 1995
(Information as of June 30, 1997 and for the Six-Month Period
Ended June 30, 1997 is Unaudited)
1. ORGANIZATION AND OPERATIONS
Front Range Assisted Living, L.L.C. (the Company), is a limited liability
company organized under the Kansas Limited Liability Company Act. The Company
was formed to develop and operate an assisted living facility in the Saint
George, Utah area. The planned facility is to consist of 38 residential rental
units.
The Managing Member of the Company is Robert A. Brooks. The Manager is
responsible for managing and controlling the affairs of the Company. The
Company is comprised of two Members whose initial capital contributions consist
of cash. The interests of the Members in the Company range from 6% to 94%. The
other Member of the Company is Carol M. Brooks, wife of the Managing Member.
The operating agreement provides for up to eight additional persons to be
admitted as Members at the sole discretion of the Managing Member. In the event
of such admission of such additional Members, the interest of such additional
Members shall reduce the interest of the Managing Member. Additional Members
shall be entitled to an interest of 6% per capital contribution of $50,000. All
items of income, gain, loss, deduction and credit shall be allocated among the
Members in accordance with their percentage interest in the Company.
The Company will rent the facility, when constructed, to elderly individuals who
are located in the Saint George, Utah area. Collection of rental income will be
dependent upon the resources of the individuals to afford the rental rates being
charged by the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financing Costs
Costs incurred in connection with obtaining financing have been capitalized and
will be amortized on the straight-line method over the term of the financing.
Financing costs consist of bond issue costs related to the bonds to be issued
and will be amortized over the life of the bonds when
issued.
Organization Costs
Costs incurred in connection with the organization of the Company will be
amortized over five years.
Income Taxes
A limited liability company ("LLC") is an entity created and authorized under
various Kansas statutes. An LLC is structured to be taxed as a partnership, yet
provides limited liability protection for all of its members. For Federal and
state tax purposes, a LLC, like a partnership, is a pass-through entity; thus,
its income and losses are taxed only at the member level based on their pro rata
shares of the Company's items of income, deductions, losses and credits.
F-7
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and Cash Equivalents
For the purposes of the statement of cash flows, cash is comprised of demand
deposit accounts.
Concentration of Credit Risks
The Company maintains cash balances at a bank which is insured by the Federal
Deposit Insurance Corporation up to $100,000.
Advertising Costs
Advertising costs are expensed as incurred.
Financial Statements
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results
may differ from estimated amounts.
3. NOTES PAYABLE
Notes payable consist of the following:
June 30, December 3l, December 3l,
1997 1996 1995
(Unaudited) (Audited) (Audited)
----------- --------- ---------
Unsecured notes payable to Managing
Member, due at various dates through
1997 and 1998 with automatic extension
provisions if not paid in full on their
maturity dates, at interest rates of 9% $ 252,726 $ 20,300 $ 5,200
Unsecured notes payable to Brooks
Development Company, L.L.C. (an
affiliated company of the Managing
Member), due at various dates through
1997 and 1998 with automatic extension
provisions if not paid in full on their
maturity dates, at interest rates of 9% 5,078 1,260 1,260
========= ======== =======
$ 257,804 $ 21,560 $ 6,460
There have been no payments of principal or interest on any of the above
outstanding notes payable by the Company. Interest expense for the period from
January 1, 1997 through June 30, 1997 was $2,584 of which $1,509 was capitalized
as a component of the cost of land and site development and $1,075 was charged
to operations. The capitalization rate used to determine the amount of interest
eligible for capitalization was 9%. For the year ended
<PAGE>
3. NOTES PAYABLE (continued)
December 31, 1996 and the period beginning July 18, 1995 to December 31, 1995,
interest expense was incurred and charged to operations in the amounts of $612
and $187, respectively.
4. FINANCING
The Company entered into a financing agreement dated December 20, 1996 with MMR
Investment Bankers, Inc. for the underwriting and sale of a bond issue in the
amount of $2,500,000, expected to be payable over 20 years at the prevailing
market rates upon issuance. The Company intends to use the bond proceeds to
provide permanent financing for the facility to be constructed. The bonds will
be collateralized by a first mortgage on the land and facility to be constructed
or in a co-first deed of trust position with a construction lender. Bond
retirement payments are to be provided from the Company's rental fees. The
Company is required to establish a three year bond reserve account in the amount
of $125,000 to be controlled and used by the Trustee to pay principal and
interest due on the bonds, should the issuer ever be in default on the bond
issue. This bond reserve account shall be in effect for a period of three years
from the date of the bond issue, and at the end of the three years, the bond
reserve account will be used to call bonds provided the issuer is current on all
bond reserve payments. The issuer will establish the bond reserve account with
the initial proceeds from the sale of the bonds. In addition, the first six
months operating fund requirements may be funded from the initial proceeds from
the sale of the bonds.
The agreement provides for the Company to pay a 1 1/4% investment banking fee
($31,250) of the aggregate amount of the bond issue. The Company has paid the
investment banking fee as of June 30, 1997. In addition, the Company will pay a
processing fee of 2.5% of the face amount of each bond sold to the constituents
of the issuer, a fee of 5% of the face amount of each bond sold to clients of
the Broker, and a fee of 6.5% of the face amount of each bond sold to and/or
through certain selected members of the National Association of Securities
Dealers, Inc. through a selling group agreement.
5. RELATED PARTY TRANSACTIONS
During the time that the Managing Member serves in that capacity, a management
fee equal to 7% of the gross rental income of the Company shall be paid to him.
In addition, the Managing Member is allowed reimbursement for reasonable costs
incurred including, but not limited to, automobile mileage, office rental,
telephone and facsimile machine expenses, expenses associated with computer and
other office equipment usage, clerical expenses and other expenses related to
the Company's business. Further, the Managing Member shall receive a
development fee in the amount of $100,000 payable at such time and in such
manner as the Managing Member shall determine is appropriate after January 1,
1997.
The Company has entered into financing arrangements in the form of unsecured
notes payable with the Managing Member and also an affiliated company of the
Managing Member (see Notes 3 and 6).
6. COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
On May 23, 1997, the Company entered into a contractual agreement in the amount
of $1,592,181 for the construction of the facility. No payments have been made
under the agreement through June 30, 1997.
<PAGE>
6. COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS (continued)
An affiliated company of the Managing Member, Brooks Development Company,
L.L.C., has entered into a contract in the amount of $91,000 with an
architecture firm to provide site development and building plans for the
facility. Brooks Development Company, L.L.C. has incurred expenses related to
the architecture contract in the amount of $83,064 to June 30, 1997. Front
Range Assisted Living, L.L.C. purchased the plans from Brooks Development
Company, L.L.C. on July 17, 1997 issuing a note payable to Brooks Development in
the amount of $83,064, due July 17, 1998 with an interest rate of 9%.
On June 20, 1997, the Company entered into a construction loan with a financial
institution for temporary financing of the project in the amount of $2,000,000.
The Company incurred a loan commitment fee in the amount of 1 1/2% ($30,000) of
the total loan commitment at the closing of the loan agreement. The loan
agreement provides for a variable daily interest rate at 1% above the "prime
rate", which was 9.50% at June 30, 1997. Interest payments are due monthly
beginning August 1, 1997 and the principal amount of the loan is due on
September 1, 1998. The loan is secured by a deed of trust on the property, a
security interest in all tangible and intangible personal property and fixtures
associated with the project, a personal guaranty by Robert A. Brooks, Managing
Member, in the amount of $340,000 and assignment of (a) a $500,000 life
insurance policy on the Managing Member, (b) a certificate of deposit in the
amount of $108,500 owned by the Managing Member and (c) a mutual fund with a
market value of $59,700 owned by the Managing Member. Draw downs under the loan
agreement to July 18, 1997 were $108,417.
The Company expects to incur total land, architecture, construction, financing
and development costs of approximately $2,510,725 for the facility.
<PAGE>
(This page is intentionally left blank)
<PAGE>
No person has been authorized in connection with the Offering made hereby
to give any information or to make any representation not contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company or any Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of any offer
to buy any of the securities offered hereby to any person or by anyone in any
jurisdiction in which it is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information contained herein
is correct as of any date subsequent to the date hereof.
TABLE OF CONTENTS
Maturity Schedule. . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . 6
Use of Proceeds. . . . . . . . . . . . . . . . .11
Business . . . . . . . . . . . . . . . . . . . .11
Description of Property. . . . . . . . . . . . .13
Principal Owners of the Company. . . . . . . . .15
Management . . . . . . . . . . . . . . . . . . .16
The Company's Plan of Operation. . . . . . . . .17
Prior Performance of the Managing Member . . . .18
Certain Transactions . . . . . . . . . . . . . .20
Description of Bonds . . . . . . . . . . . . . .20
Underwriting . . . . . . . . . . . . . . . . . .26
Legal Matters. . . . . . . . . . . . . . . . . .27
Experts. . . . . . . . . . . . . . . . . . . . .27
Additional Information . . . . . . . . . . . . .28
Index to Financial Statements. . . . . . . . . .F-1
Until _____________, 1997 (90 days after the date of this Prospectus), all
dealers effecting transactions in the Bonds offered hereby, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
$2,500,000
Co-First Deed of Trust Bonds
Series 1997-I
[LOGO]
FRONT RANGE
ASSISTED LIVING, L.L.C.
(d/b/a Evergreen Gardens of St. George)
--------------
PROSPECTUS
--------------
MMR INVESTMENT BANKERS, INC.
, 1997
------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Under the Kansas Limited Liability Company Act, all Members and Managers of
a limited liability company have limited liability without regard to their
participation in the management of the Company's business. A Member is only
liable for his contribution and improper return of capital.
The Company's Operating Agreement provides that the Company shall indemnify
the Managing member against all claims and liability incurred or imposed upon
the Managing Member in the good faith exercise of his judgement relative to the
business of the Company, provided; however, that the Managing Member is not
guilty of willful misconduct or gross negligence. The Company has also agreed
to indemnify its members against all claims or liability incurred or imposed
upon such members solely as a result of the members having an interest in the
Company.
The Underwriting Agreement, filed as Exhibit 1(a) to this Registration
Statement, provides for the indemnification by the Company of the Underwriter
and each person, if any, who controls the Underwriter against certain
liabilities and expenses, as stated therein, which may include liabilities under
the Securities Act of 1933, as amended. The Underwriting Agreement also
provides that the Underwriter similarly indemnify the Company, it directors,
officers and controlling persons, as set forth therein.
Item 25. Other Expenses of Issuance and Distribution
The following is a list of the estimated expenses in connection with the
issuance and distribution of securities being registered, other than
underwriting discounts and commissions, all of which is to be paid by the
Registrant:
SEC Registration Fee. . . . . . . . . . . . . . . . . . . . . . . . . .$863
NASD Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . .$750
Blue Sky Qualification Fees and Expenses. . . . . . . . . . . . . . . . *
CUSIP Registration Fees . . . . . . . . . . . . . . . . . . . . . . . . *
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . *
Accounting Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . *
Transfer Agent, Escrow Agent, Paying Agent, Registrar & Trustee Fees. . *
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .$*
====
* To be filed by amendment.
Item 26. Recent Sale of Unregistered Securities
The following table sets forth the Company's sales of unregistered
securities in the last three years. No underwriters were involved in any of
such sales nor were any commissions or similar fees paid by the Registrant with
respect thereto. The Company claims exemption from registration for these
issuances under Section 4(2) of the Securities Act of 1933, as amended.
<TABLE>
<CAPTION>
Date of Sale Title of Securities Sold Amount Sold Identity of Purchaser
<S> <C> <C> <C>
July 1995 Membership Interest 94% Interest Robert A. Brooks
July 1995 Membership Interest 6% Interest Carol M. Brooks
</TABLE>
II-1
<PAGE>
Item 27. Exhibits
The following exhibits are filed herewith:
Exhibit
Number Description
1(a) Form of Underwriting Agreement
1(b) Form of Selling Group Agreement
1(c) Form of Proceeds Escrow Agreement
3(a) Articles of Organization
3(b) Operating Agreement
4(a) Specimen of Bond Certificate
4(b) Form of Trust Indenture
4(c) Lienholders Agreement
5(a) Opinion of Morris, Laing, Evans, Brock & Kennedy
5(b) Opinion of Kimball, Parr, Waddoups, Brown & Gee
10(a) Construction Management Contract
10(b) Construction Loan Agreement
23(a) Consent of George, Bowerman, Osborn and Company
23(b) Consent of Morris, Laing, Evans, Brock & Kennedy
23(c) Consent of Kimball, Parr, Waddoups, Brown & Gee
23(d) Consent of Keith Callison & Associates
99(a) Appraisal
99(b) Environmental Report
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pusuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) It will file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
II-2
<PAGE>
(i) Include any prospectus required by section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
(4) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant, Front Range Assisted Living, L.L.C., certifies that it has
reasonable grounds to believe that it meets all of the requirements of filing on
Form SB-2 and authorized this Registration Statement to be signed on its behalf
by the undersigned, in the City of Wichita, State of Kansas, on this 11th day
of August, 1997.
FRONT RANGE ASSISTED LIVING, L.L.C.
By: /S/Robert A Brooks
-----------------------------------
Robert A. Brooks
Managing Member
In accordance with the requirement of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities
indicated on August 11th, 1997.
Signature Title
/S/Robert A Brooks Managing Member
- -----------------------------
Robert A. Brooks (Principal Executive and Financial Officer)
/S/Carol M Brooks Member
- -----------------------------
Carol M. Brooks
II-4
UNDERWRITING AGREEMENT
between
FRONT RANGE ASSISTED LIVING, L.L.C. (Issuer)
and
MMR INVESTMENT BANKERS, INC. (Company)
550 N. 159th East, Suite 300
P.O. Box 781440
Wichita, Kansas 67278-1440
(316) 733-5081
Toll Free 1-800-825-2663
INTRODUCTION
The Company will provide professional and technical services in preparing a bond
issue for the Issuer.
AMOUNT
The Bond Issue shall be in the aggregate amount of $2,500,000 and shall be
designated as follows:
Series 1997-I $(to be determined) First Mortgage
Series 1997-II $(to be determined) First Mortgage
SECURITY
The address of the property securing this Bond Issue is: Southwest Corner of 200
South Street and 1200 East Street, Saint George Utah.
ISSUER'S RESPONSIBILITIES
The Issuer agrees to:
1. Furnish an accurate list of potential bond purchasers on 3 1/2 inch IBM
compatible floppy disks. Names of existing MMR clients shall be deleted from
this list by the Company. The remaining names following this deletion shall be
referred to as "The Constituents of The Issuer". The Issuer shall complete the
prospectus information forms, and provide any other information requested by the
Company. An audit performed by a Certified Public Accountant will be required.
2. Engage an attorney to prepare a legal debt letter, secure a title
insurance policy in the amount of the Bond Issue and to review the necessary
legal documents, including, but not limited to, the Resolution authorizing the
Bond Issue and the Trust Indenture. This work shall be completed in a manner
and within a time period satisfactory to the Company. The Issuer shall pay the
attorney's fees.
3. Furnish to the Company a certified copy of its Articles of
Incorporation (if incorporated), its Constitution and/or By-Laws, and any other
forms required by the Company and the Securities Commission of its state or any
other state in which it wishes to sell the bonds.
4. Furnish an MAI appraisal of its property and improvements to the
Company. The Issuer agrees to pay all expenses of the appraisal.
5. Engage a paying agent, registrar, and independent trustee, selected by
the Company. The Issuer agrees to pay any expenses pertaining to these
services.
6. Prior to the delivery of the bonds, execute the Trust Indenture and
cause it to be recorded in all places required by law and as may be agreed upon
by the Company and the Issuer. The Issuer shall take such steps as necessary to
make the Indenture a valid obligation of the Issuer and a lien on and security
interest in the property owned by the Issuer and included in the lien of the
Indenture. The Issuer agrees that the Bonds will be secured by a first mortgage
on the property or in a co-first mortgage position with the construction lender.
7. The Issuer shall pay the expenses of furnishing the title insurance,
the filing and recording fees, the Attorney's fees, the Appraiser's fees, the
Accountant's fees (if any), all Trustee's fees, any taxes levied on bonds by
either state or federal government bodies and any registration and licensing
fees required by any regulatory body, any state or the federal government.
8. Furnish the Company copies of the architectural and construction
contracts, final plans and specifications, and detail of all bids.
9. The Issuer shall pay all expenses related to all local Investment
Seminars.
10. The Issuer is responsible to begin making Sinking Fund Payments the
week of Issue Date.
11. The Issuer agrees to set up a Sinking Fund Reserve account in the
amount of $130,000.00 to be controlled and used by the Trustee to pay principal
and interest due on the bonds, should the Issuer ever be in an event of default
on the bond issue. This Sinking Fund Reserve shall be in effect for a period of
ten (10) years from the date of issue, and at the end of the ten (10) years, the
Sinking Fund Reserve will be used to call bonds provided the Issuer is current
on all Sinking Fund payments. The Issuer will
1
<PAGE>
establish the Sinking Fund Reserve account with the initial proceeds from sale
of the bonds. In addition, the initial Sinking Fund payments may be funded from
the initial proceeds from the sale of the bonds in an amount up to $125,000.00.
12. The Issuer agrees that it shall not contact any person listed in the
records of the Company as a Customer of the Company for any reason whatsoever.
This provision shall not be construed to prohibit the Issuer from providing any
reports or notification to securities holders that may be mandated by any
federal or state laws or regulations.
COMPANY'S RESPONSIBILITIES
The Company agrees to:
1. Furnish the preliminary organizational material to the Issuer.
2. Set the interest rates and calculate the maturity schedule just prior
to filing the issue with the proper regulatory bodies.
3. Furnish a printed prospectus, prepared from the information provided by
the Issuer.
4. Process all information sent to the Company by the Issuer.
5. Make appropriate filings with all regulatory bodies on behalf of the
Issuer. The Issuer agrees to pay all costs of these filings.
DEPOSIT OF PROCEEDS FROM BOND SALES
The Issuer agrees to deposit proceeds from the sale of the bonds pursuant to the
Trust Indenture. Any funds received by the Company subject to the terms of the
Trust Indenture will be delivered to the bond proceeds account no later than
12:00 noon the next business day following receipt. The Company shall instruct
investors to make their checks payable to the Registrar. If there is an escrow,
then the Company will instruct investors to make their checks payable to the
Escrow Agent.
FUTURE BOND ISSUES
In accordance with the Trust Indenture, additional bonds may be issued from time
to time on a par and equality basis with the same underlying security, (plus
improvements), provided the proceeds are used to enhance the existing project,
to make additional improvements, to purchase more land, or to refinance
indebtedness. The Company shall have the first right of refusal for any
additional financing and/or refinancing for the Issuer involving the Property
that secures the Bonds for a period not to exceed three years from date of
issue.
FEES
The Issuer also agrees to pay the Company an investment banking fee of 1.25% of
the aggregate amount of the bond issue ($31,250.00). This fee is due in the
following manner: $15,625.00 is due at the time of the signing of the
Underwriting Agreement. $15,625.00 is due prior to filing the Bond Issue with
the regulatory agencies. In the event the issue is canceled prior to
qualification with certain regulatory agencies, the Company shall be entitled to
the above fee to the extent of its actual, accountable out-of-pocket expenses,
upon submission to the Issuer a listing of these expenses. These expenses may
include, but are not limited to due diligence/legal fees, travel, telephone,
photo copies, postage and printing.
In addition to the investment banking fee, the Issuer agrees to pay the Company
one of the following concessions:
Processing fee of 2.5% of the face amount of each bond sold to the
Constituents of the Issuer; Concession of 5% of the face amount of each bond
sold to clients of the Broker; Concession of 6.5% of the face amount of each
bond sold to and/or through certain selected members of the National Association
of Securities Dealers, Inc. through a Selling Group Agreement.
All bonds sales are on a best efforts basis. The concession shall be deducted
from the sale price of each bond by the Registrar and forwarded to the Company.
The Custodian of the Bond Proceeds Account is authorized to pay MMR Investment
Bankers, Inc. any fees and/or brokerage concessions due them according to the
priority of disbursements as set forth in the Trust Indenture and Prospectus.
In the event the issue is canceled, the Company shall be entitled to the above
fee to the extent of its costs, including due diligence and consulting costs
incurred by the Registered Representative, and costs paid on behalf of the
Issuer, upon submission to the Issuer of a listing of these costs.
SYNDICATION
The Company may offer these bonds for sale to and through certain selected
members of the National Association of Securities Dealers, Inc.
INDEMNIFICATION
The Issuer agrees to indemnify and hold harmless the Company and its agents for
any liability it may incur or any loss it may suffer in connection with this
bond issue because of any false, untrue or misleading facts, figures, drawings,
pictures, opinions of counsel or appraisals furnished by the Issuer to the
Company or caused by the failure or refusal of the Issuer to furnish such
information to the Company.
This agreement may be terminated by the Company without liability to the Company
if, prior to the time of delivery of any bonds any substantial change in the
financial position of the Issuer or in the existing operating, political,
international, economic or market conditions shall have taken place, which in
the judgment of the Company makes it impractical to market the bonds. The
Company may also terminate this agreement if the Issuer becomes one month
delinquent in any Sinking Fund Payment, or fails to comply with any of the
provisions of this agreement.
This agreement may be terminated by the Company or the Issuer without Liability
if, after the date of this agreement the Issuer sustains a substantial loss on
account of fire, accident or other act of God, or in the case of war or other
national emergency makes it impractical in the judgment of the Company or the
Issuer to sell the bonds. The Company or the Issuer may also terminate this
agreement without liability if
2
<PAGE>
registration or exemption from registration from any state or regulatory body is
finally denied after a good faith effort on the part of the Issuer and the
Company to obtain such registration or exemption from registration. In the
event of any such termination, the Issuer shall be liable to the Company for any
expenses incurred by the Company on behalf of the Issuer up to the date of
termination.
It is understood that no agreements will exist between MMR Investment Bankers,
Inc., its officers, agents, employees, and/or registered representatives and the
Issuer other than that which is in written form, signed by the authorized
signatories of the Issuer and MMR Investment Bankers, Inc.
This agreement must be approved by an officer of the Company. Prior to signing
by an officer, there will be an analysis of the Issuer's ability to perform the
proposed contract by the loan committee of the Company. This agreement
constitutes a binding contract. Please read it carefully before signing.
Date: /S/12/20/96 /S/Robert A Brooks, Managing Member
------------------- ------------------------------------------
Signed by Officer -- Title
Issuer's Name: Front Range Assisted Living, L.L.C.
/S/William G Martin
- ----------------------------------------------- -----------------------------
Approved by MMR Investment Bankers, Inc. Officer MMR Registered Representative
MMR Investment Bankers, Inc. mmr(corporate.agr)rev 12/96
3
SELLING GROUP AGREEMENT
- -----------------------------------:
As principal underwriter for the Issuers on Exhibit I, which is made a part of
this agreement, we invite you to participate in the distribution of any or all
such bonds subject to the following terms:
1. You are to offer and sell such bonds only at the public offering price,
in accordance with the terms of the then current prospectus. You shall not have
authority to act as agent of the Issuer, for us, or for any other dealer in any
respect. All orders are subject to acceptance by us and become effective only
upon confirmation by us.
Sales may be made only in those states where the bonds have been
qualified for sale and where your firm and its registered representatives are
licensed to sell. Should your firm wish to offer the securities in a state where
they are not qualified for sale, it shall be the responsibility of your firm to
pay for qualification of the securities in those states. MMR will help with the
actual qualification process.
2. MMR Investment Bankers, Inc. ("MMR") will process all orders and provide
with the order a prospectus at no cost to your firm.
MMR will instruct your customers to make their checks payable to the
Escrow agent. Upon receipt of payment, MMR will promptly transmit the checks and
Subscription Agreement by noon of the next business day to the Escrow Agent.
The Escrow Agent will notify MMR when the minimum contingency has been met. MMR
will then notify your firm.
If there is no minimum contingency, or if the minimum contingency has
been met, MMR will instruct your customers to make their checks payable to the
Registrar. Upon receipt, MMR will promptly transmit the checks and Subscription
Agreements by noon of the next business day to the Registrar. When the escrow
amount is met, the Registrar will mail the bonds or confirmations to your
customers. If there is no escrow, the Registrar will mail the bonds or
confirmations to your customers within four weeks of receipt of the check. The
procedure for the handling of orders shall be subject to instructions which we
shall forward from time to time to all members of the Selling Group. We shall
not accept any order from you which is placed on a conditional basis or subject
to any delay or contingency prior to execution.
3. You will receive a concession of __________% of the face amount of each
bond sold. Occasionally, MMR may be willing to negotiate a bonus if your firm
would be willing to commit to selling a large block of bonds during a specified
period of time. If there is an escrow amount to be met, your concession will be
paid after escrow is met. If there is no escrow, your concession will be
forwarded in a timely manner once it is received by us.
4. We shall furnish you without charge a "copy ready" Prospectus, with any
supplements currently in effect, and "copy ready" sales materials issued by us
from time to time. In the
<PAGE>
purchase of bonds through us, you are entitled to rely only on the information
contained in the offering Prospectus. You may not publish any advertisement or
distribute sales literature or other written material to the public which makes
reference to us or any of the Issuers (except material which we furnish to you)
without prior written approval. It will be the responsibility of your firm to
make sure all sales literature used by your firm is in compliance with state and
national regulatory agencies.
5. This agreement is in all respects subject to statements regarding the
sale of bonds made in the offering Prospectuses of the respective Issuers, and
to the Rules of Fair Practice of the National Association of Securities Dealers,
Inc., which shall control and override any provision to the contrary in this
Agreement.
6. In accordance with Article III, Section 24 of the Rules of Fair Practice
of the National Association of Securities Dealers, Inc., you represent that you
are a properly registered or licensed broker or dealer under applicable federal
and state securities laws and regulations and a member in good standing of the
National Association of Securities Dealers, Inc., and agree to notify us
immediately if you cease to be so registered or licensed or a member in good
standing of that Association. You agree to comply with the NASD Rules of Fair
Practice including but not limited to Sections 8, 24, 36 and 25.
7. Either of us may cancel this Agreement at any time by written notice to
the other. The right to sell shall cease upon receipt of written notice.
8. MMR shall notify you periodically of offerings available for sale.
Notification will also be given when an issue is no longer available for sale by
your firm.
9. All communications to us should be sent to the above address. Any notice
to you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
This agreement should be executed in duplicate and one of the duplicate
originals should be returned to us for our file.
Accepted:
MMR INVESTMENT BANKERS, INC.
By:
----------------------------------
By:
----------------------------------
Address:
-----------------------------------
-----------------------------------
Phone:
------------------------
Date:
-------------------------
<PAGE>
EXHIBIT I
ISSUER CONCESSION(1) LOCATION STATES FILED/QUALIFIED(2)
PROCEEDS ESCROW AGREEMENT
Agreement entered on the day of 19 by
and among Front Range Assisted Living, L.L.C. ("Issuer"), MMR Investment
Bankers, Inc. ("Dealer"), and Colonial Trust Company, an Arizona Trust Company
and bank, as defined by Section 3(a)(6) of the Securities and Exchange Act of
1934, (the "Escrow Agent").
WHEREAS, with the assistance of Dealer, the Issuer proposes to offer and
sell up to $2,500,00 aggregate principal amount of its Church Bonds (the
"Bonds") to be issued under a Trust Indenture between the Issuer and Colonial
Trust Company Trustee (the "Trustee").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The Escrow Agent agrees to act as escrow agent in connection with
the offering and sale of Bonds and, as such, to establish an appropriate account
and to receive the proceeds from the sale of the Bonds for deposit therein
until the earlier of the termination of this Agreement or the termination of the
offering and sale of the Bonds (the "Termination Date").
2. Checks or other items for the payment of all or a part of the
purchase price of Bonds (all Such items together with all proceeds thereof, the
"Escrowed Property") shall be payable to Escrow Agent, or endorsed by the Dealer
or Issuer to Colonial Trust Company and delivered daily to Escrow Agent. The
Escrow Agent will credit the proceeds to an escrow cash account (the "Escrow
Account") to be held by it under the terms of this Agreement subject to Rule
15c2-4 under the Securities Act of 1934. All subscribers, checks or other items
for the payment of the purchase price of Bonds shall be transmitted by Dealer to
the Escrow Agent by noon of the next business day upon receipt by Dealer.
The Escrow Agent shall invest such collected funds deposited in the
Escrow Account in short term investments to the extent permitted by the Arizona
Department of Banking in accordance with the Arizona Revised Statutes, provided
however, that any such funds held subject to any minimum escrow contingency
shall be invested subject to rule 15c2-4. The Escrow Agent shall in no event be
liable for any loss resulting from any change in interest rates applicable to
funds so invested.
Interest on funds invested pursuant to this Section shall accrue
from the date of investment of such funds until such funds are released from
escrow pursuant to paragraph 4.
3. The Escrowed Property, together with all interest earned thereon,
shall be held by the Escrow Agent until the earlier of
1
<PAGE>
(a) the time that the Escrow Agent has received proceeds from the sale of the
Bonds in the aggregate principal amount of $300,000 or more, or (b) the date of
April 1, 1998 at which time the escrow will terminate.
4. Upon termination of the escrow, the Escrow Agent shall release the
Escrowed Property, together with all interest earned thereon to be distributed
to either (a) the Issuer, or such other party or parties, as required to carry
out the purpose of the Bond offering if the minimum amount of the Bonds have
been sold within the required time period described above, or (b) the
subscribers if the minimum amount of Bonds have not been sold within such
period.
5. The Issuer agrees that in the event the minimum amount of the Bonds
have not been sold within the time period described above, therefore
necessitating the distribution by the Escrow Agent of the Escrow Property and
the interest earned thereon to the subscribers, Issuer shall promptly pay to the
Escrow Agent such sum of money as shall be necessary, if any, when added to the
amount of the Escrow Property and interest earned thereon to pay to the
subscribers of the Bonds the principal amount of such subscriptions together
with the interest from the date of authentication through the escrow termination
date at the rate attributable to the Bonds subscribed.
6. If at any time prior to the completion of this escrow said Escrow
Agent is advised by the appropriate securities or state agency that the
registration to sell said bonds has been revoked, said Escrow Agent shall
thereupon return all funds to the respective subscribers.
7. Escrow Agent shall hold the Escrowed Property in trust, commingled
with similar funds of other Issuers, but shall maintain detailed records to
reflect the share thereof attributable to each Issuer. Escrow Agent shall
furnish periodic statements to Issuer reflecting all receipts and disbursements
from the Escrow Account.
8. The Escrow Agent's and Dealer's obligations and duties in
connections herewith are confined to those specifically enumerated in this
Agreement. The Escrow Agent and Dealer shall not be in any manner liable or
responsible for the sufficiency, correctness, genuineness or validity of any
instruments received by or deposited with them or with reference to the form of
execution thereof, or the identity, authority or rights of any person executing,
delivering, or depositing same, and neither the Escrow Agent nor the Dealer
shall be liable for any loss that may occur by reason of forgery, false
representation or the exercise of their discretion in any particular manner or
for any other reason, except for their own gross negligence or willful
misconduct.
2
<PAGE>
9. Escrow Agent shall receive compensation for its services as set
forth in the separate schedule of fees as made a part hereof by reference.
10. The Escrow Agent may act pursuant to the written advice of counsel
with respect to any matter relating to this Escrow Agreement and shall not be
liable for any action taken or omitted in accordance with such advice.
11. The Escrow Agent (and any other successor escrow agent) may at any
time resign as such by delivering all of the Escrowed Property to the successor
escrow agent jointly designated by the other parties hereto in writing, or to
any court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The resignation of the Escrow Agent will take
effect on the earlier of (a) the appointment of a successor (including a court
of competent jurisdiction), or (b) the day which is thirty (30) days after the
date of delivery of its written notice of resignation to the other parties
hereto. If at that time the Escrow Agent has not received a designation of a
successor escrow agent, the Escrow Agent's sole responsibility after that time
shall be to safekeep the Escrowed Property until receipt of a designation of
successor escrow agent or a written disposition instruction by the Issuer and
Dealer or a final order of a court of competent jurisdiction.
12. If any controversy arises between the parties hereto or with any
third person, the Escrow Agent shall not be required to determine the same or to
take any action but may await the settlement of any such controversy by final
appropriate legal proceeding, or otherwise as the Escrow Agent may require, or
the Escrow Agent may, in its discretion, institute such appropriate interpleader
or other proceedings in connection therewith as it may deem proper,
notwithstanding anything in this Agreement to the contrary. In any such event,
the Escrow Agent shall not be liable for interest or damages to the Issuer or
subscribers. In the event Escrow Agent should institute, or be named as a party
in, any legal proceedings to determine the lawful owner of the Escrowed
Property, Escrow Agent shall be entitled to recover from the contending parties
to said legal proceedings, reasonable attorney's fees and expenses which shall
be incurred by Escrow Agent in said proceedings.
13. This Escrow Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their respective successors and assigns,
heirs, administrators, and representatives and shall not be enforceable by or
inure to the benefit of any third party except as provided in Section 10 with
respect to a resignation by the Escrow Agent. No party may assign any of its
rights or obligations under this Escrow Agreement without the written consent of
the other parties. This Escrow Agreement shall
3
<PAGE>
be construed in accordance with and governed by the laws of the State of Arizona
without regard to conflict of law principals.
14. This Escrow Agreement may only be modified in writing signed by all
of the parties hereto, and no waiver hereunder shall be effective unless in
writing signed by the party to be charged.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the day and year first above written.
DEALER: MMR Investment Bankers, Inc.
BY:
----------------------------------------
Date:
--------------------------------------
ISSUER:
----------------------------------------------
By:
----------------------------------------
President or Chairman of Trustees
By:
----------------------------------------
Secretary of Trustees
By:
----------------------------------------
Trustee
Date:
--------------------------------------
ESCROW AGENT: Colonial Trust Company
Phoenix, Arizona
By:
---------------------------------------
Date:
---------------------------------------
escroagr.ctc
4
STATE OF KANSAS
OFFICE OF [SEAL OF KANSAS HERE]
SECRETARY OF STATE
RON THORNBURGH
To all to whom these presents shall come, Greetings:
I, Ron Thornburgh, Secretary of State of the State of Kansas, do
hereby certify that the attached is a true and correct copy of
an original on file and of record in this office.
2 pages are attached to this certification.
In testimony whereof:
I hereto set my hand and cause to be affixed my
official seal. Done at the City of Topeka on the
date below: July 18, 1995
[SEAL OF SECRETARY OF STATE OF KANSAS HERE]
/S/Ron Thornburgh
RON THORNBURGH
SECRETARY OF STATE
<PAGE>
ARTICLES OF ORGANIZATION
OF
FRONT RANGE ASSISTED LIVING, L.L. C.
a Limited Liability Company
The undersigned member does hereby form a limited liability
company pursuant to the provisions of the Kansas Limited Liability Company Act,
Kansas Statutes Annotated, Sections 17-7601 et seq., as amended, upon the
following terms:
I.
NAME OF COMPANY
The name of the limited liability company shall be FRONT RANGE
ASSISTED LIVING, L.L.C.
II.
PERIOD OF DURATION
The limited Liability company shall commence upon the filing of these
Articles with the Secretary of State of the State of Kansas, and the period of
its duration shall be twenty-nine (29) years, unless sooner terminated by the
members or by operation of law.
III.
PURPOSE
The purpose for which the limited liability company is organized is to
engage generally in developing one or more assisted living residences and any
other business or activity in which a limited liability company may legally
engage under Kansas law.
IV.
REGISTERED OFFICE: RESIDENT AGENT
The registered office of the limited liability company in the state of
Kansas shall be 260 N. Rock Road, Suite 260, Wichita, Kansas 67206, and the
initial resident agent of the limited liability company at such address shall be
Robert A. Brooks.
V.
ADMISSION OF MEMBERS
The members shall have the right to transfer their interests (including any
transfer as collateral security for a loan) and to admit additional members only
by the unanimous written approval of the members and as provided in the
Operating Agreement of the limited liability company.
<PAGE>
VI.
CONTINUITY OF LIFE
The remaining members shall have the right to continue the business of the
limited liability company on the death, insanity, retirement, expulsion,
bankruptcy, or dissolution of the Managing Member or the occurrence of any other
event which terminates the continued membership of the Managing Member, but only
upon the written consent of the remaining members owning a majority in
interests, given at the time of such event. Otherwise, upon the occurrence of
any such event the limited liability company shall be dissolved.
VII.
MANAGEMENT
The limited liability company shall be managed by a Managing Member which
shall be Robert A. Brooks, 260 N. Rock Road, Suite 260, Wichita, Kansas 67206,
until his successor manager or managers are elected and qualified in the manner
prescribed and provided in the operating agreement of the limited liability
company. The Managing Member and all successor managers shall have the
responsibilities accorded to the Managing Member or manager by the members as
set out in the operating agreement of the limited liability company.
VIII.
OPERATING AGREEMENT
There shall be an operating agreement adopted and approved by the members
which shall govern the rights, duties and obligations of members and the manager
and which shall contain other provisions for the regulation and management of
the affairs of the limited liability company that are not inconsistent with the
law or these articles of organization.
IN WITNESS WHEREOF, the undersigned member has executed and delivered these
Articles of Organization of FRONT RANGE ASSISTED LIVING, L.L.C., the 23rd day of
June 1995.
/S/Robert A. Brooks
- --------------------------
ROBERT A. BROOKS
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
FRONT RANGE ASSISTED LIVING, L.L.C.
a Limited Liability Company
<PAGE>
AMENDED AND RESTATED
OPERATING AGREEMENT OF FRONT RANGE ASSISTED LIVING, L.L.C.
THIS AMENDED AND RESTATED OPERATING AGREEMENT ("Agreement"), dated as
of the of 24th day of December 1996, is made by and between ROBERT A. BROOKS
("Brooks") and CAROL M. BROOKS, who are the members ("Members") of FRONT RANGE
ASSISTED LIVING, L.L.C. In consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
1. DEFINITIONS
1.1 The "Act" means the Kansas Limited Liability Company Act, K.S.A.
17-7601 et seq.
1.2 The "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.3 The "Company" means the limited liability company formed pursuant to
this Agreement.
1.4 "Managing Member" shall mean Brooks or the successor managing member
of the company.
1.5 The "Project" shall mean the residential assisted living project and
related property described in Section 5.1 hereof
1.6 The "Regulations" shall mean the Treasury Regulations, as amended
from time to time, promulgated under the Code.
2. FORMATION
2.1 Formation and Name. The initial Members formed Front Range Assisted
Living, L.L.C., a limited liability company under and pursuant to the Kansas
Limited Liability Act, K.S.A. Sec. 17-7601, et seq.
2.2 Term. The term of the Company commenced upon the filing of the
Articles of Organization of the Company with the Secretary of State of Kansas on
July 18, 1995, and shall continue for a period of twenty-nine (29) years from
such date.
2.3 Offices. The address of the registered office of the Company shall
be 260 North Rock Road, Suite 260, Wichita, Kansas 67206. The name and address
of the resident agent of the Company in the state of Kansas is: Robert A.
Brooks, 260 North Rock Road, Suite 260, Wichita, Kansas 67206. The registered
office of the Company shall also be the location of its principal office.
<PAGE>
2.4 Meetings. Meetings of the Members may be held upon 10 days' written
notice, with notice deemed to have been given if sent by mail or other means of
written communication to the Members of record of the Company.
2.5 Articles and Filings. The articles of organization of the Company
have been filed with the Secretary of State of the State of Kansas. The Members
shall hereafter execute and deliver all such certificates and other instruments
conforming to this Agreement as shall be necessary for the Managing Member to
accomplish all filings and other acts appropriate to comply with all
requirements for the formation and operation of a limited liability company
under the Act.
2.6 Effectiveness. This Agreement shall be effective upon the execution
of this Agreement by Brooks and Carol M. Brooks. Thereafter, up to eight (8)
additional persons may be admitted as Members at the sole discretion of Managing
Member, and no consent shall be required of any of the other Members for the
admission of up to such eight (8) additional Members. In the event of such
admission of such additional Members, the Interest (as hereinafter defined) of
such additional Members shall reduce the Interest of Brooks alone, and shall not
affect the Interests of the other Members. Additional Members shall be entitled
to an Interest of 6% per capital contribution of $50,000. No Member shall be
admitted on more favorable terms than the terms of admission of the other
Members (other than Brooks and Carol M. Brooks). Initially the Undersigned
parties shall be all of the Members of the Company, including Brooks.
Additional Members shall be deemed admitted and party to this Agreement upon
execution and acceptance of an Endorsement substantially in the form of Exhibit
A, attached hereto.
2.7 Supersedes Prior Operating Agreements. This Agreement revokes and
supersedes all prior Operating Agreements of the Company in their entirety.
3. CAPITALIZATION
3.1 Capital Accounts. An individual capital account shall be maintained
by the Company for each Member. Such capital accounts shall be maintained in
accordance with the provisions of Regulation Section 1.704-1(b)(2)(iv). In
accordance with Code Section 704(c) and the regulations thereunder, income,
gain, loss, and deduction with respect to any property contributed to the
capital of the Company (and, in the event the value of any Company asset is
adjusted to its gross fair market value, subsequent allocations of income, gain,
loss, and deduction with respect to such asset) shall be allocated among the
members so as to take account of any variation between the adjusted basis of
such property to the Company for federal income tax purposes and its fair market
value as reflected on the books of the Company. It is the intention of the
members by this provision to comply with the provisions of Code Section 704(c),
and all computations for income tax purposes with respect to such contributed
property shall be made in accordance with the Regulations.
Provisions concerning capital accounts and other provisions of this
Agreement relating to the maintenance of capital accounts are intended to comply
with applicable Regulations and shall be interpreted and applied in a manner
consistent with such Regulations. The Members shall make such adjustments as
are necessary or appropriate to maintain equality between the capital
- 2 -
<PAGE>
accounts of the Members and the amount of Company capital reflected on the
Company's balance sheet as computed for book purposes, in accordance with
applicable Regulations, and shall make such other appropriate modifications in
the event unanticipated events might cause this Agreement not to comply with
applicable Regulations.
3.2 Initial Capital Contributions. The initial capital contributions of
the Members shall be made simultaneously with the execution and delivery of this
Agreement. Upon execution hereof, each Member shall deliver to the Company in
cash the sum set forth opposite such Member's name, which sum shall be the
initial value of such Member's capital account:
Robert A. Brooks $100
Carol M. Brooks $100
3.3 Additional Capital Contributions. No Member shall be required to
make any capital contribution to the Company beyond otherwise required by law;
provided, however, that the Members may by unanimous consent agree to contribute
cash or property to the Company as a capital contribution.
3.4 Company Capital. No Member shall be paid interest on any capital
contribution. No Member shall have the right to withdraw, or receive any return
of, its capital contribution, except as specifically provided herein.
4. INTERESTS OF INITIAL MEMBERS; ALLOCATIONS AND DISTRIBUTIONS TO
MEMBERS, VOTING RIGHTS
4.1 Interests of Members. The interests ("Interests") of the initial
Members in the Company are as follows, until changed by the admission of new
Members pursuant to Section 2.6:
Robert A. Brooks 94%
Carol M. Brooks 6%
4.2 Allocation of Profits and Losses. All items of income, gain, loss,
deduction, and credit, shall be allocated among the Members in accordance with
their percentage Interests in the Company.
4.3 Distributions. The Company will distribute, at such times as may be
determined in the sole discretion of the Managing Member, so much of the
Company's cash as is not necessary or desirable for the conduct of the
Company's business. Except in the case of liquidating distributions, which will
be in accordance with Section 10.4, all distributions shall be made to the
Members in accordance with their percentage Interests in the Company as of the
time of the distribution.
4.4 Voting Rights. With regard to any matter to be decided by a vote of
the Members, voting rights shall be allocated among the Members in accordance
with their percentage Interests
- 3 -
<PAGE>
in the Company. The decision of the Members voting the majority (unless a
greater percentage is otherwise provided) of Interests in the Company shall
prevail.
5. BUSINESS OF THE COMPANY
5.1 Purpose. The primary purpose for which the Company is organized is
to acquire, own, improve, develop, and operate an assisted care living facility;
to finance such activities by borrowing such sums as may be necessary or
advisable to grant mortgages, security agreements, or other encumbrances upon
Company property to secure the Company debt; and to take all other actions and
enter into all other agreements which are necessary, convenient, or incident to
the acquisition, ownership, improvement, development, leasing, or sale of the
Company property. Without limiting the generality of the foregoing, the Company
shall construct and operate Evergreen Gardens of St. George, a 38-unit assisted
care living facility located in St. George, Utah (the "Project").
5.2 Development. The Company shall construct the Project in substantial
conformance with the plans and specifications drafted by Folgers Architects and
Facility Design, available for inspection in the office of the Company.
5.3 Operation. Upon completion of the Project, the Company shall manage
or operate, or lease or contract for the management and operation of, the
Project.
6. MANAGEMENT
6.1 Powers, Rights. and Duties of Managing Member. The Managing Member
shall have full and complete authority and discretion in the management and
control of the business of the Company for the purposes herein stated and shall
make all decisions affecting the business of the Company. The Managing Member
shall manage and control the affairs of the Company to the best of his ability
and shall use his best efforts to carry out the business of the Company set
forth herein, and in connection therewith, the powers of the Managing Member
include, but are not limited to, the power, on behalf of the Company and in its
name, to do the following:
a) Acquire, improve, develop, maintain, lease, and sell the Project
on such terms and in such manner as the Managing Member may in its sole
discretion approve;
b) Expend the capital and revenues of the Company in furtherance of
the Company's business;
c) Seek zoning changes, plat approval, CPU approval, and other similar
administrative actions;
d) Enter into and execute agreements and any or all documents and
instruments customarily employed in the real estate industry in connection with,
or appropriate to, the proper acquisition, ownership, improvement,
- 4 -
<PAGE>
development, lease, or sale of the Project, or to perform effectively and
properly its duties, or exercise its powers hereunder, including, but not
limited to, construction contracts, subcontracts, agreements and undertakings
for engineering services, legal services and accounting services;
e) Borrow money from banks, other lending institutions, and
other lenders for any Company purpose, including, without limitation, for
construction, operation, and other purposes, and in connection herewith to issue
notes, bonds, debentures, and other debt securities, and to mortgage, pledge,
encumber, and hypothecate the assets of the Company to secure repayment of the
borrowed sums;
f) Employ agents, employees, managers, accountants, consultants, and
other persons necessary or appropriate to carry out the business and operations
of the Company (including an on-site manager or management company for the
operation of the Project), and to pay, at the expense of the Company, fees,
salaries, expenses, wages, and other compensation to such persons;
g) Exercise the option of the Company to redeem any Member's interest
pursuant to Section 9.3,
h) Maintain, at the expense of the Company, adequate records and
accounts of all operations and expenditures;
i) Sell all or substantially all of the assets of the Company and wrap
up the business affairs thereafter;
j) Purchase, at the expense of the Company, liability and other
insurance to protect the Company's properties and business, and contract for the
operation of the Project;
k) Perform any and all other acts or activities customary or incident to
the acquisition, ownership, financing, improvement, development, sale, or lease
of the Project;
l) Obtain all necessary governmental licenses, franchises, approvals,
and consents on behalf of the Company to do business and operate the Project;
m) Elect either the cash or accrual method of accounting as the
accounting method of the Company;
n) Do all other acts not prohibited by law or by this Agreement;
o) Execute valid and binding resolutions of the Company to accomplish
any of the foregoing.
- 5 -
<PAGE>
Brooks shall be the initial Managing Member of the Company and shall serve until
his resignation or until he is removed for cause by unanimous vote of all the
other Members of the Company. Upon the resignation of a Manager, a successor
shall be elected by a vote of the Members.
6.2 Restrictions on Authority of the Managing Member. In addition to
other acts expressly prohibited or restricted by this Agreement or by law, the
Managing Member shall have no authority to act on behalf of the Company and is
expressly prohibited from the following:
a) Doing any act in contravention of this Agreement;
b) Doing any act which would make it impossible to carry on the ordinary
business of the Company; provided, however, that the sale of all of the Company
Project shall be within the ordinary course of the Company business;
c) Confessing to judgment against the Company in connection with any
threatened or pending legal action;
d) Possessing Company property or assigning the rights of the Company in
specific Company property for other than a Company purpose;
e) Admitting a person as a Member except as provided in this Agreement;
f) Acquiring any property other than in connection with the acquisition,
ownership, improvement, development, leasing, or sale of the Project.
6.3 Compensation to the Managing Member. The Managing Member or Brooks
Development Company, L.L.C., shall be entitled to receive the following fees and
reimbursements from the Company:
a) A development fee in the amount of $100,000 payable at such time and
in such manner as the Managing Member shall determine is appropriate after
January 1, 1997.
b) A management fee ("Management Fee") equal to seven percent (7%) of
the gross rental income of the Company. The Management Fee shall be payable
within 45 days after the due date on which the gross rental income is earned
upon which the Management Fee is based.
c) Reimbursement for reasonable costs incurred by the Managing Member
including but not limited to automobile mileage, office rental, telephone and
facsimile machine expenses, expenses associated with computer and other office
equipment usage, clerical expenses, and other expenses related to the Company's
business.
The Managing Member is specifically authorized to enter into lease agreements or
other contracts on behalf of the Company with himself individually or with
relatives or with other entities in
- 6 -
<PAGE>
which Managing Member has a financial interest, or to otherwise charge the
Company a reasonable fee for the use of property belonging to the Managing
Member, his relatives, or entities in which he has a financial interest.
The fees provided in this paragraph shall be in addition to fees and expenses of
the on-site manager or contract management company of the Project, and in the
event the Managing Member assumes the on-site management of the Project, he
shall be entitled to a reasonable fee for such services.
6.4 Other Activities of Members. Neither the Managing Member nor any
other Member shall be required to manage or participate in the Company as its
sole and exclusive function, and may have other business interests and may
engage in other ventures or activities in addition to those relating to the
Company, which ventures or activities may compete with the Company. Neither
the Company nor any Member shall have any right by virtue of this Agreement or
otherwise in or to such other ventures or activities or to the income of
proceeds derived therefrom. Neither the Managing Member nor any other Member
shall be obligated to present investment opportunities to the Company other
than the Project including other similar assisted care living projects.
While it is the parties' understanding that the Managing Member intends to
present to the Members possible opportunities to invest in other assisted care
living facilities which the Managing Member may develop and build in the future,
nothing herein shall be construed to require him to do so.
6.5 Indemnification and Liability of Managing Member. The 6.5 Company
shall indemnify the Managing Member against all claims or liability incurred or
imposed upon Managing Member in the good faith exercise of his judgment relative
to the Company Project. Neither the Company nor any Member shall have any claim
against any Managing Member by reason of any act or omission of such Managing
Member in the exercise of its judgment relative to the Company provided such
Managing Member was not guilty of willful misconduct or gross negligence.
6.6 Indemnification and Liability of Other Members. The Company shall
indemnify any other Member against all claims or liability incurred or imposed
upon such Member solely as a result of such Member's interest in the Company.
7. PROVISIONS APPLICABLE TO MEMBERS
7.1 No Participation or Routine Management. No Member except the
Managing Member shall take any part or participate in the routine conduct of or
have any control over the day-to-day business of the Company.
7.2 No Withdrawal. The Members shall not be entitled to withdraw from
the Company or in any other manner terminate the Company except as provided
herein.
7.3 Examination of Records. All Members may have access at all
reasonable times to the books and records of the Company to inspect and copy the
same, but all Members shall keep
- 7 -
<PAGE>
the books and records of the Company confidential as may be necessary to protect
the best interests of the Company.
8. BOOKS, RECORDS AND REPORTS
8.1 Books and Records. The Managing Member will keep books of account of
the Company, employing comprehensive tax basis accounting procedures,
consistently applied. The books of account shall be maintained at the principal
office of the Company.
8.2 Financial Reports. The Managing Member shall deliver to all Members
at reasonable intervals to be determined by the Managing Member financial
statements, including a balance sheet and statement of income and expense. The
cost of such reporting shall be paid by the Company as a Company expense.
9. TRANSFERABILITY OF MEMBER'S INTEREST
9.1 Restriction on Transfer. A Member may not assign or otherwise
transfer such Member's interest in the company without the prior written consent
of all other Members, except as provided herein.
9.2 Transferee's Interest. In the event of a purported assignment or
transfer, whether voluntary or involuntary, of a Member's interest in the
company without compliance with this Section 9, the transferee of the interest
of the Member shall have no right to participate in the management of the
business and affairs of the Company or vote, but shall be entitled to receive
only the share of profits or other compensation by way of income and the return
of contributions to which that Member whose interest has been transferred
otherwise would be entitled.
9.3 Right of First Refusal. In the event any Member wishes to sell such
Member's interest in the Company to a non-Member, the Company shall first have
the option to redeem such selling Member's interest in the Company on the same
terms and conditions as such agreement with the prospective non-Member purchaser
during a period of ten (10) days following written notice to the Company and to
each of the other Members of such Member's intent to sell and the material terms
of the agreement with the prospective non-Member purchaser. In the event the
Company fails to exercise its option hereunder, then during the ten (IO) days
following the date on which the Company's option expires, any Member or Members
of the Company shall have the option to purchase such selling Member's interest
on the same terms and conditions as the agreement with the prospective
non-Member purchaser. In the event more than one Member exercises the option to
purchase hereunder, the interest shall be purchased by such Members on a
pro-rata basis based on such Members' Interests in the Company, unless otherwise
agreed to by such purchasing Members.
The Members shall have the right to transfer their Interests and to admit
additional Members only by the unanimous written approval of the Members after
the Company and the remaining Members have failed to exercise their right of
first refusal. If all of the other Members of the Company, other than the
Member proposing to dispose of such Member's interest, do not
- 8 -
<PAGE>
approve of the proposed transfer by unanimous written consent, the transferee of
the interest of the Member shall have no right to participate in the management
of the business and affairs of the Company or to become a Member. Such
transferee shall be entitled to receive only the share of profits and other
compensation by way of income and the return of contributions to which that
Member whose interest has been transferred otherwise would have been entitled.
10. DISSOLUTION, TERMINATION AND DISTRIBUTION
10.1 Dissolution. The Company shall be dissolved upon the occurrence of
one or more of the following events:
a) The expiration of the term of the Company as provided in Section 2.2
of this Agreement;
b) The unanimous written agreement of all Members; or
c) The death, insanity, retirement, expulsion, resignation, bankruptcy,
or dissolution of the Managing Member or the occurrence of any other event which
terminates the continued membership of the Managing Member; provided, however,
that the remaining Members shall have the right to continue the business of the
Company in any such event, but only upon the consent of the remaining Members
holding not less than a majority of the profits interest and a majority of the
capital interest.
10.2 Liquidation. In the event of the liquidation of all or
substantially all of the assets of the Company for any reason, the Managing
Member shall act as liquidator and shall commence to wind up the affairs of the
Company and liquidate the Company's assets. The Managing Member shall determine
whether the assets of the Company are to be sold or whether the assets are to be
distributed to the Members in dissolution of the Company. If assets are
distributed to the Members, a hypothetical gain or loss on the assets shall be
computed. All such assets to be distributed shall be valued at their then fair
market value as determined by the Members and the difference, if any, of the
fair market value over (or under) the adjusted bases of such property to the
Company shall be credited (or charged) to the capital accounts of the Members
in accordance with their Interests in the Company. If the Members are unable
to agree on the fair market value of any asset of the Company, the fair market
value shall be the average of two appraisals (one prepared by qualified
appraiser selected by the Managing Member and the other selected by the
remaining Member or Members).
10.3 Profits or Losses in Winding Up. - The Members shall continue to
share profits and losses during the winding up in the same proportion as before
liquidation.
10.4 Distributions at Liquidation. Subject to the right of the Managing
Member to set up such cash reserve as may be deemed reasonably necessary for
any contingent or unforeseen liabilities or obligations of the Company, the
proceeds of liquidation and any remaining assets of the Company shall be
distributed as follows:
- 9 -
<PAGE>
a) To creditors, in order of priority as provided by law;
b) To Members for loans, if any, made by them to the Company; and
c) To the Members, ratably, in accordance with the positive capital
account balances of the Members, after giving effect to all contributions,
distributions and allocations for all periods.
11. MISCELLANEOUS PROVISIONS
11.1 Entire Contract. This Agreement shall constitute the entire
contract between the parties, and there are no other or further agreements
outstanding not specifically mentioned herein.
11.2 Binding Effect. The covenants, terms, provisions and agreements
herein contained shall be binding upon and inure to the benefit of the parties
hereto, and to their permitted successors and assigns.
11.3 Applicable Law. This Agreement shall be construed and enforced
according to the laws of the State of Kansas.
11.4 Amendments. This Agreement may be amended only upon the unanimous
written consent of the parties hereto.
11.5 Counterparts. This Operating Agreement may be executed in any
number of counterparts, each of which is identical, all of which shall be
deemed to be an original, and all of which shall be construed together as a
single agreement. The parties authorize the assembly of signature pages of
all copies or counterparts on one agreement for record-keeping purposes. This
Agreement shall not be effective with respect to or binding upon any party
hereto until the required number of Members under Section 2.6 have executed at
least one counterpart of this Agreement.
/S/ Robert A. Brooks /S/Carol M. Brooks
- ------------------------- ------------------------------
ROBERT A. BROOKS CAROL M. BROOKS
10
BOND
STATED INTEREST PRINCIPAL
ACCOUNT NO. ISSUE DATE MATURITY RATE INTEREST PAYABLE AMOUNT
999-99-9999 5/01/90 5/01/95 11.00 SEMI-ANNUALLY $8,000
ON 05/01 AND 11/01
XYZ, INC.
2406 BROADWAY
AUSTIN TX TRUST NO.
119
BOND NO.
(herein referred to as 'Issuer') 10001-00
ISSUED JOHN DOE AND
TO: MARY JANE DOE
4215 MESA CIRCLE
PHOENIX, AZ 85012
Issuer, for value received, hereby promises to pay to the Registered Owner
shown above, or registered assigns, the Principal Amount shown above on the
Stated Maturity shown above, in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public or private debts, and to pay interest upon the Principal Amount from and
after the Authentication Date, at the per annum Interest Rate shown above, in
like coin or currency, the interest to be payable as follows: either (a)
semi-annually, quarterly or monthly upon the Interest Payable dates until the
Principal Amount has been paid (to be designated under Interest Payable above as
'Semi-annually", 'Quarterly" or "Monthly" followed by the designated interest
payment dates), or, (b) upon the Stated Maturity date, with interest to be
compounded semi-annually beginning with the first semi-annual date (six months
following the Issue Date and each six months thereafter) following the
Authentication Date, and semi-annually thereafter until the Principal Amount has
been paid (to be designated under Interest Payable above as "At Maturity"). The
Principal Amount and Interest payable upon this Bond. pursuant to the provisions
of a Trust Indenture entered into between Issuer and Colonial Trust Company
("Colonial"), shall be paid to the person whose name this Bond is registered in
at the close of business on the Interest Payable and Stated Maturity dates and
shall be paid by check drawn upon the account of Colonial and mailed to the
registered address of such person.
Reference is here made to further provisions of this Bond set forth on the
reverse hereof which further provisions are incorporated herein for all
purposes. This bond shall not be valid or become obligatory for any purpose
until it shall have been authenticated by either the manual or facsimile
signature of the proper officer of Colonial.
IN WITNESS WHEREOF, Issuer has caused this instrument to be duly issued and
authenticated.
Authentication:
COLONIAL TRUST COMPANY
CANCELLED
COLONIAL TRUST COMPANY
P.O. BOX 33487
PHOENIX, ARIZONA
85067-3487
/S/Sample Bond
- ------------------------------------
Authorized Signature
5/01/90
- ------------------------------------
Authentication Date
INTEREST DOES NOT ACCRUE AFTER MATURITY DATE
<PAGE>
[RESERVE SIDE OF SAMPLE BOND]
ADDITIONAL PROVISIONS
This Bond is one of the duly authorized Issue of Bonds to be issued by Issuer
pursuant to the terms of a Trust Indenture (herein called the "Indenture")
between Issuer and Colonial Trust Company (herein called "Colonial") to which
Indenture reference is here made for a statement of the respective rights
thereunder of Issuer, Colonial and the holders of the Bonds.
If an event of default, as defined in the Indenture, shall have occurred and be
continuing, the principal hereof may be declared due and payable in the manner
and with the effect provided in the Indenture. As provided in the Indenture and
subject to certain limitations therein set forth, this Bond is transferable on
the bond register of Issuer (as maintained by Colonial) upon surrender of this
Bond for transfer at the office of Colonial, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to Colonial duly executed
by the registered holder hereof or his attorney duly authorized in writing, and
thereupon a new Bond in the same principal amount, interest rate and maturity
date, will be issued to the designated transferee or transferees.
This Bond is issued only as a registered Bond, without coupons.
A reasonable service charge may be required to be paid to Colonial for any
transfer or exchange of the Bond.
This Bond may be subject to redemption by Issuer prior to its Stated Maturity.
No assignment or transfer of this Bond shall be effective unless such
assignment or transfer is recorded on the records of Issuer and/or Colonial as
provided in the Indenture. Neither Issuer nor Colonial shall be responsible for
the payment of the principal Amount or Interest Payable upon this Bond except to
the person in whose name this Bond is registered at the time of such payment.
FOR VALUE RECEIVED hereby
----------------------------------------------
Name of Current Owner
sells, assigns and transfers unto
--------------------------------------------
Name of New Owner
- ------------------------------------------------------------------------------
Address City State Zip Social Security Number
the within Bond, and does hereby irrevocably constitute and appoint the
Secretary of the Colonial Trust Company, Attorney to transfer the Bond on the
books of the within named Issuer with full power of substitution in the
premises. The name, mailing address and social security number of the new owner
must be provided before transfer can be completed.
DATED
--------------------------------- ------------------------------------
Current Owner
In presence of
-------------------------------------------------------------
(Signature must be guaranteed by Officer of State or National
Bank-Include Officer's Title)
(Bank is requested to use their "guarantee" Stamp or Seal)
Under penalties of perjury, I certify (1) that the number shown on this form is
my correct taxpayer identification number; and 2) that I am not subject to
backup withholding because (a) I have-not been notified that I am subject to
backup withholding as a result of a failure to report all interest or dividends,
or (b) the Internal Revenue Service has notified me that I am no longer subject
to backup withholding.
DATED
--------------------------------- ------------------------------------
New Owner
INSTRUCTIONS
All interest will be paid when due and will be mailed to your registered
address by the Colonial Trust Company (herein called "Colonial"). Upon maturity
the Bond must be surrendered to Colonial for redemption. Upon redemption, a
check in the principal amount of the Bond will be forwarded by Colonial to you
at your registered address.
Should your address change prior to the maturity of the Bond, a written
statement of this fact and your new address should be forwarded to Colonial as
soon as possible in order that future payments of principal and interest upon
the Bond may be properly paid to you.
Should you sell or transfer the Bond to another party it will be necessary for
you to complete the assignment appearing above. All registered owners must sign
the assignment in the presence of an officer of a State or National Bank. Each
signature must be guaranteed by the bank officer. The Bond, along with the
applicable transfer agent fees, must be forwarded to Colonial to be reissued in
the name of the assignee.
COLONIAL TRUST COMPANY
P.O. BOX 33487
PHOENIX, ARIZONA
85067-3487
TRUST
INDENTURE
FRONT RANGE ASSISTED LIVING, L.L.C.
Name of Issuer
Trust Number
COLONIAL TRUST COMPANY
As Trustee
<PAGE>
TABLE OF CONTENTS
PAGE
I. Capacities of Colonial ............................. 1
II. Amount of Bond Issue; Lien on the Property;
Spendthrift Trust for Bondholders ................... 1
III. Description of Bonds and Liens ...................... 2
A. Registration of Bonds and Liens ............... 2
B. Bondholders' Pro Rata Lien .................... 2
C. Trustee's Reimbursement Lien .................. 2
IV. Disbursement of Bond Proceeds ....................... 3
A. Bond Proceeds Account ......................... 3
B. Preference of Payments Out of Bond
Proceeds Account .............................. 3
C. Construction Draws ............................ 4
D. Surplus Bond Proceeds ......................... 6
E. Overpayments .................................. 6
F. Abandonment of Project ........................ 7
V. Payment of Bonds .................................... 7
A. Priorities of Issuer's Payments ............... 7
B. Priority of Charges against Sinking Fund ...... 7
C. Method of Payments into Sinking Fund .......... 7
D. Expenses of Default ........................... 8
E. Issuer's Payment Secured by its Revenues ...... 8
F. When Sinking Fund Balance May Be Paid
to Issuer ..................................... 9
G. Three Year Bond Reserve Account ............... 9
VI. Bondholders' Failure to Surrender Matured Bonds ..... 10
A. No Interest After Maturity .................... 11
B. Escheat After Three Years ..................... 11
VII. Issuer's Covenants .................................. 11
A. Issuer Shall Maintain and Insure the
Property ...................................... 11
B. Trustee May Cure .............................. 12
C. Issuer May Not Merge .......................... 13
D. Issuer's ...................................... 13
VIII. Defaults and Remedies ............................... 13
A. Events of Default Defined ..................... 13
B. Waiver of Notice by Issuer; Trustee's
Remedies ...................................... 14
C. Legal Ownership of Rights to Prosecution
and Enforcement in Trustee Alone .............. 17
i
<PAGE>
D. Trustee's Discretion to Advise Bond-
holders of Default ............................ 18
E. Bondholders' Rights in Event of
Trustee's Failure to Act ...................... 18
F. Trustee's Right to Stop Payment on
Outstanding Checks ............................ 18
G. Penalty Interest .............................. 19
H. Trustee Has No Duty to Cure; Trustee's
Rights in Event of Overdraft or Overpayment ... 19
I. Application of Sinking Fund Balances
Upon Default .................................. 19
IX. Issuer's Prepayment Privileges ...................... 21
A. Entire Series in Full or Partial at
Random ........................................ 21
B. No Pre-Payment Penalty; Additional
Trustee's Fee ................................. 22
C. Pre-Payment Funds to be on Deposit in
Advance ....................................... 22
D. Prior Notice to Trustee and to Bond-
holders Required .............................. 22
E. Disposition of Unpresented Bonds .............. 22
F. Over- and Under-Deposit of Funds .............. 23
G. Trustee's Release of Lien ..................... 23
X. Replacement of Bonds ................................ 23
A. Exchange of Mutilated or Defaced Bonds ........ 23
B. Lost, Stolen or Destroyed Bonds ............... 23
C. Remedies are Exclusive ........................ 23
XI. Additional Parity Bonds ............................. 24
A. Conditions .................................... 24
B. Right of First Refusal ........................ 23
XII. Sale of Property .................................... 25
A. For Fair Value Only ........................... 25
B. Application of Sale Proceeds .................. 25
C. Value of Pledged Property to be
Sufficient to Secure Bonds Then
Outstanding ................................... 26
XIII. Substitution of Collateral .......................... 26
A. For Fair Value Only ........................... 26
B. Must Become Part of the Lien .................. 26
XIV. Condemnation of Property ............................ 27
XV. Duties of Trustee, Paying Agent and Registrar ....... 28
A. Trustee's Administrative Duties ............... 28
ii
<PAGE>
B. Paying Agent's Duties ......................... 29
C. Registrar's Duties ........................... 30
XVI. Limitation of Trustee's Liability .................. 30
XVII. Ancillary/Co-Trustee; Resignation and Removal;
Successor Trustee .................................. 33
A. Trustee May Appoint Ancillary and
Co-Trustees .................................. 33
B. Voluntary Resignation and Involuntary
Removal of Trustee ........................... 33
XVIII. Illegal Interest ................................... 35
XIX. Release of the Lien ................................ 36
XX. Investment of Funds; Trustee's Fees ................ 37
A. Permitted Investments ........................ 37
B. Base Fees of Trustee, Paying Agent and
Registrar .................................... 37
C. Additional Fees to be Charged for
Extraordinary Services ....................... 37
XXI. Supplemental Indentures ............................ 38
A. Not Requiring Bondholder Consent ............. 38
B. Requiring Bondholder Consent ................. 38
C. Requisites of Notice to Bondholders .......... 39
D. Only Substantial Consent Required ............ 39
XXII. Bondholder Lists and Reports; Evidence
of Rights of Bondholders ........................... 39
A. Form of Bondholder Action .................... 39
B. Issuer Owned or Controlled Bonds to be
Disregarded .................................. 40
C. Third-Party Communiques to Bondholders ....... 41
D. Bondholder Identities Not to be
Disclosed .................................... 41
XXIII. Miscellaneous Provisions ............................ 42
iii
<PAGE>
TABLE OF CONTENTS
PAGE
i
<PAGE>
DRAFT
TRUST INDENTURE
STATE OF ARIZONA
COUNTY OF MARICOPA
THIS TRUST INDENTURE made and entered into between
Front Range Assisted Living, L.L.C., St. George, Utah, acting through its duly
authorized agents and representatives, hereinafter called "Issuer," and COLONIAL
TRUST COMPANY, a trust company organized under the laws of the state of Arizona,
having its principal office and post office address respectively at 5336 North
19th Avenue, Phoenix, Maricopa County, Arizona 85015 and P.O. Box 33487,
Phoenix, Maricopa County, Arizona 85067-3487, hereinafter called "Colonial,"
WITNESSETH:
I.
CAPACITIES OF COLONIAL
Colonial will serve in the multiple capacities of Trustee for the benefit of
the Bondholders (hereinafter called "Trustee"), Registrar with respect to the
transfer of the Bonds and maintenance of the Bond Register (hereinafter called
"Registrar"), and Paying Agent with respect to distribution of interest and
principal payments to or for the Bondholders (hereinafter called "Paying
Agent"). The duties and responsibilities of Colonial for its service in each of
such capacities, as well as the compensation to be paid to Colonial therefor,
are hereinafter set forth; provided that, unless the context otherwise requires,
all such terms are used interchangeably and collectively, the term for one
capacity including as well the other two terms and capacities.
II.
ISSUE OF BONDS AND SECURITY
Issuer has agreed and does hereby agree to issue Bonds of serial maturities
in the total amount of $2,500,000.00 hereinafter called the "Bonds," secured, in
accordance with the terms and provisions of this Trust Indenture by a deed of
trust or mortgage
Trust Indenture
Page 1 of 48
<PAGE>
DRAFT
and security agreement, hereinafter called the "Lien," recorded in the proper
State and County or other recording office, on and covering property of Issuer
described on Exhibit "B" attached hereto in a mortgage(s) or deed of trust to be
executed by Issuer and filed of record to secure the Bond Issue governed by this
Trust Indenture (hereinafter called the "Property"), and incorporated herein by
reference. All moneys received and maintained by the Trustee hereunder shall be
trust funds held for the benefit of the Bondholders and shall not be subject to
lien or attachment of any creditor of Issuer or Trustee.
III.
DESCRIPTION OF BONDS AND LIENS
(A) All of the Bonds shall be issued on the "Authentication Date"
defined in the prospectus or offering circular in the names of the holders
thereof as registered on the books and records of the Registrar. No principal
or interest payable upon the Bonds shall be paid to any persons other than the
registered holders. Payments of principal and/or interest upon the Bonds shall
be made by check drawn upon the Operating Account to be maintained by Trustee,
which check shall be mailed, postage prepaid, to the registered holders of the
Bonds at their registered addresses.
(B) All of the Bonds will be secured by the Lien upon the Property of
Issuer, and shall have equal rights, liens and privileges under this Trust
Indenture and the Lien so that each and every Bond shall be equally and
proportionately secured without preference, priority or distinction as to the
lien securing any one Bond over the lien securing any other Bond or Bonds.
(C) Hereinafter the phrase "Reimbursement Lien" will be used to identify
a lien against the Property in favor of Trustee securing Trustee's right to
reimbursement for its own or borrowed funds advanced or expended, said
Reimbursement Lien being likewise secured by the Property but being superior to
the Lien securing the Bondholders until such funds advanced or expended are
repaid in full. All such advances and expenditures secured by the Reimbursement
Lien shall, subject to Article XVIII, bear interest at the rate equal to two
(2%) percent per annum in excess of the "Prime Rate" quoted daily in the money
rate column of the Wall Street Journal as said note may from day to day in
Trustee's sole
Trust Indenture
Page 2 of 48
<PAGE>
DRAFT
discretion be adjusted upward and downward. All such principal and interest
accrued and/or collected by Trustee in reimbursement from Issuer shall be
Trustee's sole property.
IV.
DISBURSEMENT OF BOND PROCEEDS
(A) As the Bonds are sold (or if the Bond proceeds are placed in an
escrow account to be released to Trustee only after the conditions of the escrow
agreement have been met) , the proceeds from the sale of the Bonds shall be
delivered to Trustee to be deposited into a Bond Proceeds Account in the name
and under the exclusive control of Trustee in a depository selected by Trustee,
including its own commercial banking division. Trustee shall disburse the Bond
proceeds in accordance with the provisions of paragraph (B) below.
(B) Out of the proceeds from the sale of the Bonds, Trustee shall first
pay the following items in the order and preference listed:
(1) The Dealer's fee due the broker/dealer assisting Issuer in the
sale of the Bonds (hereinafter called "Broker") under the terms of a written
agreement between Issuer and Broker.
(2) The reimbursement to Trustee of any expenses incurred by
Trustee in the examination by its legal counsel of all documents required to
issue the Bonds.
(3) The principal and interest payable by Issuer upon promissory
notes or other obligations of Issuer or others secured by existing liens upon
the Property. Upon payment of such obligations, Trustee shall be subrogated to
the rights of the prior owners thereof.
(4) After the payment of the foregoing fees, expenses, and
pre-existing liens, if any, Trustee shall, subject to statutory retainage,
disburse the funds remaining in Issuer's Bond Proceeds Account (hereinafter
called the "Net Bond Proceeds") for the purposes of the Bond offering as set
forth and described in the prospectus or offering circular used in connection
with the Bond offering, however, in the following priority:
Trust Indenture
Page 3 of 48
<PAGE>
DRAFT
(a) The expense associated with the offering up to $187,500,
including expenses of the Broker, Trustee's fees, and other similar fees
incurred in connection with the offering;
(b) To fund the initial operating fund payments up to $125,000;
(c) The establishment of a "Ten Year Bond Reserve Account" in the
amount of $130,000;
(d) To fund development, marketing and pre-opening costs
associated with the project up to $57,500 and concurrently to;
(e) The payoff the construction loan due Emprise Bank in the
amount of $2,000,000; and
(f) The balance, if any, of the proceeds shall be used for the
repayment of unsecured notes due Robert A. Brooks and Brooks Development Company
L.L.C.
(C) The disbursement by Trustee of the Net Bond Proceeds from Issuer's
Bond Proceeds Account shall be subject to and in accordance with the following
provisions:
(1) Issuer shall furnish to Trustee at Issuer's expense and Trustee's
election an attorney's title opinion or a mortgagee's title policy in favor of
Trustee reflecting that Trustee holds the Lien on the Property as trustee for
the benefit of the Bondholders, subject to no prior liens or encumbrances other
than those agreed upon in writing between Issuer and Trustee.
(2) If Issuer is remodeling and/or constructing new improvements with
all or any portion of the Net Bond Proceeds, Issuer shall file with Trustee a
written estimate of the cost of such construction, and Issuer shall provide
builder's risk insurance during the period of construction with loss payable
clause in favor of Trustee.
(a) If Issuer enters into a contract for such construction which
provides for (or if Issuer later determines such construction will actually
result in) a total cost greater than the
Trust Indenture
Page 4 of 48
<PAGE>
DRAFT
Net Bond Proceeds, issuer will promptly notify Trustee of such of fact.
(b) Should Trustee be so advised or determine in its sole
discretion that the Net Bond Proceeds will be insufficient to complete the
contemplated use thereof, Trustee shall not be required to disburse any funds
from Issuer's Bond Proceeds Account until such time as Issuer demonstrates to
Trustee's satisfaction that the amount necessary for completion of the project
as originally contemplated is equal to or less than the Net Bond Proceeds.
(c) Provided that, notwithstanding the foregoing, Trustee may
make such construction and/or purchase disbursements from the Net Bond Proceeds
as it deems in its sole discretion to be in the best collective interest of the
Bondholders.
(3) Together with such supporting photographs and contractor's and
architect's affidavits and other information and material as Trustee may from
time to time require, Trustee shall be furnished an affidavit which shall be
signed and approved by an authorized representative of Issuer, showing the
estimate of the improvements completed in accordance with the plans and
specifications up to the date of such affidavit.
(a) Such affidavit shall be accompanied by Issuer's duly
executed written request for Trustee to make a construction payment, whereupon
Trustee is authorized to pay out of Issuer's Bond Proceeds Account the amount of
the estimate shown to be due for such labor performed or materials furnished or
such other percentage of such estimate, less any applicable retainage.
(b) When the representative of Issuer certifies that all
improvements have been completed in accordance with the plans and specifications
therefor and have been accepted by Issuer, Trustee is authorized to pay out of
Issuer's Bond Proceeds Account the final balance shown by the affidavit to be
due and owing.
(c) Disbursements may be made to the contractor and/or
Issuer, as Trustee may determine to be in the best interest of the Bondholders.
Trust Indenture
Page 5 of 48
<PAGE>
DRAFT
(4) Trustee shall be subrogated to the rights of all laborers',
materialmen's and contractors, liens which it may reduce or discharge by such
payments, and the acceptance of any such payments shall be binding and
conclusive upon the recipients and Issuer as to such rights of Trustee.
(5) If Issuer is purchasing real property with all or any portion
of the proceeds from the sale of such Bonds, Trustee shall, upon like
certification, disburse such funds as are necessary to close such purchase,
provided that such purchased real property shall be subjected to and become a
part of the Lien and any mortgage or deed of trust upon the Property, as
evidenced at Trustee's election and at Issuer's sole expense by an attorney's
title opinion or a mortgagee's title policy in favor of Trustee reflecting no
liens or encumbrances prior to the Lien other than as agreed upon in writing
between Issuer and Trustee.
(D) Any funds remaining in Issuer's Bond Proceeds Account after all the
aforesaid payments, if not usable in further improvement of the Property, shall
in the sole discretion of Trustee be distributed to Issuer, or may be retained
by Trustee in the Bond Proceeds Account until so usable or until such remaining
funds, together with any additional funds delivered to Trustee under the
provisions of Article IX hereof, are used to redeem Bonds.
(E) If for any reason other than the gross negligence or willful
misconduct of Trustee, more funds are disbursed from the Bond Proceeds Account
for the items listed in this Article IV than are deposited into said Account:
(1) Trustee shall promptly upon discovery thereof notify Issuer of
such fact by furnishing a statement showing how said overexpenditure occurred;
(2) Within thirty (30) days of the receipt of such notice, Issuer
shall remit to Trustee funds sufficient to cover the overexpenditure; and
(3) Until such time, Trustee shall have its Reimbursement Lien
therefor.
(F) If after receipt by Trustee of the proceeds from the sale of all or
any portion of Issuer's Bonds, Issuer abandons or
Trust Indenture
Page 6 of 48
<PAGE>
DRAFT
for any reason is legally restrained or prohibited from undertaking or
proceeding with the purposes for which such Bonds were issued:
(1) Before any disbursements are made by Trustee therefrom,
Issuer shall be obligated to pay and agrees promptly to pay the charges listed
in subparagraphs IV(B) (1) and (2) above, and Trustee shall return the gross
bond proceeds to the holders of such Bonds in full payment and redemption
thereof.
(2) After any disbursements have been made therefrom in good
faith by Trustee, the provisions of subparagraphs IV (B), (C), (D), (E) and this
subparagraph (F) shall then be applicable to the disbursement and return of the
excess funds remaining, if any.
In neither event shall the Bondholders be entitled, in addition to the principal
so returned after payment of such costs and expenses, to interest on such
principal. Return of such principal to the Bondholders, net of any applicable
expenses, shall operate as a complete discharge of the Trustee; and Issuer
hereby indemnities and agrees to hold Trustee from any and all claims therefor,
including all costs of maintaining a legal defense.
V.
PAYMENT OF BONDS
(A) Issuer shall pay directly and in the order and preference listed:
(1) All expenses incurred by Broker and any escrow agent in
connection with the escrowing of the Bond proceeds;
(2) The charges of any depository bank selected by Trustee;
(3) The service charges and fees of Trustee described in Article
XX; and
(4) The Operating Account maintained by Trustee for payment of
the principal and interest on the Bonds as such indebtedness matures on
successive Bondholder payment dates.
Trust Indenture
Page 7 of 48
<PAGE>
DRAFT
(B) Issuer shall remit to Trustee amounts (hereinafter collectively
referred to as "Operating Fund Payments") as set forth in the Schedule of
Payments set forth in the Offering Circular pursuant to which the bonds were
sold and a copy of which said schedule is also attached hereto as EXHIBIT "C",
which said amounts, if timely paid, will accumulate to be sufficient on each
Bondholder payment date to pay the following in the order and preference
listed:
(1) Any unpaid charges of the depository bank;
(2) Any unpaid Trustee, Registrar and Paying Agent fees and
charges and any other compensation, repayment or reimbursement payable to
Trustee hereunder; and
(3) The installments of principal and interest on all Bonds then
due for payment.
(C) Issuer shall deliver to Trustee its required Operating Fund
Payments to be deposited into a Operating Fund Account in the name of and under
the exclusive control of Trustee in a depository or depositories selected by
Trustee, including its own commercial banking division. Trustee shall cause
disbursement of the operating funds for the purpose of paying the items
described above and such other items as are expressly provided to be paid from
the Operating Account by other provisions of this Trust Indenture. Issuer
shall remit the Operating Payments to Trustee by one of the following exclusive
methods:
(1) Weekly installments to be transmitted electronically through
the Automated Clearing House "("ACH") network;
(2) Weekly installments to be paid by check or bank draft; or
(3) If agreed between Issuer and Trustee in a separate writing,
monthly installments payable by check or bank draft one (1) month in advance.
(D) In the event Issuer defaults in the payment of the principal
and/or interest upon any outstanding Bond(s) issued hereunder or any of the
other requirements of this Trust Indenture,
Trust Indenture
Page 8 of 48
<PAGE>
DRAFT
and Trustee consequently resorts to its remedies, Issuer hereby agrees to pay
the reasonable costs of cure, collection and/or foreclosure upon the Property,
including without limitation court costs, the fees of attorneys, legal
stenographers, expert witnesses, appraisers, surveyors and realtors, the travel
expenses of such persons and Trustee's own personnel and the costs of
preserving, maintaining, insuring and paying taxes on the Property; and Trustee
shall have its Reimbursement Lien therefor.
(E) Issuer agrees to pay the required installments into the Operating
Account as required herein before it disburses funds for any other purposes
whatsoever.
(1) To further secure the timely payment of the
operating fund installments and Issuer's other obligations hereunder, Issuer
hereby unconditionally assigns, sets over, and pledges its first revenues from
any and all sources.
(2) So long as the operating fund installments and other
expenditures required of Issuer are promptly and properly made, the first
revenues received by Issuer shall be handled by Issuer without any interference
by Trustee; but should Issuer fail to make the required operating fund
installments, then Trustee may elect to demand payment to it of Issuer' s first
revenues; and after receipt of such written demand Issuer shall, promptly and
without contest, deliver all of its receipts directly to Trustee until the
Operating Fund Account delinquency is remedied, after which Issuer may again
deal with its receipts as before such default.
(F) Any balance remaining in the Operating Fund Account shall be paid
to Issuer whenever (i) all matured principal and interest (including any
unforgiven penalty interest) on the Bonds has been paid in full or provision for
such payment satisfactory to Trustee has been made, (ii) all obligations,
expenses, fees, costs and charges of Trustee, Paying Agent, Registrar and all
depositories incurred hereunder have been paid, and (iii) Issuer is current in
its installments required to be paid into the Operating Fund Account.
(G) Issuer agrees to maintain with the Trustee a reserve account
(above referred to as a "Three Year Bond Reserve Account") which shall be for
the purpose of providing for, in part, the debt service requirements to pay the
principal and interest due on any
Trust Indenture
Page 9 of 48
<PAGE>
DRAFT
semiannual payment date of the bonds herein authorized. Such account shall be
held, administered and distributed as follows:
(1) The Issuer shall fund from the proceeds of the sale of the
bonds and the Trustee will accept and maintain a the Three Year Bond Reserve
Account (hereinafter referred to as the "Reserve Account") in the amount of
$115,000 as set forth in the Prospectus pursuant to the terms and conditions
hereof.
(2) During the three year period of the reserve the Reserve
Account shall be applied only to the payment of principal and interest on the
bonds in the event that as of a semiannual payment date the Issuer has failed to
deposit with the Trustee in the Sinking Fund Account sufficient sums to enable
the Trustee to pay the principal and interest due as of such payment date. In
the event that as of a certain semiannual payment date the Issuer has not
deposited sufficient sums with the Trustee to pay the principal and interest
then due, as defined in the Trust Indenture, but the total bonds owing have not
been accelerated, then Trustee shall apply, to the extent available, funds from
the Reserve Account to the payment of the principal and interest then owing on
the bonds as of such payment date.
(3) In the event that the total amount owing on the bonds has
been accelerated, then the funds held in the Sinking Fund Reserve shall be held,
administered and distributed for the benefit of all bondholders as part of the
proceeds from the collateral. No portion of the Reserve Account shall inure to
or benefit any interim note holder who is in a co-first mortgage position with
the Trustee, unless and except that the Issuer and the Trustee may agree to use
funds available in the Reserve Account to pay off any such interim lender.
(4) Any interest earned on the Reserve Account shall be retained
in the Reserve Account.
(5) Provided that the Issuer is current in the payment of its
sinking fund obligation, all funds on hand in the Reserve Account after the term
provided for in the Prospectus for the maintaining of the Reserve Account ("the
term of the Reserve") shall be transferred by the Trustee into the Sinking Fund
Account to be used to pay off existing bonds. In the event that the Issuer is
not current in its sinking fund payments as of the date of the termination of
the term of the Reserve Account, then the Trustee
Trust Indenture
Page 10 of 48
<PAGE>
DRAFT
shall continue to hold the funds in the Reserve Account pursuant to the terms
and conditions hereof until the Issuer is current in its sinking fund payments
and maintains a current status for six (6) consecutive months.
(6) In the event that the Trustee uses funds from the Reserve
Account to pay the principal and interest on the bonds due at a particular
paydate, then the Issuer shall pay to the Trustee, within one hundred eighty
(180) days from the date of such paydate, an amount necessary to replenish the
Reserve Account. Failure to replenish the Reserve Account within such one
hundred eighty (180) day period shall be an event of default hereunder and shall
entitle the Trustee to continue to hold such Reserve Account, in addition to its
other remedies.
(7) In addition to the payment of the principal and interest due
the bondholders, Trustee may pay from the Reserve Account before transferring
the Reserve Account to the Sinking Fund Account any and all late charges,
trustees fees, collection charges, attorney's fees and other out-of-pocket
expenses due and owing to the Trustee or incurred by the Trustee in regard to
this issue.
VI.
FAILURE TO SURRENDER MATURED BONDS FOR PAYMENT
As to checks representing payments of principal and/or interest mailed
by Paying Agent to the registered holders of the Bonds which are not thereafter
presented for payment, Trustee shall set aside and retain in a separate account
a sum equal to such maturing installment of principal or interest.
(A) No interest shall accrue or be payable from or after such payment
date either upon such matured installment or such funds in said separate
account.
(B) After three (3) years from such separation of funds,
any separated funds remaining unclaimed shall be escheated and delivered by
Trustee to the appropriate state which delivery shall operate as a complete
discharge of Trustee; and Issuer hereby indemnities and agrees to hold Trustee
harmless from any and all subsequent claims therefor or resulting therefrom
asserted by any
Trust Indenture
Page 11 of 48
<PAGE>
DRAFT
Bondholder(s) and/or governmental agency or agencies, including all costs of
maintaining a legal defense.
VII.
ISSUER IS COVENANTS REGARDING
MAINTENANCE OF PROPERTY
AND STATUS
(A) At its own cost and expense, Issuer shall:
(1) Maintain the Property in good repair and condition;
(2) Pay or discharge all taxes and assessments and any mechanics,
and materialmen's lien indebtedness that are or may become payable with respect
to the Property as same become due and payable under any law, ordinance or
regulation; and
(3) Secure from a reputable insurance company or companies
acceptable to Trustee, and maintain in full force and effect at all times while
any of said Bonds are outstanding, fire and extended coverage insuring the
Property against such losses in an amount at least equal to the balance
outstanding on the outstanding Bonds hereunder, including accrued interest, and
in no event less than eighty (80%) percent of the fair market value of the
improvements located thereon, which policy or policies shall contain a loss
payable clause in favor of Trustee and shall be delivered to Trustee to be kept
by it until the Bonds are paid in full.
(a) In the event of any losses, the proceeds of insurance
paid to Trustee shall be applied: (i) for the replacement and/or repair of the
improvement(s) damaged; (ii) toward the purchase of additional property,
subjected to and become a part of the Lien and any mortgage or deed of trust
upon the Property, as evidenced at Trustee's election and at Issuer's sole
expense by an attorney's title opinion or a mortgagee's title policy in favor of
Trustee reflecting no liens or encumbrances prior to the Lien other than as
agreed upon in writing between Issuer and Trustee; (iii) for the construction of
additional improvements on the Property; and/or (iv) to call and repay
outstanding Bonds in the same manner as partial prepayments are to
Trust Indenture
Page 12 of 48
<PAGE>
DRAFT
be applied under the provisions of Article IX without prepayment penalty.
(b) Subject to the approval of Trustee, Issuer has the right
to select which of these alternatives it desires to exercise and shall notify
Trustee in writing in advance as to the alternative(s) selected.
(B) In the event that Issuer defaults in its performance
of any of the undertakings set out in paragraph VII(A) above:
(1) Trustee is hereby authorized to withdraw funds
from Issuer's Operating Fund Account and to apply same in curing
such default for the account of Issuer. In the event there are no funds in
Issuer's Operating Fund Account or same are insufficient for such purpose,
Trustee may in its sole discretion borrow for and/or advance into the Operating
Fund Account such amounts as are required for compliance, secure such loan with
or be secured for such advance by the Reimbursement Lien, and repay such
withdrawal, loan or advance, together with interest accruing thereon at the
Reimbursement Lien rate, from future payments made into Issuer's Sinking Fund
Account; provided, that Trustee shall never, under any circumstances whatsoever,
be obligated to borrow for or advance funds to or for Issuer's account.
(2) Issuer shall be obligated to immediately restore the proper
balance of its Operating Fund Account by prompt payment of the amount so
withdrawn and expended.
(3) The time, amount and nature of such withdrawal and
expenditure by Trustee shall be fully established by a written notice from
Trustee to Issuer of such actions by Trustee. The exercise of this right of
withdrawal and expenditure by Trustee, however, shall not be considered
or constitute a waiver of Trustee's cumulative right hereinafter set out to
declare the entire indebtedness represented by such Bonds to be and become due
and payable at once by reason of such default on the part of Issuer.
(C) Issuer covenants that it will not merge or consolidate with or
into any other organization or corporation unless Issuer is the surviving
corporation or the surviving corporation assumes all obligations of Issuer under
this Indenture. So long as any Bonds are outstanding, Issuer shall not merge or
Trust Indenture
Page 13 of 48
<PAGE>
DRAFT
consolidate with any other organization without the prior written consent of
Trustee. Issuer further covenants that it will not sell, lease or otherwise
dispose of all or substantially all of its properties as an entirety.
(D) Issuer covenants that so long as any Bonds are
outstanding and unpaid to the extent of its financial dealings or
transactions in relation to its business and the revenues derived
therefrom, Issuer will keep or cause to be kept proper books of record and
account. Such books shall at all times be open to the inspection of such
accountants or other agencies as Trustee may from time to time designate. In
addition, Issuer shall provide Trustee upon request with financial statements
within ninety (90) days of the close of Issuer's fiscal year.
VIII.
DEFAULT AND REMEDIES
(A) For purposes hereof, any one or more of the following by Issuer shall
constitute an event of default:
(1) Failure or refusal to pay when due the principal and/or
interest on any of the Bonds;
(2) Failure or refusal to timely pay into the Operating Fund
Account any installment(s) required;
(3) Failure or refusal to pay when due any taxes, assessments,
insurance, claims, liens or encumbrances upon the Property, or to maintain the
Property in good repair; or to cure the breach of any other covenant set forth
in Article VII;
(4) Failure or refusal to pay when due any loan or advance by or
the fees and expenses of Trustee or of any depository or escrow agent;
(5) Failure or refusal, upon any written request of Trustee, (i)
to furnish Trustee with such insurance policies, financial reports and
information concerning Issuer as may be reasonably required by Trustee, or (ii)
to grant unto Trustee, its agents, accountants and attorneys access during
normal business hours to Issuer's offices for the purpose of examining and,
within reasonable limits, photocopying such records.
Trust Indenture
Page 14 of 48
<PAGE>
DRAFT
(6) Making an assignment for the benefit of creditors; or should
a receiver, liquidator, or trustee be appointed to assist in the payment of
Issuer's debt; or should any petition for the bankruptcy, reorganization, or
arrangement of Issuer be filed; or should Issuer be liquidated or dissolved, or
its charter expire or be revoked;
(B) Should an event of default occur, Issuer expressly hereby waives:
demand and presentment for payment, notice of default and of intent to
accelerate and of acceleration, and protest, notice of protest, presentment and
notice of dishonor. Trustee shall be entitled to exercise the following
remedies which shall be cumulative and not exclusive; and the waiver or
forbearance by Trustee, whether mandatory or discretionary, as to any one or
more events of default shall not under any circumstances be deemed or construed
as: (i) a waiver or estoppel as to any subsequent event of default, (ii)
impairing any rights or remedies consequent thereon, or (iii) establishing a
course of dealing with Issuer:
(1) Should the default continue for a period of thirty (30) days,
Trustee may, or Trustee shall upon the receipt of (i) written request from the
registered holders of twenty-five (25%) percent in principal amount of the Bonds
then outstanding and unpaid and (ii) satisfactory proof of indemnity, declare to
be immediately due and payable the principal balance of all unpaid Bonds
together with all accrued interest thereon and all such loans, advances, taxes,
assessments and insurance monies unpaid. This rovision, however, is subject to
the condition that if at any time after the principal of said Bonds shall have
been so declared due and payable, and before any sale of the Property shall have
been made, all defaults under this Trust Indenture have been cured and all
expenses incurred by Trustee in any attempted correction of such default and
acceleration of such indebtedness have been fully paid or reimbursed by Issuer,
then Trustee shall waive such default and its consequences.
(2) Should the default continue for a period of thirty (30) days,
upon demand of Trustee, Issuer shall forthwith peaceably surrender the Property
to Trustee, and it shall be lawful for Trustee by such officers, agents,
servants and employees as it may appoint, (i) to take possession of the Property
(with the relevant books, papers and accounts of Issuer), to lock-out Issuer's
employees and agents and/or to hold, operate and manage
Trust Indenture
Page 15 of 48
<PAGE>
DRAFT
the Property, any or all without having thereby committed trespass or violated
any statute otherwise applicable (which claim(s) Issuer expressly hereby
waives), (ii) to pay taxes, insurance and assessments thereon, (iii) to make
such repairs, alterations, additions, and improvements thereto as Trustee in its
sole discretion deems necessary; and (iv) to receive the rents, income, issues
and profits therefrom and out of them to pay all proper costs and expenses of so
taking, holding and managing such Property, including without limitation
reasonable compensation to and expenses of Trustee, its agents, employees and
counsel, for which Trustee shall have its Reimbursement Lien. the remainder of
the monies so received by Trustee, if any, shall be utilized to pay interest and
principal on the Bonds. Provided, however, that it shall not be obligatory upon
Trustee to take such possession in the event of default.
(3) Should the default continue for a period of thirty (30) days,
Trustee may, or Trustee shall upon receipt of (i) written request from the
registered holders of twenty-five (25%) percent in principal amount of the Bonds
outstanding and unpaid and (ii) satisfactory proof of indemnity, proceed to sell
the Property, in one or more parcels, as provided by law for foreclosure under
the terms and provisions of the Lien. Anyone may bid and/or purchase at such
sale, including Trustee or any Bondholder.
(4) Should the default continue for a period of thirty (30) days,
Trustee may, with or without entry upon the Property as hereinbefore provided,
proceed by suit or suits at law or in equity or by any other appropriate remedy:
(a) To recover all payments of principal, interest and other
sums which are due but have not been paid;
(b) To recover the entire principal sum of all Bonds then
outstanding together with all accrued interest thereon (irrespective of whether
the principal and/or interest of the Bonds shall then be due and payable as
therein expressed and irrespective of whether Trustee shall have made any demand
on Issuer for the payment of overdue principal and/or interest;
(c) To enforce payment of the Bonds; and/or
Trust Indenture
Page 16 of 48
<PAGE>
DRAFT
(d) To foreclose the Lien and to sell the Property under the
judgment or decree of a court or courts of competent jurisdiction.
It shall be obligatory upon Trustee to take action either by such proceedings or
by the exercise of its powers with respect to entry or sale as it in its sole
discretion may determine, upon being requested so to do in writing by the
holders of twenty-five (25%) percent in principal amount of the Bonds then
outstanding and unpaid and upon receipt of satisfactory indemnity.
(5) Trustee may in good faith, if it deems such to be in the best
collective interest of the Bondholders, agree with Issuer upon a temporarily
reduced level of performance and/or payments into the Operating Fund Account,
during which time Trustee will forbear from resorting to other remedies even
though Issuer continues in formal default; provided that such forbearance
agreement shall immediately be terminated upon Trustee's receipt of written
request from the registered holders of twenty-five percent (25%) in principal
amount of the Bonds then outstanding and unpaid directing Trustee to resort to
any other remedy.
(6) Upon a filing of a bill in equity or other commencement of
judicial proceedings to enforce the rights of Trustee on behalf of the
Bondholders, Trustee, as a matter of right and without regard to the sufficiency
of the security, shall be entitled at its sole election to the appointment
(immediately and without notice to Issuer, which is hereby waived) of a receiver
of the Property and of the income, rents, issues and profits thereof pending
such proceedings, with such powers as may be required to protect the interest of
the Bondholders as the court making such appointment shall confer.
(7) In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to Issuer, or of any other obligor upon the
Bonds or the Property or of such other obligor or their creditors, Trustee
(irrespective of whether the principal and/or interest of the Bonds shall then
be due and payable as therein expressed or by declaration or otherwise, and
irrespective of whether Trustee shall have made any demand on Issuer for the
payment of overdue principal and/or interest) shall be entitled and empowered,
by intervention in such proceeding or otherwise: (i) to represent the interests
of the
Trust Indenture
Page 17 of 48
<PAGE>
DRAFT
Bondholders as a class in any such judicial proceedings; (ii) to file and prove
a claim for the whole amount of principal and interest owing and unpaid in
respect of the Bonds and to file such other papers or documents as may be
necessary or advisable in order to have the claims of Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances of
Trustee, its agents, employees and counsel) and of the Bondholders allowed in
such judicial proceedings; and (iii) to collect and receive monies or other
property payable or deliverable on any such claims and to distribute the same.
Any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each
Bondholder to make such payments to Trustee, and in the event that Trustee shall
consent to the making of such payments directly to the Bondholders, to pay to
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances due Trustee, its agents, employees and counsel, and
any other amount due Trustee hereunder. Nothing herein contained shall be
deemed to authorize Trustee to authorize or consent to or accept or adopt on
behalf of any Bondholder any plan of reorganization, arrangement, adjustment or
compensation affecting the Bonds or the rights of any Bondholder thereof, or to
authorize Trustee to vote in respect of the claim of any Bondholder in any such
proceeding.
(8) In the event Trustee determines in good faith that Issuer and
any other actual or potential obligor(s) upon the Bonds (e.g., obligor's
personnel and members of its governing body in the event of defalcation, fraud
or other malfeasance) have no other material assets worth more than the costs
and expenses of obtaining and executing upon any judgment which might result
from a foreclosure sale of the Property and/or a suit for damages, each
Bondholder hereby expressly authorizes Trustee to bid on the Property at any
foreclosure sale the total amount of indebtedness then secured by the Lien,
in full and complete discharge of the liability of Issuer and any such
obligor(s) upon the Bonds; and Trustee shall thereby be relieved of any duty
whatsoever to pursue a deficiency against Issuer or any person. This clause
shall under no circumstances be construed as limiting the liability of Issuer
and/or its principals or sureties to the collateral or otherwise waiving
personal recourse against such persons should Trustee elect to pursue same.
(C) It is the intention of Issuer, the Bondholders and Trustee to create
hereby an express trust as defined by the Arizona
Trust Indenture
Page 18 of 48
<PAGE>
DRAFT
Trust Statutes and to which said Arizona Trust Statutes are applicable as they
now exists or may hereafter be amended; and to that end legal ownership of the
collective rights and choses in action created hereunder is vested in Trustee
for the equitable benefit of the Bondholders, including the rights to repayment
and to proceed against any and all collateral securing same and any and all
persons liable therefor, of which the bonds are only an indicia of each
individual Bondholder's equitable ownership. All rights of action and claims
under this Trust Indenture or the Bonds may be prosecuted and enforced by
Trustee as legal owner thereof without the possession of any of the Bonds or the
production thereof in any proceeding relating thereto; and any such proceeding
instituted by Trustee shall be brought in its own name as Trustee of this
express trust.
(D) After the occurrence of any event of default hereunder of which
Trustee has knowledge or is required to notice, Trustee may, but shall not be
obligated to, transmit by mail to all Bondholders, as their names and addresses
appear in the Bond register, notice of such default and Trustee's intentions
with respect thereto. Trustee shall be protected in withholding such notice so
long as Trustee in good faith determines that the withholding of such notice is
in the best collective interest of the Bondholders.
(E) No bondholder individually or as part of group may institute any
proceeding (judicial or otherwise) with respect to the Bonds and/or the
Indenture or seek any remedy thereunder, unless: (i) such Bondholder(s) has
notified Trustee of an event of default continuing thirty (30) days or more,
(ii) the Bondholders of at least twenty-five (25%) percent in principal amount
of the Bonds then outstanding and unpaid have given written notice to Trustee
to institute proceedings in respect of such event of default, (iii) such
Bondholder in subparagraph (i) and/or Bondholders in subparagraph (ii) have
offered in writing and demonstrated to Trustee's satisfaction the ability to
indemnify Trustee against the costs Trustee may incur in complying with such
request, and (iv) during the sixty (60) day period following Trustee's receipt
of the notice in subparagraphs (i) - (iii) , Trustee fails to institute a
proceeding or take action as permitted hereunder in respect to such event of
default.
(F) If, at any Bondholder payment date, Issuer has failed to make the
operating fund installments required to pay all
Trust Indenture
Page 19 of 48
<PAGE>
DRAFT
of the principal and/or interest maturing on said date, Trustee shall have the
right, among other remedies, to authorize and direct the depository bank to stop
payment on any and all checks therefor which may have been issued by Trustee to
the Bondholders and which are outstanding at such time even though the funds
which are on deposit are sufficient to pay some of those checks. When Issuer
has deposited with Trustee sums sufficient to permit payment in full of all such
Bondholders, Trustee's compensation and any reimbursement then due, and any
charges of the depository bank, Trustee may revoke its stop payment instructions
and authorize said bank to proceed to honor any checks drawn upon such Operating
Account.
(G) Notwithstanding any provision(s) of the Bonds to the contrary,
should Issuer fail for any reason to timely pay the principal and/or interest
upon the Bonds at the time such payment becomes due, and should Trustee elect
not to loan or advance the requisite funds and secure same with its
Reimbursement Lien, Issuer shall pay as a penalty for the benefit of the
Bondholders additional interest upon the past due principal and/or interest of
said Bonds at the rate, subject to Article XVIII, equal to two (2%) percent per
annum in excess of the highest rate of interest payable by said Issuer upon the
Bonds from and after the date that said indebtedness becomes due and payable
until such time as said indebtedness is paid in full; provided that Trustee may
waive such penalty interest for additional consideration or if Trustee otherwise
determines in its sole discretion that to do so is in the best collective
interest of the Bondholders.
(H) Trustee shall have no duty, obligation or liability under any
circumstances whatsoever to pay any principal and/or interest upon the Bonds
issued hereunder nor to correct or cure any default. Should Trustee, however,
for any reason pay any principal and/or interest upon said Bonds, whether
intentionally or inadvertently (excluding only overpayment), or in its sole
discretion incur any expenses, including without limitation attorney fees and
other legal costs, in attempting to correct or cure such default or collect any
delinquent payment or foreclose upon the Lien, Trustee shall have its
Reimbursement Lien to secure the repayment of such sum advanced or expended to
be repayable by Issuer and otherwise from Issuer's Operating Account and, to the
extent then necessary, from Issuer's Bond Proceeds Account, anything to the
contrary herein notwithstanding. In the event of an overpayment to a
Bondholder(s), Trustee shall look to the
Trust Indenture
Page 20 of 48
<PAGE>
DRAFT
Bondholder(s) and not Issuer for repayment, but shall have the right of offset
against other funds at any time held for distribution to such individual
overpaid Bondholder(s).
(I) All moneys received by Trustee pursuant to any right given or action
taken under the provisions of this Article in respect of an event of default
shall, after payment of the costs and expenses of the proceedings resulting in
the collection of such moneys and of the fees, expenses, liabilities and
advances incurred or made by Trustee or at its discretion, be deposited into the
Sinking Fund Account; and all moneys in the Operating Account (other than moneys
for the payment of Bonds which have matured or otherwise become payable prior to
such event of default, which moneys shall be applied to such payment) shall
during the continuance of an event of default be applied as follows:
(1) Unless the principal of all the bonds shall have become or
shall have been declared due and payable, all such moneys shall be applied:
FIRST -- To the payment in full of all series of
interest payments then due on the Bonds, in order of
maturity, and if the amount available shall not be
sufficient to pay in full the eligible series having the
most recent maturity, then to the ratable payment of
such series, without other discrimination or privilege;
and
SECOND -- To the payment in full of all series of
principal payments then due on the Bonds, in order of
maturity, and if the amount available shall not be
sufficient to pay in full the latest series having the
most recent maturity, then to the ratable payment of
such series, without other discrimination or privilege.
(2) If the principal of all the Bonds shall have become due or
shall have been declared due and payable, all such moneys shall be applied to
the payment of the principal and interest then accrued and unpaid upon all
unpaid Bonds, without preference or priority of principal over interest or of
interest over principal, or of any series or maturity over any other series
Trust Indenture
Page 21 of 48
<PAGE>
DRAFT
or maturity, or of any bond over any other bond, whether simple or compound,
ratably, according to the combined amount respectively due thereon for both
principal and interest, to the persons entitled thereto without any
discrimination or privilege.
Whenever moneys are to be applied pursuant to the provisions of this
paragraph (I), such moneys may be applied at such times and from time to time,
as Trustee may determine in its sole discretion, having due regard to the amount
of such moneys available for such application and the likelihood of additional
moneys becoming available for such application in the future. Whenever Trustee
so applies funds, it shall fix the date (which shall be a principal and/or
interest payment date unless Trustee in its sole discretion deems another date
more suitable) upon which such application is to be made, and upon such date
interest on the amounts of principal and interest to be paid on such dates shall
cease to accrue. Trustee may give such notice as it deems appropriate of the
deposit with it of any such moneys and of the fixing of any such date, and
Trustee shall not be required to make payment to the holder of any unpaid Bond
until such Bond shall be presented to Trustee for appropriate endorsement or
cancellation.
Notwithstanding anything herein to the contrary, in the event that
a Bondholder paydate distribution shall not have been made because of
insufficient funds in Issuer's Operating Account, should funds thereafter
accumulate in the Operating Account sufficient to meet such prior Bondholder
payment in whole or in part, Trustee may nonetheless continue to hold such funds
until it is able to make a good faith determination, based in its sole
discretion upon its negotiations with Issuer and its perception of Issuer's
ability to meet Issuer's future obligations hereunder: (i) to disburse
such funds pursuant to subparagraph (I) (1) , or (ii) to accelerate the entire
indebtedness effective as of either the date of the event of default or the
Bondholder payment date, as Trustee elects, and later disburse such funds along
with other proceeds pursuant to subparagraph (I)(2).
Trust Indenture
Page 22 of 48
<PAGE>
DRAFT
IX.
PREPAYMENT PRIVILEGES
(A) If Issuer is not in default:
(1) If there is only one series of Bonds outstanding hereunder,
Issuer shall have the privilege of prepaying all of the Bonds of said series in
full before maturity; provided that said prepayment shall be made only on a
principal and/or interest payment date. If there are two or more series of
Bonds outstanding hereunder, Issuer shall have the privilege of prepaying in
full before maturity, on a principal and/or interest payment date only, all of
the Bonds of one or more of such series, which series Issuer may in its sole
discretion select.
(2) Issuer shall also have the privilege of peremptory partial
prepayment, i.e., prepayment in full before maturity of one or more randomly
selected Bonds from any one outstanding series, but not all the Bonds thereof,
to be made only on a principal and/or interest payment date. Issuer shall
notify Trustee of both the amount to be prepaid and the series designated, and
Trustee shall randomly by lot, in such manner as it may determine, select from
such series individual Bonds in the requisite amount for prepayment.
(B) Except as may be otherwise provided in the prospectus, offering
circular and/or Bonds themselves, there shall be no penalty for prepayment of
all or any portion of the Bonds, but Issuer may be charged a reasonable fee
therefor in addition to and notwithstanding those fees set forth in Article XX.
(C) Issuer will pay to Trustee not less than two (2) full working days
before the date fixed by Issuer for such prepayment as provided in paragraph
(D) next following, a sum sufficient to pay the principal of the Bonds being
called for prepayment together with all interest accrued thereon as of the
prepayment date, together with Trustee's fee. Upon the prepayment date,
or as soon thereafter as shall be practicable, Trustee shall pay to the
holders of the Bonds being called for prepayment the principal and accrued
interest upon said Bonds as of the prepayment date. Payment of the
principal and accrued interest upon said Bonds shall be by check drawn
upon the Operating Account mailed,
Trust Indenture
Page 23 of 48
<PAGE>
DRAFT
postage prepaid, to the registered Bondholder at his registered address.
(D) Issuer shall give Trustee written notice of its election to call and
prepay such Bonds at least thirty (30) days prior to the date fixed by Issuer
for such call and prepayment. Trustee shall, at the expense of Issuer, then
give written notice of the proposed prepayment to each of the registered
Bondholders of the Bonds selected at least fifteen (15) days prior to the date
fixed by Issuer for such prepayment.
(E) As to any Bonds called for prepayment which are not presented to
Trustee for payment, Trustee shall set aside and retain in a separate account a
sum equal to the unpaid principal and accrued interest thereof.
(1) No interest shall accrue or be payable from or after such
payment date either upon such called Bonds or such funds in said separate
account.
(2) After three (3) years from such separation of funds, any
separated funds remaining unclaimed shall be escheated and delivered by Trustee
to the State of Arizona; such delivery shall operate as a complete discharge of
Trustee as between the Bondholders and Issuer; and Issuer hereby indemnities and
agrees to hold Trustee harmless from any and all subsequent claims therefor or
resulting therefrom asserted by any Bondholder(s) or governmental agency or
agencies, including all costs of maintaining a legal defense.
(F) Should Issuer deposit funds for the prepayment of ,outstanding bonds
in an amount which Trustee ultimately determines to be in excess of the funds
actually required to effect said prepayment, then Trustee, immediately upon
discovering this fact, shall remit such excess payment to Issuer or to such
other persons or firms to whom Issuer is obligated with respect thereto. Should
Issuer deposit funds for such prepayment which are insufficient to accomplish
same, Issuer shall immediately remit to Trustee such additional funds as may be
required to complete the prepayment, even if such underpayment was the result of
the reliance by Issuer on prepayment calculations furnished it by Trustee. In
the event that Issuer does not promptly remit such additional funds, then
Trustee may, at its option, stop payment on the checks given by it to pay the
principal and interest upon said Bonds which have not
Trust Indenture
Page 24 of 48
<PAGE>
DRAFT
been paid, or it may borrow and/or advance such additional funds as will permit
said Bonds to be prepaid. In the latter event Issuer agrees to promptly
reimburse Trustee, and Trustee shall have its Reimbursement Lien therefor.
(G) Trustee is authorized to execute a release of the Lien in the event
of complete prepayment of all Bonds issued pursuant to this Trust Indenture.
Such release will be prepared by or on behalf of Issuer at its expense and
submitted to Trustee for execution.
X.
REPLACEMENT OF BONDS
(A) In the event any Bond shall become mutilated or defaced, Registrar
in its discretion may, upon presentment and cancellation thereof, issue a new
Bond of like kind, maturity and date in exchange and in substitution therefor.
(B) In the event any Bond is destroyed, lost or stolen, Registrar in its
discretion may issue, in lieu of and in substitution therefor, a new Bond of
like kind, maturity and date upon the registered holder of such Bond (i) filing
with Registrar evidence satisfactory to it that he is the true owner of same and
that such Bond has in fact been destroyed, lost or stolen; and (ii) indemnifying
through a reputable surety and holding harmless both Issuer and Registrar and
Paying Agent against any loss resulting, directly or indirectly, from issuance
of the substitute Bond.
(C) All Bonds issued under this Trust Indenture shall be held and owned
upon the express condition that the provisions of this Article are exclusive in
respect to the replacement and payment of mutilated, defaced, destroyed, lost or
stolen Bonds, and shall preclude any and all other rights and remedies,
notwithstanding any law or statute now existing or hereafter enacted to the
contrary respecting such replacement or payment of bonds, notes,
negotiable instruments or other securities without their surrender.
Trust Indenture
Page 25 of 48
<PAGE>
DRAFT
XI.
ADDITIONAL PARITY BONDS
Subject to the following, Issuer reserves the right to issue
additional parity bonds or to incur additional debt obligations (hereinafter
collectively called "Additional Bonds" even though such debt obligations are not
in bond form) for any lawful purpose, including without limitation refunding or
prepaying any outstanding Bonds, construction of improvements and/or the
acquisition of additional real property. Such Additional Bonds, along with the
original Bonds issued under this Indenture, shall be deemed "Bonds" for all
purposes as defined in this Indenture unless the context otherwise requires.
Once issued and delivered, such Additional Bonds and the interest thereon shall
be payable from the sources described in this Indenture and secured by the
Indenture and the Lien to the same extent and priority as, and on a parity with,
all then Outstanding Bonds, regardless of the date and order of recording of the
deed(s) of trust or mortgage(s), as if such Additional Bonds had been part of
the original offering. Such Additional Bonds may be made or issued in one or
more obligations, series or issues, in various principal amounts, bearing
interest, maturing, and having such redemption features and other provisions as
may be provided in any supplemental indenture or other instrument authorizing
their making or issuance. As to such Additional Bonds, whether a debt
obligation such as a note or a series or a separate issue of bonds, and whether
governed by a note or supplement to the Indenture or a separate indenture, a
default as to any one note, series or issue shall constitute a default as to any
and all other notes, series and/or issues totally or partially secured by such a
parity lien on the same collateral.
(A) Provided, no such note or series or issue of Additional Bonds shall
be made or issued unless:
(1) Any default or event which would result in default by Issuer
under the Indenture has been first cured;
(2) Any real property acquired from the proceeds of Additional
Bonds shall be subjected to and become a part of the Lien and any mortgage or
deed of trust upon the Property, as evidenced at Trustee's election and at
Issuer's sole expense by an attorney's title opinion or a mortgagee's title
policy in favor of
Trust Indenture
Page 26 of 48
<PAGE>
DRAFT
Trustee reflecting no liens or encumbrances prior to the Lien other
than as agreed upon in writing between Issuer and Trustee;
(3) The ratio of the total Outstanding Bonds plus the Additional
Bonds shall not exceed one-hundred percent (100%) of the current appraised fair
market value of the Property then to secure the payment of the Bonds; and
(B) Further provided that for a period of three years from the effective
date of the offering, MMR Investment Bankers, Inc. shall have a first right of
refusal to provide investment banking services for any additional borrowings of
Issuer relative to the subject property or any refinancing of this
indebtedness.
XII.
SALE OF PROPERTY
Should Issuer desire to convey all or any portion of the Property,
Trustee is authorized in its sole discretion to execute a release or partial
release thereof, provided that:
(A) The consideration for such conveyance is equal to or greater than
the fair market value of the property conveyed at the time of sale and either
becomes subject to and a part of the Lien, as evidenced at Trustee's election
and at Issuer's sole expense by an attorney's title opinion or a mortgagee's
title policy in favor of Trustee reflecting no liens or encumbrances prior to
the Lien other than as agreed upon in writing between Issuer and Trustee, or is
applied as in (B);
(B) Any cash proceeds derived from such conveyance shall be delivered to
Trustee to be applied either:
(1) To call and prepay outstanding Bonds in the same manner as
partial prepayments are to be applied under the provisions of Article IX; or
Trust Indenture
Page 27 of 48
<PAGE>
DRAFT
(2) Paid into a trust or escrow account in a depository
designated by Trustee, to be applied:
(a) To purchase additional property subjected to and
becoming a part of the Lien and any mortgage or deed of trust upon the Property,
as evidenced at Trustee's election and at Issuer's sole expense by an
attorney's title opinion or a mortgagee's title policy in favor of Trustee
reflecting no liens or encumbrances prior to the Lien other than as
agreed upon in writing between Issuer and Trustee;
(b) To construct additional improvements on the property
remaining under the Lien; and/or
(c) To reduce any other lien indebtedness existing against the
Property.
Issuer, subject to the approval of Trustee, has the right to select from the
foregoing alternatives, and shall notify Trustee in writing and in advance which
alternative(s) it has selected and the respective amounts.
(C) The value of the remaining property covered by the Lien is
sufficient, in the opinion of Trustee, to secure the outstanding Bonds after
application of the sale proceeds as in (B) above.
Trustee shall not be liable for mistakes of judgment made in good faith in
reliance upon any appraisals or other information furnished which forms a
reasonable basis for Trustee's decision.
XIII.
SUBSTITUTION OF COLLATERAL
Should Issuer desire to substitute the Property, in whole or in part,
Trustee is authorized in its sole discretion to execute such releases, partial
releases and other legal documents as may be necessary to do so, provided that:
(A) The net fair market value of the substituted property after
subtracting therefrom its potential exposure to any superior lien shall be equal
to or greater than the fair market
Trust Indenture
Page 28 of 48
<PAGE>
DRAFT
value of the Property released from the Lien at the time of substitution; and
(B) The Property substituted shall be subjected to and
become a part of the Lien and any mortgage or deed of trust upon
the Property, as evidenced at Trustee's election and at Issuer's sole expense by
an attorney's title opinion or a mortgagee's title policy in favor of Trustee
reflecting no liens or encumbrances prior to the Lien other than as agreed upon
in writing between Issuer and Trustee.
Trustee shall not be liable for mistakes of judgment made in good faith in
reliance upon any appraisals or other information furnished which forms a
reasonable basis for Trustee's decision.
XIV.
CONDEMNATION OF PROPERTY
(A) Should any governmental agency undertake to acquire by eminent domain
all of the Property, Trustee is authorized to join with Issuer in negotiating
with such governmental agency, and to execute any and all instruments necessary
or required to convey said Property to such governmental agency, without
requiring formal condemnation; provided, that the sums received for such
condemnation shall be at least sufficient to pay the principal balance of the
Bonds and accrued interest to date of pay-off. Trustee is not authorized to
agree to any non-judicial total condemnation which will not provide funds
sufficient to pay all of the Bonds then outstanding, with accrued interest
thereon.
(B) Should any governmental agency undertake to acquire by eminent domain
a portion of the Property, Trustee is authorized to join with Issuer in
negotiating with such governmental agency and to execute such documents as may
be necessary or required to transfer title of such portion to such governmental
agency without requiring formal condemnation; provided, that any cash proceeds
derived from such acquisition shall be delivered to Trustee to be applied
either:
(1) To call and prepay outstanding Bonds in the same manner as
partial prepayments are to be applied under the provisions of paragraph IX(B);
or
Trust Indenture
Page 29 of 48
<PAGE>
DRAFT
(2) To be paid into a trust account maintained by Trustee to be
applied:
(a) For the purchase of additional property which shall be
subjected to and become a part of the Lien and any mortgage or deed of trust
upon the Property, as evidenced at Trustee's election and at Issuer's sole
expense by an attorney's title opinion or a mortgagee's title policy in favor
of Trustee reflecting no liens or encumbrances prior to the Lien other than as
agreed upon in writing between Issuer and Trustee;
(b) To construct additional improvements on the property
remaining under the Lien; and/or
(c) To reduce any other lien indebtedness existing against
the Property.
Issuer, subject to the approval of Trustee, has the right to select which of the
foregoing alternatives it desires to exercise, and shall notify Trustee in
writing and in advance which alternative is selected by Issuer.
XV
DUTIES OF TRUSTEE, PAYING AGENT AND REGISTRAR
The following services will be provided for the benefit of Issuer and
the Bondholders:
(A) Trustee shall:
(1) Maintain the legal file containing Issuer's application for
financing, resolution for financing, appraisal, articles of incorporation,
bylaws, trust indenture, escrow instructions and agreement (if applicable) ,
commitment for title insurance, policy of title insurance or attorney's title
opinion, opinion of counsel (if applicable) , current fire and extended coverage
insurance policy, builder's risk insurance policy (if applicable), and any other
written agreements that may be entered into between Issuer and Trustee
simultaneously with or after execution hereof.
(2) Hold for the benefit of the Bondholders their legal rights to
repayment and in and under the Lien; and in the
Trust Indenture
Page 30 of 48
<PAGE>
DRAFT
event of default by Issuer, Trustee may (or shall when required) pursue in its
name on their collective behalf all lawful remedies.
(3) Provide Issuer an amortization schedule for the payment of the
Bonds. If electronic banking is available, Trustee will provide Issuer
instructions for its use. If electronic banking is not available, Trustee will
provide Issuer a operating fund installment book.
(4) Monitor all operating fund installments and if Issuer is in
arrears, give written and/or oral notification of the delinquency.
(5) Disburse all Bond proceeds to Issuer at such time as all the
legal requirements have been met.
(6) Endorse insurance settlement checks, if any, for damages to the
insured Property when satisfied that the proceeds will be used as required
herein.
(7) Execute a release of the Lien when all Bonds have been paid or
canceled under the terms and provisions hereof.
(B) Paying Agent shall:
(1) Record all proceeds received from the sale of Bonds.
(2) Provide Issuer after the final project disbursement from the Bond
Proceeds Account with an accounting showing the deposits to and charges against
the Bond Proceeds Account.
(3) Receive and record weekly or monthly operating fund installments
from Issuer.
(4) Provide Issuer semi-annual statements showing the deposits to and
charges against the Operating Account.
(5) Prepare and mail as required interest checks to the registered
owners of simple-interest Bonds.
(6) Prepare and mail principal checks to the registered owners of
simple-interest Bonds at maturity.
Trust Indenture
Page 31 of 48
<PAGE>
DRAFT
(7) Prepare and mail principal and interest checks to the registered
owners of compound-interest Bonds at maturity.
(8) Provide Issuer with information and forms for notification of the
Bond owners in the event of a prepayment of all or a portion of the outstanding
Bonds.
(9) Prepare and mail principal and interest checks to the registered
Bond owners of Bonds that are called for prepayment prior to maturity
(10) Prepare and mail Internal Revenue Service Form 1099's to inform
each registered owner of the Bonds of the respective amount of interest earned
and required to be reported by Trustee to the Internal Revenue Service for that
taxable year (which may be different figures from those applicable to and
reportable for income tax purposes by individual Bondholders).
(11) Prepare and forward to applicable taxing authorities all
required information pertaining to the interest income of Bondholders.
(C) Registrar shall:
(1) Upon receipt by the Trustee of all documentation which is
prerequisite, print, issue, authenticate and mail all Bonds to the registered
owners.
(2) Record and reissue Bonds subsequently transferred to a new owner.
(3) Maintain a permanent Bond register which reflects the serial or
other identification number, maturity date, face value, interest rate, name and
address of owner, date bought, and price reported paid (if any) for each Bond
issued.
(4) Reissue mutilated, defaced, destroyed, lost and stolen Bonds
if prior to maturity, and if matured, direct the payment of the principal and
accrued interest to the registered Bond owners, subject to all terms and
conditions hereof.
Trust Indenture
Page 32 of 48
<PAGE>
DRAFT
XVI.
LIMITATION OF LIABILITY
Trustee, Paying Agent and Registrar (for purposes of this Article
jointly and severally called "Trustee") accept their respective duties and
responsibilities as set forth under the terms of this Trust Indenture upon the
express conditions (to which Issuer and the Bondholders by the acceptance of the
Bonds agree) that Trustee shall not be responsible for any act or omission
hereunder unless due to its own gross negligence or willful default; and no
implied covenants, obligations or warranties whatsoever shall be read into this
debenture against Trustee. Without limiting the generality of the foregoing:
(A) Trustee shall not be responsible or liable for any recitals,
statements or representations whatsoever in any prospectus or offering circular
used in connection with the sale of the Bonds. Trustee makes no presentation or
warranty whatsoever, express or implied, (i) that the terms, conditions or
provisions of this Trust Indenture are, will remain or will become in compliance
with any state or federal statute or regulations applicable or relating to this
Indenture or the transactions contemplated herein or related hereto, or (ii)
regarding any individual Bondholder's reportable amount of income from the
Bonds, his tax liability thereon or the tax consequences of any transaction
relating to the Bonds, their repayment and/or the collection thereof pursuant
to Issuer's default whether through a forbearance agreement, a court-ordered or
bondholder-approved restructure of the debt, or foreclosure and sale of the
Property.
(B) Trustee shall have no liability for any losses resulting from its
reliance upon any instrument, writing or communication believed by it in good
faith to be genuine and properly authorized, nor for forgery of any bond or
unauthorized delivery by Issuer of any Bond. Trustee shall be under no duty to
investigate or inquire into any statements contained or matters referred to in
any such item.
(C) Trustee shall not be liable upon the Bonds for the payment of the
principal and/or interest due thereon.
(D) Notwithstanding any applicable statutes or regulations relating to
registered Bonds, Trustee shall have no
Trust Indenture
Page 33 of 48
<PAGE>
DRAFT
duty to recognize any person as a Bondholder unless such person is shown as the
registered Bondholder on the books and records of Trustee.
(E) Trustee may accept as correct any written statement made to it by the
person or persons who sign this Trust Indenture for and on behalf of Issuer or
by such other representatives of Issuer as may be from time to time designated
by Issuer to act for it, and Trustee will be fully protected in acting upon and
in conformity with such opinion.
(F) Trustee may request and act upon the opinion or advice of its
counsel. If Trustee acts on an opinion of counsel concerning matters relating
hereto and its duties hereunder, it shall be relieved of all liability in
connection with the matters referenced herein and its duties hereunder when
acting in conformity therewith.
(G) If an event of default has occurred and is continuing, Trustee shall,
in exercising its rights and powers hereunder, use the same degree of care and
skill as a prudent person would exercise or use under the circumstances in the
conduct of his own affairs.
(H) Trustee shall not be bound to ascertain or inquire into the
performance or observances of any covenants, conditions, or agreements of Issuer
hereunder. However, Trustee may require of Issuer full information and advice
about such performance or observance.
(I) Trustee need not consider the ability to respond in damages when
selecting or approving any person or entity to render opinions, advice and/or
services pertaining hereto.
(J) Trustee shall not be responsible for recording or re-recording or
filing or re-filing this Indenture, for the validity of the execution by Issuer
of this Indenture, for the sufficiency or maintenance of the security for the
Bonds, or for the validity or enforceability of this Indenture, the Lien or any
security rights or remedies granted to Trustee or the Bondholders hereunder or
in any other Bond document. Trustee shall have no obligation to perform any of
the duties of Issuer under the Indenture.
Trust Indenture
Page 34 of 48
<PAGE>
DRAFT
(K) Moneys and securities held by Trustee in trust need not be segregated
from other assets except to the extent required by law or this Indenture.
Trustee shall not be liable for interest on any moneys received by it hereunder.
Trustee shall not be accountable for the use or application of funds from
Issuer's Bonds Proceeds Account after same have been disbursed in accordance
herewith.
(L) Notwithstanding anything to the contrary, if in the sole judgment of
Trustee any action it desires or is requested or demanded to take hereunder may
tend to involve liability, loss or expense, Trustee shall not be obligated to so
act unless and until it is furnished with indemnity satisfactory to it.
(M) The permissive right of Trustee to do certain things, whether express
or implied, shall not be construed as a duty or obligation to take such action.
(N) Trustee shall not be required to give any bond or security in respect
hereof.
(0) Upon delivery of an executed release of the Lien to Issuer pursuant
to Article IX(G) or upon restructure of the debt or foreclosure and final
distribution of the net proceeds therefrom to the Bondholders, Trustee shall
have thereby discharged in full all its liabilities and obligations hereunder,
and this trust shall terminate along with any further duties, obligations or
liabilities of Trustee hereunder.
(P) Should liability for any of the foregoing nonetheless be
unsuccessfully judicially asserted against Trustee, it shall be reimbursed and
have the Reimbursement Lien for costs and expenses incurred in defending itself,
including without limitation attorney, stenographer and witness fees and travel
expense and court costs.
(Q) By purchasing and accepting delivery of the Bonds, each Bondholder
shall hold same subject to all terms of this Trust Indenture.
Trust Indenture
Page 35 of 48
<PAGE>
DRAFT
XVII.
ANCILLARY/CO-TRUSTEE; RESIGNATION AND REMOVAL;
SUCCESSOR TRUSTEES
(A) Trustee may in its sole discretion appoint an additional individual
or institution as a Co-Trustee or a separate ancillary Trustee hereunder.
Trustee will so notify Issuer of such appointment, as well as any applicable
regulatory authority. Each power or right vested in Trustee hereunder shall be
exercisable by and vest in such Co-Trustee or separate ancillary Trustee to the
extent necessary or desirable to enable it to exercise the powers and rights
necessary to carry out the purposes of this Indenture. Provided, such
Co-Trustee or ancillary Trustee may not be Issuer, Broker nor an affiliate of
either.
(B) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of such appointment in writing by such successor Trustee as
hereinafter provided.
(1) Subject to the foregoing, the Trustee may, at its election,
resign at any time by either:
(a) Giving to Issuer written notice thereof; or
(b) Petitioning a court of competent jurisdiction for both
(i) the permission to resign and (ii) the appointment of a qualified successor
trustee.
Provided: (i) if the Trustee shall elect to resign while Issuer is
in default hereunder, the Trustee must so petition a court as set forth in (b)
above, as Issuer may not in such event select the successor Trustee; and
provided further, no successor Trustee shall in any event be the Broker or
Issuer, or a subsidiary, affiliate or under the control of either; and (ii)
every successor Trustee appointed or succeeding pursuant to any of the foregoing
provisions shall be either a trust company or a national or state bank with
trust powers, in good standing and having combined capital, surplus and
undivided profits of at least $500,000, or a corporation, individual(s) or
mixture approved by a court of competent jurisdiction.
Trust Indenture
Page 36 of 48
<PAGE>
DRAFT
(2) If at any time (i) the Trustee shall be adjudged a bankrupt,
(ii) a receiver shall be appointed therefor by a court of competent
jurisdiction, or (iii) an authorized regulatory agency shall take charge or
control thereof, Issuer may, if not in default hereunder, appoint a qualified
successor Trustee.
(3) If at any time the Trustee shall become incapable of acting or
ineligible to act under any state or federal law or this Indenture, it shall
tender its resignation as in subparagraph (2) above, failing which Issuer may,
if not in default, petition a court of competent jurisdiction for both (i) the
removal of the Trustee and (ii) the appointment of a qualified successor
Trustee.
(4) In the event Issuer shall be disqualified by its default from
exercising its rights under subparagraphs (B)(2) or (3) above, or shall fail to
exercise such rights within thirty (30) days from occurrence of the event giving
rise to such rights, such rights shall devolve upon:
(a) Under subparagraph (B) (2), such bankruptcy Trustee,
receiver or government agency; and
(b) Under subparagraph (B) (3), any Bondholder as set forth
in subparagraph (5) below.
(5) If, in a proper case, a successor Trustee has not been
appointed pursuant to the foregoing provisions within six months after the
resignation or removal of Trustee, any Bondholder may apply to any District
Court in and for Maricopa County, Arizona or to any succeeding court of
competent jurisdiction to appoint a successor Trustee. Such Court may
thereupon, after such notice, if any, as it may be deem proper, appoint a
successor Trustee.
(6) Any Trustee may be removed at any time by an instrument
appointing a successor Trustee executed by the holders of not less than a
majority in aggregate principal amount of all Bonds then outstanding.
(7) All provisions of this Article which refer to the "Trustee"
shall likewise always include the positions of Paying Agent and Bond Registrar,
except that the Trustee, acting voluntarily pursuant to subparagraph (2) above,
may resign as
Trust Indenture
Page 37 of 48
<PAGE>
DRAFT
Trustee while retaining its appointment(s) and continuing as Paying Agent and/or
Bond Registrar; or vice versa.
(8) Issuer shall give notice or cause notice to be given of each
resignation and each removal of the Trustee and each appointment of a successor
Trustee, Paying Agent and/or Registrar by mailing written notice of such event
by first-class mail, postage prepaid, to the Registered Holders of Bonds as
their names and addresses appear in the Bond Register. Each notice shall
include the name of the successor Trustee, Paying Agent and/or Registrar, as the
case may be, and its principal address.
(9) Should Trustee change its name, or voluntarily merge or
consolidate with or its business be taken over by another corporation chartered
to exercise trust powers and legally competent to perform such duties, then such
other corporation shall succeed to all of the powers and duties of Trustee as
herein set out, without any further act.
(10) Any successor Trustee appointed hereunder shall execute and
deliver to Issuer or the Court, whichever is applicable, an instrument accepting
such appointment. Thereupon such successor Trustee, without any further act,
shall become duly vested with all of the trust estate and the rights, powers,
trusts, duties and obligations of its predecessor.
(11) The name of any duly appointed and qualified successor trustee
shall be substituted wherever "Trustee" is used throughout this Indenture.
XVIII.
ILLEGAL INTEREST
It is the intention of the parties hereto to comply With applicable
usury laws; notwithstanding any provisions herein to the contrary or in any of
the documents securing payment or otherwise relating to the Bonds, in no event
shall this Trust Indenture, including provisions relating to penalty interest in
the event of default or to the Reimbursement Lien rate, the Bonds or such
documents require the payment or permit the collection of interest in excess of
the maximum amount permitted by such laws.
Trust Indenture
Page 38 of 48
<PAGE>
DRAFT
(A) If any such excess of interest is contracted for, charged or received
under the Bonds or under any of the instruments securing payment thereof or
otherwise relating thereto, including this Trust Indenture or in the event the
maturity of the indebtedness evidenced by the Bonds is accelerated in whole or
in part, or in the event that all or part of the principal or interest of the
Bonds shall be prepaid, so that under any of such circumstances the amount of
interest contracted for, charged or received therefrom or under any of the
instruments securing payment thereof or otherwise relating thereto, on the
amount of principal actually outstanding from time to time under the Bonds,
shall exceed the maximum amount of interest permitted by applicable usury laws,
then in any such event: (i) the provisions of this Article shall govern and
control; (ii) neither Issuer nor any other person or entity now or hereafter
liable for the payment of the Bonds shall be obligated to pay the amount of
such interest to the extent that it is in excess of the maximum amount of
interest permitted by applicable usury laws; (iii) any such excess which may
have been charged and/or collected shall be either applied as of the date
charged or collected as a credit against the then unpaid principal amount of the
Bonds or refunded to Issuer, at Issuer's option, and (iv) the effective rate of
interest shall be automatically, immediately and retroactively reduced to the
maximum lawful contract rate allowed under applicable usury laws as now or
hereafter construed by the courts having Jurisdiction thereof.
(B) Without limiting the foregoing, all calculations of the rate of
interest contracted for, charged upon or received from the Bonds or under such
other documents, which calculations are made for the purpose of determining
whether such rate exceeds the maximum lawful contract rate, shall be made, to
the extent permitted by applicable laws, by amortizing, prorating, allocating
and spreading in equal parts during the period of the full stated term of the
respective indebtedness, all interest at any time contracted for, charged or
received by Trustee from Issuer or otherwise.
XIX.
RELEASE OF THE LIEN
When Issuer has duly made all of the payments required to
be made under the provisions of this Trust Indenture, Trustee is
authorized to execute a release of the Lien even if there are
Trust Indenture
Page 39 of 48
<PAGE>
DRAFT
checks issued for the payment of the principal and/or interest upon the Bonds
which are still uncashed; provided, that Trustee shall first satisfy itself that
the funds remaining on deposit in the Operating Account are sufficient to pay
such outstanding checks upon presentment.
XX.
INVESTMENT OF BOND PROCEEDS AND OPERATING ACCOUNT FUNDS;
FEES OF TRUSTEE, ET. AL.
(A) Upon the receipt by Trustee of the proceeds from the sale of Bonds,
and upon receipt of the operating fund installments required of Issuer, it is
expressly agreed by Issuer that Trustee may invest all or part of such funds in
United States government and government agency obligations, federally insured
time and/or demand deposits of banks and savings and loan associations mutual
and/or money market funds which invests only in the foregoing instruments; and
an investment in any such instruments and/or fund(s) shall be deemed prudent.
All moneys required to be deposited with or paid to Trustee under any provision
of the Indenture, until disbursed or directed as permitted by the Indenture,
shall be held by Trustee in trust and may be commingled with other trust funds
held by the Trustee.
(B) The fees of Trustee, Paying Agent and Registrar, the payment of which
is secured by the Reimbursement Lien and to which Issuer has agreed, are set
forth on EXHIBIT "A" attached hereto.
(C) Notwithstanding the amount of fees to be paid to Trustee as set forth
on EXHIBIT "A", should Trustee, Paying Agent or Registrar be required to perform
extraordinary services, it shall have the right to assess reasonable charges
against Issuer for said extraordinary services in addition to the service
charges otherwise described on EXHIBIT "A". Such services occasioned
by Issuer's prepayment under Article IX or default shall by definition be
extraordinary. Without limiting the foregoing, Trustee shall have the right to
be reimbursed by Issuer for any fees or expenses incurred for any unusual
services required of Trustee, either in the event of prepayment, default or
otherwise, and shall specifically have the right of reimbursement and the
Reimbursement Lien for any fees, compensation or documented travel expenses paid
by Trustee to or for licensed attorneys, accountants, appraisers,
Trust Indenture
Page 40 of 48
<PAGE>
DRAFT
realtors, surveyors, court stenographers, Trustee's own personnel or any other
persons whose services are necessary or required in order to perform such
extraordinary services. The hourly compensation of Trustee's personnel shall be
computed as base annual salary divided by two thousand (2,000) hours.
XXI.
SUPPLEMENTAL INDENTURES
(A) Issuer and Trustee, without the consent of the Bondholders, from time
to time may enter into one or more indentures supplemental hereto for any of the
following purposes:
(1) To add to the covenants of Issuer for the benefit of the
Bondholders, or to surrender any right or power herein conferred upon Issuer;
(2) To cure any vagueness or ambiguity or to correct or supplement
any inconsistent or defective provision contained herein or in any supplemental
indenture; provided, such action shall not adversely affect the interest of the
Bondholders; or
(3) To make any change which, in the judgment of Trustee in
reliance upon opinion of counsel, does not adversely affect the rights of any
Bondholder.
(B) With the foregoing limited exceptions which permit modification of
the Trust Indenture by Issuer and Trustee alone, the Trust Indenture, the rights
and obligations of Issuer, and the rights and obligations of the Bondholders may
be modified by Issuer with the consent of the respective holders of not less
than sixty-six and two-thirds percent (66 2/3%) in principal of the Bonds then
outstanding; provided that no such modification may be made without the consent
of the holders of each Bond affected if such modification would:
(1) Change the stated maturity date of the principal or of any
installment of interest on any Bond; or
(2) Reduce the principal amount or rate of interest on any Bond;
or
Trust Indenture
Page 41 of 48
<PAGE>
DRAFT
(3) Impair the right as herein set out to institute suit for the
enforcement of payment on or with respect to the Bonds; or
(4) Reduce the percentage and principal amount of the Bonds of
which the holders, collective consent is required for any such supplemental
indenture;
(5) Except as permitted under this Indenture, permit the creation
of any lien ranking prior to or on a parity with the Lien; or
(6) Modify any of the provisions of this Article.
(C) Whenever the consent of Bondholders is required for any proposed
change, modification, addition, elimination or subordination of the Trust
Indenture or otherwise, Trustee may cause a notice specifying the action
proposed to be mailed, first-class, postage prepaid, to the owner of each
outstanding Bond at the address shown on the Bond Register maintained by the
Registrar. Trustee shall be entitled to treat the failure of any Bondholder
to respond within thirty (30) days after completion of the mailing of such
notice as either a consent or a rejection, as indicated in the notice, of the
proposed action specified in the notice.
(1) Except as hereinafter provided in Article XXII(B), Trustee
shall be the sole judge of the validity and regularity of all consents filed
under this paragraph, and may require evidence satisfactory to it that the
signer of such consent is lawfully entitled to execute the same.
(2) Any required action or consent of Bondholders may also be
obtained by a vote of Bondholders representing the requisite percentage of
principal then outstanding who are present or represented by proxy at a meeting
called by Trustee for such purpose to be held at Trustee's principal offices at
a time and date specified in a notice mailed to the Bondholders as above not
less than thirty (30) days prior to such meeting.
(D) It shall not be necessary for any consent of Bondholders to approve
the particular form of any proposed supplemental indenture; rather, it shall be
sufficient if such consent approves the substance thereof.
Trust Indenture
Page 42 of 48
<PAGE>
DRAFT
XXII.
BONDHOLDER LISTS AND REPORTS
EVIDENCE OF RIGHTS OF BONDHOLDERS
(A) Any request, consent or other instrument which the Indenture may
require or permit to be signed and executed by the Bondholders may be in any
number of concurrent instruments of similar tenor, and may be signed or executed
by such Bondholders in person or by an attorney appointed in writing or by a
committee constituted by an agreement to which any portion of the Bonds shall
have been made subject by deposit or otherwise. Proof of the execution of any
such request or other instrument or of a writing appointing any such agent or
the holder of the Bonds shall be sufficient for any purpose of the Indenture,
if made in the following manner:
(1) The fact and date of the execution by any person of such
request in writing may be provided by any of the following documents in form
satisfactory to Trustee:
(a) The certificate under his official seal of any notary
public or other officer in any jurisdiction who by the laws thereof has power to
take acknowledgements of documents to be recorded within such jurisdiction, that
the person signing such request or other instrument acknowledged to him the
execution thereof;
(b) An affidavit of a witness of such execution; or
(c) The certification or guarantee of the authenticity of such
signature by an officer of any duly chartered trust company or commercial bank.
(2) The ownership of registered Bonds shall be proved by the Bond
Register as hereinbefore provided.
(3) Trustee may, nevertheless, in its discretion,(i)accept other
proof in cases where it deems such other proof sufficient or (ii) require
further proof in cases where it deems further proof desirable.
Trust Indenture
Page 43 of 48
<PAGE>
DRAFT
The foregoing provisions of this paragraph shall not be construed to
abrogate, modify or affect any of the exemptions or rights of Trustee set out
in Article XVI of this Indenture.
(B) For the purposes of this Indenture, in determining whether the
holders of the required percentage of the principal amount of Bonds have
concurred in any directive, amendment, modification, consent, waiver or other
action, Bonds deemed by Trustee to be owned by Issuer, or under direct or
indirect common control of Issuer or by an officer, director, trustee, eider or
member thereof, shall be disregarded, except that for the purpose of determining
whether Trustee shall be protected in relying upon any such directive,
amendment, modification, consent, waiver or other action, only Bonds as to which
Trustee has actual knowledge of such ownership or control must be so
disregarded.
(C) If either (i) Issuer or (ii) three or more Bondholders (herein after
referred to as "Applicant(s)" apply in writing to Trustee, and, exclusive of
Issuer, furnish to Trustee reasonable proof that each such Applicant has owned a
Bond for a period of at least six (6) months preceding the date of such
application, and such application further states that the Applicant(s) desire to
communicate with all Bondholders with respect to their rights under this
Indenture or under the Bonds and is accompanied by a copy of the form of proxy
or other communication which such Applicant(s) propose to transmit, then Trustee
shall, within ten (10) business days after the receipt of such application, at
its election, either:
(1) Afford such Applicant(s) access to such information;
(2) Inform such Applicant(s) as to the approximate number of
registered Bondholders and as to the approximate cost of mailing to such
Bondholders the form of proxy or other communication, if any, specified in such
application, in which latter event Trustee shall further elect either:
(a) Within ten (10) days after tender to Trustee of the
material to be mailed and of payment of the reasonable expenses of mailing, to
mail to such Applicants, together with a return of the material to have been
mailed to the Bondholders, a written statement to the effect that, in the
opinion of Trustee, such mailing would be contrary to the best collective
Trust Indenture
Page 44 of 48
<PAGE>
DRAFT
interest of the Bondholders or would be in violation of applicable law, such
written statement specifying the basis of such opinion; or
(b) Mail, with reasonable promptness, to each registered
Bondholder a copy of the form of proxy or other communication which is
specified in such request.
(D) Issuer, Broker, and each and every holder of the Bonds by receiving
and holding the same, agrees with Trustee and Registrar that:
(1) Each Bondholder's identity is privileged information not
subject to disclosure and such Bondholder may receive communications from
Issuer, other Bondholders or any third party only in accordance with this
Article; and
(2) Neither Trustee nor Registrar shall be held accountable by
reason of mailing any material pursuant to a request made pursuant to this
Article which Trustee in its sole discretion determines to grant.
XXIII.
MISCELLANEOUS PROVISIONS
(A) When the context requires, the singular includes the plural, the
masculine includes the female and neuter, and vice versa. Except within a
series, the conjunctive includes the disjunctive and vice versa.
(B) The headings contained in the Table of Contents and body hereof are
for convenience only and shall in no manner be construed as a part of this
Indenture.
(C) All notices required hereby as between Issuer and Trustee, Paying
Agent and/or Registrar shall be sufficient if such notices are in writing and
mailed by either registered or certified mail, return receipt requested, postage
prepaid, or by delivering in person or causing the delivery thereof by
commercial courier to such party at the address shown on the last page or at
such other address as either party may hereafter furnish in writing to the
other.
Trust Indenture
Page 45 of 48
<PAGE>
DRAFT
(D) This Indenture constitutes the entire agreement between the parties
and supersedes any and all other prior agreements or understandings, if any,
whether oral or in writing, relating to the rights and liabilities arising out
of the subject matter hereof.
(E) This agreement may be amended or modified only in accordance with the
terms of this Indenture by a written instrument of even or subsequent date
hereto signed by both parties.
(F) Neither the waiver of any provision or breach hereof nor the
forbearance, failure or delay, whether intentional or inadvertent, in exercising
any right or remedy hereunder, nor the partial exercise thereof, by either party
shall be deemed a waiver of any other provision or breach or of the subsequent
or further exercise of such right or remedy or as establishing a course of
dealing.
(G) If any provision of this Trust Indenture is held to be illegal or
unenforceable, the remaining provisions shall nevertheless remain in full force
and effect. In addition, the illegal or unenforceable provisions shall be
modified so as to conform, to the greatest extent legally permissible, to the
original intent of such provision.
(H) This agreement will be binding upon and will inure to the benefit
of each party's respective successors and assigns.
(I) Each person signing below represents and warrants that he is
authorized to act in the capacity stated.
(J) ISSUER AND TRUSTEE EACH ACKNOWLEDGES AND AGREES THAT ITS
REPRESENTATIVES AND ATTORNEYS HAVE HAD THE OPPORTUNITY TO PARTICIPATE IN THE
DRAFTING AND CONSTRUCTION OF THIS INDENTURE AND THAT THE PROVISIONS HEREOF SHALL
NOT BE CONSTRUED AGAINST OR IN FAVOR OF EITHER PARTY.
(K) This Indenture shall be construed in accordance with and governed by
the laws of Arizona, with the exception of the terms and conditions pertaining
to the foreclosure of the Property set forth in Article VIII which shall be
construed in accordance with and governed by the laws of the State in which the
Property is located.
Trust Indenture
Page 46 of 48
<PAGE>
DRAFT
(L) As used throughout, the words or phrases "legal costs,"
"collection costs," "collection expenses, "costs of maintaining a legal
defense," "Reimbursement Lien" and words and phrases of like import shall be
liberally construed to include all costs and expenses reasonably incurred by
Trustee, directly or indirectly, as compensation or reimbursement to its own
personnel, licensed legal counsel, accountants, surveyors, appraisers, court
reporters and other experts, including their fees or other compensation and
travel expenses, in carrying out the purposes of this Indenture and holding
Trustee harmless from such costs and expenses.
IN TESTIMONY WHEREOF, Issuer and Trustee have caused this
instrument to be signed in duplicate originals by their duly authorized agents
and representatives this day of , 19
ISSUER: (Legal Name of Issuer)
Front Range Assisted Living, L.L.C.
By:
-------------------------------
(President or Chairman of
Governing Body)
By:
-------------------------------
(Secretary of Governing
Body)
Address:
---------------------------
St. George, Utah
Colonial:
COLONIAL TRUST COMPANY, TRUSTEE
By:
------------------------------
Title: Vice President
Address: 5336 North 19th Avenue Phoenix, Arizona 85015
Trust Indenture
Page 47 of 48
<PAGE>
DRAFT
STATE OF ARIZONA
COUNTY OF MARICOPA
This instrument was acknowledged before me on the day of
, 1997, by Susan D. Carlisle, Vice President of COLONIAL TRUST COMPANY, an
Arizona corporation with trust powers.
Notary Public, State of
Notary's Name, Printed or Typed
STATE OF
COUNTY OF
This instrument was acknowledged before me on the day of
1997, by of
a of Front Range Assisted Living, L.L.C.
Notary Public, State of
Notary's Name, Printed or Typed
Trust Indenture
Page 48 of 48
<PAGE>
DRAFT
EXHIBIT "A"
TRUSTEE, PAYING AGENT & BOND REGISTRAR/TRANSFER AGENT
SCHEDULE OF FEES
<PAGE>
DRAFT
EXHIBIT "C"
OPERATING FUND PAYMENTS
AGREEMENT BETWEEN LIENHOLDERS
THIS AGREEMENT is made this 20th day of June, 1997, by and between
Emprise Bank, N.A.(hereinafter "Lender"), having a notice address at 1200
Main, P.0. Box 400, Hays, Kansas 67601-0400, and Colonial Trust Company,
Trustee (hereinafter "Trustee"), having a notice address at P.O. Box 33487,
Phoenix, Maricopa County, Arizona 85067-3487.
WHEREAS, Lender has committed to loan and intends to loan to Front
Range Assisted Living, L.L.C. of 260 North Rock Road, Suite 260, Wichita,
Kansas 67206 (hereinafter "FRAL") the sum of Two Million Dollars
($2,000,000.00) (said loan, together with all extensions, modifications and
renewals thereof being hereinafter referred to as the "Construction Loan")
to be evidenced by a promissory note executed by FRAL and payable to Lender
and secured by, among other things, a first Deed of Trust against the real
property of FRAL described on EXHIBIT "A" attached, as well as a security
interest in and to the personal property of FRAL described on said EXHIBIT
"A" all of such real and personal property to be collateral for the
Construction Loan and hereinafter collectively referred to as the "Joint
Collateral"; and
WHEREAS, the purpose of the Construction Loan is to provide interim
financing for the construction of an intermediate care facility for senior
citizens (the "Project"); and the Construction Loan is to be paid off from
the proceeds of a bond offering in the amount of $2,500,000.00 to be made by
FRAL through MMR Investment Bankers, Inc. (hereinafter "MMR") pursuant to a
Trust Indenture dated June 20, 1997, (the "Trust Indenture") entered into by and
between FRAL and Trustee for the benefit of the holders of bonds issued
thereunder (the "Bondholders") and
WHEREAS, the indebtedness evidenced by such bonds (hereinafter the
"Bond Indebtedness") is also to be secured with the Joint Collateral and the
liens on the Joint Collateral securing the Bond Indebtedness shall also to
be a first lien of equal position and on parity with the liens securing the
Construction Loan, subject to the terms of that Agreement: and
WHEREAS, for purposes of this Agreement, (i) the Construction Loan and
the Bond Indebtedness are some times referred to individually as a "Loan"
and collectively as the "Loans"; and (ii) the term "Loan Documents" shall
mean, as the context requires, the note, loan agreement and other loan
documents evidencing the Construction Loan, or the bonds, Bond Indenture and
other bond documents evidencing the Bond Indebtedness, or both.
Initials /S/RW
/S/JKJ
/S/RWB
------------
<PAGE>
Agreement Between Lienholders
Page 2
NOW, THEREFORE, IN CONSIDERATION of mutual covenants and agreements
herein contained Lender and Trustee do hereby agree as follows.
1. Equity of Liens. FRAL shall execute, acknowledge and deliver,
for the benefit of both Lender and Trustee, a single form of Deed of Trust
and Security Agreement, and a single form of such other documents
encumbering the Joint Collateral as may be required by Lender or Trustee
(all of the foregoing being hereinafter referred to collectively as the
"Joint Collateral Documents"). The Joint Collateral Documents shall name
both Lender and Trustee as lienholder and secured party and shall secure
ratably (as further described herein) and on a parity with one another the
Construction Loan and the Bond Indebtedness,
2. Application of Bond Proceeds. The parties agree that the
proceeds from the bond offering shall be used to the extent available and
subject to the provisions of the Section IV of the Trust Indenture, a copy
of which is attached hereto as Exhibit "B", to pay the principal balance and
accrued interest of the Construction Loan. On the tenth (10th) day of each
calendar month during the term hereof, or on such day as may be mutually
agreeable to the parties, Trustee will deliver to Lender, for application to the
Construction Loan, all proceeds received from the sale of bonds that are
available for the payment of the Construction Loan pursuant to Exhibit "B",
until the Construction Loan is paid in full.
3. Notice of Default; Acceleration. In the event of a default
under either the Construction Loan or the Bond Indebtedness, the party
holding the Loan in default will give written notice to the other party
within ten (10) days after learning of such event of default. If either
party elects to accelerate such party's Loan as a result of any default, the
party electing to accelerate shall likewise give written notice to the other
party of the election prior to taking any action thereon. Each party
agrees, to the extent permitted by such party's Loan Documents, to
accelerate such party's Loan in the event of acceleration by the other
party.
4. Realization on Collateral, In the event of acceleration of the
Construction Loan and theBond Indebtedness, Lender and Trustee shall, to the
extent possible under their respective Loan Documents, act in concert to
foreclose and realize upon the Joint Collateral. The parties agree to
work together in good faith in attempting to make joint decisions regarding
such matters as collection attempts, foreclosure, selection of joint counsel
(if the parties determine that joint counsel is appropriate) and maintenance and
disposition of the Joint Collateral. In the event the parties are
unable to agree, however, Lender shall have the right, in its discretion,
(i) to direct the time, method and place of conducting all
Initials /S/RW
/S/JKJ
/S/RWB
------------
<PAGE>
Agreement Between Lienholders
Page 3
proceedings taken in connection with the enforcement of the terms and
conditions of the Joint Collateral Documents; (ii) to determine whether a
receiver for the Joint Collateral or any part thereof should be appointed
and the identity of any receiver; and (iii) to otherwise make decisions
and take action with regard to the maintenance, protection, or disposition
of the Joint Collateral; provided that such directions and actions shall be
permitted under applicable law and shall be for the ratable benefit of both
Lender and Trustee. Without limiting the generality of the foregoing,
Lender may, in its discretion, sell or otherwise dispose of the Joint
Collateral in its condition at the time of default, or may make such
renovations as Lender deems appropriate to prepare the Joint Collateral for
sale or disposition. In the event default occurs before completion of
construction or equipping of the Project, Lender may, but shall not be
required, to complete and equip the Project. In connection with the repair
or completion of the Project, Lender may, in its sole discretion advance
such funds as may be reasonably necessary to accomplish such repair or
completion, and any funds so advanced shall be reimbursed as provided in
Section 5 below. Exercise of the foregoing powers by Lender shall bind the
interest of both Lender and Trustee in the Joint Collateral, and Trustee
shall from time to time execute and deliver such instructions, conveyances
and other documents as Lender may request to further evidence the authority
granted to Lender in this Section 4 or to effectuate Lender's exercise of
the powers granted in this Section 4, Either party may be a purchaser at any
public sale or other disposition of the Joint Collateral, and after
consummation of such sale, the purchaser shall hold the Joint Collateral
free and clear of any claims of the other party. The non-purchasing party
shall be entitled to receive its portion of the proceeds of such sale or
other disposition as determined hereinafter.
5. Fees and Expenses. All legal fees, court costs and related
expenses incurred in connection with actions taken under Section 4 pursuant
to an agreement of both parties shall be advanced pro rata by Lender and
Trustee in the same proportion that the unpaid principal balance of each
party's Loan bears to the unpaid principal balance of both Loans. In the
event Lender exercises any of the powers granted to Lender in Section 4,
above, to direct the actions of the parties with regard to the Joint
Collateral, and in the further event Lender advances funds in connection the
exercise of such powers, proceeds from the sale or other disposition of the
Joint Collateral shall be applied, first, to reimburse Lender for all
amounts so advanced, All other fees, cost and expenses shall be advanced by
the party incurring such fees, costs and expenses, and all such reasonable
fees, costs and expenses shall be added to and deemed a part of the Loan of
such party to the extent permitted under such Party's Loan Documents,
Nothing contained in this Agreement is intended to constitute a waiver of
each party's right to recover all fees and expenses to the extent provided
in such party's Loan Documents.
Initials /S/RW
/S/JKJ
/S/RWB
------------
<PAGE>
Agreement Between Lienholders
Page 4
6. Proceeds of Collateral. Any proceeds arising from the
disposition of the Joint Collateral during the term of this Agreement shall,
after reimbursement of Lender's fees and expenses as provided in Section 5,
above, be divided between Lender and Trustee in the proportion that the
unpaid principal balance of each party's Loan bears to the total unpaid
principal balance of both Loans on the date such proceeds are distributed.
For purposes of calculating such prorations, the principal balance of the
Bond Indebtedness shall be reduced by the amount of any reserve or other
account held by the Trustee for the benefit of the Bondholders, and the
principal balance shall not include fees, charges or expenses incurred as a
result of default. Proceeds of Joint Collateral shall include, without
limitation, proceeds arising from the sale, condemnation or other
disposition of the Joint Collateral and shall include insurance proceeds
paid with respect to the Joint Collateral, Any proceeds of Joint Collateral
received by either party to the Agreement shall be held in trust for the
other to the extent of the other party's interest therein as provided in
this Agreement. This Agreement concerns the Joint Collateral and the
application of proceeds arising from the disposition of the Joint
Collateral. It is acknowledged that Lender has or may have third party
guarantees of all or a portion of the Construction Loan and that the
Construction Loan is or may be secured by collateral (the "Emprise
Collateral") other than and in addition to the Joint Collateral, and Trustee
shall not be entitled to receive, directly or indirectly, any proceeds of or
benefit from the payment of any such guaranty and/or realization on any of
the Emprise Collateral which is not jointly held. Accordingly, for the
purpose of calculating the interests of Lender and Trustee in the proceeds
of Joint Collateral as set forth in the first sentence of this Section 6,
the unpaid principal balance of Lender's Construction Loan shall be deemed
to be increased by any amount theretofore received by Lender attributable to
Emprise Collateral and/or a third party guarantee of the Construction Loan;
provided, however, that at such time as Lender has actually received final
payment in full of the Construction Loan (including all interest, fees,
costs and expenses permitted under the Construction Loan Documents), and
such final payment is not subject to risk of refund, the balance, if any, of the
proceeds arising from the disposition of the Joint Collateral shall be
remitted to the Trustee for the benefit of the Bondholders.
7. Representations.
a. Lender represents and warrants to Trustee that the
execution and delivery of this Agreement has been duly authorized by all
appropriate corporate action on the part of Lender; that it does not
contravene or conflict with any of the documents evidencing the Construction
Loan; and that this Agreement constitutes the legal, valid, and binding
obligation of Lender, enforceable against Lender in accordance with its
terms, subject to applicable bankruptcy and insolvency laws.
Initials /S/RW
/S/JKJ
/S/RWB
------------
<PAGE>
Agreement Between Lienholders
Page 5
b. Trustee represents and warrants to Lender (i) that the
execution, delivery and performance of this Agreement by Trustee has been
duly authorized by all appropriate corporate action on the part of Trustee;
(ii) that the execution, delivery and performance of this Agreement by
Trustee does not contravene, violate or conflict with, and is authorized by
the Trust Indenture; (iii) that the Trustee has the power and authority to
perform its obligations hereunder without further consent of the
Bondholders; and (iv) that this Agreement constitutes the legal, valid and
binding obligation of Trustee and is enforceable against the Trustee and
against all Bondholders in accordance with its terms, subject to applicable
bankruptcy and insolvency laws.
c. Concurrently with the execution of this Agreement, each party
shall deliver to the other party a favorable opinion of its counsel in form
and substance reasonably satisfactory to the recipient with regard to the
issues addressed in subparagraphs (a) and (b) above.
8. Term. This Agreement shall continue until the earliest to occur of.
(a) payment in full of the Construction Loan and transfer of Lender's
interest in the Joint Collateral Documents to Trustee; (b) the sale or other
disposition of the Joint Collateral pursuant to the Joint Collateral
Documents, the confirmation of such sale or disposition to the extent
required under applicable law, the expiration of any appeal period, and the
disbursement of the proceeds from such sale to Lender and Trustee according
to the terms hereof; or (c) the mutual written agreement of the parties to
terminate this agreement. Each party may, during the term of this Agreement and
without notice to the other party, continue to deal with and make
advances to FRAL in reliance hereon.
9. Enforcement, In any action brought to enforce or defend any of
the provisions of this agreement, the prevailing party shall be entitled to
recover its reasonable attorney's fees and expenses from the other party in
addition to other relief awarded.
10. Construction, This agreement does not make either party the
employee, agent, partner, fiduciary or legal representative of the other
party for any purpose whatsoever. Neither party is granted any right or
authority to assume or create any obligation or responsibility, express or
implied, on behalf of or in the name of the other party. Each party
acknowledges that it has, independently and without reliance on the other,
made its own credit decision with regard to FRAL. Except as expressly
provided herein, neither party has any duty or responsibility to the
other. Neither Lender nor Trustee nor any of their respective directors,
officers, agents or employees shall be liable for any action taken or
Initials /S/RW
/S/JKJ
/S/RWB
------------
<PAGE>
Agreement Between Lienholders
Page 6
omitted to be take under or in connection with this Agreement or the Joint
Collateral in the absence of its or their own gross negligence or willful
misconduct. Nothing contained in this Agreement shall be deemed an
amendment of any Loan Document or a waiver of any right or remedy contained
in any Loan Document. This Agreement shall be binding upon Leader, Trustee
and Bondholders, and shall inure to the benefit of Leader and Trustee and
their respective successors and assigns. This Agreement is solely for the
benefit of the Lender and Trustee and their respective successors and
assigns and no other person or entity shall have any right, benefit or
interest under or because of this Agreement.
IN WITNESS WHEREOF, the parties have executed this instrument effective the
date first above written.
DATED this 20th day of June, 1997.
EMPRISE BANK, N.A.
BY: /S/Randy Walker S.V.P.
----------------------------------
Randy Walker, Senior Vice
President
COLONIAL TRUST COMPANY, TRUSTEE-
BY: /S/John K Johnson
----------------------------------
John K. Johnson, President
CONSENT
Front Range Assisted Living, L.L.C. hereby consents to the terms of the
foregoing Agreement and consents to any action of Lender or Trustee taken in
accordance with the terms thereof.
Dated this 20th day of June, 1997.
FRONT RANGE ASSISTED LIVING, L.L.C.
BY: /S/Robert A Brooks
----------------------------------
Robert A. Brooks, Managing Member
[LETTERHEAD FOR MORRIS, LAING, EVANS, BROCK, & KENNEDY]
LAW OFFICES OF
morris, laing, evans, brock & kennedy, chartered
FOURTH FLOOR, 200 WEST DOUGLAS WICHITA, KANSAS 67202-3084
(316) 262-2671 FAX: (316) 262-5991
June 18, 1997
MMR Investment Bankers
550 North 159th Street East
P. 0. Box 781440
Wichita, KS 67278-1440
Re: Authorization of $2,500,000 First Mortgage Bond Issue; Front Range
Assisted Living, L.L.C.
Gentlemen:
We have represented Front Range Assisted Living, L.L.C. (hereinafter
called "Company"), in connection with its proposed issuance of up to
$2,500,000 of first mortgage bonds. The Company is a duly organized and
existing limited liability company organized under the laws of Kansas. The
correct name to be used on the first mortgage bonds and all legal
instruments is Front Range Assisted Living, L.L.C.
Effective April 28, 1997, the members of the Company signed
Resolutions authorizing the issuance of up to $2,500,000 of first mortgage
bonds and the execution of certain instruments in connection with the bond
issue by Robert A. Brooks, as Managing Member.
I have duly examined the Articles of Organization and Amended and
Restated Operating Agreement ("Operating Agreement") of the Company and
find that the Resolutions passed effective April 28, 1997, a copy of which
is attached hereto as Exhibit A and made a part of this Opinion, were
passed in accordance with the Articles of Organization, Operating
Agreement, and the laws of the State of Kansas, and I do hereby certify
that said Resolutions constitute a valid and legal authorization for the
issuance of up to $2,500,000 of first mortgage bonds for the purposes set
out in said Resolutions and for the execution of a trust indenture, setting
out the terms and conditions of the bond issue and placing a lien on the
Company's real property in order to secure payment of the first mortgage
bonds. I further certify the following person is the proper person to sign
the trust indenture in accordance with the Articles of Organization and
Operating Agreement of the Company:
Name: Robert A. Brooks Title: Managing Member.
<PAGE>
Page 2
June 18, 1997
I further certify that when the mortgage bonds have been issued, paid
for by the purchaser, and signed by the Managing Member, the first mortgage
bonds will be a legal and binding indebtedness of the Company.
The opinions expressed above are subject in their entirety to (i) the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (ii) the rights of the United
States government under the Federal Tax Lien Act of 1966, as amended; and
(iii) the discretionary power of the courts to make available remedies of
specific performances, injunctive relief or other equitable remedies. We
express no opinion concerning the validity or priority of the lien of the
deed of trust and understand that you are relying upon Utah counsel for that
opinion.
We are licensed to practice law in the State of Kansas, and this
opinion is limited in all respects to Kansas law now in effect. This
opinion is limited to the matters expressly stated herein, and no opinions
may be implied or inferred beyond the matters stated.
In giving this opinion we have assumed the authenticity of all
signatures to the Operating Agreement and the Resolutions. Further, we have
relied on certificates of public officials and the statements of the
Managing Member where necessary to our opinion.
This opinion is solely for the benefit of MMR Investment Bankers and
its counsel and may not be quoted, circulated or published in whole or in
part, without our express written consent.
Sincerely,
/S/Roger L. Theis
Roger L. Theis
For the Firm
RLT:mk
cc: Robert A. Brooks
<PAGE>
FRONT RANGE ASSISTED LIVING, L.L.C. (Issuer)
RESOLUTIONS AUTHORIZING BONDED INDEBTEDNESS
WHEREAS, FRONT RANGE ASSISTED LIVING, L.L.C. (hereinafter referred to
as "The Company"), wishes to authorize the issuance of bonded indebtedness
by The Company for the purpose of financing the construction of an assisted
care living facility located at St. George, Utah.
NOW, THEREFORE, BE IT RESOLVED, that the acts contained in these
Resolutions shall constitute the acts of The Company:
1. RESOLVED, that The Company issue and sell first mortgage bonds in the
aggregate amount of up to Two Million Five Hundred Thousand Dollars
($2,500,000) for the purpose of providing long-term financing for an
assisted care living facility for senior citizens, and that the first
revenue of The Company be appropriated and irrevocably assigned and
pledged to pay the principal and all @est as the same shall come due,
beginning with the initial six-month sinking fund payment being made on
the first Monday following the date of issue, and thereafter making
monthly deposits into the Sinking Funds in advance, and that the
mortgaging of all of The Company property in St. George, Utah, to secure
said bonds be authorized.
2 . RESOLVED, that the following individual, Robert A. Brooks, be appointed
as agent and instructed to enter into an agreement with MMR Investment
Bankers, Inc., and to approve the bond repayment schedule, the rate of
interest, the type of bonds, the issue date and the date the bonds shall
begin earning interest, the Paying Agent, the Registrar, the Independent
Trustee, the Escrow Agent, the property to be mortgaged, the date of the
Bond Program, as selected and/or approved by MMR Investment Bankers, Inc.
and any other matters necessary to implement this bond issue.
3. RESOLVED, that MMR Investment Bankers, Inc., shall have the first right of
refusal on any other financing involving the mortgaged property of The
Company for a period of three (3) years from the date of the agreement
between The Company and MMR Investment Bankers, Inc.
4. RESOLVED, that all of the necessary instruments and documents pertaining to
this bond issue, including, but not limited to, the Underwriting Agreement
between The Company and MMR Investment Bankers, Inc., the Trust Indenture
describing the terms and conditions of the issue, and related exhibits, and the
offering statement shall be on forms furnished or approved by MMR Investment
Bankers, Inc., and reviewed by an attorney at law retained by The Company, and
shall be signed and delivered for and on behalf of the Company by Robert A.
Brooks, Managing Member, who is hereby authorized by this Resolution, in
accordance with the Operating Agreement and state law, to sign and deliver these
documents and instruments on behalf of The Company.
5. RESOLVED, that Robert A. Brooks be designated agent and instructed to sign
all necessary documents or certificates on behalf of The Company; to cause the
issuance by The Company of the first mortgage bonds; to pledge, assign and
mortgage the property.
EXHIBIT A
<PAGE>
of The Company; to execute and deliver instruments pledging, assigning and
mortgaging the property of the Company; to enter into and deliver an
agreement with MMR Investment Bankers, Inc., as underwriter of the bonds, on
such terms and conditions as he in his sole judgment deems advisable; to
enter into and deliver a Trust Indenture on such terms and conditions as he
in his sole judgment deems advisable; to sign the offering statement on
behalf of the Company; and to do or cause to be done any and all other acts
on behalf of The Company necessary or convenient in carrying out the
foregoing acts and Resolutions.
6. RESOLVED, that Robert A. Brooks is hereby authorized to negotiate a
construction loan and to borrow money in the amount of $ 1.8 million on
behalf of The Company to fund the construction of the assisted care living
facility to be built at St. George, Utah; to execute and deliver an
agreement and promissory note and any and all other documents or instruments on
behalf of The Company necessary or convenient to obtain such construction loan
on the terms and conditions as he in his sole judgment deems advisable; to
pledge, assign and mortgage the property of The Company to the lender in
connection with obtaining the construction loan; and to execute and deliver
instruments pledging, assigning and mortgaging the property of The Company
in connection with the construction loan; and to do or cause to be done any
and all other acts on behalf of The Company necessary or convenient in
carrying out the foregoing acts and this Resolution.
7. RESOLVED, that these Resolutions shall take effect as of April 28,
1997, and shall be inserted and retained in The Company minute book.
8. RESOLVED, that the undersigned, on behalf of The Company, do hereby
confirm and ratify all actions heretofore and hereafter taken by Robert A.
Brooks on behalf of The Company hereby authorized or in furtherance thereof.
NOW THEREFORE, we, the undersigned, being the all of the Members
of The Company, do hereby consent to and ratify all the provisions of the
foregoing Resolutions effective as of the 28th day of April, 1997.
This document may be executed in copies or counterparts, each of
which shall be deemed to be an original and each of which shall be binding
upon the Members when executed and delivered by them, irrespective of
whether a copy or counterpart is executed by any of the other Members. The
signature and acknowledgment pages of all copies or counterparts may be
assembled on one instrument for record-keeping purposes.
/S/Robert A. Brooks
ROBERT A. BROOKS
/S/Carol M. Brooks
CAROL M. BROOKS
[LETTERHEAD FOR KIMBALL, PARR, WADDOUPS, BROWN & GEE]
KIMBALL, PARR, WADDOUPS, BROWN & GEE
A PROFESSIONAL CORPORATION
SUITE 1300
185 SOUTH STATE STREET
POST OFFICE BOX 11019
SALT LAKE CITY, UTAH 84147-0019
TELEPHONE (801) 532-7840
FACSIMILE (801) 532-7750
June 23, 1997
MMR Investment Bankers
550 North 159th Street East
P.O. Box 781440
Wichita, Kansas 67278-1440
Re: $2,500,000.00 First Mortgage Bond Issue; Front Range
Assisted Living, L.L.C.
Ladies and Gentlemen:
We have acted as Utah counsel for Front Range Assisted Living, L.L.C.,
a limited liability company organized under the laws of the State of Kansas
(the "Borrower").
As local counsel for the Borrower, we have examined:
1. The Articles of Organization of Borrower.
2. The Amended and Restated Operating Agreement of Borrower dated
December 24, 1996.
3. The Application for Foreign Limited Liability Company Certificate
of Registration of Front Range Assisted Living, L.L.C. filed June 11, 1997.
4. The Real Estate Deed of Trust dated June 20, 1997 executed by
Borrower, as grantor, in favor of Southern Utah Title Company, as
trustee for the benefit of Emprise Bank, N.A. and Colonial Trust
Company, Trustee, as lender.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of all certificates of public officials and other
documents which we have deemed necessary as a basis for the opinions
hereinafter expressed. In rendering this opinion, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted
to us as originals and the due execution of the Deed of Trust. We have also
assumed that Borrower is duly organized, validly existing and in good standing
as a limited liability company under the laws of the State of
Kansas. Based on the
<PAGE>
KIMBALL, PARR, WADDOUPS, BROWN & GEE
MMR Investment Bankers
May 29, 1997
Page 2
foregoing, and subject to the qualifications and representations set forth
in this letter, we express the following opinions with respect to the
Borrower and the Deed of Trust:
1. The Borrower is duly and properly registered and in good standing as
a foreign limited liability company under the laws of the State of Utah.
2. When recorded with the Official Records of the County Recorder of
Washington County, Utah, the Deed of Trust will create a lien on the real
property described therein.
The opinions set forth herein are predicated upon, limited by and subject
to, the following assumptions, qualifications, limitations and exceptions:
A. This opinion is subject to (i) bankruptcy, insolvency,
reorganization, moratorium, or other state or federal laws affecting
creditors' rights, now or hereafter in effect, (ii) general principles
of equity now or hereafter in effect (regardless of whether such
enforceability is considered in a proceeding in equity or at law) including,
without limitation, materiality, reasonableness, good faith and fair dealing and
the possible unavailability of specific performance or injunctive
relief, (iii) U.C.A. Section 78-37-1 which provides that there shall be one
action for the recovery of any debt or the enforcement of any right secured
solely by a mortgage upon real estate, (iv) U.C.A. Section 7OA-9-318(4) of
the UCC which limits the effectiveness of agreements purporting to limit the
assignability of a debtor's personal property or a debtor's ability to grant a
security interest in personal property, and (v) Rule 69(f) of the Utah
Rules of Civil Procedure which provides for rights of redemption with
respect to property sold at a sheriffs sale.
B. We do not express any opinion as to (i) the accuracy of the legal
description contained in the Deed of Trust, (ii) title to the real property
described in the Deed of Trust (the "Property"), (iii) the existence of any
liens, charges, restrictions, easements or encumbrances on the Property, or
(iv) the priority of any liens or security interests purported to be created
pursuant to the Deed of Trust.
C. We have assumed that (i) Borrower has a mortgageable interest in
the Property; and (ii) the description of the Property is legally sufficient to
allow a third party to identify the Property. We give no opinion as to
the existence of the value, interest or rights described in the preceding
sentence or the adequacy of the description referred to therein.
D. The opinions expressed in this letter are solely for the use of the
persons to whom this letter is expressly addressed and their counsel and
these opinions may not be relied on by any other persons without our prior
written approval. The opinions expressed in this letter speak only as of
the date of this letter, are limited to the matters set forth in this
letter, and no other opinions should be inferred beyond the matters
expressly stated. We bring to your attention the fact that our legal
opinions are an expression of professional judgment and are not a guarantee
of a result.
<PAGE>
KIMBALL, PARR, WADDOUPS, BROWN & GEE
MMR Investment Bankers
May 29, 1997
Page 3
Additionally, we do not undertake to advise you of matters which may come
to our attention subsequent to the date hereof which may affect our legal
opinions expressed herein.
F. With certain exceptions, we are qualified to practice law only in
the State of Utah. Other than as set forth above, we express no opinion
herein concerning any law other than the laws of the State of Utah and the
federal laws of the United States.
Very truly yours,
KIMBALL, PARR, WADDOUPS, BROWN & GEE
/S/Kimball, Parr, Waddoups, Brown & Gee
THE AMERICAN INSTITUTE 0F ARCHITECTS
AIA Document A 101
Standard Form of Agreement Between
Owner and Contractor
where the basis of payment is a
STIPULATED SUM
1987 EDITION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH
AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
The 1987 Edition of AIA Document A201, General Conditions of the Contract
for Construction, is adopted in this document by reference. Do not use with
other general conditions unless this document is modified.
This document has been approved and endorsed by the Associated General
Contractors of America.
AGREEMENT
made as of the 23rd day of May in the year of Nineteen Hundred and Ninety
Seven
BETWEEN the Owner. Front Range Assisted Living L.L.C.
A Kansas Limited Liability Company
260 North Red Rock Road Suite 260
Wichita, Kansas 67206
and the Contractor: Richard Watts Construction Inc.
A Utah Corporation
151 West Brigham Road
St. George, Utah 84770
The Project is: Evergreen Gardens of St. George
St. George, Utah
The Architect is: Anderzhon & Carlson, Architects
1209 Harney Street
Omaha, Nebraska 68102
The Owner and Contractor agree as set forth below.
AIA DOCUMENT A 101 - OWNER-CONTRACTOR AGREEMENT- TWELFTH EDITION - AIA -
1987 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 2000 A l01-1987
1
<PAGE>
ARTICLE l
THE CONTRACT DOCUMENTS
The Contract Documents consist of this Agreement, Conditions of the Contract
(General, Supplementary and other Conditions), Drawings, Specifications,
Addenda issued prior to execution of this Agreement, other documents listed
in this Agreement and Modifications issued after execution of this
Agreement; these form the Contract, and are as fully a part of the Contract
as if attached to this Agreement or repeated herein.
ARTICLE 2
THE WORK OF THIS CONTRACT
The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract
Documents to be the responsibility of others, or as follows: General
Contract
ARTICLE 3
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
3.1 The date of commencement is the date from which the Contract Time of
Paragraph 3.2 is measured, and shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made
for the date to be fixed in a notice to proceed issued by the Owner.
Upon receipt of building permit issued by St. George City and written notice
to proceed by owner.
Unless the date of commencement is established by a notice to proceed issued
by the Owner, the Contractor shall notify the Owner in writing not less than
five days before commencing the Work to permit the timely filing mortgages,
mechanic's liens and other security interests.
3.2 The Contractor shall achieve Substantial Completion of the entire Work
not later than
One Hundred Seventy Calendar Days From the Date of Building Permit.
subject to adjustments of this Contract Time as provided in the Contract
Documents.
AIA DOCUMENT A101 - OWNER-CONTRACTOR AGREEMENT. TWELFRH EDITION - AIA -
1987
THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE, N.W.,
WASHINGTON, D.C. 20000 AIOI-1987
2
<PAGE>
ARTICLE 4
CONTRACT SUM
4.1 The Owner shall pay the Contractor in current funds for the
Contractor's performance of the Contract the Contract Sum of
One Million Five Hundred Ninety Two Thousand One Hundred Eighty One Dollars
($ 1,592,181.00), subject to additions and deductions as provided in the
Contract Documents.
4.2 The Contract Sum is based upon the following modifications:
1. Mesa Plumbing revised specification and quotation Attached as
Exhibit A
2. Beard Electric revised specification and quotation Attached as
Exhibit B.
3. Specification Section 04400 Limestone Units is deleted and replaced
with Eldorado Architectural Stone by Stonecraft Industries Inc. To be installed
as per manufacturers recommendation. Color and Style to be chosen by Owner.
4. Specification Section 09950 Vinyl Wall coverings is deleted and
will be furnished and installed by Owner.
4.3 Unit prices and allowances, if any, are as follows:
AIA DOCUMENT Al 01 - OWNER-CONTRACTOR AGREEMENT -TWELFRH EDITION-AIA - 1987
THE AMERICAN INSTITUTE OF ARCHITECTS.1735 NEW YORK
AVENUE,N.W,WASHINGTON,D.C.20000 AI01-1987
3
<PAGE>
ARTICLE 5
PROGRESS PAYMENTS
5.1 Based upon Applications for Payment submitted to the Owner by the
Contractor, the Owner shall make progress payments on account of the
Contract Sum to the Contractor as provided below and elsewhere in the
Contract Documents.
5.2 The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:
5.3 Provided an Application for Payment is received by the Owner not later
than the last day of a month, the Owner shall make payment to the
Contractor not later than the 1Oth day of the following month. If an
Application for Payment is received by the Owner after the application date
fixed above, payment shall be made by the Owner not later than ten days
after the Owner receives the Application for Payment.
5.4 Each Application for Payment shall be based upon the Schedule of Values
submitted by the Contractor in accordance with the Contract
Documments. The Schedule of Values shall allocate the entire Contract
Sum among the various portions of the Work and be prepared in such form and
supported by such data to substantiate its accuracy as the Architect may
require. This Schedule, unless objected to by the Owner, shall be used as
a basis for reviewing the Contractor's Applications for Payment.
5.5 Applications for Payment shall indicate the percentage of completion of
each portion of thc Work as of the end of the period covered by the
Application for Payment.
5.6 Subject to the provisions of the Contract Documents, the amount of each
progress payment shall be computed as follows:
5.6.1 Take that portion of the Contract Sum property allocable to completed
Work as determined by multiplying the percentage completion of each portion
of the Work by the share of the total Contract Sum allocated to that portion of
the Work in the Schedule of Values, less retainage of 10 percent.
5.6.2 Add that portion of the Contract Sum properly allocable to materials
and equipment delivered and suitably stored at the site for subsequent
incorporation in the completed construction (or, if approved in advance by
the Owner, suitably stored off the site at a location agreed upon in
writing) less retainage of percent(10%);
5.6.3 Subtract the aggregate of previous payments made by the Owner; and
5.6.4 Subtract amounts, if any, for which the Owner has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the
General Conditions.
5.7 The progress payment amount determined in accordance with Paragraph 5.6
shall be further modified under the following circumstances:
5.7.1 Add, upon Substantial Completion of the Work, a sum sufficient to
increase the total payments to percent (10%) Sum, less such amounts as the
Owner and Contractor shall determine for incomplete Work and unsettled
claims; and
5.7.2 Add, if final completion of the Work is thereafter materially delayed
through no fault ofthe Contractor, any additional amounts payable in
accordance with Subparagraph 9.10.3 of the General Conditions.
5.8 Reduction or limitation of retainage, if any, shall be as follows:
AIA DOCUMENT Al 01 - OWNER-CONTRACTOR AGREEMENT -TWELFRH EDITION-AIA - 1987
THE AMERICAN INSTITUTE OF ARCHITECTS.1735 NEW YORK
AVENUE,N.W,WASHINGTON,D.C.20000 AI01-1987
4
<PAGE>
ARTICLE 6
FINAL PAYMENT
Final payment, constituting the entire unpaid balance of the Contract Sum,
shall be made by the Owner to the Contractor when (1) the Contract has been
fully preformed by the Contractor accept for the Contractor's responsibility to
correct nonconforming Work as provided in Subparagraph 12.2.2 of the
General Conditions and to satisfy other requirements, if any, which
necessarily survive final payment; and (2) a final Certificate for Payment
has been issued by the Architect; such final payment shall be made by the
Owner not more than 30 days after the issuance of the Architect's final
Certificate for Payment, or as follows:
ARTICLE 7
MISCELLANEOUS PROVISIONS
7.l Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Docwnent, the reference refers to that
provision as amended or supplemented by other provisions of the Contract
Documents.
7.2 Paymcnts due and unpaid under the Contract shall bear interest from the
date payment is due at the rate stated below, or in the absence thereof, at
the legal rate prevailing from time to time at the place where the Project
is located. Zions Bank of Utah prime rate plus 2%.
7.3 Other provisions:
ARTICLE 8
TERMINATION OR SUSPENSION
8.1 The Contract may be terminated by the Owner or the Contractor as
provided in Articlc 14 of the General Conditions.
8.2 The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions.
AIA DOCUMENT Al 01 - OWNER-CONTRACTOR AGREEMENT -TWELFRH EDITION-AIA - 1987
THE AMERICAN INSTITUTE OF ARCHITECTS.1735 NEW YORK
AVENUE,N.W,WASHINGTON,D.C.20000 AI01-1987
5
<PAGE>
ARTICLE 9
ENUMERATION OF CONTRACT DOCUMENTS
9.1 The Contract Documents, except for Modifcations issued after excutions
of this Agreement, are enumerated as follows:
9.1.1 The Agreement is this executed Standard From Agreement Between Owner
and Contractor, AIA Document A101 1987 Edition.
9.1.2 The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A 201, 1987 Edition.
9.1.3 The Specifications are as follow:
Section Title
Division 0 Conditions of the contract
Division 1 General Requirements
Division 2 Site Work
Section 02800 Deleted see original bid proposal
Section 02810 Deleted see original bid proposal
Division 3 Concrete
Division 4 Deleted see Paragraph 4.2
Division 5 Metals
Division 6 Wood and Plastics
Division 7 Thermal and Moisture
Protection
Division 8 Doors and Windows
Division 9 Finishes
Section 09950 Deleted see Paragraph 4.2
Division 10 Specialties
Division I I Residential Equipment
Section 11250 Deleted see original bid proposal
Section 11451 Deleted see original bid proposal
Division 12 Furnishings
Section 12500 Deleted see original bid proposal
Section 12530 Deleted see original bid proposal
Division 15 Plumbing modified as per paragraph 4.2 Mechanical
Division 16 Electrical modified as per paragraph 4.2 Electrical
AIA DOCUMENT Al 01 - OWNER-CONTRACTOR AGREEMENT -TWELFRH EDITION-AIA - 1987
THE AMERICAN INSTITUTE OF ARCHITECTS.1735 NEW YORK
AVENUE,N.W,WASHINGTON,D.C.20000 AI01-1987
6
<PAGE>
9.1.5 The Drawings are as follows, and are dated as shown below:
Cover Sheet No Date
C-1 Site and Road Improvements Cover Sheet 3-14-97
C-2 Grading and Drainage Plan 2-15-97
C-3 200 South St. Plan and Profile 4-11-97
C-4 1200 East Plan and Profile 4-11-97
C-5 Lltilities and Horizontal Control Plan 2-15-97
Al Orientation Plan 3-12-97
A-2 Foundation Plan 3-13-97
A-3 Floor Plan, Room Finish 3-12-97
A-4 Roof Framing Plan 3-13-97
A-5 Reflected Ceiling Plan 3-12-97
A-6 Exterior E]eVRtionS 3-12-97
A-7 Enlarged Plans 3-12-97
A-8 Wall and Building Sections 3-12-97
A-9 Interior I,,Ievatioiis 3-12-97
A-10 Door and Window Schedules and Details 3-12-97
M-1 HVAC Floor Plan No Date
M-2 Mechanical Schedules No Date
P-1 Plumbing Floor Plan No Date
P-2 Schematics No Date
P-3 Plumbing Schedules No Date
E-0 Electrical Standards No Date
E-1 Power Plan No Date
E-2 Electrical Lighting No Date
E-3 Special Systems Plan No Date
E-4 Enlarged Plans No Date
E-5 Enlarged Plans No Date
E-6 Panel Schedules No Date
E-7 Panel-Schedules And One line Diaoram No Date
9.1.6 The Addenda, if any, are as follows:
Number Date Pages
One April 14,1997 10
Two April 28,1997 37
Portions of the Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requiements are also in enumerated in
this Article 9.
AIA DOCUMENT Al 01 - OWNER-CONTRACTOR AGREEMENT -TWELFRH EDITION-AIA - 1987
THE AMERICAN INSTITUTE OF ARCHITECTS.1735 NEW YORK
AVENUE,N.W,WASHINGTON,D.C.20000 AI01-1987
7
<PAGE>
9.1.7 Other documents, if any, forming part of the Contract Documents are as
follows:
See Paragraph 4.2
This Agreement is entered into as, of the day and year first written above
and is executed in at least four original copies of which one is to be
delivered to the Contractor, one to the Architect for use in the
administration of the Contract, and the remainder to the Owner.
OWNER: FRONT RANGE ASSISTED LIVING LLC CONTRACTOR: RICHARD WATTS
CONSTRUCTION INC.
/S/ROBERT A BROOKS /S/RICHARD C WATTS
- -------------------- --------------------
ROBERT A. BROOKS RICHARD C. WATTS
MANAGING MEMBER PRESIDENT
AIA DOCUMENT Al 01 - OWNER-CONTRACTOR AGREEMENT -TWELFRH EDITION-AIA - 1987
THE AMERICAN INSTITUTE OF ARCHITECTS.1735 NEW YORK
AVENUE,N.W,WASHINGTON,D.C.20000 AI01-1987
8
<PAGE>
MESA PLUMBING, INC.
617 RED ROCK ROAD PROPOSAL
ST.GEORGE, UTAH 84770 DATE NUMBER
Phone 801-673-8309
5/8/97 200
EXHIBIT A
NAME/ADDRESS PROJECT
WATTS CONSTRUCTION EVERGREEN GA.
151 WEST BRIGHAM RD.
ST. GEORGE, UTAH 84770
DESCRIPTION QTY TOTAL
EVERGREEN GARDENS OF ST. GEORGE - ST. GEORGE
LASCO 1603-BFS 60"X34" WHITE F/G SHOWER
W/ELJER 517-1061 LEVER HANDLE VALVE 40
WHITE 19" X 16" S/R LAV W/ELJER 557-1010
LEVER HANDLE VALVE 40
WHITE ELJER EB 091-0128 TOILET W/SEAT 40
SS BAR SINK W/ELJER 718-2040 VALVE 42
WASHNG MACHNE HOOK-UP ONLY 4
FIAT SERVICE S@ W/ELJER 718-2040 VALVE 1
FIAT LAUNDRY S@ W/ELJER 718-2040 VALVE 1
ELJER HAND SINK W/ELJER 718-2040 VALVE 1
SS KITCHEN SINK W/DISPOSAL & ELJER TRIM 2
SILCRAFT 3600 WHIRLPOOL SYSTEM 1
GD-500-77A ASME GAS WATER HEATER W/PUMP 1
GAS DROPS 13
GREASE TRAP 1
SEWER & WATER TO 5' OUTSIDE BULIDING
MISC. MATERIAL AND LABOR
TOTAL 148,628.00
NOTE:WASTE PIPING TO BE PVC-DWV PIPE. WATER
PIPING TO BE COPPER TYPE "L" TRUNK LINES
WITH BRANCBES BEING VANEX-PEX CROSS
LINK POLYETHYLENE PIPE.
MESA PLUMBING FAX 801-673-6375 PH 801-673-8309 TOTAL $148,628.00
<PAGE>
EXHIBIT B
PROPOSAL
BEARD ELECTRIC
1021 B. ELM ST. PHONE: 673-8127
ST. GEORGE UT 47950 FAX:801-674-2176
UTAH LIC #88-248587-5501
CUSTOMER:WATTS CONST Co. NEV. LIC# 43210
ADDRESS: DATE:5/12/97
CITY:
PHONE:673-9096
JOB NAME:EVERGREEN GARDENS ASSISTED LIVING PHONE:
ADDRESS: ST. GEORCE, UT, 84790
WE HEREBY STJBMIT :SPECIFICATIONS AND ESTIMATES FOR:
ALL WIRING WILL BE: IN NMB ROMEX AND HAS BEEN APPROVED BY THE
CITY OF ST. GEORGE. JOE EMPY AND DENNIS MERTLICH.
THIS INCLUDES THE PRIMARY AND SECONDARY ON SHEETS C5 AND EO-1 HOWEVER THIS
HAS NOT BEEN APPROVED BY THE CITY SO IT WILL BE SUBJECT TO THERE APPROVAL.
WE HAVE FIGURED THE NURSES CALL SYSTEM AS IT IS ON THE DRAWINGS AS A PUSH
BUTTON NOTIFIER SYSTEM ONLY.
THE FIRE ALARM HAS BEEN FIGURED AS A NONADDRESSABLE SYSTSM. THIS MEANS THE
SMOKE DETECTORS IN THE UNITS WILL BE STAND ALONE UNITS. THEY WILL NOT
NOTIFY THE CENTRAL SYSTEM. CITY HAS TO APPROVE.
THE TV SYSTEM WILL BE DONE IN CABLE ONLY AND NO CONDUIT. IT WILL CONSIST OF
CABLE AND TV PLATES ONLY. THERE HAS BEEN NO SYSTEM FIGURED.
THE TELEPHONE IS FIGURED WITH WIRE AND TELEPHONE JACKS. NO SYSTEM.
WE PROPOSE TO HEREBY FURNISH MATERIAL AND LABOR COMPLETE IN ACCORDANCE
WITH ABOVE SPECIFICATIONS. FOR THE SUM OF: ------------ $189,550.00
ONE HUNDRED EIGHTY NINE THOUSAND FIVE HUNDRED FIFTY DOLS AND N0/100--
AUTHORIZED SIGNATURE: /S/RICK BEARD
--------------------------------------
Please sign and return one copy.
ACCEPTANCE SIGNATURE:
------------------------------------------
DATE:
--------------------
All accounts are due and payable within 10 days of invoicing. There
will be a service charge for accounts over 30 days.
COMMITMENT LETTER AND LOAN AGREEMENT
June 18, 1997
Front Range Assisted Living, L.L.C.
d/b/a Evergreen Gardens of St. George
Robert A. Brooks, Managing Member
260 N. Rock Road, Suite 260
Wichita, KS 67206
Dear Mr. Brooks:
We are pleased to inform you that Emprise Bank N.A., (herein
"Bank") has approved the following loan pursuant to the terms and conditions set
forth in this Commitment Letter, which shall also serve as the Loan
Agreement between the parties (herein referred to as the "Commitment
Letter").
1. Borrower. The Borrower will be Front Range Assisted Living,
L.L.C. d/b/a Evergreen Gardens of St. George (herein the "Borrower"). The
Managing Member of Borrower is Robert A. Brooks. (herein "Brooks").
2. Project Description. The Borrower is a Kansas Limited
Liability Company organized to engage in the operation of assisted living
residences in St. George, Utah, development of real estate property located
at 220 South 1200 East Street, St. George, Utah, and to build thereon, a
thirty-eight (38) unit assisted living facility. A survey, legal
description, and site plan of the real estate are attached hereto as
Exhibits "A", "B", and "C", respectively.
All of the foregoing shall herein collectively be referred to as
the "Project". References in this Commitment Letter to the "Real Estate"
shall mean all the real property described above or otherwise acquired by
Borrower and all improvements located and to be constructed thereon, a
portion of which shall be constructed with the proceeds of the loan
described in the Commitment Letter.
The loan described in paragraph 3 of this Commitment Letter may be
used by the Borrower for any one or all of the following uses, but for no
other and strictly in accordance with the requirements of the various loan
documents to be prepared and executed in connection with this lending
transaction:
a. Construction of a thirty-eight (38) unit assisted living
facility at 220 South 1200 East Street, St. George, Utah of approximately
$1,800,000.00, and
b. Payment of "soft costs" and site improvement expenses
associated with the development of Borrowees assisted living facility
project including legal, financing, engineering, and architectural fees and
other contingencies as approved by the Bank of approximately $63,000.00, and
c. Purchase of furniture and appliances of the types described in
exhibit "D" in an amount of approximately $137,000.00.
Construction of the Project shall be completed by September 1,
1998.
Initials /S/RAB /S/RW
--------------
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 2
3. Approved Loan. The approved Loan to the Borrower is a
$2,000,000.00 construction loan (herein the "Loan"). All unpaid principal
and accrued interest shall be due and payable September 1, 1998. The
initial interest rate shall be 9.50% and shall be variable at the lowest
rate designated as the "Prime Rate" in the "Money Rates" column of the Wall
Street Journal, Southwest Edition plus a margin of one percent (1%).
Interest shall be calculated on the basis of the actual number of days
elapsed over a year of 365 days, and shall be computed daily. Borrower
shall pay a loan commitment fee of one and one-half (1.5%) percent of the
loan commitment amount and this fee shall be due and payable at the time the
loan is closed.
Borrower shall make monthly interest payments on the Loan, with the
first payment due on the first day of the month, thirty (30) days after the
initial advance of funds hereunder. The Borrower will pay the net bond
sales proceeds to Bank from the sale of bonds issued by MMR Investment
Bankers, Inc. to be applied against the Loan's outstanding balance of
principal or interest. Borrower may utilize bond sale proceeds as outlined
in the Use of Funds section of the Offering Prospectus.
The Borrower may prepay the principal of the Loan together with all
accrued interest thereon in whole or in part at any time without penalty.
4. Conditions Precedent to Advances of Draws Against the Loan.
Upon written request by Borrower, and subject to the terms and conditions of
this Agreement, Bank will, from time to time, advance funds to Borrower.
Construction draw advances shall be made by Bank by issuing a Cashiers Check
made jointly payable to Borrower and Contractor and forwarding said
Cashier's Check directly to Borrower who in turn will endorse said check and
promptly forward it to the Contractor. Other advances shall be made by Bank by
depositing the loan funds into a special account with Bank, to be used by
Borrower to pay other bills, expenses and/or invoices associated with this
project. The following shall be conditions precedent to Bank's
obligation to made each advance or draw under the Loan to finance the
construction of the improvements contemplated by the Project:
a. Execution of a Borrower's Construction Loan Certificate, in a
form acceptable to Bank certifying, among other things, that there are no
defaults under any applicable loan agreement; that construction of the
Project is being diligently pursued; that the quality, design, and
construction of the Project are in accordance with the approved plans and
specifications; that there have been no material changes in the approved
plans and specifications except those approved by the Bank and any required
governmental agency, and also by those insurers providing insurance
protection with respect to the Project; that all applicable laws and
ordinances have been and will be complied with and that the construction of
the Project will be completed on schedule and within budget.
b. Receipt by Bank of an Application and Certificate for Payment
by Borrower's architect, general contractor or subcontractors, in a form
acceptable to Bank which shall include, but not necessarily be limited to, a
statement of the adjusted total contract price for the contractor and
any subcontractor, a statement of the percent of work completed and the
materials stored, a statement of retainage and amount requested and the
balance to be paid to any such contractor for the remainder of the Project.
Such application shall also contain a statement by the contractor
that the monies due and owing are for labor and materials supplied in
conformity with the Project plans and specifications.
Initials /S/RAB /S/RW
--------------
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 3
c. Receipt by Bank of all applicable lien waivers from lienable
parties in a form acceptable to the Bank.
d. Bank, or its agents, shall have the right to inspect the
Project at reasonable times to ascertain the progress of the construction of
improvements contemplated by the project and to allow the Bank to make such
other determinations as it may reasonably require as a condition to
allowing additional draws under the Loan.
e. Receipt by Bank of an update of the survey required under
paragraph 5(g) hereof if requested by Bank as a condition to any draw
request.
f. Receipt by Bank of an amended commitment for title insurance
"down dated" from the date of the original commitment as described in
paragraph 5(c) hereof.
g. Receipt by Bank of evidence that members of Borrower have
injected and/or pledged cash or the cash equivalent of $600,000.00 into this
Project. Bank and Borrower agree that members injection/pledge will be as
follows: Land which cost $200,000.00, Soft cost expenses for architectural,
geotechnical, engineering, etc. totalling $136,000.00, Developers overhead
costs which total $100,000, Assignment of an Emprise Bank Certificate of
Deposit in the amount of $108,500 and Assignment of an American Mutual Fund
with a current market value of approximately $59,700.
5. Conditions Precedent to Loan Closing. As a condition
precedent to Bank's obligation to close the loan transaction contemplated
herein, Borrower must provide the Bank with the following:
a. Receipt by Bank of a certified copy of Borrower's Limited
Liability Company Agreement showing the names of all limited members and
Certificate of Assumed Name containing all recording information.
b. Receipt by Bank of a certified copy of a Limited Liability
Company Resolution authorizing the borrowing described in paragraph 3, the
granting of security in paragraph 6 and the execution of all necessary
documents described in paragraph 10 thereof.
c. Receipt of a Commitment for a mortgagee's title insurance
policy in the amount of the Loan described in paragraph 3 of the Agreement
issued by a title insurance company acceptable to Bank showing the Borrower
as having fee simple title to the Real Estate subject only to a Deed of
Trust or Mortgage granted by Borrower in favor of Bank and current real
estate taxes which are not yet due and payable. Such commitment shall
insure against either violations of existing zoning ordinances and
regulations or shall certify such zoning ordinances and regulations in
sufficient detail that it can be ascertained that there is no violation
thereof on the construction of the improvements on the Premises. The
commitment shall specifically waive all of the standard preprinted general
exceptions (normally listed in Schedule B of the commitment), including
liens, encroachments, and rights of other parties not of record as of the
date of the commitment. Upon request by Bank, Borrower shall deliver to
Bank satisfactory evidence from such title company acknowledging payment in
full for all premiums, costs, and expenses for issuance for such commitment
and the final policy of insurance to be issued thereto.
Initials /S/RAB /S/RW
--------------
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 4
d. Receipt by Bank and/or title Company of such vendor's
affidavits, partial or final lien waivers and other documents as shall be
required by Bank and/or the title insurance company, to cause said
mortgagee's title insurance policy to be issued.
e. Preparation and proper execution of documentation considered
necessary by Bank and its legal counsel to evidence the respective
obligations of the parties, which documentation shall include, but not
necessarily be limited to, those documents listed in paragraph 10 hereof.
f. Borrower shall establish and maintain a satisfactory
depository account with Bank.
g. Receipt by Bank of an A.L.T.A. minimum standard detail survey
of the Real Estate, in form and content satisfactory to the Bank and/or
Title Company, prepared by a registered land surveyor showing the proposed
location of the building to be erected by the Borrower and adjacent parking
area which location shall be determined by stakes or other customary means
to mark the proposed boundaries of the improvements to be located on the
Premises.
h. Receipt by Bank of a copy of all permits or approvals required to
be received by Borrower from any local, state or federal government,
agency or commission, which permits or approvals are required as a condition
precedent to the commencement or continuation of the improvements
contemplated by the Project.
i. Receipt by Bank of a copy of Borrower's Certificate of Good
Standing evidencing that Borrower is a duly formed Limited Liability
Company, who is organized and in good standing with regard to the laws of
the State of Kansas.
j. Receipt of an appraisal prepared by an SRA appraiser, or other
person approved by Bank, indicating projected property fair market values
upon completion of the improvements contemplated by the Project which
projected values will be acceptable to the Bank.
k. Receipt by Bank of Borrower's proposed draw schedule
indicating the timing of each draw under the loan and the proposed
allocation of the draw to payment of the various contracts, subcontracts and
soft costs contemplated by the Project. Such draw schedule shall set forth
the total amount of each contract and subcontract contemplated to be
executed in connection with the Project.
l. Receipt by Bank of a copy of the building permit(s) covering
the Project.
m. Receipt by Bank of insurance certificates indicating that
Borrower has secured insurance for fire and extended coverage with a
standard mortgagee's clause, liability, workers compensation and builder's
risk non-reporting insurance during the construction period, all issued
by companies and in amounts reasonably acceptable to the Bank. Borrower
and/or Contractor shall be required to provide performance or completion
bonds with respect to the Project.
n. Receipt by Bank of executed copies of all construction
contracts and subcontracts, plans, specifications, change orders, invoices,
bids and estimates which may be reasonably required by Bank.
Initials /S/RAB /S/RW
--------------
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 5
o. Receipt by Bank of evidence, satisfactory to Bank and/or Title
Company and Bank's legal counsel, that Borrower has or will secure all
easements and street, sidewalk and alley vacations, necessary to accomplish
the satisfactory completion of the Project.
p. Receipt by Bank of an environmental Phase I study, by a
qualified environmental firm, showing no sign of environmental hazardous
materials provided, however, that if the Phase I so requires, a Phase II
report may be required by the Bank.
q. Receipt by Bank of a properly signed and executed
Participation Agreement and Certificate whereby First National Bank, Quinter
agrees to participate in this loan up to $1,050,000.00.
r. Receipt by Bank of a properly signed and executed agreement
between Bank and Colonial Trust Company, Trustee of the Bond issue. This
"Agreement Between Lienholders" shall be in a form and substance acceptable
to both Bank and Colonial Trust Company.
s. Receipt by Bank of a properly signed and executed
"Underwriting Agreement" between Borrower and MMR Investment Bankers, Inc.
providing for the sale of $2,500,000 of Bonds representing the permanent
financing for this Project. This Underwriting Agreement shall be in a form
and substance acceptable to Bank.
6. Security for Repayment of the Loan. Repayment of the Loan
referred to in paragraph 3 shall be secured by the following security
devices:
a. Borrower shall grant to Bank and the Trustee for the bonds, a
Co-First Deed Of Trust or Mortgage lien on the Real Estate. In order to
evidence such lien, Borrower agrees to execute and deliver to Bank a Deed Of
Trust or Mortgage in form and substance acceptable to Bank and its legal
counsel.
b. Borrower shall grant to bank a security interest in all
tangible and intangible personal property and fixtures associated with this
project.
c. Robert A. Brooks shall unconditionally guaranty all
outstanding indebtedness of Borrower to Bank to the extent of $340,000.00 by
executing a guaranty in form and content acceptable to Bank and its legal
counsel. Said individual is hereafter sometimes referred to as "Guarantor".
d. Borrower and/or Guarantor(s) will make an assignment of life
insurance policies, in the amount of their Guaranty(s), on the life of each
Guarantor. Each such policy of life insurance shall be assigned to Bank to
the extent of any outstanding indebtedness of Borrower to Bank.
7. Representations and Warranties. As a further condition
precedent to Bank's obligation to make the Loan described in paragraph 3
above, Borrower represents and warrants to Bank as follows:
a. Borrower is a Limited Liability Company duly organized and
validly existing under the laws of the State of Kansas.
Initials /S/RAB /S/RW
--------------
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 6
b. There does not exist at the time the Loan is made any default
or violation by Borrower of or under any of the terms, conditions, and
obligations of its Limited Liability Company Agreement, any contract to
which it is a party, any law under which it is bound or of any of the terms
and conditions of the documentation required under the provisions of
paragraph 10 of this Commitment Letter.
c. Borrower has filed all returns and reports that are required
to be filed by it in connection with any federal, state, or local taxing
authority, and has and will pay promptly all taxes, assessments, and
governmental charges as and when due.
d. Borrower has full power and authority to enter into the
transaction provided for in this Commitment Letter and has been duly
authorized to do so by appropriate action of its members.
e. The financial records previously submitted by Borrower to the
Bank as its basis for this credit approval are true, complete, and to the
best of Borrower's belief accurate statements as of the date stated therein
of its respective financial condition, net worth, and description and
projections with respect to the Project and the Borrower. There has been no
material change in the financial condition of the Borrower, the Project or its
financial projections, since the effective date of the last financial
information so furnished, which change has not been reported to the Bank in
writing.
f. As of the date of the Loan referred to in paragraph 3 above,
there are no actions, suits, proceedings, or governmental investigations
pending against Borrower and/or Borrower's managing member.
g. No pollutants or other toxic or hazardous substances,
including any solid, liquid, gaseous, or thermal irritant or contaminant,
such as smoke, vapor, soot, fumes, acids, alkalis, chemicals or waste,
including dispersed, released, stored, treated, generated, disposed of , or
allowed to escape (collectively referred as the "incident") on the Real
Estate.
h. No asbestos or asbestos-containing materials have been
installed, used, incorporated into, or disposed of on the Real Estate.
i. No polychlorinated biphenyls ("PCBs") are located on or in the
Real Estate, in the form of electrical transformers, fluorescent light
fixtures with ballasts, cooling oils, or any other device or form.
j. No underground storage tanks are located on the Real Estate or
were located on the Real Estate and subsequently removed or filled.
k. The Borrower agrees to indemnify and hold bank harmless
against any and all claims, liabilities, losses and damages (including legal
fees) Bank my incur as a result of private or governmental actions alleging
the pollution or contamination of any of the Collateral. This indemnity
shall survive the termination of this Agreement.
l. No investigation, administrative order, consent order and
agreement, litigation, or settlement (collectively referred to as the
"action") with respect to substances is proposed, threatened, anticipated or in
existence with respect to the Real Estate.
Initials /S/RAB /S/RW
--------------
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 7
m. The Real Estate and Borrower's operations at the Real Estate
are in compliance with all applicable federal, state and local statues, laws and
regulations. No notice has been served on Borrower concerning the Real
Estate, from any entity, governmental body, or individual claiming
any violation of any law, regulation, ordinance or code, or requiring
compliance with any law, regulation, ordinance or code, or demanding payment or
contribution for environmental damage or injury to natural resources.
8. Negative Covenants. Borrower, during the term of any
indebtedness of Borrower to the Bank, will not without the Bank's prior
written consent, which consent will not be unreasonably withheld:
a. Borrower will not incur any indebtedness except: (1)
indebtedness for this Project outlined in this Loan Commitment described in
paragraph 3, including indebtedness created from the sale of bonds
through MMR Investment Bankers, or open account obligations incurred in the
ordinary course of business for this project.
b. Borrower will not create, assume or allow to exist any
mortgage, deed of trust, pledge, encumbrance or other security interest or
lien upon any of the assets of this project, now or hereafter acquired by
it, other than the security provided Bank hereunder.
c. Borrower will not guarantee, endorse, or become contingently
liable for the obligations of any other person, firm or corporation except
for indebtedness described in 8(a) above.
d. Borrower will not pay any draws, salaries, dividends,
construction management fees, or other fees, or make any distributions of
income other than dividends in the amount sufficient to cover investors
income taxes resulting from the performance of the Project, without Bank
approval, so long as there is any indebtedness of the Borrower to Bank.
e. Borrower will not sell or otherwise dispose of all or any
material part of its business, property, or assets, or sell any of its
assets with the understanding or agreement that such property shall be
leased back to the Borrower.
f. Borrower will not reorganize, merge, consolidate with, or
acquire all or substantially all of the assets of any other entity, or
otherwise make any substantial change in its capitalization or the general
character of its business.
g. Borrower will not permit a change in its majority ownership to
occur.
h. Borrower will not make any loans or advances, including any
loans or advances to any officer or employee, its affiliates or
subsidiaries.
i. Borrower will not assign or transfer any of its rights under
this Agreement.
9. Affirmative Covenants. Borrower and, when applicable, the
Guarantor, agree that during the term of the Loan described in paragraph 3
above, or during the period of any indebtedness of Borrower to Bank, it or
they will:
Initials /S/RAB /S/RW
--------------
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 8
a. Borrower will maintain accurate books of account, making same
available to Bank on request. Borrower shall provide Bank with internally
prepared monthly financial statements consisting of a balance sheet and
statement of profit and loss, which monthly financial statement shall be
provided within fifteen (15) days after month-end, and, Borrower shall
further provide Bank with annual financial statements consisting of a
balance sheet and statement of profit and loss, and a statement of changes
in financial position reviewed with full disclosure by a certified public
accountant acceptable to Bank, which reviewed annual financial statement
shall be provided to Bank within sixty (60) days after fiscal year end.
The Borrower will notify its accountants in writing that the Bank
intends to rely upon the financial information prepared by said accountants
on behalf of the Borrower in determining whether to make the Loan
contemplated herein, including any advance, renewal or any part thereof.
b. Borrower will pay and discharge, when due, all indebtedness
and all taxes, assessments, charges, levies and other liabilities imposed
upon it, its income and profits, property or business.
c. Borrower will keep its insurable real and personal property
insured in an amount at least equal to the unpaid balance of principal and
accrued interest on the Loan with responsible insurance companies against
loss or damage by fire, windstorm and other hazards with a Lenders Loss
Payable clause drawn in favor of the Bank, and provide Bank with copies of
all such policies. If such insurance is not maintained by the Borrower,
then Bank has the right, but not the duty, to effect such coverage at the
Borrower's expense.
d. Borrower will comply with all laws applicable to it and to
the operation of business and do all things necessary to maintain in good
standing its limited liability company.
e. Borrower and Guarantor(s) will notify the Bank of any
litigation brought against either of them.
f. Guarantor(s), on an annual basis, shall furnish Bank with
true and complete financial statements in a form acceptable to the Bank and
a copy of his/their most recent Federal Income Tax Return.
10. Loan Documentation. In consideration of the Loan described in
paragraph 3 above, the parties agree to execute the following documents in a
form acceptable to the Bank and its legal counsel, and such other documents
as the Bank may reasonably request to carry out the intent of this
Commitment Letter:
Documents to be executed by Borrower
Promissory Note
Deed of Trust or Mortgage
Security Agreement
Financing Statements
Assignment of Life Insurance
Documents to be executed by the Guarantor/Member(s)
Guaranty
Hypothecation Agreement
Assignment
Documents to be executed by Others
Underwriting Agreement
Agreement Between Lienholders
Initials /S/RAB /S/RW
--------------
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 9
11. Events of Default and Remedies
a. An "event of default" shall exist if any one or more of the
following occurs:
1. Failure of Borrower to make any payment when due on the
loan and/or extension of credit contemplated herein or on any note,
obligation, or undertaking of Borrower to Bank which continues for 10 days
after notice thereof is delivered by Bank to Borrower.
2. Default in the performance of any covenant, agreement,
obligation, warranty or provision contained in this Loan Agreement, any of
the Loan Documents, or any other instrument, agreement, or undertaking of
Borrower to Bank which continues for 10 days after notice thereof is
delivered by Bank to Borrower.
3. Default in the performance of any covenant, agreement,
obligation, warranty, or provision contained in any instrument, agreement,
obligation or undertaking of Borrower, including the bonds as described
herein, the effect of which is to permit such obligation to be declared or
otherwise to become due prior to its stated maturity.
4. Any warranty, representation, financial information, or
statement made or furnished to Bank by Borrower is false in any material
respect when made or furnished.
5. A material adverse change, as reasonably determined by
Bank, has occurred in the financial condition of Borrower from the date of
this Loan Agreement.
6. If any judgment against Borrower, or seizure,
garnishment, attachment or other levy against the property of the Borrower
remains unpaid, unstayed on appeal, undischarged, unbonded or dismissed for
a period of 10 days.
7. Dissolution or termination of the existence of
Borrower.
8. The insolvency or business failure of, the commencement of
any involuntary bankruptcy proceedings by or against, or the filing of a
petition for the appointment of a receiver for all or any part of the
property of the Borrower, provided, however, in the event of the
commencement of any involuntary bankruptcy proceeding against Borrower or
the filing of a petition for the appointment of a receiver, the same shall
not constitute a default hereunder unless the same are not dismissed within
10 days after such petition is filed.
Initials /S/RAB /S/RW
--------------
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 10
b. Remedies. Bank may, at its option and without presentment,
protest, or demand of any kind to Borrower, all of which are expressly
waived by Borrower, immediately declare due and payable all liabilities and
obligations of Borrower to Bank, cease extending credit or making advances
of any kind to Borrower, and exercise any and all rights and remedies
possessed by Bank, including foreclosure of the deed of trust, mortgages,
security interest, and liens granted to Bank in the Loan Documents, or
which may be provided to Bank by law or equity.
12. Payment of Expenses. Borrower will pay the Bank at the time
of closing, a reasonable sum for expenses and attorney fees incurred by the Bank
in connection with the preparation and execution of the various loan
documents. IN addition, Borrower shall provide the Bank with proof of
payment of the premium for a mortgagee's title insurance policy as required by
this Commitment Letter. Borrower further agrees to pay all expenses
necessary to properly record or perfect the mortgages and security
agreement executed in connection with this loan transaction.
13. Effective Date. The effective date of this Commitment Letter
shall be June 18, 1997. The Bank's commitment as detailed in this
Commitment Letter shall become effective upon acceptance by the Borrower
and those par-ties required to sign the Acceptance which is made a part of
this Commitment Letter. Once accepted, this Commitment Letter shall remain
binding on the parties for a period of sixty (60) days from June 18, 1997. In
the event that the loan transaction contemplated by this Commitment
Letter has not been closed within such sixty (60) day period, this
commitment shall automatically be withdrawn, without the need of further
notice to Borrower or Guarantor, and shall thereafter be of no force and
effect.
14. Closing. The loan closing shall occur at a time convenient
to the parties, but no later than the expiration date of this Loan
Commitment. The closing shall occur at the offices of the Bank located at
1200 Main, Hays, KS 67601.
It is agreed that this Commitment Letter shall serve as the Loan
Agreement between and among the parties hereto and shall be binding upon
the heirs, successors and assigns of the Borrower. The Bank shall not be
deemed to have waived any of its rights upon or under the Loan, or
Collateral, unless such waiver be in writing and signed by the Bank. No
delay or omission on the part of the Bank in exercising any rights shall
operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to, or waiver of, any right on any
future occasion. This Commitment letter shall, in all respects, be
governed by and construed in accordance with the laws of the State of
Kansas. It may not be assigned by the Borrower or the Bank without the
other's written consent except that the Bank may sell a participation in
this loan to another lender without Borrower's consent but, at all times,
Borrower shall be required to deal only with Bank in connection with the
administration of the loan(s) described in Paragraph 3 herein.
Initials /S/RAB /S/RW
-------------
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 11
It is agreed that this Commitment Letter / Loan Agreement will be
executed in multiple counterparts, each of which shall be deemed original.
THIS LOAN AGREEMENT, TOGETHER WITH THE LOAN DOCUMENTS, ARE
THE FINAL EXPRESSION OF THE AGREEMENT BETWEEN THE BANK AND THE
BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR OR
CONTEMPORANEOUS ORAL AGREEMENT BETWEEN US. BANK AND BORROWER
HEREBY ACKNOWLEDGE AND AFFIRM THAT NO SUCH UNWRITTEN, ORAL
AGREEMENTS EXIST.
Very truly yours,
/S/Randy Walker
Randy Walker
Senior Vice President
/S/RAB
<PAGE>
Commitment Letter & Loan Agreement
Evergreen Gardens, St. George / Page 12
ACCEPTANCE
The undersigned acknowledge that they have reviewed the terms and
conditions contained in the above and foregoing Commitment Letter and Loan
Agreement, and agree and assent to the terms and conditions contained
therein.
Dated this 20th day of June, 1997
"BORROWER"
Front Range Assisted Living, L.L.C.
d/b/a Evergreen Gardens of St. George
BY: /S/Robert A Brooks
---------------------------------------
Robert A. Brooks, Managing Member
"GUARANTOR"
Robert A. Brooks, Individually
By: /S/Robert A Brooks
---------------------------------------
Robert A. Brooks, Individually
Initials /S/RW
-------------
<PAGE>
EXHIBIT "B" - LEGAL DESCRIPTION
Beginning at a point which lies North 0*41'53" East 250.52 feet along the
Center Section line from the Center of Section 29, Township 42 South, Range 15
West, Salt Lake Base and Meridian, and running thence North 0*41'53"
East 239.25 feet to a point on the Southerly Right of Way line of 200 South
Street, said point being also on a curve to the right, the radius point of
which bears South 40*04'43" East, 35.36 feet distant; thence Northeasterly
along said Right of Way and the arc of said curve through a central angle
of 41*40'1 7", a distance of 25.72 feet to the point of tangency; thence
South 88*24'46" East 309.92 feet along said Right of Way to the point of a
20.00 foot radius curve on the right; thence Southeasterly along said Right of
Way and the arc of said curve through a central angle of 90*00'00", a
distance of 31.42 feet to the point of tangency, said point being also on
the Westerly Right of Way of 1200 East Street; thence South 1*35'34" West
228.1 7 feet along said Westerly Right of Way; thence North 88*24'26" West
349.69 feet to the point of beginning.
Initials /S/RAB /S/RW
-------------
[GEORGE, BOWERMAN, NOEL & DEUTSCH, P.A. LETTERHEAD HERE]
July 29, 1997
MMR Investment Bankers, Inc.
550 N. 159th East, Suite 300
P.O. Box 781440
Wichita, Kansas 67278-1440
Dear Sirs:
We, George, Bowerman, Noel & Deutsch, P.A., serve as the accountants for
Front Range Assisted Living, L.L.C. and do hereby give permission to use
our name and/or values concerning the financial statements dated June 30,
1997, December 31, 1996 and December 31, 1995 in the Prospectus for the
Bond Issue(s) of Front Range Assisted Living, L.L.C. However, we do require
that a complete copy of the Prospectus for the Bond Issue(s) be submitted
to us for our review prior to its (their) distribution.
Respectively Submitted,
/S/Gary L. George
Gary L. George
Shareholder
[LETTERHEAD FOR MORRIS, LAING, EVANS, BROCK & KENNEDY]
LAW OFFICES OF
morris, laing, evans, brook & kennedy, chartered
FOURTH FLOOR, 200 WEST DOUGLAS WICHITA, KANSAS 67202-3084
(316) 262-2671 FAX: (316) 262-5991
June 18, 1997
MMR Investment Bankers
550 North 159th Street East
P. 0. Box 781440
Wichita, KS 67278-1440
Gentlemen:
Morris, Laing, Evans, Brock & Kennedy, Chartered, serves as the
attorney for Front Range Assisted Living, L.L.C., and does hereby give
permission to use its opinion letter hereby furnished to you concerning our
client's incurrence of debt in the principal amount of $2,500,000 in the
issuance of first mortgage bonds in connection with development of its
property in St. George, Utah, in the Prospectus for Bond Issue of Front
Range Assisted Living, L.L.C,
Sincerely,
/S/Roger L. Theis
Roger L. Theis
For the Firm
RLT:mk
cc: Robert A. Brooks
[LETTERHEAD FOR KIMBALL, PARR, WADDOUPS, BROWN & GEE]
LAW OFFICES OF
KIMBALL, PARR, WADDOUPS, BROWN & GEE
A PROFESSIONAL CORPORATION
SUITE 1300
185 SOUTH STATE STREET
POST OFFICE BOX 11019
SALT LAKE CITY, UTAH 84147-0019
TELEPHONE (801) 532-7840
TELECOPIER (801) 532-7750
June 11, 1997
MMR Investment Bankers
550 North 159th Street East
P.O. Box 781440
Wichita, Kansas 67278-1440
Re: $2,500,000.00 First Mortgage Bond Issue;
Front Range Assisted Living, L.L.C. (the "Company")
Gentlemen:
Kimball, Parr, Waddoups, Brown & Gee, has served as the attorney for
Front Range Assisted Living, L.L.C., in connection with the authorization
of $2,500,000.00 First Mortgage Bond Issuance, and does hereby give
permission to use our opinion letter hereby furnished to you concerning the
Company's incurrence of debt in the principal amount of $2,500,000.00 in
the issuance of first mortgage bonds in connection with the development of
its property in St. George, Utah, in the Prospectus for Bond Issue of Front
Range Assisted Living, L.L.C.
Very truly yours,
/S/David E. Gee
David E. Gee
DEG:ch
cc: Roger L. Theis, Esq.
KEITH D. CALLISON, SRA
REAL ESTATE APPRAISER and CONSULTANT
July 23, 1997
Mr. Bill Martin III
MMR Investment Bankers
P.O. Box 781440
Wichita, Kansas 67278-1440
Ref: Front Range Assisted Living, LLC
Mr. Martin,
This letter is to acknowledge permission for Front Range Assisted Living
LLC and MMR Investment Bankers to copy or reproduce the Limited/Summary
Appraisal report of Evergreen Gardens of St. George, 220 S. 1200 East
Street, St. George, Utah 84770, dated April 7, 1997, for use with
investors, and in the Prospectus on form 1A according to Regulation A.
Sincerely,
/S/ Keith D. Callison
Keith D. Callison, SRA
[Picture of building-Artist Conception]
Evergreen Gardens of St. George
220 S. 1200 East Street
St. George, Utah 84770
for
Emprise Bank
P.O. Box 400
Hays, Kansas 67601-0400
by
Keith D. Callison, SRA
Keith Callison and Associates
800 S. Broadway, #700
Wichita, Kansas 67211
Date of Value
April 7, 1997
<PAGE>
April 21, 1997
Mr. Randy Walker, Sr. Vice Pres.
Emprise Bank
P.O. Box 400
Hays, Kansas 67601-0400
Mr. Walker,
Pursuant to a request by Mr. Robert A. Brooks for an appraisal of the
market value of: The proposed site 220 S. 1200 East Street, St. George,
Utah, and proposed improvements to be known as Evergreen Gardens of St.
George, I hand you herewith a report which describes my method of approach
and contains data gathered in the investigation.
Based on analysis of the information gathered and contained in this
report, most weight is given to the Income Approach, with an indicated
value of $3,266,500.00. This value is discounted, as the project is
proposed construction, with no income at the present time.
Development and construction time is estimated at 6 months, and
lease-up should take no more than 18 months, at which time the income and
expenses should stabilize.
Considering 24 months for construction and lease-up, and an interest
rate of 11%, a future worth of $3,266,500.00 is discounted to a present
worth of $2,650,000.00.
The present value, as of April 7, 1997, for the proposed site and
proposed improvements is:
$2,650,000.00
Two Million Six Hundred Fifty Thousand Dollars
This value is expected to increase to $3,266,500.00 upon completion of
construction and lease-up, at time of stabilized occupancy, without
considering any increase in rents or expenses.
Respectfully Submitted,
/S/ Keith D. Callison
Keith D. Callison, SRA
Kansas Certified General Appraiser, #G-590
Utah State-Certified General Appraiser, #CG00051719
<PAGE>
Table of Contents
Summary of Salient Facts and Conclusions 4
Certification of Value 5
Contingent and Limiting Conditions 6
The Appraisal Process 8
Purpose of Appraisal 9
Date of Valuation 9
Definition of Market Value 10
Property Rights Appraised 11
Long-Term-Care Industry Outlook 12
Public Information and Taxes 17
Legal Description 18
Tax Data 19
Statement of Ownership 20
Area/City Data 21
Subject Neighborhood Description 26
Description of the Subject Site 26
Zoning 27
Highest and Best Use 28
The Cost Approach to Value 29
The Income Approach to Value 41
The Direct Sales Comparison Approach 50
Correlation and Final Estimate to Value 66
Addendum:
Qualifications of the Appraiser
Certifications
Page 3
<PAGE>
Summary of Salient Facts and Conclusions:
Location: In east St. George, Utah, east of I-15
and south of St. George Blvd.
Address: 220 S. 1200 East Street St. George,
Utah 84770
Owner of Record: Robert A. Brooks 646 Edgewater Rd.
Wichita, Kansas 67230
Construction Type: One story stone and frame
construction on slab, vinyl siding,
composition roof, insulated glass
windows, forced air heating & cooling
Building: One story Assisted Living Facility,
22811 sq. ft., with 35 units, center
courtyard, entry, living room, dining
room, kitchen, library, activity room,
and offices, covered porches, and 28
parking spaces.
Land Area: 87111.29 sq. ft. (1.99 acres)
Land/Building Ratio: 3.82/1.0
Present Use: Vacant land
Proposed Assisted Living Facility
Highest and Best Use: Multiple Family Residential
Present Zoning: R-3
Value of Site: $200,350.00
Date of Value: April 7, 1997
Value From Cost Approach: $2,759,200.00
Value From Income Approach: $3,266,500.00
Value From Sales
Comparison Approach: $2,874,200.00
Final Estimate/Market Value:$2,650,000.00
Page 4
<PAGE>
[Map of St George indicating subject property]
<PAGE>
Certification of Value:
I Certify that, to the best of my knowledge and belief,
1. the statements of fact contained in this report are true and
correct.
2. the reported analyses, opinions, and conclusions are limited only
by the reported assumptions and limiting conditions, and are my personal,
unbiased, professional analyses, opinions, and conclusions.
3. I have no present or prospective interest in the property that is
the subject of this report, and I have no personal interest or bias with
respect to the parties involved.
4. my compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause of the
client, the amount of the value estimate, the attainment of a stipulated
result, or the occurrence of a subsequent event.
5. my analyses, opinions, and conclusions were developed, and this
report has been prepared, in conformity with the requirements of the Code
of Professional Ethics and the Standards of the Appraisal Institute and
Uniform Standards of Professional Appraisal Practice.
6. the undersigned hereby acknowledges that he has the appropriate
education and experience to complete the assignment in a competent
manner. Please see Qualifications of Appraiser in the addenda to this
report for additional information.
7. the use of this report is subject to the requirements of the
Appraisal Institute relating to review by its duly authorized
representatives.
8. I am currently certified under the continuing education program of the
Appraisal Institute.
9. I have made a personal inspection of the property that is the
subject of this report.
10. no one provided significant professional assistance to the person
signing this report.
11. my value conclusion, as well as any other opinion expressed herein are
not based on a requested minimum value, a specific value or approval of
a loan.
12. I am certified by the State of Kansas as a Certified General Real
Property Appraiser - #G-590, expiration date 6-30-97; and by the
State of Utah as a State-Certified General Appraiser #CG00051719,
expiration date 01-31-99.
/S/ Keith D. Callison Date: 4-21-97
------------------------
Keith D. Callison, SRA
page 5
<PAGE>
Contingent and Limiting Conditions
This Appraisal Report and Valuation contained herein are expressly
subject to the following assumptions and/or conditions:
1. The title to the property is marketable, and the legal description
furnished me is assumed to be correct, and was verified by the appraiser
from records of Washington County, Utah.
2. No responsibility is assumed for matters of law or legal
interpretation.
3. To the best of the appraiser's knowledge and belief, the
statements and opinions contained in this report are supportable. The
factual data has been compiled by the appraiser from sources deemed
reliable, but no responsibility is assumed for its accuracy.
4. This appraisal represents the opinions of the appraiser based upon his
experience and assumes that all national, state, county, and city laws,
ordinances, and restrictions have been complied with.
5. No physical analysis of the building or equipment has been made by a
structural or mechanical engineer, and the conclusions as to condition
are based on the appraiser's observation only. It is assumed that there
are no hidden defects or biohazards.
6. It is assumed that there are no adverse subsurface conditions,
particularly those relating to soil bearing capacity.
7. Unless otherwise stated in this report, the existence of hazardous
material, which may or may not be present on the property, was not observed by
the appraiser. The appraiser has no knowledge of the existence of such
materials on or in the property. The appraiser, however, is not qualified
to detect such substances. The presence of substances such as asbestos,
ureaformaldehyde foam insulation, or other potentially hazardous materials
may affect the value of the property. The value estimate is predicated on
the assumption that there is no such material on or in the property that
would cause a loss in value. No responsibility is assumed for any such
conditions, or for any expertise or engineering knowledge required to
discover them. The client is urged to retain an expert in this field,
if desired.
Page 6
<PAGE>
8. The appraisal is to be considered in its entirety and use of only
a portion thereof will render the appraisal invalid.
9. Possession of this report or a copy thereof does not carry with it
the right of publication, nor may it be used for any purpose by anyone
other than the client without the previous written consent of the
appraiser, and then only with proper qualifications.
10. This original report is on buff colored paper and signed with blue ink.
The appraiser is not to be held responsible or liable for any copies
other than the original.
11. This appraisal is not to be considered as a feasibility study.
12. Neither all nor any part of the contents of this report shall be
conveyed to the public through advertising, public relations, new sales, or
other media without the written consent and approval of the author,
particularly as to valuation conclusions, and the identity of the appraiser or
firm with which he is connected or any reference to the Appraisal
Institute or the SRA designation.
13. It is understood that compensation for the appraisal services is
in no way contingent upon the value reported and is dependent only upon the
delivery of this report.
14. The appraiser shall not be required to give testimony or appear in
court by reason of this appraisal, unless prior arrangements have been
made.
15. The liability of Keith Callison and Associates for errors and
omissions, if any, in this report is limited to the amount of its compensation
for the work performed in this assignment.
16. The Americans with Disabilities Act (ADA) became effective January 26,
1992. I have not made a specific compliance survey and analysis of
this property to determine whether or not it is in conformity with the
various detailed requirements of the ADA. It is possible that a compliance
survey of the property, together with a detailed analysis of the
requirements of the ADA could reveal that the property is not in compliance with
one or more of the requirements of the Act. If so, this fact could
have a negative effect upon the value of the property. Since I have no
direct evidence relating to this issue, I did not consider possible
noncompliance with the requirements of ADA in estimating the value of the
property.
17. Acceptance of and/or use of the appraisal report constitutes acceptance
of the foregoing general assumptions and general limiting conditions.
Page 7
<PAGE>
The Appraisal Process:
An appraisal is a defensible estimate of value. The appraisal is an
unbiased estimate of the nature, quality, value, or utility of an interest
in, or aspect of, identified real estate and related personality.
An appraisal report is a report of the results of an appraisal which
begins with the definition of an appraisal problem and leads to a specific
conclusion using reasoning and relevant descriptive data.
The approaches to value are systematic procedures used to derive value
indications in real property. The methods of approaches used in this
appraisal are the following: The Cost Approach, The Income Capitalization
Approach, and The Direct Comparison Approach. If one or more of the
approaches are not used, a statement will be made to explain the reasons
why the approach was not used. The methods of each approach will be
discussed at the beginning of the appropriate section of this report.
Page 8
<PAGE>
Purpose of an Appraisal:
The stated scope of an appraisal assignment, i.e. , to estimate a
defined value of any real property interest, or to conduct an evaluation
study pertaining to real property decisions.
The purpose of this appraisal is to estimate the market value of the
described property and improvements, as of April 7, 1997.
Function of an Appraisal:
The function of the appraisal is the reason for which the appraisal is
made or is intended to be used. It relates to the character of the
decision to be based on the appraisal. For example: price at which to buy
or sell, amount of mortgage to be made.
The function of this appraisal is to establish a reasonable value for
the subject property, as it may be used as security for mortgage financing.
Date of Appraisal:
The conclusions of value contained within this report reflect the
appraiser's opinion, as of April 7, 1997.
Page 9
<PAGE>
Definition of Market Value:
The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the buyer
and seller, each acting prudently, knowledgeable, and assuming the price is not
affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and the passing of title from
seller to buyer under conditions whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised, and each acting
in what he considers his own best interest;
3. a reasonable time is allowed for exposure in the open market;
4. payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto;
5. the price represents the normal consideration for the property
sold unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.
Adjustments to the comparables must be made for special or creative
financing or sales concessions. No adjustments are necessary for those
costs which are normally paid by sellers as a result of tradition or law in a
market area; these costs are readily identifiable since the seller pays
these costs in virtually all sales transactions. Special or creative
financing adjustments can be made to the comparable property by comparisons to
financing terms offered by a third party institutional lender that is
not already involved in the property or transaction. Any adjustment should not
be calculated on a mechanical dollar for dollar cost of the financing
or concession, but the dollar amount of any adjustment should approximate
the market's reaction to the financing or concessions based on the appraiser's
judgment.
Page 10
<PAGE>
Property Rights Appraised:
Property rights consist of ownership, legal estate, economic
benefits, and financial components. Ownership may be held by an
individual, a partnership, or a corporation, and undivided
ownership rights may belong to two or more parties in tenancies.
Legal estate and economic benefits refer to the disposition of the
rights to property use and occupancy as well as the income
generated from rent or percentage of profits. The financial
components of a property consist of the equity and mortgage funds
that secure it. The equity and mortgage components of property may
be further divided into leased fee and leasehold interests or into
land and building portions.
A fee simple estate represents absolute ownership
unencumbered by any other interest or estate, and subject only to
the powers of government. Ownership of a fee simple estate can be
retained, sold, bestowed, or bequeathed. A life estate is created
by a will or deed of conveyance, which assigns life tenancy and
provides for the property to be bequeathed when the life tenant
dies.
This appraisal is predicated on as to the fact that the owner
of record holds Fee Simple Estate, except for the recorded
easements, which are included on the replat. No other encumbrances
are known.
Page 11
<PAGE>
Long-Term-Care Industry Outlook
During 1990 the elderly aged sixty-five years and over comprised 13.3%
of the total United States population, as compared to 11.3% as of the 1980
census report. Furthermore, the sixty-five and over portion of the
population is forecasted to increase 11% to 14.1% of the total population
by the end of this year. Currently, the fastest growing segment of the
country's population is the eighty-five and older group with an expected
increase from 3.0 million in 1990 to 4.4 million by the year 2000.
Approximately 24% of the population over eighty-five reside in long-term
care facilities. National population statistics and forecasts are provided on
the following table.
<TABLE>
<CAPTION>
UNITED STATES POPULATION STATISTICS
(Thousands)
Percent Change
1980 1990 1995 1980-1990 1990-1995
<S> <C> <C> <C> <C> <C>
Total U.S. 226546 249958 260788 10.3% 4.3%
65 years+ 25549 33184 36828 29.9% 11.0%
Percent/Total U.S 11.3% 13.3% 14.1%
75 years + 9969 14257 16935 43.0% 18.8%
Percent/Total U.S. 4.4% 5.7% 6.5%
</TABLE>
(Source: Donnelley Demographics)
A factor which has contributed to growth in demand for elderly care is
the increased life expectancy of the population. As the average life
expectancy for both men and women continues to increase, as illustrated on
the following table, the probability of an elderly person requiring some
form of healthcare service also increases.
<TABLE>
<CAPTION>
Men Women
At birth At age 65 At birth At age 65
<S> <C> <C> <C> <C>
1930 58.0 11.4 61.4 12.9
1940 60.9 11.9 65.3 13.4
1950 65.3 12.8 70.9 15.1
1960 66.6 12.9 73.2 15.9
1970 67.1 13.1 74.8 17.1
1980 69.9 14.0 77.5 18.4
1990 72.3 15.1 79.9 19.9
2000 est. 73.4 15.7 81.1 20.8
</TABLE>
(Source: United States Bureau of the Census)
Page 12
<PAGE>
While most major healthcare providers will benefit from the graying of
America, the nursing home industry will be the chief beneficiary.
The United States nursing home industry included a total of
approximately 17,500 facilitieswith over 1.7 million beds in 1993. The
National Center for Health Statistics estimates that the number of beds
will rise to 2.2 million by the year 2000. The number of elderly needing
care is expected to increase from an estimated nursing home population in
1993 of slightly more than 1.5 million elderly to 2.2 million by the year
2000, 2.6 million by the year 2010 and 3.0 million by the year 2020. The
average occupancy rate in the industry was approximately 95% in 1992.
Total nursing home expenditures in 1994 equaled an estimated $85.5
billion, representing a 12.5% increase from 1993 expenditures which totaled
approximately $76 billion. Nursing home expenditures are expected to
continue to exhibit higher than inflationary growth rates due to the
forecasted increases in needy elderly. The following table exhibits
nursing home and national healthcare expenditures since 1980.
<TABLE>
<CAPTION>
NURSING HOME EXPENDITURES AS A PERCENTAGE OF
NATIONAL HEALTHCARE EXPENDITURES
Year Nursing Home National Healthcare Nursing Home/
($ billions) ($ billions) National Healthcare
<S> <C> <C> <C>
1980 $20.0 $249.1 8.00%
1985 34.1 420.1 8.05
1986 36.7 454.8 8.07%
1987 39.7 494.1 7.84%
1988 42.8 546.1 7.84%
1989 47.7 604.3 7.89%
1990 53.3 675.0 7.90%
1991 59.8 751.8 7.95%
1992 67.3 840.4 8.01%
1993 76.0 942.5 8.06%
1994 85.5 1,060.5 8.06%
</TABLE>
(Source: Health Care Financing Administration, FCFA)
Medicaid days represent over 70% of the total patient mix in nursing
homes. State and federal Medicaid outlays totaled $94.5 billion in 1991,
$118.2 billion in 1992, $140.3 billion in 1993 and an estimated $161.9
billion in 1994.
Page 13
<PAGE>
In response to the growing levels of elderly needing care as well as
the resulting increased costs, many states have developed methods of
controlling the growth of these expenditures. One method implemented by
many states is a moratorium on new nursing home construction. This policy
results in an increased demand for existing facilities.
A number of efforts have been made to reduce the strain on both state
budgets and the nursing home industry. These efforts vary from state to
state. A number of states have tested the development of a prospective
payment system (PPS) for reimbursing their nursing facilities, analogous to the
one currently in place for hospitals, where payment levels are based on debility
with separate payments for special services and therapy. The
Omnibus Budget Reconciliation Act (OBRA) of 1993 included a directive to
the U.S. Department of Health and Human Services to develop, by October 1,
1995, a Medicare prospective payment system for nursing facilities based on a
case mix model. Currently, several states including Kansas, Maine,
Mississippi and South Dakota are all participating in the Health Care
Financing Administration supervised joint Medicare and Medicaid case-mix
demonstration project. (More than twenty other states operate under some
form of a case-mix reimbursement system, including Delaware, Vermont,
Alaska, Colorado, Virginia, Kentucky, North Dakota, Nebraska, Montana, New
Jersey, Illinois, Ohio, West Virginia, Maryland, and Minnesota, among
others.)
Some states are looking into managed care techniques such as Medicaid
waivers and the implementation of a competitive bidding process for gaining
admissions. The Medicaid waiver would reduce costs by diverting Medicaid
nursing home funding to less costly services. States that are currently
looking into these options include Kansas, Michigan, Arizona, Texas,
Maryland, Maine, New Jersey, Washington, and California.
Many states continue to use the Boren Amendment in relation to Medicaid
reimbursement. "The Boren Amendment requires state Medicaid programs to
set reasonable and adequate payment rates for effectively and economically
operated facilities so they can meet federal and state standards in the
provision of care. This amendment, enacted in 1980, was originally
intended to affirm states' privileges to pursue cost containment in setting
nursing home payment rates. In recent years, however, it has become the
basis for lawsuits challenging some states' methodologies of payment
rates." (From "The Guide to the Nursing Home Industry", 1994, HCIA, Inc.,
and Arthur Andersen & Company)
page 14
<PAGE>
In order to limit the risk associated with the uncertain future of
institutional nursing home care, many providers have begun to diversify
into other areas of healthcare such as home healthcare, assisted living,
and specialty care. Providers see expansion into home and community based
care as a way to avoid being adversely affected by provisions for these
services found in many healthcare reform proposals. Providers also view
home care as a favorable add-on service because it allows the facility to
continue generating revenue from post-acute discharged patients rather than
turning the patient over to another provider. Approximately 4% of all
nursing homes offer home care services. Assisted living services are also
viewed as a favorable add-on to services since they are strictly funded
with private payers and, therefore, typically have a higher profitability
level than nursing homes. Currently, approximately 22% of all nursing
facilities offer assisted living services. Many providers also see
subacute care as a favorable addition to services. Subacute patients
represent patients with complex medical and rehabilitation needs which do
not require the intensive care offered in a hospital setting. Nursing home
subacute rates are often one-third to one half the amount of hospital
rates, which has made this alternative popular among managed care
providers. Currently, 10% of the nation's nursing homes provide some type
of subacute care. (From "The Guide to the Nursing Home Industry", 1994,
HCIA, Inc., and Arthur Andersen & Company). Subacute units require a
significant capital investment and a higher level of expertise than a
typical nursing unit. These entry barriers have reduced growth in this
segment.
Also, in response to the uncertainty as to the future of healthcare and
public healthcare funding, many providers are consolidating in order to
expand their networking capabilities with managed care providers. During
1993 alone, acquisitions occurred among twenty-three of the nation's
twenty-five largest nursing home chains. One of the biggest deals of 1994
occurred in January, when Sun Healthcare Group Systems purchased Mediplex
Group, a company specializing in subacute care, for $320 million. Since
only 34% of the market is controlled by nursing home chains, the merger
activity should continue in the immediate future.
As indicated, healthcare facilities currently derive most of their
revenue from government sources such as Medicaid, Medicare and the Veterans
Administration, and from private sources such as personal funds and
insurance programs. The Medicaid program, which accounts for over 45% of
the United States nursing home revenues, typically pays rates significantly
lower than Medicare or private rates.
page 15
<PAGE>
Medicaid covers the skilled or intermediate nursing home costs of
qualified low income residents for an unlimited period. Medicare only pays part
of the skilled nursing home costs incurred by qualified residents
during a limited period. In addition, nursing homes must meet strict
federal guidelines in order to qualify as Medicare certified for
reimbursement. Therefore, fewer nursing home patients qualify for Medicare
coverage relative to Medicaid. However, nursing homes that attract a
higher percentage of Medicare or private pay patients typically have higher
operating margins than similar facilities with a higher Medicaid census.
Competition is increasing among nursing homes for the Medicare and
private pay patients. For example, many nursing homes have been developing new
services such as multiple levels of care, retirement facilities,
Alzheimer's and ventilator programs and other specialized services for
niche markets. In addition, as acute care hospitals have experienced lower
reimbursement levels and declining occupancy rates, many have expanded into
skilled nursing services to boost revenues.
Although nursing facilities benefit from increasing demand and changes
in Medicare reimbursement, widespread healthcare inflation concerns will
keep downward pressure on nursing home revenues. Federal, state and local
governments, along with insurance companies and other third party payers,
are continually seeking ways to contain healthcare expenditures. The focus on
acute care cost containment is spreading to all types of healthcare
facilities.
Conclusion:
Although the healthcare industry, as a whole, has experienced good
growth over the past several years, projections for future growth have been
tempered.
An estimated thirty-eight million Americans have no health insurance
coverage at all, with children accounting for 36% of this total.
Currently, as many as another fifty million Americans are believed to have
inadequate coverage. The percentage of total healthcare costs of the
United States gross national product (GNP) continually increases every year and
it is estimated that it will consume 28% of the GNP by the year 2010.
Costly regulations and limited reimbursement from Medicaid have
squeezed industry profits. In an effort to remain profitable, many
providers have diversified into medical specialty units, which tends to be
more profitable than typical nursing care. In any case, the elderly care
segment of the healthcare industry continues to evolve in response to
dynamic social and economic influences.
page 16
<PAGE>
Public Information and Taxes:
Real estate in Washington County is subject to a general tax which is
referred to as the ad valorem property tax. The property tax is based upon the
value of the property, which is used as a tax base when all property
values in the county are totaled.
The amount of property tax due on a property is determined by
multiplying the assessed value by a mill levy rate (per $1,000 of assessed
value) which is established for each taxing district. The tax is
established on the basis of the assessed value of the property on January
lst of each year.
Special assessments for streets, sewers, sidewalks, utilities, etc.,
which are installed by the municipality, may be assessed against the
property as a special assessment tax. Normally, the owner has the right of
prepayment, or the special tax may be allocated over a fifteen year period,
allowing for a small annual payment with interest on the balance due.
page 17
<PAGE>
Legal Description:
A tract of land located in the northeast quarter (NE/4) of Section 29,
Township 42 South, Range 15 West, Salt Lake Base and Meridian, more
particularly described as follows:
Beginning at a point which lies North 0 degrees 41 minutes 53
seconds East 250.52 feet along the Center Section line from the
Center of Section 29, Township 42 South, Range 15 West, Salt Lake
Base and Meridian, and running thence North 0 degrees 41 minutes
53 seconds East 239.25 feet to a point on the Southerly Right of
Way line of 200 South Street, said point being also on a curve to
the right, the radius point of which bears South 40 degrees 04
minutes 43 seconds East 35.36 feet distant; thence Northeasterly
along said Right of Way and the arc of said curve through a
central angle of 41 degrees 40 minutes 17 seconds, a distance of
25.72 feet to the point of tangency; thence South 88 degrees 24
minutes 46 seconds East 309.92 feet along said Right of Way to the
point of a 20.00 foot radius curve to the right; thence
Southeasterly along said Right of Way and the arc of said curve
through a central angle of 90 degrees 00 minutes 00 seconds, a
distance of 31.42 feet to the point of tangency, said point being
also on the Westerly Right of Way of 1200 East Street; thence
South I degree 35 minutes 34 seconds West 228.17 feet along said
Westerly Right of Way; thence North 88 degrees 24 minutes 26
seconds West 349.69 feet to the point of beginning, City of St.
George, Washington County, Utah.
Containing 87111.29 sq. ft. (1.99 acres), more or less.
page 18
<PAGE>
[St George, Washington County, Utah Plat of Subject Property Book 13 page
20-E]
18a
<PAGE>
Tax Data:
Account #0315393
Serial #SG-1739-A-8-A
Assessed Value: 295005
1996 Tax Rate: 11.406 mills
1996 Taxes: $3,364.83
page 19
<PAGE>
Statement of Current Ownership:
The appraiser has inspected and researched the public records in the
county courthouse. The public records indicate that the property legally
described rests with the following, considered to be the owner of said
property.
Robert A. Brooks
646 Edgewater Road
Wichita, Kansas 67230
History of Property Ownership:
Grantor: Larkin-Gifford Developments, LLC
Grantee: Robert A. Brooks
Deed: WD Bk 1063, Pg 794
Date: 12-27-96
Grantor: Ribelaca Future, LC
Grantee: Larkin-Gifford Developments, LLC
Deed: WD Bk 1063, Pg 784
Date: 12-27-96
page 20
<PAGE>
[Warranty Deed of Subject Property]
20a
<PAGE>
City/County Data:
Location/History:
St. George is located in the far southwest part of Utah in one of the
state's nine travel regions. It is known for its colorful geology and
unique history which have played major roles in giving "Color Country" its
special charm, and its name. The landscape is striking with mountains
climbing to over 12,000 feet, timbered plateaus, rugged and colorful
canyons, turquoise-blue lakes and reservoirs, and cactus-covered deserts.
The clean air, peaceful Old West lifestyle, and the openness of the western
landscape add to the Color Country experience, any time of the year.
Year round recreational opportunities are limitless in Color Country!
You can take in an exciting western rodeo, experience the thrill of
mountain biking past sweeping vistas or hiking into the backcountry where
you'll feel certain that you're the first human ever to set foot on the
land--and you may well be. Play a round of golf any time of the year, feel the
cold mist of powdery snow as you ski down a Mountainside, reel in that
rainbow trout, or just relax and take in the sights. There are plenty of
them.
The history of Color Country is as diverse and colorful as the land it
occupies. The names of the towns and rivers reflect the melting pot of
various religious beliefs and cultures. The land-so beautiful and yet so
rugged--was among the last to be explored in the nation's lower 48 states.
The earliest known occupants of the area were the Anasazi Indians,
until 1300 A.D. The Paiute Indians were the next major occupants of the
area. Many of the towns and areas in southwestern Utah have Paiute names.
Seeking religious freedom, Mormon leader Brigham Young led a group of
followers westward from Illinois to Utah in 1847. They arrived in the
Great Salt Lake Valley on July 24. Today Pioneer Day is annually
celebrated throughout the state.
As more Mormon pioneers came west and settled in the Great Salt Lake
Valley, Brigham Young sent explorers southward to scout for new settlement
locations. St. George, the largest of the settlements, was founded in 1861 and
became Brigham Young's winter home. A temple was built, and today is
the oldest Mormon temple in the world still in use.
Since it was founded more than 130 years ago, St. George has been built on a
distinct tradition of community pride. The City is actively involved
in maintaining and building on this tradition, and as the City continues to
grow, the citizens are committed to help maintain that unique spirit of
community pride.
page 21
<PAGE>
Climate:
The climate in St. George is semi-arid with two separate rainfall
seasons in the early spring and late summer. These two seasons average
about 8 inches of annual precipitation. Although average maximum
temperatures for the summer months are between 95 and 101 degrees
Fahrenheit, the low humidity makes these temperatures agreeable.
The Southern Utah climate features bright sunshine, low annual
precipitation, clean air and a wide daily temperature range. Another
attractive feature is mild winters and infrequent traces of
snowfall which rarely stay on the ground more than a day.
<TABLE>
<CAPTION>
Population:
Year St. George Washington County
<S> <C> <C>
1990 28,000 51,900
1992 32,725 55,000
1994 38,950 63,400
1995 42,000 68,500
</TABLE>
Employment:
Major employers (150 or more employees) in Washington County:
Washington County School District
Dixie Regional Medical Center
Dixie College
St. George City
Wal-Mart
Lin's Marketplace
Skywest Airlines
RMC Foods
J & J Mill & Lumber
Andrus Trucking
St. George Ford/Lincoln
McDonalds
Human Resources, Inc.
Washington County
1994 Unemployment rate: 3.2%
page 22
<PAGE>
Municipal Services:
The local government is a Council/Manager, with a mayor and five
elected council members and an appointed city manager.
Community Services:
Financial Institutions:
Number of banks: 10
Number of savings & loans: 2
Health Care:
Hospital: 1 (137 beds)
Clinics: 6
Medical Personnel:
MD(s) 69
Dentist(s) 47
DC(s) 7
DO(s) 1
DPM(S) 6
DVM(S) 6
Religious Institutions:
Protestant Churches: 18
Catholic Church: 1
Education Facilities:
Public Schools No.
Elementary 15
Middle School 4
High School 5
Alternative H.S. 1
Private Schools
Elementary 4
Middle/High School 1
Higher Education
Dixie College Avg. quarterly enrollment 4,000
page 23
<PAGE>
Housing:
The Washington County Board of Realtors reports the average home,
consisting of three bedrooms and two baths (approximately 1500 square feet)
sells for $110,000.00. The annual property tax on such a home is about
$1,100.00.
Recreational Facilities:
Type of facility:
Public tennis court(s)
Public swimming pool(s)
Public park(s)
Public golf course(s)
Country Club available: Yes
Nearest public access to lake or river: 12 miles
Activities allowed:
Fishing, boating, camping, and touring.
Convention/Lodging Facilities:
Motels: 34 (2310 rooms)
Media:
There is a daily newspaper, 7 radio stations, regular TV channels
received, and cable channels available.
Transportation:
Highways:
Interstate (N-S) I-15/0 miles
Interstate (E) I-70/125 miles
US/State (E) U-9/7 miles;US-89/58 miles
State (NW) U-18/0 miles
Air:
Public airport: Aero West & Sky West/The Delta
Connection; as well as charter service
page 24
<PAGE>
Utilities:
Electric Service: St. George City; Utah Power
Natural Gas: Mountain Fuel Supply
Water: St. George City
Sanitation: St. George City
Telephone: U.S. West Communications
State and Local Taxes:
Sales tax rate of 5.875 on all purchases.
Conclusion:
St. George is the economic center of south Utah and provides
retail/service support to a large metropolitan area, including a broad area
around St. George and extending into Arizona and Nevada. The location,
with mountains on all sides, and a mild climate that is very conducive to
golf, tennis, and other types of outdoor recreational facilities, is very
attractive to senior adults. This has stimulated a positive trend in
virtually all property values, and active construction is evident for
almost all property types throughout the city.
page 25
<PAGE>
Character of the Neighborhood:
The subject neighborhood, located in east St. George, is bounded by
Interstate I-15 on the west and north, the Rim Rock Wash on the east, and the
Virgin River on the south.
This is a mixed neighborhood, but predominantly residential use, with homes
in the $80,000.00 to $400,000.00 price range, as well as condominiums and
apartments. Shopping areas, offices, restaurants and banks are located along
the north and south of the neighborhood. Churches, schools, and parks are
located in the neighborhood.
This has been a very homogeneous, fast growing neighborhood.
Character of the Site:
The subject site is located east of I-15, south of St. George Boulevard,
and west of River Road, on the southwest corner of E. 200 South Street and S.
1200 East Street.
The subject is to be known as 220 S. 1200 East Street, St. George, Utah
84770.
The property size is: 228.17 x 349.69 x 239.25 x 25.61 x
253.34 x 31.42 = 87111.29 sq. ft., more or less (1.99 acres).
A minimum of a 25 foot front setback (front yard), and 10 foot
rear and side yard setbacks are to be provided.
The site is fairly flat, with drainage to the southeast.
All public utilities (water, gas, electricity, and sanitary sewer) are
available to the site, as well as telephone and cable TV.
The site is in Zone C (areas of minimal flooding), FIRM Panel #490177 0018
D, dated August 19, 1987.
The site has condominiums and patio homes to the east, and apartments and
condominiums to the south. The property between the site and I-15 is vacant, as
well as the property to the northeast across 1200 East Street.
The property across 200 South Street is commercial use.
The subject site is very well suited for the proposed improvements (35
units Assisted Living) , with good access and very good view, as well as being
homogeneous with the neighborhood.
page 26
<PAGE>
[Enlarged Street Map of St George indicating the subject property]
26a
<PAGE>
Zoning:
The present zoning of the subject site is "R-3", Multiple
Family Residential Zone. This zoning is to provide appropriate
locations where medium to high density residential neighborhoods on
lots of not less than 6000 square feet may be established,
maintained and protected. The regulations also permit the
establishment of, with proper controls, the public and semi-public
uses such as churches, schools, libraries, parks and playgrounds,
etc., which serve the requirements of families. The regulations
are intended to prohibit those uses that would be harmful to a
medium to high density residential neighborhood.
Permitted uses:
1. Single Family Dwellings
2. Multiple Family Dwellings
3. Household pets.
4. Horticulture and gardening for personal use.
5. Accessory uses and buildings.
6. Residential facility for the elderly.
7. Residential facility for the handicapped.
page 27
<PAGE>
City of St. George
Zoning Ordinance
Printed October 1996
27a
<PAGE>
CONTENTS PAGE
Chapter 1: General Provisions ......................... 1-1
Chapter 2: Board of Adjustment ........................ 2-1
Chapter 3: Supplementary and Qualifying Regulations ... 3-1
Chapter 4: Nonconforming Buildings and Uses ........... 4-1
Chapter 5: Walls, Fences and Hedges ................... 5-1
Chapter 6: Off-Street Parking Requirements ............ 6-1
Chapter 7: Motor Vehicle Access and Loading ........... 7-1
Chapter 8: Conditional Uses ........................... 8-1
Chapter 9: Design Standards for Single and
Two-Family Dwellings Outside a MH Zone .... 9-1
Chapter 10: Construction Subject to Geologic, Flood or
Other Natural Hazards ..................... 10-1
Chapter 1OA: Hillside Development ...................... 1OA-1
Chapter 11: Zones ...................................... 11-1
Chapter 12: Open Space Zone ............................ 12-1
Chapter 13: Residential Estates Zone ................... 13-1
Chapter 14: Single Family Residential Zone ............. 14-1
Chapter 15: Multiple Family Residential Zone ........... 15-1
Chapter 16: Mobile Home Zone ........................... 16-1
Chapter 17: Planned Development Zone ................... 17-1
Chapter 18: Administrative & Professional Office Zone .. 18-1
Chapter 19: Commercial Zone ............................ 19-1
Chapter 20: Manufacturing Zone ......................... 20-1
Chapter 21: Agriculture Zone ........................... 21-1
Chapter 22: Mining & Grazing Zone ...................... 22-1
Chapter 23: Landmark Sites ............................. 23-1
Chapter 23A: Historic District ......................... 23A-1
Chapter 24: Definitions ................................ 24-1
Chapter 25: Miscellaneous .............................. 25-1
27b
<PAGE>
Chapter Fifteen
MULTIPLE FAMILY RESIDENTIAL ZONES
Page
15-1 Purpose .......................................... 15-1
15-2 Permitted Uses ................................... 15-1
15-3 Conditional Uses ................................. 15-3
15-4 Height Regulations ............................... 15-3
15-5 Density Regulations .............................. 15-3
15-6 Area, Width and Yard Requirements ................ 15-4
15-7 Modifying Regulations ............................ 15-4
Chapter 15-A
RESORT OVERLAY ZONE
Page
15A-1 Purpose ......................................... 15A-1
15A-2 Establishment of Resort Overlay Zones ........... 15A-1
15A-3 Qualifying Criteria ............................. 15A-2
15A-4 Existing Resort Areas ........................... 15A-2
27c
<PAGE>
Chapter 15. MULTIPLE FAMILY RESIDENTIAL ZONES
R-2, R-3, R-4
15-1 Purpose:
To provide appropriate locations where medium to high density residential
neighborhoods on lots of not less than 6,000 sq. ft. may be established,
maintained and protected. the regulations also permit the establishment of, with
proper controls,the public and semi-public uses such as churches, schools,
libraries, parks and playgrounds, etc., which serve the requirements of
families. The regulations are intended to prohibit those uses that would be
harmful to a medium to high density residential neighborhood.
15-2 Permitted Uses:
1. Single Family Dwellings
2. Multiple Family Dwellings - all new construction required unless
otherwise approved by the Commission. (Townhouses or condominiums - minimum
project - 4 units).
3. Household pets
4. Horticulture and gardening for personal use.
5. Accessory uses and buildings
6. Residential facility for the elderly providing it meets the
following criteria:
a. conforms to all applicable building, safety, zoning, and health
ordinances applicable to similar dwellings;
b. is capable of use as a residential facility for elderly persons
without structural or landscaping alterations that would change
the structure's residential character;
c. is not located within three-quarters mile of another residential
facility for elderly persons or residential facility for handicapped persons;
d. is not being occupied by any person being treated for alcoholism
or drug abuse;
e. placement is on a strictly voluntary basis and not a part of, or
in lieu of, confinement, rehabilitation, or treatment in a correctional
facility;
15-1
27d
<PAGE>
f. is occupied on a 24 hour-per-day basis by eight or fewer elderly
persons in a family-type arrangement;
g. is not operated as a business as defined in 5-1-3, St. George
City Code, provided that any fee charged for food or for actual and necessary
costs of operation and maintenance of the facility shall not by themselves
cause it to be considered a business; and
h. is owned by one of the residents or by an immediate family
member of one of the residents, or is a facility for which the title has been
placed in trust for a resident.
7. Residential facility for handicapped persons provided it meets the
following criteria:
a. meets all municipal building, safety and health ordinances
applicable to similar dwellings;
b. provides assurance through the operator that the residents of
the facility will be properly supervised on a 24 hour basis;
c. is capable of use as a residential facility for handicapped
persons without structural or landscaping alterations that would change the
structure's residential character;
d. is not located within three-quarters mile of another residential
facility for handicapped persons;
e. is not occupied by any person being treated for alcoholism or
drug abuse;
f. is not occupied by any person who is violent;
g. is on a strictly voluntary basis and not a part of, or in lieu
of, confinement, rehabilitation, or treatment in a correctional facility;
h. is occupied on a 24 hour-per-day basis by eight or fewer
handicapped persons in a family-type arrangement under the supervision of a
house family member or manager; and
i. is operated by or under contract with the Utah Department of
Human Services.
15-2
27e
<PAGE>
8. Home occupations as defined herein and prescribed in the City of St.
George Home Occupation Ordinance.
15-3 Conditional Uses:
1. Church
2. School
3. Park or playground
4. Public utilities and facilities.
5. Child nursery as defined herein. The dwelling shall be the permanent
residence of the operator. The use may be conducted only within a single family
dwelling located within the multiple family zone. No multiple family dwelling
may be approved for a child nursery. Parking shall be as required by the
Planning Commission. All other requirements of the zone shall be complied with.
6. Rest homes or convalescent hospitals.
7. Other uses approved by the Planning Commission as being in harmony
with the intent of the zone and similar in nature to the above listed uses.
15-4 Height Regulations - No main building shall be erected to a height greater
than 35 feet or two and one-half stories, whichever is lesser, and no accessory
building shall be erected to a Height greater than one story or IS feet unless
recommended by the Planning Commission and approved by the City Council as a
conditional use permit (see Section 3-14 for restrictions).
15-5 Density Regulations - A lot size minimum of 6,000 sq. ft. shall be required
for any single family dwelling or the first unit of a multiple family
development. Additional units may be added according to the following schedule
(in sq. ft.):
<TABLE>
<CAPTION>
Units R-2 R-3 R-4
<S> <C> <C> <C>
lst unit 6,000 6,000 6,000
2nd unit* 2,000 2,000 2,000
3rd & 4th units* see note* 2,700/unit** 2,000/unit
Additional units* see note* 3,200/unit 1,700/unit
</TABLE>
*Except that there shall be 6,000 sq. ft. for each detached single
family dwelling. Also, 8,000 sq. ft. shall be required for each
two-family dwelling in the R-2 Zone.
**Lots approved and recorded as of the effective date (12-16-93) of
this amendment may qualify for up to a four-plex dwelling structure
provided the lot size is at least 12,800 sq. ft. in area.
15-3
27f
<PAGE>
Density may be further limited by off-street parking requirements and by open
space requirements. (see 15-7.7 and 15-7.11)
15-6 Area, Width and Yard Requirements:
<TABLE>
<CAPTION>
Zone Area Minimum Lot Width Minimum Minimum Yard Setbacks
Front Side Rear
<S> <C> <C> <C> <C> <C>
R-2 6,000 sq ft 65' 25' 10' 10'
R-3 6,000 sq ft 70' 25' 10' 10'
R-4 6,000 sq ft 70' 25' 10' 10'
</TABLE>
15-7 Modifying Regulations:
1. The side and rear yard setback on a street side yard shall be the same
as for a front yard setback. (Setback requirement is 25' from any public
street).
2. Private garages and accessory buildings located to the rear and at
least 10 feet away from the main dwelling may be built to the property line
provided that (1) the roof shall not project across the property line , (2)
storm water runoff from the building shall not run onto adjacent property, and
(3) all corner lots shall maintain 25 feet on the street side. Detached private
garages and accessory buildings shall not exceed 1,000 sq. ft. in size unless a
larger building is approved by the Planning Commission.
3. A "zero" side yard setback may be used for all two family
lots in a planned subdivision or development. In such cases, the
opposite side yard shall not be less than a combination of the side
yards otherwise required.
4. Any fractional amount of square footage left over in
calculating density may not be considered toward an additional dwelling unit
unless the full required amount of land is available.
5. In areas where the front yard setback on adjacent property is less than
25', new construction may be constructed at the lesser front yard setback
requirements; however, in a case where the lesser setbacks of the adjacent
properties on either side are different, the setback shall be a distance that is
halfway between the distance of the other two setbacks; or in a case where
one of the setbacks is greater than 25', the setback shall be a distance that is
halfway between the distance of the lesser adjacent setback and 25'; but in no
case shall the setback be less than 20'.
6. In the R-2 zone, no multiple family dwelling shall contain more than
two dwelling units per building.
7. A minimum of 30 of the lot area shall be maintained in open green space
or landscaped area and at least 70% of the front setback area shall be
maintained as landscaped area.
15-4
27g
<PAGE>
8. Multi-family dwellings which are 2 or more storied above grade in
height and which are adjacent to a single-family zone shall maintain a 25'
setback adjacent to the single-family zone boundary, and a 20' setback adjacent
to other residential zones, including the PD Planned Development Residential
Zone.
9. Front yard setback from private streets shall be 8 feet minimum from
back of curb for any main building, and shall be 18 feet minimum from back of
curb for garages or carports for projects started after April 4, 1991, except
that an 8 foot setback is allowed from a private street in the area bounded by
I-15 on the east and south, Bluff Street on the west, and the Red Hill on the
north. In addition the Planning Commission may allow an 81 front setback on
hillside developments where it is determined that adequate off-street parking is
provided and the reduced setback will reduce the overall amount of hillside
excavation. Projects which have received preliminary plat approval prior to
April 4, 1991 and have less than an 18' front setback off a private street may
complete the project according to the preliminary plat.
10. In group dwellings, no two buildings may be located closer together
than 10 feet for one story buildings, 15 feet for 2 story buildings, and 20 feet
for 2 1/2 story buildings.
11. In developments with 5 or more units, there shall be provided useable
recreation or playground areas outside of the front yard setback, with a total
minimum area of 1,000 sq. ft. for 5 units and an additional 200 sq. ft. for each
unit over 5 units. The average width and length of each useable recreation or
playground area shall not be less than 20 feet or as approved by the Planning
Commission. At least 50% or the useable area shall be in the form of open
playground or green space.
12. Except for the required street side yard setback of 25', a lot which i
s developed with only one single family dwelling may have side yard setbacks of
8' and 10'.
13. A multi-family development with a density of 12 dwelling units/acre or
more shall have access via collector, or arterial roads, or via local access
roads (50 ft. minimum right-of-way) which are not part of a single family
subdivision, including mobile home subdivisions.
Any multi-family development with a density of 12 dwelling units/acre or
more and having more than 20 dwelling units in the project or a phase thereof
shall be considered a conditional use and subject to the provisions of Chapter
8, if the only access roads are via local neighborhood streets (with 50 feet or
less right-of-way) through a single family subdivision, including mobile home
subdivisions.
If a collector or arterial road (60' or more right-of-way) will be
completed and available for use at the time of occupancy as
15-5
27h
<PAGE>
determined by the City Engineer, then the multi-family development shall be
considered a permitted use rather than a conditional use.
14. A multi-family development with a density of 12 d.u./acre or more and
having 20 or more total dwelling units shall be subject to design review
approval by the City Council. The City Council after hearing the recommendation
of the Planning Commission may approve, approve with conditions, or deny the
proposed design plan for such multi-family developments. Applicants shall
submit a site plan and elevation drawings showing the project's overall design
plan including landscaping and proposed building exteriors. The Planning
Commission and City Council shall review the design plans to determine whether
the proposed development will be compatible with the character of adjacent and
surrounding developments, and whether aesthetically the development is
harmonious with the character of the neighborhood in terms of style, materials
and colors.
15-6
27i
<PAGE>
Highest and Best Use:
1. The reasonable and probable use that supports the highest present
value of vacant land or improved property, as defined, as of the date of
appraisal.
2. The reasonably probable and legal use of land or sites as though
vacant, found to be physically possible, appropriately supported, financially
feasible, and that results in the highest present land value.
3. The most profitable use.
4. Implied in these definitions is that the determination of highest and
best use takes into account the contribution of a specific use to the community
and community development goals, as well as the benefits of that use to
individual property owners. Hence, in certain situations, the highest and best
use of land may be for parks, greenbelts, preservation, conservation, wildlife
habitats, and the like.
Conclusion:
The proposed use of the subject site is a legal use.
The size of the subject site and the location makes it physically
permissible for the proposed use as an Assisted Living Facility.
The present zoning of the subject site, "R-3", permits residential use.
The most financially feasible and profitable use is the proposed use as an
Assisted Living Facility.
page 28
<PAGE>
The Cost Approach:
The cost approach is a set of procedures in which an appraiser derives a
value indication by estimating the current cost to reproduce the existing
structures, deducting for all accrued depreciation in the property, and adding
the estimated land value.
page 29
<PAGE>
Land Sales:
[Picture of Property]
#1 Address: W side of 1200 East, between 200 South & 300 South
Legal Description: Beg at pt in N R/W Ln 300 South St being
N 0*43'13" W alg C/S/L 2546.86 ft fm S/4 cor Sec 29 T42S
R15W; Th S 89*51'16" E alg sd N R/W Ln 325.20 ft to pt
curv; Th lft 31.42 ft alg arc cur rad bear 20 ft ctrl
ang 90* to pt on W R/W Ln 1200 East St; Th N 0*08'44" E
alg sd W R/W Ln 508 ft to pt curv; Th lft 31.42 ft alg
arc cur rad 20 ft ctrl ang 90* to pt on S R/W Ln 200
South St; Th N 89*51'l6" W alg sd S R/W Ln 309.92 ft
to pt curv; Th lft 25.61 ft alg arc cur rad 35.36 ft ctrl
ang 41*30'16" to C/S/L; Th S 0*43'13" E alg C/S/L 539.18
ft to N R/W Ln 300 South St & POB.
Grantor: Ribelaca Future, LC
Grantee: Larkin-Gifford Developments, LLC
Date of Sale: 12-27-96 Sale Price: $400,000.00
Deed: WD Bk 1063, Pg 784 Site Area: 191228.4 Sq. ft.
Conditions: Cash at closing
Zoning: R-3 Unit Price: $2.091/SF
Utilities: All available
Tax Key: SG-1739-A-8-A
Remarks: Vacant land at the time of sale. Sale was confirmed
with Art Barney.
page 30
<PAGE>
[Picture of Property]
#2 Address: SW cor of 200 South & 1200 East
Legal Description: Beg at a pt which lies N 0*41'53" E 250.52
ft alg the C/S/L frm the Cntr of Sec 29, T42S, Rl5W, Salt Lake Base
& Meridian, and rnng thnc N 0*41'53" E 239.25 ft to a pt on the Sly
R/W Ln of 200 South St, sd pt bng also on a curv to the rght, the
rad pt of which bears S 40*04'43" E 35.36 ft distant; Th NEly alg sd
R/W and the arc of sd curv through a cntrl ang of 41*40'17" a
distance of 25.72 ft to the pt of tangency; Th S 88*24'46" E 309.92
ft alg sd R/W to the pt of a 20 ft rad curv to the rght; Th SEly alg
sd R/W and the arc of sd curv through a cntrl ang of 90*00'00", a
dist of 31.42 ft to the pt of tangency, sd pt bng also on the Wly
R/W of 120 0 East St; Th S 1*35'34" W 228.17 ft alg sd Wly R/W; Th
N 88*24'26" W 349.69 ft to the pt of beg.
Grantor: Larkin-Gifford Developments, LLC
Grantee: Robert A. Brooks
Date of Sale: 12-27-96 Sale Price: $200,000.00
Deed: WD Bk 1063, Pg 794 Site Area: 87111.29 Sq. ft.
Conditions: Cash at closing
Zoning: R-3 Unit Price: $2.295/SF
Utilities: All available
Tax Key: SG-1739-A-8-B
Remarks: Vacant land at the time of sale. Subject property.
page 31
<PAGE>
[Picture of Property]
#3 Address: 1100 East & 400 South
Legal Description: That portion of Blk 36,
Plat "B", St. George City Survey, lying east of Interstate 15.
Grantor: The W. Brown Hail Family Living Trust
Grantee: Lornakids 1983, Ltd.
Date of Sale: 12-2-96 Sale Price: $115,000.00
Deed: WD Bk 1056, Pg 531 Site Area: 57499.2 Sq. ft.
Conditions: Cash at closing
Zoning: R-3 Unit Price: $2.00/SF
Utilities: All available
Tax Key: SG-1016-A
Remarks: Vacant land at the time of sale. Apartments are under
construction.
page 32
<PAGE>
[Picture of property]
#4 Address: 400 East & Sunland Dr.
Legal Description: Adams property in Southern Oaks Estates;
Parcel in Phase 1A; containing .273 acres.
Grantor: Terry Gubser Ward
Grantee: Spectra-Valley Development Corp.
Date of Sale: 1-30-96 Sale Price: $35,000.00
Deed: WD Bk 971, Pg 248 Site Area: 11891.88 Sq. ft.
Conditions: Cash at closing
Zoning: R-3 Unit Price: $2.94/SF
Utilities: All available
Tax Key:_ SG-5-2-31-1203
Remarks: Vacant land at the time of sale.
page 33
<PAGE>
[Picture of Property]
#5 Address: NW corner of W. Sunset Blvd. & 2100 West
Legal Description: West part of: Beg on W Ln Dixie Downs Rd
at Pt S 89*13'27" W 40 ft fm NE cor Sec 22, T42S, R16W & Th S
0*56'37" E alg W Ln 572.57 ft; Th alg arc 50 ft rad cur rgt
85.75 ft(Ch bear S 48*11'41" W 75.62 ft) to N R/W Ln Sunset
Blvd; Th NWly alg arc 1860 ft rad cur rgt 390.50 ft (Ch bear N
76*40'15" W 389.78 ft) ; Th N 70*39'23" W alg N R/W Ln 923.79
ft to W Ln NE/4 NE/4 Sec 22, Th N Th N 0*56'35" W alg Ln 209.50
ft to EC/L; Th N 89*13'27" E 1301.41 ft alg SEC/L to POB. Less
Ely 8.57 acres.
Grantor: Church of Jesus Christ of Latter-Day Saints
Grantee: Mountain American Credit Union
Date of Sale: 1-6-97 Sale Price: $335,000.00
Deed: WD Site Area: 75620.16 Sq. ft.
Conditions: Cash at closing
Zoning: C-3 Unit Price: $4.43/SF
Utilities: All available
Tax Key: SG-6-2-22-1100
Remarks: Vacant land at the time of sale.
page 34
<PAGE>
Listing: (Comp #6)
[Picture of property]
#1 Address: NE corner of 2100 West & Sunset Blvd.
Legal Description: East part of: Beg on W Ln Dixie Downs Rd
at Pt S 89*13'27" W 40 ft fm NE cor Sec 22, T42S, R16W & Th S
0*56'37" E alg W Ln 572.57 ft; Th alg arc 50 ft rad cur rgt 85.75
ft (Ch bear S48*11'41" W 75.62 ft) to N R/W Ln Sunset Blvd; Th
NWly alg arc 1860 ft radcur rgt 390.50 ft (Ch bear N 76*40'15"
W 389.78 ft);Th N 70*39'23" W alg NR/W Ln 923.79 ft to W Ln NE/4
NE/4 Sec 2; Th N 0*56'35" W alg Ln 209.50 ft to SEC/L;
Th N 89*13'27" E 1301.41 ft alg SEC/L 2 POB. Less Ely 8.57 acres.
Grantor: Church of Jesus Christ of Latter-Day Saints
Grantee:
Date of Sale: For Sale Asking Price: $589,000.00
Deed: Site Area: 107070.48 Sq. ft.
Conditions:
Zoning: C-3 Unit Price: $5.501/SF
Utilities: All available
Tax Key: SG-6-2-22-1100
Remarks: Vacant land.
page 35
<PAGE>
<TABLE>
Summary:
<CAPTION>
Subject Sale #1 Sale #2 Sale #3 Sale #4 Sale #5 #6 Listing
<S> <C> <C> <C> <C> <C> <C> <C>
Sale Date 12-27-96 12-27-96 12-2-96 1-30-96 1-6-97
Sale Price $400,000 $200,000 $115,000 $35,000 $335,000
Asking Price $589,000
Site Area(SF) 87111.29 191228.4 87111.29 57499.2 11891.88 75620.16 107070.48
Zoning R-3 R-3 R-3 R-3 R-3 C-3 C-3
Utilities All All All All All All All
Unit Price $2.09 $2.29 $2.00 $2.94 $4.43 $5.50
Adjustments:
Zoning - 45% - 45%
Location
Total Adj. -0- -0- -0- -0- -1.99 -2.48
Ind.Unit Price $2.09 $2.29 $2.00 $2.94 $2.44 $3.02
</TABLE>
<PAGE>
The sales give an indicated value range of $2.00 to $3.02 per square
foot.
Most weight is given to Sales #1, #2, and #3.
Adjustment is made for zoning.
Sale #2 is the sale of the subject property.
Conclusion:
With consideration given to the zoning, location, and utilities, the
indicated adjusted unit value is $2.30 per square foot.
The indicated value of the site is:
87111.29 Sq. ft. x $2.30 = $200,355.96
round to $200,350.00
page 37
<PAGE>
[Map indicating the Compared Properties 1-6]
page 37a
<PAGE>
Description of Improvements:
The proposed improvement is a one story frame, stone veneer front, with
vinyl siding, slab floor, asphalt shingle roof, designed for 35 Assisted Living
Units.
There are: Fifteen Studio Units, Seventeen One Bedroom Units, and Three Two
Bedroom Units, all with kitchenettes.
Other rooms: Entry, Living Room, Dining Room, Kitchen, Pantry, Library,
Salon, Activity Room, Conference Room, Office, Reception Area, Medicine Room,
Wellness Room, Residential Laundry, Facility Laundry, Central Bath, Smoke
Lounge, and Lounge.
Exterior: Porches, Courtyard, and patios.
There is wood floor, carpet, vinyl and resilient flooring, painted walls,
oak wood doors, aluminum insulated windows, woodburning fireplace, oak millwork,
communication system, fire sprinkler system, and key-pad security door system.
Asphalt drive, parking area with 28 marked parking spaces, and landscaping
with sprinkler system.
<TABLE>
<CAPTION>
Assisted Living Units:
<S> <C> <C>
Studio Unit (15) 324 Sq. Ft.
One Bedroom Unit (17) 380 Sq. Ft.
Two Bedroom Unit (3) 627 Sq. Ft.
</TABLE>
Total Units Sq. Ft 13201 Sq. Ft.
<TABLE>
<CAPTION>
Accessory Rooms:
<S> <C>
Entry 100 Sq. Ft.
Living Room 396 Sq. Ft.
Dining Room 1083 Sq. Ft.
Kitchen/Pantry 542 Sq. Ft.
Library 183 Sq. Ft.
Activity Room 219 Sq. Ft.
Salon 150 Sq. Ft.
Conference Room 166 Sq. Ft.
Office/Reception/Med. Rm. 468 Sq. Ft.
Wellness Room 273 Sq. Ft.
Residential Laundry 74 Sq. Ft.
Facility Laundry 162 Sq. Ft.
Smoke Lounge 139 Sq. Ft.
Lounge 396 Sq. Ft.
Central Bath 155 Sq. Ft.
Sun Room 454 Sq. Ft.
Mechanical & Storage 126 Sq. Ft.
Misc. & Corridors 4524 Sq. Ft.
</TABLE>
Total Actual Building Area 22811 Sq. Ft.
page 38
<PAGE>
[Floor plan for a typical unit type A' with patio.]
38a
<PAGE>
[Floor plan of a typical unit type A' without patio]
38b
<PAGE>
[Floor plan of typical unit Type B']
38c
<PAGE>
[Floor plan of typical unit type C']
38d
<PAGE>
[Orientation plan of the entire building]
38e
<PAGE>
[Floor plan of the entire building]
38f
<PAGE>
[Exterior Elevation plan]
38g
<PAGE>
[Preliminary Site Plan]
38h
<PAGE>
Cost Approach:
Reproduction Cost-New of Improvements
(Using Marshall and Swift Cost Handbook)
Building Cost-New 22811 Sq. Ft. $1,710,825.00
Porches, Courtyard, Patio 39,740.00
Equipment 145,000.00
Reproduction Cost-New $1,895,565.00
Depreciation:
Physical -0-
Functional -0-
Economic -0-
Total Depreciated Value of Improvements $1,895,565.00
Site Improvements:
Driveway and Parking Area 275,500.00
Landscaping 50,000.00
Site 200,350.00
Developer Fee 100,000.00
Construction Overhead 237,800.00
Indicated Total Cost $2,759,215.00
round to $2,759,200.00
page 39
<PAGE>
Conclusion:
The indicated value of land and improvements is $2,759,200.00.
This is: Per Unit (35) $78,834.28
Per Sq. ft. of Building $120.95
From April 1996, Assisted Living Development Cost Survey by
Capital Valuation Group.
<TABLE>
<CAPTION>
Total Dev. Cost/Sq Ft Total Dev. Cost/Unit
<S> <C> <C>
Northeast 128.00 $95,300.00
Southeast 118.00 79,600.00
North Central 138.00 95,900.00
South Central 105.00 71,600.00
West 107.00 89,400.00
</TABLE>
Average $119.00 $84,200.00
The subject property is in the West Region.
The indicated value of subject property per Unit is $78,834.28, or 6.37% below
the national average.
The indicated value of subject property per Square Foot of building is $120.95,
or 1.64% above the national average.
The indicated value of the land and improvements by the Cost Approach is:
$2,759,200.00
page 40
<PAGE>
Income Approach:
Income capitalization approach: A set of procedures in which an appraiser
derives a value indication for income-producing property by converting
anticipated benefits into property value. This conversion is accomplished
either by; 1) capitalizing a single year's income expectancy or an annual
average of several year's income expectancies at a market-derived capitalization
rate or a capitalization rate that reflects a specified income pattern, return
on investment, and change in the value of the investment; or 2) discounting the
annual cash flows for the holding period and the reversion at a specified yield
rate.
page 41
<PAGE>
The City of St. George has 11 Care Facilities:
Retirement Homes:
The Meadows Retirement Community 89 Beds
950 S. 400 East
Mesa Manor Apartments 12
28 S. 900 East
Assisted Living Facilities:
Ann's Private Care 8
712 E. 600 South
Behavioral Medicine N/A
Dixie Regional Medical Center
544 S. 400 East
Durham Care Assisted Living 5
1239 W. 4200 North
Nursing Homes:
Brookside Private Care N/A
Vermillion
Color Country Care Center 5
233 S. 100 East
Porter's Nursing Home 53
126 W. 200 North
Red Cliffs Regional 124
1745 E. 280 North
Rosecrest Manor N/A
48 W. 700 South
St. George Care & Rehabilitation Center 159
1032 E. 100 South
Proposed Care Facility:
Retirement apartment (60 beds) and a second phase of (30 beds)
Assisted Living Units, is proposed for the old Dixie Downs.
page 42
<PAGE>
Rents in St. George are $875.00 to $2,500.00 per month.
Behavioral Medicine: $1,850.00 to $2,500.00/month
Dixie Regional Medical Center
Ann's Private Care: $1,450.00 to $1,650.00/month
Rosecrest Manor: $875.00 per month (apartment)
The Meadows Retirement Community: $1,870.00 to $1,890.00/month
Assisted Living Units
Sterling House at Broadmoor, Colorado Springs, Colorado, has 37 Assisted Living
Units, opened in September 1996, and has been 97% or more occupied for the past
three months.
Average unit rents:
Studio $1,860.00 per month
One Bedroom 2,130.00 " "
Deluxe One Bedroom 2,360.00 " "
Spouse 800.00 " "
Community Fee (one-time) 2,000.00
Average expenses per month:
Employees $24,000.00
Administrative 1,580.00
Maintenance & Supply 1,580.00
Utilities, Taxes & Insurance 5,730.00
Dietary 4,973.00
Repair/Replacement Reserve 797.00
Marketing 2,390.00
Management & Royalty 7,968.00
Total Monthly Expenses $49,018.00
Average expenses are 61.50% of monthly income.
page 43
<PAGE>
Typical rents from Sterling House Facilities in Kansas:
Sterling House at Tallgrass
8600 E. 21st St. North, Wichita, KS
Lessor: Sterling House of Wichita LLC
Lessee: Various
Date of Lease: Various Annual Rent: $466,800.00 Avg.
Term: Month-to-month Site Dimensions: Rectangular
Deposit: $500.00 entry fee Site Area: 83911 Sq. ft.
Zoning: AA, w/CUP Improvement Area: 16010 Sq. ft.
Utilities: All available Lessee Pays: Rent only
Key No.: C-49529 Rent/SF/Mo.: Various
No. of Units: 26 Land/Bldg.Ratio: 5.24/1
Occupancy: 98% Built: 1993; Opened 10-93
Remarks: Typically, units are occupied by singles. Currently, one unit is
occupied by a couple.
<TABLE>
<CAPTION>
Type Rent/Mo. (1 Person) Sq. ft.
1-2-3 Levels of Service
<S> <C> <C> <C> <C>
Studio $1,295.00 $1,545.00 $1,795.00 294
1 Bedroom 1,495.00 1,745.00 1,995.00 319
1 Bedroom 1,695.00 1,945.00 2,195.00 360
Extra Person 375.00 625.00 875.00
</TABLE>
Expenses average 65% of monthly income.
Services Available:
Utilities paid Van service
Medical assistance Personal (bathing; dressing)
24 hour staff 3 meals per day
Houskeeping & laundry weekly Central tenant laundry
Secure premises
Description:
One story brick/stone and frame construction on slab, composition roof,
insulated glass windows, forced air heating and cooling, center courtyard,
entry, living room, dining room, kitchen, library, activity room, and offices.
26 unit Assested Living Facility.
page 44
<PAGE>
Sterling House of Derby
1709 Walnut Grove, Derby, KS
Lessor: Master's Assoc., LLC
Lessee: Various
Date of Lease: Various Annual Rent: $537,000.00
Term: Month-to-month Site Dimensions: Rectangular
Deposit: $500.00 entry fee Site Area: 134412 Sq. ft.
Zoning: Multiple Family Improvement Area: 16010 Sq. ft.
Utilities: All available Lessee Pays: Rent only
Key No.: RO-DY-5227 Rent/SF/Mo.: Various
No. of Units: 26 Land/Bldg.Ratio: 8.39/1
Occupancy: 98% Built: 1993; Opened 4-94
Remarks: Currently all single occupants.
<TABLE>
<CAPTION>
Type Rent/Mo. Sq. ft.
<S> <C> <C>
Studio $1,450.00 300
1 Bedroom 1,650.00 320
Deluxe 1 Bedroom 1,800.00 360
Spouse 575.00
</TABLE>
Expenses average 61% of monthly income.
Services Available:
Utilities paid Personal (bathing; dressing)
Medical assistance 3 meals per day
24 hour staff Central tenant laundry
Housekeeping & laundry weekly Secure premises
Description:
One story brick/stone and frame construction on slab, composition roof,
insulated glass windows, forced air heating and cooling, center courtyard,
entry, living room, dining room, kitchen, library, activity room, and offices.
26 unit Assisted Living Facility.
page 45
<PAGE>
Sterling House of Hays
1800 27th St. East, Hays, KS
Lessor: Master's Assoc. LLC
Lessee: Various
Date of Lease: Various Annual Rent: $670,800.00
Term: Month-to-month Site Dimensions: Rectangular
Deposit: $500.00 entry fee Site Area: 94500 Sq. ft.
Zoning: Multi-Family Improvements: 18467 Sq. ft.
Utilities: All available Lessee Pays: Rent only
Key No.: NA Rent/SF/Mo.: Various
No. of Units: 33 Land/Bldg.Ratio: 5.11/1
Occupancy: 91% Built: 1995; Opened 6-95
Remarks: Currently all single occupants.
<TABLE>
<CAPTION>
Type Rent/Mo. Sq. ft.
<S> <C> <C>
Studio $1,400.00 300
1 Bedroom 1,550.00 320
Deluxe 1 Bedroom 1,750.00 360
Spouse 375.00
</TABLE>
Expenses average 55% to 60% of monthly income.
Services Available:
Utilities paid Personal (bathing; dressing)
Medical assistance 3 meals per day
24 hour staff Central tenant laundry
Housekeeping & laundry weekly Secure premises
Description:
One story brick/stone and frame construction on slab, composition roof,
insulated glass windows, forced air heating and cooling, center courtyard,
entry, living room, dining room, kitchen, library, activity room, and offices.
33 unit Assisted Living Facility.
page 46
<PAGE>
Conclusion:
With the strong demand for Health Care in St. George, projected rents are
based on available rents in St. George, and similar units in Colorado and
Kansas.
There appears to be a good growing need for Assisted Living Facilities, and
the proposed rents and services are in line with other facilities.
Proposed Rents:
The subject is a proposed one-story courtyard style building, with 35
assisted living units: (15) Studio Units, (17) One Bedroom Units, and (3) Two
Bedroom Units.
The proposed rents and expenses are based on similar Assisted Living
Facilities.
<TABLE>
<CAPTION>
Proposed rents for subject:
Unit Sq. ft. Per Month, Each Per Month
<S> <C> <C> <C> <C>
Studio 324 $1,875.00 (15) $28,125.00
One Bedroom 380 2,155.00 (17) 36,635.00
Two Bedroom 618 3,550.00 (3) 10,650.00
Spouse 1,200.00 (est.3) 3,600.00
</TABLE>
Community Fee $2,000.00 (one time)
Total estimated potential income per month: $79,010.00
The Community Fee is not included in the potential income per month, as
this is a one-time entry fee.
Estimated potential income per year is $948,120.00.
page 47
<PAGE>
Monthly Expenses (estimated):
Employees $22,515.00
Administrative, Office Expense 2,252.00
Maint/Repair & Replacement Reserve 2,252.00
Utilities, Taxes & Insurance 7,508.00
Dietary 5,254.00
Marketing 2,252.00
Management 3,004.00
Total Monthly Expenses $45,037.00
Total estimated expenses per year is: $540,444.00
Services Available to Tenants:
Utilities paid Personal (bathing; dressing)
Medical assistance 3 meals per day
24 hour staff Central tenant laundry
Housekeeping & laundry weekly Secure premises
page 48
<PAGE>
Annual Income ($79,010.00/Mo.) $ 948,120.00
Vacancy 5.10% $ 48,360.00
Adjusted Income 899,760.00
Expenses (estimated) 540,444.00
Net Income $ 359,316.00
Using a 11% Capitalization Rate $3,266,509.09
round to $3,266,500.00
Residual Cap Rate:
From Appraisal Institute Research Department, National Market Indicators:
Fourth Quarter 1996, a 9% to 12% Capitalization Rate range is indicated.
Overall Cap Rate:
From sales in the Direct Sales Comparison Approach, there is an indicated
Capitalization Rate range of 9.42% to 12.43%.
Conclusion:
Rents and expenses are based on the subject property at stabilized
occupancy (should be between 6 and 12 months of opening of facility), after any
discounts for rent-up.
The indicated Capitalization Rate, from average National Residual Cap Rate
and Direct Sales Comparison Overall Cap Rate, is 11%.
The indicated market value from the Income Approach is:
$3,266,500.00
page 49
<PAGE>
The Direct Sales Comparison Approach:
The direct sales comparison approach to value is a set of procedures in
which an appraiser derives a value indication by comparing the property being
appraised to similar properties that have been sold recently, applying
appropriate units of comparison, and making adjustments, based on the elements
of comparison, to the sale price of the comparables.
The "Direct Comparison" technique is normally considered to be the most
desirable method of valuation, since other people can relate to comparisons.
However, the validity and accuracy of this method depends upon an adequate
supply of sales of similar properties, and upon the ability to confirm and
analyze the available information.
The proper, and normal procedure, for the valuation of a site is by the
direct comparison of sales of similar size, zoning, access, and utility to the
subject area. Since most sales will not be identical, some adjustment will need
to be made to reflect what the sales would have sold for had they been the same
size, etc., in the current market place.
page 50
<PAGE>
Picture not available
# 1 Address: Wind Chime of Walnut Creek
2175 Ygnacio Valley Road, Walnut Creek, Calif.
Legal Description: Parcels A, B, & C as shown on the Parcel Map MS 808-83,filed
9-10-85, in Book 118 of Parcel Maps, Page 15, Contra Costa County Records.
Grantor: Wind Chime Group, LLC
Grantee: Sunrise Assisted Living
Date of Sale: 2-25-97 Sale Price: $8,400,000.00
Deed: WD Site Area: 85400 Sq. ft.
Conditions: Cash at closing Bldg. Area: 42800 Sq. ft.
Zoning: PD Land/Bldg.Ratio: 3.99/1.0
Utilities: All No. of Units: 73
Year Built: Under constr. Unit Price(Bldg): $196.26/SF
Tax Key: NA Unit Price(Unit): $115,068.49
Occupancy: NA
Remarks: A two-story wood frame building with concrete tile roof, under
construction, 73 units, 87 beds. The facility offers two basic floor plans; a
small studio, 275 sq. ft.; and a large studio; 350 sq. ft.
page 51
<PAGE>
Picture not available
#2 Address: Highland Hills Alterna Care
1501 Baldy Avenue, Pocatello, Idaho
Legal Description: NA
Grantor: Alterna Care, Inc.
Grantee: Emeritus Corporation
Date of Sale: 9-31-96 Sale Price: $3,250,000.00
Deed: WD Site Area: NA
Conditions: Cash to seller Bldg. Area: 28126 Sq. ft.
Zoning: NA Land/Bldg.Ratio: NA
Utilities: All No. of Units: 49
Year Built: 1991 Unit Price (Bldg): $115.55/SF
Tax Key: NA Unit Price(Unit): $66,326.53
Occupancy: NA
Remarks: A two-story wood frame building. This is part of a package
purchase of two facilities. The other is a 50-unit facility in Washington. The
price allocation is based upon contributory value for each facility from an
appraisal.
Page 52
<PAGE>
1501 Baldy Avenue, Pocatello, Idaho
Income Data:
Potential Gross income: NA
Vacancy: NA
Effective Gross Income: $810,784.00
Operating Expenses: 503,802.00 (62.1%)
Net Operating Incmoe: $306,982.00
(Buyer projected increase to) $361,242.00
Consideration:
Price: $3,250,000.00
Terms of Sale: Cash to seller
Cash Equivalent Price: $3,250,000.00
Economic Indicators:
Price Per Unit: $66,326.53
Price Per Sq. Ft.: $115.55
Gross Income Multiplier: 4.01
Overall Capitalization Rate: 9.45% (actual)
11.12% (buyer projection)
page 53
<PAGE>
Picture not available
#3 Address: Ridge Wind Residence
4080 Hawthorne Rd., Chubbuck, Idaho
Legal Description: NA
Grantor: Ridge Wind, LLC
Grantee: Emeritus Corporation
Date of Sale: 2-96 Sale Price: $4,550,000.00
Deed: WD Site Area: NA
Conditions: Cash to seller Bldg. Area: 48865 Sq. ft.
Zoning: NA Land/Bldg.Ratio: NA
Utilities: All No. of Units: 80
Year Built: 1995 Unit Price(Bldg): $93.11/SF
Tax Key: NA Unit Price(Unit): $56,875.00
Occupancy: NA
Remarks: A one-story wood frame structure with brick, stucco and wood
exterior, 80 units (licensed for 109 beds).
Page 54
<PAGE>
4080 Hawthorne Rd., Chubbuck, Idaho
Income Data:
Potential Gross Income: $1,536,000.00
Vacancy: 76,800.00 (5%)
Effective Gross Income: 1,459,200.00
Operating Expenses: 899,900.00 (61.7%)
Net Operating Incme: $559,300.00
Consideration:
Price: $4,400,000.00
Plus $150,000 absorption costs
Terms of Sale: Cash to seller
Cash Equivalent Price: $4,550,000.00
Economic Indicators:
Price Per Unit: $56,875.00
Price Per Sq. Ft.: $93.11
Gross Incmoe Multiplier: 3.12 (EGIM)
Overall Capitalization Rate: 12.29%
page 55
<PAGE>
[Picture of Sterling House at Tallgrass]
#4 Address: Sterling House at Tallgrass
8600 E. 21st, Wichita, Kansas
Legal Description: Lot 1, Summerfield 2nd Add.
Grantor: Sterling House Corporation
Grantee: Meditrust of Kansas, Inc.
Date of Sale: 3-29-96 Sale Price: $1,426,900.00
Deed: SWD Site Area: 83911 Sq. ft.
Conditions: Cash at closing Bldg. Area: 16010 Sq. ft.
Zoning: CUP Tallgrass Land/Bldg.Ratio: 5.24/1.0
Community Plan No. of Units: 26
Utilities: All Unit Price(Bldg): $89.12/SF
Year Built: 1993 Unit Price(Unit): $54,880.77
Tax Key: C-49529
Occupancy: 98%
Remarks: A one-story Assisted Living Facility. Typically,
units are occupied by singles. Monthly rents range from $1,295.00 to $1,945.00.
page 56
<PAGE>
8600 E. 21st, Wichita, Kansas
Income Data: (Average)
Potential Gross Income: $494,340.00
Vacancy: 9,887.00
Effective Gross Income: 484,453.00
Operating Expenses: 321,321.00
Net Operating Income: $163,132.00
Consideration:
Price: $1,426,900.00
Terms of Sale: Cash to seller
Cash Equivalent Price: $1,426,900.00
Economic Indicators:
Price Per Unit: $54,880.77
Price Per Sq. Ft.: $89.12
Gross Incme Multiplier: 2.95
Overall Capitalization Rate: 11.43%
page 57
<PAGE>
[Picture of Sterling House at Derby]
#5 Address: Sterling House at Derby
1709 Walnut Grove, Derby, Kansas
Legal Description: Lot 4, exc beg SW cor Lot 5, W 15', N 52',
E 15', S 52' to beg, Blk 1, Tanglewood Second Add.
Grantor: Masters Associates
Grantee: Meditrust of Kansas, Inc.
Date of Sale: 3-29-96 Sale Price: $1,631,500.00
Deed: SWD Site Area: 104413.32 Sq. ft.
Conditions: Cash at closing Bldg. Area: 16010 Sq. ft.
Zoning:_ R-3 Land/Bldg.Ratio: 6.52/1.0
Utilities: All No. of Units: 26
Year Built: 1994 Unit Price(Bldg): $101.90/SF
Tax Key: RO-DY-05227 Unit Price(Unit): $62,750.00
Occupancy: 100%
Remarks: A one-story Assisted Living Facility. Typically,
units are occupied by singles. Monthly rents range from
$1,295.00 to $1,945.00.
page 58
<PAGE>
1709 Walnut Grove, Derby, Kansas
Income Data: (Average)
Potential Gross Income: $494,340.00
Vacancy: 19,774.00
Effective Gross Income: 474,566.00
Operating Expenses: 321,321.00
Net Operating Income: $153,245.00
Consideration:
Price: $1,631,500.00
Terms of Sale: Cash to seller
Cash Equivalent Price: $1,631,500.00
Economic Indicators:
Price Per Unit: $62,750.00
Price Per Sq. Ft.: $101.90
Gross Income Multiplier: 3.44
Overall Capitalization Rate: 9.40%
page 59
<PAGE>
[Picture of Sterling House at Wellington]
#6 Address: Sterling House at Wellington
500 N. Plum St., Wellington, Kansas
Legal Description: E 260' of Outlot 11, North West Add.
Grantor: Wellington Partners, LLC
Grantee: Meditrust of Kansas, Inc.
Date of Sale: 3-29-96 Sale Price: $1,631,500.00
Deed: SWD Site Area: 85800 Sq. ft.
Conditions: Cash at closing Bldg. Area: 16010 Sq. ft.
Zoning: R-3 Land/Bldg.Ratio: 5.35/1.0
Utilities: All No. of Units: 26
Year Built: 1994 Unit Price(Bldg): $101.90/SF
Tax Key: NA Unit Price(Unit): $62,750.00
Occupancy: 100%
Remarks: A one-story Assisted Living Facility. Typically,
units are occupied by singles. Monthly rents range from $1,295.00 to $1,945.00.
page 60
<PAGE>
500 N. Plum St., Wellington, Kansas
Income Data: (Average)
Potential Gross Income: $494,340.00
Vacancy: 4,943.00
Effective Gross Income: 489,397.00
Operating Expenses: 321,321.00
Net Operating Income: $168,076.00
Consideration:
Price: $1,631,500.00
Terms of Sale: Cash to seller
Cash Equivalent Price: $1,631,500.00
Economic Indicators:
Price Per Unit: $62,750.00
Price Per Sq. Ft.: $101.90
Gross Income Multiplier: 3.33
Overall Capitalization Rate: 10.30%
page 61
<PAGE>
[Picture of Sterling House at Hays]
#7 Address: Sterling House at Hays
1800 E. 27th St., Hays, Kansas
Legal description: Beg SE cor, S27-Tl3S-Rl8W, W 1305.63', N 50' to pt
of property beg, W 350', N 270', E 350', S 270' to beg.
Grantor: Hays Partners, LLC
Grantee: Meditrust of Kansas, Inc.
Date of Sale: 3-29-96 Sale Price: $2,070,750.00
Deed: SWD Site Area: 94500 Sq. ft.
Conditions: Cash at closing Bldg. Area: 18467 Sq. ft.
Zoning: R-4 Land/Bldg.Ratio: 5.11/1.0
Utilities: All No. of Units: 33
Year Built: 1995 Unit Price(Bldg): $112.13/SF
Tax Key: NA Unit Price(Unit): $62,750.00
Occupancy: 100%
Remarks: A one-story Assisted Living Facility. Typically,
units are occupied by singles. Monthly rents range from $1,400.00 to
$1,750.00.
page 62
<PAGE>
1800 E. 27th St., Hays, Kansas
Income Data: (Average)
Potential Gross Income: $615,120.00
Vacancy: 6,151.00
Effective Gross Income: 608,969.00
Operating Expenses: 399,828.00
Net Operating Income: $209,141.00
Consideration:
Price: $2,070,750.00
Terms of Sale: Cash to seller
Cash Equivalent Price: $2,070,750.00
Economic Indicators:
Price Per Unit: $62,750.00
Price Per Sq. Ft.: 112.13
Gross Income Multiplier: 3.40
Overall Capitalization Rate: 10.09%
page 63
<PAGE>
<TABLE>
<CAPTION>
Summary:
Subject Sale #1 Sale #2 Sale #3 Sale #4 Sale #5
<S> <C> <C> <C> <C> <C> <C>
Date of Sale 2-25-97 9-31-96 2-96 3-29-96 3-29-96
Sale Price $8,400,000 $3,250,000 $4,550,000 $1,426,900 $1,631,500
No. of Units 35 73 49 80 26 26
Bldg. Area 22811 42800 28126 48865 16010 16010
Year Built Proposed Under Const 1991 1995 1993 1994
Price/Unit $115,068.49 $66,326.53 $56,675.00 $54,880.77 $62,750.00
Price/Sq. ft. $196.26 $115.55 $93.11 $89.12 $101.90
Adjustments:
Yr Blt (Age) + 24% +8% +16% +.12%
Location - 29% - 15% -15%
Total Adj - 56.92 + 10.40 -6.52 +14.26 + 12.23
Ind.Price/SF $139.34 $125.95 $86.59 $103.38 $114.13
</TABLE>
<TABLE>
<CAPTION>
Summary:
Sale #6 Sale #7
<S> <C> <C>
Date of Sale 3-29-96 3-29-96
Sale Price $1,631,500 $2,070,750
No. of Units 26 33
Bldg. Area 16010 18467
Year Built 1994 1995
Price/Unit $62,750.00 $62,750.00
Price/Sq. ft. $101.90 $112.13
Adjustments:
Yr Blt (Age) +12% +8%
Location
Total Adj +12.23 +8.97
Ind.Price/SF $114.13 $121.10
</TABLE>
<PAGE>
The indicated price per square foot of building has a range of $86.59 to
$139.34.
Adjustments are made for: age of the improvement (year built), and location
(in higher cost areas).
Conclusion:
The indicated value of the subject site and improvements is: $2,874,200.00.
From National Investment statistics; Investors are very interested in
investing or buying Assisted Living Facilities, though many sales are below
market rate due to poor management or other problems.
page 65
<PAGE>
Map of midwest and southwest United States Indicating comparable properties
<PAGE>
Correlation and value Conclusion
The final reconciliation is the application of the process of evaluating
alternative conclusions and selecting from the indications of value derived from
each of the approaches utilized in the appraisal problem to arrive at a final
estimate of value. The appraiser weighs the relative significance,
applicability, and defensibility of the indication of value derived from each
approach, and places most weight and reliance on the one which in his
professional judgement, best approximates the value being sought in the
appraisal. The appraiser reconciles the facts, trends, and observations
developed in his analyses, and reviews their conclusions and the probable
validity and reliability of those conclusions.
The highest and best use of the site is residential. With the present
"R-3" zoning, Multiple Family Residential, the site is well suited for an
Assisted Living Facility.
The comparable land sales indicate a value for the site, as if vacant, of
$200,350.00. The estimated cost of development and construction of the
improvements, less any depreciation, is $2,558,850.00.
The proposed rents and expenses are supported by other Assisted Living
Facilities. The Net Potential Income is capitalized at 11% to indicate a value
of $3,266,500.00.
The Direct Sales Comparison Approach, using sales of other Assisted Living
Facilities, indicates a value of $2,874,200.00.
The indications of value for the subject site and improvements by the three
approaches are as follows:
Cost Approach $2,759,200.00
Income Approach 3,266,500.00
Direct Comparison Approach 2,874,200.00
page 66
<PAGE>
The Cost Approach is an estimate of the current cost of reproduction of the
improvements, less accrued depreciation, plus the site value. It is dependent
on the price of a replacement providing the same utility as the subject. It
necessitates accurate forecasting of the consideration which would be given by
the buyer in the market place to the physical deterioration, functional
obsolescence, and economic deficiencies of the subject property, if any.
In this report, the cost approach is based on Marshall and Swift valuation
service.
The Income Approach is an analysis which converts anticipated benefits to
be derived from the ownership of property into a value estimated, with
consideration given to the gross income, expense, net income, vacancy rate, and
capitalization. This is a set of procedures in which an appraiser derives a
value indication for income-producing property by converting anticipated
benefits into property value. This conversion is accomplished
either by 1) capitalizing a single year's income expectancy or an annual average
of several years income expectancies at a market-derived capitalization rate or
a capitalization rate that reflects a specified income pattern, return on
investment, and change in the value of the investment; or 2) discounting the
annual cash flows for the holding period and the reversion at a specified yield
rate.
In this report, the proposed income and expenses are supported by other
Assisted Living Facilities, and capitalized to reflect value.
The Direct Comparison Approach is dependent upon the accurate forecasting
of what a property will bring at some time in the near future by considering
sales which have occurred in the past. It is a well-known fact that two buyers
may not want to pay the same price for the same property. It is therefore
difficult to predict, within a few - hundred dollars, what property may bring in
the open market by using sales of other properties which have occurred in the
past, unless the sales are recent.
In this report, the sales considered are similar Assisted Living Facilities
in California, Idaho, and Kansas.
page 67
<PAGE>
With consideration given to construction time and lease-up time, the
value indicated by the Income Approach is discounted.
Development time is estimated at 6 months. Construction time is
estimated at 6 months. Lease-up time is estimated at 3-to-9 months, or 12
months to stabilized occupancy.
Allowing 24 months, and investment money at 11% interest, $3,266,500.00
future value equals $2,651,164.67 present value, rounded to $2,650,000.00.
The market value of the subject proposed site, with all utilities and
improvements, as of April 7, 1997, is:
$2,650,000.00
This value is expected to increase to $3,266,500.00, with completion of
construction and lease-up, at time of stabilized occupancy, without
considering any increase in rents or expenses.
/S/ Keith D. Callison
- -------------------------------
Keith D. Callison, SRA
Kansas Certificate #G-590
Utah Certificate #CG00051719
page 68
<PAGE>
[Picture]
Subject, Looking Southwest From Northeast Corner
[Picture]
Subject, Looking Northwest From Southeast Corner
<PAGE>
[Picture]
S. 1200 East Street, Looking North
[Picture]
S. 1200 East Street, Looking South
<PAGE>
[Picture]
Subject, Looking Northeast From Southwest Corner
[Picture]
E. 200 South Street, Looking East
<PAGE>
Qualifications:
I have been a full time Real Estate Appraiser since August 1974, doing
residential, some multi-family, light commercial, and condemnation assignments.
Education:
1994 San Diego, California, Appraisal Institute, Appraisal Review -Income
Properties
1994 Columbus, Ohio, Appraisal Institute, Standards of Professional
Practice
1989 University of Colorado, American Institute of Real Estate Appraisers,
Capitalization Theory & Tech, Part A
1989 County Appraisers Eligibility Examination (K.S.A. 19-432)
1988 Omaha, NB, AIREA, Standards of Professional Practice
1975 Oklahoma University, AIREA, Course 8
1974 College of St. Thomas, MN, AIREA, Course 1-A
Designation:
1986 RM (Residential Member), American Institute of Real Estate Appraisers,
#2072; exchanged to SRA, 1992, Appraisal Institute
Certification:
1992 Kansas Certified General Real Property Appraiser - #G-590
1994 Oklahoma Certified General Appraiser - #11366
1994 Colorado Certified General Appraiser - #CG40000352
1996 Nebraska Certified General Appraiser - #CG 960187
1996 Iowa Certified General Appraiser - #510348128
1997 Utah State-Certified General Appraiser - #CGO0051719
Member:
Appraisal Institute
Member: Residential Appraisal Reports Subcommittee National Candidate
Guidance Committee
Wichita Board of Realtors
National Association of Realtors
Background:
General contractor for 15 years, building single family, multi-family, and
light commercial buildings. Planning, designing, building, and selling.
Licensed Real Estate Broker in the State of Kansas since 1969.
Appraisal Assignments For:
Central Bank & Trust, Fidelity State Bank, Garden City
Hutchinson First National Bank of Anthony
Central National Bank, Guaranty Bank & Trust Co.,
Lawrence & Topeka Oklahoma City, OK
Church Loans, Amarillo, TX INTRUST Bank
District Court, Division 9 MMR Investment Bankers, Wichita
Emprise Bank Prairie State Bank
Equitable Relocation, Inc. Resolution Trust Corp.
Norwest Bank, Omaha, NB World Savings & Loan Assn.
<PAGE>
KEITH D. CALLISON, SRA P.O. Box 343
Wichita, Kansas 67201
Work:(316) 262-2193
Home:(316) 686-1060
SUMMARY OF QUALIFICATIONS
* over 35 years experience in real estate/construction industry, including
over 20 current years as an independent appraiser.
* Appraisal expertise encompasses single and multi-family residential,
light commercial and condemnation assignments, working with banks, savings and
loans, and/or private companies in the Midwest.
* Knowledgeable of current government lending regulations and real estate
sales procedures, in addition to an indepth understanding of the construction
trade, as a result of experience as a general contractor and licensed real
estate agent. Also knowledgeable on electronic computers, and with appraisal
files, and comparable sales.
* As a result of broad background, specialized appraisal training and
experience is enhanced; capable of perceiving quality and unusual aspects in the
evaluation of property or development plans.
PROFESSIONAL EXPERIENCE
KEITH D. CALLISON, SRA
Wichita, Kansas
1974 - Present
REAL ESTATE APPRAISER
Manage and promote appraisal services, working in cooperation or
support of lending institutions, under all governmental regulatory agency
guidelines (e.g., Resolution Trust Corporation, Veterans Administration, Federal
Housing Authority, Federal Home Loan Mortgage Corporation, Federal National
Mortgage Association, and local housing authorities, etc.) based in Midwest.
Have provided construction appraisals on new building sites, working
with lenders on commercial projects at various phases of completion, to ensure
that quality methods/materials and specifications were maintained.
Designated a Residential Member (RM), through the American Institute
of Real Estate Appraisers in 1986, exchanged to SRA, Appraisal Institute, 1992.
Review Appraiser for Property Value Division, State of Kansas for
1989 Reappraisal.
1992-1996 Specialized in Assisted Living Facilities.
<PAGE>
Page 2 Keith D. Callison, SRA
DeBoer & Associates
Wichita, Kansas
1971 - 1973
CONSTRUCTION COORDINATOR/INSPECTOR
Was involved during period of rapid growth in Wichita apartment
building.
SELF-EMPLOYMENT
Winfield, Kansas
1956 - 1971
INDEPENDENT CONTRACTOR - Custom Homes
Completed requirements for Real Estate Sales License during this
time. Designed and built over 300 custom homes.
EDUCATION/TRAINING
AMERICAN INSTITUTE OF REAL ESTATE APPRAISERS
- Currently maintain required Continuing Education Units in professional
field.
- Appraisal Review - Income Properties, 1994
- Standards of Professional Practice Course, 1994
- Capitalization Theory & Techniques "A", 1989
University of Colorado; Boulder, CO.
- Course #8, 1975
Oklahoma University
- Course 1-A, 1974
College of St. Thomas; Minneapolis, MN.
KANSAS COUNTY APPRAISERS ELIGIBILITY EXAMINATION
- (K.S.A. 19-432), 1989
WICHITA STATE UNIVERSITY
Wichita, Kansas
Completed three semesters toward Architectural Engineering, 1956-1957.
<PAGE>
Page 3 Keith D. Callison, SRA
DESIGNATION
1986, Designated RM (Residential Member) - #2072
AMERICAN INSTITUE OF REAL ESTATE APPRAISERS
Exchanged to SRA, APPRAISAL INSTITUTE, 1992
CERTIFICATION
1992, KS Certified General Real Property Appraiser - #G-590
1994, OK Certified General Appraiser - #11366
1994, CO Certified General Appraiser - #CG40000352
1996, NE Certified General Appraiser - #CG 960187
1996, IA Certified General Appraiser - #510348128
1997, UT St-Certified General Appraiser - #CGO0051719
LICENSE
1969, Kansas Real Estate Broker License - EB558
PROFESSIONAL MEMBERSHIPS
American Institute of Real Estate Appraisers, 1975 - 1991
Appraisal Institute, 1992 - Present
National Residential Appraisal Reports Subcommittee
1989 - Present
Regional Ethics and Counseling Panel, 1989 - Present
National Relations Committee (1992-1996)
Wichita Board of Realtors, 1974 - Present
National Association of Realtors, 1974 - Present
<PAGE>
[Facsimile of State of Kansas Real Estate Appraisal Board Certificate for
certified General Real Property Appraiser]
<PAGE>
[Facsimile of State of Oklahoma Real Estate Appraisal Board Certificate for
certified General Real Property Appraiser]
<PAGE>
[Fascimile of State of Colorado Real Estate Appraisal Board Certificate for
certified General Real Property Appraiser]
<PAGE>
[Facsimile of State of Nebraska Real Estate Appraisal Board Certificate for
certified General Real Property Appraiser]
<PAGE>
[Facsimile of State of Iowa Real Estate Appraisal Board Certificate for
certified General Real Property Appraiser]
<PAGE>
[Facsimile of State of Utah Real Estate Appraisal Board Certificate for
certified General Real Property Appraiser]
PHASE I ENVIRONMENTAL SITE ASSESSMENT
PRELIMINARY GEOTECHNICAL STUDY
TWO ACRE PARCEL OF LAND
LOCATED AT THE SOUTHWEST CORNER
OF 200 SOUTH AND 1200 EAST STREET
ST. GEORGE, UTAH
Prepared for:
MR. ROBERT A. BROOKS
BROOKS DEVELOPMENT CO., L.L.C.
260 NORTH ROCK ROAD., SUITE 260
WICHITA, KANSAS 67206
JOB NO. S1248 NOVEMBER 18,1996
<PAGE>
[DELTA GEOTECHNICAL CONSULTANTS, INC. LETTERHEAD GOES HERE]
November 18, 1996
Mr. Robert A. Brooks L.L.C.
260 North Rock Road / Suite 260
Wichita, KS 67206
Subject: Phase I Environmental Site and Preliminary Geotechnical Study
Two Acre Parcel of Land, Located at the Southwest Corner of
200 South and 1200 East Street St. George, Utah
Dear Mr. Brooks:
We have completed our Phase I Environmental Site Assessment and preliminary
Geotechnical Study for the two acre parcel of vacant land located on the
southwest corner of 200 South Street and 1200 East Street in St. George, Utah.
The study was conducted in accordance with our contractual agreement of October
22, 1996. Details of our findings and conclusions are included in the attached
report.
If you have questions or need additional information, please call.
Very truly yours,
DELTA GEOTECHNICALICAL CONSULTANTS, INC.
/S/ Hovik Baghoomian
HOVIK BAGHOOMIAN, P.E., Ph. D.
President
HB:cdv
Submitted in 3 copies
<PAGE>
TABLE OF CONTENTS
PAGE
EXECUTIVE SUMMARY .............................................. i
1.0 INTRODUCTION ............................................ 1
2.0 SCOPE OF SERVICES ....................................... 1
3.0 SITE DESCRIPTION ......................................... 3
3.1 Description of Structures and Improvements ...... 3
3.2 Information Provided by the Client .............. 3
3.3 Surrounding Properties .......................... 4
3.4 Past Uses of the Site and Surrounding Properties . 4
4.0 RECORDS REVIEW
4.1 Topography ..................................... 4
4.2 Geology ......................................... 4
4.3 Hydrology ...................................... 5
4.4 Aerial Photograph Review ....................... 6
4.5 Federal and State Regulatory Records Review ..... 6
4.5.1 CERCLIS Databases ...................... 6
4.5.2 NPL Database .......................... 7
4.5.3 RCRA Database .......................... 8
4.5.4 ERNS Database .......................... 8
4.5.5 PADS Database .......................... 9
4.5.6 TRI Database ........................... 9
4.5.7 SSTS Database ......................... 9
4.5.8 TSCA Database ......................... 9
4.6 State of Utah Regulatory Records Review ......... 10
4.6.1 SWLF Database ......................... 10
4.6.2 LUST Database .......................... 10
4.6.3 UST Database ........................... 11
4.7 Local Records Review ............................ 11
5.0 SITE RECONNAISSANCE .................................. 11
5.1 Hazardous Substances at the Site ............. 12
5.2 Polychlorinated Biphenyis (PCBS) ............. 12
6.0 INTERVIEWS
6.1 Owners and Occupants Interviews ................ 12
6.2 Government Officials Interviewed ............... 13
7.0 SUMMARY OF ENVIRONMENTAL FINDINGS AND CONCLUSIONS ...... 13
8.0 RECOMMENDATIONS ........................................ 13
9.0 CLOSURE ................................................ 14
10.0 PROPOSED CONSTRUCTION .................................. 14
11.0 SUBSURFACE CONDITIONS .................................. 14
12.0 FOUNDATION RECOMMENDATIONS ............................ 15
<PAGE>
TABLE OF CONTENTS (cont)
13.0 LIMITATIONS ......................................... 16
14.0 SOURCES OF INFORMATION .............................. 18
APPENDIX A: VICINITY MAP AND SITE PLAN
APPENDIX B: WATER RIGHTS POINTS OF DIVERSION PLOT AND LOCATION PRINTOUT
APPENDIX C: DATABASE SEARCH REPORT
<PAGE>
EXECUTIVE SUMMARY
ENVIRONMENTAL PHASE I SITE ASSESSMENT
A Phase I Environmental Site Assessment was conducted in conformance with
the scope and limitations of ASTM Practice E-1527-94 for the 2 acre parcel of
land located at the Southwest corner of 200 South St. and 1200 East St. in St.
George, Utah. Our scope of work included: (1) review of records from
appropriate federal, state, and local regulatory agencies and private sources to
assess the site environmental history (2) interviews with persons familiar with
the site to assess past land uses and the potential for environmental
contamination (3) a site reconnaissance to view accessible land and structures
and (4) preparation of this report. This assessment has revealed no evidence of
recognized environmental conditions in connection with the property. Details of
the findings and conclusions are included in the attached report.
GEOTECHNICAL SITE ASSESSMENT
A preliminary Geotechnical study conducted at this site revealed that
slightly moisture sensitive soils underlie the parcel. Conventional spread
footings resting on structural fill is recommended for building support. Details
of the findings and conclusions are included in the attached report.
i
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 1
November 18, 1996
Project Number S1248
1.0 INTRODUCTION
This report presents the results of a Phase I Environmental Site Assessment
and Preliminary Geotechnical Study conducted on an approximately 2 acre site
located on the southwest corner of 200 South St. and 1200 East St. The objective
of the environmental assessment was to identify, to the extent feasible pursuant
to the processes prescribed in the ASTM Practice E-1527-94, recognized
environmental conditions in connection with the property. Recognized
environmental conditions, as defined by ASTM Practice E-1527-94, are the
presence or likely presence of hazardous substances or petroleum products on the
property under conditions that indicate an existing release, a past release, or
a material threat of a release into structures, the ground, ground water, or
surface water of the property. The term is not intended to include de minimis
conditions that generally do not present a material risk of harm to public
health or the environment and that generally would not be the subject of an
enforcement action if brought to the attention of appropriate governmental
agencies.
The purpose of our preliminary geotechnical study was to provide information
on subsurface conditions, preliminary recommendations for foundation types and
depths, soil bearing capacities, and other construction considerations
influenced by the subsoil conditions.
2.0 SCOPE OF SERVICES
The scope of our services consisted of performing a Standard Phase I
Environmental Assessment following ASTM Standard E-1527-94 along with a
preliminary Geotechnical Study, as presented in Delta Geotechnicals Proposal No.
SP394 dated October 21, 1996. Our work included the following:
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 2
November 18, 1996
Project Number S1248
ENVIRONMENTAL PHASE I STUDY ASSESSMENT
Records Review
Review of aerial photographs, published maps and other available
documents to determine historic land use.
Review of available documents containing information regarding the
physical site setting.
Search of U. S. Environmental Protection Agency (EPA), Utah Department
of Environmental Quality (UDEQ), and local regulatory agency records to evaluate
the possible presence of hazardous substances on or near the property.
Interviews
Interviews of owners, occupants, and governmental officials, to verify
and expand on data collected from the sources discussed above.
Site Reconnaissance
Reconnaissance of the site to evaluate its present condition, with
emphasis on environmental issues such as:
-Visible evidence of underground or aboveground storage tanks
-Refuse and waste handling procedures
-Drainage conditions, waste water, stains, sumps, and pits
-Identification of equipment containing possible polychlorinated
biphenyls (PCB's)
-Hazardous materials and their use, storage, and disposal
Report
Interpretation of the data collected and preparation of this report.
PRELIMINARY GEOTECHNICAL STUDY
Site reconnaissance
Subsurface exploration and sampling
Laboratory testing
Engineering analysis
Preparation of this report
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 3
November 18, 1996
Project Number S1248
3.0 SITE DESCRIPTION
The site is about 2 acres in size, generally rectangular in shape, and was
vacant at the time of our field study. It appears that the majority of the
native vegetation has been grubbed and stockpiled just south of the site. Due
to the existence of young vegetation, we estimate that grubbing occurred between
I and 2 years ago. A 1 to 3-foot deep drainage ditch runs diagonally from the
northwest corner to the center of the property. It appears that this ditch
drains excess storm water from the adjacent Interstate-15 freeway. Several
small stockpiles dot the parcel. These stockpiles were covered with soil and we
were unable to determine if the center of the pile contained debris, soil,
and/or vegetation. The site and surrounding facilities are shown on the
Vicinity Map and Site Plan included in Appendix A as Figure A-1 and Figure A-2,
respectively.
3.1 Description of Structures and Improvements
At the time of our visit, the site was void of any structures. As described
above, the majority of the native vegetation has been grubbed from the site.
About 1 to 5 feet of fill was placed along the east edge of the property as
indicated on Figure A-2. It is suspected that this fill was placed during road
construction of 1200 East Street.
3.2 Information Provided by the Client
The client informed us that the subject site is the northern half of a 4
acre vacant parcel of land located between 200 South St. and 300 South St. and
between 1200 East St. and the I-15 freeway. The site is zoned R-3 and is
located adjacent to several condominiums and townhomes. An area map was
provided to us prior to field work.
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 4
November 18, 1996
Project Number S1248
3.3 Surrounding Properties
The site is surrounded by the I-15 freeway right-a-way on the west, raw land
(which will be 200 South St. in the future) to the north, 1200 East Street to
the East, and vacant land to the south. The surrounding structures consist of
townhomes located east of 1200 East Street and condominiums located south of the
southern vacant lot. See Figure A-2 for location of the site with respect to
adjoining properties.
3.4 Past Uses of the Site and Surrounding Properties
Based on a review of aerial photographs and conversations with persons
familiar with the site. It appears that the property has been vacant since at
least 1960. The surrounding properties have primary been vacant until
approximately 4 to 5 years ago when the townhomes/condominiums located east of
1200 East Street were constructed.
4.0 RECORDS REVIEW
4.1 Topography
The ground slopes down gently to the south with an elevation drop across the
site of about 8 feet. The average elevation is approximately 2,740 feet above
mean sea level, according to the U.S. Geological Survey topographic maps. No
unusual features or concerns were identified from these maps.
4.2 Geology
The Site is located within the St. George Basin, a complex geological region
consisting of lava flows and alluvial deposits. The subject parcel is situated
on an alluvial deposit that stretches from the north end of the City of St.
George south to the Virgin River.
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 5
November 18, 1996
Project Number S1248
The site is between the Washington Fault, about 3.5 miles to the east, and
the Grand Wash Fault, about 12.5 miles to the west. The more active Hurricane
Fault is approximately 13.5 miles to the east (Christenson and Deen, 1983).
4.3 Hydrology
Surface drainage on the site appear to be fair due to the slight slope of
the ground surface. Because the near surface soils are sandy, the majority of
the water running along the surface would most likely percolate down through the
upper loose soils. As described earlier, a 1 -to 3 -foot deep drainage ditch
runs diagonally through the center of the property. This ditch drains excess
storm water from the 1-15 freeway. The amount or frequency of water that this
ditch carries is not known.
A detailed study of the subsurface hydrology has not been conducted in this
area. Christenson and Deen (1983) suggest that most of the groundwater found in
the St. George Basin is contained in an unconfined aquifer system with a highly
variable total dissolved solids level (144 to 6860 mg/1) with averages around
1,400 mg/I. The depth to this suggest unconfined aquifer is not given. It has
been our experience in this area that groundwater is typically around 10 feet
below the ground surface. We did not encountered groundwater during our
geotechnical investigation, but we did encounter a dry calcareous layer that is
traditionally known to carry groundwater. Regional groundwater flow is to the
south; however, the local groundwater flow direction may be somewhat influenced
by the presence of local factors such as water extraction from points of
diversion as shown in Appendix B. The National Oceanic and Atmospheric
Administration reports that the average yearly rainfall for the area is about 8
inches.
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 6
November 18, 1996
Project Number S1248
4.4 Aerial Photograph Review
Historical aerial photographs at the U.S. Bureau of Land Management's office
located in St. George, were viewed as part of the site assessment. These
included photos from 1960 through 1984. The following photographs were
reviewed:
DIH 7-AA, #33 & 34 6/25/60
WESD 5-18, #7 & 8 5/30/76
156-55 9/7/84
The following summarizes our photo review observations:
The 1960 photographs showed the site and surrounding areas as raw land. It
appears that the property was not used for farming purpose. We were unable to
determine if the property was used as cattle or horse pasture. The 1976
photograph also showed the site and surrounding properties as raw land with the
exception of the I-15 freeway. There was no noticeable change in the site and
surrounding areas between the 1976 and 1984 photographs.
The review of aerial photographs indicates that the site was vacant since
the 1960's.
4.5 Federal and State Regulatory Records Review
An Environmental Record Report database search was reviewed in an attempt to
identify properties which may affect the subject site. See Appendix B for a
copy of the database information and a detailed description of the data sources
included in the report.
4.5.1 CERCLIS AND NPL Databases
The Comprehensive Environmental Response, Compensation, and Liability
information System (CERCLIS) list is a compilation by the EPA of known or
suspected uncontrolled or
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 7
November 18, 1996
Project Number S1248
abandoned hazardous waste sites, which the EPA has investigated, or is currently
investigating for a release or threatened release of hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (CERCLA, Superfund Act). The EPA's CERCLA program provides for
liability, compensation, cleanup, and emergency response for hazardous
substances released into the environment, and for the cleanup of inactive or
uncontrolled hazardous waste sites. As part of this program, sites meeting
certain criteria are required to notify the EPA and are cataloged on the CERCLIS
database. Once a site enters CERCLA, it may be subjected to several levels of
review and evaluation, and ultimately placed on the NPL. While it has been
determined by the EPA that some CERCLA sites require no action, others could
well pose a real or perceived environmental threat to neighboring properties,
thus impacting property values. The Utah Department of Environmental Quality
(UDEQ) provides the public with information concerning inactive and abandoned
hazardous waste sites.
The review of EPA listings of locations subject to investigation concerning
contamination of soil, surface water, or groundwater (CERCLIS List) identified
no CERCLA sites located within a one mile radius from the subject site.
4.5.2 NPL Database
The National Priorities (superfund) List (NPL) is EPA's list of the most
serious uncontrolled or abandoned hazardous waste sites identified for possible
long-term remedial action under Superfund. A site must be on the NPL to receive
money from the Trust Fund for remedial action. The list is based primarily on
the score a site receives from the Hazard Ranking System. A site, to be
included on the NPL, must either meet or surpass a predetermined hazard ranking
system score,
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 8
November 18, 1996
Project Number S1248
or be chosen as a state's top priority site, or meet all three of the following
criteria: (1) the U.S. Department of Health and Human Services (HHS) issues a
health advisory recommending that people be removed from the site to avoid
exposure; (2) EPA determines that the site represents a significant threat; and
(3) EPA determines that remedial action is more cost effective than removal
action. EPA is required to update the NPL at least once a year.
The review of EPA listing did not identify any federal Superfund (National
Priority List) sites within one mile of the subject site.
4.5.3 RCRA Database
The EPA's Resources Conservation and Recovery Act (RCRA) Program, identifies
and tracks hazardous waste from the point of generation to the point of
disposal. The RCRA Notifiers are those sites which have filed notification
forms with the EPA in accordance with RCRA requirements regarding their
generation, store, transportation, treatment, or disposal of hazardous waste.
These sites include: treatment, storage and disposal sites (RCRA-TSD);
transporters; and large (RCRA-LG) and small generators (RCRA-SG) of hazardous
wastes regulated under RCRA. These sites, while they represent some form of
hazardous waste activity, are most significant if they are determined to be out
of compliance with regulation established pursuant to RCRA. There are no RCRA
sites reported within a one-mile radius of the site.
4.5.4 ERNS Database
The Emergency Response Notification System (ERNS) is a national database
that is used to store information concerning the sudden and/or accidental
release of hazardous substances, including petroleum, into the environment.
The ERNS reporting system contains preliminary information on
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 9
November 18, 1996
Project Number S1248
specific releases, including the spill location, the substance released, and the
responsible party. The ERNS indicates that there were no reported releases near
the subject property.
4.5.5 PADS Database
The PCB Activity Data Base System PADS identifies generators, transporters,
commercial storers and/or brokers and disposers of PCBs that are required to
notify the EPA of such activities. The subject property is not a PADS site.
4.5.6 TRI Database
The Toxic Release Inventory (TRI) contains information regarding facilities
which manufacture, process, or import any of the over 300 listed toxic chemicals
which are released directly into the air, water or land or are transported off
site. There are no TRI facilities located within a half-mile radius of the
property.
4.5.7 SSTS Database
The Section Seven Tracking System (SSTS) tracks the registration of all
establishments and tracks annually the types and amounts of pesticides, active
ingredients, and devices which are sold, produced or distributed. The subject
property is not a SSTS site.
4.5.8 TSCA Database
The Toxic Substances Control Act (TSCA) Inventory identifies manufactures
and importers of chemical substances included on the TSCA Chemical Substances
Inventory list. It includes data on the projection volume of these substances
by plant site. The database is no longer released by the EPA but is useful to
identify previous processing and manufacturing plants. The subject property is
not a TSCA site.
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 10
November 18, 1996
Project Number S1248
4.6 State of Utah Regulatory Records Review
An Environmental Record Report database search was also reviewed in an
attempt to identify properties which may affect the subject site. See Appendix
B for a copy of the database information and a detailed description of the data
sources included in the report.
4.6.1 SWLF Database
The Utah Solid Waste Disposal Facilities (SWF) list is a comprehensive
listing of all permitted solid waste landfills and processing facilities
operating within the State of Utah. The database did not reveal the presence of
solid waste facilities within one-half mile of the subject property.
4.6.2 LUST Database
The Utah Leaking Underground Storage Tank (LUST) report is a comprehensive
listing of all reported active and inactive LUSTs located within the State of
Utah. The LUST database was reviewed to determine if there are known LUSTs
near the subject site or in the surrounding area. According to the database
there are 3 LUST sites located within one-half mile radius of the site. The
sites are listed as follows:
Between One-eighths and One-Quarter Mile
No sites listed.
Between One-Quarter and One-Half Mile
Mont's Texaco, 915 East St. George Blvd (located 0.44 miles northwest)
H&H Shell Oil, 880 East St. George Blvd (located 0.48 miles northwest)
Surfast #1, 875 East St. George Blvd, (located 0.48 miles northwest)
The records search indicates that the Surfast #1 site was closed on 7/12/95.
The current status on the other 2 sites is not known at this time. Due to the
distance and direction of the
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 11
November 18, 1996
Project Number S1248
LUST sites in comparison to the subject site, we feel that the probability of
the contamination due to these LUST sites is low.
4.6.3 UST Database
The Underground Storage Tank (UST) report is a summary listing of all
registered active and inactive underground storage tanks located within the
State of Utah. The database which was reviewed lists no sites within
one-quarter mile of the site.
4.7 Local Records Review
Delta Geotechnical contacted individuals or reviewed records at various
county, state, and local offices for additional information concerning
historical land use and potential environmental issues relating to the area
surrounding the subject site. Environmental health officials contacted,
indicated that other than the previously mentioned events, they were not aware
of the spills, hazardous material releases, or other environmental concerns.
The Utah Division of Water Rights, Water Rights Point Diversion Plot
(Figure B-1) created November 7, 1996 lists 58 points of diversion within a
one-mile radius of the property. The majority of the points of diversion are
for irrigation, stock watering, and municipal use. The Points of Diversion
printout is included in Appendix B.
5.0 SITE RECONNAISSANCE
Mr. Christopher D. Volksen of Delta Geotechnical Consultants, Inc.
conducted a site reconnaissance on October 28, 1996. At the time of our visit,
the site was vacant of any structure. Vegetation at the site was sparse, mainly
consisting of young desert grasses and bushes. Some small
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 12
November 18, 1996
Project Number S1248
stockpile of material dot the site. As described earlier, these piles are
covered with soil, therefore we were unable to determine what is in the center
of the piles.
5.1 Hazardous Substances at the Site
No observable hazardous substances or signs of past use of hazardous
substances at the site were noted.
5.2 Polychlorinated Biphenyis (PCBs)
Delta Geotechnical inspected the property for the presence of electrical and
hydraulic equipment that may contain polychlorinated biphenyls (PCBs). PCBs
were widely used in the manufacturing industry until the mid 1970s, when they
were banned from use. There was no evidence of PCB containing material noticed
during our site visit.
6.0 INTERVIEWS
6.1 Owners and Occupants Interviewed
Since the property was vacant, there were no occupants, therefore we only i
nterviewed neighbors.
Mrs. Betty Dahl, resident at 301 South 1200 East #39, stated that she has
lived at this address for about 4 years. During that time she has been either
President of, or a board member of, the homeowners association. She indicated
that, to the best of her knowledge, there have been no environmental incidents
concerning the site or surrounding area.
Mrs. Gladys Allen, resident at 301 South 1200 East # 42, stated that she
has lived at this address for about 4 years. She indicated that, to the best
of her knowledge, there has been no environmental incidents concerning the site
or surrounding area.
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 13
November 18, 1996
Project Number S1248
6.2 Government Officials Interviewed
Delta Geotechnical contacted Mr. Wayne Huston, Fire Chief for the City of
St. George regarding any fire department involvement with the property. The
fire department was not aware of any past environmental issues concerning the
site or adjacent property.
Delta also contacted Lieutenant Robert Flowers, Commander of Section 11 for
the Utah Highway Patrol, about any traffic incidents along the 1-15 freeway that
might impact the site. According to his memory, there have been no incidents
along the section of I-15 that borders the property that might impact the site.
7.0 SUMMARY OF ENVIRONMENTAL FINDINGS AND CONCLUSIONS
Based on a review of available records, site visits, personal interviews,
and other site related work, Delta Geotechnical concludes that:
The subject property currently consists of vacant land.
There are no registered UST's located on the property.
The Federal and State records indicate that two active LUST sites are
located between one-quarter and one-half mile from the subject site.
This assessment has revealed no evidence of environmental concern in
connection with the site other than those listed above.
8.0 RECOMMENDATIONS
Based on the above information, our assessment has revealed no evidence of
environmental concern in connection with the site. We do not recommend any
additional sampling or testing for this site.
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 14
November 18, 1996
Project Number S1248
9.0 CLOSURE
This Phase I Environmental Site Assessment was performed in conformance with
the scope and limitations of ASTM Practice E-1527-94 for the subject site. Any
exceptions to, or deletions from, this practice are described in the Scope of
Services Section (2.0) of this report. This assessment has revealed no evidence
of environmental concern in connection with the site.
GEOTECHNICAL RECOMMENDATIONS
10.0 PROPOSED CONSTRUCTION
At the time of our study, the details of the proposed development had not
been determined. It is our understanding that the development could consist of
one to two-story residential buildings with paved parking lots and drives.
The buildings will most likely be masonry block or wood frame with slab-on-grade
construction similar to other buildings in the area.
11.0 SUBSURFACE CONDITIONS
In order to study subsurface conditions, 6 test pits were excavated across
the site. The subsoils correlated fairly well between the test pits which
generally consisted of an initial 6 to 12 inches of topsoil, underlain by 3 to
7 feet of loose silty sand and/or loose to medium dense clayey sand. In some
of the test pits, the sand was underlain by moist low plastic clay and/or hard
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 15
November 18, 1996
Project Number S1248
calcareous material. Details of the soils encountered in the test pits are
presented on Figures A-3 through A-8. Figure A-9 is the key to symbols and
abbreviations used on the Test Pit Logs.
Swell-consolidation test results indicated that the native soils are
slightly moisture sensitive. Samples of the sands collapsed between 0.2 and 3.0
percent while a sample of the clay expanded 0.2 percent due to saturation under
a constant load of 1.0 ksf. The sample of clay indicated a swell pressure
around 1,400 to 1,600 psf.
As described earlier, ground water was not observed in any of the test pits
during our investigation. However, due to the presence of calcareous material,
it appears that historically, ground water has been located within 5 to 6 feet o
f the ground surface.
12.0 FOUNDATION RECOMMENDATIONS
The site is suitable for the proposed development. Considering the
subsurface conditions, we believe that spread footing founded on structural
fill would be the most suitable and economical foundation system for supporting
a building on this site. Stripping of the topsoil from the building and
pavement areas will be required. The topsoil should be suitable for use in
landscaped area. Undercutting of the footings will need to be extended to a
depth of 1 to 2 feet below the bottom of the footings. This depth will depend
on the structural loads involved. The onsite materials, with the exception of
the topsoil, should be able to be used as structural fill. The bearing capacity
of the native materials when used as structural fill should be on the order of
1,800 to 2,800 psf.
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 16
November 18, 1996
Project Number S1248
Because of the hard nature of the calcareous material underlying the site,
basement and utility trench excavations may be difficult. Jack hammers or a
dozer with ripper type equipment may be required.
13.0 LIMITATIONS
The purpose of an environmental assessment is to reasonably evaluate the
potential for, or actual impact of past or present practices on a given
property. In performing an environmental assessment, it is understood that a
reasonable balance between environmental issues must be achieved as an
exhaustive analysis of each conceivable issue of potential concern is not
economically feasible. No environmental site assessment can wholly eliminate
uncertainty regarding the potential for recognized environmental conditions in
connection with a property. The environmental assessment is intended to reduce,
but not eliminate, uncertainty regarding the potential for recognized
environmental conditions in connection with the property and is limited by the
scope of services described herein and by the limitations of ASTM Practice
E-1527-94. The environmental assessment contains professional opinions about
environmental issues at the property and presents site conditions at the time of
the assessment. Site conditions may change with time. In rendering its
professional opinion, Delta Geotechnical's services provided herein were
performed, within the limited described, in accordance with current, generally
accepted environmental consulting principles and practices.
Delta Geotechnical has assessed the subject site visually, by reviewing
available historical records, and by conducting interviews with available
persons. No subsurface investigation was undertaken. Delta Geotechnical made
reasonable efforts to identify the presence of regulated
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 17
November 18, 1996
Project Number S1248
hazardous substances at the site, but does not guarantee that such substances
are not present in locations not accessible or visibly detectable to auditors.
If a higher level of confidence is required, additional investigation is
suggested.
In conducting this assessment, Delta Geotechnical used information provided
by site owners and operators. Such information was assumed to be correct and
was used as supplied without verification. No warranty is expressed or
implied.
The geotechnical analysis and recommendations found in our report should be
considered preliminary. Once the details and locations of the proposed
structures are known, a final geotechnical study should be conducted.
Very Truly Yours,
DELTA GEOTECHNICAL CONSULTANTS, INC.
/S/ Christopher D. Volksen
CHRISTOPHER D. VOLKSEN
Project Engineer
/S/ Gary K. Olson
GARY K. OLSON, P.E.
Senior Geotechnical Engineer
CDV/GKO:c
<PAGE>
Phase I Environmental and Preliminary Geotechnical Site Assessment Page 18
November 18, 1996
Project Number S1248
14.0 SOURCES OF INFORMATION
Christenson, G.E. and Deen, R.D., (1983), Engineering Geology of the St. George
Area Washington County, Utah, Utah Geological and Mineral Survey a Division of
Utah Department of Natural Resources and Energy, Special Studies 59, April
Flowers, Robert, (1996), Commander of Section 11 for the Utah Highway Patrol.
Personal communication.
Huston, Wayne, (1996), Fire Chief for the City of St. George, Personal
communication.
Regulatory Environmental Databases - National Priorities List (NPL);
Comprehensive Response, Compensation, and Liability Information System
(CERCLIS); Resource Conservation and Recovery Act (RCRA);.Leaking Underground
Storage Tanks (LUSTs); Solid Waste Landfills (SWLF); registered Underground
Storage Tanks (USTs); and Emergency Response Notification System (ERNS) spill
sites.
Thomas, Wayne, (1996), District Engineer of the Utah Department of Environmental
Quality, Personal communication.
US Bureau of Land Management, Aerial Photographs
USGS Topographic Quadrangle of St. George, Utah, 1954
Utah Division of Water Rights Database, Point of Water Diversion
