<PAGE>
REGISTRATION NO. 333-45419
------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
Registration Statement Under The Securities Act of 1933
SENIOR RETIREMENT COMMUNITIES, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
Louisiana 8261 72-1394159
- --------------- --------------- --------------
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
</TABLE>
507 Trenton Street
West Monroe, Louisiana 71291
(318) 323-2115
-----------------------
(Address and telephone number
of principal executive offices)
507 Trenton Street
West Monroe, Louisiana 71291
-----------------------
(Address of principal place of business
or intended principal place of business)
Joanne M. Caldwell-Bayles
507 Trenton Street
West Monroe, Louisiana 71291
(318) 323-2115
-----------------------
(Name, address and telephone
number of agent for service)
Copies of communications to:
Clay Carroll, Esq.
525 East Court Avenue
Jonesboro, Louisiana 71251
(318) 259-4184
Michael G. Quinn, Esq.
154 North Topeka Street
Wichita, Kansas 67202
(316) 267-0377
William Martin
MMR Investment Bankers, Inc.
550 North 159th Street East
Suite 300
Wichita, Kansas 67230
(316) 733-5081
-----------------------
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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
pusuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securitis 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. [X]
If this Form is a post-effective amendment filed purusant 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
being to be price per offering Amount of
registered registered unit price (1) registration fee
- ---------- ---------- --------- ---------- ----------
First $9,000,000 100% $9,000,000 $2,727.27
Mortgage
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>
SENIOR RETIREMENT COMMUNITIES, INC.
CROSS-REFERENCE SHEET PURSUANT TO PART I OF FORM SB-2/A
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<CAPTION>
FORM SB-2/A 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; Sources and Uses
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, Management
Promoters and Control Persons . .
11. Security Ownership of Certain Principal Owners of the Company
Beneficial Owners and Management
12. Description of Securities . . . . Description of Bonds
13. Interest of Named Experts and Legal Matters; Experts
Counsel . . . . . . . . . . . . .
14. Disclosure of Commission Not Applicable
Position on Indemnification for
Securities Act Liabilities. . . .
15. Organization within Last Five Not Applicable
Years . . . . . . . . . . . . . .
16. Description of Business . . . . . Prospectus Summary; Risk Factors;
Sources and Uses 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 Certain Transactions
Related Transactions. . . . . . .
20. Market for Common Equity and Not Applicable
Related Stockholder Matters . . .
21. Executive Compensation. . . . . . Management - Executive Compensation
22. Financial Statements. . . . . . . Financial Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure . .
</TABLE>
================================================================================
<PAGE>
PROSPECTUS Dated ______, 1998
$9,000,000.00
SENIOR RETIREMENT COMMUNITIES, INC.
Co-First Mortgage Bonds Consisting of:
$3,685,000 Co-First Mortgage Bonds, Series 1998-I (the "Ruston Project")
$3,470,000 Co-First Mortgage Bonds, Series 1998-II (the "Bossier City Project")
$1,845,000 Co-First Mortgage Bonds, Series 1998-III (the "Shreveport Project")
Senior Retirement Communities, Inc. (the "Company") is a newly formed
Louisiana corporation which will develop and operate retirement, assisted
living and memory disorder facilities in certain cities in the State of
Louisiana. The Company will conduct business doing business as the Arbor
Retirement Community. The Company is offering $9,000,000 of co-first
mortgage bonds (herein collectively referred to as the "Bonds") in three
series, with the proceeds from each series being used for a particular
project located in a city in the State of Louisiana. Herein, the Company's
three projects are collectively referred to as the "Facilities". The issue
and sale of each series of bonds is not contingent on the issue and sale
of the other series of bonds, and will be separately offered and sold and
subject to minimum proceeds prior to the issuance thereof. Pending receipt
of minimum proceeds for each series of bonds, the proceeds for the
subscriptions thereto will be held in escrow pursuant to an Escrow Agreement
between the Company and Colonial Trust Company (the "Trustee").
The Bonds are issued as fully registered bonds in denominations of $250
or any integral multiple thereof. All Bonds will be issued in book-entry
form unless the purchaser requests a printed bond. Payments of principal and
interest thereunder will be paid by the Trustee, as paying agent and registrar
of the Bonds. A portion of the Bonds bear simple interest payable
semiannually, and some of the Bonds bear compound interest payable at maturity.
See "Maturity Schedules". Interest on each series of the bonds will accrue from
its respective dates of issue whether or not the respective minimum offering
amounts have been reached. The Bonds are secured by a pledge of land and
buildings constituting the Facilities and a pledge of gross income of the
Company pursuant to the terms of the Trust Indenture (the "Trust Indenture")
between the Company and the Trustee. The Bonds are subject to redemption prior
to the respective maturities, in whole or in part, as more fully
described herein. See "Description of Bonds".
THE BONDS INVOLVE A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 7 OF
THIS PROSPECTUS CONCERNING THE COMPANY AND THIS OFFERING.
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
Series (1) Public (2) Commissions (3) Company
<S> <C> <C> <C>
Series 1998-I 100% 6% 94%
Series 1998-II 100% 6% 94%
Series 1998-III 100% 6% 94%
Total 100% 6% 94%
</TABLE>
(Notes continued on next page)
MMR INVESTMENT BANKERS, INC.
The Bonds are offered by MMR Investment Bankers, Inc. (the "Underwriter")
on a best efforts basis as agent for the Company. The Bonds are offered
subject to prior sale. The offering of the Bonds (the "Offering") will
continue until the sale of all Bonds or for a period of one year from the
date of this Prospectus. It is expected that the Bonds will be delivered in
book-entry form, subject to the sale of minimum funds for each series of
Bonds, through the facilities of the Trustee within thirty (30) days from the
date subscriptions for the Bonds are received.
<PAGE>
(Notes continued from the front page)
(1) The Series 1998-I Bonds are subject to the sale of a minimum of $750,000
in principal amount of Bonds. The Series 1998-II are subject to the sale of
a minimum of $750,000 in principal amount of Bonds. The Series 1998-III
Bonds are subject to the sale of a minimum of $500,000 in principal amount of
Bonds. Subject to the sale of all Bonds and any adjustments, the Underwriter
will receive an aggregate maximum sales commission of $630,000. See
"Underwriting". The Company, the Company's affiliates, the Underwriter and
the Underwriter's affiliates may purchase Bonds in order to reach the minimum
offering amounts for any series of the Bonds. These parties will not be
restricted to the amount of Bonds that they may purchase. The Company has
agreed to indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933,
as amended (the "Securities Act").
(2) The Bonds are issued as fully registered bonds in denominations of $250
or any integral multiple thereof.
(3) Before deducting expenses payable by the Company estimated at $280,000,
including an investment banking fee in the amount of $117,000 paid to the
Underwriter for its technical assistance in connection with the Offering,
$100,000 to be paid by the Trustee to the Underwriter over the terms of the
Bonds and miscellaneous expenses estimated to be $63,000 for registration
fees, legal fees, accounting fees and other costs associated with the Offering.
THESE SECURITIES ARE OFFERED FOR SALE IN THE STATES OF COLORADO, KANSAS,
LOUISIANA AND WYOMING PURSUANT TO A PERMISSIVE REGISTRATION WITH THE
SECURITIES COMMISSIONERS OF THESE STATES. THESE SECURITIES ARE ALSO OFFERED
FOR SALE IN THE STATES PENNSYLVANIA AND TEXAS PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THESE STATES' SECURITIES ACTS. THE REGISTRATIONS AND
EXEMPTIONS FROM REGISTRATION DO NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT BY THE COMMISSIONERS NOR DOES THE REGISTRATIONS OR EXEMPTIONS
FROM REGISTRATION SIGNIFY THAT THE COMMISSIONERS HAVE APPROVED OR PASSED UPON
THE INVESTMENT MERIT OF SUCH SECURITIES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PENNSYLVANIA RESIDENTS/INVESTORS
EACH PERSON WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM
REGISTRATION BY SECTION 203(d), DIRECTLY FROM THE ISSUER OR AFFILIATE OF THE
ISSUER, SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY
LIABILITY TO THE SELLER, UNDERWRITER (IF ANY) OR ANY OTHER PERSON WITHIN
2 BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER OF HIS WRITTEN BINDING
CONTRACT OF PURCHASE, OR, IN THE CASE OF A TRANSACTION IN WHICH THERE IS NO
BINDING CONTRACT OF PURCHASE, WITHIN 2 BUSINESS DAYS AFTER HE MAKES THE
INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED.
TEXAS RESIDENTS/INVESTORS
THESE SECURITIES ARE OFFERED FOR SALE ONLY TO FINANCIAL INSTITUTIONS,
INSTITUTIONAL INVESTORS AND ACCREDITED INVESTORS AS DEFINED IN SECTION 109.3
OF THE TEXAS SECURITIES ACT.
[Place picture of facilities here] [SRC logo here]
The Company intends to furnish annual reports containing audited financial
statements to its bondholders.
2
<PAGE>
MATURITY SCHEDULES
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<CAPTION>
Series 1998-I Bonds
Maturity Type Interest Principal
Date (1) Rate Retired
<S> <C> <C> <C>
01/01/99 S 7.50% $85,000
07/01/99 S 7.50% $88,250
01/01/00 S 8.00% $107,750
07/01/00 S 8.00% $112,250
01/01/01 C 8.50% $109,000
07/01/01 S 8.50% $135,000
01/01/02 S 9.00% $156,500
07/01/02 S 9.00% $163,750
01/01/03 C 9.25% $114,000
07/01/03 S 9.25% $171,000
01/01/04 S 9.50% $179,000
07/01/04 S 9.50% $187,500
01/01/05 C 9.75% $105,500
07/01/05 S 9.75% $196,000
01/01/06 S 10.00% $206,500
07/01/06 S 10.00% $216,000
01/01/07 C 10.00% $99,250
07/01/07 C 10.00% 94,250
01/01/08 C 10.00% 89,750
07/01/08 C 10.00% 85,750
01/01/09 C 10.25% 79,500
07/01/09 C 10.25% 75,500
01/01/10 C 10.25% 72,000
07/01/10 C 10.25% 68,250
01/01/11 C 10.25% 65,250
07/01/11 C 10.50% 60,000
01/01/12 C 10.50% 57,000
07/01/12 C 10.50% 54,250
01/01/13 C 10.50% 51,500
07/01/13 C 10.50% 48,750
01/01/14 C 10.75% 44,750
07/01/14 C 10.75% 42,500
01/01/15 C 10.75% 40,250
07/01/15 C 10.75% 38,250
01/01/16 C 10.75% 36,500
07/01/16 C 11.00% 33,000
01/01/17 C 11.00% 31,250
07/01/17 C 11.00% 29,750
01/01/18 C 11.00% 28,250
07/01/18 C 11.00% 26,500
</TABLE>
<TABLE>
Series 1998-II Bonds
Maturity Type Interest Principal
Date (1) Rate Retired (2)
<S> <C> <C> <C>
02/01/99 C 7.50% $154,750
08/01/99 C 7.50% $149,250
02/01/00 C 8.00% $159,750
08/01/00 C 8.00% $153,750
02/01/01 C 8.50% $161,750
08/01/01 C 8.50% $155,000
02/01/02 C 9.00% $160,500
08/01/02 C 9.00% $153,250
02/01/03 C 9.25% $145,500
08/01/03 C 9.25% $138,750
02/01/04 C 9.50% $131,000
08/01/04 C 9.50% $125,250
02/01/05 C 9.75% $117,500
08/01/05 C 9.75% $112,000
02/01/06 C 10.00% $105,250
02/01/06 C 10.00% $1,346,750
</TABLE>
<TABLE>
<CAPTION>
Series 1998-III Bonds
Maturity Type Interest Principal
Date (1) Rate Retired (2)
<S> <C> <C> <C>
02/01/00 S 8.00% $10,500
08/01/00 S 8.00% $11,000
02/01/01 S 8.50% $22,250
08/01/01 S 8.50% $23,000
02/01/02 S 9.00% $34,500
08/01/02 S 9.00% $36,250
02/01/03 S 9.25% $37,750
08/01/03 S 9.50% $39,750
08/01/03 S 9.50% $1,630,000
</TABLE>
Note 1:
S = Simple Interest Bonds; interest payable
semiannually until maturity.
C = Compound Interest Bonds; interest
compounded semiannually and payable at maturity.
Note 2: The Series 1998-II Bond Issue has a balloon payment of $2,800,000 due
on January 31, 2006 consisting of $1,346,750 in principal and $1,453,250 in
accrued interest. The Series 1998-III Bond Issue has a balloon payment of
$1,630,000 due on July 31, 2003.
3
<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
Senior Retirement Communities, Inc. is a development stage corporation
formed under the laws of the State of Louisiana for the purpose of developing
and operating retirement, assisted living and memory disorder facilities in
Northern Louisiana. The Company's executive offices are located at 507
Trenton Street, West Monroe, Louisiana, and the Company's telephone number is
(318) 323-2115. See "Business".
The Offering
Bonds Offered. . . . . . The Company is offering $9,000,000 of co-first
mortgage bonds in three series, with the proceeds from each series being used
for a particular project located in a city in the State of Louisiana. The
issue and sale of each series of bonds is not contingent on the issue and sale
of the other series of bonds, and will be separately offered and sold and
subject to minimum proceeds prior to the issuance thereof. The Bonds are
secured by a pledge of land and buildings constituting the Facilities and a
pledge of gross income of the Company pursuant to the terms of the Trust
Indenture between the Company and the Trustee.
The Series 1998-I Bonds will be dated July 1, 1998, and are subject to the
sale of a minimum of $750,000 in principal amount of Bonds. The aggregate
principal amount of the Series 1998-I Bonds is $3,685,000 and is comprised of
bonds in the principal amount of $2,004,500 that will mature serially and bear
simple interest payable by check mailed to the registered owners each
January 1 and July 1 until maturity and bonds in the principal amount of
$1,680,500 that will mature serially and bear interest compounded semiannually
each January 1 and July 1 that is payable at maturity.
The Series 1998-II Bonds will be dated August 1, 1998, and the Series 1998-II
are subject to the sale of a minimum of $750,000 in principal amount of Bonds.
The aggregate principal amount of the Series 1998-II Bonds is $3,470,000. The
Series 1998-II Bonds will mature serially and bear interest compounded
semiannually each February 1 and August 1 that is payable at maturity.
The Series 1998-III Bonds will be dated August 1, 1998, and the Series 1998-III
Bonds are subject to the sale of a minimum of $500,000 in principal amount of
Bonds. The aggregate principal amount of the Series 1998-III Bonds is
$1,845,000. The Series 1998-III Bonds will mature serially and bear simple
interest payable by check mailed to the registered owners each February 1 and
August 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 Schedules on page 3 hereof.
Subscription for Bonds . Each person who wishes to purchase a Bond must
execute a subscription agreement covering the Bond(s) being purchased. The
subscription agreement is generated by the Underwriter, upon receiving verbal
indication from a subscriber for the Bond(s), the subscriber has selected from
the available maturities. Subscribers may purchase any of the series of Bonds.
Prior to
4
<PAGE>
executing the subscription agreement, the subscriber will be provided a
Prospectus by the Underwriter. See "Underwriting - Subscription for Bonds".
Operating Funds. . . . . Under the Trust Indenture, the Company must establish
an operating fund account for each of the three series of bonds. The Company
will make monthly deposits into the operating fund accounts 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. The Bonds are subject
to redemption without premium at the principal amount thereof plus accrued
interest. See "Description of Bonds - Prepayment".
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 bond reserve
account ("Bond Reserve Account") which will be funded by each of the three
series of bonds. See "Sources and Uses of Proceeds". The purpose of the
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. If all the Bonds are sold, the Bond Reserve
Account will be funded in the amount of $620,000. The Bond Reserve Account
will remain in place for a period of ten years from July 1, 1998. 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 - 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
Facilities, 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 are secured by a pledge of
land and buildings constituting the Facilities and a pledge of gross income of
the Company. The properties securing the Bonds are located in the Northern
Louisiana communities of Ruston, Bossier City and Shreveport. Pursuant to
the Trust Indenture, each bond will be issued on parity with the other Bonds.
See "Description of Bonds".
Proceeds Escrow. . . . . All proceeds from the sale of Bonds will be deposited
with Colonial Trust Company as "Escrow Agent" pursuant to an Escrow Agreement
entered into between the Company and the Escrow Agent. Pursuant to the terms
of the Escrow Agreement, all proceeds from the sale of the Bonds will be
deposited with the Escrow Agent, subject to the sale of minimum funds for any
series of Bonds, as set forth herein. In the event minimum funds for any
series of
5
<PAGE>
Bonds is not received within the time set forth herein, the Company will
promptly pay to the Escrow Agent such sum of money as will be necessary, if
any, when added to the sums held in escrow, including interest earned thereon,
to pay to the subscribers the principal amount of their subscription together
with the interest from the date of issue through the escrow termination date
at the rate attributable to the Bonds subscribed to by the subscriber. During
the escrow period, the subscriber will not have access to funds held in the
Escrow Account. See "Description of Bonds - Escrow and Disbursement of Bond
Proceeds".
Use of Proceeds. . . . . Subject to the sale of minimum funds for each series
of Bonds, the net proceeds will be used to fund a small portion of the
operating fund payments on the Bonds, fund a reserve account, provide financing
for the construction, furnishing and equipping of the Company's Facilities and
payoff construction financing on the Facilities. See "Sources and Uses 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 any series of the Bonds; sale of the Minimum Offerings
will only pay expenses and reserves associated with the Offering; and if
sufficient Bonds are not sold to repay the construction loan(s), there is a
risk of foreclosure. Potential investors should carefully consider the
factors set forth under "Risk Factors".
Financial Summary
As of December 31, 1997, the Company had total assets of $1,477,784,
total liabilities of $529,605 and total stockholders' equity of $948,179.
The stockholders of the Company have contributed a total of $948,820 in
capital to the Company. Since the Company's inception on September 10, 1997
through December 31, 1997, the Company has generated no revenues and has
incurred cumulative expenses of $641. See "Financial Statements" beginning
on page F-1 of the Prospectus.
(This space is intentionally left blank)
6
<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 as 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
any series of the Bonds unless the Underwriter sell Bonds equal to the
minimum amount of bonds applicable to a series of Bonds. During the offering
period, the Underwriter will deposit all subscriptions from the sale of the
Bonds with the Escrow agent, which funds will be held until the minimum
offering for a series of Bonds is met. Thereafter, such funds shall be
disbursed to the Company and applied for the purposes set forth herein. See
"Sources and Use of Proceeds". If the minimum offering for any series of
Bonds is not sold, potential investors will loose the use of their funds
during the offering period, and any extension thereof, although the Company
has agreed to promptly pay to the Escrow Agent such sum of money as shall be
necessary, if any, when added to funds held in escrow, including interest
earned thereon, to pay to the subscribers of the bonds the principal amount
of such subscriptions together with the interest applicable to such Bonds
through the escrow termination date. See "Description of Bonds - Escrow and
Disbursement of Bond Proceeds".
Risk Associated with Bonds - Co-First Mortgage
The Company has obtained construction loans (the "Construction Loans")
with Church Loans and Investments Trust of Amarillo, Texas (the "Construction
Lender") for the financing of construction of the Company's Facilities. The
Company obtained the construction loan for the Ruston Project ("Ruston
Construction Loan") on December 1, 1997 in the amount of $2,700,000. The
Company obtained the construction loan for the Bossier City Project
("Bossier City Construction Loan") on April 24, 1998 in the amount of
$2,200,000. The Company obtained the Construction Loan for the Shreveport
Project ("Shreveport Construction Loan") on April 24, 1998 in the amount of
$1,225,000. Each construction loan is secured by a Co-First Mortgage on the
corresponding project that will be built from the proceeds of the respective
construction loan. If any of the Construction Loans go into default, the
Construction Lender may exercise its rights, including the Construction
Lender's right under the mortgage and the applicable Lienholders Agreement to
accelerate the defaulted construction loan and the applicable bonds and, if
not paid, then foreclose the subject property securing the applicable
construction loan. There is no assurance that the Company would be able to
secure alternative financing to replace the construction loan(s) on a timely
basis. Notwithstanding the fact that the security for each of the Facilities
is in parity with its respective construction loan, there can be no assurance
that the proceeds arising from any sale of any of the Facilities, even though
the construction has been fully completed, would be sufficient to fully repay
the respective construction loan and the then outstanding Bonds. Under the
terms of the Lienholders Agreements, all receipts from collection and
foreclosure are to be allocated between the construction loan and the
corresponding series of Bonds in proportion to the respective principal
balances outstanding.
See "Description of Property - Financing of the Company's Facilities,"
"Description of Bonds - Escrow and Disbursement of Bond Proceeds," "Use of
Proceeds" and "The Company's Plan of Operation". Substantial Balloon Payment
Requirements for the Series 1998-II and Series 1998-III Bonds
The Company is required to make a one time payment of $2,800,000 on
January 31, 2006 to pay principal and interest due at that time on the
remaining outstanding Series 1998-II Bonds. Additionally, the Company is
required to make a one time payment of $1,630,000 on July 31, 2003, to pay
principal due at that time on the remaining outstanding Series 1998-III Bonds.
There is no assurance the Company will have sufficient funds to do so, and,
if not, may have to refinance the balance of the Series 1998-II and Series
1998-III Bonds then due. There is also no assurance the Company will be able
to refinance an amount sufficient to retire all of the Series 1998-II and
Series 1998-III Bonds then outstanding.
Presence of Debt
The Company is newly formed and without any operating history. The
financing activities of the Company will be made primarily through the
issuance of debt. As a result, the Company will be highly leveraged. Moreover,
the Company will initially be highly dependent upon the proceeds received as a
result of the issuance of the Bonds in order to service the debt
7
<PAGE>
incurred under the Bonds and, thereafter, the payment of debt will be based
upon income from the Company's operation of the Facilities. There is no
assurance that such operations will be successful. Other than a pledge of
the land and buildings constituting the Facilities 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
stockholders 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 on all three series of bonds in amounts
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
initial operating fund payments (that are to be funded from bond proceeds)
have 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. See "Description of Bonds - Initial Operating Fund
Payments", "Description of Bonds - Events of Default" and "Description of
Bonds - Remedies of Default."
Proceeds of this Offering also will used to fund the Bond Reserve
Account 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 Bond
Reserve Account and will be in effect for ten years from July 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 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 Bond
Reserve Account must first be used to call any outstanding Bonds, provided
the Company is current on all operating fund payments. If all of the Bonds
have been retired prior to the end of the ten year period, then the Bond
Reserve Account will be released to the Company. See "Description of Bonds -
Bond Reserve Accounts".
If only a portion of the Bonds are sold, the operating fund payments 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 debt offerings offered pursuant to Regulation A of the
Securities Act of 1933, as amended, as an exemption from the registration
requirements under the Act. 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. 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 the Underwriter,
its control persons and others 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 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.
8
<PAGE>
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.
Limitations of the Trust Indenture
The Bonds will be issued 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 Company is not required to qualify the
Trust Indenture under the Trust Indenture Act of 1939 as amended (the "Act").
Thus, the Company has elected not to qualify the Trust Indenture under the
Act. See "Description of Bonds".
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.
Additional Bonds
The terms of the Trust Indenture enable the Company to further encumber
the Facilities 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. The
Company intends to issue additional bonds on parity with the Bonds to finance
the construction of other retirement, assisted living and memory disorder
facilities in the State of Louisiana. See "Description of Bonds" and "The
Company's Plan of Operation".
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.
9
<PAGE>
Lack of Operating History and Related Experience
The Company is newly formed and was organized in September of 1997.
Construction of the Company's first facility located in Ruston, Louisiana
commenced on December 1, 1997 and is not scheduled to be completed and open
for business until August of 1998. Construction of the Company's facility
located in Bossier City, Louisiana commenced on May 18, 1998 and is not
scheduled to be completed and open for business until January of 1999.
Construction of the Company's facility located in Shreveport, Louisiana
commenced on May 18, 1998 and is not scheduled to be completed and open for
business until October of 1998. Therefore, the Company has no substantial
operating history. Furthermore, the Company, its affiliates and the
President of the Company have very limited experience in the development and
operation of assisted living/memory disorder facilities. The President of
the Company has gained some previous experience in the development and
operation of a similar assisted living/memory disorder facility in West
Monroe, Louisiana, which commenced operations in November of 1997. See
"Management" and "Prior Performance of Affiliates of the Company". There is
no assurance, that once open, the Company's Facilities will generate income
sufficient to service the Bonds.
Risks Arising from Operations
Any business entity which operates retirement, assisted living and
memory disorder residences 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 Company's
facilities 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 Facilities' 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
care requirements such as residing at the Company's Facilities. 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 their facilities 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 Facilities 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 it 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. See "Business - Competition."
Rental Risk: One of the principal risks being taken by the Company is
the possibility that Facilities 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 Facilities
may be affected by a variety of factors, including but not limited to, the
following: (i) a reduction in rental income due to the Facilities' 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 Facilities due to fire, flooding, tornados or other
natural disasters.
10
<PAGE>
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. Phase
one environmental assessments were conducted on the Company's properties in
1997. Research and visual observation undertaken did not reveal any former
or current environmental conditions, problems or situations impacting the sites.
Construction Risks
Construction of the Facilities are not completed, and delays are common
in the construction industry. The Company anticipates the construction of its
Facilities to be completed by January 1999. 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 Facilities. See "Business - Construction of the Facilities".
Dependence on Management - Management Agreement
The success of the Company's business will be highly dependent upon the
services of Joanne M. Caldwell-Bayles, President of the Company. The loss of
her 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 Mrs. Caldwell-Bayles in the amount of $500,000 payable to the
Company and $1,000,000 assignable to the Trustee for the benefit of the
Bondholders. Mrs. Caldwell-Bayles, through a company owned by her, The
Forsythe Group, Inc., will enter into a Management Agreement for the
management of the Company's Facilities. See "Business - Management Agreement".
The Management Agreement extends to the day-to-day operations of the
retirement, assisted living and memory disorder facilities of the Company.
The Management Agreement extends to the year 2010 and may be terminated by
the mutual agreement of the parties, bankruptcy or for cause. See "Business
- - Facilities Operations".
Employees
Prior to the commencement of operations of each facility, the Company
intends to employ an average of 35 employees at each facility. 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
The principal shareholders of the Company, individually and/or through
their ownership of affiliated companies have or will receive fees and
compensation from the Company. These related transactions are critical to the
development and operation of the Company's Facilities. See "Certain
Transactions." Furthermore, the President of the Company has or will be
negotiating and executing agreements on behalf of the Company. The President
also has the authority to negotiate and execute agreements with entities with
which she is affiliated. This presents a conflict of interest in the fact
that affiliates may realize benefits at the expense and detriment of the
Company. However, the Company intends for the terms of each of these
agreements to be no less favorable than those which might generally be obtained
from third parties providing similar services. 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.
Government Regulations
At present there are no applicable federal regulations affecting the
operation of the Company's Facilities. The Facilities will be built to
conform with state regulations governing residential care for the elderly in
the State of Louisiana. The management is confident all state regulations
regarding the size of the Facilities, health care and environment will be met.
The Company's Facilities will be 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 Facilities will
11
<PAGE>
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 at
the present time. However, the Facilities will be required to be licensed by
the Louisiana Department of Social Services prior to the commencement of
operations of each facility. The Company will apply for licenses with the
Louisiana Department Social Services and anticipates getting a temporary
license upon completion of construction of each facility and a final license
within 90 days after the issuance of the temporary license. In the Company's
opinion, the Facilities and management practices and operations will meet or
exceed all residential care for the elderly regulations of the State of
Louisiana. 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. See "Business -
Government Regulation".
(This spavce is intentionally left blank)
12
<PAGE>
SOURCES AND USES OF PROCEEDS
The sources and anticipated uses of proceeds available after the
issuance of the Series 1998-I, 1998-II and 1998-III Bonds are set forth
below. See"Description of Property - Financing of Facilities" and "Certain
Transactions".
<TABLE>
<CAPTION>
Series 1998-I Bonds Series 1998-II Bonds
Ruston Project (1) Bossier City Project (1)
Source of Proceeds: Minimum Maximum Minimum Maximum
<S> <C> <C> <C> <C>
Gross Offering Proceeds $750,000 $3,685,000 $750,000 $3,470,000
Less Underwriting
Concessions (2) (45,000) (221,100) (45,000) (208,200)
Less Other Offering
Costs (3) (67,500) (67,500) (67,500) (67,500)
------- ---------- -------- ----------
Net Offering Proceeds 637,500 3,396,400 637,500 3,194,300
======= ========= ======= =========
Use of Proceeds:
Fund Initial Operating
Fund Payments 200,000 200,000 185,000 185,000
Retire Construction
Loan (4) 437,500 2,700,000 452,500 2,200,000
Fund Remaining
Construction Costs 0 146,400 0 469,300
Fund Pre-Opening Costs 0 100,000 0 100,000
Fund Bond Reserve
Account 0 250,000 0 240,000
------- ---------- -------- ----------
Total Use of Proceeds 637,500 3,396,400 637,500 3,194,300
======= ========= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Series 1998-III Bonds
Shreveport Project (1)
Source of Proceeds: Minimum Maximum
<S> <C> <C>
Gross Offering Proceeds $500,000 $1,845,000
Less Underwriting
Concessions (2) (30,000) (110,700)
Less Other Offering
Costs (3) (45,000) (45,000)
-------- ----------
Net Offering Proceeds 425,000 1,689,300
======== ==========
Use of Proceeds:
Fund Initial Operating
Fund Payments 100,000 100,000
Retirre Construction
Loans (4) 325,000 1,225,000
Fund Remaining
Construction Costs 0 134,300
Fund Pre-Opening Costs 0 100,000
Fund Bond Reserve
Account 0 130,000
------- ----------
Total Use of Proceeds 425,000 1,689,300
======= ==========
</TABLE>
Note 1: The issue and sale of each series of bonds is not contingent on the
issue and sale of the other series of bonds, and will be separately offered
and sold and subject to minimum proceeds prior to the issuance thereof. The
order in which the proceeds will be disbursed from each series appears above
in descending order. For example, the net proceeds from the Series 1998-I
Bonds will be disbursed in the following order and preference (based upon the
sale of all of the Series 1998-I Bonds): (1) to fund the initial operating
fund payments in the amount of $200,000; (2) to retire the Construction Loan
in the amount of $2,700,000; (3) to fund any remaining construction costs up
to $146,400 to fund pre-opening costs in the amount of $100,000; and (5) to
fund the Bond Reserve Account in the amount of $250,000. See "Description of
Bonds - Escrow and Disbursement of Bond Proceeds"
Note 2: Subject to the sale of the minimum offering amounts, the Underwriter
will receive concession from the sale of the Bonds as follows: (1) the
Underwriter will receive a concession of 6% on all bonds sold through a
selling group agreement with another NASD member firm; (2) the Underwriter
will receive a concession of 5% on all bonds sold to clients of the
Underwriter; and (3) the Underwriter will receive a processing fee of 1% of
the face amount of each bond purchased by any person or entity who is
currently not a client of the Underwriter, but is affiliated with the Company
or referred to the Underwriter by the Company. See "Underwriting".
Note 3: Other offering expenses payable by the Company are estimated at a
total of $180,000 and are allocated among the three series of bonds. Offering
expenses include an investment banking fee in the amount of $117,000 paid to
the Underwriter for its technical assistance offered in connection with the
Offering and $63,000 paid by the Company for legal fees, accounting fees,
appraisal fees, recording fees, mortgage taxes, Trustee's fees and other
similar fees incurred in connection with this Offering.
Note 4: The Construction Loans bear interest at a variable rate which is
equivalent to 2% per annum in excess of the lowest rate designated as the
"Prime Rate" of interest published by the Wall Street Journal (North Edition)
under the heading "Money Rates". Each construction loan is secured by a
Co-First Mortgage on the corresponding project that will be built from the
proceeds of the respective construction loan. See "Description of Property -
Financing of the Company's Facilities".
13
<PAGE>
BUSINESS
The Company
The concept for the Company began over ten years ago. Joanne
Caldwell-Bayles, President of the Company, visited her grandmother in a
facility in Arizona which provided the same basic services as an assisted
living center. Upon returning to Louisiana, Mrs. Caldwell-Bayles began the
study of senior care, as it related to the care provided in assisted living
facilities. At the time Mrs. Caldwell-Bayles started her studies, the
demographics were not at a point in Northern Louisiana in which assisted
living centers were a viable idea. As time passed, the aging population
began to reach the stage in which assisted living centers would be necessary
in the region. In 1994, Mrs. Caldwell-Bayles began the development of the
first assisted living facility in West Monroe, Louisiana under the legal
entity of The Arbor Group, L.L.C. See "Prior Performance of Affiliates of
the Company".
Mrs. Caldwell-Bayles started to consider the expansion into other areas in
Northern Louisiana prior to the opening of the West Monroe facility. She and
the founding stockholders of the Company decided to develop additional
locations along Interstate 20 between Shreveport and West Monroe, Louisiana.
Accordingly, the Company was organized on September 1, 1997 as a Louisiana
corporation formed for the purpose of developing and operating retirement,
assisted living and memory disorder facilities in Northern Louisiana. The
Company will conduct business doing business as the Arbor Retirement
Community.
Business Concept and Clientele
The Company's business concept is based on providing elderly residents in
North Louisiana with a broad range of cost-effective health care and personal
support services, including assisted living, retirement living and memory
disorder units.
Assisted Living. 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 assisted living
facilities are intended to provide privacy and companionship in a comfortable,
secure, non-institutional living environments which are also designed to
promote interdependence between the facilities' 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 Company's assisted living facilities are 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.
Retirement Living - Independent Cottages. Residents for independent
cottages are usually seniors who maintain an independent lifestyle, but
desire no longer to have the responsibility of ownership and maintenance
of a family residence. Most residents, if not all, will continue to own
and operate their own automobiles. They will also continue to provide
their own house cleaning, medical and medication maintenance, shopping and
other activities which are expected of seniors who maintain good health.
Some residents may wish to travel extensively while maintaining a secure home
base in which their possessions are protected while they are away.
Memory Disorder. Memory disorder units are specifically designed to
assist individuals suffering from Dementia. Dementia includes multi infact
(mini-strokes), Parkinson disease, Lou Gehrig disease, Alzheimer's and
several other similar disorders. Of these disorders, Alzheimer's is the most
common. Memory disorder units provide a secure, protected living environment
for individuals suffering from these types of disorders. Memory disorder
units provide attention with one care giver for no more than five residents
during the day. Night care giver requirements depend on the needs or each
individual resident. The Company's memory disorder units are designed to
provide as much freedom of movement and activity as the progression
of the disorder will allow. Each living unit is designed with memory
disorders in mind.
Operation of the Company's Facilities
Format. The services provided to residents of the Company's assisted
living facilities will include meals, laundry, housekeeping and physical
assistance. In addition, preventive health care programs, transportation,
organized social
14
<PAGE>
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 assisted living facilities will
also provide limited social activities for residents.
The services provided for the residents of the Company's independent
cottages will include all utilities, building and lawn maintenance, 15 meals
each month, security, emergency call systems and housekeeping once each week.
The services provided to the residents of the Company's memory disorder units
will include 24-hour care, three meals each day, medication monitoring,
therapeutic activities, bathing, personal grooming and secure outdoor
activities.
Expenses of operating the Company's Facilities 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 Facilities 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 Facilities can reasonably
provide or assist, then a resident may be forced to move from the Facilities.
Cost of Living. The Company's Facilities will have living units priced in
a range of $900 to $2,450 per month based on the type of accommodations and
services provided. Residents are billed monthly for the services rendered.
Medicare/Medicaid will not pay for a resident's stay at the Facilities.
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 approximately $1,475 to reserve their unit or
apartment. The lease of the apartments by the residents will be on a
month-to-month basis. Residents will be required to pay only for the months
in which they are residents of the facility.
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 Facilities 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 it 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. 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.
The following table indicates the number of units of existing competition
in assisted living, retirement living, nursing home care and memory disorder
for the three locations of the Company's Facilities. This information was
gathered by Essential Decisions Inc. for the Company.
<TABLE>
<CAPTION>
Summary of Existing Competition
Existing
Existing Private-Pay
Location 1996 Assisted Retirement
Population Living Units Living Units
<S> <C> <C> <C>
Ruston, Louisiana 46,040 0 0
Bossier City, Louisiana 91,309 0 59
Shreveport, Louisiana 235,933 204 241
</TABLE>
<TABLE>
<CAPTION>
Summary of Existing Competition...CONT
Memory
Existing Existing
Nursing Care Disorder
Units Units
<S> <C> <C>
Ruston, Louisiana 425 20
Bossier City, Louisiana 818 0
Shreveport, Louisiana 2,749 0
</TABLE>
15
<PAGE>
Management Agreement
On September 10, 1997, the Company entered into a management agreement
(the "Management Agreement") with The Forsythe Group, Inc., a company owned and
controlled by Joanne M. Caldwell-Bayles, the President and principal
shareholder of the Company. The Management Agreement extends to each of the
Facilities to be financed as a result of the sale of the Bonds. Pursuant to
the terms of the Management Agreement, The Forsythe Group, Inc. (the "Manager"),
as agent for the Company, will perform all services incidental to the
operation of the Facilities, including the hiring of employees, collection of
payments, the paying of expenses, receiving governmental permits and the
compliance thereof, marketing, preparing budgets, and, in general, all
activities that are associated with the management of the Facilities. The
Manager will account to the Company as its agent for the services rendered.
The Manager will maintain operating receipt and expense accounts which are
approved by the Company. Prior to the opening of any facility, the Manager
will provide the Company with maintenance and operating expense projections,
provide policies and procedure manuals, implement marketing plans, establish
bookkeeping and accounting systems and identify inventory and equipment. The
Manager will participate in final inspections of the facility before occupancy
and will coordinate matters with the architect and contractor for each
facility.
The employees of each facility will be the employees of the Company. The
Manager will have no authority to make any disbursement in excess of $15,000,
unless specifically authorized by the Company, nor may the Manager incur any
liability which would require more than one year of payment.
The Company will pay to the Manager, $1,500 per month or seven percent
(7%) of the gross collections of a facility, whichever is greater. Prior to
the opening date of a facility, the Manager shall be entitled to receive
$1,500 per month. The Management Agreement continues until January 1, 2010,
and may be terminated by the mutual consent of the parties, for cause if the
Manager shall fail to perform any of its duties pursuant to the Management
Agreement, or in the event of the Manager's bankruptcy.
Other than matters regarding the operations of the Facilities, the Manger
has no authority over the conduct of affairs of the Company or its management
and operation. The Company believes that the Management Agreement and terms
and conditions applicable thereto are the same or as similar to other
management agreements generally made for the operation of health care
facilities in the areas where these Facilities will be located.
Employees
Currently, the Company does not have any full time employees. Prior to
the commencement of operations of each facility, the Company intends to employ
an average of 35 employees at each facility. 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.
Government Regulation
Currently, retirement, assisted living and memory disorder residences
are not specifically regulated as such by the federal government. However,
the Company's Facilities will be subject to certain state regulations and
licensing requirements. To conform with Louisiana's regulations governing
residential care for the elderly, the Facilities will be required to be
licensed by the Louisiana Department of Social Services ("LDSS") prior to the
commencement of operations of the Facilities. The Company will apply for
licenses with LDSS and anticipates getting a temporary license upon
completion of construction of each facility and a final license within 90 days
after the issuance of the temporary license. The process for applying and
obtaining a license with the LDSS requires that upon completion of
construction of a facility, the State of Louisiana Fire Marshall conducts an
inspection of the facility examining the safety issues and compliance with the
Americans With Disabilities Act ("ADA"). In general, the ADA requires
businesses to accommodate the special needs of persons with certain types of
disabilities. If the facility passes the inspection by the Fire Marshall,
than a temporary license is granted that is effective for 90 days. Shortly
after the Fire Marshall's inspection and the issuance of the temporary
license, the LDSS conducts an inspection of the facility and reviews the
administration procedures governing the operation of the facility. In
addition to LDSS inspection, the Department of Health and Hospitals ("DHH")
inspects the facility for sanitation code compliance shortly after the Fire
Marshall's inspection. Any deficiencies found during the LDSS or DHH
inspection must be resolved prior to the final license being granted by LDSS.
After the final license is granted, the facility may be subject to quarterly
inspections by the DHH and annual inspections by LDSS. The renewal of the
license is granted by LDSS upon receipt of the $75 annual licensing fee and
satisfactory results from the aforementioned periodic inspections.
The Company has elected to build their memory disorder units in
conformity with DHH's requirements for nursing homes. These memory disorder
units will be licensed under LDSS. However, the additional construction is
being done in
16
<PAGE>
order that the Company may in the future increase the level of care to be
provided. If these units are to be converted to nursing homes units in the
future, than the Company must obtain such a license from the DHH.
In the Company's opinion, the Facilities and management practices and
operations will meet or exceed all residential care for elderly regulations of
State of Louisiana. Failure of the Company to receive and maintian the
required licensing would have a material adverse affect 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. As regulations are promulgated to enforce this law,
the Company may be required in the future to adapt the design and format of
the Facilities or otherwise incur additional capital costs to comply with such
law. Such costs could have an adverse effect on the operation of the Company's
facilities and their 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. Phase one environmental assessments were conducted on the
Company's properties in 1997. Research and visual observation undertaken did
not reveal any former or current environmental conditions, problems or
situations impacting the sites.
DESCRIPTION OF PROPERTY
The Company's Proposed Facilities
The Company has acquired land in Northern Louisiana and intends to
construct retirement, assisted living and memory disorder facilities on these
properties as indicated below.
The Ruston Project. The Ruston Project will be located on 6 acres of
land in Lincoln Parrish next to the eastern portion of Ruston, Louisiana north
of US Highway 80 and south of Interstate 20. Selection of the site of the
Ruston Project was based upon a location that was within an affluent
residential neighborhood with limited assisted living and retirement living
services. The Ruston Project will include a 48 unit assisted living facility
and 12 independent living cottage units. The assisted living units will
contain 483 square feet each with common area amenities including a full
service kitchen, dining area, activity area, office and reception area,
bathrooms and storage areas. Each of the assisted living units will have one
or two bedrooms, small kitchenettes, private bathroom, closet and sitting
areas. The independent living cottage units are located in separate buildings
and include six one bedroom/one bath units and six two bedroom/one bath units
containing 816 square feet and 840 square feet respectively. Each of the
cottages will have full kitchens and washer and dryers.
The Series 1998-I Bonds in parity with the Ruston Construction Loan are
secured by a co-first mortgage on the Ruston Project (both real and personal
property). See "Description of Property - Financing of the Company's
Facilities" and "Description of Bonds". The Company has title insurance on
this 6 acres of land insuring good and marketable title to the property.
During construction of the Ruston Project, builder's risk, general liability
and worker's comprehensive insurance will be provided by the general
contractor, The Forsythe Group, Inc. Upon completion of the Ruston Project,
the Company will obtain fire and extended coverage insurance to insure
against loss by fire, windstorm, explosion and various other losses in an
amount equal to the outstanding balance of the Series 1998-I Bonds. The
Company will also obtain general liability and worker's comprehensive
insurance upon completion of the Ruston Project. In the Company's opinion,
the Ruston Project is adequately covered by insurance. The Parrish of
Lincoln has no zoning ordinances. Therefore, the Ruston Project has no
zoning ordinances to comply with.
The Bossier City Project. The Bossier City Project will be located on 6
acres of land on the southside of Brandon Avenue just east of Industrial
Drive in Bossier City, Louisiana. Selection of the site of the Bossier City
Project was based upon a location that was within an affluent residential
neighborhood with limited assisted living, retirement living and
17
<PAGE>
memory disorder units. The Bossier City Project will include 18 independent
living cottage units, 18 assisted living units and 24 mental disorder units
with common area amenities including a full service kitchen, dining area,
activities area, office/reception area, bathrooms and storage areas. The
building will contain a total of 42,829 square feet of heated area. The
assisted living units will each contain approximately 485 square feet and
feature a bedroom, living room, kitchenette and full bath with shower. The
assisted living units will be identical to the independent living units in
all respects. The mental disorder units will each contain 283 square feet of
living area and feature a half bath with a toilet and lavatory and bedroom
area.
The Series 1998-II Bonds in parity with the Bossier City Construction
Loan are secured by a co-first mortgage on the Bossier City Project (both real
and personal property). See "Description of Property - Financing of the
Company's Facilities" and "Description of Bonds". The Company has title
insurance on this 6 acres of land insuring good and marketable title to the
property. See "Description of Property - Financing of the Company's Facilities"
and "Description of Bonds". During construction of the Bossier City Project,
builder's risk, general liability and worker's comprehensive insurance will
be provided by the general contractor, The Forsythe Group, Inc. Upon
completion of the Bossier City Project, the Company will obtain fire and
extended coverage insurance to insure against loss by fire, windstorm,
explosion and various other losses in an amount equal to the outstanding
balance of the Series 1998-II Bonds. The Company will also obtain general
liability and worker's comprehensive insurance upon completion of the Bossier
City Project. In the Company's opinion, the Ruston Project is adequately
covered by insurance. The Bossier City Project conforms to the zoning
ordinances of Bossier City, Louisiana.
The Shreveport Project. The Shreveport Project will be located on
approximately 3 acres of land on Lot 4, Orleans Square Subdivision, located
on East Kings Highway in Shreveport, Louisiana, or such other location of
equal value in the same area. Selection of the site of the Shreveport Project
was based upon a location that was within an affluent residential
neighborhood with limited memory disorder units. The Shreveport Project will
have 24 memory disorder units and contain 11,410 square feet of heated area.
Each of these units will contain 283 square feet of living area and feature a
half bath with a toilet and lavatory and bedroom area.
The Series 1998-III Bonds in parity with the Shreveport Construction Loan
are secured by a co-first mortgage on the Shreveport Project (both real and
personal property). See "Description of Property - Financing of the Company's
Facilities" and "Description of Bonds". The Company has title insurance on
this 3 acres of land insuring good and marketable title to the property. See
"Description of Property - Financing of the Company's Facilities" and
"Description of Bonds". During construction of the Shreveport Project,
builder's risk, general liability and worker's comprehensive insurance will
be provided by the general contractor, The Forsythe Group, Inc. Upon
completion of the Shreveport Project, the Company will obtain fire and
extended coverage insurance to insure against loss by fire, windstorm,
explosion and various other losses in an amount equal to the outstanding
balance of the Series 1998-III Bonds. The Company will also obtain general
liability and worker's comprehensive insurance upon completion of the
Shreveport Project. In the Company's opinion, the Ruston Project is
adequately covered by insurance. The Shreveport Project conforms to the
zoning ordinances of the City of Shreveport, Louisiana.
Appraisals
Robert M. McSherry, MAI 3760 Chelsea Drive, Baton Rouge, Louisiana 70809
(the "Appraiser"), estimated market values for each of the Company's
facilities (the "Appraisals"). Listed below are these appraised values.
Appraised Value of the Ruston Project. . . . . . . . . $4,955,000
Appraised Value of the Bossier City Project. . . . . . $6,310,000
Appraised Value of the Shreveport Project. . . . . . . $2,550,000
The Appraiser, who is independent of the Company, used various appraisal
approaches, but gave the most weight to the income approach in his
reconciliations and final value estimates. 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 Company's Facilities could be
sold, whether voluntarily or at judicial sale, for the appraised value.
18
<PAGE>
The Appraiser also estimated values for each of the Company's facilities
based on the cost approach. Listed below are these appraised values.
Appraised Value of the Ruston Project (Cost Approach). . . . $3,560,000
Appraised Value of the Bossier City Project (Cost Approach). $3,290,000
Appraised Value of the Shreveport Project (Cost Approach). . $1,890,000
In contrast to the income approach, the cost approach estimates the
replacement cost of the improvements. The cost approach reflects the value
of the fee simple estate in the real estate; whereas the income approach
reflects the "going concern" value, which would most likely not exist in a
default situation.
A decision to invest in the Bonds should not be made based solely on the
Appraisals. Moreover, a purchaser of the Bonds should realize and take into
consideration the fact the Company's Facilities, if they 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 the Company's Facilities
Listed below is the proposed construction schedule and development/
construction costs of the Company's Facilities. The dates and numbers as
indicated below are estimates only.
<TABLE>
<CAPTION>
Approximate
Costs of
Anticipated Development
Construction Opening and
Location Start Date Date (1) Construction (2)
<S> <C> <C> <C>
Ruston Project December 1997 October 1998 $3,750,000
Bossier City Project May 1998 January 1999 $3,500,000
Shreveport Project May 1998 October 1998 $1,845,000
</TABLE>
(1) Delays are common in the construction industry, and unforseen events may
adversely affect the cost and completion time of the Company's Facilities.
(2) Includes land, construction and service costs; architectural and
engineering costs; furniture, fixtures and equipment.
Financing of the Company's Facilities
Construction Financing. The Company has obtained construction loans
(the "Construction Loans") with Church Loans and Investments Trust of
Amarillo, Texas (the "Construction Lender") for the financing of construction
of the Company's Facilities. Each construction loan is secured by a Co-First
Mortgage on the corresponding project that will be built from the proceeds of
the respective construction loan. The Construction Loans bear interest at a
variable rate which is equivalent to 2% per annum in excess of the lowest rate
designated as the "Prime Rate" of interest published by the Wall Street
Journal (North Edition) under the heading "Money Rates". The Construction
Loans are guaranteed by The Forsythe Group, Inc., an affiliate and stockholder
of the Company, in the amount of $500,000 for each construction loan. The
Trustee and holders of the Bonds will not benefit, directly or indirectly,
from the guarantees of The Forsythe Group, Inc.
If the proceeds from the sale of the Bonds are insufficient to retire
the Construction Loans at their maturities, then the Construction Lender has
given the Company the option of initially renewing and extending the term of
the Construction Loans for an additional one year subject to the Company
being current on all its outstanding debt obligations. If any of the
Construction Loans are extended and any of the renewed Construction Loans
have not been retired by their extended maturity dates, then the Construction
Lender has given the Company the option of renewing and extending the
Construction Loan(s) into permanent loan(s) amortized over thirteen years
subject to the Company being current on all its outstanding debt obligations.
The Company obtained the construction loan for the Ruston Project
("Ruston Construction Loan") in the amount of $2,700,000. The Ruston
Construction Loan closed on December 1, 1997, and the mortgage and security
agreement setting forth the terms of the Ruston Construction Loan have been
filed of record. The Ruston Construction Loan is due December
19
<PAGE>
1, 1998, unless the Company exercises its option of renewing and extending
the Ruston Construction Loan. The Ruston Construction Loan is secured by a
Co-First Mortgage on the Ruston Project (both real and personal property) in
parity with the Series 1998-I Bonds.
The Company obtained the construction loan for the Bossier City Project
("Bossier City Construction Loan") in the amount of $2,200,000. The Bossier
City Construction Loan closed on April 24, 1998, and the mortgage and security
agreement setting forth the terms of the Bossier City Construction Loan have
been filed of record. The Bossier City Construction Loan is due April 24,
1999, unless the Company exercises is option of renewing and extending the
Bossier City Construction Loan. The Bossier City Construction Loan is
secured by a Co-First Mortgage on the Bossier City Project (both real and
personal property) in parity with the Series 1998-II Bonds.
The Company obtained the construction loan for the Shreveport Project
("Shreveport Construction Loan") in the amount of $1,225,000. The Shreveport
Construction Loan closed on April 24, 1998, and the mortgage and security
agreement setting forth the terms of the Shreveport Construction Loan have
been filed of record. The Shreveport Construction Loan is due April 24, 1999,
unless the Company exercises it option of renewing and extending the
Shreveport Construction Loan. The Shreveport Construction Loan is secured
by a Co-First Mortgage on the Shreveport Project (both real and personal
property) in parity with the Series 1998-III Bonds.
Colonial Trust Company (acting as Trustee on behalf of Series 1998-I
bondholders) and the Construction Lender have entered into a certain Agreement
Between Lienholders dated as of December 1, 1997 with regard to the Ruston
Construction Loan. Furthermore, Colonial Trust Company (acting as Trustee on
behalf of the Series 1998-II and Series 1998-III bondholders) and the
Construction Lender have enter into two additional Agreements Between
Lienholders on April 24, 1998 with regard to the Bossier City Construction Loan
and the Shreveport Construction Loan, respectively. Hereinafter, the three
Agreements Between Lienholders collectively will be referred to as the
"Lienholders Agreements".
The Lienholders Agreements state, among other things, (i) that the
mortgage, security agreement and other collateral documents covering each of
the Company's Facilities shall name both the Construction Lender and the
Trustee as lienholder and shall secure ratably as provided in the Lienholders
Agreements each construction loan and the corresponding series of Bonds, and
(ii) that proceeds of each series of Bonds will be used, subject to the Trust
Indenture, to pay down or retire the Construction Loans. The Lienholders
Agreements also state that in the event of a default, if either the
Construction Lender 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
Lienholders Agreements provide that the Construction Lender and the Trustee
will conduct collection and foreclosure actions and proceedings jointly to
the extent possible. In the event the Construction Lender and the Trustee
are unable to agree, however, the Construction Lender 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
respective project in default and enforcement of the terms of the mortgage
and security agreement. The Construction Lender may cause the defaulted
project to be sold in its then current condition or may make renovations to,
or complete construction of the defaulted project. The Construction Lender is
not required to advance any funds except by its agreement, but in the event
the Construction Lender elects to advance funds, proceeds of foreclosure will
be applied first to reimburse any such funds advanced. Either the
Construction Lender or the Trustee may purchase the defaulted project at any
foreclosure sale free and clear of the claims of the other. If any of the
Company's Facilities are sold or otherwise disposed of at foreclosure, the
Lienholders Agreements provide that the proceeds of disposition, after
reimbursement of the Construction Lender's fees and expenses as provided above,
be applied to the respective construction loan in default and the payment of
the corresponding series of Bonds on a pro-rata basis. The "pro-rata"
distribution of funds mean that after reimbursement of the Construction
Lender's fees and expenses as provided above, the Construction Lender and the
series of Bonds associated with the defaulted construction loan will each
receive funds from any disposal on foreclosure of the defaulted project
according to their respective percentage of the total principal balance
(including both the respective construction loan in default and the
corresponding series of 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 defaulted project,
whichever is lesser.
In addition to requiring the timely payment of the Construction Loans
and the Bond payments required under the terms of the Trust Indenture, the
mortgages obligate the Company to maintain proper books and records, and
refrain from certain activities (such as altering the premises) without prior
written consent. The mortgages also dictate, in part, the permitted financial
relationships between the Company and the residents.
20
<PAGE>
Permanent Financing. The Company has chosen to issue the Bonds to
provide the permanent financing for the Facilities. The first revenues of
the Company have been pledged to repay the principal and interest on the Bonds.
See "Use of Proceeds" and "Description of Bonds".
MANAGEMENT
Directors and Executive Officer
The names of the directors and executive officers of the Company, their
respective ages and their positions and office with the Company are as
follows:
Name Age Positions and Offices Held
Joanne M. Caldwell-Bayles 37 Chairperson of the Board, Chief
Executive Office, President and
Director
Raymond L. Nelson 62 Vice President and Director
Jean Gaffney Nelson 60 Director
The directors and executive officers of the Company have very limited
experience in the development and operation of assisted living/memory disorder
facilities. The professional experience of the Company's directors and
executive officers is summarized below:
Joanne M. Caldwell-Bayles has been the President and Chief Executive
Officer of the Company since its inception in September 1997. Mrs.
Caldwell-Bayles has senior executive experience in the development and
operation of an assisted living and memory disorder facility in West
Monroe, Louisiana where she presently serves as the Operating Manager of
The Arbor Group, L.L.C. ("Arbor"). Mrs. Caldwell-Bayles also has senior
executive experience in hotel management, personnel, finance and commercial
and residential development. In addition to her duties with the Company and
Arbor, Mrs. Caldwell-Bayles is the President, Chairperson of the Board of
Directors and sole owner of The Forsythe Group, Inc., the parent corporation
of four subsidiaries. These subsidiaries include: (i) Forsythe Holdings, Inc.
(a commercial and residential lending company); (ii) Format Capital, Corp.
(a commercial development and equipment leasing company); (iii) Lewis
Enterprises, Inc. (a residential development company); and (iv) Northwest
Manufacturing Co., Inc. (a manufacturing company for equipment for the
construction industry). Prior to her duties with the Company, Arbor and the
Forsythe Group, she served as the President of Oak Development Corporation
(a hotel management firm) and the general manager of Ramada Hotel in
Alexandra, Louisiana. She has served on the Board of Directors of the
Alexandria Chamber of Commerce, the Louisiana Restaurant Association and
the Louisiana Hotel/Motel Association. She also has served as President of
the Tourism Commission of Rapides Parrish Louisiana and of the Hotel/Motel
Association of Alexandria, Louisiana. Mrs. Caldwell-Bayles attended Northeast
Louisiana State University in Monroe, Louisiana.
Mrs. Caldwell-Bayles 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 her efforts. Mrs.
Caldwell-Bayles will delegate most of the daily operational responsibilities
of the Company to on-site administrators. The administrators will be
selected from a group of candidates who must have a degree in nursing and
administration. Prior to commencement of operations of each facility, Mrs.
Caldwell-Bayles will hire an administrator whose salary and employee benefits
will be an expense of operation of the Company. All other employees will
also be recruited by Mrs. Caldwell-Bayles. The Company anticipates employing
a total of an average of 35 employees to work at each facility with a total
of approximately 105 employees working for the Company upon completion of
the Ruston, Bossier City and Shreveport Projects. Mrs. Caldwell-Bayles will
devote approximately 65% of her time to the affairs of the Company but is
willing to devote additional time if necessary.
Raymond L. Nelson has served as Vice President and a Director since the
Company's inception. In addition to these duties, Mr. Nelson will be serving
as the Director of Personnel for the Company. Mr. Nelson is the person
primarily responsible for overseeing the management systems and the insurance
needs for the Company. Mr. Nelson attended the University of Houston. He is
the President and CEO of Town & Country Insurance Agency, Inc. He manages 40
employees in three locations in the Houston-Galveston, Texas metropolitan area.
Mr. Nelson is the past President of the Houston
21
<PAGE>
Council of the Navy League of the United States and is currently a national
director. He is a past director of the Independent Insurance Agency of
Houston, Texas. Mr. Nelson is developing the operations manual and all of the
employee benefits and retirement plans for the Company.
Mr. Nelson has devoted and will continue to devote approximately 15% of
his time to the Company. As compensation for performing said duties, Mr.
Nelson shall receive $6,000 annually. He may be reimbursed 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.
Jean Gaffney Nelson has served as a Director since the Company's
inception. Mrs. Nelson also will be the person primarily responsible for
inspection and evaluation of the health care facilities and employees. Mrs.
Nelson has 27 years in management experience in diagnostic and Iterventional
cardiology in a large hospital environment. Mrs. Nelson was employed as
the Manager of Cardiology Services and Nuclear Medicine at the Methodist
Hospital in Houston, Texas. She studied biology and took courses in computer
science, accounting and management at the University of Houston in Houston,
Texas. Mrs. Nelson is registered in adult echocardiography by the American
Registry of Diagnostic Medical Sonographers and is a member of the American
College of Cardiovascular Administrators.
Mrs. Nelson has management experience in environmental, operations,
materials control, finances, human resources, design and construction,
database systems, project development and marketing. Over the term of her
career, she has managed the following specific activities: cardiac
catheterization, cardiac rehabilitation, pacemaker evaluation clinic,
electrophysiology, nuclear cardiology, nuclear medicine, echocardiography,
stress testing, electrocardiography, vascular diagnostics, electrocardiograph,
aeromedical services, admission, observation and discharge units.
Selected professional accomplishments of Mrs. Nelson include managing a
cardiology departments for a large hospital and developing and implementing
this hospital's first aeromedical program to transport critically ill
patients. Mrs. Nelson also was responsible for the design and construction of
the following items at the hospital: cardiac catheterization laboratories, an
electrophysiology suite, an ambulatory diagnostic cardiology center, a
nuclear medicine laboratory, a cardiology non-invasive laboratory, and a
flight center. Mrs. Nelson has authored more than 40 articles and abstracts
related to cardiovascular disease. She was named as manager of the year in
1988 at the Methodist Hospital in Houston, Texas. In July 1997, Mrs. Nelson
retired as a full-time employee of the Methodist Hospital. However, she
continues to perform consulting duties with the hospital.
As compensation for performing said duties, Mrs. Nelson shall
receive $6,000 annually. Mrs. Nelson also may be reimbursed for reasonable
costs 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.
Executive Compensation
Joanne M. Caldwell-Bayles, President and Chief Executive Officer of the
Company, may receive the following compensation: (1) an annual salary in the
amount of $60,000 per year beginning when the Company's first facility is
opened for business and (2) reimbursement for reasonable costs incurred by
the Mrs. Caldwell-Bayles including but not limited to automobile mileage,
telephone expenses and entertainment expenses associated with the Company's
business.
PRINCIPAL OWNERS OF THE COMPANY
The following table sets forth certain information regarding the
beneficial ownership of the common stock of the Company as of January 26,
1998, (i) by each shareholder who is known by the Company to own beneficially
more than five percent (5%) of the common stock, (ii) by each director, (iii)
by each executive officer named herein under "Management," and (iv) by all
executive officers and directors as a group. Except as otherwise indicated
and except to the extent authority is shared by spouses under applicable law,
each named beneficial owner has sole voting and investment power with respect
to the common stock listed.
22
<PAGE>
<TABLE>
<CAPTION>
Name & Address of Percent of
Beneficial Owner Title of Class Shares Class Owned
<S> <C> <C> <C>
Joanne M. Caldwell Bayles Common Stock 106,313.0 16.7%
507 Trenton Street
West Monroe, LA 71291
Raymond and Jean Nelson Common Stock 57,264.0 9.0%
1075 Katy Freeway, Suite 150
Houston, TX 77024
The Forsythe Group, Inc. (1) Common Stock 352,717.5 55.4%
507 Trenton Street
West Monroe, LA 71291
The Arbor Group, L.L.C. (2) Common Stock 120,416.5 18.9%
507 Trenton Street
West Monroe, LA 71291
</TABLE>
Note 1: Joanne M. Caldwell-Bayles owns 100% of the capital stock of the
Forsythe Group, Inc.
Note 2: Joanne M. Caldwell-Bayles owns 50%, Raymond and Jean Nelson own 40%
and the Forsythe Group, Inc. owns 10% of the capital stock of The
Arbor Group, L.L.C.
The executive officers and directors of the Company as a group are the
beneficial owners of 100% of the common stock of the Company.
THE COMPANY'S PLAN OF OPERATION
The primary plan of operation of the Company is to establish a local and
regional network of retirement, assisted living and memory disorder
facilities that will operate profitably. The Company intends to complete
construction of five facilities along Interstate 20 between West Monroe,
Louisiana and Shreveport, Louisiana by January of 2000. Three of these
facilities are located in Ruston, Bossier City and Shreveport, Louisiana and
will be secured by the Bonds. The Company intends to build two additional
facilities in Minden and West Monroe, Louisiana and finance these facilities
with the issuance of bonds similar to that of this Offering. Beyond these
first five facilities, the Company may continue to expand in Northern
Louisiana and Southern Arkansas, including possible locations of Bastrop and
Homer-Hainsville, Louisiana and Crosset and El Dorado, Arkansas. The Company
intends to employ an average of 35 employees per completed facility with a
total of approximately 105 employees working for the Company upon completion
of the Ruston, Bossier City and Shreveport Projects. Based upon market
research of the assisted living, retirement living and memory disorder care
industries in Northern Louisiana, the Company expects to reach stabilized
occupancy within 24 months upon completion of each facility. However, the
Company has no historical operating results to verify this projected time
frame to reach stabilized occupancy.
An affiliate of the Company, The Arbor Group, L.L.C. ("Arbor"), has
completed construction and is now operating a similar assisted living and
memory disorder facility in West Monroe, Louisiana. Arbor has been and will
continue to be a model for the future development of the Company. Also,
Arbor is managed by the same organization, The Forsythe Group, that will
manage the Company's properties. While the Company is newly formed, it will
operate its properties under the name of The Arbor Retirement Community.
Arbor has established name recognition in the community of West Monroe, and
the Company is in the process of establishing name recognition in the
proposed communities in which the Company's units will be located.
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, and the Company will need to raise additional operating funds during
the first 12 months of operation. The Company has estimated that $200,000
will be needed for operation during the first 12 months, above and beyond the
expenses as set forth in "Sources and Uses of Funds". The Company has
presently two lines of credit from which the Company can access for the use
of additional operating funds. These lines of credit have been established by
the pledging
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of collateral not secured by the Bonds; Mrs. Caldwell-Bayles, The Forsythe
Group and Arbor also have pledged other assets to secure the lines of credit.
If additional funds are needed for the Company's operation, The Forsythe Group,
the management company of the Company, has agreed to defer collection of its
management fees. However, the Company believes that it will not be necessary
for the Company to raise additional funds during the next 12 months other
than the use of its credit lines. There is no assurance that the Company
will be able to accomplish any or all of these objectives.
The Company's product is providing living accommodations for seniors who
need assistance. As the needs of the Company's residents change, the Company
is willing to modify its operations to accommodate its residents' needs. For
example, the Company's memory disorder units will be constructed according to
nursing home specifications so that they may easily be converted into nursing
home units if such a change is warranted and the appropriate licenses are
granted. The Company is committed to continue researching the trends of
senior citizens' living accommodation needs.
PRIOR PERFORMANCE OF AFFILIATES OF THE COMPANY
The Arbor Group, L.L.C., an affiliated corporation of the Company, has
limited prior experience in the development and operation of an assisted
living and memory disorder facility similar to that of the proposed facilities.
In August 1996, Mrs. Caldwell-Bayles, Raymond Nelson and Jean Gaffney Nelson
formed The Arbor Group, L.L.C. for the purpose of developing and operating a
35-unit assisted living facility and a 24-unit memory disorder facility in
West Monroe, Louisiana. The facility was completed and opened for business
on November 4, 1997. Mrs. Caldwell-Bayles serves as the Operating Manager of
The Arbor Group, L.L.C.
The Arbor Group's gross revenues for the period beginning November 4,
1997 through March 24, 1998 were $146,877. The Arbor Group's expenses for the
same period, including deprecation and debt service, were $238,767. These
amounts were provided by the management of The Arbor Group and are not
audited. As of March 24, 1998, the occupancy rate of The Arbor Group's
assisted living and memory disorder facility was 56%.
The Arbor Group's assisted living and memory disorder facility was
financed by the issuance of bonds in the amount of $3,250,000 under terms
similar to that of the Offering. The bonds for the Arbor Group were offered
and sold by the Underwriter.
CERTAIN TRANSACTIONS
Joanne M. Caldwell-Bayles and Raymond and Jean Nelson, the principal
shareholders of the Company, individually and/or through their ownership of
affiliated companies, have or intend to engage in the following transactions
with the Company. See "Principal Owners of the Company".
Land Acquisition
On September 10, 1997, the Company acquired 6 acres of land at the Ruston
location with an estimated fair market value of $450,000 in a transaction
with The Forsythe Group, Inc. in exchange for 77,500 shares of common stock
of the Company and by assuming a debt of $200,000. This transaction would
have resulted in a gain to The Forsythe Group, Inc. of approximately $95,000
had it not been a tax free exchange.
On September 10, 1997, the Company acquired 20 acres of land at the
Ruston location with an estimated fair market value of $250,000 in a
transaction with The Forsythe Group, Inc. in exchange for 40,000 in shares
of common stock. This transaction would have resulted in a gain to The
Forsythe Group, Inc. of approximately $170,000 had it not been a tax free
exchange.
On September 10, 1997 the Company acquired land in West Monroe, Louisiana
with an estimated fair market value of $200,000 in a transaction with The
Arbor Group, L.L.C. in exchange for 100,000 shares of common stock. This
transaction would have resulted in no gain to The Arbor Group, L.L.C. had it
not been a tax free exchange.
On January 7, 1998, the Company entered into a real estate agreement with
Patterson Insurance Company ("Patterson") to purchase approximately six acres
of land on which the Bossier City Project is to be built. This transaction
closed on April 24, 1998. The sale and conveyance of this property by
Patterson to the Company was subject to the following terms: the Company
paid Patterson a total consideration of $ 525,000 for the property by
the issuance of $425,000 in preferred stock of the Company and $100,000 in
cash at closing.
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On March 6, 1998, the Company acquired approximately 3 acres of land in
Shreveport, Louisiana on which the Shreveport Project is to be built. The
Company acquired this land by securing a loan with The Forsythe Group, Inc.,
in the amount of the purchase price of the property, $266,500. The loan
bears interest at the annual rate of 1% over the Prime Rate. Interest is
payable monthly, and the loan has no stated maturity date. This loan was
retired on April 24, 1998 with proceeds from the Shreveport Construction Loan.
Construction Contracts
On November 5, 1997, the Company entered into a construction contract in
the amount of $2,750,000 with The Forsythe Group, Inc. to construct the Ruston
Project. The contract calls for the cash payments of $2,500,000 during the
building of the Ruston Project as approved by the contract engineer and the
issuance of an additional 125,000 shares of common stock at the completion of
the project. Such stock issuance is to be paid to The Forsythe Group, Inc.
as its builder's profit in the project.
On December 16, 1997, the Company entered into a construction contract in
the amount of $2,200,000 with The Forsythe Group, Inc. to construct the
Bossier City Project. The contract calls for the cash payments of $2,200,000
during the building of the Bossier City Project as approved by the contract
engineer.
On December 16, 1997, the Company entered into a construction contract in
the amount of $1,225,000 with The Forsythe Group, Inc. to construct the
Shreveport Project. The contract calls for the cash payments of $1,225,000
during the building of the Shreveport Project as approved by the contract
engineer.
Management Contract
On September 10, 1997, The Forsythe Group, Inc., entered into a Management
Agreement with the company for the management of the Facilities to be
constructed as a result of the issuance of the Bonds. The Agreement extends
to the year 2010, with compensation based on each facility, paying the
Manager $1,500 per month of seven percent (7%) of the gross collections of a
facility, whichever is greater. The Management Agreement can be terminated
by mutual consent of the parties, bankruptcy or for cause. The Company
anticipates the payments under the Management Agreement to The Forsythe
Group, Inc. will exceed $60,000 per year.
Other Services Rendered
On September 10, 1997, the Company issued 85,896 shares of common stock of
the Company to Joanne M. Caldwell-Bayles in exchange for services rendered in
connection with developing the plans for construction for the Ruston Project
and a deposit on the plans for the Bossier City, Shreveport, Minden and West
Monroe Locations.
On September 10, 1997, the Company issued 57,264 shares of common stock of
the Company to Raymond and Jean Nelson in exchange for services rendered in
connection with developing the plans for construction for the Ruston Project
and a deposit on the plans for the Bossier City, Shreveport, Minden and West
Monroe locations.
On May 10, 1998, the Company issued 162,300 shares of common stock of the
Company to The Forsythe Group, Inc. in exchange for services rendered in
connection with developing plans for the Bossier City and Shreveport Projects.
The Company has also reserved 90,140 shares of Common Stock to be issued
to The Forsythe Group in exchange for services rendered in connection with
developing the plans for the Minden and West Monroe locations.
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 Company is not required to qualify the
Trust Indenture under the Trust Indenture Act of 1939 as amended (the "Act").
Thus, the Company has elected not to qualify the Trust Indenture under the Act.
Although the Trust Indenture utilized by this Company does not conform entirely
to the required provisions to the Trust Indenture Act of 1939, the overall
agreement of the Trust Indenture does incorporate the essential provisions
for the protection of the bondholders. 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.
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Description of Liens
All of the Bonds will be secured by a mortgage and security agreement,
hereinafter called the "Lien", upon the Facilities, and shall have equal
rights, liens and privileges under the 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. The Trustee is authorized
pursuant to the Trust Indenture to modify or amend the mortgage as necessary
to accomplish the purpose of having all bonds issued by the Company in regard
to the Facilities to be secured by a lien on all three of the Projects.
General
The Company is offering $9,000,000 of co-first mortgage bonds in three
series, with the proceeds from each series being used for a particular project
located in a city in the State of Louisiana. The issue and sale of each
series of bonds is not contingent on the issue and sale of the other series
of bonds, and will be separately offered and sold and subject to minimum
proceeds prior to the issuance thereof. The Bonds are secured by a pledge of
land and buildings constituting the Facilities and a pledge of gross income
of the Company pursuant to the terms of the Trust Indenture between the
Company and the Trustee. 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. The
Bonds will be issued to mature serially. To "mature serially" means the Bonds
will mature according to predetermined maturity dates, beginning six months
from the issue date of each series of bonds and continuing to mature each six
months thereafter until the final maturity period of each of the series of
bonds as indicated in the "Maturity Schedules". The purchaser of a 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. Certain Bonds pay interest by check semiannually
("Simple Interest Bonds"). Certain other Bonds pay the interest earned only
at the maturity of the Bond ("Compound Interest Bonds"). See "Maturity
Schedules".
The Series 1998-I Bonds will be dated July 1, 1998, and are subject to
the sale of a minimum of $750,000 in principal amount of Bonds. The
aggregate principal amount of the Series 1998-I Bonds is $3,685,000 and is
comprised of bonds in the principal amount of $2,004,500 that will mature
serially and bear simple interest payable by check mailed to the registered
owners each January 1 and July 1 until maturity and bonds in the principal
amount of $1,680,500 that will mature serially and bear interest compounded
semiannually each January 1 and July 1 that is payable at maturity. The
Series 1998-I Bonds will begin accruing interest as of July 1, 1998, whether
or not they have been purchased and whether or not the minimum offering
amount has been reached. If any of the Series 1998-I Bonds are purchased
after July 1, 1998, the purchaser will nevertheless be entitled to receive
the accrued interest on the Bond from July 1, 1998.
The Series 1998-II Bonds will be dated August 1, 1998, and the Series
1998-II are subject to the sale of a minimum of $750,000 in principal amount
of Bonds. The aggregate principal amount of the Series 1998-II Bonds is
$3,470,000. The Series 1998-II Bonds will mature serially and bear interest
compounded semiannually each February 1 and August 1 that is payable at
maturity. The Series 1998-II Bonds will begin accruing interest as of
August 1, 1998, whether or not they have been purchased and whether or not
the minimum offering amount has been reached. If any of the Series 1998-II
Bonds are purchased after August 1, 1998, the purchaser will nevertheless be
entitled to receive the accrued interest on the Bond from August 1, 1998.
The Series 1998-III Bonds will be dated August 1, 1998, and the Series
1998-III Bonds are subject to the sale of a minimum of $500,000 in principal
amount of Bonds. The aggregate principal amount of the Series 1998-III Bonds
is $1,845,000. The Series 1998-III Bonds will mature serially and bear
simple interest payable by check mailed to the registered owners each February
1 and August 1 until maturity. The Series 1998-III Bonds will begin accruing
interest as of August 1, 1998, whether or not they have been purchased and
whether or not the minimum offering amount has been reached. If any of the
Series 1998-III Bonds are purchased after August 1, 1998, the purchaser will
nevertheless be entitled to receive the accrued interest on the Bond from
August 1, 1998.
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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. Each
year the purchaser of a Simple Interest Bond will receive a form 1099 INT
from the Trustee/Paying Agent showing the interest earned on the Bond(s) for
that tax year. 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. Each year the purchaser of a Compound Interest Bond will
receive a form 1099 OID from the Trustee/Paying Agent showing the interest
earned on the Bond(s) for that tax year. For further information concerning
the tax consequences of purchasing or holding the Bonds, the investor should
consult his or her tax advisor.
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 Funds, 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 Accounts any
installment(s) required;
c) Failure or refusal to pay when due any taxes, assessments, insurance,
claims, liens or encumbrances upon the Facilities, or to maintain the
Facilities 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 the 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 for a period
of 30 days, the Trustee may accelerate the Bonds and declare the principal of
all Bonds outstanding or any series of Bonds then in default 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.
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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 Facilities, 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
Facilities 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 Facilities; and
c) The ratio of the total of outstanding Bonds plus the additional bonds
shall not exceed 100% of the capitalized cost of the Property, inclusive of any
new construction or improvements thereon, to secure the payment of the Bonds.
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:
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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. 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
Facilities. These Bonds are an obligation of the Company and will be secured
by a co-first mortgage on the Ruston, Bossier City and Shreveport Projects.
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.
Requirements of the Operating Fund Accounts
Under the Trust Indenture, the Company must establish Operating Fund
Accounts and make monthly deposits into the Operating Fund Accounts in amounts
predetermined to be sufficient at all times to pay the principal and interest
of each series of the Bonds. The required monthly deposits will be as
follows:
Series 1998-I ($3,685,000)
$30,380.00 per month for one year (12 Payments) beginning July 1, 1998
$33,048.98 per month for one years (12 Payments) beginning July 1, 1999
$36,017.01 per month for one years (12 Payments) beginning July 1, 2000
$38,763.00 per month for seventeen years (204 Payments) beginning July 1, 2001
Payments include the Paying Agent fee of $921.25 per month.
Series 1998-II ($3,470,000)
$27,638.32 per month for one year (12 Payments) beginning August 1, 1998
$30,838.24 per month for one year (12 Payments) beginning August 1, 1999
$34,046.78 per month for one year (12 Payments) beginning August 1, 2000
$37,248.31 per month for four and one half years (54 Payments) beginning
July 1, 2001
with a final balloon payment of $2,800,000 due on January 31, 2006
Payments include the Paying Agent fee of $867.50.
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Series 1998-III ($1,845,000)
$14,965.56 per month for one year (12 Payments) beginning August 1, 1998
$16,735.15 per month for one year (12 Payments) beginning August 1, 1999
$18,504.75 per month for one year (12 Payments) beginning August 1, 2000
$20,274.34 per month for two years (48 Payments) beginning August 1, 2001
with a final balloon payment of $1,630,000 due on July 31, 2003
Payments include the Paying Agent fee of $461.25.
The Trustee must first draw, from the Operating Fund Accounts, the charges
due for paying agency and trustee services. Thereafter, the amounts in the
Operating Fund Accounts shall be used solely for the payment of interest
coming due or principal coming 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 Accounts to perform the Company's obligations. The Company
is obligated to immediately replenish such funds so applied.
Initial Operating Fund Payments
Initial operating fund payments in the amounts of $200,000, $185,000 and
$100,000 will be funded from the proceeds of the sale of the Series 1998-I,
II and III Bonds, respectively, and will be used only to make the initial
payments on the respective series of Bonds. These initial operating fund
payment amounts are equivalent to slightly more than the first six month
operating fund payments for the three series of Bonds assuming all of the
Bonds are sold. After the initial operating fund payment amounts have been
expended, the remaining operating fund payments will be payable primarily
from the first revenues of the Facilities. 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."
Bond Reserve Account
The Company has agreed to establish a Bond Reserve Account which will be
funded by each of the three series of bonds as follows: $250,000 from the
Series 1998-I Bonds, $240,000 from the Series 1998-II Bonds and $130,000 from
the Series 1998-III Bonds. If all the Bonds are sold, the Bond Reserve
Account will be funded in the amount of $620,000. The purpose of the 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 of any series of Bonds, the Trustee may apply available funds to
the principal and interest due on the Bonds. In the event that the Trustee
uses funds from the Bond Reserve Account to pay the principal and interest on
the Bonds due at a particular paydate, then the Company shall pay to the
Trustee, within one hundred eighty (180) days from the date of such paydate,
an amount necessary to replenish the Bond Reserve Account. Failure to
replenish the Bond Reserve Account within one hundred eighty (180) day period
shall be an event of default and shall entitle the Trustee to continue to
hold the Bond Reserve Account, in addition to its other remedies. The Bond
Reserve Account will remain in place for a period of ten years from July 1,
1998. At the end of the ten year period, any funds remaining in the Bond
Reserve Account must first be used to call any outstanding Bonds, provided
the Company is current on all operating fund payments. If all of the Bonds
have been retired prior to the end of the ten year period, then the Bond
Reserve Account will be released to the Company.
Escrow And Disbursement Of Bond Proceeds
All proceeds from the sale of the Bonds shall be payable to and deposited
with Colonial Trust Company of Phoenix, Arizona ("Escrow Agent" and "
Registrar") pursuant to an Escrow Agreement entered into between the Company
and the Escrow Agent. Pursuant to the terms of the Escrow Agreement, all
proceeds from the sale of the Bonds will be deposited with the Escrow Agent,
subject to the sale of minimum funds for any series of Bonds. The minimum
offering amounts for the Series 1998-I Bonds, Series 1998-II Bonds and Series
1998-III Bonds are $750,000, $750,000 and $500,000, respectively. No fees
still due the Underwriter related to the sale of a particular series of Bonds
shall be paid out of the escrow account until the minimum escrow amount for
that particular series of Bonds has been met. The funds shall be used only
for the purposes set forth under "Sources and Uses of Proceeds." During the
escrow period, the subscriber will not have access to funds held in the
Escrow Account. The Company, the Company's affiliates, the Underwriter and
the Underwriter's affiliates may purchase Bonds in order to reach the
minimum offering amounts for any series of the Bonds. These parties will not
be restricted to the amount of Bonds that they may purchase.
30
<PAGE>
If $750,000 has not been deposited in the escrow account from the sale
of the Series 1998-I Bonds by January 1, 1999, the subscribers to the Series
1998-I Bonds will receive the return of their subscription amount plus interest.
In the event that the minimum offering amount for the Series 1998-I Bonds is
not met by January 1, 1999, 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 July 1, 1998 through January 1, 1999 at the rate
attributable to the Series 1998-I Bonds subscribed.
If $750,000 has not been deposited in the escrow account from the sale of
the Series 1998-II Bonds by February 1, 1999, the subscribers to the Series
1998-II Bonds will receive the return of their subscription amount plus
interest. In the event that the minimum offering amount for the Series 1998-II
Bonds is not met by February 1, 1999, 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 August 1, 1998 through February 1, 1999 at the rate
attributable to the Series 1998-II Bonds subscribed.
If $500,000 has not been deposited in the escrow account from the sale of
the Series 1998-III Bonds by February 1, 1999, the subscribers to the Series
1998-III Bonds will receive the return of their subscription amount plus
interest. In the event that the minimum offering amount for the Series
1998-III Bonds is not met by February 1, 1999, 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 August 1, 1998 through February 1, 1999 at the
rate attributable to the Series 1998-III Bonds subscribed.
Subject to the sale of the minimum offering amount for the Series 1998-I
Bonds, the Company and Trustee will use available funds from the sale of the
Series 1998-I Bonds in the following order: (1) to pay expenses of the
Underwriter, attorney, appraiser, recording fees, mortgage taxes, Trustee's
fees, Paying Agent fees and other similar fees incurred in connection with
the Series 1998-I Bonds; (2) to fund an amount approximately equivalent to the
first six month operating fund payments for the Series 1998-I Bonds; (3) to
retire the Ruston Construction Loan; (4) to fund the remaining construction
costs on the Ruston Project; (5) to fund pre-opening costs of the Ruston
Project; (6) to fund the Series 1998-I portion of the Bond Reserve Account.
After the above has been accomplished, any remaining funds in the Bond
Proceeds Account related to the Series 1998-I Bonds will be released to the
Company. See "Sources and Uses of Proceeds".
Subject to the sale of the minimum offering amount for the Series
1998-II Bonds, the Company and Trustee will use available funds from the sale
of the Series 1998-II Bonds in the following order: (1) to pay expenses of
the Underwriter, attorney, appraiser, recording fees, mortgage taxes,
Trustee's fees, Paying Agent fees and other similar fees incurred in
connection with the Series 1998-II Bonds; (2) to fund an amount approximately
equivalent to the first six month operating fund payments for the Series
1998-II Bonds; (3) to retire the Bossier City Construction Loan; (4) to fund
the remaining construction costs on the Bossier City Project; (5) to fund
pre-opening costs of the Bossier City Project; (6) to fund the Series 1998-II
portion of the Bond Reserve Account. After the above has been accomplished,
any remaining funds in the Bond Proceeds Account related to the Series
1998-II Bonds will be released to the Company. See "Sources and Uses of
Proceeds".
Subject to the sale of the minimum offering amount for the Series
1998-III Bonds, the Company and Trustee will use available funds from the
sale of the Series 1998-III Bonds in the following order: (1) to pay
expenses of the Underwriter, attorney, appraiser, recording fees, mortgage
taxes, Trustee's fees, Paying Agent fees and other similar fees incurred in
connection with the Series 1998-III Bonds; (2) to fund an amount approximately
equivalent to the first six month operating fund payments for the Series
1998-III Bonds; (3) to retire the Shreveport Construction Loan; (4) to fund
the remaining construction costs on the Shreveport Project; (5) to fund
pre-opening costs of the Shreveport Project; (6) to fund the Series 1998-III
portion of the Bond Reserve Account. After the above has been accomplished,
any remaining funds in the Bond Proceeds Account related to the Series
1998-III Bonds will be released to the Company. See "Sources and Uses of
Proceeds".
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."
31
<PAGE>
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 $100,000 to be paid in installments over
the terms of the Bond Issues from the Trustee for its technical assistance
pertaining to the Bond Issues. 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 delinquent 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.
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 Accounts 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 Accounts.
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 at the public offering price of $250 per Bond
or integral multiples thereof. The Bonds will be issued in three series, as
identified herein, and each series is subject to the sale of a minimum
offering amount as indicated under "Description of Bonds - Escrow and
Disbursement of Bond Proceeds". All proceeds from the sale of the Bonds will
be transmitted promptly to an escrow account with Colonial Trust Company as
Escrow Agent. In the event minimum funds for any series of Bonds is not
received within the time set forth herein, the Company will promptly pay to
the Escrow Agent such sum of money as will be necessary, if any, when added
to the sums held in escrow, including interest earned thereon, to pay to the
subscribers the principal amount of their subscription together with the
interest form
32
<PAGE>
the date of issue through the escrow termination date at the rate attributable
to the Bonds subscribed to by the subscriber. The Company expects that the
Bonds will be delivered in book-entry form, subject to the sale of minimum
funds for each series of Bonds, through the facilities of the Trustee within
thirty (30) days from the date subscriptions for the Bonds are received.
Contingent upon the sale of the minimum principal amount of a series of
the Bonds, the Company will pay the Underwriter a concession as follows:
(1) the Underwriter will receive 6.0% of the face amount of each Bond sold by
another NASD member firm through a selling group agreement with the
Underwriter and may re-allow the full 6% to the NASD member firms participating
in this Offering; (2) the Underwriter will receive a concession of 5.0% 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 1.0% 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 or its assigns will also receive a fee not to exceed $100,000 to
be paid in installments over the term of the Bond Issues 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
Company has paid to the Underwriter an investment banking fee in the amount of
$117,000 for the Underwriter's technical assistance in connection with this
Offering. In the event the Offering is terminated prior to the issuance of
Bonds, the Company shall be liable to the Underwriter only for the
Underwriter's out-of-pocket expenses for services rendered. The Company has
agreed to pay all expenses in connection with qualifying the Bonds for sale
under such jurisdictions as the Underwriter may designate. The Underwriting
Agreement provides for reciprocal agreements of indemnity between the Company
and the Underwriter as to certain civil 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. 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 Facilities for the next three years following the offering.
Additionally, the Underwriter has advised the Company that it does not intend
to make a market in the Bonds.
Pursuant to terms of the Underwriting Agreement, 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.
Subscription for Bonds
Each person who wishes to purchase a Bond must execute a subscription
agreement covering the Bond(s) being purchased. The subscription agreement
is generated by the Underwriter upon receiving verbal indication from a
subscriber for the Bond(s) the subscriber has selected from the available
maturities. Subscribers may purchase any of the series of Bonds. Prior to
executing the subscription agreement, the subscriber will be provided a
Prospectus by the Underwriter.
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
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. Subject to the sale of minimum funds for each series of
Bonds, the Registrar will register and deliver the bonds in book-entry form or
provide those registered owners who request a printed bond certificate with
the Bonds within thirty (30) days from the date subscriptions for the Bonds
are received.
Determination of Offering Price
Prior to this Offering, there has been no public market for the Bonds of
the Company. Consequently, the initial public offering price for the Bonds
has been determined arbitrarily between the Company and the Underwriter.
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 twelve years,
the Underwriter's experience has primarily been in the underwriting of
nonprofit debt securities, intrastate debt offerings and debt offerings
offered pursuant to Regulation A of the Securities Act of 1933, as amended,
as an exemption from the registration requirements under the Act.
33
<PAGE>
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, Bobby L. Culpepper, Esq., of Jonesboro, Louisiana,
has opined upon certain legal matters pertaining to the Bonds. 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: Robert M. McSherry, MAI, of
Baton Rouge, Louisiana, has provided an appraisal of the Facilities. The
financial statements dated November 30, 1997 have been audited by William R.
Hulsey, CPA, of Monroe, Louisiana.
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.
34
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Unaudited Interim Financial Statements . . . . . . . . . . . . . . . . F-2
Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12
Balance Sheet at December 31, 1997 . . . . . . . . . . . . . . . . . . F-13
Statement of Income from September 10, 1997 until
December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . F-14
Statement of Retained Earnings (Deficit) from
September 10, 1997 until December 31, 1997 . . . . . . . . . . . . . F-15
Statement of Cash Flows from September 10, 1997
until December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . F-16
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . F-18
(This space is intentionally left blank)
F-1
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Balance Sheet
March 31, 1998
(Unaudited)
ASSETS
Current assets:
Cash $ 125
Prepaid insurance 4,125
------------
Total current assets 4,250
------------
Property, plant and equipment
Building construction in progress 982,212
Land 635,000
------------
Total property, plant and equipment 1,617,212
------------
Other assets:
Deposits 4,000
Deferred charges 240,000
------------
Total other assets 244,000
------------
$ 1,865,462
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 661,465
------------
Other liabilities:
Due to stockholders and affiliates 256,953
------------
Stockholders' Equity
Common stock, $ 2 par value, 1,500,000
shares authorized, 474,410 shares issued
and outstanding 948,820
Retained earnings ( deficit ) accumulated
during the development stage (1,776)
------------
Total stockholders' equity 947,044
------------
$ 1,865,462
------------
See accompanying notes.
F-3
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Statement of Income
For the Three Months ended March 31, 1998 and the Period from
September 10, 1997 (Date of Inception), to March 31, 1998
(Unaudited)
September 10, 1997
Three Months Ended (Inception) to
March 31, 1998 March 31, 1998
Revenues $ 0 $ 0
------------ ------------
Operating expenses
Automobile 319 319
Bank charges 27 178
Casual labor 0 380
Dues and subscriptions 125 125
Legal and accounting 50 50
Postage 154 154
Printing 272 382
Taxes 13 13
Travel and entertainment 175 175
------------ ------------
Total operating expenses 1,135 1,776
------------ ------------
Net income (loss) (1,135) (1,776)
------------ ------------
See accompanying notes.
F-2
<PAGE
Senior Retirement Communities, Inc.
(A Development Stage Company)
Statement of Retained Earnings (Deficit)
For the Three Months ended March 31, 1998 and the Period from
September 10, 1997 (Date of Inception), to March 31, 1998
(Unaudited)
September 10, 1997
Three Months Ended (Inception) to
March 31, 1998 March 31, 1998
Beginning retained earnings $ (641) $ 0
Net income (loss) (1,135) (1,776)
------------ ------------
Ending retained earnings (deficit) $ (1,776) (1,776)
------------ ------------
See accompanying notes.
F-4
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Statement of Cash Flows
For the Three Months ended March 31, 1998 and the Period from
September 10, 1997 (Date of Inception), to March 31, 1998
(Unaudited)
Three September 10,
Months Ended 1997
March 31, (Inception) to
1998 March 31, 1998
Cash flows from operating activities:
Cash paid to suppliers and employees $ (1,135) $ (5,901)
------------ ------------
Net cash provided (used) by operations (1,135) (5,901)
------------ ------------
Cash flows from investing activities
Acquisitions land 0 (635,000)
Payments towards construction (265,905) (716,307)
Payments of deposits (2,000) (4,000)
Payment of deferred charges (120,000) (120,000)
------------ ------------
Net cash provided by (applied to)
investing activities (473,307) (1,475,307)
------------ ------------
Cash flows from financing activities
Issuance of common stock 0 948,820
Interim construction loans 211,465 661,465
Loans from stockholders and affiliates 198,753 256,953
------------ ------------
Net cash provided by (applied to)
financing activities 410,218 1,867,238
------------ ------------
Net increase (decrease) in cash 21,178 125
Cash at the beginning of the period -21,053 0
------------ ------------
Cash at the end of the period $ 125 $ 125
------------ ------------
See accompanying notes.
F-5
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Statement of Cash Flows
For the Three Months ended March 31, 1998 and the Period from
September 10, 1997 (Date of Inception), to March 31, 1998
(Unaudited)
Three September 10,
Months Ended 1997
March 31, (Inception) to
1998 March 31, 1998
Reconciliation of net income to net cash provided by operations:
Net income $ (1,135) $ (1,776)
Adjustments to reconcile net income to cash
provided by operations
Payment of insurance deposits 0 (4,125)
------------ ------------
Net cash provided (used) by operations $ (1,135) $ (5,901)
------------ ------------
See accompanying notes.
F-6
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Nature of Business
The Company is a Louisiana corporation established to develop assisted living
center and dementia facilities for the housing and care of senior citizens
in Ruston, Bossier City, Shreveport, Minden and West Monroe, Louisiana.
Basis of Accounting
The Company uses the accrual basis of accounting and will utilize a calendar
year for all reporting purposes.
Income Taxes
The company is treated as a corporation for federal income tax purposes.
Property, Buildings, Equipment and Depreciation
Buildings and equipment are stated at cost and are to be depreciated by the
straight-line method over their estimated economic lives. Buildings shall
include capitalized construction period interest which will be treated as a
component cost of the building and depreciated over the same economic life as
the building. Land was acquired in a a series of tax free exchange in return
for shares of the Company's common stock ( Note 4 ). Consequently, the
Company's tax basis in the property for income tax purposes is the
stockholder's basis.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
F-7
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
Note 1 - Summary of Significant Accounting Policies-(continued)
Deferred Charges
Deferred charges represents the costs associated with obtaining long-term
financing for the care facilities of the Company. These costs are to
amortized over the life of the bonds using the effective interest rate method.
Note 2 - Related Party Transactions
The company acquired 6 acres of land at the Ruston location with an estimated
fair market value of $ 450,000 in a transaction with one of its stockholders
in exchange for 77,500 shares of common stock and by assuming a debt of
$ 200,000, which is reflected as a due.to stockholders and affiliates. This
transaction would have resulted in a gain to the transferring shareholder of
approximately $ 95,000 had it not been a tax free exchange. This land is
included on the balance sheet at a value of $ 355,000 which is the
transferring shareholder's basis in this property.
The company acquired 20 acres of land at the Ruston location with an
estimated fair market value of $ 250,000 in a transaction with one of its
stockholders in exchange for 40,000 shares of common stock. This transaction
would have resulted in a gain to the transferring shareholder of approximately
$ 170,000 had it not been a tax free exchange. This land is included on the
balance sheet at a value of $ 80,000 which is the transferring shareholder's
basis in this property.
The company acquired land at the West Monroe location with an estimated fair
market value of $ 200,000 in a transaction with one of its stockholders in
exchange for 100,000 shares of common stock. This transaction would have
resulted no gain to the transferring shareholder had it not been a tax free
exchange.
The Company has entered into a construction contract in the amount of
$ 2,750,000 with one of the shareholders to construct the Ruston facility.
The contract calls for the cash payments of $ 2,500,000 during the building
of the facility as approved by the contract engineer and the issuance of an
additional 125,000 shares of common stock at the completion of the project,
such stock issuance to represent the builders profit in the project. As of
March 31, 1998 $ 470,672 has been paid on this contract.
F-8
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
Note 2 - Related Party Transactions-(continued)
Due to stockholders and affiliates consist of amounts advanced by
stockholders and other related entities.
Note 3 - Deferred Charges
Deferred charges are summarized as follows:
Loan fees $ 240,000
The loan fees are to be amortized as interest expense over the life of the
related loan by use of the interest method.
Note 4 - Notes Payable
Notes payable at March 31, 1998 consist of one note to Church Loans, dated
December 1, 1997. This note is to provide the funding for the construction of
the Ruston not to exceed $ 2,700,000. The loan is to be repaid from the
permanent financing of the project through the proposed issuance of bonds.
This note calls for the payment of prime (as published in the Wall Street
Journal plus two per cent but in no case shall the rate be less than ten
and one-half per cent per annum. The lender shall maintain a first mortgage
position on the Ruston location until such time as the bonds are sold. At that
time Church Loans will maintain a co-first mortgage position for any amounts
which are not liquidated by the bond proceeds.
Note 5 - Issuances of Common Stock
The Company was formed September 10, 1997. The Company has issued common
stock totalling 474,410 shares of $ 2.00 par value in exchange for property
and cash as follows:
Description Shares Amount
1. Certificate number 1 issued in 20,417 $ 40,834
exchange for cash
F-9
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
Note 5 -Issuances of Common Stock-(continued)
2.Certificate number 2 issued in 85,896 171,792
exchange for services rendered
in connection with developing the
plans for construction for the Ruston
location and a deposit on the plans
for the Bossier City, Shreveport,
Minden, and West Monroe locations
3.Certificate number 3 issued in 20,417 40,834
exchange for cash
4.Certificate number 4 issued in 77,500 155,000
exchange for the equity in 6
acres of land at the Ruston location.
5.Certificate number S issued in 40,000 80,000
exchange for 20 acres of land at
the Ruston location.
6.Certificate number 6 issued in 57,264 114,528
exchange for services rendered
in connection with developing the
plans for construction for the Ruston
location and a deposit on the plans
for the Bossier City, Shreveport,
Minden, and West Monroe locations
7.Certificate number 7 issued in 20,416 40,832
exchange for cash
8.Certificate number 8 issued in 100,000 200,000
exchange for land at the West
Monroe location.
9.Certificate number 9 issued in 52,500 105,000
exchange for cash --------- ---------
Totals 474,410 $ 948,820
========= =========
The Company has also reserved 252,440 shares of Common Stock to
be issued at the completion of the services described above
relative to certificates 2 and 6.
F-10
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
Note 6- Development Stage Operations
The company has begun construction of the Ruston facility which has an
estimated completion date of late 1998. The expenditures related to this
project are reflected as building construction in progress on the balance
sheet.
Note 7- Income Taxes
As discussed in notes 2 and 4, the Company was incorporated and capitalized
during the period from September 10, 1997 to March 31, 1998 and as of
March 31, 1998, the company has incurred losses which do not require accrual
of income taxes.
Note 8- Other Matters
The financial statements presented herewith were prepared internally by the
Company and include all adjustments which in the opinion of management are
necessary to prevent the financial statements from being misleading.
F-11
<PAGE>
WILLIAM R. HULSEY
CERTIFIED PUBLIC ACCOUNTANT
2117 FORSYTHE AVENUE
MEMBER MONROE, LOUISIANA MAILING ADDRESS
AMERICAN INSTITUTE OF P. 0. BOX 2253
CERTIFIED PUBLIC ACCOUNTANTS MONROE, LOUISIANA 71207
SOCIETY OF LOUISIANA (318) 362-9900
CERTIFIED PUBLIC ACCOUNTANTS FAX (318) 362-9993
Senior Retirement Communities, Inc.
507 Trenton Street
West Monroe, Louisiana
I have audited the accompanying balance sheet of Senior Retirement
Communities, Inc. as December 31, 1997 and the related statements of income,
retained earnings and cash flows for the period then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion the financial statements referred to above present fairly in
all material respects, the financial position of Senior Retirement
Communities, Inc. at December 31, 1997 and the results of its operations and
its cash flows for the period then ended in conformity with generally accepted
accounting principles.
March 20, 1998
/S/ WILLIAM R HULSEY
William R. Hulsey
Certified Public Accountant
F-12
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Balance Sheet
December 31, 1997
ASSETS
Current assets;
Cash $ 352
Prepaid insurance 4,125
------------
Total current assets 4,477
------------
Property, plant and equipment
Building construction in progress 716,307
Land 635,000
------------
Total property, plant and equipment 1,351,307
------------
Other assets:
Deposits 2,000
Deferred charges 120,000
------------
Total other assets 122,000
------------
$ 1,477,784
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft $ 21,405
Notes payable 450,000
------------
Total current liabilities 471,405
------------
Other liabilities:
Due to stockholders and affiliates 58,200
------------
Stockholders' Equity
Common stock, $ 2 par value, 1,500,000
shares authorized, 474,410 shares issued
and outstanding 948,820
Retained earnings ( deficit ) accumulated
during the development stage (641)
------------
948,179
------------
$ 1,477,784
------------
The notes to financial statements are an integral
part of this financial statement.
F-13
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Statement of Income
Period from September 10, 1997 until December 31, 1997
Revenues $ 0
Operating expenses
Bank charges 151
Casual labor 380
Printing 110
------------
Total operating expenses 641
------------
Net income (loss) $ (641)
------------
The notes to financial statements are an integral
part of this financial statement.
F-14
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Statement of Retained Earnings ( Deficit )
Period from September 10, 1997 until December 31, 1997
Beginning retained earnings $ 0
Net loss (641)
------------
Ending retained earnings ( deficit ) $ (641)
------------
The notes to financial statements are an integral
part of this financial statement.
F-15
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Statement of Cash Flows
Period from September 10, 1997 until December 31, 1997
Cash flows from operating activities:
Cash paid to suppliers and employees $ (641)
------------
Net cash provided (used) by operations (641)
------------
Cash flows from investing activities
Acquisitions land (635,000)
Payments towards construction in progress (716,307)
Payments of deposits (2,000)
Payment of deferred charges (120,000)
------------
Net cash provided by (applied to) investing (1,473,307)
Cash flows from financing activities
Issuance of common stock 948,820
Interim construction loans 450,000
Loans from stockholders and affiliates 58,200
------------
Net cash provided by (applied to) financing 1,457,020
------------
Net increase (decrease) in cash -21,053
Cash at the beginning of the period 0
------------
Cash at the end of the period $ -21,053
------------
The notes to financial statements are an integral
part of this financial statement.
F-16
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Statement of Cash Flows
Period from September 10, 1997 until December 31, 1997
Reconciliation of net income to net cash provided by operations:
Net income $ (641)
Adjustments to reconcile net income to cash
provided by operations
------------
Net cash provided (used) by operations $ (641)
------------
The notes to financial statements are an integral
part of this financial statement.
F-17
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Business
The Company is a Louisiana corporation established to develop assisted
living center and dementia facilities for the housing and care of senior
citizens in Ruston, Bossier City, Shreveport, Minden and West Monroe,
Louisiana.
Basis of Accounting
The Company uses the accrual basis of accounting and will utilize a
calendar year for all reporting purposes.
Income Taxes
The company is treated as a corporation for federal income tax purposes.
Property, Buildings, Equipment and Depreciation
Buildings and equipment are stated at cost and are to be depreciated by
the straight-line method over their estimated economic lives. Buildings
shall include capitalized construction period interest which will be
treated as a component cost of the building and depreciated over the
same economic life as the building. Land was acquired in a a series of
tax free exchange in return for shares of the Company's common stock
( Note 4 ). Consequently, the Company's tax basis in the property for
income tax purposes is the stockholder's basis.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
F-18
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies-(continued)
Deferred Charges
Deferred charges represents the costs associated with obtaining
long-term financing for the care facilities of the Company. These
costs are to amortized over the life of the bonds using the effective
interest rate method.
Note 2 - Related Party Transactions
The company acquired 6 acres of land at the Ruston location with an
estimated fair market value of $ 450,000 in a transaction with one of
its stockholders in exchange for 125,000 shares of common stock and by
assuming a debt of $ 200,000, which is reflected as a due to
stockholders and affiliates. This transaction would have resulted in a
gain to the transferring shareholder of approximately $ 95,000 had it
not been a tax free exchange.
The company acquired 6 acres of land at the Ruston location with an
estimated fair market value of $ 450,000 in a transaction with one of
its stockholders in exchange for 77,500 shares of common stock and by
assuming a debt of $ 200,000, which is reflected as a due to stockholders
and affiliates. This transaction would have resulted in a gain to the
transferring shareholder of approximately $ 95,000 had it not been a tax
free exchange. This land is included on the balance sheet at a value of
$ 355,000 which is the transferring shareholder's basis in this property.
The company acquired 20 acres of land at the Ruston location with an
estimated fair market value of $ 250,000 in a transaction with one of its
stockholders in exchange for 40,000 shares of common stock. This
transaction would have resulted in a qain to the transferring shareholder
of approximately $ 170,006 had it not been a tax free exchange. This
land is included on the balance sheet at a value of $ 80,000 which is
the transferring shareholder's basis in this property.
The company acquired land at the West Monroe location with an estimated
fair market value of $ 200,000 in a transaction with one of its
stockholders in exchange for 100,000 shares of common stock. This
transaction would have resulted no gain to the transferring shareholder
had it not been a tax free exchange.
The Company has entered into a construction contract in the amount of
$ 2,750,000 with one of the shareholders to construct the Ruston facility.
The contract calls for the cash payments of $ 2,500,000 during the
building of the facility as approved by the contract engineer and the
issuance of an additional 125,000 shares of common stock at the
completion of the project, such stock issuance to represent the builders
profit in the project. As of December 31, 1997 $ 189,297 has been paid
on this contract.
F-19
<PAGE>
Senior Retirement Communities, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 2 - Related Party Transactions-(continued)
Due to stockholders and affiliates consist of amounts advanced by
stockholders and other related entities.
Note 3 - Deferred Charges
Deferred charges are summarized as follows:
Loan fees $ 120,000
The loan fees are to be amortized as interest expense over the life of
the related loan by use of the interest method.
Note 4 - Notes Payable
Notes payable at December 31, 1997 consist of one note to Church Loans,
dated December 1, 1997. This note is to provide the funding for the
construction of the Ruston not to exceed $ 2,700,000. The loan is to
be repaid from the permanent financing of the project through the
proposed issuance of bonds. This note calls for the payment of interest
at a rate of prime ( as published in the Wall Street Journal plus two
percent but in no case shall the rate be less than ten and one-half per
cent per annum. The lender shall maintian a first mortgage position on
the Ruston location until such time as the bonds are sold. At that time
Church Loans will maintain a co-first mortgage position for any amounts
which are not liquidated by the bond proceeds.
Note 5 - Issuances of Common Stock
The Company was formed September 10, 1997. The Company has issued
common stock totalling 606,910 shares of $ 2.00 par value in exchange
for property and cash as follows:
Description Shares Amount
1. Certificate number 1 issued in 20,417 $ 40,834
exchange for cash
F-20
<PAGE>
2. Certificate number 2 issued in 85,896 171,792
exchange for services rendered
in connection with developing the
plans for construction for the Ruston
location and a deposit on the plans
for the Bossier City, Shreveport,
Minden, and West Monroe locations
3. Certificate number 3 issued in 20,417 40,834
exchange for cash
4. Certificate number 4 issued in 77,500 155,000
exchange for the equity in 6
acres of land at the Ruston location.
5. Certificate number 5 issued in 40,000 80,000
exchange for 20 acres of land at
the Ruston location.
6. Certificate number 6 issued in 57,264 114,528
exchange for services rendered
in connection with developing the
plans for construction for the Ruston
Location and a deposit on the plans
for the Bossier City, Shreveport,
Minden, and West Monroe locations
7. Certificate number 7 issued in 20,416 40,832
exchange for cash
8. Certificate number 8 issued in 100,000 200,000
exchange for land at the West
Monroe location.
9. Certificate number 9 issued in 52,500 105,000
exchange for cash -------- ---------
Totals 606,910 $1,213,820
======== =========
The Company has also reserved 252,440 shares of Common Stock to be
issued at the completion of the services described above relative to
certificates 2 and 6.
F-21
<PAGE>
Note 6 - Development Stage Operations
The Company has begun construction of the Ruston facility which has an
estimated completion date of late 1998. The expenditures related to
this project are reflected as building construction in progress on the
balance sheet.
Note 7 - Income Taxes
As discussed in notes 2 and 4, the Company was incorporated and
capitalized during the period from September 10, 1997 to December 31,
1997.
F-22
<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 Schedules . . . . . . . . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . . . 7
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 13
Business . . . . . . . . . . . . . . . . . . . . . . . . 14
Description of Property. . . . . . . . . . . . . . . . . 17
Management . . . . . . . . . . . . . . . . . . . . . . . 21
Principal Owners of the Company. . . . . . . . . . . . . 22
The Company's Plan of Operation. . . . . . . . . . . . . 23
Prior Performance of Affiliates of the Company . . . . . 24
Certain Transactions . . . . . . . . . . . . . . . . . . 24
Description of Bonds . . . . . . . . . . . . . . . . . . 25
Underwriting . . . . . . . . . . . . . . . . . . . . . . 32
Legal Matters. . . . . . . . . . . . . . . . . . . . . . 34
Experts. . . . . . . . . . . . . . . . . . . . . . . . . 34
Additional Information . . . . . . . . . . . . . . . . . 34
Index to Financial Statements. . . . . . . . . . . . . . F-1
Until _____________, 1998 (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.
$9,000,000
Co-First Mortgage Bonds
[SRC LOGO HERE]
SENIOR RETIREMENT
COMMUNITIES, INC.
(d/b/a the Arbor Retirement Community)
----------
PROSPECTUS
----------
MMR INVESTMENT BANKERS, INC.
[MMR LOGO HERE] [SIPC LOGO HERE]
________________, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Louisiana General Corporation Code (La. R. S. 12:24C (1968), as
amended 1987) confers broad powers upon corporations incorporated in Louisiana
with respect to indemnification of any person against liabilities incurred by
reason of the fact that such person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the reequest of the
corporation as a director, officer, employee or agent of another corporation
or other business entity. These provisions are not exclusive of any other
rights to which those seeking indemnification may be entitled under any
by-law, agreement, or otherwise.
The Articles of Incorporation of the Company contain a provision regarding
the limits of liability of incorporators, offcer and directors of the Company
to the fullest extent allowed by law.
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. . . . . . . . . . . . . . . . . . $2,727
NASD Registration Fee . . . . . . . . . . . . . . . . . $1,400
Blue Sky Qualification Fees and Expenses. . . . . . . . $3,150
CUSIP Registration Fees . . . . . . . . . . . . . . . . $734
Legal Fees and Expenses . . . . . . . . . . . . . . . .$23,000
Accounting Fees and Expenses. . . . . . . . . . . . . .$20,000
Transfer Agent, Escrow Agent, Paying Agent,
Registrar & Trustee Fees. . . . . . . . . . . . . . . $9,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . $3,000
-------
Total. . . . . . . . . . . . . . . . . . . . . . .$63,011
=======
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.
These securities were sold as a private placement to the original stockholders,
each of which is an accredited investor as defined under the Securities Act
of 1933, as amended.
II-1
<PAGE>
<TABLE>
<CAPTION>
Date of Title of Identity of
Sale Securities Amount Sold Purchaser Consideration
<S> <C> <C> <C> <C>
09/10/97 Common Stock 20,417 Shares Joanne $40,834 in cash
Caldwell-Bayles
09/10/97 Common Stock 85,896 Shares Joanne Issued in exchange
Caldwell-Bayles for services
rendered in
connection with
developing the plans
for construction for
the Ruston Project
and a deposit on the
plans for the
Bossier City,
Shreveport, Minden
and West Monroe
locations
09/10/97 Common Stock 20,417 Shares The Forsythe Group $40,834 in cash
09/10/97 Common Stock 40,000 Shares The Forsythe Group Issued in exchange
for 20 acres of
land at the Ruston
location
09/10/97 Common Stock 77,500 Shares The Forsythe Group Issued in exchange
for 6 acres of land
at the Ruston
location
09/10/97 Common Stock 57,264 Shares Raymond & Jean
Nelson Issued in exchange
for services
rendered in
connection with
developing the plans
for construction
for the Ruston
Project and a
deposit
on the plans for the
Bossier City,
Shreveport, Minden
and West Monroe
locations
09/10/97 Common Stock 20,416 Shares The Arbor Group $40,832 in cash
09/10/97 Common Stock 100,000 Shares The Arbor Group Issued in exchange
for land at the
West Monroe
location
09/10/97 Common Stock 52,500 Shares The Forsythe Group $105,000 in cash
04/24/98 Preferred 425,000 Shares Patterson Insurance Issued in exchange
Stock Co. for land at the
Bossier City
location
05/10/98 Common Stock 162,300 Shares The Forsythe Group Issued in exchange
for services
rendered in
connection with
developing the
plans for
construction
for the Bossier City
and Shreveport
Project
</TABLE>
II-2
Item 27. Exhibits
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 Incorporation
3(b) * Constitution and By-Laws
4(a) * Specimen of Bond Certificate
4(b) * Form of Trust Indenture
4(c) * Lienholders Agreement
5(a) * Opinion of Bobby L. Culpepper, Esq.
10(a) * Construction Management Contract - Ruston Facility
10(b) * Construction Management Contract - Bossier City Facility
10(c) * Construction Management Contract - Shreveport Facility
10(d) ** Construction Loan Agreement - Ruston
10(e) * Management Agreement
10(f) ** Construction Loan Agreement - Bossier City
10(g) ** Construction Loan Agreement - Shreveport
23(a) * Consent of William R. Hulsey, CPA
23(b) * Consent of Bobby L. Culpepper, Esq.
23(c) * Consent of Appraiser - Ruston
23(d) * Consent of Appraiser - Bossier City
23(e) * Consent of Appraiser - Shreveport
99(a) * Appraisal - Ruston
99(b) * Appraisal - Bossier City
99(c) * Appraisal - Shreveport
99(e) * Environmental Report - Ruston
99(f) * Environmental Report - Bossier City
99(g) * Environmental Report - Shreveport
* Filed previously
** Filed herewith
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 pursuant 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.
II-3
<PAGE>
(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:
(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-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant, Senior Retirement Communities, Inc., 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 West Monroe, State of Louisiana, on
this 4th day of June , 1998.
------ ------------------
Senior Retirement Communities, Inc.
By: /S/ JOANNE M CALDWELL-BAYLES
--------------------------------_
Joanne. M. Caldwell-Bayles
Chief Executive Officer
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 June 4th , 1998.
--------------
Signature Title
/S/JOANNE M CALDWELL-BAYLES
- --------------------------------- President, Chief Executive Officer,
Joanne M. Caldwell-Bayles Chief Financial Officer and Chairman of
the Board
/S/RAYMOND L NELSON
- ---------------------------------- Vice-President and Director
Raymond L. Nelson
/S/JEAN GAFFNEY NELSON
- ---------------------------------- Director
Jean Gaffney Nelson
PROCEEDS ESCROW AGREEMENT
Agreement entered on the 1st day of March, 1998 by and among SENIOR
RETIREMENT COMMUNITIES, INC.,("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 $9,000,000 aggregate principal amount of its First Mortgage
Bonds (collectively, the "Bonds") to be issued in three series (1998-I,
1998-II and 1998-III) and to be issued pursuant to a Trust Indenture between
the Issuer and Colonial Trust Company Trustee (the "Trustee").
WHEREAS, the proceeds from each series are to be used to construct a
separate particular project: one in Rutson, Louisiana, one in Bossier City,
Louisiana and one in Shreveport, Louisiana, as more particularly set forth
and described in the Offering Circular applicable to the Bonds; and
WHEREAS, each issue of a series of the Bonds has its own escrow minimum
requirement and the issue and sale of each series of the Bonds is not
contingent on the issue and sale of any other series of the Bonds;
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 each series of Bonds and, as such, to establish
appropriate accounts and to receive the proceeds from the sale of the Bonds
for deposit in the applicable account until the earlier of the termination of
this Agreement or the termination of the offering and sale of the applicable
series of Bonds (the "Applicable 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 the applicable escrow
cash account (such accounts being collectively referred to herein as 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
<PAGE>
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 l5c2-4. 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 the following dates as
applicable to each of the series of the Bonds:
(a) Series 1998-I Bonds:
(i) the date that the Escrow Agent has received proceeds from the
sale of such series of the Bonds in the aggregate principal amount
of $750,000.00, or more, or (ii) the date of January 1, 1999, at
which time the Series 1998-I escrow account will terminate;
(b) Series 1998-II Bonds:
(i) the date that the Escrow Agent has received proceeds from the
sale of such series of the Bonds in the aggregate principal amount
of $750,000.00, or more, or (ii) the date of February 1, 1999, at
which time the Series 1998-II escrow account will terminate;
(c) Series 1998-III Bonds:
(i) the date that the Escrow Agent has received proceeds from the
sale of such series of the Bonds in the aggregate principal amount
of $500,000.00, or more, or (ii) the date of February 1, 1999, at
which time the Series 1998-III escrow account will terminate.
Notwithstanding the above, the proceeds from the sale of each series
of bonds shall be held by the Escrow Agent until the Escrow Agent shall have
received a written consent to release such proceeds from the Kansas Securities
Commissioner, pursuant to K.A.R. 81-7-1(e).
4. Upon termination of the escrow, the Escrow Agent shall release the
applicable 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
-2-
<PAGE>
applicable series of Bonds have been sold and the required consent of the
Kansas securities Comnissioner has been received within the required time
period described above, or (b) the subscribers if the minimum amount of the
applicable series of Bonds have not been sold or the required consent of the
Kansas Securities Commissioner has not been received within such period.
5. The Issuer agrees that in the event the minimum amount of the
applicable series of Bonds have not been sold or the required consent of the
Kansas Securities Commissioner has not been received within the time period
described above, therefore necessitating the distribution by the Escrow Agent
of the applicable 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 applicable
Escrow Property and interest earned thereon to pay to the subscribers of the
applicable series of 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 applicable series of 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 or any series thereof has been revoked, said
Escrow Agent shall thereupon return all funds relative to the series of Bonds
for which the registration has been revoked 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.
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.
3
<PAGE>
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 be construed in accordance
with and governed by the laws of the State of Arizona without regard to
conflict of law principals.
-4-
<PAGE>
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: /S/ WM G MARTIN
--------------------------
Date: March 1, 1998
------------------------
ISSUER: SENIOR RETIREMENT COMMUNITIES,
INC.
By: /S/JOANNE M CALDWELL BAYLES
--------------------------
President
By: /S/DIANA M CALDWELL
--------------------------
Secretary
Date: March 1, 1998
------------------------
ESCROW AGENT: COLONIAL TRUST COMPANY
Phoenix, Arizona
By: /S/SUSAN CARLISLE
--------------------------
Date: March 1, 1998
------------------------
-5-
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
A Real Estate Investment Trust
November 5, 1997
Senior Retirement Communities, Inc., Ruston, LA
C/O The Arbor Group, L.L.C.
507 Trenton St
West Monroe, LA 71291
Re: $2,700,000 Interim Loan
Gentlemen:
This will constitute the commitment of Church Loans & Investments Trust
("Church Loans") to loan to Senior Retirement Communities, Inc., Ruston, LA
("Borrower") the sum of $2,700,000, or any amount less than that amount as
the Borrower may need less any title insurance, appraisal costs, mortgage
registration tax and all other closing costs and expense that may be incurred
by Church Loans in connection with the funding and collection of the loan.
The loan is to be made pending the offering of bonds by the Borrower through
MMR Investment Bankers ("MMR") as provided hereinafter.
The loan will be for a term of one year and will bear interest on the unpaid
principal at a variable rate which would be equal to 2% per annum in excess
of the "Prime Rate" of interest as published by the Wall Street Journal under
the heading "Money Rates". The minimum rate of interest will not be less
than the initial rate of interest. Interest shall be paid monthly upon the
first day of each month during the term of the loan. Both principal and any
unpaid interest on the loan will be due at maturity.
Funds advanced upon this loan will be used to construct the facility commonly
referred to as Senior Retirement Communities, Inc., Ruston, LA to be located
on U.S. Highway 80, 1/4 mile east of Ruston, LA.
5305 I-40 West P. 0. Box 8203 Amarillo, Texas 79114
(806)358-3666 WATS 1-800-692-1111
<PAGE>
Senior Retirement Communities, Inc., Ruston, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
November 5, 1997
This commitment shall be subject to the following conditions:
1. That the Borrower pay to Church Loans, in addition to the interest
on the loan as described above, a commitment fee equal to 2.5% (two
and one-half percent) of the principal amount of the funds to be
advanced to the Borrower under the terms of this commitment.
One-half of the total commitment fee (ie. $33,750.00) shall be
remitted with this signed commitment letter. Although such
commitment fee is due and payable upon the Borrower's acceptance and
execution of this commitment letter, as a convenience to the
Borrower, Church Loans will allow the balance of the commitment fee
to be paid at closing from the proceeds of the loan. However, in
the event that you decide not to proceed to close this loan for any
reason, the balance of the commitment fee is due and owing by you to
Church Loans and the amount already paid is non-refundable. Such
fee is not interest, but is paid and payable to Church Loans to
induce Church Loans to enter into this loan commitment and to
compensate Church Loans for making available the funds necessary to
fund the entire amount of the committed loan whether or not such
amount is advanced.
2. That the Borrower pay in advance the sum of $250.00 which is the
title insurance cancellation fee in the event the Borrower decides
not to accept the commitment after title work has begun. Upon
closing, this fee will be used to offset other closing expenses.
This sum should be remitted with this signed commitment letter. The
closing of your loan will normally be enhanced if our law firm
orders the title insurance from title companies that have had
experience in dealing with our closings. If possible, we would
recommend that you allow our legal counsel to place the order for
the title insurance. Our legal counsel will order the title
insurance as soon as they have a correct legal description for the
property.
3. That upon acceptance of this commitment the Borrower shall deposit
with Church Loans the additional sum of $3,000.00 which are the
legal fees to be incurred by Church Loans in connection with the
loan. This amount should be remitted with this commitment letter.
4. That the loan shall be secured by a first mortgage lien and security
interest upon all the Borrower's real estate, buildings and
facilities, both existing and to be constructed with the proceeds of
this loan. Such property shall be subject to no prior liens or
encumbrances.
5. That the loan will be made pursuant to a loan agreement entered into
by the Borrower and Church Loans consistent with the terms of this
commitment and such other normal covenants of the Church Loans'
basic loan agreement.
2
<PAGE>
Senior Retirement Communities, Inc., Ruston, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
November 5, 1997
6. That a mortgage title insurance policy in the face amount of not
less than the total amount of the loan be issued by a title
insurance company acceptable to Church Loans, insuring the fact
that Church Loans is the owner and holder of a good and valid first
lien mortgage upon the real estate securing the loan as described in
paragraph 4 above.
7. That the total loan will not exceed 66 2/3% of the total appraised
value of the real estate given to secure the loan. Such appraisal
will be completed by an appraiser acceptable to Church Loans and
must (a) be a FIRREA-conforming appraisal and (b) be certified to
comply with the standards of Church Loans and be submitted for
approval prior to advancement of any funds. Such appraisal shall be
rendered by an appraiser who, among other things, shall have: (a)
appraised the real estate at not more than the fair market value
thereof; (b) appraised the value of the improvements on the real
estate at not more than the depreciated cost thereof; and (c)
considered in making such appraisal the likelihood of deterioration
of the neighborhood in which the real estate and improvements are
located. The qualifications of the appraiser and references,
preferably banks and insurance companies, should be submitted with
the appraisal.
8. That the Borrower enter into a bond offering agreement with MMR
under the terms of which MMR shall assist the Borrower in the
offering upon a best efforts basis bonds of the Borrower in an
amount not less than $9,000,000 of which the first proceeds after
the payment of the expenses of the offering shall be used to retire
this loan. It is further agreed an additional amount not to exceed
$250,000 may be placed in a so-called sinking fund reserve prior to
the repayment of this loan. The effective date of this bond
offering shall be not more than 90 days after the date of the note
securing this loan. Effective date is the date the bonds are first
offered for sale.
9. That the loan be closed on or before sixty days from the date
hereof.
10. That the promissory note evidencing the loan be guaranteed by the
Forsythe Group, Inc. so that $500,000 of the total amount of the
loan is guaranteed upon guaranty forms furnished by Church Loans.
11. That during the term of the loan the Borrower shall agree to
periodically supply Church Loans with financial statements and
reports as requested by Church Loans.
12. That Church Loans must review and approve all legal documents prior
to closing.
3
<PAGE>
Senior Retirement Communities, Inc., Ruston, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
November 5, 1997
13. That a representative of Church Loans conduct three on-site
inspections during the construction phase of the property to be
given by the Borrower to secure the loan. The expense of these
inspections shall be borne by the Borrower.
14. That a Phase One environmental site assessment will be completed
prior to closing by an engineering firm acceptable to Church Loans
certifying that the property is free and clear of any environmental
problems and that the property is in compliance with all current
laws and regulations regarding such environmental assessment.
15. That the Borrower require the contractor to furnish to Church Loans
an original policy providing builder's risk coverage in an amount
not less than the amount of this loan. Church Loans is to be listed
as mortgagee. An original copy of the policy evidencing such
coverage must be furnished prior to funding.
16. That the Borrower furnish to Church Loans an original copy of an
insurance policy providing fire & extended coverage on the
Borrower's property in an amount not less than the amount of this
loan. Church Loans is to be listed as mortgagee. The original
policy evidencing such coverage must be furnished prior to funding.
17. That the Borrower secure a fixed-price contract for the new
construction in an amount not to exceed $2,500,000. No changes or
modifications will be made to this contract without the expressed
written consent of Church Loans.
18. Notwithstanding the above, if regulatory approval of the bond
offering requires changes in the bond offering, bond offering
procedures, prospectus, interim loan, repayment of the interim loan
or otherwise, which such changes materially effect the interim loan,
the method and time of repayment of the interim loan or the
likelihood of repayment of the interim loan, in the sole judgment of
Church Loans, then Church Loans may, at its option, revoke this
commitment without liability for same.
19. You also should be aware that once all of our requirements and the
requirements of our legal counsel are met for the closing of the
loan, we must have three business days to deliver the funds to the
closing agent. Once all closing requirements have been met, our
legal counsel will notify our office and the actual closing can be
scheduled in accordance with the above-mentioned time requirements.
4
<PAGE>
Senior Retirement Communities, Inc., Ruston, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
November 5, 1997
The acceptance of this commitment must be indicated by the Borrower's signing
and returning the original copy of this commitment letter within fifteen (15)
days from the date hereof. The acceptance of this commitment will be the
Borrower's authorization for Church Loans to withhold from the proceeds of
any loan any premiums for the purchase of title insurance, appraisal costs
and other closing costs which are to be paid which are associated with the
loan. This commitment is conditioned upon the loan being closed on or before
January 5, 1998. Any extension of this commitment will be subject to terms
which may be mutually agreed upon at the time of extension. We look forward
to working with you in connection with this transaction.
Sincerely yours,
/S/KELLY ARCHER
Kelly Archer
Manager of Operations
KA/ja
The above commitment has been agreed to and accepted by the undersigned
Officers of the Senior Retirement Communities, Inc., Ruston, LA.
Date: 11-7-97
Senior Retirement Communities, Inc. Ruston, LA
/S/Joanne Caldwell-Bayles /S/Diana M Cadlwell, Secretary
- ------------------------- ----------------------------------
5
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
(A Real Estate Investment Trust)
June 1, 1998
Senior Retirement Communities, Inc.
Attn: Joanne Caldwell-Bayles
507 Trenton St
West Monroe, LA 71291
Re: Ruston, LA Project
Dear Mrs. Caldwell-Bayles:
Reference is made to the commitment made by Church Loans & Investments
Trust ("Church Loans") to Senior Retirement Communities FBO: Ruston, LA
("Borrower") dated November 5, 1997, This will serve as an addendum to that
original commitment.
The addendum is as follows:
1. That should the proceeds from the sale of the bonds through MMR
Investment Bankers ("MMR") and other participating broker/dealers, after the
payment of the expenses associated with the bond offering, be insufficient to
pay the unpaid principal and interest upon the loan committed herein at its
maturity, at the option of the Borrower the term of said loan shall be
renewed and extended by Church Loans as follows:
(a) The term of the loan shall be initially renewed and extended for an
additional period of one (1) year upon the following terms and conditions:
(1) The Borrower shall be current upon all of its outstanding debt
obligations, to include, but not necessarily restricted to all sinking fund
payments payable to the trustee in connection with the bonds to be offered
through MMR and other participating broker/dealers, and all interest payments
upon the loan to be made by Church Loans to the Borrower under the terms of
this commitment.
5305 I-40 West PO Box 8203 Amarillo, TX 79114-8203
(806)358-3666 (800)692-1111 Fax (806)358-1430
<PAGE>
Senior Retirement Communities
Attn: Joanne Caldwell-Bayles
West Monroe, LA
June 1, 1998
Page 2
(2) The amount of the loan to be renewed and extended shall be the
lesser of (i) the unpaid principal upon the loan committed herein at maturity,
or (ii) the unpaid principal amount of all unsold bonds offered through MMR
and other participating broker/dealers described above. Any principal amount
of the loan in excess of the amount of the unsold bonds must be paid in full
by Borrower.
(3) The interest rate upon the loan shall be at a variable rate
equal to 2% per annum in excess of the "Prime Rate" of interest published by
the Wall Street Journal under the heading "Money Rates".
(4) The interest upon the unpaid principal balance of the loan shall
be payable monthly.
(5) The principal upon the loan shall be paid on or before one year
from date.
(6) The Borrower shall pay Church Loans a loan extension fee equal
to 2% (2 points) of the principal amount of the loan.
(7) The total amount of the loan extended and the sold bonds shall
not exceed 66 2/3% of the appraised market value of the collateral.
(b) If on the maturity of the one year extension, December 1, 1999,
should the proceeds from the sale of the bonds to be offered by the Borrower
through MMR and other participating broker/dealers be insufficient to pay
the unpaid principal and interest upon the loan, then, at the option of the
Borrower, the principal amount of the loan extended in regard to the Ruston
issue, shall be renewed and extended by Church Loans into a permanent loan
upon the following terms and conditions:
(1) The Borrower shall be current upon all of its outstanding debt
obligations, to include, but not necessarily restricted to all sinking fund
payments payable to the trustee in connection with the bonds to be offered
through MMR and other participating broker/dealers, and all interest payments
upon the loan to be made by Church Loans to the Borrower under the terms of
this commitment.
<PAGE>
Senior Retirement Communities
Attn: Joanne Caldwell-Bayles
West Monroe, LA
June 1, 1998
Page 3
(2) The permanent loan shall bear interest at the same rate as
described in paragraph (a) (3) above.
(3) The amount of the permanent loan shall be payable in equal, or
as equal as possible due to the variable rate of interest on the loan, monthly
installments of principal and interest over a period of thirteen years with
the right of the Borrower to prepay the loan at any time without penalty.
(4) The Borrower shall pay to Church Loans an additional loan
renewal fee equal to 5% (5 points) of the principal amount of the permanent
loan.
(5) The loan shall continue to the secured on an equal basis with
the outstanding bonds to be issued by the Borrower through MMR and other
participating broker/dealers upon all property to be given by the Borrower to
secure the loan committed herein.
(6) The total amount of the loan and sold bonds shall not exceed
66 2/3% of the appraised market value of the property.
(c) Until such time as the loans committed herein are paid in full,
the Borrower shall not further encumber the property securing the payment of
said loans, either by placing additional mortgages or deeds of trust upon said
property, or by increasing the indebtedness of the Borrower under any Trust
Indenture, mortgage or deed of trust or other security documents associated with
the sale of bonds secured by said property. Should the Borrower additionally
encumber the property securing the loans committed hereby prior to their
payment in full, Church Loans shall have the right to declare the unpaid
principal and interest upon said loans immediately due and payable upon
thirty days notice to the Borrower.
<PAGE>
Senior Retirement Communities
Attn: Joanne Caldwell-Bayles
West Monroe, LA
June 1, 1998
Page 4
The acceptance of this addendum must be indicated by the Borrower's signing
and returning the original copy of this letter within fifteen (15) days from
the date hereof.
Sincerely yours,
/S/KELLY ARCHER
Kelly Archer
Manager of Operations
The above addendum has been agreed to and accepted by the undersigned
Officers of the Senior Retirement Communities, Inc., Ruston, LA.
Date: 6-3-98
------------
/S/Tonya L Hamilton SENIOR RETIREMENT COMMUNITIES, INC.
------------------------------- --------------------------------------
WITNESS
/S/Randy Ratcliff /S/Joanne Caldwell-Bayles
------------------------------- --------------------------------------
WITNESS
CHURCH LOANS & INVESTMENTS TRUST
A Real Estate Investment Trust
March 10, 1998
Senior Retirement Communities, Inc., Bossier City, LA
C/O The Arbor Group, L.L.C.
507 Trenton St
West Monroe, LA 71291
Re:$2,200,000 Interim Loan
Gentlemen:
This will constitute the commitment of Church Loans & Investments Trust
("Church Loans") to loan to Senior Retirement Communities, Inc., Bossier City,
LA ("Borrower") the sum of $2,200,000, or any amount less than that amount
as the Borrower may need less any title insurance, appraisal costs, mortgage
registration tax and all other closing costs and expense that may be incurred
by Church Loans in connection with the funding and collection of the loan.
The loan is to be made pending the offering of bonds by the Borrower through
MMR Investment Bankers ("MMR") as provided hereinafter.
The loan will be for a term of one year and will bear interest on the unpaid
principal at a variable rate which would be equal to 2% per annum in excess
of the "Prime Rate" of interest as published by the Wall Street Journal under
the heading "Money Rates". The minimum rate of interest will not be less
than the initial rate of interest. Interest shall be paid monthly upon the
first day of each month during the term of the loan. Both principal and any
unpaid interest on the loan will be due at maturity.
Funds advanced upon this loan will be used to construct the facility
commonly referred to as Senior Retirement Communities, Inc., Bossier City, LA
to be located on the south side of Brandon Avenue just east of Industrial
Drive, Bossier City, LA.
5305 1-40 West PO Box 8203 Amarillo, TX 79114-8203
(806)358-3666 (800)692-1111 Fax (806)358-1430
<PAGE>
Senior Retirement Communities, Inc., Bossier City, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
March 10, 1998
This commitment shall be subject to the following conditions:
1. That the Borrower pay to Church Loans, in addition to the interest on the
loan as described above, a commitment fee equal to 2.5% (two and one-half
percent) of the principal amount of the funds to be advanced to the Borrower
under the terms of this commitment. One-half of the total commitment fee
(ie. $27,500.00) shall be remitted with this signed commitment letter.
Although such commitment fee is due and payable upon the Borrower's
acceptance and execution of this commitment letter, as a convenience to the
Borrower, Church Loans will allow the balance of the commitment fee to be
paid at closing from the proceeds of the loan. However, in the event that
you decide not to proceed to close this loan for any reason, the balance of
the commitment fee is due and owing by you to Church Loans and the amount
already paid is non-refundable. Such fee is not interest, but is paid and
payable to Church Loans to induce Church Loans to enter into this loan
commitment and to compensate Church Loans for making available the funds
necessary to fund the entire amount of the committed loan whether or not such
amount is advanced.
2. That the Borrower pay in advance the sum of $250.00 which is the title
insurance cancellation fee in the event the Borrower decides not to accept
the commitment after title work has begun. Upon closing, this fee will be
used to offset other closing expenses. This sum should be remitted with this
signed commitment letter. The closing of your loan will normally be
enhanced if our law firm orders the title insurance from title companies that
have had experience in dealing with our closings. If possible, we would
recommend that you allow our legal counsel to place the order for the title
insurance. Our legal counsel will order the title insurance as soon as they
have a correct legal description for the property.
3. That upon acceptance of this commitment the Borrower shall deposit with
Church Loans the additional sum of $3,000.00 which are the legal fees to be
incurred by Church Loans in connection with the loan. This amount should be
remitted with this commitment letter.
4. That the loan shall be secured by a first mortgage lien and security
interest upon all the Borrower's real estate, buildings and facilities, both
existing and to be constructed with the proceeds of this loan. Such property
shall be subject to no prior liens or encumbrances.
5. That the loan will be made pursuant to a loan agreement entered into by
the Borrower and Church Loans consistent with the terms of this commitment
and such other normal covenants of the Church Loans' basic loan agreement.
2
<PAGE>
Senior Retirement Communities, Inc., Bossier City, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
March 10, 1998
6. That a mortgage title insurance policy in the face amount of not less
than the total amount of the loan be issued by a title insurance company
acceptable to Church Loans, insuring the fact that Church Loans is the owner
and holder of a good and valid first lien mortgage upon the real estate
securing the loan as described in paragraph 4 above.
7. That the total loan will not exceed 66 2/3% of the total appraised value
of the real estate given to secure the loan. Such appraisal will be
completed by an appraiser acceptable to Church Loans and must (a) be a
FIRREA-conforming appraisal and (b) be certified to comply with the standards
of Church Loans and be submitted for approval prior to advancement of any
funds. Such appraisal shall be rendered by an appraiser who, among other
things, shall have: (a) appraised the real estate at not more than the fair
market value thereof; (b) appraised the value of the improvements on the real
estate at not more than the depreciated cost thereof; and (c) considered in
making such appraisal the likelihood of deterioration of the neighborhood in
which the real estate and improvements are located. The qualifications of
the appraiser and references, preferably banks and insurance companies, should
be submitted with the appraisal.
8. That the Borrower enter into a bond offering agreement with MMR under the
terms of which MMR shall assist the Borrower in the offering upon a best
efforts basis bonds of the Borrower in an amount not less than $3,470,000 of
which the first proceeds after the payment of the expenses of the offering
shall be used to retire this loan. It is further agreed an additional amount
not to exceed $185,000 may be placed in a so-called sinking fund reserve
prior to the repayment of this loan. The effective date of this bond
offering shall be not more than 90 days after the date of the note securing
this loan. Effective date is the date the bonds are first offered for sale.
9. That the loan be closed on or before sixty days from the date hereof.
10. That the promissory note evidencing the loan be guaranteed by the Forsythe
Group, Inc. so that $500,000 of the total amount of the loan is guaranteed
upon guaranty forms furnished by Church Loans.
11. That during the term of the loan the Borrower shall agree to periodically
supply Church Loans with financial statements and reports as requested by
Church Loans.
12. That Church Loans must review and approve all legal documents prior to
closing.
3
<PAGE>
Senior Retirement Communities, Inc., Bossier City, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
March 10, 1998
13. That a representative of Church Loans conduct up to three on-site
inspections during the construction phase of the property to be given by the
Borrower to secure the loan. The expense of these inspections shall be
borne by the Borrower.
14. That a Phase One environmental site assessment will be completed prior
to closing by an engineering firm acceptable to Church Loans certifying that
the property is free and clear of any environmental problems and that the
property is in compliance with all current laws and regulations regarding
such environmental assessment.
15. That the Borrower require the contractor to furnish to Church Loans an
original policy providing builder's risk coverage in an amount not less than
the amount of this loan. Church Loans is to be listed as mortgagee. An
original copy of the policy evidencing such coverage must be furnished prior
to funding.
16. That the Borrower furnish to Church Loans an original copy of an
insurance policy providing fire & extended coverage on the Borrower's
property in an amount not less than the amount of this loan. Church Loans is
to be listed as mortgagee. The original policy evidencing such coverage must
be furnished prior to funding.
17. That the Borrower secure a fixed-price contract for the new construction
in an amount not to exceed $3,100,000. No changes or modifications will be
made to this contract without the expressed written consent of Church Loans.
18. Notwithstanding the above, if regulatory approval of the bond offering
requires changes in the bond offering, bond offering procedures, prospectus,
interim loan, repayment of the interim loan or otherwise, which such changes
materially effect the interim loan, the method and time of repayment of the
interim loan or the likelihood of repayment of the interim loan, in the sole
judgment of Church Loans, then Church Loans may, at its option, revoke this
commitment without liability for same.
19. You also should be aware that once all of our requirements and the
requirements of our legal counsel are met for the closing of the loan, we
must have three business days to deliver the funds to the closing agent.
Once all closing requirements have been met, our legal counsel will notify
our office and the actual closing can be scheduled in accordance with the
above-mentioned time requirements.
4
<PAGE>
Senior Retirement Communities, Inc., Bossier City, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
March 10, 1998
The acceptance of this commitment must be indicated by the Borrower's signing
and returning the original copy of this commitment letter within fifteen (15)
days from the date hereof. The acceptance of this commitment will be the
Borrower's authorization for Church Loans to withhold from the proceeds of
any loan any premiums for the purchase of title insurance, appraisal costs
and other closing costs which are to be paid which are associated with the
loan. This commitment is conditioned upon the loan being closed on or
before May 10, 1998. Any extension of this commitment will be subject to
terms which may be mutually agreed upon at the time of extension.
We look forward to working with you in connection with this transaction.
Sincerely yours,
/S/KELLY ARCHER
Kelly Archer
Manager of Operations
KA/ja
The above commitment has been agreed to and accepted by the undersigned
Officers of the Senior Retirement Communities, Inc., Bossier City, LA.
Date: 3-20-98
-----------
attest: Senior Retirement Communities, Inc.
- --------------------------------------------------------------
/S/Diana M. Caldwell by: /S/Joanne M Caldwell Bayles-Pres
- --------------------------------------------------------------
Secretary
- --------------------------------------------------------------
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
(A Real Estate Investment Trust)
June 1, 1998
Senior Retirement Communities, Inc.
Attn: Joanne Caldwell-Bayles
507 Trenton St
West Monroe, LA 71291
Re: Bossier City, LA Project
Dear Mrs. Caldwell-Bayles:
Reference is made to the commitment made by Church Loans & Investments Trust
("Church Loans") to Senior Retirement Communities FBO: Bossier City, LA
("Borrower") dated March 10, 1998. This will serve as an addendum to that
original commitment.
The addendum is as follows:
1. That should the proceeds from the sale of the bonds through MMR Investment
Bankers ("MMR") and other participating broker/dealers, after the payment of
the expenses associated with the bond offering, be insufficient to pay the
unpaid principal and interest upon the loan committed herein at its maturity,
at the option of the Borrower the term of said loan shall be renewed and
extended by Church Loans as follows:
(a) The term of the loan shall be initially renewed and extended for
an additional period of one (1) year upon the following terms and conditions:
(1) The Borrower shall be current upon all of its outstanding debt
obligations, to include, but not necessarily restricted to all sinking fund
payments payable to the trustee in connection with the bonds to be offered
through MMR and other participating broker/dealers, and all interest payments
upon the loan to be made by Church Loans to the Borrower under the terms of
this commitment.
5305 I-40 West PO Box 8203 Amarillo, TX 79114-8203
(806)358-3666 (800)692-1111 Fax (806)358-1430
<PAGE>
Senior Retirement Communities
Attn: Joanne Caldwell-Bayles
West Monroe, LA
June 1, 1998
Page 2
(2) The amount of the loan to be renewed and extended shall be the
lesser of (i) the unpaid principal upon the loan committed herein at maturity,
or (ii) the unpaid principal amount of all unsold bonds offered through MMR
and other participating broker/dealers described above. Any principal amount
of the loan in excess of the amount of the unsold bonds must be paid in full
by Borrower.
(3) The interest rate upon the loan shall be at a variable rate
equal to 2% per annum in excess of the "Prime Rate" of interest published by
the Wall Street Journal under the heading "Money Rates".
(4) The interest upon the unpaid principal balance of the loan
shall be payable monthly.
(5) The principal upon the loan shall be paid on or before one year
from date.
(6) The Borrower shall pay Church Loans a loan extension fee equal
to 2% (2 points) of the principal amount of the loan.
(7) The total amount of the loan extended and the sold bonds shall
not exceed 66 2/3% of the appraised market value of the collateral.
(b) If on the maturity of the one year extension, April 24, 2000, should
the proceeds from the sale of the bonds to be offered by the Borrower through
MMR and other participating broker/dealers be insufficient to pay the unpaid
principal and interest upon the loan, then, at the option of the Borrower, the
principal amount of the loan extended in regard to the Bossier City issue,
shall be renewed and extended by Church Loans into a permanent loan upon the
following terms and conditions:
(1) The Borrower shall be current upon all of its outstanding debt
obligations, to include, but not necessarily restricted to all sinking fund
payments payable to the trustee in connection with the bonds to be offered
through MMR and other participating broker/dealers, and all interest payments
upon the loan to be made by Church Loans to the Borrower under the terms of
this commitment.
<PAGE>
Senior Retirement Communities
Attn: Joanne Caldwell-Bayles
West Monroe, LA
June 1, 1998
Page 3
(2) The permanent loan shall bear interest at the same rate as
described in paragraph (a) (3) above.
(3) The amount of the permanent loan shall be payable in equal, or
as equal as possible due to the variable rate of interest on the loan, monthly
installments of principal and interest over a period of thirteen years with
the right of the Borrower to prepay the loan at any time without penalty.
(4) The Borrower shall pay to Church Loans an additional loan
renewal fee equal to 5% (5 points) of the principal amount of the permanent
loan.
(5) The loan shall continue to the secured on an equal basis with
the outstanding bonds to be issued by the Borrower through MMR and other
participating broker/dealers upon all property to be given by the Borrower to
secure the loan committed herein.
(6) The total amount of the loan and sold bonds shall not exceed
66 2/3% of the appraised market value of the property.
(c) Until such time as the loans committed herein are paid in full, the
Borrower shall not further encumber the property securing the payment of said
loans, either by placing additional mortgages or deeds of trust upon said
property, or by increasing the indebtedness of the Borrower under any Trust
Indenture, mortgage or deed of trust or other security documents associated
with the sale of bonds secured by said property. Should the Borrower
additionally encumber the property securing the loans committed hereby prior
to their payment in full, Church Loans shall have the right to declare the
unpaid principal and interest upon said loans immediately due and payable
upon thirty days notice to the Borrower.
<PAGE>
Senior Retirement Communities
Attn: Joanne Caldwell-Bayles
West Monroe, LA
June 1, 1998
Page 4
The acceptance of this addendum must be indicated by the Borrower's signing
and returning the original copy of this letter within fifteen (15) days from
the date hereof.
Sincerely Yours,
/S/KELLY ARCHER
Kelly Archer
Manager of Operations
The above addendum has been agreed to and accepted by the undersigned Officers
of the Senior Retirement Communities, Inc., Bossier City, LA.
Date: 6-3-98
------------
/S/Tonya L Hamilton SENIOR RETIREMENT COMMUNITIES, INC.
------------------------------- --------------------------------------
WITNESS
/S/Randy Ratcliff /S/Joanne Caldwell-Bayles
------------------------------- --------------------------------------
WITNESS
CHURCH LOANS & INVESTMENTS TRUST
A Real Estate Investment Trust
March 10, 1998
Senior Retirement Communities, Inc., Shreveport, LA
C/O The Arbor Group, L.L.C.
507 Trenton St
West Monroe, LA 71291
Re:$1,225,000 Interim Loan
Gentlemen:
This will constitute the commitment of Church Loans & Investments Trust
("Church Loans") to loan to Senior Retirement Communities, Inc., Shreveport,
LA ("Borrower") the sum of $1,225,000, or any amount less than that amount as
the Borrower may need less any title insurance, appraisal costs, mortgage
registration tax and all other closing costs and expense that may be
incurred by Church Loans in connection with the funding and collection of the
loan.
The loan is to be made pending the offering of bonds by the Borrower through
MMR Investment Bankers ("MMR") as provided hereinafter.
The loan will be for a term of one year and will bear interest on the unpaid
principal at a variable rate which would be equal to 2% per annum in excess
of the "Prime Rate" of interest as published by the Wall Street Journal under
the heading "Money Rates". The minimum rate of interest will not be less
than the initial rate of interest. Interest shall be paid monthly upon the
first day of each month during the term of the loan. Both principal and any
unpaid interest on the loan will be due at maturity.
Funds advanced upon this loan will be used to construct the facility commonly
referred to as Senior Retirement Communities, Inc., Shreveport, LA to be
located on the southeast corner of the intersection of Lot 4 of the Orleans
Square subdivision East Kings Highway containint 3.496 Acres. /S/JMC
5303 I-40 West PO Box 8203 Amarillo, TX 79114-8203
(806)358-3666 (800)692-1111 Fax (8O6)358-1430
<PAGE>
Senior Retirement Communities, Inc., Shreveport, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
March 10, 1998
This commitment shall be subject to the following conditions:
1. That the Borrower pay to Church Loans, in addition to the interest on
the loan as described above, a commitment fee equal to 2.5% (two and one-half
percent) of the principal amount of the funds to be advanced to the Borrower
under the terms of this commitment. One-half of the total commitment fee
(ie. $15,312.50) shall be remitted with this signed commitment letter.
Although such commitment fee is due and payable upon the Borrower's
acceptance and execution of this commitment letter, as a convenience to the
Borrower, Church Loans will allow the balance of the commitment fee to be
paid at closing from the proceeds of the loan. However, in the event that
you decide not to proceed to close this loan for any reason, the balance of
the commitment fee is due and owing by you to Church Loans and the amount
already paid is non-refundable. Such fee is not interest, but is paid and
payable to Church Loans to induce Church Loans to enter into this loan
commitment and to compensate Church Loans for making available the funds
necessary to fund the entire amount of the committed loan whether or not such
amount is advanced.
2. That the Borrower pay in advance the sum of $250.00 which is the title
insurance cancellation fee in the event the Borrower decides not to accept
the commitment after title work has begun. Upon closing, this fee will be
used to offset other closing expenses. This sum should be remitted with this
signed commitment letter. The closing of your loan will normally be enhanced
if our law firm orders the title insurance from title companies that have had
experience in dealing with our closings. If possible, we would recommend that
you allow our legal counsel to place the order for the title insurance. Our
legal counsel will order the title insurance as soon as they have a correct
legal description for the property.
3. That upon acceptance of this commitment the Borrower shall deposit with
Church Loans the additional sum of $2,500.00 which are the legal fees to be
incurred by Church Loans in connection with the loan. This amount should be
remitted with this commitment letter.
4. That the loan shall be secured by a first mortgage lien and security
interest upon all the Borrower's real estate, buildings and facilities, both
existing and to be constructed with the proceeds of this loan. Such property
shall be subject to no prior liens or encumbrances.
5. That the loan will be made pursuant to a loan agreement entered into by
the Borrower and Church Loans consistent with the terms of this commitment
and such other normal covenants of the Church Loans' basic loan agreement.
2
<PAGE>
Senior Retirement Communities, Inc., Shreveport, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
March 10, 1998
6. That a mortgage title insurance policy in the face amount of not less
than the total amount of the loan be issued by a title insurance company
acceptable to Church Loans, insuring the fact that Church Loans is the owner
and holder of a good and valid first lien mortgage upon the real estate
securing the loan as described in paragraph 4 above.
7. That the total loan will not exceed 66 2/3% of the total appraised value
of the real estate given to secure the loan. Such appraisal will be
completed by an appraiser acceptable to Church Loans and must (a) be a
FIRREA-conforming appraisal and (b) be certified to comply with the standards
of Church Loans and be submitted for approval prior to advancement of any
funds. Such appraisal shall be rendered by an appraiser who, among other
things, shall have: (a) appraised the real estate at not more than the fair
market value thereof; (b) appraised the value of the improvements on the
real estate at not more than the depreciated cost thereof; and (c)
considered in making such appraisal the likelihood of deterioration of the
neighborhood in which the real estate and improvements are located. The
qualifications of the appraiser and references, preferably banks and
insurance companies, should be submitted with the appraisal.
8. That the Borrower enter into a bond offering agreement with MMR under
the terms of which MMR shall assist the Borrower in the offering upon a best
efforts basis bonds of the Borrower in an amount not less than $1,845,000 of
which the first proceeds after the payment of the expenses of the offering
shall be used to retire this loan. It is further agreed an additional amount
not to exceed $100,000 may be placed in a so-called sinking fund reserve
prior to the repayment of this loan. The effective date of this bond
offering shall be not more than 90 days after the date of the note securing
this loan. Effective date is the date the bonds are first offered for sale.
9. That the loan be closed on or before sixty days from the date hereof.
10. That the promissory note evidencing the loan be guaranteed by the
Forsythe Group, Inc. so that $500,000 of the total amount of the loan is
guaranteed upon guaranty forms furnished by Church Loans.
11. That during the term of the loan the Borrower shall agree to
periodically supply Church Loans with financial statements and reports as
requested by Church Loans.
12. That Church Loans must review and approve all legal documents prior to
closing.
3
<PAGE>
Senior Retirement Communities, Inc., Shreveport, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
March 10, 1998
13. That a representative of Church Loans conduct two on-site inspections
during the construction phase of the property to be given by the Borrower to
secure the loan. The expense of these inspections shall be borne by the
Borrower.
14. That a Phase One environmental site assessment will be completed prior
to closing by an engineering firm acceptable to Church Loans certifying that
the property is free and clear of any environmental problems and that the
property is in compliance with all current laws and regulations regarding
such environmental assessment.
15. That the Borrower require the contractor to furnish to Church Loans an
original policy providing builder's risk coverage in an amount not less than
the amount of this loan. Church Loans is to be listed as mortgagee. An
original copy of the policy evidencing such coverage must be furnished prior
to funding.
16. That the Borrower furnish to Church Loans an original copy of an
insurance policy providing fire & extended coverage on the Borrower's
property in an amount not less than the amount of this loan. Church Loans is
to be listed as mortgagee. The original policy evidencing such coverage must
be furnished prior to funding.
17. That the Borrower secure a fixed-price contract for the new construction
in an amount not to exceed $1,400,000. No changes or modifications will be
made to this contract without the expressed written consent of Church Loans.
18. Notwithstanding the above, if regulatory approval of the bond offering
requires changes in the bond offering, bond offering procedures, prospectus,
interim loan, repayment of the interim loan or otherwise, which such changes
materially effect the interim loan, the method and time of repayment of the
interim loan or the likelihood of repayment of the interim loan, in the sole
judgment of Church Loans, then Church Loans may, at its option, revoke this
commitment without liability for same.
19. You also should be aware that once all of our requirements and the
requirements of our legal counsel are met for the closing of the loan, we
must have three business days to deliver the funds to the closing agent. Once
all closing requirements have been met, our legal counsel will notify our
office and the actual closing can be scheduled in accordance with the
above-mentioned time requirements.
4
<PAGE>
Senior Retirement Communities, Inc., Shreveport, LA
C/O The Arbor Group, L.L.C.
West Monroe, LA
March 10, 1998
The acceptance of this commitment must be indicated by the Borrower's signing
and returning the original copy of this commitment letter within fifteen (15)
days from the date hereof. The acceptance of this commitment will be the
Borrower's authorization for Church Loans to withhold from the proceeds of
any loan any premiums for the purchase of title insurance, appraisal costs
and other closing costs which are to be paid which are associated with the
loan. This commitment is conditioned upon the loan being closed on or
before May 10, 1998. Any extension of this commitment will be subject to
terms which may be mutually agreed upon at the time of extension.
We look forward to working with you in connection with this transaction.
Sincerely yours,
/S/KELLY ARCHER
Kelly Archer
Manager of Operations
KA/ja
The above commitment has been agreed to and accepted by the undersigned
Officers of the Senior Retirement Communities, Inc., Shreveport, LA.
Date: 3-20-98
--------------
Attest: Senior Retirement Communities, Inc.
- ---------------------------------------------------------------------
\S\Diana M Caldwell by \S\Joanne M Caldwell Bayles-President
- ---------------------------------------------------------------------
Secretary
- ---------------------------------------------------------------------
5
<PAGE>
CHURCH LOANS & INVESTMENTS TRUST
(A Real Estate Investment Trust)
June 1, 1998
Senior Retirement Communities, Inc.
Attn: Joanne Caldwell-Bayles
507 Trenton St
West Monroe, LA 71291
Re: Shreveport, LA Project
Dear Mrs. Caldwell-Bayles:
Reference is made to the commitment made by Church Loans & Investments Trust
("Church Loans") to Senior Retirement Communities FBO: Shreveport, LA
("Borrower") dated March 10, 1998. This will serve as an addendum to that
original commitment.
The addendum is as follows:
1. That should the proceeds from the sale of the bonds through MMR
Investment Bankers ("MMR") and other participating broker/dealers, after the
payment of the expenses associated with the bond offering, be insufficient to
pay the unpaid principal and interest upon the loan committed herein at its
maturity, at the option of the Borrower the term of said loan shall be
renewed and extended by Church Loans as follows:
(a) The term of the loan shall be initially renewed and extended for
an additional period of one (1) year upon the following terms and conditions:
(1) The Borrower shall be current upon all of its outstanding debt
obligations, to include, but not necessarily restricted to all sinking fund
payments payable to the trustee in connection with the bonds to be offered
through MMR and other participating broker/dealers, and all interest payments
upon the loan to be made by Church Loans to the Borrower under the terms of
this commitment.
5305 I-40 West PO Box 8203 Amarillo, TX 79114-8203
(806)358-3666 (800)692-1111 Fax (806)358-1430
<PAGE>
Senior Retirement Communities
Attn: Joanne Caldwell-Bayles
West Monroe, LA
June 1, 1998
Page 2
(2) The amount of the loan to be renewed and extended shall be the
lesser of (i) the unpaid principal upon the loan committed herein at maturity,
or (ii) the unpaid principal amount of all unsold bonds offered through MMR
and other participating broker/dealers described above. Any principal amount
of the loan in excess of the amount of the unsold bonds must be paid in full
by Borrower.
(3) The interest rate upon the loan shall be at a variable rate
equal to 2% per annum in excess of the "Prime Rate" of interest published by
the Wall Street Journal under the heading "Money Rates".
(4) The interest upon the unpaid principal balance of the loan
shall be payable monthly.
(5) The principal upon the loan shall be paid on or before one
year from date.
(6) The Borrower shall pay Church Loans a loan extension fee equal
to 2% (2 points) of the principal amount of the loan.
(7) The total amount of the loan extended and the sold bonds shall
not exceed 66 2/3% of the appraised market value of the collateral.
(b) If on the maturity of the one year extension, April 24, 2000, should
the proceeds from the sale of the bonds to be offered by the Borrower through
MMR and other participating broker/dealers be insufficient to pay the unpaid
principal and interest upon the loan, then, at the option of the Borrower, the
principal amount of the loan extended in regard to the Shreveport issue, shall
be renewed and extended by Church Loans into a permanent loan upon the
following terms and conditions.
(1) The Borrower shall be current upon all of its outstanding debt
obligations, to include, but not necessarily restricted to all sinking fund
payments payable to the trustee in connection with the bonds to be offered
through MMR and other participating broker/dealers, and all interest payments
upon the loan to be made by Church Loans to the Borrower under the terms of
this commitment.
<PAGE>
Senior Retirement Communities
Attn: Joanne Caldwell-Bayles
West Monroe, LA
June 1, 1998
Page 3
(2) The permanent loan shall bear interest at the same rate as
described in paragraph (a) (3) above.
(3) The amount of the permanent loan shall be payable in equal, or
as equal as possible due to the variable rate of interest on the loan, monthly
installments of principal and interest over a period of thirteen years with
the right of the Borrower to prepay the loan at any time without penalty.
(4) The Borrower shall pay to Church Loans an additional loan
renewal fee equal to 5% (5 points) of the principal amount of the permanent
loan.
(5) The loan shall continue to the secured on an equal basis with
the outstanding bonds to be issued by the Borrower through MMR and other
participating broker/dealers upon all property to be given by the Borrower
to secure the loan committed herein.
(6) The total amount of the loan and sold bonds shall not exceed
66 2/3% of the appraised market value of the property,
(c) Until such time as the loans committed herein are paid in full, the
Borrower shall not further encumber the property securing the payment of said
loans, either by placing additional mortgages or deeds of trust upon said
property, or by increasing the indebtedness of the Borrower under any Trust
Indenture, mortgage or deed of trust or other security documents associated
with the sale of bonds secured by said property. Should the Borrower
additionally encumber the property securing the loans committed hereby prior
to their payment in full, Church Loans shall have the right to declare the
unpaid principal and interest upon said loans immediately due and payable
upon thirty days notice to the Borrower.
<PAGE>
Senior Retirement Communities
Attn: Joanne Caldwell-Bayles
West Monroe, LA
June 1, 1998
Page 4
The acceptance of this addendum must be indicated by the Borrower's signing
and returning the original copy of this letter within fifteen (15) days from
the date hereof.
Sincerely yours,
/S/KELLY ARCHER
Kelly Archer
Manager of Operations
The above addendum has been agreed to and accepted by the undersigned Officers
of the Senior Retirement Communities, Inc., Shreveport, LA.
Date: 6-3-98
------------
/S/Tonya L Hamilton SENIOR RETIREMENT COMMUNITIES, INC.
------------------------------- --------------------------------------
WITNESS
/S/Randy Ratcliff /S/Joanne Caldwell-Bayles
------------------------------- --------------------------------------
WITNESS
<PAGE>
