AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 16, 1996.
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
TRANSEASTERN PROPERTIES, INC.
----------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
FLORIDA 1531 59-2745379
- -------------------------------- ---------------------------- ---------------------
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
ncorporation or organization) Classification Code Number) Identification Number)
</TABLE>
3300 UNIVERSITY DRIVE
SUITE 001
CORAL SPRINGS, FLORIDA 33065
TELEPHONE (954) 346-9700
--------------------------
(Address, including Zip Code, and telephone
number, including area code, of registrant's
principal executive offices)
ARTHUR FALCONE
PRESIDENT AND CHAIRMAN OF THE BOARD
TRANSEASTERN PROPERTIES, INC.
3300 UNIVERSITY DRIVE
SUITE 001
CORAL SPRINGS, FLORIDA 33065
TELEPHONE (954) 346-9700
--------------
(Name, address, including Zip Code,
and telephone number,
including area code, of agent for service)
Please send copies of all communications to:
STEVEN D. RUBIN, ESQ.
CARL D. ROSTON, ESQ. BRIAN J. MCCARTHY, ESQ.
STEARNS WEAVER MILLER WEISSLER SKADDEN, ARPS, SLATE, MEAGHER & FLOM
ALHADEFF & SITTERSON, P.A. 300 S. GRAND AVENUE
150 WEST FLAGLER STREET 34TH FLOOR
SUITE 2200 LOS ANGELES, CALIFORNIA 90071
MIAMI, FLORIDA 33130 (213) 687-5000
(305) 789-3200
Approximate date of commencement of proposed sale to the public: AS
SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box [ ] .
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering [ ].
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same Offering [ ].
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box [ ].
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.01 per share................. $31,625,000 $10,906
=====================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
(2) Includes shares of Common Stock which may be purchased by the Underwriters.
pursuant to an over-allotment option.
--------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
TRANSEASTERN PROPERTIES, INC.
Cross-Reference Sheet Pursuant to Item 501(b) of Regulation S-K showing
the location in the Prospectus of the Responses to the Items of Part I of Form
S-1.
<TABLE>
<CAPTION>
FORM S-1
ITEM NO. ITEM CAPTION LOCATION IN PROSPECTUS
- -------- ------------ ----------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front Forepart of the Registration Statement and
Cover Page of Prospectus................................ Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover Pages
Prospectus.............................................. of Prospectus
3. Summary Information, Risk Factors and Ratio of Earnings Prospectus Summary; Risk Factors
to Fixed Charges........................................
4. Use of Proceeds......................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price......................... Outside Front Cover Page; Underwriting
6. Dilution................................................ Risk Factors; Dilution
7. Selling Security Holders................................ Principal and Selling Shareholders
8. Plan of Distribution.................................... Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered.............. Outside Front Cover Page; Prospectus Summary;
Capitalization; Description of Capital Stock
10. Interests of Named Experts and Counsel.................. Legal Matters; Experts
11. Information with Respect to the Registrant.............. Prospectus Summary; Risk Factors; The
Company; Capitalization; Selected Financial
Data; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Principal and
Selling Shareholders; Management; Certain
Relationships and Related Transactions;
Description of Capital Stock; Shares Eligible
for Future Sale; Underwriting; Financial
Statements
12. Disclosure of Commission Position on Indemnification....
Securities Act Liabilities.............................. Not Applicable
</TABLE>
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 16, 1996
2,500,000 SHARES
[LOGO] TRANSEASTERN PROPERTIES, INC.
COMMON STOCK
----------
Of the 2,500,000 shares of common stock, par value $.01 per share (the
"Common Stock"), offered hereby (the "Offering"), 2,250,000 shares are being
offered by Transeastern Properties, Inc., a Florida corporation ("Transeastern"
or the "Company"), and 250,000 shares are being offered by certain of the
Selling Shareholders (as defined herein). The Company will not receive any of
the proceeds from the sale of the shares by the Selling Shareholders. See
"Principal and Selling Shareholders."
Prior to the Offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price for the
Common Stock will be between $9.00 and $11.00 per share. See "Underwriting" for
a discussion of the factors considered in determining the initial public
offering price of the Common Stock.
The Company intends to apply for quotation of the Common Stock on the
Nasdaq Stock Market's National Market under the symbol "TEPI."
SEE "RISK FACTORS," BEGINNING AT PAGE 6 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=======================================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE.............................. $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------
TOTAL(3)............................... $ $ $ $
=======================================================================================================================
<FN>
(1) The Company and the Selling Shareholders have agreed to indemnify the Underwriters (as defined herein) against certain
liabilities, including certain liabilities under the Securities Act of 1933, as amended. Excludes the value of the
Representative's Warrants (as defined herein) to purchase up to 250,000 shares of Common Stock issued to Cruttenden Roth
Incorporated, as Representative (as defined herein) of the several Underwriters. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $___________, including the Representative's
non-accountable expense allowance and including the Selling Shareholders' expenses of $____________ to be paid by the
Company. See "Underwriting."
(3) The Company and certain Selling Shareholders have granted the Underwriters an option exercisable within 30 days after the
date of this Prospectus to purchase up to an additional 375,000 shares of Common Stock, on the terms set forth above solely
to cover over-allotments, if any. If such option is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to Selling Shareholders will be $______, $______, $______ and
$__________, respectively. See "Underwriting."
</FN>
</TABLE>
----------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offers and to reject orders in whole or in part. Delivery of the
shares is expected against payment therefor on or about ___________, 1996, at
the offices of Cruttenden Roth Incorporated, Irvine, California or through the
facilities of the Depository Trust Company.
CRUTTENDEN ROTH
INCORPORATED
The date of this Prospectus is _______________, 1996
<PAGE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-2-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus. Unless
otherwise indicated, all information in this Prospectus (i) assumes the
Underwriters' over-allotment option is not exercised, (ii) assumes an initial
public offering price of $10.00 per share (which is the midpoint of the
estimated range of the initial public offering price), (iii) reflects an
8.2-for-1 stock split effected on August 15, 1996, (iv) assumes the redemption
of all 1,819 shares of the Company's issued and outstanding Series A Preferred
Stock and all 33,202 shares of the Company's issued and outstanding Series B
Preferred Stock upon consummation of the Offering, (v) assumes the exercise of
all of the 1,258,782 Warrants to purchase Common Stock of the Company
outstanding at June 30, 1996 ("Warrants"), (vi) assumes no exercise of any of
the Representative's Warrants issued in connection with the Offering, (vii)
assumes no exercise of any options granted under the Company's 1996 Long-Term
Stock Plan (the "1996 Stock Plan") and (viii) does not include warrants to
purchase shares of Common Stock (the "Contingent Warrants"), which Contingent
Warrants are issuable in the event certain targeted Common Stock share prices
are not achieved in the Offering (see "Capitalization"). See "Underwriting,"
"Management - 1996 Stock Plan," and "Description of Capital Stock-Contingent
Warrants." Investors should carefully consider the information set forth under
the heading "Risk Factors."
THE COMPANY
Transeastern is a diversified real estate company engaged primarily in
the acquisition of land and the construction and sale of quality, single-family
and multi-family homes for the move-up and senior home-buying markets in the
State of Florida. The Company utilizes standardized methodologies and a
systematic approach to the operation of its business. This process begins with
Transeastern's disciplined approach to the acquisition of parcels of land
through a rigorous evaluation of each parcel to determine whether it satisfies
the Company's quantitative and qualitative acquisition criteria. This process
continues with the construction of homes in a variety of designs with
standardized option packages in order to cost-effectively build homes of
superior value. This process culminates with the utilization of innovative
marketing and sales programs and procedures.
Transeastern believes that its disciplined approach coupled with its
emphasis on customer satisfaction, quality, value and pride in workmanship are
largely responsible for its growth. The Company experienced a ten-fold increase
in revenues over the past four years, and has become the fourth largest
homebuilder in South Florida and one of the 100 largest homebuilders in the
United States in terms of the number and dollar volume of home closings. The
Company's objective is to become a more broadly-diversified real estate company
achieving long-term, stable growth with measured risk. The Company employs the
following five strategies in furtherance of this objective: (i) to aggressively
target the move-up and senior home-buying markets, by constructing and selling
quality homes of superior value on distinctive niche properties in growth
markets, primarily featuring waterfront and golf course living and other upscale
recreational amenities; (ii) to strategically acquire land which is well-suited
for the construction and sale of the Company's homes, and which may also include
parcels considered favorable for short-term, profitable resale to other
builders; (iii) to develop multi-family housing, primarily for sale to
institutional investors; (iv) to develop strategic alliances with leading real
estate and institutional investors to further the Company's ability to
opportunistically acquire and finance distinctive niche properties in growth
markets, primarily for single-family home development by the Company; and (v) to
develop ancillary business activities which traditionally complement
single-family home development businesses.
The Company has experienced significant growth in revenues during the
past four consecutive years. Revenues increased by 1,788% during the fiscal year
ended June 30, 1996 to $105.7 million as compared to $5.6 million in fiscal year
1992. The Company's pre-tax income increased from $146,000 in 1992 to $8.1
million in 1996. The Company's net income before income taxes and extraordinary
gain in 1996 of $8.1 million increased by 741% from $963,000 in 1995. The number
of homes closed increased from 25 in 1992 to 375 in 1996.
The Company was incorporated in 1986 as a Florida corporation. The
Company's executive offices are located at 3300 University Drive, Suite 001,
Coral Springs, Florida 33065 and its telephone number at that address is (954)
346-9700.
-3-
<PAGE>
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Common Stock being offered:
By the Company......................... 2,250,000 shares
By the Selling Shareholders............ 250,000 shares
Total.................................. 2,500,000 shares
Common Stock outstanding immediately
prior to the Offering(1)...................... 7,525,419 shares
Common Stock to be outstanding
immediately after the Offering(1)............. 9,775,419 shares
Use of Proceeds................................. The redemption of all issued and outstanding Series A
Preferred Stock and Series B Preferred Stock, the
purchase of minority interests in the Company's joint
ventures and limited partnerships, the repayment of
existing indebtedness (including indebtedness to certain
affiliates), working capital and general corporate
purposes.
Proposed Nasdaq National Market Symbol.......... "TEPI"
<FN>
- -----------------------------
(1) Does not include an aggregate of up to 375,000 shares of Common Stock reserved for issuance upon
exercise of stock options which will be outstanding upon consummation of the Offering under the
Company's 1996 Stock Plan. See "Management - Executive Compensation."
</FN>
</TABLE>
-4-
<PAGE>
SUMMARY FINANCIAL DATA
The Summary Financial Data presented below are derived from the
Consolidated Financial Statements of the Company and are qualified in their
entirety by, and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
------------------------------------------------------------
1994 1995 1996
---------- ---------- ---------------------------
PRO FORMA AS
ADJUSTED FOR
ACTUAL OFFERING
---------- ------------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues $ 22,595 $ 38,889 $ 105,673 $ 105,673
Expenses 21,019 37,926 96,732 96,732
Minority interest in income of consolidated
subsidiaries -- -- (865) (865)
Net income before income taxes
and extraordinary gain 1,577 963 8,076 8,076
Income tax expense 493 374 3,075 3,075
----------- ----------- ---------- ----------
Net income before extraordinary gain 1,084 589 5,001 5,001
Extraordinary gain from early
extinguishment of debt,
net of income taxes -- 700 -- --
----------- ----------- ---------- ----------
Net income 1,084 1,289 5,001 5,001
Dividends on redeemable preferred stock [352] [271] [411] [411]
Excess of the carrying amount of
redeemable preferred stock over the
amount allocated upon repurchase 1,712
----------- ----------- ---------- ----------
Net income available for common shares $ 732 $ 2,730 $ 4,590 $ 4,590
=========== =========== ========== ==========
Net income per common and common
equivalent share:
Net income before extraordinary gain $ . 08 $ .25 $ .61 $ .51
----------- ----------- ---------- ----------
Extraordinary gain -- .09 -- --
Net income $ .08 $ .34 $ .61 $ .51
=========== =========== ========== ==========
Weighted average number of common stock
and common stock equivalents
outstanding 8,841,128 8,228,341 7,548,443 9,798,443
=========== =========== ========== ==========
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents $ 470 $ 630 $ 3,769 $ 5,769
Total assets 28,670 36,352 92,703 97,178
Total liabilities 25,754 29,685 74,578 64,793
Minority interest in consolidated
subsidiaries -- -- 3,739 1
Redeemable preferred stock 2,271 3,373 3,502 --
Shareholders' equity 645 3,294 10,884 31,185
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
------------------------------------------------------------
1994 1995 1996
---------- ---------- ---------------------------
PRO FORMA AS
ADJUSTED FOR
ACTUAL OFFERING
---------- ------------
<S> <C> <C> <C> <C>
OPERATING DATA:
Homes closed (units) 74 146 375 375
Average price of homes closed $ 260 $ 244 $ 203 $ 203
Number of projects owned at
period end 7 9 13 13
Net new orders (units) 162 190 385 385
Backlog (units) (at period end) 141 185 195 195
Sales value of backlog (at period
end) $ 38,181 $ 38,520 $ 45,663 $ 45,663
</TABLE>
-6-
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD
CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, TOGETHER WITH THE INFORMATION
SET FORTH IN THIS PROSPECTUS IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
MAKING AN INVESTMENT DECISION.
REAL ESTATE AND HOMEBUILDING INDUSTRIES AND ECONOMIC CONDITIONS
The real estate and homebuilding industries are cyclical and
significantly affected by national, regional and local economic conditions and
other conditions, many of which are beyond the Company's control. In particular,
the real estate and homebuilding industries are adversely affected by decreases
in employment levels, reductions in the availability of financing, increases in
interest rates, increases in inflation, decreases in consumer confidence and
decreases in housing demand. A variety of other risks are also inherent in the
real estate and homebuilding industries, including conditions of supply and
demand in local markets, the demand of institutional investors for multi-family
rental housing, illiquidity of homesite inventory, the risks inherent in holding
and developing land, the carrying costs associated with holding land and
homesite inventory, competitive overbuilding, decreases in the value of real
property, delays in construction schedules, cost overruns, increases in real
estate taxes and other local government fees, the availability and cost of land,
materials and qualified labor and the risks referenced below. Because of the
long-term financial commitment involved in purchasing a home, adverse economic
conditions as well as economic uncertainties tend to result in fewer home
purchases. Moreover, builders are subject to the risks associated with natural
disasters such as hurricanes and fires. Also, because a significant portion of
the Company's customer base is comprised of move-up buyers (i.e., a buyer
selling a less expensive existing home in order to purchase a more expensive
home) and senior buyers, adverse changes in the resale market for homes may have
a material adverse effect upon the Company. Adverse changes in the economy or
any of these other factors as well as economic uncertainties could have a
material adverse effect on the Company. The homebuilding and real estate
industries are also subject to the potential for significant variability and
fluctuations in real estate values. No assurance can be given that write-downs
to the net realizable value of some or all of the Company's assets will not
occur from time to time if market conditions deteriorate, or that such
write-downs, should they occur, will not have a material adverse effect on the
Company's results of operations and financial condition. See "Business - The
Economy and Housing and Real Estate Markets," "Business - Business Strategy,"
"Business - Summary of Residential Communities," "Business - Land Acquisition"
and "Business - Customer Financing and Title Services."
LEVERAGE AND FUTURE CAPITAL REQUIREMENTS
The homebuilding and real estate industries are capital intensive and
require significant expenditures for land purchases, land development and
housing construction. Primarily as a result of the capital intensive nature of
these industries, the Company has incurred significant indebtedness to finance
its operations. At June 30, 1996, on a pro forma basis after giving effect to
the Offering and the anticipated use of proceeds therefrom, the Company's total
liabilities would have been approximately $64.8 million and the Company's ratio
of indebtedness to net worth would have been approximately 2.1 to 1. The
Company's degree of leverage may limit its ability to withstand adverse economic
or business conditions. Additionally, the ability to make principal and interest
payments on the indebtedness will be dependent on future operations which may be
affected by financial, economic and other factors beyond the control of the
Company, and there can be no assurance that the current level of operations will
continue or that the Company will be able to make principal and interest
payments when due.
The Company believes, based on currently proposed plans and assumptions
relating to its operations that proceeds from the Offering, borrowings under its
existing credit facilities or borrowings under a proposed new revolving credit
facility of up to $75 million (the "Credit Facility") anticipated to be entered
into in connection with the Offering and internally generated funds will be
sufficient to satisfy the Company's cash requirements for at least 12 months
after the consummation of the Offering. However, there can be no
-7-
<PAGE>
assurance that the Company will be successful in closing the Credit Facility.
Additionally, the Company will need to seek additional financing or capital in
the future, whether to implement its growth strategy, to refinance its
indebtedness upon maturity or otherwise. Such capital may be raised by the
issuance of additional equity or the incurrence of indebtedness. The amount and
type of such additional financing or capital will be limited by the terms of the
Company's outstanding indebtedness at that time (whether limited by the terms of
the Company's proposed Credit Facility or other indebtedness). In addition, the
availability of borrowed funds, especially for land acquisition and construction
financing, has been reduced nationally, and lenders are requiring increased
amounts of equity to be invested in a project by the borrower in connection with
both new loans and the extension or refinancing of existing loans. There can be
no assurance that such additional financing or capital will be available on
terms satisfactory to the Company, if at all. If the Company is unable to obtain
sufficient additional capital or financing, it may be forced to adopt
alternative strategies that could materially and adversely effect its operations
and prospects, including, but not limited to, reducing or delaying capital
expenditures, reducing the size of its operations and selling assets. Certain of
the Company's indebtedness has historically been guaranteed by certain of its
shareholders and there can be no assurance that any such shareholders will
continue to guarantee the Company's indebtedness in the future.
The Company will also be subject to the risks associated with incurring
substantial indebtedness, including the risk that interest rates may fluctuate
and that cash flow may be insufficient to pay principal and interest on such
indebtedness. Additionally, the terms of such indebtedness will include
financial and other covenants with which the Company must remain in compliance
to avoid a default thereunder. See "Use of Proceeds," "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
MORTGAGE FINANCING AND INTEREST RATES
Almost all purchasers of the Company's homes finance their acquisitions
through third-party lenders providing mortgage financing. Housing demand is
generally adversely affected by increases in interest rates, decreases in the
availability of mortgage financing, increasing housing costs and unemployment.
If the availability of financing decreases or interest rates increase and the
ability of prospective buyers to finance home purchases is adversely affected,
the Company's operating results and financial condition may be negatively
impacted. The Company's homebuilding activities also are dependent upon the
availability and cost of mortgage financing for buyers of homes owned by
potential customers, permitting these potential customers to sell their existing
homes. Also, the Company believes that the availability of Federal Housing
Administration and Veterans Administration mortgage financing is an important
factor in marketing certain of its homes. Any limitation or restriction on the
availability of such financing could materially adversely affect the Company.
See "Business - The Economy and Housing and Real Estate Markets," "Business -
Business Strategy," "Business -Summary of Residential Communities," "Business -
Land Acquisition" and "Business - Customer Financing and Title Services."
VARIABILITY OF RESULTS
The Company historically has experienced, and expects to continue to
experience, variability in sales and revenues on a quarterly basis and from year
to year. Factors expected to contribute to this variability include, among
others, the Company's ability to acquire land on acceptable terms, the timing of
receipt of regulatory and other governmental approvals for the construction of
homes, the condition of the real estate market and economic conditions in the
Company's markets, the cyclical nature of the real estate and homebuilding
industries, prevailing interest rates, the availability of mortgage financing,
the cost and availability of materials and labor, the timing of home closings,
weather, competitive variables and the stage of development of the Company's
residential communities. The volume of the Company's new sales contracts and
home closings typically vary from quarter to quarter depending primarily on the
stages of development of its projects. In the early stages of a project's
development, the Company incurs significant start-up costs associated with,
among other things, project design, land acquisition and development,
construction and marketing expenses. Since revenues from sales of homes are
generally recognized only upon the transfer of title at the closing of a sale of
a home, there are no revenues during the early stages of a project, other than
from the sale of land
-8-
<PAGE>
parcels and residential homesites to other builders. Accordingly, the Company's
historical financial performance is not necessarily a meaningful indicator of
future results, and the Company expects its financial results to vary from
community to community and from time to time. See "Business - The Economy and
Housing and Real Estate Markets" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
COMPETITION
The real estate and homebuilding industries are highly competitive and
fragmented. Competitive overbuilding in certain local markets, among other
competitive factors, may materially adversely affect homebuilders in that
market. Homebuilders compete for financing, raw materials and skilled labor, as
well as for the sale of homes. Additionally, competition for prime properties is
intense and the acquisition of such properties may become more expensive in the
future to the extent demand and competition increase. Accordingly, there can be
no assurance that the Company will continue to realize gross profits from land
sales in the future. The Company competes both with other local, regional and
national real estate companies and homebuilders, often within larger
subdivisions designed, planned and developed by such competitors. The Company
also competes for sales with individual resales of existing housing and with
available rental housing. Many of the Company's competitors have longer
operating histories and greater financial, marketing, sales and other resources
than the Company. See "Business - Competition."
DEPENDENCE ON SOUTH FLORIDA MARKET AND EXPANSION INTO NEW MARKETS
To date, substantially all of the Company's homebuilding and real estate
activities have been conducted in markets within South Florida, principally in
Broward County and Palm Beach County, and it is likely that the Company's
activities will continue to be concentrated in South Florida in the near future.
Accordingly, the Company's business and earnings are likely to be dependent upon
economic, demographic and other conditions in South Florida and the Company's
ability to achieve growth in that market. The Company is, however, planning
homebuilding and real estate ventures in other areas of Florida where the
Company has not previously operated and is also considering expansion into other
growth markets outside of Florida. To the extent the Company expands into new
markets, it will need to employ personnel with knowledge of the new markets.
There can be no assurance that the Company will be able to employ the necessary
personnel or that it will be successful in its efforts to expand into other
areas of Florida or any other new markets. See "Business - Business Strategy."
GOVERNMENTAL REGULATION AND BUILDING MORATORIUMS
The Company and its competitors are subject to various federal, state
and local laws, ordinances and regulations concerning, among other things,
environmental matters, wetland preservation, health and safety, zoning, land use
and other entitlements, building design and density levels, which can, among
other things, limit the number of homes that may be built, result in substantial
compliance, mitigation and other costs, increase the cost of development and
construction, delay development and construction and otherwise have a material
adverse effect on the homebuilding industry in general. In developing a project
and building homes, the Company must also obtain the approval of numerous
governmental authorities regulating such matters as water and waste disposal,
the dedication of acreage for open space, parks, schools, and the construction
design, methods and materials used. Several governmental authorities have
imposed impact fees as a means of defraying the cost of providing certain
governmental services to developing areas, which fees have increased
significantly during recent years.
The Company may be subject to delays or may be precluded from developing
in certain communities because of building moratoriums or changes in statutes or
rules that could be imposed in the future. The State of Florida and various
counties, including Broward County and Palm Beach County, have and may continue
to declare moratoriums on the issuance of building permits and impose
restrictions in areas where the infrastructure (E.G., roads, schools, parks,
water and sewage treatment facilities and other public facilities) does not
reach minimum standards. In addition, as a result of Hurricane Andrew, Broward
County and Palm Beach County and other counties in Florida have recently enacted
new, more stringent building codes which have
-9-
<PAGE>
resulted in increased costs of construction. There can be no assurance that the
Company will be able to pass through its increased development and construction
costs to home buyers or that existing or new governmental regulations will not
have a material adverse effect on the business of the Company. See "Business -
Governmental Regulation and Environmental Matters."
EFFECT OF NATURAL DISASTERS; AVAILABILITY AND COST OF HOMEOWNERS' INSURANCE
The markets in which the Company operates are subject to the risks of
natural disasters. The State of Florida in particular may be affected by
tropical storms such as Hurricane Andrew which struck the southeast coast of
Florida on August 24, 1992, damaging or destroying thousands of homes and
business structures, primarily in southern Dade County, Florida. The occurrence
of tropical storms or other natural disasters could have a material adverse
effect on the Company's business including the incurrence of uninsured losses,
delays in construction, and shortages and increased costs of labor and building
materials. Additionally, primarily as a result of Hurricane Andrew, numerous
insurance carriers have opted either not to write homeowners' insurance in
Florida at all or to only renew existing policies and not to write new policies.
These practices have resulted in substantial increases in the cost of
homeowners' insurance, a widespread shortage of available private insurance for
homeowners in the State of Florida and the creation of a state joint
underwriting association. The state-provided insurance coverages generally
afford homeowners less protection than typically provided by private insurance
carriers at greater costs. The continued inability of homeowners to obtain cost
effective homeowners' insurance may have an adverse effect on demand for new
homes and, as a result, on the Company's homebuilding business.
CONCENTRATION OF OWNERSHIP
Immediately after consummation of the Offering, three existing
shareholders will own approximately 60.8% (58.0% if the Underwriters'
over-allotment option is exercised in full and these three existing shareholders
sell half of the shares sold in the over-allotment option) of the Company's
outstanding Common Stock. Accordingly, these three shareholders will have the
ability to elect the entire Board of Directors of the Company and to control the
outcome of all issues submitted to a vote of the shareholders of the Company.
Voting control by these shareholders may discourage certain types of
transactions involving an actual or potential change of control of the Company,
including transactions in which the holders of Common Stock might receive a
premium for their shares over prevailing market prices. See "Principal and
Selling Shareholders."
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a significant degree on the
efforts of the Company's principal executive officers. The Company's operations
may be adversely affected if one or more of the Company's current executive
officers cease to be employed by the Company. The Company has no employment
agreements with any of its employees. The Company's success is also dependent
upon its ability to attract and retain qualified personnel. The Company has
obtained key-person life insurance on the lives of Arthur Falcone, Edward
Falcone and Philip Cucci in the amount of $5 million, $4 million and $4 million,
respectively. See "Management."
DILUTION
Upon completion of the Offering, investors in the Offering will
experience immediate dilution in the per share net tangible book value of their
Common Stock of $6.81 from the assumed initial public offering price of $10.00
per share. See "Dilution."
ABSENCE OF PUBLIC MARKET AND VOLATILITY OF COMMON STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock. Although the Company intends to apply to have the Common Stock approved
for quotation on the Nasdaq National Market, there is no assurance that the
shares will be approved for quotation, that any trading market therefor will
develop, or,
-10-
<PAGE>
if any such market develops, that it will be sustained. Accordingly, purchasers
of the Common Stock may experience difficulty selling or otherwise disposing of
their shares. The initial public offering price of the Common Stock offered
hereby will be determined through negotiations among the Company, the Selling
Shareholders and the Representative and may not be indicative of the market
price for the Common Stock after the Offering. Moreover, the market price for
the Common Stock after completion of the Offering may be volatile and will be
affected by, among other things, the Company's performance, industry related
factors and general market conditions. See "Underwriting" for information
relating to the method of determining the initial public offering price of the
Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have a total of
9,775,419 shares of Common Stock outstanding. Of such 9,775,419 shares, the
2,500,000 shares of Common Stock being sold in the Offering (together with any
shares sold upon exercise of the Underwriters' over-allotment option) and shares
issued upon exercise of stock options will be immediately eligible for resale in
the public market without restriction, except for shares purchased by or issued
to any "affiliate" of the Company (within the meaning of the Securities Act of
1933, as amended (the "Securities Act")).
Of such outstanding shares, the remaining 7,275,419 shares will be
"restricted securities" (within the meaning of Rule 144 promulgated under the
Securities Act, in that they were issued by the Company in private transactions
not involving a public offering). The existing holders of these shares of Common
Stock and the Company's officers and directors have agreed not to sell or
otherwise dispose of any of their shares of Common Stock for a period of six
months from the date of the completion of the Offering without the prior written
consent of the Representative. Upon the expiration of such six-month period,
6,953,790 of such shares will be eligible for resale under Rule 144. Each of the
holders of Common Stock issued upon exercise of Warrants issued in connection
with the Series A Preferred Stock and the Series B Preferred Stock and each of
the purchasers of Common Stock in the Company's March, 1996 offering of Common
Stock have been granted registration rights with respect to an aggregate of
[________] shares of Common Stock. No prediction can be made as to the effect,
if any, that sales of shares of Common Stock or the availability of such shares
for sale will have on the market prices prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock (whether
now outstanding or issued in the future) may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and impair the
Company's ability to raise capital through the sale of its equity securities.
See "Shares Eligible for Future Sale" and "Certain Relationships and Related
Transactions."
POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS; PREFERRED STOCK
Certain provisions of the Company's Articles of Incorporation and
Bylaws, such as the Company's staggered board, the advance notice requirements
for the nomination of directors and limits on the ability of the shareholders to
call a special meeting, have anti-takeover effects and may delay, defer or
prevent a takeover of the Company. In addition, Florida has enacted legislation
that may deter or frustrate takeovers of Florida corporations. The Florida
Control Share Act generally provides that shares acquired in a "control share
acquisition" will not possess any voting rights unless such voting rights are
approved by a majority of the corporation's disinterested shareholders or
approved by resolution of the Board of Directors. A "control share acquisition"
is an acquisition, directly or indirectly, by any person or ownership of, or the
power to direct the exercise of voting power with respect to, issued and
outstanding, "control shares" of a publicly-held Florida corporation. "Control
shares" are shares, which, except for the Florida Control Share Act, would have
voting power that, when added to all other shares owned by a person or in
respect of which such person may exercise or direct the exercise of voting
power, would entitle such person, immediately after acquisition of such shares,
directly or indirectly, alone or as a part of a group, to exercise or direct the
exercise of voting power in the election of directors within any of the
following ranges: (a) at least 20% but less than 33-1/3% of all voting power;
(b) at least 33-1/3% but less than a majority of all voting power; or (c) a
majority or more of all voting power. See "Description of Capital Stock."
-11-
<PAGE>
The Company's Articles of Incorporation authorize the issuance of 20
million shares of "blank check" preferred stock (the "New Preferred Stock") with
such designations, rights and preferences as may be determined from time to time
by the Board of Directors. No shares of New Preferred Stock are outstanding as
of the date of this Prospectus. Accordingly, the Board of Directors is
empowered, without shareholder approval, to issue New Preferred Stock with
dividend, liquidation, conversion, voting or other rights that could materially
adversely affect the voting power or other rights of the holders of the
Company's Common Stock. In the event of issuance, New Preferred Stock could be
utilized, under certain circumstances, as a method of discouraging, delaying, or
preventing a change in control of the Company. Although the Company has no
present intention to issue any shares of New Preferred Stock, there can be no
assurance that the Company will not do so in the future. The application of any
such provisions or the issuance of New Preferred Stock could prevent
shareholders from realizing a premium upon the sale of their shares of Common
Stock. See "Description of Capital Stock."
CHANGES IN TAX LAWS
Recently, certain proposals have been made, generally in connection
with so-called flat tax proposals, that would eliminate or limit the
deductibility of mortgage interest for federal income tax purposes and would
eliminate or limit tax-free rollover treatment provided under current law where
proceeds of the sale of a principal home are reinvested in a new principal home.
Enactment of such proposals may have a material adverse effect on the
homebuilding industry in general, and on the Company in particular. There can be
no assurance that such proposals will not be enacted or, if enacted, what
particular form such laws would take.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of
2,250,000 shares of Common Stock by the Company in the Offering (after deducting
the estimated underwriting discounts and commissions and offering expenses) are
estimated to be approximately $20.3 million based on an assumed initial public
offering price of $10.00 per share (which is the midpoint of the estimated range
of the initial public offering price), and $21.7 million if the Underwriters'
over-allotment option is exercised in full (assuming that 40% of the shares
sold in the over-allotment option will be sold by the Company, with the
remaining 60% being sold by Selling Shareholders). The Company intends to use
approximately $3.5 million of the net proceeds of the Offering for the
redemption of all issued and outstanding Series A Preferred Stock and the Series
B Preferred Stock, approximately $7.4 million of the net proceeds for the
repayment of existing indebtedness to unaffiliated parties, approximately $2.4
million of the net proceeds for the repayment of existing indebtedness to
affiliates, approximately $3.0 million of the net proceeds to acquire the
remaining minority interests in the Company's joint ventures and limited
partnership and the remaining approximately $4.0 million for working capital and
general corporate purposes. Pending utilization of the funds, the funds will be
invested in short-term United States government securities and other financial
institutions, including, overnight repurchase agreements with financial
institutions. The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Shareholders.
DIVIDEND POLICY
The Company currently intends to retain any earnings to finance the
development and expansion of the Company's business and does not anticipate
paying any cash dividends in the foreseeable future. The declaration and payment
of dividends by the Company are subject to the discretion of the Board of
Directors of the Company. Any future determination to pay dividends will depend
on the Company's results of operations, financial condition, capital
requirements, contractual restrictions and other factors deemed relevant at the
time by the Board of Directors. The terms of the Credit Facility will restrict
the Company's ability to pay dividends. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
-12-
<PAGE>
CAPITALIZATION
The following table sets forth, at June 30, 1996 (i) the actual
capitalization of the Company and (ii) the capitalization of the Company as
adjusted to reflect the authorization of the New Preferred Stock, the redemption
of the Series A Preferred Stock and Series B Preferred Stock and the payment of
dividends thereon as described under "Dividends" and the sale of Common Stock in
the Offering (at an assumed initial public offering price of $10.00 per share,
which represents the midpoint of the estimated range of the initial public
offering price). The following table should be read in conjunction with the
financial statements of the Company and the related notes thereto included
elsewhere in this Prospectus. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------
ACTUAL AS ADJUSTED
-------- -----------
(Dollars in Thousands)
<S> <C> <C>
Total indebtedness:
Construction loans................................. $21,471 $21,471
Acquisition and development loans.................. 25,302 22,446
Other subordinated debt............................ 7,810 3,260
Other liabilities.................................. 19,995 17,616
-------- -------
Total liabilities.................................. 74,578 64,793
Minority interest in consolidated subsidiaries........ 3,739 1,200
Redeemable preferred stock............................ 3,502 --
Shareholders' equity:
Common stock, $.01 par value, 5,000,000 shares
authorized, 6,266,637(1) shares and 9,775,419
shares issued and outstanding, respectively, as
of June 30, 1996 and as adjusted as of June 30,
1996(2)(3)....................................... 63 98
New preferred stock 20,000,000 shares
authorized and zero shares outstanding........... -- --
Additional paid-in capital......................... 2,944 23,210
Retained earnings ................................. 7,877 7,877
------- -------
Total shareholders' equity......................... 10,884 31,185
Total capitalization.................................. 92,703 97,178
======= ======
<FN>
- ----------
(1) Does not include the exercise of 1,258,782 Warrants outstanding as of
June 30, 1996.
(2) Reflects the 8.2-for-1 stock split effected on August 15, 1996.
(3) Does not include the Contingent Warrants to purchase additional shares
of Common Stock in the event certain targeted Common Stock share prices
are not achieved in the Offering. Assuming an initial public offering
price of $10.00 per share, the Contingent Warrants would be exercisable
for 53,392 shares of Common Stock. See "Description of Capital Stock -
Contingent Warrants" and Notes 2(j) and 12(e) to the Company's
Consolidated Financial Statements.
</FN>
</TABLE>
-13-
<PAGE>
DILUTION
The net tangible book value of the Common Stock as of June 30, 1996, was
$10,884,217 or approximately $1.45 per share (assuming the exercise of all
1,258,782 of the Company's Warrants outstanding as of June 30, 1996). "Net
tangible book value per share" represents the amount of the Company's
stockholders' equity, less intangible assets, divided by the number of shares of
Common Stock outstanding immediately prior to the Offering. After giving effect
to the sale by the Company of the 2,250,000 shares of Common Stock offered by
the Company hereby (based on an assumed initial public offering price of $10.00
per share (which is the midpoint of the estimated range of the initial public
offering price)) and after deducting the estimated underwriting discounts and
commissions and offering expenses payable by the Company, the Company's pro
forma net tangible book value as of June 30, 1996 would have been $31,184,217,
or $3.19 per share of Common Stock. This represents an immediate increase in pro
forma net tangible book value of $1.74 per share to existing holders of Common
Stock and an immediate dilution in net tangible book value of $6.81 per share to
new investors purchasing Common Stock in the Offering at the assumed initial
public offering price. The following table illustrates the foregoing information
with respect to dilution to new shareholders on a per share basis:
Assumed initial public offering price per share................... $10.00
Net tangible book value per share
before the Offering........................................... 1.45
Increase per share attributable to
new investors................................................. 1.74
Pro forma net tangible book value per
share after the Offering...................................... 3.19
------
Dilution per share to new investors............................. $ 6.81
======
The following table sets forth on a pro forma basis as of June 30, 1996,
after giving effect to the sale by the Company of 2,250,000 shares of Common
Stock in the Offering, the differences between existing holders of Common Stock
and the purchasers of shares in the Offering (based on an assumed initial public
offering price of $10.00 per share (which is the midpoint of the estimated range
of the initial public offering price)) with respect to the number of shares of
Common Stock purchased from the Company, the total consideration paid and the
average consideration paid per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
----------------- ---------------------- -------------
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders(1)..... 7,525,419 77.0% $3,008,788 57.2% $ .40
New investors(1)............. 2,250,000 23.0% 2,250,000 42.8% 10.00
--------- ----- ---------- ----- -------
Totals................... 9,775,419 100.0% $5,258,788 100.0% $ .54
========= ===== ========== ===== =======
<FN>
(1) The 250,000 shares sold by the Selling Shareholders will reduce the number
of shares held by the existing holders of Common Stock to 7,275,419 or
74.4%and increase the number of shares held by new investors to 2,500,000
or 25.6%. The Underwriters have the option to purchase 375,000 shares
(150,000 shares from the Company and 225,000 shares from the Selling
Shareholders) of the Company's Common Stock to cover over-allotments, if
any, in connection with the sale of Common Stock. Assuming the Underwriters
exercise the over-allotment option, the number of shares held by the
existing shareholders will be reduced to 7,050,419 or 72.1% and the number
of shares of Common Stock held by new investors will increase to 2,725,000
or 27.9%.
</FN>
</TABLE>
-14-
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below under the captions "Statement
of Operations Data" and "Balance Sheet Data (at period-end)" for, and as of the
end of, each of the years in the three-year period ended June 30, 1996, are
derived from the Consolidated Financial Statements of Transeastern, which
financial statements have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The Consolidated Financial Statements as of June
30, 1996 and 1995, and for each of the years in the three-year period ended June
30, 1996, and the report thereon which refers to a change in the method of
accounting for a real estate joint venture, are included elsewhere in this
Prospectus. The selected data presented below as of and for the years ended June
30, 1993 and 1992 have been derived from the unaudited consolidated financial
statements of the Company, which in the opinion of management include all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the financial position and results of operations for such dates and
periods. The selected financial information set forth below should be read in
conjunction with the Consolidated Financial Statements and the related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
-----------------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues:
Home and homesite sales $ 5,597 $ 9,777 $22,473 $38,431 $104,474
Rental and other income 52 114 173 234 1,199
Equity in income of real
estate joint venture -- -- (51) 224 --
------- ------- ------- ------- --------
Total revenues 5,649 9,891 22,595 38,889 105,673
Expenses:
Cost of home and homesite sales 4,839 8,705 18,903 32,449 86,442
Selling, general and
administrative expenses 650 1,118 1,962 5,281 10,051
Interest expense, net 14 170 154 196 238
------- ------- ------- ------- --------
Total expenses 5,503 9,993 21,019 37,926 96,732
Minority interest in income of
consolidated subsidiaries -- -- -- -- (865)
Net income (loss) before income
taxes and extraordinary gain 146 (102) 1,577 963 8,076
Income tax expense -- -- 493 374 3,075
------- ------- ------- ------- --------
Net income (loss) before
extraordinary gain 146 (102) 1,084 589 5,001
Extraordinary gain from early
extinguishment of debt,
net of income taxes -- -- -- 700 --
------- ------- ------- ------- --------
Net income (loss) $ 146 $ (102) $ 1,084 $ 1,289 $ 5,001
======= ======= ======= ======= ========
Net income (loss) per common
and common equivalent share $ .02 $ (.02) $ .08 $ .34 $ .61
======= ======= ======= ======= ========
Weighted average number of
common stock and common stock
equivalents outstanding 6,266,637 6,447,469 8,841,128 8,228,341 7,548,443
========= ========= ========= ========= =========
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
-----------------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Cash $ 73 $ 819 $ 470 $ 630 $ 3,769
Total assets 4,205 8,761 28,670 36,352 92,703
Total liabilities 4,074 6,898 25,754 29,685 74,578
Minority interest in
consolidated subsidiaries -- -- -- -- 3,739
Redeemable preferred stock -- 2,000 2,271 3,373 3,502
Shareholders' equity 131 (137) 645 3,294 10,884
OPERATING DATA:
Homes closed (units) 25 46 74 146 375
Average price of homes closed $ 215 $ 212 $ 260 $ 244 $ 203
Number of communities owned at
period end 1 3 7 9 13
Net new orders (units) 40 66 162 190 385
Backlog (units) (at period end) 33 53 141 185 195
Sales value of homes in backlog
(at period end) $ 7,130 $11,324 $38,181 $38,520 $ 45,663
</TABLE>
-16-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion includes the operations of the Company for each
of the periods presented. This discussion and analysis should be read in
conjunction with "Selected Financial Data" and the Company's Consolidated
Financial Statements and the related notes thereto which are included elsewhere
in this Prospectus.
OVERVIEW
The Company, which was formed in 1986, is engaged primarily in the
acquisition of land and the construction and sale of single-family homes and
rental apartments in the State of Florida. The Company has experienced
substantial growth in recent years as the result of acquiring and developing
several large land parcels. The Company posted record earnings before income
taxes of $8.1 million on total revenue of $105.7 million for the fiscal year
ending June 30, 1996. The Company expects to continue its growth in 1997 with
the acquisition, development and sale of additional properties and by expanding
its operations into new markets.
RESULTS OF OPERATIONS
YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995
The following tables set forth certain information relating to the
Company's operations for the years ended June 30, 1996 and 1995:
1996 1995
----------------- ----------------
(in thousands)
Total revenues....................... $105,673 100.0% $38,889 100.0%
Cost of home and homesite sales...... 86,442 81.8 32,449 83.4
-------- ----- ------- -----
Gross profit......................... 19,231 18.2 6,440 16.6
Selling, general and administrative
expenses............................ 10,051 9.5 5,281 13.6
Interest expense, net................ 238 0.2 196 0.5
Net income........................... 5,001 4.7 1,289 3.3
TOTAL REVENUES. Total revenues in 1996 of $105.7 million were up 172%
from $38.9 million in 1995. The $66.8 million increase in total revenues was
primarily attributable to an increase in home sales revenues, to an increase in
revenues from parcel and homesite sales and to a change in the accounting method
used on the Company's Parkside joint venture. Revenues from home sales increased
by $42 million to $77.7 million in 1996 from $35.7 million in 1995 as a result
of a 157% increase in the number of home deliveries (375 in 1996 versus 146 in
1995) due primarily to an expansion of the number of residential projects under
development (13 in 1996 versus 9 in 1995). The increase in home sales revenue
caused by higher deliveries was partially offset by a lower average sales price
of homes delivered in 1996 ($203,000 in 1996 versus $244,000 in 1995). The lower
average home price reflects the Company's decision to broaden the range of
product types it offers, increasing its emphasis on moderately priced homes
directed to the move-up and senior markets. Management believes that these two
markets represent the largest growth segment of the geographic areas in which it
operates.
The increase in parcel and homesite sales was attributable to the sale
of various parcels within the Company's communities to other builders. Land
parcel and homesite sales totaled $26.8 million in 1996 and $2.7 million in
1995. The Company sells such land parcels and homesites in part to reduce its
market risk and carrying costs associated with its owning land. The Company will
continue to seek to identify opportunities to acquire land parcels as a part of
large, mixed-use property acquisitions and to resell these parcels to other
builders.
-17-
<PAGE>
The increase in revenues in 1996 was also partially attributable to a
change in accounting method used for the Company's Parkside joint venture. The
joint venture was accounted for on the equity method of accounting in 1995 and
1994 but was accounted for as a consolidated subsidiary in 1996. The change in
accounting method was caused by a modification to the joint venture agreement
which gave the Company effective operating control over the joint venture.
Revenues in 1995 would have been $45.8 million (195 homes delivered) if the
joint venture had been accounted for as a consolidated subsidiary in that year.
(The change would not have affected 1994 revenues as no homes were delivered at
Parkside in that year.) Consolidation of the joint venture in 1995 would have
had no effect on the Company's reported earnings for the joint venture in that
year.
COST OF SALES. Cost of sales increased from $32.4 million in 1995 to
$86.4 million in 1996, an increase of $54.0 million, or 167%. The increase was
caused by increased home deliveries, land parcels sales and the change in the
accounting method used for the Parkside joint venture, as discussed above.
GROSS PROFIT. Gross profit percentages from the sales of homes and land
were 18.2% in 1996 and 16.6% in 1995. The higher gross profit percentages
experienced in 1996 were primarily attributable to the increase in land parcel
sales in 1996. The Company experienced gross profit percentages on land parcel
sales of 32.1% in 1996 and 20.6% in 1995. The relatively high margins
experienced on these parcels in 1996 reflects the benefits of purchasing such
parcels as part of large mixed-use property acquisitions and then reselling the
parcels to other developers. This allowed the Company to acquire such parcels at
bulk land prices and to resell the parcels in a relatively short period of time
on a retail land basis.
Excluding the effects of land sales, the Company experienced gross
profit percentages of 12.2% and 15.2% in 1996 and 1995, respectively. The lower
profit percentage experienced in 1996 on home sales was partially attributable
to low margins on custom home sales in the Coral Springs market. A significant
oversupply of housing inventory developed in the Coral Springs market in 1996 as
the result of a substantial increase in the sale of land parcels by the area's
master developer. This oversupply resulted in a significant increase in
competition in this market which, coupled with permitting delays and other
problems, caused profit margins to significantly decline in this market in 1996.
Management elected to substantially reduce its involvement in the Coral Springs
market, and began to take steps to accomplish this reduction in late 1995. The
Company's remaining inventory relating to the Coral Springs custom home product
line was $2.8 million as of June 30, 1996. The Company experienced a 13.5% gross
profit percentage in 1996 on total home sales excluding Coral Springs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $10.1 million in 1996 and $5.3 million in 1995.
These expenses as a percentage of total revenues were 9.5% and 13.6% in 1996 and
1995, respectively. These expenses as a percentage of revenues in 1995 were
higher than 1996 expenses due to management's decision to significantly increase
its management resources and operating systems in preparing for the anticipated
substantial increase in home deliveries in 1996 and 1997. In particular, the
Company focused on building the core of its upper management team during 1995.
The Company had 85 total employees at the end of 1996, up from approximately 60
in 1995. Management believes that with its investment in additional employees in
1996 that it is prepared to handle significantly higher levels of sales and home
deliveries with minimal additional new hires in 1997.
INTEREST EXPENSE, NET. The Company's total interest costs were $5.2
million in 1996 and $1.8 million in 1995. The higher interest costs in 1996
reflect the significant increases in the Company's acquisition, development and
construction loan indebtedness, resulting from substantial inventory additions
during the year. In accordance with generally accepted accounting principles,
interest costs are capitalized to land and construction in process inventories
during the period in which activities necessary to prepare the property for its
intended use are in progress. Interest costs of $5.0 million and $1.6 million
were capitalized to the Company's inventories in 1996 and 1995, respectively.
NET INCOME. The Company's net income after tax increased 288% in 1996 to
$5.0 million ($.61 per share) from 1995 net income of $1.3 million ($.34 per
share). Net income in 1995 included a $0.7 million
-18-
<PAGE>
extraordinary item relating to the early extinguishment of debt. The increase in
income was attributable to the $12.1 million increase in gross profit from
sales, partially offset by a $4.8 million increase in selling, general and
administrative expenses and a $2.7 million increase in income taxes.
The $2.7 million increase in income tax expenses was directly
proportionate to the increase in the Company's income before taxes. The
Company's effective tax rate was 38.1% and 38.2% in 1996 and 1995, respectively.
YEAR ENDED JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30, 1994
The following tables sets forth certain information relating to the
Company's operations for the years ended June 30, 1995 and 1994:
1995 1994
----------------- ----------------
(in thousands)
Total revenues...................... $38,889 100.0% $22,595 100.0%
Cost of home and sales.............. 32,449 83.4 18,903 83.7
------- ------ ------- -----
Gross profit........................ 6,440 16.6 3,692 16.3
Selling, general and administrative
expense, net....................... 5,281 13.6 1,962 8.7
Interest expense, net............... 196 0.5 154 0.7
Net income.......................... 1,289 3.3 1,084 4.8
TOTAL REVENUES. Total revenues of $38.9 million in 1995 were 72% higher
than 1994 total revenues of $22.6 million, primarily due to a $16.4 million
increase in home sales revenues. The increase in home sales revenues resulted
from a 97% increase in home deliveries (146 in 1995 versus 74 in 1994),
partially offset by a reduction in the average sales price of homes delivered
from $260,000 in 1994 to $244,000 in 1995. The lower average price reflect the
Company's increased marketing emphasis on moderately priced houses directed
towards move-up and senior buyers versus high-end (over $500,000 average sales
price) custom homes.
COST OF SALES. Cost of sales increased from $18.9 million in 1994 to
$32.4 million in 1995, an increase of $13.5 million, or 71%. The increase was
directly proportionate to the increase in sales revenues, caused by higher home
deliveries in 1995 as discussed above.
GROSS PROFIT. Gross profit percentages from the sales of homes and land
were 16.6% in 1995 and 16.3% in 1994. Excluding the effects of land sales, these
percentages were 15.2% and 15.1% in 1995 and 1994, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $5.3 million in 1995 and $2.0 million in 1994.
These expenses as a percentage of total revenues were 13.6% and 8.7% in 1995 and
1994, respectively. These expenses in 1995 as a percentage of revenues were
higher than 1994 expenses due to management's decision to significantly increase
its management resources and operating systems in 1995 in preparing for the
anticipated substantial increase in home deliveries in 1996. In particular, the
Company focused on building the core of its upper management team during 1995.
The Company had approximately 60 total employees at the end of 1995 and
approximately 40 employees at the end of 1994.
INTEREST EXPENSE, NET. The Company's total interest costs were $1.8
million in 1995 and $1.1 million in 1994. The higher interest costs in 1995
reflect the increases in the Company's acquisition, development and construction
loan indebtedness, resulting from substantial inventory additions during the
year. In accordance with generally accepted accounting principles, interest
costs are capitalized to land and construction in process inventories during the
period in which activities necessary to get the property ready for its intended
use are in progress. Interest costs of $1.6 million and $1.0 million were
capitalized in the Company's inventories in 1995 and 1994, respectively.
-19-
<PAGE>
NET INCOME. The Company's net income of $1.3 million in 1995 ($.34 per
share) was 19% higher than 1994 net income of $1.1 million ($.08 per share). Net
income in 1995 included a $0.7 million extraordinary item relating to the early
extinguishment of debt. The decrease in net income (before the extraordinary
item) was primarily attributable to the $3.3 million increase in selling,
general and administrative expenses, partially offset by a $2.7 million increase
in gross profit from sales and a $.3 million increase in equity in income from
the Parkside joint venture.
The Company's income tax expense was $.4 million in 1995 and $.5 million
in 1994. The Company's effective tax rate was 38.2% in 1995 and 31.2% in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Transeastern's operations require cash for land acquisitions, additions
to its housing inventories, operating expenses, interest and other costs. The
following table summarizes cash flows provided by (used in) various activities
experienced by the Company during fiscal years 1994-1996 (dollars in millions):
1996 1995 1994
---- ---- ----
Net cash used in operating activities $(39.5) $( 2.1) $(17.8)
Net cash provided by (used in) investing
activities 4.4 ( 1.1) (0.7)
Net cash provided by financing activities 38.2 3.3 18.2
------ ------- ------
Net increase in cash $ 3.1 $ 0.1 $ (0.3)
------ ------- ------
The Company's most significant ongoing cash requirements for operating
activities relate to its growing inventory levels. The Company's land,
construction in process and completed home inventory increased by $53.1 million
in 1996, primarily due to several large land acquisitions during the year. As
with most developers, the Company experiences a delay between the time it
acquires property and the time it is able to recover its acquisition and
development costs, due to, among other things, the time required to obtain
permits, make necessary land improvements and complete construction of the
homes, and due to the time period from the date customers execute their sales
contracts until the home closings. While customers typically place deposits on
home sales contracts with the Company of 10%, these deposits are generally
placed in escrow and are not available for the Company's use until the time that
the related home contract closes. Escrow deposits totalled $2.7 million at June
30, 1996, up from $1.2 million at June 30, 1995. The Company attempts to
minimize the capital resources needed to acquire additional property by the use
of options, phased closings, and by the short-term resale of selected land
parcels acquired as a part of large, mixed-use property acquisitions.
The Company has historically met the majority of its short-term
financing needs with cash generated from operations and from acquisition,
development and revolving construction loans provided by financial institutions
for its projects. Interest rates for these loans typically range from prime plus
1.0% to prime plus 1.5%. The Company obtained $47.1 million and $57.9 million in
proceeds from borrowings on acquisition and development loans and construction
loans, respectively, in 1996. The Company will continue to seek outside
financing for its future projects including acquisition and development loans
and construction loans. There can be no assurance, however, that the Company
will be able to obtain sufficient additional financing for future developments
on terms satisfactory to the Company or at all. Failure of the Company to obtain
additional financing on terms satisfactory to the Company could have a material
adverse effect on the Company's operations and prospects. Additionally, Messrs.
Arthur Falcone, Philip Cucci and Edward Falcone have personally guaranteed
approximately $38.6 million of the Company's existing bank borrowings and there
can be no assurance that any of such individuals will continue to guarantee the
Company's indebtedness in the future.
The Company's loan agreements include customary representations and
covenants, including limitations on additional indebtedness and limitations on
the ability of the Company's subsidiaries to pay cash dividends or make loans or
advances to the Company. Additionally, under the loans guaranteed by certain of
the
-20-
<PAGE>
Company's shareholders, the death or insolvency of any of the guarantors will
generally be considered an event of default. Additionally, substantially all of
the loan agreements evidencing the Company's indebtedness include cross-default
provisions with respect to the Company's other indebtedness and provide that a
change in control of the Company would be considered an event of default. If an
event of default should occur under such borrowings, the lender would have the
immediate right to accelerate the loan and there is no assurance the Company
would be able to repay or refinance such borrowings. See Notes (8) and (9) of
the Company's Consolidated Financial Statements.
The Company in 1996 also obtained capital for land acquisitions and
working capital requirements from other sources, including a $3.0 million
private placement of the Company's Common Stock and the placement of $5.7
million of subordinated debt. The Company also privately placed $3.0 million in
preferred stock in 1995, and issued $4.0 and $6.4 million in subordinated debt
in 1995 and 1994, respectively. Terms of the subordinated debt placements vary
and include both interest payments, rate of return adjustments and profit
participation features (see note 10 to the Company's 1996 financial statements
for additional information regarding the terms of these debt agreements). The
Company intends to repay substantially all subordinated debt and preferred stock
currently outstanding with the proceeds of the Offering. See "Use of Proceeds."
During 1996, the Company also obtained a $750,000 secured credit line
from a commercial bank which is used to provide working capital. The facility,
which bears interest at prime plus 1%, had no available balance as of August 14,
1996.
The Company is currently negotiating with certain financial institutions
to establish a revolving line of credit of up to $75 million which would be
secured by first mortgages on its land holdings and would be used as a primary
source of working capital in the future (the "Credit Facility"). The proposed
Credit Facility would include customary representations and warranties and
covenants with respect to the conduct of the Company's business and require the
maintenance of various financial ratios, which could limit amounts available to
be borrowed under the proposed Credit Facility. There can be no assurance that
the Company will obtain this Credit Facility or as to the amount or terms of any
such Credit Facility. In the event that the Company does not establish such a
Credit Facility, it intends to continue to use traditional acquisition,
development and revolving construction loans to provide the majority of funding
required on its projects. The Company believes that the capital available from
existing credit facilities, cash generated from operations and the proceeds of
this offering will be sufficient to fund its obligations for at least 12 months.
On a long term basis, the need to raise additional capital will be primarily
dependent on the number of additional land acquisitions undertaken by the
Company, and the size and purchase terms of those acquisitions.
SELECTED UNAUDITED QUARTERLY OPERATING DATA
The Company's quarterly financial results are subject to significant
fluctuations due to the timing of land parcel closings, which had a significant
impact on second and fourth quarter fiscal 1996 financial results. To a lesser
extent, quarterly operating profits are impacted by the timing of home closings
and the mix of sales among its product lines. The following table presents
certain selected quarterly operating data of the Company for the years ended
June 30, 1996 and June 30, 1995. This data is not necessarily indicative of the
results of operations for any future period. See "Risk Factors - Variability of
Results."
-21-
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED,
---------------------------------------------------
(dollars in thousands)
SEPTEMBER DECEMBER MARCH JUNE
30, 1995 31, 1995 31, 1996 30, 1996
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues $ 13,154 $ 32,188 $ 16,555 $ 43,775
Total expenses 12,711 30,092 16,581 38,228
-------- -------- -------- --------
Net income (loss) before income taxes 443 2,096 (26) 5,547
Income tax expense (benefit) 168 796 (10) 2,108
-------- -------- -------- --------
Net income (loss) $ 275 $ 1,300 $ (16) $ 3,439
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
(dollars in thousands)
SEPTEMBER DECEMBER MARCH JUNE
30, 1995 31, 1995 31, 1996 30, 1996
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Total revenues $ 6,489 $ 6,738 $ 8,021 $ 17,641
Total expenses 6,516 6,318 7,685 17,407
-------- -------- -------- --------
Net income (loss) before income taxes
and extraordinary gain (27) 420 336 234
Income tax expense (benefit) $ (11) $ 163 $ 130 $ 91
-------- --------- -------- --------
Extraordinary gain -- 700 -- --
Net income (loss) $ (16) $ 957 $ 205 $ 143
======== ======== ======== ========
</TABLE>
Revenue for the quarter ended September 30, 1995 was $6.7 million higher
than for the quarter ended September 30, 1994, primarily due to an increase in
home sales. The Company had net income before taxes of $443,000 in the quarter
ended September 30, 1995 as compared to a net loss of $27,000 in the quarter
ended September 30, 1994, primarily due to higher sales margins in 1995.
Revenue and net income before income taxes for the quarter ended
December 31, 1995 were $25.5 and $1.7 million higher than for the quarter ended
December 31, 1994, respectively, primarily due to a $12.0 million parcel sale in
the quarter ended December 31, 1995 which generated $1.9 in net income before
income taxes.
Revenue for the quarter ended March 31, 1996 was $8.5 million higher
than for the quarter ended March 31, 1995, primarily due to an increase in home
sales. The Company had a net loss before income taxes of $26,000 for the quarter
ended March 31, 1996 as compared to net income before income taxes of $336,000
in the quarter ended March 31, 1995. The lower earnings were caused by higher
sales and marketing expenses for the quarter ended March 31, 1996 primarily due
to grand opening, marketing and other costs incurred by the Company in
connection with the introduction of several new communities.
Revenues and net income before taxes for the quarter ended June 30, 1996
were $26.1 million and $5.2 million higher than for the quarter ended June 30,
1995, respectively, primarily due to $12.9 million in parcel and homesite sales
in the quarter ended June 30, 1996, which generated $6.3 million in net income
before income taxes.
-22-
<PAGE>
INTEREST RATES AND INFLATION
The majority of the Company's home purchasers finance their acquisitions
through third-party lenders who provide mortgage financing. Higher mortgage
interest rates may significantly affect the affordability of permanent mortgage
financing to prospective purchasers. Additionally, increases in interest rates
have a significant effect on the Company's financing costs, which cannot
necessarily be passed on to its customers. The Company seeks to mitigate the
potential impact of rising interest rates on its sales by directing marketing
efforts in several of its communities to the senior market, which includes a
significant percentage of cash buyers. The Company further seeks to reduce the
potential impact of rising interest rates through its development and marketing
of rental apartments, which tend to increase in demand in periods of rising
interest rates.
The Company's financial results may be adversely affected during periods
of high inflation due to higher land and construction costs. The Company seeks
to mitigate the potential short-term effects of inflation on its construction
costs by negotiating fixed price contracts with its subcontractors and material
suppliers for the construction of most of its projects. The Company also
attempts to pass through to its customers any increases in costs through
increased sales prices. To date, inflation has not had a material adverse effect
on the Company's results of operations. However, no assurances can be made that
inflation will not have a material adverse impact on the Company's future
results of operations.
BACKLOG
Sales of the Company's homes are generally made pursuant to a standard
contract which requires a down payment of at least 10% of the sales price. Sales
contracts often contain financing contingencies which permit the customer to
cancel in the event that mortgage financing at prevailing interest rates is
unobtainable within a specified period, typically six weeks. The Company
excludes sales contracts containing financing and house sale contingencies from
its sales backlog figures. The following table summarizes the Company's backlog
as of the end of each of the last three fiscal years (dollars in thousands):
1996 1995 1994
---- ---- ----
Number of Homes in Backlog 195 185 141
Aggregate Sales Value of Homes in Backlog $ 45,663 $ 38,520 $ 38,181
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Prospectus contains forward-looking statements, including
statements regarding, among other things, (i) the Company's growth strategies,
(ii) anticipated trends in the economy and the homebuilding industry and (iii)
the Company's future financing plans. In addition, when used in this Prospectus,
the words "believes," "anticipates," "expects" and similar words often are
intended to identify certain forward-looking statements. These forward-looking
statements are based largely on the Company's expectations and are subject to a
number of risks and uncertainties, many of which are beyond the Company's
control. Actual results could differ materially from these forward-looking
statements as a result of changes in trends in the economy and the homebuilding
industry and the factors described in "Risk Factors," including among others,
"Real Estate and Homebuilding Industries and Economic Conditions," "Mortgage
Financing and Interest Rates," "Competition," "Leverage and Future Capital
Requirements," "Dependence on South Florida Market and Expansion into New
Markets" and "Expansion Strategy." In light of these risks and uncertainties,
there can be no assurance that the forward-looking statements contained in this
Prospectus will in fact occur. The Company does not undertake any obligation to
publicly release the results of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances.
-23-
<PAGE>
BUSINESS
GENERAL
Transeastern is a diversified real estate company engaged primarily in
the acquisition of land and the construction and sale of quality, single-family
and multi-family homes for the move-up and senior home-buying markets in the
State of Florida. The Company utilizes standardized methodologies and a
systematic approach to the operation of its business. This process begins with
Transeastern's disciplined approach to the acquisition of parcels of land
through a rigorous evaluation of each parcel to determine whether it satisfies
the Company's quantitative and qualitative acquisition criteria. This process
continues with the construction of homes in a variety of designs with
standardized option packages in order to cost-effectively build homes of
superior value. This process culminates with the utilization of innovative
marketing and sales programs and procedures.
Transeastern believes that its disciplined approach coupled with its
emphasis on customer satisfaction, quality, value and pride in workmanship are
largely responsible for its growth. The Company experienced a ten-fold increase
in revenues over the past four years, and has become the fourth largest
homebuilder in South Florida and one of the 100 largest homebuilders in the
United States in terms of the number and dollar value of home closings. The
Company's objective is to become a more broadly-diversified real estate company
achieving long-term, stable growth with measured risk. The Company employs the
following five strategies in furtherance of this objective: (i) to aggressively
target the move-up and senior home-buying markets, by constructing and selling
quality homes of superior value on distinctive niche properties in growth
markets, primarily featuring waterfront and golf course living and other upscale
recreational amenities; (ii) to strategically acquire land which is well-suited
for the construction and sale of the Company's homes, and which may also include
parcels considered favorable for short-term, profitable resale to other
builders; (iii) to develop multi-family housing, primarily for sale to
institutional investors; (iv) to develop strategic alliances with leading real
estate and institutional investors to further the Company's ability to
opportunistically acquire and finance distinctive niche properties in growth
markets, primarily for single-family home development by the Company; and (v) to
develop ancillary business activities which traditionally complement
single-family home development businesses.
The Company has experienced significant growth in revenues during the
past four consecutive years. Revenues increased by 1,788% during the fiscal year
ended June 30, 1996 to $105.7 million as compared to $5.6 million in fiscal year
1992. The Company's pre-tax income increased from $146,000 in 1992 to $8.1
million in 1996. The Company's net income before income taxes and extraordinary
gain in 1996 of $8.1 million increased by 741% from $963,000 in 1995. The number
of homes closed increased from 25 in 1992 to 375 in 1996.
THE ECONOMY AND HOUSING AND REAL ESTATE MARKETS
The economies of different geographic areas in the United States are
characterized by differing rates of economic and population growth. Similarly,
the market in the United States for real estate and homes in general, and homes
for the move-up and senior markets in particular, is also characterized by
differing rates of growth in different geographic areas. The Company anticipates
that it will continue to implement an operating strategy of engaging in real
estate activities in geographic areas which are projected to have (i) rapid
economic and population growth and (ii) rapid growth in home starts in general,
and in home starts for the move-up and senior markets in particular. All of the
Company's activities have in the past been in the State of Florida, where
approximately one of ten new homes in the United States is currently being
built.
As compared to the rest of the United States, South Florida and the
remainder of the State of Florida have favorable economic and demographic
profiles for real estate development and homebuilding in general, and for
homebuilding for the move-up and senior markets in particular.
According to the U.S. Department of Census projections, the population
of the United States is projected to grow by 19 million people from 1990 to
2000, an increase of 7.7%. The University of Florida's Bureau of
-24-
<PAGE>
Business and Economic Research ("BEBR") projects that the Gross Domestic Product
will grow 2.4% in both 1997 and 1998, compared to 2.1% in 1995 and 1.6% in 1996.
The BEBR projects that U.S. employment will grow by 2.0% per year in 1996-1997,
resulting in an unemployment rate of approximately 5.8%. During the same period,
the national housing market is expected to grow at a rate of 1.2 million to 1.4
million housing starts annually.
The BEBR forecasts that Florida's population will increase by 265,000
residents, or 1.8% in 1997, and by 249,000, or 1.7%, in 1998, a rate of growth
approximately double that of the nation as a whole. Florida is expected to add
between 119,000 and 155,000 new jobs in 1997 and 1998, respectively, a growth
rate of 2.0% in 1997 and 2.5% in 1998. Florida's continued population and job
growth are expected to favorably impact Florida's housing markets. The BEBR
projects that Florida's housing market will grow by 109,500 units (79,200 single
family and 30,300 multi-family) in 1997, representing nearly 10% of all housing
starts nationally. In 1998, Florida's housing market is forecasted to grow by an
additional 110,200 units (77,700 single family and 32,500 multi-family).
A substantial portion of the Company's operations are based in Florida's
Broward County and Palm Beach County. The population of Broward County is
projected by BEBR to increase by 22,400, or 1.6% in 1997 and by 20,900, or 1.5%,
in 1998. The population of Palm Beach County is projected to increase by 19,300,
or 2.0%, in 1997 and by 16,400, or 1.7% in 1998. The growth in these counties in
1997 represents over 15% of total projected population growth of the entire
state in each respective year. BEBR forecasts that Broward County and Palm Beach
County will add 9,800 and 9,000 new jobs in 1997, respectively, and 13,200 and
9,900 new jobs in 1998, respectively. The population and job growth projected in
these counties is expected to favorably impact the area's housing market. The
BEBR projects that the housing markets in Broward County and Palm Beach County
will grow by 10,444 and 9,747 housing starts, respectively in 1997 and by 9,752
and 9,824 housing starts, respectively in 1998.
The housing markets primarily targeted by the Company are (i) move-up
families with heads of households 35-54 years old, and (ii) seniors buyers,
55-64 years old, purchasing retirement, vacation and second homes in warm
weather locations. Demographic information indicates that these age groups are
experiencing substantial population growth in the Company's targeted geographic
markets. According to U.S. Department of Census projections for the 1990-2000
period, the age group representing the move-up market will grow by 7%
nationally, but will grow by 29% in the state of Florida, by 45% in Broward
County and by 53% in Palm Beach County. For the same period, the seniors market
will grow by 11.5% nationally, 27% in Florida, 23% in Broward County and 28% in
Palm Beach County.
BUSINESS STRATEGY
The Company intends to continue to employ the following five strategies
in furtherance of its primary business objectives:
DEVELOPMENT OF QUALITY HOMES ON DISTINCTIVE NICHE PROPERTIES
One of the Company's primary business strategies is to aggressively
target the move-up and senior home-buying markets by constructing and selling
value-based, quality homes which are (i) located on distinctive niche
properties, primarily featuring golf course and waterfront living and other
upscale recreational amenities, (ii) designed in a variety of styles and price
ranges, and (iii) built in a variety of architectural designs with standardized
option packages. The Company constructs and sells homes in a broad variety of
styles (including detached single-family homes, attached villas, patio homes and
townhouses) and throughout a wide range of prices (primarily, from $100,000 to
$500,000), designed to appeal to most lifestyles and economic and demographic
segments of the move-up and senior home-buying markets. Based on the Company's
demographic analyses, the Company believes that this broad variety of products
appeals to significant segments of the home-buying public and mitigates the
Company's exposure to cyclical market conditions that may affect certain
individual demographic or economic segments of the market. See "Business -
Summary of Residential Communities."
-25-
<PAGE>
STRATEGIC ACQUISITION OF LAND
The Company intends to continue to acquire multi-use parcels of land in
growth markets which are well-suited for the construction and sale of the
Company's homes, and which may also include parcels which are considered
favorable for resale to other residential and commercial builders.
Transeastern's disciplined approach to the acquisition of parcels of land
requires a rigorous evaluation of each parcel to determine whether it satisfies
the Company's quantitative and qualitative acquisition criteria. Although this
land acquisition strategy is designed to effect prudent land acquisition, it is
also structured to enable the Company to act swiftly in taking advantage of
significant unique opportunities. The Company believes its reputation for
building homes of quality and value enables it to compete for and acquire
distinctive parcels of land. In turn, this creates opportunities for the Company
to sell selected parcels within its communities to other residential and
commercial builders, which provides additional revenue to the Company and limits
the amount of investment in, and the risks associated with, any single
community. See "Business - Land Acquisition" for a detailed description of the
Company's land acquisition policies and procedures.
DEVELOPMENT OF MULTI-FAMILY HOUSING PRIMARILY FOR SALE TO INSTITUTIONAL
INVESTORS
The Company intends to continue to expand its recent activities as a
developer of investment-grade multi-family housing. The Company believes that
multi-family housing development will complement its homebuilding activities by,
among other things, (i) furthering the Company's ability to capture revenues in
another segment of the real estate development industry, (ii) providing the
Company opportunities to acquire and maximize utilization of multi-use
properties, (iii) adding a degree of diversification to the Company's business
by enabling it to devote its resources to a broader variety of complementary
businesses throughout the economic cycle and (iv) increasing the number of
available properties which are both attractive to the Company and satisfy its
land-acquisition criteria. See "Business - Summary of Residential Communities"
and "Business - Land Acquisition."
DEVELOPMENT OF STRATEGIC ALLIANCES WITH LEADING REAL ESTATE AND INSTITUTIONAL
INVESTORS
The Company continually seeks to establish strategic alliances with
leading real estate and institutional investors to further its ability to
opportunistically acquire and finance interests in distinctive niche properties
in growth markets (primarily for single-family home development by the Company).
The Company believes that the successful implementation of this strategy will
also allow it to gain control over desirable properties while minimizing its
capital investment and the related land ownership risks and carrying costs.
Effective implementation of this strategy enhances the Company's ability to act
swiftly in taking advantage of acquisition opportunities on a greater scale,
while mitigating and diversifying the land ownership risks associated with such
acquisitions. See "Business - Land Acquisition."
DEVELOPMENT OF ANCILLARY BUSINESS ACTIVITIES
In order to increase stability and predictability of the Company's
earnings throughout the business cycle, the Company is continually seeking to
enter into ancillary businesses, both on its own and through strategic alliances
with providers of such services, including residential mortgage brokerage
services, title insurance and closing services and other related residential
services. The Company believes that these activities complement each other and
the Company's core homebuilding activities, may provide the Company with an
additional degree of cyclical diversification and will enable the Company to
capture revenues from a broader spectrum of activities related to homebuilding.
See "Business - Customer Financing and Title Services."
SUMMARY OF RESIDENTIAL COMMUNITIES
The following tables provide an overview, as of June 30, 1996, of the
communities in which the Company has contracted to acquire land pursuant to
options and arrangements for phased closings, the communities in which the
Company has completed homebuilding activities, the communities in which the
-26-
<PAGE>
Company is currently engaged in development and homebuilding activities and the
communities in which the Company has plans for development and homebuilding
activities.
<TABLE>
<CAPTION>
LAND OPTIONS AND PHASED CLOSINGS
PURCHASE
HOMESITES UNDER EXPIRATION PRICE
COMMUNITY OPTION DATE (000S)
- ------------------------------ ---------------------- ----------------------- ------------
<S> <C> <C> <C>
Village of Pembroke Pines 108(1) --(1) $3,500
Wellington Lakes 58(2) September 30, 1996 $ 487
---
166
===
</TABLE>
<TABLE>
<CAPTION>
COMMUNITIES COMPLETED
NUMBER OF FISCAL RANGE OF BASE
HOMES COMPLETED YEAR HOME PRICES
COMMUNITY LOCATION AND DELIVERED OPENED (000S)
- ----------------------- ------------------ ----------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Coopers Pointe Broward County 36 1993 $140-$210
Cypress Cay Broward County 106 1994 $140-$193
---
142
===
</TABLE>
<TABLE>
<CAPTION>
COMMUNITIES CURRENTLY BEING DEVELOPED
NUMBER OF FISCAL RANGE OF BASE
NUMBER OF HOMES HOMESITE YEAR HOME PRICES
COMMUNITY HOMES SOLD/DELIVERED INVENTORY OPENED (000S)
- ------------------------------- -------------- -------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Cypress Head 30(3) 29/27 3 1994 $450 - $1,400
Eagle Trace at Eagle Landing 55 45/26 29 1994 $190 - $ 300
Mariner's Cove 131 26/2 129 1994 $200 - $ 325
Sunset Pointe on Lake Wellington 68 54/43 25 1995 $115 - $ 160
Aberdeen Golf and Country Club 447(4) 88/32 415 1996 $145 - $ 325
Parkside at Spring Valley(5) 465 235/216 249 1995 $125 - $ 195
Weston(6) 72 72/44 28 1993 $230 - $ 425
Coral Springs/Parkland(6) 215 215/205 10 1989 $235 - $ 500
------ --------- ----
1,483 764/595 888
====== ========= ====
</TABLE>
<TABLE>
<CAPTION>
COMMUNITIES PLANNED FOR FUTURE DEVELOPMENT
FISCAL YEAR RANGE OF BASE
NUMBERS OF LOCATION HOME PRICES
COMMUNITY LOCATION HOMES EXPECTED TO OPEN (000S)
- -------------------------------------- ----------------- ------------ ---------------- ---------------
<S> <C> <C> <C> <C>
Wellington Lakes Palm Beach County 125 1997 $100 - $140
Egret Walk at Village of Pembroke Pines Broward County 114 1997 $130 - $167
Pelican Pointe at Village of Pembroke Pines(7) Broward County 356 1997 $ 77 - $110
Carlyle Club Luxury Apartment Homes(8) Broward County 150 1997 (9)
Pinehurst Club Luxury Apartment Villas(8) Broward County 196 1997 (10)
Cape Coral(11) Lee County 60 1997 $100 - $250
Banyan Bay(11) Martin County 750 1997 $100 - $180
Aloma Woods(11) Orange County 212 1997 $120 - $250
-----
1,963
=====
-27-
<PAGE>
<FN>
(1) An option was exercised by the Company on July 1, 1996 to acquire (i) an additional 108 homesites in Pelican Pointe at the
Village of Pembroke Pines and (ii) a 10-acre commercial parcel. See "Business - Summary of Residential Communities - Egret
Walk and Pelican Pointe at the Village of Pembroke Pines."
(2) Phased closing.
(3) Does not include 61 homesites sold to other homebuilders.
(4) Does not include 512 homesites sold to other homebuilders.
(5) The Company owns a 50 percent interest in the joint venture which is developing this community.
(6) The Company acts as a preferred builder for developers in these communities.
(7) Excludes the 108 homesites acquired on July 1, 1996 through the exercise of the option described in note (1), above.
(8) The Company owns a controlling interest in the limited partnership which is developing these communities.
(9) Monthly lease rates range from $750 to $1,500 per apartment unit.
(10) Monthly lease rates range from $700 to $1,200 per apartment unit.
(11) The Company has entered into a letter of intent to acquire these homesites.
</FN>
</TABLE>
NARRATIVE SUMMARY OF RESIDENTIAL COMMUNITIES
Set forth below is a narrative description of the Company's communities
as of June 30, 1996.
COOPERS POINTE. Coopers Pointe is a community of 36 single-family homes
situated on 15 acres in Cooper City in Broward County. The Company acquired this
property in 1993, acted as the exclusive homebuilder in Coopers Pointe and sold
the last of the 36 single-family homes that were planned for this community in
1995. The base sales prices of the Company's homes in this community ranged from
approximately $140,000 to $210,000.
CYPRESS CAY. Cypress Cay is located in Parkland, Florida, which the
Company believes is one of Broward County's most prestigious single-family home
communities, and is adjacent to Cypress Head (another of the Company's
communities, which is described below). Cypress Cay encompasses 24 acres of land
which the Company acquired in 1993. The Company was the exclusive homebuilder in
Cypress Cay and sold the last of the 106 single-family homes planned for this
community in 1996. The base price range of homes in Cypress Cay was
approximately $140,000 to $193,000. This community features a wide range of
amenities, including tennis courts, community swimming centers, sundecks, cabana
houses and a private, gated entrance.
CYPRESS HEAD. Cypress Head was the first master-planned community in
Parkland, Florida, which the Company believes is one of Broward County's most
prestigious single-family home communities. In 1993, the Company acquired the
last 130 acres of Cypress Head on which 91 custom homes were planned for
development. The Company sold 61 of the homesites in Cypress Head to other
builders, and has sold 29 of the 30 homes that it intends to build in Cypress
Head. Base prices for the Company's homes in Cypress Head range from
approximately $450,000 to $1,400,000. Cypress Head is an established 670-acre
community featuring towering pines and cypress trees and a 70-acre lake. This
community offers a wide array of recreational amenities, including a lighted
tennis center, nature trails, two private clubhouses, water sports and team
sports facilities.
EAGLE LANDING AT EAGLE TRACE. Eagle Trace is a country club community
located in Coral Springs, Florida, which features a TPC golf course and a wide
variety of upscale recreational amenities. The Company acquired the land for the
55 single-family homes planned for development in Eagle Landing at Eagle Trace
in 1994. The Company is acting as the exclusive developer and homebuilder in
Eagle Landing, where approximately 70 percent of the homes will have golf course
or waterfront views. The base prices for these homes, most of which have already
been sold, range from approximately $190,000 to $300,000. Other features of
Eagle Landing include championship golf and tennis facilities and 24-hour
security.
MARINER'S COVE. Mariner's Cove is a single-family home community
located in Coral Springs, Florida, in which the Company is the exclusive
builder. In June 1994, the Company acquired the 43 acres of land which
-28-
<PAGE>
encompass Mariner's Cove. Homes are currently being developed and sold at base
prices ranging from approximately $200,000 to $325,000. Approximately 50 of
these 131 homes will have waterfront views. Mariner's Cove provides an array of
recreational amenities, including a children's play lot, family picnic area and
boat landing facility. This community is adjacent to a large existing
development, which also provides additional recreational opportunities,
including boating, canoeing and fishing, and is across the water from an upscale
neighborhood with homes selling for in excess of $1 million.
SUNSET POINTE ON WELLINGTON LAKE. Sunset Pointe on Lake Wellington was
the Company's first community in Palm Beach County. Situated on 15 acres of land
on a 180-acre lake near Wellington Lakes (another of the Company's communities
which is discussed below), this community features waterfront views on one of
Palm Beach County's largest man-made lake. The Company acquired Sunset Pointe on
Wellington Lakes in 1995, and is the exclusive homebuilder. The base prices of
the 68 single-family homes in this community (most of which have already been
sold) range from approximately $115,000 to $160,000.
ABERDEEN GOLF AND COUNTRY CLUB. Aberdeen Golf and Country Club is a
master-planned senior community located in Boynton Beach, between West Palm
Beach and Boca Raton. In September 1995, the Company acquired 959 homesites in
this 1,441 acre country club community, which features a 40,000 square foot
clubhouse, private-gated entrances, an 18-hole championship golf course designed
by golf course architect Desmond Muirhead, a 15-court tennis complex and a
staffed fitness center. The Company re-sold 512 homesites to other residential
builders in this community in fiscal 1996, of which 486 had been delivered as of
June 30, 1996. The Company has sold a significant portion of the 447
single-family homes which it plans to build in this community, and is currently
building and selling attached villas, patio homes and single-family homes. This
community also features over 400 acres of lakes, parks and upscale amenities.
Aberdeen's land plan features golf course and waterfront views and a low density
of 1.6 homes per acre. The Company's residences currently have base prices from
approximately $145,000 to $325,000.
PARKSIDE AT SPRING VALLEY. Parkside at Spring Valley is a community in
Broward County's Pembroke Pines in which approximately half of the 465 homes
scheduled for development have already been sold. Amenities in Parkside at
Spring Lake include a community pool and cabana baths. The Company serves as
project manager for the development of this 98-acre community which was acquired
in two phases in 1994 and 1995 through a 50/50 joint venture with H.A. Cumber of
Pembroke Pines, Inc., another builder in Broward County. The base prices for the
Company's homes in Parkside at Spring Valley range from approximately $125,000
to $195,000.
WESTON. Weston is a master-planned community being developed by Arvida
Corporation in Broward County. Weston is a 10,000 acre country club community,
which features a broad variety of upscale amenities. The amenities located
within Weston include a championship golf course and tennis facilities that are
located at a clubhouse featuring restaurants and pro shops, waterfront and golf
course views, large parks and athletic fields, schools, shopping centers and
places of worship. Arvida has planned to develop thousands of homes in this
community at base prices ranging from approximately $80,000 to over $2 million,
and the base prices of the Company's homes in Weston have ranged from $230,000
to $425,000. Arvida controls all of the land in Weston and selected the Company
as one of ten preferred builders which home buyers may select to build their
individual single-family home.
CORAL SPRINGS/PARKLAND. Coral Springs/Parkland is a master-planned
community being developed by WCI Communities in northeast Broward County's Coral
Springs. This community of 35,000 homes features excellent schools, extensive
parks and other recreational amenities. WCI Communities controls all of the land
in this community and selected the Company as one of twenty preferred builders
which home buyers may select to build their individual single-family home. Base
home prices in this community range from approximately $105,000 to $1,000,000.
Since 1989, the Company has built 205 homes in this community and currently has
a backlog of 10 homes there.
WELLINGTON LAKES. Wellington Lakes is a community located on Lake
Wellington in Palm Beach County, which will feature a wide array of recreational
amenities, including a community pool, cabana bathhouse located
-29-
<PAGE>
on Lake Wellington, and water sports facilities. In 1996, the Company acquired
this 25-acre community and anticipates acting as the exclusive developer and
homebuilder in constructing 125 single-family cluster homes. The Company
anticipates that its homes in Wellington Lakes will be offered at base prices
ranging from approximately $100,000 to $140,000. Wellington Lakes is surrounded
by completed neighborhoods with homes offered in a higher price range and also
features water views.
EGRET WALK AND PELICAN POINTE AT THE VILLAGE OF PEMBROKE PINES. In
March, 1996, the Company purchased a multi-use parcel encompassing 134
developable acres, which includes Egret Walk and Pelican Pointe at the Village
of Pembroke Pines in Broward County. Of such 134 acres purchased, the Company
resold to other developers (i) a 29-acre parcel, on which a 300,000 square foot
shopping center is being constructed and (ii) a 26-acre parcel, on which a
468-unit apartment complex is being developed. The remaining property has been
subdivided into enclaves which include two single-family residential
subdivisions known as Pelican Pointe and Egret Walk which the Company is
developing. Pelican Pointe will be comprised of 464 townhouses expected to be
offered at base prices ranging from approximately $77,000 to $110,000, and will
offer residents a central recreational island, which will include tennis courts,
a recreational building, swimming pool and cabana/bathhouse. Egret Walk will be
a gated neighborhood modeled after the community the Company is developing at
Parkside at Spring Valley and will be comprised of 114 patio homes at base
prices anticipated to range from approximately $130,000 to $167,000. In
connection with this acquisition, the Company also obtained and exercised an
option to acquire a 10-acre commercially-zoned parcel and an additional six-acre
site on which the Company will build 108 of the 464 townhouses in Pelican
Pointe. The Company exercised this option in July 1996. The Company intends to
resell this commercial parcel to another developer in fiscal 1997. The Company
expects to begin the sales program for Pelican Pointe and Egret Walk in
September, 1996.
CARLYLE CLUB LUXURY APARTMENT HOMES. Carlyle Club Luxury Apartment Homes
is situated on 9.8 acres of land in Plantation, Florida, and will consist of a
gated community with 150, one, two and three bedroom apartment homes in five
separate, three-story courtyard buildings. Apartments will be offered for lease
to the public and will provide a wide range of amenities, including a carport
for each apartment, a swimming pool with a large deck and a jacuzzi, and a
club/recreation building, containing a media room, a business center, management
and leasing offices, a bar and kitchen area and exercise facilities. The Company
began construction of this community in November 1995 and intends to complete
construction in October 1996. The Company anticipates that substantially all of
these apartments will be leased by March, 1997, and is already engaged in
preliminary discussions with a number of institutional investors for the resale
of all five of these buildings. Monthly rental rates for these homes range from
$750 to $1,500.
PINEHURST CLUB LUXURY APARTMENT VILLAS. The apartment project is
situated on a 7.8-acre parcel in Hollywood in Broward County and will consist of
a gated community with 196, one, two and three bedroom apartment homes in seven
separate, three-story courtyard buildings. Apartments will be offered for lease
to the public and will include use of a wide range of amenities, including 60
covered parking spaces for rental, an oversized swimming pool with a large deck
and jacuzzi, and a club/recreation building, containing a media room, a business
center, management and leasing offices, a bar and kitchen area, exercise
facilities and a full size air conditioned racquetball court. The Company began
construction of this community in November 1995 and intends to complete
construction in October 1996. The Company anticipates that substantially all of
these apartments will be leased by March, 1997, and is already engaged in
preliminary discussions with a number of institutional investors for the resale
of all seven of these buildings. Monthly rental rates for these homes range from
$700 to $1,200.
CAPE CORAL. The Company has entered into a letter of intent to acquire
several parcels of land in Cape Coral in Lee County, Florida, which is near Fort
Myers. Subject to a variety of conditions, including the receipt of governmental
development approvals, the closing is expected to occur in mid-1997. The Company
anticipates that it will build approximately 50 single-family homes in the
community, with base prices starting at approximately $100,000. This community
will be targeted to the move-up and senior markets, and features boating, golf,
parks and other amenities.
-30-
<PAGE>
BANYAN BAY. The Company has entered into a letter of intent to acquire a
251-acre, single-family home community in Martin County, which is north of Palm
Beach County. Subject to a variety of conditions, including the receipt of
governmental development approvals, the closing is expected to occur in
mid-1997. The Company anticipates that it will be the exclusive homebuilder for
all of the approximately 700 single-family homes planned for this community,
with base prices starting at approximately $100,000. This community will be
targeted to senior buyers, and will feature a clubhouse, a marina and other
amenities.
ALOMA WOODS. The Company has entered into a letter of intent to acquire
212 single-family homesites in Winter Park, an established suburb of Orlando.
This parcel is located in an existing community known as Aloma Woods, and all
zoning and land use approvals have already been obtained. Subject to certain
conditions, the closing is expected to occur in stages from September, 1996
through June, 1999. The Company anticipates that it will be the exclusive
homebuilder for all 212 of these homes, with base prices starting at
approximately $120,000. This community will be targeted to the move-up buyer,
and will feature a gated community, a large lake and boat ramp and tennis
facilities.
LAND ACQUISITION
The Company aggressively identifies and takes advantage of opportunities
to acquire land in a number of markets where demographic trends, housing
preferences, competitive factors and related economic data are indicative of
opportunities for successful construction and sale of the Company's homes and
investment-grade apartments and for the short-term sale of portions of certain
of the Company's parcels to other residential and commercial builders.
The Company's approach to land-acquisition requires that before a local
market can be approved for development, the Company's methodology must be used
to evaluate whether that market satisfies the Company's quantitative and
qualitative selection criteria and is therefore deemed favorable for successful
development. This local market approval process includes a detailed analysis of
a variety of factors as they pertain to the Company's primary target market of
move-up and senior buyers, including demographic trends, historical and
projected growth in housing starts, job creation and personal income, housing
preferences, projected supply and demand for competitive products, acquisition
and development costs as they relate to projected sales prices, and related
national, regional and local economic factors. Only after a particular local
market is approved for development will the Company's senior management team
consider acquiring particular parcels of land within that local market. The
Company believes that the development of relationships between members of the
Company's senior management team and key participants in each local market as
well as personal observation and analysis of a local market and particular
parcels by members of the Company's senior management team is critical to
identifying and capitalizing on strategic land acquisition opportunities.
Before acquiring a particular parcel of land within an approved local
market which the Company's senior management team has preliminarily identified
as an acquisition candidate, the Company undertakes simultaneous (i)
comprehensive feasibility, development and marketing studies and (ii) detailed
financial analyses. These studies and analyses evaluate a variety of factors
with the principal objective of determining whether the projected rate of return
on capital for the parcel justifies the anticipated level of risk. These studies
and analyses include the development of a comprehensive master design theme and
marketing concept. The Company also evaluates whether conditions are favorable
for both the short-term profitable resale of a portion of the acquired land to
other residential and commercial builders and the development and construction
of homes (and, where appropriate, investment-grade apartments) by the Company on
the remainder of the land. In conducting these studies and analyses, the Company
evaluates a wide variety of qualitative and quantitative factors including (i)
the competitive environment, and the projected supply and demand for particular
styles and price ranges of homes, (ii) acquisition and development costs as they
relate to the projected market for fully-developed residential and commercial
communities, (iii) the distinctiveness and attractiveness of the parcel (e.g.,
potential for golf course and waterfront living and other desirable lifestyles
and recreational amenities, and proximity to recreational amenities and other
desirable communities), (iv) compatibility of the Company's product line with
the desired lifestyles of targeted buyers, (v) access to major thoroughfares,
(vi) availability of desirable schools, (vii) where applicable, the market for
institutional-grade apartments for purchase by
-31-
<PAGE>
institutional investors and (viii) the extent to which necessary zoning, land
use, building permit and other governmental entitlements and approvals have been
received. The Company's detailed financial analyses of a particular parcel use
the Company's established financial criteria and homebuilding models to evaluate
whether profitable development is likely. Particular emphasis in these financial
analyses is given to whether the projected return on investment justifies the
anticipated level of risk. While these studies and analyses are designed to
assure prudent land acquisitions, the Company is able to conduct them quickly so
as to enable the Company to act swiftly in taking advantage of significant
opportunities. In practice, even if a particular parcel satisfies these
selection criteria, it is acquired only if the Company's senior management team
believes that, based on its years of experience, relationships with key real
estate market participants, and personal observation of the parcel and its
surroundings, the parcel is desirable for acquisition and development.
The Company's land acquisition program is also geared towards
undertaking projects with shorter life cycles in an effort to improve the rate
of return on capital and mitigate the risks inherent in land ownership and
development. The Company maintains a variety of policies designed specifically
to shorten project life cycles, including (i) acquiring land where rapid growth
is projected, (ii) acquiring land only if it has received (or the Company is
reasonably certain that it will soon receive) all necessary zoning, land use,
building permit and other governmental entitlements and approvals, (iii) where
possible, acquiring land through the utilization of options and other similar
non-recourse purchase agreements and (iv) conducting hazardous waste and other
environmental tests and surveys prior to acquiring land. As a result, the
Company is often able to begin marketing for a community soon after it acquires
a parcel of land.
The Company seeks to develop strategic alliances with leading real
estate and institutional investors to further the Company's ability to
opportunistically acquire interests in distinctive niche properties in growth
markets. The Company believes that the successful implementation of this
strategy will also allow it to obtain control over desirable properties while
minimizing its capital investment and the related land-ownership risks and
carrying costs. Effective development of these relationships enhances the
Company's ability to act swiftly in taking advantage of acquisition
opportunities on a greater scale, while mitigating and diversifying the land
ownership risks associated with such acquisitions.
The Company generally seeks to control a homesite inventory of
two-to-four years based on anticipated absorption rates, by options and other
non-recourse arrangements and by outright purchase.
The following table sets forth a summary of the Company's land/homesite
position at June 30, 1996:
Finished homesites owned by the Company..................... 714
Homesites under development owned by the Company............ 749
----
Total owned homesites................................ 1463
Homesites available under homesite option and similar
contracts................................................ 166
----
Total land/homesite position......................... 1629
====
CONSTRUCTION AND COST CONTAINMENT
The Company generally acts as the general contractor for all of its
single-family home construction and utilizes subcontractors for site improvement
and construction. The Company retains independent firms to act as general
contractor for its multi-family home construction. Company employees monitor
site planning for the construction of each community. They also participate in
all material design and building decisions and coordinate the activities of
independent general contractors, subcontractors and suppliers and subject
general contractors' and subcontractors' work to quality and cost controls.
Finally, they monitor compliance with zoning, land use, building, entitlement
regulations and other governmental requirements and coordinate the closing
process. The services of independent architectural, design, engineering and
other consulting firms are engaged throughout this process.
The Company has implemented a broad array of policies and procedures
with its suppliers and subcontractors which are designed to facilitate
cost-effective development of quality homes in a timely manner.
-32-
<PAGE>
Whenever possible, the Company negotiates agreements for price and volume
discounts with national, regional or local suppliers of materials for itself and
its subcontractors. The Company does not have any long-term contractual
commitments to any of its subcontractors or suppliers, but often obtains
long-term, fixed price commitments from them. Nonetheless, the Company is still
subject to variations in the price of materials which affect the homebuilding
industry in general. The Company generally requires its subcontractors and
suppliers to agree to standard terms such as frequency of payment and
maintenance of insurance. The Company also utilizes multiple subcontractors and
suppliers to minimize cost increases. The Company does not maintain significant
inventories of construction materials, except for homes under construction and a
limited amount of other materials.
The Company has developed a unique and innovative system which enables
it to offer a broad variety of architectural designs and options to satisfy
customer requirements, while maintaining critical operating efficiencies. For
each price range of homes within a community, the Company creates general
architectural designs (which are consistent with the master design theme and
marketing concept for the community), each of which may be semi-customized by
the home buyer by selecting from a menu of standardized value-based option
packages. The Company generally obtains pre-approval from local zoning and
building departments for each of these architectural designs and standardized
option packages, thereby streamlining the process for obtaining building permits
for each particular home. By implementing this system, the Company succeeds in
providing the home buyer with a variety of designs and standardized option
packages which the Company's internal marketing data suggests is more than broad
enough for the targeted home buyer, while (i) minimizing costly delays in the
issuance of building permits and (ii) avoiding an unduly broad combination of
designs and options which is unnecessary, unmanageable and not cost effective.
The Company develops and implements a number of policies and procedures
designed to facilitate effective communication of each customer's
construction-related desires to the Company's personnel throughout the pre-sale,
sale, closing and post-closing periods. The Company encourages home buyers to be
involved with the design staff and field personnel in all phases of design and
construction. The Company's personnel also maintain responsibility for
pre-closing, quality control inspections and responding to customers'
pre-closing and post-closing needs. In particular, the Company's field personnel
seek to complete all items on a buyer-prepared "punch-list" simultaneously with
the delivery of each home. Additionally, each home owner is surveyed
periodically to ensure that any construction-related matters arising after the
closing are promptly taken care of. The Company believes that the prompt and
courteous response to each home buyer's needs during and after construction
reduces pre-closing expenses and post-closing repair costs, enhances the
Company's reputation for quality and service, and ultimately leads to
significant repeat and referral business from the real estate community and home
buyers.
Additionally, to mitigate the risk of holding finished homes and the
related carrying costs, the Company generally does not begin construction until
each of the following steps is completed (i) the customer has chosen a model,
signed a sales contract and provided a cash deposit, (ii) plans have been
finalized and permits have been received, (iii) firm competitive "fixed-price"
bids have been obtained from subcontractors and "fixed-price" contracts have
been entered into with subcontractors and (iv) mortgage approval has been
obtained by the customer from a bank or mortgage company.
Construction time for the Company's homes depends on the time of year,
availability of labor, materials and supplies and other factors. The Company
typically completes the construction of a home within four to eight months from
commencement of construction.
MANAGEMENT INFORMATION SYSTEMS
From its inception, the Company has continually developed and
implemented uniform management information systems and procedures designed to
increase margins, assure quality and customer satisfaction and reduce cost
overruns and construction delays. A primary example is the Company's automated
computerized management information system, which fully integrates the Company's
purchasing, construction management, marketing, sales and accounting functions
into a common data base to maintain the integrity of the data. This
-33-
<PAGE>
system uses a proven software package developed specifically for the
homebuilding industry and customized to meet the Company's particular operating
needs. Critical path techniques are employed in this system to detail the
integral steps necessary for the complete construction of a home and to set
forth specific milestones and the necessary timing to achieve these milestones,
allowing the Company to carefully track the progress of the construction of each
of its homes. All data is updated on a daily basis resulting in current
management information by community and by individual home to increase the
likelihood of, among other things, timely completion of homes under
construction. At any time during the construction phase, the Company can provide
the home buyer with information regarding the status of construction and
anticipated delivery dates. The Company also utilizes specialized software
packages for special applications that range from feasibility analyses to
construction monitoring and scheduling. These management information systems
also assist the Company in monitoring expenditures and coordinating
subcontractors and suppliers and the delivery of building materials to further
control costs of construction. This system and the related procedures have been
developed to handle the Company's anticipated growth by providing the capability
to significantly increase the system's capacity in a short period of time at a
moderate incremental cost. Additionally, all of the Company's offices are
electronically connected through dedicated telephone lines and a wide-area
computer network. The Company also has a full complement of experienced
financial personnel to manage these systems and procedures.
SALES AND MARKETING
The Company takes an innovative approach to marketing, using
non-traditional as well as traditional advertising vehicles and media sources to
maximize the impact of its marketing budget. The Company believes that this has
made it a market leader in the industry for unique campaigns and successful
special events. In 1995, the Company was awarded 23 PRISM (Professional
Recognition in Sales & Marketing) awards by the Florida's Gold Coast Builders
Association, of which 12 were for advertising excellence and outstanding
creativity in promotions, marketing and sales merchandising.
Foremost in Transeastern's marketing strategy is the development of
brand-name awareness for Transeastern and its reputation for quality
construction, customer service and outstanding value. The Company places an
emphasis on ensuring its logo and slogan are integral parts of all advertising
and marketing efforts. The Company also includes its "Built With Pride" tag line
on all ads, community signage, sales centers and collateral materials. Major
promotions are planned for the entire Company and specific communities during
peak seasonal shopping periods annually, such as a month-long event that
featured a free car, boat or other luxury item with each new home purchase. The
Company creates each community with a comprehensive master design theme and
marketing concept which is carried throughout sales, merchandising and
advertising for the life of the project. By constantly emphasizing the Company's
name and this master design theme in all advertising, the Company continually
attempts to reinforce brand-name awareness.
The Company seeks to increase the effectiveness of its annual marketing
budget by employing cooperative arrangements with leading regional retailers.
This cooperative advertising effort reduces the Company's costs for its entire
marketing program while increasing its effectiveness. The Company utilizes a
broad variety of marketing vehicles, including newspapers, direct mail, the
internet, billboards, radio, corporate sponsorships and home shows. The Company
also relies heavily on customer referrals and repeat purchases for its business.
The Company also builds model homes, many of which have won awards for
display to prospective home buyers. The Company uses highly sophisticated model
merchandising techniques and professional designers to create models which
appeal to target buyers in the specific market area. Designs are planned down to
the smallest detail, including personalized scents and music piped in
continuously in every model home and tailored to the specific buyer profile for
which that model is designed.
The Company sells its homes through a staff of approximately 15 sales
associates who typically work from sales offices located at model homes in each
community. Company sales personnel assist prospective home buyers by providing
them with floor plans, information on prices, options and custom features and
tours of model homes. The Company trains its sales personnel on the availability
of financing, construction
-34-
<PAGE>
schedules, marketing and advertising plans. Keynote speakers and sales trainers
are brought in periodically to conduct personalized training sessions, seminars
and workshops geared toward improving sales effectiveness. Sales personnel are
typically compensated on straight commission with a small draw, and are
evaluated monthly to determine whether they are meeting individual sales goals.
The Company seeks to retain its sales personnel on a long-term, rather
than community-by-community basis, in order to reduce training costs and ensure
a more experienced sales force. The Company also pays brokers and agents a fee
for referring buyers. In order to assist the Company's sales personnel, it
maintains an ever-increasing and sophisticated data base of prospects derived
from sales registration questionnaires used in every sales center. This data
base also helps the Company to generate demographic and market profile
information about its customers.
Sales of the Company's homes generally are made pursuant to a standard
sales contract which requires a down payment of 10% of the sales price. The
contract includes a financing contingency which permits the customer to cancel
in the event mortgage financing at prevailing interest rates is not obtainable
within a specified period, typically four to six weeks, and may include other
contingencies, such as the sale of an existing home. The Company includes a home
sale in its sales backlog upon execution of the sales contract and receipt of
the initial down payment. The Company does not recognize revenue upon the sale
of a home until the home is closed and title passes.
The Company also seeks to retain exclusive sales agency rights for homes
within its communities which are built by other builders to whom the Company
sold the underlying land. By doing so, the Company is able to capture additional
revenues in the development process and ensure quality and consistency in the
sales and marketing of all homes within its communities.
CUSTOMER FINANCING AND TITLE SERVICES
The Company seeks to assist its home buyers in obtaining financing by
arranging with mortgage lenders to offer qualified buyers a variety of financing
options. By making available an array of attractive mortgage programs to
qualified buyers, the Company is able to better coordinate and expedite the
entire sales process by ensuring that the mortgage commitments are received and
the closings take place on a timely and efficient basis. The Company utilizes a
network of preferred financial institutions with representatives located at
sales centers within its communities to assist customers in the purchase of
their homes. Substantially all home buyers utilize long-term mortgage financing
to purchase a home. The Company attempts to minimize potential risks relating to
customer-financing by securing mortgage financing commitments that lock in the
availability of funds and interest costs at specified levels. Although the
Company does not currently underwrite or otherwise provide any mortgage
financing, it is exploring opportunities to enter into this business with an
existing mortgage broker. By providing mortgage brokerage services, the Company
positions itself to capture revenues from an ancillary business.
As of the closing of the Offering, the Company intends to provide title
insurance services through a wholly-owned subsidiary. Management currently
anticipates that this subsidiary will be an approved agent of one or more
nationally-recognized title insurance underwriters. The Company anticipates that
its provision of title insurance services will enable it to capture revenues
from an additional ancillary business which is complementary to its core
homebuilding activities.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
The Company and its competitors are subject to various local, state and
federal statues, ordinances, rules and regulations concerning zoning, land use,
building design, construction and similar matters including, permitted land uses
and levels of density in order to limit the number of homes that can ultimately
be built within the boundaries of a particular community, the installation of
utility services such as water and waste disposal and the dedication of acreage
for open space, parks, schools and other community purposes. A number of
authorities in Florida (including Broward County and Palm Beach County) and in
other states have imposed impact
-35-
<PAGE>
fees as a means of defraying the cost of providing certain governmental services
to developing areas, and the amount of these fees has increased significantly
during recent years. Other state and local laws require the use of specific
construction materials which reduce the need for energy-consuming heating and
cooling systems or are expected to withstand certain wind speeds. As a result of
Hurricane Andrew, Dade County and Broward County enacted more stringent building
codes which increased costs of construction. The State of Florida and other
states and counties and cities within the state have also, at times, declared
moratoriums on the issuance of building permits and imposed other restrictions
in areas where the infrastructure (e.g., roads, schools, parks, water and sewage
treatment facilities and other public facilities) does not reach minimum
standards, all of which could have a material adverse effect on the Company's
business. To date, the governmental approval processes and the restrictive
zoning and land use, moratoriums and allocation system discussed above have not
had a material adverse effect on the Company's development activities, in large
part because the Company maintains a general policy of acquiring land only if
zoning, land use, building permits and other entitlements and governmental
approvals have been (or the Company is reasonably certain will soon be)
obtained.
To minimize development risks, the Company restricts land purchases to
tracts that have (or that the Company is reasonably certain will soon have) all
necessary zoning, land use, building permit and other entitlements and
governmental approvals. A variety of permits and other approvals are often
required to complete the residential developments currently being planned by the
Company, including, land development permits (water, sewer, paving and
drainage), sales center permits, model home permits and building permits. The
process of obtaining these permits and other approvals is an ongoing process in
the ordinary course of business that the Company is engaged in as it develops
and constructs homes for its communities. The ability of the Company to obtain
these necessary permits and other approvals for these communities is often
beyond the Company's control, and could restrict the development of otherwise
desirable property. The length of time necessary to obtain these permits and
other approvals increases the carrying costs of unimproved property acquired for
the purpose of development and construction. To date, the Company has not
encountered any material difficulties in obtaining these permits and other
approvals.
Prior to acquiring property, the Company's current practice is to engage
independent environmental consultants to conduct assessments in order to
evaluate the environmental condition of, and potential environmental liabilities
associated with, such property. Such assessments generally consist of an
investigation of environmental conditions at the subject property (not including
soil or groundwater sampling or analysis), as well as a review of available
information regarding the site and publicly available data regarding conditions
at other sites in the vicinity. In certain cases, the Company has conducted
follow up reviews of certain such properties based on such assessments. In
addition to the risks, if any, identified by such assessments, certain
environmental-related laws and regulations that typically apply to real estate
development (for example, wetlands laws and regulations, open space
requirements, and zoning laws and regulations) may result in delays, cause the
Company to incur substantial compliance or other costs and prohibit or severely
restrict development in certain environmentally sensitive regions or areas. To
date, the Company has not been materially adversely affected by any such
environmental matters.
COMPETITION
The homebuilding industry is highly competitive and competition is based
on a number of interrelated factors, including location, reputation, amenities,
design, quality and price. The Company competes with numerous large and small
builders, including some builders with nationwide operations and greater
financial, marketing, sales and other resources. The Company also competes for
home sales with individual resales of existing homes and condominiums, including
sales of homes at deeply discounted prices by lenders and other financial
institutions. Based on its knowledge and analysis of the homebuilding market and
its knowledge of its competitors, management believes that the Company's primary
competitive strengths have been (i) its ability to acquire land which meets its
acquisition criteria at attractive prices, (ii) its ability to provide quality
homes with customized features at a wide range of prices, (iii) the distinctive
location of its communities and the lifestyles and recreational amenities
offered in its communities and (iv) its reputation for customer satisfaction,
service, innovative design and value pricing.
-36-
<PAGE>
The Company also competes with other homebuilders for the acquisition of
land. Competition for available homesites varies from market to market depending
on supply and is based primarily on price, reputation and ability to build,
market and sell homes. Increased competition for land throughout local markets
or for particular parcels may significantly increase acquisition costs and
reduce the Company's ability to profitably build homes in such markets.
BONDS, WARRANTIES AND OTHER OBLIGATIONS
In connection with the development of its projects, the Company is often
required to obtain performance or maintenance bonds or letters of credit which
are generally for the benefit of governmental authorities. Lenders financing
these projects typically provide for these bonds and letters of credit, and
because these bonds and letters of credit do not materially increase these
lenders' exposure, the Company's marginal cost of obtaining these bonds and
letters of credit is not material. The amount of such obligations outstanding at
any time varies in accordance with the Company's pending construction
activities. In the event any such obligations are drawn upon because of the
Company's failure to build its required infrastructure, the Company would be
obligated to reimburse the lenders. At June 30, 1996, there were approximately
$4.0 million in letters of credit and bonds outstanding.
The Company also has obligations to subsidize homeowners' associations
in certain of its residential developments up to a pro rata portion of expenses
based on the number of homesites which have not been closed in such
developments. These obligations are not a material part of the Company's
operating expenses.
The Company provides its home buyers with a limited one-year warranty on
workmanship and building materials. The subcontractors who perform most of the
actual construction, in turn, provide warranties of workmanship to the Company,
and generally are prepared to respond to the Company and homeowner promptly upon
request. To cover its potential warranty obligations, the Company accrues an
estimated amount for future warranty costs.
EMPLOYEES
At June 30, 1996, the Company employed 85 persons of whom 28 were sales
and marketing personnel, 26 were executive, administrative and clerical
personnel and 31 were involved in construction. Additionally, the Company has 15
salespersons who are independent contractors. The Company's employees are not
covered by any collective bargaining agreements; however, certain of the
subcontractors which the Company engages are represented by labor unions or are
subject to collective bargaining agreements. The Company believes that its
relations with its employees and subcontractors are good.
LEGAL PROCEEDINGS
The Company is involved from time to time in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company.
HEADQUARTERS FACILITIES
The Company currently leases approximately 4,800 square feet of office
space, increasing to 5,900 square feet effective October 1, 1996, for its
corporate headquarters in Coral Springs, Florida from University Financial Plaza
Limited, a limited partnership of which Messrs. Arthur Falcone, Philip Cucci and
Edward Falcone (all of whom are executive officers, directors and principal
shareholders of the Company) are partners. The lease has a five-year term
expiring in September 30, 2001, with a renewal option for an additional
five-year term. Pursuant to the terms of the lease, the Company has paid rent of
approximately $18,000, $59,000 and $60,000 for the years ended June 30, 1994,
1995 and 1996, respectively. The minimum lease payment for the year ended June
30, 1997 is approximately $72,000 and increases five percent per year
thereafter. The Company believes that the lease rate reflects the gross market
lease rate for comparable properties. The lessor of this property is an
affiliate of the Company. See "Certain Relationships and Related Transactions."
-37-
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth the names and ages of the directors and
officers of the Company as well as the positions and offices held by such
persons. A summary of the background and experience of each of these individuals
is set forth after the table. The officers of the Company serve at the
discretion of the Company's Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Arthur Falcone 37 President and Chairman of the Board
Philip Cucci 37 Executive Vice President, Chief Operating Officer and Director
Edward Falcone 43 Executive Vice President and Director
Les Campbell 39 Chief Financial Officer
Neil Eisner 41 Vice President of Real Estate Operations
Daniel Andreacci 50 Vice President of Sales and Marketing
Cora DiFiore 39 Vice President of Administration
Tom Pagnotta 36 Vice President of Construction
Richard Phillips 31 Controller
Christopher Allick 42 Director
Anthony Ciabattoni 52 Director
</TABLE>
ARTHUR FALCONE has been President and a director of the Company since its
founding in 1986. Mr. Falcone is responsible for overseeing all aspects of the
Company's business, including managing ongoing projects and locating and
securing land parcels for future acquisition and development. Prior to and
during the early years of the Company's existence, Mr. Falcone owned, operated
or managed over 100 restaurants including McDonalds and Wendy's restaurants as
well as other family style restaurants, in New York, California and Florida. Mr.
Falcone also has owned or managed hotels, office buildings, health clubs and
other properties in Florida, Boston and New York, as well as consulting firms
which advise such restaurants and properties. Mr. Falcone is the brother of
Edward Falcone.
PHILIP CUCCI joined the Company in 1988 as Vice President and became Executive
Vice President and Chief Operating Officer in 1995 and a director in 1993. Mr.
Cucci is currently responsible for all of the Company's operations. Mr. Cucci
has over 17 years of experience in the homebuilding business. Prior to joining
the Company, Mr. Cucci owned and operated companies in Long Island, New York
which built custom homes on the land it acquired and developed. Mr. Cucci also
has owned and operated office buildings for many years. Mr. Cucci holds a
general contractor's license in Florida and is the Company's qualifier. He is a
1981 graduate of C.W. Post College in Brookville, New York.
EDWARD FALCONE has been Executive Vice President of the Company since 1993,
served as Vice President from 1986 to 1993 and has been a director since 1993.
In his current capacity, Mr. Falcone is responsible for
-38-
<PAGE>
coordinating all sales, marketing and advertising of the Company, as well as
locating land parcels for future acquisition and development. Mr. Falcone also
owned, operated or managed over 100 restaurants including McDonalds and Wendy's
restaurants as well as other family style restaurants in New York, Florida and
California. Mr. Falcone has also owned or managed hotels, office buildings,
shopping centers, health clubs and other properties in New York, Florida,
Boston, Texas and Washington, D.C., and has also served in various capacities in
other restaurant-related businesses and consulting firms which advise such
restaurants and other properties. Mr. Falcone is the brother of Arthur Falcone.
LES CAMPBELL joined the Company as Chief Financial Officer in July 1994. From
1984 until 1994, he was employed by Coral Ridge Properties, the developer of
Coral Springs, Florida. Mr. Campbell served as controller with Coral Ridge
Properties for eight years (1986 to 1994) and was director of audits for
Westinghouse Communities, Inc., the parent of Coral Ridge Properties, for two
years (1984 to 1986). Mr. Campbell is a certified public accountant and, from
1978 to 1984, was an auditor with Price Waterhouse in Fort Lauderdale and West
Palm Beach, Florida. Mr. Campbell is a 1977 graduate of Florida State
University.
NEIL EISNER joined the Company during 1994 as Vice President of Real Estate
Operations. Mr. Eisner is responsible for the Company's real estate operations
in Broward County and Palm Beach County. From 1992 to 1994, Mr. Eisner was Vice
President of Real Estate Operations of Weitzer Homes, a residential builder in
Dade County and Broward County. From 1987 to 1992, Mr. Eisner served as Vice
President of Real Estate Operations for a developer of hotels, office parks and
single-family homes in New York. Mr. Eisner is a 1977 graduate of the University
of Maryland, with a Bachelor of Science Degree in Business Administration and
Management.
DANIEL ANDREACCI joined the Company in 1993 as Vice President of Sales and
Marketing. Mr. Andreacci is currently responsible for the Company's marketing
and sales operations in Broward County and Palm Beach County. Over the past 20
years, Mr. Andreacci has been involved in many aspects of the real estate
business, including sales, marketing, development and acquisitions. In 1987, Mr.
Andreacci formed ASC Associates and later the Andreacci Group, both real estate
sales, marketing and consulting firms. Mr. Andreacci attended New York's Pace
College for business administration.
CORA DIFIORE has been Vice President of Administration since 1992. Ms. DiFiore
is responsible for coordinating construction, development and acquisition
financing, for coordinating all residential closings and for managing the
Company's corporate offices. Ms. DiFiore has worked with Arthur Falcone and
Edward Falcone in various administrative capacities for over 17 years, and held
a variety of administrative positions with the Company until being named Vice
President in 1992. Ms. DiFiore is a 1978 graduate of Stony Brook University in
Stony Brook, New York.
TOM PAGNOTTA joined the Company in 1992 as Purchasing Director. He was promoted
to Vice President of Construction in July, 1996. His responsibilities include
monitoring all construction activities, construction budgets and quality
assurance for all projects in Broward County and Palm Beach County. Mr. Pagnotta
was President and owner of Pagnotta Construction Corp. of America from 1987 to
1992. Prior to 1987, Mr. Pagnotta was Vice President of Rolling Hills
Development Corporation. Mr. Pagnotta attended New York Institute of Technology
in New York City.
RICHARD PHILLIPS has been Controller of the Company since August 1995. From 1992
until 1994, Mr. Phillips served as Controller of the Houston division of Lennar
Corporation, one of the largest homebuilders in the United States. Mr. Phillips
is a certified public accountant, and, from 1988 to 1992, was an auditor for
KPMG Peat Marwick in Boston, Massachusetts, and Ft. Lauderdale, Florida. Mr.
Phillips is a 1988 graduate of Northeastern University in Boston, Massachusetts.
CHRISTOPHER ALLICK is an Executive Vice President at Jefferies & Company, Inc.
He is a member of the Corporate Finance Department's Management Committee and a
member of the Executive Committee of Jefferies & Company, Inc. Prior to joining
Jefferies & Company, Inc. in 1990 he was a First Vice president in the Corporate
Finance Department at Drexel Burnham Lambert, Inc. for four years. From 1977
until 1986, Mr.
-39-
<PAGE>
Allick was a member of Dean Witter Reynolds' Corporate Finance Department. Mr.
Allick received an M.B.A./M.A. in Economics from the University of Toronto in
1978 and a B.A. in Economics and English from the University of Colorado in
1976.
ANTHONY CIABATTONI has been a director of the Company since 1995. Mr. Ciabattoni
is the founder of Pacific Business Interiors, one of the largest of Steelcase
furniture supply companies in Southern California. From 1984 until its sale in
1996, Mr. Ciabattoni was the President and CEO of Pacific Business Interiors.
Mr. Ciabattoni also founded Recycled Office Solutions in 1993. This is the
largest re-manufacturer of Steelcase furniture in Southern California. Mr.
Ciabattoni received his Bachelor of Arts Degree from the University of Delaware
in 1967.
BOARD OF DIRECTORS
The Board of Directors of the Company is currently comprised of five
directors. Effective as of the consummation of the Offering, the Board of
Directors has established an audit committee and a compensation committee, both
of which are comprised of Mr. Allick and Mr. Ciabattoni. The audit committee
consists entirely of directors who are not employees of the Company and, among
other things, makes recommendations to the Board of Directors regarding the
independent auditors for the Company, approves the scope of the annual audit
activities of the independent auditors, reviews audit results and has general
responsibility for all auditing-related matters. The compensation committee also
consists entirely of directors who are not employees of the Company. The
compensation committee recommends to the Board of Directors compensation plans
and arrangements with respect to the Company's executive officers and
administers certain employee benefit plans, including the Company's 1996 Stock
Plan. The Company intends to implement a compensation program for non-employee
directors pursuant to which such directors will receive fees and stock options.
Non-employee directors will be entitled to receive $12,000 per year and $500 per
meeting for services as a director plus reimbursement of travel expenses to
board and committee meetings. Pursuant to the Company's 1996 Stock Plan,
non-employee directors automatically are granted non-qualified options to
purchase (i) ________ shares upon the later of their initial election to the
Board of Directors or the adoption of the 1996 Stock Plan and (ii) _____ shares
on the first business day following each succeeding annual meeting of the
Company's shareholders. These options vest one year after the date of issuance,
are exercisable at an exercise price equal to the fair market value of the
Common Stock on the date of grant and have a term of ten years. Directors who
are also employees of the Company will receive no additional compensation for
service as a director other than reimbursement of any travel expenses to attend
meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Offering, the Company had no separate compensation
committee or other committee of the Board of Directors performing equivalent
functions. The Company's Board of Directors carried out this function. Each of
the directors of the Company participated in deliberations concerning executive
compensation.
EXECUTIVE COMPENSATION
The table set forth below sets forth the total compensation earned by
the Company's Chief Executive Officer and the four other most highly compensated
executive officers of the Company for services rendered in all capacities to the
Company for the fiscal year ended June 30, 1996. The Company did not grant any
stock options or restricted stock awards or make any long-term incentive plan
payments to any of these officers during the fiscal year ended June 30, 1996,
and none of such officers executed any stock options during such year.
-40-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ALL OTHER
ANNUAL COMPENSATION COMPENSATION($)
----------------------------------------------------- ---------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)
- ------------------ ---- --------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Arthur Falcone 1996 234,627 0 -- (1)
President and Chairman
of the Board
Philip Cucci 1996 203,051 0 -- (1)
Executive Vice President,
Chief Operating Officer
and Director
Edward Falcone 1996 195,143 0 -- 0
Executive Vice President
and Director
Neil Eisner 1996 100,096 133,922(2) -- 5,600(3)
Vice President of Real
Estate Operations
Daniel Andreacci 1996 82,192 96,657(2) -- 4,800(3)
Vice President of Marketing
and Sales
<FN>
- ----------
(1) In 1996, the Company constructed and sold homes to Messrs. Arthur Falcone and Philip Cucci for amounts equal
to the Company's cost of constructing the homes, including land. See "Certain Relationship and Related
Transactions - Other Arrangements with Affiliates."
(2) Commissions for housing sales.
(3) Car allowance.
</FN>
</TABLE>
LONG-TERM STOCK PLAN
The 1996 Stock Plan was adopted on August 15, 1996. A total of 1,000,000
shares of Common Stock may be issued under the 1996 Stock Plan. The Company has
granted, under the 1996 Stock Plan, subject to the closing of the Offering,
options to purchase 375,000 shares of Common Stock, exercisable at the initial
public offering price set forth on the cover page hereof. Messrs. Arthur
Falcone, Edward Falcone, Philip Cucci, Neil Eisner, and Daniel Andreacci have
been granted options to purchase 92,250, 78,000, 81,083, 33,750 and 24,750
shares of Common Stock, respectively, pursuant to the 1996 Stock Plan. These
options vest over a three-year period.
Pursuant to the 1996 Stock Plan, the Company may grant non-qualified stock
options, not intended to qualify under Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code"), to employees and non-employee directors. The
1996 Stock Plan provides for administration by a Compensation Committee (the
"Compensation Committee") of the Board of Directors. The Compensation Committee
of the Board of Directors will administer the 1996 Stock Plan.
The Compensation Committee will select the plan's participants (excluding
non-employee directors), authorize the grant of options and determine the
exercise price, terms and vesting schedule for options. The
-41-
<PAGE>
Compensation Committee also has the authority to prescribe, amend and rescind
rules and regulations relating to the 1996 Stock Plan, to accelerate the
exercise date of any option, to delegate authority to specific members of a
committee of management, and to interpret the 1996 Stock Plan and make all
necessary determinations in administering the 1996 Stock Plan. All options
granted under the 1996 Stock Plan shall be evidenced by a written agreement,
which shall contain such provisions, including, without limitation, restrictions
upon the exercise of the options as the Compensation Committee shall determine.
Under the 1996 Stock Plan, an option to purchase _____ shares was granted
to each person who was a non-employee director as of the date the 1996 Stock
Plan was adopted and thereafter _____ shares shall be granted to each person who
is a non-employee director on the first business day following the annual
meeting of shareholders of the Company. These options shall vest one year after
the date of issuance and terminate 10 years from the date of the grant to the
participant.
The per share exercise price of an option shall be as determined by the
Compensation Committee, provided that the exercise price of non-qualified stock
options may not be less than fair market value on the date of grant. The
purchase price for shares acquired pursuant to the exercise of an option shall
be as determined by the Compensation Committee and may consist of cash, check,
surrender of other shares of the Company's capital stock or any combination
thereof.
No stock options may be transferred by an optionee other than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order, and, except with respect to a qualified domestic relations
order, during the lifetime of an optionee, the option will be exercisable only
by the optionee. Notwithstanding the foregoing, to the extent permitted by
applicable law and Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Compensation Committee may permit a recipient
of a non-qualified stock option to (i) designate in writing during the
optionee's lifetime a family member or a trust established by the optionee or a
family member (a "Beneficiary"), to receive and exercise the optionee's
non-qualified stock options in the event of such optionee's death or (ii)
transfer a non-qualified stock option to a Beneficiary.
In the event that a participant shall die, become disabled, or terminate
employment with the Company for any reason other than retirement, the
participant shall be able to exercise the vested portion of an option, if any.
In the event a participant shall terminate employment with the Company for any
reason other than death, disability or retirement, the participant shall
immediately forfeit all unvested and unexercisable options, if any, unless
otherwise determined by the Compensation Committee. In the event that a
participant's employment with the Company shall terminate as the result of
death, disability, or retirement, the Compensation Committee may determine, in
its discretion, to vest all or portion of the unvested and unexercised options,
if any. The exercise of any option after termination of employment will be
subject to the condition that the participant not engage in deliberate action
which, as determined by the Compensation Committee, causes substantial harm to
the interest of the Company or constitutes a breach of any obligation of the
participant to the Company. In no case may options be exercised later than the
expiration date of the stock options originally specified in the related written
agreements. In the event of change of control of the Company, all options then
outstanding under the 1996 Stock Plan will become immediately exercisable.
The 1996 Stock Plan will expire in 2006 unless terminated earlier by the
Board of Directors. No options granted under the 1996 Stock Plan can be
exercised more than 10 years from the date of grant. Shares under any
unexercised options that expire or that terminate upon an employee's ceasing to
be employed by the Company become available again for issuance under the 1996
Stock Option Plan.
The 1996 Stock Plan may be amended or terminated by the Board of Directors
without shareholder approval, except that no amendment which increases the
maximum aggregate number of shares which may be issued under the 1996 Stock
Plan, changes the class of persons who are eligible to participate in the 1996
Stock Plan or materially increases the benefits accruing to the participants,
may be made without the approval of the shareholders of the Company. No
amendment or termination of the 1996 Stock Plan will affect previously
-42-
<PAGE>
granted awards under the 1996 Stock Plan without the participant's consent
unless the Compensation Committee determines that such amendment is in the best
interest of the shareholders or the participants.
INDEMNIFICATION AND LIMITED LIABILITY
Pursuant to the Company's Articles of Incorporation, Bylaws and
indemnification agreements between the Company and each of its officers and
directors the Company is obligated to indemnify each of its directors and
officers to the fullest extent permitted by law with respect to all liability
and loss suffered, and reasonable expense incurred, by such person in any
action, suit or proceeding in which such person was or is made or threatened to
be made a party or is otherwise involved by reason of the fact that such person
is or was a director or officer of the Company. The Company is also obligated to
pay the reasonable expenses of indemnified directors or officers in defending
such proceedings if the indemnified party agrees to repay all amounts advanced
should it be ultimately determined that such person is not entitled to
indemnification.
The Company maintains an insurance policy covering directors and officers
under which the insurer agrees to pay, subject to certain exclusions, for any
claim made against the directors and officers of the Company for a wrongful act
for which they may become legally obligated to pay or for which the Company is
required to indemnify its directors or officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CORPORATE HEADQUARTERS
The Company currently leases approximately 4,800 square feet of office
space, increasing to 5,900 square feet effective October 1, 1996, for its
corporate headquarters in Coral Springs, Florida from University Financial Plaza
Limited, a limited partnership of which Messrs. Arthur Falcone, Philip Cucci and
Edward Falcone (all of whom are executive officers, directors and principal
shareholders of the Company) are partners. The lease has a five-year term
expiring in September 30, 2001, with a renewal option for an additional
five-year term. Pursuant to the terms of the lease, the Company has paid rent of
approximately $18,000, $59,000, and $60,000 for the years ended June 30, 1994,
1995 and 1996, respectively. The minimum lease payment for the year ended June
30, 1997 is approximately 72,000 and increases five percent per year thereafter.
The Company believes that the lease rate reflects the gross market lease rate
for comparable properties in the area.
TRANSACTIONS WITH JEFFERIES & COMPANY, INC.
During 1995, the Company paid a $500,000 fee to Jefferies & Company, Inc.,
in which Christopher Allick, a director of the Company, serves as Executive Vice
President, to perform due diligence relating to prospective real estate
acquisitions and financial advisory services for the Company. The Company was
reimbursed by an unrelated third party for such fee in September 1995.
The Company also paid to Jefferies & Company, Inc. a fee of $424,819 for
services rendered in facilitating the Company's repurchase in 1995 of (i) 21,258
shares of Series A Preferred Stock and related warrants to purchase 2,057,692
shares of Common Stock, (ii) $2,963,084 of senior subordinated project financing
notes and (iii) $2,500,000 of senior subordinated project financing acquisition
notes. See Notes (11), (12) and (13) to the Company's Consolidated Financial
Statements for the years ended June 30, 1995 and 1994.
During 1995, Jefferies & Company, Inc. also loaned to the Company
$1,000,000 pursuant to senior subordinated project financing notes bearing
interest at 18% per annum and payable quarterly. Such loan has been repaid in
full.
CERTAIN LOANS
In April 1993, a company controlled by Robert Falcone, the brother of
Messrs. Arthur and Edward Falcone, provided the Company with a $100,000 loan,
which was used in connection with the acquisition of Coopers
-43-
<PAGE>
Pointe. The loan had a balance on June 30, 1996 of $70,000. Interest is payable
monthly at an annual rate of 12% and principal is due on demand.
In April 1994, Robert Falcone provided the Company with a $200,000 loan,
which was used in connection with the acquisition of Eagle Landing. The loan had
a balance on June 30, 1996 of $200,000. Interest on the loan is payable monthly
at an annual rate of 10% and principal is due on demand.
In September 1995, Robert Falcone provided the Company with a $100,000
loan, which was used in connection with the acquisition of Aberdeen. The loan
had a balance on June 30, 1996 of $100,000. Interest is payable monthly at an
annual rate of 12% and principal is due in September 1997.
In January 1996, Anthony Ciabattoni, a director of the Company, provided
the Company with a $600,000 loan, which was used for working capital by the
Company. The loan had a balance on June 30, 1996 of $600,000. The loan bears
interest at an annual rate of 13% and principal is due in October 1996.
In June 1996, Anthony Ciabattoni provided the Company with a $1,000,000
loan, which was used by the Company to exercise its option to acquire additional
property at the Village of Pembroke Pines. The loan had a balance on June 30,
1996 of $1,000,000. The loan bears interest at an annual rate of 13% and
principal is due in November 1996.
In September 1994, Arthur Falcone provided the Company with a $124,000
loan, which was used for working capital by the Company. The loan had a balance
on June 30, 1996 of $124,000. Interest on the loan is payable monthly at an
annual rate of 11% and principal is due on demand.
In September 1994, Edward Falcone provided the Company with a $156,512
loan, which was used for working capital by the Company. The loan had a balance
on June 30, 1996 of $156,512. Interest on the loan is payable monthly at an
annual rate of 11% and principal is due on demand.
In September 1994, Philip Cucci provided the Company with a $75,997 loan,
which was used for working capital by the Company. The loan had a balance on
June 30, 1996 of $75,997. Interest on the loan is payable monthly at an annual
rate of 11% and principal is due on demand.
REGISTRATION RIGHTS
The Common Stock issued upon exercise of the Warrants issued in connection
with the issuance of the Series A Preferred Stock and the Series B Preferred
Stock and the Common Stock issued upon exercise of any Contingent Warrants
carries certain incidental (i.e., piggyback) rights to participate in certain
subsequent registrations of shares of Common Stock by the Company for sale to
the public. Additionally, Anthony Ciabattoni and Christopher Allick have been
granted certain demand registration rights with respect to the Common Stock
owned by them.
EXERCISE OF WARRANTS
All holders of the Company's outstanding Warrants as of June 30, 1996
converted such Warrants into Common Stock prior to the consummation of the
Offering. In connection therewith, the holders of Warrants issued in connection
with the Series A Preferred Stock and Series B Preferred Stock agreed to sell
certain of their shares of Common Stock in the Offering, to vote in favor of
certain of the transactions contemplated hereby, to modify certain of their
registration rights and to not sell or otherwise dispose of any of their shares
of Common Stock for a period of six months from the date of the Offering without
the consent of the Representative. The individuals to whom the Contingent
Warrants may be issued also agreed to sell certain of their shares of Common
Stock in the Offering, to modify certain of their registration rights and to not
sell or otherwise dispose of any of their shares of Common Stock for a period of
six months from the date of the Offering without the consent of the
Representative.
OTHER ARRANGEMENTS WITH AFFILIATES
In 1996, the Company constructed and sold homes to Messrs. Arthur Falcone
and Philip Cucci. The homes were sold for amounts equal to the Company's cost of
constructing the homes, including land. In connection with the sales, the
Company accepted unsecured notes aggregating $215,873 from Messrs. Arthur
Falcone and Philip Cucci. The loans to Messrs. Arthur Falcone and Philip Cucci
will be forgiven prior to the
-44-
<PAGE>
consummation of the Offering, in accordance with the terms and conditions
previously established by the Company's Board of Directors. The loans are
repayable two years form the date of closing and bear interest at the rate of
5.88% per annum. The Company was owed an additional $67,449 on the home sold to
Mr. Arthur Falcone as of June 30, 1996, which was repaid in July, 1996.
-45-
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock immediately prior to and
immediately following the Offering by (i) each person or entity who is the
beneficial owner of five percent or more of the outstanding shares of Common
Stock, (ii) each director and named executive officer of the Company, (iii) all
directors and executive officers of the Company as a group and (iv) all
shareholders of the Company offering Common Stock in the Offering (the "Selling
Shareholders"). Except as set forth in the notes to the table, the business
address of each five percent holder is the Company's corporate address. As
described in the notes to the table, voting and/or investment power with respect
to certain shares of Common Stock is shared by the named individuals.
Consequently, such shares are shown as beneficially owned by more than one
person.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
------------------------ --------------------------
NAME AND ADDRESS NUMBER PERCENT NUMBER OF SHARES NUMBER PERCENT
OF BENEFICIAL OWNER OF SHARES OF SHARES BEING OFFERED OF SHARES OF SHARES
------------------- --------- --------- ---------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Arthur Falcone 1,981,669 26.3 --(1) 1,981,669(1) 20.27
Philip Cucci 1,981,669 26.3 --(1) 1,981,669(1) 20.27
Edward Falcone 1,981,669 26.3 --(1) 1,981,669(1) 20.27
Anthony Ciabattoni 356,900 4.7 30,000 326,900 3.3
John Cucci 5,363 .1 1,000 4,363 .1
Bill Mitchell 5,363 .1 1,000 4,363 .1
Robert J. Falcone, trustee 122,407 1.6 30,000 92,407 .9
Christopher Allick 34,292 .4 18,000 16,292(2) .2
Andrew Whittaker 9,799 .1 5,143 4,656(3) .1
David F. Eisner 19,590 .3 10,283 9,307(4) .1
David J. Losito 9,799 .1 5,143 4,656(3) .1
Handler Family Trust 97,982 1.3 51,431 46,551(5) .5
Daniel Andreacci 4,734 .1 1,162 3,572 .1
Brancaleone Family Partnership 75,677 1.0 18,579 57,098 .6
Albert Bruno 47,298 .6 11,611 35,687 .4
Les Campbell 4,734 .1 1,162 3,572 --
Phillip J. Ciabattoni 5,671 .1 1,392 4,279 --
Otto Claricurzio 4,734 .1 1,162 3,572 --
Audrey Cohen 18,919 .3 4,645 14,274 .1
Neil Eisner 4,734 .1 1,162 3,572 --
Kenneth Ginsberg 28,378 .4 6,967 21,411 .2
David W. Gove 9,458 .1 2,322 7,136 .1
Larry T. Nicholson 4,733 .1 1,162 3,571 --
Bruce and Kim Phillips 11,352 .1 2,787 8,565 .1
Anthony Prezzamolo 18,919 .3 4,645 14,274 .1
Ray Stromback 3,787 .1 930 2,857 --
Stephen R. Day 4,733 .1 1,162 3,571 --
Issac Abolafia 18,919 .3 4,645 14,274 .1
Anthony C. Musto 18,919 .3 4,645 14,274 .1
Bruce R. and Jody A. Johnson 33,112 .4 8,129 24,983 .3
Clay S. Cunningham 4,725 .1 1,160 3,565 --
Albert A. DiClemente 4,725 .1 1,160 3,565 --
Neal Katz 4,725 .1 1,160 3,565 --
Brooke Jones 4,725 .1 1,160 3,565 --
-46-
<PAGE>
John Murphy 3,779 .1 928 2,851 --
Marc J. Spizzirri 4,725 .1 1,160 3,565 .1
DuRay E. Stromback, trustee 4,725 .1 1,160 3,565 .1
Ray W. and Evelyn M. Stromback
living trust 3,779 .1 928 2,851 --
John & Irene Passarelli 28,378 .4 6,967 21,411 .2
Philip J. Weiss, trustee 9,467 .1 2,324 7,143 .1
Arthur J. Falcone, Sr. 6,618 .1 1,624 4,994 .1
--------- ---- ------- -------- --
All directors and
executive officers as a
group (11 persons) 7,005,684 93.6% 250,000 6,755,684 69.1
========= ==== ======= ========= ====
<FN>
- ----------
(1) Intends to sell 62,500 shares if the over-allotment option is exercised in full.
(2) Intends to sell 7,500 shares if the over-allotment option is exercised in full.
(3) Intends to sell 2,143 shares if the over-allotment option is exercised in full.
(4) Intends to sell 4,284 shares if the over-allotment option is exercised in full.
(5) Intends to sell 21,430 shares if the over-allotment option is exercised in full.
</FN>
</TABLE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common
Stock. No predictions can be made as to the affect, if any, that market sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock of the Company in the public market after the lapse of the
restrictions described below, or the potential of such sales, could materially
adversely affect the prevailing market prices for the Common Stock and the
ability of the Company to raise equity capital in the future.
Upon completion of the Offering, the Company will have 9,775,419 shares of
Common Stock outstanding (9,962,919 if the Underwriters' over-allotment option
is exercised in full, assuming that half of the shares sold under the
over-allotment option are sold by the Company with the remaining half being sold
by certain Selling Shareholders). All of the 2,500,00 shares of Common Stock
offered hereby (2,875,000 if the Underwriters' over-allotment option is
exercised in full), will be freely tradeable without restriction or further
registration under the Securities Act, unless purchased by "affiliates" of the
Company, as that term is defined in Rule 144, described below. All of the
7,275,419 remaining outstanding shares of the Company's Common Stock are
"restricted securities" as that term is defined in Rule 144, as they were issued
by the Company in private transactions not involving a public offering.
In general, under Rule 144 as currently in effect, any affiliate of the
Company or any person (or persons whose shares are aggregated in accordance with
Rule 144) who has beneficially owned Common Stock which is treated as restricted
securities for at least two years would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the outstanding shares of Common Stock (approximately 97,754 shares based upon
the number of shares outstanding after the Offering) or the reported average
weekly trading volume in the Common Stock during the four weeks preceding the
date on which notice of such sale was filed under Rule 144. Sales under Rule 144
are also subject to certain manner of sale restrictions and notice requirements
and to the availability of current public information concerning the Company. In
addition, affiliates of the Company must comply with the restrictions and
requirements of Rule 144 (other than the two-year holding period requirements)
in order to sell shares of Common Stock that are not restricted securities (such
as Common Stock acquired by affiliates in market transactions). Further, if a
period of at least three years has elapsed from the date restricted securities
were acquired from the Company or an affiliate of the Company, a holder of such
restricted securities who is not an affiliate at the time of the sale and who
has not been an affiliate for at least three months prior to such sale would be
entitled to sell the shares immediately without regard to the volume, manner of
sale, notice and public information requirements of Rule 144. The Common Stock
issued upon exercise of the Warrants issued in connection with the issuance of
the Series A Preferred Stock and the Series B Preferred Stock and the Common
Stock issued upon exercise of any
-47-
<PAGE>
Contingent Warrants carries certain incidental (i,e, piggyback) rights to
participate in certain subsequent registrations of shares of Common Stock by the
Company for sale to the public.
The Company intends to file a registration statement on Form S-8 covering
all shares of Common Stock issuable under the Company's employee benefit plans
in effect on the date of this Prospectus. The Company has outstanding stock
options with respect to an aggregate of approximately 375,000 shares of Common
Stock as of the date of this Prospectus. Accordingly, any shares issued upon
exercise of outstanding options will be eligible for sale in the public market
(subject to the six-month lock-up arrangement described below) beginning on the
effective date of such registration statement.
The existing holders of the Company's Common Stock not being sold hereby,
and the Company's officers and directors have agreed not to sell, offer to sell,
grant any option for the sale of, assign, pledge, grant any security interest in
or otherwise dispose of, or register for sale by others, any shares of Common
Stock or any security convertible into or exchangeable or exercisable for shares
of Common Stock, except for intra-family transfers, without the prior written
consent of the Representative, on behalf of The Underwriters, for a period of
six months after the consummation of the Offering.
DESCRIPTION OF CAPITAL STOCK
The Company's shareholders have approved Amended and Restated Articles of
Incorporation and Bylaws to become effective upon consummation of the Offering.
Pursuant to the terms of the Amended and Restated Articles of Incorporation,
effective as of the consummation of the Offering, (i) the Company's authorized
Series A Preferred Stock and Series B Preferred Stock will be eliminated and
(ii) a new class of "blank check" preferred stock, par value $.01 per share (the
"New Preferred Stock"), will be created. Accordingly, effective as of the
consummation of the Offering, the Company's capital stock will consist of 100
million shares of Common Stock and 20 million shares of New Preferred Stock. All
of the Company's issued and outstanding Series A Preferred Stock and Series B
Preferred Stock which is issued and outstanding immediately prior to the
consummation of the Offering will be redeemed immediately prior to the
consummation of the Offering. As of the date of this Prospectus, there were
6,266,637 shares of Common Stock outstanding, 1,819 shares of Series A Preferred
Stock outstanding and 33,202 shares of Series B Preferred Stock outstanding.
The following discussion describes the Company's capital stock, Articles
of Incorporation and Bylaws as anticipated to be in effect upon the consummation
of the Offering. The following description of the Company's capital stock does
not purport to be complete and is subject to and qualified in its entirety by
the provisions of the Company's Amended and Restated Articles of Incorporation
and Bylaws, which are included as exhibits to the Registration Statement of
which this Prospectus is a part, and by the provisions of applicable law.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held
of record on all matters to be voted on by shareholders. There is no cumulative
voting with respect to the election of directors, with the result that the
holders of more than 50 percent of the shares voted for the election of
directors can elect all of the directors. The holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of Directors
out of funds legally available therefor, subject to the dividend and liquidation
rights of any New Preferred Stock that may be issued and outstanding. In the
event of liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities and after provision has been
made for each class of stock, if any having preference over the Common Stock.
Holders of shares of Common Stock, as such, have no conversion, preemptive or
other subscription rights, and there are no redemption provisions applicable to
the Common Stock. All of the outstanding shares of Common Stock are, and the
shares of Common Stock offered hereby, when issued against the consideration set
forth in this Prospectus will be, fully paid and nonassessable. In the event of
liquidation, after payment of the debts and of the liabilities of the Company
and after making
-48-
<PAGE>
provision for the holders of New Preferred Stock, if any, the remaining assets
of the Company will be distributable ratably among the holders of Common Stock.
The Transfer Agent and Registrar for the Common Stock is ________________.
The Company intends to file an application for the approval for quotation
of the Common Stock on the Nasdaq National Market under the proposed trading
symbol "TEPI," subject to official notice of issuance.
PREFERRED STOCK
The Board of Directors of the Company is authorized, without further
shareholder action, to divide any or all shares of the authorized New Preferred
Stock into series and fix and determine the designations, preferences and
relative rights and qualifications, limitations, or restrictions thereon of any
series so established, including voting powers, dividend rights, liquidation
preferences, redemption rights and conversion privileges. As of the date of this
Prospectus, the Board of Directors has not authorized any series of New
Preferred Stock, and there are no plans, agreements or understandings for the
authorization or issuance of any shares of Blank Check Preferred Stock. The
issuance of New Preferred Stock with voting rights or conversion rights may
adversely affect the voting power of the Common Stock, including the loss of
voting control to others. The issuance of New Preferred Stock may have the
effect of delaying, deferring or preventing a change of control of the Company
without shareholder approval. See "Risk Factors - Preferred Stock; Possible
Anti-Takeover Effect of Certain Charter Provisions."
CONTINGENT WARRANTS
In connection with the private placement of the Company's Common Stock
in March, 1996, the Company would issue to the purchasers of the Common Stock
the Contingent Warrants to purchase additional shares of Common Stock in the
event certain targeted Common Stock share prices are not achieved in the
Offering. The number of shares, if any, for which the Contingent Warrants are
exercisable is based upon the initial public offering price in the Offering.
Assuming an initial public offering price of $10.00 per share (which is the
midpoint of the estimated range of the initial public offering price), the
Contingent Warrants would be exercisable for an aggregate of 53,392 shares of
Common Stock. The Contingent Warrants are exercisable in whole or part at any
time prior to the first anniversary of the effective date of this Prospectus at
an exercise price equal to $.01 per share and contain customary anti-dilution
adjustments upon the occurrence of certain changes in the Company's capital
structure following the consummation of the Offering.
The holders of Common Stock issuable upon exercise of the Contingent
Warrants will have certain incidental (piggyback) rights to participate in
certain subsequent registrations of shares of Common Stock by the Company for
sale to the public.
CERTAIN PROVISIONS OF FLORIDA LAW
The Company is subject to several anti-takeover provisions under Florida
law that apply to a public corporation organized under Florida law, because the
corporation has not elected to opt out of such provisions in its articles of
incorporation or bylaws. The Common Stock of the Company is subject to the
"affiliated transactions" and "control-share acquisition" provisions of the
Florida Business Corporation Act. These provisions require, subject to certain
exceptions, that an "affiliated transaction" be approved by the holders of
two-thirds of the voting shares other than those beneficially owned by an
"interested shareholder" or by a majority of disinterested directors and that
voting rights be conferred on "control shares" acquired in specified control
share acquisitions generally only to the extent conferred by resolution approved
by the shareholders, excluding holders of shares defined as "interested shares."
In addition, Florida law presently limits the personal liability of a corporate
director for monetary damages, except where the director (i) breaches his or her
fiduciary duties and (ii) such breach constitutes or includes certain unlawful
distributions or certain other reckless, wanton or willful acts or misconduct.
-49-
<PAGE>
OTHER PROVISIONS OF ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation provide that the Board will be divided into
three classes, with each class, after a transitional period, serving for three
years, and one class being elected each year. A majority of the remaining
directors then in office, though less than a quorum, or the sole remaining
director, will be empowered to fill any vacancy on the Board which arises during
the term of a director. The provision for a classified board may be altered or
repealed only upon the affirmative vote of holders of at least 66-2/3% of the
total voting power of the Company. The classification of the Board may
discourage a third party from making a tender offer or otherwise attempting to
gain control of the Company and may have the effect of maintaining the
incumbency of the Board.
Special meetings of shareholders may be called by the Company's Board of
Directors, the Chairman of the Board of Directors or the Chief Executive
Officer. Shareholders of the Company may only call a special meeting of
shareholders if the holders of at least 50% of the total voting power of the
Company sign, date and deliver to the Company's secretary one or more written
demands for the meeting describing the purpose or purposes for which it is to be
held.
Shareholders of the Company are required to provide advance notice of
nominations of directors to be made at, and of business proposed to be brought
before, a meeting of shareholders. The failure to deliver proper notice within
the periods specified in the Company's Bylaws will result in the denial of the
shareholder's right to make such nominations or propose such action at the
meeting.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain United States federal tax
consequences of the acquisition, ownership and disposition of Common Stock by a
holder that, for United States federal income tax purposes, is not a "United
States person" (a "Non-United States Holder"). This discussion is based upon the
United States federal tax law now in effect, which is subject to change,
possibly retroactively. For purposes of this discussion, a "United States
person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in the United States or under
the laws of the United States or of any political subdivision thereof or an
estate or trust whose income is includible in gross income for United States
federal income tax purposes regardless of its source. This discussion does not
consider any specific facts or circumstances that may apply to a particular
Non-United States Holder. Prospective investors are urged to consult their tax
advisors regarding the United States federal tax consequences of acquiring,
holding and disposing of Common Stock, as well as any tax consequences that may
arise under the laws of any foreign state, local or other taxing jurisdiction.
DIVIDENDS
Dividends paid to a Non-United States Holder will generally be subject to
withholding of United States federal income tax at the rate of 30% unless the
dividend is effectively connected with the conduct of a trade or business within
the United States by the Non-United States Holder, in which case the dividend
will be subject to the United States federal income tax on net income on the
same basis that applies to United States persons generally (and, with respect to
corporate holders and under certain circumstances, the branch profits tax).
NonUnited States Holders should consult any applicable income tax treaties that
may provide for a lower rate of withholding or other rules different from those
described above. A Non-United States Holder may be required to satisfy certain
certification requirements in order to claim treaty benefits or otherwise claim
a reduction of or exemption from withholding under the foregoing rules.
-50-
<PAGE>
GAIN ON DISPOSITION
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale or other disposition of Common
Stock unless (i) the gain is effectively connected with the conduct of a trade
or business within the United States by the Non-United States Holder, (ii) in
the case of a Non-United States Holder who is a nonresident alien individual and
holds the Common Stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year and certain other requirements
are met, or (ii) the Company is or has been a "United States real property
holding corporation" (a "USRPHC") for federal income tax purposes at any time
during the five year period ending on the date of disposition. While not free
from doubt, the Company currently believes that it is a USRPHC. Nevertheless, a
Non-United States Holder would generally not be subject to federal income tax or
withholding on the gain from the sale or other disposition of Common Stock by
reason of the Company's USRPHC status if the Common Stock is regularly traded on
an established securities market ("regularly traded") during the calendar year
in which such sale or disposition occurs provided that such holder does not own,
actually or constructively, Common Stock with a fair market value in excess of
5% of the fair market value of all Common Stock outstanding at any time during a
required holding period. The Company anticipates that the Common Stock will be
regularly traded.
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as specially defined for United States federal estate tax
purposes) of the United States at the date of death will be included in such
individual's estate for United States federal estate tax purposes, unless and
applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the United States Internal Revenue
Service and to each Non-United States Holder the amount of dividends paid to,
and the tax withheld with respect to, such holder, regardless of whether any tax
was actually withheld. This information may also be made available to the tax
authorities of a country in which the Non-United States Holder resides.
Under temporary United States Treasury regulations, United States
information reporting requirements and backup withholding tax will generally not
apply to dividends paid on the Common Stock to a Non-United States Holder at an
address outside the United States. Payments by a United States office of a
broker of the proceeds of a sale of the Common Stock is subject to both backup
withholding at a rate of 31% and information reporting unless the holder
certifies its Non-United States Holder status under penalties of perjury or
otherwise establishes an exemption. Information reporting requirements (but not
backup withholding) will also apply to payments of the proceeds of sales of the
Common Stock by foreign offices of United States brokers, or foreign brokers
with certain types of relationships to the United States, unless the broker has
documentary evidence in its records that the holder is a Non-United States
Holder and certain other conditions are met, or the holder otherwise establishes
an exemption.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules will be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that
certain required information is furnished to the United States Internal Revenue
Service.
These information reporting and backup withholding rules are under review
by the United States Treasury and their application to the Common Stock could be
changed by future regulations. The United States Internal Revenue Service has
recently issued proposed Treasury regulations concerning these rules which are
presently proposed to be effective for payments made after December 31, 1997.
Prospective investors should consult their tax advisors concerning the potential
adoption of such proposed Treasury regulations and the potential effect on their
ownership and disposition of the Common Stock.
-51-
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement (the
"Underwriting Agreement"), the underwriters named below (the "Underwriters"),
for whom Cruttenden Roth Incorporated is acting as representative (the
"Representative"), have severally agreed to purchase from the Company and the
Selling Shareholders, and the Company and the Selling Shareholders have agreed
to sell the Underwriters, the respective number of shares of Common Stock set
forth opposite each Underwriter's name below:
NUMBER OF SHARES
----------------
UNDERWRITERS
- ------------
Cruttenden Roth Incorporated ................................. _____
Total................................................. 2,500,000
---------
The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to certain conditions precedent, including
the absence of any material adverse change in the Company's business and the
receipt of certain certificates, opinions and letters from the Company and its
counsel and independent certified public accountants. The nature of the
Underwriters' obligations is such that they are committed to purchase and pay
for all the shares in the Offering if any are purchased.
The Company has been advised by the Representative that the Underwriters
propose to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $_____ per share of
Common Stock. The Underwriters may allow, and such dealers may reallow, a
discount not in excess of $_____ per share of Common Stock on sales to certain
brokers and dealers. After the initial public offering of the shares, the public
offering price and other selling terms may be changed by the Representative. No
change in such terms shall change the amount of proceeds to be received by the
Company and the Selling Shareholders as set forth on the cover page of this
Prospectus.
The Company has granted an option to the Underwriters, exercisable for a
period of 30 days after the date of this Prospectus, to purchase up to an
additional 375,000 shares of Common Stock at the public offering price set forth
on the cover page of this Prospectus, less the underwriting discounts and
commissions. The Underwriters may exercise this option only to cover
over-allotments, if any. To the extent that the Underwriters exercise this
option, each Underwriter will be committed, subject to certain conditions, to
purchase such additional shares of Common Stock in approximately the same
proportion as set forth in the above table.
The Company has agreed to issue to the Representative, for a total of
$250, warrants (the "Representative's Warrants") to purchase up to 250,000
shares of Common Stock at an exercise price per share equal to 120% of the
initial public offering price. The Representative's Warrants are exercisable for
a period of four years beginning one year from the date of this Prospectus. The
holders of the Representative's Warrants will have no voting, dividend, or other
stockholder rights until the Representative's Warrants are exercised. In
addition, the Company has granted certain rights to the holders of the
Representative's Warrants to register the Representative's Warrants under the
Securities Act.
The Company has agreed to pay the Representative a non-accountable
expense allowance equal to two percent of the aggregate public offering price
(including with respect to shares of Common Stock underlying the over-allotment
option, if and to the extent it is exercised) set forth on the front cover of
this Prospectus for expenses in connection with this offering, of which the sum
of $30,000 has already been paid. To the extent that the expenses of the
Representative are less than the non-accountable expense allowance, the excess
may be deemed to be compensation to the Representative.
The Company has granted to the Representative a right of first refusal
to manage or co-manage certain public offerings or private placements of the
Company's debt or equity securities by the Company and certain
-52-
<PAGE>
shareholders. The right of first refusal terminates upon the first to occur of
(i) the date the Company has completed an offering that the Representative has
declined, or (ii) the first anniversary of the closing date of the sale of
Common Stock offered by this Prospective.
The existing holders of the Company's Common Stock not being sold
hereby, and the holders of the Warrants and the Company's officers and directors
have agreed not to sell, offer to sell, grant any option for the sale of,
assign, pledge, grant any security interest in or otherwise dispose of, or
register for sale by others, any shares of Common Stock or any security
convertible into or exchangeable or exercisable for shares of Common Stock,
except for intra-family transfers, without the prior written consent of the
Representative, on behalf of the Underwriters, for a period of six months after
the consummation of the Offering. See "Shares Eligible for Future Sale."
At the request of the Company, the Underwriters have initially reserved
up to ____ shares of Common Stock for sale at the initial public offering price
set forth on the cover page of this Prospectus to directors, officers, employees
and business associates of the Company and other persons associated with the
Company or affiliated with any director, officer or employee of the Company. The
number of shares of Common Stock available for sale to the general public will
be reduced to the extent such persons purchase such reserved shares. Any
reserved shares which are not so purchased will be offered by the Underwriters
to the general public on the same basis as other shares offered hereby. Certain
managerial employees of the Company who purchase reserved shares will be
required to agree not to dispose of such shares for a period of six months after
the date of this Prospectus.
Prior to the Offering, there has been no established trading market for
the shares of Common Stock of the Company. Consequently, the initial public
offering price for the Common Stock offered hereby has been determined by
negotiations between the Company and the Representative. Among the factors
considered in such negotiations were the preliminary demand for the Common
Stock, the prevailing market and economic conditions, the Company's results of
operations, estimates of the business potential and prospects of the Company,
the present state of the Company's business operations, an assessment of the
Company's management, the consideration of these factors in relation to the
market valuation of comparable companies in related businesses, the current
condition of the markets in which the Company operates, and other factors deemed
relevant. There can be no assurance that an active market will develop for the
Common Stock or that the Common Stock will trade in the public market subsequent
to this Offering at or above the initial public offering price.
The Company intends to file an application for the approval for
quotation of the Common Stock on the Nasdaq National Market under the proposed
trading symbol "TEPI," subject to the official notice of issuance.
The Underwriters do not intend to confirm sales of the Common Stock
offered hereby to any accounts over which they exercise discretionary authority.
The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters and their controlling persons
against certain liabilities under the Securities Act or will contribute to
payments the Underwriters and their controlling persons may be required to make
in respect thereof.
LEGAL MATTERS
The validity of the Common Stock being offered hereby and certain other
legal matters will be passed upon for the Company by Stearns Weaver Miller
Weissler Alhadeff & Sitterson, P.A., 150 West Flagler Street, Suite 2200, Museum
Tower, Miami, Florida 33130. Certain legal matters will be passed upon for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom, 300 South Grand Avenue,
Los Angeles, California 90071.
-53-
<PAGE>
EXPERTS
The consolidated financial statements of Transeastern Properties, Inc.
and subsidiaries as of June 30, 1996 and 1995, and for each of the years in the
three-year period ended June 30, 1996, have been included herein and in the
registration statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP covering the June 30, 1996 consolidated financial
statements refers to a change in the method of accounting for a real estate
joint venture.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-1 under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company or such Common Stock, reference is made
to such Registration Statement and the exhibits and schedules thereto, certain
portions of which are omitted from this Prospectus as permitted by the rules and
regulations of the Commission. Statements contained in this Prospectus regarding
the contents of any contract or other document referred to herein or therein are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference.
Upon completion of the Offering, the Company will be subject to the
informational requirements of the Exchange Act, and, in accordance therewith,
will file reports and other information with the Commission. Such reports and
other information, as well as the Registration Statement and the exhibits and
schedules thereto, may be inspected, without charge, at the public reference
facility maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such information is also available
on the internet at http;\\www.sec.gov.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements examined and reported upon, with an
opinion expressed by independent certified public accountants, and quarterly
reports containing unaudited financial information for the first three quarters
of each year.
-54-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Transeastern Properties, Inc.:
We have audited the accompanying consolidated balance sheets of Transeastern
Properties, Inc. and subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of earnings, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended June 30, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Transeastern
Properties, Inc. and subsidiaries at June 30, 1996 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended June 30, 1996, in conformity with generally accepted accounting
principles.
The Company, through a modification of the joint venture agreement in 1996, as
discussed in note 5, obtained effective operating control of its 50%-owned real
estate joint venture. Accordingly, the joint venture has been consolidated for
the year ended June 30, 1996 and was carried under the equity method for the
years ended June 30, 1995 and 1994.
KPMG PEAT MARWICK LLP
July 19, 1996
F-1
<PAGE>
<TABLE>
<CAPTION>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
ASSETS 1996 1995
-------------- ------------
<S> <C> <C>
Cash $ 3,769,220 629,847
Restricted cash 2,657,188 1,183,630
Trade and other accounts receivable 881,538 348,838
Due from affiliates and officers 637,313 136,792
Land, construction in process and completed homes 82,919,919 29,829,373
Costs and estimated earnings in excess of billings on uncompleted contracts
- 199,695
Investment in unconsolidated real estate joint venture - 1,478,981
Property and equipment, net 1,006,715 382,160
Deferred tax asset 27,500 188,500
Prepaid assets 206,040 480,571
Other assets 597,350 1,494,123
-------------- ------------
$ 92,702,783 36,352,510
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Trade accounts payable 853,661 163,517
Accrued expenses 6,391,406 2,952,909
Customer deposits 3,791,924 3,124,856
Income taxes payable 2,725,600 314,480
Deferred tax liability 1,283,300 840,600
Due to affiliates and officers 2,441,366 885,073
Other liabilities 2,507,605 148,169
Construction loans payable 21,470,810 10,785,290
Acquisition and development loans 25,302,389 6,895,377
Subordinated debt 7,810,030 3,574,993
-------------- ------------
Total liabilities 74,578,091 29,685,264
Minority interest in consolidated subsidiaries 3,738,375 -
Redeemable preferred stock 3,502,100 3,372,632
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value, 5,000,000 shares authorized, 764,224 shares
in 1996 and 725,001 shares in 1995 issued and outstanding
7,642 7,250
Additional paid-in capital 2,999,608 -
Retained earnings 7,876,967 3,287,364
-------------- ------------
Total shareholders' equity 10,884,217 3,294,614
-------------- ------------
$ 92,702,783 36,352,510
============== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Home, lot and parcel sales $ 104,473,891 38,430,526 22,473,377
Rental and other income 1,199,286 234,173 173,277
Equity in income (loss) of real estate joint venture - 224,089 (51,032)
------------- ------------ ------------
Total revenues 105,673,177 38,888,788 22,595,622
------------- ------------ ------------
Expenses:
Cost of home and lot sales 86,442,346 32,448,813 18,902,873
Selling, general and administrative 10,051,254 5,281,026 1,962,158
Interest expense 5,232,383 1,833,272 1,119,764
Less amount capitalized (4,993,970) (1,636,796) (965,905)
------------- ------------ ------------
Net interest expense 238,413 196,476 153,859
------------- ------------ ------------
Total expenses 96,732,013 37,926,315 21,018,890
------------- ------------ ------------
Minority interest in income of consolidated subsidiaries (865,394) - -
------------- ------------ ------------
Net income before income taxes and
extraordinary gain
8,075,770 962,973 1,576,733
Income tax expense 3,074,820 374,200 492,700
------------- ------------ ------------
Net income before extraordinary gain 5,000,950 588,773 1,084,033
Extraordinary gain from early extinguishment of debt, net of
income taxes of $422,600 - 700,485 -
------------- ------------ ------------
Net income 5,000,950 1,289,258 1,084,033
------------- ------------ ------------
Dividends on redeemable preferred stock (411,347) (270,723) (352,404)
Excess of the carrying amount of redeemable preferred stock
over the amount allocated upon repurchase - 1,711,719 -
------------- ------------ ------------
Net income available for common shares $ 4,589,603 2,730,254 731,629
============= ============ ============
Net income per common and common equivalent share:
Net income before extraordinary gain .61 .25 .08
Extraordinary gain - .09 -
--- --- ---
Net income $ .61 .34 .08
--- --- ---
Average common and equivalent shares outstanding 7,548,443 8,228,341 8,841,128
============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
RETAINED
ADDITIONAL EARNINGS
COMMON PAID-IN (ACCUMULATED
STOCK CAPITAL DEFICIT) TOTAL
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance, June 30, 1993 $ 7,250 - (144,519) (137,269)
Net income - - 1,084,033 1,084,033
Dividends:
Common stock - - (30,000) (30,000)
Preferred stock - - (352,404) (352,404)
------------ ----------- ------------ -----------
Balance, June 30, 1994 7,250 - 557,110 564,360
Net income - - 1,289,258 1,289,258
Excess of carrying amount of redeemable preferred
stock over the amount allocated upon repurchase
1,711,719 1,711,719
Dividends:
Preferred stock - - (270,723) (270,723)
------------ ----------- ------------ -----------
Balance, June 30, 1995 7,250 - 3,287,364 3,294,614
Net income - - 5,000,950 5,000,950
Issuance of common stock 392 2,999,608 - 3,000,000
Dividends:
Preferred stock - - (411,347) (411,347)
------------ ----------- ------------ -----------
Balance, June 30, 1996 $ 7,642 2,999,608 7,876,967 10,884,217
============ =========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
1996 1995 1994
------------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,000,950 1,289,258 1,084,033
Adjustments to reconcile net income to net cash used in
operating activities:
Amortization and depreciation 222,220 64,340 43,078
Extraordinary gain from early extinguishment
of debt, net of taxes - (700,485) -
Equity in (income) loss of real estate joint
venture - (224,089) 51,032
Deferred income taxes 603,700 682,200 (30,100)
Decrease (increase) in restricted cash (1,473,557) 202,871 (355,809)
Decrease (increase) in trade and other accounts
receivable (532,700) (301,770) 17,713
Decrease (increase) in amounts due from
affiliates (500,521) (24,459) -
Increase in land, construction in process and
completed homes (53,090,546) (5,782,056) (18,172,049)
Decrease (increase) in costs and estimated
earnings in excess of billings on
uncompleted contracts 199,695 160,099 (359,794)
Decrease (increase) in prepaid expenses 774,531 (723,958) (256,613)
Decrease (increase) in other assets 396,773 587,211 (719,489)
Increase (decrease) in trade accounts payable 690,144 (246,544) 302,576
Increase in accrued expenses 3,438,496 3,362,824 7,133
Increase (decrease) in income taxes payable 2,411,120 (630,920) 522,800
Increase in other liabilities 2,359,434 148,171 -___
------------- ----------- -----------
Net cash used in operating activities (39,500,261) (2,137,307) (17,865,489)
============= ============ ===========
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
Cash flows from investing activities:
Additions to property and equipment, net (846,775) (279,132) (182,447)
Net receipts from (advances to) real estate joint
venture 1,478,981 (772,161) (533,763)
Increase (decrease) in minority interest in consolidated
subsidiaries 3,738,375 -- --
---------- ----------- -----------
Net cash provided by (used in) investing
activities 4,370,581 (1,051,293) (716,210)
---------- ----------- -----------
Cash flows from financing activities:
Increase in customer deposits 667,070 806,508 1,207,653
Net proceeds from (payments of) affiliate and
officers' loans 1,556,293 326,509 (127,674)
Principal payments on construction loans payable (47,214,626) (21,753,677) (10,683,563)
Proceeds from borrowings on construction loans
payable 57,900,146 25,080,661 13,872,834
Principal payments on acquisition and development
loans (28,650,474) (9,410,859) -
Proceeds from borrowings on acquisition and
development 47,057,486 7,111,662 8,444,574
Proceeds from issuance of subordinated debt 5,658,819 4,028,128 6,360,000
Principal payments on subordinated debt (1,423,782) (5,302,650) (810,000)
Proceeds from issuance of preferred stock - 3,000,000 -
Proceeds from issuance of common stock 3,000,000 - -
Repurchase of preferred stock, common stock warrants and
senior subordinated notes (66,832) (535,000) -
Dividends (215,047) (3,184) (30,592)
---------- ----------- -----------
Net cash provided by financing activities 38,269,053 3,348,098 18,233,232
---------- ----------- -----------
Net increase (decrease) in cash 3,139,373 159,498 (348,467)
Cash at beginning of year 629,847 470,349 818,816
---------- ----------- -----------
Cash at end of year $ 3,769,220 629,847 470,349
=========== =========== ===========
Supplemental disclosure of noncash financing
activities:
Imputed interest on noninterest-bearing loans $ - - 305,336
=========== =========== ===========
Preferred stock - stock dividends $ 196,300 222,600 271,500
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for:
Taxes $ 60,000 322,920 -
=========== =========== ===========
Interest $ 1,621,855 982,708 498,020
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
Transeastern Properties, Inc. (the "Company") was formed on December 4,
1986. The Company acquires and develops residential land and constructs
single family homes and rental apartment communities in South Florida.
Subsequent to year-end the Company changed its name from Transeastern
Properties of South Florida, Inc. to Transeastern Properties, Inc.
which has been reflected in these financial statements.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements for the year ended June
30, 1996 include the accounts of the Company and the following
subsidiaries: Transeastern Properties at the Cove, Inc.,
Transeastern Pembroke Properties, Inc., Transeastern Pembroke
Villages, Inc., Transeastern Plantation Apartments, Inc.,
Transeastern Plantation Apartments, Ltd., Transeastern Hollywood
Apartments, Inc., Transeastern Hollywood Apartments, Ltd.,
Transeastern Aberdeen Properties, Inc., Transeastern Finance,
Inc., Transeastern Wellington Properties, Inc. and Parkside
Homes.
Transeastern Pembroke Properties, Inc. owns a 50% interest in
Parkside Homes, a real estate joint venture, formed to acquire
and develop Parkside at Spring Valley, a single family community
in Pembroke Pines. The Company's investment in this venture is
consolidated for the year ended June 30, 1996 and was accounted
for under the equity method for the years ended June 30, 1995
and 1994 (see note 5).
Transeastern Hollywood Apartments, Inc. and Transeastern
Plantation Apartments, Inc. own controlling interests,
respectively, in real estate limited partnerships, Transeastern
Hollywood Apartments, Ltd. and Transeastern Plantation
Apartments, Ltd., formed during the year ended June 30, 1996 to
acquire, develop and sell multifamily communities. The Company
owns both general and limited partnership interests. As general
partner, the Company has the option to buy out nonaffiliated
limited partnership interests, after one year from date of
formation, for an amount equal to a 30% return on the
nonaffiliated limited partnership investments. The operations
have been consolidated for the year ended June 30, 1996.
All significant intercompany balances and transactions have
been eliminated in consolidation.
(B) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimate and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and
F-7
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
expenses during the reporting period. Actual results could
differ from those estimates and these differences could have a
significant impact on the financial statements.
(C) BUSINESS RISK
Any substantial change in economic conditions or any significant
price fluctuations related to the real estate industry could
affect the Company's operations and have a material impact on
the Company's business. In addition, the Company is subject to
competition from other entities engaged in the business of
building homes and apartments in the South Florida area.
(D) REVENUE RECOGNITION
SALE OF HOMES UNDER SHORT-TERM CONSTRUCTION CONTRACTS
Revenues from sales of homes in which the estimated construction
period is less than one year are recognized under the completed
contract method at closing.
SALE OF HOMES UNDER LONG-TERM CONSTRUCTION CONTRACTS
Revenues from construction contracts in which the estimated
construction period exceeds one year is recognized using the
percentage of completion method, measured by the ratio of costs
incurred to total estimated costs (cost to cost method).
Estimated losses are accrued in full during the period in which
losses are determined. The asset entitled costs and estimated
earnings in excess of billings on uncompleted contracts
represents revenues recognized in advance of amounts billed. The
liability, if any, entitled billings in excess of costs and
estimated earnings on uncompleted contracts represents billings
in advance of revenues recognized. As of June 30, 1996, all
contracts of this type are completed and no future percentage of
completion contracts are anticipated for the foreseeable future.
PARCEL AND LOT SALES
Revenues from sales of land parcels and residential lots to
other builders are recognized at closing when all contingencies,
if any, have been resolved.
(E) CASH
Cash includes cash deposited in checking and savings accounts,
money market accounts, and overnight investment accounts.
(F) RESTRICTED CASH
Restricted cash comprises certain customer deposits relating to
home purchases which are held by the Company's escrow agents
until closing.
(Continued)
F-8
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(G) LAND, CONSTRUCTION IN PROCESS AND COMPLETED HOMES
Land, construction in process and completed homes are stated at
the lower of accumulated costs or net realizable value. Costs
related to development of land or construction are capitalized.
Costs of land and related improvements are allocated to sales
under the relative sales value method. Construction costs
include all subcontractor, direct material and labor costs, and
utility connection rights as well as indirect costs related to
subcontract performance, such as indirect labor and supplies.
Indirect costs that do not clearly relate to development or
construction, including general and administrative expenses, are
charged to expense as incurred. Real estate taxes, insurance and
interest are capitalized only during the period in which
activities necessary to get the property ready for its intended
use are in progress.
(H) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, ranging
from three to seven years.
(I) INCOME TAXES
The Company accounts for income taxes under the asset and
liability method of computing deferred income taxes. Under the
asset and liability method, deferred income taxes are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amount of existing
assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured by using enacted
statutory rates expected to apply to taxable income.
(J) PER SHARE DATA
Earnings per common and common equivalent shares is computed by
dividing earnings reduced by redeemable preferred stock
dividends and increased by the excess of the carrying amount of
redeemable preferred stock over the amount allocated upon
repurchase (see note 11) by the weighted average number of
common shares outstanding considering dilutive common equivalent
shares. Common equivalent shares consist of common stock
warrants.
(Continued)
F-9
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The March, 1996 common stock issuance included a provision which
provided for the issuance of warrants to purchase additional
shares of the Company's common stock in the event certain
targeted common stock share prices were not achieved in the
Company's initial public offering. Presuming an offering price
of $10, the warrants would be exercisable for 53,392 shares of
common stock and net income per common and common equivalent
share would be modified for the additional common equivalents as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net income available for common shares $ 4,585,970 2,730,254 731,629
=========== ========= =======
Net income per common and common equivalent share:
Net income before extraordinary gain
.60 .25 .08
Extraordinary gain - .08 -
--- --- ---
Net income $ .60 .33 .08
=== === ===
Average common and equivalent shares outstanding
7,601,835 8,281,733 8,894,520
========= ========= =========
</TABLE>
In accordance with a Securities and Exchange Commission Staff
Accounting Bulletin, shares and warrants issued within a
one-year period prior to the initial filing of a registration
statement relating to an initial public offering are treated as
outstanding for all periods presented. Such calculation has been
retroactively adjusted to reflect the Company's March 1996
common stock issuance (see note 12) and the Company's 8.2 to 1
common stock split (see note 16).
(K) REDEEMABLE PREFERRED STOCK
Redeemable preferred stock is stated at redemption value.
(L) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by
reference to various market data and other valuation techniques
as appropriate. The Company's financial instruments consist of
cash equivalents, mortgages and notes receivable, construction
loans payable, acquisition and development loans, and the
subordinated debt. Unless otherwise disclosed, the fair value of
financial instruments approximates their recorded values.
(Continued)
F-10
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(M) NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," as of July 1, 1995
and, accordingly, evaluates its real estate investments
periodically to assess whether any impairment indications are
present, including recurring operating losses and significant
adverse changes in legal factors or business climate that affect
the recovery of the recorded value. If any real estate
investment is considered impaired, a loss is provided to reduce
the carrying value of the property to its estimated fair value.
The implementation of this standard by the Company on July 1,
1996, prospectively, is not expected to have an initial material
effect on financial position or results of operations.
(N) RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform with the
1996 presentation.
(3) LAND, CONSTRUCTION IN PROCESS AND COMPLETED HOMES
A summary of land, construction in process and completed homes is as
follows:
1996 1995
---- ----
Land and land improvements $ 29,583,733 13,792,728
Construction in process 50,270,394 14,951,838
Completed homes 3,065,792 826,679
---------- ----------
$ 82,919,919 29,571,245
========== ==========
As of June 30, 1996, the construction in process and land and land
improvements balances include $7,434,096 and $6,301,367, respectively,
relating to multifamily apartment complexes under construction.
Substantially all of the land and land improvements, construction in
process and completed homes serve as collateral for the construction
loans payable, acquisition and development loans and subordinated debt.
(Continued)
F-11
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) CONTRACT BILLING STATUS
Information follows with respect to the billing status of uncompleted
contracts, under which revenue is recognized under the percentage of
completion method, as of June 30, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Costs incurred on uncompleted contracts $ 1,434,389 648,569 247,691
Estimated earnings 82,441 70,199 112,103
--------- -------- -------
1,516,830 718,768 359,794
Less billings to date (1,516,830) (519,073) --
--------- -------- -------
Costs and estimated earnings in excess of
billings on uncompleted contracts $ - 199,695 359,794
========= ======== =======
</TABLE>
(5) INVESTMENT IN UNCONSOLIDATED REAL ESTATE JOINT VENTURE
On February 16, 1994, Transeastern Pembroke Properties, Inc. acquired
a 50% interest in Parkside Homes, a joint venture with an unrelated
party, H. A. Cumber of Pembroke Pines, Inc., for purposes of acquiring
and developing land in Pembroke Pines, Florida. Transeastern Pembroke
Properties, Inc. serves as the project manager for the joint venture
and received a management fee of $127,500, $150,000 and $80,000
included in rental and other income in 1996, 1995 and 1994,
respectively. Profits and losses of the joint venture are allocated
equally between the parties.
The joint venture agreement between the parties was modified in 1996,
resulting in Transeastern Pembroke Properties, Inc. obtaining effective
operating control over the joint venture. Accordingly, the joint
venture has been consolidated for the year ended June 30, 1996 and was
accounted for under the equity method for the years ended June 30, 1995
and 1994.
(Continued)
F-12
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The condensed balance sheet of the joint venture at June 30, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash $ 490,950 88,517
Restricted cash 210,000 -
Other current assets 558,473 10,631
Deposit on land 735,525 832,117
Land 6,748,840 -
Construction in progress 1,500,189 -
Fixed assets, net 78,235 34,197
------------ ---------
$ 10,322,212 965,462
============ =========
Current liabilities 634,665 -
Customer deposits 964,422 -
Notes payable 5,765,163 -
Venturers' capital:
Transeastern Pembroke Properties, Inc. 1,478,981 482,731
H. A. Cumber of Pembroke Pines, Inc. 1,478,981 482,731
------------ ---------
$ 10,322,212 965,462
============ =========
</TABLE>
The condensed statement of income of the joint venture for the periods
ended June 30, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C>
Sales $ 6,998,900 -
Cost of sales and expenses 6,550,721 102,065
------------ ---------
Net income (loss) $ 448,179 (102,065)
============ =========
The Company's share of net income (loss) $ 224,089 (51,032)
============ =========
(6) PROPERTY AND EQUIPMENT
Property and equipment are as follows at June 30, 1996 and 1995:
1996 1995
---- ----
Property and equipment $ 389,140 173,447
Office and model home furnishings 983,602 352,520
----------- --------
1,372,742 525,967
Accumulated depreciation and amortization (366,027) (143,807)
----------- ---------
$ 1,006,715 382,160
=========== =========
</TABLE>
(Continued)
F-13
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Depreciation expense was approximately $222,000, $64,000 and $43,000
for the years ended June 30, 1996, 1995 and 1994, respectively.
(7) INCOME TAXES
During the years ended June 30, 1996, 1995 and 1994, income tax expense
consisted of the following:
1996 1995 1994
---- ---- ----
Current:
Federal $ 2,402,220 (263,000) 446,400
State 411,000 (45,000) 76,400
--------- -------- -------
2,813,220 (308,000) 522,800
--------- -------- -------
Deferred:
Federal 223,300 582,500 (27,200)
State 38,300 99,700 (2,900)
--------- -------- -------
261,600 682,200 (30,100)
--------- -------- -------
Income tax expense $ 3,074,820 374,200 492,700
========= ======== =======
Total income tax expense differed from the amounts computed by applying
the U.S. Federal income tax rate of 34% for 1996, 1995 and 1994 to
pre-tax income as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense $ 2,745,400 327,400 536,090
State income taxes, net of Federal income tax benefit
302,800 36,100 50,400
Decrease in beginning of the year valuation allowance for
deferred tax assets - - (87,400)
Other, net 26,620 10,700 (6,390)
--------- -------- -------
$ 3,074,820 374,200 492,700
========= ======== =======
The significant components of deferred income tax (benefit) expense for
the years ended June 30, 1996, 1995 and 1994 follow:
1996 1995 1994
---- ---- ----
Deferred income tax expense (benefit) $ 261,600 682,200 57,300
Decrease in beginning of the year valuation allowance for
deferred tax assets - - (87,400)
--------- -------- -------
$ 261,600 682,200 (30,100)
========= ======== =======
</TABLE>
(Continued)
F-14
<PAGE>
<TABLE>
<CAPTION>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
June 30, 1996 and 1995 are as follows:
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Construction in process due to differences in indirect costs
capitalized $ - 164,500
Property and equipment due to differences in depreciation
21,600 -
Adjustment resulting from change in tax status 5,900 7,900
Other - 16,100
--------- --------
Total gross deferred tax assets 27,500 188,500
Less valuation allowance - -
--------- --------
Deferred tax assets 27,500 188,500
--------- --------
Deferred tax liabilities:
Interest capitalized 975,500 434,800
Investment in joint venture 206,700 149,700
Construction in process due to differences in indirect costs
capitalized 79,400 -
Profits recognized under percentage of completion method for
financial statement purposes - 26,400
Commissions capitalized for tax reporting purposes 21,700 21,700
Deferred cost - 188,200
Property and equipment due to differences in depreciation
- 19,800
--------- --------
Total gross deferred tax liabilities 1,283,300 840,600
--------- --------
Net deferred tax liabilities $(1,255,800) (652,100)
========= ========
During the year ended June 30, 1996, there was no change to the
valuation on deferred tax assets.
(Continued)
F-15
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) CONSTRUCTION LOANS PAYABLE
Construction loans payable as of June 30, 1996 and 1995 were as
follows:
1996 1995
---- ----
<S> <C> <C>
Construction first mortgage loans for various communities payable to
various lenders, secured by construction in process and completed
homes, with interest rates ranging from prime plus 1% to prime
plus 1.5%, maturing as follows: 1997 - $13,295,297, 1998 -
$8,175,513.
$ 21,470,810 10,785,290
========== ==========
Payment of several of the Company's construction, acquisition and
development loans has been personally guaranteed by the principal
owners of the Company.
(9) ACQUISITION AND DEVELOPMENT LOANS PAYABLE
Acquisition and development loans payable as of June 30, 1996 and 1995
were as follows:
1996 1995
---- ----
Acquisition and development first mortgage loans payable, interest
ranging from prime plus 1% to prime plus 1.5% with maturities
ranging from August 28, 1996 to November 30, 1998, secured by
various underlying real estate parcels.
$ 21,878,922 6,399,947
Acquisition and development first mortgage loan payable, interest
accruing at 20% per annum (an amount equal to prime plus 2% to be
paid monthly during the term of the loan with the difference to be
calculated and paid by the Company at the time the loan is paid in
full). The loan agreement provides that net cash flow generated
from the project securing the loan, after direct expenses and
overhead payments, will be paid to the lender to reduce the loan
balance. The loan matures on September 25, 2000.
2,941,320 -
Acquisition and development second mortgage loans payable,
noninterest-bearing with maturities from the lesser of 6 to 24
months or upon the sale of the home, secured by construction in
process, completed homes or lots within various communities.
482,147 495,430
========== ==========
$ 25,302,389 6,895,377
========== ==========
</TABLE>
(Continued)
F-16
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Aggregate scheduled principal maturities are as follows:
Year ending June 30,
--------------------
1997 $ 6,600,400
1998 15,053,169
1999 707,500
2000 -
2001 2,941,320
----------
$ 25,302,389
==========
(10) SUBORDINATED DEBT
Subordinated debt as of June 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Subordinated loan payable, interest at 10% with an additional 10%
interest participation (subject to a minimum additional
participation of $800,000), maturing February 28, 1999, secured by
a collateral assignment of all the common stock of Transeastern
Properties at the Cove, Inc.
$ 3,121,785 2,821,212
Subordinated loan payable with a base interest rate of 20%. An
additional 4% interest is payable to the lender subject to the
generation of sufficient net profits from the property. In
addition, to the extent that the property generated net profits
after the payment of the 4% additional interest, the lender is
entitled to an additional 5% of net profits generated on the
residential parcels and 2.5% of net profits generated on other
mixed-use parcels. In the event that a $1,000,000 principal
payment on the loan is not made by September 1, 1996, the 5% and
2.5% are increased to 10% and 5%, respectively. The lender is
still entitled to receive the contingent returns even in the event
of prepayment of the loan. The loan matures on March 29, 1998 and
is secured by a pledge of all the common stock of Transeastern
Pembroke Villages, Inc.
2,800,000 -
(Continued)
F-17
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1996 1995
--------- ---------
Subordinated loan payable, interest at 10% with an additional
participation ranging from 30% to 45% of excess cash flow over the
term of the loan, subject to a minimum additional participation of
$500,000. The loan matures on November 28, 2000 and is secured by
a collateral assignment of all of the general and limited partnership
interest of Transeastern Plantation Apartments, Ltd.
1,888,245 --
Subordinated loans payable, interest ranging from 14% to 18% with
various maturity dates. -- 753,781
--------- ---------
$ 7,810,030 3,574,993
========= =========
</TABLE>
Aggregate scheduled principal maturities are as follows:
YEAR ENDING JUNE 30,
--------------------
1997 $ -
1998 2,800,000
1999 3,121,785
2000 -
2001 1,888,245
---------
$ 7,810,030
=========
During January, 1996, the Company entered into an agreement with a
lender to provide a $750,000 revolving credit line, interest at prime
plus 1%, maturing on February 1, 1998. The line of credit is secured by
various underlying real estate parcels. Borrowings outstanding under
this line of credit totaling $1,000 were classified as other
liabilities at June 30, 1996.
(Continued)
F-18
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) REDEEMABLE PREFERRED STOCK
A summary of redeemable preferred stock follows as of June 30, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Series A redeemable preferred stock, $.01 par value, redeemable at $100
per share plus cumulative unpaid dividends, 29,000 shares
authorized, 1,819 and 2,215 shares issued and outstanding in 1996
and 1995, respectively
$ 181,900 235,832
Series B redeemable preferred stock, $.01 par value, redeemable at $100
per share plus cumulative unpaid dividends, 46,500 shares
authorized, 33,202 and 31,368 shares issued and outstanding in
1996 and 1995, respectively
3,320,200 3,136,800
--------- ---------
$ 3,502,100 3,372,632
========= =========
</TABLE>
The Series A Redeemable Preferred Stock (the "Series A Preferred
Stock") contained a provision in which the Company retained the right
to repurchase a stipulated amount of shares and related warrants prior
to November 30, 1995. On an annual basis the Company has adjusted the
carrying amount of the redeemable preferred stock eligible for
redemption by November 30, 1995 by the amount representing the required
rate of return of 25% less dividends actually paid. This has been
reflected with a charge against retained earnings and a related
adjustment to the preferred stock dividend amount. In redeeming these
Series A Preferred Stock shares and warrants, the Company was required
to redeem the same percentage of outstanding Series A preferred stock
as the percentage of warrants redeemed. Certain eligible shares and
warrants were redeemed as part of the repurchase in 1995 as described
below. In the current year, the Company repurchased all shares and
warrants eligible for redemption.
In 1995, the Company repurchased (1) 21,358 shares of Series A
Preferred Stock and related warrants to purchase 2,057,692 shares of
common stock for $.01, (2) $2,963,084 of senior subordinated project
financing notes, and (3) $2,500,000 of senior subordinated project
financing acquisition notes for an aggregate price of $4,500,000. Such
repurchase transaction was facilitated through an entity in which a
director is an officer (note 13). Based on the above, the Company
recognized an extraordinary gain of $700,485, net of related taxes of
$422,600, relative to the extinguishment of the above mentioned senior
subordinated project financing and acquisition notes. The Series A
Preferred Stock and related common stock warrants had been issued for
an aggregate price of $2,135,800 and were re-acquired for a total cost
of $535,000, including related tax effects. Such $1,711,719 excess of
the carrying amount of redeemable preferred stock over the amount
allocated upon repurchase, including related tax effects, has been
reflected as a credit to shareholders' equity.
(Continued)
F-19
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1995, the Company authorized 46,500 and issued 30,000 shares of
Series B redeemable preferred stock (the "Series B Preferred Stock"),
par value $.01, at a price of $100 per share. Holders of the Series B
or Series A Preferred Stock (the "preferred stock") are entitled to
receive cumulative dividends at the rate of $12 per share per annum.
Dividends are payable quarterly in cash, except for the first twelve
quarterly dividends for Series A Preferred Stock and the first five
quarterly dividends for Series B Preferred Stock which were, at the
option of the Company, paid by the issuance of additional shares of
preferred stock, based on a $100 share value. Series A Preferred Stock
has a dividend and liquidation preference over Series B Preferred
Stock. Holders of preferred stock shall have the right as a class to
elect one member of the Company's Board of Directors or additional
members in order to retain at least 25% of the total number of
directors. Upon a default in payment of dividends on preferred stock
for two consecutive quarters, the preferred stockholders shall have the
right to elect a majority of the number of directors constituting a
full board. Series A Preferred Stock and Series B Preferred Stock which
remains outstanding until June 1, 2005 and December 31, 2004,
respectively, shall be redeemed at $100 per share plus cumulative
unpaid dividends. The Company retains the right to call for redemption
any or all preferred stock at any time at a price equal to $100 per
share plus cumulative unpaid dividends. Additionally, all preferred
stock must be redeemed at a price equal to $100 per share plus
cumulative unpaid dividends, by the Company in the event that the
Company completes a sale of its common stock resulting in gross
proceeds in excess of $5,000,000 or $10,000,000, triggering redemption
of Series A and Series B Preferred Stock, respectively.
(12) WARRANTS
Information relating to common stock warrants issued by the Company is
summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES REPRESENTED
BY OUTSTANDING WARRANTS AT JUNE 30,
----------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Issued in connection with:
Series A redeemable preferred stock (a) 171,462 197,308 2,255,000
Series B redeemable preferred stock (b) 567,588 567,588 -
Subordinated debt (c) 445,424 445,424 445,424
Other (d) 74,308 74,308 74,308
Common stock - contingent shares (e) -- -- --
--------- --------- ---------
1,258,782 1,284,628 2,774,732
========= ========= =========
</TABLE>
(Continued)
F-20
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of June 30, 1996, the exercise price on all outstanding warrants was
$.01 per warrant share.
(a) In 1993, in connection with the issuance of Series A preferred
stock, the Company issued warrants initially exercisable for
2,255,000 shares of common stock (27.5% of fully diluted common
stock) at an exercise price of $.01 per warrant share (the
"Series A Warrants"). As part of the aforementioned repurchase
of the Series A preferred stock, warrants to purchase 2,057,692
shares of common stock were redeemed from the original 2,255,000
leaving outstanding 197,308 warrants to purchase common stock,
associated with Series A Preferred Stock. The Company redeemed
53,808 Series A Warrants on November 30, 1995 in connection with
a special redemption right as described in note 11. The
remaining Series A Warrants expire on June 30, 2005 if
unexercised. The Series A Warrants contain an anti-dilution
provision which allows the warrantholder to purchase additional
shares of common stock (additional warrants for 27,962 shares of
common stock were issued due to the 1996 common stock issuance)
in the event that the warrantholder's potential ownership
percentage in the Company would otherwise be reduced as the
result of the sale of common stock to other parties. The
additional warrants were retroactively adjusted as outstanding
for all periods presented in the table above.
(b) In connection with the issuance of the Series B Preferred Stock,
the Company issued warrants initially exercisable for 540,733
shares of common stock at an exercise price of $.01 per warrant
share (the "Series B Warrants"). The Series B Warrants are
exercisable through the expiration date of December 31, 2003.
The Series B Warrants contain an anti-dilution provision which
allows the warrantholder to purchase additional shares of common
stock (additional warrants for 26,855 shares of common stock are
issuable to the warrantholders due to the 1996 common stock
issuance) in the event that the warrantholder's potential
ownership percentage in the Company would otherwise be reduced
as the result of the sale of common stock for cash to other
parties in the aggregate amount not to exceed $5 million. The
additional warrants were retroactively adjusted as outstanding
for all periods presented in the table above.
(c) As additional consideration for the purchase of the $2,500,000
senior subordinated project acquisition notes issued in 1994,
the Company issued warrants to purchase 445,424 shares of common
stock at an exercise price of $.01 per share. The warrants
expire on June 1, 2005 if unexercised. As described in note 12,
the $2,500,000 subordinated project acquisition notes were
prepaid at a discount during 1995 but the warrants remain
outstanding.
(d) In June, 1993, the Company also issued warrants to purchase
74,308 shares of common stock at an exercise price of $.01 per
share. These warrants were issued to an unrelated party for
assistance in completing the Series A preferred stock placement.
The warrants expire on June 1, 2005 if unexercised.
(Continued)
F-21
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(e) The March, 1996 common stock issuance included a provision which
provided for the issuance of warrants to purchase additional
shares of the Company's common stock in the event certain
targeted common stock share prices were not achieved in the
Company's initial public offering. Presuming an offering price
of $10, the warrants would be exercisable for 53,392 shares of
common stock.
As of June 30, 1996, none of the warrants have been exercised.
(13) RELATED PARTY TRANSACTIONS
During 1995, the Company had the following transactions with an entity
in which a director is an officer: (1) a $500,000 fee, which was
included as a deferred cost in other assets at June 30, 1995, was paid
to the entity for due diligence relating to prospective real estate
acquisitions and financial advisory services. The Company was
reimbursed for this fee by a third party in September, 1995; (2) the
entity received $424,819 for facilitating a repurchase of Series A
preferred stock, warrants and senior subordinated project financing and
acquisition notes from an investor (note 12); and (3) the entity loaned
the Company $1,000,000 pursuant to senior subordinated project
financing notes of which $670,000 was outstanding as of June 30, 1995
(note 11). Interest on such notes aggregated $88,000 for 1995.
Loans payable to affiliates and officers includes $75,997 of
noninterest-bearing unsecured loans, and $2,365,369 of interest-bearing
unsecured loans at annual interest rates ranging from prime plus 1% to
13% and maturities ranging from due on demand to November, 1996.
In March, 1994, the Company entered into a 5-year lease for office
space with an affiliated corporation. Rent expense under the lease was
approximately $58,000 for the year ended June 30, 1996 (see note 15).
In 1996, the Company constructed and sold homes to two of the Company's
principal shareholders and officers. The homes were sold for amounts
equal to the Company's cost of constructing the homes, including land.
In connection with the sales, the Company accepted unsecured notes
aggregating $215,873 from the officers. The loans are repayable two
years from the date of closing and bear interest at 5.88%. The Company
was owed an additional $67,449 on one of the homes as of June 30, 1996
which was repaid subsequent to year end.
(14) EMPLOYEE BENEFITS
(A) 401(K) PLAN
In March, 1996, the Company adopted a defined contribution
retirement plan which complies with Section 401(k) of the
Internal Revenue Code. Substantially all employees who have
completed 120 days of service with the Company are eligible to
participate in the plan. The plan provides for Company matching
contributions of 25% of the employee's voluntary contributions,
up to a maximum of 6% of the employee's
(Continued)
F-22
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
compensation. The amount expensed for the Company's 25% matching
contribution during 1996 was $2,586.
(B) INCENTIVE COMPENSATION PLANS (UNAUDITED)
In August, 1996, the Board of Directors adopted, subject to
shareholder approval, an incentive compensation program for its
employees. One million shares of the Company's common stock have
been reserved for issuance. Under the program, the Company may
periodically grant nonqualified stock options for common stock
to key employees and/or award restricted common stock shares to
certain non-management employees. The restricted common stock
awards would vest over a three-year period, subject to the
employee's continued employment with the Company.
The program also provides for long-term incentive awards in
which cash awards will be paid to key employees at the end of
three-year rolling performance periods, based upon total
shareholder return achieved by the Company as compared to
shareholder returns achieved by a broad index of other publicly
held companies.
(15) COMMITMENTS AND CONTINGENCIES
Rent expense for 1996 aggregated approximately $60,000.
Future minimum lease payments for the years ending June 30 are
approximated as follows:
AFFILIATED
COMPANY
OTHER (SEE NOTE 13) TOTAL
---------- ------------- --------
1997 $ 21,000 60,000 81,000
1998 21,000 62,000 83,000
1999 20,000 42,000 62,000
-------- ------- -------
$ 62,000 164,000 226,000
======== ======= =======
Rent expense is recognized on a straight-line basis for financial
statement purposes.
The Company and certain subsidiaries are parties to various claims,
legal actions and complaints arising in the ordinary course of
business. In the opinion of management, the disposition of these
matters will not have a material adverse effect on the financial
condition of the Company.
The Company is subject to the usual obligations associated with
entering into contracts for the purchase, development and sale of real
estate in the routine conduct of its business. However, at June 30,
1996, the Company was subject to specific significant project
construction and development contracts with a remaining aggregate
commitment of $8,640,000.
(Continued)
F-23
<PAGE>
TRANSEASTERN PROPERTIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company is committed, under various letters of credit and
performance bonds, to perform certain development and construction
activities and provide certain guarantees in the normal course of
business. Outstanding letters of credit under these arrangements
totaled approximately $3.5 million at June 30, 1996.
Performance bonds outstanding as of June 30, 1996 totaled $491,155.
(16) SUBSEQUENT EVENTS
In August, 1996 (unaudited), the Company's Board of Directors approved
a 8.2 to 1 common stock split. Where appropriate, amounts in the
accompanying consolidated financial statements have been restated to
give retroactive effect to the stock split.
On July 1, 1996, the Company exercised an option to acquire a parcel of
land in Pembroke Pines, Florida. The purchase price was $3,500,000,
funded in part with a $2,485,000 first mortgage bearing interest at
prime plus 1-1/2% and due and payable on October 1, 1996 with an option
to extend to January 1, 1997.
The Company intends to conduct an initial public offering by filing a
registration statement on Form S-1 for 2.5 million shares of common
stock, par value $.01 per share, with 2,250,000 shares being sold by
the Company and 250,000 shares being sold by certain shareholders of
the Company. The Company will not receive any of the proceeds from the
sale of common stock by selling shareholders. However, there can be no
assurances that such offering will be consummated.
F-24
<PAGE>
No person has been authorized in connection with the Offering made
hereby to give any information or to make any representations not contained in
this Prospectus, and if given or made, such information and representations must
not be relied upon as having been authorized by the Company, the Selling
Shareholders or the Underwriters. This Prospectus does not constitute an offer
to sell or a solicitation of an 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 an 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
PAGE
----
Prospectus Summary.....................................................
The Offering...........................................................
Summary Financial Data.................................................
Risk Factors...........................................................
Use of Proceeds........................................................
Dividend Policy........................................................
Capitalization.........................................................
Dilution...............................................................
Selected Financial Data................................................
Management's Discussion and
Analysis of Financial Condition
and Results of Operations............................................
Business...............................................................
Management.............................................................
Certain Relationships and Related Transactions ........................
Principal and Selling Shareholders.....................................
Shares Eligible for Future Sale........................................
Description of Capital Stock...........................................
Certain United States Federal Tax Considerations
for Non-U.S. Holders of Common Stock.................................
Underwriting...........................................................
Legal Matters..........................................................
Experts................................................................
Additional Information.................................................
Index to Financial Statements..........................................
----------
Until ____________, 1996 (25 days after the date of this Prospectus),
all dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may by required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
2,500,000 Shares
[LOGO]
TRANSEASTERN PROPERTIES, INC.
Common Stock
----------------
PROSPECTUS
----------------
CRUTTENDEN ROTH
INCORPORATED
----------------
____________, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a list of the estimated expenses (other than
underwriting discounts and commissions) to be paid by the Registrant in
connection with the issuance and distribution of the securities being registered
herein.
SEC Registration Fee....................................... $ 10,906
NASD Filing Fee ......................................... 3,663
NASDAQ National Market Quotation Fee.......................
Legal Fees and Expenses*...................................
Registrar and Transfer Agent Fees and Expenses*............
Accounting Fees and Expenses*..............................
Printing and Engraving Expenses*...........................
Blue Sky Qualification Fees and Expenses...................
Miscellaneous .........................................
-------------
Total *............................... $
=============
- ------------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0831 of the Florida Business Corporation Act (the "Florida
Act") provides that a director is not personally liable for monetary damages to
the corporation or any person for any statement, vote, decision or failure to
act regarding corporate management or policy, by a director, unless: (a) the
director breached or failed to perform his duties as a director; and (b) the
director's breach of, or failure to perform, those duties constitutes: (i) a
violation of criminal law unless the director had reasonable cause to believe
his conduct was lawful or had no reasonable cause to believe his conduct was
unlawful; (ii) a transaction from which the director derived an improper
personal benefit, either directly or indirectly; (iii) a circumstance under
which the director is liable for an improper distribution; (iv) in a proceeding
by, or in the right of the corporation to procure a judgment in its favor or by
or in the right of a shareholder, conscious disregard for the best interests of
the corporation, or willful misconduct; or (v) in a proceeding by or in the
right of someone other than the corporation or a shareholder, recklessness or an
act or omission which was committed in bad faith or with malicious purpose or in
a manner exhibiting wanton and willful disregard of human rights, safety or
property.
Section 607.0850 of the Florida Act provides that a corporation shall
have the power to indemnify any person who was or is a party to any proceeding
(other than an action by, or in
II-1
<PAGE>
the right of, the corporation), by reason of the fact that he is or was a
director, officer or employee or agent of the corporation against liability
incurred in connection with such proceeding if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 607.0850 also
provides that a corporation shall have the power to indemnify any person, who
was or is a party to any proceeding by, or in the right of, the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, against expenses and
amounts paid in settlement not exceeding, in the judgment of the board of
directors, the estimated expense of litigating the proceeding to conclusion,
actually and reasonably incurred in connection with the defense or settlement of
such proceeding, including any appeal thereof. Under Section 607.0850,
indemnification is authorized if such person acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue, or matter as to which such person is adjudged to be liable unless, and
only to the extent that, the court in which such proceeding was brought, or any
other court of competent jurisdiction, shall determine upon application that,
despite the adjudication of liability, but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court deems proper. To the extent that a director, officer,
employee or agent has been successful on the merits or otherwise in defense of
any of the foregoing proceedings, or in defense of any claim, issue or matter
therein Section 607.0850 provides that, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith. Under Section
607.0850, any indemnification, unless pursuant to a determination by a court,
shall be made by the corporation only as authorized in the specific case upon a
determination that the indemnification of the director, officer, employee or
agent is proper under the circumstances because he has met the applicable
standard of conduct. Notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary determination by the corporation in a
specific case, Section 607.0850 permits a director, officer, employee or agent
of the corporation who is or was a party to a proceeding to apply for
indemnification to the appropriate court and such court may order
indemnification if it determines that such person is entitled to indemnification
under the applicable standard.
Section 607.0850 also provides that a corporation has the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of Section 607.0850.
The Registrant's bylaws provide that it shall indemnify its officers
and directors and former officers and directors to the full extent permitted by
law.
The Registrant has entered into indemnification agreements with its
directors and certain of its officers. The indemnification agreements generally
provide that the Registrant will pay certain amounts incurred by an officer or
director in connection with any civil or criminal action or proceeding and
specifically including actions by or in the name of the Registrant (derivative
suits) where the individual's involvement is by reason of the fact that he was
or is an officer or director. Under the indemnification agreements, an officer
or director will not receive indemnification if such person is found not to have
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Registrant. The
II-2
<PAGE>
agreements provide a number of procedures and presumptions used to determine the
officer's or director's right to indemnification and include a requirement that
in order to receive an advance of expenses, the officer or director must submit
an undertaking to repay any expenses advanced on his behalf that are later
determined he was not entitled to receive.
The Registrant's directors and officers are covered by insurance
policies indemnifying them against certain liabilities, including liabilities
under the federal securities laws (other than liability under Section 16(b) of
the Exchange Act), which might be incurred by them in such capacities.
The Underwriting Agreement, filed as Exhibit 1.1 to this Registration
Statement, provides for indemnification by the Underwriter of the Registrant's
directors, officers and controlling persons against certain liabilities that may
be incurred in connection with the offering, including liabilities under the
Securities Act of 1933, as amended.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Except as hereinafter set forth, there have been no sales of
unregistered securities during the last three years by the Registrant. (The
following information has been adjusted to reflect an 8.2-for-1 stock split of
the Common Stock effected on August 15, 1996). The following transactions were
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof.
(a) On October 20, 1993 the Registrant issued a warrant to purchase up
to 74,308 shares of Common Stock at an exercise price of $.01 per share to
Forrest Hamilton in exchange for his performance of certain services on the
Registrant's behalf.
(b) On January 3, 1994 the Registrant issued a warrant to purchase up
to 445,424 shares of Common Stock at an exercise price of $.01 per share to G.
Patrick Savin as an inducement to him to provide certain financial
accommodations to the Registrant.
(c) On December 6, 1994, the Registrant sold an aggregate of 30,000
shares of its Series B Preferred Stock, par value $.01 per share (the "Series B
Preferred") at a price of $100 per share (yielding gross proceeds of
$3,000,000), and warrants to purchase an aggregate of approximately 567,587
shares of Common Stock at an exercise price of $.01 per share (the "Series B
Warrants"). The number of shares of Series B Preferred and Series B Warrants
sold and the names of the Registrant's shareholders to whom such Series B
Preferred and Series B Warrants were issued are set forth on the following
table:
NUMBER OF SERIES B NUMBER OF SERIES
NAME PREFERRED SHARES B WARRANTS
- ---- ------------------ ----------------
Daniel J. Andreacci 250 4,733
Brancaleone Family Partnership 4,000 75,676
Albert Bruno, Jr. 1,000 18,918
Les Campbell 250 4,733
Anthony Ciabattoni 2,000 37,837
II-3
<PAGE>
NUMBER OF SERIES B NUMBER OF SERIES
NAME PREFERRED SHARES B WARRANTS
- ---- ------------------ ----------------
Philip J. Ciabattoni 300 5,670
Otto Claricurzio 250 4,736
Audrey Cohen 1,000 18,918
Neil Eisner 250 4,733
Robert J. Falcone, Trustee of 5,000 94,596
the Robert J. Falcone Revocable
Living Trust 9/1/93
Kenneth Ginsberg 1,500 28,377
David W. Gove 250 4,733
Larry T. Nicholson 250 4,733
Bruce Phillips, M.D. & Kim 600 11,351
Phillips, JTWROS
Anthony Prezzamolo 1,000 18,918
Ray Stromback 200 3,787
Robert J. Falcone, Trustee of 11,900 225,138
the Robert J. Falcone Revocable
Living Trust 9/1/93
TOTAL 30,000 567,587
(d) In March and April, 1996, the Registrant sold to 4 private
investors an aggregate of 321,629 shares of Common Stock for $9.33 per share,
yielding gross proceeds of approximately $3,000,798. The names of such Common
Stock shareholders and the amount of shares received by each are set forth on
the following table:
NUMBER OF SHARES OF
NAME COMMON STOCK
- ---- -------------------
Anthony Ciabattoni 300,169
John Cucci 5,363
Bill Mitchell 5,363
Robert J. Falcone, Trustee of the Robert J. 10,734
Falcone Revocable Living Trust 9/1/93
TOTAL 321,629
In April and May, 1996, in connection with the Registrant's sale of
such Common Stock, the Registrant agreed to issue to such investors warrants to
purchase additional shares of Common Stock (the "Common Stock Warrants") at an
exercise price of $.01 per share if the initial public offering price is less
than certain targeted amounts. The number of shares, if any, for which the
Common Stock Warrants are exercisable shall be determined on the effective date
II-4
<PAGE>
of this offering. Assuming an initial public offering price of $10.00 per share
(which is the midpoint of the estimated range of the initial public offering
price), the Common Stock Warrants will be exercisable for an aggregate of 53,392
shares of Common Stock.
(e) On May 30, 1996, the Registrant reissued warrants to the holders of
outstanding shares of its Series A Redeemable Preferred Stock, par value $.01
per share (the "Series A Preferred") to purchase an aggregate of 171,462 shares
of its Common Stock at an exercise price of $.01 per share (the "Series A
Warrants"). The Series A Warrants were reissued in connection with the
redemption of certain shares of the Series A Preferred by the Registrant
pursuant to certain of its contractual redemption rights and the related
cancellation of certain warrants held by the holders of the Series A Warrants.
The number of Series A Warrants issued and the names of the Registrant's
shareholders to whom the Series A Warrants were issued are set forth on the
following table:
NAME NUMBER OF SERIES A WARRANTS
- ---- ---------------------------
Christopher Allick 34,292
Andrew Whittaker 9,799
David Eisner 19,590
David Losito 9,799
The Handler Family Trust 97,982
TOTAL 171,462
ITEM 16. EXHIBITS
The following exhibits either are filed herewith or incorporated by
reference to documents previously filed or will be filed by amendment, as
indicated below:
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Articles of Incorporation of the Registrant, as amended
3.2 Bylaws of the Registrant
4.1 Form of Common Stock Certificate*
4.2 Form of Series A Redeemable Preferred Stock Certificate
4.3 Form of Series B Redeemable Preferred Stock Certificate*
5.1 Form of Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
10.1 Series A Redeemable Preferred Stock and Warrant Purchase Agreement dated
June 2, 1993
II-5
<PAGE>
EXHIBITS DESCRIPTION
- -------- -----------
10.2 Form of Amended and Restated Series A Warrant to Purchase Common Stock
dated May 30, 1996
10.3 Shareholders' Agreement dated June 2, 1993 between Transeastern Properties,
Inc., Arthur J. Falcone and Marcy Falcone, Edward W. Falcone and Diana
Falcone, Philip Cucci, Jr. and Linda Cucci, Mezzonen, S.A., The Handler
Family Trust DTD 9/12/91, Christopher Allick, Andrew Whittaker, David F.
Eisner and David J. Losito
10.4 Confidential Private Placement Memorandum dated November 28, 1994
10.5 Series B Redeemable Preferred Stock and Warrant Purchase Agreement dated
December 6, 1994
10.6 Form of Series B Warrant to Purchase Common Stock
10.7 Common Stock Purchase Agreement dated April 15, 1996 between Transeastern
Properties, Inc., Arthur J. Falcone, Edward W. Falcone, Philip Cucci, Jr.,
Anthony Ciabattoni, John Cucci, Bill Mitchell and Robert J. Falcone, Trustee of
the Robert J. Falcone Revocable Living Trust 9/1/93
10.8 Form of Common Stock Warrant to Purchase Common Stock
10.9 Joint Venture Agreement dated February 16, 1994 between Transeastern
Pembroke Properties, Inc. and H.A. Cumber of Pembroke Pines, Inc., as
amended
10.10 Aberdeen Acquisition and Development Loan Agreement dated September 25,
1995 between Transeastern Aberdeen Properties, Inc. and Berkeley Federal Bank
& Trust, F.S.B., including related Promissory Note, Unconditional Guaranty and
Purchase Money First Mortgage, Security Agreement, Financing Statement and
Assignment of Leases, Rent and Income*
10.11 Loan Agreement dated March 29, 1996 between Transeastern Pembroke Villages,
Inc. and AMRESCO Funding Corporation, including related Promissory Note,
two Security Agreements, Pledge Agreement and Guaranty
10.12 Mortgage, Assignment of Rents and Security Agreement dated March 29, 1996
between Transeastern Pembroke Villages, Inc. and AMRESCO Funding
Corporation (3,000,000)*
10.13 Promissory Note dated November 28, 1995 of Transeastern Plantation
Apartments, Ltd. payable to Heller Financial, Inc. ($2,160,000)*
II-6
<PAGE>
EXHIBITS DESCRIPTION
- -------- -----------
10.14 Loan Agreement dated November 29, 1995 between Transeastern Plantation
Apartments, Ltd. and Heller Financial, Inc., including related Promissory Note,
Form of Assignment of Partnership Agreement and Guaranty*
10.15 Loan Agreement dated February 23, 1995 between Transeastern Properties at the
Cove, Inc. and Heller Financial, Inc., including related Promissory Note and
Stock Pledge Agreement*
10.16 Form of Indemnification Agreement dated June 2, 1993
21.1 Subsidiaries of the Registrant*
23.1 Consent of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
23.2 Consent of KPMG Peat Marwick LLP
24.1 Power of Attorney (included with signature pages to this Registration Statement)
27.1 Financial Data Schedule
</TABLE>
- ------------------
* To be filed by amendment.
II-7
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
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 Securities 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 Securities 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,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, 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.
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such name as required by the Underwriters to
permit prompt delivery to each purchaser.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Coral
Springs, State of Florida, on the 16th day of August, 1996.
TRANSEASTERN PROPERTIES, INC.
By: /s/ Arthur Falcone
----------------------------
Arthur Falcone
President and Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Arthur Falcone, Edward Falcone and Les
Campbell and each of them acting alone, his true and lawful attorneys-in-fact
and agents, each with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration Statement,
or any registration statement relating to this offering to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Arthur Falcone President and August 16, 1996
- ------------------ Chairman of the Board
Arthur Falcone
/s/ Philip Cucci Director, Executive Vice
- ---------------- President and Chief Operating
Philip Cucci Officer August 16, 1996
II-9
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Edward Falcone Director and Executive August 16, 1996
- ------------------ Vice President
Edward Falcone
/s/ Les Campbell Chief Financial Officer August 16, 1996
- ---------------- (Principal Financial and
Les Campbell Accounting Officer)
/s/ Christopher Allick Director August 16, 1996
- ----------------------
Christopher Allick
/s/ Anthony Ciabattoni Director August 16, 1996
- ----------------------
Anthony Ciabattoni
II-10
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
Pursuant to Sections 607.0601, 607.0602, 607.1001, 607.1002, 607.1003,
607.1006, and 607.1007 of the Florida Business Corporation Act, Transeastern
Properties of South Florida, Inc., a Florida corporation (the "Corporation"),
hereby submits the following Amended and Restated Articles of Incorporation:
1. The name of the Corporation is Transeastern Properties of South
Florida, Inc.
2. These Amended and Restated Articles of Incorporation (as hereinafter
defined) were recommended by the Board of Directors to the holders of the
authorized and outstanding shares of (i) Series A Redeemable Preferred Stock and
(ii) Common Stock of the Corporation on November 29, which were the only classes
of shares of stock of the Corporation authorized and outstanding as of such
date. These Amended and Restated Articles of Incorporation were approved by a
unanimous vote of the Board of Directors and holders of the outstanding shares
of (i) Common Stock and (ii) Series A Redeemable Preferred Stock of the
Corporation on November 29, 1994 and are intended to be effective as of such
date.
3. The Amended and Restated Articles of Incorporation of the
Corporation are hereby amended and restated (the "Amended and Restated Articles
of Incorporation"), thereby superseding the Corporation's original Articles of
Incorporation and any amendments thereto and prior restatements thereof, as
follows:
ARTICLE 1. NAME
The name of the Corporation is Transeastern Properties of South
Florida, Inc.
ARTICLE 2. CAPITAL STOCK
The total number of shares of capital stock that the Corporation shall
be authorized to issue is FIVE MILLION SIXTY-SIX THOUSAND FIVE HUNDRED
(5,075,500) divided into two classes as follows: (a) FIVE MILLION (5,000,000)
shares of common stock, par value of $.01 per share ("Common Stock"), (b)
TWENTY-NINE THOUSAND (29,000) shares of Series A Redeemable Preferred Stock, par
value $.01 per share ("Series A Preferred"), and (c) FORTY-SIX THOUSAND FIVE
HUNDRED (46,500) shares of Series B Redeemable Preferred Stock, par value $.01
per share ("Series B Preferred"). Series A Preferred and Series B Preferred are
hereinafter collectively referred to as the "Preferred Stock." The relative
rights, privileges, preferences, and limitations of the Common Stock and the
Preferred Stock are as follows:
SECTION 2.1. COMMON STOCK. Each share of Common Stock shall be
identical in all respects and for all purposes and is entitled to one vote per
share in all proceedings in which action may or is required to be taken by the
shareholders of the Corporation. Each share of Common Stock shall participate
equally in all dividends payable with respect to the Common Stock, as, if, and
when declared by the Board of Directors of the Corporation, subject to any
dividend preferences of the Preferred Stock then outstanding, and shall
participate ratably in all distributions of assets of the Corporation in the
event of any voluntary or involuntary liquidation, or winding up of the affairs
of the Corporation, or upon any
-1-
<PAGE>
distribution of the assets of the Corporation, subject to any liquidation
preferences of the Preferred Stock then outstanding.
SECTION 2.2. PREFERRED STOCK. The rights, preferences, and privileges
granted to and the limitations and restrictions imposed upon the Preferred Stock
are as follows:
A. DIVIDENDS. Holders of Preferred Stock shall be entitled to
dividends as follows:
(1) QUARTERLY DIVIDENDS. Each holder of Preferred
Stock shall be entitled to receive, as and when declared by the
Board of Directors out of funds legally available therefor,
dividends at the rate of $12.00 per share per annum, from the
Original Issue Date (as hereinafter defined) through the first
to occur of (i) the Redemption Date (as defined in Article 2.2D
hereof) or (ii) the date Preferred Liquidation Payments (as
defined in Article 2.2B hereof) are set aside for holders of
the Preferred Stock, prior and in preference to any dividends
payable on or with respect to any other class or series of
capital stock of the Corporation now or hereafter authorized.
Dividends shall be payable to the holders of Preferred Stock
quarterly on each April 1, July 1, October 1, and January 1
(individually, a "Quarterly Preferred Dividend Payment Date"
and collectively, the "Quarterly Preferred Dividend Payment
Dates") as long as any shares of Preferred Stock are
outstanding, to holders of record of Preferred Stock on a date,
to be fixed by the Board of Directors, not exceeding 40 days
preceding each Quarterly Preferred Dividend Payment Date. The
first Quarterly Preferred Dividend Payment Date for Series B
Preferred shall be January 1, 1995, and the Preferred Dividend
payable per share shall be prorated based on the number of days
such shares have been outstanding on January 1, 1995. As more
particularly described in Articles 2A (2), (3), and (4) hereof,
Preferred Dividends in an amount of $3.00 per share per quarter
(the "Quarterly Preferred Dividend Amount") shall be paid on
each Quarterly Preferred Dividend Payment Date in cash
("Preferred Cash Dividends") or under certain circumstances set
forth below, in additional shares of Preferred Stock
("Preferred Dividends in Kind"). Preferred Cash Dividends and
Preferred Dividends in Kind are collectively referred to as
"Preferred Dividends." The Original Issue Date of Series A
Preferred is June 2, 1993, and the Original Issue Date of
Series B Preferred is November ___, 1994, except with respect
to shares of Preferred Stock issued as Dividends in Kind, as to
which the Original Issue Date shall be the Quarterly Preferred
Dividend Payment Date on which such Preferred Stock was issued.
(2) DIVIDENDS IN KIND. On each of the first twelve
(12) Quarterly Preferred Dividend Payment Dates for the Series
A Preferred and one each of the first five (5) Quarterly
Preferred Dividend Payment Dates for the Series B Preferred,
Preferred Dividends may, at the option of the Corporation, be
paid in additional shares of Preferred Stock, with the number
of shares of Preferred Stock to be issued to each holder of
Preferred Stock equal to the quotient of (a) the product of (x)
the number of shares of Preferred Stock held of record by such
holder MULTIPLIED BY (y) the Quarterly Dividend Amount, DIVIDED
BY (b) $100.00. No fractional shares of Preferred Stock shall
be issued in connection with Preferred Dividends In Kind, and
in lieu thereof the Corporation shall pay cash in an amount
equal to the product of $100.00 MULTIPLIED BY such fraction.
(3) CASH DIVIDENDS. On the thirteenth and each
subsequent Quarterly Preferred Dividend Payment Date for the
-2-
<PAGE>
Series A Preferred and on the sixth and each subsequent
Quarterly Preferred Dividend Payment Date for the Series B
Preferred, Preferred Dividends shall only be paid in cash, in
an amount per share equal to the Quarterly Preferred Dividend
Amount.
(4) PAYMENT OF DIVIDENDS. Preferred Cash Dividends and
cash in lieu of fractional shares of Preferred Stock, shall be
paid by check delivered, and Preferred Dividends in Kind shall
be paid by delivery of a stock certificate evidencing the
shares issued as a Preferred Dividend in Kind, to the address
of the holder of record as such holder's address appears in the
Corporation's register of Preferred Stockholders.
(5) CUMULATIVE. All Preferred Dividends payable on the
Preferred Stock are cumulative, and to the extent Preferred
Cash Dividends are not paid in full on any Quarterly Preferred
Dividend Payment Date, such accrued and unpaid Preferred Cash
Dividends shall be paid when funds are legally available
therefor, and in any event upon liquidation of the Corporation
as set forth in Article 2.2B hereof, or upon redemption of the
Preferred Stock by the Corporation as set forth in Article 2D
hereof.
(6) RESTRICTIONS. No dividends shall be declared or
paid by the Corporation on Common Stock or any other class or
series of preferred stock now or hereafter created, unless (i)
all accrued Preferred Dividends are simultaneously paid on all
Preferred Stock entitled to Preferred Dividends, or (ii) any
partial payment of then accrued Preferred Dividends to holders
of Preferred Stock is made ratably in proportion to the full
amount of accrued Preferred Dividends to which each such holder
is then entitled.
(7) SERIES A DIVIDEND PREFERENCE. No dividends shall
be declared or paid by the Corporation on Series B Preferred,
Common Stock, or any other class or series of Preferred Stock
now or hereafter created, UNLESS all accrued Preferred
Dividends on Series A Preferred are simultaneously paid on all
shares of Series A Preferred entitled to Preferred Dividends.
(8) SERIES B DIVIDEND PREFERENCE. No Dividends shall
be declared or paid by the Corporation on Common Stock, UNLESS
all accrued Preferred Dividends on shares of Series B Preferred
are similarly paid on all shares of Series B Preferred entitled
to Preferred Dividends.
B. LIQUIDATION. Upon any Liquidation, Preferred Stock shall be
entitled to liquidation payments as follows:
(1) AMOUNT. Subject to the Series A Liquidation
Preference, each holder of Preferred Stock is entitled to a
liquidation payment in an amount equal to $100.00 per share of
Preferred Stock, PLUS an amount equal to all Preferred
Dividends unpaid thereon computed from the Original Issue Date
to the date the Preferred Liquidation Payment (as defined
below) is tendered, PLUS (any other dividends declared on
Preferred Stock but unpaid thereon (the amount payable with
respect to a share of Preferred Stock pursuant to this Article
2.2B is hereinafter referred to as a "Preferred Liquidation
Payment" and with respect to all shares of Preferred Stock as
the "Preferred Liquidation Payments").
-3-
<PAGE>
(2) SERIES A LIQUIDATION PREFERENCE. If upon a
Liquidation, the assets or surplus funds to be distributed
among the holders of Preferred Stock shall be insufficient to
permit payment to the holders of Series A Preferred of the full
amounts of their Preferred Liquidation Payments, then the
entire assets or surplus funds of the Corporation to be so
distributed shall be distributed ratably among the holders of
Series A Preferred Stock then outstanding in proportion to the
full amount of the Series A Preferred Liquidation Payments due
to all holders of Preferred Stock.
(3) SERIES B LIQUIDATION PREFERENCE. If upon such
Liquidation, the assets or surplus funds to be distributed
among the holders of Preferred Stock shall be sufficient to pay
holders of Series A Preferred the full amounts of the Series A
Liquidation Payments, but are insufficient to permit payment to
the holders of Series B Preferred of the full amounts of their
Series B Preferred Liquidation Payments, then the entire assets
or surplus funds of the Corporation remaining after payment of
the Series A Liquidation Payments shall be distributed ratably
among the holders of Series B Preferred then outstanding in
proportion to the full amount of the Series B Preferred
Liquidation Payments due to all holders of Preferred.
(4) LIQUIDATION ON COMMON STOCK. After the holders of
Preferred Stock have been paid in full their Preferred
Liquidation Payments, the remaining net assets of the
Corporation may be distributed to the holders of the Common
Stock.
(5) PROCEDURES FOR PAYMENT OF LIQUIDATION PAYMENTS.
Written notice of such Liquidation, stating a payment date, the
amount of the Preferred Liquidation Payments, and the place
where said Preferred Liquidation Payments shall be payable,
shall be given by mail, postage prepaid not less than ten (10)
days prior to the payment date stated therein, to the holders
of record of Preferred Stock, such notice to be addressed to
each such holder at its address as shown by the records of the
Corporation.
(6) DEFINITION. As used herein, a "LIQUIDATION" is any
consolidation, share exchange, or merger of the Corporation
into or with any other entity or entities in which the
Corporation is not the surviving corporation; any sale, lease,
exchange, or transfer by the Corporation of all or
substantially all of its assets; or any change of control of
the Corporation such that Arthur J. Falcone, Edward W. Falcone
or Philip Cucci, Jr. (the "Founders") and their Affiliates (as
hereinafter defined) or Associates (as hereinafter defined)
cease to beneficially own a majority of the shares of Common
Stock of the Corporation. As used in the preceding sentence,
"Affiliate" shall mean a person who directly or indirectly
controls, is controlled by, or is under common control with the
Founders or any of them. Associate shall mean the spouse,
parent, child, sibling, mother- and father-in-law, son- and
daughter-in-law, or brother- and sister-in-law of a Founder.
C. VOTING RIGHTS.
(1) INITIAL VOTING RIGHTS. Except as otherwise
provided by the Florida Business Corporation Act or as
otherwise provided herein, holders of Preferred Stock shall
vote together with holders of Common Stock as a single class on
all actions to be taken by the shareholders of the Corporation,
except that prior to a Two-Dividend Default (as defined below),
-4-
<PAGE>
holders of Preferred Stock shall vote as a separate class for
the election of one director, provided, however, if the number
of directors on the Board of Directors is expanded to five or
more, holders of Preferred Stock shall elect the whole number
rounded to the next highest whole number which is 25 percent of
the total number of directors comprising the full Board of
Directors. Any action taken by holders of Preferred Stock
voting as a separate series shall require the affirmative vote
or consent of holders of a majority of the then outstanding
shares of Preferred Stock. Each share of Preferred Stock shall
entitle the holder thereof to one vote per share.
(2) RIGHTS UPON DEFAULT IN PAYMENT OF DIVIDENDS. In
the event that Preferred Dividends are not paid in full on both
Series A Preferred and Series B Preferred on two consecutive
Quarterly Preferred Dividend Payment Dates (a "Two-Dividend
Default"), in lieu of the voting rights set forth in Article
2.2C(1), the holders of Preferred Stock shall vote together as
a separate class on all actions to be taken by the shareholders
of the Corporation, and shall have the right, voting together
as a separate class to elect three (3) directors, as well as
the power to remove as many directors as shall be necessary to
create a total of two (2) vacancies on the Board of Directors
(after taking into account the increase in the number of
members on the Board provided in Article 2.2C(4) below). To the
extent the size of the Board of Directors is increased above
five (5) or decreased below five (5), holders of the Preferred
Stock shall have the right voting together as a single class to
elect a majority of the number of directors comprising the full
board as constituted from time to time after a Two-Dividend
Default. The power to appoint and remove Directors may be
exercised by the written consent of the holders of Preferred
Stock consenting together as a single class, with a copy of
such consent being delivered to the Corporation, and the
Corporation shall deliver a copy of such consent to the holders
of all other voting securities of the Corporation. From and
after a Two-Dividend Default holders of Common Stock of the
Corporation voting as a separate class shall have the right to
elect two (2) of the five (5) directors, or such greater or
lesser number as shall constitute the directors not elected by
holders of Preferred Stock as constituted from time to time.
(3) NOTICES OF SHAREHOLDERS MEETINGS. Holders of the
shares of Preferred Stock shall be entitled to receive notice
of all meetings of shareholders of the Corporation, not less
than ten (10) nor more than thirty (30) days prior to any
meeting of shareholders of the Corporation at which shareholder
action is to be taken.
(4) SIZE OF BOARD OF DIRECTORS. Prior to a
Two-Dividend Default, the number of directors of the Board of
Directors of the Corporation shall be fixed at four (4);
provided, however, that such number may be changed as provided
in the Bylaws of the Corporation provided such change is
approved by the written consent or affirmative vote given in
writing or by vote at a meeting of the holders of at least a
majority of the then outstanding shares of Common Stock and
Preferred Stock, voting as separate classes. From and after a
Two-Dividend Default, the number of directors of the Board of
Directors of the Corporation shall be automatically fixed
without action by any person at five (5), or such greater or
lesser number as may be fixed by stockholder action.
(5) STOCKHOLDER MEETINGS. From and after a
Two-Dividend Default, in addition to the rights granted to
shareholders by law and by the by-laws of the Corporation, any
holder of Preferred Stock shall have the right to call a
-5-
<PAGE>
special meeting of holders of voting securities by notice to
the Corporation or by notice to holders of voting securities at
the discretion of such holder.
(6) MECHANICS. From and after a Two-Dividend Default:
(a) Any holder of Preferred Stock shall be
authorized to convene a special meeting of the
Shareholders of the Corporation on not less than ten
(10) days notice for the purpose of electing a Board
of Directors. At such meeting, the Shareholders shall
fix the number of directors and a majority of such
number shall be elected by holders of Preferred Stock
voting as a separate class (the "Preferred
Directors") with the remaining directors being
elected by holders of Common Stock voting as a
separate class (the "Common Directors").
(b) Any vacancy occurring in the Preferred
Directors shall be filled by the affirmative vote of
a majority of the Preferred Directors remaining in
office, and any vacancy occurring in the Common
Directors shall be filled by the affirmative vote of
a majority of the Common Directors remaining in
office.
(c) Common Directors shall be elected
annually, at the annual meeting of shareholders or at
a special meeting in lieu of the annual meeting. Each
Common Director shall serve for a term of one year
and until his successor is elected and qualified. If
the annual election of Common Directors is not held
on the date designated therefor, the Board of
Directors shall cause such election to be held as
soon thereafter as convenient.
(d) Preferred Directors shall initially be
appointed by holders of Preferred Stock for an
initial term which expires at the annual meeting of
shareholders to be held next following the initial
appointment of the Preferred Directors; thereafter,
Preferred Directors shall serve for a term of one
year and until successors are elected and qualified.
If the annual election of Preferred Directors is not
held on the date designated therefor, the Board of
Directors shall cause such election to be held as
soon thereafter as convenient. Failure of
shareholders to hold annual meetings for the purpose
of electing directors, shall not invalidate any
actions taken by directors.
(e) Immediately following a Two-Dividend
Default, the then existing Directors shall, by a
resolution of the Board of Directors, remove that
number of Common Directors necessary to reduce the
number of Common Directors remaining in office to
less than a majority of the members of the Board ,
which Common Directors shall thereafter be the Common
Directors contemplated by Section 2.2C(6)(a) hereof.
If the Directors have not acted to remove the number
of Directors necessary to reduce the number of Common
Directors remaining in office to less than a majority
of the members of the Board, thereby creating
vacancies for the full number of Preferred Directors
authorized hereby, the holders of Preferred Stock may
convene a special meeting of holders of Preferred
Stock (without participation by holders of any other
class or series of the Corporation's capital stock),
-6-
<PAGE>
to remove a number of Common Directors necessary to
reduce the number of Directors remaining in office to
less than a majority of the members of the Board. The
Directors may be removed with or without cause by the
affirmative vote of the holders of the majority of
the shares of Preferred Stock.
(f) From and after the creation of the
classified board in the manner described in Sections
2.2C(6)(b), (c), (d) and (e) hereof, any Common
Director may be removed from office with or without
cause, upon the affirmative vote of the majority of
the holders of the issued and outstanding shares of
Common Stock of the Corporation, at a meeting with
respect to which notice of such purpose is given, and
any Preferred Director may be removed from office
with or without cause upon the affirmative vote of a
majority of the holders of the issued and outstanding
shares of Preferred Stock, at a meeting with respect
to which notice of such purpose is given.
D. REDEMPTION. The Preferred Stock shall be redeemed as
follows:
(1) REDEMPTION UPON PUBLIC OFFERING; CONVERSION. Each
share of Preferred Stock which remains outstanding on the
closing date of a public offering pursuant to a registration
statement filed with the Securities Exchange Commission (the
"Registration Date"), in which the Corporation completes the
sale of its Common Stock for an aggregate purchase price in
excess of Ten Million Dollars ($10,000,000), shall
automatically, and without any action on the part of the holder
thereof or the Corporation except as provided in clause (i)
below, be converted into solely the right to receive, upon
surrender thereof as hereinafter provided, an amount equal to
$100, plus an amount equal to all Preferred Dividends unpaid
thereon computed from the Original Issue Date to the
Registration Date, plus any other dividends declared but unpaid
thereon. The Corporation shall have no obligation to deliver to
any holder of such converted Preferred Stock the funds to which
the holder shall be entitled until such holder has surrendered
the certificate or certificates for the shares of Preferred
Stock held by such holder, duly endorsed, at the office of the
Corporation or any transfer agent for the Preferred Stock or
the holder notifies the Corporation that such certificates have
been lost, stolen, or destroyed, and executes an agreement
satisfactory to the Corporation to indemnify the Corporation
from any loss incurred by it in connection therewith. All
rights with respect to such shares of converted Preferred Stock
outstanding on the Registration Date shall forthwith after the
Registration Date terminate, except for the rights of the
holders of such shares (i) to receive the funds stated herein
upon surrender of their certificates for the Preferred Stock
and (ii) with respect to cumulated unpaid Preferred Dividends
described in Article 2.2A(6) hereof.
(2) REDEMPTION AT MATURITY. Each share of Series A
Preferred Stock which remains outstanding on June 1, 2005 (the
"Series A Maturity Date") and each share of Series B Preferred
which remains outstanding on December 31, 2004 (the "Series B
Maturity Date"). As used hereinafter the term "Maturity Date"
means Series A Maturity Date when used to describe the Maturity
Date for the Series A Preferred and Series B Maturity Date when
used to describe the Maturity Date for the Series B Preferred
shall be redeemed by the Corporation for an amount equal to
$100 per share of Preferred Stock, plus an amount equal to all
Preferred Dividends unpaid thereon computed from the Original
Issue Date to the Maturity Date, plus any other dividends
declared but unpaid thereon (the "Redemption Amount"). The
Corporation shall have no obligation to deliver to any holder
-7-
<PAGE>
of Preferred Stock the Redemption Amount to which the holder
shall be entitled until the holder has surrendered the
certificate or certificates for the shares of Preferred Stock
held by such holder, duly endorsed, at the office of the
Corporation or any transfer agent for the Preferred Stock, or
the holder notifies the Corporation that such certificates have
been lost, stolen, or destroyed, and executes an agreement
satisfactory to the Corporation to indemnify the Corporation
from any loss incurred by it in connection therewith. All
rights with respect to shares of Preferred Stock outstanding on
the Maturity Date shall forthwith after the Maturity Date
terminate, except for the rights of the holders of such shares
(i) to receive the Redemption Amount upon surrender of their
certificates for the Preferred Stock and (ii) with respect to
cumulated unpaid Preferred Dividends described in Article
2.2A(6) hereof.
(3) RIGHT OF CORPORATION TO CALL SHARES FOR
REDEMPTION. Commencing on the Original Issue Date, the
Corporation shall have the right to call for redemption all or
any part of the outstanding Preferred Stock (the "Called
Shares"), at any time or from time to time, at a price equal to
$100.00 for each Called Share, plus an amount equal to all
Preferred Dividends unpaid thereon computed from the Original
Issue Date to the date such payment is made to holders of the
Called Shares, plus any other dividends declared but unpaid
thereon. The amount payable with respect to each Called Share
is hereinafter referred to as the "Call Price". Written notice
of the Corporation's election to purchase all or part of the
then outstanding Preferred Stock stating a payment date, the
amount of the Call Price, the number of Called Shares, and the
place where the Call Price shall be payable, shall be given by
mail, postage prepaid, not less than thirty (30) days prior to
the payment date stated therein, to the holders of record of
all shares of Preferred Stock called for redemption, such
notice to be addressed to each such holder at its address as
shown by the records of the Corporation. Each redemption of
Called Shares shall be made ratably among the holders of
Preferred Stock then outstanding so that the number of Shares
redeemed from each such holder shall bear the same ratio to the
total number of Called Shares redeemed from all such holders as
the number of shares of Preferred Stock then held by such
holders bears to the aggregate number of shares of Preferred
Stock then outstanding. From and after the close of business on
the payment date, unless there is a default in the payment of
the Call Price, all rights of the holders (except the right to
receive the Call Price) shall cease with respect to the Called
Shares, any Preferred Dividends shall cease to accrue and such
shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose
whatsoever.
(4) REDEEMED OR OTHERWISE ACQUIRED SHARES. Any
Preferred Stock redeemed pursuant to this Article 2.2D or
otherwise acquired by the Corporation in any manner whatsoever
shall be canceled and shall not under any circumstance be
reissued, and the Corporation may from time to time take such
appropriate corporate action as may be necessary to reduce
accordingly the number of authorized shares of Preferred Stock.
E. NOTICES. In the event of (i) any taking by the Corporation
of a record of the holders of any class or series of securities for the
purpose of determining the holders thereof who are entitled to receive
any dividend or other distribution, (ii) any reclassification or
recapitalization of the capital stock of the Corporation, (iii) any
merger or consolidation of the Corporation, or any transfer of all or
substantially all the assets of the Corporation to any other
corporation, entity or person, or (iv) any voluntary or involuntary
dissolution, liquidation, or winding up of the affairs of the
Corporation, the Corporation shall mail to each holder of Preferred
Stock at least thirty (30) days prior to the record date specified
therein, a notice specifying (A) the date on which any such record is
-8-
<PAGE>
to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on which any
such reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any is to be fixed, as to when the holders of
record of Common Stock or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation, or winding up. Any notice required by the provisions of
this Article 2E to be given to the holder of shares of the Preferred
Stock shall be deemed given when personally delivered to such holder or
five (5) business days after the same has been deposited in the United
States mail, certified or registered mail, return receipt requested,
postage prepaid, and addressed to each holder of record at his address
appearing on the books of the Corporation.
F. PAYMENT OF TAXES. The Corporation will pay all documentary,
stamp and similar taxes and governmental charges imposed upon the
transfer of the Preferred Stock that may be imposed upon the issuance
or redemption of shares of the Preferred Stock.
G. NO DILUTION OR IMPAIRMENT. The Corporation shall not amend
its Articles of Incorporation or participate in any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
for the purpose of avoiding or seeking to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by the Corporation, but will at all times in good faith assist in
carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of
the Preferred Stock against dilution or other impairment.
H. RESTRICTIONS AND LIMITATIONS. So long as any shares of
Preferred Stock remain outstanding, the Corporation shall not, and
shall not permit any subsidiary to, without the vote or written consent
by the holders of at least two-thirds of the outstanding Preferred
Stock in each such case voting or consenting as a separate series:
(1) REDEMPTION OF EQUITY SECURITIES. Purchase, redeem,
or otherwise acquire (or pay into or set aside for a sinking
fund for such purpose), any of the Common Stock or any other
shares of its capital stock of any class or any warrants,
rights, or options to purchase or acquire any shares of its
capital stock except for redemption as provided for herein or
in the Series A Redeemable Preferred Stock and Warrant Purchase
Agreement dated June 2, 1993; provided, however, that this
restriction shall not apply to the repurchase of shares of
Common Stock from employees, officers, directors, consultants,
or other persons performing services for the Corporation or any
subsidiary of the Corporation pursuant to agreements under
which the Corporation has the option or obligation to
repurchase such shares upon the occurrence of certain events as
set forth in that certain Shareholders Agreement being executed
by the Company, holders of Series A Preferred, and the Founders
dated June 2, 1993, such as the termination of employment;
(2) SALE OF SIGNIFICANT ASSETS. Effect any sale,
lease, assignment, transfer, or other conveyance of all or
substantially all of the assets or business of the Corporation
or any subsidiaries of the Corporation, or liquidate, dissolve,
or enter into any consolidation, merger, or other similar
combination involving the Corporation or any of its
Subsidiaries, or any reclassification or other change of any
-9-
<PAGE>
stock, or any recapitalization of the Corporation (except that
a subsidiary may merge or otherwise be combined with, or
liquidated and dissolved into, any other subsidiary of the
Corporation), or convey, sell, license, or lease any rights to
any inventions developed or owned by the Corporation;
(3) INCREASE AUTHORIZED PREFERRED. Increase the total
number of authorized shares of Preferred Stock; or
(4) AMEND PREFERRED STOCK. Following the date of issue
of any shares of Preferred Stock, amend, modify, or supersede
the terms of the Preferred Stock without the affirmative vote
or consent of holders of a majority of each series of the then
outstanding shares of Preferred Stock, voting or consenting as
a separate series.
I. NO REISSUANCE OF PREFERRED STOCK. No share or shares of
Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion, or otherwise shall be reissued, and all such
shares shall be canceled, retired, and eliminated from the shares which
the Corporation shall be authorized to issue.
ARTICLE 3.
The mailing address of the principal office of the Corporation is 3300
University Drive, Coral Springs, Florida 33065.
ARTICLE 4.
Any action required by law or by the Bylaws of the Corporation to be
taken at a meeting of the shareholders of the Corporation, and any action which
may be taken at a meeting of the shareholders, may be taken without a meeting if
a written consent, setting forth the action so taken, shall be signed by persons
entitled to vote at a meeting those shares having sufficient voting power to
cast not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
were present and voted. Notice of such action without a meeting by less than
unanimous written consent shall be given within ten (10) days of the taking of
such action to those shareholders of record on the date when the written consent
is first executed and whose shares were not represented on the written consent.
ARTICLE 5.
No director shall have any personal liability to the Corporation or its
shareholders for monetary damages for breach of duty of care or other duty as a
director, by reason of any act or omission occurring subsequent to the date when
this provision becomes effective, except that this provision shall not eliminate
or limit the liability of a director for (a) any appropriation, in violation of
his duties, of any business opportunity of the Corporation; (b) acts or
omissions which involve intentional misconduct or a knowing violation of law; or
(c) any transaction from which the director derived an improper personal
benefit.
ARTICLE 6.
In discharging the duties of their respective positions and in
determining what is believed to be in the best interests of the corporation, the
Board of Directors, committees of the Board of Directors, and individual
directors, in addition to considering the effects of any action on the
corporation or its Shareholders, may consider the interest of the employees,
customers, suppliers, and creditors of the corporation and its subsidiaries, the
-10-
<PAGE>
communities which offices or other establishments of the corporation and its
subsidiaries are located, and all other factors such directors consider
pertinent; provided, however, that this provision shall be deemed solely to
grant discretionary authority for the Directors and shall not be deemed to
provide to any constituency any right to be considered.
ARTICLE 7.
The Corporation shall indemnify, or advance expenses to, to the fullest
extent authorized or permitted by the Florida General Corporation Act, any
person made, or threatened to be made, a party to any action, suit or proceeding
by reason of the fact that he (i) is or was a director of the Corporation; (ii)
is or was serving at the request of the Corporation as a director of another
corporation; (iii) is or was an officer of the Corporation, provided that he is
or was at the time a director of the Corporation; or (iv) is or was serving at
the request of the Corporation as an officer of another corporation, provided
that he is or was at the time a director of the Corporation, serving at the
request of the Corporation. Unless otherwise expressly prohibited by the Florida
General Corporation Act, and except as otherwise provided in the foregoing
sentence, the Board of Directors of the Corporation shall have the sole and
exclusive discretion, on such terms and conditions as it shall determine, to
indemnify, or advance expenses to, any person made, or threatened to be made, a
party to any action, suit or proceeding by reason of the fact that he is or was
an officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as an officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. No person
falling within the purview of the foregoing sentence may apply for
indemnification or advancement of expenses to any court of competent
jurisdiction. The Corporation may enter into separate agreements with its
directors whereby the Company agrees to indemnify such directors as provided
hereinabove.
IN WITNESS WHEREOF, TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC. has
caused these Amended and Restated Articles of Incorporation to be executed, its
corporate seal affixed and the foregoing to be attested, all by its duly
authorized officers this 29th day of November, 1994.
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
By:
Arthur J. Falcone, President
[CORPORATE SEAL]
ATTEST:
Philip Cucci, Jr., Secretary
-11-
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
Pursuant to the provisions of Sections 607.1002, 607.10025 and 607.1006
of the Florida Business Corporation Act, the Articles of Incorporation of
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC., a Florida corporation (the
"Corporation"), are hereby amended as follows:
1. Article 1 shall be deleted in its entirety and amended to
read as follows:
"ARTICLE 1. - NAME
The name of this Corporation is TRANSEASTERN
PROPERTIES, INC."
2. The directors of the Corporation approved, on August 14, 1996, an
8.2-for-one forward stock split effective immediately such that each outstanding
share of the Corporation's common stock, par value $.01 per share ("Common
Stock") shall, after the effective date of these Articles of Amendment,
represent 8.2 shares of Common Stock. Accordingly, introductory paragraph to
Article 2 shall be deleted in its entirety and amended to read as follows:
"ARTICLE 2. - CAPITAL STOCK
The total number of shares of capital stock that the
Corporation shall be authorized to issue is FORTY-ONE MILLION
SEVENTY-FIVE THOUSAND FIVE HUNDRED (41,075,500) divided into
two classes as follows: (a) FORTY-ONE MILLION (41,000,000)
shares of common stock, par value $.01 per share ("Common
Stock"), (b) TWENTY-NINE THOUSAND (29,000) shares of Series A
Redeemable Preferred Stock, par value $.01 per share ("Series
A Preferred"), and (c) FORTY-SIX THOUSAND FIVE HUNDRED
(46,500) shares of Series B Redeemable Preferred Stock, par
value $.01 per share ("Series B Preferred"). Series A
Preferred and Series B Preferred are hereinafter collectively
referred to as the "Preferred Stock."
<PAGE>
Each outstanding share of Common Stock shall, after the date
of these Article of Amendment, represent 8.2 shares of Common
Stock. The relative rights, privileges, preferences, and
limitations of the Common Stock and the Preferred Stock are as
follows:"
3. The undersigned, hereby certifies that the foregoing amendments to
the Articles of Incorporation were duly adopted and approved by at least a
majority of the directors of the Corporation on August 14, 1996 at a meeting
duly called at which a quorum was present, without shareholder approval. The
number of votes cast was sufficient for approval. The foregoing amendments to
the Articles of Incorporation do not adversely affect the rights or preferences
of the holders of outstanding shares of any class or series and do not result in
the percentage of authorized shares that remain unissued after the stock split
exceeding the percentage of authorized shares that were unissued before the
stock split. Shareholder approval of the foregoing amendments was not required
under Sections 607.1002 and 607.10025 of the Florida Business Corporation Act.
Dated: August 14, 1996 TRANSEASTERN PROPERTIES OF
SOUTH FLORIDA, INC.
By:\S\ EDWARD FALCONE
-----------------------
- -----------------------
Edward Falcone,
Executive Vice President
-2-
BYLAWS
OF
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
ARTICLE I. MEETING OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
this corporation shall be held on the 1ST day of JUNE of each year or at such
other time and place designated by the Board of Directors of the corporation.
Business transacted at the annual meeting shall include the election of
directors of the corporation. If the designated day shall fall on a Sunday or
legal holiday, then the meeting shall be held on the first business day
thereafter.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders shall
be held when directed by the President or the Board of Directors, or when
requested in writing by the holders of not less than 10% of all the shares
entitled to vote at the meeting. A meeting requested by shareholders shall be
called for a date not less than 10 nor more than 60 days after the request is
made, unless the shareholders requesting the meeting designate a later date. The
call for meeting shall be issued by the Secretary, unless the President, Board
of Directors, or shareholders requesting the meeting shall designate another
person to do so.
SECTION 3. PLACE. Meeting of shareholders shall be held at the principal
place of business of the corporation or at such other place as may be designated
by the Board of Directors.
SECTION 4. NOTICE. Written notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered no less than 10 not more than 60 days
before the meeting, either personally or by first class mail, by or at the
direction of the President, the Secretary or the officer of persons calling the
meeting to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid.
SECTION 4. NOTICE OF ADJOURNED MEETING. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this Article to each shareholder
of record on the new record date entitled to vote at such meeting.
SECTION 6. SHAREHOLDER QUORUM AND VOTING. 70% of the shares entitled to
vote,
<PAGE>
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders.
If a quorum is present, the affirmative vote of 70% of the shares
represented at the meeting and entitled to vote on the subject matter shall be
the act of the shareholders unless otherwise provided by law.
SECTION 7. VOTING OF SHARES. Each outstanding share shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders.
SECTION 8. PROXIES. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or his duly authorized attorney-in-fact.
No proxy shall be valid after the duration of 11 months from the date thereof
unless otherwise provided in the proxy.
SECTION 9. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action required
by law, these by laws, or the Articles of Incorporation of this corporation to
be taken at any annual or special meeting of shareholders, or any action which
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted, as is provided by
law.
ARTICLE II. DIRECTORS
SECTION 1. FUNCTION. All Corporate powers shall be exercised by or under
the authority of, and the business and affairs of the corporation shall be
managed under the direction of , the Board of Directors.
SECTION 2. QUALIFICATION. Directors NEED NOT be residents of this state
and shareholders of this corporation.
SECTION 3. COMPENSATION. THE SHAREHOLDERS shall have authority to fix
the compensation of directors.
SECTION 4. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which any action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless he votes against such action or abstains from voting in rewpect thereto
because of an asserted conflict of interest.
SECTION 5. NUMBER. This corporation shall have 2 directors.
SECTION 6. ELECTION AND TERM. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors shall hold office
until the first annual meeting of shareholders, and until his successor shall
have been elected and qualified or until his earlier resignation, removal from
office or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each
<PAGE>
director shall hold office for a term from which he is elected and until his
successor shall have been elected and qualified or until his earlier
resignation, removal from office or death.
SECTION 7. VACANCIES. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
SECTION 8. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of 70% of the shares
then entitled to vote at an election of directors.
SECTION 9. QUORUM AND VOTING. 100% of the number of directors fixed by
these bylaws shall constitute a quorum for the transaction of business. The act
of 100% of the directors present at a meeting at which a quorum is present shall
be the act of Board of Directors.
SECTION 10. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by 100% of the full Board of Directors, may designate from
among its members an executive committee and one or more other committees each
of which, to the extent provided in such resolution shall have and may exercise
all the authority of the Board of Directors, except as is provided by law.
SECTION 11. PLACE OF MEETING. Regular and Special meetings of the Board
of Directors shall be held AT THE CORPORATE OFFICE OF THE COMPANY.
SECTION 12. TIME, NOTICE AND CALL OF MEETINGS. Regular meetings of the
Board of Directors shall be held without notice on THE FIRST DAY OF JUNE OF EACH
YEAR. Written notice of the time and place of special meetings of the Board of
Directors shall be given to each director by either personal delivery, telegram
or cablegram at least TEN days before the meeting or by notice mailed to the
director at least FIFTEEN days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place. Notice
of any such adjourned meeting shall be give to the directors who were not
present at the time of the adjournment and,
<PAGE>
unless the time and place of the adjourned meeting are announced at the time of
the adjournment, to the other directors.
Meetings of the Board of Directors may be called by the chairman of the
board, by the president of the corporation or by any two directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone of similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participate by such means shall constitute presence in person at
a meeting.
SECTION 13, ACTION WITHOUT A MEETING. Any action required to be taken at
a meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, signed
by all the directors, or all the members of the committee, as the case may be,
is filed in the minutes of the proceedings of the board or of the committee.
Such consent shall have the same effect as a unanimous vote.
ARTICLE III. OFFICERS
SECTION 1. OFFICERS. The officers of this corporation shall consist of a
president, a secretary and a treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers and agents as may
be deemed necessary may be elected or appointed by the Board of Directors from
time to time. Any two or more officers may be held by the same person.
SECTION 2. DUTIES. The officers of this corporation shall have the
following duties.
The President shall be the chief executive officer of the corporation,
shall have general and active management of the business and affairs of the
corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the shareholders and Board of Directors.
The Secretary shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all meetings
of the shareholders and Board of Directors, send all notices of all meetings and
perform such other duties as may be prescribed by the Board of Directors of the
President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts of receipts and disbursements and render accounts thereof at the
annual meetings of shareholders and whenever else required by the Board of
Directors of the president, shall perform such other duties as may be prescribed
by the Board of Directors of the President.
SECTION 3. REMOVAL OF OFFICERS. An officer or agent elected or appointed
by the Board
<PAGE>
of Directors may be removed by the board whenever in its judgment the best
interests of the corporation will be served thereby.
Any vacancy in any office may be filed by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
SECTION 1. ISSUANCE. Every holder of shares in this corporation shall be
entitled to have a certificate representing all shares to which he is entitled.
No certificates shall be issued for any share until such share is fully paid.
SECTION 2. FORM. Certificates representing shares in this corporation
shall be signed by the President or Vice President and the Secretary or an
Assistant Secretary and may be sealed with the seal of this corporation or
facsimile thereof.
SECTION 3, TRANSFER OF STOCK. The corporation shall request a stock
certificate presented to it or transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
If the shareholder shall claim to have lost or destroyed a certificate of shares
issued by the corporation, a new certificate shall be issued upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed, and, at the discretion of the Board of Directors,
upon the deposit of a bond or other indemnity in such amount and with such
sureties, if any, as the board may reasonable require.
ARTICLE V. BOOKS AND RECORDS.
SECTION 1. BOOKS AND RECORDS. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders, Board of Directors and committees of directors.
This corporation shall keep at its registered office or principal place
of business a record of its shareholders, giving the names and addresses of all
shareholders and the number of the shares held by each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
SECTION 2. SHAREHOLDERS' INSPECTION RIGHTS. Any person who shall have
been a holder of record of shares or of voting trust certificates thereof at
least six months immediately preceding his demand or shall be the holder of
record of, or the holder of record of voting trust
<PAGE>
certificates for, at least five percent of the outstanding shares of the
corporation, upon written demand stating the purpose thereof, shall have the
right to examine, in person or by agent or attorney, at any reasonable time or
times, for any proper purpose its relevant books and records of accounts,
minutes and records of shareholders and to make extracts therefrom.
SECTION 3. FINANCIAL INFORMATION. Not later than four months after the
close of each fiscal year, this corporation shall prepare a balance sheet
showing in reasonable detail the financial condition of the corporation as of
the close of its fiscal year, and a profit and loss statement showing the
results of the operations of the corporation during its fiscal year.
Upon the written request of any shareholder of holder of voting trust
certificates for shares of the corporation, the corporation shall mail to each
shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement.
The balance sheets and profit and loss statements shall be filed in the
registered office of the corporation in this state, shall be kept for at least
five years, and shall be subject to inspection during business hours by any
shareholder or holder of voting trust certificates, in person or by agent.
ARTICLE VI. DIVIDENDS.
The Board of Directors of this corporation may, form time to time,
declare and the corporation may pay dividends on its shares in cash, property or
its own shares, except when the corporation is insolvent or when the payment
thereof would render the corporation insolvent, subject to the provisions of the
Florida Statutes.
ARTICLE VII. CORPORATE SEAL.
The Board of Directors shall provide a corporate seal which shall be in
circular form.
ARTICLE VIII. AMENDMENT.
These bylaws may be altered, amended or repealed, and new bylaws may be
adopted, by the vote of a majority of the Board of Directors present at any
regular meeting of the said Board, or at a special meeting of the directors
called for that purpose, provided a quorum of the directors are present at such
meeting, unless reserved to the shareholders by the Articles of Incorporation.
These bylaws, and any amendments thereto, and any new bylaws added by the
directors, may be amended, altered or repealed by the shareholders and the
shareholders may prescribe in any bylaw made by them that such bylaw shall not
be altered, amended or repealed by the Board of Directors.
A-Cert Shares
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
A FLORIDA CORPORATION
SERIES A REDEEMABLE PREFERRED STOCK, PAR VALUE $0.01
29,000 SHARES AUTHORIZED
Name
Number (Shares)****
of the Series A Redeemable Preferred Stock of Transeastern Properties
of South Florida, Inc. which are fully paid and non-assessable and which are
_____________________________ __________________________________
PRESIDENT SECRETARY
August 16, 1996
THE FOLLOWING OPINION IS INTENDED TO BE RENDERED UPON THE
TRANSACTIONS DESCRIBED HEREIN IN SUBSTANTIALLY THE FORM
PRESENTED, ASSUMING NO CHANGE IN THE FACTS OR THE LAW UPON
WHICH SUCH OPINION IS BASED, AND SUBJECT TO THE RECEIPT,
REVIEW AND APPROVAL OF FINAL DOCUMENTS.
Mr. Arthur Falcone
Chief Executive Officer
Transeastern Properties, Inc.
3300 University Drive, Suite 001
Coral Springs, Florida 33065
Re: Transeastern Properties, Inc.
OFFERING OF SHARES OF COMMON STOCK
Dear Falcone:
As counsel to Transeastern Properties, Inc. (the "Corporation"), we
have examined the Articles of Incorporation and Bylaws of the Corporation as
well as such other documents and proceedings as we have considered necessary for
the purposes of this opinion. We have also examined and are familiar with the
proceedings taken by the Corporation to authorize the issuance of up to
2,750,000 shares of Common Stock of the Corporation, par value $.01 per share
(the "Common Stock"). In addition, we have examined a copy of the Prospectus
included in the Corporation's Registration Statement on Form S-1, File No.
333-______, which is incorporated by reference into this registration statement.
In rendering this opinion, we have assumed, without independent
investigation: (i) the authenticity of all documents submitted to us as
originals; (ii) the conformity to original documents of all documents submitted
to us as certified or photostatic copies; and (iii) the genuineness of all
signatures. In addition, as to questions of fact material to the opinions
expressed herein, we have relied upon such certificates of public officials,
corporate agents and officers of the Corporation and such other certificates as
we deemed relevant.
Based upon the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that following the issuance and
delivery of the Common Stock against payment of adequate consideration therefore
in accordance with the terms of such Prospectus, the Common Stock will be
validly issued, fully paid and non-assessable.
Very truly yours,
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
================================================================================
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT
PURCHASE AGREEMENT
AMONG
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.,
ARTHUR J. FALCONE and MARCY FALCONE,
EDWARD W. FALCONE and DIANA FALCONE,
PHILIP CUCCI, JR. and LINDA CUCCI
AND
THE SEVERAL INVESTORS NAMED IN SCHEDULE 1
Dated as of June 2, 1993
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE 1.THE PREFERRED STOCK .............................................. 2
Section 1.1 Purchase and Sale of Preferred Stock ..................... 2
Section 1.2 Purchase and Sale of Warrants ............................ 2
Section 1.3 Closing .................................................. 2
Section 1.4 Related Transactions ..................................... 2
ARTICLE 2.REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................... 3
Section 2.1 Organization, Qualifications and Corporate Power ........ 3
Section 2.2 Authorization of Agreements, Etc ........................ 3
Section 2.3 Validity ................................................ 4
Section 2.4 Authorized Capital Stock ................................ 4
Section 2.5 Litigation; Compliance with Law ......................... 5
Section 2.6 Proprietary Information of Third Parties ................ 5
Section 2.7 Title to Properties ..................................... 6
Section 2.8 Leasehold Interests ..................................... 7
Section 2.9 Insurance ............................................... 7
Section 2.10 Taxes .................................................. 8
Section 2.11 Other Agreements ....................................... 8
Section 2.12 Patents, Trademarks, Etc ............................... 10
Section 2.13 Loans and Advances ..................................... 11
Section 2.14 Assumption, Guaranties, Etc. of
Indebtedness of Other Persons .......................... 11
Section 2.15 Significant Customers and Suppliers .................... 11
Section 2.16 Governmental Approvals ................................. 11
Section 2.17 Financial Statements ................................... 11
Section 2.18 Absence of Undisclosed Liabilities ..................... 12
Section 2.19 Absence of Changes ..................................... 12
Section 2.20 Employee Benefit Plans ................................. 13
Section 2.21 Disclosure ............................................. 14
Section 2.22 Brokers ................................................ 14
Section 2.23 Transactions with Affiliates ........................... 14
Section 2.24 Employees .............................................. 14
Section 2.25 U.S. Real Property Holding Corporation ................. 15
Section 2.26 Foreign Corrupt Practices Act .......................... 15
Section 2.27 Environmental Regulations .............................. 15
Section 2.28 Disclosure ............................................. 16
ARTICLE 3.REPRESENTATION AND WARRANTIES OF THE INVESTORS .................. 16
ARTICLE 4.CONDITIONS PRECEDENT TO THE PURCHASE OF THE
PREFERRED STOCK AND WARRANTS BY INVESTORS ....................... 17
i
<PAGE>
ARTICLE 5.CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
COMPANY ......................................................... 19
ARTICLE 6.COVENANTS OF THE COMPANY ........................................ 19
Section 6.1 Financial Statements, Reports, Etc ...................... 19
Section 6.2 Financial Covenants and Ratios .......................... 21
Section 6.3 Corporate Existence ..................................... 22
Section 6.4 Properties, Business, Insurance ......................... 22
Section 6.5 Inspection, Consultation, and Advice .................... 22
Section 6.6 Restrictive Agreements Prohibited ....................... 22
Section 6.7 Transactions with Affiliates ............................ 22
Section 6.8 Expenses of Directors ................................... 23
Section 6.9 Use of Proceeds ......................................... 23
Section 6.10 Board of Directors Meetings ............................ 23
Section 6.11 Compensation ........................................... 23
Section 6.12 Bylaws ................................................. 23
Section 6.13 Maintenance of Ownership of Investments ................ 23
Section 6.14 Distributions by Investments ........................... 23
Section 6.15 Compliance with Laws ................................... 24
Section 6.16 Keeping of Records and Books of Account ................ 24
Section 6.17 Employee Stock Plans ................................... 24
Section 6.18 Fees and Expenses of Investors' Counsel ................ 24
Section 6.19 Indemnification Agreement .............................. 24
Section 6.20 United States Real Property Holding Corporation ........ 24
ARTICLE 7.SPECIAL REDEMPTION RIGHT ........................................ 25
ARTICLE 8.MISCELLANEOUS ................................................... 26
Section 8.1 Expenses ................................................ 26
Section 8.2 Survival of Agreements .................................. 26
Section 8.3 Survival of Agreements .................................. 27
Section 8.4 Brokerage ............................................... 27
Section 8.5 Parties in Interest ..................................... 27
Section 8.6 Notices ................................................. 27
Section 8.7 Governing Law ........................................... 28
Section 8.8 Entire Agreement ........................................ 28
Section 8.9 Counterparts ............................................ 28
Section 8.10 Amendments ............................................. 28
Section 8.11 Severability ........................................... 28
Section 8.12 Titles and Subtitles ................................... 29
Section 8.13 Certain Defined Terms .................................. 29
ii
<PAGE>
CROSS REFERENCE OF DEFINED TERMS
Term Section
---- -------
A. Falcones Preamble
affiliate Section 8.12
Agreement Preamble
Articles Section 2.4
Closing Section 1.3
Closing Date Section 1.3
Common Stock Section 2.4(a)
Company Preamble
Company Benefit Plans Section 2.20(a)
Contracts Section 2.11
Cuccis Preamble
Disclosure Schedule Article 2
E. Falcones Preamble
Employees Section 2.20(a)
Environmental Permits Section 2.27
ERISA Section 2.20(a)(i)
Expiration Date Section 7.2
Financial Statements Section 2.17
Founder Preamble
General Partnership Interest Section 2.1(b)
Hazardous Materials Section 2.27
Indemnification Agreement Section 1.4
Intellectual Property Section 2.12
Investment Section 2.1(b)
Investor Preamble
IRC Section 6.20
person Section 8.12
Preferred Stock Background
Real Property Section 2.7(a)
Redeemable Warrants and Shares Section 7.2
Securities Act Section 2.11(m)
Series A Directors Section 6.8
Shareholders Agreement Section 1.4
Special Redemption Notice Article 7
Special Redemption Rights Article 7
Total Equity Section 6.2(c)
Warrant Background
Warrant Shares Background
iii
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1 Preferred Stock and Warrant Shares Purchased
Schedule 2 Disclosure Schedule
Schedule 3 Accredited Investor Certificates
Exhibit A Form of Warrant Agreement
Exhibit B Shareholders Agreement
Exhibit C Opinion of Company Counsel
Exhibit D Amended and Restated Articles of Incorporation
Exhibit E Indemnification Agreement
v
<PAGE>
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
THIS SERIES A REDEEMABLE PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
("Agreement") is made and entered into as of June 2, 1993 between TRANSEASTERN
PROPERTIES OF SOUTH FLORIDA, INC., a Florida corporation (the "Company"), ARTHUR
J. FALCONE and MARCY FALCONE, residents of the State of Florida (the "A.
Falcones"), EDWARD W. FALCONE and DIANA FALCONE, residents of the State of
Florida (the "E. Falcones"), PHILIP CUCCI, JR. and LINDA CUCCI, residents of the
State of Florida (the "Cuccis"), and the several persons named in the attached
Schedule 1 (such persons are hereinafter referred to individually as an
"Investor," and, collectively as the "Investors"). A. Falcones, E. Falcones, and
Cuccis are sometimes hereinafter referred to individually as a "Founder" and
collectively as the "Founders."
BACKGROUND
A. The Investors desire to invest in the Company to enable the Company to
pursue acquisition, development, management, and other opportunities
relating to the building and development of residential properties.
B. The Investors desire to purchase (i) an aggregate of 20,000 shares of
the Series A Redeemable Preferred Stock of the Company, par value
$.01, (the "Preferred Stock") at a price of $100.00 per share and (ii)
warrants initially exercisable for 275,000 shares of common stock (the
"Warrant Shares") at an exercise price of $.01 per Warrant Share (the
"Warrants"), on the terms and subject to the conditions set forth in
this Agreement.
C. The Company desires to obtain additional equity capital through the
issuance and sale to the Investors of the Preferred Stock and the
Warrants, on the terms and subject to the conditions set forth in this
Agreement. The Founders are the controlling shareholders of the
Company and will receive a direct benefit from the issuance and sale
by the Company of the Preferred Stock and the Warrants.
AGREEMENT
For and in consideration of the premises and the mutual covenants and
agreements contained in this Agreement and for other good and valuable
consideration, the receipt and legal sufficiency of which is hereby
acknowledged, the parties hereby agree:
<PAGE>
ARTICLE 1.
THE PREFERRED STOCK AND THE WARRANTS
SECTION 1.1 PURCHASE AND SALE OF PREFERRED STOCK. The Company agrees to
issue and sell to each Investor, and each Investor agrees to purchase from the
Company, the number of shares of Preferred Stock set forth opposite the name of
such Investor on Schedule 1 hereto under the caption "Preferred Stock Purchased"
at a purchase price of $100.00 per share.
SECTION 1.2 PURCHASE AND SALE OF WARRANTS. The Company agrees to issue and
sell to each Investor, and each Investor agrees to purchase from the Company, a
Warrant to purchase the number of Warrant Shares set forth opposite the name of
such Investor on Schedule 1 hereto under the caption "Warrant Shares Purchased."
Each Warrant shall be substantially in the form of Exhibit A attached hereto.
The purchase price for each Warrant shall be equal to the product of $.001
multiplied by the number of Warrant Shares issuable upon exercise of the
Warrant.
SECTION 1.3 CLOSING. The closing of the purchase and sale of the Preferred
Stock and the Warrants shall take place at the offices of Powell, Goldstein,
Frazer & Murphy, 191 Peachtree Street, N.E., Atlanta, GA 30303 at 10:00 a.m.,
Eastern Daylight Time, on June 2, 1993, or at such other location, date, and
time as may be agreed upon between the Investors and the Company (such closing
being called the "Closing" and such date and time being called the "Closing
Date"). At the Closing, the Company shall issue and deliver to each Investor a
stock certificate or certificates in definitive form, registered in the name of
each Investor, representing the Preferred Stock and the Warrants being purchased
by each Investor at the Closing. As payment in full for the Preferred Stock and
the Warrants, and against delivery of the certificates evidencing the Preferred
Stock and the Warrants purchased, on the Closing Date, each Investor shall
deliver to the Company a cashier's check payable to the order of the Company, in
the amount set forth opposite the name of such Investor on Schedule 1 under the
heading "Aggregate Purchase Price," or shall transfer such sum to the account of
the Company by wire transfer.
SECTION 1.4 RELATED TRANSACTIONS. At the Closing, the Company, the
Founders, and the Investors (and such other parties as may be necessary) shall
execute and deliver a shareholders agreement among the Company, the A. Falcones,
the E. Falcones, the Cuccis, and the Investors, in substantially the form of
Exhibit B hereto (the "Shareholders Agreement"). In addition, (a) the Company
and the Founders shall deliver (i) a certificate with respect to the matters
described in Section 4(f) hereof, and (ii) the opinion of Kinsey & Gleason,
counsel to the Company, in substantially the form of Exhibit C hereto, and (b)
the Company shall deliver an indemnification agreement in substantially the form
of Exhibit E hereto (the "Indemnification Agreement") to the Series A Directors
(as hereinafter defined).
2
<PAGE>
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE FOUNDERS
For the purpose of inducing the Investors to purchase the Shares and the
Warrants, the Company and each Founder represents and warrants to each Investor
that, except as otherwise set forth in the Disclosure Schedule attached hereto
as Schedule 2 (the "Disclosure Schedule") by means of an explicit reference to
the particular representation or warranty as to which exception is taken, which
in each case shall constitute the sole representation and warranty as to which
such exception shall apply:
SECTION 2.1 ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER.
(a) The Company is a corporation duly incorporated, validly existing,
and in good standing under the laws of the State of Florida and is duly licensed
or qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business transacted by
it or the character of the properties owned or leased by it requires such
licensing or qualification. The Company has the corporate power and authority to
(i) own and hold its properties and carry on its business as now conducted and
as proposed to be conducted, (ii) execute, deliver, and perform each of this
Agreement, the Warrants, the Shareholders Agreement, and the Indemnification
Agreement, (iii) issue, sell, and deliver the Preferred Stock, and (iv) issue
and deliver the Warrants and the Warrant Shares issuable upon exercise of the
Warrants.
(b) Section 2.1(b) of Schedule 2 contains a true and correct list of
each (i) corporation some or all of the securities of which are held by the
Company (an "Investment"), indicating with respect to each Investment, the
number and type of securities outstanding and the number and type of securities
held by the Company, and (ii) each general or limited partnership owned in whole
or in part by the Company (a "General Partnership Interest"). Except for
Investments and General Partnership Interests listed on Section 2.1(b) of the
Disclosure Schedule, the Company does not (i) own of record or beneficially,
directly or indirectly, (A) any shares of capital stock or securities
convertible into capital stock of any corporation, (B) any debt securities of
any corporation, or (C) any participating interest in or any indebtedness of any
partnership, joint venture, limited liability company, or other non-corporate
business enterprise or (ii) control, directly or indirectly, any other entity.
SECTION 2.2 AUTHORIZATION OF AGREEMENTS, ETC.
(a) The Company is not in violation of or default under any provision
of its Amended and Restated Articles of Incorporation, or Bylaws, of any
provision of any indenture, contract, agreement, mortgage, deed of trust, loan,
commitment, judgment, decree, order, or obligation to which it is a party or by
which any of its properties or assets are bound, or of any provision of any
Federal, state, or local statute, rule, or governmental regulation applicable to
the Company. The execution and delivery by the Company of this Agreement and
each of the other agreements, documents, and instruments contemplated hereby,
the performance by the Company of its obligations hereunder and thereunder, the
issuance, sale, and delivery of the Preferred Stock and the Warrants, and the
issuance and delivery of the Warrant Shares upon exercise of the Warrants, have
been duly authorized by all requisite corporate action on the part of the
Company and its officers, directors, and shareholders and will not result in any
such violation, conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any such provision, require any
3
<PAGE>
consent or waiver under any such provision, or result in the creation or
imposition of any lien, charge, restriction, claim, or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company. There is no such
provision which materially and adversely affects, or so far as the Company is
presently aware, in the future may materially and adversely affect, the
condition (financial or otherwise), business, property, prospects, assets, or
liabilities of the Company.
(b) The Preferred Stock has been duly authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid, and
nonassessable. The Warrants have been duly authorized and, when issued in
accordance with this Agreement, will be validly issued. The Preferred Stock and
the Warrants, when issued in accordance with this Agreement, will be free and
clear of all liens, charges, restrictions, claims, and encumbrances imposed by
or through the Company, except as reflected on the certificates evidencing the
Preferred Stock. The Warrant Shares have been duly and validly reserved for
issuance upon exercise of the Warrants, and the Warrant Shares, when so issued,
will be duly authorized, validly issued, fully paid, and nonassessable and will
be free and clear of all liens, charges, restrictions, claims, and encumbrances
imposed by or through the Company, except as reflected on the certificates
evidencing the Warrants and the Warrant Shares. Neither the issuance, sale, and
delivery of the Preferred Stock and the Warrants nor the issuance and delivery
of the Warrant Shares is subject to any preemptive right, right of first
refusal, or other right in favor of any person.
SECTION 2.3 VALIDITY. Each of this Agreement, the Warrants, the
Shareholders Agreement, and the Indemnification Agreement have been duly and
validly executed and delivered by the Company and constitutes the legal, valid,
and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
SECTION 2.4 AUTHORIZED CAPITAL STOCK. Immediately prior to the Closing:
(a) the authorized capital stock of the Company will consist of (i)
Twenty-Nine Thousand (29,000) shares of Series A Redeemable Preferred Stock and
(ii) Five Million (5,000,000) shares of common stock (the "Common Stock").
(b) Seven Hundred Twenty Five Thousand and One (725,001) shares of
Common Stock will be validly issued and outstanding, fully paid and
nonassessable, and no shares of Preferred Stock will be issued and outstanding;
(c) all issued and outstanding shares of Common Stock are owned of
record and beneficially by the persons and in the amounts set forth in Section
2.4 of the Disclosure Schedule;
(d) the relative rights, powers, preferences, qualifications,
limitations, and restrictions in respect of each class of authorized capital
stock of the Company are as set forth in the Company's Amended and Restated
Articles of Incorporation (the "Articles"), a copy of which is attached as
Exhibit D hereto, and all such rights, powers, preferences, qualifications,
limitations, and restrictions are valid, binding, and enforceable and in
accordance with all applicable laws;
(e) except as set forth in Section 2.4 of the Disclosure Schedule, (i)
no person owns of record or is known to the Company to own beneficially any
shares of any equity stock, (ii) no subscription, warrant, option, convertible
security, or other right (contingent or other) to purchase or otherwise acquire
4
<PAGE>
equity securities of the Company is authorized or outstanding, and (iii) there
is no commitment by the Company to issue shares, subscriptions, warrants,
options, convertible securities, or other such rights or to distribute to
holders of any of its equity securities any evidence of indebtedness or assets,
except as contemplated by this Agreement; and
(f) except as set forth in the Articles and in the Shareholders
Agreement, the Company has no obligation (contingent or other) to purchase,
redeem, or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any other distribution in respect
thereof. Except as set forth in the Shareholders Agreement, there are no voting
trusts or agreements, preemptive rights, or proxies relating to any securities
of the Company (whether or not the Company is a party thereto). All of the
outstanding securities of the Company were issued in compliance with all
applicable Federal and state securities laws.
SECTION 2.5 LITIGATION; COMPLIANCE WITH LAW. There is no (i) action, suit,
claim, proceeding, or investigation pending or, to the knowledge of the Company
or the Founders, threatened against or affecting the Company, at law or in
equity, or before or by any Federal, state, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, (ii) arbitration proceeding relating to the Company pending under
collective bargaining agreements or otherwise, or (iii) governmental inquiry
pending or, to the knowledge of the Company or the Founders, threatened against
or affecting the Company, (including without limitation any inquiry as to the
qualification of the Company to hold or receive any license or permit), and
there is no basis known to the Company of the Founders for any of the foregoing.
The Company is not exposed to any liability which may be materially adverse to
the Company's business, prospects, financial condition, operations, properties,
or affairs. The Company is not subject to any order, writ, injunction, or decree
of any court or of any Federal, state, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign. There is no action or suit by the Company pending or threatened against
any other person. The Company is in material compliance with all laws, rules,
regulations, and orders applicable to the Company's business, operations,
properties, assets, licenses, and other authorizations required to conduct its
business as conducted and as proposed to be conducted. There is no existing law,
rule, regulation, or order, and neither the Company nor any Founder, after due
inquiry, is aware of any proposed law, rule, regulation, or order, whether
Federal or state, which would prohibit or restrict the Company from, or
otherwise materially adversely affect the Company in, conducting its business in
any jurisdiction in which it is now conducting business or in which it proposes
to conduct business within the foreseeaSection 2.6 Proprietary Information of
Third Parties. After reasonable investigation, neither the Company nor any
Founder is aware that any significant employee or consultant of the Company is
obligated under any contract or other agreement, or subject to any judgment,
decree, or order of any court or administrative agency, that would conflict with
the obligation of such employee to use best efforts to promote the interests of
the Company. To the knowledge of the Company or the Founders, no third party has
claimed or has reason to claim that any person employed by or affiliated with
the Company has (a) violated or may be violating any of the terms or conditions
of any employment, non-competition, or non-disclosure agreement between such
employee and such third party, (b) disclosed or may be disclosing, or utilized
or may be utilizing, any trade secret or proprietary information or
documentation of such third party, or (c) interfered or may be interfering in
the employment relationship between such third party and any of the Company's
present or former employees. No third party has requested information from the
Company which suggests that such a claim might be contemplated. To the knowledge
of the Company and the Founders, no person employed by or affiliated with the
Company has employed or proposes to employ any trade secret or any information
or documentation proprietary to any
5
<PAGE>
former employer, and to the knowledge of the Company and the Founders, no person
employed by or affiliated with the Company has violated any confidential
relationship which such person may have had with any third party, in connection
with the development, manufacture, or sale of any product or proposed product,
or the development or sale of any service or proposed service of the Company,
and the Company has no reason to believe there will be any such employment or
violation. To the knowledge of the Company and the Founders, none of the
execution or delivery of this Agreement, or the carrying on of the business of
the Company by its officers, employees, or agentsproposed conduct of the
business of the Company, will conflict with or result in a breach of the terms,
conditions, or provisions of or constitute a default under any contract,
covenant, or instrument under which any such person is obligated.
SECTION 2.7 TITLE TO PROPERTIES.
(a) Section 2.7(a) of the Disclosure Schedule contains a true and
correct list of each tract of real property owned by the Company ("Real
Property") and a summary description of the proposed use thereof and the number
of buildable lots remaining in each tract, and if applicable, a general
description of all improvements and structures located on such tract. Attached
to the Disclosure Schedule are copies of binders for title insurance for each
tract of Real Property. Except as reflected in such title insurance binders, the
Company has good and marketable fee simple title to the Real Property, free and
clear of all mortgages, liens, charges, encumbrances, and purchase options and
other rights to or against such property, other than such minor imperfections of
title, liens, easements, zoning restrictions, or encumbrances, if any, as are
not substantial in character, amount, or extent, and do not, severally or in the
aggregate, detract from the value or interfere with the present uses of the Real
Property, or otherwise impair the business and operations of the Company, except
for claims of subcontractors, laborers, and materialmen which have performed
work or provided services to such property and which are unpaid within normal
payment terms. Copies of all documents evidencing mortgages, liens, charges, or
other encumbrances upon the Real Property and copies of all title insurance
policies insuring the interest of the Company therein are attached to the
Disclosure Schedule.
(b) All improvements on the Real Property conform in all material
respects to all applicable state and local laws, use restrictions, building
ordinances, and health and safety ordinances, and the property is zoned for the
various purposes for which the Real Property and improvements thereon are
presently being used.
(c) The Company, has received no written notice of any pending or
threatened condemnations, planned public improvements, annexation, special
assessments, zoning or subdivision changes, or other adverse claims affecting
the Real Property.
(d) There is no private restrictive covenant or governmental use
restriction (including zoning) known to the Company after reasonable inquiry, on
all or any portion of the Real Property which prohibits the current or
contemplated use of the Real Property.
(e) All licenses, permits, and approvals required for the occupancy
and operation of the Real Property have been obtained and are in full force and
effect and the Company has received no notices of violations in connection with
such items.
6
<PAGE>
(f) The Company does not have in its possession any studies or reports
which indicates any defects in the design or construction of any of the
improvements on the Real Property.
(g) There are no past due taxes, assessments, or other charges
affecting the Real Property.
(h) The Company has good and marketable title to all personal
properties and assets owned by it, free and clear of all mortgages, pledges,
security interests, liens, charges, claims, restrictions and other encumbrances,
except liens for current taxes not yet due and payable and minor imperfections
of title, if any, not material in nature or amount and not materially detracting
from the value or impairing the use of the personal property subject thereto or
impairing the operations or proposed operations of the Company. The Company owns
or leases all personal properties and assets necessary to the operation of its
business as now conducted. All of such personal properties and assets are in
good operating condition (normal wear and tear excepted), are reasonably fit for
the purposes for which such personal properties and assets are presently used,
are adequate and usable for the continued operation of the business of the
Company as the same is presently conducted, and none of such personal properties
and assets are in need of maintenance or repairs except for ordinary, routine
maintenance and repairs, the cost of which will not vary materially from
historic patterns.
SECTION 2.8 LEASEHOLD INTERESTS. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any default of the Company
thereunder and, to the best of the Company's knowledge, without any default
thereunder of any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a default or
event of default by the Company under any such lease or agreement or, to the
best of the Company's knowledge, by any other party thereto. The Company's
possession of such property has not been disturbed and, to the best of the
Company's knowledge, no claim has been asserted against the Company adverse to
its rights in such leasehold interests.
SECTION 2.9 INSURANCE. All of the properties and business of the Company of
an insurable nature are insured to the extent usually insured by persons or
entities engaged in the same or similar businesses against loss or damage of the
kind customarily insured against by such persons or entities. The Company is not
in default regarding the provisions of any such policy. The Company has not,
since inception, self-insured against any risk ordinarily insured against by
similar businesses. The Company has not received any notice from any of its
insurers that any insurance premiums will be increased in the future or that any
insurance coverage presently in force will not be available in the future on
substantially the same terms as are now in effect. There are no outstanding
requirements or recommendations by any current insurer or underwriter with
respect to the Company which require or recommend changes in the conduct of the
business or require any repairs or other work to be done to the assets and
properties of the Company.
SECTION 2.10 TAXES. The Company has filed or obtained filing extensions for
all tax returns, Federal, state, county, and local, required to be filed by it,
and the Company has paid or established adequate reserves (in accordance with
generally accepted accounting principles) for the payment of all taxes shown to
be due by such returns as well as all other taxes, assessments, and governmental
charges which have become due or payable, including, without limitation, all
taxes which the Company is obligated to withhold from amounts owing to
employees, creditors, and third parties. The Federal income tax returns of the
Company have never been audited by the Internal Revenue Service and no state
income or sales tax returns of the
7
<PAGE>
Company have been audited. No deficiency assessment with respect to or proposed
adjustment of the Company's Federal, state, county, or local taxes is pending
or, to the best of the Company's knowledge, threatened. There is no tax lien,
whether imposed by any Federal, state, county, or local taxing authority,
outstanding against the assets, properties, or business of the Company. Neither
the Company nor any of its shareholders has ever filed a consent pursuant to
Section 341(f) of the IRC (as hereinafter defined), relating to collapsible
corporations.
SECTION 2.11 OTHER AGREEMENTS. Except as set forth in Section 2.11 of the
Disclosure Schedule, the Company is not a party to or otherwise bound by any
written or oral contract, obligation, agreement, commitment, restriction, or the
like which individually or in the aggregate could materially adversely affect
the business, prospects, financial condition, operations, property, or affairs
of the Company. Except as set forth in Section 2.11 of Disclosure Schedule, the
Company is not a party to or otherwise bound by any written or oral:
(a) distributor, dealer, manufacturer's representative, advertising or
sales agency contract or agreement which is not terminable on less than ninety
days' notice without cost or other liability to the Company (except for
contracts which, in the aggregate, are not material to the business of the
Company);
(b) contract with any labor union or collective bargaining
organization (and, to the knowledge of the Company or the Founders, no
organizational effort is being made with respect to any of its employees);
(c) contract or other commitment with any supplier containing any
provision permitting any party other than the Company to renegotiate the price
or other terms, or containing any pay-back or other similar provisions upon the
occurrence of a failure by the Company to meet its obligations when due or the
occurrence of any other event;
(d) contract for the future purchase of fixed assets or for the future
purchase of materials, supplies, or equipment in excess of expected normal
operating requirements;
(e) contract for the employment of any officer, employee, or other
person (whether of a legally binding nature or in the nature of informal
understandings) of a full-time or consulting basis, except severance
arrangements not in excess one month's pay and accrued vacation pay;
(f) bonus, pension, profit-sharing, retirement, hospitalization,
insurance, stock purchase, stock option, or other plan, contract or
understanding pursuant to which benefits are provided to any employee of the
Company (other than group insurance plans applicable to employees generally);
(g) loan, note, indenture, agreement, or instrument relating to or
evidencing the borrowing of money or the mortgaging or pledging of, or otherwise
placing a lien or security interest on, any asset of the Company;
(h) guaranty of any obligation for borrowed money or otherwise;
8
<PAGE>
(i) voting trust or agreement, shareholders agreement, pledge
agreement, buy-sell agreement, or first refusal or preemptive rights agreement
relating to any securities of the Company (except for the Shareholders
Agreement);
(j) agreement, or group of related agreements with the same party or
any group of affiliated parties under which the Company has advanced or agreed
to advance money or has agreed to lease any property as lessee or lessor;
(k) agreement or obligation (contingent or otherwise) to issue, sell,
or otherwise distribute or repurchase or otherwise acquire or retire any share
of its capital stock or any of its other equity securities, except pursuant to
this Agreement and the Shareholders Agreement;
(l) assignment, license, or other agreement with respect to any form
of intangible property;
(m) agreement under which it has granted any person any rights to
register under the Securities Act of 1933, as amended (the "Securities Act"),
any of its currently outstanding securities or any of its securities which may
hereafter be issued;
(n) agreement under which the Company, the Founders, or any executive
or key employee has limited or restricted its right to compete with any person
in any respect;
(o) agreement providing for disposition of the business, assets, or
shares of the Company, agreements of merger or consolidation to which the
Company is a party or letters of intent with respect to the foregoing;
(p) franchise agreement, or any agreements involving, or letters of
intent with respect to, the acquisition of the business, assets, or shares of
capital stock of any other business;
(q) insurance policies; or
(r) other contract or group of related contracts with the same party
involving more than $10,000 or continuing over a period of more than six (6)
months from the date or dates thereof (including renewals or extensions optional
with another party), which contract or group of contracts is not terminable by
the Company without penalty upon notice of thirty (30) days or less, but
excluding any contract or group of contracts with a customer of the Company for
the sale, lease, or rental of the Company's products or services if such
contract or group of contracts was entered into by the Company in the ordinary
course of business.
The Company has provided counsel to the Investors with copies of and access to
all of the obligations, agreements and the like set forth in Section 2.11 to the
Disclosure Schedule (referred to individually as a "Contract" and collectively
as the "Contracts"). Each of the Contracts are valid, binding and in full force
and effect in all material respects. The Company, and to the knowledge of the
Company and the Founders, each other party thereto has in all material respects
performed all the obligations required to be performed by it to date and has
received no notice of default and is not in default (with due notice or lapse of
time or both) under any of the Contracts. The Company has no present expectation
or intention of not fully performing all its obligations under each of the
Contracts, and the Company has no knowledge of any breach or anticipated breach
9
<PAGE>
by the other party to any of the Contracts. There is no Contract that contains
any contractual requirement with which there is a reasonable likelihood that the
Company or any other party thereto will be unable to comply with the terms
thereof. The continuation, validity, and effectiveness of each Contract will in
no way be affected by the consummation of the transactions contemplated by this
Agreement. There exists no actual or, to the best knowledge of the Company, any
threatened termination, cancellation, or limitation of, or any amendment,
modification, or change to any Contract, which would have a material adverse
effect on the business or condition, financial or otherwise, of the Company.
SECTION 2.12 PATENTS, TRADEMARKS, ETC. The Company has sufficient title to
and ownership of, or can obtain on terms which will not adversely affect its
business, all franchises, permits, licenses, and other similar authority
necessary for the conduct of its business as now being conducted and as planned
to be conducted, and it is not in default under any of such franchises, permits,
licenses, and other similar authority. The Company possesses all patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, copyrights, formulae, trade secrets, and
know how (collectively, "Intellectual Property") necessary or desirable to the
conduct of its business as conducted and as proposed to be conducted, and no
claim is pending or, to the knowledge of the Company and the Founders,
threatened to the effect that the operations of the Company infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and, to the knowledge of the Company and the Founders, there is no
basis for any such claim (whether or not pending or threatened). No claim is
pending or threatened to the effect that any such Intellectual Property owned or
licensed by the Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company, and, to the knowledge of the Company
and the Founders, there is no basis for any such claim (whether or not pending
or threatened). The Company is not aware of any third party which is infringing
or violating any of the Intellectual Property of the Company. To the knowledge
of the Company and the Founders, all technical information developed by and
belonging to the Company which has not been patented has been kept confidential.
The Company has not granted or assigned to any other person or entity any of the
Intellectual Property or the right to manufacture, have manufactured, assemble,
or sell the products or proposed products or to provide the services or proposed
services of the CompaSection 2.13 Loans and Advances. The Company does not have
any outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each case, for advances to employees of the
Company in respect of reimbursable business expenses anticipated to be incurred
by them in connection with their performance of services for the Company in the
ordinary course of business, consistent with past practice.
SECTION 2.14 ASSUMPTION, GUARANTIES, ETC. of Indebtedness of Other Persons.
The Company has not assumed, guaranteed, endorsed, or otherwise become directly
or contingently liable on any indebtedness of any other person (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to, or otherwise invest
in the debtor, or otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.
SECTION 2.15 SIGNIFICANT CUSTOMERS AND SUPPLIERS. No customer or supplier
which was or has been significant to the Company in the past three (3) years has
terminated, materially reduced or threatened to terminate or materially reduce
its purchases from or provision of products or services to the Company, as the
case may be.
10
<PAGE>
SECTION 2.16 GOVERNMENTAL APPROVALS. Subject to the accuracy of the
representations and warranties of the Investors set forth in Article 3 hereof,
no registration, qualification, or filing with, or consent or approval of or
other action by, any Federal, state, or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery, and
performance by the Company of this Agreement, the offer, issuance, sale and
delivery of the Preferred Stock and the Warrants, the issuance and delivery of
the Warrant Shares upon exercise of the warrants or the consummation of any
other transaction contemplated hereby, other than (i) filings pursuant to state
securities laws (all of which filings have been made as of the date hereof) in
connection with the offer and sale of the Preferred Stock and the Warrants and
(ii) the filing of a notice under Regulation D under the Securities Act.
SECTION 2.17 FINANCIAL STATEMENTS. Attached as Section 2.17 to the
Disclosure Schedule are true, correct, and complete copies of: the audited
Statement of Assets, Liabilities and Shareholders' Equity - Income Tax Basis of
the Company dated December 31, 1992, and an audited Statement of Revenues and
Expenses - Income Tax Basis, and an audited Statement of Changes in Shareholders
Equity - Income Tax Basis for the year then ended, together with notes thereto
and the audit report of KPMG Peat Marwick thereon (collectively, the "Financial
Statements"). The Financial Statements (i) are in accordance with the books and
records of the Company, (ii) present fairly the financial condition of the
Company as of the respective dates indicated and the results of operations for
such periods except that interim period financial statements are subject to
normal year-end audit adjustments, which in the aggregate will not materially or
adversely change such interim financial statements, (iii) have been prepared on
a tax accounting basis consistently applied throughout the periods involved, and
(iv) reflect adequate reserves for all liabilities and losses. The Company has
not received any advice or notification from its independent certified public
accountants that the Company has used any improper accounting practice that
would have the effect of not reflecting or incorrectly reflecting in the
Financial Statements or the books and records of the Company, any properties,
assets, liabilities, revenues, or expenses. The Financial Statements do not
contain any items of special or nonrecurring income, or other income not earned
in the ordinary course of business, except as set forth in the notes to the
Financial Statements. The books, records, and accounts of the Company accurately
and fairly reflect, in reasonable detail, the transactions and the assets and
liabilities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any of the funds of the Company, except for
transactions, bank accounts, and funds which have been and are reflected in the
normally maintained books and records of the Company.
SECTION 2.18 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
material liabilities or obligations (secured or unsecured, whether accrued,
absolute, direct, indirect, contingent, or otherwise, and whether due or to
become due) that are not fully accrued or reserved against in the Financial
Statements, other than (a) liabilities incurred in the ordinary course of
business subsequent to the date of the Financial Statements and (b) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements, which liabilities and obligations, individually or in
the aggregate, are not material to the financial condition or operating results
of the Company.
SECTION 2.19 ABSENCE OF CHANGES. Since the date of the Financial Statements
and except as reflected therein, (a) there has been no material adverse change
in the condition (financial or otherwise), business, property, assets, or
liabilities of the Company other than changes in the ordinary course of
business, none of which, individually or in the aggregate, has been materially
adverse; (b) the Company has not entered into any material transaction which was
not in the ordinary course of its business; (c) there has been no damage to,
11
<PAGE>
destruction of, or loss of physical property (whether or not covered by
insurance) materially adversely affecting the business or operations of the
Company; (d) except as contemplated by this Agreement, the Company has not
declared or paid any dividend on its stock, made any distribution on its stock,
redeemed, purchased, or otherwise acquired any of its stock, granted any options
to purchase shares of its stock; (e) the Company has not increased the
compensation of any of its officers, or the rate of pay of its employees as a
group, except as part of regular compensation increases in the ordinary course
of its business, to an amount in excess of the amounts set forth in the pro
formas previously delivered to the Investors; (f) there has been no resignation
or termination of employment of any key officer or employee of the Company, and
the Company does not know of the impending resignation or termination of
employment of any such officer or employee that if consummated, would have a
material adverse effect on the business of the Company; (g) there has been no
labor dispute involving the Company or its employees and none is pending or to
the knowledge of the Company and the Founders, threatened; (h) there has been no
change, except in the ordinary course of business, in the contingent obligations
of the Company by way of guaranty, endorsement, indemnity, warranty, or
otherwise; (i) there have been no loans made by the Company to its employees,
officers, directors, or partners other than travel advances and office advances
made in the ordinary course of business; and (j) to the knowledge of the Company
and the Founders, there has been no other event or condition of any kind which
might reasonably be expected to result in a material and adverse change in the
Company's condition (financial or otherwise) or business or to impair materially
the ability of the Company to conduct its business as it is currently being
conducted.
SECTION 2.20 EMPLOYEE BENEFIT PLANS.
(a) Section 2.20 of the Disclosure Schedule contains a true and
complete list of all the following agreements or plans which are presently in
effect or which have previously been in effect and which cover employees of the
Company ("Employees"):
(i) Any employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), and any trust or
other funding agency created thereunder, or under which the Company, with
respect to the Employees, has any outstanding, present, or future obligation or
liability, or under which any Employee or former Employee has any present or
future right to benefits which are covered by ERISA; or
(ii) Any other pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus, vacation,
severance, disability, hospitalization, medical, life insurance, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which the Company, with respect to the Business,
maintains or to which the Company, with respect to the Business, has any
outstanding, present, or future obligations to contribute or make payments
under, whether voluntary, contingent, or otherwise.
The plans, programs, policies, or arrangements which are described in
subparagraph (i) or (ii) above and which are listed on Section 2.20 of the
Disclosure Schedule are hereinafter collectively referred to as the "Company
Benefit Plans." The Company has delivered to the Investors true and complete
copies of all written plan documents and contracts evidencing the Company
Benefit Plans, as they may have been amended to the date hereof, together with
(A) all documents relating to any tax-qualified retirement plan maintained by
the Company, which documents are required to have been filed prior to the date
hereof with governmental authorities for each of the three most recently
completed plan years; (B) attorney's response to an auditor's request for
12
<PAGE>
information for each of the three most recently completed plan years; and (C)
financial statements for each Company Benefit Plan for each of the three most
recently completed plan years.
(b) Except for the Company Benefit Plans, the Company does not now
maintain, nor has the Company at any time in the past been obligated to make any
payment or contribution to any pension, retirement, profit-sharing, deferred
compensation, stock purchase, stock option, bonus or incentive plan, any
medical, vision, dental, or other health plan, any life insurance plan,
vacation, severance, disability, or any other employee benefit plan, program,
policy, or arrangement, whether written, unwritten, formal, or informal,
including, without limitation, any "employee benefit plan" as defined in Section
3(3) of ERISA. The Company has not made, entered into, or agreed to any
commitment, whether written or oral, which would obligate the Company to
establish any employee benefit plan, or continue any employment agreement or
employment policy covering Employees. With respect to all "welfare plans," as
defined in Section 3(1) of ERISA, covering Employees or former Employees, there
are no obligations to continue coverage or to make payments to or on behalf of
persons who are or may become retired or terminated Employees or their
beneficiaries, other than as may be required by Sections 601 through 608 of
ERISA.
(c) The Company has complied with the continuation coverage
requirements of Section 1001 of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and ERISA Sections 601 through 608.
SECTION 2.21 DISCLOSURE.
(a) The Company has delivered to the Investors a true and correct copy
of (i) the Articles of Incorporation of the Company, and all amendments thereto
and restatements thereof certified by the appropriate state official; and (ii)
the Bylaws of the Company and all amendments thereto.
(b) The minute books of the Company made available to the Investors
prior to the date hereof, accurately reflect all corporate action taken by the
directors and shareholders of the Company or any committee of the Board of
Directors of the Company and contain true and accurate copies of or originals of
the respective minutes of all meetings or consent actions of the directors, any
committee of the Board of Directors, and the shareholders.
(c) The stock record books of the Company, made available to the
Investors prior to the date hereof, accurately reflect the stock ownership of
the Company, and contain complete and accurate records with respect to the
transfer of all securities issued by the Company and each Investment since
inception.
SECTION 2.22 BROKERS. The Company has no contract, arrangement, or
understanding with any broker, finder, or similar agent with respect to the
transactions contemplated by this Agreement, nor has the Company authorized or
employed any person in connection with the offering or sale of the Preferred
Stock, or the Warrants or any security of the Company similar to the Preferred
Stock or the Warrants.
SECTION 2.23 TRANSACTIONS WITH AFFILIATES. No Founder, director, officer,
employee, or shareholder of the Company, or member of the family of any such
person, or any corporation, partnership, trust, or other entity in which any
such person, or any member of the family of any such person, has a substantial
interest or is an officer, director, trustee, partner, or holder of more than 5%
of the outstanding equity interests thereof is
13
<PAGE>
a party to any transaction with the Company, including any contract, agreement
or other arrangement providing for the employment of, furnishing of services by,
rental of real or personal property from or otherwise requiring payments to any
such person or firm.
SECTION 2.24 EMPLOYEES.
(a) No officer or key Employee has advised the Company (orally or in
writing) that he or she intends to terminate employment with the Company. The
Company has complied in all material respects with all applicable laws relating
to the employment of labor, including provisions relating to wages, hours, equal
opportunity, worker health and safety, collective bargaining, and the payment of
Social Security and other taxes, and with ERISA.
(b) The Company does not have any collective bargaining agreement
covering any of its Employees. There is no pending or, to the best knowledge of
the Company, threatened labor dispute involving the Company or any of its
Employees. To the best of the Company's knowledge, the Company has amicable
relations with its Employees.
SECTION 2.25 U.S. REAL PROPERTY HOLDING CORPORATION. [Intentionally
omitted.]
SECTION 2.26 FOREIGN CORRUPT PRACTICES ACT. The Company has not made,
offered or agreed to offer anything of value to any government official,
political party or candidate for government office nor has it taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977.
SECTION 2.27 ENVIRONMENTAL REGULATIONS.
(a) Except for failures which will not result in any material
liability or consequences to the Company, the Company has met, and continues to
meet, all applicable local, state, Federal and national environmental
regulations.
(b) The Company has not been notified that it is potentially liable,
has not received any requests for information or other correspondence concerning
any site or facility, and is not otherwise aware that it is considered
potentially liable under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or any similar state law.
(c) The Company has not entered into or received any consent decree,
compliance order, or administrative order relating to environmental protection.
(d) The Company has neither entered into or received nor is the
Company in default under any judgment, order, writ, injunction, or decree of any
federal, state, or municipal court or other governmental authority relating to
environmental protection.
(e) The Company has all permits, licenses, approvals, consents, and
authorizations (the "Environmental Permits") relating to environmental or health
protection which are required under Federal, state, or local laws, rules, and
regulations and is in compliance with all the Environmental Permits (including
any information provided on the applications therefor), and Section 2.27 of the
Disclosure Schedule contains
14
<PAGE>
a complete list and description of all such Environmental Permits and attached
to Section 2.27 of the Disclosure Schedule is a true and correct copy of each
such Environmental Permit;
(f) There are no actions, suits, claims, arbitration proceedings, or
complaints pending or, to the Company's knowledge, threatened or under
consideration by any governmental authority, municipality, community, citizen,
or other entity against the Company relating to environmental protection, nor
does the Company have reason to believe that any such actions, suits, claims, or
complaints will be brought against it.
(g) No disposal, releases, burial, or placement of hazardous or toxic
substances, pollutants, contaminants, petroleum, gas products, or
asbestos-containing materials (as any of such terms may be defined under
Federal, state, or local law) (hereinafter collectively referred to as
"Hazardous Materials") has occurred on, in, at, or about any of the Company's
properties or facilities or any other facility or site to which Hazardous
Materials from the Company may have been taken at any time in the past and
Section 2.27 of the Disclosure Schedule contains a list of all facilities to
which Hazardous Materials from the Company have been taken in the past.
(h) To the Company's knowledge, there has been no disposal, releases,
burial, or placement of Hazardous Materials on any property not owned or
operated in the present or the past by the Company which may result or has
resulted in contamination of or beneath any of the Company's properties or
facilities.
(i) There are no above-ground and underground storage tanks on the
Real Property.
(j) No lien has arisen on the Company's properties or facilities under
Federal, state, or local laws, rules, or regulations as they relate to
environmental protection.
(k) No audit or investigation has been conducted as to environmental
matters at any of the Company's properties by any private party (including but
not limited to the Company) or any governmental agency.
SECTION 2.28 DISCLOSURE. Neither this Agreement nor any Schedule or Exhibit
hereto, contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein not misleading.
None of the statements, documents, certificates or other items prepared or
supplied by the Company with respect to the transactions contemplated hereby
contains an untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein not misleading.
ARTICLE 3.
REPRESENTATION AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company as to such
Investor only, that:
(a) it is an "accredited investor" within the meaning of Rule 501
under the Securities Act, as indicated on the Investor Certification of such
Investor, annexed hereto as Schedule 3;
15
<PAGE>
(b) it has sufficient knowledge and experience to evaluate the risks
and merits of its investment in the Company and it is able financially to bear
the risks thereof;
(c) it has had an opportunity to ask questions of and receive answers
from and to discuss the Company's business, management, and financial affairs
with the Company's management;
(d) the Preferred Stock and the Warrants are being acquired for its
own account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof;
(e) it was not offered nor made aware of the Company's interest in
issuing the Preferred Stock and the Warrants by any means of public
advertisement or solicitation;
(f) in connection with such Investor's purchase of the Preferred Stock
and the Warrants, it has been solely responsible for its own (i) due diligence
investigation of the Company and (ii) investment decision, and has not engaged
or relied upon any agent or "purchaser representative" to review or analyze the
Company's business and affairs or advise such Investor with respect to the
merits of the investment;
(g) it has full power and authority to execute, deliver, and perform
each of this Agreement, the Shareholders Agreement, the Warrant, and to purchase
the Preferred Stock and the Warrants; and, that each of this Agreement, the
Shareholders Agreement, and Warrant, will constitute the legal, valid, and
binding obligation of the Investor, enforceable against it in accordance with
their respective terms; and
(h) in the event that the Investor proposes to sell the Preferred
Stock or the Warrants pursuant to Rule 144A under the Securities Act, it will
(A) take reasonable steps to obtain the information required by such Rule to
establish a reasonable belief that the prospective purchaser is a "qualified
institutional buyer" as such term is defined in Rule 144A and (B) advise the
prospective purchaser that the Investor is relying on the exemption from the
registration provisions of the Securities Act available pursuant to Rule 144A.
ARTICLE 4.
CONDITIONS PRECEDENT TO THE PURCHASE OF THE
PREFERRED STOCK AND WARRANTS BY INVESTORS
In connection with the purchase of the Preferred Stock and Warrants at
the Closing, the Investors shall be entitled to receive the following
certificates, opinions, and documents or evidence reasonably satisfactory to
them as to the following, each of which requirements may be waived by the
Investors. The Company agrees to use its best efforts to cause each of such
requirements to be satisfied:
(a) The Investors shall have received from Kinsey & Gleason, counsel
for the Company and the Founders, an opinion dated the Closing Date, in form and
scope satisfactory to the Investors and its counsel, in substantially the form
attached hereto as Exhibit D.
16
<PAGE>
(b) The representations and warranties contained in Article 2 shall be
true, complete and correct.
(c) The Company shall have performed and complied with all covenants
and agreements contained herein required to be performed or complied with by it
prior to or at the Closing Date.
(d) The Company shall have obtained any and all consents, permits and
waivers and made all filings necessary or appropriate for the consummation of
the transactions contemplated hereby.
(e) All corporate and other proceedings to be taken by the Company in
connection with the transactions contemplated hereby and all documents relating
to such transactions shall be satisfactory in form and substance to the
Investors and its counsel, and the Investors and its counsel shall have received
all such counterpart originals or certified or other copies of such documents as
they reasonably may request. The Company shall have delivered to the Investors a
certificate executed by the President and Treasurer of the Company certifying as
to the fulfillment of the conditions specified in subsections (b), (c), (d) and
(i) of this Article 4.
(f) The Investors and their counsel shall have received copies of the
following documents:
(i) (A) the Articles in the form of Exhibit D hereto, certified
or bearing evidence of filing by the Department of State of the State of
Florida, and (B) a certificate of said Department of State, dated as of a
recent date as to the due incorporation and good standing of the Company,
the payment of all franchise taxes by the Company and listing all documents
of the Company on file with said Department of State;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company dated the Closing Date and certifying: (A) that attached
thereto is a true and complete copy of the Bylaws of the Company as in
effect on the date of such certification; (B) that attached thereto is a
true and complete copy of all resolutions adopted by the Board of Directors
or the shareholders of the Company authorizing the execution, delivery, and
performance of this Agreement, the Shareholders Agreement, the
Indemnification Agreement, the Warrants, the issuance, sale, and delivery
of the Preferred Stock, and that all such resolutions are in full force and
effect and are all the resolutions adopted in connection with the foregoing
agreements and the transactions contemplated thereby; (C) that the Articles
have not been amended since the date of the last amendment referred to in
the certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of the Company executing
this Agreement, the Shareholders Agreement, the Indemnification Agreement,
the Warrants, the stock certificates representing the Preferred Stock, and
any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate referred to in this clause
(ii); and
(iii) such additional supporting documents and other information
with respect to the operations and affairs of the Company as the Investors
or its counsel reasonably may request.
17
<PAGE>
(g) The Investors shall have received the Shareholders Agreement
executed and delivered by each of the Company, each Investor, the A. Falcones,
the E. Falcones, and the Cuccis.
(h) All shareholders of the Company having any preemptive, first
refusal, or other rights with respect to the issuance of the Preferred Stock or
the Warrants shall have irrevocably waived the same in writing and copies of
such waivers shall have been delivered to Investors's counsel.
ARTICLE 5.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
The obligation of the Company to issue and sell the Preferred Stock
and the Warrants to the Investors on the Closing Date is, at its option, subject
to the satisfaction, on or before the Closing Date, of the following conditions:
(a) All representations and warranties of the Investors contained in
Article 3 hereof shall be true and correct on the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date.
(b) All corporate and other proceedings to be taken by the Investors
in connection with the transactions contemplated hereby, and all documents
incidental thereto, shall be satisfactory in form and substance to the Company
and its counsel.
(c) The Investors shall have delivered to the Company the full
purchase price for the Preferred Stock and the Warrants to be purchased
hereunder.
(d) The Company shall have received the Shareholders Agreement
executed by each Investor.
ARTICLE 6.
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Investors that, unless waived in
accordance with Section 8.9 hereof, so long as any of the Preferred Stock or the
Warrants are outstanding:
SECTION 6.1 FINANCIAL STATEMENTS, REPORTS, ETC. The Company shall furnish
to the Investors:
(a) within one hundred twenty (120) days after the end of each fiscal
year of the Company, an audited balance sheet of the Company, as of the end of
such fiscal year and the related statements of income, shareholders' equity, and
changes in cash flows for such fiscal year, prepared in accordance with
generally accepted accounting principles and certified by a firm of independent
public accountants of recognized national standing selected by the Board of
Directors of the Company;
18
<PAGE>
(b) within forty-five (45) days after the end of each fiscal quarter
(other than the last quarter in each fiscal year) a balance sheet of the
Company, and the related statements of income, shareholders' equity, and changes
in cash flows, unaudited but prepared in accordance with generally accepted
accounting principles and certified by the Chief Financial Officer of the
Company, such balance sheet to be as of the end of such quarter and such
statements of income, shareholders' equity and changes in cash flows to be for
such quarter and for the period from the beginning of the fiscal year to the end
of such quarter, in each case with comparative statements for the prior fiscal
year (except for 1992, the Company shall not be required to provide comparative
statements), provided that the Company's obligations under this Section 6.1(b)
shall terminate upon the completion of a firm commitment underwritten public
offering of the Company's securities;
(c) within thirty (30) days after the end of each fiscal month, other
than the last month in each fiscal year and each fiscal quarter, a summary
balance sheet of the Company and a summary income statement of the Company,
unaudited, but prepared in accordance with generally accepted accounting
principles;
(d) at the time of delivery of each annual financial statement
pursuant to Section 6.1(a) hereof, a certificate executed by the Chief Financial
Officer of the Company stating that such officer has caused this Agreement, the
Articles, the Shareholders Agreement, and the Warrants to be reviewed and has no
knowledge of any default by the Company in the performance or observance of any
of the provisions of this Agreement, the Articles, the Shareholders Agreement,
or the Warrants, if such officer has such knowledge, specifying such default and
the nature thereof;
(e) at the time of delivery of each quarterly statement pursuant to
Section 6.1(b) hereof, a management narrative report explaining all significant
variances from forecasts and all significant current developments in staffing,
marketing, sales, and operations;
(f) not less than forty-five (45) days prior to the start of each
fiscal year, capital and operating expense budgets, cash flow projections and
income and loss projections for the Company in respect of such fiscal year, all
itemized in reasonable detail and prepared on a monthly basis and approved by a
majority of the Board of Directors and the Series A Directors (as hereinafter
defined), and, promptly after preparation, any revisions to any of the foregoing
approved by the Board of Directors;
(g) promptly following receipt by the Company, each audit response
letter, accountant's management letter and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company or any of its subsidiaries;
(h) promptly after the commencement thereof, notice of all actions,
suits, claims, proceedings, investigations, and inquiries of the type described
in Section 2.5 hereof that could materially adversely affect the Company or any
of its subsidiaries;
(i) promptly upon sending, making available or filing the same, all
press releases, reports, and financial statements that the Company sends or
makes available to its shareholders or directors;
(j) within ten (10) business days following the receipt of a request
by the Investors or any subsequent holder of the Preferred Stock or the Warrants
advising the Company that the Investors or
19
<PAGE>
such holder proposes to sell all or any part of such securities pursuant to Rule
144A or by a prospective purchaser of the Preferred Stock or the Warrants in a
sale proposed to be made pursuant to Rule 144A, (A) a brief statement of the
nature of the business of the Company and the products and services the Company
offers prepared as of a date within the preceding twelve (12) months, (B) the
Company's most recent (1) balance sheet which shall be as of a date within the
preceding sixteen (16) months, and (2) statements of profit and loss and
retained earnings which shall be as of a date within the twelve (12) months
preceding the date of such balance sheet, provided, however, that if such
balance sheet is not as of a date within the preceding six (6) months, the
balance sheet shall be accompanied by additional statements of profit and loss
and retained earnings for the period from the date of such balance sheet to a
date within the preceding six (6) months and (C) the Company's audited balance
sheet, statements of profit and loss and retained earnings for the two (2)
preceding fiscal years of the Company; and
(k) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property, or affairs of
the Company as the Investors reasonably may request.
SECTION 6.2 FINANCIAL COVENANTS AND RATIOS.
(a) The Company will not permit, at any time, its total shareholders'
equity (including common and preferred stock, capital surplus, additional
paid-in-capital and retained earnings, less the cost of capital stock of the
Company required for the Treasury and other capital accounts, if any) of the
Company at such date, determined in accordance with generally accepted
accounting principles consistently applied ("Total Equity"), to be less than
$1,000,000.
(b) The Company will not have any indebtedness due to any shareholder
except for up to $1,000,000 of indebtedness ("Shareholder Loans"), without the
approval of the Board of Directors and the Series A Director.
(c) The Company will not permit the ratio of (x) its indebtedness from
all sources (excluding indebtedness secured by real estate which is subject to a
binding, valid, and subsisting sale contract with an unaffiliated third party)
minus Shareholder Loans to (y) its Total Equity (excluding the effect, if any,
of the loans described in the previous parenthetical) plus Shareholder Loans to
exceed 2.5:1.0 as of the last day in any fiscal month.
(d) The Company will not acquire, purchase or lease pursuant to a
capitalized lease, fixed assets, equipment, or real estate (excluding building
lots for homes) having an aggregate purchase price of capitalized cost (in the
case of capitalized leases) in excess of $250,000 in any fiscal year provided
that the Company may exceed such amount, in each case with the approval of the
Board of Directors and the Series A Director.
(e) Any covenant violation in this Section 6.2 may be waived at the
discretion of the Series A Director.
SECTION 6.3 CORPORATE EXISTENCE. The Company shall maintain and cause any
Investment in which the Company owns a controlling interest to maintain their
respective separate corporate existences, rights, and franchises in full force
and effect.
20
<PAGE>
SECTION 6.4 PROPERTIES, BUSINESS, INSURANCE. The Company shall maintain and
cause any subsidiary to maintain as to their respective properties and
businesses, with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated which insurance shall be deemed by
the Company to be sufficient. The Company shall also maintain in effect "key
person" life insurance policies, payable to the Company, on the life of each of
Arthur J. Falcone and Philip Cucci, Jr. (so long as he remains an employee of
the Company), in the amount of at least $1,000,000. The Company shall not cause
or permit any assignment or change in beneficiary and shall not borrow against
such policy. If requested by the Investors, the Company will add one designee of
the Investors as a notice party for such policy and shall request that the
issuer of such policy provide such designee with ten (10) days notice before
such policy is terminated (for failure to pay premiums or otherwise) or assigned
or before any change is made in the beneficiary thereof.
SECTION 6.5 INSPECTION, CONSULTATION, AND ADVICE. The Company shall permit
and cause any subsidiary to permit any of the Investors and such persons as the
Investors may designate, at the expense of the Company once per year, and if
more often than once per calendar year, with the additional visits at such
Investor's expense, to visit and inspect any of the properties of the Company
and any Investment, examine their books and take copies and extracts therefrom,
discuss the affairs, finances, and accounts of the Company with their officers,
employees, and public accountants and the Company hereby authorizes said
accountants to discuss with such Investors and such designees such affairs,
finances, and accounts), and consult with and advise the management of the
Company as to their affairs, finances, and accounts, all at reasonable times and
upon reasonable notice.
SECTION 6.6 RESTRICTIVE AGREEMENTS PROHIBITED. The Company shall not become
a party to any agreement which by its terms restricts the Company's performance
of this Agreement, the Articles, the Shareholders Agreement, the Indemnification
Agreement, or the Warrants.
SECTION 6.7 TRANSACTIONS WITH AFFILIATES. Except for (a) transactions
contemplated by this Agreement, (b) transactions with the affiliated entities
listed in Section 6.7 of the Disclosure Schedule, provided that the terms of
such transactions are no less favorable to the Company than the terms available
from third parties on an arm's length basis from non-affiliated third parties,
(c) loans by shareholders up to $1,000,000 outstanding at any time, provided
that the security for such loans is limited to the real estate on which the
specific construction activities financed are located and provided further that
the interest rate and terms are no less favorable than the rate and terms
available on an arm's length basis from unaffiliated third parties, or (d) as
otherwise approved by the Board of Directors, the Company shall not enter into
any transaction with any director, officer, employee, or holder or more than 5%
of the outstanding capital stock of any class or series of capital stock of the
Company, member of the family of any such person, or any corporation,
partnership, trust, or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner, or holder
of more than 5% of the outstanding capital stock thereof, except for
transactions on customary terms related to such person's employment. All
transactions with affiliates shall be reported on a quarterly basis in the
financial reports required by Section 6.1(b) hereof, including, with respect to
each transaction, the affiliate involved, the amount paid to the affiliate in
such quarter, and amounts remaining to be paid to the affiliate by the Comany.
SECTION 6.8 EXPENSES OF DIRECTORS. The Company shall promptly reimburse in
full, each director of the Company who is designated as a nominee for the Board
of Directors pursuant to the rights of the Investors under the Shareholders
Agreement or pursuant to the Articles (the "Series A Directors"), for all of his
21
<PAGE>
or her reasonable out-of-pocket expenses incurred in attending each meeting of
the Board of Directors of the Company or any committee thereof. In addition, the
Company shall pay directors fees to each Series A Director in an amount of
$12,000 per annum, in equal quarterly installments commencing June 1993, and
continuing quarterly thereafter until holders of Preferred Stock and Warrant
Shares no longer have the right to designate Series A Directors.
SECTION 6.9 USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Preferred Stock and the Warrants for repayment of indebtedness not
to exceed $400,000, working capital requirements, and for general corporate
purposes.
SECTION 6.10 BOARD OF DIRECTORS MEETINGS. The Company shall use its best
efforts to ensure that meetings of the Board of Directors of the Company are
held at least four (4) times each year and at least once each quarter.
SECTION 6.11 COMPENSATION. Without the written consent of the Series A
Directors, the Company shall not pay to its management compensation in excess of
that shown on the pro formas previously delivered to the Investors.
SECTION 6.12 BYLAWS. The Company shall at all times cause its Bylaws to
provide that, (a) unless otherwise required by the laws of the State of Florida,
(i) any two (2) directors and (ii) any holder or holders of at least 66% of the
outstanding shares of Common Stock or 25% of the outstanding Preferred Stock,
shall have the right to call a meeting of the Board of Directors or shareholders
and (b) the number of directors fixed in accordance therewith shall in no event
conflict with any of the terms or provisions of the Articles. The Company shall
at all times maintain provisions in its Bylaws or Articles indemnifying all
directors against liability to the maximum extent permitted under the laws of
the State of Florida.
SECTION 6.13 MAINTENANCE OF OWNERSHIP OF INVESTMENTS. The Company shall not
sell or otherwise transfer any shares of capital stock of any Investment, except
to the Company or another Investment, or permit any Investment in which the
Company owns a controlling interest, to issue, sell or otherwise transfer any
shares of its capital stock or the capital stock of any Investment except to the
Company or another Investment.
SECTION 6.14 DISTRIBUTIONS BY INVESTMENTS. The Company shall not permit any
Investment in which the Company owns a controlling interest to purchase or set
aside any sums for the purchase of, or pay any dividend, or make any
distribution on, any shares of its stock, except for dividends or other
distributions payable to the Company or another Investment in which the Company
owns a controlling interest.
SECTION 6.15 COMPLIANCE WITH LAWS. The Company shall comply with all
applicable laws, rules, regulations, and orders, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise.
SECTION 6.16 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles, consistently
applied, reflecting all financial transactions of the Company and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts, and other purposes in connection with its
business shall be made.
22
<PAGE>
SECTION 6.17 EMPLOYEE STOCK PLANS. As long as the Investors shall continue
to own any of the Preferred Stock, Warrants, or Warrant Shares, the Company
shall sell shares of or grant options to purchase shares of its capital stock to
Employees, officers, and directors of and consultants to the Company only
pursuant to stock option plans or stock purchase plans which have been adopted
and approved by the Company's Board of Directors and only so long as the Company
has an option to repurchase such shares upon the termination of employment with
the Company of such Employees, officers, directors, and consultants, and the
total number of shares of Common Stock as to which the Company may make such
sales or grant such options shall not exceed 10,000 shares, such number subject
to equitable adjustment for reorganizations, stock splits, stock dividends, and
like events (including shares issued or sold pursuant to (i) any such stock
option plan even though the shares were acquired upon the exercise of stock
options which were granted prior to the date hereof, and (ii) any such stock
purchase plans even though the shares acquired thereunder were purchased prior
to the date hereof). Under no circumstances shall the total number of shares of
the Company's Common Stock issued under any such stock purchase plan, plus any
shares issued or subject to issuance under any such stock option plan, exceed
10,000 shares (such number subject to equitable adjustment for reorganizations,
stock splits, stock dividends, and like events) at any time.
SECTION 6.18 FEES AND EXPENSES OF INVESTORS' COUNSEL. The Company shall pay
the fees not to exceed $30,000, and expenses of Powell, Goldstein, Frazer &
Murphy, Investors' counsel at the closing of the purchase and sale of the
Preferred Stock and Warrants.
SECTION 6.19 INDEMNIFICATION AGREEMENT. The Company will execute and
deliver to each Director an Indemnification Agreement in substantially the form
of Exhibit E hereto and will not take any action to terminate, rescind, or
reduce the scope of the indemnification provided thereby.
SECTION 6.20 UNITED STATES REAL PROPERTY HOLDING CORPORATION. If at any
time in the future the Company shall become a "United States Real Property
Holding Corporation" (as that term is defined in Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service) the Company shall, as
promptly as practicable, notify each foreign investor. Within thirty (30) days
after receipt of a request from a foreign investor, the Company shall prepare
and deliver to such foreign investor the statement required under Regulation
Section 1.897-2(h)(1)(IV) and subject to the succeeding sentence either or both
of the following documents: (i) an affidavit in conformance with the
requirements of Internal Revenue Code ("IRC") Section 1445(b)(3) or (ii) a
notarized statement, executed by an officer having actual knowledge of the
facts, that the shares of Company stock held by such foreign investor are of a
class that is regularly traded on an established securities market, within the
meaning of IRC Section 1445(b)(6). If the Company is unable to provide either of
the documents described in (i) or (ii) above, if requested, it shall promptly
notify such foreign investor in writing of the reasons for such inability.
Finally, upon the request of a foreign investor and without regard to whether
either document described in (i) or (ii) above has been requested, the Company
shall reasonably cooperate with the efforts of such foreign investor to obtain a
"qualifying statement," within the meaning of IRC Section 1445(b)(4) or such
other documents as would excuse a transferee of a foreign investor's interest
from withholding of income tax imposed pursuant to IRC Section 897(a).
23
<PAGE>
ARTICLE 7.
SPECIAL REDEMPTION RIGHT
The Company, and with the unanimous written consent of the Board of
Directors, the Founders, or any of them, at any time prior to November 30, 1995
(the "Expiration Date"), shall have the right to redeem Warrants exercisable for
75,000 Warrant Shares, or if Warrants have been exercised such that the then
outstanding Warrants are exercisable for less than 75,000 shares, then the right
to redeem shall encompass (i) the then outstanding Warrants plus (ii) a number
of issued and outstanding Warrant Shares which, when added to the number of
Warrant Shares issuable upon exercise of the then outstanding Warrants, equals
75,000 (such number of Warrants or Warrants and Warrant Shares, as the case may
be, are hereinafter the "Redeemable Warrants and Shares") and 5,455 shares of
Preferred Stock, upon the following terms and conditions (the "Special
Redemption Right"):
(a) If the Company, or, if applicable, the Founders, determine that it
or they desire to exercise the Special Redemption Right, the Company or the
Founders shall deliver a written notice (the "Special Redemption Notice") to
each Investor which specifies (i) that 75,000 Redeemable Warrants and Shares and
5,455 shares of Preferred Stock are to be redeemed by the Company or the
Founders, whichever the case may be, (ii) the number of Redeemable Warrants and
Shares and shares of Preferred Stock to be redeemed from each Investor (as
determined in accordance with subsection (b) hereof), and (iii) the time, date,
and place of the closing of the redemption which shall be a date at least 30
days after the date the Special Redemption Notice is delivered to the Investors,
but in no event after the Expiration Date.
(b) The Special Redemption Notice shall constitute an irrevocable call
option in favor of the Company or the Founders, which ever is applicable, to
purchase from each Investor a number of (i) Redeemable Warrants and Shares equal
to the product of (A) 75,000 multiplied by (B) a fraction, the numerator of
which is the number of Redeemable Warrants and Shares owned of record by such
Investor, and the denominator of which is the total number of then outstanding
Warrant Shares plus the total number of Warrant Shares issuable upon exercise of
all then outstanding Warrants, and (ii) shares of Preferred Stock equal to the
product of (A) 5,455 multiplied by (B) a fraction, the numerator of which is the
number of shares Preferred Stock owned of record by such Investor on the date of
the Special Redemption Notice, and the denominator of which is the total number
of shares of Preferred Stock outstanding on the date of the Special Redemption
Notice (including any Preferred Stock issued as a Preferred Dividend-in-Kind, as
set forth in the Articles).
(c) The purchase price to be paid to each Investor at the closing of
the redemption described in the Special Redemption Notice shall be equal to the
product of the number of Shares of Preferred Stock to be redeemed from such
Investor multiplied by $100 plus an amount which, when added to the Preferred
Dividends (as defined in the Articles) actually paid on the shares of Preferred
Stock being redeemed, would yield to such Investor an annual internal rate of
return of 25%, computed from the date hereof through the date of the closing of
the redemption described in the Special Redemption Notice. For purposes of the
redemption, shares of Preferred Stock shall be redeemed on a first issued, first
redeemed basis, and Warrants shall be redeemed prior to the redemption of
Warrant Shares.
(d) The closing of the purchase of redemption described in the Special
Redemption Notice shall be held at the principal office of the Company in Coral
Springs, Florida on a date at least 30 days
24
<PAGE>
after the date the Special Redemption Notice is delivered to the Investors, but
in no event after the Expiration Date. At the closing, the Investors shall
deliver certificates evidencing the Warrants and the Preferred Stock being
redeemed, duly endorsed or accompanied by duly executed stock powers, free and
clear of all liens, claims, charges, or encumbrances, against payment for the
Redeemable Warrants and Shares and the shares of Preferred Stock being redeemed.
At the closing, the Company will, if necessary re-issue certificates evidencing
the balance of the Warrant Shares and shares of Preferred Stock held by such
Investor after the redemption. No Investor shall be obligated to tender the
Redeemable Warrants and Shares and shares of Preferred Stock at the closing of
the redemption described in the Special Redemption Notice, unless the Company
redeems the number of Redeemable Warrants and Shares and shares of Preferred
Stock from each Investor as specified in the Special Redemption Notice or any
amendment thereof which is satisfactory to all Investors.
ARTICLE 8.
MISCELLANEOUS
SECTION 8.1 EXPENSES. Except as provided in Section 6.17 hereof, the
Company shall pay at Closing, all expenses incurred by it and by the Investors
in connection with the negotiation, documentation, and consummation of the
transactions contemplated hereby, whether or not such transactions shall be
consummated.
SECTION 8.2 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations, and warranties made herein or in the Shareholders Agreement and
the Warrants, or any certificate or instrument delivered to the Investors
pursuant to or in connection with this Agreement, the Shareholders Agreement and
the Warrants shall survive the execution and delivery of this Agreement, the
Shareholders Agreement and the Warrants, and the closing of the transactions
contemplated hereby and thereby, and all statements contained in any certificate
or other instrument delivered by the Company or the Founders hereunder or
thereunder or in connection herewith or therewith shall be deemed to constitute
representations and warranties made by the Company or the Founders,
respectively. All covenants, agreements, representations, and warranties made
herein or in the Shareholders Agreement and the Warrants, or any certificate or
instrument delivered to the Company and the Founders pursuant to or in
connection with this Agreement, the Shareholders Agreement and the Warrants
shall survive the execution and delivery of this Agreement, the Shareholders
Agreement and the Warrants, and the closing of the transactions contemplated
hereby and thereby, and all statements contained in any certificate or other
instrument delivered by the Investors hereunder or thereunder or in connection
herewith or therewith shall be deemed to constitute representations and
warranties made by the Investors.
SECTION 8.3 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations, and warranties made herein or in the Shareholders Agreement and
the Warrants, or any certificate or instrument delivered to the Company or the
Founders pursuant to or in connection with this Agreement, the Shareholders
Agreement and the Warrants shall survive the execution and delivery of this
Agreement, the Shareholders Agreement and the Warrants, and the closing of the
transactions contemplated hereby and thereby, and all statements contained in
any certificate or other instrument delivered by the Investors hereunder or
thereunder or in connection herewith or therewith shall be deemed to constitute
representations and warranties made by the Investors.
25
<PAGE>
SECTION 8.4 BROKERAGE. Except for an advisory fee payable by the Company to
Jefferies & Company in the amount of $50,000, each party hereto will indemnify
and hold harmless the others against and in respect of any claim for brokerage
or other commissions relative to this Agreement or to the transactions
contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third
party.
SECTION 8.5 PARTIES IN INTEREST. All representations, covenants, and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants, and agreements
benefiting the Investors shall inure to the benefit of any and all subsequent
holders from time to time of the Preferred Stock or the Warrants.
Notwithstanding the foregoing, the right to purchase the Preferred Stock and the
Warrants hereunder pursuant to Section 1.1 may not be sold, transferred, or
otherwise assigned except to an affiliate of the Investors, a successor to
substantially all the business and assets of the Investors.
SECTION 8.6 NOTICES. All notices, requests, consents, and other
communications required or permitted hereunder shall be in writing and shall be
effective when delivered in person or by a courier service, postage prepaid,
addressed as follows:
(a) if to the Company:
Transeastern Properties of South Florida, Inc.
7522 Wiles Road
Suite 203
Coral Springs, FL 33067
Attention: President
with a copy (which shall not constitute notice) to:
Kinsey & Gleason
185 Northwest Spanish River Boulevard
Suite 100
Boca Raton, FL 33431
Attention: John Kinsey, Esq.
(b) if to the Investors: At the address of
such Investor on Schedule 1 hereto
with a copy (which shall not constitute notice) to:
Powell, Goldstein, Frazer & Murphy
191 Peachtree Street, N.E.
16th Floor
Atlanta, Georgia 30303
Attention: Gerardo M. Balboni II, Esq.
Facsimile Number (404) 572-6999;
26
<PAGE>
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 8.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, irrespective of
the choice of law provisions thereof.
SECTION 8.8 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits hereto, and the other documents delivered pursuant hereto constitute
the full and entire agreement of the parties with respect to the subject matter
hereof and thereof. All Schedules and Exhibits hereto are hereby incorporated
herein by reference.
SECTION 8.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 8.10 AMENDMENTS. This Agreement may not be amended or modified, and
no provisions hereof may be waived, without the written consent of the Company
and the holders of at least two-thirds of the outstanding shares of Preferred
Stock and Warrant Shares.
SECTION 8.11 SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority to
the extent possible, it shall be modified in such manner as to be valid, legal,
and enforceable but so as to most nearly retain the intent of the parties and,
if such modification is not possible, such provision shall be severed from this
Agreement, and in either case, the validity and enforceability of any other
provision and of the entire Agreement shall not be affected thereby.
SECTION 8.12 TITLES AND SUBTITLES. The title and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
SECTION 8.13 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "affiliate" shall mean, with respect to any person, any person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such other person.
(b) "person" shall mean an individual, corporation, trust,
partnership, joint venture, limited liability company, unincorporated
organization, government agency, or any agency or political subdivision thereof,
or other entity.
27
<PAGE>
IN WITNESS WHEREOF, the Company and the Investors have executed this
Agreement as of the day and year first above written.
TRANSEASTERN PROPERTIES OF SOUTH
FLORIDA, INC.
[Corporate Seal] By:
Attest: Title:
Secretary
INVESTORS:
MEZZONEN, S.A.
By: Patrick Savin, Chief Financial Officer
THE HANDLER FAMILY TRUST DTD 9/12/91
By: Richard Handler, Trustee
CHRISTOPHER ALLICK
ANDREW WHITTAKER
DAVID F. EISNER
DAVID J. LOSITO
By:
Kenneth Taratus, Attorney-in-fact
under POA dated June 1, 1993
[SIGNATURES CONTINUED ON NEXT PAGE]
28
<PAGE>
FOUNDERS
Arthur J. Falcone
Marcy Falcone
Edward W. Falcone
Diana Falcone
Philip Cucci, Jr.
Linda Cucci
29
<PAGE>
SCHEDULE 1
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
Preferred Warrant Aggregate
Shares Shares Purchase
Investor Name and Address Purchased Purchased Price
- ------------------------- --------- --------- -----
Mezzonen, S.A.* ....................... 18,250 250,938 $ 1,825,250.94
Savin Carlson Investment Corp.
9777 Wilshire Boulevard
Suite 811
Beverly Hills, CA 92212
Attention: Patrick Savin,
Chief Investment Advisor
Christopher Allick .................... 350 4,812 $ 35,004.81
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, CA 90025
Andrew Whittaker ...................... 100 1,375 $ 10,001.38
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, CA 90025
David F. Eisner ....................... 200 2,750 $ 20,002.75
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, CA 90025
David J. Losito ....................... 100 1,375 $ 10,001.38
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, CA 90025
The Handler Family Trust DTD 9/12/91 .. 1,000 13,750 $ 100,013.75
Jefferies & Company, Inc.
11100 Santa Monica Boulevard
10th Floor
Los Angeles, CA 90025
20,000 275,000 $ 2,000,275.01
* Nominee to register shares for Mezzonen is: Banque Scandinave A. Luxembourg
<PAGE>
SCHEDULE 2
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
DISCLOSURE SCHEDULE
<PAGE>
SCHEDULE 3
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
ACCREDITED INVESTOR CERTIFICATES
<PAGE>
EXHIBIT A
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
FORM OF WARRANT
<PAGE>
EXHIBIT B
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
FORM OF SHAREHOLDERS AGREEMENT
<PAGE>
EXHIBIT C
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
AMENDED AND RESTATED ARTICLES OF INCORPORATION
<PAGE>
EXHIBIT D
TO
SERIES A REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
FORM OF OPINION OF COMPANY COUNSEL
THIS WARRANT HAS BEEN, AND THE WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF WILL
BE, ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") AND OF THE FLORIDA INVESTOR
PROTECTION ACT (THE "FLORIDA ACT"). SUCH SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, OR TRANSFERRED OTHER THAN (I) PURSUANT TO AN EFFECTIVE REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE 1933 ACT AND THE FLORIDA ACT, AND (II) UPON
RECEIPT BY THE ISSUER OF EVIDENCE SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933
ACT, THE FLORIDA ACT, AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER
JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL
SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
Original Issue Date: May 30, 1996 Warrant No. 96R-2
AMENDED AND RESTATED
WARRANT TO PURCHASE COMMON STOCK
THIS WARRANT AMENDS, RESTATES AND SUPERSEDES THAT CERTAIN WARRANT 93-2, ISSUED
TO HOLDER JUNE 2, 1993, TO GIVE EFFECT TO THE SPECIAL RIGHT OF REDEMPTION
GRANTED TO TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC. PURSUANT TO ARTICLE 7
OF THAT CERTAIN SERIES A REDEEMABLE PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT DATED JUNE 2, 1993.
THIS CERTIFIES THAT IN CONNECTION WITH, and as an inducement to
CHRISTOPHER ALLICK (the "Holder"), to consummate the transactions contemplated
by that certain Series A Redeemable Preferred Stock and Warrant Purchase
Agreement, dated June 2, 1993 among Holder, TRANSEASTERN PROPERTIES OF SOUTH
FLORIDA, INC., a Florida corporation (the "Corporation"), and certain other
parties identified therein (the "Purchase Agreement"), Holder is entitled to
purchase, on the terms and conditions hereinafter set forth, FOUR THOUSAND ONE
HUNDRED EIGHTY-TWO (4,182) shares of the Common Stock, $.01 par value, of the
Corporation (the "Common Stock"), at a price $.01 per share (the "Exercise
Price"), such number of shares and such Exercise Price being subject to
adjustment upon the occurrence of the contingencies set forth in this Warrant.
Each share of Common Stock as to which this Warrant is exercisable is a
"Warrant Share" and all such shares are collectively the "Warrant Shares").
SECTION 1. REGISTRATION OF WARRANT. This Warrant is one of a series of
Warrants (collectively, the "Transaction Warrants") issued in connection with
the transaction contemplated by the Purchase Agreement. Each Transaction
Warrant contains identical terms except for the number of Warrant Shares and
the distinctive Warrant number. The Corporation shall register this Warrant,
upon records to be maintained by the Corporation for that purpose, in the name
of the record Holder of this Warrant from time to time. The Corporation shall
deem and treat the registered Holder of this Warrant as
-1-
<PAGE>
the absolute owner hereof for the purpose of any exercise or any distribution to
the Holder hereof, and for all other purposes, and the Corporation shall not be
affected by any notice to the contrary.
SECTION 2. EXERCISE OF WARRANT.
2.1 TIME OF EXERCISE. This Warrant may be exercised in whole or in part, at
any time or from time to time prior to 5:00 p.m., Eastern Daylight Time, June 1,
2005, unless extended as hereinafter provided. The Corporation shall deliver to
Holder, not less than 30 nor more than 60 days prior to the Expiration Date,
written notice (the "Expiration Notice") which specifies the last date this
Warrant may be exercised. The failure to deliver the Expiration Notice shall
automatically extend the Expiration Date until a date which is 30 days after the
date the Expiration Notice shall have been delivered to Holder. The last day
this Warrant can be exercised, whether June 1, 2005 or a later date determined
as set forth above is hereinafter referred to as the "Expiration Date."
2.2 MANNER OF EXERCISE. In order to exercise this Warrant, the registered
Holder hereof shall deliver to the Corporation at its principal office at 3300
University Drive, Suite 001, Coral Springs, Florida 33065, Attention: President,
or at such other office as shall be designated by the Corporation in writing
pursuant to Section 12 hereof on or before 5:00 p.m. Eastern Time on the
Expiration Date, (i) a written notice of such registered Holder's election to
exercise this Warrant (the "Exercise Notice"), which notice may be in the form
of the Notice of Exercise attached hereto, properly executed and completed by
the registered Holder or an authorized officer thereof, (ii) a check payable to
the order of the Corporation, in an amount equal to the product of the Exercise
Price multiplied by the number of Warrant Shares specified in the Exercise
Notice, and (iii) this Warrant (the items specified in (i), (ii), and (iii) are
collectively the "Exercise Materials"). Upon timely receipt of the Exercise
Materials, the Corporation shall, as promptly as practicable, and in any event
within five (5) business days after its receipt of the Exercise Materials,
execute or cause to be executed and delivered to such registered Holder a
certificate or certificates representing the number of Warrant Shares specified
in the Exercise Notice, together with cash in lieu of any fraction of a share,
as hereinafter provided, and, (x) if the Warrant is exercised in full, a copy
this Warrant marked "Exercised" or (y) if the Warrant is partially exercised, a
copy this Warrant marked "Partially Exercised" together with a new Warrant on
the same terms for the unexercised balance of the Warrant Shares. All of the
certificates evidencing Warrant Shares shall bear the legend set forth in
Section 8.2 hereof. The stock certificate or certificates shall be registered in
the name of the registered Holder of this Warrant or such other name as shall be
designated in the Exercise Notice. The date on which the Warrant shall be deemed
to have been exercised (the "Exercise Date"), and the date the person in whose
name any certificate for Warrant Shares is issued shall be deemed to have become
the holder of record of such shares, shall be the date the Corporation receives
the Exercise Materials, irrespective of the date of delivery of a certificate or
certificates evidencing the Warrant Shares, except that, if the date on which
the Exercise Materials are received by the Corporation is a date when the stock
transfer books of the Corporation are closed, the Exercise Date shall be the
date the Corporation receives the Exercise Materials, and the date such person
shall be deemed to have become the holder of the Warrant Shares shall be the
next succeeding date on which the stock transfer books are open.
SECTION 3. ADJUSTMENTS TO WARRANT SHARES. The number of Warrant Shares
issuable upon the exercise hereof shall be subject to adjustment in certain
cases as set forth in this Section 3.
-2-
<PAGE>
3.1 CONSOLIDATION, MERGER, OR SALE. In the event the Corporation is a party
to a consolidation, share exchange, or merger, or the sale of all or
substantially all of the assets of the Corporation to, any person, or in the
case of any consolidation or merger of another corporation into the Corporation
in which the Corporation is the surviving corporation, and in which there is a
reclassification or change of the shares of Common Stock of the Corporation,
this Warrant shall after such consolidation, share exchange, merger, or sale be
exercisable for the kind and number of securities or amount and kind of property
of the Corporation or the corporation or other entity resulting from such share
exchange, merger, or consolidation, or to which such sale shall be made, as the
case may be (the "Successor Corporation"), to which a holder of the number of
shares of Common Stock deliverable upon the exercise (immediately prior to the
time of such consolidation, share exchange, merger, or sale) of this Warrant
would have been entitled upon such consolidation, share exchange, merger, or
sale; and in any such case appropriate adjustments shall be made in the
application of the provisions set forth herein with respect to the rights and
interests of the registered Holder of this Warrant, such that the provisions set
forth herein shall thereafter correspondingly be made applicable, as nearly as
may reasonably be, in relation to the number and kind of securities or the type
and amount of property thereafter deliverable upon the exercise of this Warrant.
The above provisions shall similarly apply to successive consolidations, share
exchanges, mergers, and sales. Any adjustment required by this Section 3.1(a)
because of a consolidation, share exchange, merger, or sale shall be set forth
in an undertaking delivered to the registered Holder of this Warrant and
executed by the Successor Corporation which provides that the Holder of this
Warrant shall have the right to exercise this Warrant for the kind and number of
securities or amount and kind of property of the Successor Corporation or to
which the holder of a number of shares of Common Stock deliverable upon exercise
(immediately prior to the time of such consolidation, share exchange, merger, or
sale) of this Warrant would have been entitled upon such consolidation, share
exchange, merger, or sale. Such undertaking shall also provide for future
adjustments to the number of Warrant Shares and the Exercise Price in accordance
with the provisions set forth in Section 3 hereof.
3.2 ADJUSTMENTS FOR STOCK DIVIDENDS AND SPLITS. In the event the
Corporation should at any time, or from time to time after the Original Issue
Date, fix a record date for the effectuation of a stock split or subdivision of
the outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock, or securities or rights convertible into, or entitling
the holder thereof to receive directly or indirectly, additional shares of
Common Stock (hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder for the additional shares of Common
Stock or the Common Stock Equivalents (including the additional shares of Common
Stock issuable upon exercise or exercise thereof), then, as of such record date
(or the date of such dividend, distribution, split, or subdivision if no record
date is fixed), the number of Warrant Shares issuable upon the exercise hereof
shall be proportionately increased and the Exercise Price shall be appropriately
decreased by the same proportion as the increase in the number of outstanding
Common Stock Equivalents of the Corporation resulting from the dividend,
distribution, split, or subdivision. Notwithstanding the preceding sentence, no
adjustment shall be made to decrease the Exercise Price below $.01 per Share.
3.3 REVERSE STOCK SPLITS. In the event the Corporation should at any time
or from time to time after the Original Issue Date, fix a record date for the
effectuation of a reverse stock split, or a
-3-
<PAGE>
transaction having a similar effect on the number of outstanding shares of
Common Stock of the Corporation, then, as of such record date (or the date of
such reverse stock split or similar transaction if no record date is fixed), the
number of Warrant Shares issuable upon the exercise hereof shall be
proportionately decreased and the Exercise Price shall be appropriately
increased by the same proportion as the decrease of the number of outstanding
Common Stock Equivalents resulting from the reverse stock split or similar
transaction.
3.4 RECLASSIFICATION. In the event the Corporation should at any time or
from time to time after the Original Issue Date, fix a record date for a
reclassification of its Common Stock, then, as of such record date (or the date
of the reclassification if no record date is set), this Warrant shall thereafter
be convertible into such number and kind of securities as would have been
issuable as the result of such reclassification to a holder of a number of
shares of Common Stock equal to the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such reclassification, and the
Exercise Price shall be unchanged.
3.5 SALES OR DEEMED SALES OF CORPORATION SECURITIES.
(a) [Intentionally omitted].
(b) From and after the Original Issue Date of this Amended and
Restated Warrant, if and whenever the Corporation shall issue or sell any shares
of Common Stock or any equity or debt securities of the Corporation which are
convertible into or exchangeable for shares of Common Stock, then, forthwith
upon such issuance or sale, the number of Warrant Shares issuable upon the
exercise of this Warrant shall be adjusted to a number which is equal to (i) the
quotient of (x) the number of warrant shares issuable upon exercise hereof on
the Original Issue Date DIVIDED BY (y) 20,910, MULTIPLIED BY (ii) the difference
between (1) the quotient of (x) the number of shares of Fully Diluted Common
Stock immediately after such issuance or sale DIVIDED BY (y) .9772 MINUS (2) the
number of shares of Fully Diluted Common Stock immediately after such issuance
or sale. As used herein, the term "Fully Diluted Common Stock" means the
outstanding shares of Common Stock assuming the conversion into Common Stock of
all then outstanding convertible securities (at the then effective conversion
prices), and the exercise of all then outstanding rights, options, and warrants,
excluding the Transaction Warrants.
3.6 NO DILUTION OR IMPAIRMENT. The Corporation will not, by amendment of
its Articles of Incorporation or through reorganization, consolidation, merger,
dissolution, issue, or sale of securities, sale of assets or any other voluntary
action, void or seek to avoid the observance or performance of any of the terms
of the Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment. Without limiting the generality of the foregoing, the
Corporation (a) will not create a par value of any share of stock receivable
upon the exercise of the Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or appropriate
in order that the Corporation may validly and legally issue fully paid and
non-assessable shares upon the exercise of the Warrant.
-4-
<PAGE>
3.7 NOTICE OF ADJUSTMENT. When any adjustment is required to be made in the
number or kind of shares purchasable upon exercise of the Warrant, or in the
Exercise Price, the Corporation shall promptly notify the Holder of such event
and of the number of shares of Common Stock or other securities or property
thereafter purchasable upon exercise of the Warrants and of the Exercise Price,
together with the computation resulting in such adjustment.
SECTION 4. CASH DIVIDENDS. In the event of any payment of any cash dividend
or any distribution of property (including evidences of indebtedness of the
Corporation, but excluding distributions of Common Stock), either tangible or
intangible, to the holders of the Common Stock, prior to the Exercise Date, the
registered Holder of this Warrant shall be entitled to receive, concurrently
with the holders of the Common Stock, the per share amount of any such dividend
or distribution MULTIPLIED BY the number of Warrant Shares then issuable upon
exercise of this Warrant in the same manner and to the same extent as if the
registered Holder of this Warrant were then the registered owner of such number
of shares of Common Stock. For purposes hereof, the per share amount of any
distribution of property shall be the fair market value thereof as determined by
the Board of Directors in good faith in the resolutions authorizing any such
distribution.
SECTION 5. COVENANTS AS TO COMMON STOCK. The Corporation covenants and
agrees that all Warrant Shares which may be issued will, upon issuance, be
validly issued, fully paid and non-assessable. The Corporation further covenants
and agrees that the Corporation will at all times have authorized and reserved,
free from preemptive rights, a sufficient number of shares of its Common Stock
to provide for the exercise of the Warrant in full.
SECTION 6. NO STOCKHOLDER RIGHTS. This Warrant shall not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Corporation.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE HOLDER TO THE
CORPORATION. The registered Holder of this Warrant, by acceptance of this
Warrant represents, warrants, and covenants to the Corporation as follows:
(a) The Holder is acquiring this Warrant, and agrees that the exercise
of this Warrant and the acceptance of a certificate for Warrant Shares shall
constitute its representation that the Warrant Shares are being acquired, for
its own account for investment and not with a view to the distribution thereof,
subject, however, to Holder's right to transfer this Warrant and the Warrant
Shares in accordance with and subject to the restrictions on such transfer set
forth herein.
(b) The Holder understands that this Warrant and the Warrant Shares
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act") or state securities laws, by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act and
applicable state securities laws. The Holder acknowledges being informed that
this Warrant and the Warrant Shares must be held indefinitely unless this
Warrant or the Warrant Shares are registered for sale by such Holder under the
Securities Act and applicable state securities laws or an exemption from
registration is available. The Holder understands that a sale of the Warrant
Shares made in reliance upon Rule 144 promulgated under the Securities Act
("Rule 144") can only be made in accordance with the
- -5-
<PAGE>
terms and conditions of Rule 144 and further understands that in the event that
the exemption from registration provided by such Rule is not available,
compliance with some other exemption under the Securities Act will be required
in the absence of registration.
(c) The Holder agrees not to sell, transfer, pledge or hypothecate
this Warrant or any Warrant Shares unless a Registration statement is effective
for this Warrant or Warrant Shares under the Securities Act or, in the written
opinion of such Holder's counsel (a copy of which opinion shall be addressed to
and delivered to the Corporation, and which counsel and which opinion shall be
reasonably satisfactory to the Corporation), such transaction will not result in
any violation of the registration requirements of the Securities Act or any
applicable state securities law. The Corporation may not, and may instruct its
transfer agent not to, transfer this Warrant or the Warrant Shares unless the
Corporation has been advised by its counsel that the Holder has complied with
the provisions of this Warrant and applicable securities laws relating to the
proposed transfer.
SECTION 8. TRANSFER OF SECURITIES.
8.1 RESTRICTION ON TRANSFER. This Warrant and the Warrant Shares and any
shares of capital stock received in respect thereof, whether by reason of a
stock split or share reclassification thereof, a stock dividend thereon, or
otherwise, shall not be transferable except upon the conditions specified in
Section 7 and this Section 8, which conditions are intended to ensure compliance
with the provisions of the Securities Act and applicable State securities laws
with respect to the transfer of such securities. The Holder of this Warrant, by
acceptance of this Warrant, agrees to be bound by the provisions of Section 7
and this Section 8 and to indemnify and hold harmless the Corporation against
any loss or liability arising from the disposition of this Warrant or the
Warrant Shares issuable upon exercise hereof or any interest in either thereof
in violation of the provisions of this Warrant.
8.2 RESTRICTIVE LEGEND. Each certificate for the Warrant Shares and any
shares of capital stock received in respect thereof, whether by reason of a
stock split or share reclassification thereof, a stock dividend thereon or
otherwise, and each certificate for any such securities issued to subsequent
transferees of any such certificate shall (unless otherwise permitted by the
provisions hereof) be stamped or otherwise imprinted with a legend in
substantially the following form:
Legend for Warrant Shares or other shares of capital stock:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
BEEN ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT") AND THE FLORIDA
INVESTOR PROTECTION ACT (THE "FLORIDA ACT") THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, OR TRANSFERRED OTHER THAN (I) PURSUANT TO AN
EFFECTIVE REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT
AND THE FLORIDA ACT, AND (II) UPON RECEIPT BY THE ISSUER OF EVIDENCE
SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933 ACT, THE FLORIDA ACT,
AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION. THE
ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY
TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
8.3 TRANSFER OF WARRANTS. Subject to the restrictions on transfer specified
in Section 7 and this Section 8, the Warrant is transferable in accordance with
this Warrant, in whole or in part, at the
- -6-
<PAGE>
agency or office of the Corporation referred to in Section 1 hereof, by the
Holder hereof in person or by a duly authorized attorney, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly executed by the then
registered Holder of this Warrant or its duly authorized agent. The Corporation
or its transfer agents shall register the transfer of any Warrants transferred
in compliance with Section 7 and this Section 8 upon records to be maintained
for that purpose, upon surrender of this Warrant. Upon any such Registration of
transfer, a new Warrant substantially in the form of this Warrant evidencing the
Warrant so transferred shall be issued to the transferee.
SECTION 9. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated, or destroyed, the Corporation shall issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated, or destroyed, provided the registered Holder hereof shall deliver a
lost warrant certificated in customary form, including indemnification of the
Corporation.
SECTION 10. FRACTIONAL WARRANT SHARES. The Corporation shall not be
required to issue any fractions of Warrant Shares upon exercise of this Warrant,
but the Corporation shall pay cash in respect of any fractional interest in a
Warrant Share which would otherwise be issuable in an amount equal to the same
fraction of the fair market value per share of the Common Stock on the day of
the exercise, as reasonably determined by the Board of Directors of the
Corporation.
SECTION 11. NOTICE. All notices, requests, demands, and other
communications required or permitted under this Warrant and the transactions
contemplated herein shall be in writing and shall be deemed to have been duly
given, made, and received when personally delivered the day after deposited with
a recognized national overnight delivery service prior to its dead-line for
receiving packages for next day delivery or upon the fifth day after deposited
in the United States registered or certified mail with postage prepaid, return
receipt requested, in each case addressed as set forth below:
If to the Corporation: Transeastern Properties of South Florida, Inc.
3300 University Drive
Suite 001
Coral Springs, FL 33063
Attention: President
If to the Holder hereof, to the address of such Holder appearing on the
books of the Corporation.
SECTION 12. CAPTIONS, SECTION, HEADINGS. Captions and section headings used
herein are for convenience only, and are not a part of this Warrant and shall
not be used in construing it.
SECTION 13. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws in the State of Florida, irrespective of the choice
of law provisions.
IN WITNESS WHEREOF, TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC., has
caused this Warrant to be executed in its name by its duly authorized officers
under its corporate seal, and to be dated as of the date first above written.
-7-
<PAGE>
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
By: ___________________________________
Arthur J. Falcone, President
ATTEST:
____________________________
Philip Cucci, Secretary
-8-
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of unexercised Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________ the attached Warrant to purchase the number
of full shares of Common Stock, $____ par value, of Transeastern Properties of
South Florida, Inc., issuable upon exercise of said Warrant, and appoints
________________, Attorney, to transfer such Warrant on the books of
Transeastern Properties of South Florida, Inc., with full power of substitution
in the premises.
Dated: ___________________ _______________________________
[Signature]
_______________________________
_______________________________
[Address]
Signature guaranteed by a member of a national securities exchange or national
bank:
__________________________
NOTICE
The signature above must correspond to the name as written upon the fact of
the within Warrant in every particular, without alteration or enlargement or any
change whatsoever.
<PAGE>
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of Warrant]
To: TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
The undersigned registered Holder of the attached Warrant hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder, the
full number of whole shares of Common Stock, $____ par value, of Transeastern
Properties of South Florida, Inc., issuable upon exercise of said Warrant and
hereby surrenders said Warrant and delivers to Transeastern Properties of South
Florida, Inc., in immediately available funds, $_________ representing the
Purchase Price for such shares. The undersigned herewith requests that the
certificates for such shares be issued in the name of, and delivered to the
undersigned, whose address is _________________________________ and social
security or tax identification number is ______________.
Dated: _________________________ ____________________________
NOTICE
The signature above must correspond to the name as written upon the fact
of the within Warrant in every particular, without alteration or enlargement or
any change whatsoever.
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT is made and entered into this 2nd day of June,
1993, by and among TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC, a Florida
corporation (the "Company"), ARTHUR J. FALCONE and MARCY FALCONE, residents of
the State of Florida (the "A. Falcones"), EDWARD W. FALCONE and DIANA FALCONE,
residents of the State of Florida (the "E. Falcones"), PHILIP CUCCI, JR. and
LINDA CUCCI, residents of the State of Florida (the "Cuccis"), MEZZONEN, S.A.
("Mezzonen"), a Luxembourg company, HANDLER FAMILY TRUST DTD 9/12/91 ("HFT"), a
living trust organized and existing pursuant to the laws of the State of
California, CHRISTOPHER ALLICK, a resident of the State of California
("Allick"), ANDREW WHITTAKER, a resident of the State of California
("Whittaker"), DAVID F. EISNER, a resident of the State of California
("Eisner"), and DAVID J. LOSITO a resident of the State of California,
("Losito").
BACKGROUND
A. Each of the A. Falcones, the E. Falcones, and the Cuccis are the
holders as tenants by the entirety of the number of shares of the Common Stock
(as hereinafter defined) of the Company set forth beside their names on the
signature page hereto; and, the A. Falcones, the E. Falcones, and the Cuccis,
collectively own all of the Common Stock issued and outstanding on the date
hereof; and
B. Pursuant to a Series A Redeemable Preferred Stock and Warrant Purchase
Agreement (the "Stock Purchase Agreement") Mezzonen, HFT, Allick, Whittaker,
Eisner, and Losito, have collectively purchased twenty thousand (20,000) shares
of the Preferred Stock (as hereinafter defined), (or 100%) of the Preferred
Stock issued and outstanding on the date hereof; and
C. The execution and delivery of this Agreement by each of the A.
Falcones, the E. Falcones, the Cuccis, and the Company is a condition precedent
to the obligation of Mezzonen, HFT, Allick, Whittaker, Eisner, and Losito, to
purchase the Preferred Stock pursuant to the Stock Purchase Agreement;
D. The parties hereto wish to state herein their mutual agreements and
obligations and to impose certain restrictions on the rights and benefits with
respect to the disposition of the Shares (as hereinafter defined) now or
hereafter owned by the Shareholders (as defined below), and to set forth certain
agreements with respect to the management of the Company.
AGREEMENT
For and in consideration of the foregoing, the agreements set forth below,
and other good and valuable consideration, the receipt and sufficiency of which
is acknowledged, the parties agree as follows:
1. DEFINITIONS
The following capitalized terms are used in this Agreement with meanings
thereafter ascribed:
<PAGE>
1.1 AFFILIATE. When used to indicate a relationship to a specified person,
firm, corporation, partnership, association, or entity, "Affiliate" means any
person, firm, corporation, partnership, association, or entity that, directly or
indirectly or through one or more intermediaries, controls, is controlled by, or
is under common control with such person, firm, corporation, partnership,
association, or entity.
1.2 AGREEMENT. "Agreement" means this Agreement, together with any addenda
and amendments made in the manner described in this Agreement.
1.3 BUSINESS OF THE COMPANY. "Business of the Company" means the business
of acquisition, development, and management of residential properties.
1.4 CAUSE. "Cause" means (a) conduct amounting to fraud or dishonesty
against the Company; (b) willful misconduct or repeated refusal to follow the
reasonable directions of the Board of Directors of the Company; (c) knowing
violation of law in the course of performance of the duties of employment with
the Company; (d) repeated absences from work without a reasonable excuse; (e)
repeated intoxication with alcohol or drugs while on the Company's premises
during regular business hours; (f) a breach or violation of the terms of any
agreement with the Company; (g) an act of disloyalty to the Company,
substantially detrimental to the welfare of the Company; (h) a violation of the
covenants set forth in Section 3 hereof; or (i) a conviction or plea of guilty
or NOLO CONTENDERE to a felony or a crime involving moral turpitude.
1.5 COMMISSION. "Commission" means the Securities and Exchange Commission,
or any other federal agency at the time administering the Securities Act.
1.6 COMMON STOCK. "Common Stock" means the Five Million (5,000,000)
authorized shares of common stock, $.01 par value, of the Company, of which
Seven Hundred and Twenty Five Thousand and One (725,001) shares are issued and
outstanding as of the date hereof.
1.7 COMMON STOCK EQUIVALENTS. "Common Stock Equivalents" means the sum of
(x) the number of shares of Common Stock outstanding, PLUS (y) the number of
shares of Common Stock issuable upon conversion of all outstanding convertible
securities and the exercise of all outstanding warrants, options, and rights.
1.8 COMPETITOR. "Competitor" means a person or entity that is
substantially engaged in a business like or similar to the Business of the
Company. For purposes hereof "substantially engaged" shall mean that the average
annual revenues of such person or entity derived from the conduct of a business
like or similar to the Business of the Company during the three most recent
completed fiscal years of such person or entity (of if such person or entity has
conducted such business for less than three completed fiscal years, then for
such lesser period) is equal to or greater than ten percent (10%) of the average
annual gross revenues of such person or entity over such fiscal years (or lesser
period).
1.9 DISABILITY. "Disability" means (i) the inability of a Management
Shareholder to perform the duties of such Management Shareholder's employment
due to physical or emotional incapacity or illness, where such inability is
expected to be of long-continued and indefinite duration or (ii) such Management
Shareholder shall be entitled to (x) disability retirement benefits under the
2
<PAGE>
Federal Social Security Act or (y) recover benefits under any long-term
disability plan or policy maintained by the Company. In the event of a dispute,
the determination of Disability shall be made by the Board of Directors of the
Company and shall be supported by advice of a physician competent in the area to
which such Disability relates.
1.10 DISPOSITION. "Disposition" means any transfer of all or any part of
the rights and incidents of ownership of the Shares, including the right to
vote, and the right to possession of Shares as collateral for indebtedness,
whether such transfer is outright or conditional, INTER VIVOS or testamentary,
voluntary or involuntary, or for or without consideration.
1.11 EFFECTIVE DATE OF TERMINATION. "Effective Date of Termination" means
the effective date of the termination of the employee-employer relationship
between a Management Shareholder and the Company for any reason, including,
without limitation, resignation, discharge (with or without Cause), death,
Disability, or retirement, notwithstanding that severance or similar payments
are made to such Management Shareholder, or if no effective date of termination
of such relationship is established by any notice given by either the Company or
such Management Shareholder (which date established by notice shall not be
retroactive), then the effective date of termination shall be the date such
Management Shareholder last performs the regular duties of such Management
Shareholder's employment or position with the Company, as determined in good
faith by the Board of Directors.
1.12 EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
1.13 INVESTORS. "Investors" means Mezzonen, HFT, Allick, Whittaker,
Eisner, and Losito,.
1.14 FAIR MARKET VALUE. "Fair Market Value" means the quotient of (x) the
fair market value of the Company as of the fiscal quarter ended immediately
prior to an Effective Date of Termination, as determined in good faith by the
Board of Directors of the Company, DIVIDED BY (y) the total number of Common
Stock Equivalents outstanding on the applicable Effective Date of Termination.
In making the determination of the Fair Market Value pursuant to this
subsection, the Board of Directors shall assume that fair market value of the
Company is equal to the amount which would be paid in cash for the Company, as a
going concern, by an unaffiliated third party financial buyer, and may take into
account such additional factors as may be relevant to such valuation, including
without limitation, the absence of a trading market for the Shares, the minority
status of the Shares, and such other facts and circumstances as may be material.
The Board of Directors may, but shall not be obligated to, engage the services
of a reputable, experienced investment banking firm to assist it in the
determination of Fair Market Value. The cost of determining Fair Market Value
shall be borne by the Company.
3
<PAGE>
1.15 MANAGEMENT SHAREHOLDERS. "Management Shareholders" means,
collectively, Arthur J. Falcone, Edward W. Falcone, and Philip Cucci, Jr.
1.16 PERMITTED DISPOSITION. "Permitted Disposition" means:
(a) a Disposition by a Management Shareholder to which each Shareholder
consents in writing;
(b) a Disposition effected pursuant to the provisions of Sections 2.2,
2.3, 2.6, and 2.7 hereof;
(c) a Disposition by a Management Shareholder to (i) a member of such
Management Shareholder's immediate family, as defined in the regulations
promulgated under Section 16 of the Exchange Act, or to any trust for his or
their benefit, (ii) to any employee of the Company;
(d) a Disposition effected by a Management Shareholder prior to a
Termination of Employment in one of the following transactions: (i) dissolution
or liquidation of the Company, (ii) merger of the Company into another
corporation, or any consolidation, share exchange, combination, reorganization,
or like transaction in which the Company is not the survivor, excluding any such
merger, consolidation, reorganization, or like transaction in which the
Investors or any Affiliate of an Investor is the survivor, (iii) sale or
transfer (other than as security for the Company's obligations) of at least a
majority of the assets of the Company, excluding any such transfer to the
Investors or their Affiliates, (iv) sale or transfer of 50% or more of the
issued and outstanding Shares by the holders thereof in a single transaction or
in a series of related transactions, excluding any such transfer to the
Investors or their Affiliates, (v) a Public Offering (if and to the extent
permitted by the managing underwriter thereof), or (vi) the exercise of the
right of the Company to repurchase the Shares upon a Termination of Employment;
or
(e) a Disposition effected by an Investor, provided the conditions of
Section 2.6(a) hereof are satisfied, if applicable.
The foregoing notwithstanding, no Disposition shall be a Permitted
Disposition unless the transferor shall have obtained the written agreement of
the proposed transferee, that such transferee will be bound by, and the Shares
proposed to be transferred will be subject to, this Agreement. Such written
agreement shall be attached as an addendum to this Agreement and thereby
incorporated as a part of this Agreement, whereupon the proposed transferee
shall have adopted this Agreement, and thereafter shall be a party hereto, and
the term "Shareholders" as used herein shall thereafter mean and include such
transferee.
1.17 PREFERRED STOCK. "Preferred Stock" means the Twenty Nine Thousand
(29,000) authorized shares of Series A Redeemable Preferred Stock, of which
Twenty Thousand (20,000) shares are issued and outstanding as of the date
hereof.
1.18 PRIME RATE. "Prime Rate" means the "prime rate" as published in THE
WALL STREET JOURNAL (Eastern Edition) under its "Money Rates" column and
specified as "[t]he base rate on corporate loans at large U.S. commercial
banks," or, if no longer published as such, the rate of
4
<PAGE>
interest announced from time to time by NationsBank, N.A., as its prime rate,
base rate or reference rate. If the Wall Street Journal publishes more than one
"Prime Rate" under its "Money Rates" column, then the Prime Rate shall be the
average of such rates.
1.19 PROPRIETARY INFORMATION. "Proprietary Information" means information
which derives economic value, actual or potential, from not being generally
known and not being readily ascertainable by proper means to other persons who
can obtain economic value from its disclosure or use and which is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy or
confidentiality, but shall not include Excluded Information. Proprietary
Information may include either technical or non-technical data, including
without limitation, (a) any process, machine, pattern, compilation, program,
method, technique, formula, chemical formula, composition of matter, or device
which (1) is not generally known or which a Management Shareholder has a
reasonable basis to believe may not be generally known, (2) is being used or
studied, or may be used or studied, by the Company and is not described in a
printed patent or in any literature already published and distributed externally
by the Company, and (3) is not readily ascertainable from inspection of a
product of the Company; (b) any engineering, technical, or product
specifications including those of features used in any current product of the
Company or which may be so used, or the use of which is contemplated, or may be
contemplated, in a future product of the Company; (c) any application, operating
system, communication system, or other computer software (whether in source or
object code) and all flow charts, algorithms, coding sheets, routines,
subroutines, compilers, assemblers, design concepts, test data, documentation,
or manuals related thereto, whether or not copyrighted, patented or patentable,
related to or used in the Business of the Company; or (d) information concerning
the customers, suppliers, products, pricing strategies of the Company, personnel
assignments and policies of the Company, or matters concerning the financial
affairs and management of the Company or any parent, subsidiary, or affiliate of
the Company; provided however, that Proprietary Information shall not include
any Excluded Information. As used herein, "Excluded Information" means
Proprietary Information (i) which has been voluntarily disclosed to the public
by the Company, (ii) independently developed and disclosed by parties other than
the Company, or (iii) that otherwise enters the public domain through lawful
means or without misappropriation of the Management Shareholders.
1.20 PUBLIC OFFERING. "Public Offering" means one or a series of firmly
underwritten public offerings by the Company, pursuant to registration
statements filed by the Company with the Securities and Exchange Commission,
whereby the Company completes a sale of its Common Stock such that the gross
proceeds to the Company resulting from such sale exceed Five Million Dollars
($5,000,000).
1.21 REGISTRATION EXPENSES. "Registration Expenses" means the expenses so
described in Section 5.5 hereof.
1.22 RESTRICTED STOCK. "Restricted Stock" means all shares of Common Stock
held by the Shareholders, including the shares of Common Stock issued or
issuable upon exercise of the Warrants described in the Stock Purchase
Agreement, excluding in each case securities which have been (a) registered
under the Securities Act pursuant to an effective registration statement filed
thereunder and disposed of in accordance with the registration statement
covering them or (b) publicly sold pursuant to Rule 144 under the Securities
Act.
5
<PAGE>
1.23 SECURITIES ACT. "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.24 SELLING EXPENSES. "Selling Expenses" means the expenses so described
in Section 5.5 hereof.
1.25 SHARES. "Shares" means and include as to each Shareholder, all shares
of the capital stock of the Company, including without limitation the Common
Stock and the Preferred Stock, now or in the future owned of record or
beneficially by such Shareholder (including without limitation, all Common
Stock, Preferred Stock, or other securities of the Company hereafter acquired
pursuant to the exercise of any option, warrant, or other right granted by the
Company to such Shareholder), and all securities of the Company that may be
issued in exchange for or in respect of such capital stock or securities
(including, without limitation, all securities issued or resulting from any
stock dividend, stock split, recapitalization, or merger effected by the
Company).
1.26 SHAREHOLDERS. "Shareholders" means the Management Shareholders and
the Investors.
1.27 TERMINATION OF EMPLOYMENT. "Termination of Employment" means the
termination of the employee-employer relationship between a Management
Shareholder and the Company for any reason, including, without limitation, a
termination by resignation, discharge, death, Disability, or retirement,
notwithstanding that severance or similar payments are made to such Management
Shareholder. The Board of Directors of the Company shall, in its absolute
discretion, determine the effect of all matters and questions relating to a
Termination of Employment, including whether a leave of absence constitutes a
Termination of Employment, or whether a Termination of Employment is for Cause.
1.28 TRANSACTION. "Transaction" means the Company shall consummate (i) a
sale of all or substantially all of the assets of the Company, (ii) the merger
of the Company into another corporation or any consolidation, share exchange,
combination, reorganization, or like transaction in which the Company is not the
survivor or in which persons holding a majority of the Common Stock of the
Company issued and outstanding immediately prior to the consummation of such
transaction and any related transaction hold less than a majority of the shares
of the resulting or surviving corporation, issued and outstanding immediately
after the consummation of such transaction or transactions, or (iii) sale or
transfer of 50% or more of the issued and outstanding common stock of the
Company held by the Investors, excluding any distribution by an Investor to its
partners of such Common Stock, treating as outstanding for the purposes of such
determination all shares of Common Stock issuable upon the conversion of all
then outstanding convertible securities and the exercise of all outstanding
options and warrants, effective the date immediately preceding the consummation
of such sale of assets, merger, consolidation, share exchange, combination,
reorganization, or sale of Common Stock.
6
<PAGE>
2. SHARE CONTROL
2.1 RESTRICTIONS UPON TRANSFER OF SHARES. Except as otherwise provided in
this Agreement, no Shareholder shall make any Disposition of any Shares owned by
such Shareholder, except a Permitted Disposition as provided in this Agreement.
No Permitted Disposition shall be valid unless the Shareholder shall have
obtained the written agreement of the proposed transferee, including, without
limitation, any pledgee, that such transferee will be bound by, and the Shares
to be transferred will be subject to, this Agreement.
2.2 RIGHT OF FIRST REFUSAL.
(a) If a Shareholder (the "Offering Shareholder"), desiring to make
a transfer of Shares, which is not a Permitted Disposition until the provisions
of this Section 2.2 have been observed, shall receive a bona fide written offer
from a third party that is not a Competitor (the "Proposed Transferee") to
purchase all or part of the Shares then owned by the Offering Shareholder that
the Offering Shareholder desires to accept (an "Offer"), the Offering
Shareholder shall as a condition precedent to accepting the Offer, offer to the
Company, the Investors, and each of the other Shareholders (collectively the
Investors and the other Shareholders are the "Other Shareholders" and
individually an "Other Shareholder"), in the manner set forth below, the right
to purchase, individually or in the aggregate, all of the Shares that are the
subject of the Offer for the same price and the same terms as contained in the
Offer.
(b) Within ten (10) business days after receipt of the Offer, the
Offering Shareholder shall notify the Company and each of the Other Shareholders
in writing of the Offer, stating in such notice (the "Transfer Notice") the
details of the Offer, including (i) the name and address of the Proposed
Transferee, (ii) the number of Shares to which the Offer pertains (the "Offered
Shares"), (iii) the price per share offered by the Proposed Transferee for the
Offered Shares (the "Price"), and (iv) the terms and method of payment. A copy
of the Offer shall be attached to the Transfer Notice. The Transfer Notice shall
constitute an offer (the "Right of First Refusal") by the Offering Shareholder
to sell the Offered Shares to the Company and, if and to the extent that the
Company shall not accept the Right of First Refusal, to the Other Shareholders
at the Price and upon the terms and conditions set forth in the Transfer Notice,
which offer shall be irrevocable for sixty (60) business days from the date the
Transfer Notice is delivered to the Company, subject to satisfaction of the
conditions specified in Section 2.2(f) hereof.
(c) The Company shall have the first option to purchase all or any
portion of the Offered Shares. If the Company desires to purchase all or any
part of the Offered Shares, the Company shall communicate, in writing, its
election to purchase to the Offering Shareholder, which communication shall
state the number of Offered Shares the Company desires to purchase and the Price
and terms of payment (which shall be identical to the terms described in the
Transfer Notice), and shall be delivered in person or mailed to the Offering
Shareholder at the address set forth in the Transfer Notice or if no address is
set forth in the Transfer Notice, at the address reflected in the Company's
stock transfer records (with a copy being contemporaneously delivered to each of
the Other Shareholders) within thirty (30) business days of the date the
Transfer Notice was delivered to the Company. Such communication shall, when
taken in conjunction with the Transfer Notice, be deemed to constitute a valid,
legally binding, and enforceable agreement for the sale and purchase of
7
<PAGE>
all or that portion of the Offered Shares which the Company has so elected to
purchase, subject to satisfaction to the conditions specified in Section 2.2(f)
hereof.
(d) If the Company does not exercise its option to purchase all of
the Offered Shares from the Offering Shareholder, each Other Shareholder shall
have an option to purchase all or any portion of the Offered Shares not
purchased by the Company (the "Remaining Shares"), exercisable by giving written
notice of exercise to the Offering Shareholder, each Other Shareholder and the
Company. Such written notice shall state the number of Remaining Shares such
Other Shareholder elects to purchase, and shall be delivered in person or mailed
to the Offering Shareholder, the Company, and all Other Shareholders at the
addresses reflected in the Company's stock transfer records within twenty (20)
business days after the expiration of the thirty (30) day period for exercise of
the Right of First Refusal granted to the Company in Section 2.2(c) above. Such
communication shall, when taken in conjunction with the Transfer Notice, be
deemed to constitute a valid, legally binding, and enforceable agreement for the
sale and purchase of all or that portion of the Offered Shares which the Other
Shareholder has so elected to purchase, subject to the satisfaction of the
conditions specified in Section 2.2(f) of this Agreement, and to the terms set
forth in the remainder of this paragraph. In the event that more than one Other
Shareholder exercises the right to purchase the Remaining Shares, each Other
Shareholder may purchase up to a pro rata portion of the Remaining Shares (based
upon the ratio of the number of Shares owned by each such exercising Other
Shareholder to the number of Shares owned by all exercising Other Shareholders).
In the event that one or more exercising Other Shareholders elects not to
purchase the full pro rata portion of Offered Shares to which such Other
Shareholder is entitled, the exercising Other Shareholders may purchase such
Remaining Shares on a pro rata basis (based upon the ratio of the number of
Shares owned by each exercising Other Shareholder to the number of Shares owned
by all exercising Other Shareholders). This method of allocation shall continue
to apply to options to purchase all of the Offered Shares not purchased by the
Company until all options have been exercised by one or more Other Shareholders
(which exercises shall constitute the valid, legally binding, and enforceable
agreement as provided above), or until the remaining Other Shareholders elect
not to exercise their rights to purchase any additional Remaining Shares.
(e) The closing of the purchase of any Offered Shares by the Company
or Remaining Shares by the Other Shareholders hereunder shall be held at the
principal office of the Company in Coral Springs, Florida. The Company shall
designate a closing date and time, which date shall be not earlier than sixty
(60) nor later than ninety (90) business days after the date of the Transfer
Notice as may be agreed upon by the Company and the Offering Shareholder. At the
closing, the Offering Shareholder shall deliver certificates duly endorsed or
accompanied by duly executed stock powers for the Offered Shares being purchased
pursuant to this Section 2.2 and shall transfer the Offered Shares being
purchased pursuant to this Section 2.2 to the purchasers thereof, free and clear
of all liens, claims, charges, or encumbrances, against payment for the Offered
Shares in accordance with the terms of the Transfer Notice. If the Company shall
be the purchaser of the Offered Shares, the Company shall have the right to set
off against any payment for such Offered Shares the amount by which the Offering
Shareholder shall be indebted to the Company.
(f) Notwithstanding the foregoing, if the Right of First Refusal is
not exercised with respect to all of the Offered Shares within sixty (60) days
after the date of the Transfer Notice, or if the Company and the Other
Shareholders do not purchase all of the Offered Shares within the
8
<PAGE>
time period specified in Section 2.2(e), then the Offering Shareholder shall be
under no obligation to sell any Offered Shares to the Company or the Other
Shareholders, and the Offered Shares may be sold by the Offering Shareholder to
the Proposed Transferee at any time within forty-five (45) days after the date
of the expiration of the sixty (60) day time period referred to above. Any such
sale shall be only to the Proposed Transferee at not less than the Price and
upon other terms and conditions not more favorable to the Proposed Transferee
than those specified in the Transfer Notice. No transfer of the Offered Shares
or any portion thereof shall be made to any Competitor.
(g) As a condition precedent to the sale and transfer of any Offered
Shares by the Offering Shareholder, the Offering Shareholder shall obtain (i)
the written agreement of the Proposed Transferee that the Proposed Transferee
will be bound by, and that the Offered Shares transferred to the Proposed
Transferee will be subject to, this Agreement as provided in Section 2.1 above,
except that, notwithstanding any other provision of this Agreement, the Proposed
Transferee shall not be subject to Sections 2.3, 2.6, or 2.7 of this Agreement
and (ii) an opinion of counsel, satisfactory to the Company, that such transfer
of interest does not require registration under the Securities Act, and any
applicable state securities laws. The Company shall not give effect on its books
to any transfer or purported transfer of Offered Shares held or owned by any
Offering Shareholder to the Proposed Transferee unless each and all of the
conditions hereof effecting such transfer shall have been satisfied. If the
transfer by the Offering Shareholder to the Proposed Transferee of that portion
of the Offered Shares as to which the Right of First Refusal has not been
exercised and consummated, is not made within forty-five (45) days after the
date the Offering Shareholder first becomes free to make such transfer, that
right to transfer in accordance with this Section 2.2 shall expire. In such
event the restrictions of this Section 2.2 shall be reinstated as to all Shares
which have not been so transferred, and any subsequent transfer of such Shares,
whether or not to the same Proposed Transferee, must be made strictly in
compliance with the provisions of this Section 2.2.
2.3 COMPANY'S RIGHT TO REPURCHASE SHARES.
(a) Upon the occurrence of a Termination of Employment prior to the
third anniversary of this Agreement, the Company shall have the option to
purchase all or any portion of the Shares owned by the Management Shareholder as
to whom a Termination of Employment has occurred (such Management Shareholder is
hereinafter the "Subject Shareholder") at any time within three (3) months after
the Effective Date of Termination. The purchase price for the Shares owned by
such Subject Shareholder shall be determined on the basis of whether the
Termination of Employment of the Subject Shareholder was for Cause, and if the
Termination of Employment was not for Cause, the amount of time which has
elapsed between the date of this Agreement and the Effective Date of
Termination.
(b) In the event the Termination of Employment of the Subject
Shareholder is for Cause, the purchase price per Share shall be $.01.
(c) In the event the Termination of Employment of the Subject
Shareholder is not for Cause, the aggregate purchase price for all Shares owned
by the Subject Shareholder shall be equal to the sum of (x) the product of (i)
the number of FMV Shares (as set forth on the table below) MULTIPLIED BY (ii)
Fair Market Value PLUS (y) the product of (i) the number of Cost Shares
MULTIPLIED BY (ii) $.01. The number of FMV Shares and the number of Cost Shares
shall be determined by
9
<PAGE>
multiplying the applicable percentage from the table set forth below by the
number of Shares owned of record and beneficially (in the case of a Permitted
Disposition described in Section 1.16(c) hereof) by the Subject Shareholder and
rounding to the nearest whole Share.
Percentage of Shares which are:
FMV COST
DATE OF TERMINATION SHARES SHARES
Prior to the first anniversary hereof ................. 0% 100%
On or after the first anniversary hereof through the
day prior to the second anniversary hereof ......... 33.3% 66.6%
On or after the second anniversary hereof through
the day prior to the third anniversary hereof ...... 66.6% 33.3%
On or after the third anniversary hereof .............. 100% 0%
(d) The Company shall exercise its right to purchase, if it chooses
to exercise such right, by giving written notice to the Subject Shareholder (or
the personal representative, executor or administrator of the Subject
Shareholder, as the case may be) within ninety (90) days following the
occurrence of the Termination of Employment. The closing of any purchase of
Shares pursuant to this Section 2.3 shall take place at the principal office of
the Company not earlier than thirty (30) nor later than forty-five (45) days
after the date of the Company's written notice of the exercise of its right to
purchase such Shares pursuant to this Section 2.3.
(e) At the closing, the Subject Shareholder shall deliver all stock
certificates representing the Shares to be purchased, properly endorsed for
transfer, and the Company shall pay the Subject Shareholder the aggregate
purchase price for the Shares (i) one part in cash in an amount equal to 25% of
the total purchase price and (ii) the other part shall be paid by delivery of an
unsecured promissory note of the Company, payable to the order of the Subject
Shareholder (or the personal representative, executor, or administrator of the
Subject Shareholder, as the case may be), and bearing interest at the Prime Rate
in effect on the date of the Closing PLUS three percentage points, with accrued
and unpaid interest being due on each principal installment payment date. The
principal amount of such note shall be payable in (i) eight (8) equal quarterly
installments if the original principal amount of the note is equal to or less
than $1,000,000, (ii) twelve (12) equal quarterly installments if the original
principal amount of the note is greater than $1,000,000 but equal to or less
than $1,500,000; (iii) sixteen (16) equal quarterly installments if the original
principal amount of the note is greater than $1,500,000 but equal to or less
than $2,000,000, or (iv) twenty (20) equal quarterly installments if the
original principal amount of the note is greater than $2,000,000. Payment of
quarterly installments shall commence on the first three month anniversary of
the closing date. The Company shall have the right to set off against the cash
portion of the purchase price paid at Closing the amount of any indebtedness,
including accrued but unpaid interest, then owed by the Subject Shareholder to
the Company.
10
<PAGE>
2.4 FAILURE TO DELIVER SHARES TO THE COMPANY. If a Shareholder becomes
obligated to sell any Shares to the Company or to the Other Shareholders under
this Agreement (the "Obligated Shareholder") and fails to deliver such Shares in
accordance with the terms of this Agreement, the Company or such Other
Shareholder may, in addition to all other remedies it may have, tender to the
Obligated Shareholder, at the address set forth in the stock transfer records of
the Company, the purchase price for such Offered Shares as is herein specified,
and (i) in the case of shares to be sold to the Company pursuant to this
Agreement, cancel such shares on its books and records whereupon all of the
Obligated Shareholder's right, title, and interest in and to such Shares shall
terminate, (ii) in the case of Shares to be sold to an Other Shareholder under
this Agreement, issue certificates representing such shares to the Other
Shareholder and register the Other Shareholder on its Company's books and
records as the record owner of the shares whereupon all of the Obligated
Shareholder's right, title, and interest in and to such shares shall terminate.
2.5 COMPANY'S INABILITY TO PURCHASE. If the Company shall become obligated
under either Sections 2.2 or 2.3 hereof to purchase the Shares of a Shareholder
and the Company at such time is unable to fulfill its obligations hereunder by
reason of the Company's commitments to creditors, the Company may assign its
rights or delegate its obligations hereunder to one or more other Shareholders
or Investors of the Company who may then perform all of the obligations of the
Company, and exercise all rights of the Company, with respect to the purchase of
such Shares; provided, however, such assignment and delegation shall not relieve
the Company of its obligations hereunder (including, without limitation, the
obligation to pay for the purchased Shares) upon the failure of such assignee or
delegatee to perform such obligations.
2.6 COMEALONG AND TAKEALONG RIGHTS OF MANAGEMENT SHAREHOLDERS.
(a) In the event an Investor proposes to sell, or otherwise dispose
of for value, more than twenty-five (25%) percent in value of the Warrants and
Warrant Shares owned by such Investor to (1) a third party, or, (2) directly or
indirectly, to the Company (for the purposes of this Section 2.6(a), a
"Transferee"), other than a transfer by an Investor that is a distribution or
partial distribution, without new consideration, of all or any part of the
Warrants and Warrant Shares owned by such Investor to the partners of such
Investor (for the purposes of this Section 2.6(a), the Warrants and Warrant
Shares to be sold are hereinafter referred to as the "Transfer Shares"), such
Investor shall require the Transferee, as a condition precedent to the
consummation of the sale or disposition of the Transfer Shares of such Investor
to the Transferee, to offer to acquire on the same terms as the proposed sale or
disposition from each Management Shareholder a number of Shares equal to the
product of (i) the number of Shares owned of record by such Management
Shareholder MULTIPLIED BY (ii) a fraction, the numerator of which is the number
of Transfer Shares such Investor proposes to sell or otherwise dispose of to the
Transferee, and the denominator of which is the total number of Shares owned
beneficially and of record by such Investor (for the purposes of this Section
2.6(a), such number of Shares is hereinafter referred to as the "Allocation
Shares"). For purposes of determining the numerator and denominator of the
fraction described in the preceding sentence, the number of Transfer Shares to
be sold by such Investor and the number of Shares owned of record or
beneficially by such Investor shall be determined on a Common Stock Equivalents
basis. Such Investor shall give written notice (for the purposes of this Section
2.6(a), the "Co-Sale Notice") to each Management Shareholder which shall
describe fully the terms of the proposed sale or disposition, the number of
Transfer Shares of such Investor to be sold or otherwise disposed of, and the
number of Allocation
11
<PAGE>
Shares of each Management Shareholder eligible for co-sale, the name and address
of the Transferee, and the proposed closing date of the purchase and sale. The
Co-Sale Notice shall be signed by such Investor and by the Transferee and shall
be an irrevocable offer, open for thirty (30) days after receipt, of both
parties to acquire, as provided above, all Allocation Shares. Each Management
Shareholder shall have thirty (30) days after receipt of the Co-Sale Notice to
accept such offer as to all or a portion of the Allocation Shares and notify the
Transferee and such Investor in writing of the number of Allocation Shares, if
any, such Management Shareholder wishes to sell to the Transferee. Such Investor
may not consummate the proposed sale or disposition to the Transferee unless (x)
the sale of Allocation Shares pursuant to the co-sale right of each Management
Shareholder who timely accepts the offer of the Transferee is consummated or (y)
each Management Shareholder waives the right of co-sale as to all or part of the
Allocation Shares or (z) the irrevocable offer expires without acceptance by any
Management Shareholder after the thirty (30) day period. Such Investor and the
Transferee shall keep each Management Shareholder fully informed of the progress
of the sale proposed in the Co-Sale Notice.
(b) In the event a Management Shareholder proposes to sell, or
otherwise dispose of for value, more than twenty five (25%) percent in number of
the Shares owned by such Management Shareholder (1) to a third party other than
a transaction described in Section 1.16(c) or 1.16(d) or (2) directly or
indirectly, to the Company (for the purposes of this Section 2.6(b), a
"Transferee"), after compliance with the provisions of Section 2.2 hereof (for
the purposes of this Section 2.6(b), the Shares to be sold are hereinafter
referred to as the "Transfer Shares"), such Management Shareholder shall require
the Transferee, as a condition precedent to the consummation of the sale or
disposition of the Transfer Shares of such Management Shareholder to the
Transferee, to offer to acquire on the same terms as the proposed sale or
disposition from each Investor a number of outstanding Warrant Shares and
Warrant Shares issuable upon exercise of outstanding Warrants (defined as the
"Warrant Share Equivalents") equal to the product of (i) the number of Warrant
Share Equivalents owned of record by such Investor MULTIPLIED BY (ii) a
fraction, the numerator of which is the number of Transfer Shares such
Management Shareholder proposes to sell or otherwise dispose of to the
Transferee, and the denominator of which is the total number of Shares owned
beneficially and of record by such Management Shareholder (for the purposes of
this Section 2.6(b), such number of Warrant Share Equivalents is hereinafter
referred to as the "Allocation Shares"). For purposes of determining the
numerator and denominator of the fraction described in the preceding sentence,
the number of Transfer Shares to be sold by such Management Shareholder and the
number of Shares owned of record or beneficially by such Management Shareholder
shall be determined on a Common Stock Equivalents basis. Such Management
Shareholder shall give written notice (for the purposes of this Section 2.6(b),
the "Co-Sale Notice") to each Investor which shall describe fully the terms of
the proposed sale or disposition, the number of Transfer Shares of such
Management Shareholder to be sold or otherwise disposed of, and the number of
Allocation Shares of each Investor eligible for co- sale, the name and address
of the Transferee, and the proposed closing date of the purchase and sale. The
Co-Sale Notice shall be signed by such Management Shareholder and by the
Transferee and shall be an irrevocable offer, open for thirty (30) days after
receipt, of both parties to acquire, as provided above, all Allocation Shares.
Each Investor shall have thirty (30) days after receipt of the Co-Sale Notice to
accept such offer as to all or a portion of the Allocation Shares and notify the
Transferee and such Management Shareholder in writing of the number of
Allocation Shares, if any, such Investor wishes to sell to the Transferee. Such
Management Shareholder may not consummate the proposed sale or disposition to
the Transferee unless (x) the sale of Allocation Shares pursuant to the
12
<PAGE>
co-sale right of each Investor who timely accepts the offer of the Transferee is
consummated or (y) each Investor waives the right of co-sale as to all or part
of the Allocation Shares or (z) the irrevocable offer expires without acceptance
by any Investor after the thirty (30) day period. Such Management Shareholder
and the Transferee shall keep each Investor fully informed of the progress of
the sale proposed in the Co-Sale Notice.
(c) In the event that the Investors, at any time after June 1, 1996,
negotiate in good faith a term sheet, letter of interest, or letter of intent
for the sale of all Preferred Stock, Warrants, and Warrant Shares owned by the
Investors as a group and all Shares owned by the Management Shareholders to a
non-affiliated buyer (such buyer is for the purposes of this Section 2.6(c), a
"Buyer") on terms acceptable to the Investors, in a transaction which is not an
offering which requires registration under the Act, the Investors shall notify
the Company and each of the Management Shareholders in writing of their receipt
of a term sheet, letter of interest, or letter of intent from a Buyer, stating
in such notice (the "Section 2.6(c) Notice") the details of the proposed
transaction, including (i) the name and address of the Buyer, (ii) the number of
Warrant Shares or rights to obtain Warrant Shares to be sold or transferred by
the Investors in the proposed transaction (which shall be all of the Warrants
and Warrant Shares held by the Investors), (iii) the number of shares of
Preferred Stock to be sold or transferred to the Buyer in the proposed
transaction (which shall be all of the Preferred Stock held by the Investors),
(iv) the total purchase price ("Total Proceeds") to be paid by the Buyer for all
outstanding shares of Preferred Stock, all outstanding Warrants, and all
outstanding Warrant Shares held by the Investors and all shares of Common Stock
by the Management Shareholders and their affiliates proposed to be sold or
transferred to the Buyer in the proposed transaction, (v) the allocation of the
Total Proceeds between the Preferred Stock on one hand and all outstanding
shares of the Common Stock and all outstanding Warrants and Warrant Shares on
the other, which allocation shall be made as follows: first, $100 per
outstanding share of Preferred Stock PLUS any accrued and unpaid Dividends on
each outstanding share of Preferred Stock, and second, the balance shall be
allocated equally per share to the then outstanding Common Stock, Warrants, and
Warrant Shares on a Common Stock Equivalent basis, such that each outstanding
share of Common Stock held by a Management Shareholder, and each Warrant Share
that is outstanding or issuable upon the exercise of an outstanding Warrant,
receives an identical per share allocation of the Total Proceeds, and (vi) the
terms and method of payment by the Buyer of the consideration to be paid for the
Preferred Stock, Common Stock, Warrants, and Warrant Shares to be sold or
transferred to the Buyer. A copy of the term sheet, letter of interest, or
letter of intent, shall be attached to the Section 2.6(c) Notice. The Management
Shareholders, acting by the vote of a majority of the Shares held by the
Management Shareholders, shall have thirty (30) days from receipt of the Section
2.6(c) Notice to consider the proposed transaction and (x) to deliver to the
Company and to each Investor, a Call Notice, which obligates the Company and the
Management Shareholders (on a joint and several basis) to redeem all outstanding
Preferred Stock, Warrants, and Warrant Shares then held by the Investors for the
same amount of consideration which the Investors would have received in the
proposed transaction, as specified in the Section 2.6(c) Notice in accordance
with subsection (v) of this Section 2.6(c), or (y) participate in the proposed
transaction, by each Management Shareholder selling to the Buyer, all Shares
owned by such Management Shareholder for the same consideration per share of
Common Stock held by a Management Shareholder as the consideration to be
received by the Investors for each Warrant Share outstanding or issuable upon
exercise of a Warrant, as specified in the Section 2.6(c) Notice, in accordance
with subsection (v) of this Section 2.6(c). In the event the Management
Shareholders holding a majority of the Shares held by Management Shareholders
elect,
13
<PAGE>
within such thirty (30) day period, to pursue the alternative described in
subsection (x) in the preceding sentence and thereby decline to participate in
the proposed transaction, the Company and the Management Shareholders shall
deliver a Call Notice within such thirty (30) day period, which shall constitute
an irrevocable call option from the Company and the Management Shareholders (on
a joint and several basis) on the Preferred Stock and on the Warrants and
Warrant Shares held by the Investors for the amount of consideration which the
Investors would have received in the proposed transaction as specified in the
Section 2.6(c) Notice in accordance with subsection (v) of this Section 2.6(c).
Delivery of the Call Notice within such thirty (30) day period shall terminate
any obligation of the Management Shareholders to sell any Shares to the Buyer.
The closing of the transaction contemplated by the Call Notice by the Company
and the Management Shareholders shall be held at the principal office of the
Company in Coral Springs, Florida. The Company shall designate a closing date
and time, which date shall be not later than one hundred fifty (150) days after
the date of the Section 2.6(c) Notice as may be agreed upon by the Company and
Investors. At the closing of the transactions contemplated by the Call Notice,
the Investors shall deliver certificates duly endorsed or accompanied by duly
executed stock powers for the Preferred Stock, Warrants, and Warrant Shares
being purchased pursuant to this Section 2.6(c) and shall transfer the Preferred
Stock, Warrants, and Warrant Shares being purchased pursuant to this Section
2.6(c) to the purchasers thereof, free and clear of all liens, claims, charges,
or encumbrances, against payment for the Preferred Stock, Warrants, and Warrant
Shares, against payment of the amount of consideration payable therefor, payable
in cash or cash and notes, in each case having a value equal to the amount of
consideration which the Investors would have received in the proposed
transaction as specified in the Section 2.6(c) Notice in accordance with
subsection (v) of this Section 2.6(c). If on the other hand, the Management
Shareholders holding a majority of Shares owned by all Management Shareholders
fail to deliver a Call Notice within such thirty (30) day period, the Management
Shareholders shall have an irrevocable obligation to sell to the Buyer, on the
same terms and conditions as the Investors for the consideration specified in
the Section 2.6(c) Notice as aforesaid. The Investors shall keep the Management
Shareholders fully informed as to the status of the proposed transaction and
permit the Management Shareholders to participate in all negotiations with the
Buyer after the expiration of the thirty (30) day period which commences on the
date the Company receives the Section 2.6(c) Notice (assuming no Call Notice is
delivered to the Investors. The Investors and the Management Shareholders will,
in such event, use best efforts to consummate the proposed transaction with the
Buyer. The right of first refusal provided in Section 2.2 hereof shall be
inapplicable to any sale effected under this Section 2.6(c).
2.7 PURCHASE UPON DEATH.
Prior to a Public Offering, upon the death of any of Arthur J. Falcone
("AJF"), Edward W. Falcone ("EWF") or Philip Cucci, Jr. ("CUCCI"), the Company
shall purchase from the surviving spouse of such individuals, or from the estate
of such individuals if their respective spouses shall not have survived them,
all Shares then owned by such individuals, either jointly with their respective
spouses or in their individual names. The Purchase Price for such Shares shall
be the par value thereof. The Company shall maintain life insurance policies on
the lives of each of AJF, EWF, and CUCCI in the amount of $1,000,000 each. The
beneficiaries of such policies shall be the spouses of the respective
individuals. Each of the spouses of such individuals, by their signatures hereto
agree to sell all Shares to the Company in accordance with the terms hereof. All
of the aforementioned individuals shall cause their respective last wills and
testaments to be modified to
14
<PAGE>
include an agreement for the sale of all Shares owned by such individuals to the
Company. In the event that the Company shall fail to maintain such policies or
if the proceeds thereof shall not be paid to the respective spouses, the
agreement of the spouses to such sale shall lapse.
3. RESTRICTIVE COVENANTS.
3.1 COVENANT NOT TO COMPETE. Each Management Shareholder separately
covenants and agrees with the Company that, for so long as such Management
Shareholder is employed by the Company, and for a period of one (1) year
following the termination, for whatever reason, of such employment, such party
will not, either directly or indirectly, on such party's own behalf or in the
service of others in the territorial United States:
(a) engage in the Business of the Company as an officer, director,
executive, managerial employee, consultant to, representative of, agent of,
partner, or stockholder of a Competitor (other than as owner of less than five
(5%) percent of the outstanding voting securities of an entity whose voting
securities are traded or quoted on a national securities exchange or the
National Association of Securities Dealers Automated Quotation System);
(b) solicit or attempt to solicit for the benefit of a Competitor,
the Business of the Company from any person, firm, or entity that was a customer
of the Company while Management Shareholder was an employee of the Company; or
(c) hire, solicit, or induce away, or attempt to hire, solicit, or
induce away, for the benefit of a Competitor any person employed by the Company,
whether such employment is at will or for a stated period.
3.2 PROPRIETARY INFORMATION.
(a) Each Management Shareholder acknowledges and agrees that all
Proprietary Information, and all physical embodiments thereof, are confidential
to and shall be and remain the sole and exclusive property of the Company and
that any Proprietary Information produced by the Management Shareholder during
the period of the Management Shareholder's employment by the Company shall be
considered "work for hire" as such term is defined in 17 U.S.C. Section 101, ET.
SEQ., the ownership and, if applicable, the copyright of which shall be vested
solely in the Company. Each Management Shareholder agrees (i) immediately to
disclose to the Company all Proprietary Information developed in whole or part
by such Management Shareholder during the term of such Management Shareholder's
employment by the Company, and (ii) at the request and expense of the Company,
to do all things and sign all documents or instruments reasonably necessary in
the opinion of the Company to eliminate any ambiguity as to the exclusive rights
of the Company in such Proprietary Information including, without limitation,
providing to the Company such Management Shareholder's full cooperation in any
litigation or other proceeding to establish, protect, or obtain such exclusive
rights. Upon request by the Company, and in any event upon Termination of
Employment, such Management Shareholder shall promptly deliver to the Company,
and shall not retain or transmit to any other party or parties, all property
belonging to the Company including, without limitation, all Proprietary
Information (and all embodiments thereof) then in such Management Shareholder's
custody, control, or possession.
15
<PAGE>
(b) Each Management Shareholder agrees that all Proprietary
Information received or developed by such Management Shareholder as a result of
such Management Shareholder's employment or association with the Company will be
held in trust and kept in the strictest confidence, that such Management
Shareholder will protect such Proprietary Information from disclosure, and that
such Management Shareholder will not use, reproduce, distribute, disclose, or
otherwise disseminate, by electronic or other means, the Proprietary Information
or any physical embodiments thereof, except in connection with such Management
Shareholder's employment hereunder, without the Company's prior written consent.
The obligations of confidentiality contained in this Agreement with respect to
all Proprietary Information will apply during such Management Shareholder's
employment by the Company and at any and all times after expiration or
termination (for whatever reason) of such employment.
3.3 ENFORCEMENT. In the event of final adjudication of a breach or
contemplated breach of the covenants and agreements set forth in Sections 3.1
and 3.2 above, the Company shall have the right, in addition to all other rights
or remedies available to it at law or in equity, to set off against and deduct
from any monies then payable or thereafter to become payable to the breaching
Shareholder pursuant to Section 2 hereof, the amount of any damages suffered or
incurred by the Company as a result of such breach. In addition, the Company
shall be entitled to preliminary and permanent injunctive relief against the
breaching Shareholder to prevent or enjoin an actual or threatened breach of
such covenants and agreements or the continuation thereof by such Shareholder.
4. CORPORATE GOVERNANCE
4.1 VOTING AGREEMENTS AND RIGHTS.
(a) For so long as this Agreement remains in effect, and no
Two-Dividend Default, as defined in the Amended and Restated Articles of
Incorporation of the Company as in effect on the date hereof has occurred, each
Shareholder agrees to vote all Shares the voting of which is under the control
of such Shareholder in the following manner:
(i) To maintain a Board of Directors consisting of four (4)
members, unless otherwise agreed to by all Shareholders in writing;
(ii) To cause AJF to be elected as a Director of the Company
for so long as AJF is a holder of Common Stock;
(iii) To cause two persons designated in writing by the
Management Shareholders holding a majority of the Shares held by the
Management Shareholders and their Affiliates (the "Management Shareholder
Nominees") to be elected as Directors of the Company; and
(iv) To cause a person designated in writing by the Investors
holding a majority of the outstanding shares of Preferred Stock and
Warrant Shares (the "Investor Nominee") to be elected as a director of the
Company.
16
<PAGE>
(b) As of the date hereof, the Management Shareholder Nominees are
EWF and CUCCI and the Investor Nominee is Christopher Allick. This designation
shall remain in effect until a new designation is delivered in writing to the
Corporation and each party to this Agreement. A new designation shall be
effective when delivered. The Management Shareholders and the Investors will
each use reasonable efforts to notify all other Shareholders at least three (3)
days prior to any meeting (or written action in lieu of a meeting) of
stockholders of the Company at or by which directors are to be elected, if the
director nominee will change from the Nominee set forth in this sub section (b).
(c) The Investor Nominee shall be appointed to fill the vacancy
created on the Board of Directors by the filing of the Company's Amended and
Restated Articles of Incorporation with the Department of State of the State of
Florida effective upon the execution of this Agreement.
(d) In the event that either a Management Shareholder Nominee or the
Investor Nominee shall cease to serve as a director of the Company for any
reason, the Management Shareholders or the Investors, which ever is applicable,
shall have the right to appoint a successor nominee. The Shareholders shall use
their best efforts to ensure that such successor nominee is duly appointed and
elected to fill such vacancy in the manner provided in the Bylaws of the
Company.
(e) From and after the occurrence of a Two-Dividend Default, the
Investors and the Management Shareholders shall have the voting rights set forth
in the Amended and Restated Articles of Incorporation.
4.2 LIMITATION ON CERTAIN ACTIONS.
(a) The Shareholders agree that, with regard to any matter which
requires stockholder action, or which the Board of Directors desires to obtain
stockholder consent, the action by the Shareholders shall be taken (i) by
written consent in lieu of a meeting and such written consent action is approved
in writing by the holders of a majority of the then outstanding shares of
Preferred Stock consenting as a separate class, in accordance with the Bylaws of
the Company or (ii) a meeting of Shareholders duly called and held in accordance
with the Bylaws of the Company.
(b) The Shareholders agree that no action shall be taken by the
Board of Directors unless such action is taken (i) by written consent in lieu of
a meeting or (ii) at a meeting duly called and held in accordance with the
Bylaws of the Company.
(c) The Shareholders agree that no dividend shall be payable on or
with respect to the Common Stock without the written consent of the Director or
Directors nominated by the Investors.
4.3 RIGHT TO PURCHASE NEW SECURITIES. The Company hereby grants to each
Shareholder the right to purchase a pro rata share of any New Securities, as
hereinafter defined (the "Purchase Right"), which the Company may, from time to
time, propose to sell and issue. A pro rata share, for purposes of this Purchase
Right, is a fraction, the numerator of which is the number of Common Stock
Equivalents then held by a Shareholder, and the denominator of which is the
total number of Common Stock Equivalents then outstanding.
17
<PAGE>
(a) Except as set forth below, "New Securities" shall mean any
shares of capital stock of the Company including Common Stock and Preferred
Stock, whether now authorized or not, and any rights, options, or warrants to
purchase said shares of Common Stock or Preferred Stock, and securities of any
type that are, or may become, convertible into said shares of Common Stock or
Preferred Stock. Notwithstanding the foregoing, "New Securities" does not
include: (i) securities offered to the public generally pursuant to a
registration statement filed pursuant to the Securities Act, or pursuant to
Regulation A under the Securities Act; (ii) securities issued pursuant to the
acquisition of another corporation by the Company by a merger, share exchange,
the purchase of substantially all of the assets, or other reorganization whereby
the Company or its shareholders own not less than fifty-one percent (51%) of the
voting power of the surviving or successor corporation; (iii) shares of Common
Stock or related options convertible into such Common Stock issued to employees
of, officers, and directors of the Company pursuant to any plan or arrangement
approved by the Board of Directors of the Company; (iv) securities issued
pursuant to any rights or agreements including without limitation convertible
securities, options, and warrants, provided that the Purchase Right under this
Section 4.3 applies with respect to the initial sale of New Securities or the
grant by the Company of such rights or agreements; (v) securities issued in
connection with any stock split, stock dividend, or recapitalization by the
Company; (vi) securities issued pursuant to the anti-dilution provisions of any
now or hereafter outstanding option, warrant, right, or convertible security; or
(vii) as a dividend in kind on the Preferred Stock.
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give each Shareholder written notice of its intention,
describing the type of New Securities, and the price and terms upon which the
Company proposes to issue the New Securities. Each Shareholder shall have
fifteen (15) days from the date of receipt of any such notice to agree to
purchase up to its respective pro rata portion of shares of such New Securities
for the price and upon the terms specified in the notice by giving written
notice to the Company of such Shareholder's intentions and stating therein the
quantity of New Securities to be purchased by such Shareholder.
(c) In the event a Shareholder fails to exercise the Purchase as
provided herein within said fifteen (15) day period, the Company shall have
ninety (90) days thereafter to sell or enter into a written agreement (pursuant
to which the sale of New Securities covered thereby shall be completed, if at
all, within sixty (60) days from the date of said agreement) to sell the New
Securities not elected to be purchased by the Shareholders at a price and upon
such terms which are no more favorable to the purchaser of such New Securities
than specified in the Company's notice to the Shareholders. In the event the
Company has not sold the New Securities or entered into a written agreement to
sell the New Securities within said ninety (90) day period (or completed the
sale of the New Securities within sixty (60) days from the date of said
agreement, as provided above), the Company shall not thereafter issue or sell
any New Securities without first offering such securities in the manner provided
in this Section 4.3.
(d) The Right to Purchase New Securities granted to a Shareholder
under this Section 4.3 shall expire upon the first to occur of the following:
(i) the closing of the first public offering of the Common Stock of the Company
to the general public which is effected pursuant to a registration statement
filed with, and declared effective by, the Commission under the Securities Act
or (ii) the date such Shareholder no longer owns any Shares.
18
<PAGE>
5. REGISTRATION RIGHTS.
5.1 DEMAND REGISTRATION. Investors holding not less than one-half of the
shares of Restricted Stock then held by Investors, may request the Company to
register under the Securities Act not less than one-half of all shares of
Restricted Stock then held by the Investors as a group for sale in the manner
specified in such notice (shares of Restricted Stock issuable upon exercise of
any option, warrant, or right which is then immediately exercisable and shares
of Restricted Stock issuable upon conversion of any convertible security which
is then immediately convertible, shall be deemed held by such Investor for the
purposes of this Section 5.1). Notwithstanding anything to the contrary
contained herein, no request may be made under this Section 5.1 within six
months after the effective date of a registration statement filed by the Company
covering a firm commitment underwritten public offering in which the Investors
shall have been entitled to join pursuant to Sections 5.2 or 5.3 hereof, and in
which there shall have been effectively registered all shares of Restricted
Stock as to which registration shall have been requested by such Investors. If
the Company receives a notice from an Investor or Investors that imposes on the
Company the registration obligations of this Section 5.1, and if, in the
reasonable opinion of the Board of Directors of the Company the general market
conditions are not appropriate at the time for an offering, the Company may, at
its option, delay the commencement of the performance of the Company's
obligation pursuant to this Section 5.1 for up to one hundred twenty (120) days.
If an Investor specifies in the notice, that the method of disposition of the
Restricted Stock shall be an underwritten public offering, the Investor may
designate the managing underwriter of such offering, subject to the approval of
the Company, which approval shall not be unreasonably withheld or delayed. The
Company shall be obligated to register Restricted Stock pursuant to this Section
5.1 on two occasions only (irrespective of the number of Investors requesting
such registration), PROVIDED, HOWEVER, that such obligation shall be deemed
satisfied only when a registration statement covering shares of Restricted
Stock, for sale in accordance with the method of disposition specified by the
requesting Investor, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, such shares shall
have been sold pursuant thereto. The Company shall be entitled to include in any
registration statement referred to in this Section 5.1 for sale in accordance
with the method of disposition specified by the requesting Investor, shares of
Common Stock to be sold by the Company for its own account, except as and to the
extent that in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Restricted Stock to be sold. Except for
registration statements on Forms S-4 or S-8, or any successor thereto, the
Company will not file with the Commission any other registration statement with
respect to its Common Stock, whether for its own account or that of other
stockholders, from the date of receipt of a notice from the requesting Investor
pursuant to this Section 5.1 until the completion of the period of distribution
of the registration contemplated thereby.
5.2 PIGGYBACK REGISTRATION. If the Company at any time proposes to
register any of its securities under the Securities Act for sale to the public,
whether for its own account or for the account of other security holders or both
(except with respect to registration statements on Forms S-4 or S-8 or another
form not available for registering the Restricted Stock for sale to the public),
each such time it will give written notice to each Shareholder of its intention
so to do. Upon the written request of Shareholders received by the Company
within 30 days after the giving of any such notice by the Company, to register
such number of shares of Restricted Stock held by each Shareholder (or
19
<PAGE>
by persons taking from such Shareholder pursuant to a Permitted Disposition)
specified in such written request, the Company will cause the Restricted Stock
as to which registration shall have been so requested to be included in the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent requisite to permit the sale or other disposition
by each Shareholder (in accordance with its written request) of such Restricted
Stock so registered. In the event that any registration pursuant to this Section
5.2 shall be, in whole or in part, an underwritten public offering of Common
Stock, the number of shares of Restricted Stock to be included in such an
underwriting may be reduced if and to the extent that the managing underwriter
shall be of the opinion that such inclusion would adversely affect the marketing
of the securities to be sold by the Company therein. In the event such a
reduction is necessary, (i) all Shareholders proposing to sell Restricted Stock
in the offering shall bear the reduction on a pro-rata basis, based on the
number of shares of Restricted Stock each Shareholder proposed to offer for sale
in the Offering, or (ii) Shareholders holding a majority of the Shares may elect
to withdraw from such registration all shares of Restricted Stock held by
Shareholders as to which registration was requested. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 5.2 without thereby incurring any liability to any
Shareholder.
5.3 REGISTRATION ON FORM S-3. If at any time a Shareholder shall request
that the Company file a registration statement on Form S-3 or any successor
thereto for a public offering of shares of Restricted Stock then held by such
Shareholder and the Company is a registrant entitled to use Form S-3 or any
successor thereto to register such shares, then the Company shall use its best
efforts to register under the Securities Act on Form S-3 or any successor
thereto, for public sale in accordance with the method of disposition specified
in such notice, the number of shares of Restricted Stock specified in such
notice. Whenever the Company is required by this Section 5.3 to use its best
efforts to effect the registration of Restricted Stock, each of the procedures
and requirements of Section 5.4 hereof shall apply to such registration,
PROVIDED, HOWEVER, that there shall be no limitation on the number of
registrations on Form S-3 which may be requested and obtained under this Section
5.3, and PROVIDED, FURTHER, HOWEVER, that the Company shall not be required to
effect (i) more than one such registration in each six month period and (ii) any
registration under this Section 5.3 that would require the Company to expedite
the preparation or audit of its financial statements.
5.4 REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Section 5.1, 5.2, or 5.3 hereof to use its best efforts to
effect the registration of any shares of Restricted Stock under the Securities
Act, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 5.1
or 5.2 hereof, shall be on Form S-1, Form S-2, any successor forms thereto, or
other form of general applicability satisfactory to the managing underwriter
selected as herein provided) with respect to such securities and use its best
efforts to cause such registration statement to become and remain effective for
the period of the distribution contemplated thereby (determined as hereinafter
provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period of distribution and comply with the provisions
20
<PAGE>
of the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the intended method of
disposition set forth in such registration statement for such period;
(c) furnish to each Shareholder and to each underwriter such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may request
in order to facilitate the public sale or other disposition of the Restricted
Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the Shareholders, or, in the case of an underwritten
public offering, the managing underwriter reasonably shall request, PROVIDED,
HOWEVER, that the Company shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any jurisdiction
where it is not so qualified or to consent to general service of process in any
such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by
such registration statement with any securities exchange or NASDAQ on which the
Common Stock of the Company is then listed or quoted;
(f) notify each selling Shareholder at any time when a prospectus
relating to Restricted Stock is required to be delivered under the Securities
Act of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such Shareholder, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Restricted Stock, such prospectus will not contain an untrue statement
of a material fact or omit to state any fact necessary to make the statements
therein not misleading; provided that the 180-day period described below will be
tolled from the time a prospectus contains such a statement or omission until a
prospectus correcting such statement or omission has been delivered to the
Shareholders and may be delivered to the purchasers of such Restricted Stock in
compliance with the Securities Act;
(g) notify the selling Shareholders immediately, and confirm the
notice in writing, (1) when the registration statement becomes effective, (2) of
the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceedings for that purpose, (3) of the receipt by the
Company of any notification with respect to the suspension of qualification of
the Restricted Stock for sale in any jurisdiction or of the initiation, or the
threatening, of any proceedings for that purpose, and (4) of the receipt of any
comments, or requests for additional information, from the Commission or any
state regulatory authority. If the Commission or any state regulatory authority
shall enter such a stop order or order suspending qualification at any time, the
Company will promptly use its best reasonable efforts to obtain the lifting of
such order; and
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders as soon as reasonably practicable, but not later than 15 months after
the effective date of the registration statement, an earnings statement covering
a period of at least 12 months beginning after the effective date of the
21
<PAGE>
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
For purposes hereof, the period of distribution of Restricted Stock
in a firm commitment underwritten public offering shall be deemed to extend
until each underwriter has completed the distribution of all securities
purchased by it, and the period of distribution of Restricted Stock in any other
registration shall be deemed to extend until the earlier of the sale of all
Restricted Stock covered thereby or 180 days after the effective date thereof.
In connection with each registration hereunder, each Shareholder
will furnish to the Company in writing such information with respect to it as a
stockholder as reasonably shall be necessary in order to assure compliance with
federal and applicable state securities laws.
In connection with each registration pursuant to Section 5.1, 5.2,
or 5.3 hereof covering an underwritten public offering, the Company and each
Shareholder agree to enter into a written agreement with the managing
underwriter selected in the manner herein provided in such form and containing
such provisions as are customary in the securities business for such an
arrangement between such underwriter and companies of the Company's size and
investment stature.
5.5 EXPENSES. All reasonable expenses incurred by the Company in complying
with Section 5.1, 5.2, or 5.3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of
insurance, and fees and disbursements of one counsel for the sellers of
Restricted Stock , but excluding any Selling Expenses, are called "Registration
Expenses". All underwriting discounts and selling commissions applicable to the
sale of Restricted Stock are called "Selling Expenses".
(a) The Company shall pay all Registration Expenses attributable to
the shares of Restricted Stock of Shareholders included in the Registration in
connection with each registration statement under Section 5.1, 5.2, or 5.3
hereof.
(b) All Selling Expenses in connection with each registration
statement under Section 5.1, 5.2, or 5.3 hereof shall be borne by the
Shareholders and any other selling stockholder in proportion to the number of
shares sold by each Shareholder, or by such other selling stockholders.
5.6 INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Section 5.1, 5.2, or 5.3 hereof, the
Company will indemnify and hold harmless each Shareholder, its directors and its
officers (provided any such Shareholder is a seller of Restricted Stock
thereunder), each underwriter of such Restricted Stock thereunder, and each
other person, if any, who controls such Shareholder, its directors and its
officers or underwriter within the meaning of the Securities Act, against any
losses, claims, damages, or liabilities, joint or several, to which such
Shareholder, its directors and officers, such underwriter or such person may
become
22
<PAGE>
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which any shares of Restricted
Stock were registered under the Securities Act pursuant to Section 5.1, 5.2, or
5.3 hereof, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each such Shareholder, its directors and officers, each such
underwriter and each such person for any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability, or action, provided, however, that the Company
will not be liable in any such case if and to the extent that any such loss,
claim, damage, or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by such Shareholder, its directors and its
officers, such underwriter and such person in writing specifically for use in
such registration statement or prospectus.
(b) In the event of a registration of any of the shares of
Restricted Stock under the Securities Act pursuant to Section 5.1, 5.2, or 5.3
hereof, each Shareholder including Shares of Restricted Stock in such
Registration, severally but not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter, and each person who
controls any underwriter within the meaning of the Securities Act, against all
losses, claims, damages, or liabilities, joint or several, to which the person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which any shares of
Restricted Stock were registered under the Securities Act pursuant to Section
5.1, 5.2, or 5.3 hereof, any Preliminary Prospectus, or final Prospectus
contained therein, or any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and each such officer,
director, underwriter, and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action, provided, however, that each
such Shareholder will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage, or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Shareholder, as such, respectively, furnished in writing to the Company by
such Shareholder specifically for use in such registration statement or
prospectus, and provided, further, however, that the respective liability of
each Shareholder hereunder shall be limited to the proportion of any such loss,
claim, damage, liability, or expense which is equal to the proportion that the
public offering price of the shares sold by such Shareholder, under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds received
by such Shareholder from the sale of shares of Restricted Stock or covered by
such registration statement. In no event will any Shareholder be required to
enter into any agreement or undertaking in connection with any registration
under this Agreement providing for any
23
<PAGE>
indemnification or contribution obligation on the part of such Shareholder
greater than such Shareholder's obligation under this Section 5.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 5 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 5 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 5.6 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected,
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be reasonable defenses available to it
which are different from or additional to those available to the indemnifying
party or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 5 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
5 then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages, or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the proceeds received from sale
of Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
24
<PAGE>
5.7 CHANGES IN COMMON STOCK. If, and as often as, there is any change in
the Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the registration rights granted in this Section 5
shall continue with respect to the Common Stock as so changed.
5.8 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, at all times
after ninety (90) days after any registration statement covering a public
offering of securities of the Company under the Securities Act shall have become
effective, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each Shareholder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports as such Shareholder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such
Shareholder to sell any Restricted Stock without registration.
5.9 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Corporation
to register securities granted the Shareholders under Section 5 hereof may be
assigned to a transferee or assignee in connection with any transfer or
assignment of Restricted Stock provided that: (i) such transfer may otherwise be
effected in accordance with applicable securities laws, and (ii) such assignee
or transferee acquires at least one-half of the shares of Restricted Stock
(appropriately adjusted for stock split or recapitalization) then held by such
Shareholder. Notwithstanding the foregoing, the rights to cause the Company to
register securities may be assigned to any shareholder, partner, or affiliate of
an Investor without compliance with item (ii) above, provided written notice
thereof is promptly given to the Company.
5.10 STANDOFF AGREEMENT. Each Shareholder agrees, so long as such
Shareholder holds at least five percent (5%) of the Company's outstanding voting
equity securities, in connection with the Company's initial public offering,
upon request of the Company or the underwriters managing any underwritten
offering of the Company's securities, not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Restricted
Stock (other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not to exceed ninety (90) days from the effective date of such
registration as may be requested by the underwriters; provided that the
officers, directors, and all five percent or greater shareholders of the Company
also agree to such restrictions.
25
<PAGE>
6. GENERAL PROVISIONS
6.1 TERM. This Agreement shall terminate and be of no force and effect,
unless extended as provided herein, upon the first to occur of (a) the passage
of twenty (20) years from the date of this Agreement, (b) the effective date of
a written agreement signed by all of the parties hereto providing for the
termination of this Agreement, or (c) the effective date of a Public Offering.
6.2 LEGEND. During the term of this Agreement, each certificate
representing the Shares shall bear the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the provisions
hereof and the applicable security laws (any such certificate not having such
legend shall be surrendered upon demand by the Company and so endorsed):
On the face of the certificate:
"TRANSFER OF THIS STOCK IS RESTRICTED IN ACCORDANCE WITH CONDITIONS PRINTED ON
THE REVERSE OF THIS CERTIFICATE."
On the reverse:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND
TRANSFERRABLE ONLY IN ACCORDANCE WITH THAT CERTAIN SHAREHOLDERS AGREEMENT BY AND
AMONG TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC. (THE "COMPANY") AND THE
STOCKHOLDERS THEREOF, DATED JUNE 2, 1993, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY IN CORAL SPRINGS, FLORIDA. NO TRANSFER OR PLEDGE
OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN ACCORDANCE WITH AND SUBJECT
TO THE PROVISIONS OF SAID AGREEMENT. BY ACCEPTANCE OF THIS CERTIFICATE, ANY
HOLDER, TRANSFEREE OR PLEDGEE HEREOF AGREES TO BE BOUND BY ALL OF THE PROVISIONS
OF SAID AGREEMENT."
"SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE
HOLDER FOR INVESTMENT PURPOSES ONLY AND NOT FOR RESALE, TRANSFER OR
DISTRIBUTION, HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF APPLICABLE STATE AND FEDERAL SECURITIES LAWS, AND MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO EFFECTIVE
REGISTRATION UNDER SUCH LAWS, OR IN TRANSACTIONS OTHERWISE IN COMPLIANCE WITH
SUCH LAWS, AND UPON EVIDENCE SATISFACTORY TO THE COMPANY OF COMPLIANCE WITH SUCH
LAWS, AS TO WHICH THE COMPANY MAY RELY UPON AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY."
Each Shareholder shall promptly surrender the certificates representing his/her
Shares to the Company so that the Company may affix the foregoing legends
thereto. A copy of this Agreement shall be kept on file in the principal office
of the Company in Coral Springs, Florida. Upon termination of all applicable
restrictions set forth herein and upon tender to the Company of the appropriate
stock certificates, the Company shall reissue to the holder of such stock
certificates new stock certificates which shall contain only the second
paragraph of the restrictive legend set forth above. The parties to this
Agreement intend that the legend conform to the applicable provisions of the
Uniform Commercial Code of Florida and the Florida Business Corporation Act.
This legend may be modified from time to time by the Board of Directors of the
Company to conform to such statutes or to this Agreement.
26
<PAGE>
6.3 EXTENSION OF TERM. This Agreement may be extended for additional ten
(10) year periods if all Shareholders bound by this Agreement at the time of the
extension so agree in writing.
6.4 CONTINUATION OF EMPLOYMENT. Nothing in this Agreement shall create an
obligation on the Company to continue the employment of a Shareholder with the
Company or any Affiliate of the Company.
6.5 SPECIFIC ENFORCEMENT. The Shareholders expressly agree that they will
be irreparably damaged if this Agreement is not specifically enforced. Upon a
breach or threatened breach of the terms, covenants and/or conditions of this
Agreement by any Shareholder, any other Shareholder shall, in addition to all
other remedies available with respect to such breach, be entitled to a temporary
or permanent injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions hereof.
6.6 NOTICES. All notices, requests, consents, and other communications
required or permitted hereunder shall be in writing and shall be effective when
delivered in person or one day after deposit with a nationally recognized
overnight delivery carrier properly addressed and prior to its deadline for
receipt of overnight packages, or five days after deposit in the U.S. Mails,
certified or registered mail, return receipt requested, postage prepaid, in each
case addressed as follows (or at such other address for the parties as shall be
specified by like notice):
(a) if to the Company:
Transeastern Properties of South Florida, Inc.
7522 Wiles Road
Suite 203
Coral Springs, Florida
Attn: President
with a copy (which shall not constitute notice) to:
Kinsey & Gleason
185 Northwest Spanish River Boulevard
Suite 100
Boca Raton, Florida 33431
Attn: John Kinsey, Esq.
(b) if to a Shareholder, to the Shareholder's address as
reflected in the stock records of the Company or as the Shareholders
shall designate to the Company in writing, with a copy (which shall
not constitute notice) to Powell, Goldstein, Frazer & Murphy,
Sixteenth Floor, 191 Peachtree Street, N.E., Atlanta, GA 30303,
Attn: Gerardo M. Balboni II, Esq.
27
<PAGE>
(c) if to an Investor, to the Investor's address as reflected
in the stock records of the Company or as the Investors shall
designate to the Company in writing, with a copy (which shall not
constitute notice) to Powell, Goldstein, Frazer & Murphy, Sixteenth
Floor, 191 Peachtree Street, N.E., Atlanta, GA 30303, Attn: Gerardo
M. Balboni II, Esq.
6.7 ASSIGNMENT. This Agreement shall not be assignable by any of the
parties hereto without the written consent of the other parties.
6.8 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Florida, irrespective of the
choice of law provisions thereof.
6.9 AMENDMENT. This Agreement may be amended, supplemented or interpreted
at any time, but only by a written instrument executed by all the parties
hereto.
6.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.11 ENTIRE AGREEMENT. This Agreement, together with other documents
delivered pursuant hereto or incorporated by reference herein, contain the
entire agreement between the parties hereto concerning the transactions
contemplated herein and supersede all prior agreements or understandings between
the parties hereto relating to the subject matter hereof. No oral
representation, agreement, or understanding made by any party hereto shall be
valid or binding upon such party or any other party hereto.
6.12 EFFECT OF OTHER LAWS AND AGREEMENTS. The rights and obligations of
the parties under this Agreement shall be subject to any restrictions on the
purchase of stock which may be imposed by the Florida Business Corporation Act
or any agreement now or hereafter entered into between the Company and any
financial institution with respect to loans or other financial accommodations
made to the Company. Nothing contained herein shall be deemed to limit the
obligations and duties imposed upon officers and directors in accordance with
state and federal laws.
6.13 FURTHER ASSURANCE. Each party hereto shall do and perform, or cause
to be done and performed, all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
any other party hereto may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.14 CAPTIONS AND SECTION HEADINGS. Except as used in Section 1, captions
and section headings used herein are for convenience only and are not a part of
this Agreement and shall not be used in construing it.
28
<PAGE>
6.15 WAIVER. Any waiver by any party hereto of any of his or its rights
hereunder shall be without prejudice of his or its future assertion of any such
rights, and any delay in exercising any rights shall not operate as a waiver
thereof.
6.16 SEVERABILITY OF PROVISIONS. If any one or more of the provisions of
this Agreement shall be determined to be invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provision of this
Agreement shall not be impaired in any way.
6.17 SPECIFIC PERFORMANCE. In any action or proceeding to specifically
enforce the provisions of this Agreement, any person (including the Company)
against whom such action or proceeding is brought hereby waives the claim or
defense therein that the plaintiff or claimant has an adequate remedy at law,
and such person shall not urge in any such action or proceeding the claim or
defense that such remedy at law exists. The provisions of this paragraph shall
not prevent any party from seeking a remedy at law in connection with any breach
of this Agreement.
6.18 SHAREHOLDER OBLIGATIONS. The obligations of the Shareholders
hereunder are several and not joint.
29
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date
and year first above written.
TRANSEASTERN PROPERTIES OF SOUTH
FLORIDA, INC.
By:
Name:
Title:
[CORPORATE SEAL]
Attest:
Secretary
INVESTORS:
MEZZONEN, S.A.
By: Patrick Savin, Chief Financial Officer
THE HANDLER FAMILY TRUST DTD 9/12/91
By: Richard Handler, Trustee
CHRISTOPHER ALLICK
ANDREW WHITTAKER
DAVID F. EISNER
DAVID J. LOSITO
By:
Kenneth Taratus, Attorney-in-Fact
under POA dated June 1, 1993
[SIGNATURES CONTINUED ON NEXT PAGE]
30
<PAGE>
SHAREHOLDERS:
SHARES OF
COMMON STOCK:
241,667 (SEAL)
Arthur J. Falcone
and
(SEAL)
Marcy Falcone
241,667 (SEAL)
Edward W. Falcone
and
(SEAL)
Diana Falcone
241,667 (SEAL)
Philip Cucci, Jr.
and
(SEAL)
Linda Cucci
31
CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
Dated: November 28, 1994 Copy No. ____
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
30,000 SHARES SERIES B REDEEMABLE PREFERRED STOCK
AND
WARRANTS EXERCISEABLE FOR 65,950 SHARES OF COMMON STOCK
This Confidential Private Placement Memorandum (the "Memorandum")
relates to an offering (the "Offering") of 30,000 shares of Series B Redeemable
Preferred Stock, par value $.01, (the "Series B Shares") of Transeastern
Properties of South Florida, Inc. ("Transeastern" or the "Company") and Warrants
(the "Warrants") exerciseable for 65,950 shares of Common Stock, par value $.01
(the "Warrant Shares"). The Series B Shares and the Warrants will be sold as
units ("Units"), with each Unit consisting of one Series B Share and one Warrant
exerciseable for 2.198 Warrant Shares. There is no minimum number of Units which
must be sold before the Company may accept subscriptions. All of the Units
offered hereby are being sold by the Company. There is no public market for the
Units, the Series B Shares, the Warrants, or the Warrant Shares, and no such
market is expected to develop following the Offering.
--------------------------
THE UNITS OFFERED HEREBY ARE SPECULATIVE. INVESTMENT IN THE
UNITS INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR
INVESTORS WHO HAVE SUBSTANTIAL NET WORTH AND LIQUIDITY. SEE
"RISK FACTORS AND SPECIAL CONSIDERATIONS." INVESTORS MUST BE
PREPARED TO BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR AN
INDEFINITE PERIOD AND BE ABLE TO WITHSTAND A TOTAL LOSS OF
THEIR INVESTMENT. THE OFFERING IS MADE ONLY TO CERTAIN
QUALIFIED INVESTORS. SEE "INVESTOR SUITABILITY REQUIREMENTS."
IN ADDITION, THE UNITS ARE SUBJECT TO RESALE RESTRICTIONS. SEE
"RISK FACTORS AND SPECIAL CONSIDERATIONS."
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSIONER OF ANY STATE NOR HAS THE COMMISSION OR ANY STATE
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PRIVATE PLACEMENT
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION.
<TABLE>
<CAPTION>
Offering Selling
Price(1) Commission(2) Proceeds to Company(3)
------------------------- -------------- ------------------- -----------------------------
<S> <C> <C> <C>
Per Unit $100.00 $ -0- $100.00
------------------------- -------------- ------------------- -----------------------------
Total Offering $3,000,000 $ -0- $ 3,000,000
------------------------- -------------- ------------------- -----------------------------
</TABLE>
(1) The minimum investment per investor is $25,000 unless such minimum is
waived by the Company. The purchase price must be paid in full in cash
at the time of subscription.
(2) The Units are being offered by the executive officers and directors of
the Company without any commissions or other remuneration payable in
connection with the Offering.
(3) Before deducting expenses of the Offering, estimated at
$50,000 payable by the Company.
-1-
<PAGE>
NO OFFERING LITERATURE OR ADVERTISING IN WHATEVER FORM MAY BE
EMPLOYED IN THE OFFERING OF THE UNITS EXCEPT FOR THIS
MEMORANDUM. NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE UNITS EXCEPT THE
REPRESENTATIONS CONTAINED HEREIN. ANY REPRESENTATION OTHER
THAN THOSE SET FORTH IN THIS MEMORANDUM, AND ANY INFORMATION
OTHER THAN THAT CONTAINED IN DOCUMENTS AND RECORDS FURNISHED
BY THE COMPANY UPON REQUEST, MUST NOT BE RELIED UPON. THE
INFORMATION IN THIS MEMORANDUM SUPERSEDES ALL OTHER
INFORMATION OR REPRESENTATIONS, IF ANY, PREVIOUSLY GIVEN OR
MADE IN CONNECTION WITH THIS OFFERING. NEITHER THE DELIVERY OF
THIS MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE MATTERS SET FORTH HEREIN SINCE THE DATE OF THIS
MEMORANDUM.
SALES MAY BE MADE ONLY TO PERSONS DEEMED SUITABLE FOR AN
INVESTMENT IN THE COMPANY UNDER THE CRITERIA SET FORTH IN THIS
MEMORANDUM. THE COMPANY RESERVES THE RIGHT, NOTWITHSTANDING
ANY SUCH OFFER, TO WITHDRAW OR MODIFY THIS OFFERING AND TO
REJECT ANY SUBSCRIPTION FOR UNITS IN WHOLE OR IN PART. THIS
MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE
OF THE UNITS BY ANY PERSON IN ANY STATE IN WHICH IT IS
UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION, OR
SALE.
THE UNITS ARE OFFERED SUBJECT TO PRIOR SALE, APPROVAL OF
COUNSEL, THE RIGHT TO TERMINATE THE OFFER WITHOUT PRIOR NOTICE
OR TO REJECT ANY SUBSCRIPTION, AND CERTAIN OTHER CONDITIONS.
EACH INVESTOR MUST RELY ON THE INVESTOR'S OWN EVALUATION OF THE COMPANY
AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED,
IN MAKING AN INVESTMENT DECISION WITH RESPECT TO THE UNITS.
--------------------
CONFIDENTIAL INFORMATION
THE INFORMATION CONTAINED IN THIS MEMORANDUM IS CONFIDENTIAL
AND PROPRIETARY TO THE COMPANY AND IS BEING SUBMITTED TO
PROSPECTIVE INVESTORS SOLELY FOR SUCH INVESTORS' CONFIDENTIAL
USE WITH THE EXPRESS UNDERSTANDING THAT, WITHOUT THE PRIOR
EXPRESS PERMISSION OF THE COMPANY, SUCH PROSPECTIVE INVESTORS
WILL NOT RELEASE THIS DOCUMENT OR DISCUSS THE INFORMATION
CONTAINED HEREIN OR MAKE REPRODUCTIONS OF OR USE THE
MEMORANDUM FOR ANY PURPOSE OTHER THAN EVALUATING A POTENTIAL
INVESTMENT IN THE UNITS OF THE COMPANY. PROSPECTIVE INVESTORS
SHALL CAUSE THEIR ADVISORS (IF ANY) TO MAINTAIN THE
CONFIDENTIALITY OF THE INFORMATION CONTAINED HEREIN.
A PROSPECTIVE INVESTOR, BY ACCEPTING DELIVERY OF THIS
MEMORANDUM, AGREES PROMPTLY TO RETURN TO THE PLACEMENT AGENTS
OR THE COMPANY THIS MEMORANDUM AND ANY OTHER DOCUMENTS OR
INFORMATION FURNISHED IF THE PROSPECTIVE INVESTOR ELECTS NOT
TO PURCHASE ANY OF THE UNITS OFFERED HEREBY.
--------------------
RIGHT TO INCREASE THE OFFERING
THE COMPANY RESERVES THE RIGHT TO INCREASE THE NUMBER OF
SHARES OF SERIES B REDEEMABLE PREFERRED STOCK AND WARRANT
SHARES OFFERED HEREBY BY 10,000 AND 21,983, RESPECTIVELY, AT
ANY TIME PRIOR TO MARCH 30, 1995. IF THE OFFERING IS SO
EXTENDED AND THE ADDITIONAL UNITS SOLD, EQUITABLE ADJUSTMENTS
WILL BE MADE TO THE NUMBER OF WARRANT SHARES ISSUABLE UPON
EXERCISE OF THE WARRANTS TO PREVENT ANY DILUTION TO THE
HOLDERS OF THE UNITS PURCHASED FROM THE PERCENTAGES REFLECTED
IN THIS MEMORANDUM.
-2-
<PAGE>
INFORMATION FOR RESIDENTS OF CERTAIN STATES
FOR RESIDENTS OF ALL STATES/GENERIC:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES LAWS
OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE
ON EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT
AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTION ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES, PASSED UPON OR ENDORSED THE MERITS OF
THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE MEMORANDUM.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FOR CALIFORNIA RESIDENTS:
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THESE
OFFERING DOCUMENTS HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF
ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH
QUALIFICATION OR OBTAINING AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. THE RIGHTS OF ALL PARTIES TO THIS
TRANSACTION ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION
BEING OBTAINED OR UPON AN EXEMPTION FROM SUCH QUALIFICATION
REQUIREMENTS.
FOR DELAWARE RESIDENTS:
A PURCHASER OF THE SECURITIES OFFERED HEREIN MUST BEAR THE
ECONOMIC RISK OF THE INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME BECAUSE THE SECURITIES HAVE NOT BEEN REGISTERED UNDER
APPLICABLE SECURITIES LAWS, INCLUDING THOSE OF DELAWARE, AND
THEREFORE CANNOT BE RESOLD UNLESS THEY ARE SUBSEQUENTLY
REGISTERED OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. ANY
ACTION CONTRARY TO THESE RESTRICTIONS IS UNLAWFUL.
FOR FLORIDA RESIDENTS:
THE UNITS HAVE NOT BEEN REGISTERED UNDER THE FLORIDA
SECURITIES AND INVESTOR PROTECTION ACT AND ARE BEING SOLD IN
RELIANCE UPON AN EXEMPTION CONTAINED IN SECTION 517.061(11)(9)
THEREOF. THE UNITS MAY NOT BE RE-OFFERED FOR SALE OR RESOLD IN
THE STATE OF FLORIDA UNLESS THE UNITS ARE REGISTERED OR THE
TRANSACTION IS EXEMPT UNDER SAID ACT. ANY SALE MADE PURSUANT
TO SUCH SUBSECTION IS VOIDABLE AT THE OPTION OF THE PURCHASER
WITHIN THREE DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS
MADE BY THE PURCHASER TO THE ISSUER OR ITS AGENT, OR WITHIN
THREE DAYS AFTER THE AVAILABILITY OF THE PRIVILEGE IS
COMMUNICATED TO THE PURCHASER, WHICHEVER OCCURS LATER.
FOR NEW YORK RESIDENTS:
THESE OFFERING DOCUMENTS HAVE NOT BEEN REVIEWED BY THE
ATTORNEY GENERAL PRIOR TO THEIR ISSUANCE AND USE. THE ATTORNEY
GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THESE OFFERING DOCUMENTS DO NOT CONTAIN AN UNTRUE STATEMENT OF
A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO
MAKE THE STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER
WHICH THEY ARE MADE, NOT MISLEADING. IT CONTAINS A FAIR
SUMMARY OF THE MATERIAL TERMS OF DOCUMENTS PURPORTED TO BE
SUMMARIZED HEREIN.
-3-
<PAGE>
TABLE OF CONTENTS
Page
Summary of the Offering......................................... 5
Investor Suitability Requirements............................... 9
Risk Factors and Special Considerations......................... 10
Terms of the Offering........................................... 14
Capitalization.................................................. 15
Use of Proceeds................................................. 16
Dividend Policy................................................. 16
Business........................................................ 16
Management...................................................... 24
Principal Securityholders....................................... 26
Description of Outstanding Securities........................... 28
Independent Auditors............................................ 29
Additional Information.......................................... 30
TABLE OF EXHIBITS
Exhibit A Financial Statements
1. Unaudited Interim Financial Statements
Consolidated Balance Sheet dated September 30, 1994
Consolidated Statement of Operations for 3 months
ended September 30, 1994
2. Audited Financial Statements dated June 30, 1994
Report of KPMG Peat Marwick, Independent Accountants
Consolidated Balance Sheets as of June 30, 1994 and 1993
Consolidated Statements of Operations, Shareholders'
Equity, and Cash Flows for the period from July 1, 1993
to June 30, 1994 and July 1, 1992 to June 30, 1993
Notes to Financial Statements
Exhibit B Projections
Assumptions
Projected Balance Sheets as of June 30, 1995-1996
Projected Statements of Operations and Cash Flows for the
fiscal years ending June 30, 1995-1996
Notes to Projections
Exhibit C Form of Series B Redeemable Preferred Stock and
Warrant Purchase Agreement
Exhibit D Form of Amended and Restated Articles of Incorporation
Exhibit E Form of Warrant
Exhibit F Promotional Materials
-4-
<PAGE>
SUMMARY OF THE OFFERING
The following summary should be read in conjunction with, and is
qualified in its entirety by, the more detailed information and financial
statements appearing elsewhere in this Memorandum.
THE COMPANY
Transeastern Properties ("Transeastern" or "the Company") is a builder
of single family homes in Broward County, Florida, part of the expanding
Southeast Florida market. The Company builds custom homes as a preferred builder
for developers of master planned communities, acquires developed land parcels,
and markets lots and/or homes with lots. After experiencing success as a custom
homebuilder, the Company extended it business focus to the acquisition of unique
developed parcels of land within master planned communities, which it then
markets to home buyers, thus controlling the marketing, financing, and
construction phases of home-building. Transeastern believes that by following
this strategy, it can maximize the margins in its business, while reducing risks
common to home-building.
Transeastern has built an image in its market as a quality homebuilder
that is more service oriented than national homebuilders. The Company believes
it is one of the most recognized builders in the market, and is able to leverage
off its reputation to generate more customer interest. Due to its reputation and
relationships, the Company has been able to acquire very attractive land parcels
from community developers at preferential prices, and believes that it will be
able to do so in the future.
The principal office of the Company is located 3300 University Drive,
Coral Springs, Florida 33065. The Company's telephone number is (305) 346-9700.
THE OFFERING
The Company is offering 30,000 Units each consisting of one share of
Series B Redeemable Preferred Stock and one Warrant exerciseable for 2.198
shares of Common Stock. The purchase price per Unit is $100.00. The minimum
purchase per investor is $25,000; however, the Company reserves the right to
accept purchases of a lesser amount. Sales of the Units will be made primarily
to accredited investors, although the Company reserves the right to sell the
Units to a limited number of non-accredited investors. See "Investor Suitability
Requirements." The Company reserves the right to reject any subscription in
whole or in part in its sole discretion.
THE RECAPITALIZATION
The net proceeds of the Offering together with corporate borrowings of
$2,000,000 from NationsBank of Florida, N.A., will be used to redeem $2,500,000
in principal amount of the Company's Amended and Restated Senior Subordinated
Project Acquisition Notes due 1998, $2,963,084 in principal amount of the
Company's Senior Subordinated Project Financing Notes due 1998 (collectively the
"Notes"), and 21,358 shares of Series A Redeemable Preferred Stock par value
$.01 ("Series A Shares"), which are redeemable by the Company at $2,135,800. The
$5,000,000 redemption price of the Notes and Series A Shares represents a
discount of approximately 34% over the current outstanding principal balance of
the Notes and the current redemption price of the Series A Shares.
-5-
<PAGE>
OUTSTANDING EQUITY SECURITIES
On November 28, 1994, as adjusted for the sale of the Units offered
hereby, the redemption of the Notes and Series A Shares, and the exercise of the
Warrants issued as a part of the Units, and the exercise of all other
outstanding warrants to purchase Common Stock, the Company's outstanding equity
on a fully diluted basis would have been:
<TABLE>
<CAPTION>
Existing Securityholders Investors in this Offering (2)
------------------------ ------------------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Series A Shares(1) 2,036 100% 0 0%
Series B Shares 0 0% 30,000 100%
Common Stock(3) 814,549 100% 880,499 100%
</TABLE>
- ----------------
(1) As adjusted to reflect the Recapitalization.
(2) Assumes that no current investor purchases Units in the Offering.
(3) Includes 725,001 outstanding shares of Common Stock and assumes the
exercise of outstanding warrants to purchase 89,548 shares of Common
Stock, and 155,498 shares of Common Stock as adjusted.
DESCRIPTION OF SERIES B SHARES
Number: 30,000 shares of Series B Redeemable Preferred
Stock
Issue price: $100.00 per share
Liquidation preference: $100.00 per share plus accrued and unpaid dividends
Dividends: 12% per annum, paid quarterly each January 1,
April 1, July 1, and October 1, subject to
dividend preference on Series A Preferred. For
the first five Quarterly Dividend Payment
Dates, at the option of the Company, dividends
may be paid in additional shares of Series B
Redeemable Preferred Stock.
Maturity: 9 years (December 31, 2003)
Mandatory redemption: Upon closing of a public offering
of the Company's Common Stock in which the
proceeds to the Company are not less than
$10,000,000.
Optional redemption: The Company may redeem the shares
of Series B Redeemable Preferred Stock at any
time upon payment of $100 per share plus
accrued and unpaid dividends.
-6-
<PAGE>
Voting: Except as otherwise provided by law, holders
of Series B Redeemable Preferred Stock vote
together with holders of Common Stock and
Series A Preferred Stock, as a single class on
all matters, except for the election of
directors. For the election of Directors
holders of Series B Redeemable Preferred Stock
vote together with holders of Series A
Redeemable Preferred Stock as a single class
for one (1) director on a four person Board of
Directors.
DESCRIPTION OF WARRANTS
Number: Warrants exerciseable for 65,950 shares of
Common Stock. One warrant exerciseable for
2.195 shares of Common Stock for each share of
Series B Preferred Stock purchased.
Exercise price: $.01 per share of Common Stock
Term: The Warrants may be exercised at any time or
from time to time prior to December 31, 2003.
Anti-dilution: The number of shares of Common Stock issuable
upon exercise of the warrants is subject to
adjustment for certain issuances of common
stock.
Registration rights: The Common Stock issuable upon
exercise of the Warrants are entitled to piggy
back registration rights.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Units will be used to effect the Recapitalization. See "Use of Proceeds."
HOW TO SUBSCRIBE
Investors desiring to subscribe for Units must deliver to the Company,
an executed signature page to the Series B Redeemable Preferred Stock and
Warrant Purchase Agreement, in the form attached as Exhibit C to this
Memorandum, and a wire transfer to an account designated by the Company in an
amount equal to $100.00 multiplied by the number of Units subscribed. Unless
waived by the Company, the minimum purchase is $25,000. The Units should be
considered as speculative, and are a suitable investment only for investors who
can afford a total loss of their investment. See "Risk Factors" and "Terms of
the Offering."
-7-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY FINANCIAL INFORMATION
(in thousands)
YEAR ENDED JUNE 30, THREE MONTHS ENDED
------------------- ------------------
1993 1994 SEPTEMBER 30, 1994
---- ---- ------------------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenue $ 9,891 $ 22,647 $ 6,484
Gross profit 854 2,980 994
Operating income (loss) (102) 1,577 275
Net income (loss) (102) 1,084 189
OPERATING DATA:
Units:
New contracts, net of cancellations(1) 47 169 79
Closings(1) 38 74 27
Backlog at end of period 46 141 193
Aggregate sales value of homes in
backlog at end of period $ 11,874 $ 38,181 $47,758
Average sale price per home closed $ 257 $ 260 $240
Gross profit as a percentage of
total revenue 8.6% 13.2% 15.3%
General and administrative expense
as a percentage of total revenue 6.5% 3.5% 8.6%(2)
</TABLE>
- ---------------------
(1) Excludes 24 homesites contracted for and closed in fiscal 1994
representing aggregate sales revenue of $3,162.
(2) General and Administrative expenses as a percentage of total revenues
are projected to be 3.8% for the fiscal year ending June 30, 1995. The
actual percentage for the first quarter was relatively high due to the
disproportionate volume of sales scheduled to close in the last six
months of the fiscal year.
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
(in thousands)
THREE MONTHS ENDED
YEAR ENDED JUNE 30 SEPTEMBER 30, 1994
------------------ ------------------
1993 1994 ACTUAL ADJUSTED
---- ---- ------ --------
<S> <C> <C> <C> <C>
Cash $ 819 $ 470 $ 158 $ 158
Inventory 5,844 23,711 25,030 25,030
Total assets 8,761 28,782 28,793 28,793
Senior subordinated notes 0 5,550 5,550 87
Mortgages, construction and other
loans payable 5,675 16,988 16,362 18,362
Total debt 5,675 22,538 21,912 18,449
Invested capital 2,007 2,213 2,213 5,450
Stockholders' equity 1,863 2,850 2,985 6,222
</TABLE>
-8-
<PAGE>
INVESTOR SUITABILITY REQUIREMENTS
This Offering is made only to persons who are "accredited investors"
(as described below) in reliance upon an exemption from registration under the
Securities Act of 1933 (the "Act").
The suitability standards discussed below represent minimum suitability
standards for prospective investors. The satisfaction of such standards by a
prospective investor does not necessarily mean that the securities are a
suitable investment for such prospective investor. The nature and stage of
development of the Company's business, together with the lack of a market for
the Units, make the purchase of Units suitable only for investors who have
adequate financial resources and who can afford the total loss of their
investment. Prospective investors are encouraged to consult their financial
advisors to determine whether an investment in the Units is appropriate. The
Company may reject subscriptions, in whole or in part, in its absolute
discretion.
GENERAL
The Company will require each investor to represent in writing, among
other things, (i) that the investor is acquiring the Units for the investor's
own account, for investment only and not with a view toward the resale or
distribution thereof, and that the investor is aware that the Units, the Series
B Shares, the Warrants, and the Warrant Shares have not been registered under
the Act and that their transfer is restricted by the Act, the absence of a
market for the Units, the Series B Shares, the Warrants, and the Warrant Shares,
and in the case of United States investors, by applicable state securities laws;
and (ii) the investor is an "accredited investor" as defined below.
ACCREDITED INVESTORS
An "accredited investor" (as such term is used in Regulation D under
the Act) is any person described by any of the following categories at the time
of the sale of the Series B Shares to that person:
1. a bank as defined in Section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined
in Section 3(a)(5)(A) of the Act whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to Section 15 of the Securities Exchange
Act of 1934; an insurance company as defined in Section 2(13)
of the Act; an investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that act; a Small
Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions, or any
agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; or an employee
benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, if the investment
decision is made by a plan fiduciary, as defined in Section
3(21) of such act, which is either a bank, savings and loan
association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self directed plan, with
investment decisions made solely by persons that are
accredited investors;
-9-
<PAGE>
2. a private business development company, as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
3. an organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess
of $5,000,000;
4. a director or executive officer of the Company;
5. a natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of purchase
exceeds $1,000,000;
6. a natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse of $300,000 in each of those years
and has a reasonable expectation of reaching the same income
level in the current year;
7. a trust with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the securities offered,
whose purchase is directed by a person who has such knowledge
and experience in financial and business matters that he or
she is capable of evaluating the merits and risks of the
prospective investment; or
8. an entity in which all the equity owners are accredited
investors.
As used in this Memorandum, the term "net worth" means the excess of
total assets over total liabilities. In computing net worth for the purpose of
(5), the principal residence of the investor must be valued at cost, including
cost of improvements, or at recently appraised value by an institutional lender
making a secured loan, net of encumbrances. In determining income for purposes
of (6) above, an investor should add to the investor's adjusted gross income for
federal income tax purposes any amounts attributable to tax exempt income
received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to an IRA or Keogh retirement
plan, alimony payments, and any amount by which income from long-term capital
gains has been reduced in arriving at adjusted gross income.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Investment in the Units involves a high degree of risk and should be
regarded as speculative. As a result, the purchase of Units should be considered
only by persons who can reasonably afford a loss of their entire investment.
Prospective investors should carefully consider, in addition to the matters set
forth elsewhere in this Memorandum, the following factors relating to the
business of the Company, the Warrants and the Offering:
HOMEBUILDING INDUSTRY MARKET CONDITIONS. The homebuilding industry is
cyclical and is significantly affected by changes in national and local economic
and other conditions, such as employment levels, availability of financing,
interest rates, consumer confidence, and housing demand. The risks inherent to
homebuilders in purchasing and developing land increase as consumer demand for
housing decreases. Because of the long-term financial commitment involved in
purchasing a home, general economic uncertainties tend to result in more caution
-10-
<PAGE>
on the part of home buyers, which caution tends to result in fewer home
purchases. Such uncertainties could adversely affect the performance of the
Company. In addition, homebuilders are subject to various risks, many of which
are outside the control of the homebuilder, including conditions of supply and
demand in local markets, weather conditions, and natural disasters, delays in
construction schedules, cost overruns, changes in government regulation,
increases in real estate taxes, and other local government fees and availability
and cost of land, materials, and labor. Although the principal raw materials
used in the homebuilding industry generally are available from a variety of
sources, such materials are subject to periodic price fluctuations. For example,
homebuilders nationwide have recently experienced significant volatility in the
cost of lumber. There can be no assurance that the occurrence of any of the
foregoing will not have a material adverse effect on the Company.
INTEREST RATES; MORTGAGE FINANCING. Virtually all purchasers of the
Company's homes finance their acquisitions through third-party lenders providing
mortgage financing. In general, housing demand is adversely affected by
increases in interest rates, unavailability of mortgage financing, increasing
housing costs, and unemployment. If mortgage interest rates increase and the
ability of prospective buyers to finance home purchases is adversely affected,
the Company's sales, gross margins and net income and the market price of the
Common Stock may be adversely impacted. The Company's homebuilding activities
are also dependent upon the availability and cost of mortgage financing for
buyers of homes owned by potential customers so those customers ("move-up
buyers") can sell their homes and purchase a home from the Company. In addition,
the Company believes that the availability of Federal Housing Administration
("FHA") and Veterans Administration ("VA") mortgage financing is an important
factor in marketing many of its homes. Any limitations or restrictions on the
availability of such financing could adversely affect the Company's sales.
Furthermore, changes in Federal income tax laws may affect demand for new homes.
Recently, proposals have been publicly discussed to eliminate or limit the
deductibility of mortgage interest for Federal income tax purposes and to
eliminate or limit tax-free rollover treatment provided under current law where
proceeds of the sale of a principal residence are reinvested in a new principal
residence. Enactment of such proposals may have an adverse effect on the
homebuilding industry in general, and demand for the Company's products in
particular. No prediction can be made whether any such proposals will be enacted
and, if enacted, the particular form such laws would take.
VARIABILITY OF RESULTS. Although the Company had net income for the
fiscal year ended June 30, 1994, and the three months ended September 30, 1994,
there can be no assurance that the Company's profitability will continue on a
quarterly or annual basis. The Company historically has experienced, and in the
future expects to continue to experience, variability in sales and net income on
a quarterly basis. Factors expected to contribute to this variability include,
among others, (i) the timing of home closings and land sales; (ii) the Company's
ability to continue to acquire additional land or options thereon on acceptable
terms; (iii) the condition of the real estate market and the general economy in
South Florida; (iv) the cyclical nature of the homebuilding industry and changes
in prevailing interest rates and the availability of mortgage financing; and (v)
costs of material and labor and delays in construction schedules. The Company's
historical financial performance is not necessarily a meaningful indicator of
future results and, in general. The Company expects its financial results to
vary from project to project and from quarter to quarter.
COMPETITION. The homebuilding industry is highly competitive and
fragmented. Homebuilders compete for desirable properties, financing, raw
materials, and skilled labor. The Company competes for residential sales with
other developers, individual resales of existing homes, available rental
housing, and, to a lesser extent, resales of condominiums. The Company's
competitors include large homebuilding companies, some of which have greater
financial resources than the Company, and smaller homebuilders who may have
lower costs.
-11-
<PAGE>
FINANCING; LEVERAGE. The homebuilding industry is capital intensive and
requires significant up-front expenditures to acquire land and begin
development. Accordingly, the Company incurs substantial indebtedness to finance
its homebuilding activities. The Company may be required to seek additional
capital in the form of equity or debt financing from a variety of potential
sources, including additional bank financing and/or securities offerings. The
amount and types of indebtedness which the Company may incur is limited by the
terms of certain senior subordinated Notes issued by the Company. See
"Description of Securities." The availability of borrowed funds, especially for
land acquisition and construction financing, has been greatly reduced
nationally, and the lending community is requiring increased amounts of equity
to be invested in a project by borrowers in connection with both new loans and
the extension of existing loans. If the Company is not successful in obtaining
sufficient capital to fund its planned capital and other expenditures, new
projects planned or begun may be significantly delayed or abandoned. Any such
delay or abandonment could result in a reduction in sales and may adversely
affect the Company's future results of operations.
NATURAL DISASTERS; AVAILABILITY OF HOMEOWNERS' INSURANCE. The climate
and geology of South Florida present risks of natural disasters. To the extent
that hurricanes, severe storms, floods, or other natural disasters or similar
events occur, the homebuilding industry in general, and the Company's business
in particular, may be adversely affected. Certain insurance companies doing
business in Florida have restricted, curtailed or suspended the issuance of
homeowners' insurance policies on single family and multi-family homes. This has
had the effect of both reducing the availability of hurricane and other types of
natural disaster insurance and, in general, increasing the cost of such
insurance to prospective purchasers of homes in Florida. Mortgage financing for
a new home is conditioned, among other things, on the availability of adequate
homeowners' insurance. There can be no assurance that homeowners' insurance will
be available or affordable to prospective purchasers of the Company's homes
offered for sale in Florida. Long-term restrictions on, or unavailability of,
homeowners' insurance in Florida could have an adverse effect on the
homebuilding industry in that market in general, and on the Company's business
within that market in particular.
GOVERNMENT REGULATIONS; ENVIRONMENTAL CONTROLS. The Company is subject
to local, state, and federal statutes and rules regulating certain developmental
matters, as well as building and site design. In addition, certain fees, some of
which may be substantial, may be imposed to defray the cost of providing certain
governmental services and improvements. The Company may be subject to additional
costs and delays or may be precluded entirely from building its projects because
of "no growth" or "slow growth" initiatives, building permit allocation
ordinances, building moratoriums or similar government regulations that could be
imposed in the future due to health, safety, welfare, or environmental concerns.
The Company must also obtain certain licenses, permits, and approvals from
certain government agencies for certain of its activities, the granting or
receipt of which are beyond the Company's control.
The Company and its competitors are subject to a variety of local,
state, and federal statutes, ordinances, rules and regulations concerning the
protection of health and the environment. The particular environmental laws
which apply to any given community vary greatly according to the community site,
the site's environmental conditions and the present and former use of the site.
Environmental laws may result in delays, may cause the Company to incur
substantial compliance and other costs and may also prohibit or severely
restrict development in certain environmentally sensitive area.
LIMITED OPERATING HISTORY. The Company has a limited operating history
upon which investors may base an evaluation of the Company's performance. The
Company must be evaluated in light of the expenses, delays, uncertainties, and
other difficulties frequently encountered by an unseasoned business enterprise.
No assurance can be given that the Company will achieve profitable operations in
the future.
-12-
<PAGE>
PROJECTIONS. The Projections of the Company included as Exhibit B to
this Memorandum are based upon assumptions which the Company believes to be
reasonable. Such assumptions may be incomplete or incorrect, and unanticipated
events and circumstances may occur. For these reasons, actual results achieved
during this period will vary from the Projections, and the variations may be
material and adverse. In addition, in preparing the Projections, the Company had
a limited operating history on which to base its revenue and expense
assumptions. As a result, the Projections are in large part based on assumptions
derived from management's experience, rather than on actual performance data of
the Company. The Company's independent accountants have not been engaged to
review the Projections, and therefore have not expressed any form of assurance
with respect to them.
CAPITAL REQUIREMENTS AND ADDITIONAL FINANCING. There is no minimum
number of Units which must be sold in the Offering before the Company may accept
subscriptions. The Company intends to accept subscriptions as they are tendered,
therefore there is no assurance that the Company will sell any minimum number of
Units or that the Company will obtain sufficient proceeds from this Offering to
complete the Recapitalization. The proceeds of this Offering, assuming all
Series B Shares offered are sold, are believed sufficient when combined with
$2,000,000 of corporate borrowings to complete the Recapitalization. The Company
is dependent on this Offering to provide the equity necessary to obtain the
corporate borrowings to complete the Recapitalization. The Company will require
additional financing in connection with its business activities. There can be no
assurance that such financing, if available, can be obtained when needed or on
terms favorable to the Company or the holders of the Units.
DEPENDENCE ON KEY MANAGEMENT. The development of the Company's business
and operations has been and will continue to be materially dependent upon the
active participation of a management team led by Arthur J. Falcone, President,
Edward W. Falcone, and Philip Cucci, Jr. The Company does not have employment
agreements with any of these individuals. The loss of the services of any of
these key executives, or other key employees of the Company, could have a
material adverse effect on the Company. The Company further believes that its
future success will also depend upon the Company's ability to attract and retain
qualified employees.
DETERMINATION OF OFFERING PRICE. The offering price of the Units has
been determined arbitrarily by the Company and should not be regarded as an
indication of the fair market value or intrinsic value of the Company's capital
stock.
LIQUIDITY. There is no public market for the Units and none is expected
to develop in the foreseeable future. The Units, the Series B Shares, the
Warrants, and the Warrant Shares issuable upon exercise of the Warrants will not
be registered under the Act in reliance upon exemptions from the registration
requirements of the Act. Investors will be required to make investment
representations agreeing to restrictions on transfer necessary to satisfy the
requirements of such exemptions, and the certificates evidencing the Series B
Shares, the Warrants, and the Warrant Shares will bear legends indicating they
are so restricted. Transfer of the Series B Shares, the Warrants, and the
Warrant Shares may also be restricted under the securities laws of certain other
jurisdictions. Accordingly, an investor may be unable to liquidate its
investment.
CONTROL BY EXISTING SHAREHOLDERS. The Company's management will
continue to own a majority of the Company's Common Stock (on a fully diluted
basis) and will be able to elect a majority of the directors of the Company
after the sale of the Units offered hereby, until a Two Dividend Default. See
"Principal Shareholders" and "Management."
-13-
<PAGE>
TERMS OF THE OFFERING
THE OFFERING
The Company is offering 30,000 Units, each Unit consisting of one
Series B Share and one Warrant exerciseable for 2.198 Warrant Shares. The
purchase price for each Unit is $100.00. The minimum investment by each
Purchaser is $25,000, although the Company reserves the right to accept
purchases of lesser amounts. No minimum amount of gross proceeds from the
Offering has been established as a condition precedent to the closing of this
Offering, and the Company intends to accept subscriptions as they are tendered.
Sales of Units will be made only to investors who satisfy the
requirements set forth under "Investor Suitability Requirements." The Offering
will be made pursuant to the exemption from registration provided by Section
4(2) of the Act and Regulation D promulgated thereunder, and exemptions
available under applicable state securities laws. The Company reserves the right
to reject any subscription in whole or in part.
SUBSCRIPTION PROCEDURE
Those persons desiring to purchase Units will enter into a Series B
Redeemable Preferred Stock and Warrant Purchase Agreement in the form of Exhibit
C (the "Purchase Agreement"). The Purchase Agreement will contain, among other
things, certain representations and warranties by the investors, including
investment representations required by the Act and applicable state securities
laws.
The Company will pay all expenses incurred by the Company in the
Offering. Any investor desiring to engage counsel or advisers will be
responsible for the fees and expenses of such representation.
PLAN OF PRIVATE PLACEMENT
The Units will be offered through the executive officers and directors
of the Company without commission or other remuneration.
-14-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1994, as adjusted to reflect the sale of the Units offered hereby
and the Recapitalization, and the application of the anticipated net proceeds to
the Company after deduction of estimated expenses of the Offering of $50,000.
September 30, 1994
-------------------------------
(000's omitted)
As Adjusted
Actual For The Offering
------ ----------------
Short term debt $16,362 $18,362(1)
Long term debt 5,550 87
Total debt 21,912 18,449
Shareholders' equity:
Common Stock, $.01 par
value, 5,000,000 shares
authorized, 725,001
issued and outstanding;
Series A Shares, $.01 par
value, 29,000 authorized,
23,394 issued and
outstanding, 2,036 issued
and outstanding as
adjusted; Series B
Shares, $.01 par value,
36,500 authorized, none
issued and outstanding,
30,000 issued and
outstanding, as adjusted (1) 2,213 5,450
Retained earnings 772 772
Total shareholders' equity 2,985 6,222
(1) Includes corporate borrowings of $2,000,000 from NationsBank of
Florida, N.A., incurred as a part of the Recapitalization.
-15-
<PAGE>
USE OF PROCEEDS
The proceeds to be received by the Company from the sale of the Series
B Shares are estimated to be $3,000,000 before deduction of estimated expenses
of the Offering payable by the Company aggregating $50,000.
The net proceeds of the Offering together with corporate borrowings of
$2,000,000 from NationsBank of Florida, N.A., will be used to redeem $2,500,000
in principal amount of the Company's Amended and Restated Senior Subordinated
Project Acquisition Notes due 1998, $2,963,084 in principal amount of the
Company's Senior Subordinated Project Financing Notes due 1998 (collectively the
"Notes"), and 21,358 shares of Series A Redeemable Preferred Stock par value
$.01 ("Series A Shares"), which are redeemable by the Company at $2,135,800. The
$5,000,000 redemption price of the Notes and Series A Shares represents a
discount of approximately 34% over the current outstanding principal balance of
the Notes and the current redemption price of the Series A Shares.
DIVIDEND POLICY
The Amended and Restated Articles of Incorporation of the Company
require the Company to pay quarterly dividends in the amount of $3.00 per Series
A Share and $3.00 per Series B Share. At the option of the Company, the dividend
on Series A Shares may be paid in additional shares Series A Shares until the
dividend payable on July 1, 1996. At the option of the Company, the dividend on
Series B Shares may be paid in additional shares Series B Shares until the
dividend payable on April 1, 1996. The Company has never paid a cash dividend on
any of its Common Stock and has no plans to pay cash dividends in the
foreseeable future. It is the present policy of the Company's Board of Directors
to retain any earnings for use in the Company's business.
BUSINESS
THE COMPANY
Transeastern is engaged in the design, construction and sale of single
family homes in South Florida. The Company has established itself as a preferred
builder in several master planned communities in Broward County, and is one of
the most recognized builders in the South Florida market. The homes built by
Transeastern cover most of the single family segments in Broward County, and
range in price from approximately $120,000 to as high as $1,200,000. These
include first-time buyer homes, move-up homes and custom homes, built primarily
for the white collar and professional home buyers in this rapidly growing,
service-based economy.
-16-
<PAGE>
Transeastern was founded by Art Falcone in 1984, who was later joined
by his business partner and brother Ed Falcone and Phil Cucci. The founders
recognized the opportunity that existed for a builder of high quality homes in
an affluent market and formed Transeastern to bring together their management
capabilities. To enter the market, the Company initially built speculative homes
to demonstrate its quality, service and value, the three most recognized
attributes of its homes. During this time the Company worked intensely to build
a reputation, and intentionally achieved only modest profits in return for the
goodwill it was building among customers. This strategy proved successful and
the Company achieved preferred builder status with both Coral Ridge Properties
("CRP") and Arvida, both developers of master communities in Broward County. CRP
is the developer of Coral Springs, Florida, a planned community which has been
in development for 25 years and will ultimately have 125,000 residents.
COMPANY STRATEGY
Having achieved success as a preferred builder, the Company determined
that it could more effectively grow and manage its operations through buying
developed parcels of land within master planned communities within Broward
County, and directly control all phases of selling and construction. Having
constructed and sold custom homes in several master-planned communities, the
Company is very familiar with market trends and the remaining developed pieces
of property in existence that could be used to exploit those trends.
Transeastern set out to identify and acquire "niche" unbuilt properties within
the custom home areas of master communities. Niche properties for Transeastern
are unique properties on water or a golf course, where a home can be built and
sold profitably, and provide better value to the buyer in relation to
surrounding area homes. The Company uses its contacts and relationships to
acquire those properties, typically at below market values. Based on its ability
in the past to source these transactions, and close them on a timely basis, the
Company believes that it will continue to find attractive property acquisition
opportunities.
After acquisition, Transeastern creates a perception among customers of
limited availability of a quality product. Having built a reputation for quality
as a preferred builder in Coral Springs, the Company pursues a strategy of
increasing the awareness of Transeastern and its communities through
advertisements in South Florida newspapers, billboards and promotional
activities. In addition to advertising, the Company immediately designs a
limited number of models and establishes a sales center on or near the property
with displays of home designs. This way, a substantial number of sales are made
even prior to the construction of a model row.
Transeastern's strategy of acquiring and building out niche properties
tends to mitigate many risks that are common in the home-building industry. The
Company has not pursued the pioneering of new projects in lesser developed
areas, nor does it intend to invest in large tracts of land on a speculative
basis. By acquiring only unique properties to be immediately built-out, the
Company believes its properties are more liquid. This is due to the number of
builders who need lots, but don't have the buying relationships that the Company
has, and cannot access the capital necessary to purchase the land. Other risk
reducing practices of the Company are:
* Concentrating projects only within the Company's sphere of influence.
The Company's management team is very involved and well connected with
the communities in which it selects projects.
* Constructing homes across most single family home segments. Instead of
concentrating in one area of home-building, the Company developed the
capability to profitably build in almost all segments. As the market
changes, Transeastern can adjust its planned product mix and take
advantage of shortages in various home segments.
-17-
<PAGE>
* Concentrating its projects with or adjacent to higher priced and more
desirable communities with existent amenities. This approach enhances
the perception of value and limited availability to the buyer.
* Owning a 5.1% share of related mortgage company, Builders Finance, Ltd.
The Company's involvement with Builders Finance, Ltd. allows it to
obtain mortgage approval quicker than with banks, as well as being able
to market loans with house packages, increasing the Company's product
and service offerings. This also allows the Company to minimize the
length of time between the signing of a contract and the beginning of
construction.
* Commencing construction of a home only after execution of a sales
contract by a customer and receipt of a sales deposit and mortgage
approval.
* Purchasing larger land parcels in stages through option agreements.
Transeastern prefers to control larger parcels under option agreements,
which allows it to purchase segments in stages and reduces the risk of
holding land on its balance sheet.
CONSTRUCTION AND PROJECT MANAGEMENT
Transeastern has developed systems which enable it to maximize its
margins on homes built and reduce the risk of cost overruns or unexpected
construction delays. In almost all cases, construction of a home is not began
until the customer's mortgage is committed, a contract is signed and the
customer's deposit has been received.
Typically a customer chooses a model, signs a contract, provides a cash
deposit and the planning and approval process begins. Plans are finalized,
permits requested, and firm proposals are obtained from subcontractors. No
construction begins until bids are finalized, all costs are known and fixed, and
mortgage approval has been obtained from a bank or mortgage company.
The Company has recently established a centralized purchase order
system which enables it to better control payments to subcontractors. Due to the
nature of the subcontracting business, errors in invoices or variances from
amounts agreed upon often occur. In order to eliminate payment errors, the
Company has implemented this system which requires all payments to be generated
from approved purchase orders to subcontractors. This system will also allow the
Company to direct material purchases by subcontractors to home-building supply
companies (Kohler, for example) who will provide rebates to the Company based on
annual purchase volumes.
FINANCING
The Company uses significant amounts of capital in the early to mid
stages of its projects. Typically, property must be acquired, ground
improvements such as roads and sewer may be built, sales centers and model homes
are built, and construction is started on a number of homes before the Company
receives significant cash flow from a project. Customers, upon signing a
contract, put down a deposit of approximately 10%, but most of the Company's
cash flow comes from closings when homes are completed.
In order to minimize its financing cost, the Company uses banks to
provide acquisition, development and construction loans at floating rates,
typically prime plus 1.5%. Banks ordinarily advance 75% of the cost of land and
75-100% of underground development costs. When construction begins, the Company
can also obtain funding for up to 80% of the projected appraisal value of the
homes it is building. Repayment terms on these bank loans are linked to
closings, and are accelerated toward earlier closings rather than being
-18-
<PAGE>
pro-rata. The Company has used NationsBank of Florida, N.A., as its primary
funding source, but maintains contacts with other institutions.
The Company has financed the remainder of its capital needs through
privately placed project specific financings with institutions and individuals.
MARKETING
Transeastern has become recognized in the South Florida market for
quality and service by providing superior service to its customers. The Company
reinforces its image through distinctive and quality advertising. Transeastern's
marketing and advertising, as well as how it handles its customers, are
coordinated to ensure that the image it projects through advertising is carried
through the working relationship with a home buyer. The Company believes that
repeat or referral business is essential to its long term success, and, in fact,
over 50% of the Company's customers come from referrals or prior relationships.
Competing national builders don't focus on long term relationships with
customers or the communities, and tend to promote homes based primarily on
price. Building a reputation for quality also requires a commitment to extensive
follow-up with customers, a practice which is uncommon to the average
home-building company. Transeastern maintains a relationship with its customers
even after final closing on a home. The Company delivers gifts to customers when
they move in and pursues extensive follow-up to ensure satisfaction.
Having achieved a reputation for quality, Transeastern maintains top of
mind awareness through advertising which projects quality of life rather than
just a home at a price. The Company uses newspaper, billboards on major
thoroughfares, radio, and corporate sponsorships to cover as much of the
potential buyer audience as possible. The selling process continues through the
customer's experience at the well merchandised sales centers where home designs
are presented and options are considered. The Company's design consultants are
well trained, and employ sophisticated technology such as C.A.D. systems to
assist customers in creating a more customized product.
CURRENT PROJECTS
The Company's current projects demonstrate its business strategy of
building-out niche properties.
The following chart summarizes the Company's existing projects and
provides the status of each as of September 30, 1994. A discussion of each
project follows the summary.
-19-
<PAGE>
<TABLE>
<CAPTION>
TOTAL NUMBER OF EXPECTED SELL
LOTS HOUSES/LOTS SOLD HOUSES/LOTS HOUSES/LOTS TO OUT/CLOSING DATE
PROJECT NAME CLOSED SELL
- --------------------- ------------------ ----------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Cooper City 37 37 37 0 Sept. 1994
- --------------------- ------------------ ----------------- ------------------ ---------------- ------------------
Cypress Head 91 47 28 44 Dec. 1995
Dec. 1996
- --------------------- ------------------ ----------------- ------------------ ---------------- ------------------
Cypress Cay 106 54 0 52 Sept. 1995
Dec. 1995
- --------------------- ------------------ ----------------- ------------------ ---------------- ------------------
Eagle Landing 55 7 0 48 May 1995
Nov. 1995
- --------------------- ------------------ ----------------- ------------------ ---------------- ------------------
Parkside at Spring 465 75 0 390 April 1997
Valley Oct. 1997
- --------------------- ------------------ ----------------- ------------------ ---------------- ------------------
Mariner's Cove 130 0 0 130 Aug. 1996
Feb. 1997
- --------------------- ------------------ ----------------- ------------------ ---------------- ------------------
</TABLE>
CYPRESS HEAD. In September 1993 Transeastern Properties acquired the
last remaining 130 acres of the estate community of Cypress Head, the first
master planned development in Parkland, Florida and one of Broward County's most
prestigious single-family communities. Cypress Head is an established
neighborhood with a wide array of recreational amenities including a lighted
tennis center, nature trails, volleyball and basketball courts, a junior soccer
field, two private clubhouses available for residents use and large community
pool with its own oversized sun deck and lounging areas. The community is
situated on 670 acres of towering pines and spectacular cypress trees, with a
70-acre man-made lake providing Cypress Head residents with fishing, sailing and
canoeing.
The property consists of lots ranging in size from approximately 29,000
square feet to 61,000 square feet and average 38,850 square feet each, or almost
one acre. Transeastern Properties intends to sell the remaining 44 developed
lots for prices ranging from $110,000 to $250,000 per lot, with an average
selling price of $137,500 per lot. The optional model homes offered have five
bedrooms, 3 garages and are primarily one story. Existing homes in the community
range in price from $400,000 to almost $1,000,000. Most homes over $500,000 are
custom homes up to 5,000 - 6,000 square feet.
CYPRESS CAY. Cypress Cay encompasses 24 acres of land adjacent to
Cypress Head Estates in Parkland. This land was acquired as part of the Cypress
Head parcel. Transeastern is the exclusive developer of this 106-lot executive
patio home community. Cypress Cay's amenities will include two tennis courts,
two community swimming centers, two sundecks, cabana houses and a private
entrance off Parkside Drive which will be equipped for a guard gate. Cypress Cay
is being developed in two phases with Phase I consisting of the first 65 lots of
which 80% have already been sold. During Phase II an additional 41 lots will be
developed and sold at prices slightly higher than Phase I lots.
Construction of the first three models is currently in progress. Lots
range in size between 50' x 110' and 50' x 130', and lot premiums range from
-20-
<PAGE>
$1,000 to $10,000. Cypress Cay features six home designs with one-and two-story
plans. The Cypress Cay homes will range from 1,863 to 2,960 square feet space
priced from $139,900 to $192,900.
EAGLE LANDING AT EAGLE TRACE. Eagle Trace is a country club community
which has a Tournament Players Course golf course and large recreation
facilities. Amenities include 24-hour security gated community, lush fairways,
breathtaking views, rolling greens, beautiful lakes and championship golf and
tennis facilities. The land that Transeastern had purchased is located inside
the golf course. Existing houses surrounding the golf course cost between
$500,000 to $800,000. Transeastern is offering 55 single-family home zero lots
from 50' x 120' in size with 69% lake or fairways views. The lot premiums range
is from $2,000 to $60,000. Eagle Trace features four model homes. Through
September 30, 1994, seven of the 55 homes had been sold. Prices start at
$170,000 for 4-5 bedroom homes.
PARKSIDE AT SPRING VALLEY. Through wholly owned subsidiary Transeastern
Pembroke Properties, Inc., Transeastern has formed a 50/50 joint venture with H.
A. Cumber, another established builder in Broward County, to acquire 98 acres in
the Spring Valley P.U.D. in Pembroke Pines, Florida. Transeastern and H. A.
Cumber will build 465 one- and two-story homes on this developed parcel of land.
Lot sizes range between 50' x 90' and 55' x 115' with lot premiums of $1,000 to
$19,500. Seventy-five of these lots, or l2%, have already been sold prior to the
construction of models. Phase I will consist of 232 fully developed (inclusive
of all infrastructure) and platted lots to be improved with single family
dwelling units. Phase II will consist of an additional 233 fully developed lots.
Buyers can choose between six model plans offering three and four bedroom
designs from 1,801 to 3,119 total square feet. The houses are priced from
$117,990 including a standard lot, up to $159,900 with lot premiums as high as
$19,500. Completion of models is planned for November, with the first homes
scheduled for delivery in February 1995.
MARINER'S COVE. Mariner's Cove ("The Cove") is a land parcel that was
acquired from Coral Ridge Properties in June of 1994. The Cove, a single family
home community, is located by the 120-acre Lake Coral Springs, across from the
upscale "Isles" neighborhood with million dollar homes and spectacular
entranceways. The Cove provides convenient access to the Sawgrass Expressway,
placing the residents within minutes of everything the Coral Springs area has to
offer, including excellent schools, golf courses, tennis clubs, shopping and
fine dining. On-site recreation includes a children's play lot, family picnic
area and a boat landing facility. Lake Coral Springs provides additional
recreational opportunities such as boating, canoeing and fishing.
Transeastern will develop the land. The development will encompass 130
single-family homes ranging in size from 2100 to 3000 square feet. The gated
community offers a collection of four new home designs featuring four and five
bedrooms ranging from $179,000 to $229,000, not including the lot premium which
can range up to $35,000 for houses with magnificent lake views.
PREFERRED BUILDER PROGRAMS.
In addition to its projects, the Company continues to build custom
homes in Coral Springs and Weston, Florida as a preferred builder. In these
preferred builder programs, the Company is one of a small member of builders
authorized by the Master Developer of the community to build homes. The
developer controls all the land under these programs, and Transeastern is
selected by the customer to build his/her home. Transeastern acquires the
customer selected lot from the developer after the customer signs a contract.
Then the Company works with the customer to refine the model plan, and add
whatever custom additions the buyer may desire. Transeastern expects that
approximately 40% of its 1995 fiscal year sales will come from the construction
and sale of custom homes.
-21-
<PAGE>
Transeastern has been very successful in the custom home business, due
to its willingness to build homes in accordance with individual specifications.
The Company's reputation for dealing with the customer from inception, selection
and to the finished product is exceptional mostly due to the efforts of the
Company's key personnel who have been trained not only by the building industry
but in many service industries. Transeastern encourages the home buyers to work
with the Company's design staff and the Company's field personnel to make the
buyers feel personally involved in all stages of construction. The high level of
service that the Company provides to its home buyers makes the buyers feel
comfortable and enables the customer to have a pleasant experience with their
home and with the Company. This enables the Company to have repeat business from
friends, relatives and business associates. Management believes that this
cooperation and flexibility distinguishes the Company from its competitors and
permits the Company to sell to home buyers who might not otherwise purchase a
standard model home.
While most design modifications are significant to home buyers, such
changes typically involve relatively minor adjustments to interior floor plans.
Consequently, the Company is able to maintain the efficiencies of a production
builder while delivering personalized homes to its customers.
The custom home business is generated mostly from two large
communities, Coral Springs/Parkland ("Coral Springs") and Weston, an Arvida
development. Coral Springs, developed by WCI Communities, a subsidiary of
Westinghouse Electric Company, is a 16,000 acre development which will
ultimately include 35,000 dwellings. 11,000 acres have been developed to date,
and completion of the remaining 5,000 acres will provide a stream of business to
Transeastern throughout the decade. Coral Springs is one of the fastest growing
cities in Florida, and is a "family" town with schools, park facilities and
other amenities. Weston is a 10,000-acre development in southwest Broward County
developed by Arvida Corporation. Located west of Fort Lauderdale on Arvida
Parkway, Weston is designed for a population of 50,000 residents by the year
2005. Schools, country clubs, shopping centers and houses of worship will be
built within the community, which is the site of the annual New Honda Classic
golf tournament.
THE SOUTH FLORIDA AND BROWARD COUNTY HOUSING MARKET.
To date, all of the Company's home-building activity has occurred in
Broward County, one of the three counties in southeast Florida. Large cities and
communities in Broward include Fort Lauderdale, Pembroke Pines, Coral Springs
and approximately 25 other incorporated communities. The county has experienced
consistent growth in population and jobs which has driven demand for new homes.
Since 1988, the annual home start rate has ranged from approximately 4,000 (4th
quarter, 1991) to 8,000 per year. Since early 1993, home starts have grown
steadily from approximately 5,000 per year to the current rate of 8,000. The
growth in Broward county can be attributed to many factors; however, the most
significant are:
* Robust growth in the service-based economy in Southeast Florida, which
includes Dade, Broward and Palm Beach counties.
* Hurricane Andrew accelerated the migration from Dade County to Broward
as homeowners who lost homes or sought better schools made the decision
to migrate.
* The completion of I-595, I-75 and the Sawgrass expressways, which
greatly increased access to the formerly undeveloped southwestern part
of the county and shortened travel time to Miami and Dade County.
Travel time to the Miami business district from southwest Broward is
now less than from many parts of western Dade County.
-22-
<PAGE>
* Southwest Broward was picked as the site for the proposed Blockbuster
Park, a $1.5 billion theme park, thus increasing the attractiveness of
the area.
The Company believes that new housing demand in Broward County will be
less cyclical than the rest of the U.S. in any future economic slowdown; this
was demonstrated in 1990 and 1991 when starts were reduced from 1988 and 1989
levels, but dropped less than 25%. See Exhibit B for a summary of recent Broward
County economic and housing activity. Also see Exhibit C for a recent news
article describing the growth in southwest Broward County.
While Broward County's growth is projected to be robust for the next 10
years, ultimately land inventory will become scarce and more development will
occur to the north in Palm Beach County. Since Dade County is mostly developed
and the Everglades National Park and the Atlantic Ocean bound Broward to the
west and east, future development can only occur north of Broward County. The
Company has developed relationships with several large landowners in Palm Beach
County and is positioning itself to acquire properties or enter into joint
ventures with landowners to develop attractive properties.
PROPERTIES
Transeastern's offices are located in a 4,000 square foot leased
facility on the ground floor of the largest office building in Coral Springs,
Florida. The lease expires March 1999, and grants the Company options to renew
the lease for a subsequent two-year term. The monthly rental escalates from $12
per square foot per year by $.50 per square foot per year. No additional
insurance or taxes are required on these facilities.
EMPLOYEES
As of September 30, 1994, the Company employed 42 persons on a
full-time basis and 9 independent sales agents. The Company seeks to establish a
culture among its employees that is characterized by teamwork, entrepreneurial
spirit, and a commitment to the goals of the Company. The Company encourages
this culture by offering a pleasant working environment and an opportunity for
advancement, by providing employees at all levels with an opportunity to make
creative suggestions for improvement of the Company's products and operations,
and by providing opportunities for stock ownership.
LITIGATION
There are no material pending legal proceedings by or against the
Company or, to its knowledge, against its officers and directors.
-23-
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
NAME AGE POSITION
Arthur J. Falcone 35 Director, President
Edward W. Falcone 41 Director, Executive Vice President
Philip Cucci, Jr. 35 Director, Vice President, Secretary
Christopher Allick 40 Director
As long as no Two-Dividend Default shall have occurred and be
continuing, the Amended and Restated Articles of Incorporation provide that the
holders of Series A Shares and Series B Shares voting together as a single class
have the right to elect one director to a four man Board of Directors and
holders of Common Stock voting together as a single class have the right to
elect three directors to a four man Board of Directors. All directors hold
office until the next annual meeting of the shareholders of the Company and
until their successors have been elected and qualified.
The principal occupation of each director, executive officer, and
significant employee of the Company for the last five years is set forth below.
Transeastern has assembled an experienced management team which
provides home-building, marketing and financial expertise. The principal
shareholders, Art Falcone, Ed Falcone, and Phillip Cucci, have all run
successful businesses prior to Transeastern. A description of each of the key
management follows:
Arthur Falcone, President: Mr. Falcone has been President of
Transeastern since its founding in 1984. Prior to and during the early years of
Transeastern's existence, Mr. Falcone, along with Edward Falcone, owned,
operated, or managed over 100 restaurants such as McDonald's and Wendy's as well
as other family style restaurants, all in New York State and Florida. Mr.
Falcone organized a partnership which built and operated a successful Days Inn
Hotel in Binghamton, New York. Mr. Falcone also founded several consulting firms
who advised fast food restaurants and hotels.
Edward Falcone, Executive Vice President: Mr. Falcone has been
Executive Vice President of Transeastern since 1993, and served as Vice
President since 1986. Mr. Falcone also owned, operated and managed over 100
restaurants such as McDonald's and Wendy's. Mr. Falcone has served in various
capacities in other restaurant-related businesses and consulting firms.
-24-
<PAGE>
Phillip Cucci, Executive Vice President and C.O.O.: Mr. Cucci joined
Transeastern in 1988 as Vice President and oversees all home construction
activities. Prior to joining Transeastern, Mr. Cucci operated a custom
home-building company on Long Island. Mr. Cucci has been involved in the custom
home-building business for 17 years.
Larry Nicholson, Vice President Construction: Mr. Nicholson joined
Transeastern in early 1993. Prior to that time, he served for five years as Vice
President for Berman Development, a $50 million revenue Philadelphia-based
builder which was developing commercial and residential projects in five states
including Florida. Prior to Berman, Mr. Nicholson was a project manager in South
Florida for Porten-Sullivan, a $70 million revenue developer based in
Washington, D.C. Mr. Nicholson has a total of 14 years experience in commercial
and residential construction.
Cora DiFiore, Vice President of Administration: Ms. DiFiore is
responsible for the closing of all residential sales contracts and coordinates
construction, development and acquisition financing with the Company's lenders.
Ms. DiFiore also manages all employee benefit and corporate insurance programs
and manages the corporate offices. Ms. DiFiore has worked in various management
capacities with the Falcones for 16 years. She is a graduate of Stony Brook
University.
Les Campbell, Chief Financial Officer: Mr. Campbell joined Transeastern
in July of 1994, and was formerly employed by Coral Ridge Properties, the
developer and land bank for Coral Springs, Florida. Mr. Campbell served as
Controller with Coral Ridge Properties for eight years, and was Director of
Audits for Westinghouse Communities, Inc., the parent of Coral Ridge Properties,
for two years prior to that. Prior to joining Westinghouse Communities, Mr.
Campbell was a member of the audit staff of Price Waterhouse in Fort Lauderdale
and West Palm Beach, Florida. He is a certified public accountant. Mr. Campbell
is a graduate of Florida State University.
Neil Eisner, Director of Operations: Mr. Eisner joined Transeastern
during 1994, and is responsible for overseeing the Parkside at Spring Valley
project as well as all other Company operations in southern Broward County. Mr.
Eisner has extensive real estate experience in both residential and commercial
development. Prior to joining Transeastern, Mr. Eisner was Vice President of a
$50 million sales residential builder in Dade and Broward counties. Prior to
that, Mr. Eisner served as Vice President of real estate operations for an even
larger developer of hotels, office parks and single family homes in New York
State.
Dan Andreacci, Director of Marketing and Sales: Mr. Andreacci joined
Transeastern in 1993 and is responsible for overseeing the operations of the
Cypress Head and Cypress Cay projects and all Company operations in North
Broward and Palm Beach counties. Mr. Andreacci has a total of 18 years
experience in the construction and marketing of single and multi-family housing
developments. Mr. Andreacci also has extensive experience as a consultant in the
workout of troubled buildings and developments for financial institutions. Since
1986, Mr. Andreacci owned and operated The Andreacci Group, a real estate
consulting and management group involved in the construction and/or renovation,
marketing and sales of condominiums and single family homes in north Miami,
Florida.
Christopher Allick, Director. Mr. Allick is an Executive Vice President
of Jefferies and Company, Inc. Prior to joining Jefferies & Company, Inc. in
February 1990, Mr. Allick was First Vice President of Drexel Burnham and
Lambert. Mr. Allick received an M.B.A./M.A. in Economics from the University of
Toronto in 1978 and a B.A. in Economics and English from the University of
Colorado-Boulder in 1976.
-25-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation to each of the
Company's executive officers and directors.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR NUMBER IN CAPACITIES IN WHICH SERVED ANNUAL COMPENSATION (1)
GROUP
<S> <C> <C>
Arthur J. Falcone Director, President $280,000
Edward W. Falcone Director, Executive Vice President $270,000
Philip Cucci, Jr. Director, Vice President, Secretary $270,000
All executive officers as a $820,000
group (3 persons)
</TABLE>
- ------------------------
(1) Cash compensation was $175,000 for Mr. Arthur J. Falcone and $165,000
for each of Mr. Edward Falcone and Mr. Cucci. Also, as a bonus, a lot
free and clear valued at $100,000 each.
PRINCIPAL SECURITYHOLDERS
The following table and notes thereto set forth certain information
with respect to the Company's outstanding Capital Stock as of November 28, 1994,
as adjusted to give effect to the Recapitalization, that may be beneficially
owned by (a) the three most highly compensated executive officers and directors
of the Company, (b) each person who is known by the Company to be the beneficial
owner of more than 10% of the outstanding stock of any class of equity
securities issued by the Company, and (c) all directors and executive officers
as a group, as adjusted to reflect the exercise of all warrants and options then
outstanding, and the sale of the Series B Shares offered hereby.
-26-
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
-------------------
NUMBER AND TYPE
BENEFICIAL OWNER OF SHARES BEFORE OFFERING AFTER OFFERING(2)
- ---------------- --------- --------------- -----------------
<S> <C> <C> <C>
Arthur J. Falcone(3) 241,667 Common Shares 29.7% 27.5%
Edward W. Falcone(4) 241,667 Common Shares 29.7% 27.5%
Philip Cucci, Jr.(5) 241,667 Common Shares 29.7% 27.5%
Christopher Allick (6) 406 Series A Shares 1.7% 19.9%
5,233 Common Shares .64% .59%
David F. Eisner (7) 231 Series A Shares 1.0% 11.4%
2,990 Common Shares .37% .34%
Richard A. Handler(8) 1,169 Series A Shares 5.0% 57.4%
14,952 Common Shares 1.84% 1.7%
All Directors and Executive Officers 406 Series A Shares 1.7% 19.9%
as a group (4 persons) 730,234 Common Shares 89.74% 83.09%
</TABLE>
- --------------------
(2) Assumes that none of the officers, directors, or 10% beneficial owners
purchase Series B Shares in this Offering.
(3) Shares indicated as beneficially owned are held of record by Arthur J.
Falcone and his spouse as tenants by the entirety.
(4) Shares indicated as beneficially owned are held of record by Edward W.
Falcone and his spouse as tenants by the entirety.
(5) Shares indicated as beneficially owned are held of record by Philip
Cucci, Jr. and his spouse as tenants by the entirety.
(6) Includes 5,233 shares of Common Stock issuable upon an exercise of a
Warrant which expires June 1, 2005.
(7) Includes 2,990 shares of Common Stock issuable upon an exercise of a
Warrant which expires June 1, 2005.
(8) Includes 14,952 shares of Common Stock issuable upon an exercise of a
Warrant which expires June 1, 2005.
-27-
<PAGE>
DESCRIPTION OF OUTSTANDING SECURITIES
As of November 28, 1994, the authorized capital stock of the Company,
consisted of 5,000,000 shares of Common Stock, and 29,000 shares of Series A
Redeemable Preferred Stock, of which, after giving effect to the
Recapitalization, 725,001 shares and 2,036 shares respectively would have been
outstanding. A description of the terms of outstanding equity securities is set
forth below.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. Subject to
dividend restrictions that may be applicable to the Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. In the event
of a liquidation, dissolution, or winding up of the Company, holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, and liquidation preferences in favor of Preferred Stock. Holders of
Common Stock do not have any preemptive rights with respect to the issuance of
any securities of the Company.
SERIES A REDEEMABLE PREFERRED STOCK
On June 2, 1993, the Company issued and sold 20,000 Series A Shares to
an investor group led by Mezzonen, S.A. Series A Shares entitle the holder
thereof to cumulative dividends at the rate of 12% per annum. At the option of
the Company dividends may be paid in additional shares of Series A Shares until
the dividend payable July 1, 1996. Holders of Series A shares are entitled to a
liquidation payment equal to $100 per share plus the amount of any cumulated
dividends or any other dividends declared but unpaid thereon. Holders of Series
A Shares vote as a separate class on all matters submitted for shareholder
action, except for the election of directors, in which they vote together with
the holders of Common Stock as a single class, prior to a Two Dividend Default.
Pursuant to the terms of a Shareholders Agreement dated June 2, 1993 (the
"Shareholder Agreement"), holders of certain shares of Common Stock agreed to
vote all shares of common stock, the voting of which was under their control to
elect one person nominated by the holders of a majority of the Series A Shares
as a director. Series A Shares must be redeemed by the Company at $100 per
share, plus all cumulated dividends, plus the amount of any dividends which have
been declared but are unpaid, upon the first to occur of a public offering of
the Common Stock of the Company in which the proceeds to the Company are at
least $5,000,000 or on June 1, 2005. In conjunction with the issuance of the
Series A Shares, the Company issued warrants exerciseable for Common Stock. The
Shareholders Agreement gives the holders of Series A Shares rights to acquire
shares transferred by members of senior management of the Company on the same
terms as the proposed transferee of such shares. In addition the holders of
Series A Shares have co-sale rights, and demand and piggy back registration
rights.
CYPRESS HEAD NOTES.
On September 15, 1993, the Company issued and sold $3,860,000 in
principal amount of its Senior Subordinated Project Financing Notes due 1998
(the "Cypress Head Notes"). The Cypress Head Notes accrue interest at the
initial rate of 11% per annum, increasing by 50 basis points each quarter (such
rate as in effect form time to time is the "Note Rate"). The current interest
rate on the Cypress Head Notes is 13% per annum. Interest may be paid quarterly.
Any interest not paid when due accrues interest at the Note Rate plus 100 basis
points. The Note Purchase Agreement dated September 15, 1993, requires the
-28-
<PAGE>
Company to make mandatory payments upon the "sale" or "deemed sale" of lots in
the Cypress Head Project. The amount of the payment ranges from $10,000 to
$30,000. The Cypress Head Notes are subordinated to certain indebtedness due to
NationsBank of Florida, N.A. which is secured by the Cypress Head development.
After giving effect to the Recapitalization, the Company will have $86,916 in
principal amount of the Cypress Head Notes outstanding. There was no equity
participation issued in connection with the Cypress Head Notes.
SPRING VALLEY NOTES.
On January 25, 1994, The Company issued and sold $1,500,000 in
principal amount of Senior Subordinated Project Acquisition Notes due 1998 (the
"Spring Valley Notes"), pursuant to an Amended and Restated Note Purchase
Agreement dated January 25, 1994, as amended June 30, 1994, to increase the
principal amount of the Spring Valley Notes to $2,500,000. The Spring Valley
Notes accrue interest at the rate of 11% per annum. Interest is payable
quarterly. Interest not paid when due accrues interest at the rate of 12% per
annum. Principal is due at September 15, 1998. The Spring Valley Notes are
subordinated to any indebtedness secured by the Spring Valley Project. The
Company is currently negotiating with a senior lender for a loan develop the
Spring Valley Project. The Spring Valley Notes are to be redeemed in the
Recapitalization. There was no equity participation issued in connection with
the Spring Valley Notes.
SECOND SPRING VALLEY NOTES.
On November 18, 1994, the Company issued and sold $1,000,000 in
principal amount of its Senior Subordinated Project Financing Notes due 1995
(the "Second Spring Valley Notes") to Jefferies Group, Inc. The Spring Valley
Notes accrue interest at the rate of 15% per annum. Interest is payable February
3, 1995, May 4, 1995, and August 4, 1995. Interest not paid when due accrues
interest at the rate of 18% per annum. Principal is due August 4, 1995. The
Second Spring Valley Notes are subordinated to any indebtedness secured by the
Spring Valley Project. The Company is currently negotiating with a senior lender
to develop the Spring Valley Project. The proceeds of the Second Spring Valley
Notes were used by the Company to make a capital contribution to its wholly
owned subsidiary Transeastern Pembroke Properties, Inc., to contribute to a
joint venture to develop the Spring Valley Project. There was no equity
participation issued in connection with the Second Spring Valley Notes. The
entire $1,000,000 in principal amount of the Second Spring Valley Notes will be
outstanding after the Recapitalization.
INDEPENDENT AUDITORS
The Financial Statements as of June 30, 1994 and 1993, and for the
fiscal years then ended, included in this Memorandum have been audited by KMPG
Peat Marwick, independent accountants, as stated in their report appearing
herein.
-29-
<PAGE>
ADDITIONAL INFORMATION
The Company will provide, prior to the consummation of the offering, to
each prospective investor and the representatives and advisors of such
prospective investors, if any, the opportunity to ask questions and receive
answers concerning the terms and conditions of this offering and to obtain any
additional information which the Company may possess or can obtain without
unreasonable effort or expense that is necessary to verify the accuracy of the
information furnished to such prospective investor. Any such questions should be
directed to Edward W. Falcone or Arthur J. Falcone at Transeastern Properties of
South Florida, Inc., 3300 University Drive, Coral Springs, Florida 33065,
telephone number (305) 346-9700. No other persons have been authorized to give
information or to make any representations concerning this Offering, and if
given or made, such other information or representations must not be relied upon
as having been authorized by the Company.
-30-
<PAGE>
EXHIBIT A
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
Unaudited Interim Financial Statements
Consolidated Balance Sheet dated September 30, 1994
Consolidated Statement of Operations for 3 months ended
September 30, 1994
2. AUDITED FINANCIAL STATEMENTS DATED JUNE 30, 1994
Report of KPMG Peat Marwick, Independent Accountants
Consolidated Balance Sheets as of June 30, 1994 and 1993
Consolidated Statements of Operations, Shareholders' Equity,
and Cash Flows
for the period from July 1, 193 to June 30, 1994 and July 1,
1992 to June 30, 1993 Notes to Financial Statements
<PAGE>
EXHIBIT B
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
PROJECTIONS
Assumptions
Projected Balance Sheets as of June 30, 1995-1996
Projected Statements of Operations and Cash Flows for
the fiscal years ending June 30, 1995-1996 Notes to
Projections
<PAGE>
ASSUMPTIONS
The following projections ("Projections") have been prepared by the
management of the Company and are based upon assumptions which the Company
believes to be reasonable. Such assumptions may be incomplete or incorrect, and
unanticipated events and circumstances may occur. For these reasons, actual
results achieved during the periods covered hereby will vary from the
Projections, and the variations may be material and adverse. The Company's
independent accountants have not been engaged to review, and therefore have not
expressed any form of assurance with respect to the Projections. The Projections
should be read in conjunction with "Risk Factors and Special Considerations"
contained elsewhere in this Memorandum. All references to years herein are to
fiscal years. The Company's fiscal year end is June 30.
In preparing the Projections, the Company had a limited operating
history upon which to base its revenue and expense assumptions. As a result, the
Projections are, in large part, based upon assumptions derived from management's
subjective experience, rather than upon actual performance data of the Company.
The Projections for fiscal 1995 reflect the Company's annual operating
plan. The Projections for fiscal years 1996 are derived from the Company's
operating plan for fiscal 1995 and management's judgment and experience.
Management believes that the following assumptions (the "Assumptions") are
significant to the Projections, or are key factors which could affect the
financial results of the Company.
THE PROJECTIONS ARE NOT, NOR ARE THEY INTENDED TO BE, A
PREDICTION OF FUTURE EVENTS. THE PROJECTIONS REPRESENT ONE
POSSIBLE FINANCIAL RESULT UNDER THIS SET OF ASSUMPTIONS, WHICH
MANAGEMENT BELIEVES IS REASONABLE IN LIGHT OF THE
CIRCUMSTANCES EXISTING AT THE DATE OF THE MEMORANDUM.
ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD NOT RELY ON THE
PROJECTIONS AS A REPRESENTATION OR WARRANTY OF THE COMPANY'S
FUTURE PERFORMANCE.
Capitalized terms not defined in the Assumptions are used with the
meanings ascribed to such terms in the Memorandum.
The Assumptions and Notes to Projections
are an integral part of these Projections.
<PAGE>
EXHIBIT C
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
FORM OF SERIES B REDEEMABLE PREFERRED
STOCK AND WARRANT PURCHASE AGREEMENT
<PAGE>
EXHIBIT D
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
FORM OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION
<PAGE>
EXHIBIT E
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
FORM OF WARRANT
<PAGE>
EXHIBIT F
PROMOTIONAL MATERIALS
SERIES B REDEEMABLE PREFERRED STOCK
AND
WARRANT
PURCHASE AGREEMENT
AMONG
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.,
ARTHUR J. FALCONE,
EDWARD W. FALCONE,
PHILIP CUCCI, JR.,
AND
THE SEVERAL INVESTORS NAMED IN SCHEDULE 1
Dated as of December 6, 1994
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE 1. THE PREFERRED STOCK AND THE
WARRANTS..............................................................................................1
Section 1.1. Purchase and Sale of Preferred Stock.........................................1
Section 1.2. Purchase and Sale of Warrants................................................1
Section 1.3. Closing......................................................................2
Section 1.4. Related Transactions.........................................................2
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE FOUNDERS.........................2
Section 2.1. Organization, Qualifications and Corporate Power.............................2
Section 2.2. Authorization of Agreements, Etc.............................................3
Section 2.3. Validity.....................................................................3
Section 2.4. Authorized Capital Stock.....................................................4
Section 2.5. Litigation; Compliance with Law..............................................4
Section 2.6. Proprietary Information of Third Parties.....................................5
Section 2.7. Title to Properties..........................................................6
Section 2.8. Leasehold Interests..........................................................7
Section 2.9. Insurance....................................................................7
Section 2.10. Taxes........................................................................7
Section 2.11. Other Agreements.............................................................7
Section 2.12. Patents, Trademarks, Etc.....................................................8
Section 2.13. Loans and Advances...........................................................8
Section 2.14. Assumption, Guaranties, Etc. of Indebtedness of Other Persons................8
Section 2.15. Significant Customers and Suppliers..........................................9
Section 2.16. Governmental Approvals.......................................................9
Section 2.17. Financial Statements.........................................................9
Section 2.18. Absence of Undisclosed Liabilities...........................................9
Section 2.19. Absence of Changes..........................................................10
Section 2.20. Employee Benefit Plans......................................................10
Section 2.21. Disclosure..................................................................11
Section 2.22. Brokers.....................................................................12
Section 2.23. Transactions with Affiliates................................................12
Section 2.24. Employees...................................................................12
Section 2.25. Foreign Corrupt Practices Act..............................................12
Section 2.26. Environmental Regulations...................................................12
Section 2.27. Disclosure..................................................................13
ARTICLE 3. REPRESENTATION AND WARRANTIES OF THE INVESTORS........................................14
ARTICLE 4. CONDITIONS PRECEDENT TO THE PURCHASE OF THE PREFERRED STOCK AND
WARRANTS BY INVESTORS.................................................................14
ARTICLE 5. CONDITIONS PRECEDENT..................................................................16
ARTICLE 6. COVENANTS OF THE COMPANY..............................................................16
Section 6.1. Financial Statements, Reports, Etc..........................................16
Section 6.2. Corporate Existence.........................................................17
-i-
<PAGE>
Section 6.3. Properties, Business, Insurance.............................................17
Section 6.4. Inspection, Consultation, and Advice........................................17
Section 6.5. Restrictive Agreements Prohibited...........................................17
Section 6.6. Transactions with Affiliates................................................17
Section 6.7. Use of Proceeds.............................................................18
Section 6.8. Board of Directors Meetings.................................................18
Section 6.9. Bylaws......................................................................18
Section 6.10. Maintenance of Ownership of Investments.....................................18
Section 6.11. Distributions by Investments................................................18
Section 6.12. Compliance with Laws........................................................18
Section 6.13. Keeping of Records and Books of Account.....................................19
Section 6.14. Employee Stock Plans........................................................19
Section 6.15. Piggyback Registration Rights. .............................................19
Section 6.16. Registration Procedures. ...................................................20
Section 6.17. Expenses. ..................................................................21
ARTICLE 7. MISCELLANEOUS.........................................................................22
Section 7.1. Survival of Agreements......................................................22
Section 7.2. Brokerage...................................................................22
Section 7.3. Parties in Interest.........................................................22
Section 7.4. Notices.....................................................................22
Section 7.5. Governing Law...............................................................23
Section 7.6. Entire Agreement............................................................23
Section 7.7. Counterparts................................................................23
Section 7.8. Amendments..................................................................23
Section 7.9. Severability................................................................23
Section 7.10. Titles and Subtitles........................................................23
Section 7.11. Certain Defined Terms.......................................................23
</TABLE>
-ii-
<PAGE>
CROSS REFERENCE OF DEFINED TERMS
Term Section
affiliate Section 7.12
AJF Preamble
Agreement Preamble
Articles Section 2.4(d)
Closing Section 1.3
Closing Date Section 1.3
Common Stock Section 2.4(a)
Company Preamble
Company Benefit Plans Section 2.20(a)
Contracts Section 2.11
Cucci Preamble
Disclosure Schedule Article 2
EWF Preamble
Employees Section 2.20(a)
Environmental Permits Section 2.26
ERISA Section 2.20(a)(i)
Financial Statements Section 2.17
Founder Preamble
General Partnership Interest Section 2.1(b)
Hazardous Materials Section 2.26(g)
Intellectual Property Section 2.12
Investment Section 2.1(b)
Investor Preamble
Memorandum Section 2.4(b)
person Section 7.12
Preferred Stock Background
Real Property Section 2.7(a)
Recapitalization Background
Registration Expenses Section 6.17
Selling Expenses Section 6.17
Shareholders Agreement Section 2.4(e)
Warrants Background
Warrant Shares Background
-iii-
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1 Preferred Stock and Warrant Shares Purchased
Schedule 2 Disclosure Schedule
Schedule 3 Accredited Investor Certificates
Exhibit A Form of Warrant Agreement
Exhibit B Opinion of Company Counsel
Exhibit C Amended and Restated Articles of Incorporation
-iv-
<PAGE>
SERIES B REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
THIS SERIES B REDEEMABLE PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
("Agreement") is made and entered into as of December 6, 1994, among
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC., a Florida corporation (the
"Company"), ARTHUR J. FALCONE, a resident of the State of Florida ("AJF"),
EDWARD W. FALCONE, a resident of the State of Florida ("EWF"), PHILIP CUCCI,
JR., a resident of the State of Florida ("Cucci"), and the several persons named
in the attached Schedule 1 (such persons are hereinafter referred to
individually as an "Investor," and, collectively as the "Investors"). AJF, EWF,
and Cucci are sometimes hereinafter referred to individually as a "Founder" and
collectively as the "Founders."
BACKGROUND
A. The Investors desire to invest in the Company to enable the Company to
undertake the repurchase of $2,963,084 in principal amount of Senior
Subordinated Project Financing Notes due 1998, $2,500,000 in principal
amount of Amended and Restated Senior Subordinated Project Acquisition
Notes due 1998, and 21,358 shares of Series A Redeemable Preferred
Stock of the Company for an aggregate $5,000,000 (the
"Recapitalization").
B. The Investors desire to purchase (i) an aggregate of 30,000 shares of
the Series B Redeemable Preferred Stock of the Company, par value $.01
(the "Preferred Stock"), at a price of $100.00 per share and (ii)
warrants initially exercisable for 65,950 shares of common stock (the
"Warrant Shares") at an exercise price of $.01 per Warrant Share (the
"Warrants"), on the terms and subject to the conditions set forth in
this Agreement.
C. The Company desires to obtain additional equity capital through the
issuance and sale to the Investors of the Preferred Stock and the
Warrants, on the terms and subject to the conditions set forth in this
Agreement. The Founders are the controlling shareholders of the Company
and will receive a direct benefit from the issuance and sale by the
Company of the Preferred Stock and the Warrants.
AGREEMENT
For and in consideration of the premises and the mutual covenants and
agreements contained in this Agreement and for other good and valuable
consideration, the receipt and legal sufficiency of which is hereby
acknowledged, the parties hereby agree:
ARTICLE 1. THE PREFERRED STOCK AND THE WARRANTS
SECTION 1.1 PURCHASE AND SALE OF PREFERRED STOCK. The Company agrees to
issue and sell to each Investor, and each Investor agrees to purchase from the
Company, the number of shares of Preferred Stock set forth opposite the name of
such Investor on Schedule 1 hereto under the caption "Preferred Shares
Purchased" at a purchase price of $100.00 per share.
SECTION 1.2 PURCHASE AND SALE OF WARRANTS. The Company agrees to issue
and sell to each Investor, and each Investor agrees to purchase from the
Company, a Warrant to purchase a number of Warrant Shares equal to the product
-1-
<PAGE>
of the number of shares of Preferred Stock under the caption "Preferred Shares
Purchased" on Schedule 1 hereto MULTIPLIED BY 2.198 (rounded to the nearest
whole share), which number of Warrant Shares is set forth opposite the name of
such Investor on Schedule 1 hereto under the caption "Warrant Shares Purchased."
Each Warrant shall be substantially in the form of Exhibit A attached hereto.
SECTION 1.3 CLOSING. The closing of the purchase and sale of the
Preferred Stock and the Warrants shall take place at the offices of the Company,
3300 University Drive, Coral Springs, Florida 33065, at 10:00 a.m., Eastern
Standard Time, on November 30, 1994, or at such other location, date, and time
as may be agreed upon between the Investors and the Company (such closing being
called the "Closing" and such date and time being called the "Closing Date"). At
the Closing, the Company shall issue and deliver to each Investor a stock
certificate or certificates in definitive form, registered in the name of each
Investor, representing the Preferred Stock being purchased by each Investor and
the right to purchase Warrant Shares on the terms set forth in the Warrant. As
payment in full for the Preferred Stock and the Warrants, and against delivery
of the certificates evidencing the Preferred Stock and the Warrants purchased,
on the Closing Date, each Investor shall deliver to the Company a cashier's
check payable to the order of the Company, in the amount set forth opposite the
name of such Investor on Schedule 1 under the heading "Aggregate Purchase
Price," or shall transfer such sum to an account designated in writing by the
Company by wire transfer.
SECTION 1.4 RELATED TRANSACTIONS. At the Closing, the Company and the
Founders shall deliver (i) a certificate with respect to the matters described
in Section 4(f) hereof, and (ii) the opinion of John T. Kinsey, P.A., counsel to
the Company, in substantially the form of Exhibit B hereto.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE FOUNDERS
For the purpose of inducing the Investors to purchase the Shares and
the Warrants, the Company and each Founder represents and warrants to each
Investor that, except as otherwise set forth in the Disclosure Schedule attached
hereto as Schedule 2 (the "Disclosure Schedule") by means of an explicit
reference to the particular representation or warranty as to which exception is
taken, which in each case shall constitute the sole representation and warranty
as to which such exception shall apply:
SECTION 2.1 ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER
(a) The Company is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of Florida
and is duly licensed or qualified to transact business as a foreign
corporation and is in good standing in each jurisdiction in which the
nature of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or
qualification. The Company has the corporate power and authority to (i)
own and hold its properties and carry on its business as now conducted
and as proposed to be conducted, (ii) execute, deliver, and perform
each of this Agreement and the Warrants, (iii) issue, sell, and deliver
the Preferred Stock, and (iv) issue and deliver the Warrants and the
Warrant Shares issuable upon exercise of the Warrants.
(b) Section 2.1(b) of the Disclosure Schedule contains a true
and correct list of (i) each corporation some or all of the securities
of which are held by the Company (an "Investment"), indicating with
respect to each Investment, the number and type of securities
outstanding and the number and type of securities held by the Company,
and (ii) each general or limited partnership owned in whole or in part
by the Company (a "General Partnership Interest"). Except for
-2-
<PAGE>
Investments and General Partnership Interests listed on Section 2.1(b)
of the Disclosure Schedule, the Company does not (i) own of record or
beneficially, directly or indirectly, (A) any shares of capital stock
or securities convertible into capital stock of any corporation, (B)
any debt securities of any corporation, or (C) any participating
interest in or any indebtedness of any partnership, joint venture,
limited liability company, or other non-corporate business enterprise
or (ii) control, directly or indirectly, any other entity.
SECTION 2.2 AUTHORIZATION OF AGREEMENTS, ETC.
(a) The Company is not in violation of or default under any
provision of its Amended and Restated Articles of Incorporation, or
Bylaws, of any material provision of any indenture, contract,
agreement, mortgage, deed of trust, loan, commitment, judgment, decree,
order, or obligation to which it is a party or by which any of its
properties or assets are bound, or of any provision of any Federal,
state, or local statute, rule, or governmental regulation applicable to
the Company. The execution and delivery by the Company of this
Agreement and each of the other agreements, documents, and instruments
contemplated hereby, the performance by the Company of its obligations
hereunder and thereunder, the issuance, sale, and delivery of the
Preferred Stock and the Warrants, and the issuance and delivery of the
Warrant Shares upon exercise of the Warrants, have been duly authorized
by all requisite corporate action on the part of the Company and its
officers, directors, and shareholders and will not result in any such
violation, conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under any such
provision, require any consent or waiver under any such provision, or
result in the creation or imposition of any lien, charge, restriction,
claim, or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company. There is no such provision which
materially and adversely affects, or so far as the Company is presently
aware, in the future may materially and adversely affect, the condition
(financial or otherwise), business, property, prospects, assets, or
liabilities of the Company.
(b) The Preferred Stock has been duly authorized and, when
issued in accordance with this Agreement, will be validly issued, fully
paid, and nonassessable. The Warrants have been duly authorized and,
when issued in accordance with this Agreement, will be validly issued.
The Preferred Stock and the Warrants, when issued in accordance with
this Agreement, will be free and clear of all liens, charges,
restrictions, claims, and encumbrances imposed by or through the
Company, except as reflected on the certificates evidencing the
Preferred Stock. The Warrant Shares have been duly and validly reserved
for issuance upon exercise of the Warrants, and the Warrant Shares,
when so issued, will be duly authorized, validly issued, fully paid,
and nonassessable and will be free and clear of all liens, charges,
restrictions, claims, and encumbrances imposed by or through the
Company, except as reflected on the certificates evidencing the
Warrants and the Warrant Shares. Neither the issuance, sale, and
delivery of the Preferred Stock and the Warrants nor the issuance and
delivery of the Warrant Shares is subject to any preemptive right,
right of first refusal, or other right in favor of any person.
SECTION 2.3 VALIDITY. Each of this Agreement and the Warrants have been
duly and validly executed and delivered by the Company and constitutes the
legal, valid, and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
-3-
<PAGE>
SECTION 2.4 AUTHORIZED CAPITAL STOCK. Immediately prior to the
Closing:
(a) the authorized capital stock of the Company will consist
of (i) Twenty-Nine Thousand (29,000) shares of Series A Redeemable
Preferred Stock; Thirty-six Thousand Five Hundred (36,500) shares of
Series B Redeemable Preferred Stock, and (ii) Five Million (5,000,000)
shares of common stock (the "Common Stock");
(b) Seven Hundred Twenty Five Thousand and One (725,001)
shares of Common Stock will be validly issued and outstanding, fully
paid and nonassessable, and after giving effect to the Recapitalization
described in the Private Placement Memorandum (the "Memorandum"), 2,036
shares of Series A Redeemable Preferred Stock and 30,000 shares of
Series B Redeemable Preferred Stock will be issued and outstanding will
be validly issued and outstanding, fully paid and nonassessable;
(c) all issued and outstanding shares of Common Stock and
Series A Redeemable Preferred Stock are owned of record and
beneficially by the persons and in the amounts set forth in Section 2.4
of the Disclosure Schedule;
(d) the relative rights, powers, preferences, qualifications,
limitations, and restrictions in respect of each class of authorized
capital stock of the Company are as set forth in the Company's Amended
and Restated Articles of Incorporation (the "Articles"), a copy of
which is attached as Exhibit C hereto, and all such rights, powers,
preferences, qualifications, limitations, and restrictions are valid,
binding, and enforceable and in accordance with all applicable laws;
(e) except as set forth in Section 2.4 of the Disclosure
Schedule, (i) no person owns of record or is known to the Company to
own beneficially any shares of any equity stock, (ii) no subscription,
warrant, option, convertible security, or other right (contingent or
other) to purchase or otherwise acquire equity securities of the
Company is authorized or outstanding, and (iii) there is no commitment
by the Company to issue shares, subscriptions, warrants, options,
convertible securities, or other such rights or to distribute to
holders of any of its equity securities any evidence of indebtedness or
assets, except as contemplated by this Agreement; and
(f) except as set forth in the Articles and in the
Shareholders Agreement dated June 2, 1993 (the "Shareholders
Agreement"), the Company has no obligation (contingent or other) to
purchase, redeem, or otherwise acquire any of its equity securities or
any interests therein or to pay any dividend or make any other
distribution in respect thereof. Except as set forth in the
Shareholders Agreement, there are no voting trusts or agreements,
preemptive rights, or proxies relating to any securities of the Company
(whether or not the Company is a party thereto). All of the outstanding
securities of the Company were issued in compliance with all applicable
Federal and state securities laws.
SECTION 2.5 LITIGATION; COMPLIANCE WITH LAW. Except as set forth in
Section 2.5 of the Disclosure Schedule, there is no (a) action, suit, claim,
proceeding, or investigation pending or, to the knowledge of the Company or the
Founders, threatened against or affecting the Company, at law or in equity, or
before or by any Federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign, (b)
arbitration proceeding relating to the Company pending under collective
bargaining agreements or otherwise, or (c) governmental inquiry pending or, to
the knowledge of the Company or the Founders, threatened against or affecting
the Company, (including without limitation any inquiry as to the qualification
of the Company to hold or receive any license or permit), and there is no basis
known to the Company of the Founders for any of the foregoing. The Company is
-4-
<PAGE>
not subject to any order, writ, injunction, or decree of any court or of any
Federal, state, municipal, or other governmental department, commission, board,
bureau, agency, or instrumentality, domestic or foreign. There is no action or
suit by the Company pending or threatened against any other person. The Company
is in material compliance with all laws, rules, regulations, and orders
applicable to the Company's business, operations, properties, assets, licenses,
and other authorizations required to conduct its business as conducted and as
proposed to be conducted. There is no existing law, rule, regulation, or order,
and neither the Company nor any Founder, after due inquiry, is aware of any
proposed law, rule, regulation, or order, whether Federal or state, which would
prohibit or restrict the Company from, or otherwise materially adversely affect
the Company in, conducting its business in any jurisdiction in which it is now
conducting business or in which it proposes to conduct business within the
foreseeable future.
SECTION 2.6 PROPRIETARY INFORMATION OF THIRD PARTIES. After reasonable
investigation, neither the Company nor any Founder is aware that any significant
employee or consultant of the Company is obligated under any contract or other
agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would conflict with the obligation of such employee
to use best efforts to promote the interests of the Company. To the knowledge of
the Company or the Founders, no third party has claimed or has reason to claim
that any person employed by or affiliated with the Company has (a) violated or
may be violating any of the terms or conditions of any employment,
non-competition, or non-disclosure agreement between such employee and such
third party, (b) disclosed or may be disclosing, or utilized or may be
utilizing, any trade secret or proprietary information or documentation of such
third party, or (c) interfered or may be interfering in the employment
relationship between such third party and any of the Company's present or former
employees. No third party has requested information from the Company which
suggests that such a claim might be contemplated. To the knowledge of the
Company and the Founders, no person employed by or affiliated with the Company
has employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, and to the knowledge of the
Company and the Founders, no person employed by or affiliated with the Company
has violated any confidential relationship which such person may have had with
any third party, in connection with the development, manufacture, or sale of any
product or proposed product, or the development or sale of any service or
proposed service of the Company, and the Company has no reason to believe there
will be any such employment or violation. To the knowledge of the Company and
the Founders, none of the execution or delivery of this Agreement, or the
carrying on of the business of the Company by its officers, employees, or
agents, or the conduct or proposed conduct of the business of the Company, will
conflict with or result in a breach of the terms, conditions, or provisions of
or constitute a default under any contract, covenant, or instrument under which
any such person is obligated.
SECTION 2.7 TITLE TO PROPERTIES
(a) The Memorandum contains a list of the material tracts of
real property owned by the Company ("Real Property") and a summary
description of the proposed use thereof and the number of buildable
lots remaining in each such tract. Except as reflected in title
insurance binders for the tracts of Real Property, the Company has good
and marketable fee simple title to the Real Property, free and clear of
all mortgages, liens, charges, encumbrances, and purchase options and
other rights to or against such property, other than such minor
imperfections of title, liens, easements, zoning restrictions, or
encumbrances, if any, as are not substantial in character, amount, or
extent, and do not, severally or in the aggregate, detract from the
value or interfere with the present uses of the Real Property, or
otherwise impair the business and operations of the Company, except for
claims of subcontractors, laborers, and materialmen which have
performed work or provided services to such property and which are
unpaid within normal payment terms.
-5-
<PAGE>
(b) All improvements on the Real Property conform in all
material respects to all applicable state and local laws, use
restrictions, building ordinances, and health and safety ordinances,
and the property is zoned for the various purposes for which the Real
Property and improvements thereon are presently being used.
(c) The Company, has received no written notice of any pending
or threatened condemnations, planned public improvements, annexation,
special assessments, zoning or subdivision changes, or other claims
which would in the aggregate materially and adversely affect the Real
Property.
(d) There is no private restrictive covenant or governmental
use restriction (including zoning) known to the Company after
reasonable inquiry, on all or any portion of the Real Property which
prohibits the current or contemplated use of the Real Property.
(e) All licenses, permits, and approvals required for the
occupancy and operation of the Real Property have been obtained and are
in full force and effect and the Company has received no notices of
violations in connection with such items.
(f) The Company does not have in its possession any studies or
reports which indicates any defects in the design or construction of
any of the improvements on the Real Property.
(g) There are no past due taxes, assessments, or other charges
affecting the Real Property.
(h) The Company has good and marketable title to all personal
properties and assets owned by it, free and clear of all mortgages,
pledges, security interests, liens, charges, claims, restrictions and
other encumbrances, except liens for current taxes not yet due and
payable and minor imperfections of title, if any, not material in
nature or amount and not materially detracting from the value or
impairing the use of the personal property subject thereto or impairing
the operations or proposed operations of the Company. The Company owns
or leases all personal properties and assets necessary to the operation
of its business as now conducted. All of such personal properties and
assets are in good operating condition (normal wear and tear excepted),
are reasonably fit for the purposes for which such personal properties
and assets are presently used, are adequate and usable for the
continued operation of the business of the Company as the same is
presently conducted, and none of such personal properties and assets
are in need of maintenance or repairs except for ordinary, routine
maintenance and repairs, the cost of which will not vary materially
from historic patterns.
SECTION 2.8 LEASEHOLD INTERESTS. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any default of the Company
thereunder and, to the best of the Company's knowledge, without any default
thereunder of any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a default or
event of default by the Company under any such lease or agreement or, to the
best of the Company's knowledge, by any other party thereto. The Company's
possession of such property has not been disturbed and, to the best of the
Company's knowledge, no claim has been asserted against the Company adverse to
its rights in such leasehold interests.
-6-
<PAGE>
SECTION 2.9 INSURANCE. All of the properties and business of the
Company of an insurable nature are insured to the extent usually insured by
persons or entities engaged in the same or similar businesses against loss or
damage of the kind customarily insured against by such persons or entities. The
Company is not in default regarding the provisions of any such policy. The
Company has not, since inception, self-insured against any risk ordinarily
insured against by similar businesses. The Company has not received any notice
from any of its insurers that any insurance premiums will be increased in the
future or that any insurance coverage presently in force will not be available
in the future on substantially the same terms as are now in effect. There are no
outstanding requirements or recommendations by any current insurer or
underwriter with respect to the Company which require or recommend changes in
the conduct of the business or require any repairs or other work to be done to
the assets and properties of the Company.
SECTION 2.10 TAXES. The Company has filed or obtained filing extensions
for all tax returns, Federal, state, county, and local, required to be filed by
it, and the Company has paid or established adequate reserves (in accordance
with generally accepted accounting principles) for the payment of all taxes
shown to be due by such returns as well as all other taxes, assessments, and
governmental charges which have become due or payable, including, without
limitation, all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors, and third parties. The Federal income tax returns
of the Company have never been audited by the Internal Revenue Service and no
state income or sales tax returns of the Company have been audited. No
deficiency assessment with respect to or proposed adjustment of the Company's
Federal, state, county, or local taxes is pending or, to the best of the
Company's knowledge, threatened. There is no tax lien, whether imposed by any
Federal, state, county, or local taxing authority, outstanding against the
assets, properties, or business of the Company. Neither the Company nor any of
its shareholders has ever filed a consent pursuant to Section 341(f) of the IRC
(as hereinafter defined), relating to collapsible corporations.
SECTION 2.11 OTHER AGREEMENT. The Company is not a party to or
otherwise bound by any written or oral contract, obligation, agreement,
commitment, restriction, or the like which individually or in the aggregate
could materially adversely affect the business, prospects, financial condition,
operations, property, or affairs of the Company. The Company has provided to the
Investors access to copies of all obligations, agreements, and the like
(referred to individually as a "Contract" and collectively as the "Contracts").
Each of the Contracts are valid, binding and in full force and effect in all
material respects. The Company, and to the knowledge of the Company and the
Founders, each other party thereto has in all material respects performed all
the obligations required to be performed by it to date and has received no
notice of default and is not in default (with due notice or lapse of time or
both) under any of the Contracts. The Company has no present expectation or
intention of not fully performing all its obligations under each of the
Contracts, and the Company has no knowledge of any breach or anticipated breach
by the other party to any of the Contracts. There is no Contract that contains
any contractual requirement with which there is a reasonable likelihood that the
Company or any other party thereto will be unable to comply with the terms
thereof. The continuation, validity, and effectiveness of each Contract will in
no way be affected by the consummation of the transactions contemplated by this
Agreement. There exists no actual or, to the best knowledge of the Company, any
threatened termination, cancellation, or limitation of, or any amendment,
modification, or change to any Contract, which would have a material adverse
effect on the business or condition, financial or otherwise, of the Company.
SECTION 2.12 PATENTS, TRADEMARKS, ETC. The Company has sufficient title
to and ownership of, or can obtain on terms which will not adversely affect its
business, all franchises, permits, licenses, and other similar authority
-7-
<PAGE>
necessary for the conduct of its business as now being conducted and as planned
to be conducted, and it is not in default under any of such franchises, permits,
licenses, and other similar authority. The Company possesses all patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, copyrights, formulae, trade secrets, and
know how (collectively, "Intellectual Property") necessary or desirable to the
conduct of its business as conducted and as proposed to be conducted, and no
claim is pending or, to the knowledge of the Company and the Founders,
threatened to the effect that the operations of the Company infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and, to the knowledge of the Company and the Founders, there is no
basis for any such claim (whether or not pending or threatened). No claim is
pending or threatened to the effect that any such Intellectual Property owned or
licensed by the Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company, and, to the knowledge of the Company
and the Founders, there is no basis for any such claim (whether or not pending
or threatened). The Company is not aware of any third party which is infringing
or violating any of the Intellectual Property of the Company. To the knowledge
of the Company and the Founders, all technical information developed by and
belonging to the Company which has not been patented has been kept confidential.
The Company has not granted or assigned to any other person or entity any of the
Intellectual Property or the right to manufacture, have manufactured, assemble,
or sell the products or proposed products or to provide the services or proposed
services of the Company.
SECTION 2.14 LOANS AND ADVANCES. The Company does not have any
outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each case, for advances to employees of the
Company in respect of reimbursable business expenses anticipated to be incurred
by them in connection with their performance of services for the Company in the
ordinary course of business, consistent with past practice.
SECTION 2.14 ASSUMPTION, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS. The Company has not assumed, guaranteed, endorsed, or otherwise become
directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to, or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for (a) guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business and (b) guaranties by
the Company of the debts of its subsidaries.
SECTION 2.15 SIGNIFICANT CUSTOMERS AND SUPPLIERS. No customer or
supplier which was or has been significant to the Company in the past three (3)
years has terminated, materially reduced, or threatened to terminate or
materially reduce its purchases from or provision of products or services to the
Company, as the case may be.
SECTION 2.16 GOVERNMENTAL APPROVALS. Subject to the accuracy of the
representations and warranties of the Investors set forth in Article 3 hereof,
no registration, qualification, or filing with, or consent or approval of or
other action by, any Federal, state, or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery, and
performance by the Company of this Agreement, the offer, issuance, sale and
delivery of the Preferred Stock and the Warrants, the issuance and delivery of
the Warrant Shares upon exercise of the warrants or the consummation of any
other transaction contemplated hereby, other than (i) filings pursuant to state
securities laws (all of which filings have been made as of the date hereof) in
connection with the offer and sale of the Preferred Stock and the Warrants and
(ii) the filing of a notice under Regulation D under the Securities Act.
SECTION 2.17 FINANCIAL STATEMENTS. The Memorandum contains true,
correct, and complete copies of: the unaudited Consolidated Balance Sheet of the
Company dated September 30, 1994, and the unaudited Consolidated Statement of
-8-
<PAGE>
Operations of the Company for the three months then ended, the audited
Consolidated Balance Sheet of the Company dated June 30, 1994, and June 30,
1993, and an audited Consolidated Statements of Operations, Consolidated
Statements of Changes in Shareholders' Equity, and Consolidated Statements of
Cash Flows for the fiscal years then ended, together with notes thereto and the
audit report thereon of KPMG Peat Marwick thereon (collectively, the "Financial
Statements"). The Financial Statements (i) are in accordance with the books and
records of the Company, (ii) present fairly the financial condition of the
Company as of the respective dates indicated and the results of operations for
such periods except that interim period financial statements are subject to
normal year-end audit adjustments, which in the aggregate will not materially or
adversely change such interim financial statements, (iii) have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, and (iv) reflect adequate reserves for all
liabilities and losses. The books, records, and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of the Company. The Company has not engaged in any
transaction, maintained any bank account, or used any of the funds of the
Company, except for transactions, bank accounts, and funds which have been and
are reflected in the normally maintained books and records of the Company.
SECTION 2.18 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
material liabilities or obligations (secured or unsecured, whether accrued,
absolute, direct, indirect, contingent, or otherwise, and whether due or to
become due) that are required to be reflected in the Financial Statements by
generally accepted accounting principles which are not fully accrued or reserved
against in the Financial Statements, other than liabilities incurred in the
ordinary course of business subsequent to the date of the Financial Statements
which liabilities and obligations, individually or in the aggregate, are not
material to the financial condition or operating results of the Company.
SECTION 2.19 ABSENCE OF CHARGES. Since the date of the most recent
Consolidated Balance Sheet included in the Financial Statements and except as
reflected therein or in the Memorandum, (a) there has been no material adverse
change in the condition (financial or otherwise), business, property, assets, or
liabilities of the Company other than changes in the ordinary course of
business, none of which, individually or in the aggregate, has been materially
adverse; (b) the Company has not entered into any material transaction which was
not in the ordinary course of its business; (c) there has been no damage to,
destruction of, or loss of physical property (whether or not covered by
insurance) materially adversely affecting the business or operations of the
Company; (d) except as contemplated by this Agreement, the Company has not
declared or paid any dividend on its stock, made any distribution on its stock,
redeemed, purchased, or otherwise acquired any of its stock, granted any options
to purchase shares of its stock; (e) the Company has not increased the
compensation of any of its officers, or the rate of pay of its employees as a
group, except as part of regular compensation increases in the ordinary course
of its business, to an amount in excess of the amounts set forth in the pro
formas previously delivered to the Investors; (f) there has been no resignation
or termination of employment of any key officer or employee of the Company, and
the Company does not know of the impending resignation or termination of
employment of any such officer or employee that if consummated, would have a
material adverse effect on the business of the Company; (g) there has been no
labor dispute involving the Company or its employees and none is pending or to
the knowledge of the Company and the Founders, threatened; (h) there has been no
change, except in the ordinary course of business, in the contingent obligations
of the Company by way of guaranty, endorsement, indemnity, warranty, or
otherwise; (i) there have been no loans made by the Company to its employees,
officers, directors, or partners other than travel advances and office advances
made in the ordinary course of business; and (j) to the knowledge of the Company
and the Founders, there has been no other event or condition of any kind which
might reasonably be expected to result in a material and adverse change in the
Company's condition (financial or otherwise) or business or to impair materially
the ability of the Company to conduct its business as it is currently being
conducted.
-9-
<PAGE>
SECTION 2.20 EMPLOYEE BENEFIT PLANS.
(a) Section 2.20 of the Disclosure Schedule contains a true
and complete list of all the following agreements or plans which are
presently in effect or which have previously been in effect and which
cover employees of the Company ("Employees"):
(i) Any employee benefit plan as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974
("ERISA"), and any trust or other funding agency created
thereunder, or under which the Company, with respect to the
Employees, has any outstanding, present, or future obligation
or liability, or under which any Employee or former Employee
has any present or future right to benefits which are covered
by ERISA; or
(ii) Any other pension, profit sharing, retirement,
deferred compensation, stock purchase, stock option, incentive,
bonus, vacation, severance, disability, hospitalization,
medical, life insurance, or other employee benefit plan,
program, policy, or arrangement, whether written or unwritten,
formal or informal, which the Company, with respect to the
Business, maintains or to which the Company, with respect to
the Business, has any outstanding, present, or future
obligations to contribute or make payments under, whether
voluntary, contingent, or otherwise.
The plans, programs, policies, or arrangements which are described in
subparagraph (i) or (ii) above and which are listed on Section 2.20 of the
Disclosure Schedule are hereinafter collectively referred to as the "Company
Benefit Plans." The Company has delivered to the Investors true and complete
copies of all written plan documents and contracts evidencing the Company
Benefit Plans, as they may have been amended to the date hereof, together with
(A) all documents relating to any tax-qualified retirement plan maintained by
the Company, which documents are required to have been filed prior to the date
hereof with governmental authorities for each of the three most recently
completed plan years; (B) attorney's response to an auditor's request for
information for each of the three most recently completed plan years; and (C)
financial statements for each Company Benefit Plan for each of the three most
recently completed plan years.
(b) Except for the Company Benefit Plans, the Company does not
now maintain, nor has the Company at any time in the past been
obligated to make any payment or contribution to any pension,
retirement, profit-sharing, deferred compensation, stock purchase,
stock option, bonus or incentive plan, any medical, vision, dental, or
other health plan, any life insurance plan, vacation, severance,
disability, or any other employee benefit plan, program, policy, or
arrangement, whether written, unwritten, formal, or informal,
including, without limitation, any "employee benefit plan" as defined
in Section 3(3) of ERISA. The Company has not made, entered into, or
agreed to any commitment, whether written or oral, which would obligate
the Company to establish any employee benefit plan, or continue any
employment agreement or employment policy covering Employees. With
respect to all "welfare plans," as defined in Section 3(1) of ERISA,
covering Employees or former Employees, there are no obligations to
continue coverage or to make payments to or on behalf of persons who
are or may become retired or terminated Employees or their
beneficiaries, other than as may be required by Sections 601 through
608 of ERISA.
(c) The Company has complied with the continuation coverage
requirements of Section 1001 of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and ERISA Sections 601 through
608.
-10-
<PAGE>
SECTION 2.21 DISCLOSURE.
(a) The Company has delivered to the Investors a true and
correct copy of (i) the Amended and Restated Articles of Incorporation
of the Company, and all amendments thereto and restatements thereof
certified by the appropriate state official; and (ii) the Bylaws of the
Company and all amendments thereto.
(b) The minute books of the Company made available to the
Investors prior to the date hereof, accurately reflect all corporate
action taken by the directors and shareholders of the Company or any
committee of the Board of Directors of the Company and contain true and
accurate copies of or originals of the respective minutes of all
meetings or consent actions of the directors, any committee of the
Board of Directors, and the shareholders.
(c) The stock record books of the Company, made available to
the Investors prior to the date hereof, accurately reflect the stock
ownership of the Company, and contain complete and accurate records
with respect to the transfer of all securities issued by the Company
and each Investment since inception.
The Company has no contract, arrangement, or understanding with any
broker, finder, or similar agent with respect to the transactions contemplated
by this Agreement, nor has the Company authorized or employed any person in
connection with the offering or sale of the Preferred Stock, or the Warrants or
any security of the Company similar to the Preferred Stock or the Warrants.
Except as permitted by Section 6.6 hereof, no Founder, director,
officer, employee, or shareholder of the Company, or member of the family of any
such person, or any corporation, partnership, trust, or other entity in which
any such person, or any member of the family of any such person, has a
substantial interest or is an officer, director, trustee, partner, or holder of
more than 5% of the outstanding equity interests thereof is a party to any
transaction with the Company, including any contract, agreement or other
arrangement providing for the employment of, furnishing of services by, rental
of real or personal property from or otherwise requiring payments to any such
person or firm.
SECTION 2.24 EMPLOYEES.
(a) No officer or key Employee has advised the Company (orally
or in writing) that he or she intends to terminate employment with the
Company. The Company has complied in all material respects with all
applicable laws relating to the employment of labor, including
provisions relating to wages, hours, equal opportunity, worker health
and safety, collective bargaining, and the payment of Social Security
and other taxes, and with ERISA.
(b) The Company does not have any collective bargaining
agreement covering any of its Employees. There is no pending or, to the
best knowledge of the Company, threatened labor dispute involving the
Company or any of its Employees. To the best of the Company's
knowledge, the Company has amicable relations with its Employees.
SECTION 2.25 FOREIGN CORRUPT PRACTICES ACT. The Company has not made,
offered or agreed to offer anything of value to any government official,
political party or candidate for government office nor has it taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977.
-11-
<PAGE>
SECTION 2.26 ENVIRONMENTAL REGULATIONS.
(a) Except for failures which will not result in any material
liability or consequences to the Company, the Company has met, and
continues to meet, all applicable local, state, Federal and national
environmental regulations.
(b) The Company has not been notified that it is potentially
liable, has not received any requests for information or other
correspondence concerning any site or facility, and is not otherwise
aware that it is considered potentially liable under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended, or any similar state law.
(c) The Company has not entered into or received any consent
decree, compliance order, or administrative order relating to
environmental protection.
(d) The Company has neither entered into or received nor is
the Company in default under any judgment, order, writ, injunction, or
decree of any federal, state, or municipal court or other governmental
authority relating to environmental protection.
(e) The Company has all permits, licenses, approvals,
consents, and authorizations (the "Environmental Permits") relating to
environmental or health protection which are required under Federal,
state, or local laws, rules, and regulations and is in compliance with
all the Environmental Permits (including any information provided on
the applications therefor);
(f) There are no actions, suits, claims, arbitration
proceedings, or complaints pending or, to the Company's knowledge,
threatened or under consideration by any governmental authority,
municipality, community, citizen, or other entity against the Company
relating to environmental protection, nor does the Company have reason
to believe that any such actions, suits, claims, or complaints will be
brought against it.
(g) No disposal, releases, burial, or placement of hazardous
or toxic substances, pollutants, contaminants, petroleum, gas products,
or asbestos-containing materials (as any of such terms may be defined
under Federal, state, or local law) (hereinafter collectively referred
to as "Hazardous Materials") has occurred on, in, at, or about any of
the Company's properties or facilities or any other facility or site to
which Hazardous Materials from the Company may have been taken at any
time in the past.
(h) To the Company's knowledge, there has been no disposal,
releases, burial, or placement of Hazardous Materials on any property
not owned or operated in the present or the past by the Company which
may result or has resulted in contamination of or beneath any of the
Company's properties or facilities.
(i) There are no above-ground and underground storage tanks on
the Real Property.
(j) No lien has arisen on the Company's properties or
facilities under Federal, state, or local laws, rules, or regulations
as they relate to environmental protection.
(k) No audit or investigation has been conducted as to
environmental matters at any of the Company's properties by any
governmental agency.
-12-
<PAGE>
SECTION 2.27 DISCLOSURE. Neither this Agreement nor any Schedule or
Exhibit hereto, contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading. None of the statements, documents, certificates or other items
prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
The Memorandum was prepared in good faith by the Company to provide an overview
of the business of the Company and, to the best knowledge of Founders, does not
contain an untrue statement of a material fact.
ARTICLE 3. REPRESENTATION AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company as to such
Investor only, that:
(a) it is an "accredited investor" within the meaning of Rule
501 under the Securities Act, as indicated on the Investor
Certification of such Investor, annexed hereto as Schedule 3;
(b) it has sufficient knowledge and experience to evaluate the
risks and merits of its investment in the Company and it is able
financially to bear the risks thereof;
(c) it has had an opportunity to ask questions of and receive
answers from and to discuss the Company's business, management, and
financial affairs with the Company's management;
(d) the Preferred Stock and the Warrants are being acquired
for its own account for the purpose of investment and not with a view
to or for sale in connection with any distribution thereof;
(e) it was not offered nor made aware of the Company's
interest in issuing the Preferred Stock and the Warrants by any means
of public advertisement or solicitation;
(f) in connection with such Investor's purchase of the
Preferred Stock and the Warrants, it has been solely responsible for
its own (i) due diligence investigation of the Company and (ii)
investment decision, and has not engaged or relied upon any agent or
"purchaser representative" to review or analyze the Company's business
and affairs or advise such Investor with respect to the merits of the
investment;
(g) it has full power and authority to execute, deliver, and
perform each of this Agreement and to purchase the Preferred Stock and
the Warrants; and, that this Agreement will constitute the legal,
valid, and binding obligation of the Investor, enforceable against it
in accordance with their respective terms; and
(h) in the event that the Investor proposes to sell the
Preferred Stock or the Warrants pursuant to Rule 144A under the
Securities Act, it will (A) take reasonable steps to obtain the
information required by such Rule to establish a reasonable belief that
the prospective purchaser is a "qualified institutional buyer" as such
term is defined in Rule 144A and (B) advise the prospective purchaser
that the Investor is relying on the exemption from the registration
provisions of the Securities Act available pursuant to Rule 144A.
-13-
<PAGE>
ARTICLE 4. CONDITIONS PRECEDENT TO THE PURCHASE OF THE PREFERRED STOCK
AND WARRANTS BY INVESTORS
In connection with the purchase of the Preferred Stock and Warrants at
the Closing, the Investors shall be entitled to receive the following
certificates, opinions, and documents or evidence reasonably satisfactory to
them as to the following, each of which requirements may be waived by the
Investors. The Company agrees to use its best efforts to cause each of such
requirements to be satisfied:
(a) The Investors shall have received from John T. Kinsey,
P.A. counsel for the Company and the Founders, an opinion dated the
Closing Date, in form and scope satisfactory to the Investors and its
counsel, in substantially the form attached hereto as Exhibit B.
(b) The representations and warranties contained in Article 2
shall be true, complete and correct.
(c) The Company shall have performed and complied with all
covenants and agreements contained herein required to be performed or
complied with by it prior to or at the Closing Date.
(d) The Company shall have obtained any and all consents,
permits and waivers and made all filings necessary or appropriate for
the consummation of the transactions contemplated hereby.
(e) All corporate and other proceedings to be taken by the
Company in connection with the transactions contemplated hereby and all
documents relating to such transactions shall be satisfactory in form
and substance to the Investors and its counsel, and the Investors and
its counsel shall have received all such counterpart originals or
certified or other copies of such documents as they reasonably may
request. The Company shall have delivered to the Investors a
certificate executed by the President and Treasurer of the Company
certifying as to the fulfillment of the conditions specified in
subsections (b), (c), (d) and (i) of this Article 4.
(f) The Investors shall have received copies of the following
documents:
(i) (A) the Articles in the form of Exhibit C hereto,
bearing evidence of filing by the Department of State of the
State of Florida, and (B) a certificate of said Department of
State, dated as of a recent date as to the due incorporation
and good standing of the Company;
(ii) a certificate of the Secretary or an Assistant
Secretary of the Company dated the Closing Date and certifying:
(A) that attached thereto is a true and complete copy of the
Bylaws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete
copy of all resolutions adopted by the Board of Directors or
the shareholders of the Company authorizing the execution,
delivery, and performance of this Agreement, the Warrants, the
issuance, sale, and delivery of the Preferred Stock, and that
all such resolutions are in full force and effect and are all
the resolutions adopted in connection with the foregoing
agreements and the transactions contemplated thereby; (C) that
the Articles have not been amended since the date of the last
amendment referred to in the certificate delivered pursuant to
clause (i)(B) above; and (D) to the incumbency and specimen
signature of each officer of the Company executing this
-14-
<PAGE>
Agreement, the Warrants, the stock certificates representing
the Preferred Stock, and any certificate or instrument
furnished pursuant hereto, and a certification by another
officer of the Company as to the incumbency and signature of
the officer signing the certificate referred to in this clause
(ii); and
(iii) such additional supporting documents and other
information with respect to the operations and affairs of the
Company as the Investors or its counsel reasonably may request.
(g) All shareholders of the Company having any preemptive,
first refusal, or other rights with respect to the issuance of the
Preferred Stock or the Warrants shall have irrevocably waived the same
in writing and copies of such waivers shall have been delivered to
Investors' counsel.
ARTICLE 5. CONDITIONS PRECEDENT
The obligation of the Company to issue and sell the Preferred Stock and
the Warrants to the Investors on the Closing Date is, at its option, subject to
the satisfaction, on or before the Closing Date, of the following conditions:
(a) All representations and warranties of the Investors
contained in Article 3 hereof shall be true and correct on the Closing
Date with the same effect as though such representations and warranties
had been made on and as of such date.
(b) All corporate and other proceedings to be taken by the
Investors in connection with the transactions contemplated hereby, and
all documents incidental thereto, shall be satisfactory in form and
substance to the Company and its counsel.
(c) The Investors shall have delivered to the Company the full
purchase price for the Preferred Stock and the Warrants to be purchased
hereunder.
ARTICLE 6. COVENANTS OF THE COMPANY
The Company covenants and agrees with the Investors that, unless waived
in accordance with Section 7.9 hereof, so long as any of the Preferred Stock is
outstanding:
SECTION 6.1 FINANCIAL STATEMENTS, REPORTS, ETC. The Company shall
furnish to the Investors:
(a) within one hundred twenty (120) days after the end of each
fiscal year of the Company, an audited balance sheet of the Company, as
of the end of such fiscal year and the related statements of income,
shareholders' equity, and changes in cash flows for such fiscal year,
prepared in accordance with generally accepted accounting principles
and certified by a firm of independent public accountants of recognized
national standing selected by the Board of Directors of the Company;
(b) within sixty (60) days after the end of each fiscal
quarter (other than the last quarter in each fiscal year) a balance
sheet of the Company, and the related statements of income,
-15-
<PAGE>
shareholders' equity, and changes in cash flows, unaudited but prepared
in accordance with generally accepted accounting principles and
certified by the Chief Financial Officer of the Company, such balance
sheet to be as of the end of such quarter and such statements of
income, shareholders' equity and changes in cash flows to be for such
quarter and for the period from the beginning of the fiscal year to the
end of such quarter, in each case with comparative statements for the
prior fiscal year;
(d) at the time of delivery of each annual financial statement
pursuant to Section 6.1(a) hereof, a certificate executed by the Chief
Financial Officer of the Company stating that such officer has caused
this Agreement, the Articles, and the Warrants to be reviewed and has
no knowledge of any default by the Company in the performance or
observance of any of the provisions of this Agreement, the Articles or
the Warrants, if such officer has such knowledge, specifying such
default and the nature thereof;
(e) at the time of delivery of each quarterly statement
pursuant to Section 6.1(b) hereof, a management narrative report
explaining all significant variances from forecasts and all significant
current developments in staffing, marketing, sales, and operations;
(f) promptly, from time to time, such other information
regarding the business, prospects, financial condition, operations,
property, or affairs of the Company as the Investors reasonably may
request.
SECTION 6.2 CORPORATE EXISTENCE. The Company shall maintain and cause
any Investment in which the Company owns a controlling interest to maintain
their respective separate corporate existences, rights, and franchises in full
force and effect.
SECTION 6.3 PROPERTIES, BUSINESS, INSURANCE. The Company shall maintain
and cause any subsidiary to maintain as to their respective properties and
businesses, with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is
customary for companies similarly situated which insurance shall be deemed by
the Company to be sufficient.
SECTION 6.4 INSPECTION, CONSULTATION, AND ADVICE. The Company shall
permit and cause any subsidiary to permit any of the Investors and such persons
as the Investors may designate, at the expense of the Company once per year, and
if more often than once per calendar year, with the additional visits at such
Investor's expense, to visit and inspect any of the properties of the Company
and any Investment, examine their books and take copies and extracts therefrom,
discuss the affairs, finances, and accounts of the Company with their officers,
employees, and public accountants and the Company hereby authorizes said
accountants to discuss with such Investors and such designees such affairs,
finances, and accounts), and consult with and advise the management of the
Company as to their affairs, finances, and accounts, all at reasonable times and
upon reasonable notice.
SECTION 6.5 RESTRICTIVE AGREEMENTS PROHIBITED. The Company shall not
become a party to any agreement which by its terms restricts the Company's
performance of this Agreement, the Articles, or the Warrants.
SECTION 6.6 TRANSACTIONS WITH AFFILIATES. Except for (a) transactions
contemplated by this Agreement, (b) transactions with the affiliated entities
listed in Section 6.6 of the Disclosure Schedule, provided that the terms of
such transactions are no less favorable to the Company than the terms available
from third parties on an arm's length basis from non-affiliated third parties,
(c) loans by shareholders up to $1,000,000 outstanding at any time, provided
that the security for such loans is limited to the real estate on which the
-16-
<PAGE>
specific construction activities financed are located and provided further that
the interest rate and terms are no less favorable than the rate and terms
available on an arm's length basis from unaffiliated third parties, or (d) as
otherwise approved by the Board of Directors, the Company shall not enter into
any transaction with any director, officer, employee, or holder or more than 5%
of the outstanding capital stock of any class or series of capital stock of the
Company, member of the family of any such person, or any corporation,
partnership, trust, or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner, or holder
of more than 5% of the outstanding capital stock thereof, except for
transactions on customary terms related to such person's employment. All
transactions with affiliates shall be reported on a quarterly basis in the
financial reports required by Section 6.1(b) hereof, including, with respect to
each transaction, the affiliate involved, the amount paid to the affiliate in
such quarter, and amounts remaining to be paid to the affiliate by the Company.
SECTION 6.7 USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Preferred Stock and the Warrants as a part of the purchase price
to acquire $2,963,084 in principal amount of the Company's Senior Subordinated
Project Financing Notes due 1998, $2,500,000 in principal amount of the
Company's Amended and Restated Senior Subordinated Project Acquisition Notes due
1998, and 21,358 shares of Series A Redeemable Preferred Stock, and expenses of
the transactions contemplated hereby. The remainder of the purchase price will
be borrowed from NationsBank.
SECTION 6.8 BOARD OF DIRECTORS MEETINGS. The Company shall use its best
efforts to ensure that meetings of the Board of Directors of the Company are
held at least four (4) times each year and at least once each quarter.
SECTION 6.9 BYLAWS. The Company shall at all times cause its Bylaws to
provide that, (a) unless otherwise required by the laws of the State of Florida,
(i) any two (2) directors and (ii) any holder or holders of at least 66% of the
outstanding shares of Common Stock or 25% of the outstanding Preferred Stock,
shall have the right to call a meeting of the Board of Directors or shareholders
and (b) the number of directors fixed in accordance therewith shall in no event
conflict with any of the terms or provisions of the Articles. The Company shall
at all times maintain provisions in its Bylaws or Articles indemnifying all
directors against liability to the maximum extent permitted under the laws of
the State of Florida.
SECTION 6.10 MAINTENANCE OF OWNERSHIP OF INVESTMENTS. The Company shall
not sell or otherwise transfer any shares of capital stock of any Investment,
except to the Company or another Investment, or permit any Investment in which
the Company owns a controlling interest, to issue, sell or otherwise transfer
any shares of its capital stock or the capital stock of any Investment except to
the Company or another Investment.
SECTION 6.11 DISTRIBUTIONS BY INVESTMENTS. The Company shall not permit
any Investment in which the Company owns a controlling interest to purchase or
set aside any sums for the purchase of, or pay any dividend, or make any
distribution on, any shares of its stock, except for dividends or other
distributions payable to the Company or another Investment in which the Company
owns a controlling interest.
SECTION 6.12 COMPLIANCE WITH LAWS. The Company shall comply with all
applicable laws, rules, regulations, and orders, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise.
SECTION 6.13 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles, consistently
applied, reflecting all financial transactions of the Company and in which, for
-17-
<PAGE>
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts, and other purposes in connection with its
business shall be made.
SECTION 6.14 EMPLOYEE STOCK PLANS. As long as the Investors shall
continue to own any of the Preferred Stock, Warrants, or Warrant Shares, the
Company shall sell shares of or grant options to purchase shares of its capital
stock to Employees, officers, and directors of and consultants to the Company
only pursuant to stock option plans or stock purchase plans which have been
adopted and approved by the Company's Board of Directors and only so long as the
Company has an option to repurchase such shares upon the termination of
employment with the Company of such Employees, officers, directors, and
consultants, and the total number of shares of Common Stock as to which the
Company may make such sales or grant such options shall not exceed 10,000
shares, such number subject to equitable adjustment for reorganizations, stock
splits, stock dividends, and like events (including shares issued or sold
pursuant to (i) any such stock option plan even though the shares were acquired
upon the exercise of stock options which were granted prior to the date hereof,
and (ii) any such stock purchase plans even though the shares acquired
thereunder were purchased prior to the date hereof). Under no circumstances
shall the total number of shares of the Company's Common Stock issued under any
such stock purchase plan, plus any shares issued or subject to issuance under
any such stock option plan, exceed 10,000 shares (such number subject to
equitable adjustment for reorganizations, stock splits, stock dividends, and
like events) at any time.
SECTION 6.15 PIGGYBACK REGISTRATION RIGHTS. If the Company at any time
proposes to register any of its securities under the Securities Act for sale to
the public, whether for its own account or for the account of other security
holders or both (except with respect to registration statements on Forms S-4 or
S-8 or another form not available for registering the Warrant Shares for sale to
the public), each such time it will give written notice to Investors of its
intention so to do. Upon the written request of any Investor received by the
Company within 10 days after the giving of any such notice by the Company, to
register such number of Warrant Shares held by such Investor specified in such
written request, the Company will cause the Warrant Shares as to which
registration shall have been so requested to be included in the securities to be
covered by the registration statement proposed to be filed by the Company, all
to the extent requisite to permit the sale or other disposition by such Investor
(in accordance with its written request) of such Warrant Shares so registered.
In the event that any registration pursuant to this Section 6.15 shall be, in
whole or in part, an underwritten public offering of Common Stock, the number of
Warrant Shares to be included in such an underwriting may be reduced if and to
the extent that the managing underwriter shall be of the opinion that such
inclusion would adversely affect the marketing of the securities to be sold by
the Company therein. In the event such a reduction is necessary, the reduction
shall be borne first by holders of common stock who are not Investors, and if a
further reduction is necessary in the judgment of the managing underwriter,
then, all Investors proposing to sell Warrant Shares and holders of warrants
issued in conjunction with the issuance of the Series A Redeemable Preferred
Stock in the offering shall bear the reduction on a pro-rata basis, based on the
number of Warrant Shares each Investor proposed to offer for sale in the
Offering, or an Investor holding a majority of the Warrant Shares may elect to
withdraw from such registration all Warrant Shares held by Investors as to which
registration was requested. Notwithstanding the foregoing provisions, the
Company may for any reason and without the consent of Investors withdraw any
registration statement referred to in this Section 6.15 without thereby
incurring any liability to any Investor.
SECTION 6.16 REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of Section 6.15 hereof to use its best efforts to
effect the registration of any Warrant Shares under the Securities Act, the
Company will, as expeditiously as possible:
-18-
<PAGE>
(a) prepare and file with the Commission a registration
statement (which shall be on Form S-1, Form S-2, any successor forms
thereto, or other form of general applicability satisfactory to the
managing underwriter selected as herein provided) with respect to such
securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period of distribution and comply with the
provisions of the Securities Act with respect to the disposition of all
Warrant Shares covered by such registration statement in accordance
with the intended method of disposition set forth in such registration
statement for such period;
(c) furnish to each Investor and to each underwriter such
number of copies of the registration statement and the prospectus
included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale
or other disposition of the Warrant Shares covered by such registration
statement;
(d) use its best efforts to register or qualify the Warrant
Shares covered by such registration statement under the securities or
"blue sky" laws of such jurisdictions as the Shareholders, or, in the
case of an underwritten public offering, the managing underwriter
reasonably shall request, provided, however, that the Company shall not
for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;
(e) use its best efforts to list the Warrant Shares covered by
such registration statement with any securities exchange or NASDAQ on
which the Common Stock of the Company is then listed or quoted;
(f) notify each selling Investor at any time when a prospectus
relating to Warrant Shares is required to be delivered under the
Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such
Shareholder, the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Warrant Shares, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the
statements therein not misleading;
(g) notify the selling Investors immediately, and confirm the
notice in writing, (1) when the registration statement becomes
effective, (2) of the issuance by the Commission of any stop order or
of the initiation, or the threatening, of any proceedings for that
purpose, (3) of the receipt by the Company of any notification with
respect to the suspension of qualification of the Warrant Shares for
sale in any jurisdiction or of the initiation, or the threatening, of
any proceedings for that purpose, and (4) of the receipt of any
comments, or requests for additional information, from the Commission
or any state regulatory authority. If the Commission or any state
regulatory authority shall enter such a stop order or order suspending
qualification at any time, the Company will promptly use its best
reasonable efforts to obtain the lifting of such order; and
-19-
<PAGE>
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders as soon as reasonably practicable, but not
later than 15 months after the effective date of the registration
statement, an earnings statement covering a period of at least 12
months beginning after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
For purposes hereof, the period of distribution of Warrant Shares in a
firm commitment underwritten public offering shall be deemed to extend until
each underwriter has completed the distribution of all securities purchased by
it, and the period of distribution of Warrant Shares in any other registration
shall be deemed to extend until the earlier of the sale of all Warrant Shares
covered thereby or 180 days after the effective date thereof.
In connection with each registration hereunder, each Shareholder will
furnish to the Company in writing such information with respect to it as a
stockholder as reasonably shall be necessary in order to assure compliance with
federal and applicable state securities laws.
In connection with each registration pursuant to Section 6.15 hereof
covering an underwritten public offering, the Company and each Investor agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
SECTION 6.17 EXPENSES. All reasonable expenses incurred by the Company
in complying with Section 6.15 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of
insurance, and the reasonable fees and disbursements of one counsel for the
sellers of Warrant Shares , but excluding any Selling Expenses, are called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Warrant Shares are called "Selling Expenses".
(a) The Company shall pay all Registration Expenses
attributable to the Warrant Shares of Investors included in the
Registration in connection with each registration statement under
Section 6.15 hereof.
(b) All Selling Expenses in connection with each registration
statement under Section 6.15 hereof shall be borne by the Investor and
any other selling stockholder in proportion to the number of shares
sold by Investor, or by such other selling stockholders.
ARTICLE 7. MISCELLANEOUS
SECTION 7.1 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations, and warranties made herein or in the Warrants, or any
certificate or instrument delivered to the Investors pursuant to or in
connection with this Agreement and the Warrants shall survive the execution and
delivery of this Agreement, the Warrants, and the closing of the transactions
contemplated hereby and thereby.
SECTION 7.2 BROKERAGE. Each party hereto will indemnify and hold
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 7.3 PARTIES IN INTEREST. All representations, covenants, and
agreements contained in this Agreement by or on behalf of any of the parties
-20-
<PAGE>
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants, and agreements
benefiting the Investors shall inure to the benefit of any and all subsequent
holders from time to time of the Preferred Stock or the Warrants.
Notwithstanding the foregoing, the right to purchase the Preferred Stock and the
Warrants hereunder pursuant to Section 1.1 may not be sold, transferred, or
otherwise assigned except to an affiliate of the Investors, a successor to
substantially all the business and assets of the Investors.
SECTION 7.4 NOTICES. All notices, requests, consents, and other
communications required or permitted hereunder shall be in writing and shall be
effective when delivered in person or by a courier service, postage prepaid,
addressed as follows:
(a) if to the Company:
Transeastern Properties of South Florida, Inc.
3300 University Drive
Coral Springs, FL 33065,
Attention: Arthur J. Falcone, President
with a copy (which shall not constitute notice) to:
John T. Kinsey, P.A.
2300 Corporate Blvd.
Two Corporate Court, Suite 112
Boca Raton, FL 33431,
Attention: John Kinsey, Esq.
(b) if to the Investors:
At the address of such Investor on Schedule 1 hereto.
or, in any such case, at such other address or addresses as shall have
been furnished in writing by such party to the others.
SECTION 7.5 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, irrespective of
the choice of law provisions thereof.
SECTION 7.6 ENTIRE AGREEMENT. This Agreement, including the Schedules
and Exhibits hereto, and the other documents delivered pursuant hereto
constitute the full and entire agreement of the parties with respect to the
subject matter hereof and thereof. All Schedules and Exhibits hereto are hereby
incorporated herein by reference.
SECTION 7.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-21-
<PAGE>
SECTION 7.8 AMENDMENTS. This Agreement may not be amended or modified,
and no provisions hereof may be waived, without the written consent of the
Company and the holders of at least two-thirds of the outstanding shares of
Preferred Stock and Warrant Shares.
SECTION 7.9 SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority to
the extent possible, it shall be modified in such manner as to be valid, legal,
and enforceable but so as to most nearly retain the intent of the parties and,
if such modification is not possible, such provision shall be severed from this
Agreement, and in either case, the validity and enforceability of any other
provision and of the entire Agreement shall not be affected thereby.
SECTION 7.10 TITLES AND SUBTITLES. The title and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
SECTION 7.11 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "affiliate" shall mean, with respect to any person, any person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such other person.
(b) "person" shall mean an individual, corporation, trust, partnership,
joint venture, limited liability company, unincorporated organization,
government agency, or any agency or political subdivision thereof, or other
entity.
-22-
<PAGE>
+ IN WITNESS WHEREOF, the Company and the Investors have executed this
Agreement as of the day and year first above written.
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
By:
Arthur J. Falcone, President
Attest:
Philip Cucci, Jr., Secretary
INVESTORS:
[SIGNATURE BLANKS TO FOLLOW]
-23-
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
TO
SERIES B REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
INVESTOR NAME AND ADDRESS PREFERRED SHARES WARRANT SHARES AGGREGATE PURCHASE PRICE
PURCHASED PURCHASED
<S> <C> <C> <C>
Daniel J. Andreacci 250 550 $25,000.00
8649 - NW 43 Ct.
Coral Springs, Florida 33065
(305) 344-4800
Taxpayer ID No.: ###-##-####
Brancaleone Family Partnership 4,000 8,792 $400,000.00
Jesse Brancaleone
6661 Royal Palm Blvd.
Margate, Florida 33063
(305) 971-5986
Taxpayer ID No.: ###-##-####
Albert Bruno 1,000 2,198 $100,000.00
6915 Ocala Lane
Parkland, Florida 33067
(305) 755-1733
Taxpayer ID No.: ###-##-####
Les Campbell 250 550 $25,000.00
12644 Classic Drive
Coral Springs, Florida 33071
(305) 346-6446
Taxpayer ID No.: ###-##-####
Anthony Ciabattoni 2,000 4,396 $200,000.00
30662 Hunt Club Drive
San Juan Capistrano, California 92675
(714) 240-1022
Taxpayer ID No.: ###-##-####
Phillip J. Ciabattoni 300 659 $30,000.00
3 E. 40th Street, Apt. 1
Wilmington, Delaware 19802
(302) 762-7398
Taxpayer ID No.: ###-##-####
Otto Claricurzio 250 550 $25,000.00
106 Peoples Way
Hockessin Valley Falls
Hockessin, Delaware 19707
(302) 234-9431
Taxpayer ID No.: ###-##-####
Schedule 1 page 1 of 2
<PAGE>
Audrey Cohen 1,000 2,198 $100,000.00
16 The Hollows
Muttontown, New York 11732
(516) 922-1746
Taxpayer ID No.: ###-##-####
Neil Eisner 250 550 $25,000.00
9911 NW 48th Court
Coral Springs, Florida 33076
(305) 344-9246
Taxpayer ID No.: ###-##-####
Robert J. Falcone, Trustee of the Robert J. 16,900 37,146 $1,690,000.00
Falcone Rev. Living Trust 9/1/93
35 Riverview Terrace
Smithtown, New York 11287
(516) 499-9500
Taxpayer ID No.: ###-##-####
Kenneth Ginsberg 1,500 3,297 $150,000.00
5 Mohegan Place
Huntington Station, New York 11746
(516) 271-2636
Taxpayer ID No.: ###-##-####
David W. Gove 250 550 $25,000.00
27661 Nopales
Mission Viejo, California 92692
(714) 770-7403
Taxpayer ID No.: ###-##-####
Larry T. Nicholson 250 550 $25,000.00
6658 Thornhill Court
Boca Raton, Florida 33433
(407) 368-3529
Taxpayer ID No.: ###-##-####
Bruce Phillips, M.D. and Kim Phillips 600 1,319 $60,000.00
JTWROS
5800 NW 22nd Avenue
Boca Raton, Florida 33496
(407) 241-1480
Taxpayer ID No.: ###-##-####
Anthony Prezzamolo 1,000 2,198 $100,000.00
1736 NW 124 Way
Coral Springs, Florida 33071
(305) 752-1646
Taxpayer ID No.: ###-##-####
Ray Stromback 200 440 $20,000.00
1759 Modoc
Orange, California 92667
(714) 998-9603
Taxpayer ID No.: ###-##-####
Schedule 1 page 2 of 2
<PAGE>
</TABLE>
SCHEDULE 2
TO
SERIES B REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
DISCLOSURE SCHEDULE
<PAGE>
SCHEDULE 3
TO
SERIES B REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
ACCREDITED INVESTOR CERTIFICATES
<PAGE>
EXHIBIT A
TO
SERIES B REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
FORM OF WARRANT
<PAGE>
EXHIBIT B
TO
SERIES B REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
OPINION OF COMPANY COUNSEL
<PAGE>
EXHIBIT C
TO
SERIES B REDEEMABLE PREFERRED STOCK
AND
WARRANT PURCHASE AGREEMENT
AMENDED AND RESTATED ARTICLES OF INCORPORATION
THIS WARRANT HAS BEEN, AND THE WARRANT SHARES ISSUABLE UPON EXERCISE
HEREOF WILL BE, ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT") AND OF THE FLORIDA INVESTOR PROTECTION ACT (THE "FLORIDA ACT").
SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, OR TRANSFERRED OTHER
THAN (I) PURSUANT TO AN EFFECTIVE REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE 1933 ACT AND THE FLORIDA ACT, AND (II) UPON RECEIPT
BY THE ISSUER OF EVIDENCE SATISFACTORY TO IT OF COMPLIANCE WITH THE
1933 ACT, THE FLORIDA ACT, AND THE APPLICABLE SECURITIES LAWS OF ANY
OTHER JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION
OF COUNSEL SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE
LAWS.
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
Original Issue Date: October 13, 1995 Warrant No. 94B-25
WARRANT TO PURCHASE COMMON STOCK
THIS CERTIFIES THAT IN CONNECTION WITH, and as an inducement to BRUCE
R. JOHNSON AND JODY A. JOHNSON AS TENANTS, BY THE ENTIRETY (the "Holder"), to
consummate the transactions contemplated by that certain Series B Redeemable
Preferred Stock and Warrant Purchase Agreement, dated December 6, 1994 among
Holder, TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC., a Florida corporation
(the "Corporation"), and certain other parties identified therein (the "Purchase
Agreement"), Holder is entitled to purchase, on the terms and conditions
hereinafter set forth, Three Thousand Eight Hundred and Forty-Seven shares of
the Common Stock, $.01 par value, of the Corporation (the "Common Stock"), at a
price $.01 per share (the "Exercise Price"), such number of shares and such
Exercise Price being subject to adjustment upon the occurrence of the
contingencies set forth in this Warrant. Each share of Common Stock as to which
this Warrant is exercisable is a "Warrant Share" and all such shares are
collectively referred to as the "Warrant Shares").
SECTION 1. REGISTRATION OF WARRANT. This Warrant is one of a series of
Warrants (collectively, the "Transaction Warrants") issued in connection with
the transaction contemplated by the Purchase Agreement. Each Transaction Warrant
contains identical terms except for the number of Warrant Shares and the
distinctive Warrant number. The Corporation shall register this Warrant, upon
records to be maintained by the Corporation for that purpose, in the name of the
record Holder of this Warrant from time to time. The Corporation shall deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise or any distribution to the Holder hereof, and for all
other purposes, and the Corporation shall not be affected by any notice to the
contrary.
SECTION 2. EXERCISE OF WARRANT.
2.1. TIME OF EXERCISE. This Warrant may be exercised in whole
or in part, at any time or from time to time prior to 5:00 p.m., Eastern
Standard Time, December 31, 2003, unless extended as hereinafter provided. The
last day this Warrant can be exercised is hereinafter referred to as the
"Expiration Date."
2.1. MANNER OF EXERCISE. In order to exercise this Warrant,
the registered Holder hereof shall deliver to the Corporation at its principal
office at 3300 University Drive, Coral Springs, Florida 33065, Attention:
President, or at such other office as shall be designated by the Corporation in
writing pursuant to Section 12 hereof on or before 5:00 p.m. Eastern Standard
Time on the Expiration Date, (i) a written notice of such registered Holder's
-1-
<PAGE>
election to exercise this Warrant (the "Exercise Notice"), which notice may be
in the form of the Notice of Exercise attached hereto, properly executed and
completed by the registered Holder or an authorized officer thereof, (ii) a
check payable to the order of the Corporation, in an amount equal to the product
of the Exercise Price multiplied by the number of Warrant Shares specified in
the Exercise Notice, and (iii) this Warrant (the items specified in (i), (ii),
and (iii) are collectively the "Exercise Materials"). Upon timely receipt of the
Exercise Materials, the Corporation shall, as promptly as practicable, and in
any event within ten (10) business days after its receipt of the Exercise
Materials, execute or cause to be executed and delivered to such registered
Holder a certificate or certificates representing the number of Warrant Shares
specified in the Exercise Notice, together with cash in lieu of any fraction of
a share, as hereinafter provided, and, (x) if the Warrant is exercised in full,
a copy this Warrant marked "Exercised" or (y) if the Warrant is partially
exercised, a copy this Warrant marked "Partially Exercised" together with a new
Warrant on the same terms for the unexercised balance of the Warrant Shares. All
of the certificates evidencing Warrant Shares shall bear the legend set forth in
Section 7.2 hereof. The stock certificate or certificates shall be registered in
the name of the registered Holder of this Warrant or such other name as shall be
designated in the Exercise Notice. The date on which the Warrant shall be deemed
to have been exercised (the "Exercise Date"), and the date the person in whose
name any certificate for Warrant Shares is issued shall be deemed to have become
the holder of record of such shares, shall be the date the Corporation receives
the Exercise Materials, irrespective of the date of delivery of a certificate or
certificates evidencing the Warrant Shares, except that, if the date on which
the Exercise Materials are received by the Corporation is a date when the stock
transfer books of the Corporation are closed, the Exercise Date shall be the
date the Corporation receives the Exercise Materials, and the date such person
shall be deemed to have become the holder of the Warrant Shares shall be the
next succeeding date on which the stock transfer books are open.
SECTION 3. ADJUSTMENTS TO WARRANT SHARES. The number of Warrant Shares
issuable upon the exercise hereof shall be subject to adjustment in certain
cases as set forth in this Section 3.
3.1. CONSOLIDATION, MERGER, OR SALE. In the event the
Corporation is a party to a consolidation, share exchange, or merger, or the
sale of all or substantially all of the assets of the Corporation to, any
person, or in the case of any consolidation or merger of another corporation
into the Corporation in which the Corporation is the surviving corporation, and
in which there is a reclassification or change of the shares of Common Stock of
the Corporation, this Warrant shall after such consolidation, share exchange,
merger, or sale be exercisable for the kind and number of securities or amount
and kind of property of the Corporation or the corporation or other entity
resulting from such share exchange, merger, or consolidation, or to which such
sale shall be made, as the case may be (the "Successor Corporation"), to which a
holder of the number of shares of Common Stock deliverable upon the exercise
(immediately prior to the time of such consolidation, share exchange, merger, or
sale) of this Warrant would have been entitled upon such consolidation, share
exchange, merger, or sale; and in any such case appropriate adjustments shall be
made in the application of the provisions set forth herein with respect to the
rights and interests of the registered Holder of this Warrant, such that the
provisions set forth herein shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to the number and kind of securities
or the type and amount of property thereafter deliverable upon the exercise of
this Warrant. The above provisions shall similarly apply to successive
consolidations, share exchanges, mergers, and sales. Any adjustment required by
this Section 3.1 because of a consolidation, share exchange, merger, or sale
shall be set forth in an undertaking delivered to the registered Holder of this
Warrant and executed by the Successor Corporation which provides that the Holder
of this Warrant shall have the right to exercise this Warrant for the kind and
number of securities or amount and kind of property of the Successor Corporation
or to which the holder of a number of shares of Common Stock deliverable upon
exercise (immediately prior to the time of such consolidation, share exchange,
merger, or sale) of this Warrant would have been entitled upon such
consolidation, share exchange, merger, or sale. Such undertaking shall also
-2-
<PAGE>
provide for future adjustments to the number of Warrant Shares and the Exercise
Price in accordance with the provisions set forth in Section 3 hereof.
3.2. ADJUSTMENTS FOR STOCK DIVIDENDS AND SPLITS. In the event
the Corporation should at any time, or from time to time after the Original
Issue Date, fix a record date for the effectuation of a stock split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock, or securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon exercise or
exercise thereof), then, as of such record date (or the date of such dividend,
distribution, split, or subdivision if no record date is fixed), the number of
Warrant Shares issuable upon the exercise hereof shall be proportionately
increased and the Exercise Price shall be appropriately decreased by the same
proportion as the increase in the number of outstanding Common Stock Equivalents
of the Corporation resulting from the dividend, distribution, split, or
subdivision. Notwithstanding the preceding sentence, no adjustment shall be made
to decrease the Exercise Price below $.01 per Share.
3.3. REVERSE STOCK SPLITS. In the event the Corporation should
at any time or from time to time after the Original Issue Date, fix a record
date for the effectuation of a reverse stock split, or a transaction having a
similar effect on the number of outstanding shares of Common Stock of the
Corporation, then, as of such record date (or the date of such reverse stock
split or similar transaction if no record date is fixed), the number of Warrant
Shares issuable upon the exercise hereof shall be proportionately decreased and
the Exercise Price shall be appropriately increased by the same proportion as
the decrease of the number of outstanding Common Stock Equivalents resulting
from the reverse stock split or similar transaction.
3.4. RECLASSIFICATION. In the event the Corporation should at
any time or from time to time after the Original Issue Date, fix a record date
for a reclassification of its Common Stock, then, as of such record date (or the
date of the reclassification if no record date is set), this Warrant shall
thereafter be convertible into such number and kind of securities as would have
been issuable as the result of such reclassification to a holder of a number of
shares of Common Stock equal to the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such reclassification, and the
Exercise Price shall be unchanged.
3.5. SALES OR DEEMED SALES OF CORPORATION SECURITIES. If and
whenever the Corporation shall, prior to a public offering, issue or sell any
shares of Common Stock or any equity or debt securities of the Corporation which
are convertible into or exchangeable for shares of Common Stock in a transaction
in which the consideration received by the Corporation (including the cash
consideration for any non-convertible securities which were issued together with
a security convertible or exchangeable for Common Stock) consists SOLELY of cash
in the aggregate not to exceed $5,000,000, then, forthwith upon such issuance or
sale, the number of Warrant Shares issuable upon the exercise of this Warrant
shall be adjusted to a number which is equal to the product of (i) the number of
Warrant Shares issuable upon exercise hereof on the Original Issue Date
multiplied by (ii) a fraction, the numerator of which is the number of shares of
Fully Diluted Common Stock immediately after such issuance or sale and the
denominator of which is the number of shares of Fully Diluted Common Stock
immediately before such issuance or sale. As used herein, the term "Fully
Diluted Common Stock" means the outstanding shares of Common Stock assuming the
conversion into Common Stock of all then outstanding convertible securities (at
-3-
<PAGE>
the then effective conversion prices), and the exercise of all then outstanding
rights, options, and warrants, excluding the Transaction Warrants.
3.6. NO DILUTION OR IMPAIRMENT. The Corporation will not, by
amendment of its Articles of Incorporation or through reorganization,
consolidation, merger, dissolution, issue, or sale of securities, sale of assets
or any other voluntary action, void or seek to avoid the observance or
performance of any of the terms of the Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Holder against dilution or other impairment. Without limiting the generality of
the foregoing, the Corporation (a) will not create a par value of any share of
stock receivable upon the exercise of the Warrant above the amount payable
therefor upon such exercise, and (b) will take all such action as may be
necessary or appropriate in order that the Corporation may validly and legally
issue fully paid and non-assessable shares upon the exercise of the Warrant.
3.7. NOTICE OF ADJUSTMENT. When any adjustment is required to
be made in the number or kind of shares purchasable upon exercise of the
Warrant, or in the Exercise Price, the Corporation shall promptly notify the
Holder of such event and of the number of shares of Common Stock or other
securities or property thereafter purchasable upon exercise of the Warrants and
of the Exercise Price, together with the computation resulting in such
adjustment.
SECTION 4. COVENANTS AS TO COMMON STOCK. The Corporation covenants and
agrees that all Warrant Shares which may be issued will, upon issuance, be
validly issued, fully paid and non-assessable. The Corporation further covenants
and agrees that the Corporation will at all times have authorized and reserved,
free from preemptive rights, a sufficient number of shares of its Common Stock
to provide for the exercise of the Warrant in full.
SECTION 5. NO STOCKHOLDER RIGHTS. This Warrant shall not entitle the
Holder hereof to any voting rights or other rights as a stockholder of the
Corporation.
SECTION 6. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE HOLDER .
The registered Holder of this Warrant, by acceptance of this Warrant represents,
warrants, and covenants to the Corporation as follows:
(a) The Holder is acquiring this Warrant, and agrees that the
exercise of this Warrant and the acceptance of a certificate for
Warrant Shares shall constitute its representation that the Warrant
Shares are being acquired, for its own account for investment and not
with a view to the distribution thereof, subject, however, to Holder's
right to transfer this Warrant and the Warrant Shares in accordance
with and subject to the restrictions on such transfer set forth herein.
(b) The Holder understands that this Warrant and the Warrant
Shares have not been registered under the Securities Act of 1933, as
amended (the "Securities Act") or state securities laws, by reason of
their issuance in a transaction exempt from the registration
requirements of the Securities Act and applicable state securities
laws. The Holder acknowledges being informed that this Warrant and the
Warrant Shares must be held indefinitely unless this Warrant or the
Warrant Shares are registered for sale by such Holder under the
Securities Act and applicable state securities laws or an exemption
from registration is available. The Holder understands that a sale of
the Warrant Shares made in reliance upon Rule 144 promulgated under the
Securities Act ("Rule 144") can only be made in accordance with the
terms and conditions of Rule 144 and further understands that in the
-4-
<PAGE>
event that the exemption from registration provided by such Rule is not
available, compliance with some other exemption under the Securities
Act will be required in the absence of registration.
(c) The Holder agrees not to sell, transfer, pledge or
hypothecate this Warrant or any Warrant Shares unless a Registration
statement is effective for this Warrant or Warrant Shares under the
Securities Act or, in the written opinion of such Holder's counsel (a
copy of which opinion shall be addressed to and delivered to the
Corporation, and which counsel and which opinion shall be reasonably
satisfactory to the Corporation), such transaction will not result in
any violation of the registration requirements of the Securities Act or
any applicable state securities law. The Corporation may not, and may
instruct its transfer agent not to, transfer this Warrant or the
Warrant Shares unless the Corporation has been advised by its counsel
that the Holder has complied with the provisions of this Warrant and
applicable securities laws relating to the proposed transfer.
SECTION 7. TRANSFER OF SECURITIES.
7.1. RESTRICTION ON TRANSFER. This Warrant and the Warrant
Shares and any shares of capital stock received in respect thereof, whether by
reason of a stock split or share reclassification thereof, a stock dividend
thereon, or otherwise, shall not be transferable except upon the conditions
specified in Section 6 and this Section 7, which conditions are intended to
ensure compliance with the provisions of the Securities Act and applicable State
securities laws with respect to the transfer of such securities. The Holder of
this Warrant, by acceptance of this Warrant, agrees to be bound by the
provisions of Section 6 and this Section 7 and to indemnify and hold harmless
the Corporation against any loss or liability arising from the disposition of
this Warrant or the Warrant Shares issuable upon exercise hereof or any interest
in either thereof in violation of the provisions of this Warrant.
7.2. RESTRICTIVE LEGEND. Each certificate for the Warrant
Shares and any shares of capital stock received in respect thereof, whether by
reason of a stock split or share reclassification thereof, a stock dividend
thereon or otherwise, and each certificate for any such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions hereof) be stamped or otherwise imprinted with a legend in
substantially the following form:
Legend for Warrant Shares or other shares of capital stock:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
BEEN ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT") AND THE FLORIDA
INVESTOR PROTECTION ACT (THE "FLORIDA ACT") THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, OR TRANSFERRED OTHER THAN (I) PURSUANT TO AN
EFFECTIVE REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT AND
THE FLORIDA ACT, AND (II) UPON RECEIPT BY THE ISSUER OF EVIDENCE
SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933 ACT, THE FLORIDA ACT,
AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION. THE
ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY
TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
7.3. TRANSFER OF WARRANTS. Subject to the restrictions on
transfer specified in Section 6 and this Section 7, the Warrant is transferable
in accordance with this Warrant, in whole or in part, at the agency or office of
the Corporation referred to in Section 1 hereof, by the Holder hereof in person
or by a duly authorized attorney, upon surrender of this Warrant, with the Form
of Assignment attached hereto duly executed by the then registered Holder of
this Warrant or its duly authorized agent. The Corporation or its transfer
agents shall register the transfer of any Warrants transferred in compliance
with Section 6 and this Section 7 upon records to be maintained for that
purpose, upon surrender of this Warrant. Upon any such Registration of transfer,
-5-
<PAGE>
a new Warrant substantially in the form of this Warrant evidencing the Warrant
so transferred shall be issued to the transferee.
SECTION 8. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANT. If this
Warrant is lost, stolen, mutilated, or destroyed, the Corporation shall issue a
new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated, or destroyed, provided the registered Holder hereof shall deliver a
lost warrant certificated in customary form, including indemnification of the
Corporation.
SECTION 9. FRACTIONAL WARRANT SHARES. The Corporation shall not be
required to issue any fractions of Warrant Shares upon exercise of this Warrant,
but the Corporation shall pay cash in respect of any fractional interest in a
Warrant Share which would otherwise be issuable in an amount equal to the same
fraction of the fair market value per share of the Common Stock on the day of
the exercise, as reasonably determined by the Board of Directors of the
Corporation.
SECTION 10. NOTICE. All notices, requests, demands, and other
communications required or permitted under this Warrant and the transactions
contemplated herein shall be in writing and shall be deemed to have been duly
given, made, and received when personally delivered the day after deposited with
a recognized national overnight delivery service prior to its dead-line for
receiving packages for next day delivery or upon the fifth day after deposited
in the United States registered or certified mail with postage prepaid, return
receipt requested, in each case addressed as set forth below:
If to the Corporation: Transeastern Properties of South Florida, Inc.
3300 University Drive
Coral Springs, Florida 33065
Attention: President
If to the Holder hereof, to the address of such Holder appearing on the
books of the Corporation.
SECTION 11. CAPTIONS, SECTION, HEADINGS. Captions and section headings
used herein are for convenience only, and are not a part of this Warrant and
shall not be used in construing it.
SECTION 12. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws in the State of Florida, irrespective of
the choice of law provisions.
IN WITNESS WHEREOF, TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC., has
caused this Warrant to be executed in its name by its duly authorized officers
under its corporate seal, and to be dated as of the date first above written.
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
By:
Arthur J. Falcone, President
ATTEST:
Philip Cucci, Jr., Secretary
-6-
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of unexercised Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________ the attached Warrant to purchase the number
of full shares of Common Stock, $____ par value, of Transeastern Properties of
South Florida, Inc., issuable upon exercise of said Warrant, and appoints
________________, Attorney, to transfer such Warrant on the books of
Transeastern Properties of South Florida, Inc., with full power of substitution
in the premises.
Dated:______________________
[Signature]
_______________________________________
_______________________________________
[Address]
Signature guaranteed by a member of a national securities exchange or
national bank:
--------------------------
NOTICE
The signature above must correspond to the name as written upon the
fact of the within Warrant in every particular, without alteration or
enlargement or any change whatsoever.
<PAGE>
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of Warrant]
To: TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
The undersigned registered Holder of the attached Warrant hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder, the
full number of whole shares of Common Stock, $____ par value, of Transeastern
Properties of South Florida, Inc., issuable upon exercise of said Warrant and
hereby surrenders said Warrant and delivers to Transeastern Properties of South
Florida, Inc., a check in the amount of $_________ representing the aggregate
Exercise Price for such shares. The undersigned herewith requests that the
certificates for such shares be issued in the name of, and delivered to the
undersigned, whose address is _________________________________ and social
security or tax identification number is ______________.
Dated:
NOTICE
The signature above must correspond to the name as written upon the
fact of the within Warrant in every particular, without alteration or
enlargement or any change whatsoever.
- --------------------------------------------------------------------------------
COMMON STOCK
PURCHASE AGREEMENT
AMONG
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.,
ARTHUR J. FALCONE,
EDWARD W. FALCONE,
PHILIP CUCCI, JR.,
AND
THE SEVERAL INVESTORS NAMED IN SCHEDULE 1
Dated as of April 15, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. THE COMMON STOCK 1
Section 1.1. Purchase and Sale of Common Stock. 1
Section 1.2. Issuance of Warrants. 1
Section 1.3. Closing. 1
Section 1.4. Related Transactions. 2
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
FOUNDERS 2
Section 2.1. Organization, Qualifications and Corporate Power 2
Section 2.2. Authorization of Agreements, Etc. 2
Section 2.3. Validity. 3
Section 2.4. Authorized Capital Stock. 3
Section 2.5. Litigation; Compliance with Law. 4
Section 2.6. Proprietary Information of Third Parties. 4
Section 2.7. Title to Properties 5
Section 2.8. Leasehold Interests. 6
Section 2.9. Insurance. 6
Section 2.10. Taxes. 6
Section 2.11. Other Agreements. 7
Section 2.12. Patents, Trademarks, Etc. 7
Section 2.13. Loans and Advances. 7
Section 2.14. Assumption, Guaranties, Etc. of Indebtedness of Other
Persons. 8
Section 2.15. Governmental Approvals. 8
Section 2.16. Financial Statements. 8
Section 2.17. Absence of Undisclosed Liabilities. 8
Section 2.18. Absence of Changes. 9
Section 2.19. Employee Benefit Plans. 9
Section 2.20. Disclosure. 10
Section 2.21. Brokers. 10
Section 2.22. Transactions with Affiliates. 11
Section 2.23. Employees. 11
Section 2.24. Foreign Corrupt Practices Act. 11
Section 2.25. Environmental Regulations. 11
Section 2.26. Disclosure. 12
ARTICLE 3. REPRESENTATION AND WARRANTIES OF THE INVESTORS 12
ARTICLE 4. CONDITIONS PRECEDENT TO THE PURCHASE OF THE COMMON
STOCK AND WARRANTS BY INVESTORS 13
ARTICLE 5. CONDITIONS PRECEDENT 14
ARTICLE 6. COVENANTS OF THE COMPANY 15
Section 6.1. Financial Statements, Reports, Etc. 15
Section 6.2. Corporate Existence. 15
Section 6.3. Properties, Business, Insurance. 15
-i-
<PAGE>
Section 6.4. Inspection, Consultation, and Advice. 16
Section 6.5. Restrictive Agreements Prohibited. 16
Section 6.6. Transactions with Affiliates. 16
Section 6.7. Use of Proceeds. 16
Section 6.8. Board of Directors Meetings. 16
Section 6.9. Bylaws. 16
Section 6.10. Maintenance of Ownership of Investments. 17
Section 6.11. Distributions by Investments. 17
Section 6.12. Compliance with Laws. 17
Section 6.13. Keeping of Records and Books of Account. 17
Section 6.14. Employee Stock Plans. 17
Section 6.15. Piggyback Registration Rights. 17
Section 6.16. Registration Procedures. 18
Section 6.17. Expenses. 19
ARTICLE 7. MISCELLANEOUS 20
Section 7.1. Survival of Agreements. 20
Section 7.2. Brokerage. 20
Section 7.3. Parties in Interest. 20
Section 7.4. Notices. 20
Section 7.5. Governing Law. 21
Section 7.6. Entire Agreement. 21
Section 7.7. Counterparts. 21
Section 7.8. Amendments. 21
Section 7.9. Severability. 21
Section 7.10. Titles and Subtitles. 21
Section 7.11. Certain Defined Terms. 21
-ii-
<PAGE>
CROSS REFERENCE OF DEFINED TERMS
TERM SECTION
affiliate Section 7.11
AJF Preamble
Agreement Preamble
Articles Section 2.4(d)
Closing Section 1.3
Closing Date Section 1.3
Common Stock Background
Company Preamble
Company Benefit Plans Section 2.19(a)
Contracts Section 2.11
Cucci Preamble
Disclosure Schedule Article 2
EWF Preamble
Employees Section 2.19(a)
Environmental Permits Section 2.25(e)
ERISA Section 2.19(a)(i)
Financial Statements Section 2.16
Founder Preamble
General Partnership Interest Section 2.1(b)
Hazardous Materials Section 2.25(g)
Intellectual Property Section 2.12
Investment Section 2.1(b)
Investor Preamble
Memorandum Section 2.7(a)
person Section 7.11
Real Property Section 2.7(a)
Registration Expenses Section 6.17
Selling Expenses Section 6.17
Shareholders Agreement Section 2.4(f)
Warrants Section 1.2
Warrant Shares Section 1.3
-iii-
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 1 Common Stock Purchased
Schedule 2 Disclosure Schedule
Schedule 3 Accredited Investor Certificates
Exhibit A Form of Warrant Agreement
Exhibit B Opinion of Company Counsel
Exhibit C Amended and Restated Articles of Incorporation
-iv-
<PAGE>
COMMON STOCK
PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
as of April 15, 1996, among TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC., a
Florida corporation (the "Company"), ARTHUR J. FALCONE, a resident of the State
of Florida ("AJF"), EDWARD W. FALCONE, a resident of the State of Florida
("EWF"), PHILIP CUCCI, JR., a resident of the State of Florida ("Cucci"), and
the several persons named in the attached SCHEDULE 1 (such persons are
hereinafter referred to individually as an "Investor," and, collectively as the
"Investors"). AJF, EWF, and Cucci are sometimes hereinafter referred to
individually as a "Founder" and collectively as the "Founders."
BACKGROUND
A. The Investors desire to purchase an aggregate of 39,223 shares of the
Common Stock of the Company, par value $.01 (the "Common Stock"), at a
price of $76.49 per share, on the terms and subject to the conditions set
forth in this Agreement.
B. The Company desires to obtain additional equity capital through the
issuance and sale to the Investors of the Common Stock, on the terms and
subject to the conditions set forth in this Agreement. The Founders are the
controlling shareholders of the Company and will receive a direct benefit
from the issuance and sale by the Company of the Common Stock.
AGREEMENT
For and in consideration of the premises and the mutual covenants and
agreements contained in this Agreement and for other good and valuable
consideration, the receipt and legal sufficiency of which is hereby
acknowledged, the parties hereby agree:
ARTICLE 1. THE COMMON STOCK
SECTION 1.1. PURCHASE AND SALE OF COMMON STOCK. The Company agrees to issue
and sell to each Investor, and each Investor agrees to purchase from the
Company, the number of shares of Common Stock set forth opposite the name of
such Investor on SCHEDULE 1 hereto under the caption "Common Stock Purchased" at
a purchase price of $76.49 per share.
SECTION 1.2. ISSUANCE OF WARRANTS. The Company agrees to issue and deliver
to each Investor, a warrant (the "Warrant") which may become exercisable for
Common Stock at the time of the Company's initial public offering. Each Warrant
shall be substantially in the form of EXHIBIT A attached hereto.
SECTION 1.3. CLOSING. The closing of the purchase and delivery of the sale
of the Common Stock shall take place at the offices of the Company, 3300
University Drive, Coral Springs, Florida 33065, at 10:00 a.m., Eastern Standard
Time, on April 15, 1996, or at such other location, date, and time as may be
agreed upon between the Investors and the Company (such closing being called the
"Closing" and such date and time being called the "Closing Date"). At the
Closing, the Company shall issue and deliver to each Investor a stock
certificate or certificates in definitive form, registered in the name of each
Investor, representing the Common Stock being purchased by each Investor and the
right to purchase Warrant Shares on the terms set forth in the Warrant. As
payment in full for the Common Stock, and against delivery of the certificates
evidencing the Common Stock purchased, on the Closing Date, each
-1-
<PAGE>
Investor shall deliver to the Company a cashier's check payable to the order of
the Company, in the amount set forth opposite the name of such Investor on
SCHEDULE 1 under the heading "Aggregate Purchase Price," or shall transfer such
sum to an account designated in writing by the Company by wire transfer.
SECTION 1.4. RELATED TRANSACTIONS. At the Closing, the Company and the
Founders shall deliver (i) a certificate with respect to the matters described
in Section 4(f) hereof, and (ii) the opinion of Balboni Ashley & Schoenberg LLC,
in substantially the form of EXHIBIT B hereto.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE FOUNDERS
For the purpose of inducing the Investors to purchase the Shares, the
Company and each Founder represents and warrants to each Investor that, except
as otherwise set forth in the Disclosure Schedule attached hereto as SCHEDULE 2
(the "Disclosure Schedule") by means of an explicit reference to the particular
representation or warranty as to which exception is taken, which in each case
shall constitute the sole representation and warranty as to which such exception
shall apply:
SECTION 2.1. ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER
(a) The Company is a corporation duly incorporated, validly existing,
and in good standing under the laws of the State of Florida and is duly
licensed or qualified to transact business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification. The Company has the corporate
power and authority to (i) own and hold its properties and carry on its
business as now conducted and as proposed to be conducted, (ii) execute,
deliver, and perform each of this Agreement, (iii) issue, sell, and deliver
the Common Stock, and (iv) issue and deliver the Warrants and the Warrant
Shares issuable upon exercise of the Warrants.
(b) Section 2.1(b) of the Disclosure Schedule contains a true and
correct list of (i) each corporation some or all of the securities of which
are held by the Company (an "Investment"), indicating with respect to each
Investment, the number and type of securities outstanding and the number
and type of securities held by the Company, and (ii) each general or
limited partnership owned in whole or in part by the Company (a "General
Partnership Interest"). Except for Investments and General Partnership
Interests listed on Section 2.1(b) of the Disclosure Schedule, the Company
does not (i) own of record or beneficially, directly or indirectly, (A) any
shares of capital stock or securities convertible into capital stock of any
corporation, (B) any debt securities of any corporation, or (C) any
participating interest in or any indebtedness of any partnership, joint
venture, limited liability company, or other non-corporate business
enterprise or (ii) control, directly or indirectly, any other entity.
SECTION 2.2. AUTHORIZATION OF AGREEMENTS, ETC.
(a) The Company is not in violation of or default under any provision
of its Amended and Restated Articles of Incorporation, or Bylaws, of any
material provision of any indenture, contract, agreement, mortgage, deed of
trust, loan, commitment, judgment, decree, order, or obligation to which it
is a party or by which any of its properties or assets are bound, or of any
provision of any Federal, state, or local statute, rule, or governmental
regulation applicable to the Company. The execution and delivery by the
Company of this Agreement and each of the other
-2-
<PAGE>
agreements, documents, and instruments contemplated hereby, the performance
by the Company of its obligations hereunder and thereunder, the issuance,
sale, and delivery of the Common Stock, and the issuance and delivery of
the Warrant Shares upon exercise of the Warrants, have been duly authorized
by all requisite corporate action on the part of the Company and its
officers, directors, and shareholders and will not result in any such
violation, conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any such provision,
require any consent or waiver under any such provision, or result in the
creation or imposition of any lien, charge, restriction, claim, or
encumbrance of any nature whatsoever upon any of the properties or assets
of the Company. There is no such provision which materially and adversely
affects, or so far as the Company is presently aware, in the future may
materially and adversely affect, the condition (financial or otherwise),
business, property, prospects, assets, or liabilities of the Company.
(b) The Common Stock has been duly authorized and, when issued in
accordance with this Agreement, will be validly issued, fully paid, and
nonassessable. The Warrants have been duly authorized and, when issued in
accordance with this Agreement, will be validly issued. The Common Stock,
when issued in accordance with this Agreement, will be free and clear of
all liens, charges, restrictions, claims, and encumbrances imposed by or
through the Company, except as reflected on the certificates evidencing the
Common Stock. The Warrant Shares have been duly and validly reserved for
issuance upon exercise of the Warrants, and the Warrant Shares, when so
issued, will be duly authorized, validly issued, fully paid, and
nonassessable and will be free and clear of all liens, charges,
restrictions, claims, and encumbrances imposed by or through the Company,
except as reflected on the certificates evidencing the Warrants and the
Warrant Shares. Neither the issuance, sale, and delivery of the Common
Stock nor the issuance and delivery of the Warrant Shares is subject to any
preemptive right, right of first refusal, or other similar right in favor
of any person, which has not been waived or complied with.
SECTION 2.3. VALIDITY. Each of this Agreement and the Warrants have been
duly and validly executed and delivered by the Company and constitutes the
legal, valid, and binding obligation of the Company, enforceable against the
Company in accordance with its terms.
SECTION 2.4. AUTHORIZED CAPITAL STOCK. Immediately prior to the Closing:
(a) the authorized capital stock of the Company will consist of (i)
Twenty-Nine Thousand (29,000) shares of Series A Redeemable Common Stock;
Forty-Six Thousand Five Hundred (46,500) shares of Series B Redeemable
Preferred Stock, and (ii) Five Million (5,000,000) shares of Common Stock
(the "Common Stock");
(b) Seven Hundred Twenty Five Thousand One (725,001) shares of Common
Stock, Two Thousand Three Hundred Forty-five (2,345) shares of Series A
Redeemable Preferred Stock, and Thirty Three Thousand, Two Hundred Two
(33,202) shares of Series B Redeemable Preferred Stock will be validly
issued and outstanding, and fully paid and nonassessable;
(c) all issued and outstanding shares of Common Stock, Series A
Redeemable Preferred Stock, and Series B Redeemable Preferred Stock are
owned of record and beneficially by the persons and in the amounts set
forth in Section 2.4 of the Disclosure Schedule;
(d) the relative rights, powers, preferences, qualifications,
limitations, and restrictions in respect of each class of authorized
capital stock of the Company are as set forth in the
-3-
<PAGE>
Company's Amended and Restated Articles of Incorporation (the "Articles"),
a copy of which is attached as EXHIBIT C hereto, and all such rights,
powers, preferences, qualifications, limitations, and restrictions are
valid, binding, and enforceable and in accordance with all applicable laws;
(e) except as set forth in Section 2.4 of the Disclosure Schedule, (i)
no person owns of record or is known to the Company to own beneficially any
shares of any equity stock, (ii) no subscription, warrant, option,
convertible security, or other right (contingent or other) to purchase or
otherwise acquire equity securities of the Company is authorized or
outstanding, and (iii) there is no commitment by the Company to issue
shares, subscriptions, warrants, options, convertible securities, or other
such rights or to distribute to holders of any of its equity securities any
evidence of indebtedness or assets, except as contemplated by this
Agreement; and
(f) except as set forth in the Articles and in the Shareholders
Agreement dated June 2, 1993 (the "Shareholders Agreement"), the Company
has no obligation (contingent or other) to purchase, redeem, or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any other distribution in respect thereof. Except as set
forth in the Shareholders Agreement, there are no voting trusts or
agreements, preemptive rights, or proxies relating to any securities of the
Company (whether or not the Company is a party thereto). All of the
outstanding securities of the Company were issued in compliance with all
applicable Federal and state securities laws.
SECTION 2.5. LITIGATION; COMPLIANCE WITH LAW. There is no (a) action, suit,
claim, proceeding, or investigation pending or, to the knowledge of the Company
or the Founders, threatened against or affecting the Company, at law or in
equity, or before or by any Federal, state, municipal, or other governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, (b) arbitration proceeding relating to the Company pending under
collective bargaining agreements or otherwise, or (c) governmental inquiry
pending or, to the knowledge of the Company or the Founders, threatened against
or affecting the Company, (including without limitation any inquiry as to the
qualification of the Company to hold or receive any license or permit), and
there is no basis known to the Company or the Founders for any of the foregoing.
The Company is not subject to any order, writ, injunction, or decree of any
court or of any Federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign.
There is no action or suit by the Company pending or threatened against any
other person. The Company is in material compliance with all laws, rules,
regulations, and orders applicable to the Company's business, operations,
properties, assets, licenses, and other authorizations required to conduct its
business as conducted and as proposed to be conducted. There is no existing law,
rule, regulation, or order, and neither the Company nor any Founder, after due
inquiry, is aware of any proposed law, rule, regulation, or order, whether
Federal or state, which would prohibit or restrict the Company from, or
otherwise materially adversely affect the Company in, conducting its business in
any jurisdiction in which it is now conducting business or in which it proposes
to conduct business within the foreseeable future.
SECTION 2.6. PROPRIETARY INFORMATION OF THIRD PARTIES. After reasonable
investigation, neither the Company nor any Founder is aware that any significant
employee or consultant of the Company is obligated under any contract or other
agreement, or subject to any judgment, decree, or order of any court or
administrative agency, that would conflict with the obligation of such employee
to use best efforts to promote the interests of the Company. To the knowledge of
the Company or the Founders, no third party has claimed or has reason to claim
that any person employed by or affiliated with the Company has (a) violated or
may be violating any of the terms or conditions of any employment,
non-competition, or non-disclosure agreement between such employee and such
third party, (b) disclosed or may be disclosing,
-4-
<PAGE>
or utilized or may be utilizing, any trade secret or proprietary information or
documentation of such third party, or (c) interfered or may be interfering in
the employment relationship between such third party and any of the Company's
present or former employees. No third party has requested information from the
Company which suggests that such a claim might be contemplated. To the knowledge
of the Company and the Founders, no person employed by or affiliated with the
Company has employed or proposes to employ any trade secret or any information
or documentation proprietary to any former employer, and to the knowledge of the
Company and the Founders, no person employed by or affiliated with the Company
has violated any confidential relationship which such person may have had with
any third party, in connection with the development, manufacture, or sale of any
product or proposed product, or the development or sale of any service or
proposed service of the Company, and the Company has no reason to believe there
will be any such employment or violation. To the knowledge of the Company and
the Founders, none of the execution or delivery of this Agreement, or the
carrying on of the business of the Company by its officers, employees, or
agents, or the conduct or proposed conduct of the business of the Company, will
conflict with or result in a breach of the terms, conditions, or provisions of
or constitute a default under any contract, covenant, or instrument under which
any such person is obligated.
SECTION 2.7. TITLE TO PROPERTIES
(a) The Memorandum contains a list of the material tracts of real
property owned by the Company ("Real Property") and a summary description
of the proposed use thereof and the number of buildable lots remaining in
each such tract. Except as reflected in title insurance binders for the
tracts of Real Property, the Company has good and marketable fee simple
title to the Real Property, free and clear of all mortgages, liens,
charges, encumbrances, and purchase options and other rights to or against
such property, other than such minor imperfections of title, liens,
easements, zoning restrictions, or encumbrances, if any, as are not
substantial in character, amount, or extent, and do not, severally or in
the aggregate, detract from the value or interfere with the present uses of
the Real Property, or otherwise impair the business and operations of the
Company, except for claims of subcontractors, laborers, and materialmen
which have performed work or provided services to such property and which
are unpaid within normal payment terms.
(b) All improvements on the Real Property conform in all material
respects to all applicable state and local laws, use restrictions, building
ordinances, and health and safety ordinances, and the property is zoned for
the various purposes for which the Real Property and improvements thereon
are presently being used.
(c) The Company has received no written notice of any pending or
threatened condemnations, planned public improvements, annexation, special
assessments, zoning, or subdivision changes, or other claims which would in
the aggregate materially and adversely affect the Real Property.
(d) There is no private restrictive covenant or governmental use
restriction (including zoning) known to the Company after reasonable
inquiry, on all or any portion of the Real Property, which prohibits the
current or contemplated use of the Real Property.
(e) All licenses, permits, and approvals required for the occupancy
and operation of the Real Property have been obtained and are in full force
and effect and the Company has received no notices of violations in
connection with such items.
-5-
<PAGE>
(f) The Company does not have in its possession any studies or reports
which indicate any defects in the design or construction of any of the
improvements on the Real Property.
(g) There are no past due taxes, assessments, or other charges
affecting the Real Property.
(h) The Company has good and marketable title to all personal
properties and assets owned by it, free and clear of all mortgages,
pledges, security interests, liens, charges, claims, restrictions and other
encumbrances, except liens for current taxes not yet due and payable,
listed on Section 2.7 of the Disclosure Schedule and minor imperfections of
title, if any, not material in nature or amount and not materially
detracting from the value or impairing the use of the personal property
subject thereto or impairing the operations or proposed operations of the
Company. The Company owns or leases all personal properties and assets
necessary to the operation of its business as now conducted. All of such
personal properties and assets are in good operating condition (normal wear
and tear excepted), are reasonably fit for the purposes for which such
personal properties and assets are presently used, are adequate and usable
for the continued operation of the business of the Company as the same is
presently conducted, and none of such personal properties and assets are in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs, the cost of which will not vary materially from historic patterns.
SECTION 2.8. LEASEHOLD INTERESTS. Each lease or agreement to which the
Company is a party under which it is a lessee of any property, real or personal,
is a valid and subsisting agreement without any default of the Company
thereunder and, to the best of the Company's knowledge, without any default
thereunder of any other party thereto. No event has occurred and is continuing
which, with due notice or lapse of time or both, would constitute a default or
event of default by the Company under any such lease or agreement or, to the
best of the Company's knowledge, by any other party thereto. The Company's
possession of such property has not been disturbed and, to the best of the
Company's knowledge, no claim has been asserted against the Company adverse to
its rights in such leasehold interests.
SECTION 2.9. INSURANCE. All of the properties and business of the Company
of an insurable nature are insured to the extent usually insured by persons or
entities engaged in the same or similar businesses against loss or damage of the
kind customarily insured against by such persons or entities. The Company is not
in default regarding the provisions of any such policy. The Company has not,
since inception, self-insured against any risk ordinarily insured against by
similar businesses. The Company has not received any notice from any of its
insurers that any insurance premiums will be increased in the future or that any
insurance coverage presently in force will not be available in the future on
substantially the same terms as are now in effect. There are no outstanding
requirements or recommendations by any current insurer or underwriter with
respect to the Company which require or recommend changes in the conduct of the
business or require any repairs or other work to be done to the assets and
properties of the Company.
SECTION 2.10. TAXES. The Company has filed or obtained filing extensions
for all tax returns, Federal, state, county, and local, required to be filed by
it, and the Company has paid or established adequate reserves (in accordance
with generally accepted accounting principles) for the payment of all taxes
shown to be due by such returns as well as all other taxes, assessments, and
governmental charges which have become due or payable, including, without
limitation, all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors, and third parties. The Federal income tax returns
of the Company have never been audited by the Internal Revenue Service and no
state income or sales tax returns of the Company have been audited. No
deficiency assessment with respect to or proposed
-6-
<PAGE>
adjustment of the Company's Federal, state, county, or local taxes is pending
or, to the best of the Company's knowledge, threatened. There is no tax lien,
whether imposed by any Federal, state, county, or local taxing authority,
outstanding against the assets, properties, or business of the Company. Neither
the Company nor any of its shareholders has ever filed a consent pursuant to
Section 341(f) of the IRC (as hereinafter defined), relating to collapsible
corporations.
SECTION 2.11. OTHER AGREEMENTS. The Company is not a party to or otherwise
bound by any written or oral contract, obligation, agreement, commitment,
restriction, or the like which individually or in the aggregate could materially
adversely affect the business, prospects, financial condition, operations,
property, or affairs of the Company. The Company has provided to the Investors
access to copies of all obligations, agreements, and the like (referred to
individually as a "Contract" and collectively as the "Contracts"). Each of the
Contracts are valid, binding, and in full force and effect in all material
respects. The Company, and to the knowledge of the Company and the Founders,
each other party thereto has in all material respects performed all the
obligations required to be performed by it to date and has received no notice of
default and is not in default (with due notice or lapse of time or both) under
any of the Contracts. The Company has no present expectation or intention of not
fully performing all its obligations under each of the Contracts, and the
Company has no knowledge of any breach or anticipated breach by the other party
to any of the Contracts. There is no Contract that contains any contractual
requirement with which there is a reasonable likelihood that the Company or any
other party thereto will be unable to comply with the terms thereof. The
continuation, validity, and effectiveness of each Contract will in no way be
affected by the consummation of the transactions contemplated by this Agreement.
There exists no actual or, to the best knowledge of the Company, any threatened
termination, cancellation, or limitation of, or any amendment, modification, or
change to any Contract, which would have a material adverse effect on the
business or condition, financial or otherwise, of the Company.
SECTION 2.12. PATENTS, TRADEMARKS, ETC. The Company has sufficient title to
and ownership of, or can obtain on terms which will not adversely affect its
business, all franchises, permits, licenses, and other similar authority
necessary for the conduct of its business as now being conducted and as planned
to be conducted, and it is not in default under any of such franchises, permits,
licenses, and other similar authority. The Company possesses all patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names, copyrights, formulae, trade secrets, and
know how (collectively, "Intellectual Property") necessary or desirable to the
conduct of its business as conducted and as proposed to be conducted, and no
claim is pending or, to the knowledge of the Company and the Founders,
threatened to the effect that the operations of the Company infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and, to the knowledge of the Company and the Founders, there is no
basis for any such claim (whether or not pending or threatened). No claim is
pending or threatened to the effect that any such Intellectual Property owned or
licensed by the Company, or which the Company otherwise has the right to use, is
invalid or unenforceable by the Company, and, to the knowledge of the Company
and the Founders, there is no basis for any such claim (whether or not pending
or threatened). The Company is not aware of any third party which is infringing
or violating any of the Intellectual Property of the Company. To the knowledge
of the Company and the Founders, all technical information developed by and
belonging to the Company which has not been patented has been kept confidential.
The Company has not granted or assigned to any other person or entity any of the
Intellectual Property or the right to manufacture, have manufactured, assemble,
or sell the products or proposed products or to provide the services or proposed
services of the Company.
SECTION 2.13. LOANS AND ADVANCES. Except as described on Section 2.13 of
the Disclosure Schedule, the Company does not have any outstanding loans or
advances to any person and is not obligated to make any such loans or advances,
except, in each case, for advances to employees of the Company in
-7-
<PAGE>
respect of reimbursable business expenses anticipated to be incurred by them in
connection with their performance of services for the Company in the ordinary
course of business, consistent with past practice.
SECTION 2.14. ASSUMPTION, GUARANTIES, ETC. OF INDEBTEDNESS OF OTHER
PERSONS. The Company has not assumed, guaranteed, endorsed, or otherwise become
directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to, or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for (a) guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business and (b) guaranties by
the Company of the debts of its subsidaries.
SECTION 2.15. GOVERNMENTAL APPROVALS. Subject to the accuracy of the
representations and warranties of the Investors set forth in Article 3 hereof,
no registration, qualification, or filing with, or consent or approval of or
other action by, any Federal, state, or other governmental agency or
instrumentality is or will be necessary for the valid execution, delivery, and
performance by the Company of this Agreement, the offer, issuance, sale and
delivery of the Common Stock, the issuance and delivery of the Warrant Shares
upon exercise of the warrants or the consummation of any other transaction
contemplated hereby, other than (i) filings pursuant to state securities laws
(all of which filings have been made as of the date hereof) in connection with
the offer and sale of the Common Stock and (ii) the filing of a notice under
Regulation D under the Securities Act.
SECTION 2.16. FINANCIAL STATEMENTS.
The unaudited Consolidated Balance Sheet of the Company dated December 31,
1995, and the unaudited Consolidated Statement of Operations of the Company for
the six (6) months then ended, are attached as Section 2.16 of the Disclosure
Schedule. The Memorandum contains true, correct, and complete copies of the
audited Consolidated Balance Sheets of the Company dated June 30, 1995, June 30,
1994, and June 30, 1993, and audited Consolidated Statements of Operations,
Consolidated Statements of Changes in Shareholders' Equity, and Consolidated
Statements of Cash Flows for the fiscal years then ended, together with notes
thereto and the audit reports thereon of KPMG Peat Marwick thereon
(collectively, the "Financial Statements"). The Financial Statements (i) are in
accordance with the books and records of the Company, (ii) present fairly the
financial condition of the Company as of the respective dates indicated and the
results of operations for such periods except that interim period financial
statements are subject to normal year-end audit adjustments, which in the
aggregate will not materially or adversely change such interim financial
statements, (iii) have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved, and
(iv) reflect adequate reserves for all liabilities and losses. The books,
records, and accounts of the Company accurately and fairly reflect, in
reasonable detail, the transactions and the assets and liabilities of the
Company. The Company has not engaged in any transaction, maintained any bank
account, or used any of the funds of the Company, except for transactions, bank
accounts, and funds which have been and are reflected in the normally maintained
books and records of the Company.
SECTION 2.17. ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
material liabilities or obligations (secured or unsecured, whether accrued,
absolute, direct, indirect, contingent, or otherwise, and whether due or to
become due) that are required to be reflected in the Financial Statements by
generally accepted accounting principles which are not fully accrued or reserved
against in the Financial Statements, other than liabilities incurred in the
ordinary course of business subsequent to the date of the Financial Statements
which liabilities and obligations, individually or in the aggregate, are not
material to the financial condition or operating results of the Company.
-8-
<PAGE>
SECTION 2.18. ABSENCE OF CHANGES. Since the date of the most recent
Consolidated Balance Sheet included in the Financial Statements and except as
reflected therein or in the Memorandum, (a) there has been no material adverse
change in the condition (financial or otherwise), business, property, assets, or
liabilities of the Company other than changes in the ordinary course of
business, none of which, individually or in the aggregate, has been materially
adverse; (b) the Company has not entered into any material transaction which was
not in the ordinary course of its business; (c) there has been no damage to,
destruction of, or loss of physical property (whether or not covered by
insurance) materially adversely affecting the business or operations of the
Company; (d) except as contemplated by this Agreement, the Company has not
declared or paid any dividend on its stock, made any distribution on its stock,
redeemed, purchased, or otherwise acquired any of its stock, granted any options
to purchase shares of its stock; (e) the Company has not increased the
compensation of any of its officers, or the rate of pay of its employees as a
group, except as part of regular compensation increases in the ordinary course
of its business, to an amount in excess of the amounts set forth in the pro
forma previously delivered to the Investors; (f) there has been no resignation
or termination of employment of any key officer or employee of the Company, and
the Company does not know of the impending resignation or termination of
employment of any such officer or employee that if consummated, would have a
material adverse effect on the business of the Company; (g) there has been no
labor dispute involving the Company or its employees and none is pending or to
the knowledge of the Company and the Founders, threatened; (h) there has been no
change, except in the ordinary course of business, in the contingent obligations
of the Company by way of guaranty, endorsement, indemnity, warranty, or
otherwise; (i) there have been no loans made by the Company to its employees,
officers, directors, or partners other than travel advances and office advances
made in the ordinary course of business; and (j) to the knowledge of the Company
and the Founders, there has been no other event or condition of any kind which
might reasonably be expected to result in a material and adverse change in the
Company's condition (financial or otherwise) or business or to impair materially
the ability of the Company to conduct its business as it is currently being
conducted.
SECTION 2.19. EMPLOYEE BENEFIT PLANS.
(a) Section 2.19 of the Disclosure Schedule contains a true and
complete list of all the following agreements or plans which are presently
in effect or which have previously been in effect and which cover employees
of the Company ("Employees"):
(i) Any employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), and any
trust or other funding agency created thereunder, or under which the
Company, with respect to the Employees, has any outstanding, present,
or future obligation or liability, or under which any Employee or
former Employee has any present or future right to benefits which are
covered by ERISA; or
(ii) Any other pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus,
vacation, severance, disability, hospitalization, medical, life
insurance, or other employee benefit plan, program, policy, or
arrangement, whether written or unwritten, formal or informal, which
the Company, with respect to the Business, maintains or to which the
Company, with respect to the Business, has any outstanding, present,
or future obligations to contribute or make payments under, whether
voluntary, contingent, or otherwise.
The plans, programs, policies, or arrangements which are described in
subparagraph (i) or (ii) above and which are listed on Section 2.19 of the
Disclosure Schedule are hereinafter collectively referred
-9-
<PAGE>
to as the "Company Benefit Plans." The Company has delivered to the Investors
true and complete copies of all written plan documents and contracts evidencing
the Company Benefit Plans, as they may have been amended to the date hereof,
together with (A) all documents relating to any tax-qualified retirement plan
maintained by the Company, which documents are required to have been filed prior
to the date hereof with governmental authorities for each of the three most
recently completed plan years; (B) attorney's response to an auditor's request
for information for each of the three most recently completed plan years; and
(C) financial statements for each Company Benefit Plan for each of the three
most recently completed plan years.
(b) Except for the Company Benefit Plans, the Company does not now
maintain, nor has the Company at any time in the past been obligated to
make any payment or contribution to any pension, retirement,
profit-sharing, deferred compensation, stock purchase, stock option, bonus
or incentive plan, any medical, vision, dental, or other health plan, any
life insurance plan, vacation, severance, disability, or any other employee
benefit plan, program, policy, or arrangement, whether written, unwritten,
formal, or informal, including, without limitation, any "employee benefit
plan" as defined in Section 3(3) of ERISA. The Company has not made,
entered into, or agreed to any commitment, whether written or oral, which
would obligate the Company to establish any employee benefit plan, or
continue any employment agreement or employment policy covering Employees.
With respect to all "welfare plans," as defined in Section 3(1) of ERISA,
covering Employees or former Employees, there are no obligations to
continue coverage or to make payments to or on behalf of persons who are or
may become retired or terminated Employees or their beneficiaries, other
than as may be required by Sections 601 through 608 of ERISA.
(c) The Company has complied with the continuation coverage
requirements of Section 1001 of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and ERISA Sections 601 through 608.
SECTION 2.20. DISCLOSURE.
(a) The Company has delivered to the Investors a true and correct copy
of (i) the Amended and Restated Articles of Incorporation of the Company,
and all amendments thereto and restatements thereof certified by the
appropriate state official; and (ii) the Bylaws of the Company and all
amendments thereto.
(b) The minute books of the Company made available to the Investors
prior to the date hereof, accurately reflect all corporate action taken by
the directors and shareholders of the Company or any committee of the Board
of Directors of the Company and contain true and accurate copies of or
originals of the respective minutes of all meetings or consent actions of
the directors, any committee of the Board of Directors, and the
shareholders.
(c) The stock record books of the Company, made available to the
Investors prior to the date hereof, accurately reflect the stock ownership
of the Company, and contain complete and accurate records with respect to
the transfer of all securities issued by the Company and each Investment
since inception.
SECTION 2.21. BROKERS. The Company has no contract, arrangement, or
understanding with any broker, finder, or similar agent with respect to the
transactions contemplated by this Agreement, nor has the Company authorized or
employed any person in connection with the offering or sale of the Common Stock,
or the Warrants or any security of the Company similar to the Common Stock or
the Warrants.
- -10-
<PAGE>
SECTION 2.22. TRANSACTIONS WITH AFFILIATES. Except as permitted by Section
6.6 hereof, no Founder, director, officer, employee, or shareholder of the
Company, or member of the family of any such person, or any corporation,
partnership, trust, or other entity in which any such person, or any member of
the family of any such person, has a substantial interest or is an officer,
director, trustee, partner, or holder of more than 5% of the outstanding equity
interests thereof is a party to any transaction with the Company, including any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from or otherwise
requiring payments to any such person or firm.
SECTION 2.23. EMPLOYEES.
(a) No officer or key Employee has advised the Company (orally or in
writing) that he or she intends to terminate employment with the Company.
The Company has complied in all material respects with all applicable laws
relating to the employment of labor, including provisions relating to
wages, hours, equal opportunity, worker health and safety, collective
bargaining, and the payment of Social Security and other taxes, and with
ERISA.
(b) The Company does not have any collective bargaining agreement
covering any of its Employees. There is no pending or, to the best
knowledge of the Company, threatened labor dispute involving the Company or
any of its Employees. To the best of the Company's knowledge, the Company
has amicable relations with its Employees.
SECTION 2.24. FOREIGN CORRUPT PRACTICES ACT. The Company has not made,
offered, or agreed to offer anything of value to any government official,
political party, or candidate for government office nor has it taken any action
which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977.
SECTION 2.25. ENVIRONMENTAL REGULATIONS.
(a) Except for failures which will not result in any material
liability or consequences to the Company, the Company has met, and
continues to meet, all applicable local, state, Federal, and national
environmental regulations.
(b) The Company has not been notified that it is potentially liable,
has not received any requests for information or other correspondence
concerning any site or facility, and is not otherwise aware that it is
considered potentially liable under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or any
similar state law.
(c) The Company has not entered into or received any consent decree,
compliance order, or administrative order relating to environmental
protection.
(d) The Company has neither entered into or received nor is the
Company in default under any judgment, order, writ, injunction, or decree
of any federal, state, or municipal court or other governmental authority
relating to environmental protection.
(e) The Company has all permits, licenses, approvals, consents, and
authorizations (the "Environmental Permits") relating to environmental or
health protection which are required under Federal, state, or local laws,
rules, and regulations and is in compliance with all the Environmental
Permits (including any information provided on the applications therefor);
-11-
<PAGE>
(f) There are no actions, suits, claims, arbitration proceedings, or
complaints pending or, to the Company's knowledge, threatened or under
consideration by any governmental authority, municipality, community,
citizen, or other entity against the Company relating to environmental
protection, nor does the Company have reason to believe that any such
actions, suits, claims, or complaints will be brought against it.
(g) No disposal, releases, burial, or placement of hazardous or toxic
substances, pollutants, contaminants, petroleum, gas products, or
asbestos-containing materials (as any of such terms may be defined under
Federal, state, or local law) (hereinafter collectively referred to as
"Hazardous Materials") has occurred on, in, at, or about any of the
Company's properties or facilities or any other facility or site to which
Hazardous Materials from the Company may have been taken at any time in the
past.
(h) To the Company's knowledge, there has been no disposal, releases,
burial, or placement of Hazardous Materials on any property not owned or
operated in the present or the past by the Company which may result or has
resulted in contamination of or beneath any of the Company's properties or
facilities.
(i) There are no above-ground and underground storage tanks on the
Real Property.
(j) No lien has arisen on the Company's properties or facilities under
Federal, state, or local laws, rules, or regulations as they relate to
environmental protection.
(k) No audit or investigation has been conducted as to environmental
matters at any of the Company's properties by any governmental agency.
SECTION 2.26. DISCLOSURE. Neither this Agreement nor any Schedule or
Exhibit hereto, contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained herein or therein not
misleading. None of the statements, documents, certificates or other items
prepared or supplied by the Company with respect to the transactions
contemplated hereby contains an untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein not misleading.
The Memorandum was prepared in good faith by the Company to provide an overview
of the business of the Company and, to the best knowledge of Founders, does not
contain an untrue statement of a material fact.
ARTICLE 3. REPRESENTATION AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company as to such Investor
only, that:
(a) it is an "accredited investor" within the meaning of Rule 501
under the Securities Act, as indicated on the Investor Certification of
such Investor, annexed hereto as SCHEDULE 3;
(b) it has sufficient knowledge and experience to evaluate the risks
and merits of its investment in the Company and it is able financially to
bear the risks thereof;
(c) it has had an opportunity to ask questions of and receive answers
from and to discuss the Company's business, management, and financial
affairs with the Company's management;
-12-
<PAGE>
(d) the Common Stock is being acquired for its own account for the
purpose of investment and not with a view to or for sale in connection with
any distribution thereof;
(e) it was not offered nor made aware of the Company's interest in
issuing the Common Stock by any means of public advertisement or
solicitation;
(f) in connection with such Investor's purchase of the Common Stock,
it has been solely responsible for its own (i) due diligence investigation
of the Company and (ii) investment decision, and has not engaged or relied
upon any agent or "purchaser representative" to review or analyze the
Company's business and affairs or advise such Investor with respect to the
merits of the investment;
(g) it has full power and authority to execute, deliver, and perform
each of this Agreement and to purchase the Common Stock ; and, that this
Agreement will constitute the legal, valid, and binding obligation of the
Investor, enforceable against it in accordance with their respective terms;
and
(h) in the event that the Investor proposes to sell the Common Stock
or the Warrants pursuant to Rule 144A under the Securities Act, it will (A)
take reasonable steps to obtain the information required by such Rule to
establish a reasonable belief that the prospective purchaser is a
"qualified institutional buyer" as such term is defined in Rule 144A and
(B) advise the prospective purchaser that the Investor is relying on the
exemption from the registration provisions of the Securities Act available
pursuant to Rule 144A.
ARTICLE 4. CONDITIONS PRECEDENT TO THE PURCHASE OF THE COMMON STOCK AND
WARRANTS BY INVESTORS
In connection with the purchase of the Common Stock and Warrants at the
Closing, the Investors shall be entitled to receive the following certificates,
opinions, and documents or evidence reasonably satisfactory to them as to the
following, each of which requirements may be waived by the Investors. The
Company agrees to use its best efforts to cause each of such requirements to be
satisfied:
(a) The Investors shall have received from Balboni Ashley & Schoenberg
LLC, an opinion dated the Closing Date, in substantially the form attached
hereto as EXHIBIT B.
(b) The representations and warranties contained in Article 2 shall be
true, complete and correct.
(c) The Company shall have performed and complied with all covenants
and agreements contained herein required to be performed or complied with
by it prior to or at the Closing Date.
(d) The Company shall have obtained any and all consents, permits and
waivers and made all filings necessary or appropriate for the consummation
of the transactions contemplated hereby.
(e) All corporate and other proceedings to be taken by the Company in
connection with the transactions contemplated hereby and all documents
relating to such transactions shall be satisfactory in form and substance
to the Investors and its counsel, and the Investors and its counsel shall
have received all such counterpart originals or certified or other copies
of such
-13-
<PAGE>
documents as they reasonably may request. The Company shall have delivered
to the Investors a certificate executed by the President and Treasurer of
the Company certifying as to the fulfillment of the conditions specified in
subsections (b), (c), (d), and (i) of this Article 4.
(f) The Investors shall have received copies of the following
documents:
(i) (A) the Articles in the form of EXHIBIT C hereto, bearing
evidence of filing by the Department of State of the State of Florida,
and (B) a certificate of said Department of State, dated as of a
recent date as to the due incorporation and good standing of the
Company;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company dated the Closing Date and certifying: (A) that attached
thereto is a true and complete copy of the Bylaws of the Company as in
effect on the date of such certification; (B) that attached thereto is
a true and complete copy of all resolutions adopted by the Board of
Directors or the shareholders of the Company authorizing the
execution, delivery, and performance of this Agreement, the Warrants,
the issuance, sale, and delivery of the Common Stock, and that all
such resolutions are in full force and effect and are all the
resolutions adopted in connection with the foregoing agreements and
the transactions contemplated thereby; (C) that the Articles have not
been amended since the date of the last amendment referred to in the
certificate delivered pursuant to clause (i)(B) above; and (D) to the
incumbency and specimen signature of each officer of the Company
executing this Agreement, the Warrants, the stock certificates
representing the Common Stock, and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of
the Company as to the incumbency and signature of the officer signing
the certificate referred to in this clause (ii); and
(iii) such additional supporting documents and other information
with respect to the operations and affairs of the Company as the
Investors or its counsel reasonably may request.
(g) All shareholders of the Company having any preemptive, first
refusal, or other rights with respect to the issuance of the Common Stock
or the Warrants shall have irrevocably waived the same in writing and
copies of such waivers shall have been delivered to Investors' counsel.
ARTICLE 5. CONDITIONS PRECEDENT
The obligation of the Company to issue and sell the Common Stock to the
Investors on the Closing Date is, at its option, subject to the satisfaction, on
or before the Closing Date, of the following conditions:
(a) All representations and warranties of the Investors contained in
Article 3 hereof shall be true and correct on the Closing Date with the
same effect as though such representations and warranties had been made on
and as of such date.
(b) All corporate and other proceedings to be taken by the Investors
in connection with the transactions contemplated hereby, and all documents
incidental thereto, shall be satisfactory in form and substance to the
Company and its counsel.
-14-
<PAGE>
(c) The Investors shall have delivered to the Company the full
purchase price for the Common Stock to be purchased hereunder.
ARTICLE 6. COVENANTS OF THE COMPANY
The Company covenants and agrees with the Investors that, unless waived in
accordance with Section 7.9 hereof, so long as any of the Common Stock is
outstanding:
SECTION 6.1. FINANCIAL STATEMENTS, REPORTS, ETC. The Company shall furnish
to the Investors:
(a) within one hundred twenty (120) days after the end of each fiscal
year of the Company, an audited balance sheet of the Company, as of the end
of such fiscal year and the related statements of income, shareholders'
equity, and changes in cash flows for such fiscal year, prepared in
accordance with generally accepted accounting principles and certified by a
firm of independent public accountants of recognized national standing
selected by the Board of Directors of the Company;
(b) within sixty (60) days after the end of each fiscal quarter (other
than the last quarter in each fiscal year) a balance sheet of the Company,
and the related statements of income, shareholders' equity, and changes in
cash flows, unaudited but prepared in accordance with generally accepted
accounting principles and certified by the Chief Financial Officer of the
Company, such balance sheet to be as of the end of such quarter and such
statements of income, shareholders' equity and changes in cash flows to be
for such quarter and for the period from the beginning of the fiscal year
to the end of such quarter, in each case with comparative statements for
the prior fiscal year;
(c) at the time of delivery of each annual financial statement
pursuant to Section 6.1(a) hereof, a certificate executed by the Chief
Financial Officer of the Company stating that such officer has caused this
Agreement, the Articles, and the Warrants to be reviewed and has no
knowledge of any default by the Company in the performance or observance of
any of the provisions of this Agreement, the Articles or the Warrants, if
such officer has such knowledge, specifying such default and the nature
thereof;
(d) at the time of delivery of each quarterly statement pursuant to
Section 6.1(b) hereof, a management narrative report explaining all
significant variances from forecasts and all significant current
developments in staffing, marketing, sales, and operations;
(e) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property, or affairs
of the Company as the Investors reasonably may request.
SECTION 6.2. CORPORATE EXISTENCE. The Company shall maintain and cause any
Investment in which the Company owns a controlling interest to maintain their
respective separate corporate existences, rights, and franchises in full force
and effect.
SECTION 6.3. PROPERTIES, BUSINESS, INSURANCE. The Company shall maintain
and cause any subsidiary to maintain as to their respective properties and
businesses, with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is
-15-
<PAGE>
customary for companies similarly situated which insurance shall be deemed by
the Company to be sufficient.
SECTION 6.4. INSPECTION, CONSULTATION, AND ADVICE. The Company shall permit
and cause any subsidiary to permit any of the Investors and such persons as the
Investors may designate, at the expense of the Company once per year, and if
more often than once per calendar year, with the additional visits at such
Investor's expense, to visit and inspect any of the properties of the Company
and any Investment, examine their books and take copies and extracts therefrom,
discuss the affairs, finances, and accounts of the Company with their officers,
employees, and public accountants and the Company hereby authorizes said
accountants to discuss with such Investors and such designees such affairs,
finances, and accounts), and consult with and advise the management of the
Company as to their affairs, finances, and accounts, all at reasonable times and
upon reasonable notice.
SECTION 6.5. RESTRICTIVE AGREEMENTS PROHIBITED. The Company shall not
become a party to any agreement which by its terms restricts the Company's
performance of this Agreement, the Articles, or the Warrants.
SECTION 6.6. TRANSACTIONS WITH AFFILIATES. Except for (a) transactions
contemplated by this Agreement, (b) transactions with the affiliated entities
listed in Section 6.6 of the Disclosure Schedule, provided that the terms of
such transactions are no less favorable to the Company than the terms available
from third parties on an arm's length basis from non-affiliated third parties,
(c) loans by shareholders up to $1,000,000 outstanding at any time, provided
that the security for such loans is limited to the real estate on which the
specific construction activities financed are located and provided further that
the interest rate and terms are no less favorable than the rate and terms
available on an arm's length basis from unaffiliated third parties, or (d) as
otherwise approved by the Board of Directors, the Company shall not enter into
any transaction with any director, officer, employee, or holder or more than 5%
of the outstanding capital stock of any class or series of capital stock of the
Company, member of the family of any such person, or any corporation,
partnership, trust, or other entity in which any such person, or member of the
family of any such person, is a director, officer, trustee, partner, or holder
of more than 5% of the outstanding capital stock thereof, except for
transactions on customary terms related to such person's employment. All
transactions with affiliates shall be reported on a quarterly basis in the
financial reports required by Section 6.1(b) hereof, including, with respect to
each transaction, the affiliate involved, the amount paid to the affiliate in
such quarter, and amounts remaining to be paid to the affiliate by the Company.
SECTION 6.7. USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Common Stock for general working capital purposes.
SECTION 6.8. BOARD OF DIRECTORS MEETINGS. The Company shall use its best
efforts to ensure that meetings of the Board of Directors of the Company are
held at least four (4) times each year and at least once each quarter.
SECTION 6.9. BYLAWS. The Company shall at all times cause its Bylaws to
provide that, (a) unless otherwise required by the laws of the State of Florida,
(i) any two (2) directors and (ii) any holder or holders of at least 66% of the
outstanding shares of Common Stock or 25% of the outstanding Common Stock, shall
have the right to call a meeting of the Board of Directors or shareholders and
(b) the number of directors fixed in accordance therewith shall in no event
conflict with any of the terms or provisions of the Articles. The Company shall
at all times maintain provisions in its Bylaws or Articles indemnifying all
directors against liability to the maximum extent permitted under the laws of
the State of Florida.
-16-
<PAGE>
SECTION 6.10. MAINTENANCE OF OWNERSHIP OF INVESTMENTS. The Company shall
not sell or otherwise transfer any shares of capital stock of any Investment,
except to the Company or another Investment, or permit any Investment in which
the Company owns a controlling interest, to issue, sell or otherwise transfer
any shares of its capital stock or the capital stock of any Investment except to
the Company or another Investment.
SECTION 6.11. DISTRIBUTIONS BY INVESTMENTS. The Company shall not permit
any Investment in which the Company owns a controlling interest to purchase or
set aside any sums for the purchase of, or pay any dividend, or make any
distribution on, any shares of its stock, except for dividends or other
distributions payable to the Company or another Investment in which the Company
owns a controlling interest.
SECTION 6.12. COMPLIANCE WITH LAWS. The Company shall comply with all
applicable laws, rules, regulations, and orders, noncompliance with which could
materially adversely affect its business or condition, financial or otherwise.
SECTION 6.13. KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles, consistently
applied, reflecting all financial transactions of the Company and in which, for
each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts, and other purposes in connection with its
business shall be made.
SECTION 6.14. EMPLOYEE STOCK PLANS. As long as the Investors shall continue
to own any of the Common Stock, Warrants, or Warrant Shares, the Company shall
sell shares of or grant options to purchase shares of its capital stock to
Employees, officers, and directors of and consultants to the Company only
pursuant to stock option plans or stock purchase plans which have been adopted
and approved by the Company's Board of Directors and only so long as the Company
has an option to repurchase such shares upon the termination of employment with
the Company of such Employees, officers, directors, and consultants, and the
total number of shares of Common Stock as to which the Company may make such
sales or grant such options shall not exceed 10,000 shares, such number subject
to equitable adjustment for reorganizations, stock splits, stock dividends, and
like events (including shares issued or sold pursuant to (i) any such stock
option plan even though the shares were acquired upon the exercise of stock
options which were granted prior to the date hereof, and (ii) any such stock
purchase plans even though the shares acquired thereunder were purchased prior
to the date hereof). Under no circumstances shall the total number of shares of
the Company's Common Stock issued under any such stock purchase plan, plus any
shares issued or subject to issuance under any such stock option plan, exceed
10,000 shares (such number subject to equitable adjustment for reorganizations,
stock splits, stock dividends, and like events) at any time.
SECTION 6.15. PIGGYBACK REGISTRATION RIGHTS. If the Company at any time
proposes to register any of its securities under the Securities Act for sale to
the public, whether for its own account or for the account of other security
holders or both (except with respect to registration statements on Forms S-4 or
S-8 or another form not available for registering the Common Stock and shares
(if any) issuable under the warrants (the "Registrable Securities") for sale to
the public), each such time it will give written notice to Investors of its
intention so to do. Upon the written request of any Investor received by the
Company within 10 days after the giving of any such notice by the Company, to
register such number of Registrable Securities held by such Investor specified
in such written request, the Company will cause the Registrable Securities as to
which registration shall have been so requested to be included in the securities
to be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the
-17-
<PAGE>
sale or other disposition by such Investor (in accordance with its written
request) of such Registrable Securities so registered. In the event that any
registration pursuant to this Section 6.15 shall be, in whole or in part, an
underwritten public offering of Common Stock, the number of Registrable
Securities to be included in such an underwriting may be reduced if and to the
extent that the managing underwriter shall be of the opinion that such inclusion
would adversely affect the marketing of the securities to be sold by the Company
therein. In the event such a reduction is necessary, the reduction shall be
borne first by holders of Common Stock who are not Investors, and if a further
reduction is necessary in the judgment of the managing underwriter, then, all
Investors proposing to sell Registrable Securities and holders of warrants
issued in conjunction with the issuance of the Series A Redeemable Common Stock
and the Series B Redeemable Preferred Stock in the offering shall bear the
reduction on a pro-rata basis, based on the number of Registrable Securities
each Investor proposed to offer for sale in the Offering, or an Investor holding
a majority of the Registrable Securities may elect to withdraw from such
registration all Registrable Securities held by Investors as to which
registration was requested. Notwithstanding the foregoing provisions, the
Company may for any reason and without the consent of Investors withdraw any
registration statement referred to in this Section 6.15 without thereby
incurring any liability to any Investor.
SECTION 6.16. REGISTRATION PROCEDURES. If and whenever the Company is
required by the provisions of Section 6.15 hereof to use its best efforts to
effect the registration of any Registrable Securities under the Securities Act,
the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which shall be on Form S-1, Form S-2, any successor forms thereto, or
other form of general applicability satisfactory to the managing
underwriter selected as herein provided) with respect to such securities
and use its best efforts to cause such registration statement to become and
remain effective for the period of the distribution contemplated thereby
(determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period of distribution and comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement in accordance
with the intended method of disposition set forth in such registration
statement for such period;
(c) furnish to each Investor and to each underwriter such number of
copies of the registration statement and the prospectus included therein
(including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or other disposition of the
Registrable Securities covered by such registration statement;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or
"blue sky" laws of such jurisdictions as the Shareholders, or, in the case
of an underwritten public offering, the managing underwriter reasonably
shall request, PROVIDED, HOWEVER, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent
to general service of process in any such jurisdiction;
(e) use its best efforts to list the Registrable Securities covered by
such registration statement with any securities exchange or NASDAQ on which
the Common Stock of the Company is then listed or quoted;
-18-
<PAGE>
(f) notify each selling Investor at any time when a prospectus
relating to Registrable Securities is required to be delivered under the
Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such
Shareholder, the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make
the statements therein not misleading;
(g) notify the selling Investors immediately, and confirm the notice
in writing, (1) when the registration statement becomes effective, (2) of
the issuance by the Commission of any stop order or of the initiation, or
the threatening, of any proceedings for that purpose, (3) of the receipt by
the Company of any notification with respect to the suspension of
qualification of the Registrable Securities for sale in any jurisdiction or
of the initiation, or the threatening, of any proceedings for that purpose,
and (4) of the receipt of any comments, or requests for additional
information, from the Commission or any state regulatory authority. If the
Commission or any state regulatory authority shall enter such a stop order
or order suspending qualification at any time, the Company will promptly
use its best reasonable efforts to obtain the lifting of such order; and
(h) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security
holders as soon as reasonably practicable, but not later than 15 months
after the effective date of the registration statement, an earnings
statement covering a period of at least 12 months beginning after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act.
For purposes hereof, the period of distribution of Registrable Securities
in a firm commitment underwritten public offering shall be deemed to extend
until each underwriter has completed the distribution of all securities
purchased by it, and the period of distribution of Registrable Securities in any
other registration shall be deemed to extend until the earlier of the sale of
all Registrable Securities covered thereby or 180 days after the effective date
thereof.
In connection with each registration hereunder, each Shareholder will
furnish to the Company in writing such information with respect to it as a
stockholder as reasonably shall be necessary in order to assure compliance with
federal and applicable state securities laws.
In connection with each registration pursuant to Section 6.15 hereof
covering an underwritten public offering, the Company and each Investor agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
SECTION 6.17. EXPENSES. All reasonable expenses incurred by the Company in
complying with Section 6.15 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of
insurance, and the reasonable fees and disbursements of one counsel for the
sellers of Registrable
-19-
<PAGE>
Securities, but excluding any Selling Expenses, are called "Registration
Expenses." All underwriting discounts and selling commissions applicable to the
sale of Registrable Securities are called "Selling Expenses."
(a) The Company shall pay all Registration Expenses attributable to
the shares of Common Stock and Registrable Securities of Investors included
in the Registration in connection with each registration statement under
Section 6.15 hereof.
(b) All Selling Expenses in connection with each registration
statement under Section 6.15 hereof shall be borne by the Investor and any
other selling stockholder in proportion to the number of shares sold by
Investor, or by such other selling stockholders.
ARTICLE 7. MISCELLANEOUS
SECTION 7.1. SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations, and warranties made herein, or any certificate or instrument
delivered to the Investors pursuant to or in connection with this Agreement
shall survive the execution and delivery of this Agreement, and the closing of
the transactions contemplated hereby and thereby.
SECTION 7.2. BROKERAGE. Each party hereto will indemnify and hold harmless
the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements, or understandings made or
claimed to have been made by such party with any third party.
SECTION 7.3. PARTIES IN INTEREST. All representations, covenants, and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants, and agreements
benefiting the Investors shall inure to the benefit of any and all subsequent
holders from time to time of the Common Stock or the Warrants. Notwithstanding
the foregoing, the right to purchase the Common Stock hereunder pursuant to
Section 1.1 may not be sold, transferred, or otherwise assigned except to an
affiliate of the Investors, a successor to substantially all the business and
assets of the Investors.
SECTION 7.4. NOTICES. All notices, requests, consents, and other
communications required or permitted hereunder shall be in writing and shall be
effective when delivered in person or by a courier service, postage prepaid,
addressed as follows:
(a) if to the Company:
Transeastern Properties of South Florida, Inc.
3300 University Drive
Coral Springs, FL 33065,
Attention: Arthur J. Falcone, President
with a copy (which shall not constitute notice) to:
John T. Kinsey, P.A.
2300 Corporate Boulevard
Two Corporate Court, Suite 112
-20-
<PAGE>
Boca Raton, Florida 33431,
Attention: John Kinsey, Esq.
and a copy to:
Balboni Ashley & Schoenberg LLC
990 One Live Oak Center
3475 Lenox Road, NE
Atlanta, Georgia 30326,
Attention: Gerardo M. Balboni II, Esq.
(b) if to the Investors: At the address of such Investor on SCHEDULE 1
hereto.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 7.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, irrespective of
the choice of law provisions thereof.
SECTION 7.6. ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits hereto, and the other documents delivered pursuant hereto constitute
the full and entire agreement of the parties with respect to the subject matter
hereof and thereof. All Schedules and Exhibits hereto are hereby incorporated
herein by reference.
SECTION 7.7. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 7.8. AMENDMENTS. This Agreement may not be amended or modified, and
no provisions hereof may be waived, without the written consent of the Company
and the holders of at least two-thirds of the outstanding shares of Common Stock
and Warrant Shares.
SECTION 7.9. SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority to
the extent possible, it shall be modified in such manner as to be valid, legal,
and enforceable but so as to most nearly retain the intent of the parties and,
if such modification is not possible, such provision shall be severed from this
Agreement, and in either case, the validity and enforceability of any other
provision and of the entire Agreement shall not be affected thereby.
SECTION 7.10. TITLES AND SUBTITLES. The title and subtitles used in this
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
SECTION 7.11. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
-21-
<PAGE>
(a) "affiliate" shall mean, with respect to any person, any person
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such other person.
(b) "person" shall mean an individual, corporation, trust,
partnership, joint venture, limited liability company, unincorporated
organization, government agency, or any agency or political subdivision
thereof, or other entity.
IN WITNESS WHEREOF, the Company and the Investors have executed this
Agreement as of the day and year first above written.
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA,
INC.
By: _____________________________
Arthur J. Falcone, President
Attest:
- -----------------------------
Philip Cucci, Jr., Secretary
INVESTORS:
------------------------------
Anthony Ciabattoni
------------------------------
John Cucci
------------------------------
Robert J. Falcone, Trustee
------------------------------
Bill Mitchell
-22-
<PAGE>
SCHEDULE 1
TO
COMMON STOCK
AND
WARRANT PURCHASE AGREEMENT
<TABLE>
<CAPTION>
COMMON STOCK AGGREGATE
INVESTOR NAME AND ADDRESS PURCHASED PURCHASE PRICE DATE PURCHASED
------------------------- --------- -------------- --------------
<S> <C> <C> <C>
Anthony Ciabattoni
18 Lagunita
Laguna Beach, CA 92651
(714) 494-1060
Taxpayer ID No.: ###-##-#### 36,606 $2,800,000.00 April 15, 1996
John Cucci
18 Leonard Street
Farmingdale, NY 11735 654 $50,000.00 May 7, 1996
Bill Mitchell
7821 Sequoia Lane
Parkland, FL 33067 654 $50,000.00 May 3, 1996
Robert J. Falcone, Trustee of the
Robert J. Falcone Rev. Living Trust
9/1/93
35 Riverview Terrace
Smithtown, NY 11287 1,309 $100,000.00 __________
TOTALS 39,223 $3,000,000.00
</TABLE>
<PAGE>
SCHEDULE 2
TO
COMMON STOCK
AND
WARRANT PURCHASE AGREEMENT
DISCLOSURE SCHEDULE
<PAGE>
SCHEDULE 3
TO
COMMON STOCK
AND
WARRANT PURCHASE AGREEMENT
ACCREDITED INVESTOR CERTIFICATES
<PAGE>
EXHIBIT A
TO
COMMON STOCK
AND
WARRANT PURCHASE AGREEMENT
FORM OF WARRANT
<PAGE>
EXHIBIT B
TO
COMMON STOCK
AND
WARRANT PURCHASE AGREEMENT
OPINION OF COMPANY COUNSEL
<PAGE>
EXHIBIT C
TO
COMMON STOCK
AND
WARRANT PURCHASE AGREEMENT
AMENDED AND RESTATED ARTICLES OF INCORPORATION
THIS WARRANT HAS BEEN, AND THE WARRANT SHARES ISSUABLE UPON EXERCISE HEREOF WILL
BE, ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") AND OF THE FLORIDA INVESTOR
PROTECTION ACT (THE "FLORIDA ACT"). SUCH SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, OR TRANSFERRED OTHER THAN (I) PURSUANT TO AN EFFECTIVE REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE 1933 ACT AND THE FLORIDA ACT, AND (II) UPON
RECEIPT BY THE ISSUER OF EVIDENCE SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933
ACT, THE FLORIDA ACT, AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER
JURISDICTION. THE ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL
SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
Original Issue Date: April 15, 1996 Warrant No. 96C-2
WARRANT TO PURCHASE COMMON STOCK
THIS CERTIFIES THAT IN CONNECTION WITH, and as an inducement to ANTHONY
CIABATTONI (the "Holder"), to consummate the transactions contemplated by that
certain Common Stock Purchase Agreement, dated March 25, 1996 among Holder,
TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC., a Florida corporation (the
"Corporation"), and certain other parties identified therein (the "Purchase
Agreement"), Holder may become entitled to purchase, on the terms and conditions
hereinafter set forth, a number shares of the Common Stock, $.01 par value, of
the Corporation (the "Common Stock") determined pursuant to Section 2.3 hereof,
at a price $.01 per share (the "Exercise Price"). Each share of Common Stock as
to which this Warrant is exerciseable is a "Warrant Share" and all such shares
are collectively referred to as the "Warrant Shares").
SECTION 1. REGISTRATION OF WARRANT. This Warrant is one of a series of
Warrants (collectively, the "Transaction Warrants") issued in connection with
the transaction contemplated by the Purchase Agreement. Each Transaction Warrant
contains identical terms except for the number of Warrant Shares and the
distinctive Warrant number. The Corporation shall register this Warrant, upon
records to be maintained by the Corporation for that purpose, in the name of the
record Holder of this Warrant from time to time. The Corporation shall deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise or any distribution to the Holder hereof, and for all
other purposes, and the Corporation shall not be affected by any notice to the
contrary.
SECTION 2. EXERCISE OF WARRANT.
2.1. TIME OF EXERCISE. This Warrant may be exercised in whole or in part,
at any time or from time to time prior to 5:00 p.m., Eastern Standard Time, on
the first anniversary of the Determination Date (as defined in Section 2.3
hereof), unless extended as hereinafter provided. The last day this Warrant can
be exercised is hereinafter referred to as the "Expiration Date."
2.2. MANNER OF EXERCISE. In order to exercise this Warrant, the registered
Holder hereof shall deliver to the Corporation at its principal office at 3300
University Drive, Coral Springs, Florida 33065, Attention: President, or at such
other office as shall be designated by the Corporation in writing pursuant to
Section 12 hereof on or before 5:00 p.m. Eastern Standard Time on the Expiration
Date, (i) a written notice of such registered Holder's election to exercise this
Warrant (the "Exercise Notice"), which notice may be in the form of the Notice
of Exercise attached hereto, properly executed and completed by the registered
-1-
<PAGE>
Holder or an authorized officer thereof, (ii) a check payable to the order of
the Corporation, in an amount equal to the product of the Exercise Price
MULTIPLIED BY the number of Warrant Shares specified in the Exercise Notice, AND
(iii) this Warrant (the items specified in (i), (ii), and (iii) are collectively
the "Exercise Materials"). Upon timely receipt of the Exercise Materials, the
Corporation shall, as promptly as practicable, and in any event within ten (10)
business days after its receipt of the Exercise Materials, execute or cause to
be executed and delivered to such registered Holder a certificate or
certificates representing the number of Warrant Shares specified in the Exercise
Notice, together with cash in lieu of any fraction of a share, as hereinafter
provided, and, (x) if the Warrant is exercised in full, a copy this Warrant
marked "Exercised" or (y) if the Warrant is partially exercised, a copy this
Warrant marked "Partially Exercised" together with a new Warrant on the same
terms for the unexercised balance of the Warrant Shares. All of the certificates
evidencing Warrant Shares shall bear the legend set forth in Section 7.2 hereof.
The stock certificate or certificates shall be registered in the name of the
registered Holder of this Warrant or such other name as shall be designated in
the Exercise Notice. The date on which the Warrant shall be deemed to have been
exercised (the "Exercise Date"), and the date the person in whose name any
certificate for Warrant Shares is issued shall be deemed to have become the
holder of record of such shares, shall be the date the Corporation receives the
Exercise Materials, irrespective of the date of delivery of a certificate or
certificates evidencing the Warrant Shares, except that, if the date on which
the Exercise Materials are received by the Corporation is a date when the stock
transfer books of the Corporation are closed, the Exercise Date shall be the
date the Corporation receives the Exercise Materials, and the date such person
shall be deemed to have become the holder of the Warrant Shares shall be the
next succeeding date on which the stock transfer books are open.
2.3. CALCULATION OF WARRANT SHARES The number of Warrant Shares (if any)
issuable upon exercise of this Warrant shall be fixed on the effective date of
the first registration statement (the "Determination Date") filed on Form S-1 or
S-18 (or any successor form thereto) filed with the Securities and Exchange
Commission (the "Registration Statement"). The number of Warrant Shares issuable
under this Warrant shall be:
(a) zero if the quotient of (i) the Share Price MINUS the Purchase
Price, DIVIDED BY the Purchase Price is greater than or equal to 25%.
(b) Equal to the quotient of (i) Share Price MINUS Purchase Price
MULTIPLIED BY the number of Purchased Shares DIVIDED BY (ii) the Share
Price if the quotient of (i) the Share Price MINUS the Purchase Price
DIVIDED BY the Purchase Price is less than 25%.
(c) The capitalized terms listed below are used with the meanings
thereafter ascribed.
"PURCHASED SHARES" means the number of shares of Common Stock purchased by
Holder from the Company pursuant to the Purchase Agreement, as adjusted for any
stock splits, stock dividends, or similar transactions.
"PURCHASE PRICE" means the purchase price for one (1) share of Common Stock
purchased by Holder pursuant to the Purchase Agreement, as adjusted for any
stock splits, stock dividends, or similar transactions.
"SHARE PRICE" means the price to the public in the Registration Statement,
before deduction of underwriting discounts, fees, and expenses.
2
<PAGE>
SECTION 3. ADJUSTMENTS TO WARRANT SHARES. The number of Warrant Shares
issuable upon the exercise hereof shall be subject to adjustment in certain
cases as set forth in this Section 3 which occur AFTER the Determination Date.
3.1. CONSOLIDATION, MERGER, OR SALE. In the event the Corporation is a
party to a consolidation, share exchange, or merger, or the sale of all or
substantially all of the assets of the Corporation to, any person, or in the
case of any consolidation or merger of another corporation into the Corporation
in which the Corporation is the surviving corporation, and in which there is a
reclassification or change of the shares of Common Stock of the Corporation,
this Warrant shall after such consolidation, share exchange, merger, or sale be
exerciseable for the kind and number of securities or amount and kind of
property of the Corporation or the corporation or other entity resulting from
such share exchange, merger, or consolidation, or to which such sale shall be
made, as the case may be (the "Successor Corporation"), to which a holder of the
number of shares of Common Stock deliverable upon the exercise (immediately
prior to the time of such consolidation, share exchange, merger, or sale) of
this Warrant would have been entitled upon such consolidation, share exchange,
merger, or sale; and in any such case appropriate adjustments shall be made in
the application of the provisions set forth herein with respect to the rights
and interests of the registered Holder of this Warrant, such that the provisions
set forth herein shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to the number and kind of securities or the
type and amount of property thereafter deliverable upon the exercise of this
Warrant. The above provisions shall similarly apply to successive
consolidations, share exchanges, mergers, and sales. Any adjustment required by
this Section 3.1 because of a consolidation, share exchange, merger, or sale
shall be set forth in an undertaking delivered to the registered Holder of this
Warrant and executed by the Successor Corporation which provides that the Holder
of this Warrant shall have the right to exercise this Warrant for the kind and
number of securities or amount and kind of property of the Successor Corporation
or to which the holder of a number of shares of Common Stock deliverable upon
exercise (immediately prior to the time of such consolidation, share exchange,
merger, or sale) of this Warrant would have been entitled upon such
consolidation, share exchange, merger, or sale. Such undertaking shall also
provide for future adjustments to the number of Warrant Shares and the Exercise
Price in accordance with the provisions set forth in Section 3 hereof.
3.2. ADJUSTMENTS FOR STOCK DIVIDENDS AND SPLITS. In the event the
Corporation should at any time, or from time to time after the Original Issue
Date, fix a record date for the effectuation of a stock split or subdivision of
the outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock, or securities or rights convertible into, or entitling
the holder thereof to receive directly or indirectly, additional shares of
Common Stock (hereinafter referred to as "Common Stock Equivalents") without
payment of any consideration by such holder for the additional shares of Common
Stock or the Common Stock Equivalents (including the additional shares of Common
Stock issuable upon exercise or exercise thereof), then, as of such record date
(or the date of such dividend, distribution, split, or subdivision if no record
date is fixed), the number of Warrant Shares issuable upon the exercise hereof
shall be proportionately increased and the Exercise Price shall be appropriately
decreased by the same proportion as the increase in the number of outstanding
Common Stock Equivalents of the Corporation resulting from the dividend,
distribution, split, or subdivision. Notwithstanding the preceding sentence, no
adjustment shall be made to decrease the Exercise Price below $.01 per Share.
3.3. REVERSE STOCK SPLITS. In the event the Corporation should at any time
or from time to time after the Original Issue Date, fix a record date for the
effectuation of a reverse stock split, or a transaction having a similar effect
on the number of outstanding shares of Common Stock of the Corporation, then, as
of such record date (or the date of such reverse stock split or similar
transaction if no
3
<PAGE>
record date is fixed), the number of Warrant Shares issuable upon the exercise
hereof shall be proportionately decreased and the Exercise Price shall be
appropriately increased by the same proportion as the decrease of the number of
outstanding Common Stock Equivalents resulting from the reverse stock split or
similar transaction.
3.4. RECLASSIFICATION. In the event the Corporation should at any time or
from time to time after the Original Issue Date, fix a record date for a
reclassification of its Common Stock, then, as of such record date (or the date
of the reclassification if no record date is set), this Warrant shall thereafter
be convertible into such number and kind of securities as would have been
issuable as the result of such reclassification to a holder of a number of
shares of Common Stock equal to the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such reclassification, and the
Exercise Price shall be unchanged.
3.5. NO DILUTION OR IMPAIRMENT. The Corporation will not, by amendment of
its Articles of Incorporation or through reorganization, consolidation, merger,
dissolution, issue, or sale of securities, sale of assets or any other voluntary
action, void or seek to avoid the observance or performance of any of the terms
of the Warrant, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment. Without limiting the generality of the foregoing, the
Corporation (a) will not create a par value of any share of stock receivable
upon the exercise of the Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or appropriate
in order that the Corporation may validly and legally issue fully paid and
non-assessable shares upon the exercise of the Warrant.
3.6. NOTICE OF ADJUSTMENT. When any adjustment is required to be
made in the number or kind of shares purchasable upon exercise of the Warrant,
or in the Exercise Price, the Corporation shall promptly notify the Holder of
such event and of the number of shares of Common Stock or other securities or
property thereafter purchasable upon exercise of the Warrants and of the
Exercise Price, together with the computation resulting in such adjustment.
SECTION 4. COVENANTS AS TO COMMON STOCK. The Corporation covenants and
agrees that all Warrant Shares which may be issued will, upon issuance, be
validly issued, fully paid and non-assessable. The Corporation further covenants
and agrees that the Corporation will at all times have authorized and reserved,
free from preemptive rights, a sufficient number of shares of its Common Stock
to provide for the exercise of the Warrant in full.
SECTION 5. NO STOCKHOLDER RIGHTS. This Warrant shall not entitle the Holder
hereof to any voting rights or other rights as a stockholder of the Corporation.
SECTION 6. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE HOLDER . The
registered Holder of this Warrant, by acceptance of this Warrant represents,
warrants, and covenants to the Corporation as follows:
(a) The Holder is acquiring this Warrant, and agrees that the exercise
of this Warrant and the acceptance of a certificate for Warrant Shares
shall constitute its representation that the Warrant Shares are being
acquired, for its own account for investment and not with a view to the
distribution thereof, subject, however, to Holder's right to transfer this
Warrant and the Warrant Shares in accordance with and subject to the
restrictions on such transfer set forth herein.
4
<PAGE>
(b) The Holder understands that this Warrant and the Warrant Shares
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act") or state securities laws, by reason of their issuance in
a transaction exempt from the registration requirements of the Securities
Act and applicable state securities laws. The Holder acknowledges being
informed that this Warrant and the Warrant Shares must be held indefinitely
unless this Warrant or the Warrant Shares are registered for sale by such
Holder under the Securities Act and applicable state securities laws or an
exemption from registration is available. The Holder understands that a
sale of the Warrant Shares made in reliance upon Rule 144 promulgated under
the Securities Act ("Rule 144") can only be made in accordance with the
terms and conditions of Rule 144 and further understands that in the event
that the exemption from registration provided by such Rule is not
available, compliance with some other exemption under the Securities Act
will be required in the absence of registration.
(c) The Holder agrees not to sell, transfer, pledge or hypothecate
this Warrant or any Warrant Shares unless a Registration statement is
effective for this Warrant or Warrant Shares under the Securities Act or,
in the written opinion of such Holder's counsel (a copy of which opinion
shall be addressed to and delivered to the Corporation, and which counsel
and which opinion shall be reasonably satisfactory to the Corporation),
such transaction will not result in any violation of the registration
requirements of the Securities Act or any applicable state securities law.
The Corporation may not, and may instruct its transfer agent not to,
transfer this Warrant or the Warrant Shares unless the Corporation has been
advised by its counsel that the Holder has complied with the provisions of
this Warrant and applicable securities laws relating to the proposed
transfer.
SECTION 7. TRANSFER OF SECURITIES.
7.1. RESTRICTION ON TRANSFER. This Warrant and the Warrant Shares and
any shares of capital stock received in respect thereof, whether by reason
of a stock split or share reclassification thereof, a stock dividend
thereon, or otherwise, shall not be transferable except upon the conditions
specified in Section 6 and this Section 7, which conditions are intended to
ensure compliance with the provisions of the Securities Act and applicable
State securities laws with respect to the transfer of such securities. The
Holder of this Warrant, by acceptance of this Warrant, agrees to be bound
by the provisions of Section 6 and this Section 7 and to indemnify and hold
harmless the Corporation against any loss or liability arising from the
disposition of this Warrant or the Warrant Shares issuable upon exercise
hereof or any interest in either thereof in violation of the provisions of
this Warrant.
7.2. RESTRICTIVE LEGEND. Each certificate for the Warrant Shares and
any shares of capital stock received in respect thereof, whether by reason
of a stock split or share reclassification thereof, a stock dividend
thereon or otherwise, and each certificate for any such securities issued
to subsequent transferees of any such certificate shall (unless otherwise
permitted by the provisions hereof) be stamped or otherwise imprinted with
a legend in substantially the following form:
Legend for Warrant Shares or other shares of capital stock:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
BEEN ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT") AND THE FLORIDA
INVESTOR PROTECTION ACT (THE "FLORIDA ACT") THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, OR TRANSFERRED OTHER THAN (I) PURSUANT TO AN
EFFECTIVE REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE 1933 ACT
AND THE FLORIDA ACT, AND (II) UPON RECEIPT BY THE ISSUER OF EVIDENCE
SATISFACTORY TO IT OF COMPLIANCE WITH THE 1933 ACT, THE FLORIDA ACT,
AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION. THE
5
<PAGE>
ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY
TO IT WITH RESPECT TO COMPLIANCE WITH THE ABOVE LAWS.
7.3. TRANSFER OF WARRANTS. Subject to the restrictions on transfer
specified in Section 6 and this Section 7, the Warrant is transferable in
accordance with this Warrant, in whole or in part, at the agency or office of
the Corporation referred to in Section 1 hereof, by the Holder hereof in person
or by a duly authorized attorney, upon surrender of this Warrant, with the Form
of Assignment attached hereto duly executed by the then registered Holder of
this Warrant or its duly authorized agent. The Corporation or its transfer
agents shall register the transfer of any Warrants transferred in compliance
with Section 6 and this Section 7 upon records to be maintained for that
purpose, upon surrender of this Warrant. Upon any such Registration of transfer,
a new Warrant substantially in the form of this Warrant evidencing the Warrant
so transferred shall be issued to the transferee.
SECTION 8. LOST, STOLEN, MUTILATED, OR DESTROYED WARRANT. If this Warrant
is lost, stolen, mutilated, or destroyed, the Corporation shall issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated, or destroyed, provided the registered Holder hereof shall deliver a
lost warrant certificated in customary form, including indemnification of the
Corporation.
SECTION 9. FRACTIONAL WARRANT SHARES. The Corporation shall not be required
to issue any fractions of Warrant Shares upon exercise of this Warrant, but the
Corporation shall pay cash in respect of any fractional interest in a Warrant
Share which would otherwise be issuable in an amount equal to the same fraction
of the fair market value per share of the Common Stock on the day of the
exercise, as reasonably determined by the Board of Directors of the Corporation.
SECTION 10. NOTICE. All notices, requests, demands, and other
communications required or permitted under this Warrant and the transactions
contemplated herein shall be in writing and shall be deemed to have been duly
given, made, and received when personally delivered the day after deposited with
a recognized national overnight delivery service prior to its dead-line for
receiving packages for next day delivery or upon the fifth day after deposited
in the United States registered or certified mail with postage prepaid, return
receipt requested, in each case addressed as set forth below:
If to the Corporation: Transeastern Properties of South Florida, Inc.
3300 University Drive
Coral Springs, Florida 33065
Attention: President
If to the Holder hereof, to the address of such Holder appearing on the
books of the Corporation.
SECTION 11. CAPTIONS, SECTION, HEADINGS. Captions and section headings used
herein are for convenience only, and are not a part of this Warrant and shall
not be used in construing it.
SECTION 12. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws in the State of Florida, irrespective of the choice
of law provisions.
6
<PAGE>
IN WITNESS WHEREOF, TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC., has
caused this Warrant to be executed in its name by its duly authorized officers
under its corporate seal, and to be dated as of the date first above written.
TRANSEASTERN PROPERTIES OF SOUTH
FLORIDA, INC.
By: ______________________________
Arthur J. Falcone, President
ATTEST:
____________________________
Philip Cucci, Jr., Secretary
7
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of unexercised Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________ the attached Warrant to purchase the number
of full shares of Common Stock, $____ par value, of Transeastern Properties of
South Florida, Inc., issuable upon exercise of said Warrant, and appoints
________________, Attorney, to transfer such Warrant on the books of
Transeastern Properties of South Florida, Inc., with full power of substitution
in the premises.
Dated:__________________
[Signature]
____________________
____________________
[Address]
Signature guaranteed by a member of a national securities exchange or
national bank:
__________________________
NOTICE
The signature above must correspond to the name as written upon the fact of
the within Warrant in every particular, without alteration or enlargement or any
change whatsoever.
<PAGE>
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of Warrant]
To: TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC.
The undersigned registered Holder of the attached Warrant hereby
irrevocably elects to exercise the Warrant for, and to purchase thereunder, the
full number of whole shares of Common Stock, $____ par value, of Transeastern
Properties of South Florida, Inc., issuable upon exercise of said Warrant and
hereby surrenders said Warrant and delivers to Transeastern Properties of South
Florida, Inc., a check in the amount of $_________ representing the aggregate
Exercise Price for such shares. The undersigned herewith requests that the
certificates for such shares be issued in the name of, and delivered to the
undersigned, whose address is _________________________________ and social
security or tax identification number is ______________.
Dated:____________________
NOTICE
The signature above must correspond to the name as written upon the fact of
the within Warrant in every particular, without alteration or enlargement or any
change whatsoever.
JOINT VENTURE AGREEMENT
OF
PARKSIDE HOMES
THIS JOINT VENTURE AGREEMENT ("Agreement') is made and entered into as
of February __, 1994, by and between TRANSEASTERN PEMBROKE PROPERTIES, INC., a
Florida corporation ("Transeastern") and H.A. CUMBER OF PEMBROKE PINES, INC., a
Florida corporation ("Cumber"). Transeastern and Cumber are sometimes
hereinafter referred to individually as "Venturer" and collectively as
"Venturers."
WITNESSETH
WHEREAS, the Venturers have heretofore determined that they desire to
participate together in a joint venture (the "Venture") formed under the general
partnership law of the State of Florida for the acquisition of certain real
property located in Broward County, Florida, as more fully described on Exhibit
"A" attached hereto, and to construct thereon single family residences for sale
to the public (such real property and the improvements to be constructed thereon
being hereafter referred to as the "Project"); and
WHEREAS, the Venturers wish to reduce their agreements regarding the
acquisition and development of the Project to a written instrument.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions contained herein, the parties hereby agree as follows:
ARTICLE ONE
INCORPORATION BY REFERENCE AND DEFINITIONS
1.1 INCORPORATION BY REFERENCE. The foregoing recitals are hereby
acknowledged to be true and are incorporated herein by reference, and all
Exhibits annexed hereto and referred to herein are incorporated herein by
reference.
1.2 CERTAIN DEFINITIONS. The terms set forth on Exhibit "B" attached
hereto shall have the meanings set forth in such Exhibit "B".
1
<PAGE>
ARTICLE TWO
FORMATION NAME, PRINCIPAL OFFICE AND PURPOSE
2.1 FORMATION. The Venturers hereby form a joint venture partnership
pursuant to the laws of the State of Florida, for the purposes set forth herein.
2.2 NAME. The name of the Venture shall be "Parkside Homes" and the
business and affairs of the Venture initially shall be conducted under said
name. The Venture may conduct business under such other name or fictitious name
as may be determined, from time to time, by the Venturers. The Venturers shall
execute all assumed or fictitious name certificates necessary or appropriate to
be filed in the applicable records of any county or jurisdiction in which the
Venture is doing business.
2.3 PRINCIPAL OFFICE AND PLACE OF BUSINESS. The principal office of the
Venture shall be located at 3300 University Drive, Coral Springs, FL 33064, or
at such other location in the State of Florida as may be determined by the
Venturers.
2.4 PURPOSE AND SCOPE OF THE VENTURE. (a) The business, purpose
and scope of the Venture is to acquire the Property and to own, develop,
improve, maintain, manage, operate, sell, lease, mortgage, exchange and
otherwise use all or any portion of the Project for the production of income and
profit, and to engage in all manner of transactions and activities incidental to
the foregoing.
(b) The Venturers have approved a Business Plan providing for
construction and marketing of the Project as a residential community to be known
as "Meadow Run at Spring Valley", which Business Plan incorporates the following
components:
(i) A development plan reflecting a division of the
Property into two Phases, each of which is intended to improved
and marketed by the Venture at a particular time (each such
phase, as ultimately set forth in the Business Plan being
referred to as a "Phase"), including the specific number of lots
in each Phase, the houses to be built in each Phase, the time
frame for the planned acquisition of the Phase, construction of
houses and marketing of each Phase;
(ii) A marketing plan setting forth, with respect to
each Phase, the number and type of homes to be constructed in
such Phase, the projected prices therefor and the advertising
and marketing programs which the Venture plans for such Phase;
2
<PAGE>
(iii) A budget setting forth, in general categories, the
expenses anticipated to be incurred by the Venture with respect
to each Phase through the sale thereof and the projected
revenues to be derived from each Phase upon its disposition
(which budget, as approved by the Venturers, from time to time,
shall be hereinafter referred to as the "Budget"), and (iv) A
cash flow analysis setting forth, in the sequence in which the
Phases will be developed, improved and marketed, as applicable,
the sources and uses of funds that will be available to and
expended by the Venture in connection therewith (which cash flow
analysis, approved by the Venturers, from time to time, shall be
hereinafter referred to as the "Cash Flow Analysis"). (c) The
business of the Venture shall be as set forth herein and in the
Business Plan. The Venture shall not engage in any other
business or activity, except as the Venturers shall otherwise
agree in writing. Except as expressly provided to the contrary
in this Agreement, nothing herein shall be deemed to restrict in
any way the freedom of a Venturer to conduct any other business
or activity whatsoever without any accountability to the Venture
or the other Venturer.
2.5 TERM. The term of the Venture as a general partnership shall
commence as of the date of this Agreement and shall continue in full force and
effect until terminated in accordance with Article Eight of this Agreement or as
otherwise provided by the Law.
2.5 TITLE. Legal title to the Venture's property shall be held in the
name of the Venture, or in such other manner as the Venturers shall determine.
2.7 DESIGNATED PERSONS. For purposes of facilitating the performance of
the terms and provisions of this Agreement and the operation of the Venture,
each Venturer designates the person(s) set forth below opposite such Venturer's
name ("Designated Person") as such Venturer's attorney-in-fact to take all
actions, make all decisions on its behalf which such Venturer, in its capacity
as Venturer, is permitted or required to take or make, and to execute promissory
notes, mortgages or other collateral documents, agreements to purchase real
property and agreements to sell Lots within the Project as a group. Either
Venturer may change its Designated Person by delivering to the other Venturer
and to the Venture, written notice thereof, which notice shall be a certified
corporate resolution of the Venturer's Board of Directors. The foregoing shall
not be construed to preclude other duly authorized persons from acting on any
Venturer's behalf. The Designated Persons, as of the date hereof, are as
follows:
3
<PAGE>
VENTURER DESIGNATED PERSON
Transeastern Arthur J. Falcone
Cumber Aftab Cumber
(b) In addition to the foregoing, each of the Venturers designate
the persons listed on Exhibit "C" as their authorized representatives for the
execution of deeds, affidavits, bills of sale, closing statements and other
documents solely related to the closing of sales of single family homes within
the Project to customers. Such persons have no further authority by virtue of
this Paragraph to execute documents of any kind or nature on behalf of the
Venture. The Venturers may hereafter adopt resolutions granting further
authority to such persons or to other persons to execute various documents on
behalf of the Venture.
ARTICLE THREE
CAPITAL CONTRIBUTIONS; FINANCING
3.1 INITIAL CAPITAL CONTRIBUTIONS. Simultaneously with the execution
hereof, each Venturer shall make the following Capital Contributions to the
Venture and shall receive a credit to their respective Capital Accounts
therefor:
Transeastern $400,000.00
Cumber $400,000.00
3.2 ADDITIONAL CAPITAL. If and when, from time to time after the date
hereof, the Venturers agree that the Venture is in need of additional capital in
order to meet Venture obligations relating to the performance of the Venture
business, such additional cash shall be contributed to the Venture equally by
the Venturers as a Capital Contribution, for which each Venturer shall receive a
credit, in the amount thereof, to its Capital Account.
3.3 FINANCING FROM THIRD PARTIES. The cash contributed as Capital
Contributions to the Venture will not be sufficient to carry out the business of
the Venture. Accordingly, the Venturers contemplate that additional funds will
be made available to the Venture pursuant to third party financing from an
institutional lender or similar source. The responsibility for obtaining such
required financing for the Venture shall rest equally with the Venturers. Such
financing shall comply with the following parameters:
4
<PAGE>
(a) Separate Acquisition Loans for the purchase of the first and
second Phases of the Project on the following terms:
(i) Principal amounts of at least $5,700,000.00;
(ii) A term of at least two years each, with two
renewal options of two years each;
(iii) Interest rates not to exceed prime rate plus
1.0% per annum;
(iv) Secured by mortgages on the Project, permitting
the partial release of individual lots, together
with other collateral documents standard to
loans of similar type and size;
(v) Personal guaranties of payment by the parties
listed on Exhibit "D" hereto.
(b) Revolving construction lines of credit for use in both Phases
of the Project on the following terms:
(i) Principal amounts of at least $6,000,000.00;
(ii) A term of at least four years;
(iii) Interest rate not to exceed prime rate plus 1.0%
per annum;
(iv) Secured by mortgages on the Project, permitting
the partial release of individual lots, together
with other collateral documents standard to
loans of similar type and size, and providing an
acceptable procedure for the funding of
construction of individual houses;
(v) Personal guaranties of payment by the parties
listed on Exhibit "D" hereto.
3.4 LOANS FROM VENTURERS. If the financing provided by an Approved
Mortgage is insufficient to provide, together with other available funds of the
Venture, sufficient cash to satisfy Venture obligations with respect to the
construction and marketing of the Project, the Venturers may provide loans to
the Venture to fund such deficiencies, which loans shall be made in accordance
with the provisions hereof and shall be repaid as provided in Section 5.3(a)
hereof. Loans by any Venturer to the Venture shall not be considered Capital
Contributions. If not expressly agreed in writing otherwise, loans to the
Venture from a Venturer shall accrue interest at the rate of ten percent (10%)
per annum, and shall be otherwise be payable on terms to be agreed upon by the
Venturers. Nothing herein shall authorize any loan by a Venturer to
5
<PAGE>
the Venture unless otherwise authorized pursuant to other provisions of this
Agreement or unless agreed to in writing by the Venturers.
3.5 OTHER MATTERS RELATING TO CAPITAL. (a) Except as may be expressly
provided herein, no Venturer shall be entitled to withdraw or to the return of
any part of the Capital Contribution of such Venturer or to receive property or
assets other than cash from the Venture for any reason whatsoever. To the extent
that any distributions which any Venturer is entitled to receive pursuant to
Article Five hereof would constitute a return of capital, each of the Venturers
consent to the withdrawal of such capital.
(b) No Venturer shall be entitled to priority over any other
Venturer with respect to return of its Capital Contribution, except to the
extent expressly provided in this Agreement.
(c) No interest shall be paid by the Venture on Capital
Contributions, except to the extent expressly provided in this Agreement.
ARTICLE FOUR
MANAGEMENT OF THE VENTURE
4.1 MAJOR DECISIONS. No decision shall be made with respect to any of
the major decisions enumerated below ("Major Decisions") unless and until same
has been approved in writing by all Venturers. The Major Decisions are:
(a) The sale, exchange or other disposition of all, or
substantially all, of the property and assets of the
Venture, other than the sale of individual lots and
houses to be constructed thereon within the Project;
(b) Any material modification to the approved Business Plan
including, without limitation, any material modification
to the Budget or Cash Flow Analysis and any other
component thereof;
(c) Modifications to the layout or facade of houses,
adjustments to lot sizes, adjustments to selling prices
and incurring of expenditures not contemplated by the
Budget but which do result in increasing the Budget by
more than ten percent (10%) shall not be deemed material
modifications;
(d) A decision by the Venture to enter into an Approved
Mortgage or any other financing arrangements, whether or
not secured by any portion of
6
<PAGE>
the Property and whether or not with or without recourse
to the assets of the Venture, including routine
equipment leases or other installment obligations that
are substantially consistent with the Business Plan,
including the Budget and Cash Flow Analysis;
(e) A decision to admit any additional person into the
Venture as a Venturer or, except pursuant to Section
7.4, approval of any transfer of all or any part of a
Venturer's Venture Interest;
(f) A decision by the Venture to acquire any real property
other than the Property;
(g) A decision to dissolve the Venture;
(h) Any transaction, not expressly authorized herein,
between the Venture and a Venturer or any Affiliate of a
Venturer;
(i) A decision to enter into a joint venture or similar
arrangement with third parties for the purpose of
developing any portion of the Property or for any other
purpose;
(j) A decision to expand or restrict the authority of the
Project Manager Venturer to act with respect to any
matter concerning the Venture; and
(k) Such other decisions as, pursuant to the terms hereof,
are vested in the Venturers. For purposes of the
foregoing, any reference in this Agreement to an act,
approval, consent or other event occurring "by the
Venturers," "from the Venturers," "in the Venturers" or
"of the Venturers" shall mean by unanimous consent of
the Venturers. All power and authority of the Venture
not expressly delegated herein to the Managing Venturer
shall be vested in the Venturers.
4.2 PROJECT MANAGER. The Venturers shall select an individual to be in
charge of the day-to-day activities of the Venture in the construction and
marketing of the Project ( the "Project Manager"). The Project Manager shall
have the following responsibilities and all authority necessary to the
performance of such responsibilities: (a) Preparing and delivering monthly
reports to the Venturers as required pursuant to Article Six hereof and as shall
otherwise be necessary or helpful in keeping the Venturers fully informed as to
Venture affairs;
(b) Negotiating and entering into contracts with
sub-contractors and materialmen with respect to
construction and other activities of the Venture and
supervising the performance of same;
7
<PAGE>
(c) Arrange for appropriate insurance policies with such
coverage and in such amounts as prudent to protect the
Venture;
(d) To retain and/or hire on staff services of engineers,
surveyors, appraisers, architects, real estate brokers,
mortgage brokers, escrow agents, depositaries,
custodians, agents for collection, insurers, insurance
agents, advertising personnel and such other technical
or administrative advisors as reasonably deemed useful
by the Project Manager to further the purposes of the
Venture;
(e) Expending the capital and revenues of the Venture
substantially consistent with the Business Plan;
(f) Such other matters and obligations provided elsewhere in
this Agreement to be performed by the Project Manager or
as may be delegated, from time to time, by the
Venturers;
(g) Keeping all books of accounts and other records required
by the Venture, including vouchers, statements,
receipted bills, invoices and all other records needed
or helpful to documenting all collections, disbursements
and other data in connection with the activities of the
Venture;
(h) Supervising land development and construction with
respect to each Phase in substantial accordance with the
Business Plan;
(i) Authorizing parties to prepare research reports,
economic and statistical data, evaluations, analyses,
opinions and recommendations as may be necessary or
desirable with respect to preparing or implementing the
Business Plan;
(j) Doing any and all other things which are necessary,
incidental or required in giving effect to all of the
foregoing duties and responsibilities and, in general,
as required to carry out the day-to-day operations of
the Venture; and
(k) Approving minor adjustments to selling prices and
concessions in connection with the sale of houses to
customers in an amount not to exceed $500.00 per house..
4.3 VENTURE MEETINGS. Either Venturer may, at any time, deliver notice
to the other Venturer setting a meeting of the Venture to be held at the
principal office of the Venture on a business day that is not less than ten
(10), nor more than thirty (30) days after delivery of the
8
<PAGE>
notice. The annual meeting of the Venture shall take place at the principal
office of the Venture on a date which shall be within ten (10) days after
receipt of the periodic reports to be delivered to by the Venture Accountants
pursuant to Section 6.3 hereof
4.4 LIABILITY AND INDEMNIFICATION. No Venturer nor any of its officers,
shareholders, directors, employees or agents shall be liable to the Venture or
any Venturer for any loss or liability incurred in connection with any act or
omission in the conduct of the business of the Venture in accordance with the
terms hereof, except for any loss or liability which the Venture or Venturer
incurs in connection with such person's or entity's fraud, willful and wanton
misconduct or gross negligence. The Venture, to the fullest extent permitted by
law, hereby agrees to defend and indemnifies and holds harmless each Venturer
and its officers, directors, shareholders, employees and agents from and against
any and all liability, loss, cost, expense or damage incurred or sustained by
reason of any act or omission in the conduct of the business of the Venture in
accordance with the terms hereof including, but not limited to, reasonable
attorneys' and paralegals' fees through any and all negotiations, and trial and
appellate levels; provided, however, the Venture shall not indemnify such person
or entity or hold it harmless with respect to any of the foregoing incurred in
connection with such person's or entity's fraud, willful and wanton misconduct
or gross negligence. Notwithstanding the foregoing, the Venture shall advance,
on behalf of any Venturer against whom a claim is filed with respect to any
alleged act or omission in the conduct of the business of the Venture, all costs
and expenses of litigation, including reasonable attorneys' and paralegals' fees
through any and all negotiations, at trial and appellate levels, and will be
entitled to seek reimbursement from the Venturer for such sums advanced only to
the extent such Venturer is ultimately determined, by a final non-appealable
order or judgment, to have been guilty of fraud, willful or wanton misconduct or
gross negligence and only to the extent the Venture is not reimbursed by any
insurance policies with respect to such costs and expenses. The provisions of
this Section 4.5 shall survive termination of this Agreement.
4.6 COMPETITION. Each Venturer may have other business interests and may
engage in any other business or trade, individually, in partnership or
association with others or in any capacity whatsoever, whether or not such
business competes with the Venture. No Venturer shall be required to devote its
entire time or attention to the business of the Venture or, in any event, more
time or attention than shall reasonably be required to carry out its obligations
under this Agreement. Provided, however, that neither Venturer, nor any
corporation owned or controlled by the parties listed on Exhibits "E" and "F"
hereto shall be
9
<PAGE>
involved in the construction of "zero lot-line" single family homes in any
community located within a three mile radius of the sewer lift station located
in the Project until such time as contracts have been signed for at least 85% of
the homes to be constructed in the Project. This limitation shall not apply to
any community wherein either Venturer or any related entity is presently
constructing homes of any type.
ARTICLE FIVE
ALLOCATIONS AND DISTRIBUTIONS
5.1 ALLOCATIONS FROM OPERATIONS AND FROM CAPITAL TRANSACTIONS. Except as
provided below, the Adjusted Net Income or Adjusted Net Loss of the Venture from
operations and any income (including gain) or losses resulting from any Interim
or Terminating Capital Transactions as calculated for federal income tax
purposes and reported by the Venture on its U.S. Partnership Return of Income
for each fiscal year (or portion thereof) during the term of this Agreement,
shall be allocated to the Venturers pro rata in accordance with their respective
Venture Percentages.
5.2 DISTRIBUTION OF AVAILABLE CASH. Periodically, but not less
frequently than quarterly, the Available Cash of the Venture, if any, shall be
distributed to the Venturers in accordance with the provisions of this Section
5.2. Available Cash will be distributed to the Venturers as follows and in the
following order of priority:
(a) First: To the Venturers in repayment of the principal
amounts and accrued interest owing to the Venturers in
respect of any loans made by the Venturers to the
Venture. Amounts so distributed shall be applied first
to accrued interest and then to principal.
(b) Second: To the Venturers, PRO RATA, in accordance with
their then respective Unreturned Capital Contributions.
(c) Third: To the Venturers, PRO RATA, in accordance with
their then respective Venture Percentages.
5.3 DISTRIBUTION FOLLOWING TERMINATING CAPITAL TRANSACTIONS.
Distributions following a Terminating Capital Transaction shall be distributed
in the manner set forth in Section 8.2.
10
<PAGE>
5.4 DISTRIBUTION IN CASH ONLY. Except as the Venturers may otherwise
agree, no Venturer in his capacity as a Venturer shall have the right to demand
or receive property other than cash (as and when provided herein) from the
Venture for any reason whatsoever and no Venturer shall have the right to sue
for partition of the Venture or for the Venture's assets.
ARTICLE SIX
FISCAL MATTERS
6.1 ACCOUNTING YEAR. The fiscal year of the Venture for accounting
purposes ("Accounting Year") and for income tax purposes shall end on December
31.
6.2 BOOKS AND RECORDS. The Venture shall retain two sets of accountants.
The first group of accountants ("Basic Accountants") shall keep, or cause to be
kept, full and accurate books and records of all transactions of the Venture on
the accrual method of accounting. The Basic Accountants shall be responsible for
the routine day-to-day accounting functions of the Venture and the preparation
of periodic reports, excepting the annual audit to be performed for the Venture.
The second group of accountants ("Audit Accountants") shall be responsible for
the preparation of the annual audited financial statements of the Venture. All
organizational records of the Venture and other records required to be kept by
the Venture under the Law shall, at all times, be maintained at the Venture's
record-keeping office referred to in Section 2.3 hereof, and shall be open
during ordinary business hours for inspection and copying upon the reasonable
request and at the expense of any Venturer and its authorized representatives.
6.3 REPORTS AND STATEMENTS.
(a) ANNUAL REPORTS. Within sixty (60) days after the end of each
Accounting Year, the Basic Accountants shall, at the expense of the Venture,
cause to be delivered to the Venturers a balance sheet of the Venture as of the
end of such Accounting Year and a profit and loss statement for such Accounting
Year. Such financial statements shall be prepared on a federal income tax basis,
and shall be accompanied by such other information as may be reasonably
necessary for the Venturers to be advised of the financial status and results of
operations of the Venture.
In addition, within ninety (90) days after the end of each Accounting
Year, the Audit Accountants shall, at the expense of the Venture, cause to be
delivered to the Venturers audited financial statements of the Venture prepared
by the Audit Accountants, which financial
11
<PAGE>
statements shall include a balance sheet of the Venture as of the and of such
Accounting Year, a profit and loss statement for such Accounting Year and a
sources and uses of cash statement for such Accounting Year.
(b) QUARTERLY REPORTS. Within twenty (20) days after the end of
each quarter of an Accounting Year, the Project Manager shall, at the expense of
the Venture, cause to be delivered to the Venturers a quarterly status report
setting forth the following:
(i) An unaudited financial statement of the Venture
for the preceding quarter including an income
statement, balance sheet as of the last day of
the quarter and a statement as to the sources
and uses of Venture cash;
(ii) A comparison of the quarterly financial
statement with the Budget and Cash Flow Analysis
portions of the Business Plan applicable to the
transactions reflected in the quarterly
financial statement;
(iii) A narrative description of the Venture's
operations during the preceding quarter and its
financial condition and status at the end of the
quarter;
(iv) A description of any material default by the
Venture in any of its contractual obligations or
indebtedness and a description of any material
default by a party contractually obligated to
the Venture, and the intended action of the
Venture with respect to any such default; and
(v) Any other matters which are necessary or helpful
to enabling the Venturers to be fully apprised
as to all material matters relating to the
Venture.
6.4 TAX RETURNS. The Venture Accountants shall prepare or cause to be
prepared, all tax returns and statements, if any, that must be filed on behalf
of the Venture with any taxing authority and shall make or cause to be made the
timely filing thereof. The tax returns shall be prepared and distributed to the
Venturers for approval within a reasonable time after the end of each Accounting
Year.
6.5 TAX ELECTIONS. The Venturers shall determine, from time to time,
whether or not to make or attempt to revoke any and all tax elections regarding
depreciation methods and recovery periods, capitalization of construction period
expenses, amortization of organizational and start-up expenditures, basis
adjustments upon admission or retirement of Venturers, and any other federal,
state or local income tax elections.
12
<PAGE>
6.6 BANK ACCOUNTS. The Venturers may authorize the establishment of
Venture accounts for the Venture at banks, savings and loan associations or
other financial institutions ("Accounts") selected by the Venturers. The initial
parties who shall be authorized signatories for such accounts are set forth on
Exhibit "G" attached hereto. No funds of the Venture shall be co-mingled with
funds of any Venturer or any other individual or entity.
ARTICLE SEVEN
TRANSFER OF VENTURE INTEREST
7.1 GENERAL PROHIBITION. Except as expressly provided herein and except
with the prior written consent of all the Venturers, no Venturer shall sell,
transfer, assign, syndicate, pledge, encumber or otherwise dispose of, either
voluntarily, involuntarily, by operation of law or otherwise ("Transfer") all or
any part of its Venture Interest unless made pursuant to and in compliance with
this Article Seven and unless a copy of an executed and acknowledged assignment
effecting such Transfer has been filed with the Venture. A transaction which
results in any Person other than the parties listed on Exhibit "E" hereto
owning, directly or indirectly, a controlling portion of the outstanding capital
stock of Transeastern shall constitute a Transfer of Transeastern's Venture
Interest . A transaction which results in any Person other than the parties
listed on Exhibit "F" hereto owning, directly or indirectly, a controlling
portion of the outstanding capital stock of Cumber shall constitute a Transfer
of Cumber's Venture Interest. Any purported Transfer of a Venture Interest in
violation of the provisions of this Agreement shall be violation hereof, and
shall be null, void and of no force and effect. Provided, however, that the
foregoing prohibition shall not operate to prevent any of the parties listed on
Exhibits "E" and "F" from transferring all or any portion of the stock in
Transeastern or Cumber owned by such person to any member of such person's
immediate family or to any trust, corporation or other entity controlled by such
person.
7.2 RIGHTS OF ASSIGNEE. Any Transfer of a Venture Interest (or any part
thereof) to a Person ("Assignee") who is not admitted to the Venture as a
Venturer shall vest in such Person only the rights of an assignee, and shall not
entitle the Assignee to be admitted to the Venture as a Venturer. An Assignee
who has not been admitted to the Venture as a Venturer shall only have the right
to receive the share of profits, losses, tax credits and distributions of the
Venture to which the assigning Venturer would have been entitled with respect to
the Venture Interest (or a portion thereof) so assigned and shall have no right
to require any information or
13
<PAGE>
accounting of the Venture's transactions or finances or to inspect Venture
books, or to exercise any powers or other rights including voting and consent
rights, incidental to ownership of a Venture Interest. Admission of an Assignee
to the Venture as a Venturer in the manner hereinafter provided shall vest in
such person all rights and powers, and subject such person to all duties and all
obligations thereafter arising, of a Venturer.
7.3 ADMISSION OF VENTURERS. A Venturer may Transfer all or any part of
its Venture Interest to an Assignee to be admitted to the Venture as a Venturer
if all of the following conditions are met:
(a) All other Venturers consent in writing to the Transfer and
the admission of the Assignee as a Venturer, which consent may be withheld at
the non-transferring Venturer's sole discretion, it being agreed that the
parties hereto have entered into this Agreement in reliance upon the special
expertise, experience, financial strength, reputation and personal integrity of
the principals of each of the Venturers;
(b) The Assignee agrees in writing to be bound by the provisions of this
Agreement;
(c) The Assignee executes any and all documents, including an amendment
to this Agreement, required to effectuate or evidence its admission to the
Venture;
(d) The Venture has received an opinion of counsel to the effect that
the contemplated Transfer and admission of the Assignee as a Venturer will not
cause the termination of the Venture for federal income tax purposes or cause
the Venture not to be treated as a partnership for federal income tax purposes
or cause any other materially adverse impact to the Venture or any Venturer;
(e) The Assignee reimburses the Venture for all reasonable costs and
expenses (including reasonable attorney's fees) incurred in connection with the
Transfer and admission;
(f) The Assignee shall have delivered to the Venture, in writing, the
consent or waiver of the applicable parties to any note, mortgage, loan
agreement, contract or similar instrument or document to which the Venture is a
party and as to which the proposed Transfer may be a violation, event of default
under, or give rise to a right of acceleration; and
(g) The Assignee is not a minor or legal incompetent.
7.4 BLIND OPTION. (a) Without regard to any restrictions contained in
this Agreement or any other agreements between the Venture and third parties,
the Venturers shall each have the right (the Venturer exercising such right as
hereinafter set forth being referred to as the "Offeror") to purchase all, but
not less than all, of the Venture Interest of the other
14
<PAGE>
Venturer (the "Offeree") at any time that is at least eighteen (18) months after
the date hereof by delivering written notice of its election to do so (the
"Triggering Notice") setting forth (i) its offer to purchase the Offeree's
Venture Interest, (ii) the value at which the Offeror values the Venture's
assets after the assumed satisfaction of all Venture obligations so such assets
are free and clear of all liabilities (the "Assumed Net Asset Value"), (iii) the
amount ("Offeree Payment") that would be distributed to the Offeree as a final
distribution if all assets of the Venture were sold on the Purchase Date, such
sale resulted in proceeds to the Venture equal to the Assumed Net Asset Value,
and the proceeds were distributed among the Venturers in liquidation without any
reserve, in accordance with the provisions of this Agreement, (iv) a closing
date for the purchase (the "Purchase Date"), which shall be no later than one
hundred fifty (150) days, and no less than one hundred twenty (120) days after
the date of the Triggering Notice, (v) the amount ("Offeror Payment") that would
be paid to the Offeror as the final distribution the Offeror would receive in
such a liquidation, and (vi) the calculations made by the Offeror in concluding
that proceeds equal to the Assumed Net Asset Value would result in an Offeree
Payment and an Offeror Payment in the amounts set forth.
The Triggering Notice shall be accompanied by a copy of a check made
payable to a title company, bank or law firm willing to act as escrow agent, in
its capacity as such (the "Escrow Agent"), in an amount equal to five percent
(5.0%) of the Offeree Payment, the original of which was delivered by the
Offeror to the Escrow Agent as a down payment on the proposed purchase by the
Offeror (the "Offeror's Deposit"), and an escrow agreement executed by the
Offeror and the Escrow Agent pursuant to which the Escrow Agent acknowledges
receipt of the Offeror's Deposit and agrees to hold and apply same in accordance
with the provisions hereof.
(b) If the Offeree disputes the calculations made to arrive at
either the Offeror Payment or Offeree Payment set forth in the Triggering Notice
(no disputes may be based upon the Assumed Net Asset Value), the Offeree may,
within five days after delivery of the Triggering Notice, submit the dispute to
the Venture Accountants and, within ten days, the Venture Accountants shall make
a determination as to the dispute, all parties shall be bound thereby, and the
Offeror Payment and Offeree Payment shall thereafter be the amount established
by the Venture Accountants, if different than the amounts established by the
Offeror. The Offeree shall have the right, exercisable by delivery of written
notice to the Offeror not more than ninety (90) days after receipt of the
Triggering Notice (the "Election Notice") to elect to either (1) sell such
Offeree's Venture Interest to the Offeror for a price equal to the Offeree
Payment, or (2) purchase the Venture Interest of the Offeror for a cash purchase
price equal to the Offeror Payment.
15
<PAGE>
If the Offeree elects to purchase the Venture Interest of the Offeror,
then the Offeree shall, concurrent with the delivery of the Election Notice,
deliver a check payable to the Escrow Agent in an amount equal to five percent
(5.0%) of the Offeror Payment, as a down payment on the purchase by the Offeree
(the "Offeree's Deposit") and an agreement executed by the Offeree authorizing
the Escrow Agent to hold and apply the Offeree's Deposit pursuant to the
provisions hereof. The Offeree shall also authorize the Escrow Agent to return
the Offeror's Deposit, plus any interest accrued thereon, to the Offeror. In the
event the Offeree does not deliver an election Notice within ninety (90) days
after delivery of the Triggering Notice, the Offeree shall be deemed to have
accepted the offer by the Offeror to purchase the Offeree's Venture Interest in
return for the Offeree Payment.
(c) On the Purchase Date, the Offeree, unless it has delivered a
timely Election Notice and otherwise complied with the provisions of the
preceding paragraph, shall sell, and the Offeror shall purchase, the Venture
Interest of the Offeree for the Offeree Payment by directing the Escrow Agent to
deliver the Offeror's Deposit to the Offeree (including any interest accrued
thereon) and delivering the balance of the Offeror Payment to the Offeree by
cashier's check, federal funds wire or law firm trust account check. If the
Offeree has duly delivered an Election Notice and otherwise complied with the
provisions of the preceding paragraph, then, on the Purchase Date, the Offeree
shall purchase the Venture Interest of the Offeror and the Offeror shall sell
its Venture Interest to the Offeree for the Offeror Payment which shall be made
by the Offeree directing the Escrow Agent to disburse the Offeree's Deposit
(including any interest accrued thereon) to the Offeror and the Offeree paying
the balance of the Offeror Payment to the Offeror by cashier's check, federal
funds wire or law firm trust account check. If the purchasing Venturer shall
fail to complete the purchase on the Purchase Date through no fault of the
selling Venturer, unless the Offeror and Offeree mutually notify the Escrow
Agent to the contrary, the Escrow Agent shall deliver the Deposit made by the
defaulting Venturer, plus any interest accrued thereon, to the selling Venturer
as liquidated damages for the failure of the purchasing Venturer to complete the
purchase.
(d) After delivery of a Triggering Notice, no Venturer shall be
obligated to contribute any Additional Capital in accordance with the terms
hereof. Any Venturer may make a loan to the Venture, at two percent (2%) over
the Stipulated Rate, during the period from delivery of a Triggering Notice
until the Purchase Date, which loan shall be repaid if made by a selling
Venturer, on the Purchase Date.
(e) On the Purchase Date, the Venturer selling its Venture
Interest ("Seller") shall, in writing, represent and warrant to the purchasing
Venturer ("Purchaser") that the Seller's Venture Interest is owned by the Seller
free and clear of all claims and encumbrances and that
16
<PAGE>
valid title to the Seller's Venture Interest will be vested in the Purchaser (or
its designees) upon consummation of the transaction. The Purchaser may designate
one or more Persons to take title to all or any portion of the Venture Interest
being conveyed.
(f) The Purchaser hereunder must arrange for all loans owed by
the Venture to a Seller (or its Affiliates) to be paid in full at the closing on
the Purchase Date. Failure to do so shall be deemed a default for which the
above liquidated damages provision shall be applicable.
(g) At the closing of the purchase and sale of any Venture
Interest pursuant to this Section 7.4, the Seller shall assign, transfer and
convey the Venture Interest to be purchased to the Purchaser. In addition,
Purchaser shall be required to obtain and deliver to Seller the unconditional
release of Seller (and, if separate guaranties have been made by same, to any
shareholder, partner or other Affiliate of the Seller), from any and all
contractual obligations, contingent or otherwise, for monies borrowed by the
Venture and for contractual guaranties or contractual undertakings of the
Venture for which Seller (and/or its shareholders, partners or other Affiliates)
may be personally liable.
ARTICLE EIGHT
DISSOLUTION - TERMINATION
8.1 DISSOLUTION. It is the intention of the Venturers that the business
of the Venture be continued by the Venturers pursuant to the provisions of this
Agreement until such time as the occurrence of an "Event of Termination," as
hereinafter defined, at which time the Venture shall dissolve. The occurrence of
any of the following shall be deemed an "Event of Termination:"
(a) The sale of all or substantially all of the assets of the
Venture;
(b) The written decision by the Venturers that the Venture should be
dissolved;
(c) The Venture or a Venturer shall suffer a Bankruptcy; or
(d) December 31, 2003.
8.2 WIND-UP. Upon the dissolution of the Venture, the Venture
Accountants shall make a final accounting of the business and affairs of the
Venture and the Venturers shall proceed with reasonable promptness to liquidate
the business, property and assets of the Venture and to distribute the proceeds
in the following order of priority:
17
<PAGE>
(a) To the payment of expenses of any sale, disposition or
transfer of the Venture assets in liquidation of the Venture;
(b) To the payment of just debts and liabilities of the Venture
(including to any Venturers), in the order of priority provided by this
Agreement;
(c) To the establishment of a reasonable reserve for contingent
expenses, final legal, accounting and similar expenses incurred in connection
with liquidating the Venture and for other unforeseen and miscellaneous
expenses. In addition, the sum of $200,000.00 shall be deposited into a reserve
for the payment of any warranty claims by homeowners. Such reserves, when no
longer needed for the purposes established, shall be distributed as provided in
subparagraphs (d) through (f) below;
(d) To the Venturers, PRO RATA, in accordance with their
respective Unreturned Capital Contributions;
(e) To the Venturers, PRO RATA, in accordance with their
respective Venture Interests.
The Venturers may elect to distribute the remaining property and assets
of the Venture, if any, in kind, in lieu of selling them, based upon the then
existing fair market value thereof and after allocating to the Venturers, in
accordance with their respective interests in the Venture, any unrealized gain
inherent in such assets.
The wind-up of the affairs of the Venture shall be conducted by the
Venturers. In liquidating the assets of the Venture, all tangible assets of a
saleable value shall be sold at such price and terms as the Venturers determine
to be fair and equitable. Any Venturer may purchase such assets at such sale. It
shall not be necessary to sell any intangible assets of the Venture. A
reasonable time shall be allowed for the orderly liquidation of the assets of
the Venture and the discharge of liabilities to creditors to minimize the losses
that might otherwise occur upon liquidation.
ARTICLE NINE
GENERAL PROVISIONS
9.1 RELATIONSHIP. Nothing contained in this Agreement shall be deemed or
construed to constitute any Venturer as a general partner, employee or agent of
the other Venturer, other than in connection with activities included within the
purpose and scope of the Venture as set forth herein and subject to limitations
upon same, as set forth herein.
18
<PAGE>
9.2 NOTICE. All notices, demands or other communications given hereunder
shall be in writing and shall be deemed to have been duly given only upon hand
delivery thereof, including by recognized overnight courier, or upon the first
business day after mailing by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Transeastern: 3300 University Drive
Coral Springs, FL 33064
If to Cumber: 10100 West Sample Road
Suite 205
Coral Springs, FL 33065
or at such other address, or to such other person and at such address for that
person, as any party shall designate in writing to the other Venturer for such
purpose in the manner hereinabove set forth.
9.3 ENTIRE AGREEMENT. This Agreement sets forth all the promises,
covenants, agreements, conditions and understandings between the parties hereto,
and supersedes all prior and contemporaneous agreements, understandings,
inducements or conditions expressed or implied, oral or written, except as
herein contained.
9.4 AGENCY. Except as provided herein, nothing herein contained shall be
construed to constitute any Venturer the agent of any other Venturer or to limit
in any manner the Venturers in the carrying on of their own respective
businesses or activities.
9.5 BINDING EFFECT, NO ASSIGNMENT. This Agreement shall be binding upon
the parties hereto, their heirs, administrators, successors and permitted
assigns. No party may assign or transfer its interests herein, or delegate its
duties hereunder, except as expressly provided herein.
9.6 AMENDMENT. The parties hereby irrevocably agree that no attempted
amendment, modification, termination, discharge or change (collectively,
"Amendment") of this Agreement shall be valid and effective, unless the parties
shall unanimously agree in writing to such Amendment.
19
<PAGE>
9.7 NO WAIVER. No waiver of any provision of this Agreement shall be
effective unless it is in writing and signed by the party against whom it is
asserted, and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
9.8 GENDER AND USE OF SINGULAR AND PLURAL. All pronouns shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the party or parties, or their personal representatives, successors and
assigns may require.
9.9 COUNTERPARTS. This Agreement and any amendments may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
9.10 HEADINGS. The article and section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of the Agreement.
9.11 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Florida and any proceeding arising between the parties
in any manner pertaining or related to this Agreement shall, to the extent
permitted by law, be held in Broward County, Florida.
9.12 FURTHER ASSURANCES. The parties hereto will execute and deliver
such further instruments and do such further acts and things as may be
reasonably required to carry out the intent and purposes of this Agreement.
9.13 PROVISIONS SEVERABLE. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules, and regulations of the jurisdiction in which the parties do
business. If any provision of this Agreement, or the application thereof to any
person or circumstance shall, for any reason or to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law.
20
<PAGE>
9.14 LITIGATION. If any party hereto is required to engage in litigation
against any other party hereto, either as plaintiff or as defendant, in order to
enforce or defend any of its rights under this Agreement, and such litigation
results in a final judgment in favor of such party ("Prevailing Party"), then
the party or parties against whom said final judgment is obtained shall
reimburse the Prevailing Party for all direct, indirect or incidental expenses
incurred by the Prevailing Party in so enforcing or defending its rights
hereunder including, but not limited to, all attorney's fees and court costs and
other expenses incurred throughout all negotiations, trials or appeals
undertaken in order to enforce the Prevailing Party's rights hereunder.
9.15 REMEDIES. Each party hereto recognizes and agrees that the
violation of any term, provision or condition of this Agreement may cause
irreparable damage to the other parties which may be difficult to ascertain, and
that the award of any sum of damages may not be adequate relief to such parties.
Each party, therefore, agrees that, in addition to other remedies available in
the event of a breach of this Agreement, any party shall have a right to
equitable relief including, but not limited to, the remedy of specific
performance.
9.16 NO FOREIGN PERSON WITHHOLDING. Each of the Venturers hereby
represent and warrant for the benefit of the other that it is not a "foreign
person" within the meaning of Code Section 1445.
9.17 NO RECORDATION. Neither this Agreement nor any memorandum thereof
shall be recorded among the public records of any governmental authority.
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
H.A. CUMBER OF PEMBROKE PINES,
INC.,
a Florida corporation, general partner
- ------------------------
Print Name:__________________ By:______________________
Aftab H. Cumber,
President
(Corporate Seal)
- ------------------------
Print Name:__________________ Dated: February ___, 1994
TRANSEASTERN PEMBROKE PROPERTIES,INC.,
a Florida Corporation, general partner
- ------------------------
Print Name:__________________
By:_____________________
Arthur Falcone,
President
(Corporate Seal)
- ------------------------
Print Name:__________________ Dated: February ___, 1994
22
<PAGE>
EXHIBIT DESCRIPTION
A Legal Description of the Property
B Definitions
C Authoritzed signatories for house closings
D Guarantors of Approved Mortgage Loans
E Stockholders of Transeastern Pembroke Properties, Inc.
F Stockholders of A.H. Cumber of Pembroke Pines, Inc.
G Authorized signatories for Venture Bank Accounts
<PAGE>
EXHIBIT "A"
(Legal Description of the Property)
<PAGE>
EXHIBIT "B"
(Definitions)
(a) ADJUSTED NET INCOME AND ADJUSTED NET LOSS. "Adjusted Net Income" or
"Adjusted Net Loss" means the net income or loss of the Venture resulting from
Venture operations during any stated period, as calculated by the Venture
Accountants for federal income tax purposes, provided that gain or loss
resulting from any disposition of property with respect to which gain or loss is
recognized for federal income tax purposes shall be computed by reference to the
Gross Asset Value of the property disposed of, notwithstanding that the adjusted
tax basis of such property differs from its Gross Asset Value.
(b) AFFILIATE. Any of the following: (i) any person or entity directly
or indirectly controlling, controlled by or under common control with a
Venturer, (ii) a person or entity owning or controlling ten percent (10%) or
more of the outstanding voting equity of a Venturer, (iii) any officer, director
or partner of a Venturer or an employee acting in a similar capacity, and (iv)
if such other person is an officer, director, partner or similar employee of a
Venturer, any entity for which such person acts in any such capacity.
(c) AGREEMENT. This Joint Venture Agreement of Parkside Homes, a Florida
general partnership, as originally executed and as amended from time to time, as
the context requires.
(d) AVAILABLE CASH. Cash of the Venture, excluding cash proceeds from a
Terminating Capital Transaction, if any, not needed to satisfy current
liabilities, upcoming capital expenditures or as a reasonable reserve for either
and thus available for distribution to the Venturers, which may include, but
shall not be limited to, cash proceeds generated by Venture operations and
Interim Capital Transactions, including financing and refinancing (which term,
"refinancing" is defined, for all purposes under this Agreement, to include
financing which has been recast, modified, extended or increased).
(e) BANKRUPTCY. As used in this Agreement, the term "Bankruptcy" with
respect to the Venture or a Venturer, shall refer to:
(1) the appointment of a receiver, conservator, rehabilitator or
similar officer for the Venture, a Venturer or any person or entity that has
majority voting rights with respect to any Venturer, unless the appointment of
such officer shall be vacated and such officer discharged within one hundred
twenty (120) days of the appointment; (2) the taking of possession of, or the
assumption of control over, all or any substantial part of the property of the
Venture, any Venturer or any person or entity that has majority voting rights
with respect to any Venturer by any receiver, conservator, rehabilitator or
similar officer or by the United States Government or any agency thereof, unless
such property is relinquished within one hundred twenty (120) days of the
taking; (3) the filing of a petition in bankruptcy or the commencement of any
proceeding under any present or future federal or state law relating to
bankruptcy, insolvency, debt relief or reorganization of debtors by or against
the Venture, any Venturer or any person or entity that has majority voting
rights with respect to any Venturer provided, if filed against the Venture, any
Venturer or the person or entity that has majority voting rights with respect to
any Venturer, such petition or proceeding is not dismissed within thirty (30)
days of the filing of the petition or the commencement of the proceeding; (4)
the making of an assignment for the benefit of creditors or a private
composition, arrangement or adjustment with the creditors of the Venture, any
Venturer or any person or entity that has majority voting rights with respect to
any Venturer; or (5) the commencement of any
<PAGE>
proceedings supplementary to the execution of any judgment against the Venture,
any Venturer or any person or entity that has majority voting rights with
respect to any Venturer, unless such proceeding is dismissed within thirty (30)
days of the date it was commenced.
(f) CAPITAL ACCOUNTS. Throughout the full term of the Venture, each
Venturer shall have a separate Capital Account determined and maintained in
accordance with the provisions of Treasury Regulations Section
1.704-l(b)(2)(iv), promulgated under Code Section 704(b).
(g) CAPITAL CONTRIBUTION.The total amount of money or the agreed fair
market value of property other than money contributed by each Venturer to the
capital of the Venture, as reflected in the books of the Venture.
(h) CODE. The Internal Revenue Code of 1986, as amended from time to
time, or any corresponding provision or provisions of any federal internal
revenue law enacted in substitution of the Internal Revenue Code of 1986.
(i) EVENT OF TERMINATION. Any of the events that result in dissolution
of the Venture as set forth in Section 8.1 hereof.
(j) PERSON. Any individual, trust, partnership, corporation, joint
venture, or other entity or association, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person.
<PAGE>
EXHIBIT "C"
(Authoritzed Signatories for House cCosings)
<PAGE>
EXHIBIT "D"
(Guarantors of Approved Mortgage Loans)
<PAGE>
EXHIBIT "E"
(Stockholders of Transeastern Pembroke Properties, Inc.)
<PAGE>
EXHIBIT "F"
(Stockholders of A.H. Cumber of Pembroke Pines, Inc.)
<PAGE>
EXHIBIT "G"
(Authorized Signatories for Venture Bank Accounts)
<PAGE>
ADDENDUM TO JOINT VENTURE AGREEMENT
OF
PARKSIDE HOMES
THIS ADDENDUM TO JOINT VENTURE AGREEMENT OF PARKSIDE HOMES (the
"Addendum") is made and entered into as of May __, 1994, by and between
TRANSEASTERN PEMBROKE PROPERTIES, INC., a Florida corporation ("Transeastern")
and H.A. CUMBER OF PEMBROKE PINES, INC., a Florida corporation ("Cumber").
Transeastern and Cumber are sometimes hereinafter referred to individually as
"Venturer" and collectively as "Venturers."
WITNESSETH
WHEREAS, the Venturers have heretofore executed that certain Joint
Venture Agreement dated February 19, 1994 (the "Agreement"), pursuant to which
the Venturers have agreed to participate together in a joint venture (the
"Venture") formed under the general partnership law of the State of Florida for
the acquisition of certain real property located in Broward County, Florida, as
more fully described on Exhibit "A" attached hereto, and the construction
thereon of single family residences for sale to the public (such real property
and the improvements to be constructed thereon being hereafter referred to as
the "Project"); and
WHEREAS, the Venturers have reached agreement regarding certain
modifications to the Agreement and wish to reduce their agreement regarding such
modifications to a written instrument.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions contained herein, the parties hereby agree as follows:
1. INCORPORATION BY REFERENCE. The foregoing recitals are hereby
acknowledged to be true and are incorporated herein by reference, and all
Exhibits annexed hereto and referred to herein are incorporated herein by
reference.
2. RATIFICATION OF AGREEMENT. The terms, covenants and conditions of the
Agreement remain in full force and effect and are hereby expressly ratified by
the parties.
33
<PAGE>
3. SELECTION OF PROJECT MANAGER. Section 4.2 of the Agreement is hereby
modified to provide that Transeastern Properties of South Florida, Inc.
("Transeastern Properties") shall serve as the Project Manager (as defined in
the Agreement) . All references in the Agreement to the Project Manager shall be
deemed to refer to Transeastern Properties in its capacity as Project Manager.
4. COMPENSATION OF PROJECT MANAGER. As compensation for its services as
Project Manager, Transeastern Properties shall be entitled to receive the sum of
$200,000.00 for the calendar year 1994, payable in twelve equal monthly
installments of $16,666.66 per month. Transeastern Properties shall be entitled
to receive the sum of One Hundred Thousand Dollars per annum for all calendar
years after 1994, payable in equal monthly installments of $8,333.33 per month,
through completion of the sale of houses within the Project. All such monthly
payments shall be due and payable on the first day of each month. The
compensation due to Transeastern Properties shall be an expense of the Venture,
shall be paid from the funds of the Venture and shall be included as an
operating expense of the Venture in determining the Available Cash of the
Venture. Prior to the commencement of sales of completed houses by the Venture,
the Venture shall pay such amount to Transeastern on a monthly basis. Cumber
shall not be entitled to any credit against its capital account in the venture
on account of such payments. Payment of the installments due for the months of
January - May, 1994 has been made concurrent with the execution hereof. The
provisions of Section of the Agreement shall be deemed modified to provide that
such monthly management fee paid to Transeastern from the Venture's funds shall
be charged against any Distribution of Available Cash due to Cumber under the
Agreement.
5. MISCELLANEOUS.
A. HEADINGS. The article and section headings contained in this Addendum
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of the Addendum or the Agreement.
B. GOVERNING LAW. This Addendum shall be construed in accordance with
the laws of the State of Florida and any proceeding arising between the parties
in any manner pertaining or related to this Addendum shall, to the extent
permitted by law, be held in Broward County, Florida.
C. EXTENT OF MODIFICATION. Except as expressly modified by the terms and
conditions hereof, the terms, covenants and conditions of the Agreement shall be
otherwise left unaffected, and are hereby ratified and confirmed in all
respects.
34
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Addendum the day and
year first above written.
H.A. CUMBER OF PEMBROKE PINES,
INC., a Florida corporation, general partner
- ------------------------
Print Name:__________________ By:______________________
Aftab H. Cumber,
President
(Corporate Seal)
- ------------------------
Print Name:__________________ Dated: May ___, 1994
TRANSEASTERN PEMBROKE
PROPERTIES,INC., a Florida Corporation, general
partner
- ------------------------
Print Name:__________________
By:_____________________
Arthur Falcone,
President
(Corporate Seal)
- ------------------------
Print Name:__________________ Dated: May ___, 1994
35
<PAGE>
SECOND
ADDENDUM TO JOINT VENTURE AGREEMENT
OF
PARKSIDE HOMES
THIS SECOND ADDENDUM TO JOINT VENTURE AGREEMENT OF PARKSIDE HOMES (the
"Addendum") is made and entered into as of May __, 1996, by and between
TRANSEASTERN PEMBROKE PROPERTIES, INC., a Florida corporation ("Transeastern")
and H.A. CUMBER OF PEMBROKE PINES, INC., a Florida corporation ("Cumber").
Transeastern and Cumber are sometimes hereinafter referred to individually as
"Venturer" and collectively as "Venturers."
WITNESSETH
WHEREAS, the Venturers have heretofore executed that certain Joint
Venture Agreement dated February 16, 1994 (the "Agreement"), pursuant to which
the Venturers agreed to participate together in a joint venture (the "Venture")
formed under the general partnership law of the State of Florida for the
acquisition of certain real property located in Broward County, Florida, as more
fully described on Exhibit "A" attached hereto, and the construction thereon of
single family residences for sale to the public (such real property and the
improvements to be constructed thereon being hereafter referred to as the
"Project"); and
WHEREAS, pursuant to the provisions of that certain Addendum to Joint
Venture Agreement dated July 1, 1994 (the "First Addendum"), the Venturers
agreed to certain modifications to the Agreement as more fully set forth in the
Addendum; and
WHEREAS, the Venturers have reached agreement regarding certain
additional modifications to the Agreement and wish to reduce their agreement
regarding such additional modifications to a written instrument.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions contained herein, the parties hereby agree as follows:
1. INCORPORATION BY REFERENCE. The foregoing recitals are hereby
acknowledged to be true and are incorporated herein by reference, and all
Exhibits annexed hereto and referred to herein are incorporated herein by
reference.
36
<PAGE>
2. RATIFICATION OF AGREEMENT. The terms, covenants and conditions of the
Agreement, as modified by the First Addendum, remain in full force and effect
and are hereby expressly ratified by the parties.
3. MODIFICATION OF MAJOR DECISIONS. Section 4.1 of the Agreement sets
forth various "Major Decisions," which require the consent of both of the
Venturers. The Venturers hereby agree that the provisions of Section are hereby
modified to provide that the Major Decisions shall henceforth be as follows: (a)
The sale, exchange or other disposition of all, or substantially all, of the
property and assets of the Venture, other than the sale of individual lots and
houses to be constructed thereon within the Project; (b) A decision to dissolve
the Venture;
4. MANAGING VENTURER. From the date of this Addendum, Transeastern shall
be the Managing Venturer, and in such capacity shall have the following
responsibilities and all authority necessary to the performance of such
responsibilities:
(a) Approval of any material modification to the approved
Business Plan including, without limitation, any material
modification to the Budget or Cash Flow Analysis and any
other component thereof;
(b) Approval of modifications to the layout or facade of
houses, adjustments to lot sizes, adjustments to selling
prices and incurring of expenditures not contemplated by
the Budget but which do result in increasing the Budget by
more than ten percent (10%) shall not be deemed material
modifications;
(c) To authorize the Venture to enter into an Approved
Mortgage or any other financing arrangements, whether or
not secured by any portion of the Property and whether or
not with or without recourse to the assets of the Venture,
including routine equipment leases or other installment
obligations that are substantially consistent with the
Business Plan, including the Budget and Cash Flow
Analysis;
(d) To authorize any transaction, not expressly authorized
herein, between the Venture and a Venturer or any
Affiliate of a Venturer. Provided, however, that any such
material transactions which provide for the payment of
compensation in excess of amounts which could be
reasonably negotiated at arms length with qualified
non-affiliated third parties for the performance of such
services will require approval of all Venturers;
(e) To authorize the Venture to enter into a joint venture or
similar arrangement with third parties for the purpose of
developing any portion of the Property or for any other
purpose; and
(f) To authorize an expansion or restriction of the authority
of the Project Manager to act with respect to any matter
concerning the Venture.
All power and authority of the Venture not expressly delegated herein to
the Venturers
37
<PAGE>
shall be vested in the Managing Venturer. For purposes of the foregoing, any
reference in this Agreement to an act, approval, consent or other event
occurring "by the Venturers," "from the Venturers," "in the Venturers" or "of
the Venturers" shall mean by unanimous consent of the Venturers.
5. MISCELLANEOUS.
A. HEADINGS. The article and section headings contained in this Addendum
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of the Addendum or the Agreement.
B. GOVERNING LAW. This Addendum shall be construed in accordance with
the laws of the State of Florida and any proceeding arising between the parties
in any manner pertaining or related to this Addendum shall, to the extent
permitted by law, be held in Broward County, Florida.
C. EXTENT OF MODIFICATION. Except as expressly modified by the terms and
conditions hereof, the terms, covenants and conditions of the Agreement, as
heretofore modified by the Addendum, shall be otherwise left unaffected, and are
hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties have executed this Addendum the day and
year first above written.
H.A. CUMBER OF PEMBROKE PINES,
INC., a Florida corporation, general partner
- ------------------------
Print Name:__________________ By:__________________________________
Aftab A. Cumber, President
(Corporate Seal)
- ------------------------
Print Name:__________________ Dated: May ___, 1996
TRANSEASTERN PEMBROKE
PROPERTIES,INC.,
a Florida Corporation, general partner
- ------------------------
Print Name:__________________
By:_________________________________
Arthur J. Falcone, President
(Corporate Seal)
- ------------------------
Print Name:__________________ Dated: May ___, 1996
38
LOAN AGREEMENT
Between
TRANSEASTERN PEMBROKE VILLAGES, INC.
and
AMRESCO FUNDING CORPORATION
Dated: , 1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS............................................................2
Section 1.1 Definitions....................................2
Section 1.2 Other Definitional Provisions.................21
ARTICLE II
AMOUNT AND TERMS OF LOAN AND CHASE FEDERAL LOANS......................22
Section 2.1 Terms of Loan.................................22
Section 2.2 Terms of Chase Federal Loans..................23
Section 2.3 Terms of Note.................................24
Section 2.4 Application of Funds..........................24
Section 2.5 Tracts C and E Acquisition Loan
and Construction Loan.........................24
Section 2.6 Prepayment of Loan............................25
Section 2.7 [INTENTIONALLY DELETED].......................25
Section 2.8 Intent Not to Commit Usury....................25
Section 2.9 Determination of Net Profit...................25
Section 2.10 Application of Net Sales Proceeds.............25
Section 2.11 Distributions.................................26
ARTICLE III
SALE OF REAL PROPERTY; APPLICATION OF PROCEEDS........................26
Section 3.1 Partial Releases..............................26
Section 3.2 Sales of Tracts or Units on the
Real Property.................................27
Section 3.3 Borrower's First Priority Return..............30
Section 3.4 First Contingent Return.......................31
Section 3.5 Borrower's Second Priority Return.............31
Section 3.6 Second Contingent Return......................31
Section 3.7 Intent of Lender..............................31
ARTICLE IV
SECURITY AND GUARANTY FOR PAYMENT OF THE LOAN.........................33
Section 4.1 Mortgage......................................33
Section 4.2 Security Agreement............................33
Section 4.3 Assignment of Leases, Rents and Profits.......34
Section 4.4 Collateral Assignment of Agreements
Affecting Real Estate.........................34
Section 4.5 Pledge Agreements and Stock Certificates......34
Section 4.14 Mortgagor's Affidavit.........................34
<PAGE>
Section 4.15 Guaranty......................................34
Section 4.16 Funding Agreement.............................35
Section 4.17 Environmental Indemnity Agreement.............35
Section 4.18 [INTENTIONALLY DELETED].......................35
Section 4.19 Security Documents............................35
Section 4.20 Filing and Recording..........................35
ARTICLE V
SECURITY AND GUARANTY FOR
PAYMENT OF THE CONTINGENT RETURNS.....................................36
Section 5.1 Contingent Return Mortgage....................36
Section 5.2 Collateral Assignment of Agreements
Affecting Real Estate.........................36
Section 5.3 Pledge Agreements and Stock Certificates......36
Section 5.4 Assignment of Leases, Rents and Profits.......37
ARTICLE VI
DEBTOR PARTIES' REPRESENTATIONS AND WARRANTIES........................37
Section 6.1 Organization and Standing.....................37
Section 6.2 Capitalization................................37
Section 6.3 Power and Authority...........................38
Section 6.4 Valid and Binding Obligation..................38
Section 6.5 No Legal Bar..................................39
Section 6.6 Title to Collateral...........................39
Section 6.7 Financial Statements and Other
Information...................................39
Section 6.8 Litigation....................................40
Section 6.9 Investment Company Act........................40
Section 6.10 Federal Regulation............................40
Section 6.11 Disclosure....................................41
Section 6.12 Brokerage.....................................41
Section 6.13 Taxes.........................................41
Section 6.14 ERISA.........................................42
Section 6.15 Liabilities to Employees and Officers.........43
Section 6.16 Subsidiaries..................................43
Section 6.17 Environmental Contamination/Hazardous
Material......................................43
Section 6.19 Condition of Mortgaged Property...............44
Section 6.20 Utilities.....................................44
Section 6.21 Budget for Acquisition Contract
Development Work..............................45
Section 6.22 Zoning and Land Use...........................45
Section 6.23 Permits and Licenses..........................45
Section 6.24 [Intentionally Delete]........................45
Section 6.25 No Defaults...................................45
Section 6.26 Facilities For Handicapped....................45
Section 6.27 Other Agreements..............................46
Section 6.28 Chase Federal Loan Documents..................46
<PAGE>
Section 6.29 Representations and Warranties in
Other Loan Documents..........................46
Section 6.30 Reliance on Representations...................46
ARTICLE VII
CONDITIONS PRECEDENT..................................................47
Section 7.1 Correctness of Warranties.....................47
Section 7.2 Opinion of Counsel............................47
Section 7.3 Entity Documents..............................47
Section 7.4 Certified Resolutions and Incumbency..........47
Section 7.5 Loan Documents................................48
Section 7.6 Mortgagee Title Insurance Policy..............48
Section 7.7 Chase Federal Loan Documents..................48
Section 7.8 Equity Contribution...........................49
Section 7.9 Stock Certificates and Stock Powers...........49
Section 7.10 Acquisition Contract, Option Contract
and Tract B Sales Contract....................49
Section 7.11 Soils Test....................................49
Section 7.12 [INTENTIONALLY DELETED].......................49
Section 7.13 Copies of Permits, Licenses and
Approvals.....................................49
Section 7.14 Availability of Utilities.....................50
Section 7.15 Plans and Specifications......................50
Section 7.16 Construction Contract.........................50
Section 7.17 Approvals of Governmental Authorities.........50
Section 7.18 Compliance with Governmental
Requirements..................................50
Section 7.19 Certificates from General Contractor
and Engineer..................................51
Section 7.20 Cost Breakdown................................51
Section 7.21 Flood Hazard Area.............................51
Section 7.22 Survey........................................51
Section 7.23 Tri-Party Agreement...........................51
Section 7.24 No Moratorium.................................51
Section 7.25 Insurance.....................................52
Section 7.26 Subordination to the Loan.....................52
Section 7.27 Additional Documents and Instruments..........52
ARTICLE VIII
DEBTOR PARTIES' AFFIRMATIVE COVENANTS.................................52
Section 8.1 Existence and Qualification...................52
Section 8.2 Financial Statements and Information..........53
Section 8.3 [Intentionally Deleted].......................55
Section 8.4 Taxes and Claims..............................55
Section 8.5 Insurance.....................................56
Section 8.6 Sales.........................................58
Section 8.7 Books and Reserves............................58
<PAGE>
Section 8.8 Inspection by Lender..........................58
Section 8.9 Location of Collateral........................59
Section 8.10 Pay Indebtedness to the Lender and
Perform Other Covenants.......................59
Section 8.11 Litigation....................................59
Section 8.12 Defaults or Assessments.......................60
Section 8.13 Employee Benefit Plans........................60
Section 8.14 Subordination of Indebtedness.................60
Section 8.15 Correspondence with Accountants...............60
Section 8.16 Estoppel Affidavits...........................61
Section 8.17 Change of Name, Principal Place of
Business, Etc.................................61
Section 8.18 Environmental Laws............................61
Section 8.19 Compliance with Laws..........................62
Section 8.20 Purchase of Materials and Supplies............62
Section 8.21 Indemnification...............................62
Section 8.22 Solvency......................................63
Section 8.23 Separate Accounts.............................63
ARTICLE IX
BORROWER'S NEGATIVE COVENANTS.........................................64
Section 9.1 Type of Business..............................64
Section 9.2 Mortgages, Liens, Etc.........................64
Section 9.3 Covenant to Subordinate.......................65
Section 9.4 Indebtedness..................................65
Section 9.5 Loans, Investments and Guarantees.............66
Section 9.6 Merger, Sale of Assets, Dissolution,Etc.......67
Section 9.7 Transfer of Ownership Interest in
Borrower and Mortgaged Property...............67
Section 9.8 Distributions; Restricted Payments............68
Section 9.9 Transactions with Affiliates..................68
Section 9.10 Issuance or Disposition of Capital
Securities....................................68
Section 9.11 Change in Documents...........................68
Section 9.12 Change of Fiscal Year, Etc....................69
Section 9.13 Covenant Not to Compete.......................69
Section 9.14 Purchase Agreements...........................70
ARTICLE X
EVENTS OF DEFAULT.....................................................70
Section 10.1 Immediate Acceleration........................71
Section 10.2 Discretionary Acceleration....................72
Section 10.3 Waiver of Default.............................74
<PAGE>
ARTICLE XI
REMEDIES FOR DEFAULT..................................................74
Section 11.1 Action for Enforcement........................74
Section 11.2 Rights and Remedies Cumulative................75
Section 11.3 Rights and Remedies Not Waived................75
ARTICLE XII
FEES AND PAYMENTS.....................................................75
Section 12.1 Commitment Fee................................75
Section 12.2 Expense Deposit...............................76
Section 12.3 Costs, Taxes and Attorneys' Fees..............76
ARTICLE XIII
MISCELLANEOUS.........................................................78
Section 13.1 Notices.......................................78
Section 13.2 Further Assurances............................79
Section 13.3 Survival of Representations and
Warranties....................................80
Section 13.4 Attorneys' Fees...............................80
Section 13.5 Approved Form.................................80
Section 13.6 Severability..................................81
Section 13.7 Counterparts..................................81
Section 13.8 Interpretation................................81
Section 13.9 Conflict......................................81
Section 13.10 Headings......................................82
Section 13.11 Jurisdiction and Venue........................82
Section 13.12 Amendments....................................82
Section 13.13 Waivers.......................................82
Section 13.14 Publicity.....................................83
Section 13.15 Development Consultant........................83
Section 13.16 Governing Law; Benefit........................84
Section 13.17 Reproduction of Documents.....................84
Section 13.18 Absence of Control............................84
Section 13.19 Governmental Regulations of the Lender........85
Section 13.20 Accrual of Interest Under the Note............85
Section 13.21 WAIVER OF CONSEQUENTIAL DAMAGES...............85
Section 13.22 ENTIRE AGREEMENT..............................85
Section 13.23 WAIVER OF JURY TRIAL..........................85
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT made this 29th day of March, 1996 by and
between TRANSEASTERN PEMBROKE VILLAGES, INC., a Florida corporation (the
"BORROWER") and AMRESCO FUNDING CORPORATION, a Delaware corporation, (the
"LENDER").
PRELIMINARY STATEMENTS:
WHEREAS, pursuant to that certain commitment letter dated March
15, 1996 (the "Commitment Letter"), Lender has agreed to loan and the Borrower
has agreed to borrow a sum not to exceed THREE MILLION DOLLARS
($3,000,000.00)(the "Loan"), the proceeds of which shall be used by the Borrower
for the (i) acquisition of Tracts B, D and F of the Real Property, as
hereinafter defined and (ii) funding of interest due on the Loan, all in
accordance with the terms and conditions set forth in the Loan Documents, as
hereinafter defined; and
WHEREAS, simultaneously herewith, Chase Federal Bank, a federal
savings bank ("Chase Federal") has made a loan to the Borrower in the principal
amount of TEN MILLION ONE HUNDRED FIFTY THOUSAND and no/100 DOLLARS
($10,150,000.00) and has issued letters of credit on behalf of the Borrower in
an aggregate amount of THREE MILLION, FIVE HUNDRED EIGHTY FIVE THOUSAND, FIVE
HUNDRED NINETY- THREE AND 78/100 DOLLARS ($3,585,593.78)(the "CHASE FEDERAL A&D
LOAN"), the proceeds of which shall be used by the Borrower for (i) the
acquisition of Tracts B, D and F of the Real Property, (ii) the Acquisition
Contract Development Work, as hereinafter defined, and (iii) the Chase Federal
Letters of Credit, as hereinafter defined, all in accordance with the terms and
conditions set forth in the Chase Federal Loan Documents, as hereinafter
defined; and
WHEREAS, Chase Federal has indicated its willingness to make a
loan to the Borrower in an amount equal to eighty percent (80%) of the cost of
the Tract Infrastructure Work, as hereinafter defined (the "Chase Federal Tract
Loan"), the proceeds of which shall be used by the Borrower for the Tract
Infrastructure Work, all in accordance with the terms and conditions to be set
forth in the Chase Federal Tract Loan Documents, as hereinafter defined; and
WHEREAS, simultaneously herewith, the Borrower has agreed to pay
to Lender certain Contingent Returns, as hereinafter defined, in accordance with
the terms of Article III hereof; and
WHEREAS, the Lender is willing to make the Loan on the terms and
conditions and on the security hereinafter set forth.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises,
conditions, representations and warranties hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS
As used in this Loan Agreement, the Exhibits and Schedules
attached hereto, if any, and any Loan Document executed incidental thereto, the
following terms shall have the following meanings unless the context otherwise
requires:
"ACQUISITION CONTRACT" shall mean that certain Agreement of
Purchase and Sale dated August 14, 1995, by and between Transeastern and
SarahPark Development Corporation ("SarahPark"), as amended on December 13,
1995.
"ACQUISITION CONTRACT DEVELOPMENT WORK" shall mean the work
specified in Exhibit D to the Acquisition Contract, pertaining to all Tracts
within the boundary plat commonly referred to as the "Nasher Plat", which shall
not include the Tract Infrastructure Work, as incorporated into a business plan
and budget acceptable to Lender.
"AFFILIATE" shall mean, with respect to any Person, a Commonly
Controlled Entity, any other Person which controls (directly or indirectly) the
Person in question, or any other Person which is (directly or indirectly)
controlled by or under common control with the Person in question. For the
purpose of this definition, "control" of a Person shall mean the possession,
directly or indirectly, or the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise.
"AGREEMENT" shall mean this Loan Agreement, as the same may be
amended, supplemented or otherwise modified from time to time by an agreement in
writing signed by the Borrower, the Guarantor and the Lender.
"AMRESCO UNIT RELEASE PRICE" shall mean the release price(s) to
be specified by Lender.
2
<PAGE>
"BORROWER'S FIRST PRIORITY RETURN" shall mean an amount to be
paid from Net Sales Proceeds in connection with residences constructed on Tracts
D and F of the Real Property, and Tract E of the Real Property to the extent the
same is acquired by the Borrower, equal to 2% of gross sales proceeds for each
such residence, provided that (a) such return shall not be greater than
$30,000.00 in a given calendar month (and amounts payable but for this limit
shall not accrue), and (b) the aggregate of all amounts paid to the Borrower in
respect of the Borrower's First Priority Return shall not exceed an amount equal
to 4% of the sum of (x) development costs for the Tract Infrastructure
Development Work in connection with Tracts D and F of the Real Property, and
Tract E of the Real Property to the extent the same is acquired by the Borrower,
and (y) the costs of construction of improvements on Tracts D and F of the Real
Property, and Tract E of the Real Property to the extent the same is acquired by
the Borrower. Notwithstanding anything to the contrary contained herein, the
payment of the Borrower's First Priority Return shall be strictly conditioned
upon there not existing at the time that the same would otherwise be paid, a
default or event of default pursuant to the Loan Documents, or any event or
circumstance which with the passing of time or the giving of notice, or both,
would be a default or event of default pursuant to the Loan Documents (for the
purposes of this Agreement terms that refer to Borrower's costs of construction
or such similar terms or references shall refer to the actual amounts that are
billed and paid by Borrower to subcontractors/contractors to furnish labor and
materials to the Project and shall not include any Borrower overhead or
mark-up).
"BORROWER'S SECOND PRIORITY RETURN" shall mean (a) an amount
equal to 4% of the sum of (x) development costs for the Tract Infrastructure in
connection with Tracts D and F, and Tract E to the extent the same is acquired
by the Borrower, and (y) the costs of construction of improvements on Tracts D
and F, and Tract E to the extent the same is acquired by the Borrower; reduced
by (b) the amount of the Borrower's First Priority Return which has been paid to
the Borrower. Notwithstanding anything to the contrary contained herein, the
payment of the Borrower's Second Priority Return shall be strictly conditioned
upon there not existing at the time that the same would otherwise be paid, a
default or event of default pursuant to the Loan Documents, or any event or
circumstance which with the passing of time or the giving of notice, or both,
would be a default or event of default pursuant to the Loan Documents.
"BUDGET" shall mean that certain semi-annual budget to be
prepared by Borrower twice annually and submitted to Lender for Lender's review
and approval in accordance with the terms of Section 8.2 hereof.
3
<PAGE>
"BUSINESS DAY" shall mean a day other than Saturday, Sunday or
other day on which commercial banks in Broward County, Florida are authorized or
required by law to close.
"CAPITAL SECURITY" shall mean, (i) with respect to any Person
that is a corporation, any share of capital stock of such Person or any security
convertible into, or any option, warrant or other right to acquire, any share of
capital stock of such Person and (ii) with respect to any Person that is a
partnership, any partnership or other ownership interest in such Person or any
security convertible into, or any option, warrant or other right to acquire, any
partnership or other ownership interest in such Person.
"CASH FLOW" shall mean Gross Revenue minus Project Expenses.
"CHASE FEDERAL" shall mean Chase Federal Bank, a federal savings
bank.
"CHASE FEDERAL A&D LOAN" shall mean the credit facility described
in the second paragraph of the Preliminary Statements and in Section 2.2 hereof.
"CHASE FEDERAL LETTER(S) OF CREDIT" means those certain letters
of credit in an aggregate amount equal to $3,585,593.78 issued by Chase Federal
to applicable governmental authorities to insure completion of certain
infrastructure improvements on the Property.
"CHASE FEDERAL LOAN DOCUMENTS" shall mean (i) the Chase Federal
Note, the Chase Federal Mortgage and all other documents executed by Borrower to
Chase Federal evidencing and securing the Chase Federal A&D Loan, (ii) the Chase
Federal Tract Loan Documents, and (iii) all documents executed and delivered by
Borrower to Chase Federal evidencing and securing the Construction Loan, to the
extent the Construction Loan is provided by Chase Federal and the documents are
approved as to form and substance by Lender in writing.
"CHASE FEDERAL LOANS", collectively, shall mean the Chase Federal
A&D Loan, the proposed Chase Federal Tto Chase Federal encumbering the Property
which secures (i) the indebtedness evidenced by the Chase Federal Note, (ii)
sums disbursed under the
4
<PAGE>
Chase Federal Letters of Credit, and (iii) the Borrower's obligations under the
other Chase Federal Loan Documents.
"CHASE FEDERAL NOTE" shall mean that certain promissory note of
even date herewith from Borrower to Chase Federal evidencing the indebtedness to
Chase Federal under the Chase Federal A&D Loan in the original principal amount
of TEN MILLION ONE HUNDRED FIFTY THOUSAND and no/100 DOLLARS ($10,150,000.00)
together with any reimbursement obligations in connection with the Chase Federal
Letters of Credit.
"CHASE FEDERAL SECURED SUM" means (i) the outstanding principal
balance under the Chase Federal A&D Loan but in no event greater than
$10,150,000.00, (ii) the outstanding principal balance under the Chase Federal
Tract Loan but in no event greater than $2,600,000.00, provided the same is
approved by Lender in writing (iii) all accrued and unpaid interest under the
Chase Federal Loans, (iv) all sums advanced by Chase Federal to prevent
impairment of the collateral secured by the Chase Federal Loan Documents; and
(v) all sums advanced by Chase Federal in the event the Chase Federal Letter(s)
of Credit are drawn upon but in no event greater that $3,585,593.78.
"CHASE FEDERAL TRACT LOAN" shall mean the credit facility
described in the third paragraph of the Preliminary Statements and in Section
2.2 hereof.
"CHASE FEDERAL TRACT LOAN DOCUMENTS" shall mean all documents to
be executed and delivered by Borrower to Lender evidencing and securing the
proposed Chase Federal Tract Loan, provided such documents are approved as to
form and substance by Lender in writing.
"CHASE FEDERAL UNIT RELEASE PRICE" shall mean the sum of money to
be paid to Chase Federal in connection with the sale of a residence and the
release of the Chase Federal Loan Documents from such residence, which amount
shall be established upon execution of the construction loan documentation.
"CONSTRUCTION LOAN" means that certain loan to be obtained by the
Borrower to finance the construction of certain improvements on Tracts C and E
of the Real Property in accordance with the terms of Section 2.5 of this
Agreement.
"CLOSING" shall mean the consummation of the making of the
Loan.
"CLOSING DATE" shall mean the date on which the Closing takes
place.
5
<PAGE>
"CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and applicable regulations of the Department of Treasury
(including applicable final regulations, temporary regulations and proposed
regulations), the applicable rulings of the Internal Revenue Service (including
published Revenue Rulings and private letter rulings) and applicable court
decisions.
"COLLATERAL" shall mean at the time in question, all real and all
tangible and intangible personal property in which a Lien has been created
pursuant to any of the Loan Documents including, without limitation, the
Pledge), all Real Property and Personal Property.
"COLLATERAL ASSIGNMENTS" shall mean all of those certain
assignments, in form and substance satisfactory to the Lender, from the Borrower
which are being delivered, or in the future may be delivered, to the Lender
pursuant to Section 4 hereof.
"COMMITMENT LETTER" shall have the meaning specified in the
second paragraph of the Preliminary Statements.
"COMMONLY CONTROLLED ENTITY" shall mean, with respect to any
Person, an entity, whether or not incorporated, which is under common control
with such Person within the meaning of Subsections 414(b) or (c) of the Code.
"CONSISTENT BASIS" shall mean, in reference to the application of
Generally Accepted Accounting Principles, that the accounting principles
observed in the current period are comparable in all material respects to those
applied in the preceding period.
"CONSTRUCTION CONTRACT" shall mean that certain construction
contract between SarahPark and the General Contractor in connection with the
Acquisition Contract Development Work and the Tract Infrastructure Work, which
shall be assumed by the Borrower on or before the Closing Date.
"CONTINGENT OBLIGATION" as to any Person shall mean the undrawn
face amount of all letters of credit issued for the account of such Person and
shall mean any obligation of such Person guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends, letters of credit or other obligations
("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation, or (ii) to maintain working capital or equity
6
<PAGE>
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the obligee under any such
primary obligation, or (d) otherwise to assure or hold harmless the obligee
under such primary obligation against loss in respect thereof; provided,
however, that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business.
"CONTINGENT RETURNS" collectively, shall mean the Lender's
First Contingent Return and the Lender's Second Contingent Return.
"CONTINGENT RETURN DOCUMENTS" shall mean the Commitment Letter,
this Agreement, the Contingent Return Mortgage and all other documents,
agreements, instruments or certificates delivered to the Lender in connection
with the Contingent Returns (whether at, prior to or after the Closing).
"CONTINGENT RETURN MORTGAGE" shall mean that certain third
mortgage of even date herewith executed by the Borrower to Lender encumbering
the Mortgaged Property which secures the Contingent Returns and the Borrower's
obligations hereunder and under the other Contin "CONTRACTUAL OBLIGATION" of any
Person shall mean any provision of any security issued by such Person or of any
agreement, instrument or undertaking to which such Person is a party or by which
it or any of its property is bound or to which it is subject.
"COUNSEL FOR LENDER" shall mean the firm of Gunster, Yoakley,
Valdes-Fauli & Stewart, P.A. having an office at 500 East Broward
Boulevard, Suite 1400, Broward Financial Center, Fort Lauderdale,
Florida 33394, Attn: Andrew S. Robins.
"DEBTOR PARTIES" shall mean, collectively, the Borrower and
the Guarantors.
"DEFAULT" shall mean any of the events specified in Sections 10.1
and 10.2 herein, whether or not any requirement for the giving of notice, the
lapse of time or both, has been satisfied.
"DOLLARS" AND "$" shall mean dollars in lawful currency of the
United States of America.
"ENVIRONMENTAL CLAIM" shall mean any investigative, enforcement,
cleanup, removal, containment, remedial or other private or governmental or
regulatory action at any time threatened, instituted or completed pursuant to
any applicable Environmental Requirement, against Borrower or against or with
7
<PAGE>
respect to the Mortgaged Property or any condition, use or activity on the
Mortgaged Property (including any such action against Lender), and any claim at
any time threatened or made by any person against Borrower or against or with
respect to the Mortgaged Property or any condition, use or activity on the
Mortgaged Property (including any such claim against Lender), relating to
damage, contribution, cost recovery, compensation, loss or injury resulting from
or in any way arising in connection with any Hazardous Material or any
Environmental Requirement.
"ENVIRONMENTAL LAW" shall mean any federal, state or local law,
statute, ordinance, code, rule, regulation, license, authorization, decision,
order, injunction, decree, or rule of common law, and any judicial or agency
interpretation of any of the foregoing, which pertains to health, safety, any
Hazardous Material, or the environment (including but not limited to ground or
air or water or noise pollution or contamination, and underground or above
ground tanks) and shall include without limitation, the Solid Waste Disposal
Act, 42 U.S.C. ss. 6901 ET SEQ.; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 ET SEQ. ("CERCLA"),
as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA");
the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 ET SEQ.; the
Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 ET SEQ.; the Clean Air
Act, 42 U.S.C. ss. 7401 ET SEQ.; the Toxic Subhe Florida Resource Recovery and
Management Act, the Water Quality Assurance Act of 1983, The Florida Resource
Conversation and Recovery Act, the Florida Air and Water Pollution Control Act,
The Florida Safe Drinking Water Act, The Pollution Spill Prevention and Control
Act and any other local, state or federal environmental statutes, and all rules,
regulations, orders and decree now or hereafter promulgated under any of the
foregoing, as any of the foregoing now exist or may be changed or amended or
come into effect in the future.
"ENVIRONMENTAL REQUIREMENT" shall mean any Environmental Law,
agreement or restriction (including but not limited to any condition or
requirement imposed by any insurance or surety company), as the same now exists
or may be changed or amended or come into effect in the future, which pertains
to health, safety, any Hazardous Material, or the environment, including but not
limited to ground or air or water or noise pollution or contamination, and
underground or above ground tanks.
"EQUIPMENT" shall mean all furniture, fixtures, tenant
improvements, machinery, vehicles, equipment and other personal property of
every nature whatsoever now or hereafter owned by the Borrower wheresoever
located including personal property now or hereafter located in, on, or used or
intended to be used in
8
<PAGE>
connection with, the operation of the Mortgaged Property or any of the other
real property now or hereafter owned by the Borrower, including without
limitation (i) all extensions, additions, improvements, betterments, renewals
and replacements to any of the foregoing, and (ii) all of the right, title and
interest of the Borrower in any such personal property or fixtures subject to
any conditional sales contract, chattel mortgage or similar lien or claim
together with the benefit of any deposits or payments now or hereafter made by
or on behalf of the Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"EVENT OF DEFAULT" shall mean any of the events specified in
Sections 10.1 and 10.2 hereof, provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, has been satisfied.
"FIRST CONTINGENT RETURN" shall mean an additional contingent
return to Lender that calculation of which shall be limited to the extent of any
Net Profits after the Borrower's First Priority Return (as that term is defined
herein) in an amount equal to an additional return on amounts which have been
advanced pursuant to the Loan, based on the amount of time that such funds have
been outstanding, at a rate equal to four (4%) percent per annum compounded
monthly.
"FIXTURES" shall have the meaning ascribed thereto in the
Mortgage.
"FUNDING AGREEMENT" shall mean that certain letter agreement of
even date herewith executed by the Guarantors to the Lender, agreeing to pay
certain amounts related to increases in the cost of the Project in excess of
said costs as reflected in the Pre-Closing Budget.
"GENERAL CONTRACTOR" shall mean Ryan Incorporated Eastern.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" OR "GAAP" shall mean
those principles of accounting set forth in Opinions of the Financial Accounting
Standards Board of the American Institute of Public Accountants or which have
other substantial authoritative support and are applicable in the circumstances
as of the date of any report required herein or as of the date of an application
of such principles as required herein.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, and
any state or other political subdivision thereof, and any other agency,
department, commission, board, bureau, court or other instrumentality or entity
exercising executive, legislative,
9
<PAGE>
judicial, regulatory or administrative functions of or pertaining
to government.
"GOVERNMENTAL REQUIREMENT" shall mean any law, enactment,
statute, code, ordinance, order, rule, regulation, judgment, decree, writ,
injunction, franchise, permit, certificate, license, authorization, or other
direction or requirement of any Governmental Authority now existing or hereafter
enacted, adopted, promulgated, entered, or issued applicable to Lender, Borrower
or the Mortgaged Property, including, without limitation, any Environmental Law.
"GROSS REVENUE" shall mean, for a given period of time, the gross
income received by Borrower or any affiliate of Borrower from all sources
arising from, or in connection with the Real Property during such period,
calculated on a cash basis but otherwise in accordance with generally accepted
accounting practices consistently applied and shall include, without limitation,
(i) proceeds of the sale of Tract B of the Real Property, (ii) proceeds of the
sale of Tract C of the Real Property, (iii) proceeds of the sale of any product
of the Real Property, (iv) proceeds of the sale of any other portion of the Real
Property or of any residential unit constructed on the Real Property or any
right or property interested associated with the Real Property or any such
residential unit constructed thereon, (v) proceeds of any contract right, cause
of action claim or other interest associated in any way with the Real Property,
(vi) proceeds of liability insurance; (vii) casualty proceeds and condemnation
proceeds net of reasonable expenses from any casualty, taking or conveyance in
lieu thereof (other than a total condemnation) of the Real Property to the
extent not paid to the holder of a mortgage on the Real Property and paid to
Borrower and not applied to the restoration of the Real Property, (viii)
interest payable to Borrower on security deposits, (ix) interest on escrows
approved or required by Lender, (x) payments made in consideration of any
contract extension for the sale of any of the property within the Project, (xi)
interest on Gross Receipts or on Cash Flow until applied in accordance with this
Loan Agreement, (xii) amounts received by Borrower from purchasers of Tracts or
from applicable Governmental Authorities as reimbursements for impact fees paid
by or on behalf of Borrower and (xiii) payments made under any joint venture
partnership interest owned by Borrower; and (xiv) and any other amounts or
revenues typically considered as revenues. Notwithstanding anything to the
contrary in the previous sentence, Gross Receipts shall not include (i) proceeds
the Loan Documents or the Chase Federal Loan Documents; (ii) casualty insurance
and taking proceeds actually applied to restoration of the Real Property as
permitted by the Loan Documents; (iii) income derived from the period prior to
the date of this Note; and (iv) amounts escrowed for Expenses to be paid on a
future date as provided in the Loan Documents until such time as the amounts are
applied to Expenses. Components of
10
<PAGE>
revenue will be allocated among the Tracts and Gross Revenue will be determined
on a Tract specific basis as well as on an aggregate basis.
"GUARANTORS" shall mean Transeastern and the Principals,
jointly and severally.
"GUARANTY" shall mean that certain guaranty of payment and
performance of even date herewith executed by each of the Guarantors to the
Lender.
"HAZARDOUS MATERIAL" shall mean any substance, whether solid,
liquid or gaseous which is listed, defined or regulated as a "hazardous
substance," "hazardous waste," or "solid waste," or pesticide or otherwise
classified as hazardous or toxic, in or pursuant to any Environmental
Requirement; or which is or contains asbestos, radon, any polychlorinated
biphenyl, urea formaldehyde foam insulation, explosive or radioactive material,
or motor fuel or other petroleum hydrocarbons; which causes or poses a threat to
cause a contamination or nuisance on the Mortgaged Property or any adjacent
property or a hazard to the environment or to the health or safety of persons on
the Mortgaged Property.
"IMPOSITIONS" shall mean all (i) real estate and personal
property taxes and other taxes and assessments, public or private; utility rates
and charges including those for water and sewer; all other governmental and
non-governmental charges and any interest or costs or penalties with respect to
any of the foregoing; and charges for any public improvement, easement or
agreement maintained for the benefit of or involving the Mortgaged Property,
general and special, ordinary and extraordinary, foreseen and unforeseen, of any
kind and nature whatsoever that at any time prior to or after the execution of
this Agreement may be assessed, levied or imposed upon the Mortgaged Property or
the Revenues or income received therefrom, or any use or occupancy thereof, (ii)
other taxes, assessments, fees and governmental and non-governmental charges
levied, imposed or assessed upon or against Borrower or any of its properties
and (iii) taxes levied or assessed upon this Mortgage, the Note, and the other
Loan Documents, or any of them.
"IMPROVEMENTS" shall mean all buildings, structures,
appurtenances and improvements, including all additions thereto and replacements
and extensions thereof, now constructed or hereafter to be constructed under, on
or above the Real Property.
"INDEBTEDNESS" of a Person shall mean (a) indebtedness of such
Person for borrowed money (other than its obligations hereunder), or (b)
indebtedness of such Person (i) for the deferred purchase price of services or
property, which purchase price is paid over a
11
<PAGE>
period of 12 months or more from the date of incurrence of the obligation in
respect thereof, or (ii) evidenced by a note or similar written instrument
(including, without limitation, any such indebtedness which is non-recourse to
the credit of such Person but is secured by assets of such Person), (c)
obligations of such Person under leases which have been or, in accordance with
GAAP, should be, recorded as Capitalized Leases, (d) indebtedness of such Person
arising under acceptance facilities, (e) indebtedness consisting of unpaid
reimbursement obligations in respect of all drafts drawn under letters of credit
issued for the account of such Person, (f) indebtedness of such Person arising
as a result of any Contractual Obligation (other than non-material Contractual
Obligations arising in the ordinary course of business of the Borrower), and (g)
a Contingent Obligation which has matured into a non-contingent obligation.
"INTEREST RATE" shall mean a fixed rate of interest equal to
Twenty Percent (20%) per annum.
"INTEREST RESERVE ACCOUNT" shall have the meaning ascribed
thereto in Section 2.1(b) hereof.
"LIEN" shall mean any mortgage, deed of trust, deed to secure
debt, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code (other than any such financing statement filed for informational
purposes only or in connection with an operating lease) or comparable law of any
jurisdiction to evidence any of the foregoing.
"LOAN" shall mean the credit facility described in the first
paragraph of the Preliminary Statements and in Section 2.1 hereof.
"LOAN DOCUMENTS" means, collectively, (i) this Agreement, the
Note, the Guaranty, the Funding Agreement, the Mortgage, the Contingent
Mortgage, the Pledge Agreement, the Security Documents, and all other documents
executed by the Debtor Parties to the Lender in connection with the Loan, and
(ii) all other agreements, documents and instruments arising out of any
agreement, document or instrument referred to in clause (i) above.
"LOAN PROCEEDS" shall mean (i) the portion of the Loan funded at
Closing, and (ii) the amount reserved for the payment of interest, all in
accordance with Section 2.1 of this Agreement, which is being funded for the
purpose of constructing
12
<PAGE>
infrastructure and other improvements for, among other things, the construction
of single and multi-family projects.
"LOAN TERM" shall mean that certain period of time commencing on
the Closing Date and terminating on that certain date twenty four (24) months
thereafter.
"MORTGAGE" shall mean that certain second mortgage of even date
herewith executed by the Borrower to Lender encumbering the Mortgaged Property
which secures (i) the indebtedness evidenced by the Note, and (ii) the
Borrower's obligations hereunder and under the other Loan Documents.
Notwithstanding the foregoing, the Mortgage shall not secure the Contingent
Returns which are secured by the Contingent Return Mortgage.
"MORTGAGED PROPERTY" shall mean the Real Property and the
Improvements, if any.
"NET PROFIT" shall mean net income before taxes, payment of the
Second Contingent Return, depreciation and other non cash expenses, all as
determined in accordance with GAAP; and shall be determined independently for
each Tract based on an allocation of income and expense items acceptable to the
Lender.
"NET SALES PROCEEDS" shall mean the gross sales price of each
unit for the sale of units to be constructed on the Real Property, less: (i)
Borrower's cost for deed preparation, transfer taxes and prorated property taxes
in an amount not to exceed one and one-half (1 1/2%) percent of the gross sales
price; (ii) aggregate sales commissions not to exceed six percent (6%) of the
gross sales price; (iii) 100% of the amount of construction loan proceeds drawn
in connection with the construction of such unit; (iv) the Chase Federal Unit
Release Price; and (v) the AMRESCO Unit Release Price.
"NOTE" shall mean that certain promissory note of even date
herewith from Borrower to Lender evidencing the indebtedness to Lender under the
Loan in the original principal amount of THREE MILLION DOLLARS ($3,000,000.00).
"OPTION CONTRACT" shall mean that certain option agreement
between SarahPark and Transeastern dated August 14, 1995, as amended by
amendment dated December 13, 1995.
"OPTION PROPERTY" shall mean those certain parcels of real
property which are the subject of the Option Contract and are more particularly
described as Tract C and Tract E in EXHIBIT 1 attached hereto and made a part
hereof.
"PAY RATE" shall mean a rate of interest equal to Ten Percent
(10%) per annum.
13
<PAGE>
"PERMITTED TITLE EXCEPTIONS" shall mean those matters described
in Schedule B to the title insurance policy insuring Lender's interest in the
Mortgage.
"PERSON" shall mean any corporation, business entity, natural
person, firm, joint venture, partnership, trust, unincorporated organization,
association, government, or any department or agency of any government.
"PERSONAL PROPERTY" shall have the meaning ascribed thereto in
the Mortgage.
"PLAN" shall mean any pension plan which is covered by Title IV
of ERISA and in respect of which the Borrower or a Commonly Controlled Entity of
the Borrower is an "employer" as defined in Subsection 407(d)(7) of ERISA.
"PLEDGE AGREEMENT" shall mean that certain Pledge Agreement of
even date herewith between Transeastern, as Pledgor, and Lender.
"PLEDGOR" shall mean Transeastern.
"PRE-CLOSING BUDGET" shall mean that certain budget to be
prepared by Borrower and submitted to Lender for its review and approval prior
to the Closing Date in accordance with the terms of Section 7.12 hereof.
"PRINCIPALS", collectively, shall mean Arthur Falcone, Edward
Falcone and Phil Cucci (each individually, a "Principal").
"PRIORITY RETURNS" collectively, shall mean the Borrower's First
Priority Return and the Borrower's Second Priority Return.
"PROJECT" shall mean the acquisition and development of the Real
Property, the construction of the Improvements and the selling of Tracts on and
units of the Real Property.
"PROJECT EXPENSES" shall mean, for any period, all costs and
expenses reasonably incurred and actually paid by Borrower during such period
incident to the normal ownership and development of and construction upon the
Real Property for which provision is made in a Budget, calculated on a cash
basis (except as otherwise set forth under (ii) below), but otherwise in
accordance with generally accepted accounting principles consistently applied,
including, without limitation, (i) approved costs of the Acquisition Contract
Development Work, the Tract Infrastructure Work and unit construction costs,
(ii) real estate and personal property taxes, water charges, sewer rents,
assessments and other governmental levies assessed against the Real Property, or
such other similar
14
<PAGE>
taxes, assessments, levies or charges as may be imposed in lieu of or in
addition to any of the foregoing by appropriate governmental authority, and
insurance premiums, all of which to the extent paid on other than a monthly
basis shall be calculated on an accrual basis allocating such expenses in equal
monthly amounts over the applicable period of their payment; (iii) regularly
scheduled installments of principal and interest on the Chase Federal Loan and
the Loan and release prices approved by the Lender in connection with the fees
in connection with a construction loan for improvements on Tracts D and F of the
Real Property, and Tract E of the Real Property to the extent the same is
acquired by the Borrower; (vi) other reasonable and ordinary expenses for
properties similar to the Real Property; and (vii) expenses deducted in
connection with the computation of Net Sales Proceeds.
Notwithstanding anything to the contrary in the preceding sentence, Expenses
shall not include (i) obligations of Borrower not related to the ownership and
operation of the Real Property, (ii) payments to the Borrower, the Principals or
their affiliates other than the Borrower's First Priority Return, (iv)
commitment, origination, finder's, broker's, and other fees paid in connection
with the acquisition of the Real Property or the Option Property, the sale of
Tract B or Tract C of the Real Property, or any financing of the Real Property
or any portion thereof, including any such fees paid in connection with the
Chase Federal Loan and the Loan, (v) any cost or expense paid out of any reserve
established to cover Cost Overruns, (vi) non-cash expenses such as depreciation,
(vii) the cost of any item required to be capitalized under generally accepted
accounting principles except for capital expenditures included in the
Pre-Closing Budget or a Budget, (viii) legal, accounting, management and similar
fees and other obligations and expenses of Borrower not exclusively related to
the ownership and operation of the Real Property or otherwise approved by Lender
in writing, with the exception of the Borrower's First Priority Return, (ix)
except for regularly scheduled installments of principal and interest on the
Chase Federal Loan and the Loan, all other payments of debt service or otherwise
on any loan or financing, including, without limitation, any late charges or
similar charges, including increased interest payments at a default rate,
payable under the Chase Federal Loan and the Loan, (x) any reimbursement to
Lender of expenses incurred by reason of an Event of Default together with any
interest payable thereon, (xi) any costs, expenses or fees, including interest
payments, payable to any party by reason of a default by Borrower in the
performance of any obligation owing to any such party, unless specifically
approved by Lender in its sole discretion for inclusion in Expenses, (xii) any
demand fees, penalties or similar charges relating to late payments of real
estate taxes, assessments and similar charges on the Real Property, and any
interest relating to such late payments, (xiii) any income, franchise or similar
taxes
15
<PAGE>
on Borrower or its affiliates, (xiv) any costs or expenses incurred by Borrower
in connection with closing the Loan or satisfying any of the conditions
precedent to the funding of the Loan, (xv) any costs or expenses not approved by
Lender in writing relating to correcting any violation of any law, ordinance or
regulation affecting the Real Property (xvi) appraisal costs, (xvii) expenses
relating to, or incurred during, the period prior to the date of this Agreement,
(xviii) any return of equity or return on equity, and (xix) any expenses for
which Borrower receives reimbursement or funds from other sources not included
in Gross Revenue, such as disbursements under the Chase Federal Loan or the Loan
or any other loan, and proceeds of insurance and condemnation awards other than
those included in Gross Receipts. In no event shall any particular payment of
any cost or expense included within the foregoing definition of "Project
Expenses" be taken into account more than once. Components of Project Expenses
will be allocated among the Tracts and Project Expenses will be determined on a
Tract specific basis as well as on an aggregate basis.
"REAL PROPERTY" shall mean that certain real property located in
Broward County, Florida and described more particularly in EXHIBIT 2 attached
hereto and made a part hereof as Tract B, Tract D and Tract F, together with any
additional real property the title to which is held by the Borrower from time to
time, including, without limitation, the Option Property.
"REPORTABLE EVENT" shall mean any of the events set forth in
Subsection 4043(b) of ERISA or the regulations thereunder.
"REQUIREMENT OF LAW" for any Person shall mean the Articles of
Incorporation and Bylaws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"RESPONSIBLE OFFICER" of any Person shall mean the trustee or the
chairman of the board or president of such Person in each case duly authorized
to undertake the required action then being taken and, as to financial matters,
the chief financial officer or treasurer of any Person, in each case duly
authorized to undertake the required action then being taken.
"SECOND CONTINGENT RETURN" shall mean an additional contingent
return equal to ten (10%) percent of the Net Profits on Tracts D, E and F of the
Real Property, and five (5%) percent of the Net Profits on Tracts B and C of the
Real Property, in each case, as reduced by (a) the First Contingent Return, (b)
the Borrower's First Priority Return, and (c) the Borrower's Second Priority
Return, provided, however, in the event that the Loan is reduced by
16
<PAGE>
the sum of $1,000,000.00 plus current and accrued interest on the $1,000,000 at
the Interest Rate thereon, on or before September 1, 1996, the foregoing
percentages shall be reduced to five (5%) percent and two and on half (2 1/2)
percent, respectively.
"SECURITY DOCUMENTS" shall have the meaning ascribed in
Section 4.19 hereof.
"STOCK" shall mean the stock of Borrower pledged by Transeastern
to Lender under the Stock Pledge Agreement.
"SUBORDINATED INDEBTEDNESS" shall mean the indebtedness of the
Borrower to any trustee, officer, director, shareholder, Subsidiary or Affiliate
of the Borrower which has been subordinated to the Loan pursuant to Section 8.14
hereof.
"SUBSIDIARY" of any Person shall mean (i) a corporation or other
entity of which shares of stock or other ownership interests having voting power
(other than stock or other ownership interests having such power only by reason
of the happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person, and (ii) as to the Borrower, any
Subsidiary of a Subsidiary (and successor Subsidiaries thereof) of the Borrower.
"TRACT" shall mean any one of the parcels of real property
forming a part of the Real Property, any one of which may be identified by
reference to the letter assigned thereto in the applicable exhibit to this
Agreement.
"TRACT B SALES CONTRACT" shall mean that certain contract for the
sale of Tract B of the Real Property dated December 8, 1995, by and between
Borrower, as seller, and Hanover PH Limited Partnership, as buyer.
"TRACT INFRASTRUCTURE FUNDING REQUIREMENT" shall mean the portion
of the costs of completing the Tract Infrastructure Work with respect to Tracts
D and F of the Real Property which are not funded pursuant to the Chase Federal
Tract Loan, which amount shall not exceed $642,000.00. The Tract Infrastructure
Funding Requirement shall be deemed reduced from time to time by the amount of
any other funds made available for the purpose of funding the Tract
Infrastructure Work (other than the proceeds obtained from the Chase Federal
Tract Loan), reductions in the cost of the Tract Infrastructure Work and as
otherwise appropriate to effectuate the intentions of the parties hereto.
"TRACT INFRASTRUCTURE WORK" shall mean the work required to
install infrastructure within the boundaries of a particular Tract
17
<PAGE>
of the Property, which work shall be approved by Lender and shall not include
Acquisition Contract Development Work.
"TRACTS C AND E ACQUISITION LOAN" shall have the meaning ascribed
thereto in Section 2.5 hereof.
"TRACT GROSS REVENUE" shall mean the Gross Revenue with respect
to a particular Tract forming a portion of the Real Property.
"TRACT NET PROFIT" shall mean the Net Profit with respect to a
particular Tract forming a portion of the Real Property.
"TRACT PROJECT EXPENSES" shall mean the Project Expenses with
respect to a particular Tract forming a portion of the Real Property.
"TRANSEASTERN" shall mean Transeastern Properties of South
Florida, Inc., a Florida corporation.
"TRI-PARTY AGREEMENT" shall mean that certain tri-party agreement
of even date herewith by and among Borrower, Lender and Chase Federal whereby
the parties thereto set forth their mutual understanding with respect to (i) the
terms by which Lender has agreed to subordinate to the Chase Federal Loan
Documents, (ii) the exercise of certain rights, remedies and options by the
respective parties hereto under the above described documents, and (iii) the
Borrower obtaining a construction loan to finance the construction of certain
improvements on the Property.
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS
(a) The terms "material" and "materially" shall have the meanings
ascribed to such terms under GAAP as such would be applied to the business of
the Borrower, except as the context shall clearly otherwise require; (b) all of
the terms defined in this Agreement shall have such defined meanings when used
in other documents issued under, or delivered pursuant to, this Agreement unless
the context shall otherwise require; (c) all terms defined in this Agreement in
the singular shall have comparable meanings when used in the plural, and vice
versa; (d) accounting terms to the extent not otherwise defined shall have the
respective meanings given them under, and shall be construed in accordance with,
GAAP; (e) terms defined in, or by reference to, Article 9 of the Uniform
Commercial Code as adopted in Florida (Chapter 679 of the Florida Statutes) to
the extent not otherwise defined herein shall have the respective meanings given
to them in Article 9 with the exception of the word "document" unless the
context clearly requires such meaning; (f) the words "hereby," "hereto,"
"hereof," "herein,", "hereunder" and words of similar import when used in this
Agreement
18
<PAGE>
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement; (g) the masculine and neuter genders are used herein and
whenever used shall include the masculine, feminine and neuter as well; and (h)
whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the heirs, personal representatives,
participants, successors and assigns of such parties unless the context shall
expressly provide otherwise.
ARTICLE II
AMOUNT AND TERMS OF LOAN AND CHASE FEDERAL LOANS
SECTION 2.1 TERMS OF LOAN
Subject to the terms, conditions set forth herein, the Lender
agrees to make the Loan to Borrower as follows:
(a) The Pre-Closing Budget shall call for the application of the
Loan Proceeds (i) for the acquisition of Tracts B, D and F of the Real Property
pursuant to the Acquisition Contract; and (ii) to fund interest to the Lender at
the Pay Rate in accordance with the terms of subsection (c) below.
(b) The Lender shall advance up to $2,800,000.00 at the Closing,
with the precise amount funded being determined by the Lender based on the
amount necessary to fund the acquisition of Tracts B, D and F of the Real
Property.
(c) The parties acknowledge that a portion of the Loan Proceeds,
$200,000, has been allocated by Lender to an "Interest Reserve Account."
Provided there is no Event of Default, interest payments from the Interest
Reserve Account shall be funded by Lender for the account of Borrower at the Pay
Rate on the first day of each respective month, as the same become due, by
Lender's bookkeeping entries, unless Borrower elects to pay interest due in cash
to Lender. Upon disbursement of funds from the Interest Reserve Account, the
amount disbursed shall be added to the outstanding principal sum of the Loan and
shall bear interest at the Interest Rate. When and if such Interest Reserve
Account is depleted, then and in such event all monthly interest payments shall
be paid by Borrower. Notwithstanding any other provisions contained in this
Agreement to the contrary, Lender shall not be required to fund any sums from
the Interest Reserve Account if there is an Event of Default.
SECTION 2.2 TERMS OF CHASE FEDERAL LOANS
(a) The Borrower has negotiated the Chase Federal A & D Loan
in connection with the acquisition of the Real Property and
19
<PAGE>
development of the Project, the closing on and funding of which loan on terms
satisfactory to Lender, is a condition precedent to the obligation of the Lender
to close the Loan. The Borrower contemplates that Chase Federal will fund the
Chase Federal Tract Loan to partially finance the cost of the Tract
Infrastructure Work. The Chase Federal Loans shall be as follows:
(i) The Chase Federal A&D Loan shall be for an
amount acceptable to the Borrower and the Lender, not to exceed $10,150,000.00,
together with any reimbursement obligations in connection with the Chase Federal
Letters of Credit for (aa) acquisition of Tracts B, D and F of the Real
Property, (bb) the Acquisition Contract Development Work, and (cc) the Chase
Federal Letters of Credit; and
(ii) The proposed Chase Federal Tract Loan shall be
for an amount acceptable to the Borrower and the Lender not to exceed a maximum
of 80% of the cost of the Tract Infrastructure Work for Tracts D and F of the
Real Property, which shall be $3,242,000.00 resulting in a maximum loan amount
of $2,600,000.00.
(b) As a condition to funding the Loan, (i) all documents
governing the Chase Federal Loans must be acceptable to the Lender, and (ii)
Chase Federal, Borrower and Lender shall have entered into the Tri-Party
Agreement. Lender acknowledges that the Chase Federal Loan Documents shall also
secure the repayment obligations pursuant to the Chase Federal Letters of Credit
in connection with the Acquisition Contract Development Work which is to be
funded pursuant to the Chase Federal A&D Loan.
SECTION 2.3 TERMS OF NOTE
As evidence of the Loan, the Borrower shall execute and deliver the
Note to the Lender on the Closing Date. The terms of The Note
shall be as follows:
(a) The Note shall bear interest at the Interest Rate calculated
on the basis of a 365-day year based on the actual number of days elapsed.
(b) Interest shall be paid in accordance with the Note.
(c) The entire unpaid principal balance then outstanding plus
accrued and unpaid interest shall mature and be due and payable upon the earlier
of: (i) the occurrence of an Event of Default; or (ii) April 1, 1998.
SECTION 2.4 APPLICATION OF FUNDS
All funds paid to the Lender in connection with the Loan shall be
applied first to the payment of any outstanding costs, expenses,
20
<PAGE>
fees or charges which were required to be paid pursuant to the Loan Documents,
then to the payment of all accrued interest and then to the repayment of
principal.
SECTION 2.5 TRACTS C AND E ACQUISITION LOAN AND
CONSTRUCTION LOAN
The parties acknowledge and agree that the Borrower may obtain a
loan for the acquisition of Tracts C and E of the Real Property (the "Tracts C
and E Acquisition Loan") and the Construction Loan from Chase Federal, or such
other financial institution reasonably satisfactory to Lender, to finance the
acquisition of Tracts C and E and the construction of the Improvements,
respectively. Lender agrees that it will subordinate the lien and operation of
the Loan Documents to the lien and operation of the documents securing the
Tracts C and E Acquisition Loan and the Construction Loan, provided, however,
that such loans shall be with lenders and pursuant to documents and in amounts
and on terms which shall be acceptable to the Lender, including, without
limitation, the terms governing the relationship between such lenders and the
Lender.
SECTION 2.6 PREPAYMENT OF LOAN
Borrower may prepay the Loan in whole or in part at any time
without bonus or penalty. Notwithstanding the foregoing, Borrower acknowledges
that the prepayment of the Loan in whole or in part shall in no way impair or
affect Lender's right to receive the Contingent Returns.
SECTION 2.7 [INTENTIONALLY DELETED]
SECTION 2.8 INTENT NOT TO COMMIT USURY
The Borrower does not intend or expect to pay, nor does the
Lender intend or expect to charge, accept or collect, any interest under the
Note, this Agreement or any other instrument executed in connection herewith
greater than the maximum legal rate of interest which may be charged under
applicable law. Should any event result in the computation or earning of
interest in excess of such maximum legal rate, any and all such excess shall be
refunded to the Borrower. Notwithstanding anything to the contrary contained in
this Agreement, the Note, or any other instrument delivered in connection
herewith, the amount of interest due under the terms of this Agreement, the Note
or any other instrument shall in no event exceed the maximum amount of interest
permitted to be charged by law.
SECTION 2.9 DETERMINATION OF NET PROFIT
21
<PAGE>
The Net Profits in connection with the Project shall be computed
separately with respect to each Tract (aggregating Tracts D and E) forming a
portion of the Real Property based on an allocation acceptable to the Lender of
all items which enter into the determination of Net Profit.
Net Profit shall be computed on a quarterly basis and shall be
reflected in the financial information required to be delivered to the Lender
pursuant to Section 8.2 of this Agreement.
SECTION 2.10 APPLICATION OF NET SALES PROCEEDS
The Lender shall have the right to direct the title company or
law firm acting as closing agent with respect to any closing on a residential
unit comprising a portion of the Real Property to deposit any Net Sales Proceeds
for each such unit in an account acceptable to the Lender and Borrower
authorizes such trust or escrow arrangements with respect to such funds as shall
be acceptable to the Lender.
SECTION 2.11 DISTRIBUTIONS
Other than the payment of the Borrower's First Priority Return,
as specifically set forth in Section 3.3 of this Agreement, all Cash Flow shall
be applied on a quarterly basis to reduce the principal balance of the Loan,
which shall include all accrued and unpaid interest pursuant to the Loan. All
funds so applied shall first be applied in accordance with the terms of Section
2.4 of this Agreement.
ARTICLE III
SALE OF REAL PROPERTY; APPLICATION OF PROCEEDS
SECTION 3.1 PARTIAL RELEASES.
Provided the Borrower is not then in Default hereunder, under the
Note, the Mortgage or any other Loan Document, Lender will provide partial
releases in respect of its interest under the Mortgage and other Loan Documents,
as required for the purpose of transferring clear title to purchasers of
portions of the Real Property, including, without limitation, residential units
in the Project, provided Borrower complies with all of the following items:
(a) That the Lender receives the proceeds due
Lender in accordance with the terms set forth in this Article III hereof.
22
<PAGE>
(b) Borrower's request for a partial release shall
be accompanied by a fully-executed photocopy of the purchase agreement and
fully-executed, original buyer's and seller's settlement statements.
(c) Payments made for releases shall be applied by
Lender in accordance with the terms of this Agreement.
(d) Borrower shall provide Lender with current
survey(s) of any Tract(s) to be released from the Mortgage which survey shall be
certified to Lender and shall be in compliance with applicable laws.
(e) Lender shall receive an endorsement to its
mortgagee title insurance policy reflecting the Tract or unit released.
(f) No Tract shall be released if such release
would deny or restrict (i) access from the remaining Mortgaged Property to a
paved public street, and (ii) utilities to the remaining Mortgaged Property.
(g) Borrower agrees to reimburse Lender for all
out-of- pocket fees and costs, including, without limitation, legal fees, in
connection with the granting of such partial releases and shall provide Lender
with any and all information requested by Lender with respect to the portion of
the Real Property to be released.
SECTION 3.2 SALES OF TRACTS OR UNITS ON THE REAL PROPERTY.
The parties acknowledge and agree that Borrower, upon the sale of
Tracts or Units constituting a portion of the Real Property shall pay to Chase
Federal and to Lender certain release prices in connection therewith and shall
apply other portions of the Net Sales Proceeds, as follows:
(a) TRACT B. Upon the sale or other transfer of
Tract B of the Real Property, the following terms shall apply:
(i) The Chase Federal Release Price for said Tract,
$5,000,000.00, shall be paid to Chase Federal to be applied against the
Borrower's outstanding indebtedness under the Chase Federal A&D Loan; and
(ii) The remaining net proceeds of sale (after
payment of closing costs and third party brokerage expenses in amounts and for
purposes acceptable to Lender), which shall be not less then $1,000,000.00,
subject to reduction for escrows of amounts due to secure the payment of the
full amount of the Municipal Land Dedication charges due or to become due, shall
be (i) paid to Lender to be applied against the Borrower's outstanding
indebtedness under the Loan, provided, however, a portion thereof
23
<PAGE>
not greater than an amount equal to the Tract Infrastructure Funding Requirement
may be used by the Borrower for the payment of costs incurred by the Borrower
for the Tract Infrastructure Work with respect to Tracts D and F of the Real
Property, provided such costs are approved in writing by Lender, with the
remaining balance thereof paid to Lender, or (ii) subject to the prior written
consent of Lender which consent may be granted or withheld by Lender in its sole
and absolute discretion, paid to Chase Federal to repay additional amounts due
Chase Federal under the Chase Federal A&D Loan.
(b) TRACT D. Upon the sale or other transfer of Tract D of the
Real Property and provided that Lender has approved the terms of such transfer,
which approval shall be given in Lender's sole and absolute discretion, the
following terms shall apply:
(i) The Chase Federal Release Price for said Tract,
$4,500,000.00, shall be paid to Chase Federal to be applied against the
Borrower's outstanding indebtedness under the Chase Federal A&D Loan; and
(ii) The remaining net proceeds of sale (after
payment of closing costs and third party brokerage expenses in amounts and for
purposes accepta sale or other transfer of Tract F of the Real Property and
provided that Lender has approved the terms of such transfer, which approval
shall be given in Lender's sole and absolute discretion, the following terms
shall apply:
(i) The Chase Federal Release Price for said Tract,
$3,000,000.00, shall be paid to Chase Federal to be applied against the
Borrower's outstanding indebtedness under the Chase Federal A&D Loan; and
(ii) The remaining net proceeds of sale (after
payment of closing costs and third party brokerage expenses in amounts and for
purposes acceptable to Lender) shall be paid to Lender to be applied against the
Borrower's outstanding indebtedness under the Loan.
(d) TRACT C. As to Tract C of the Option Property,
the following terms shall apply:
(i) It is the Borrower's intention to arrange for
the conveyance of Tract C of the Option Property contemporaneously with the
acquisition of the Option Property pursuant to the Option Contract, in which
event, (i) the net proceeds of sale (after payment of closing costs and third
party brokerage expenses in
24
<PAGE>
amounts and for purposes acceptable to Lender), which shall be not less than
$1,000,000.00, which may be payable at a later date pursuant to the terms of the
sale/joint venture documents and which documents Lender has the right to approve
in its sole and absolute discretion, shall be paid to Lender to be applied
against the Borrower's outstanding indebtedness under the Loan, provided,
however, at the Borrower's election, a portion thereof not greater than an
amount equal to the Tract Infrastructure Funding Requirement may be applied by
the Borrower to the payment of costs incurred by the Borrower for the Tract
Infrastructure Work with respect to Tracts D and F of the Real Property, and
Tract E of the Option Property, to the extent approved in writing by Lender,
with the remaining balance thereof paid to Lender, olute discretion, a portion
of such sales proceeds may be applied to repay additional amounts due Chase
Federal under the Chase Federal A&D Loan.
(ii) In the event that Tract C of the Option
Property is acquired by the Borrower and is not contemporaneously conveyed to a
third party, the Borrower shall be permitted to obtain up to $3,600,000.00 of
mortgage financing for the purpose of acquiring the Option Property, provided
that such loan shall be with lenders and pursuant to documents and in amounts
and on terms which shall be acceptable to Lender, including, without limitation,
terms governing the relationship between the provider of such financing and
AMRESCO (the "TRACTS C AND E ACQUISITION LOAN") . At the time of the subsequent
transfer of Tract C of the Option Property by the Borrower, (i) the net proceeds
of sale (after payment of closing costs and third party brokerage expenses in
amounts and for purposes acceptable to Lender) shall be applied to the release
price for such Tract C due to the lender which provided the Tract C and E
Acquisition Loan and the remaining net proceeds shall be paid to Lender to be
applied against the Borrower's outstanding indebtedness under the Loan,
provided, however, at the Borrower's election, a portion thereof not greater
than an amount equal to the Tract Infrastructure Funding Requirement may be
applied by the Borrower to the payment of costs incurred by the Borrower for the
Tract Infrastructure Work with respect to Tracts D and F of the Real Property,
and the remaining balance thereof paid to Lender, or, (ii) subject to the prior
written consent of Lender, which consent may be granted or withheld by Lender in
its sole and absolute discretion, a portion of such sales proceeds may be
applied to repay additional amounts due Chase Federal under the Chase Federal
A&D Loan.
25
<PAGE>
(e) SALE OF UNITS. Upon the sale or other transfer of Units,
the Borrower shall pay (in current funds) (i) the Chase Federal
Unit Release Price; (ii) 100% of the amount of construction loan proceeds drawn
in connection with the construction of such unit; (iii) to Lender, the AMRESCO
Unit Release Price and shall satisfy the other conditions to the granting of
partial releases which are set forth in Section 3.1 of this Agreement; (iv) any
excess shall be remitted to Borrower who shall reconcile and pay any outstanding
Project Expenses as to which funds have not been advanced pursuant to the Chase
Federal Loans or, at Lender's sole option, shall be paid into an account
pursuant to the terms of Section 2.10 from which such unfunded Project Expenses
may be paid in accordance with the Budget.
SECTION 3.3 BORROWER'S FIRST PRIORITY RETURN
The Borrower's First Priority Return shall be paid in connection
with the sale of each residence constructed on Tracts D and F of the Real
Property, and Tract E of the Real Property to the extent the same is acquired by
the Borrower, provided that (a) there does not exist at the time that the same
would otherwise be paid, a default or event of default pursuant hereto or
pursuant to any of the other documents or instruments evidencing or governing
the Loan, or any event or circumstance which with the passing of time or the
giving of notice, or both, would be a default or event of default pursuant
hereto or pursuant to any of the other documents or instruments evidencing or
governing the Loan, (b) the Chase Federal Unit Release Price shall have been
paid, and (c) to the extent that any portion of the principal or interest (at
the Interest Rate) pursuant to the Loan remains outstanding, a minimum payment
with respect to each residence conveyed, in amounts to be determined by Lender,
shall have been applied to reduce the same.
SECTION 3.4 FIRST CONTINGENT RETURN
At such time as the Loan has been repaid, together with interest
thereon, the AMRESCO Release Prices, together with the Net Cash Flow from the
sale of units, shall be used to pay Lender its First Contingent Return.
SECTION 3.5 BORROWER'S SECOND PRIORITY RETURN
To the extent of Cash Flow, the Borrower's Second Priority Return
may be distributed provided that (a) the First Contingent Return has been paid;
(b) there shall not exist at the time that the same would otherwise be paid, a
default or event of default pursuant to the Loan Documents, or any event or
circumstance which with the passing of time or the giving of notice, or both,
would be a default or event of default pursuant to the Loan Documents.
26
<PAGE>
SECTION 3.6 SECOND CONTINGENT RETURN
The Second Contingent Return shall be paid to the Lender after
the payment of the First Contingent Return, the Borrower's First Priority Return
and the Borrower's Second Priority Return, to the extent of the Borrower's Cash
Flow. Subject to the terms of Section 3.2(e) of this Agreement, the Borrower
shall pay the Contingent Returns on a quarterly basis based on the quarterly
determinations of Net Profit, and the amounts of such Contingent Returns shall
be adjusted if appropriate based on the audited financial statements provided
for in Section 8.2 of this Agreement, provided that any overpayment to Lender of
Contingent Returns, after adjustment as provided herein, shall be refunded to
the Borrower, within thirty (30) days after request therefor, or netted against
any future quarterly payment of Contingent Returns.
SECTION 3.7 INTENT OF LENDER
The Borrower acknowledges that the receipt by Lender of the
Contingent Returns is subject to numerous risks and uncertainties, including,
without limitation, the possibility of unanticipated costs in performing the
Acquisition Contract Development Work (e.g., as a result of change orders,
unforseen conditions or force majeure) and the Tract Infrastructure, the
possibility that Tract B is not sold pursuant to the Tract B Sales Contract at
the price contemplated therein; the possibility that the Borrower does not
acquire Tract C or Tract E; the possibility that no contract for the sale of
Tract C is completed or that said Tract is not conveyed pursuant thereto at the
price reflected in the Borrower's projections; the possibility of utility
moratoria or materials or labor costs decreasing the Borrower's anticipated
profits; and the possibility of a change in interest rates or the economy in
general, impacting the sale of residences. The Borrower further acknowledges
that the Lender's receipt of any of the Contingent Returns is contingent on the
availability of profit and the payment of the Borrower's First Priority Return
and the Borrower's Second Priority Return, as applicable. The Borrower
acknowledges that the Contingent Returns are not interest; but are an additional
return to the Lender which is based strictly on the success of the Borrower's
business venture. The Borrower further acknowledges that the Commitment Fee
charged pursuant hereto is a customary and reasonable charge for the Lender
performing the services necessary to enable it to, and to compensate it for,
committing to provide the Loan. The Borrower acknowledges that no portion of the
Commitment Fee constitutes interest. It is expressly stipulated and agreed to be
the intent of Borrower and Lender at all times to comply with applicable state
law or applicable United States federal law (to the extent that it permits
Lender to contract for, charge, take, reserve or receive a greater amount of
interest than under state law) and that this Paragraph shall control every other
covenant and agreement in this Commitment Letter. If the
27
<PAGE>
applicable law (state or federal) is ever judicially interpreted so as to render
usurious any amount called for under this Commitment Letter, the Note or under
any of the Loan Documents, or contracted for, charged, taken, reserved or
received with respect to the
indebtedness evidenced by the Loan, or to accelerate the maturity of the Note,
or if any prepayment by Borrower, late payment charge, default interest,
commitment fee, servicing or loan administration fee, or other fee, charge, or
imposition of any kind results in Borrower having paid any interest in excess of
that permitted by applicable law, then it is Borrower's and Lender's express
intent that all excess amounts theretofore collected by Lender be repaid to
Borrower with interest thereon at the maximum lawful rate, and the provisions of
the Note and the other Loan Documents immediately be deemed reformed and the
amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder and thereunder. All sums paid or agreed to be paid to
Lender for the use, forbearance and detention of the indebtedness represented by
the Loan shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the maximum rate permitted under applicable law
from time to time in effect and applicable to the indebtedness evidenced hereby
for so long as such indebtedness remains outstanding. Notwithstanding anything
to the contrary contained herein or in any of the Loan Documents, it is not the
intention of Lender to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.
ARTICLE IV
SECURITY AND GUARANTY FOR PAYMENT OF THE LOAN
As security for the full and timely payment of the principal and
interest under the Note, and for any and all other indebtedness, obligations or
liability of the Borrower to the Lender pursuant to the Loan, whether now
existing or hereafter arising:
SECTION 4.1 MORTGAGE
The Borrower shall execute and deliver to the Lender the Mortgage
which shall constitute a second lien on the Mortgaged Property in accordance
with the terms of the Tri-Party Agreement and subject to the Permitted Title
Exceptions.
28
<PAGE>
SECTION 4.2 SECURITY AGREEMENT
The Borrower shall execute and deliver to Lender a Security
Agreement which shall grant to the Lender a second priority security interest in
and a continuing lien in and upon all of the Fixtures and Personal Property.
SECTION 4.3 ASSIGNMENT OF LEASES, RENTS AND PROFITS
The Borrower shall duly execute and deliver to the Lender an
Assignment of Leases, Rents and Profits as to the Mortgaged Property which gives
to the Lender the right to receive any income generated from the operation,
lease, sublease or sale of the Mortgaged Property.
SECTION 4.4 COLLATERAL ASSIGNMENT OF AGREEMENTS AFFECTING
REAL ESTATE
The Borrower shall execute and deliver an assignment, as
continuing collateral security, of the benefit of all agreements affecting the
Property and/or the Project.
SECTION 4.5 PLEDGE AGREEMENTS AND STOCK CERTIFICATES
Pledgor shall execute and deliver to Lender a Pledge (the
"Pledge") of all of such party's legal and beneficial interest in and to the
Borrower, together with stock certificates evidencing such interests and stock
powers, executed in blank.
[SECTIONS 4.5 THROUGH 4.13 ARE INTENTIONALLY DELETED]
SECTION 4.14 MORTGAGOR'S AFFIDAVIT
The Borrower shall execute and deliver to the Lender a
Mortgagor's Affidavit attesting to the absence of judgments and suits against
the Borrower, and the absence of liens and encumbrances, including mechanic's
liens, delinquent taxes or claims that can or might become liens on the
Property, and the ownership and possession of the Property.
SECTION 4.15 GUARANTY
Each Guarantor shall execute and deliver to the Lender a
Guaranty, whereby each Guarantor jointly and severally guarantees all of the
Borrower's obligations hereunder and under the Note in accordance with the terms
of the Guaranty.
29
<PAGE>
SECTION 4.16 FUNDING AGREEMENT
Each Guarantor shall execute and deliver to the Lender a Funding
Agreement, whereby each Guarantor jointly and severally guarantees certain
obligations in accordance with the terms of the Funding Agreement.
SECTION 4.17 ENVIRONMENTAL INDEMNITY AGREEMENT
The Borrower and the Guarantors shall each execute and deliver to
the Lender an Environmental Indemnity Agreement whereby the Borrower and the
Guarantors shall indemnify, defend and hold Lender harmless from any and all
loss and damage suffered as a result of any Environmental Claim.
SECTION 4.18 [INTENTIONALLY DELETED]
SECTION 4.19 SECURITY DOCUMENTS
The Borrower, in order to set forth the terms and conditions
under which the Collateral described in Sections 4.1 through 4.16 hereof will be
held by the Lender, shall execute and deliver to the Lender, in form and
substance satisfactory to the Lender and its Counsel, any and all mortgages,
security agreements, UCC-1 Financing Statements, hypothecation agreements,
assignments, pledge agreements, financing statements, notices of lien, and any
other documents relating to any security as the Lender shall require from time
to time (the documents and instruments referred to in Sections 4.1 through 4.16
and in Sections 5.1 through 5.5, together with all of the foregoing, are all
herein referred to collectively as the "SECURITY DOCUMENTS").
SECTION 4.20 FILING AND RECORDING
The Borrower shall bear the cost and expense of causing such of
the Security Documents to be duly recorded and/or filed in all places necessary,
in the opinion of the Lender and Counsel for Lender, to perfect and protect the
interest of the Lender in the property covered thereby. The Borrower hereby
authorizes the Lender to file any financing statement or notice of lien in
respect of any security interest created pursuant to this Agreement which may at
any time be required or which, in the opinion of the Lender, may at any time be
desirable, although the same may have been executed only by the Lender, or, at
the option of the Lender, to sign such financing statement or notice of lien on
behalf of the Borrower and file the same. The Borrower hereby irrevocably
designates the Lender, its agents, representatives and designees as agents and
attorneys-in-fact for Borrower for this purpose and acknowledges that this is a
power coupled with an interest and that it is irrevocable. In the event that any
rerecording or refiling
30
<PAGE>
thereof (or the filing of any statements of continuation or assignment of any
financing statement) is required to protect and preserve security interests in
favor of the Lender, the Borrower shall bear the cost and expense of causing the
same to be rerecorded and/or refiled at the time and in the manner required by
the Lender.
ARTICLE V
SECURITY AND GUARANTY FOR
PAYMENT OF THE CONTINGENT RETURNS
As security for the full and timely payment of the Contingent
Returns:
SECTION 5.1 CONTINGENT RETURN MORTGAGE
The Borrower shall execute and deliver to the Lender the
Contingent Return Mortgage which shall secure payment to Lender of the
Contingent Returns and which shall constitute a third lien on the Mortgaged
Property, subject to Permitted Title Exceptions.
SECTION 5.2 COLLATERAL ASSIGNMENT OF AGREEMENTS AFFECTING
REAL ESTATE
The Borrower shall execute and deliver an assignment, as
continuing collateral security, of the benefit of all agreements affecting the
Property and/or the Project.
SECTION 5.3 PLEDGE AGREEMENTS AND STOCK CERTIFICATES
Pledgor shall execute and deliver to Lender a Pledge (the
"Contingent Return Pledge") of all of such party's legal and beneficial interest
in and to the Borrower, together with stock certificates evidencing such
interests and stock powers, executed in blank.
SECTION 5.4 ASSIGNMENT OF LEASES, RENTS AND PROFITS
The Borrower shall duly execute and deliver to the Lender an
Assignment of Leases, Rents and Profits as to the Mortgaged Property which gives
to the Lender the right to receive any income generated from the operation,
lease, sublease or sale of the Mortgaged Property, in order to secure the
Contingent Returns.
31
<PAGE>
ARTICLE VI
DEBTOR PARTIES' REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, the Debtor
Parties make the following representations and warranties which shall be deemed
to be continuing representations and warranties so long as the Note or other
indebtedness of the Borrower to the Lender remains unpaid:
SECTION 6.1 ORGANIZATION AND STANDING
Borrower and Transeastern (a) are duly organized, validly
existing and in good standing under the laws of the state of Florida, (b) have
the corporate power and authority to own their respective properties and to
carry on their respective business as now being conducted, (c) are qualified to
do business in all jurisdictions in which the character of their properties or
nature of their business requires such qualification, (d) are in compliance with
all Governmental Requirements, and (e) have not amended or modified their
articles or certificate of incorporation or bylaws except as previously
disclosed in writing to Lender prior to the execution hereof.
SECTION 6.2 CAPITALIZATION
(a) Borrower has authorized capital stock of 10,000 shares of
common stock, par value $.01 per share, of which 10,000 shares are issued and
outstanding and owned beneficially and of record by Pledgor. Subject to the
terms of this Agreement and the Loan Documents, Pledgor has the unrestricted
right to vote, and to receive dividends and distributions on, all shares of such
stock of Borrower. All such stock has been duly authorized and validly issued
and is fully paid and nonassessable. Other than the common stock, there are
outstanding no other Capital Securities of Borrower and there are no outstanding
subscriptions, rights, agreements, commitments, warrants or options for the
purchase of Capital Securities of Borrower. Borrower's common stock is subject
to no restrictions, limitations, prohibitions or other restraint on alienation
(including, without limitation, pursuant to a shareholders agreement). The
owners of all of the common (voting) stock of Transeastern are listed in EXHIBIT
6.2 attached hereto.
(b) There are two (2) classes of preferred stock of Transeastern,
Class A Preferred Stock and Class B Preferred. The owners of the Class A
Preferred Stock also own warrants for the purchase of Transeastern's common
stock. If such warrants are exercised, the common stock issued pursuant thereto
would not represent more than a twenty percent (20%) interest in all of such
issued common (voting) stock of Transeastern.
32
<PAGE>
SECTION 6.3 POWER AND AUTHORITY
The execution, delivery and performance by Borrower of the Loan
Documents, and the borrowing evidenced by the Note, (i) are within the powers
and purposes of Borrower, (ii) have been duly authorized by all requisite action
of Borrower, (iii) do not require the approval of any Governmental Authority,
and (iv) will not violate any Governmental Requirement, the articles of
incorporation or bylaws of Borrower or any Contractual Obligation of Borrower,
or be in conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such Contractual Obligation or result
in the creation or imposition of any Lien upon any of its property or assets,
except as contemplated by the provisions of the Loan Documents.
SECTION 6.4 VALID AND BINDING OBLIGATION
The Loan Documents constitute the legal, valid and binding
respective obligations of the Borrower, enforceable in accordance with their
terms subject to applicable bankruptcy and insolvency laws and laws affecting
creditors' rights and the enforcement thereof.
SECTION 6.5 NO LEGAL BAR
The execution, delivery and performance of this Agreement, the
other Loan Documents, and the borrowings contemplated by this Agreement do not
and will not violate any Requirement of Law or any Contractual Obligation of the
Debtor Parties and will not result in, or require, the creation or imposition of
any Lien (other than Liens created pursuant to the Loan Documents or permitted
under Section 9.2 hereof) on any of its properties or revenues pursuant to any
Requirement of Law or any Contractual Obligation which violation or Lien would
have a material adverse effect, cost or expense to the business, operations or
financial condition of the Debtor Parties.
SECTION 6.6 TITLE TO COLLATERAL
The Borrower is indefeasibly seized of and has and will have good
and marketable fee simple title to the Real Property and Improvements free and
clear of any and all mortgages, liens, encumbrances, claims, charges, equities,
covenants, conditions, restrictions, easements, rights-of-way and all other
matters affecting the Real Property and Improvements, whether or not of record,
except for the Permitted Title Exceptions. Borrower has and will have good,
absolute and marketable title to the Fixtures and Personal Property all free and
clear of any and all liens, charges, encumbrances, security interests and
adverse claims whatsoever, except those in favor of (i) Chase Federal pursuant
to the Chase Federal Loan Documents, and (ii) Lender. Borrower will
33
<PAGE>
preserve its title to the Mortgaged Property and will forever warrant and defend
the same to Lender and will forever warrant and defend the validity and priority
of the lien of the Mortgage against the claims of all persons and parties
whomsoever subject, however, to the rights of Chase Federal pursuant to the
Chase Federal Loan Documents.
SECTION 6.7 FINANCIAL STATEMENTS AND OTHER INFORMATION
(a) All balance sheets, statements of profit and loss, and other
financial data that have been given to Lender with respect to the Borrower and
the Guarantors, (i) are complete and correct in all material respects, (ii)
accurately present the financial condition of said parties as of the dates, and
the results of its or their operations, for the periods for which the same have
been furnished, and (iii) as to the Borrower and Transeastern, have been
prepared in accordance with Generally Accepted Accounting Principles
consistently followed throughout the periods covered thereby; all balance sheets
disclose all known liabilities, direct and contingent, as of their respective
dates; and there has been no change in the condition of the Borrower or the
Guarantors, financial or otherwise, since the date of the most recent financial
statements given to Lender with respect to said parties, other than changes in
the ordinary course of business, none of which changes has been materially
adverse.
(b) All other information, including reports, financial
statements, certificates, papers, data and otherwise, given and to be given to
Lender with respect (i) to Borrower or any Guarantor, (ii) to the Loan and (iii)
to others obligated under the terms of the Loan Documents, are true, accurate
and correct in all material respects and complete.
SECTION 6.8 LITIGATION
There are no judgments outstanding against the Debtor Parties and
there is no action, suit, proceeding, or investigation now pending (or to the
best of the Debtor Parties's knowledge after diligent inquiry, threatened)
against, involving or affecting the Debtor Parties or the Mortgaged Property, or
any part thereof, at law, in equity or before any Governmental Authority that if
adversely determined as to the Mortgaged Property or as to The Debtor Parties
would result in a material adverse change in the business or financial condition
of the Debtor Parties or the Borrower's operation and ownership of the Mortgaged
Property, nor is there any basis for such action, suit, proceeding or
investigation.
34
<PAGE>
SECTION 6.9 INVESTMENT COMPANY ACT
The Borrower is not an "investment company" (as the quoted term
is defined or used in the Investment Company Act of 1940, as amended).
SECTION 6.10 FEDERAL REGULATION
No part of the proceeds of the Loan will be used for any purpose
which violates, or which would be inconsistent with, the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
or any other Requirement of Law. Neither the Debtor Parties nor any agent acting
on their behalf has taken or will take any action which might cause this
Agreement or any of the Loan Documents or instruments delivered pursuant hereto
to violate any regulation of the Board or to violate the Securities Exchange Act
of 1934, in each case, as in effect on the Closing Date.
SECTION 6.11 DISCLOSURE
No representation or warranty made by the Debtor Parties in this
Agreement, in any of the other Loan Documents or in any other document furnished
or to be furnished from time to time in connection herewith or therewith
contains or will contain any misrepresentation of a material fact or omits or
will omit to state any material fact necessary to make the statements herein or
therein not misleading. There is no fact known to the Debtor Parties which
materially adversely affects, or which would in the future materially adversely
affect, the business, assets, property, prospects or financial condition of the
Debtor Parties.
SECTION 6.12 BROKERAGE
The Debtor Parties have dealt with no broker or finder in
connection with the Loan other than Holliday, Fenoglio, Dockerty & Gibson (the
"Broker") who has been engaged by the Borrower, at the Borrower's expense. The
Debtor Parties hereby agree to indemnify the Lender against and to hold the
Lender harmless from any claims for finders' or brokerage fees or commission in
connection with the Loan (including any and all fees due the Broker) and agrees
to pay all expenses (including but not limited to attorneys' fees and expenses)
incurred by the Lender in connection with the defense of any action or
proceeding brought to collect any such fees or commissions or otherwise relating
to any such brokerage claims resulting from or arising out of any claim that the
Debtor Parties consulted, dealt or negotiated with the person or entity making
such brokerage claim.
35
<PAGE>
SECTION 6.13 TAXES
(a) The Debtor Parties have filed or caused to be filed all tax
returns which to the knowledge of the Debtor Parties are required to be filed,
and has fully paid all taxes shown to be due and payable on said returns or on
any assessments made against it or its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental
Authority, including payroll taxes. No tax liens have been filed and, to the
knowledge of the Debtor Parties, no claims are being made or may hereafter be
asserted with respect to any such taxes, fees or other charges, except for: (i)
those the amount or validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Debtor Parties, as the case may be;
and (ii) such failures to file or to pay such tax liens or claims, as could not,
in the aggregate, reasonably be expected to have a material adverse affect on
the business, operations, property or financial or other condition of the Debtor
Parties and could not reasonably be expected to have an adverse affect on the
ability of the Debtor Parties to perform any of its respective obligations in
any material respect under this Agreement, the other Loan Documents to which it
is a party or under any other Contractual Obligation.
(b) The Real Property is not currently assessed separately from
all other adjacent land for the purposes of real estate taxes.
Notwithstanding the foregoing, there is no intended public improvements which
may involve any charge being levied or assessed, or which may result in the
creation of any lien upon the Mortgaged Property. Borrower covenants and agrees
to proceed expeditiously after the Closing Date to have the Real Property
assessed separately.
SECTION 6.14 ERISA
Each pension, profit sharing or other employee benefit plan
maintained by the Debtor Parties is in material compliance with ERISA, the Code
and all applicable rules and regulations adopted by regulatory authorities
pursuant thereto. The Debtor Parties have filed all material reports required to
be filed by ERISA, the Code and such rules and regulations. In addition, any
qualified plan subject to the minimum funding standards does not as of the date
hereof have a funding deficiency as defined by ERISA. No "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) or
"accumulated funding deficiency" (as defined in Section 302 of ERISA) or
Reportable Event material in relation to the business, operations, property or
financial or other condition of the Debtor Parties has occurred with respect to
any Plan. No tax penalty, nor other liability in the aggregate material in
relation to business, operations, property or financial
36
<PAGE>
condition of the Debtor Parties has been assessed against the Debtor Parties
with respect to a Plan.
SECTION 6.15 LIABILITIES TO EMPLOYEES AND OFFICERS
The Debtor Parties do not have any liabilities to officers or
employees in respect of employment termination benefits.
SECTION 6.16 SUBSIDIARIES
The Borrower does not have any Subsidiaries, partnership
interests or Affiliates other than those listed on EXHIBIT 6.16 attached hereto.
All such Subsidiaries are wholly-owned by Borrower. The Borrower has the
unrestricted right to vote, and to receive dividends and distributions on, all
Capital Securities of the Subsidiaries owned by Borrower. All such Capital
Securities have been duly authorized and validly issued and are fully paid and
nonassessable.
SECTION 6.17 ENVIRONMENTAL CONTAMINATION/HAZARDOUS MATERIAL
Borrower and the Mortgaged Property are in full compliance with
all Environmental Laws, and there are no civil, criminal or administrative
actions, suits, demands, claims, hearings, notices or demand letters, notices of
violation, investigations, or proceedings pending or threatened against the
Borrower or the Mortgaged Property relating in any way to any Environmental Law
or any agreement, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved under any Environmental Law.
There have never been nor are there currently any Hazardous Material located on,
in, or under the Mortgaged Property or used in connection therewith, and neither
Borrower nor any other person has ever used the Mortgaged Property for the
manufacture, processing, distribution, use, transport, handling, treatment,
storage, disposal, emission, discharge or release of any Hazardous Material. No
notice or advice has been received by Borrower of any condition or state of
facts that would be contributing to a claim of pollution or any other damage to
the environment by reason of the conduct of any business on the Mortgaged
Property or operation of the Mortgaged Property, whether past or present.
SECTION 6.18 NO VIOLATIONS
No Governmental Requirement and no covenant, condition,
restriction, easement or similar matter affecting the Real Property has been
violated, and Borrower has not received any notice of violation from any
Governmental Authority or any other person with respect to any of the foregoing
matters.
SECTION 6.19 CONDITION OF MORTGAGED PROPERTY
37
<PAGE>
The Mortgaged Property or any part thereof, now existing, is not
damaged or injured as a result of any fire, explosion, accident, flood or other
casualty. The Improvements, if any, as of the date of this Mortgage, are free of
any defects in material, structure and construction and do not violate any
Governmental Requirements. There is no existing, proposed or contemplated plan
to modify or realign any street or highway or any existing, proposed or
contemplated eminent domain proceeding that would result in the taking of all or
any part of the Mortgaged Property or that would adversely affect the use or the
operation of the Mortgaged Property.
SECTION 6.20 UTILITIES
There is available to the Real Property and Improvements through
public or private easements or rights-of-way abutting or crossing the Real
Property (which would inure to the benefit of Lender in case of enforcement of
this Mortgage) a water supply and a sanitary sewer service, and electric, gas
(if applicable) and telephone service, all of sufficient capacity to serve the
needs of the Real Property and Improvements according to their intended purpose.
All necessary permits for the foregoing have been issued, are in good standing
and all fees have been paid to the applicable Governmental Authorities. Upon
completion of the utility line, said utility lines shall be approved by all
health and other applicable Governmental Authorities having jurisdiction.
SECTION 6.21 BUDGET FOR ACQUISITION CONTRACT DEVELOPMENT
WORK
The total budget for the (i) acquisition of Parcels B, D and F of
the Real Property, and (ii) performance of the Acquisition Contract Development
Work shall not exceed Thirteen Million Dollars
($13,000,000).
SECTION 6.22 ZONING AND LAND USE
The Real Property is zoned so as to permit the Real Property and
Improvements to be used for the purposes set forth in City of Pembroke Pines
Ordinance No. 1113 and all attachments thereto which include the intended use of
the Project.
SECTION 6.23 PERMITS AND LICENSES
The Borrower has obtained certain permits, licenses and approvals
in connection with its development of the Real Property and the construction of
the Improvements, all as set forth on EXHIBIT 6.23 attached hereto.
SECTION 6.24 [INTENTIONALLY DELETE]
38
<PAGE>
SECTION 6.25 NO DEFAULTS
The Acquisition Contract, the Option Contract, the Construction
Contract and the Tract B Sales Contract are all in full force and effect, there
are no defaults thereunder and no event has occurred which with due notice or
the lapse of time, or both, would constitute a default thereunder.
SECTION 6.26 FACILITIES FOR HANDICAPPED
The Improvements when constructed shall comply with all legal
requirements regarding access and facilities for handicapped or
disabled persons, including, without limitation, and to the extent
applicable, Part V of the Florida Building Construction Standards
Act entitled "Accessibility by Handicapped Persons", Chapter 553,
Fla Stat.; the Federal Architectural Barriers Act of 1988 (42
U.S.C. ss.4151, et.seq.), The Fair Housing Amendment Act of 1988 (42
U.S.C. ss.3601, et.seq), The Americans With Disabilities Act of 1990
(42 U.S.C. ss.12101 et. seq.), and The Rehabilitation Act of 1973 (29
U.S.C. ss.794).
SECTION 6.27 OTHER AGREEMENTS
Borrower is not a party to any agreement or instrument materially
and adversely affecting it or its present or proposed businesses, properties or
assets, operation or condition, financial or otherwise, and Borrower is not in
default in the performance, observance or fulfillment of any of the material
obligations, covenants or conditions set forth in any agreement or instrument to
which it is a party.
SECTION 6.28 CHASE FEDERAL LOAN DOCUMENTS
The Chase Federal Loan Documents are in good standing, all
principal, interest and other payments due thereunder have been paid in
accordance with the terms thereof, there is no default thereunder and no event
has occurred which with due notice or the lapse of time, or both, would
constitute a default thereunder. In connection therewith, monies from the Chase
Federal Letters of Credit are solely for the construction of the Project
(including offsite improvements therefor) and proceeds from the Chase Federal
Loan will be sufficient to construct the Acquisition Contract Development Work
and the Tract Infrastructure Work.
SECTION 6.29 REPRESENTATIONS AND WARRANTIES IN OTHER LOAN
DOCUMENTS
All of the representations and warranties contained in the other
Loan Documents are true and correct.
39
<PAGE>
SECTION 6.30 RELIANCE ON REPRESENTATIONS
The Borrower acknowledges that the Lender has relied upon the
Borrower's representations, has made no independent investigation of the truth
thereof, is not charged with any knowledge contrary thereto that may be received
by an examination of the public records in Tallahassee, Florida and Broward
County, Florida, or that may have been received by any officer, director, agent,
employee or shareholder of Lender.
ARTICLE VII
CONDITIONS PRECEDENT
The effectiveness of this Agreement and the obligation of the
Lender to consummate any of the transactions contemplated hereby shall be
subject to the satisfaction of the following conditions precedent, at or prior
to the time of the Closing Date.
SECTION 7.1 CORRECTNESS OF WARRANTIES
All representations and warranties contained herein or otherwise
made to the Lender in connection herewith or in any other Loan Document shall be
true and correct.
SECTION 7.2 OPINION OF COUNSEL
Lender shall have received from counsel to the Borrower specific
opinions addressed to and satisfactory to the Lender.
SECTION 7.3 ENTITY DOCUMENTS
Lender shall have received true and correct copies, certified as
to authenticity by a Responsible Officer of the Borrower and Transeastern, as
applicable, of the Articles of Incorporation and the By-Laws of the Borrower and
any amendments thereto, a current Certificate of Good Standing from the State of
Florida for both, and such other certificates, documents or instruments as may
be reasonably requested by the Lender.
SECTION 7.4 CERTIFIED RESOLUTIONS AND INCUMBENCY
The directors and the stockholders, if necessary, of the
Borrower and Transeastern shall have adopted specific resolutions
authorizing the execution and delivery of all Loan Documents and
the taking of all actions called for by this Agreement, and the
Borrower and Transeastern shall have furnished copies of such
resolutions, certified by the Secretary or an Assistant Secretary
to be true, correct and complete and in full force and effect. The
40
<PAGE>
Lender shall also have received a certificate of the Secretary or an Assistant
Secretary of the Borrower and Transeastern, as applicable, dated the Closing
Date, as to the incumbency and signature of the officers of the Borrower and
Transeastern, as applicable, executing this Agreement, the other Loan Documents
to which it is a party and any certificate or other documents to be delivered by
it pursuant hereto or thereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary (or other representative), as the case may be.
SECTION 7.5 LOAN DOCUMENTS
The Lender shall have received the Loan Documents duly executed
and delivered by a Responsible Officer or other appropriate Person, as the case
may be, of each of the parties thereto, and the Lender shall have received
evidence satisfactory to it that all actions necessary to perfect the Liens or
other security interest granted thereby have been, or promptly after the Closing
will be, taken.
SECTION 7.6 MORTGAGEE TITLE INSURANCE POLICY
The Borrower shall cause to be delivered to the Lender a
Mortgagee Title Insurance Commitment (the "Commitment") naming the Lender as
insured which Commitment shall have title insurance coverage in the amount of
THREE MILLION DOLLARS ($3,000,000.00). The Commitment and policy shall be
written by a title insurance company acceptable to the Lender and licensed by
the State of Florida, unrecorded easements, mechanic's liens and/or parties in
possession. All other exceptions shall be subject to the approval of the Lender
and Counsel to Lender. The Commitment must provide to the Lender "gap" and "Form
9" insurance coverage. The Commitment and policy must also give such other
affirmative insurance and reinsurance as reasonably required by the Lender and
Counsel to Lender. The Borrower shall provide at the request of Counsel to
Lender any corrective instruments, releases, satisfactions, affidavits, etc.,
necessary to cause the Commitment and policy to be issued. The Commitment,
policy and endorsements shall be on American Real Property Title Association
Loan forms approved in the State of Florida.
SECTION 7.7 CHASE FEDERAL LOAN DOCUMENTS
The Lender shall have received copies of the Chase Federal Loan
Documents in form and substance satisfactory to Lender certified by a
Responsible Officer of the Borrower to be true, correct and complete.
SECTION 7.8 EQUITY CONTRIBUTION
41
<PAGE>
The Lender shall have received evidence that the Borrower has
invested into the Project a minimum equity contribution of not less than
$450,000.
SECTION 7.9 STOCK CERTIFICATES AND STOCK POWERS
The Lender shall have received the Pledge duly executed and
delivered by a Responsible Officer of Pledgor, together with the certificate(s)
evidencing the stock being pledged thereby and stock assignment powers separate
from certificate duly endorsed in blank for transfer.
SECTION 7.10 ACQUISITION CONTRACT, OPTION CONTRACT AND
TRACT B SALES CONTRACT
Borrower shall deliver to Lender shall have received copies of
the Acquisition Contract, the Option Contract and the Tract B Sales Contract,
and all amendments thereto, certified by a Responsible Officer of the Borrower
to be true, correct and complete.
SECTION 7.11 SOILS TEST
Lender shall have received a report as to soil borings showing
the Real Property to be suitable for construction of the Improvements and within
forty-five (45) days of completion of the filling activities of the Project,
shall provide soil compaction reports.
SECTION 7.12 [INTENTIONALLY DELETED]
SECTION 7.13 COPIES OF PERMITS, LICENSES AND APPROVALS
Lender shall have received copies of the excavation permit, tree
removal permit, land alteration permit, dredge and fill permit, storm water
discharge permit, the building permit and any other permits required by
applicable Governmental Authorities for the development of the Property.
SECTION 7.14 AVAILABILITY OF UTILITIES
Lender shall have received evidence of the availability and
suitability of the utilities needed to properly service the Improvements as to
their intended uses, including water, sewer, electric, telephone and natural gas
(if applicable).
SECTION 7.15 PLANS AND SPECIFICATIONS
Lender shall have received a complete set of plans and
specifications for the Acquisition Contract Development Work and, within fifteen
(15) days of completion shall provide to Lender
42
<PAGE>
plans for the Tract Infrastructure Work, approved in writing by the Borrower and
the General Contractor, and identical to those reviewed and approved by the
appropriate Governmental Authority.
SECTION 7.16 CONSTRUCTION CONTRACT
Lender shall have received a copy of the Construction Contract
certified by a Responsible Officer of the Borrower to be true, correct and
complete.
SECTION 7.17 APPROVALS OF GOVERNMENTAL AUTHORITIES
Lender shall have received evidence that all applicable
Governmental Authorities have approved Borrower's development plan for the Real
Property (exclusive of individual site plan approvals for the tracts).
SECTION 7.18 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS
Lender shall have received evidence that the Borrower's
development of the Real Property, construction of the proposed Improvements and
use of the Real Property complies in all respects with concurrency requirements
and all other applicable Governmental Requirements including, without
limitation, local comprehensive plan and local land development regulations,
zoning rules and regulations, environmental protection rules and regulations
pertaining to water supply, sewage disposal and air and water pollution, rules
and regulations governing the Mortgaged Real Property.
SECTION 7.19 CERTIFICATES FROM GENERAL CONTRACTOR AND
ENGINEER
Lender shall have received appropriate certificates from the
General Contractor and Borrower's engineer certifying (i) that the Borrower's
development of the Real Property is in compliance with all applicable
Governmental Requirements, and (ii) as to the status of permits and approvals
obtained by the Borrower in connection therewith.
SECTION 7.20 COST BREAKDOWN
Lender shall have received from the Borrower a detailed trade
breakdown of the cost of constructing the Acquisition Contract Development Work
and the Tract Infrastructure Work including an itemization of non-construction
and land costs.
SECTION 7.21 FLOOD HAZARD AREA
43
<PAGE>
Lender shall have received evidence that the Real Property is not
located in an area identified as having special flood hazards pursuant to the
Flood Disaster Protection Act of 1973.
SECTION 7.22 SURVEY
Within thirty (30) days of completion of the Acquisition Contract
Development Work, Lender shall have received at least four (4) current sealed
copies of a survey for the Real Property prepared by a registered surveyor,
reflecting no conditions unsatisfactory to Lender or Counsel for Lender and
prepared in accordance with Lender's survey requirements.
SECTION 7.23 TRI-PARTY AGREEMENT
Lender, Chase Federal and Borrower shall have entered into the
Tri-Party Agreement, in form and substance satisfactory to Lender.
SECTION 7.24 NO MORATORIUM
The Lender shall have received a certification or certifications
or other evidence, in form and substance and from a Person or Persons
satisfactory to the Lender, with respect to any moratorium or other legal
impediment currently in effect, proposed or threatened, which would prohibit or
materially and adversely interfere in any way with the operation, development
(as to non-developed Real Property), sale or disposition of the Mortgaged Real
Property.
SECTION 7.25 INSURANCE
Lender shall have received copies of insurance certificates or
binders for, or other evidence of, the maintenance by Borrower of the insurance
required by Section 8.5 hereof, which shall be satisfactory in form and
substance to Lender in accordance with its insurance requirements.
SECTION 7.26 SUBORDINATION TO THE LOAN
The subordination to the Loan (pursuant to an agreement in form
and substance satisfactory to Lender) of all loans and other indebtedness
payable by the Borrower to any partner, officer, director, stockholder,
Subsidiary or Affiliate of the Borrower, the General Partner and the Operator
shall have been delivered to Lender.
SECTION 7.27 ADDITIONAL DOCUMENTS AND INSTRUMENTS
44
<PAGE>
Lender shall have received all the instruments, documents and
Real Property contemplated to be delivered by the Borrower hereunder, and the
same shall be in full force and effect.
ARTICLE VIII
DEBTOR PARTIES' AFFIRMATIVE COVENANTS
The Debtor Parties covenant and agree that until the Note,
together with interest and all other indebtedness to the Lender under the terms
of this Agreement, are paid in full, unless specifically waived by the Lender in
writing:
SECTION 8.1 EXISTENCE AND QUALIFICATION
The Borrower shall do, or cause to be done, all things necessary
to preserve, renew and keep in full force and effect the Borrower's existence
and its rights, licenses and permits; shall comply with all laws applicable to
it, operate its business in a proper and efficient manner and substantially as
presently operated or proposed to be operated; and at all times shall maintain,
preserve and protect all franchises and trade names and preserve all Real
Property used or useful in the conduct of its business, and keep the same in
good repair, working order and condition, and from time to time make, or cause
to be made, all needful and proper repairs, renewals, replacements, betterments
and improvements thereto, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times. Borrower
will not, no will Borrower permit any Guarantor to amend, modify or otherwise
change the articles or incorporation or bylaws of Borrower in a manner which
would adversely affect the Borrower's existence as a single purpose entity.
SECTION 8.2 FINANCIAL STATEMENTS AND INFORMATION
The Borrower shall keep its books of account (which shall not be
commingled) in accordance with Generally Accepted Accounting Principles and
shall furnish to Lender the following financial information, statements and
reports:
(a) MONTHLY REPORTS. Within fifteen (15) days of the end of each
calendar month, a report of (i) all fundings pursuant to any loans in connection
with the Project or the Real Property, (ii) all contracts, letters of intent,
reservation agreements, options or similar agreements relating to the sale of
Tracts or residential units comprising a portion of the Real Property and any
material changes in the status of any such contracts previously reported on,
(iii) any sales of Tracts or residential units comprising a portion of the Real
Property, (iv) copies of draw requests under the Chase Federal Loan, and (v)
such other matters with respect to the
45
<PAGE>
Project or the Real Property as Lender may request, all certified by a
Responsible Officer as being true and accurate.
(b) QUARTERLY REPORTS. Within forty-five (45) days after the end
of each fiscal quarter of the Borrower, (i) a profit and loss statement and
balance sheet, (ii) a listing and aging of accounts payable, (iii) an accounting
of Gross Revenue, Expenses, Cash Flow, and Net Profit for the Borrower, and (iv)
such other financial and related information with respect to the Borrower and
the Project as Lender may request, all prepared in accordance with Generally
Accepted Accounting Principles and certified by a Responsible Officer as being
true and accurate.
(c) ANNUAL REPORTS. Within sixty (60) days of the end of each
fiscal year of the Borrower, internally prepared financial statements of the
Borrower, including (i) a profit and loss statement and a balance sheet as of
the end of such year, (ii) an accounting of Gross Revenue, Expenses, Cash Flow,
and Net Profit for the Borrower for the prior fiscal year together with such
information as may be required to compute the First Contingent Return, the
Second Contingent Return, the Borrower's First Priority Return and the
Borrower's Second Priority Return, reconciling reports provided with respect to
each of the fiscal quarters within such fiscal year, and (iii) such other
financial and related information with respect to the Borrower and the Project
as Lender may request, all prepared in accordance with Generally Accepted
Accounting Principles and certified by a Responsible Officer as being true and
accurate.
(d) AUDITED ANNUAL REPORTS. Within 120 days after the end of
their respective fiscal years, the Borrower and each of the other
Debtor Parties shall provide to Lender (i) a profit and loss
statement and reconciliation of surplus statement for such year,
and a balance sheet as of the end of such year, audited without
scope limitations by independent certified public accountants of
recognized standing selected by the Debtor Parties and satisfactory
to Lender, (ii) an accounting of Gross Revenue, Expenses, Cash
Fl provided with respect to each of the fiscal
quarters within such fiscal year, together with such information as
may be required to compute the First Contingent Return, the Second
Contingent Return, the Borrower's First Priority Return and the
Borrower's Second Priority Return, for such fiscal year, (iii) such
other financial and related information as Lender may request, all
prepared in accordance with Generally Accepted Accounting
Principles and certified by a Responsible Officer as being true and
accurate and (iv) a representation that their examination has
revealed there exists no Event of Default and no event which, with
the giving of notice or passage of time, or both, would constitute
such an Event of Default, or, if this is not the case, that one or
more specified Events of Default have occurred. The outside
46
<PAGE>
accountant and the opinion of the outside accountant must be
acceptable to the Lender.
(e) TAX RETURNS. Within fifteen (15) after filing, complete
copies of the Borrower's and each of the Debtor Parties' annual tax
returns.
(f) BUDGET. On or before May 15, 1996, Borrower shall provide a
budget for the Project commencing July 1, 1996 which shall be updated every
November 15th and May 15th occurring thereafter and shall provide projections on
an individual tract and aggregate basis. The aforesaid budget shall include,
without limitation, a narrative description of the Borrower's business plan for
such upcoming year (each, a "BUDGET", collectively, the "BUDGETS").
(g) ADDITIONAL INFORMATION. The Borrower, with reasonable
promptness, shall furnish to Lender such other data as Lender may request and
will at all times and from time to time permit Lender by or through any of its
officers, agents, employees, attorneys or accountants to inspect and make
extracts from the Borrower's books and records, which may include, without
limitation, review and obtaining copies of all invo SECTION 8.3 [INTENTIONALLY
DELETED]
SECTION 8.4 TAXES AND CLAIMS
(a) The Borrower shall properly pay and discharge:
(a) all Impositions, including payroll taxes, prior to the date on which
penalties attach thereto, unless and to the extent that such Impositions are
being diligently contested in good faith and by appropriate proceedings and
appropriate reserves therefor have been established; and (b) all lawful claims,
whether for labor, materials, supplies, services or anything else which might or
could, if unpaid, become a lien or charge upon the properties or assets of the
Borrower unless and to the extent only that the same are transferred to bond,
being diligently contested in good faith and by appropriate proceedings, and
appropriate reserves therefor have been established. Borrower shall deliver to
Lender receipts evidencing the payment of all Impositions within thirty (30)
days after same become due and payable or before same shall become delinquent,
whichever is sooner.
(b) In the event of the passage, after the date of
this Agreement, of any law (i) making it illegal for the Borrower to pay the
whole or any part of the Impositions, or charges or liens herein required to be
paid by Borrower, or (ii) rendering the payment by Borrower of any and all taxes
levied
47
<PAGE>
or assessed upon the Mortgage, the Note, or the other Loan Documents or the
interest in the Mortgaged Property represented by this Mortgage unlawful, or
(iii) rendering the covenants for the payment of the matters set forth in
Subparts (i) and (ii) of this Subsection by Borrower legally inoperative, the
Borrower shall pay, upon demand, the entire unpaid Obligations notwithstanding
anything in the Note, the Mortgage, or the other Loan Documents to the contrary.
SECTION 8.5 INSURANCE
Until the expiration of this Agreement, Borrower shall maintain,
at Borrower's cost and expense, the following insurance coverages in full force
and effect at all times throughout the term of this Agreement:
(a) LIABILITY INSURANCE. Borrower will obtain and
keep in full force a "Broad Form Comprehensive General Liability" insurance
coverage for both Borrower and any contractor performing services to the Real
Property in the minimum coverage amount of One Million Dollars ($1,000,000.00)
per occurrence and combined single limit ("CSL") of Ten Million Dollars
($2,000,000.00), with excess umbrella liability coverage of Five Million Dollars
($5,000,000).
(b) HAZARD INSURANCE. Upon completion of the
Improvements, Borrower shall keep the Improvements insured at all times against
loss or damage by fire and other hazards included within the term "all risk" or
"extended coverage" and against such other hazards as Lender may require in the
full insurable value thereof (or such lesser amount as Lender may authorize in
writing), with an insurer satisfactory to Lender. Such policy shall include a
Replacement Cost and Agreed Amount/Stipulated Value Endorsement and a Sinkhole
Endorsement, if deemed necessary by Lender.
(c) FLOOD INSURANCE. If at any time the Real
Property or any portion thereof is located in a "Flood Hazard Area" pursuant to
the Flood Disaster Protection Act of 1973 or any successor or supplemental act
thereto, flood insurance in the maximum amount available or such other amount as
Lender may reasonably request.
(d) BUILDER'S RISK INSURANCE. Prior to commencement
of construction of the Improvements, an "All risk", non-reporting, completed
value builder's risk insurance policy, which policy shall include Agreed Amount,
Replacement Cost, Permit to Occupy and Vandalism/Malicious Mischief
Endorsements.
(e) OTHER INSURANCE. Boiler and machinery
insurance, worker's compensation insurance, wind damage insurance, and other
insurance coverages as Lender may reasonably require.
48
<PAGE>
The policy or policies of insurance shall (i) be from companies
and in coverage amounts acceptable to Lender, (ii) contain a standard Lender
clause in favor of Lender naming Lender as a Lender and including a lender's
loss payee clause in such policy, as applicable (iii) not be terminable or
modified without thirty (30) days' prior written notice to Lender, and (iv) be
evidenced by original policies or certified copies of policies deposited with
Lender, as Lender may elect, to be held by Lender until the Obligations shall
have been fully paid and discharged. Borrower shall furnish Lender satisfactory
evidence of payment of all premiums required and similar evidence of renewal or
replacement coverage not later than thirty (30) days prior to the date any
coverage will expire.
Each insurance policy or endorsement required herein shall be
written by an insurer having a rating not less than "A-XII" Best's Rating
according to the most current edition of Best's Key Rating Guide as determined
at the time of the initial policy and at all times during the term hereof. All
policies shall indicate that notices related to such insurance shall be sent to
Lender at:
AMRESCO Funding Corporation
1845 Woodall Rodgers Freeway
Dallas, Texas 75201
Attn: Loan Servicing Department
(f) The Borrower shall from time to time, upon
request of Lender, promptly furnish or cause to be furnished to Lender evidence
in form and substance satisfactory to Lender of the maintenance of all insurance
required by this Section to be maintained, including, but not limited to, such
originals or copies as Lender may request of policies, certificates of
insurance, riders and endorsements relating to such insurance and proof of
premium payments. Lender shall be under no duty to examine such certificates or
to advise the Borrower in case the insurance is not sufficient or not in
compliance herewith.
SECTION 8.6 SALES
The Borrower shall achieve at least sixty (60%) percent of the
sales projected in the Borrower's sales projections for any rolling six (6)
month period, commencing four (4) months from the earlier to occur of (a) the
date of pouring the first slab for a residence under contract for sale to a
third party purchaser, or (b) on the effective date of such a contract for sale,
in the event the slab for such residence has previously been poured, which sales
projections shall be approved by the Lender prior to Closing.
SECTION 8.7 BOOKS AND RESERVES
49
<PAGE>
The Borrower shall: (a) maintain at all times true and complete
books, records and accounts in which true and correct entries shall be made of
its transactions in accordance with Generally Accepted Accounting Principles
consistently applied and consistent with those applied in the preparation of the
financial statements referred to in Section 8.2; and (b) by means of appropriate
quarterly entries reflected in its accounts and in all financial statements
furnished pursuant to Section 8.2, proper liabilities and reserves for all taxes
and proper reserves for depreciation, renewal and replacement, obsolescence and
amortization of its properties and bad debts, all in accordance with Generally
Accepted Accounting Principles consistently applied as above.
SECTION 8.8 INSPECTION BY LENDER
The Borrower shall allow any representative of Lender to visit
and inspect any of the Mortgaged Property or other properties of the Borrower,
to examine the books of account and other records and files of the Borrower, to
make copies thereof and to discuss the affairs, business, finances and accounts
of the Borrower with its officers and employees, all at such reasonable times
and upon reasonable prior notice and as often as Lender may request.
SECTION 8.9 LOCATION OF COLLATERAL
The Borrower shall keep the Collateral, to the extent applicable,
at its principal place of business or at the Mortgaged Property. In the event
the Borrower intends to maintain stores, warehouses or any other location where
any of the Collateral may be kept other than principal place of business, the
Borrower shall provide Lender with the address of such location or locations and
shall execute and deliver to Lender a UCC-l financing statement covering the
Collateral for filing in any other state before any Collateral is brought into
such other State.
SECTION 8.10 PAY INDEBTEDNESS TO THE LENDER AND PERFORM
OTHER COVENANTS
The Borrower shall: (a) make full and timely payments of the
principal of and interest on the Note and all other indebtedness of the Borrower
to the Lender (including without limitation the Contingent Returns), whether now
existing or hereafter arising; (b) duly comply with all the terms and covenants
contained in each of the instruments and documents given to the Lender pursuant
to this Agreement at the times and places and in the manner set forth herein;
and (c) at all times maintain the liens and security interests provided for
under or pursuant to this Agreement as valid and perfected liens and security
interests on the Real Property intended to be covered thereby.
50
<PAGE>
SECTION 8.11 LITIGATION
The Borrower will promptly notify Lender upon the commencement of
any action, suit, claim, counterclaim or proceeding against or investigation of
the Debtor Parties where the damage claim is in excess of $25,000 or where the
litigation may materially adversely affect the Debtor Parties' business (except
when the alleged liability is fully covered by insurance); and shall provide
Lender with an opinion of counsel concerning the litigation or investigation and
the probable outcome thereof, if requested by Lender.
SECTION 8.12 DEFAULTS OR ASSESSMENTS
The Borrower shall promptly notify Lender in writing of: (a) any
material assessment by any Governmental Authority for unpaid taxes as soon as
the Borrower has knowledge thereof and shall supply Lender with copies of all
notices from the Internal Revenue Service or any other taxing authority; and (b)
any alleged default by the Debtor Parties in the performance of or any material
modification of any of the terms or conditions contained in any agreement,
mortgage, indenture or instrument to which the Debtor Parties are a party or
which is binding upon the Debtor Parties and of any default by the Debtor
Parties in the payment of any of its Indebtedness.
SECTION 8.13 EMPLOYEE BENEFIT PLANS
The Borrower shall establish no employee benefit plans of any
nature without the prior written consent of Lender. Each pension, profit
sharing, or other employee benefit plan at any time maintained by the Borrower
shall be in material compliance with ERISA and all applicable rules and
regulations adopted by regulatory authorities pursuant hereto. The Borrower will
cause to be filed all material reports required to be filed by ERISA, the Code,
and such rules and regulations.
SECTION 8.14 SUBORDINATION OF INDEBTEDNESS
All indebtedness of the Borrower to any officer, director,
shareholder, Subsidiary or Affiliate, whether now existing or hereafter
incurred, shall be and is hereby subordinated to the indebtedness of the
Borrower to the Lender, and any claims by said parties against the Borrower are
subordinated to the indebtedness of the Borrower to the Lender and no such
claims shall be made against the Borrower until the Loan and the Contingent
Returns are paid in full.
51
<PAGE>
SECTION 8.15 CORRESPONDENCE WITH ACCOUNTANTS
The Borrower shall promptly deliver to Lender copies of all
material correspondence between the Debtor Parties and the Debtor Parties's
independent accountants.
SECTION 8.16 ESTOPPEL AFFIDAVITS
The Borrower, within 10 days after written request from Lender,
will furnish a written statement in form satisfactory to Lender, duly
acknowledged: (i) setting forth the unpaid principal balance of, and the
interest and other sums due on, the indebtedness evidenced by the Note and/or
secured by the Mortgage or any of the other Loan Documents; (ii) stating whether
or not any offsets or defenses exist against the payments due under the Note,
the Mortgage or any of the other Loan Documents; (iii) stating the current
maturity date of the Note; (iv) setting forth the amount and for which purpose
any escrow account is being held by Lender; and (v) setting forth such other
information as Lender may reasonably request from time to time.
SECTION 8.17 CHANGE OF NAME, PRINCIPAL PLACE OF BUSINESS,
ETC.
The Borrower shall notify Lender immediately of any change in the
name of any of the Debtor Parties, the principal place of business of the Debtor
Parties, the office where the books and records of the Debtor Parties are kept
or any change in the registered agent of the Debtor Parties for the purpose of
service of process.
SECTION 8.18 ENVIRONMENTAL LAWS
The Borrower shall keep and maintain the Mortgaged Real Property
in compliance in all material respects with all Environmental Laws; promptly
advise the Lender in writing of (a) any and all enforcement, cleanup, removal or
other governmental or regulatory actions instituted, completed or threatened in
writing pursuant to any applicable Environmental Laws, (b) any and all claims
made or threatened in writing by any third party against Borrower or the
Mortgaged Real Property relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials and (c)
discovery by Borrower of any occurrence or condition on any Real Property
adjoining or in the vicinity of the Mortgaged Real Property that could
reasonably be expected to cause the Mortgaged Real Property or any part thereof
to be subject to any restrictions on the ownership, occupancy, transferability
or use of the Mortgaged Real Property under any Environmental Laws.
52
<PAGE>
SECTION 8.19 COMPLIANCE WITH LAWS
The Borrower shall do or cause to be done all acts and things
necessary to effect compliance with all applicable local, state and federal
zoning, land use and building codes and shall do or cause to be done all acts
and things required for the preservation and protection of the Mortgaged
Property such that the Mortgaged Real Property are, at all times, in compliance
with all applicable zoning, land use and building codes. The Borrower shall also
do or cause to be done all acts and things necessary so that the Mortgaged Real
Property shall at all times be in full compliance with all covenants,
restrictions, agreements or instruments affecting the Mortgaged Real Property
and the uses thereof.
SECTION 8.20 PURCHASE OF MATERIALS AND SUPPLIES
In the event Borrower purchases any materials, supplies or
services for the Project from Affiliates, all such items shall be purchased at
cost and written verification of the same shall be provided to Lender.
SECTION 8.21 INDEMNIFICATION
(a) Borrower shall at its own expense, and does hereby agree to,
protect, indemnify, reimburse, defend and hold harmless Lender and its
directors, officers, shareholders, agents, employees attorneys, successors and
assigns from and against any and all liabilities (including strict liability),
losses, suits, proceedings, settlements, judgments, orders, penalties, fines,
liens, assessments, claims, demands, damages, injuries, obligations, costs,
disbursements, expenses or fees, of any kind or nature (including attorneys'
fees and expenses paid or incurred in connection therewith) arising out of or by
reason of (i) an incorrect legal description of the Real Property; (ii) any
action, or inaction of Lender in connection with the Loan Documents, the
Contingent Return Documents or the Mortgaged Property constituting gross
negligence or willful misconduct or a material breach of the Loan Documents;
(iii) the construction of any Improvements; (iv) the use and operation of the
Mortgaged Property; (v) any acts or omissions of Borrower or any other Person
at, on or about the Mortgaged Property regarding the contamination of air, soil,
surface waters or groundwaters over, on or under the Mortgaged Property; (vi)
the presence, whether past, present or future, of any Hazardous Material on, in
or under the Mortgaged Property; (vii) any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or plans
involving the manufacture, processing, distribution, use, transport, handling,
treatment, storage, disposal, cleanup, emission, discharge, seepage, spillage,
leakage, release or threatened release of any Hazardous Material on, in, under
or from the Mortgaged Property, in connection with Borrower's operations on
53
<PAGE>
the Mortgaged Property, or otherwise; or (viii) the acts of any third parties,
including, without limitation, third party claims, except to the extent that any
loss therefrom is caused by the gross
negligence or willful misconduct of Locuments; all of the foregoing regardless
of whether within the control of Lender.
(b) The indemnifications of this Section 8.21 shall survive the
full payment and performance of the Loan and the Contingent Returns.
SECTION 8.22 SOLVENCY
Borrower is and will remain solvent and Borrower shall pay its
debts from its assets as the same shall become due. In connection therewith,
Borrower shall maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations. Neither Borrower nor any constituent party of
Borrower will seek the dissolution or winding up, in whole or in part, of
Borrower, nor will Borrower merge with or be consolidated into any other entity.
SECTION 8.23 SEPARATE ACCOUNTS
Borrower will maintain books and records and bank accounts
separate from those of its Affiliates, including, without limitation,
Transeastern, and any constituent party of Borrower, and Borrower will file its
own tax return. In connection therewith, Borrower shall not commingle the funds
and other assets of Borrower with those of any Affiliate, any Guarantor, any
constituent party of Borrower or any other person. Borrower has and will
maintain its assets in such a manner that it will not be costly or difficult to
segregate, ascertain or identify its individual assets from those of any
constituent party or Borrower, an Affiliate, a Guarantor or any other Person.
ARTICLE IX
BORROWER'S NEGATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof and
until payment in full of the principal of and interest on the Note, and all
other indebtedness to the Lender under this Agreement, unless Lender shall
otherwise consent in writing, it will not, either directly or indirectly, do any
of the following:
SECTION 9.1 TYPE OF BUSINESS
54
<PAGE>
The Borrower will not engage in any business other than the
ownership, development and operation of the Project. In addition, Borrower does
not own and will not own any asset or property other than (a) the Real Property,
and (b) the incidental personal property necessary for the ownership,
construction and operation of the Project.
SECTION 9.2 MORTGAGES, LIENS, ETC.
The Borrower will not create, incur, assume or suffer to exist
any mortgage, pledge, security interest, encumbrance, lien or charge of any kind
upon any of the Borrower's properties or assets of any character, whether owned
at the date hereof or hereafter acquired, or hold or acquire any Real Property
or assets of any character under conditional sales or other title retention
agreements, except:
(a) Mortgages, liens, pledges and security
interests in favor of the Lender;
(b) The Chase Federal Loans subject, however, to
the terms of the Tri-Party Agreement;
(c) (i) Liens arising out of judgments or awards in respect of
which the Borrower shall in good faith be prosecuting an appeal or proceedings
for review and in respect of which the Borrower shall have secured a subsisting
stay of execution pending such appeal or procedures for review, provided the
Borrower shall have set aside on its books adequate reserves with respect to
such judgment or award; (ii) liens for taxes, assessments or governmental
charges or levies, provided payment thereof shall not at the time be required in
accordance with the provisions of Section 8.4; (iii) deposits, liens or pledges
to secure payments of worker's compensation, unemployment insurance, old age
pensions or other social security obligations or the performance of bids,
tenders, leases, contracts (other than contracts for the payment of money),
public or statutory obligations, surety, stay or appeal bonds or other similar
obligations arising in the ordinary course of business; (iv) mechanics',
workmens', repairmens' warehousemans', vendors' or carriers' liens or other
similar liens arising in the ordinary course of business which have been
transferred to bond as required herein; (v) statutory landlords' liens under
leases to which the Borrower is a party; and (vi) zoning restrictions,
easements, license restrictions on the use of Real Property or minor
irregularities relating thereto which do not materially impair the use of such
Real Property in the operation of the business of the Borrower or the value of
such Real Property or the purpose of such business; and
(d) The Permitted Title Exceptions.
55
<PAGE>
SECTION 9.3 COVENANT TO SUBORDINATE
In the event of a prepayment of the Loan in full, Lender agrees
to subordinate the Contingent Return Documents to senior secured financing which
shall not exceed the amount of the outstanding indebtedness of the Loan at the
time the Loan is paid in full and on such other terms and conditions which are
acceptable to Lender.
SECTION 9.4 INDEBTEDNESS
The Borrower will not create, incur, assume or suffer to exist,
contingently or otherwise, any Indebtedness, except:
(a) Indebtedness of the Borrower to the Lender;
(b) Indebtedness pursuant to the Chase Federal Loan
Documents subject, however, to the terms of the Tri-Party Agreement;
(c) The Tract C and E Acquisition Loan and/or the
Construction Loan(s) subject, however, to the terms of Section 2.5 hereof.
(e) Subordinated Indebtedness;
(e) Unsecured current liabilities incurred with
trade creditors relating to the Project in the ordinary course of business other
than those which are for money borrowed or are evidenced by bonds, debentures,
notes or other similar instruments;
(f) Indebtedness (not overdue) secured by
mortgages, liens or security interests permitted by Section 9.2 hereof;
(g) Indebtedness under guarantees or for other
contingent liabilities to the extent permitted by Section 9.5 hereof; or
(h) Liability under operating leases required in
the normal day-to-day operation of the business of the Borrower.
SECTION 9.5 LOANS, INVESTMENTS AND GUARANTEES
The Borrower will not lend or advance money, credit or Real
Property to any Person, or invest in (by capital contribution or otherwise), or
purchase or repurchase the stock or indebtedness, or all or a substantial part
of the assets or properties, of any Person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly or by any instrument
having the effect of assuring any Person's payment or performance or capability)
the indebtedness, performance, obligations, stock or dividends of any Person, or
agree to do any of the foregoing except:
56
<PAGE>
(a) Endorsement of negotiable instruments for
deposit or collection in the ordinary course of business;
(b) Investments in readily marketable, direct
obligations of the Government of the United States of America maturing not more
than one year after the date of the purchase thereof and/or in certificates of
deposit issued by Lender;
(c) Investments representing stock or obligations
issued to the Borrower in settlement of claims against any other Person by
reason of an event of bankruptcy or a composition or readjustment of debt or a
reorganization of any debtor of the Borrower;
(d) Investments representing the indebtedness of
any Person owing as a result of a sale by the Borrower in the ordinary course of
business of tangible personal Real Property no longer required in its business;
or
(e) Travel advances to officers and employees.
(f) Payment of brokerage commission advances for
residential sales which are customary in the construction industry subject,
however, to the prior written approval of Lender.
SECTION 9.6 MERGER, SALE OF ASSETS, DISSOLUTION, ETC.
The Borrower will not enter into any transaction of merger or
consolidation, or transfer, sell, assign, lease or otherwise dispose of (other
than sales of products and services in the ordinary course of business) all or a
substantial part of its properties or assets, or any of its notes or
Receivables, or any assets or properties necessary or desirable for the proper
conduct of its business or any interest in any of the foregoing, or change the
nature of its business, conclude, liquidate or dissolve, or acquire any assets
or business from or Capital Securities of any Person, or agree to do any of the
foregoing.
SECTION 9.7 TRANSFER OF OWNERSHIP INTEREST IN BORROWER AND
MORTGAGED PROPERTY
(a)The Borrower shall not permit the sale or other transfer
of any ownership interest(beneficial or otherwise) in the Borrower.
(b) Except as may otherwise be expressly permitted in this
Agreement, Borrower shall not sell, convey, or transfer or permit to be sold,
conveyed or transferred any interest in the Mortgaged Property or any part
thereof.
57
<PAGE>
SECTION 9.8 DISTRIBUTIONS; RESTRICTED PAYMENTS
The Borrower shall not make or declare or otherwise become
obligated to make (A) any dividend or other distribution, directly or
indirectly, on account of any Capital Securities of the Borrower (except for
annual cash distributions to its shareholder in an aggregate amount or any
Subsidiary (other than dividends and other distributions payable to the
Borrower), (B) any payment on account of the principal of or premium, if any, on
any indebtedness convertible into Capital Securities of the Borrower or any
Subsidiary ( other than any such payment to the Borrower), (C) any payment on
account of any purchase, redemption, retirement, exchange or conversion of any
Capital Securities of the Borrower or any Subsidiary (other than any such
payment to the Borrower), (D) any other payment, loan or advance to a
shareholder of the Borrower or any other Affiliate of the Borrower or Affiliate
of such shareholder (including the Principals) or (E) any forgiveness or release
without adequate consideration by Borrower of any indebtedness or other
obligation owing to Borrower by a Person that is a shareholder of Borrower or an
Affiliate of any such shareholder (including the Principals).
SECTION 9.9 TRANSACTIONS WITH AFFILIATES
The Borrower shall not effect any transaction with any Affiliate
(including the Principals) on a basis less favorable than would at the time be
obtainable for a comparable transaction in an arms-length dealing with an
unrelated third party.
SECTION 9.10 ISSUANCE OR DISPOSITION OF CAPITAL SECURITIES
The Borrower shall not issue any of its Capital Securities or
sell, transfer or otherwise dispose of any Capital Securities of any Subsidiary.
SECTION 9.11 CHANGE IN DOCUMENTS
The Borrower shall not amend, supplement, terminate or otherwise
modify its articles of incorporation or bylaws.
SECTION 9.12 CHANGE OF FISCAL YEAR, ETC.
The Borrower shall not change its fiscal year nor will the
Borrower amend in any respect its entity documents from those in existence on
the date of this Agreement or change its accounting methods or practices, its
depreciation or amortization policy or rates, except as required to comply with
law or with Generally Accepted Accounting Principles.
SECTION 9.13 COVENANT NOT TO COMPETE
58
<PAGE>
From the date hereof and for a period of one (1) year after the
date that Lender sells the Project after acquiring title thereto or the stock of
the Borrower pursuant to an occurrence of an Event of Default (such period, the
"RESTRICTION PERIOD"), neither the Borrower nor any Affiliate of the Borrower or
Affiliate of a shareholder of the Borrower (including the Principals) nor
Affiliate of any of the foregoing (collectively, the "RESTRICTED PARTIES")
shall, directly or indirectly, own, manage, invest or otherwise acquire any
economic stake or interest in, or otherwise engage or participate in any manner
whatsoever (whether as proprietor, partner, shareholder, investor, manager,
owner, officer, director, employee, agent, lender, borrower, guarantor, broker,
investor, independent contractor, consultant, advisor, representative, lessor,
lessee or other participant), or prepare to do any of the foregoing, with or in
any Person or other business enterprise in any form which engages in, directly
or indirectly, any business that is similar to the business as currently
conducted by the Borrower or as the same may be conducted by the Borrower at any
time during the Restriction Period, anywhere within one-half (1/2) mile of the
Real Property. Nothing in this Section 9.13 shall prohibit the Restricted
Parties from owning as a passive investment less than 1% of the outstanding
shares of capital stock in a corporation, which shares are listed on a national
securities exchange or publicly traded in the over-the-counter market. The
Restricted Parties acknowledge and confirm that (i) the length of the
Restriction Period and geographical restrictions contained herein are fair and
reasonable and (ii) the provisions and restrictions set forth in this Section
9.13 are reasonable and necessary for the protection of the legitimate interests
of the Borrower and Lender.
The Restricted Parties acknowledge that the Borrower and/or the
Lender will be irreparably harmed (and damages at law would be an inadequate
remedy) by a breach or threatened breach of the provisions of this Section 9.13.
Therefore, in the event of a breach or threatened breach by any Restricted Party
of any provision of this Section 9.13, the Lender and/or Borrower, as
applicable, shall be entitled, in addition to all other rights, remedies or
damages to which it is entitled, to injunctions restraining such breach and/or
to a decree for specific performance of the provisions of this Section 9.13,
without being required to show any actual damage or to post any bond or other
security. The existence of any claim or cause of action by Borrower and/or
Lender predicated on the provisions of this Section 9.13, shall not constitute a
defense to the enforcement by the Borrower and/or Lender of these covenants. In
the event the Borrower and/or Lender should bring any legal action or other
proceeding for the enforcement of this Section 9.13, the time for calculating
the applicable Restriction Period or terms of any other restriction herein shall
not include the period of time commencing with the filing of legal action or
other proceeding to enforce the terms of
59
<PAGE>
this Section 9.13 through the date of final judgment or final resolution,
including all appeals, if any, of such legal action or other proceeding.
SECTION 9.14 PURCHASE AGREEMENTS. Borrower shall not amend or
otherwise modify or amend any of the existing Purchase Agreements for the sale
of the all or any part of the Real Property, without Lender's consent. In
addition, Borrower shall not enter into any other purchase agreements for all or
any part of the Real Property, without Lender's consent, or thereafter amend or
modify the same, without the Lender's consent.
ARTICLE X
EVENTS OF DEFAULT
The occurrence of any one of more of the following events is a
Default hereunder and the continuance of any such Default beyond the period (if
any) provided below within which such Defaults may be cured shall be an Event of
Default hereunder:
SECTION 10.1 IMMEDIATE ACCELERATION
(A) Any of the Debtor Parties: (a) shall file a
voluntary petition under Title 11 of the United States Code for adjudication as
a bankrupt; (b) shall file an answer seeking reorganization or an arrangement
under any bankruptcy or similar statute of the United States of America or any
subdivision thereof or of any foreign jurisdiction in response to an involuntary
petition; (c) shall consent to the filing of a petition in any such bankruptcy
or reorganization proceeding; (d) shall consent to the appointment of a receiver
or trustee or officer performing similar functions with respect to any
substantial part of its Real Property; (e) shall make a general assignment for
the benefit of its creditors; or (f) shall execute a consent to any other type
of insolvency proceedings (under the Bankruptcy Act or otherwise) or any
informal proceeding for the dissolution or liquidation of, or settlement of,
claims against or winding up of affairs of, the Company or the Partnership; or
(B) The appointment of a receiver or trustee or
officer performing similar functions for any of the Debtor Parties for any of
its assets, or the filing against any of the Debtor Parties of a petition for
adjudication as a bankrupt or insolvent or for reorganization under any
bankruptcy or similar laws of the United States of America or of any state
thereof or of any foreign jurisdiction, or the institution against any of the
Debtor Parties of any other type of insolvency proceeding (under the Bankruptcy
Act or otherwise) or of any formal or informal proceeding for the
60
<PAGE>
dissolution or liquidation, settlement of claims against or winding up of
affairs, of any of the Debtor Parties, and the failure to have such appointment
vacated or such petition or proceeding dismissed within sixty (60) days after
such appointment, filing or institution;
then the credit hereby granted and all obligations to make advances hereunder
shall immediately terminate without notice, and all principal and interest owing
hereunder shall forthwith mature and become due and payable without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived.
SECTION 10.2 DISCRETIONARY ACCELERATION
(a) Default by the Borrower in the payment of any
principal, interest or payment within fifteen (15) days after the same becomes
due to the Lender hereunder or under the Note;
(b) Default in the payment or performance of any
other liability, obligation or covenant of the Borrower to the Lender hereunder,
under the Loan Documents or under any other agreement with the Lender (including
without limitation the Tri-Party Agreement), and continuance thereof for thirty
(30) days after written notice to the Borrower from the Lender;
(c) Default in the performance or observance of any
term, covenant, condition or agreement of any Debtor Party contained in any
Security Document or Loan Document to which such Debtor Party is a party and
continuance thereof for thirty (30) days after written notice to the Borrower
from the Lender;
(d) If, on or after the Closing Date, (i) for any
reason (other than any act on the part of any of the Lender) any Loan Document
ceases to be in full force and effect in any material respect or any of the
Liens created by any Loan Document ceases to be a valid and perfected Lien in
the priority set forth in the Tri- Party Agreement, or (ii) any party to any
Loan Document (other than the Lender) shall assert in writing that any such
document or agreement has ceased to be in full force and effect and Lender shall
have determined that such assertion constitutes an Event of Default;
(e) Any representation, warranty, statement,
certificate, schedule or report made or furnished by any of the Debtor Parties
proves to have been false or erroneous in any material respect at the time of
the making thereof, or to have omitted any substantial liability or claim
against any of the Debtor Parties, or if on the date of execution of this
Agreement there shall have been any materially adverse change in any of the
facts disclosed therein, which matters shall not have been
61
<PAGE>
disclosed to the Lender at or prior to the time of such execution as which
Borrower shall have a period of ten (10) days following written notice to prove
that such matters were previously disclosed to Lender prior to execution of this
Agreement or are not erroneous;
(f) The rendition by any court of a final judgment
against the Borrower in excess of $25,000.00 which shall not be satisfactorily
stayed, discharged, vacated or set aside within thirty (30) days of the making
thereof; or the attachment of the Real Property which has not been released or
provided for to the satisfaction of Lender within thirty (30) days after the
making thereof;
(g) Any litigation or any proceeding which is
pending against any of the Debtor Parties or is threatened (and which is not
covered by adequate insurance as determined by Lender in its reasonable
discretion), the outcome of which would probably seriously affect the continued
operation of the applicable Debtor Party, and the applicable Debtor Party
failing to take corrective measures reasonably satisfactory to Lender within
thirty (30) days after notice from Lender;
(h) Borrower's failure to achieve the sales
projections as set forth in Section 8.6 hereof;
(i) If any Chase Federal Letters of Credit are
drawn upon and are not refunded by the applicable governmental authority or
reimbursed by the Guarantors within forty-five (45) days thereafter;
(j) A default or an event of default under any of
the Guaranty or the Funding Agreement;
(k) A default or an event of default is declared
under any of the Chase Federal Loan Documents and the same is not cured within
any applicable grace period;
(l) Transeastern shall cease to own, directly or
indirectly, 100% of the outstanding ownership interests in the Borrower.
(m) A default or an event of default is declared
under the Tract C and E Acquisition Loan and/or the Construction Loan.
then, upon the occurrence of any such Default and the execution of the
applicable grace period, the Lender, at its option, may terminate the Loan
hereby granted, together with all obligations of Lender hereunder, by written
notice to that effect to the Borrower and may declare (i) all principal and
interest owing hereunder, and (ii) the Contingent Returns, to be mature and be
forthwith due and payable without presentment, demand, protest or further notice
of
62
<PAGE>
any kind, all of which are hereby expressly waived or may elect not to
accelerate the Loan but increase the interest rate under the Note up to the
default rate of interest. Lender acknowledges that in the event Borrower is not
able to cure any of the non-monetary Defaults within the required grace periods
(if any) after diligently attempting to cure same, Borrower may have an
additional time to cure same provided, however, such additional grace period
shall in no event exceed thirty (30) days after expiration of the initial grace
period.
SECTION 10.3 WAIVER OF DEFAULT
Lender at any time may waive any Default or any Event of Default
which shall have occurred and any of its consequences, in which case the parties
hereto shall be restored to their former positions and rights and obligations
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon, and no such waiver shall
be effective unless it is in a written document executed by a duly authorized
officer.
ARTICLE XI
REMEDIES FOR DEFAULT
Upon the occurrence of an Event of Default, Lender shall have the
following remedies:
SECTION 11.1 ACTION FOR ENFORCEMENT
In case any one or more Events of Default shall occur and be
continuing, Lender may proceed to protect and enforce its rights or remedies
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein, in
the Note, in the Contingent Return Mortgage or in any document or instrument
delivered in connection with or pursuant to this Agreement, or to enforce the
payment of the Note, the Contingent Returns or any other legal or equitable
right or remedy.
SECTION 11.2 RIGHTS AND REMEDIES CUMULATIVE
No right or remedy herein conferred upon Lender is intended to be
exclusive of any other right or remedy contained herein, in the Note, Loan
Documents, Contingent Return Documents or in any instrument or document
delivered in connection with or pursuant to this Agreement, and every such right
or remedy shall be cumulative and shall be in addition to every other such right
or remedy contained herein and therein or now or hereafter existing at law or in
equity or by statute or otherwise. In the event of any conflict
63
<PAGE>
among the Loan Documents as to the notice required before resort to any remedy,
the shortest notice provision shall control all others with respect to the
remedy in question (for purposes of this Section only, "without notice" shall be
deemed a notice provision).
SECTION 11.3 RIGHTS AND REMEDIES NOT WAIVED
No course of dealing between the Borrower and the Lender or any
failure or delay on the part of Lender in exercising any rights or remedies
hereunder shall operate as a waiver of any rights or remedies of the Lender and
no single or partial exercise of any rights or remedies hereunder shall operate
as a waiver or preclude the exercise of any other rights or remedies hereunder.
ARTICLE XII
FEES AND PAYMENTS
SECTION 12.1 COMMITMENT FEE
In consideration of the Lender holding itself ready, willing and
able to make the Loan and maintaining available a portion of its loan portfolio
to fund the Loan at the designated interest rate, and in further consideration
of the substantial services which the Lender has rendered, the Borrower shall
have paid to the Lender upon and as a condition of closing the Loan a Commitment
Fee in the aggregate amount of SIXTY THOUSAND AND NO/100 DOLLARS ($60,000.00)
payable as follows:
(i) A non-refundable commitment fee in the amount of $30,000
shall be due and payable to Lender in full upon the Borrower's acceptance of the
Commitment Letter and Lender acknowledges payment of same; and
(ii) A non-refundable commitment fee in the amount of $30,000
shall be due and payable to Lender in full upon the closing of the Loan.
The Commitment Fee described above shall be deemed earned by the
Lender upon issuance of the Commitment Letter and shall be retained by the
Lender as liquidated damages in the event the Borrower is unwilling or unable to
close the Loan for any cause whatsoever, and shall not be applied to any loan
costs or expenses of any kind.
SECTION 12.2 EXPENSE DEPOSIT
The Lender acknowledges receipt from the Borrower of the sum of
Twenty-Five Thousand and No/100 ($25,000.00) Dollars ("Expense
64
<PAGE>
Deposit") to be applied to expenses incurred by the Lender in accordance with
Section 12.3 hereof. These costs are payable at the earlier to occur of Closing
or the termination of the Commitment Letter and will be paid to the extent
available from the Expense Deposit and thereafter from the assets of the
Borrower, Transeastern and the Principals, who, by execution of the Commitment
Letter, agree to be jointly and severally liable for such obligations. If the
Loan closes, Lender shall return any portion of such Expense Deposit which is
not applied as provided above, to the Borrower within 45 days after Closing.
SECTION 12.3 COSTS, TAXES AND ATTORNEYS' FEES
Whether or not the Closing is effectuated and the transactions
contemplated hereby shall be consummated, the Borrower agrees: (a) to pay all
out-of-pocket costs, expenses, disbursements and fees incurred by the Lender in
connection with the origination, preparation, execution and delivery of and any
amendment, supplement or modification to, any of the Loan Documents and any
other documents prepared in connection herewith, and the consummation of the
transactions contemplated hereby and thereby (whether incurred before or after
the Closing), including, without limitation, title search, examination and
insurance charges, UCC searches, judgment and tax lien searches, surveys,
recording fees, charges and taxes, documentary stamps, intangible taxes,
disbursement fees, appraisal fees, attorneys' fees and disbursements of Counsel
to the Lender in connection with the origination and/or the Closing of the Loan;
(b) to pay or reimburse the Lender for all their out-of-pocket (I.E.,
non-overhead) costs and expenses incurred in connection with the administration,
audit and/or enforcement or preservation of any rights under the Loan Documents
and any such other documents; (c) to indemnify and hold the Lender harmless from
any and all recording and filing fees (including all intangible and documentary
stamp taxes) and any and all liabilities with respect to, or resulting from, any
delay in paying stamp, excise, documentary and other similar taxes, if any,
which may be payable or determined to be payable in connection with the
origination, administration, audit, execution and delivery of, or consummation
of, any of the transactions contemplated by, or any amendment, supplement or
modification to, or any waiver or consent under or in respect of, the Loan
Documents and any such other document; and (d) to pay, indemnify and hold the
Lender harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments and suits, costs, expenses or
commissions, including, without limitation, any brokerage claims arising out of
orn any way relating to the Loan and arising out of conduct (or alleged conduct)
of the Borrower (all of the foregoing, collectively, the "Indemnified
Liabilities"). The agreements contained in this Section shall survive repayment
of the Note and all other amounts payable hereunder or under the other Loan
Documents or under the
65
<PAGE>
Contingent Return Documents. Such expenses shall be paid at the Closing, or in a
reasonable time thereafter upon receipt of written invoices, and will be paid to
the extent available from the Expense Deposit and thereafter from the assets of
the Borrower. In the event the Borrower fails to pay such expenses within a
reasonable time, the Lender may pay any such expenses which exceed the Expense
Deposit on the Borrower's behalf and charge the Borrower's account. The Borrower
shall also pay post-closing expenses incurred by the Lender on behalf of the
Borrower, including, but not limited to, additional documentary stamp or
intangible taxes if required, recertification of title expenses and preparation
of documents to terminate the Loan and release the security therefor.
Furthermore, the Borrower shall be liable for post-closing collection expenses,
including, but not limited to, expenses related to the repossession, storage or
sale of the Collateral and to the collection of obligations of the Borrower
hereunder, including reasonable attorneys' fees, including appellate
proceedings, post-judgment proceedings and bankruptcy proceedings. Attorneys'
fees shall include the fees or paraprofessionals such as paralegals,
investigators, etc.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 NOTICES
All notices, consents, requests and demands to or upon the
respective parties hereto to be effective shall be in writing or by telegraph,
telex or telecopy and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand or when deposited
in the mail, postage prepaid, or, in the case of telex, telegraphic or telecopy
notice, when sent, addressed as follows, or to such address or other addresses
as may be hereafter notified by any of the respective parties hereto or any
future holders of the Note:
TO THE BORROWER: Transeastern Pembroke Villages, Inc.
3300 University Drive, 1st Floor
Coral Springs, Florida 33065
Attn: Arthur J. Falcone
Phone: (305) 346-9700
Fax: (305) 753-0351
WITH A COPY TO: John T. Kinsey, Esquire
Two Executive Court
2300 Corporate Blvd, Suite 112
Boca Raton, Florida 33431
Phone: (407) 994-9890
Fax: (407) 994-5952
TO THE GUARANTORS: Arthur J. Falcone
66
<PAGE>
Edward Falcone
Philip Cucci
Transeastern Properties of South Florida,
Inc.
3300 University Drive, 1st Floor
Coral Springs, Florida 33065
Attn: Arthur J. Falcone
Phone: (305) 346-9700
Fax: (305) 753-0351
WITH A COPY TO: John T. Kinsey, Esquire
Two Executive Court
2300 Corporate Blvd, Suite 112
Boca Raton, Florida 33431
Phone: (407) 994-9890
Fax: (407) 994-5952
TO THE LENDER: AMRESCO FUNDING CORPORATION,
1845 Woodall Rodgers Freeway
Suite 1400
Dallas, Texas 75201
Attn: President
Phone: (214) 953-7723
Fax: (214) 953-7756
WITH A COPY TO: AMRESCO FUNDING CORPORATION,
1845 Woodall Rodgers Freeway
Suite 1700
Dallas, Texas 75201
Attn: General Counsel
Phone: (214) 953-7000
Fax: (214) 953-
SECTION 13.2 FURTHER ASSURANCES
At any time and from time to time, upon Lender's request and at
the expense of the Borrower, the Borrower will promptly (and in no event within
more than 10 days) execute and deliver any and all further instruments and
documents and take such further action as Lender may deem reasonable to effect
the purposes of this Agreement and/or any of the other Loan Documents. In
addition, upon request of Lender from time to time, and at the Borrower's sole
cost and expense, the Borrower will promptly (and in no event within more than
10 days) correct any defect which may be discovered in the Note, the Mortgage,
this Agreement or any of the other Loan Documents, and after the execution of
same, the Borrower will make, execute and deliver to Lender and, where
appropriate, will cause to be recorded and/or filed and from time to time
thereafter re-recorded and/or refiled at such time and in such offices and
places as are deemed desirable by Lender, any and all mortgages, instruments of
further assurance, certificates and other documents as may, in the reasonable
opinion of Lender, be necessary or
67
<PAGE>
desirable by Lender in order to effectuate, complete or perfect, or to continue
and preserve: (i) the obligations of the Borrower under the Mortgage, the Note,
this Agreement or any of the other Loan Documents, (ii) the Lien of the Mortgage
as a Lien upon the Mortgaged Real Property, and the lien or security interest of
the Lender on any of the Collateral, whether now owned or hereafter acquired by
the Borrower. Upon any failure by the Borrower to comply with this Section,
Lender may make, execute, record, file, re-record and/or refile any and all
mortgages, instruments, certificates and documents for and in the name of the
Borrower, and the Borrower hereby irrevocably appoints Lender the agent and
attorney-in-fact of the Borrower to do so, which agency and appointment as
attorney-in-fact shall be coupled with an interest.
SECTION 13.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties made hereunder, in the other
Loan Documents or in any document, certificate or statement delivered pursuant
hereto or thereto or in connection herewith or therewith shall survive the
execution and delivery of this Agreement, the Note, the Mortgage and the other
Loan Documents.
SECTION 13.4 ATTORNEYS' FEES
Any and all references to the payment of attorneys' fees and
disbursements herein or in any of the other Loan Documents shall include those
incurred before, during and after litigation, whether in negotiating, drafting,
closing, attempting collection without litigation, investigating and litigating
in all trial and appellate levels, as well as those incurred in any bankruptcy
proceedings and post-judgment proceedings. Attorneys' fees includes fees of
paraprofessionals such as paralegals and investigators, administrative costs and
all other charges whatsoever billed by counsel to the Lender.
SECTION 13.5 APPROVED FORM
Any provision of this Agreement or any of the other Loan
Documents which requires the Borrower or any other party to execute and/or
deliver any agreement, instrument or other written document or material or which
requires the Borrower or any other party to take or perform any act or action,
shall in each case be interpreted, construed and enforced as if it was expressly
provided in such provision that each such agreement, instrument or other written
document is to be in form, substance and content satisfactory to the Lender in
its judgment (reasonably exercised in good faith), and that each such act or
action is to be performed and/or accomplished in a manner fully satisfactory to
the Lender acting in good faith.
68
<PAGE>
SECTION 13.6 SEVERABILITY
Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 13.7 COUNTERPARTS
This Agreement may be executed by one or more of the parties to
this Agreement on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. Confirmation of execution by telex or by telecopied facsimile
signature page shall be binding upon any party so confirming or telecopying. A
set of the copies of this Agreement signed by all the parties hereto shall be
lodged with the Borrower and the Lender.
SECTION 13.8 INTERPRETATION
Each of the parties hereto acknowledges that they have been
represented by their own counsel throughout the negotiations and at the
execution of this Agreement and all of the other Loan Documents and therefore
none of the parties hereto shall, while this Agreement is effective or after its
termination, claim or assert that any provisions of this Agreement or any of the
other Loan Documents should be construed against the drafter of this Agreement
or any of the other Loan Documents.
SECTION 13.9 CONFLICT
If the terms and provisions of any of the other Loan Documents
should conflict with any of the terms and provisions of this Agreement, the
terms and provisions of this Agreement shall be interpreted as being paramount,
superior and controlling.
SECTION 13.10 HEADINGS
The headings of the Articles, Sections, and Subsections of this
Agreement are for convenience of reference only, and are not to be considered a
part hereof, and do not limit or otherwise affect any of the terms hereof.
SECTION 13.11 JURISDICTION AND VENUE
Each of the parties irrevocably and unconditionally: (a) agrees
that any suit, action or other legal proceeding arising out of or relating to
this Agreement may, and to the extent permitted by the courts of the State of
Florida shall be brought in the courts of record of the State of Florida in
Broward County or the
69
<PAGE>
District Court of the United States, Southern District of Florida; (b) consents
to the jurisdiction of each such court in any such suit, action or proceeding;
(c) waives any objection which it may have to the laying of venue of any such
suit, action or proceeding in any of such court; and (d) agrees that service of
any court paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable laws or
court rules in the State of Florida.
SECTION 13.12 AMENDMENTS
The provisions of this Agreement may not be amended,
supplemented, waived or changed orally, but only by a writing signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
SECTION 13.13 WAIVERS
The Borrower waives presentment, demand, protest, notice of
default, nonpayment, partial payments and all other notices and formalities
relating to this Agreement other than notices specifically required hereunder.
The Borrower consents to and waives notice of the granting of indulgences or
extensions of time of payment, the taking or releasing of security, the addition
or release of persons primarily or secondarily liable on or with respect to
liabilities of the Borrower to the Lender, all in such manner and at such time
or times as the Lender may deem advisable. No act or omission of the Lender
shall in any way impair or affect any of the indebtedness or liabilities of the
Borrower to the Lender or rights of the Lender in any security. No delay by the
Lender to exercise any right, power or remedy hereunder or under any Security
Documents, and no indulgence given to the Borrower in case of any default, shall
impair any such right, power or remedy or be construed as having created a
course of dealing or performance contrary to the specific provisions of this
Agreement or as a waiver of any default by the Borrower or any acquiescence
therein or as a violation of any of the terms or provisions of this Agreement.
The Lender shall have the right at all times to enforce the provisions of this
Agreement and all other documents executed in connection herewith in strict
accordance with their terms, notwithstanding any course of dealing or
performance by the Lender in refraining from so doing at any time and
notwithstanding any custom in the banking trade. No course of dealing between
the Borrower and the Lender shall operate as a waiver of any of the Lender'
rights.
SECTION 13.14 PUBLICITY
The Lender is authorized at its discretion to issue news releases
and, at its own expense, to publish "tombstone ads" and other announcements in
newspapers, trade journal and other appropriate media, containing information
about the Loan as may be deemed noteworthy by the Lender, including without
limitation the
70
<PAGE>
legal and trade names of the Borrower and Transeastern, the amount of the Loan
and the name, nature and location of the Collateral. The Borrower shall not
publicize or advertise the name of the Lender as a source of the financing
without the prior express written permission of the Lender.
SECTION 13.15 DEVELOPMENT CONSULTANT
The Lender may designate a consultant to perform various services
on behalf of the Lender both prior to and after Closing, including, without
limitation, review of plans and specifications and all proposed changes to them,
preparation of a "cost take-off" construction analysis, if so desired by the
Lender, the inspection of construction work for conformity with the approved
plans and specifications and the approval of requests for Loan disbursements,
and review and approval of the documents, permits, items and other matters more
particularly described in Section 7 of this Agreement.
SECTION 13.16 GOVERNING LAW; BENEFIT
This Agreement and all rights hereunder shall be governed by the
laws of the State of Florida and of the United States. In the event of conflicts
between Florida and Federal laws, the laws of the United States shall supersede
and control. This Agreement shall bind and inure to the benefit of, and the
terms "Borrower," "Subsidiaries," and "Lender," respectively, as used in this
Agreement shall include, the respective parties and their respective heirs,
personal representatives, participants, successors and assigns. However, the
Borrower may not assign its rights and obligations under this Agreement. The
Lender may assign, in whole or in part, and issue participating interests in and
to this Agreement, the Note and Loan Documents. No consent of the Borrower to
such assignment or participation shall be required. In such event, the Borrower
agrees to attorn to such assignee and to execute such estoppel certificates and
consents thereto and other documentation as may be reasonably required to
facilitate such assignment, provided such consents and documentation do not add
to the obligations of the Borrower.
SECTION 13.17 REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto, including,
without limitation: (a) consents, waivers and modifications which may hereafter
be executed; (b) documents received by the Lender at the closing of the Loan;
and (c) financial statements, appraisals, credit reports, certificates and other
information previously or hereafter furnished to the Lender, may be reproduced
by the Lender by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process and the Lender may destroy any original
document so reproduced. The Borrower agrees and stipulates that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether nor not the original is in
existence and whether or not such reproduction was made by the Lender in the
71
<PAGE>
regular course of business) and that any enlargement, facsimile or further
reproduction of shall like wise be admissible in evidence.
SECTION 13.18 ABSENCE OF CONTROL
In no event shall the Lender' rights hereunder or under any of
the Loan Documents grant the Lender the right to, or be deemed to indicate that,
the Lender are in control of the business, management or properties of the
Borrower, or has power over the daily management functions and operating
decisions made by the Borrower. The Lender are lenders only and shall not be
considered a shareholder, joint venturer or partner of the Borrower.
SECTION 13.19 GOVERNMENTAL REGULATIONS OF THE LENDER
The Lender is subject to various Governmental Authorities and the
laws, rules and regulations enacted, adopted and promulgated by them. To the
extent that the Lender's power and authority to perform the obligations on the
part of the Lender to be performed under this Agreement, now or hereafter, may
be limited or regulated thereby, the Lender is excused from such performance.
SECTION 13.20 ACCRUAL OF INTEREST UNDER THE NOTE
Interest under the Note shall commence to accrue as of the date
of disbursal or wire transfer by the Lender, notwithstanding whether the
Borrower shall receive the benefit of such monies as of such date and even if
such monies are held in escrow pursuant to the terms of any escrow arrangement
or agreement. When monies are disbursed by wire transfer, then such monies shall
be considered advanced at the time of receipt thereof by the receiving financial
institution.
SECTION 13.21 WAIVER OF CONSEQUENTIAL DAMAGES
The Lender and the Debtor Parties hereby waive any and all right
to claim or receive consequential damages in connection with any claim or cause
of action arising out of or related to the Loan.
SECTION 13.22 ENTIRE AGREEMENT
This Agreement and the Loan Documents embody the entire agreement
and understanding between the parties with respect to the matters set forth
herein and supersede and cancel all prior loan applications, expressions of
interest, commitments (including, without limitation, the Commitment Letter),
agreements and understandings, whether oral or written, relating to the subject
matter hereof.
SECTION 13.23 WAIVER OF JURY TRIAL
THE PARTIES HERETO DO HEREBY MUTUALLY AND WILLINGLY WAIVE THE
RIGHT TO A TRIAL BY JURY OF ANY AND ALL CLAIMS MADE AMONG THEM
72
<PAGE>
WHETHER NOW EXISTING OR ARISING IN THE FUTURE, INCLUDING WITHOUT LIMITATION, ANY
AND ALL CLAIMS, DEFENSES, COUNTERCLAIMS, CROSS-CLAIMS, THIRD PARTY CLAIMS AND
INTERVENOR'S CLAIMS WHETHER ARISING FROM OR RELATED TO THE NEGOTIATION,
EXECUTION AND PERFORMANCE OF THE TRANSACTION TO WHICH THIS LOAN AGREEMENT
RELATES.
TRANSEASTERN PEMBROKE VILLAGES,
INC., a Florida Corporation
By:
Name:
Title:
(CORPORATE SEAL)
AMRESCO FUNDING CORPORATION
By:
Name:
Title:
73
<PAGE>
CONSENT AND JOINDER OF GUARANTORS
The undersigned, referred to as one of the "Guarantors" in the
foregoing Loan Agreement, hereby consents thereto and joins therein, for the
purpose of making the representations and warranties set forth therein and
agreeing to the affirmative and negative covenants set forth therein, including,
without limitation, the negative covenant set forth in Section 9.13 therein, and
agrees to be bound by the terms of the foregoing Agreement, insofar as the same
apply to the undersigned.
TRANSEASTERN PROPERTIES OF SOUTH
FLORIDA, INC., a Florida corporation
By:
Name:
Title:
(CORPORATE SEAL)
74
<PAGE>
CONSENT AND JOINDER OF GUARANTORS
The undersigned, referred to as one of the "Guarantors" in the
foregoing Loan Agreement, hereby consents thereto and joins therein, for the
purpose of making the representations and warranties set forth therein and
agreeing to the affirmative and negative covenants set forth therein, including,
without limitation, the negative covenant set forth in Section 9.13 therein, and
agrees to be bound by the terms of the foregoing Agreement, insofar as the same
apply to the undersigned.
By:
Name:
Title:
(CORPORATE SEAL)
75
<PAGE>
SCHEDULE OF EXHIBITS
EXHIBIT 1 Option Property
EXHIBIT 2 Real Property
EXHIBIT 6.16 Subsidiaries
EXHIBIT 6.2 Transeastern Stockholders
EXHIBIT 6.23 Permits and Licenses
76
<PAGE>
PROMISSORY NOTE
$3,000,000 March 29, 1996
Fort Lauderdale, Florida
PAYMENT SCHEDULE AND MATURITY DATE. FOR VALUE RECEIVED, the
undersigned (herein called "MAKER," whether one or more) hereby promises to pay
to the order of AMRESCO FUNDING CORPORATION, a Delaware corporation ("LENDER")
without offset, in immediately available funds in lawful money of the United
States of America, at P.O. BOX 277215, ATLANTA, GEORGIA 30384-7215, the
principal sum of THREE MILLION AND NO/100 DOLLARS ($3,000,000) (or the unpaid
balance of all principal advanced against this Note, if that amount is less),
plus amounts capitalized pursuant to the terms hereof, together with interest on
the unpaid principal balance of this Note from day to day outstanding as
hereinafter provided, as follows:
INTEREST PAYMENTS. Commencing on May 1, 1996 and on the first
(1st) day of each month thereafter until April 1, 1998 (the "MATURITY DATE"),
Maker (i) shall make payments of interest in arrears at the Pay Rate (as defined
in Section 3 hereof), and (ii) may make payments of all or a portion of the
interest earned at the Accrual Rate (as defined in Section 3 hereof) and the
balance of such accrued interest that has not been paid in accordance with this
clause (ii) shall be added to the unpaid principal amount of this note (this
"NOTE") on the first (1st) day of each month and shall thereafter accrue
interest together with the unpaid principal amount of this Note at the Stated
Rate.
PRINCIPAL PAYMENTS. Maker shall apply the sums described in
Section 3.2 of the Loan Agreement (as defined in Paragraph 2 below) to the
payment of the obligations described therein, including, without limitation and
to the extent provided for therein, to the reduction of the unpaid principal
balance of this Note. On the Maturity Date the entire unpaid principal amount of
this Note, together with all unpaid principal and interest shall be due and
payable.
SECURITY; LOAN DOCUMENTS. The loan evidenced by this Note is
further evidenced, secured and governed by that certain Loan Agreement of even
date herewith between Maker and Lender (the "LOAN AGREEMENT" - unless otherwise
defined herein all capitalized terms used in this Note shall have the meanings
assigned to the same in the Loan Agreement). All of the terms, definitions,
conditions and covenants of the Loan Documents are expressly made a part of this
Note by reference in the same manner and with the same effect as if set forth
herein at length, and any holder of this Note is entitled to the benefit of and
remedies provided in the Loan Documents. Subject to the terms and conditions of
this Note and the Loan Documents, Lender shall advance funds to Maker pursuant
to the terms of the Loan Agreement.
DOCUMENTARY STAMPS IN THE AMOUNT OF $________ HAVE BEEN PAID AND PROPER STAMPS
HAVE BEEN AFFIXED TO THE MORTGAGE.
<PAGE>
INTEREST RATE.
Subject to the further provisions of this Section 3, the unpaid
principal balance of this Note from day to day outstanding which is not past due
shall bear interest at a rate per annum equal to the lesser of: ( the Maximum
Rate (hereinafter defined); or ( the Stated Rate (hereinafter defined) computed
on the Annual Basis (hereinafter defined). The term "STATED RATE" as used in
this Note means a fixed rate of twenty percent (20%) per annum. The terms "PAY
RATE" and "ACCRUAL RATE" as used in this Note each means a fixed rate of ten
percent (10%) per annum, thereby totaling the Stated Rate of twenty percent
(20%) per annum.
The "Annual Basis" referred to in this Note means computation of
interest for the actual number of days elapsed and as if each year were composed
of 365 days.
Any principal of, and to the extent permitted by applicable law,
any interest on this Note, and any other sum payable hereunder, which is not
paid when due shall bear interest, from the date due and payable until paid,
payable on demand, at a rate per annum (the "PAST DUE RATE") equal to the lesser
of (i) the Stated Rate plus two and four-tenths percent (2.4%) or (ii) the
Maximum Rate. The term "Maximum Rate" as used in this Note means the maximum
nonusurious rate of interest per annum permitted by the law of the state of
Florida, including to the extent permitted by applicable law, any amendments
thereof hereafter or any new law hereafter coming into effect to the extent a
higher Maximum Rate is permitted thereby. The interest that accrues hereunder at
the Maximum Rate and that remains unpaid shall be added to the unpaid principal
amount of this Note on the first (1st) day of each month and shall thereafter
accrue interest together with the unpaid principal amount of this Note at the
Maximum Rate. The Maximum Rate shall be applied by taking into account all
amounts characterized by applicable law as interest on the debt evidenced by
this Note, so that the aggregate of all interest does not exceed the maximum
nonusurious amount permitted by applicable law (the "MAXIMUM AMOUNT").
PREPAYMENT. Maker may prepay the principal balance of this Note,
in full at any time or in part from time to time, provided that: ( Lender shall
have actually received from Maker at least five (5) business days' prior written
notice of Maker's intent to prepay, of the amount of principal which will be
prepaid (the "PREPAID PRINCIPAL") and of the date on which the prepayment will
be made; and ( each prepayment shall be in the amount of 100% of the Prepaid
Principal, plus accrued unpaid interest thereon to the date of prepayment, plus
any other sums which have become due to Lender under the Loan Documents on or
before the date of prepayment but have not been paid. If this Note is prepaid in
full, any commitment of Lender for further advances shall automatically
terminate. Any partial prepayment shall be applied in accordance with Paragraph
6 below and shall not postpone the due date of any subsequent installments or
the Maturity Date, or change the amount of such installments due, unless Lender
shall otherwise agree in writing.
CERTAIN PROVISIONS REGARDING PAYMENTS. All payments made as
scheduled on this Note and all prepayments shall be applied as provided in the
Loan Agreement. Remittances in payment of any part of the indebtedness shall
not, regardless of any receipt or credit issued therefor, constitute payment
until such amount is actually received by the holder hereof in immediately
2
<PAGE>
available U.S. funds and shall be made and accepted subject to the condition
that any check or draft may be handled for collection in accordance with the
practice of the collecting bank or banks. Acceptance by the holder hereof of any
payment in an amount less than the amount then due on any indebtedness shall be
deemed an acceptance on account only and shall not in any way excuse the
existence of a Default (as defined in Section 6 below).
DEFAULT/ACCELERATION.
It shall be a default ("DEFAULT") under this Note in the event
that: (a) any principal, interest or other amount of money due under this Note
is not paid in full within ten (10) days after the same is due, regardless of
how such amount may have become due; or (b) there shall occur any Event of
Default (as such term is defined in the Loan Agreement). Upon the occurrence of
a Default, the holder hereof shall have the right to declare the unpaid
principal balance and accrued but unpaid interest on this Note at once due and
payable (and upon such acceleration, the same shall be at once due and payable
without presentation, demand, protest or notice of any kind, which are all
hereby waived by Maker, and this Note shall thereafter bear interest at the Past
Due Rate), to foreclose any liens and security interests securing payment hereof
and to exercise any of its other rights, powers and remedies under this Note,
under any other Loan Document, or at law or in equity.
All of the rights, remedies, powers and privileges (together,
"RIGHTS") of the holder hereof provided for in this Note and in any other Loan
Document are cumulative of each other and of any and all other Rights at law or
in equity. The resort to any Right shall not prevent the concurrent or
subsequent employment of any other appropriate Right. No single or partial
exercise of any Right shall exhaust it, or preclude any other or further
exercise thereof, and every Right may be exercised at any time and from time to
time. No failure by the holder hereof to exercise, nor delay in exercising any
Right, including but not limited to the right to accelerate the maturity of this
Note, shall be construed as a waiver of any Default or as a waiver of the Right.
Without limiting the generality of the foregoing provisions, the acceptance by
the holder hereof from time to time of any payment under this Note which is past
due or which is less than the payment in full of all amounts due and payable at
the time of such payment, shall not ( constitute a waiver of or impair or
extinguish the right of the holder hereof to accelerate the maturity of this
Note or to exercise any other Right at the time or at any subsequent time, or
nullify any prior exercise of any such Right, or ( constitute a waiver of the
requirement of punctual payment and performance or a novation in any respect.
If any holder of this Note retains an attorney in connection with
any Default or at the Maturity Date or to collect, enforce or defend this Note
or any other Loan Document in any lawsuit, at trial, or in any appellate,
probate, reorganization, bankruptcy or other proceeding, or if Maker sues any
holder in connection with this Note or any other Loan Document and does not
prevail, then Maker agrees to pay to each such holder, in addition to principal,
interest and any other sums owing to Lender under the Loan Documents, all
reasonable costs and expenses incurred by such holder in trying to collect this
Note or in any such suit or proceeding, including without limitation reasonable
attorneys' fees, paralegals' fees and costs.
3
<PAGE>
CONTROLLING AGREEMENT. All parties to the Loan Documents intend
to comply with applicable usury law. All existing and future agreements
regarding the debt evidenced by this Note are hereby limited and controlled by
the provisions of this Section. In no event (including but not limited to
prepayment, default, demand for payment, or acceleration of maturity) shall the
interest taken, reserved, contracted for, charged or received under this Note or
under any of the other Loan Documents or otherwise, exceed the Maximum Amount.
If, from any possible construction of any document, interest would otherwise be
payable in excess of the Maximum Amount, then IPSO FACTO, such document shall be
reformed and the interest payable reduced to the Maximum Amount, without
necessity of execution of any amendment or new document. If the holder hereof
ever receives interest in an amount which apart from this provision would exceed
the Maximum Amount, the excess shall, without penalty, be refunded to the payor,
or at the option of such payor, be applied to the unpaid principal of this Note
in inverse order of maturity of installments and not to the payment of interest.
The holder hereof does not intend to charge or receive unearned interest on
acceleration. All interest paid or agreed to be paid to the holder hereof shall
be spread throughout the full term (including any renewal or extension) of the
debt so that the amount of interest does not exceed the Maximum Amount. The
provisions of this Section 8 are further supplemented by the provisions of
Section 3.7 of the Loan Agreement.
GENERAL PROVISIONS.
Time is of the essence hereunder. If more than one person or
entity executes this Note as Maker, all of said parties shall be jointly and
severally liable for payment of the indebtedness evidenced hereby. Maker and all
sureties, endorsers, guarantors and any other party now or hereafter liable for
the payment of this Note in whole or in part, hereby severally ( waive demand,
presentment for payment, notice of dishonor and of nonpayment, protest, notice
of protest, notice of intent to accelerate, notice of acceleration and all other
notices (except any notices which are specifically required by this Note or any
other Loan Document), filing of suit and diligence in collecting this Note or
enforcing any of the security therefor; ( agree to any substitution,
subordination, exchange or release of any such security or the release of any
party primarily or secondarily liable hereon; ( agree that the holder hereof
shall not be required first to institute suit or exhaust its remedies hereon
against Maker or others liable or to become liable hereon or to perfect or
enforce its rights against them or any security therefor; and ( consent to any
extensions or postponements of time of payment of this Note for any period or
periods of time and to any partial payments, before or after maturity, and to
any other indulgences with respect hereto, without notice thereof or further
consent of Maker or any guarantors to any of them.
A determination that any provision of this Note is unenforceable
or invalid shall not affect the enforceability or validity of any other
provision and the determination that the application of any provision of this
Note to any person or circumstance is illegal or unenforceable shall not affect
the enforceability or validity of such provision as it may apply to other
persons or circumstances. The remaining provisions of this Note shall remain
operative and in full force and effect and shall in no way be affected
prejudiced, or disturbed thereby. This Note may not be amended except in a
writing specifically intended for the purpose and executed by the party against
whom enforcement of the amendment is sought. In the event any provisions of this
Note are inconsistent with the provisions of the Loan Documents, or any other
agreements or documents
4
<PAGE>
executed in connection with this Note, this Note shall control. The holder of
this Note may, from time to time, sell or offer to sell the loan evidenced by
this Note, or interests therein, to one or more assignees or participants and is
hereby authorized to disseminate any information it has pertaining to the loan
evidenced by this Note, including, without limitation, any security for this
Note and credit information on Maker, any of its principals and any guarantor of
this Note, to any such assignee or participant or prospective assignee or
prospective participant, and to the extent, if any, specified in any such
assignment or participation, such assignee(s) or participant(s) shall have the
rights and benefits with respect to this Note and the other Loan Documents as
such person(s) would have if such person(s) were Lender hereunder. Maker
warrants and represents to Lender and all other holders of this Note that the
loan evidenced by this Note is and will be for business or commercial purposes
and not primarily for personal, family, or household use. The terms, provisions,
covenants and conditions hereof shall be binding upon Maker and the heitives,
successors and assigns of Maker. Captions and headings in this Note are for
convenience only and shall be disregarded in construing it. The pronouns used in
this instrument shall be construed as masculine, feminine or neuter as the
occasion may require. Use of the singular includes the plural, and vice versa.
Any reference herein to a day or business day shall be deemed to refer to a
banking day which shall be a day on which Lender is open for the transaction of
business, excluding any national holidays, and any performance which would
otherwise be required on a day other than a banking day shall be timely
performed in such instance, if performed on the next succeeding banking day.
Notwithstanding such timely performance, interest shall continue to accrue
hereunder until such payment or performance has been made.
SUBMISSION TO JURISDICTION. Maker irrevocably and
unconditionally: (a) agrees that any suit, action, or other legal proceeding
arising out of or relating to this Note may be brought, at the option of the
Lender, in a court of record of the STATE OF FLORIDA IN BROWARD COUNTY, IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA, or in any
other court of competent jurisdiction; (b) consents to the jurisdiction of each
such court in any such suit, action, or proceeding; (c) waives any objection
which it may have to the laying of venue of any such suit, action, or proceeding
in any of such courts; and (d) agrees that service of any court paper may be
effected on Maker as may be provided under applicable laws or court rules in
said State. Maker hereby irrevocably appoints John Kinsey, whose address is Two
Executive Court, 2300 Corporate Boulevard, Suite 112, Boca Raton, Florida 33431,
as agent for the service of process for the purposes of any purported
controversy or cause of action arising out of this Note or any Loan Document.
CONFLICT OF LAW. This Note shall be construed, interpreted,
enforced and governed by and in accordance with the laws of the STATE OF FLORIDA
(excluding the principles thereof governing conflicts of law).
FURTHER ASSURANCE. Maker agrees, upon the written request of
Lender, to execute and deliver to Lender from time to time any additional
instruments or documents reasonably considered necessary by Lender or its
counsel to cause this Note to be, become or remain valid and effective in
accordance with its terms.
WAIVER OF TRIAL BY JURY. TO THE EXTENT ANY LITIGATION BETWEEN
LENDER AND MAKER MAY ARISE IN CONNECTION WITH THIS NOTE, LENDER
5
<PAGE>
AND MAKER KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT
EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR
COUNTERCLAIM BASED ON THIS NOTE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS
NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR LENDER ACCEPTING THIS NOTE FROM MAKER AND FOR MAKER GIVING THIS NOTE TO
LENDER.
IN WITNESS WHEREOF, Maker has duly executed this Note as of the date
first above written.
MAKER:
TRANSEASTERN PEMBROKE
VILLAGES, INC., a Florida corporation
By:____________________________
Name:_______________________
Title: President
6
<PAGE>
STATE OF FLORIDA )
) ss.:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this _____
day of March, 1996, by , as of TRANSEASTERN PEMBROKE VILLAGES, INC., a Florida
corporation, on behalf of the corporation. He/she is personally known to me or
has produced a driver's license as identification.
Print or Stamp Name:
Notary Public, State of Florida at Large
Commission No.:
My Commission Expires:
7
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT"), dated the 29th day of
March, 1996, by TRANSEASTERN PEMBROKE VILLAGES, INC., a Florida corporation,
having a place of business at 3300 University Drive, Suite 1, Coral Springs, FL
33065 ("DEBTOR") in favor of AMRESCO FUNDING CORPORATION, a Delaware
corporation, having a place of business at 1845 Woodall Rodgers Freeway, Dallas,
Texas 75201 ("SECURED PARTY").
WHEREAS, Secured Party and Debtor have entered into that certain Loan
Agreement of even date herewith (the "LOAN AGREEMENT"). Unless otherwise defined
herein, all capitalized terms used herein shall have the meanings assigned to
the same in the Loan Agreement.
WHEREAS, Secured Party will lend and Debtor will borrow the sum of
THREE MILLION AND NO/100 DOLLARS ($3,000,000.00) (the "LOAN"), evidenced by a
certain Promissory Note (the "NOTE") executed and delivered by Debtor to Secured
Party of even date herewith; and
WHEREAS, as security for the Note, Debtor, on even date herewith,
granted Secured Party the Mortgage on certain real property owned by Debtor and
located in Broward County, Florida (the "PROPERTY"), as more particularly
described in EXHIBIT "A" attached hereto and incorporated herein; and
WHEREAS, in accordance with the terms of the Loan Agreement, and to
further secure the Note and other Loan Documents, but excluding the Contingent
Returns, Debtor hereby grants to Secured Party a security interest in certain of
the assets of the Debtor now or hereinafter located on the Property, as
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the
covenants hereinafter set forth, the parties hereto agree as follows:
SECTION L. CREATION OF SECURITY INTEREST.
Debtor hereby grants to Secured Party a security interest in the
following described property:
(a) All of Debtor's inventory, of whatever type or
description, wherever located and whether now owned or hereafter acquired;
(b) All of Debtor's accounts, which include, but are not
limited to, all notes receivable, accounts receivable, beach club dues,
membership fees, and all other forms of customer obligations now existing and
which may at any time hereafter come into existence;
(c) All of Debtor's vehicles, equipment, machinery,
furniture, fixtures and other items of personal property, whether now or
hereafter acquired;
(d) All of Debtor's permits, licenses, and other
governmental approvals;
<PAGE>
(e) Debtor's business on an ongoing basis, together with
all goodwill of the business, and all of Debtor's customer lists, routes, price
lists, patents, trademarks, service marks, trade names, trade secrets and other
proprietary information;
(f) All of Debtor's cash, certificates of deposit,
securities, instruments and general intangibles;
(g) The right to all insurance proceeds of all insurance
covering the Collateral as hereinafter defined;
(h) All proceeds, products, replacements, additions,
substitutions and accessions of and to all of the foregoing; and
(i) All personal property of Debtor, whether now or
hereafter existing or now owned or hereafter acquired, of every kind and
description, tangible or intangible, now or hereafter in the possession, custody
or control of Secured Party, now or hereafter existing.
Paragraphs (a) through (i) are collectively herein referred to as the
"COLLATERAL".
SECTION 2. OBLIGATIONS SECURED.
Such security interest shall secure the Note and the payment and
performance of any and all indebtedness, obligations and liabilities of any kind
of Debtor to Secured Party and also to others to the extent of their
participations granted to or interests therein created or acquired for them by
Secured Party, now or hereafter existing, arising directly between Debtor and
Secured Party or acquired outright, conditionally or as collateral security from
another by Secured Party, absolute or contingent, joint or several, secured or
unsecured, due or not due, contractual or tortious, liquidated or unliquidated,
arising by operation of law or otherwise, direct or indirect, including, but
without limiting the generality of the foregoing, indebtedness, obligations or
liabilities of Debtor as a member of any partnership, syndicate, association or
other group, to Secured Party, and whether incurred by Debtor as principal,
surety, indorser, guarantor, accommodation party or otherwise, provided,
however, that the foregoing shall exclude all obligations of Borrower arising
from the Contingent Returns which are secured by a separate security agreement
(all of the foregoing matters are collectively referred to as the
"OBLIGATIONS").
SECTION 3.DEBTOR'S COVENANTS, REPRESENTATIONS AND WARRANTIES.
Debtor covenants, represents and warrants that:
(a) Debtor is the owner of the Collateral free from any
adverse lien, security interest, or encumbrance, other than the security
interest granted hereby and the Permitted Title Exceptions.
- 2 -
<PAGE>
(b) Debtor will defend the Collateral against all claims
and demands of all persons at any time claiming the same or any interest
therein.
(c) None of the Collateral shall be subject to a purchase
money security interest other than that of Secured Party or otherwise permitted
under the Loan Agreement.
(d) The Collateral is and shall be kept at the Property, or
at Debtor's principal place of business, where Secured Party may inspect it at
any reasonable time. Debtor shall not remove the Collateral from said location
without the prior written consent of Secured Party. The Collateral will not be
allowed to be wasted, misused or abused or to deteriorate, except for ordinary
wear and tear, and will not be used in violation of any law, ordinance or
regulation of any governmental authority.
(e) The Collateral shall be insured with such carriers and
in such amounts and against such risks as shall be reasonably satisfactory to
Secured Party, with policies payable to Secured Party as its interest may
appear. All policies of insurance shall provide for thirty (30) days' prior
written notice of cancellation, modification, termination or expiration to
Secured Party, and Secured Party shall be furnished with duplicate policies or
other evidence of compliance with the foregoing insurance provisions.
(f) Debtor will pay, when due, all taxes and assessments
upon the Collateral or its operation or use.
(g) At its option, and without any obligation to do so,
Secured Party may discharge or pay any taxes, liens, security interests or other
encumbrances at any time levied or placed on or against the Collateral or
Debtor, and may pay for insurance on the Collateral, and may pay for the
Collateral's maintenance and preservation. Debtor agrees to reimburse Secured
Party on demand for any such payment made or expense incurred pursuant to the
foregoing authorizations or, at Secured Party's option, any payment made by
Secured Party may be added to the balance of the liability then owing.
(h) The Collateral will not, without the prior written
consent of Secured Party, be sold, leased, transferred, disposed of or
substantially modified except for the sale, replacement or other disposition of
the Collateral in the ordinary course of Debtor's business.
(i) Debtor hereby authorizes Secured Party to file such
financing statements relating to the Collateral without Debtor's signature
thereon, as Secured Party may deem appropriate. Debtor shall also execute from
time to time, along or with Secured Party, any financing statements or other
documents, and do such other act or acts considered by Secured Party to be
necessary or desirable to perfect or protect the security interest hereby
created, and shall pay all costs and expenses (including, without limitation,
reasonable fees and expenses of counsel and filing fees) related to the
preparation and filing of any financing statements, continuation statements or
other documents related to the perfection or protection of the security interest
hereby created.
- 3 -
<PAGE>
SECTION 4. RIGHTS OF SECURED PARTY PRIOR TO DEFAULT.
(a) Notwithstanding any other part of this Agreement,
Secured Party may enter upon the Property or such other of Debtor's premises, at
any reasonable time, to inspect Debtor's books and records pertaining to the
Collateral or its proceeds, and Debtor shall assist Secured Party in whatever
way necessary to make any inspection.
(b) Debtor hereby agrees that upon five (5) days' written
notice from Secured Party, it will do any or all of the following:
(l) deliver to Secured Party lists or copies of
all accounts, which are proceeds of Debtor's Collateral, promptly after they
arise; and/or
(2) join with Secured Party, at its request, in
executing financing statements and pay the cost of filing the same wherever
Secured Party deems, and will do, make, execute and deliver all such additional
and further acts, things, deeds, assurances and instruments as Secured Party may
require to completely vest in it and assure to it its rights hereunder in and to
the Collateral and the proceeds thereof and will pay all out-of-pocket expenses,
including attorneys' fees and disbursements including appellate, bankruptcy and
post judgment proceedings, incurred or expended by Secured Party in connection
with this Agreement and other agreements relating to the Collateral, the
enforcement of any of the obligations or the administration, preservation or
protection of or realization upon the Collateral or any part thereof.
SECTION 5. RIGHTS OF DEBTOR PRIOR TO DEFAULT.
Until an Event of Default shall have occurred or as otherwise
provided herein, Debtor may use the Collateral in any lawful manner not
inconsistent with this Agreement and with the terms of insurance thereon.
SECTION 6. EVENTS OF DEFAULT.
Debtor shall be in default under this Security Agreement upon (a) the
occurrence of an Event of Default under the Loan Agreement; or (b) loss, theft,
substantial change or destruction to a substantial portion of the Collateral
unless replaced forthwith or covered by insurance.
Upon the happening of any of the foregoing Events of Default, the
Obligations shall become and be immediately due and payable. Debtor expressly
waives any presentment, demand, protest or other notice of any kind.
SECTION 7.SECURED PARTY'S REMEDIES AND ADDITIONAL RIGHTS AFTER
DEFAULT.
Upon the occurrence of an Event of Default, Secured Party shall have
the rights and remedies of a secured party under the Florida Uniform Commercial
Code or any other applicable law.
- 4 -
<PAGE>
Without limiting the generality of the foregoing, Secured Party may exercise the
following rights and remedies:
(a) Secured Party may peaceably, or by its own means or
with judicial assistance by injunction or otherwise, enter the Property or such
other of Debtor's premises and take possession of the Collateral, or render it
unusable, or dispose of the Collateral on the Property, and Debtor will not
resist or interfere with such action;
(b) Secured Party may with judicial assistance by
injunction, or otherwise, require Debtor, at Debtor's expense, to assemble all
or any part of the Collateral and make it available to Secured Party at any
place designated by Secured Party. Debtor hereby agrees that any place
designated by Secured Party within Broward County, Florida, is a place
reasonably convenient to Debtor to assemble such Collateral;
(c) Debtor hereby agrees that a notice to Debtor, at least
five (5) days before the time of any intended sale or of the time after which
any public or private sale or other disposition of the Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition;
(d) In the event of sale or other disposition of any of the
Collateral, Secured Party may apply the proceeds of any such sale or disposition
to the satisfaction of its reasonable attorneys' fees, legal expenses, and other
costs and expenses incurred in connection with its taking, retaking, holding,
preparing for sale and selling of the Collateral;
(e) Without precluding any other methods of sale, the sale
of Collateral shall have been made in commercially reasonable manner if
conducted in conformity with reasonable commercial practices but, in any event,
Secured Party may sell on such terms as it may choose, without assuming any
credit risk and without any obligation to advertise or give notice of any kind;
(f) The Collateral need not be present at any public or
private sale or in view of the purchaser or purchasers, and title shall pass
upon such sale wherever the property or any part thereof is located with like
effect as though all the property were present and in the possession of the
person conducting the sale and where physically delivered to the purchaser or
purchasers; Secured Party may bid for and purchase at any public or private sale
the Collateral offered for sale or any part thereof, and by such purchase, shall
become the owner thereof;
(g) In the case of the exercise of any of the rights or
remedies of Secured Party hereunder, all Collateral, and other property or
security given to secure the Obligations, may be offered for sale for one total
price, and the proceeds of such sale accounted for in one account without
distinction between items of security or without assigning to them any
proportion of the proceeds of such sale. Debtor, insofar as it legally may do
so, hereby waives the application of any doctrine of marshaling. At the option
of Secured Party, the Collateral, or such other property or security for the
Obligations, may be offered for sale separately at different times and/or
locations.
- 5 -
<PAGE>
No such separate sale shall preclude subsequent sales of the Collateral or the
exercise by Secured Party of any other right or remedy hereunder;
(h) Secured Party may deduct from the gross proceeds of any
public or private sale the expenses incurred by Secured Party in connection
therewith, including reasonable attorneys' fees and brokers' commissions, if
any, and the net proceeds then remaining shall be applied first to the
satisfaction of the amount owed to Secured Party by Debtor and any amount then
remaining shall be returned to Debtor; and
(i) If the proceeds from the sale of the Collateral are not
sufficient to satisfy the indebtedness of Debtor to Secured Party, Secured Party
may proceed against Debtor for any deficiency.
SECTION 8. MISCELLANEOUS.
(a) No failure on the part of Secured Party to exercise,
and no delay in exercising any right or remedy hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise by Secured Party of any
right or remedy hereunder preclude any other or future exercise thereof, or the
exercise of any other right or remedy.
(b) This Security Agreement and the rights and obligations
of the parties hereunder shall be construed and interpreted in accordance with
the laws of the STATE OF FLORIDA without regard for its conflict of laws
doctrine.
(c) In the event of a conflict between the terms and
conditions of this Security Agreement and the Note, the Mortgage, or the Loan
Agreement, then, and in that event occurring, the terms and conditions of the
Note, the Mortgage, or the Loan Agreement shall prevail.
(d) The terms of this Security Agreement shall be binding
upon Debtor and its successors and permitted assigns and shall inure to the
benefit of Secured Party and its heirs, executors, administrators, personal
representatives, successors and assigns.
(e) This Security Agreement may not be changed orally, but
only by an instrument in writing and signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
SECTION 9. WAIVER OF JURY TRIAL.
THE PARTIES HERETO MUTUALLY AND WILLINGLY WAIVE THE RIGHT TO A TRIAL
BY JURY OF ANY AND ALL CLAIMS MADE BETWEEN THEM WHETHER NOW EXISTING OR ARISING
IN THE FUTURE, INCLUDING WITHOUT LIMITATION, ANY AND ALL CLAIMS, DEFENSES,
COUNTERCLAIMS, CROSS CLAIMS, THIRD PARTY CLAIMS AND INTERVENOR'S CLAIMS WHETHER
ARISING FROM OR
- 6 -
<PAGE>
RELATED TO THE NEGOTIATION, EXECUTION AND PERFORMANCE OF THE TRANSACTIONS TO
WHICH THIS DOCUMENT RELATES.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
DEBTOR:
TRANSEASTERN PEMBROKE
VILLAGES, INC., a Florida corporation
By:
Name:
Title:
(CORPORATE SEAL)
SECURED PARTY:
AMRESCO FUNDING CORPORATION,
a Delaware corporation
By:
Name:
Title:
(CORPORATE SEAL)
- 7 -
<PAGE>
STATE OF FLORIDA )
) ss.:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this 29th day of
March, 1996, by _______________________ , as _________________ of TRANSEASTERN
PEMBROKE VILLAGES, INC., a Florida corporation, on behalf of the corporation.
He/she is personally known to me or has produced a driver's license as
identification.
Print or Stamp Name: ________________________
Notary Public, State of Florida at Large
Commission No.:
My Commission Expires:
STATE OF )
) ss.:
COUNTY OF )
The foregoing instrument was acknowledged before me this 29th day of
March, 1996, by __________________________ , as _______________________ of
AMRESCO FUNDING CORPORATION, a Delaware corporation, on behalf of the
corporation. He/she is personally known to me or has produced a driver's license
as identification.
Print or Stamp Name: ________________________
Notary Public, State of at Large
Commission No.:
My Commission Expires:
- 8 -
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "AGREEMENT"), dated the 29th day of
March, 1996, by TRANSEASTERN PEMBROKE VILLAGES, INC., a Florida corporation,
having a place of business at 3300 University Drive, Suite 1, Coral Springs, FL
33065 ("DEBTOR") in favor of AMRESCO FUNDING CORPORATION, a Delaware
corporation, having a place of business at 1845 Woodall Rodgers Freeway, Dallas,
Texas 75201 ("SECURED PARTY").
WHEREAS, Secured Party and Debtor have entered into that certain Loan
Agreement of even date herewith (the "LOAN AGREEMENT"). Unless otherwise defined
herein, all capitalized terms used herein shall have the meanings assigned to
the same in the Loan Agreement.
WHEREAS, Secured Party will lend and Debtor will borrow the sum of
THREE MILLION AND NO/100 DOLLARS ($3,000,000.00) (the "LOAN"), evidenced by a
certain Promissory Note (the "NOTE") executed and delivered by Debtor to Secured
Party of even date herewith; and
WHEREAS, as security for the Note, Debtor, on even date herewith,
granted Secured Party the Mortgage on certain real property owned by Debtor and
located in Broward County, Florida (the "PROPERTY"), as more particularly
described in EXHIBIT "A" attached hereto and incorporated herein; and
WHEREAS, in accordance with the terms of the Loan Agreement, and to
further secure the Note and other Loan Documents, but excluding the Contingent
Returns, Debtor hereby grants to Secured Party a security interest in certain of
the assets of the Debtor now or hereinafter located on the Property, as
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the
covenants hereinafter set forth, the parties hereto agree as follows:
SECTION L. CREATION OF SECURITY INTEREST.
Debtor hereby grants to Secured Party a security interest in the
following described property:
(a) All of Debtor's inventory, of whatever type or
description, wherever located and whether now owned or hereafter acquired;
(b) All of Debtor's accounts, which include, but are not
limited to, all notes receivable, accounts receivable, beach club dues,
membership fees, and all other forms of customer obligations now existing and
which may at any time hereafter come into existence;
(c) All of Debtor's vehicles, equipment, machinery,
furniture, fixtures and other items of personal property, whether now or
hereafter acquired;
(d) All of Debtor's permits, licenses, and other
governmental approvals;
<PAGE>
(e) Debtor's business on an ongoing basis, together with
all goodwill of the business, and all of Debtor's customer lists, routes, price
lists, patents, trademarks, service marks, trade names, trade secrets and other
proprietary information;
(f) All of Debtor's cash, certificates of deposit,
securities, instruments and general intangibles;
(g) The right to all insurance proceeds of all insurance
covering the Collateral as hereinafter defined;
(h) All proceeds, products, replacements, additions,
substitutions and accessions of and to all of the foregoing; and
(i) All personal property of Debtor, whether now or
hereafter existing or now owned or hereafter acquired, of every kind and
description, tangible or intangible, now or hereafter in the possession, custody
or control of Secured Party, now or hereafter existing.
Paragraphs (a) through (i) are collectively herein referred to as the
"COLLATERAL".
SECTION 2. OBLIGATIONS SECURED.
Such security interest shall secure the Note and the payment and
performance of any and all indebtedness, obligations and liabilities of any kind
of Debtor to Secured Party and also to others to the extent of their
participations granted to or interests therein created or acquired for them by
Secured Party, now or hereafter existing, arising directly between Debtor and
Secured Party or acquired outright, conditionally or as collateral security from
another by Secured Party, absolute or contingent, joint or several, secured or
unsecured, due or not due, contractual or tortious, liquidated or unliquidated,
arising by operation of law or otherwise, direct or indirect, including, but
without limiting the generality of the foregoing, indebtedness, obligations or
liabilities of Debtor as a member of any partnership, syndicate, association or
other group, to Secured Party, and whether incurred by Debtor as principal,
surety, indorser, guarantor, accommodation party or otherwise, provided,
however, that the foregoing shall exclude all obligations of Borrower arising
from the Contingent Returns which are secured by a separate security agreement
(all of the foregoing matters are collectively referred to as the
"OBLIGATIONS").
SECTION 3.DEBTOR'S COVENANTS, REPRESENTATIONS AND WARRANTIES.
Debtor covenants, represents and warrants that:
(a) Debtor is the owner of the Collateral free from any
adverse lien, security interest, or encumbrance, other than the security
interest granted hereby and the Permitted Title Exceptions.
- 2 -
<PAGE>
(b) Debtor will defend the Collateral against all claims
and demands of all persons at any time claiming the same or any interest
therein.
(c) None of the Collateral shall be subject to a purchase
money security interest other than that of Secured Party or otherwise permitted
under the Loan Agreement.
(d) The Collateral is and shall be kept at the Property, or
at Debtor's principal place of business, where Secured Party may inspect it at
any reasonable time. Debtor shall not remove the Collateral from said location
without the prior written consent of Secured Party. The Collateral will not be
allowed to be wasted, misused or abused or to deteriorate, except for ordinary
wear and tear, and will not be used in violation of any law, ordinance or
regulation of any governmental authority.
(e) The Collateral shall be insured with such carriers and
in such amounts and against such risks as shall be reasonably satisfactory to
Secured Party, with policies payable to Secured Party as its interest may
appear. All policies of insurance shall provide for thirty (30) days' prior
written notice of cancellation, modification, termination or expiration to
Secured Party, and Secured Party shall be furnished with duplicate policies or
other evidence of compliance with the foregoing insurance provisions.
(f) Debtor will pay, when due, all taxes and assessments
upon the Collateral or its operation or use.
(g) At its option, and without any obligation to do so,
Secured Party may discharge or pay any taxes, liens, security interests or other
encumbrances at any time levied or placed on or against the Collateral or
Debtor, and may pay for insurance on the Collateral, and may pay for the
Collateral's maintenance and preservation. Debtor agrees to reimburse Secured
Party on demand for any such payment made or expense incurred pursuant to the
foregoing authorizations or, at Secured Party's option, any payment made by
Secured Party may be added to the balance of the liability then owing.
(h) The Collateral will not, without the prior written
consent of Secured Party, be sold, leased, transferred, disposed of or
substantially modified except for the sale, replacement or other disposition of
the Collateral in the ordinary course of Debtor's business.
(i) Debtor hereby authorizes Secured Party to file such
financing statements relating to the Collateral without Debtor's signature
thereon, as Secured Party may deem appropriate. Debtor shall also execute from
time to time, along or with Secured Party, any financing statements or other
documents, and do such other act or acts considered by Secured Party to be
necessary or desirable to perfect or protect the security interest hereby
created, and shall pay all costs and expenses (including, without limitation,
reasonable fees and expenses of counsel and filing fees) related to the
preparation and filing of any financing statements, continuation statements or
other documents related to the perfection or protection of the security interest
hereby created.
- 3 -
<PAGE>
SECTION 4. RIGHTS OF SECURED PARTY PRIOR TO DEFAULT.
(a) Notwithstanding any other part of this Agreement,
Secured Party may enter upon the Property or such other of Debtor's premises, at
any reasonable time, to inspect Debtor's books and records pertaining to the
Collateral or its proceeds, and Debtor shall assist Secured Party in whatever
way necessary to make any inspection.
(b) Debtor hereby agrees that upon five (5) days' written
notice from Secured Party, it will do any or all of the following:
(l) deliver to Secured Party lists or copies of
all accounts, which are proceeds of Debtor's Collateral, promptly after they
arise; and/or
(2) join with Secured Party, at its request, in
executing financing statements and pay the cost of filing the same wherever
Secured Party deems, and will do, make, execute and deliver all such additional
and further acts, things, deeds, assurances and instruments as Secured Party may
require to completely vest in it and assure to it its rights hereunder in and to
the Collateral and the proceeds thereof and will pay all out-of-pocket expenses,
including attorneys' fees and disbursements including appellate, bankruptcy and
post judgment proceedings, incurred or expended by Secured Party in connection
with this Agreement and other agreements relating to the Collateral, the
enforcement of any of the obligations or the administration, preservation or
protection of or realization upon the Collateral or any part thereof.
SECTION 5. RIGHTS OF DEBTOR PRIOR TO DEFAULT.
Until an Event of Default shall have occurred or as otherwise
provided herein, Debtor may use the Collateral in any lawful manner not
inconsistent with this Agreement and with the terms of insurance thereon.
SECTION 6. EVENTS OF DEFAULT.
Debtor shall be in default under this Security Agreement upon (a) the
occurrence of an Event of Default under the Loan Agreement; or (b) loss, theft,
substantial change or destruction to a substantial portion of the Collateral
unless replaced forthwith or covered by insurance.
Upon the happening of any of the foregoing Events of Default, the
Obligations shall become and be immediately due and payable. Debtor expressly
waives any presentment, demand, protest or other notice of any kind.
SECTION 7.SECURED PARTY'S REMEDIES AND ADDITIONAL RIGHTS AFTER
DEFAULT.
Upon the occurrence of an Event of Default, Secured Party shall have
the rights and remedies of a secured party under the Florida Uniform Commercial
Code or any other applicable law.
- 4 -
<PAGE>
Without limiting the generality of the foregoing, Secured Party may exercise the
following rights and remedies:
(a) Secured Party may peaceably, or by its own means or
with judicial assistance by injunction or otherwise, enter the Property or such
other of Debtor's premises and take possession of the Collateral, or render it
unusable, or dispose of the Collateral on the Property, and Debtor will not
resist or interfere with such action;
(b) Secured Party may with judicial assistance by
injunction, or otherwise, require Debtor, at Debtor's expense, to assemble all
or any part of the Collateral and make it available to Secured Party at any
place designated by Secured Party. Debtor hereby agrees that any place
designated by Secured Party within Broward County, Florida, is a place
reasonably convenient to Debtor to assemble such Collateral;
(c) Debtor hereby agrees that a notice to Debtor, at least
five (5) days before the time of any intended sale or of the time after which
any public or private sale or other disposition of the Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition;
(d) In the event of sale or other disposition of any of the
Collateral, Secured Party may apply the proceeds of any such sale or disposition
to the satisfaction of its reasonable attorneys' fees, legal expenses, and other
costs and expenses incurred in connection with its taking, retaking, holding,
preparing for sale and selling of the Collateral;
(e) Without precluding any other methods of sale, the sale
of Collateral shall have been made in commercially reasonable manner if
conducted in conformity with reasonable commercial practices but, in any event,
Secured Party may sell on such terms as it may choose, without assuming any
credit risk and without any obligation to advertise or give notice of any kind;
(f) The Collateral need not be present at any public or
private sale or in view of the purchaser or purchasers, and title shall pass
upon such sale wherever the property or any part thereof is located with like
effect as though all the property were present and in the possession of the
person conducting the sale and where physically delivered to the purchaser or
purchasers; Secured Party may bid for and purchase at any public or private sale
the Collateral offered for sale or any part thereof, and by such purchase, shall
become the owner thereof;
(g) In the case of the exercise of any of the rights or
remedies of Secured Party hereunder, all Collateral, and other property or
security given to secure the Obligations, may be offered for sale for one total
price, and the proceeds of such sale accounted for in one account without
distinction between items of security or without assigning to them any
proportion of the proceeds of such sale. Debtor, insofar as it legally may do
so, hereby waives the application of any doctrine of marshaling. At the option
of Secured Party, the Collateral, or such other property or security for the
Obligations, may be offered for sale separately at different times and/or
locations.
- 5 -
<PAGE>
No such separate sale shall preclude subsequent sales of the Collateral or the
exercise by Secured Party of any other right or remedy hereunder;
(h) Secured Party may deduct from the gross proceeds of any
public or private sale the expenses incurred by Secured Party in connection
therewith, including reasonable attorneys' fees and brokers' commissions, if
any, and the net proceeds then remaining shall be applied first to the
satisfaction of the amount owed to Secured Party by Debtor and any amount then
remaining shall be returned to Debtor; and
(i) If the proceeds from the sale of the Collateral are not
sufficient to satisfy the indebtedness of Debtor to Secured Party, Secured Party
may proceed against Debtor for any deficiency.
SECTION 8. MISCELLANEOUS.
(a) No failure on the part of Secured Party to exercise,
and no delay in exercising any right or remedy hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise by Secured Party of any
right or remedy hereunder preclude any other or future exercise thereof, or the
exercise of any other right or remedy.
(b) This Security Agreement and the rights and obligations
of the parties hereunder shall be construed and interpreted in accordance with
the laws of the STATE OF FLORIDA without regard for its conflict of laws
doctrine.
(c) In the event of a conflict between the terms and
conditions of this Security Agreement and the Note, the Mortgage, or the Loan
Agreement, then, and in that event occurring, the terms and conditions of the
Note, the Mortgage, or the Loan Agreement shall prevail.
(d) The terms of this Security Agreement shall be binding
upon Debtor and its successors and permitted assigns and shall inure to the
benefit of Secured Party and its heirs, executors, administrators, personal
representatives, successors and assigns.
(e) This Security Agreement may not be changed orally, but
only by an instrument in writing and signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
SECTION 9. WAIVER OF JURY TRIAL.
THE PARTIES HERETO MUTUALLY AND WILLINGLY WAIVE THE RIGHT TO A TRIAL
BY JURY OF ANY AND ALL CLAIMS MADE BETWEEN THEM WHETHER NOW EXISTING OR ARISING
IN THE FUTURE, INCLUDING WITHOUT LIMITATION, ANY AND ALL CLAIMS, DEFENSES,
COUNTERCLAIMS, CROSS CLAIMS, THIRD PARTY CLAIMS AND INTERVENOR'S CLAIMS WHETHER
ARISING FROM OR
- 6 -
<PAGE>
RELATED TO THE NEGOTIATION, EXECUTION AND PERFORMANCE OF THE TRANSACTIONS TO
WHICH THIS DOCUMENT RELATES.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
DEBTOR:
TRANSEASTERN PEMBROKE
VILLAGES, INC., a Florida corporation
By:
Name:
Title:
(CORPORATE SEAL)
SECURED PARTY:
AMRESCO FUNDING CORPORATION,
a Delaware corporation
By:
Name:
Title:
(CORPORATE SEAL)
- 7 -
<PAGE>
STATE OF FLORIDA )
) ss.:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this 29th day of
March, 1996, by _______________________ , as _________________ of TRANSEASTERN
PEMBROKE VILLAGES, INC., a Florida corporation, on behalf of the corporation.
He/she is personally known to me or has produced a driver's license as
identification.
Print or Stamp Name: ________________________
Notary Public, State of Florida at Large
Commission No.:
My Commission Expires:
STATE OF )
) ss.:
COUNTY OF )
The foregoing instrument was acknowledged before me this 29th day of
March, 1996, by __________________________ , as _______________________ of
AMRESCO FUNDING CORPORATION, a Delaware corporation, on behalf of the
corporation. He/she is personally known to me or has produced a driver's license
as identification.
Print or Stamp Name: ________________________
Notary Public, State of at Large
Commission No.:
My Commission Expires:
- 8 -
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
<PAGE>
SECURITY AGREEMENT (CONTINGENT RETURNS)
THIS SECURITY AGREEMENT (this "AGREEMENT"), dated the 29th day of
March, 1996, by TRANSEASTERN PEMBROKE VILLAGES, INC., a Florida corporation,
having a place of business at 3300 University Drive, Suite 1, Coral Springs, FL
33065 ("DEBTOR") in favor of AMRESCO FUNDING CORPORATION, a Delaware
corporation, having a place of business at 1845 Woodall Rodgers Freeway, Dallas,
Texas 75201 ("SECURED PARTY").
WHEREAS, Secured Party and Debtor have entered into that certain Loan
Agreement of even date herewith (the "LOAN AGREEMENT"). Unless otherwise defined
herein, all capitalized terms used herein shall have the meanings assigned to
the same in the Loan Agreement.
WHEREAS, as security for the payment of the Contingent Returns,
Debtor, on even date herewith, granted Secured Party the Contingent Mortgage on
certain real property owned by Debtor and located in Broward County, Florida
(the "PROPERTY"), as more particularly described in EXHIBIT "A" attached hereto
and incorporated herein; and
WHEREAS, in accordance with the terms of the Loan Agreement, and to
further secure the Borrower's obligations to pay the Contingent Returns under
the Loan Agreement, Debtor hereby grants to Secured Party a security interest in
certain of the assets of the Debtor now or hereinafter located on the Property,
as hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the
covenants hereinafter set forth, the parties hereto agree as follows:
SECTION L. CREATION OF SECURITY INTEREST.
Debtor hereby grants to Secured Party a security interest in the
following described property:
(a) All of Debtor's inventory, of whatever type or
description, wherever located and whether now owned or hereafter acquired;
(b) All of Debtor's accounts, which include, but are not
limited to, all notes receivable, accounts receivable, beach club dues,
membership fees, and all other forms of customer obligations now existing and
which may at any time hereafter come into existence;
(c) All of Debtor's vehicles, equipment, machinery,
furniture, fixtures and other items of personal property, whether now or
hereafter acquired;
(d) All of Debtor's permits, licenses, and other
governmental approvals;
(e) Debtor's business on an ongoing basis, together with
all goodwill of the business, and all of Debtor's customer lists, routes, price
lists, patents, trademarks, service marks, trade names, trade secrets and other
proprietary information;
<PAGE>
(f) All of Debtor's cash, certificates of deposit,
securities, instruments and general intangibles;
(g) The right to all insurance proceeds of all insurance
covering the Collateral as hereinafter defined;
(h) All proceeds, products, replacements, additions,
substitutions and accessions of and to all of the foregoing; and
(i) All personal property of Debtor, whether now or
hereafter existing or now owned or hereafter acquired, of every kind and
description, tangible or intangible, now or hereafter in the possession, custody
or control of Secured Party, now or hereafter existing.
Paragraphs (a) through (i) are collectively herein referred to as the
"COLLATERAL".
SECTION 2. OBLIGATIONS SECURED.
Such security interest shall secure the Borrower's obligations to pay
the Contingent Returns in accordance with the terms of the Loan Agreement (all
of the foregoing matters are collectively referred to as the "OBLIGATIONS").
SECTION 3.DEBTOR'S COVENANTS, REPRESENTATIONS AND WARRANTIES.
Debtor covenants, represents and warrants that:
(a) Debtor is the owner of the Collateral free from any
adverse lien, security interest, or encumbrance, other than the security
interest granted hereby and the Permitted Title Exceptions.
(b) Debtor will defend the Collateral against all claims
and demands of all persons at any time claiming the same or any interest
therein.
(c) None of the Collateral shall be subject to a purchase
money security interest other than that of Secured Party or otherwise permitted
under the Loan Agreement.
(d) The Collateral is and shall be kept at the Property, or
at Debtor's principal place of business, where Secured Party may inspect it at
any reasonable time. Debtor shall not remove the Collateral from said location
without the prior written consent of Secured Party. The Collateral will not be
allowed to be wasted, misused or abused or to deteriorate, except for ordinary
wear and tear, and will not be used in violation of any law, ordinance or
regulation of any governmental authority.
- 2 -
<PAGE>
(e) The Collateral shall be insured with such carriers and
in such amounts and against such risks as shall be reasonably satisfactory to
Secured Party, with policies payable to Secured Party as its interest may
appear. All policies of insurance shall provide for thirty (30) days' prior
written notice of cancellation, modification, termination or expiration to
Secured Party, and Secured Party shall be furnished with duplicate policies or
other evidence of compliance with the foregoing insurance provisions.
(f) Debtor will pay, when due, all taxes and assessments
upon the Collateral or its operation or use.
(g) At its option, and without any obligation to do so,
Secured Party may discharge or pay any taxes, liens, security interests or other
encumbrances at any time levied or placed on or against the Collateral or
Debtor, and may pay for insurance on the Collateral, and may pay for the
Collateral's maintenance and preservation. Debtor agrees to reimburse Secured
Party on demand for any such payment made or expense incurred pursuant to the
foregoing authorizations or, at Secured Party's option, any payment made by
Secured Party may be added to the balance of the liability then owing.
(h) The Collateral will not, without the prior written
consent of Secured Party, be sold, leased, transferred, disposed of or
substantially modified except for the sale, replacement or other disposition of
the Collateral in the ordinary course of Debtor's business.
(i) Debtor hereby authorizes Secured Party to file such
financing statements relating to the Collateral without Debtor's signature
thereon, as Secured Party may deem appropriate. Debtor shall also execute from
time to time, along or with Secured Party, any financing statements or other
documents, and do such other act or acts considered by Secured Party to be
necessary or desirable to perfect or protect the security interest hereby
created, and shall pay all costs and expenses (including, without limitation,
reasonable fees and expenses of counsel and filing fees) related to the
preparation and filing of any financing statements, continuation statements or
other documents related to the perfection or protection of the security interest
hereby created.
SECTION 4. RIGHTS OF SECURED PARTY PRIOR TO DEFAULT.
(a) Notwithstanding any other part of this Agreement,
Secured Party may enter upon the Property or such other of Debtor's premises, at
any reasonable time, to inspect Debtor's books and records pertaining to the
Collateral or its proceeds, and Debtor shall assist Secured Party in whatever
way necessary to make any inspection.
(b) Debtor hereby agrees that upon five (5) days' written
notice from Secured Party, it will do any or all of the following:
(l) deliver to Secured Party lists or copies of
all accounts, which are proceeds of Debtor's Collateral, promptly after they
arise; and/or
- 3 -
<PAGE>
(2) join with Secured Party, at its request, in
executing financing statements and pay the cost of filing the same wherever
Secured Party deems, and will do, make, execute and deliver all such additional
and further acts, things, deeds, assurances and instruments as Secured Party may
require to completely vest in it and assure to it its rights hereunder in and to
the Collateral and the proceeds thereof and will pay all out-of-pocket expenses,
including attorneys' fees and disbursements including appellate, bankruptcy and
post judgment proceedings, incurred or expended by Secured Party in connection
with this Agreement and other agreements relating to the Collateral, the
enforcement of any of the obligations or the administration, preservation or
protection of or realization upon the Collateral or any part thereof.
SECTION 5. RIGHTS OF DEBTOR PRIOR TO DEFAULT.
Until an Event of Default shall have occurred or as otherwise
provided herein, Debtor may use the Collateral in any lawful manner not
inconsistent with this Agreement and with the terms of insurance thereon.
SECTION 6. EVENTS OF DEFAULT.
Debtor shall be in default under this Security Agreement upon (a) the
occurrence of an Event of Default under the Loan Agreement; or (b) loss, theft,
substantial change or destruction to a substantial portion of the Collateral
unless replaced forthwith or covered by insurance.
Upon the happening of any of the foregoing Events of Default, the
Obligations shall become and be immediately due and payable. Debtor expressly
waives any presentment, demand, protest or other notice of any kind.
SECTION 7.SECURED PARTY'S REMEDIES AND ADDITIONAL RIGHTS AFTER
DEFAULT.
Upon the occurrence of an Event of Default, Secured Party shall have
the rights and remedies of a secured party under the Florida Uniform Commercial
Code or any other applicable law. Without limiting the generality of the
foregoing, Secured Party may exercise the following rights and remedies:
(a) Secured Party may peaceably, or by its own means or
with judicial assistance by injunction or otherwise, enter the Property or such
other of Debtor's premises and take possession of the Collateral, or render it
unusable, or dispose of the Collateral on the Property, and Debtor will not
resist or interfere with such action;
(b) Secured Party may with judicial assistance by
injunction, or otherwise, require Debtor, at Debtor's expense, to assemble all
or any part of the Collateral and make it available to Secured Party at any
place designated by Secured Party. Debtor hereby agrees that any place
designated by Secured Party within Broward County, Florida, is a place
reasonably convenient to Debtor to assemble such Collateral;
- 4 -
<PAGE>
(c) Debtor hereby agrees that a notice to Debtor, at least
five (5) days before the time of any intended sale or of the time after which
any public or private sale or other disposition of the Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition;
(d) In the event of sale or other disposition of any of the
Collateral, Secured Party may apply the proceeds of any such sale or disposition
to the satisfaction of its reasonable attorneys' fees, legal expenses, and other
costs and expenses incurred in connection with its taking, retaking, holding,
preparing for sale and selling of the Collateral;
(e) Without precluding any other methods of sale, the sale
of Collateral shall have been made in commercially reasonable manner if
conducted in conformity with reasonable commercial practices but, in any event,
Secured Party may sell on such terms as it may choose, without assuming any
credit risk and without any obligation to advertise or give notice of any kind;
(f) The Collateral need not be present at any public or
private sale or in view of the purchaser or purchasers, and title shall pass
upon such sale wherever the property or any part thereof is located with like
effect as though all the property were present and in the possession of the
person conducting the sale and where physically delivered to the purchaser or
purchasers; Secured Party may bid for and purchase at any public or private sale
the Collateral offered for sale or any part thereof, and by such purchase, shall
become the owner thereof;
(g) In the case of the exercise of any of the rights or
remedies of Secured Party hereunder, all Collateral, and other property or
security given to secure the Obligations, may be offered for sale for one total
price, and the proceeds of such sale accounted for in one account without
distinction between items of security or without assigning to them any
proportion of the proceeds of such sale. Debtor, insofar as it legally may do
so, hereby waives the application of any doctrine of marshaling. At the option
of Secured Party, the Collateral, or such other property or security for the
Obligations, may be offered for sale separately at different times and/or
locations. No such separate sale shall preclude subsequent sales of the
Collateral or the exercise by Secured Party of any other right or remedy
hereunder;
(h) Secured Party may deduct from the gross proceeds of any
public or private sale the expenses incurred by Secured Party in connection
therewith, including reasonable attorneys' fees and brokers' commissions, if
any, and the net proceeds then remaining shall be applied first to the
satisfaction of the amount owed to Secured Party by Debtor and any amount then
remaining shall be returned to Debtor; and
(i) If the proceeds from the sale of the Collateral are not
sufficient to satisfy the indebtedness of Debtor to Secured Party, Secured Party
may proceed against Debtor for any deficiency.
- 5 -
<PAGE>
SECTION 8. MISCELLANEOUS.
(a) No failure on the part of Secured Party to exercise,
and no delay in exercising any right or remedy hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise by Secured Party of any
right or remedy hereunder preclude any other or future exercise thereof, or the
exercise of any other right or remedy.
(b) This Security Agreement and the rights and obligations
of the parties hereunder shall be construed and interpreted in accordance with
the laws of the STATE OF FLORIDA without regard for its conflict of laws
doctrine.
(c) In the event of a conflict between the terms and
conditions of this Security Agreement and the Contingent Mortgage or the Loan
Agreement, then, and in that event occurring, the terms and conditions of the
Contingent Mortgage or the Loan Agreement shall prevail.
(d) The terms of this Security Agreement shall be binding
upon Debtor and its successors and permitted assigns and shall inure to the
benefit of Secured Party and its heirs, executors, administrators, personal
representatives, successors and assigns.
(e) This Security Agreement may not be changed orally, but
only by an instrument in writing and signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
SECTION 9. WAIVER OF JURY TRIAL.
THE PARTIES HERETO MUTUALLY AND WILLINGLY WAIVE THE RIGHT TO A TRIAL
BY JURY OF ANY AND ALL CLAIMS MADE BETWEEN THEM WHETHER NOW EXISTING OR ARISING
IN THE FUTURE, INCLUDING WITHOUT LIMITATION, ANY AND ALL CLAIMS, DEFENSES,
COUNTERCLAIMS, CROSS CLAIMS, THIRD PARTY CLAIMS AND INTERVENOR'S CLAIMS WHETHER
ARISING FROM OR RELATED TO THE NEGOTIATION, EXECUTION AND PERFORMANCE OF THE
TRANSACTIONS TO WHICH THIS DOCUMENT RELATES.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
DEBTOR:
TRANSEASTERN PEMBROKE
VILLAGES, INC., a Florida corporation
By:
Name:
Title:
(CORPORATE SEAL)
[SIGNATURES AND ACKNOWLEDGEMENTS CONTINUE ON NEXT PAGE]
- 6 -
<PAGE>
SECURED PARTY:
AMRESCO FUNDING CORPORATION,
a Delaware corporation
By:
Name:
Title:
(CORPORATE SEAL)
STATE OF FLORIDA )
) ss.:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this 29th day of
March, 1996, by _________________________ , as _____________________ of
TRANSEASTERN PEMBROKE VILLAGES, INC., a Florida corporation, on behalf of the
corporation. He/she is personally known to me or has produced a driver's license
as identification.
Print or Stamp Name: ________________________
Notary Public, State of Florida at Large
Commission No.:
My Commission Expires:
STATE OF )
) ss.:
COUNTY OF )
The foregoing instrument was acknowledged before me this 29th day of
March, 1996, by ____________________________ , as ______________________ of
AMRESCO FUNDING CORPORATION, a Delaware corporation, on behalf of the
corporation. He/she is personally known to me or has produced a driver's license
as identification.
Print or Stamp Name: ________________________
Notary Public, State of at Large
Commission No.:
My Commission Expires:
- 7 -
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION
<PAGE>
PLEDGE AGREEMENT
PLEDGE AGREEMENT (as may be amended, modified, supplemented, waived,
extended or restated from time to time, this "AGREEMENT") dated as of March 29,
1996, between TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC. (the "PLEDGOR") and
AMRESCO FUNDING CORPORATION, a Delaware corporation (the "SECURED PARTY").
WHEREAS, contemporaneously with the execution hereof, Secured Party has
entered into a Loan Agreement of even date herewith (as the terms thereof may
have been or may be amended, supplemented, waived or otherwise modified from
time to time, the "LOAN AGREEMENT") with Transeastern Pembroke Villages, Inc., a
Florida corporation (the "BORROWER"), pursuant to which Lender will lend and
Borrower will borrow the sum of Three Million and No/100 Dollars ($3,000,000.00)
(the "LOAN"), evidenced by a certain Promissory Note of even date herewith (the
"NOTE") executed and delivered by Borrower to Lender; and
WHEREAS, Pledgor will derive substantial benefit, directly and
indirectly, by reason of the Secured Party entering into the Loan Agreement with
the Borrower; and
WHEREAS, to induce the Secured Party to enter into the Loan Agreement
and to extend credit thereunder and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Pledgor has
agreed to grant to the Secured Party a security interest in the Collateral (as
hereinafter defined) as security for the Secured Obligations (as hereinafter
defined in Section 1 below) on the terms set forth below.
NOW, THEREFORE, in consideration of the premises, and other good
and valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the Pledgor and the Secured Party hereby agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used but not otherwise
defined herein shall have the meanings assigned to such terms in the Loan
Agreement. The following terms, as used herein, shall have the following
respective meanings:
"AGREEMENT" means this Agreement, including all Schedules,
Annexes and Exhibits hereto.
"COLLATERAL" shall have the meaning assigned to such term in
Section 2.
"CONTRACT" means (i) any agreement (whether executory or
non-executory and whether a Person entitled to rights thereunder is so entitled
directly or as a third-party beneficiary), including an indenture, lease or
license, (ii) any deed or other instrument of conveyance, (iii) any certificate
of incorporation or charter and (iv) any by-law.
"GOVERNMENTAL APPROVAL" means any authorization, consent,
approval, license or exemption of, registration or filing with, or report or
notice to, any Governmental Authority.
Statements, the Loan Agreement, the Other Assignments and the Loan Documents
referred to which are not
<PAGE>
"OTHER PLEDGE AGREEMENT" means that certain Pledge Agreement of
even date herewith between Pledgor and Secured Party securing, among other
things, payment of the Contingent Returns.
"PLEDGED SECURITIES" shall have the meaning assigned to such term
in Section 2.
"PROCEEDS" shall have the meaning assigned to such term under the
Florida Uniform Commercial Code and, in any event, shall include (i) any and all
proceeds of any guarantee, insurance or indemnity payable to the Pledgor from
time to time with respect to any of the Collateral; (ii) any and all payments
(in any form whatsoever) made or due and payable to the Pledgor from time to
time in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental authority
(or any person acting under color of governmental authority); and (iii) any and
all other amounts from time to time paid or payable with respect to or in
connection with any of the Collateral.
"SECURED OBLIGATIONS" shall mean, collectively: (a) the principal
of and interest on (including, without limitation, interest accruing after the
date of any filing by the Borrower of any petition in bankruptcy or the
commencement of any bankruptcy, insolvency or similar proceedings with respect
to the Borrower, whether or not allowed as a claim in such proceeding under
applicable law) the Loan, the Note, and all other indebtedness, liability or
obligation of the Borrower from time to time owing to the Secured Party
(including all commitment and other fees but excluding Borrower's obligations in
respect of the Contingent Returns) under or in respect of the Loan Documents to
which the Borrower is a party; and (b) all obligations of the Pledgor to the
Secured Party under this Agreement.
Unless otherwise defined herein or in the Loan Agreement, or
unless the context otherwise requires, all terms used herein that are defined in
the Florida Uniform Commercial Code shall have the meanings therein stated. The
definitions in this Section 1 shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
"include," "includes" and "including" as used in this Agreement shall be deemed
in each case to be followed by the phrase "without limitation." References to
Sections, Schedules and Exhibits shall be deemed references to Sections of and
Schedules and Exhibits to this Agreement, unless otherwise specified.
SECTION 2. PLEDGE. As security for the payment and performance in
full of the Secured Obligations, the Pledgor hereby hypothecates, pledges,
assigns, grants, sets over and delivers to the Secured Party, a continuing first
priority security interest in all its right, title and interest in, to and under
the following, whether now owned or hereafter acquired:
(i) the shares of capital stock of the Borrower owned by the
Pledgor on the date hereof, including the shares of such capital stock
listed on Schedule I, and any additional shares of capital stock of the
Borrower (or successors thereto) obtained in the future by the Pledgor,
and, in each case, all certificates representing such shares and, in
each case, all
-2-
<PAGE>
rights, options, warrants, stock or other securities which may hereafter
be received, receivable or distributed in respect of, or exchanged for,
any of the foregoing (all of the foregoing being referred to herein as
the "PLEDGED SECURITIES");
(ii) all other property which may be delivered to and held by
the Secured Party pursuant to the terms hereof of any character
whatsoever into which any of the foregoing may be converted or which may
be substituted for any of the foregoing; and
(iii) subject to the provisions of Section 5, all Proceeds of
the Pledged Securities and of such other property, including all cash,
securities or other property at any time and from time to time acquired,
receivable or otherwise distributed in respect of, or in exchange for,
any of or all such stock or other property (the items referred to in
clauses (i) through (iii) being collectively referred to as the
"COLLATERAL").
TO HAVE AND TO HOLD the Collateral, together with all right,
title, interest, powers, privileges and preferences pertaining or incidental
thereto, unto the Secured Party, its successors and assigns, forever; SUBJECT,
HOWEVER, to the terms, covenants and conditions hereinafter set forth.
SECTION 3. DELIVERY OF COLLATERAL. (a) Contemporaneously with the
execution of this Agreement, the Pledgor shall deliver or cause to be delivered
to the Secured Party (i) any and all certificates and other instruments
evidencing the Pledged Securities, along with undated stock powers duly executed
in blank or other instruments of transfer satisfactory to the Secured Party and
endorsed in blank and such other instruments and documents as the Secured Party
may reasonably request to effect the purposes contemplated hereby, (ii) any and
all certificates or other instruments or documents representing any of the
Collateral and (iii) all other property comprising part of the Collateral with
proper instruments of assignment duly executed and such other instruments or
documents as the Secured Party may reasonably request to effect the purposes
contemplated hereby.
(b) If the Pledgor shall become entitled to receive or shall
receive any shares of stock (including, without limitation, shares of Pledged
Securities acquired after the date hereof), options, warrants, rights or other
similar property (including, without limitation, any certificate representing a
stock dividend, or any distribution in connection with any recapitalization,
reclassification or increase or reduction of capital, or issued in connection
with any reorganization of the Borrower) in respect of the Pledged Securities
(whether as an addition to, in substitution of, or in exchange for, such Pledged
Securities or otherwise), the Pledgor agrees:
(i) to accept the same as the agent of the Secured Party;
-3-
<PAGE>
(ii) to hold the same in trust on behalf of and for the
benefit of the Secured Party; and
(iii) to deliver any and all certificates or instruments
evidencing the same to the Secured Party on or before the close of
business on the seventh (7th) day following the receipt thereof by the
Pledgor, in the exact form received, with the endorsement in blank of
the Pledgor when necessary and with appropriate undated stock powers
duly executed in blank (with signatures properly guaranteed), to be held
by the Secured Party, subject to the terms of this Agreement, as
additional Collateral.
SECTION 4. REGISTRATION IN NOMINEE NAME. Upon the occurrence of
an Event of Default, the Secured Party shall have the right (in its sole and
absolute discretion and without prior notice to the Pledgor) to transfer to or
to register the Pledged Securities in its own name or the name of its nominee.
SECTION 5. VOTING RIGHTS, ETC. (a) Unless and until an Event of
Default shall have occurred:
(i) The Pledgor shall be entitled to exercise any and all voting
and/or consensual rights and powers accruing to an owner of Pledged
Securities or any part thereof for any purpose not prohibited by the
terms of this Agreement or the Loan Agreement.
(ii) The Secured Party shall execute and deliver to the Pledgor,
or cause to be executed and delivered to the Pledgor, all such proxies,
powers of attorney, and other instruments as the Pledgor may reasonably
request for the purpose of enabling the Pledgor to exercise the voting
and/or consensual rights and powers which it is entitled to exercise
pursuant to subparagraph (i) above.
(iii) The Pledgor shall be entitled to receive, subject to the
provisions of the Loan Agreement and Section 2 hereof, and retain any
and all dividends paid on the Pledged Securities. Except for dividends
that the Pledgor shall be entitled to receive and retain pursuant to the
preceding sentence, all noncash dividends, stock or dividends paid or
payable in cash or otherwise in connection with a partial or total
liquidation or dissolution, instruments, securities, other distributions
in property, return of capital, capital surplus or paid-in surplus or
other distributions made on or in respect of Pledged Securities, whether
paid or payable in cash or otherwise, whether resulting from a
subdivision, combination or reclassification of the outstanding capital
stock of the Borrower or from any bankruptcy or reorganization of the
Borrower or received in exchange for Pledged Securities or any part
thereof, or in redemption thereof, as a result of any merger,
consolidation, acquisition or other exchange of assets to which such
issuer may be a party or otherwise, shall be and become part of the
Collateral, and, if received by the Pledgor, shall not be commingled by
the Pledgor with any of its other funds or property but shall be held
separate and apart therefrom, shall be held in trust for the benefit of
the Secured Party and shall be forthwith
-4-
<PAGE>
delivered to the Secured Party in the same form as so received (with any
necessary endorsements).
(b) Upon the occurrence of an Event of Default, if so specified
by the Secured Party in a written notice to the Pledgor, all rights of the
Pledgor to exercise the voting and consensual rights and powers which the
Pledgor is entitled to exercise pursuant to Section 5(a)(i) shall cease, and all
such rights shall thereupon become vested in the Secured Party, which shall have
the sole and exclusive right and authority to exercise such voting and
consensual rights and powers, and the Pledgor shall execute and deliver to the
Secured Party all such documents and instruments (including proxies) as the
Secured Party shall reasonably request in order to effect the purposes of this
Section 5(b).
(c) Upon the occurrence of an Event of Default, all rights of the
Pledgor to receive any dividends which the Pledgor is authorized to receive
pursuant to clause (iii) of paragraph (a) of this Section 5 shall cease, and all
such rights shall thereupon become vested in the Secured Party, which shall have
the sole and exclusive right and authority to receive and retain such dividends.
All dividends which are received by the Pledgor contrary to the provisions of
this paragraph (c) shall be received in trust for the benefit of the Secured
Party shall be segregated from other property or funds of the Pledgor and shall
be forthwith delivered to the Secured Party as Collateral in the same form as so
received (with any necessary endorsement). Any and all money and other property
paid over to or received by the Secured Party pursuant to the provisions of this
Section 5 shall be retained by the Secured Party in an account to be established
by the Secured Party upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 9 hereof.
SECTION 6. REPRESENTATIONS; WARRANTIES AND COVENANTS. The Pledgor
hereby represents, warrants and covenants to and with the Secured Party that:
(a) Except for any security interest granted to the Secured
Party, the Pledgor (i) is and will at all times continue to be the
direct owner, beneficially and of record, of the Pledged Securities,
(ii) is and will at all times hold the Collateral free and clear of all
Liens, (iii) will make no assignment, pledge, hypothecation or transfer
of, or create or suffer to exist any Lien on, the Collateral and (iv)
subject to Section 5, will cause any and all Collateral, whether for
value paid by the Pledgor or otherwise, to be forthwith deposited with
the Secured Party and pledged or assigned hereunder.
(b) The Pledgor (i) has, and at all times will have, the right
and legal authority to pledge the Collateral in the manner hereby done
or contemplated and (ii) will defend its and the Secured Party's
respective title and interest thereto or therein against any and all
attachments, Liens, claims or other impediments of any nature, however
arising, of all Persons whomsoever.
(c) No authorization, consent or approval, or other action by,
and no notice to or filing with, any Governmental Authority (including
any securities exchange) not previously
-5-
<PAGE>
obtained is required (i) for the pledge by the Pledgor of the Collateral
pursuant to this Agreement or the perfection therein of the Secured
Party's security interest created hereby, other than the filing of
appropriate Uniform Commercial Code financing statements in the offices
of the Department of State in the State of Florida, (ii) for the
execution, delivery or performance of this Agreement by the Pledgor or
(iii) for the exercise by the Secured Party of the rights provided for
in this Agreement or the remedies in respect of the Collateral pursuant
to this Agreement, other than compliance with applicable Federal and
state securities laws in connection with the acquisition and sale or
other disposition of Pledged Securities in accordance with the terms of
this Agreement.
(d) By virtue of the execution and delivery by the Pledgor of
this Agreement, when the certificates representing the Pledged
Securities owned by the Pledgor are delivered to the Secured Party in
accordance with this Agreement, the Secured Party will obtain and, so
long as the Secured Party maintains possession of the certificates
representing the Pledged Securities, will have and will continue to have
a valid and perfected first priority lien upon and security interest in
such Pledged Securities as security for the repayment of the Secured
Obligations, prior to all other liens and encumbrances thereon and
security interests therein.
(e) The Pledged Securities constitute, and at all times will
constitute, all of the issued and outstanding shares of capital stock of
Borrower owned by the Pledgor.
(f) All of the representations and warranties contained in this
Agreement shall survive the execution, delivery and performance of this
Agreement.
(g) This Agreement constitutes the legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms
(subject as to enforceability to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors' rights
generally and to general principles of equity).
(h) The execution, delivery and performance in accordance with
its respective terms by the Pledgor of this Agreement do not and will
not (a) require any Governmental Approval or any other consent or
approval or (b) violate, conflict with, result in a breach of or
constitute a default under, or result in or require the creation of any
Lien upon any assets of the Pledgor under, (i) any Contract to which the
Pledgor is a party or by which it or its property may be bound or (ii)
any applicable law.
(i) The Pledged Securities have been duly authorized and validly
issued, are fully paid and non-assessable and have been duly and validly
pledged hereunder in accordance with applicable law.
(j) There are no contractual restrictions upon the voting rights
or upon the transfer of any of the shares of the Pledged Securities
other than as referred to herein, in the Other Pledge Agreement or in
the Loan Agreement.
-6-
<PAGE>
(k) The Pledgor represents and warrants that it has made its own
arrangements for keeping informed of changes or potential changes
affecting the Collateral (including, but not limited to, rights to
convert, rights to subscribe, payment of dividends, reorganization or
other exchanges, tender offers and voting rights), and the Pledgor
agrees that the Secured Party shall not have any responsibility or
liability for informing the Pledgor of any such changes or potential
changes.
(l) The Pledgor shall not:
(i) permit or suffer Borrower to voluntarily dissolve or
liquidate, retire any of its capital stock, reduce its capital or merge
or consolidate with any other entity if such action would violate the
provisions of the Loan Agreement, or
(ii) vote any of the Pledged Securities in favor of any
of the foregoing.
SECTION 7. ISSUANCE OF ADDITIONAL STOCK. The Pledgor agrees that
it will not (a) permit Borrower to issue any stock or other securities
(including warrants, options and other similar agreements), whether in addition
to, by stock dividend or other distribution upon, or in substitution for, the
Pledged Securities or otherwise (unless such issuance is not prohibited by the
Loan Agreement and such stock or other securities are effectively pledged
hereunder in a manner reasonably satisfactory to the Secured Party) or (b) sell,
assign, transfer, exchange or otherwise dispose of, or grant any option with
respect to, the Collateral, or create, incur or permit to exist any Lien or
option in favor of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the Lien provided for by this
Agreement and the Other Pledge Agreement.
SECTION 8. REMEDIES UPON DEFAULT. (a) If an Event of Default
shall have occurred, the Secured Party shall have, in addition to any other
rights and except as otherwise provided herein, all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform Commercial
Code in the State of Florida. In addition, the Secured Party may (without any
obligation to seek performance of any guarantee or to resort to any other
security, right or remedy granted to it under any other instrument or agreement,
including the Loan Agreement) sell the Collateral, or any part thereof, at
public or private sale or at any broker's board or on any securities exchange,
for cash, upon credit or for future delivery as the Secured Party shall deem
appropriate. The Secured Party shall be authorized at any such sale (if it deems
it advisable to do so) to restrict the prospective bidders or purchasers to
persons who will represent and agree that they are purchasing the Collateral for
their own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale the Secured Party shall have the
right to assign, transfer and deliver to the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at any such sale shall hold the property
so sold absolutely, free from any claim or right on the part of the Pledgor
(other than rights that the Pledgor may have against such purchaser generally
and without regard to this Agreement or such sale), and the Pledgor hereby
waives (to the extent permitted by law) all equity or rights of redemption, stay
and appraisal which the Pledgor may
-7-
<PAGE>
now have or may at any time in the future have under any rule of law or statute
now existing or hereafter enacted.
(b) No demand, advertisement or notice, all of which are hereby
expressly waived by the Pledgor, shall be required in connection with any sale
or other disposition of any part of the Collateral that may decline speedily in
value or that is of a type customarily sold in a reorganized market; otherwise,
the Secured Party shall give the Pledgor at least 10 days' written notice (which
the Pledgor agrees is reasonable notice within the meaning of Section 9-504(3)
of the Uniform Commercial Code as in effect in Florida) of the time of and place
where such sale is to be made (or, in the case of a sale at a broker's board or
on a securities exchange, the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange) and of the time after
which any private sale or other disposition is to be made, all other demand,
advertisements and notices being hereby waived. Any such public sale shall be
held at such time or times within ordinary business hours and at such place or
places as the Secured Party may fix and state in the notice of such sale. At any
such sale, the Collateral, or portion thereof, to be sold may be sold as a unit
or in separate parcels, as the Secured Party may (in its sole and absolute
discretion) determine. The Secured Party shall not be obligated to make any sale
of any Collateral if it shall determine not to do so, regardless of the fact
that notice of sale of such Collateral shall have been given. The Secured Party
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Secured Party until the sale price is paid by the
purchaser or purchasers thereof, but the Secured Party shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice, and in no event shall any portion of the
proceeds of any such sale be credited against payment of the costs, expenses and
obligations set forth in Section 9 hereof until cash payment for the Collateral
so sold has been received by the Secured Pavate sale of Collateral of a type
customarily sold in a recognized market, and at any public sale made pursuant to
this Section 8, the Secured Party may bid for or purchase, free (to the extent
permitted by law) from any equity or right of redemption, stay or appraisal on
the part of the Pledgor (all said rights being also hereby waived and released
to the extent permitted by law), the Collateral or any part thereof offered for
sale and may make payment on account thereof by using any claim then due and
payable to the Secured Party by the Pledgor under or pursuant to the Loan
Documents as a credit, up to an amount equal to the amount the Secured Party
would otherwise be entitled to receive pursuant to Section 9 in connection with
such sale, against the purchase price. For purposes hereof, in the case of any
such sale pursuant to a written agreement to purchase the Collateral or any
portion thereof, the Secured Party shall be free to carry out such sale pursuant
to such agreement, and the Pledgor shall not be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact that
after the Secured Party shall have entered into such an agreement all Events of
Default shall have been remedied and the Secured Obligations paid in full. As an
alternative to exercising the power of sale herein conferred upon it, the
Secured Party may proceed by a suit or suits at law or in equity to foreclose
upon the Collateral pursuant to this
-8-
<PAGE>
Agreement and to sell the Collateral, or any portion thereof, pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
(c) If the Secured Party shall have instituted any proceeding to
enforce any right or remedy hereunder, and such proceeding shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Secured Party, the Secured Party shall, subject to any
determination in any such proceeding, be restored to its former position
hereunder, and thereafter, subject as aforesaid, all rights and remedies of the
Secured Party shall continue as though no such proceeding had been instituted.
SECTION 9. APPLICATION OF PROCEEDS OF SALE. The proceeds of any
sale of, or other realization upon, all or any part of the Collateral pursuant
to Section 8, as well as any Collateral consisting of cash, shall be applied by
the Secured Party as follows:
FIRST, to the payment of all costs and expenses reasonably
incurred by the Secured Party in connection with such sale or otherwise
in connection with this Agreement or any of the Secured Obligations,
including all court costs and the reasonable fees and expenses of its
agents, brokers, investment advisors, and legal counsel, the repayment
of all advances plus any interest thereon made hereunder by the Secured
Party on behalf of the Pledgor and any other costs or expenses
reasonably incurred in connection with the exercise of any right or
remedy hereunder;
SECOND, to the payment in full of the Secured Obligations
(whether or not then due and payable, at maturity, by acceleration or
otherwise) as of the date of such payment, until all the Secured
Obligations have been paid in full; and
THIRD, to the Pledgor, its successors or assigns, subject to the
duty of the Secured Party imposed by law to the holder of any
subordinate security interest or as a court of competent jurisdiction
may otherwise direct.
SECTION 10. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. The Pledgor
hereby appoints the Secured Party, its successors or assigns, as its true and
lawful agent and attorney-in-fact for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instrument which the
Secured Party may deem necessary or advisable to accomplish the purposes hereof,
in each case upon the occurrence of an Event of Default, which appointment is
irrevocable and coupled with an interest and any proxy or proxies heretofore
given by the Pledgor to any other person that is inconsistent herewith are
hereby revoked. Without limiting the generality of the foregoing, the Secured
Party shall have the right, upon the occurrence of an Event of Default, with
full power of substitution either in the Secured Party's name or in the name of
the Pledgor, to ask for, demand, sue for, collect, receive, receipt and give
acquittance for any and all moneys due or to become due under and by virtue of
any Collateral, to endorse checks, drafts, orders and other instruments for the
payment of money payable to the Pledgor representing any interest or dividend
-9-
<PAGE>
or other distribution payable in respect of the Collateral or any part thereof
or on account thereof and to give full discharge for the same, to settle,
compromise, prosecute or defend any action, claim or proceeding with respect
thereto, and to sell, assign, endorse, pledge, transfer and make any agreement
respecting, or otherwise deal with, the same; PROVIDED, HOWEVER, that nothing
herein contained shall be construed as requiring or obligating the Secured Party
to take any action, including requiring or obligating the Secured Party to make
any commitment or to make any inquiry as to the nature or sufficiency of any
payment received by the Secured Party or to present or file any claim or notice,
or to take any action with respect to the Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property covered thereby,
and no action taken by the Secured Party or omitted to be taken by it with
respect to the Collateral or any part thereof shall give rise to any defense,
counterclf the Pledgor or to any claim or action against the Secured Party in
the absence of the gross negligence or willful misconduct of the Secured Party
as shall have been determined in a final, nonappealable judgment of a court of
competent jurisdiction.
SECTION 11. NO WAIVER; REMEDIES CUMULATIVE. No failure on the
part of the Secured Party to exercise, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy by the Secured
Party preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law or otherwise. The Secured Party
shall not be deemed to have waived any rights hereunder or under any other
agreement or instrument unless such waiver shall be in writing and signed by the
Secured Party.
SECTION 12. SECURITIES ACT, ETC. (a) In view of the position of
the Pledgor in relation to the Pledged Securities, or because of other present
or future circumstances, a question may arise under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), or any similar or successor Federal
securities law (together with the Securities Act, the "FEDERAL SECURITIES LAWS")
with respect to any disposition of the Pledged Securities permitted hereunder.
The Pledgor understands that compliance with the Federal Securities Laws might
strictly limit the course of conduct of the Secured Party if the Secured Party
were to attempt to dispose of all or any part of the Pledged Securities, and
might also limit the extent to which or the manner in which any subsequent
transferee of any Pledged Securities could dispose of the same. Similarly, there
may be other legal restrictions or limitations affecting the Secured Party in
any attempt to dispose of all or part of the Pledged Securities under applicable
blue sky or other state securities laws or similar laws analogous in purpose or
effect.
(b) Anything herein to the contrary notwithstanding, and in view
of restrictions specified in paragraph (a) of this Section 12, the Pledgor
agrees that, upon the occurrence of an Event of Default, the Secured Party may,
from time to time, attempt to sell all or any part of the Pledged Securities by
means of a private placement, restricting the bidders and prospective purchasers
to those who will represent or agree as to their investment intent or method of
resale or both in a manner reasonably required by the Secured Party to assure
compliance with applicable
-10-
<PAGE>
securities laws. In so doing, the Secured Party may solicit offers to buy such
Pledged Securities or any part thereof, for cash, from a limited number of
investors deemed by the Secured Party, in its exclusive judgment, to be
responsible parties who might be interested in purchasing such Pledged
Securities. Pledgor acknowledges and agrees that private sales so made may be at
prices and other terms less favorable to the seller than if the Pledged Security
were sold at public sales.
SECTION 13. SECURITY INTEREST ABSOLUTE; WAIVERS BY PLEDGOR. (a)
All rights of the Secured Party hereunder, the grant of a security interest in
the Collateral and all obligations of the Pledgor hereunder, shall be absolute
and unconditional irrespective of (i) any lack of validity or enforceability of
the Loan Agreement, any other agreement with respect to any of the Secured
Obligations or any other agreement or instrument relating to any of the
foregoing, (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment or
waiver of or any consent to any departure from the Loan Agreement or any other
agreement or instrument, (iii) any exchange, release or nonperfection of any
other collateral, or any release or amendment or waiver of or consent to or
departure from any guaranty, for all or any of the Secured Obligations, (iv) any
failure by the Secured Party to demand payment or performance by the Borrower of
any of the Secured Obligations or to exercise or enforce any right or remedy in
respect thereof or (v) any other circumstance (other than payment in full of the
Secured Obligations or, in the case of rights predicated on the existence of an
Event of Default, a cure or waiver of such Event of Default) which might
otherwise constitute a defense available to, or a discharge of, the Pledgor or
any other person in respect of the Secured Obligations or in respect of this
Agreement. The Pledgor hereby acknowledges that the Secured Party shall not be
under any obligation to marshal any assets in favor of the Pledgor or against or
in payment of any or all of the Secured Obligations. The Pledgor hereby waives
and forever relinquishes any and all rights of subrogation, reimbursement, or
indemnity whatsoever in respect of the Borrower arising out of remedies
exercised by the Secured Party hereunder.
(b) The Pledgor hereby waives notice of acceptance of this
Agreement. The Pledgor further waives presentment and demand for payment of any
of the Secured Obligations, protest and notice of dishonor or default with
respect to any of the Secured Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided in
this Agreement or in the Loan Agreement. The Pledgor (to the extent that it may
lawfully do so) covenants that it shall not at any time insist upon or plead, or
in any manner claim or take the benefit or advance of, any stay (except in
connection with a pending appeal), valuation, appraisal, redemption or extension
law now or at any time hereafter in force that, but for this waiver, might be
applicable to any sale made under any judgment, order or decree based on this
Agreement or on the Loan Agreement; and the Pledgor (to the extent that it may
lawfully do so) hereby expressly waives and relinquishes all benefit and advance
of any and all such laws and hereby covenants that it will not hinder, delay or
impede the execution of any power in this Agreement or therein granted and
delegated to the Secured Party, but that it will suffer and permit the execution
of every such power as though no such law or laws had been made or enacted.
-11-
<PAGE>
SECTION 14. PAYMENT OF COSTS AND EXPENSES, ETC. (a) The Pledgor
hereby agrees that upon demand it shall pay to the Secured Party the amount of
any and all expenses, including the reasonable fees and expenses the Secured
Party may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Secured Party hereunder, or (iv) the failure by the
Pledgor to perform or observe any of the provisions hereof. Any such amounts
payable as provided hereunder or thereunder shall be additional Secured
Obligations secured hereby. The Pledgor hereby agrees to indemnify and hold
harmless the Secured Party (and each of its directors, officers, agents and
employees), to the fullest extent permitted by law, from and against any and all
claims, losses, liabilities (including liabilities for penalties), actions,
suits, judgments, demands, costs and expenses (including reasonable attorneys'
and paralegals' fees and expenses incurred, whether litigation is commenced ot
not and, if incurred, through all appellate and bankruptcy proceedings) of
whatever nature incurred by the Secured Party hereunder or in connection
herewith, unless such loss, liability, cost or expense shall be due to willful
misconduct or gross misconduct or gross negligence on the part of the Secured
Party or its directors, officers, agents or employees as shall have been
determined in a final, nonappealable judgment of a court of competent
jurisdiction.
(b) The Pledgor hereby agrees to pay to the Secured Party, upon
demand, the amount of any taxes (including documentary stamp taxes) which the
Secured Party may have been required to pay by reason of the security interests
established pursuant to this Agreement (including any applicable transfer
taxes).
(c) All obligations of the Pledgor under this Sectwed by law and
shall be additional Secured Obligations secured hereby.
SECTION 15. TERMINATION. This Agreement, and the assignments,
pledges and security interests created or granted hereby, shall terminate when
(a) all the Secured Obligations shall have been indefeasibly paid in full in
cash and satisfied and (b) the commitments and obligations of the Secured Party
under the Loan Agreement have terminated, at which time the Secured Party shall
reassign and deliver to the Pledgor, or to such person or persons as the Pledgor
shall designate, against receipt, such of the Collateral (if any) as shall not
have been sold or otherwise applied by the Secured Party pursuant to the terms
hereof and shall still be held by it hereunder, together with appropriate
instruments of reassignment and release, all without any recourse to, or
warranty whatsoever by, the Secured Party, and at the sole cost and expense of
the Pledgor; PROVIDED, HOWEVER, that all indemnities of the Pledgor contained in
this Agreement shall survive, and remain operative and in full force and effect
regardless of, the termination of this Agreement. Upon any such termination of
the security interests or release of Collateral, the Secured Party will, at the
Pledgor's expense, execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence the termination of the security
interests in the Collateral.
-12-
<PAGE>
SECTION 16. NOTICES. All notices, demands, requests and other
communications, if any, required under this Agreement shall be given in the
manner set forth in the Loan Agreement. This Agreement does not require that
Secured Party give Pledgor any notice, demand, or request and this Section 16
shall not be construed to create such a requirement.
SECTION 17. FURTHER ASSURANCES. The Pledgor agrees to do such
further acts and things, and to execute and deliver such additional conveyances,
stock powers, proxies, assignments, agreements, financing statements and other
recordings, and instruments, as the Secured Party may at any time request in
connection with the administration and enforcement of this Agreement or with
respect to the Collateral or any part thereof or in order better to assure and
confer unto the Secured Party its rights, powers and remedies hereunder.
SECTION 18. SUCCESSORS AND ASSIGNS. In the event of assignment of
all or a portion of any of the indebtedness under the Loan Agreement by the
Secured Party, the rights of or on behalf of the Secured Party hereunder, to the
extent applicable to the indebtedness so assigned, shall be transferred with
such indebtedness. This Agreement is binding on the Pledgor and its heirs, legal
representatives and successors, but none of them shall be permitted to assign
this Agreement, any of its obligations hereunder or any interest herein or in
the Collateral, or any part thereof, or otherwise pledge, encumber or grant any
option with respect to the Collateral, or any part thereof, or any cash or
property held by the Secured Party as Collateral under this Agreement except as
expressly permitted by this Agreement or the Loan Agreement.
SECTION 19. CHANGES IN WRITING. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by a statement or instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. Any
waiver shall be effective only in the specific instance and for the specific
purpose for which made or given.
SECTION 20. APPLICABLE LAW. This Agreement shall be construed in
accordance with and governed by the law of the State of Florida.
SECTION 21. JUDICIAL PROCEEDINGS Pledgor irrevocably and
unconditionally: (a) agrees that any suit, action, or other legal proceeding
arising out of or relating to this Agreement may be brought, at the option of
the Secured Party, in a court of record of the State of Florida in Broward
County, in the United States District Court for the Southern District of
Florida, or in any other court of competent jurisdiction; (b) consents to the
jurisdiction of each such court in any such suit, action, or proceeding; (c)
waives any objection which it may have to the laying of venue of any such suit,
action, or proceeding in any of such courts; and (d) agrees that service of any
court paper may be effected on Pledgor by mail, addressed and mailed as provided
in Section 16 hereof or in such other manner as may be provided under applicable
laws or court rules in said State. Pledgor hereby irrevocably appoints John T.
Kinsey, Esq., whose address is Two Executive Court, 2300 Corporate Blvd., Suite
112, Boca Raton, Florida 33431, as agent for the service of process for the
purposes of any purported controversy or cause of action arising out of this
Agreement or any related
-13-
<PAGE>
instrument.
SECTION 22. SEVERABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in such
jurisdiction, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 23. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument. This Agreement
shall be effective when a counterpart bearing the signature of the Pledgor shall
have been delivered to the Secured Party.
SECTION 24. HEADINGS. Section headings used herein are for
convenience only and are not to affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 25. IMMUNITIES OF SECURED PARTY. The Secured Party's
performance of its duties hereunder shall in all respects be subject to and
governed by the Loan Agreement. Nothing contained herein shall be construed to
enlarge the degree of responsibility or discretion or the duty of care to be
exercised by the Secured Party beyond those expressly set forth in the Loan
Agreement.
SECTION 26. WAIVER OF TRIAL BY JURY. SECURED PARTY AND PLEDGOR
HEREBY KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT
EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR
COUNTERCLAIM BASED ON THIS AGREEMENT, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION
WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR SECURED PARTY ACCEPTING THIS AGREEMENT FROM PLEDGOR AND
FOR PLEDGOR GIVING THIS AGREEMENT TO SECURED PARTY.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
PLEDGOR:
TRANSEASTERN PROPERTIES OF SOUTH
FLORIDA, INC., a Florida corporation
By:
<PAGE>
Name:
Title: President
AMRESCO FUNDING CORPORATION, as
Secured Party
By_________________________________
Name:
Title:
SCHEDULE 1 TO THE
PLEDGE AGREEMENT
PLEDGED SECURITIES
<TABLE>
<CAPTION>
==========================================================================================================
ISSUER SHARES PLEDGED CERTIFICATE NUMBER(S) PLEDGOR
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transeastern Pembroke Villages, Inc.
==========================================================================================================
</TABLE>
<PAGE>
GUARANTY
Dated as of March 29, 1996
DEFINITIONS:
In this Guaranty (this "GUARANTY"), the following terms shall have the
following indicated meanings:
1. BORROWER: TRANSEASTERN PEMBROKE VILLAGES, INC., a Florida corporation
2. LENDER: AMRESCO FUNDING CORPORATION, a Delaware corporation
3. GUARANTORS: collectively, TRANSEASTERN PROPERTIES OF SOUTH FLORIDA,
INC., a Florida corporation ("TRANSEASTERN"), ARTHUR FALCONE, EDWARD FALCONE,
and PHILIP CUCCI, jointly and severally.
4. OBLIGATIONS: All indebtedness, liabilities, covenants, promises,
agreements, terms, conditions and other obligations of every nature whatsoever
of Borrower to Lender and all renewals, modifications and extensions thereof
howsoever, evidenced, whether now existing or hereafter created or arising,
direct or indirect, absolute or contingent, joint or several, liquidated or
unliquidated, matured or unmatured, and howsoever now or hereafter owned, held
or acquired by Lender and arising out of (a) that certain promissory note
executed by Borrower to Lender of even date herewith in the original principal
amount of THREE MILLION AND NO/100 DOLLARS ($3,000,000.00); (b) that certain
loan agreement executed by Borrower and Lender of even date herewith (the "LOAN
AGREEMENT" - unless otherwise defined herein, all capitalized terms used herein
shall have the meanings assigned to the same in the Loan Agreement); and (c) all
other Loan Documents. The foregoing shall be deemed to include, without
limitation: (i) all principal and interest (including, without limitation, all
interest accruing after a petition is filed in bankruptcy or similar
proceedings, notwithstanding that Borrower's obligation to pay such interest may
have ceased to exist by operation of law) and other charges and payments due
under the Loan Documents, including, without limitation the Contingent Returns
if they become payable pursuant to the Loan Documents; (ii) all costs of
collection, including reasonable attorneys' fees, paralegals' fees and legal
assistants' fees (whether incurred with collection, trial, appeal, bankruptcy
proceedings or otherwise notwithstanding that Borrower's obligation to pay such
fees may have ceased to exist by operation of law); (iii) all monies paid by
Lender on account of taxes, assessments, wages, insurance, or to any other
person as a result of this Guaranty or arising out of or connected with the
loans or advances made to Borrower; (iv) all documentary stamp tax and
intangible tax (including interest and penalties, if any) determined to be due
in connection with any evidence of said indebtedness, obligations and
liabilities; and (v) all other amounts which Borrower is obligated to pay Lender
under any of the Loan Documents.
CONSIDERATION:
As a material inducement to Lender to extend credit to Borrower pursuant
to the Loan Documents and because the Guarantors will benefit from any credit
extended to Borrower, the Guarantors make this Guaranty. In connection
therewith, the Guarantors covenant that Transeastern is the sole shareholder of
Borrower and Arthur Falcone, Edward Falcone and Philip Cucci are the sole
shareholders, jointly with their spouses, of at least 80% of the voting (I.E.,
common) stock of Traneastern and, accordingly, the Guarantors will derive a
substantial benefit from the Loan.
TERMS, COVENANTS AND CONDITIONS:
1. NATURE AND SCOPE OF GUARANTY. Subject to the provisions of Section 10
of this Guaranty:
1.1 The Guarantors, jointly and severally, irrevocably, absolutely and
unconditionally guarantee to Lender, the due and punctual payment and
performance of the Obligations.
1.2 This Guaranty is an absolute and unconditional guaranty of payment
and performance and not one of collection and all Obligations guaranteed hereby
shall be conclusively presumed to have been created in reliance hereon.
1.3 Guarantors will make all payments hereunder in lawful money of the
United States of America in immediately available funds without set-off or
counterclaim.
1.4 Guarantors' liability hereunder shall remain unchanged irrespective
of any invalidity, illegality or unenforceability of or any defense (whether
arising by reason of disability, dissolution or liquidation of Borrower, or lack
of corporate or partnership power or authority of Borrower, or claims that any
interest to be paid to Lender in connection with the Loan Documents, exceeds the
applicable usury threshold or otherwise) to the Obligations, the Loan Documents
or any portion thereof, or of any security for the Obligations, or any portion
thereof, it being understood and agreed that each Guarantor shall be and remain
fully bound hereunder regardless of whether Borrower shall be found not liable
on the Obligations or any other guarantor (including a Guarantor) be relieved or
released from liability for any reason whatsoever.
1.5 In case of the death, incompetency, disability, dissolution,
liquidation or insolvency (howsoever evidenced) of Borrower, or in case any
bankruptcy, reorganization, debt arrangement, adjustment, composition, or other
proceeding under any bankruptcy or insolvency law, or any dissolution,
liquidation or receivership proceeding is instituted by or against Borrower, or
Borrower admits in writing its inability to pay its debts as they mature, all
Obligations then existing shall at the option of Lender, without notice to
anyone, immediately become due and payable by the Guarantors.
1.6 Guarantors acknowledge that Lender has no obligations or
duties to Guarantors under this Guaranty.
2. DISCHARGE OF GUARANTORS. Guarantors shall be discharged from
liability hereunder only upon the full payment and performance of the
Obligations; provided, however, that if any sums paid to and applied by Lender
toward the Obligations are thereafter required to be repaid to Borrower or to
any affiliate of Borrower, or to any trustee, receiver or other person, by
reason of the application of the Bankruptcy Code, the Uniform Fraudulent
Transfer Act or any other law relating to creditors' rights generally, then this
Guaranty shall be reinstated, AB INITIO, as if such portion of the Obligations
had never been paid.
3. CONSENT TO AGREEMENTS MADE BY BORROWER. Guarantors consent, without
notice to Guarantors, to all terms and agreements set forth in the Loan
Documents and all other terms and agreements hereafter made by Borrower with
Lender insofar as same may affect the Obligations.
4. CONSENT TO LENDER'S ACTIONS OR INACTIONS REGARDING BORROWER, THE
GUARANTORS, AND THE COLLATERAL. Guarantors consent that Lender may at any time
and from time to time, before or after any default by Borrower, with or without
further notice to or consent from Guarantors:
4.1 Either with or without consideration to Borrower, any guarantor
(including any of the Guarantors), pledgor, or grantor of any Collateral,
exchange, release, surrender (in whole or in part), or fail to protect or to
preserve the value of any Collateral now or hereafter held as security for the
Obligations, or waive, release, or subordinate any lien or security interest (in
whole or in part) in or on any such Collateral;
4.2 Waive or delay the exercise of any of its rights or remedies against
Borrower or any other person or entity, including, without limitation, any
guarantor (including any Guarantor); notwithstanding any waiver or delay, Lender
shall not be precluded from further exercise of any of its rights, powers or
privileges expressly provided for herein or otherwise available, it being
understood that all such rights and remedies are cumulative;
4.3 Waive or extend the time of Borrower's performance of any and all
terms, provisions and conditions set forth in the Loan Documents or in any other
instrument or agreement evidencing or relating to the Obligations;
4.4 Release Borrower or any other person or entity, including, without
limitation, any guarantor (including any Guarantor) from all or any portion of
the Obligations;
4.5 Proceed against any or all of the Guarantors without first
proceeding against or joining Borrower or any guarantor (including the other
Guarantors) or any endorser of the Note or other agreement evidencing the
Obligations, or any property securing the payment or performance of the
Obligations, including, without limitation, the Loan Documents;
4.6 Renew, extend or modify the terms of the Obligations or any
instrument or agreement evidencing or relating to the Obligations;
4.7 Apply payments by Borrower, the Guarantors, or any other person or
entity to the reduction of the Obligations in such manner and in such amounts
and at such time or times and in such order and priority as Lender may see fit;
and
4.8 Generally deal with Borrower or any of the security for the
Obligations or other person or party as Lender may see fit.
The Guarantors shall remain bound under this Guaranty notwithstanding any such
exchange, release, surrender, subordination, waiver (whether or not such waiver
is oral or written), delay, proceeding, renewal, extension, modification,
application, act or failure to act, or other dealing described in Subsections
4.1 through 4.8, inclusive, above even though done without notice to or consent
from the Guarantors.
5. WAIVER OF RIGHTS.
5.1 Guarantors shall not be entitled to any abatement, deferment,
suspension, reduction, set-off, defense or counterclaim in respect of the
Obligations.
5.2 Guarantors expressly waive all rights Guarantors may have now or in
the future under any statute, or at common law, or at law or in equity, or
otherwise, including, without limitation, any rights Guarantors may have to
compel Lender to proceed in respect of the Obligations against Borrower or any
other party or against any security for the payment of the Obligations before or
while proceeding against, or as a condition to proceeding against, Guarantors.
Guarantors agree that any notice or direction given at any time to Lender which
is inconsistent with the waiver in the immediate preceding sentence shall be
void and may be ignored by Lender, and, in addition, may not be pleaded or
introduced as evidence in any litigation relating to this Guaranty for the
reason that such pleading or introduction would be at variance with the written
terms of this Guaranty, unless Lender has specifically agreed otherwise by a
written document.
5.3 It is agreed between Guarantors and Lender that the foregoing
waivers contained in this Section 5 are of the essence of the making of the Loan
and that, but for this Guaranty and such waivers, Lender would decline to agree
to the Loan.
5.4 In addition to the other waivers by Guarantors contained herein,
Guarantors waive and agree that Guarantors will not at any time insist upon,
plead or in any manner whatever claim or take the benefit or advantage of, any
and all appraisal, valuation, stay, extension, marshalling-of-assets or
redemption laws, or right of homestead or exemption, whether now or at any time
hereafter in force, which may delay, prevent or otherwise affect the performance
by Guarantors or Guarantors' obligations under, or the enforcement by Lender of
this Guaranty.
5.5 Guarantors hereby waive diligence, notice of dishonor, presentment
and demand (whether for non-payment or protest or of acceptance, maturity,
extension of time, change in nature or form of the Obligations, acceptance of
further security, release of security, composition or agreement arrived at as to
the amount of or the terms of the Obligations, notice of adverse change in
Borrower's financial condition, any default by Borrower or any pledgor, grantor
of security, or any guarantor (including the Guarantors) and any other fact
which might materially increase the risk to Guarantors) and any other notices to
which the Guarantors may otherwise be entitled with respect to any of the
Obligations, and all other demands whatsoever, and waive the benefit of all
provisions of law which are or might be in conflict with the terms of this
Guaranty, except to the extent that this Guaranty may otherwise specify the
giving of notice.
6. SUBROGATION Guarantors shall not have any right of contribution,
subrogation, reimbursement or indemnity whatsoever against Borrower, nor any
right of recourse to security for the Obligations or guaranty obligations of
Borrower to Lender, all of which shall be deemed to be waived by Guarantors.
Neither Guarantors nor Borrower shall be deemed a creditor of the other with
respect to the Obligations or to any other obligations arising hereunder, as
said term "creditor" is defined pursuant to Title 11 of the United States Code,
as amended.
(a) If, notwithstanding the foregoing, Guarantors, by payment or
otherwise, become subrogated to all or any of the rights of Lender under any of
the Loan Documents or any other documentation underlying or securing the
Obligations and the foregoing waiver is not effective under applicable law, the
rights of Lender to which Guarantors shall be subrogated shall be accepted by
Guarantors "as is" and without any representation or warranty of any kind by
Lender, expressed or implied, with respect to the legality, value, validity or
enforceability of any of such rights, or the existence, availability, value,
merchantability or fitness for any particular purpose of any Collateral.
(b) If Lender may under any applicable law proceed to realize its
benefits under any of the Loan Documents giving Lender a lien upon or security
interest in the Collateral whether owned by Borrower or by any other person,
either by judicial foreclosure or by non-judicial sale or enforcement, Lender
may, at its sole option, determine which of its remedies or rights it may pursue
without affecting any of its rights and remedies under this Guaranty. If in the
exercise of any of its rights and remedies Lender shall forfeit any of its
rights or remedies, whether because of any applicable laws pertaining to
"election of remedies" or anti-deficiency statute or law or the like, Guarantors
hereby consent to such action by Lender and waives any claim based upon such
action, even if such action by Lender shall result in a full or partial loss of
any rights of subrogation which the Guarantors might otherwise have had but for
such action by Lender. Any election of remedies or anti-deficiency statute or
law which results in the denial or impairment of Lender's right to seek a
deficiency judgment against Borrower, including, without limitation, the
exercise of Lender's rights under the Pledge Agreement to retain the Stock under
Section 679.505(2) of the Florida Statutes in effect on the date hereof (or any
successor statutory section), shall not impair Guarantors' obligation to pay
such deficiency. In the event Lender shall bid in at any foreclosure sale or at
any private sale permitted by law or by the Loan Documents for the Mortgaged
Property or any of the Collateral, including the Stock, Lender may bid all or
less than the amount of the indebtedness owing by Borrower to Lender and the
amount of such bid need not be paid by Lender but will be credited against the
Obligations. The amount of the successful bid at any such sale, whether Lender
or any other party is the successful bidder, shall be conclusively deemed to be
the fair market value of the Collateral notwithstanding that any present or
future law or court decision or ruling may have the effect of reducing the
amount of any deficiency claim to which Lender might otherwise be entitled under
this Guaranty.
7. SUBORDINATION.
7.1 All rights and claims of Guarantors (collectively the "GUARANTOR
CLAIMS") against Borrower or any of Borrower's property now or hereafter
existing shall be subordinate and subject in right of payment to the prior
payment in full of and the performance of all of the Obligations.
Notwithstanding the foregoing, if an Event of Default occurs and Lender retains
or otherwise disposes of the Stock in accordance with the Pledge Agreement, then
as and from the date that the Stock is retained or otherwise disposed of by
Lender, Guarantors shall be deemed to have waived all of their Guarantor Claims.
7.2 Until the Obligations have been paid and performed in full and
Guarantors shall have performed all of Guarantors' obligations hereunder,
Guarantors shall not receive or collect, directly or indirectly, from Borrower
or any other party any payment upon the Guarantor Claims, nor seek to realize
upon any collateral securing such Guarantor Claims. Notwithstanding the
foregoing, if Guarantors should receive any such payment, Guarantors agree to
hold same in trust for Lender and agrees that Guarantors shall have absolutely
no rights in or to or dominion over such payments except to pay them promptly to
Lender, and Guarantors hereby covenant to do so; provided, however, that
Guarantors are not obligated to repay amounts representing Borrower's First
Property Returns which are received by Guarantors prior to the occurrence of an
Event of Default.
8. GRANT. To secure the prompt payment and performance of the
Obligations, the Guarantors grant to Lender a continuing first lien security
interest in the Guarantor Claims and all proceeds thereof. Guarantors agree that
Lender shall have the rights and remedies of a secured party under the Uniform
Commercial Code-Secured Transactions as adopted by the State of Florida with
respect to all of the Guarantor Claims, including, without limitation, the right
to sell or otherwise dispose of any or all of such property. Lender may, without
further notice to anyone, apply or set off any balances, credits, deposits,
accounts, monies or other indebtedness at any time created by or due from Lender
to the Guarantors against the amounts due hereunder. Any notification of
intended disposition of any property required by law shall be deemed reasonably
and properly given if given at least five (5) calendar days before such
disposition.
9. DEFAULT BY BORROWER. Guarantors shall be deemed to be in default
under the terms of this Guaranty in the event that: (a) Guarantors fail to
provide the financial statements set forth in Section 10 below; (b) any
representation of Guarantors herein proves to be false or materially misleading;
or (c) Guarantors fail to comply with their representations, covenants, and
agreements set forth herein. If any Event of Default or any default which
continues beyond any applicable grace or cure period shall occur under any of
the Loan Documents, including, without limitation, a default under this
Guaranty, and if Lender shall declare the then outstanding principal amount of
the Note and all other amounts due under the Loan Agreement and other Loan
Documents, together with accrued interest, to be immediately due and payable and
if this Guaranty has become enforceable under the provisions of Section 10
thereof, then Guarantors shall, within three (3) days after demand in writing
therefor shall have been made by Lender to Guarantors, pay to Lender the amount
of all outstanding Obligations due and owing Lender. Payment by Guarantors shall
be made to Lender at the address indicated below for the giving of notice to
Lender or at any other address that may be specified in writing from time to
time by Lender.
10. EFFECTIVENESS OF GUARANTY. This Guaranty shall be effective on the
date hereof, provided, however, that Lender shall not proceed to enforce any of
the terms and provisions hereof, unless and until the occurrence of the
following events:
(a) any Collateral shall be transferred which causes an Event of Default
to occur under the Loan Agreement;
(b) an Event of Default occurs under the Loan Agreement as a result of
the breach of the non-competition covenant set forth in Section 9.13 thereof;
(c) any lien or encumbrance, including, without limitation, mechanic=s
liens, shall be placed against any of the Collateral which causes an Event of
Default under the Loan Agreement;
(d) Borrower shall misuse or misapply any funds, including, without
limitation, Loan Proceeds, sales proceeds or other revenues of Borrower,
insurance or condemnation proceeds, deposits or escrowed funds;
(e) Borrower, Guarantors or any other Borrower related parties to the
Loan Documents shall enter into any transactions with affiliates of Borrower or
Guarantors (i.e., entities in which Borrower and/or any Guarantors own,
singularly or in the aggregate, more than a fifteen percent (15%) interest);
(f) Borrower, any or all of the Guarantors or any other Borrower related
parties to the Loan Documents (including, without limitation, any successors of
the foregoing, such as a trustee in Bankruptcy), shall attempt in any manner to
obstruct Lender=s exercise of any of its remedies under the Loan Documents after
an Event of Default has occurred thereunder, provided, however, that Borrower or
any or all of the Guarantors or any other Borrower related party to the Loan
Documents may challenge the existence of a Default or Event of Default, without
causing this Guaranty to become effective under this subsection (f), unless a
court of competent jurisdiction determines that the Default or Event of Default
declared by Lender does in fact exist, in which event such challenge shall be
deemed the occurrence of an event set forth in this subsection (f) and this
Guaranty shall thereupon become effective;
(g) Borrower, any or all of the Guarantors or any other Borrower related
parties to the Loan Documents (including, without limitation, any successors of
the foregoing, such as a trustee in Bankruptcy) shall challenge or assert a
defense to Lender=s rights pursuant to the Loan Documents, including, without
limitation, Lender=s right to any payments provided for in the Loan Documents,
be they payments of principal, interest, Contingent Returns or otherwise;
(h) Lender becomes liable or is otherwise alleged to be liable for any
Environmental Claim that is not cured and/or paid by Borrower in accordance with
the terms of the Environmental Indemnity Agreement and the other Loan Documents;
(i) there shall occur any intentional destruction or waste of the
Improvements or other assets of Borrower;
(j) Borrower shall fail to complete the construction of the Project as a
result of a discrepancy between actual development and construction costs for
the Project being in excess of amounts reflected in the proforma projections for
the same which have been approved by Lender, to the extent that actual costs
exceed those reflected in the projections by an amount in excess of $50,000.00,
in the aggregate (after netting savings against cost increases);
(k) Borrower shall fail to complete the construction of any structure
(as evidenced by the issuance of a certificate of occupancy) upon which
construction has commenced (as defined as pouring a slab) free of any Liens.
(l) if an Event of Default occurs and if so requested by Lender, the
failure of Borrower, Guarantors or any other Borrower related party to the Loan
Documents to facilitate and cooperate with Lender in an uncontested foreclosure
and/or a deed in lieu of foreclosure for all of the real property, and one or
more comparable procedures with respect to all personal property, which stands
as Collateral for the Loan, which shall include, without limitation, Borrower's,
Pledgor's or any other party's objection to Lender retaining the Stock under the
Pledge Agreement in satisfaction of Borrower's obligations under the Loan in
accordance with Section 679.505(2) of the Florida Statutes, in effect on the
date hereof (or any successor statutory section); .
(m) if an Event of Default occurs and if so requested by Lender, the
failure of Borrower, Pledgor or any other Borrower related party to the Loan
Documents to liquidate the Collateral in a manner acceptable to Lender;
(n) fraud of Borrower, any of the Guarantors or any other Borrower
related parties to the Loan Documents;
(o) misrepresentation of Borrower, any of the Guarantors or any other
Borrower related parties to the Loan Documents;
(p) criminal acts of Borrower, any of the Guarantors or any other
Borrower related parties to the Loan Documents; or
(q) Borrower merges or consolidates with any partnership, corporation or
other entity or person, including, without limitation, Transeastern, or acquires
any assets or business from or stock of any partnership, corporation or other
entity or person, including, without limitation, Transeastern, or is otherwise
deemed to be consolidated or merged in any bankruptcy proceedings or otherwise,
or causes an Event of Default to occur under the Loan Agreement as a result of
the breach of Section 9.10 thereof.
11. FINANCIAL STATEMENTS. So long as all or any portion of the
Obligations remains unpaid or unsatisfied, each Guarantor covenants and agrees
that each Guarantor shall deliver to Lender:
11.1 within one hundred twenty (120) days after the end of each fiscal
year of a corporate Guarantor, financial statements of profit and loss for each
such fiscal year and balance sheets as of the end of each such year, in
reasonable detail, and in form and content acceptable to Lender, prepared in
accordance with generally accepted accounting principles consistently applied
and certified by such corporate Guarantor;
11.2 within one hundred twenty (120) days after the end of each calendar
year, then current financial statements of each Guarantor (which shall be
prepared at least annually), certified by each Guarantor and in form and content
satisfactory to Lender and (A) if a corporate Guarantor, prepared in accordance
with generally accepted accounting principles consistently applied, and (B) if
an individual Guarantor, prepared on a present value basis;
11.3 within fifteen (15) days after the same is filed, a copy of the tax
return of each Guarantor; and
11.4 forthwith after the issuance thereof, any other financial
statements of each Guarantor, prepared by an accountant or furnished directly or
indirectly to any other creditor.
12. REPRESENTATIONS AND WARRANTIES.
12.1 Guarantors represent and warrant to Lender that:
(a) Transeastern (A) is duly organized, validly existing and in good
standing under the laws of the state of Florida, (B) has the corporate power and
authority to own its properties and to carry on its business as now being
conducted, (C) is qualified to do business in the State of Florida, (D) is in
compliance with all laws, orders, regulations, authorizations and similar
matters (collectively the "GOVERNMENTAL REQUIREMENTS") of all governmental
authorities, whether federal, state, county, or municipal (collectively the
"GOVERNMENTAL AUTHORITY"), (E) all of its issued and outstanding stock is fully
paid and nonassessable, there are no outstanding rights or options to acquire
any additional stock (except for warrants exercisable by holders of Class A
Preferred Shares of Transeastern for conversion to common stock thereof), and
its stock has not been pledged or encumbered in any manner whatsoever and (F)
has not amended or modified its articles of incorporation or its bylaws except
as previously disclosed in writing to Lender prior to the execution hereof.
(b) The execution, delivery and performance by Guarantors of this
Guaranty, (i) is within the corporate purposes of Transeastern, (ii) has been
duly authorized by all requisite corporate action of Transeastern, (iii) does
not require the approval of any Governmental Authority, and (iv) will not
violate any Governmental Requirement, the articles of incorporation and bylaws
of Transeastern or any indenture, agreement or other instrument to which
Guarantors are a party or by which Guarantors or any of Guarantors' property is
bound, or be in conflict with, result in a breach of or constitute (with due
notice or the lapse of time, or both) a default under any such indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of Guarantors'
property or assets, except as contemplated by the provisions of this Guaranty.
(c) This Guaranty when executed and delivered by Guarantors will
constitute the legal, valid and binding obligations of Guarantors enforceable in
accordance with the terms hereof.
(d) There are no judgments outstanding against Guarantors and there is
no action, suit, proceeding, or investigation now pending (or to the best of
Guarantors' knowledge after diligent inquiry threatened) against, involving or
affecting any Guarantor or any Guarantor's properties or any part thereof, at
law, in equity or before any Governmental Authority, which will have a material
adverse effect on the Project or the financial condition of the Guarantors.
(e) All balance sheets, statements of profit and loss and other
financial data that have been and will be given to Lender with respect to
Guarantors in accordance with Section 11 hereof, (i) are and will be complete
and correct in all material respects; (ii) do and will accurately present the
financial condition of Guarantors as of the dates, and the results of
Guarantors' operations, for the periods for which the same have been and will be
furnished; and (iii) as to Transeastern, have been and will be prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods covered and to be covered thereby and, as to the
individual Guarantors, have been or will be prepared on a present value basis.
(f) All balance sheets disclose and will disclose all known liabilities,
direct and contingent, as of their respective dates; and there has been no
change in the condition of Guarantors, financial or otherwise, since the date of
the most recent financial statements given to Lender with respect to Guarantors
other than changes in the ordinary course of business, none of which changes has
been materially adverse.
(g) None of the Guarantors are insolvent and will not be rendered
insolvent by the execution, delivery, payment and performance of this Guaranty.
(h) Until the Obligations have been paid and performed in full and
Guarantors shall have performed all of Guarantors' obligations hereunder,
Guarantors shall not, directly or indirectly, sell, convey, or transfer or
permit to be sold, conveyed, or transferred any of Guarantors' assets to any
party or entity to which Guarantors are related or in which Guarantors have an
interest without Lender's prior written consent which may be granted or withheld
in Lender's sole and absolute discretion.
(i) Guarantors represent, warrant and agree that, as of the date of this
Guaranty, Guarantors' obligations under this Guaranty are not subject to any
counterclaims, offsets or defenses against Lender of any kind. Guarantors
further agree that Guarantors' obligations under this Guaranty shall not be
subject to any counterclaims, offsets or defenses against Lender or against
Borrower of any kind which may arise in the future.
12.2 Guarantors acknowledge that Lender has relied upon the Guarantors'
representations, has made no independent investigation of the truth thereof and
is not charged with any knowledge contrary thereto that may have been received
by any officer, director, employee, or shareholder of Lender. Guarantors further
acknowledges that they have not been induced to execute and deliver this
Guaranty as a result of, and is not relying upon, any representations,
warranties, agreements, or conditions, whether express or implied, written or
oral, by Lender or by any officer, director, employee, or shareholder of Lender.
13. MODIFICATION. No agreement unless in writing and signed by an
authorized officer of Lender and no course of dealing between Guarantors and
Lender shall be effective to change or modify or to discharge in whole or in
part this Guaranty. No waiver of any rights or powers of Lender or consent by it
shall be valid unless in writing signed by an authorized officer of Lender and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
14. COST OF ENFORCEMENT. Guarantors agree that, whenever an attorney is
used to obtain payment or performance under or otherwise enforce this Guaranty
or to enforce, declare, or adjudicate any rights or obligations under this
Guaranty, whether by suit or any other manner whatsoever, reasonable attorneys'
fees, paralegals' fees, legal assistants' fees and costs (whether incurred in
collection, litigation, bankruptcy proceedings, appeals, or otherwise) shall be
payable by Guarantors to Lender.
15. SUBMISSION TO JURISDICTION. Guarantors irrevocably and
unconditionally: (a) agree that any suit, action, or other legal proceeding
arising out of or relating to this Guaranty may be brought, at the option of
Lender, in a court of record of the STATE OF FLORIDA IN BROWARD COUNTY, IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA, or in any
other court of competent jurisdiction; (b) consent to the jurisdiction of each
such court in any such suit, action, or proceeding; (c) waive any objection
which it may have to the laying of venue of any such suit, action, or proceeding
in any of such courts; and (d) agree that service of any court paper may be
effected on any Guarantor by mail, addressed and mailed as provided in Section
16 hereof or in such other manner as may be provided under applicable laws or
court rules in said State. Transeastern hereby irrevocably appoints John T.
Kinsey, whose address is Two Executive Court, 2300 Corporate Boulevard, Suite
112, Boca Raton, Florida 33431, as agent for the service of process for the
purposes of any purported controversy or cause of action arising out of this
Guaranty or any related instrument.
16. NOTICE. All notices, demands, requests and other communications, if
any, required under this Guaranty shall be given in accordance with the Loan
Agreement. This Guaranty does not require that Lender give Guarantors any
notice, demand, or request and this Section 16 shall not be construed to create
such a requirement.
17. CONFLICT OF LAW. This Guaranty shall be construed, interpreted,
enforced and governed by and in accordance with the laws of the State of Florida
(excluding the principles thereof governing conflicts of law).
18. CONTINUING GUARANTY. Guarantors agree that this Guaranty is a
continuing guaranty and shall remain in full force and effect until the payment
in full of the Obligations.
19. PERMITTED ASSIGNMENT BY LENDER. Lender may freely assign its rights
and delegate its duties under this Guaranty without notice to or the consent of
Guarantors.
20. FURTHER ASSURANCE. Guarantors agree, upon the written request of
Lender, to execute and deliver to Lender from time to time any additional
instruments or documents reasonably considered necessary by Lender or its
counsel to cause this Guaranty to be, become or remain valid and effective in
accordance with its terms.
21. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Guarantors set forth in this Guaranty shall survive for so long as
all or any portion of the Obligations remains unpaid or unsatisfied.
22. NON-WAIVER. The failure of Lender to enforce any right or remedy
hereunder, or promptly to enforce any such right or remedy, shall not constitute
a waiver thereof, nor give rise to any estoppel against Lender, nor excuse
Guarantors from their obligations hereunder. Any waiver of any such right or
remedy must be in writing and signed by Lender. In the event any of the deadline
for the payment of any sums or performance of any obligations hereunder occurs
on a day which is not a Business Day, then such deadline shall be deemed to be
the next occurring Business Day.
23. GENDER AND NUMBER. In this Guaranty, wherever the context so
requires, the use of any gender shall include all other genders, and words in
the singular shall include the plural and the plural shall include the singular.
Where applicable the term "Guarantors" as used herein mean the "Guarantors and
each of them".
24. SUCCESSORS AND ASSIGNS. This Guaranty shall inure to the benefit of
Lender, its successors and assigns, and shall be binding upon the Guarantors and
their respective heirs, personal representatives, successors and assigns.
25. SAVINGS CLAUSE. If any provision or portion of this Guaranty is
declared or found by a court of competent jurisdiction to be unenforceable or
null and void, such provision or portion thereof shall be deemed stricken and
severed from this Guaranty, and the remaining provisions and portions thereof
shall continue in full force and effect.
26. HEADINGS. The captions of Sections of this Guaranty are for
convenient reference only, and shall not affect the construction or
interpretation of any of the terms and provisions set forth in this Guaranty.
27. JOINT AND SEVERAL LIABILITY. The liability of the Guarantors
hereunder shall be joint and several with Borrower and all other guarantors of
the Obligations.
28. WAIVER OF TRIAL BY JURY. LENDER AND GUARANTORS HEREBY KNOWINGLY,
IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS
GUARANTY, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY OR ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS GUARANTY, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER
ACCEPTING THIS GUARANTY FROM GUARANTORS AND FOR GUARANTORS GIVING THIS GUARANTY
TO LENDER.
IN WITNESS WHEREOF, the Guarantors intending to be jointly and severally
legally bound hereby have duly executed and delivered this Guaranty on the 29th
day of March, 1996.
Signed, sealed and delivered
in the presence of:
TRANSEASTERN PROPERTIES OF SOUTH
FLORIDA, INC., a Florida corporation
By:
Name:
Title:
ARTHUR FALCONE
EDWARD FALCONE
PHILIP CUCCI
[ACKNOWLEDGMENTS FOLLOW]
STATE OF FLORIDA )
) ss.:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this 29th day of March,
1996, by , as
of TRANSEASTERN PROPERTIES OF SOUTH FLORIDA, INC., a Florida
corporation, on behalf of the corporation. He/she is personally known to me or
has produced a driver's license as identification.
Print or Stamp Name:
Notary Public, State of Florida at Large
Commission No.:
My Commission Expires:
STATE OF FLORIDA )
) ss.:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this 29th day of
March, 1996, by ARTHUR FALCONE, an individual. He/she is personally known to me
or has produced a driver's license as identification.
Print or Stamp Name:
Notary Public, State of Florida at Large
Commission No.:
My Commission Expires:
STATE OF FLORIDA )
) ss.:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this 29th day of
March, 1996, by EDWARD FALCONE, an individual. He/she is personally known to me
or has produced a driver's license as identification.
Print or Stamp Name:
Notary Public, State of Florida at Large
Commission No.:
My Commission Expires:
STATE OF FLORIDA )
) ss.:
COUNTY OF BROWARD )
The foregoing instrument was acknowledged before me this 29th day of
March, 1996, by PHILIP CUCCI, an individual. He/she is personally known to me or
has produced a driver's license as identification.
Print or Stamp Name:
Notary Public, State of Florida at Large
Commission No.:
My Commission Expires:
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into as of this 2nd day of June,
1993, by and between Transeastern Properties of South Florida, Inc., a Florida
corporation (the "Company"), and ________________, a director of the Company
(the "Indemnitee").
BACKGROUND
A. Article Seven of the Amended and Restated Articles of Incorporation
of the Company permits the Company to indemnify directors of the Company under
certain circumstances in accordance with the provisions of the Florida Business
Corporation Act, as the same exists or may hereafter be amended (the "Act").
B. The parties desire to memorialize herein the Company's agreement to
indemnify Indemnitee against certain expenses, and, in addition, to set forth
certain covenants and agreements with respect to the obligations of the Company
to indemnify Indemnitee.
AGREEMENT
For and in consideration of the mutual agreements herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. The following capitalized terms are used in this
Agreement with the meaning thereafter ascribed:
(a) "Corporation" means the Company, and any domestic or foreign entity
that is the successor entity to the Company by merger, combination,
consolidation, or other transaction in which the separate existence of the
Company ceases.
(b) "Director" or "director" means an individual who is or was a
director of the Corporation, or an individual who while a director of the
Corporation is or was serving at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another corporation (including
any subsidiary of the Corporation), partnership, limited liability company,
joint venture, trust, employee benefit plan, or other enterprise. A Director is
considered to be serving an employee benefit plan at the Corporation's request
if such Director's duties to the Corporation also impose duties on, or otherwise
involve services by, such Director to the participants in or beneficiaries of
the plan. The term "Director" or "director" includes, unless the context
requires otherwise, the estate or personal representative of a Director. For the
purposes of this Agreement, Indemnitee serves as a Director of each of the
subsidiaries of the Company at the request of the Company.
(c) "Expenses" includes attorneys' fees and other expenses actually and
reasonably incurred (i) by a Party in connection with the defense or settlement
of a Proceeding or (ii) by a Director in connection with a Proceeding for which
such Director is subpoenaed to appear as a witness.
<PAGE>
(d) "Indemnifiable Expenses" means all Expenses, Liabilities, and losses
(including attorneys' fees, judgments, penalties, fines, and amounts paid or to
be paid in any settlement approved in advance by the Corporation, such approval
not to be unreasonably withheld) actually and reasonably incurred or suffered by
Indemnitee in connection with a Proceeding, whether as a Party to the Proceeding
or as a witness who has been subpoenaed to appear at the Proceeding.
(e) "Interim Expenses" means Indemnifiable Expenses incurred by
Indemnitee in connection with any Proceeding to which Indemnitee is a Party in
advance of the final disposition thereof.
(f) "Liability" or "Liabilities" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to an
employee benefit plan), or reasonable Expenses incurred with respect to a
Proceeding.
(g) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a Proceeding by reason of the fact that
such individual is or was a Director or an officer of the Corporation.
(h) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, whether formal or informal, any appeal in such an action, suit,
or proceeding, and any inquiry or investigation that could lead to such an
action, suit, or proceeding, whether formal or informal.
(i) "Special Legal Counsel" means a law firm, an attorney or a member of
a law firm, that is experienced in matters of corporate law and neither
currently is, nor in the past five (5) years has been, retained to represent (i)
either the Corporation or Indemnitee in any matter material to either party, or
(ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. The term "Special Legal Counsel" shall not include
any person who, under the applicable standards of professional conduct
prevailing at the time of the representation, would have a conflict of interest
in representing either the Corporation or Indemnitee in an action to determine
Indemnitee's rights under the provisions of the Corporation's Articles of
Incorporation, Bylaws, or any agreement upon which Indemnitee relies to
establish Indemnitee's right to indemnification or advancement of expenses.
2. INDEMNIFICATION. Subject to authorization pursuant to Section 5
hereof, the Corporation shall indemnify Indemnitee against all Indemnifiable
Expenses incurred by Indemnitee in connection with any Proceeding in which
Indemnitee was, is, or is threatened to be:
(a) made a party because Indemnitee is or was a Director or officer of
the Corporation IF (i) Indemnitee acted in a manner Indemnitee reasonably
believed in good faith to be in, or not opposed to, the best interests of the
Corporation, and (ii) in the case of any criminal Proceeding, Indemnitee had no
reasonable cause to believe Indemnitee's conduct was unlawful, or
(b) subpoenaed to appear as a non-party witness.
3. EXCLUSIONS. The Corporation shall not be obligated under this
Agreement to indemnify Indemnitee in connection with any Proceeding in which:
-2-
<PAGE>
(a) a judgment or other final adjudication establishes that the acts or
omissions to act of Indemnitee were material to the cause of action and
constitute:
(i) a violation of the criminal law, unless Indemnitee had reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe
his conduct was unlawful;
(ii) a transaction from which Indemnitee derived an improper personal
benefit;
(iii) a transaction in which the liability provisions of Section
607.0834 of the Act are applicable;
(iv) willful misconduct or conscious disregard for the interests of the
Corporation liable to the Corporation, but only if the Proceeding is by or in
the right of the Corporation or by or in the right of a shareholder;
(b) Indemnitee receives payment from an insurance policy, provided that
the Corporation shall remain obligated to Indemnitee hereunder for all
Indemnifiable Expenses in excess of the payment received from such insurance
policy; or
(c) Indemnitee receives payment from the Corporation other than pursuant
to this Agreement, provided that the Corporation shall remain obligated to
Indemnitee hereunder for all Indemnifiable Expenses in excess of such payment
from the Corporation.
4. MANDATORY INDEMNIFICATION FOR SUCCESSFUL PARTY. To the extent that
Indemnitee has been successful, on the merits or otherwise, in the defense of
any Proceeding to which Indemnitee was a Party, or in defense of any claim,
issue, or matter therein, because Indemnitee is or was a Director of the
Corporation, the Corporation shall indemnify the Indemnitee against all
Indemnifiable Expenses actually and reasonably incurred by Indemnitee, including
all expenses incurred by Indemnitee in connection with establishing Indemnitee's
right to indemnification pursuant to this Section 4, in whole or in part,
subject only to the exclusions in Sections 3(b) and 3(c) hereof.
5. AUTHORIZATION AND DETERMINATION OF INDEMNIFICATION.
(a) Except with respect to mandatory indemnification pursuant to Section
4 hereof, and except as may be ordered by a court, the Corporation shall not be
obligated to indemnify Indemnitee under Section 2(a) hereof unless and until (i)
Indemnitee delivers a written demand to the Corporation pursuant to Section 7
hereof and (ii) the Corporation makes a determination in the manner set forth in
Section 5(b) below, that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct set
forth in Section 2(a) hereof (the "Standard of Conduct"). For purposes of such
determination, the termination of a Proceeding by judgment, order, settlement,
or conviction, or upon a plea of NOLO CONTENDERE or its equivalent is not, of
itself, determinative that the Indemnitee did not meet the Standard of Conduct.
Indemnitee shall be deemed to have been found liable in respect of any claim,
issue or matter only after the Indemnitee shall have been so adjudged by a court
of competent jurisdiction after of all appeals therefrom.
(b) The determination as to whether Indemnitee met the Standard of
Conduct shall be made within forty-five (45) days from the date the written
demand of the Indemnitee pursuant to Section 7 hereof is received by the
Corporation and shall be made by:
-3-
<PAGE>
(i) The Board of Directors of the Corporation, by majority vote
of a quorum consisting of Directors not at the time Parties to the
Proceeding or, if such a quorum cannot be obtained, then by majority
vote of a committee duly designated by the Board of Directors (in which
designation Directors who are Parties may participate), consisting
solely of two (2) or more Directors not at the time Parties to the
Proceeding; or
(ii) By Special Legal Counsel to the Corporation, which Special
Legal Counsel is selected by the Board of Directors or its committee in
the manner prescribed by subparagraph (i) above or, if such a quorum
cannot be obtained and such a committee cannot be designated, then
Special Legal Counsel shall be selected by majority vote of the full
Board of Directors (in which selection Directors who are Parties may
participate); or
(iii) The shareholders of the Corporation holding a majority of
votes of voting securities, provided that shares of voting securities
owned by or voted under the control of Directors who are at the time
Parties to a Proceeding shall be excluded from the vote with respect to
the determination.
(c) The Corporation shall not be obligated to indemnify Indemnitee under
Section 2(b) hereof, unless (i) Indemnitee has delivered a written demand to the
Corporation pursuant to Section 7 hereof and (ii) Indemnitee is, at the time,
not a named Party to a Proceeding. The Corporation may require Indemnitee to
comply with the provisions of Section 6 hereof as a condition precedent to the
payment of Indemnifiable Expenses.
(d) Evaluation as to reasonableness of Indemnifiable Expenses or
Expenses shall be made in the same manner as the determination that the
Indemnitee has met the applicable Standard of Conduct, except that if the
determination that the Indemnitee has met the applicable Standard of Conduct is
made by Special Legal Counsel, evaluation as to reasonableness of Indemnifiable
Expenses or Expenses shall be made by those entitled under paragraph (ii) of
Section 5(b) to select such Special Legal Counsel.
6. INTERIM EXPENSES. The Corporation shall advance Interim Expenses
incurred by Indemnitee if:
(a) Indemnitee furnishes the Corporation with a written affirmation of
Indemnitee's good faith belief that Indemnitee has met the applicable Standard
of Conduct; and
(b) Indemnitee furnishes the Corporation with a written undertaking,
executed personally or on Indemnitee's behalf in substantially the form attached
hereto as Annex I, to repay any amounts advanced under this Section if it is
ultimately determined that Indemnitee has not met the Standard of Conduct or if
it is ultimately determined that indemnification of the Indemnitee against such
Interim Expenses is prohibited by the Act. The written undertaking required
herein must be an unlimited general obligation of the Indemnitee but need not be
secured and may be accepted without reference to financial ability to make
repayment.
7. PROCEDURE FOR MAKING DEMAND. If the Indemnitee is entitled to make a
claim for indemnification pursuant to Section 2 of this Agreement, the
Indemnitee shall deliver to the Corporation the Indemnitee's written request for
payment of Indemnifiable Expenses (which written request shall
-4-
<PAGE>
include, in the case of a request for Interim Expenses, the written affirmation
and undertaking of Indemnitee referred to in Section 5 hereof).
8. PAYMENT OF INDEMNIFIABLE EXPENSES. Within fifteen (15) days after the
determination pursuant to Section 5 that Indemnitee met the Standard of Conduct,
the Corporation shall deliver to Indemnitee either (a) payment of such
indemnification or (b) written notice by the Corporation that the Corporation
has determined that the Indemnitee is not entitled to indemnification. If the
Indemnitee has not received either the payment or the written determination from
the Corporation within sixty (60) days after receipt by the Corporation of such
written request, the Indemnitee may, but need not, at any time thereafter bring
an action against the Corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the Indemnitee shall also be entitled to be
paid for the expense (including attorneys' fees) of bringing such action.
9. EFFECT OF CHANGES IN LAW OR CORPORATE DOCUMENTS. No changes in the
Act and no amendment to the Corporation's Articles of Incorporation or Bylaws
after the date hereof shall have the effect of limiting or eliminating the
indemnification available under this Agreement. If, after the date of this
Agreement, any change in any applicable law, statute, or rule expands the power
of the Corporation to indemnify a Director, the Indemnitee's rights and the
Corporation's obligations under this Agreement shall be expanded, without any
action by Indemnitee or the Corporation, to include such change. If any change
in any applicable law, statute, or rule narrows the right of the Corporation to
indemnify a Director, such change, except to the extent otherwise required by
law, shall have no effect on this Agreement or the parties' rights or
obligations hereunder.
10. INDEMNITEE'S OBLIGATIONS. The Indemnitee shall promptly advise the
Corporation in writing of the institution of any Proceeding which is or may be
subject to this Agreement, and shall keep the Corporation generally informed of
and shall consult with the Corporation with respect to, the status of any such
Proceeding. Notices to the Corporation shall be sent to: Transeastern Properties
of South Florida, Inc.,7522 Wiles Road, Suite 203, Coral Springs, Florida 33067,
Attention: President (or such other address as the Corporation shall designate
in writing to the Indemnitee). Notices shall be deemed received five (5) days
after the date postmarked if sent by United States mail, postage prepaid and
properly addressed. In the event of payment by the Corporation to the Indemnitee
under this Agreement, the Indemnitee agrees that the Corporation shall be
subrogated to the extent of such payment to all the rights of recovery of the
Indemnitee, and the Indemnitee agrees to execute all papers required and to do
everything necessary to secure such rights, including the execution of such
documents necessary to enable the Corporation effectively to bring suit to
enforce such rights. In addition, Indemnitee agrees to give the Corporation such
information and cooperation as the Corporation may reasonably require and as
shall be within Indemnitee's power regarding any Proceeding which is or may be
subject to this Agreement.
11. SUCCESSORS. This Agreement establishes contract rights which shall
be binding upon, and shall inure to the benefit of, the successors, assigns,
heirs, and legal representatives of the parties hereto.
12. CONTRACT RIGHTS NOT EXCLUSIVE. The contract rights conferred by this
Agreement shall be in addition to, but not exclusive of, any other right which
Indemnitee may have or may hereafter acquire under any statute, the Articles of
Incorporation or Bylaws of the Corporation, or any agreement, vote of
stockholders or disinterested directors, or otherwise. The rights granted in
this Agreement supersede any similar right granted under any previous written
agreement between the Corporation and Indemnitee with respect to the subject
matter hereof.
-5-
<PAGE>
13. AMENDMENT, MODIFICATION AND WAIVER. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by both
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, irrespective of the choice of
law provisions thereof.
15. CAPTIONS AND SECTION HEADINGS. Captions and section headings used
herein are for convenience only and are not a part of this Agreement and shall
not be used in construing it.
16. SEVERABILITY. Should any provision of this Agreement, or any clause
hereof, be held to be invalid, illegal or unenforceable, in whole or in part,
the remaining provisions and clauses of this Agreement shall remain fully
enforceable and binding on the parties. To the extent permitted by law, the
parties waive any provision of law which renders any such provision prohibited
or unenforceable in any respect.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURES CONTINUED ON NEXT PAGE]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as the day and year
first written above.
TRANSEASTERN PROPERTIES OF
SOUTH FLORIDA, INC.
By:________________________________
Title:_____________________________
[CORPORATE SEAL]
Attest:
______________________________
____________________, Secretary
SERIES A DIRECTOR
By:________________________________
-7-
<PAGE>
Annex I
to
Indemnification Agreement
FORM OF UNDERTAKING AGREEMENT
This AGREEMENT is made on ____________________, between Transeastern
Properties of South Florida, Inc., a Florida corporation (the "Corporation"),
and ____________, a member of the Board of Directors of the Corporation
("Indemnitee").
WHEREAS, Indemnitee has become involved in investigations, claims,
actions, suits, or proceedings which have arisen as a result of Indemnitee's
service to the Corporation; and
WHEREAS, Indemnitee desires that the Corporation pay any and all
expenses (including, but not limited to, attorneys' fees and court costs)
actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in
defending or investigating any such suits or claims and that such payment be
made in advance of the final disposition of such investigations, claims,
actions, suits, or proceedings to the extent that Indemnitee has not been
previously reimbursed by insurance; and
WHEREAS, the Corporation is willing to make such payments but, in
accordance with Section 607.0850 of the Florida Business Corporation Act (the
"Act"), the Corporation may make such payments only if it receives an
undertaking to repay from Indemnitee; and
WHEREAS, Indemnitee is willing to give such an undertaking.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Indemnitee affirms his good faith belief that he has met the Standard
of Conduct necessary for indemnification as defined in Section 5(a) of the
Indemnification Agreement between the Corporation and Indemnitee (the
"Indemnification Agreement").
2. In regard to any payments made by the Corporation to Indemnitee
pursuant to the terms of the Indemnification Agreement or pursuant to Article
____ of the Bylaws of the Corporation, Indemnitee undertakes and agrees to repay
to the Corporation any and all amounts so paid promptly and in any event within
thirty (30) days after (a) any determination made pursuant to Section 5 of the
Indemnification Agreement that the Indemnitee has not met the applicable
Standard of Conduct defined therein or (b) any final determination that
Indemnitee is not entitled to indemnification hereunder or pursuant to the
Bylaws or pursuant to the Act.
3. This Agreement shall not affect in any manner the rights which
Indemnitee may have against the Corporation, any insurer or any other person to
seek indemnification for or reimbursement of (a) any expenses referred to herein
or (b) any judgment which may be rendered in any litigation or proceeding.
Annex I - Page 1
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
TRANSEASTERN PROPERTIES OF
SOUTH FLORIDA, INC.
By:___________________________________
Title:________________________________
SERIES A DIRECTOR
_______________________________________
Annex I - Page 2
<PAGE>
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into as of this 2nd day of June,
1993, by and between Transeastern Properties of South Florida, Inc., a Florida
corporation (the "Company"), and EDWARD W. FALCONE, a director of the Company
(the "Indemnitee").
BACKGROUND
A. Article Seven of the Amended and Restated Articles of Incorporation
of the Company permits the Company to indemnify directors of the Company under
certain circumstances in accordance with the provisions of the Florida Business
Corporation Act, as the same exists or may hereafter be amended (the "Act").
B. The parties desire to memorialize herein the Company's agreement to
indemnify Indemnitee against certain expenses, and, in addition, to set forth
certain covenants and agreements with respect to the obligations of the Company
to indemnify Indemnitee.
AGREEMENT
For and in consideration of the mutual agreements herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
18. DEFINITIONS. The following capitalized terms are used in this
Agreement with the meaning thereafter ascribed:
(a) "Corporation" means the Company, and any domestic or foreign entity
that is the successor entity to the Company by merger, combination,
consolidation, or other transaction in which the separate existence of the
Company ceases.
(b) "Director" or "director" means an individual who is or was a
director of the Corporation, or an individual who while a director of the
Corporation is or was serving at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another corporation (including
any subsidiary of the Corporation), partnership, limited liability company,
joint venture, trust, employee benefit plan, or other enterprise. A Director is
considered to be serving an employee benefit plan at the Corporation's request
if such Director's duties to the Corporation also impose duties on, or otherwise
involve services by, such Director to the participants in or beneficiaries of
the plan. The term "Director" or "director" includes, unless the context
requires otherwise, the estate or personal representative of a Director. For the
purposes of this Agreement, Indemnitee serves as a Director of each of the
subsidiaries of the Company at the request of the Company.
(c) "Expenses" includes attorneys' fees and other expenses actually and
reasonably incurred (i) by a Party in connection with the defense or settlement
of a Proceeding or (ii) by a Director in connection with a Proceeding for which
such Director is subpoenaed to appear as a witness.
(d) "Indemnifiable Expenses" means all Expenses, Liabilities, and losses
(including attorneys' fees, judgments, penalties, fines, and amounts paid or to
be paid in any settlement approved in advance by the Corporation, such approval
not to be unreasonably withheld) actually and reasonably incurred or
-2-
<PAGE>
suffered by Indemnitee in connection with a Proceeding, whether as a Party to
the Proceeding or as a witness who has been subpoenaed to appear at the
Proceeding.
(e) "Interim Expenses" means Indemnifiable Expenses incurred by
Indemnitee in connection with any Proceeding to which Indemnitee is a Party in
advance of the final disposition thereof.
(f) "Liability" or "Liabilities" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to an
employee benefit plan), or reasonable Expenses incurred with respect to a
Proceeding.
(g) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a Proceeding by reason of the fact that
such individual is or was a Director or an officer of the Corporation.
(h) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, whether formal or informal, any appeal in such an action, suit,
or proceeding, and any inquiry or investigation that could lead to such an
action, suit, or proceeding, whether formal or informal.
(i) "Special Legal Counsel" means a law firm, an attorney or a member of
a law firm, that is experienced in matters of corporate law and neither
currently is, nor in the past five (5) years has been, retained to represent (i)
either the Corporation or Indemnitee in any matter material to either party, or
(ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. The term "Special Legal Counsel" shall not include
any person who, under the applicable standards of professional conduct
prevailing at the time of the representation, would have a conflict of interest
in representing either the Corporation or Indemnitee in an action to determine
Indemnitee's rights under the provisions of the Corporation's Articles of
Incorporation, Bylaws, or any agreement upon which Indemnitee relies to
establish Indemnitee's right to indemnification or advancement of expenses.
19. INDEMNIFICATION. Subject to authorization pursuant to Section 5
hereof, the Corporation shall indemnify Indemnitee against all Indemnifiable
Expenses incurred by Indemnitee in connection with any Proceeding in which
Indemnitee was, is, or is threatened to be:
(a) made a party because Indemnitee is or was a Director or officer of
the Corporation IF (i) Indemnitee acted in a manner Indemnitee reasonably
believed in good faith to be in, or not opposed to, the best interests of the
Corporation, and (ii) in the case of any criminal Proceeding, Indemnitee had no
reasonable cause to believe Indemnitee's conduct was unlawful, or
(b) subpoenaed to appear as a non-party witness.
20. EXCLUSIONS. The Corporation shall not be obligated under this
Agreement to indemnify Indemnitee in connection with any Proceeding in which:
(a) a judgment or other final adjudication establishes that the acts or
omissions to act of Indemnitee were material to the cause of action and
constitute:
-2-
<PAGE>
(i) a violation of the criminal law, unless Indemnitee had
reasonable cause to believe his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful;
(ii) a transaction from which Indemnitee derived an improper
personal benefit;
(iii) a transaction in which the liability provisions of Section
607.0834 of the Act are applicable;
(iv) willful misconduct or conscious disregard for the interests
of the Corporation liable to the Corporation, but only if the Proceeding
is by or in the right of the Corporation or by or in the right of a
shareholder;
(b) Indemnitee receives payment from an insurance policy, provided that
the Corporation shall remain obligated to Indemnitee hereunder for all
Indemnifiable Expenses in excess of the payment received from such insurance
policy; or
(c) Indemnitee receives payment from the Corporation other than pursuant
to this Agreement, provided that the Corporation shall remain obligated to
Indemnitee hereunder for all Indemnifiable Expenses in excess of such payment
from the Corporation.
21. MANDATORY INDEMNIFICATION FOR SUCCESSFUL PARTY. To the extent that
Indemnitee has been successful, on the merits or otherwise, in the defense of
any Proceeding to which Indemnitee was a Party, or in defense of any claim,
issue, or matter therein, because Indemnitee is or was a Director of the
Corporation, the Corporation shall indemnify the Indemnitee against all
Indemnifiable Expenses actually and reasonably incurred by Indemnitee, including
all expenses incurred by Indemnitee in connection with establishing Indemnitee's
right to indemnification pursuant to this Section 4, in whole or in part,
subject only to the exclusions in Sections 3(b) and 3(c) hereof.
22. AUTHORIZATION AND DETERMINATION OF INDEMNIFICATION.
(a) Except with respect to mandatory indemnification pursuant to Section
4 hereof, and except as may be ordered by a court, the Corporation shall not be
obligated to indemnify Indemnitee under Section 2(a) hereof unless and until (i)
Indemnitee delivers a written demand to the Corporation pursuant to Section 7
hereof and (ii) the Corporation makes a determination in the manner set forth in
Section 5(b) below, that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct set
forth in Section 2(a) hereof (the "Standard of Conduct"). For purposes of such
determination, the termination of a Proceeding by judgment, order, settlement,
or conviction, or upon a plea of NOLO CONTENDERE or its equivalent is not, of
itself, determinative that the Indemnitee did not meet the Standard of Conduct.
Indemnitee shall be deemed to have been found liable in respect of any claim,
issue or matter only after the Indemnitee shall have been so adjudged by a court
of competent jurisdiction after of all appeals therefrom.
(b) The determination as to whether Indemnitee met the Standard of
Conduct shall be made within forty-five (45) days from the date the written
demand of the Indemnitee pursuant to Section 7 hereof is received by the
Corporation and shall be made by:
(i) The Board of Directors of the Corporation, by majority vote
of a quorum consisting of Directors not at the time Parties to the
Proceeding or, if such a quorum cannot be obtained, then by majority
vote of a committee duly designated by the Board of Directors (in which
-3-
<PAGE>
designation Directors who are Parties may participate), consisting
solely of two (2) or more Directors not at the time Parties to the
Proceeding; or
(ii) By Special Legal Counsel to the Corporation, which Special
Legal Counsel is selected by the Board of Directors or its committee in
the manner prescribed by subparagraph (i) above or, if such a quorum
cannot be obtained and such a committee cannot be designated, then
Special Legal Counsel shall be selected by majority vote of the full
Board of Directors (in which selection Directors who are Parties may
participate); or
(iii) The shareholders of the Corporation holding a majority of
votes of voting securities, provided that shares of voting securities
owned by or voted under the control of Directors who are at the time
Parties to a Proceeding shall be excluded from the vote with respect to
the determination.
(c) The Corporation shall not be obligated to indemnify Indemnitee under
Section 2(b) hereof, unless (i) Indemnitee has delivered a written demand to the
Corporation pursuant to Section 7 hereof and (ii) Indemnitee is, at the time,
not a named Party to a Proceeding. The Corporation may require Indemnitee to
comply with the provisions of Section 6 hereof as a condition precedent to the
payment of Indemnifiable Expenses.
(d) Evaluation as to reasonableness of Indemnifiable Expenses or
Expenses shall be made in the same manner as the determination that the
Indemnitee has met the applicable Standard of Conduct, except that if the
determination that the Indemnitee has met the applicable Standard of Conduct is
made by Special Legal Counsel, evaluation as to reasonableness of Indemnifiable
Expenses or Expenses shall be made by those entitled under paragraph (ii) of
Section 5(b) to select such Special Legal Counsel.
23. INTERIM EXPENSES. The Corporation shall advance Interim Expenses
incurred by Indemnitee if:
(a) Indemnitee furnishes the Corporation with a written affirmation of
Indemnitee's good faith belief that Indemnitee has met the applicable Standard
of Conduct; and
(b) Indemnitee furnishes the Corporation with a written undertaking,
executed personally or on Indemnitee's behalf in substantially the form attached
hereto as Annex I, to repay any amounts advanced under this Section if it is
ultimately determined that Indemnitee has not met the Standard of Conduct or if
it is ultimately determined that indemnification of the Indemnitee against such
Interim Expenses is prohibited by the Act. The written undertaking required
herein must be an unlimited general obligation of the Indemnitee but need not be
secured and may be accepted without reference to financial ability to make
repayment.
24. PROCEDURE FOR MAKING DEMAND. If the Indemnitee is entitled to make a
claim for indemnification pursuant to Section 2 of this Agreement, the
Indemnitee shall deliver to the Corporation the Indemnitee's written request for
payment of Indemnifiable Expenses (which written request shall include, in the
case of a request for Interim Expenses, the written affirmation and undertaking
of Indemnitee referred to in Section 5 hereof).
25. PAYMENT OF INDEMNIFIABLE EXPENSES. Within fifteen (15) days after
the determination pursuant to Section 5 that Indemnitee met the Standard of
Conduct, the Corporation shall deliver to Indemnitee either (a) payment of such
indemnification or (b) written notice by the Corporation that the
-4-
<PAGE>
Corporation has determined that the Indemnitee is not entitled to
indemnification. If the Indemnitee has not received either the payment or the
written determination from the Corporation within sixty (60) days after receipt
by the Corporation of such written request, the Indemnitee may, but need not, at
any time thereafter bring an action against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the
Indemnitee shall also be entitled to be paid for the expense (including
attorneys' fees) of bringing such action.
26. EFFECT OF CHANGES IN LAW OR CORPORATE DOCUMENTS. No changes in the
Act and no amendment to the Corporation's Articles of Incorporation or Bylaws
after the date hereof shall have the effect of limiting or eliminating the
indemnification available under this Agreement. If, after the date of this
Agreement, any change in any applicable law, statute, or rule expands the power
of the Corporation to indemnify a Director, the Indemnitee's rights and the
Corporation's obligations under this Agreement shall be expanded, without any
action by Indemnitee or the Corporation, to include such change. If any change
in any applicable law, statute, or rule narrows the right of the Corporation to
indemnify a Director, such change, except to the extent otherwise required by
law, shall have no effect on this Agreement or the parties' rights or
obligations hereunder.
27. INDEMNITEE'S OBLIGATIONS. The Indemnitee shall promptly advise the
Corporation in writing of the institution of any Proceeding which is or may be
subject to this Agreement, and shall keep the Corporation generally informed of
and shall consult with the Corporation with respect to, the status of any such
Proceeding. Notices to the Corporation shall be sent to: Transeastern Properties
of South Florida, Inc.,7522 Wiles Road, Suite 203, Coral Springs, Florida 33067,
Attention: President (or such other address as the Corporation shall designate
in writing to the Indemnitee). Notices shall be deemed received five (5) days
after the date postmarked if sent by United States mail, postage prepaid and
properly addressed. In the event of payment by the Corporation to the Indemnitee
under this Agreement, the Indemnitee agrees that the Corporation shall be
subrogated to the extent of such payment to all the rights of recovery of the
Indemnitee, and the Indemnitee agrees to execute all papers required and to do
everything necessary to secure such rights, including the execution of such
documents necessary to enable the Corporation effectively to bring suit to
enforce such rights. In addition, Indemnitee agrees to give the Corporation such
information and cooperation as the Corporation may reasonably require and as
shall be within Indemnitee's power regarding any Proceeding which is or may be
subject to this Agreement.
28. SUCCESSORS. This Agreement establishes contract rights which shall
be binding upon, and shall inure to the benefit of, the successors, assigns,
heirs, and legal representatives of the parties hereto.
29. CONTRACT RIGHTS NOT EXCLUSIVE. The contract rights conferred by this
Agreement shall be in addition to, but not exclusive of, any other right which
Indemnitee may have or may hereafter acquire under any statute, the Articles of
Incorporation or Bylaws of the Corporation, or any agreement, vote of
stockholders or disinterested directors, or otherwise. The rights granted in
this Agreement supersede any similar right granted under any previous written
agreement between the Corporation and Indemnitee with respect to the subject
matter hereof.
30. AMENDMENT, MODIFICATION AND WAIVER. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by both
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
-5-
<PAGE>
31. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, irrespective of the choice of
law provisions thereof.
32. CAPTIONS AND SECTION HEADINGS. Captions and section headings used
herein are for convenience only and are not a part of this Agreement and shall
not be used in construing it.
33. SEVERABILITY. Should any provision of this Agreement, or any clause
hereof, be held to be invalid, illegal or unenforceable, in whole or in part,
the remaining provisions and clauses of this Agreement shall remain fully
enforceable and binding on the parties. To the extent permitted by law, the
parties waive any provision of law which renders any such provision prohibited
or unenforceable in any respect.
34. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURES CONTINUED ON NEXT PAGE]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as the day
and year first written above.
TRANSEASTERN PROPERTIES OF
SOUTH FLORIDA, INC.
By:___________________________
Title:________________________
[CORPORATE SEAL]
Attest:
______________________________
___________________________, Secretary
________________________(SEAL)
Edward W. Falcone
-7-
<PAGE>
Annex I
to
Indemnification Agreement
FORM OF UNDERTAKING AGREEMENT
This AGREEMENT is made on _____________________, between Transeastern
Properties of South Florida, Inc., a Florida corporation (the "Corporation"),
and EDWARD W. FALCONE, a member of the Board of Directors of the Corporation
("Indemnitee").
WHEREAS, Indemnitee has become involved in investigations, claims,
actions, suits, or proceedings which have arisen as a result of Indemnitee's
service to the Corporation; and
WHEREAS, Indemnitee desires that the Corporation pay any and all
expenses (including, but not limited to, attorneys' fees and court costs)
actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in
defending or investigating any such suits or claims and that such payment be
made in advance of the final disposition of such investigations, claims,
actions, suits, or proceedings to the extent that Indemnitee has not been
previously reimbursed by insurance; and
WHEREAS, the Corporation is willing to make such payments but, in
accordance with Section 607.0850 of the Florida Business Corporation Act (the
"Act"), the Corporation may make such payments only if it receives an
undertaking to repay from Indemnitee; and
WHEREAS, Indemnitee is willing to give such an undertaking.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Indemnitee affirms his good faith belief that he has met the Standard
of Conduct necessary for indemnification as defined in Section 5(a) of the
Indemnification Agreement between the Corporation and Indemnitee (the
"Indemnification Agreement").
2. In regard to any payments made by the Corporation to Indemnitee
pursuant to the terms of the Indemnification Agreement or pursuant to Article
____ of the Bylaws of the Corporation, Indemnitee undertakes and agrees to repay
to the Corporation any and all amounts so paid promptly and in any event within
thirty (30) days after (a) any determination made pursuant to Section 5 of the
Indemnification Agreement that the Indemnitee has not met the applicable
Standard of Conduct defined therein or (b) any final determination that
Indemnitee is not entitled to indemnification hereunder or pursuant to the
Bylaws or pursuant to the Act.
3. This Agreement shall not affect in any manner the rights which
Indemnitee may have against the Corporation, any insurer or any other person to
seek indemnification for or reimbursement of (a) any expenses referred to herein
or (b) any judgment which may be rendered in any litigation or proceeding.
Annex I - Page 1
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
TRANSEASTERN PROPERTIES OF
SOUTH FLORIDA, INC.
By:___________________________
Title:________________________
______________________________
Edward W. Falcone
Annex I - Page 2
<PAGE>
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into as of this 2nd day of June,
1993, by and between Transeastern Properties of South Florida, Inc., a Florida
corporation (the "Company"), and ARTHUR J. FALCONE, a director of the Company
(the "Indemnitee").
BACKGROUND
A. Article Seven of the Amended and Restated Articles of Incorporation
of the Company permits the Company to indemnify directors of the Company under
certain circumstances in accordance with the provisions of the Florida Business
Corporation Act, as the same exists or may hereafter be amended (the "Act").
B. The parties desire to memorialize herein the Company's agreement to
indemnify Indemnitee against certain expenses, and, in addition, to set forth
certain covenants and agreements with respect to the obligations of the Company
to indemnify Indemnitee.
AGREEMENT
For and in consideration of the mutual agreements herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
35. DEFINITIONS. The following capitalized terms are used in this
Agreement with the meaning thereafter ascribed:
(a) "Corporation" means the Company, and any domestic or foreign entity
that is the successor entity to the Company by merger, combination,
consolidation, or other transaction in which the separate existence of the
Company ceases.
(b) "Director" or "director" means an individual who is or was a
director of the Corporation, or an individual who while a director of the
Corporation is or was serving at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another corporation (including
any subsidiary of the Corporation), partnership, limited liability company,
joint venture, trust, employee benefit plan, or other enterprise. A Director is
considered to be serving an employee benefit plan at the Corporation's request
if such Director's duties to the Corporation also impose duties on, or otherwise
involve services by, such Director to the participants in or beneficiaries of
the plan. The term "Director" or "director" includes, unless the context
requires otherwise, the estate or personal representative of a Director. For the
purposes of this Agreement, Indemnitee serves as a Director of each of the
subsidiaries of the Company at the request of the Company.
(c) "Expenses" includes attorneys' fees and other expenses actually and
reasonably incurred (i) by a Party in connection with the defense or settlement
of a Proceeding or (ii) by a Director in connection with a Proceeding for which
such Director is subpoenaed to appear as a witness.
(d) "Indemnifiable Expenses" means all Expenses, Liabilities, and losses
(including attorneys' fees, judgments, penalties, fines, and amounts paid or to
be paid in any settlement approved in advance by the Corporation, such approval
not to be unreasonably withheld) actually and reasonably incurred or
<PAGE>
suffered by Indemnitee in connection with a Proceeding, whether as a Party to
the Proceeding or as a witness who has been subpoenaed to appear at the
Proceeding.
(e) "Interim Expenses" means Indemnifiable Expenses incurred by
Indemnitee in connection with any Proceeding to which Indemnitee is a Party in
advance of the final disposition thereof.
(f) "Liability" or "Liabilities" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to an
employee benefit plan), or reasonable Expenses incurred with respect to a
Proceeding.
(g) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a Proceeding by reason of the fact that
such individual is or was a Director or an officer of the Corporation.
(h) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, whether formal or informal, any appeal in such an action, suit,
or proceeding, and any inquiry or investigation that could lead to such an
action, suit, or proceeding, whether formal or informal.
(i) "Special Legal Counsel" means a law firm, an attorney or a member of
a law firm, that is experienced in matters of corporate law and neither
currently is, nor in the past five (5) years has been, retained to represent (i)
either the Corporation or Indemnitee in any matter material to either party, or
(ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. The term "Special Legal Counsel" shall not include
any person who, under the applicable standards of professional conduct
prevailing at the time of the representation, would have a conflict of interest
in representing either the Corporation or Indemnitee in an action to determine
Indemnitee's rights under the provisions of the Corporation's Articles of
Incorporation, Bylaws, or any agreement upon which Indemnitee relies to
establish Indemnitee's right to indemnification or advancement of expenses.
36. INDEMNIFICATION. Subject to authorization pursuant to Section 5
hereof, the Corporation shall indemnify Indemnitee against all Indemnifiable
Expenses incurred by Indemnitee in connection with any Proceeding in which
Indemnitee was, is, or is threatened to be:
(a) made a party because Indemnitee is or was a Director or officer of
the Corporation IF (i) Indemnitee acted in a manner Indemnitee reasonably
believed in good faith to be in, or not opposed to, the best interests of the
Corporation, and (ii) in the case of any criminal Proceeding, Indemnitee had no
reasonable cause to believe Indemnitee's conduct was unlawful, or
(b) subpoenaed to appear as a non-party witness.
37. EXCLUSIONS. The Corporation shall not be obligated under this
Agreement to indemnify Indemnitee in connection with any Proceeding in which:
(a) a judgment or other final adjudication establishes that the acts
or omissions to act of Indemnitee were material to the cause of action and
constitute:
-2-
<PAGE>
(i) a violation of the criminal law, unless Indemnitee had
reasonable cause to believe his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful;
(ii) a transaction from which Indemnitee derived an improper
personal benefit;
(iii) a transaction in which the liability provisions of Section
607.0834 of the Act are applicable;
(iv) willful misconduct or conscious disregard for the interests
of the Corporation liable to the Corporation, but only if the Proceeding
is by or in the right of the Corporation or by or in the right of a
shareholder;
(b) Indemnitee receives payment from an insurance policy, provided that
the Corporation shall remain obligated to Indemnitee hereunder for all
Indemnifiable Expenses in excess of the payment received from such insurance
policy; or
(c) Indemnitee receives payment from the Corporation other than pursuant
to this Agreement, provided that the Corporation shall remain obligated to
Indemnitee hereunder for all Indemnifiable Expenses in excess of such payment
from the Corporation.
38. MANDATORY INDEMNIFICATION FOR SUCCESSFUL PARTY. To the extent that
Indemnitee has been successful, on the merits or otherwise, in the defense of
any Proceeding to which Indemnitee was a Party, or in defense of any claim,
issue, or matter therein, because Indemnitee is or was a Director of the
Corporation, the Corporation shall indemnify the Indemnitee against all
Indemnifiable Expenses actually and reasonably incurred by Indemnitee, including
all expenses incurred by Indemnitee in connection with establishing Indemnitee's
right to indemnification pursuant to this Section 4, in whole or in part,
subject only to the exclusions in Sections 3(b) and 3(c) hereof.
39. AUTHORIZATION AND DETERMINATION OF INDEMNIFICATION.
(a) Except with respect to mandatory indemnification pursuant to Section
4 hereof, and except as may be ordered by a court, the Corporation shall not be
obligated to indemnify Indemnitee under Section 2(a) hereof unless and until (i)
Indemnitee delivers a written demand to the Corporation pursuant to Section 7
hereof and (ii) the Corporation makes a determination in the manner set forth in
Section 5(b) below, that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct set
forth in Section 2(a) hereof (the "Standard of Conduct"). For purposes of such
determination, the termination of a Proceeding by judgment, order, settlement,
or conviction, or upon a plea of NOLO CONTENDERE or its equivalent is not, of
itself, determinative that the Indemnitee did not meet the Standard of Conduct.
Indemnitee shall be deemed to have been found liable in respect of any claim,
issue or matter only after the Indemnitee shall have been so adjudged by a court
of competent jurisdiction after of all appeals therefrom.
(b) The determination as to whether Indemnitee met the Standard of
Conduct shall be made within forty-five (45) days from the date the written
demand of the Indemnitee pursuant to Section 7 hereof is received by the
Corporation and shall be made by:
(i) The Board of Directors of the Corporation, by majority vote
of a quorum consisting of Directors not at the time Parties to the
Proceeding or, if such a quorum cannot be obtained, then by majority
vote of a committee duly designated by the Board of Directors (in which
-3-
<PAGE>
designation Directors who are Parties may participate), consisting
solely of two (2) or more Directors not at the time Parties to the
Proceeding; or
(ii) By Special Legal Counsel to the Corporation, which Special
Legal Counsel is selected by the Board of Directors or its committee in
the manner prescribed by subparagraph (i) above or, if such a quorum
cannot be obtained and such a committee cannot be designated, then
Special Legal Counsel shall be selected by majority vote of the full
Board of Directors (in which selection Directors who are Parties may
participate); or
(iii) The shareholders of the Corporation holding a majority of
votes of voting securities, provided that shares of voting securities
owned by or voted under the control of Directors who are at the time
Parties to a Proceeding shall be excluded from the vote with respect to
the determination.
(c) The Corporation shall not be obligated to indemnify Indemnitee under
Section 2(b) hereof, unless (i) Indemnitee has delivered a written demand to the
Corporation pursuant to Section 7 hereof and (ii) Indemnitee is, at the time,
not a named Party to a Proceeding. The Corporation may require Indemnitee to
comply with the provisions of Section 6 hereof as a condition precedent to the
payment of Indemnifiable Expenses.
(d) Evaluation as to reasonableness of Indemnifiable Expenses or
Expenses shall be made in the same manner as the determination that the
Indemnitee has met the applicable Standard of Conduct, except that if the
determination that the Indemnitee has met the applicable Standard of Conduct is
made by Special Legal Counsel, evaluation as to reasonableness of Indemnifiable
Expenses or Expenses shall be made by those entitled under paragraph (ii) of
Section 5(b) to select such Special Legal Counsel.
40. INTERIM EXPENSES. The Corporation shall advance Interim Expenses
incurred by Indemnitee if:
(a) Indemnitee furnishes the Corporation with a written affirmation of
Indemnitee's good faith belief that Indemnitee has met the applicable Standard
of Conduct; and
(b) Indemnitee furnishes the Corporation with a written undertaking,
executed personally or on Indemnitee's behalf in substantially the form attached
hereto as Annex I, to repay any amounts advanced under this Section if it is
ultimately determined that Indemnitee has not met the Standard of Conduct or if
it is ultimately determined that indemnification of the Indemnitee against such
Interim Expenses is prohibited by the Act. The written undertaking required
herein must be an unlimited general obligation of the Indemnitee but need not be
secured and may be accepted without reference to financial ability to make
repayment.
41. PROCEDURE FOR MAKING DEMAND. If the Indemnitee is entitled to make a
claim for indemnification pursuant to Section 2 of this Agreement, the
Indemnitee shall deliver to the Corporation the Indemnitee's written request for
payment of Indemnifiable Expenses (which written request shall include, in the
case of a request for Interim Expenses, the written affirmation and undertaking
of Indemnitee referred to in Section 5 hereof).
-4-
<PAGE>
42. PAYMENT OF INDEMNIFIABLE EXPENSES. Within fifteen (15) days after
the determination pursuant to Section 5 that Indemnitee met the Standard of
Conduct, the Corporation shall deliver to Indemnitee either (a) payment of such
indemnification or (b) written notice by the Corporation that the Corporation
has determined that the Indemnitee is not entitled to indemnification. If the
Indemnitee has not received either the payment or the written determination from
the Corporation within sixty (60) days after receipt by the Corporation of such
written request, the Indemnitee may, but need not, at any time thereafter bring
an action against the Corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the Indemnitee shall also be entitled to be
paid for the expense (including attorneys' fees) of bringing such action.
43. EFFECT OF CHANGES IN LAW OR CORPORATE DOCUMENTS. No changes in the
Act and no amendment to the Corporation's Articles of Incorporation or Bylaws
after the date hereof shall have the effect of limiting or eliminating the
indemnification available under this Agreement. If, after the date of this
Agreement, any change in any applicable law, statute, or rule expands the power
of the Corporation to indemnify a Director, the Indemnitee's rights and the
Corporation's obligations under this Agreement shall be expanded, without any
action by Indemnitee or the Corporation, to include such change. If any change
in any applicable law, statute, or rule narrows the right of the Corporation to
indemnify a Director, such change, except to the extent otherwise required by
law, shall have no effect on this Agreement or the parties' rights or
obligations hereunder.
44. INDEMNITEE'S OBLIGATIONS. The Indemnitee shall promptly advise the
Corporation in writing of the institution of any Proceeding which is or may be
subject to this Agreement, and shall keep the Corporation generally informed of
and shall consult with the Corporation with respect to, the status of any such
Proceeding. Notices to the Corporation shall be sent to: Transeastern Properties
of South Florida, Inc.,7522 Wiles Road, Suite 203, Coral Springs, Florida 33067,
Attention: President (or such other address as the Corporation shall designate
in writing to the Indemnitee). Notices shall be deemed received five (5) days
after the date postmarked if sent by United States mail, postage prepaid and
properly addressed. In the event of payment by the Corporation to the Indemnitee
under this Agreement, the Indemnitee agrees that the Corporation shall be
subrogated to the extent of such payment to all the rights of recovery of the
Indemnitee, and the Indemnitee agrees to execute all papers required and to do
everything necessary to secure such rights, including the execution of such
documents necessary to enable the Corporation effectively to bring suit to
enforce such rights. In addition, Indemnitee agrees to give the Corporation such
information and cooperation as the Corporation may reasonably require and as
shall be within Indemnitee's power regarding any Proceeding which is or may be
subject to this Agreement.
45. SUCCESSORS. This Agreement establishes contract rights which shall
be binding upon, and shall inure to the benefit of, the successors, assigns,
heirs, and legal representatives of the parties hereto. 46. CONTRACT RIGHTS NOT
EXCLUSIVE. The contract rights conferred by this Agreement shall be in addition
to, but not exclusive of, any other right which Indemnitee may have or may
hereafter acquire under any statute, the Articles of Incorporation or Bylaws of
the Corporation, or any agreement, vote of stockholders or disinterested
directors, or otherwise. The rights granted in this Agreement supersede any
similar right granted under any previous written agreement between the
Corporation and Indemnitee with respect to the subject matter hereof.
47. AMENDMENT, MODIFICATION AND WAIVER. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by both
parties hereto. No waiver of any of
-5-
<PAGE>
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
48. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, irrespective of the choice of
law provisions thereof.
49. CAPTIONS AND SECTION HEADINGS. Captions and section headings used
herein are for convenience only and are not a part of this Agreement and shall
not be used in construing it.
50. SEVERABILITY. Should any provision of this Agreement, or any clause
hereof, be held to be invalid, illegal or unenforceable, in whole or in part,
the remaining provisions and clauses of this Agreement shall remain fully
enforceable and binding on the parties. To the extent permitted by law, the
parties waive any provision of law which renders any such provision prohibited
or unenforceable in any respect.
51. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURES CONTINUED ON NEXT PAGE]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as the day
and year first written above.
TRANSEASTERN PROPERTIES OF
SOUTH FLORIDA, INC.
By:____________________________
Title:_________________________
[CORPORATE SEAL]
Attest:
________________________________
_________________________, Secretary
_____________________________(SEAL)
Arthur J. Falcone
-7-
<PAGE>
Annex I
to
Indemnification Agreement
FORM OF UNDERTAKING AGREEMENT
This AGREEMENT is made on ____________________, between Transeastern
Properties of South Florida, Inc., a Florida corporation (the "Corporation"),
and ARTHUR J. FALCONE, a member of the Board of Directors of the Corporation
("Indemnitee").
WHEREAS, Indemnitee has become involved in investigations, claims,
actions, suits, or proceedings which have arisen as a result of Indemnitee's
service to the Corporation; and
WHEREAS, Indemnitee desires that the Corporation pay any and all
expenses (including, but not limited to, attorneys' fees and court costs)
actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in
defending or investigating any such suits or claims and that such payment be
made in advance of the final disposition of such investigations, claims,
actions, suits, or proceedings to the extent that Indemnitee has not been
previously reimbursed by insurance; and
WHEREAS, the Corporation is willing to make such payments but, in
accordance with Section 607.0850 of the Florida Business Corporation Act (the
"Act"), the Corporation may make such payments only if it receives an
undertaking to repay from Indemnitee; and
WHEREAS, Indemnitee is willing to give such an undertaking.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Indemnitee affirms his good faith belief that he has met the Standard
of Conduct necessary for indemnification as defined in Section 5(a) of the
Indemnification Agreement between the Corporation and Indemnitee (the
"Indemnification Agreement").
2. In regard to any payments made by the Corporation to Indemnitee
pursuant to the terms of the Indemnification Agreement or pursuant to Article
____ of the Bylaws of the Corporation, Indemnitee undertakes and agrees to repay
to the Corporation any and all amounts so paid promptly and in any event within
thirty (30) days after (a) any determination made pursuant to Section 5 of the
Indemnification Agreement that the Indemnitee has not met the applicable
Standard of Conduct defined therein or (b) any final determination that
Indemnitee is not entitled to indemnification hereunder or pursuant to the
Bylaws or pursuant to the Act.
3. This Agreement shall not affect in any manner the rights which
Indemnitee may have against the Corporation, any insurer or any other person to
seek indemnification for or reimbursement of (a) any expenses referred to herein
or (b) any judgment which may be rendered in any litigation or proceeding.
Annex I - Page 1
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
TRANSEASTERN PROPERTIES OF
SOUTH FLORIDA, INC.
By:______________________________
Title:___________________________
_________________________________
Arthur J. Falcone
Annex I - Page 2
<PAGE>
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into as of this 2nd day of June,
1993, by and between Transeastern Properties of South Florida, Inc., a Florida
corporation (the "Company"), and PHILIP CUCCI, a director of the Company (the
"Indemnitee").
BACKGROUND
A. Article Seven of the Amended and Restated Articles of Incorporation
of the Company permits the Company to indemnify directors of the Company under
certain circumstances in accordance with the provisions of the Florida Business
Corporation Act, as the same exists or may hereafter be amended (the "Act").
B. The parties desire to memorialize herein the Company's agreement to
indemnify Indemnitee against certain expenses, and, in addition, to set forth
certain covenants and agreements with respect to the obligations of the Company
to indemnify Indemnitee.
AGREEMENT
For and in consideration of the mutual agreements herein contained, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
52. DEFINITIONS. The following capitalized terms are used in this
Agreement with the meaning thereafter ascribed:
(a) "Corporation" means the Company, and any domestic or foreign entity
that is the successor entity to the Company by merger, combination,
consolidation, or other transaction in which the separate existence of the
Company ceases.
(b) "Director" or "director" means an individual who is or was a
director of the Corporation, or an individual who while a director of the
Corporation is or was serving at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another corporation (including
any subsidiary of the Corporation), partnership, limited liability company,
joint venture, trust, employee benefit plan, or other enterprise. A Director is
considered to be serving an employee benefit plan at the Corporation's request
if such Director's duties to the Corporation also impose duties on, or otherwise
involve services by, such Director to the participants in or beneficiaries of
the plan. The term "Director" or "director" includes, unless the context
requires otherwise, the estate or personal representative of a Director. For the
purposes of this Agreement, Indemnitee serves as a Director of each of the
subsidiaries of the Company at the request of the Company.
(c) "Expenses" includes attorneys' fees and other expenses actually and
reasonably incurred (i) by a Party in connection with the defense or settlement
of a Proceeding or (ii) by a Director in connection with a Proceeding for which
such Director is subpoenaed to appear as a witness.
(d) "Indemnifiable Expenses" means all Expenses, Liabilities, and losses
(including attorneys' fees, judgments, penalties, fines, and amounts paid or to
be paid in any settlement approved in advance by the Corporation, such approval
not to be unreasonably withheld) actually and reasonably incurred or
<PAGE>
suffered by Indemnitee in connection with a Proceeding, whether as a Party to
the Proceeding or as a witness who has been subpoenaed to appear at the
Proceeding.
(e) "Interim Expenses" means Indemnifiable Expenses incurred by
Indemnitee in connection with any Proceeding to which Indemnitee is a Party in
advance of the final disposition thereof.
(f) "Liability" or "Liabilities" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to an
employee benefit plan), or reasonable Expenses incurred with respect to a
Proceeding.
(g) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a Proceeding by reason of the fact that
such individual is or was a Director or an officer of the Corporation.
(h) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, whether formal or informal, any appeal in such an action, suit,
or proceeding, and any inquiry or investigation that could lead to such an
action, suit, or proceeding, whether formal or informal.
(i) "Special Legal Counsel" means a law firm, an attorney or a member of
a law firm, that is experienced in matters of corporate law and neither
currently is, nor in the past five (5) years has been, retained to represent (i)
either the Corporation or Indemnitee in any matter material to either party, or
(ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. The term "Special Legal Counsel" shall not include
any person who, under the applicable standards of professional conduct
prevailing at the time of the representation, would have a conflict of interest
in representing either the Corporation or Indemnitee in an action to determine
Indemnitee's rights under the provisions of the Corporation's Articles of
Incorporation, Bylaws, or any agreement upon which Indemnitee relies to
establish Indemnitee's right to indemnification or advancement of expenses.
53. INDEMNIFICATION. Subject to authorization pursuant to Section 5
hereof, the Corporation shall indemnify Indemnitee against all Indemnifiable
Expenses incurred by Indemnitee in connection with any Proceeding in which
Indemnitee was, is, or is threatened to be:
(a) made a party because Indemnitee is or was a Director or officer of
the Corporation IF (i) Indemnitee acted in a manner Indemnitee reasonably
believed in good faith to be in, or not opposed to, the best interests of the
Corporation, and (ii) in the case of any criminal Proceeding, Indemnitee had no
reasonable cause to believe Indemnitee's conduct was unlawful, or
(b) subpoenaed to appear as a non-party witness.
54. EXCLUSIONS. The Corporation shall not be obligated under this
Agreement to indemnify Indemnitee in connection with any Proceeding in which:
(a) a judgment or other final adjudication establishes that the acts or
omissions to act of Indemnitee were material to the cause of action and
constitute:
-2-
<PAGE>
(i) a violation of the criminal law, unless Indemnitee had
reasonable cause to believe his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful;
(ii) a transaction from which Indemnitee derived an improper
personal benefit;
(iii) a transaction in which the liability provisions of Section
607.0834 of the Act are applicable;
(iv) willful misconduct or conscious disregard for the interests
of the Corporation liable to the Corporation, but only if the Proceeding
is by or in the right of the Corporation or by or in the right of a
shareholder;
(b) Indemnitee receives payment from an insurance policy, provided that
the Corporation shall remain obligated to Indemnitee hereunder for all
Indemnifiable Expenses in excess of the payment received from such insurance
policy; or
(c) Indemnitee receives payment from the Corporation other than pursuant
to this Agreement, provided that the Corporation shall remain obligated to
Indemnitee hereunder for all Indemnifiable Expenses in excess of such payment
from the Corporation.
55. MANDATORY INDEMNIFICATION FOR SUCCESSFUL PARTY. To the extent that
Indemnitee has been successful, on the merits or otherwise, in the defense of
any Proceeding to which Indemnitee was a Party, or in defense of any claim,
issue, or matter therein, because Indemnitee is or was a Director of the
Corporation, the Corporation shall indemnify the Indemnitee against all
Indemnifiable Expenses actually and reasonably incurred by Indemnitee, including
all expenses incurred by Indemnitee in connection with establishing Indemnitee's
right to indemnification pursuant to this Section 4, in whole or in part,
subject only to the exclusions in Sections 3(b) and 3(c) hereof.
56. AUTHORIZATION AND DETERMINATION OF INDEMNIFICATION.
(a) Except with respect to mandatory indemnification pursuant to Section
4 hereof, and except as may be ordered by a court, the Corporation shall not be
obligated to indemnify Indemnitee under Section 2(a) hereof unless and until (i)
Indemnitee delivers a written demand to the Corporation pursuant to Section 7
hereof and (ii) the Corporation makes a determination in the manner set forth in
Section 5(b) below, that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct set
forth in Section 2(a) hereof (the "Standard of Conduct"). For purposes of such
determination, the termination of a Proceeding by judgment, order, settlement,
or conviction, or upon a plea of NOLO CONTENDERE or its equivalent is not, of
itself, determinative that the Indemnitee did not meet the Standard of Conduct.
Indemnitee shall be deemed to have been found liable in respect of any claim,
issue or matter only after the Indemnitee shall have been so adjudged by a court
of competent jurisdiction after of all appeals therefrom.
(b) The determination as to whether Indemnitee met the Standard of
Conduct shall be made within forty-five (45) days from the date the written
demand of the Indemnitee pursuant to Section 7 hereof is received by the
Corporation and shall be made by:
(i) The Board of Directors of the Corporation, by majority vote
of a quorum consisting of Directors not at the time Parties to the
Proceeding or, if such a quorum cannot be obtained, then by majority
vote of a committee duly designated by the Board of Directors (in which
-3-
<PAGE>
designation Directors who are Parties may participate), consisting
solely of two (2) or more Directors not at the time Parties to the
Proceeding; or
(ii) By Special Legal Counsel to the Corporation, which Special
Legal Counsel is selected by the Board of Directors or its committee in
the manner prescribed by subparagraph (i) above or, if such a quorum
cannot be obtained and such a committee cannot be designated, then
Special Legal Counsel shall be selected by majority vote of the full
Board of Directors (in which selection Directors who are Parties may
participate); or
(iii) The shareholders of the Corporation holding a majority of
votes of voting securities, provided that shares of voting securities
owned by or voted under the control of Directors who are at the time
Parties to a Proceeding shall be excluded from the vote with respect to
the determination.
(c) The Corporation shall not be obligated to indemnify Indemnitee under
Section 2(b) hereof, unless (i) Indemnitee has delivered a written demand to the
Corporation pursuant to Section 7 hereof and (ii) Indemnitee is, at the time,
not a named Party to a Proceeding. The Corporation may require Indemnitee to
comply with the provisions of Section 6 hereof as a condition precedent to the
payment of Indemnifiable Expenses.
(d) Evaluation as to reasonableness of Indemnifiable Expenses or
Expenses shall be made in the same manner as the determination that the
Indemnitee has met the applicable Standard of Conduct, except that if the
determination that the Indemnitee has met the applicable Standard of Conduct is
made by Special Legal Counsel, evaluation as to reasonableness of Indemnifiable
Expenses or Expenses shall be made by those entitled under paragraph (ii) of
Section 5(b) to select such Special Legal Counsel.
57. INTERIM EXPENSES. The Corporation shall advance Interim Expenses
incurred by Indemnitee if:
(a) Indemnitee furnishes the Corporation with a written affirmation of
Indemnitee's good faith belief that Indemnitee has met the applicable Standard
of Conduct; and
(b) Indemnitee furnishes the Corporation with a written undertaking,
executed personally or on Indemnitee's behalf in substantially the form attached
hereto as Annex I, to repay any amounts advanced under this Section if it is
ultimately determined that Indemnitee has not met the Standard of Conduct or if
it is ultimately determined that indemnification of the Indemnitee against such
Interim Expenses is prohibited by the Act. The written undertaking required
herein must be an unlimited general obligation of the Indemnitee but need not be
secured and may be accepted without reference to financial ability to make
repayment.
58. PROCEDURE FOR MAKING DEMAND. If the Indemnitee is entitled to make a
claim for indemnification pursuant to Section 2 of this Agreement, the
Indemnitee shall deliver to the Corporation the Indemnitee's written request for
payment of Indemnifiable Expenses (which written request shall include, in the
case of a request for Interim Expenses, the written affirmation and undertaking
of Indemnitee referred to in Section 5 hereof).
-4-
<PAGE>
59. PAYMENT OF INDEMNIFIABLE EXPENSES. Within fifteen (15) days after
the determination pursuant to Section 5 that Indemnitee met the Standard of
Conduct, the Corporation shall deliver to Indemnitee either (a) payment of such
indemnification or (b) written notice by the Corporation that the Corporation
has determined that the Indemnitee is not entitled to indemnification. If the
Indemnitee has not received either the payment or the written determination from
the Corporation within sixty (60) days after receipt by the Corporation of such
written request, the Indemnitee may, but need not, at any time thereafter bring
an action against the Corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the Indemnitee shall also be entitled to be
paid for the expense (including attorneys' fees) of bringing such action.
60. EFFECT OF CHANGES IN LAW OR CORPORATE DOCUMENTS. No changes in the
Act and no amendment to the Corporation's Articles of Incorporation or Bylaws
after the date hereof shall have the effect of limiting or eliminating the
indemnification available under this Agreement. If, after the date of this
Agreement, any change in any applicable law, statute, or rule expands the power
of the Corporation to indemnify a Director, the Indemnitee's rights and the
Corporation's obligations under this Agreement shall be expanded, without any
action by Indemnitee or the Corporation, to include such change. If any change
in any applicable law, statute, or rule narrows the right of the Corporation to
indemnify a Director, such change, except to the extent otherwise required by
law, shall have no effect on this Agreement or the parties' rights or
obligations hereunder.
61. INDEMNITEE'S OBLIGATIONS. The Indemnitee shall promptly advise the
Corporation in writing of the institution of any Proceeding which is or may be
subject to this Agreement, and shall keep the Corporation generally informed of
and shall consult with the Corporation with respect to, the status of any such
Proceeding. Notices to the Corporation shall be sent to: Transeastern Properties
of South Florida, Inc.,7522 Wiles Road, Suite 203, Coral Springs, Florida 33067,
Attention: President (or such other address as the Corporation shall designate
in writing to the Indemnitee). Notices shall be deemed received five (5) days
after the date postmarked if sent by United States mail, postage prepaid and
properly addressed. In the event of payment by the Corporation to the Indemnitee
under this Agreement, the Indemnitee agrees that the Corporation shall be
subrogated to the extent of such payment to all the rights of recovery of the
Indemnitee, and the Indemnitee agrees to execute all papers required and to do
everything necessary to secure such rights, including the execution of such
documents necessary to enable the Corporation effectively to bring suit to
enforce such rights. In addition, Indemnitee agrees to give the Corporation such
information and cooperation as the Corporation may reasonably require and as
shall be within Indemnitee's power regarding any Proceeding which is or may be
subject to this Agreement.
62. SUCCESSORS. This Agreement establishes contract rights which shall
be binding upon, and shall inure to the benefit of, the successors, assigns,
heirs, and legal representatives of the parties hereto. 63. CONTRACT RIGHTS NOT
EXCLUSIVE. The contract rights conferred by this Agreement shall be in addition
to, but not exclusive of, any other right which Indemnitee may have or may
hereafter acquire under any statute, the Articles of Incorporation or Bylaws of
the Corporation, or any agreement, vote of stockholders or disinterested
directors, or otherwise. The rights granted in this Agreement supersede any
similar right granted under any previous written agreement between the
Corporation and Indemnitee with respect to the subject matter hereof.
64. AMENDMENT, MODIFICATION AND WAIVER. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by both
parties hereto. No waiver of any of
-5-
<PAGE>
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
65. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida, irrespective of the choice of
law provisions thereof.
66. CAPTIONS AND SECTION HEADINGS. Captions and section headings used
herein are for convenience only and are not a part of this Agreement and shall
not be used in construing it.
67. SEVERABILITY. Should any provision of this Agreement, or any clause
hereof, be held to be invalid, illegal or unenforceable, in whole or in part,
the remaining provisions and clauses of this Agreement shall remain fully
enforceable and binding on the parties. To the extent permitted by law, the
parties waive any provision of law which renders any such provision prohibited
or unenforceable in any respect.
68. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURES CONTINUED ON NEXT PAGE]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as the day
and year first written above.
TRANSEASTERN PROPERTIES OF
SOUTH FLORIDA, INC.
By:_______________________________
Title:____________________________
[CORPORATE SEAL]
Attest:
__________________________
_________________, Secretary
____________________________(SEAL)
Philip Cucci
-7-
<PAGE>
Annex I
to
Indemnification Agreement
FORM OF UNDERTAKING AGREEMENT
This AGREEMENT is made on ___________________, between Transeastern
Properties of South Florida, Inc., a Florida corporation (the "Corporation"),
and PHILIP CUCCI, a member of the Board of Directors of the Corporation
("Indemnitee").
WHEREAS, Indemnitee has become involved in investigations, claims,
actions, suits, or proceedings which have arisen as a result of Indemnitee's
service to the Corporation; and
WHEREAS, Indemnitee desires that the Corporation pay any and all
expenses (including, but not limited to, attorneys' fees and court costs)
actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in
defending or investigating any such suits or claims and that such payment be
made in advance of the final disposition of such investigations, claims,
actions, suits, or proceedings to the extent that Indemnitee has not been
previously reimbursed by insurance; and
WHEREAS, the Corporation is willing to make such payments but, in
accordance with Section 607.0850 of the Florida Business Corporation Act (the
"Act"), the Corporation may make such payments only if it receives an
undertaking to repay from Indemnitee; and
WHEREAS, Indemnitee is willing to give such an undertaking.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Indemnitee affirms his good faith belief that he has met the Standard
of Conduct necessary for indemnification as defined in Section 5(a) of the
Indemnification Agreement between the Corporation and Indemnitee (the
"Indemnification Agreement").
2. In regard to any payments made by the Corporation to Indemnitee
pursuant to the terms of the Indemnification Agreement or pursuant to Article
____ of the Bylaws of the Corporation, Indemnitee undertakes and agrees to repay
to the Corporation any and all amounts so paid promptly and in any event within
thirty (30) days after (a) any determination made pursuant to Section 5 of the
Indemnification Agreement that the Indemnitee has not met the applicable
Standard of Conduct defined therein or (b) any final determination that
Indemnitee is not entitled to indemnification hereunder or pursuant to the
Bylaws or pursuant to the Act.
3. This Agreement shall not affect in any manner the rights which
Indemnitee may have against the Corporation, any insurer or any other person to
seek indemnification for or reimbursement of (a) any expenses referred to herein
or (b) any judgment which may be rendered in any litigation or proceeding.
Annex I - Page 1
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
TRANSEASTERN PROPERTIES OF
SOUTH FLORIDA, INC.
By:________________________________
Title:_____________________________
________________________
Philip Cucci
Annex I - Page 2
CONSENT OF COUNSEL
We hereby consent to the use of our opinion included herein and to the
incorporation by reference in this Registration Statement on Form S-1 of all
references to this firm under the heading "Legal Matters" in the Prospectus
constituting a part of the Registration Statement on Form S-1 of Transeastern
Properties, Inc. (File No. 333_______).
STEARNS WEAVER MILLER WEISSLER
ALHADEFF & SITTERSON, P.A.
Miami, Florida
August 16, 1995
ACCOUNTANTS' CONSENT
The Board of Directors
Transeastern Properties, Inc.:
We consent to the use of our report dated July 19, 1996, on the consolidated
financial statements of Transeastern Properties, Inc. as of June 30, 1996 and
1995, and for each of the years in the three-year period ended June 30, 1996
included herein. Our report refers to a change in the method of accounting for
a real estate joint venture. We consent to the reference to our firm under the
headings "Selected Financial Data" and "Experts" in the prospectus.
KPMG Peat Marwick LLP
West Palm Beach, Florida
August 16, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 6,426,408
<SECURITIES> 0
<RECEIVABLES> 1,518,851
<ALLOWANCES> 0
<INVENTORY> 82,919,919
<CURRENT-ASSETS> 0
<PP&E> 1,372,742
<DEPRECIATION> 366,027
<TOTAL-ASSETS> 92,702,783<F1>
<CURRENT-LIABILITIES> 18,711,562<F2>
<BONDS> 54,583,229
3,502,100
0
<COMMON> 7,642
<OTHER-SE> 10,876,575
<TOTAL-LIABILITY-AND-EQUITY> 92,702,783<F3>
<SALES> 104,473,891
<TOTAL-REVENUES> 105,673,177
<CGS> 86,442,346
<TOTAL-COSTS> 9,185,860<F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 238,413
<INCOME-PRETAX> 8,075,770
<INCOME-TAX> 3,074,820
<INCOME-CONTINUING> 5,000,950
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,000,950
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
<FN>
<F1>Includes deferred tax asset of $27,500, prepaid assets of $206,040 and other
assets of $597,350 which is not identified above.
<F2>Includes trade accounts payable of $853,661, accrued expenses of $6,391,406,
customer deposits of $3,791,924, income tax payable of $2,725,600, due to
affiliates and officers of $2,441,366 and other liabilities of $2,507,605
although Company's balance sheet is unclassified.
<F3>Includes deferred tax liability of $1,283,300 and minority interest in
consolidated subsidiaries $3,738,375 which is not identified above.
<F4>Includes minority interest in income of consolidated subsidiaries of
$865,394.
</FN>
</TABLE>
