UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission File No. 0001042810
EQUITY ONE, INC.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
1600 N.E. MIAMI GARDENS DRIVE, SUITE 200
N. MIAMI BEACH, FLORIDA 33179
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(Address of Principal Executive Offices)
(305) 947-1664
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(Issuer's Telephone Number, Including Area Code)
MARYLAND 52-1794271
- ------------------------------------ --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of the close of business on March 31, 1999, 10,574,320 shares of the
Company's common stock, par value $0.01 per share, were issued and outstanding.
<PAGE>
EQUITY ONE, INC.
INDEX TO FORM 10-Q
QUARTER ENDED MARCH 31, 1999
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets- As of March 31, 1999
(unaudited) and December 31, 1998
Condensed Consolidated Statements of Operations- For the three months
ended March 31, 1999 and 1998 (unaudited)
Condensed Consolidated Statements of Stockholders' Equity For the
three months ended March 31, 1999 and 1998 (unaudited)
Condensed Consolidated Statements of Cash Flows- For the three months
ended March 31, 1999 and 1998 (unaudited)
Notes to the Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, 1999 (UNAUDITED) AND DECEMBER 31, 1998
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
(UNAUDITED)
ASSETS
Rental Properties:
Land, building and equipment ......................... $ 149,480 $ 134,330
Building improvements ................................ 6,634 6,580
Land held for development ............................ 2,725 2,680
Construction in progress ............................. 7,666 4,497
--------- ---------
166,505 148,087
Accumulated depreciation ............................. (10,255) (9,464)
--------- ---------
Rental properties, net ............................. 156,250 138,623
Cash and cash equivalents ............................ 1,002 1,594
Restricted cash ...................................... -- 6,780
Accounts and other receivables, net .................. 832 1,142
Securities available for sale ........................ 1,740 1,633
Deposits ............................................. 1,087 529
Prepaid and other assets ............................. 1,259 1,454
Deferred expenses, net ............................... 1,294 1,200
--------- ---------
Total assets ..................................... $ 163,464 $ 152,955
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable ............................... $ 74,441 $ 67,145
Note payable ......................................... 585 560
Accounts payable and accrued expenses ................ 1,443 868
Put option liability ................................. 2,127 2,127
Tenants' security deposits ........................... 939 885
Deferred rental income ............................... 190 152
Minority interest in equity of consolidated
subsidiary.......................................... 988 --
--------- ---------
Total liabilities ................................ 80,713 71,737
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock ......................................... 105 102
Additional paid-in capital ........................... 82,785 81,214
Accumulated other comprehensive income ............... (139) (98)
Retained earnings .................................... -- --
--------- ---------
Total stockholders' equity ....................... 82,751 81,218
--------- ---------
Total liabilities and stockholders' equity ............. $ 163,464 $ 152,955
========= =========
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------
1999 1998
-------- -------
(UNAUDITED)
REVENUES:
Rental income .............................................. $ 5,985 $ 5,322
Investment revenue ......................................... 110 72
------- -------
Total revenues ........................................... 6,095 5,394
------- -------
COSTS AND EXPENSES:
Operating expenses ......................................... 1,591 1,377
Depreciation and amortization .............................. 797 658
Interest ................................................... 1,072 1,485
General and administrative expenses ........................ 412 234
Minority interest in earnings of consolidated subsidiary ... 23 --
------- -------
Total costs and expenses ................................. 3,895 3,754
------- -------
Net income ................................................... $ 2,200 $ 1,640
======= =======
EARNINGS PER SHARE:
Basic earnings per share ..................................... $ 0.21 $ 0.24
======= =======
Number of shares used in computing basic earnings per share .. 10,298 6,908
======= =======
Diluted earnings per share ................................... $ 0.21 $ 0.23
======= =======
Number of shares used in computing diluted earnings per share 10,433 7,247
======= =======
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------
1999 1998
------- -------
(UNAUDITED)
Net income ........................................... $ 2,200 $ 1,640
------- -------
Other comprehensive income:
Net unrealized holding loss on securities
available for sale ............................... (41)
------- -------
Comprehensive income ................................. $ 2,159 $ 1,640
======= =======
See accompanying notes to the consolidated financial statements.
5
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NOTES
RECEIVABLE ACCUMULATED
ADDITIONAL FROM OTHER TOTAL
COMMON PAID-IN STOCK COMPREHENSIVE RETAINED STOCKHOLDERS'
STOCK CAPITAL SALES INCOME EARNINGS EQUITY
-------- ---------- ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 1999
Balance, January 1, 1999 ..................... $ 102 $ 81,214 $ -- $ (98) $ -- $ 81,218
Net income ................................. -- -- -- -- 2,200 2,200
Net unrealized holding loss
on securities available for sale ......... -- -- -- (41) -- (41)
Issuance of common stock ................... 3 1,991 -- -- -- 1,994
Dividends .................................. -- (420) -- -- (2,200) (2,620)
-------- -------- -------- -------- -------- --------
Balance, March 31, 1999 (Unaudited) .......... $ 105 $ 82,785 $ -- $ (139) $ -- $ 82,751
======== ======== ======== ======== ======== ========
THREE MONTHS ENDED MARCH 31, 1998
Balance, January 1, 1998 ..................... $ 69 $ 55,036 $ (1,525) $ -- $ -- $ 53,580
Net income ................................. -- -- -- -- 1,640 1,640
Dividends paid ............................. -- (87) -- -- (1,640) (1,727)
-------- -------- -------- -------- -------- --------
Balance, March 31, 1998 (Unaudited) .......... $ 69 $ 54,949 $ (1,525) $ -- $ -- $ 53,493
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
6
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ................................................................. $ 2,200 $ 1,640
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................................ 828 690
Provision for losses on accounts receivable .............................. 16 --
Minority interest in earnings of consolidated
subsidiary ............................................................. 23 --
Changes in assets and liabilities:
Restricted cash ........................................................ 6,780 --
Accounts and other receivables ......................................... 294 222
Deposits ............................................................... (466) (269)
Prepaid and other assets ............................................... 150 (37)
Accounts payable and accrued expenses .................................. 575 (33)
Tenants' security deposits ............................................. -- 34
Deferred rental income ................................................. 38 (105)
Due from related parties ............................................... 32 15
-------- --------
Net cash provided by operating activities .............................. 10,470 2,157
-------- --------
INVESTING ACTIVITIES:
Acquisition of land held for development ................................... (45) --
Acquisition of rental property ............................................. (15,150) (6,768)
Improvements to rental property ............................................ (54) (1,710)
Construction costs incurred ................................................ (3,169) (444)
Purchases of securities .................................................... (155) --
Sales and prepayments of securities ........................................ 7 7
Change in deposits for acquisition of rental property ...................... (38) 450
-------- --------
Net cash used in investing activities .................................. (18,604) (8,465)
-------- --------
FINANCING ACTIVITIES:
Repayments of mortgage notes payable ....................................... (540) (2,438)
Borrowings under mortgage notes payable .................................... 7,836 7,700
Borrowings under note payable .............................................. 25 2,000
Cash dividends paid to stockholders ........................................ (2,620) (1,727)
Stock subscription and issuance ............................................ 1,994 --
Deferred financing expenses, net ........................................... (118) (169)
Change in minority interest ................................................ 965 --
-------- --------
Net cash provided by financing activities .............................. 7,542 5,366
-------- --------
Net Decrease in Cash and Cash Equivalents .................................... (592) (942)
Cash and Cash Equivalents, Beginning of Period ............................... 1,594 2,598
-------- --------
Cash and Cash Equivalents, End of Period ..................................... $ 1,002 $ 1,656
======== ========
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest, net of amount capitalized .......................... $ 1,021 $ 1,429
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Change in unrealized depreciation in securities available for sale ........... $ (41) $ --
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
7
<PAGE>
EQUITY ONE, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED) AND DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Equity
One, Inc. and Subsidiaries (collectively, the "Company") as of March 31,
1999 and 1998 and for the three months then ended, have been prepared by
the Company which is responsible for their integrity and objectivity and
should be read in conjunction with the Company's December 31, 1998
annual consolidated financial statements and the related notes.
To the best of management's knowledge and belief, the statements and
related information were prepared in conformity with generally accepted
accounting principles and are based on recorded transactions and
management's best estimates and judgments. The interim results of
operations are not necessarily indicative of the results which may be
expected for the full year.
The condensed consolidated financial statements as of March 31, 1999 and
1998 and for the three months then ended, include, in the opinion of
management, all adjustments (which are normal recurring adjustments)
necessary for a fair presentation of the financial condition and results
of operations of the Company for the periods indicated.
Reclassifications - Certain March 31, 1998 amounts have been
reclassified to conform to the March 31, 1999 presentation.
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the preparation of the
condensed consolidated financial statements are identical to those
applied in the preparation of the most recent annual consolidated
financial statements.
PUT OPTION EXPENSE - The Company has granted a former stockholder an
option to put 293,430 shares of common stock issuable upon exercise of
the Company's Series C Warrants to the Company at a price of $15.50 per
share or to put the Series C Warrants to the Company at a price of $7.25
per Warrant, which equals the put option price of $15.50 per Warrant
less the Series C Warrant exercise price of $8.25 per Warrant. The put
option is exercisable in whole or in part by the former stockholder from
December 1, 1999 until December 15, 1999. The put option would involve a
maximum net expenditure of $2.1 million. During 1998, the Company
recognized $1.3 million as an expense and approximately $807,000 as a
reduction of paid-in capital related to the Company's initial public
offering.
3. EARNINGS PER SHARE
Basic earnings per share is computed by dividing earnings attributable
to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the
earnings of the Company.
8
<PAGE>
4. MINORITY INTEREST
On January 1, 1999, a wholly owned subsidiary of the Company, Equity One
(Walden Woods) Inc., entered into a limited partnership as a general
partner. The limited partners contributed an income producing shopping
center (Walden Woods Village) and the Company contributed 93,656 shares
of common stock to the limited partnership at an agreed upon price of
$10.30 per share. Based on this per share price and the net value of
property contributed by the limited partners, each of the partners
received 93,656 limited partnership units. The Company and the limited
partners have entered into a Redemption Agreement whereby the limited
partners can request that the Company purchase back all or part of the
common stock at $10.30 per share no earlier than two years nor later
than fifteen years after the exchange date of January 1, 1999. As a
result of the Redemption Agreement, the minority interest has been
presented as a liability. In addition, under the terms of the limited
partnership agreement, the minority interest does not have an interest
in the common stock of the Company except to the extent of dividends
declared on such common stock. Accordingly, a preference in earnings has
been allocated to the minority interest to the extent of the dividends
declared. The shares of the Company held by the consolidated limited
partnership are not considered outstanding in the condensed consolidated
financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following should be read in conjunction with the Company's condensed
consolidated financial statements, including the notes thereto, which are
included elsewhere herein.
(1) RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Total revenues increased by approximately $701,000, or 13.0%, to $6.1
million for the three months ended March 31, 1999 from $5.4 million for the
comparable period of 1998. The increase resulted primarily from the Company's
acquisition of (i) a new supermarket anchored shopping center located in
Orlando, Florida in February, 1999 ("Park Promenade"), (ii) a new free-standing
restaurant property located in Miami Beach, Florida in April, 1998 ("El
Novillo"), (iii) a new drug store anchored shopping center located in
Jacksonville, Florida in May, 1998 ("Beauclerc Village"), (iv) a new supermarket
anchored shopping center located in Fort Myers, Florida in June, 1998
("Summerlin Square"), (v) a new supermarket anchored shopping center located in
Plant City, Florida in January, 1999 ("Walden Woods") and the Winn-Dixie
expansion at Commonwealth Shopping Center. During the fourth quarter of 1998,
the Company sold Parker Towne Shopping Center located in Planto, Texas.
Operating expenses increased by approximately $214,000 or 15.5% to $1.6
million for the three months ended March 31, 1999 from $1.4 million in the
comparable period of 1998. The primary cause for the increase was $194,000
attributed to the net increase in properties mentioned above.
Depreciation and amortization expense increased by approximately
$139,000, or 21.1%, to $797,000 for the three months ended March 31, 1999, from
$658,000 for the comparable period of 1998. The increase resulted primarily from
the acquisitions mentioned above and the Winn-Dixie expansion.
Interest expense decreased by approximately $413,000, or 27.8%, to $1.1
million for the three months ended March 31, 1999 from $1.5 million for the
comparable period of 1998. The decrease resulted primarily from the Company's
use of proceeds from its initial public offering of common stock consummated in
May 1998 (the "IPO") to reduce mortgage indebtedness.
General and administrative expenses increased by $178,000, or 76.1%, to
$412,000 for the three months ended March 31, 1999 from $234,000 for the
comparable period of 1998. The increased resulted primarily from an increase in
compensation cost of $104,000 and approximately $54,000 of expenses related to
the Company becoming publicly traded.
9
<PAGE>
As a result of the foregoing, net income increased by approximately
$560,000, or 34.1%, to $2.2 million for the three months ended March 31, 1999,
compared to $1.6 million for the comparable period of 1998.
FUNDS FROM OPERATIONS
In March, 1995, the National Association of Real Estate Investment
Trusts ("NAREIT") adopted the NAREIT White Paper on Funds from Operations (the
"White Paper") which provided additional guidance on the calculation of funds
from operations. The White Paper defines funds from operations as net income
(loss) (computed in accordance with generally accepted accounting principles
("GAAP")), excluding gains (or losses) from debt restructuring and sales of
property, plus real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures ("FFO").
Management believes FFO is a helpful measure of the performance of an equity
real estate investment trust ("REIT") because, along with cash flows from
operating activities, investing activities and financing activities, it provides
an understanding of the ability of the Company to incur and service debt and
make capital expenditures. The Company computes FFO in accordance with standards
established by the White Paper, which may differ from the methodology for
calculating FFO utilized by other REITs, and accordingly, may not be comparable
to such other REITs. Further, FFO does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, or other commitments and uncertainties. The
Company believes that in order to facilitate a clear understanding of the
consolidated historical operating results of the Company, FFO should be examined
in conjunction with the net income as presented in the condensed consolidated
financial statements and information included elsewhere herein. FFO should not
be considered as an alternative to net income (determined in accordance with
GAAP) as an indication of the Company's financial performance or to cash flows
from operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make distributions.
The following table illustrates the calculation of FFO for the three
months ended March 31, 1999 and 1998:
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 1998
------- -------
(UNAUDITED)
Net income ............................................. $ 2,200 $ 1,640
Depreciation of real estate assets ..................... 776 646
Amortization of leasing costs .......................... 8 13
Lease termination fee .................................. 112 --
Minority interest ...................................... 23 --
------- -------
FUNDS FROM OPERATIONS .................................. $ 3,119 $ 2,299
======= =======
FUNDS FROM OPERATIONS PER SHARE (DILUTED) .............. $ 0.30 $ 0.32
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) .......... 10,433 7,247
======= =======
FFO increased by approximately $820,000 or 35.7%, to $3.1 million for
the three months ended March 31,1999, from $2.3 million for the comparable
period of 1998. The increase is primarily the result of the acquisitions of
additional properties and the reduction of the Company's mortgage indebtedness.
PRO FORMA RESULTS OF OPERATIONS
The Company completed an IPO of an aggregate of 4,700,000 shares of
common stock, par value $0.01 per share, on May 19, 1998. Of the 4,700,000
shares of common stock sold in the offering, 3,330,398 shares,
10
<PAGE>
generating net proceeds of approximately $33.0 million, were sold by the Company
and 1,369,602 shares were sold by a stockholder of the Company.
The following reports actual results of operations for three months
ended March 31, 1999, and the pro forma results of operations for the three
months ended March 31, 1998. The pro forma results give effect to the initial
public offering as if it had occurred on January 1, 1998. Pro forma adjustments
assume application of the net proceeds of the offering to purchase properties,
retire mortgage indebtedness and other related adjustments. The following pro
forma financial information is not necessarily indicative of the results of
operations which would have been reported if the offering had occurred on the
dates or for the periods indicated.
The following table illustrates the actual and pro forma results of
operations for the three months ended March 31, 1999 and 1998:
THREE MONTHS ENDED
MARCH 31,
----------------
1999 1998
(ACTUAL) (PRO FORMA)
-------- -----------
(UNAUDITED)
REVENUES:
Rental income ........................................... $ 5,985 $ 5,778
Investment revenue ...................................... 110 117
------- -------
Total revenues ........................................ 6,095 5,895
COSTS AND EXPENSES:
Operating expenses ...................................... 1,591 1,472
Depreciation and amortization ........................... 797 729
Interest ................................................ 1,072 1,242
General and administrative expenses ..................... 412 234
Minority interest in earnings of consolidated affiliate . 23 --
------- -------
Total costs and expenses .............................. 3,895 3,677
------- -------
NET INCOME ................................................ $ 2,200 $ 2,218
======= =======
EARNINGS PER SHARE:
BASIC EARNINGS PER SHARE .................................. $ 0.21 $ 0.22
======= =======
NUMBER OF SHARES USED IN COMPUTING BASIC EARNINGS
PER SHARE ............................................... 10,298 10,239
======= =======
DILUTED EARNINGS PER SHARE ................................ $ 0.21 $ 0.21
======= =======
NUMBER OF SHARES USED IN COMPUTING DILUTED EARNINGS
PER SHARE ............................................... 10,433 10,504
======= =======
11
<PAGE>
The following table illustrates the actual FFO and pro forma FFO
calculation for the three months ended March 31, 1999 and 1998:
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 1998
(ACTUAL) (PRO FORMA)
-------- -----------
(UNAUDITED)
Net income ...................................... $ 2,200 $ 2,218
Depreciation of real estate assets .............. 776 716
Amortization of leasing costs ................... 8 13
Lease termination fee ........................... 112 --
Minority interest ............................... 23 --
------- -------
FUNDS FROM OPERATIONS ........................... $ 3,119 $ 2,947
======= =======
FUNDS FROM OPERATIONS PER SHARE (DILUTED) ....... $ 0.30 $ 0.28
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED) ... 10,433 10,504
======= =======
LIQUIDITY AND CAPITAL RESOURCES
Historically, the principal sources of funding for the Company's
operations, including the renovation, expansion, development and acquisition of
shopping centers, have been operating cash flows, the issuance of securities and
mortgage loans. The Company's principal demands for liquidity are maintenance,
repair and tenant improvements of existing properties, acquisitions and
development activities, debt service and repayment obligations and distributions
to its stockholders.
As of March 31, 1999, the Company had total mortgage indebtedness of
approximately $74.4 million, all of which was fixed rate mortgage indebtedness
bearing interest at a weighted average rate of 7.90% and collateralized by 16 of
the Company's existing properties. The Company also has provided a $1.5 million
letter of credit to secure certain obligations in connection with the
acquisition of one of the Company's properties. This letter of credit is
collateralized by a mixed-use property located in West Palm Beach, Florida.
On February 4, 1999, the Company secured a $35,000,000 Master Revolving
Credit Agreement (the "Credit Agreement") with City National Bank of Florida.
Advances under this Agreement are limited to $16,590,000, with any excess
advances being conditioned on the lender securing participation from other
lenders. The Credit Agreement accrues interest at 225 basis points over the
thirty day LIBOR rate, payable monthly, adjusted every six months and matures
February 4, 2002. Advances under the Credit Agreement will be used to fund
property acquisitions, development activities and other Company activities, and
is secured by four of the Company's unencumbered properties.
In addition, the terms of the Credit Agreement allow the lender to cease
funding and/or accelerate the maturity date if neither Mr. Katzman nor Mr.
Valero remains as the executives in control of the Company. The Credit Agreement
also limits the amount that can be borrowed for the purchase of vacant land and
other customary conditions, including, among other things, the payment of
commitment fees and the required delivery of various title, insurance, zoning
and environmental assurances on the secured properties, and will contain various
covenants, such as a prohibition on secondary financing on any of the secured
properties.
The Company completed an IPO of its common stock in May 1998. Pursuant
to the IPO, an aggregate of 4,700 shares of the Company's common stock were
sold, of which 3,330,398 shares, generating net proceeds of approximately $33.5
million, were sold by the Company and 1,369,602 shares were sold by a
stockholder of the Company. As of March 31, 1999, no proceeds from the IPO
remained available for use.
12
<PAGE>
The Company has one major redevelopment project under construction that
will add an additional 240,000 square feet of retail space to the Company's
portfolio. This project is expected to be completed during the first quarter of
2000. It is anticipated that future funding required for this project is
estimated to be $13.0 million and will come from the Credit Agreement and other
sources of cash including obtaining permanent debt on certain unencumbered
existing properties. Management expects this redevelopment to have a positive
effect on cash generated by operating activities and Funds from Operations.
The Company believes, based on currently proposed plans and assumptions
relating to its operations, that the Company's existing financial arrangements,
together with cash flows from operations, will be sufficient to satisfy its cash
requirements for a period of at least 12 months. In the event that the Company's
plans change, its assumptions change or prove to be inaccurate or the proceeds
from the IPO or available financing arrangements prove to be insufficient to
fund the Company's expansion and development efforts, the Company would be
required to seek additional sources of financing. There can be no assurance that
any additional financing will be available to the Company on acceptable terms,
or at all. If adequate funds are not available, the Company's business
operations could be materially adversely affected.
During the three months ended March 31, 1999, the Company declared and
paid a cash dividend of $0.25 per outstanding share of Common Stock.
YEAR 2000 COSTS
The Company has undertaken a study of its functional application systems
to determine their compliance with year 2000 issues and, to the extent of
noncompliance, the required remediation. As a result of such study, the Company
believes the majority of its systems are year 2000 compliant. To date, the
expenses incurred by the Company in order to become year 2000 compliant,
including computer software costs, have been approximately $25,000. Costs other
than software have been expensed as incurred.
An assessment of the readiness of year 2000 compliance of third party
entities with which the Company has relationships, such as its banking
institutions, tenants and others is ongoing. The Company has inquired, or is in
the process of inquiring, of the significant aforementioned third party entities
as to their readiness with respect to year 2000 compliance and to date has
received indications that many of them are either compliant or in the process of
remediation. The Company will continue to monitor these third party entities to
determine the impact on the business of the Company and the actions the Company
must take, if any, in the event of non-compliance by any of these third parties.
The Company's initial assessment of compliance by third party entities is that
there is not a material business risk to the Company posed by any such
noncompliance and, as such, the Company has not yet developed any related
contingency plans.
INFLATION
Most of the Company's leases contain provisions designed to partially
mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rents based on tenant's gross sales
above predetermined levels, which rents generally increase as prices rise, or
escalation clauses which are typically related to increases in the Consumer
Price Index or similar inflation indices. Most of the Company's leases require
the tenant to pay its share of operating expenses, including common area
maintenance, real estate taxes and insurance, thereby reducing the Company's
exposure to increases in costs and operating expenses resulting from inflation.
The Company's financial results are affected by general economic
conditions in the markets in which its properties are located. An economic
recession, or other adverse changes in general or local economic conditions,
could result in the inability of some existing tenants of the Company to meet
their lease obligations and could otherwise adversely affect the Company's
ability to attract or retain tenants. The properties are typically anchored by
supermarkets, drug stores and other consumer necessity and service retailers
which typically offer day-to-day
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necessities rather than luxury items. These types of tenants, in the experience
of the Company, generally maintain more consistent sales performance during
periods of adverse economic conditions.
CAUTIONARY STATEMENT RELATING TO FORWARD LOOKING STATEMENTS
The foregoing Management's Discussion and Analysis contains various
"forward looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represent the Company's expectations or beliefs concerning
future events, including, but not limited to, statements regarding growth in
rental revenues and sufficiency of the Company's cash flow for its future
liquidity and capital resource needs. These forward looking statements are
further qualified by important factors that could cause actual events to differ
materially from those in such forward looking statements. These factors include,
without limitation, increased competition, dependence on key tenants, geographic
concentration, lack of development experience, reliance on key personnel and
maintaining its REIT status. Results actually achieved may differ materially
from expected results included in these forward looking statements as a result
of these or other factors.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 26, 1998, Albertsons, Inc. ("Albertsons") commenced an
action against a subsidiary of the Company (the "Subsidiary") in the Circuit
Court for the Eleventh Judicial District in and for Miami-Dade County, Florida,
alleging breach of a letter agreement and seeking injunctive relief and the
payment of damages in excess of $10,000,000 representing lost profits and other
damages. This action was commenced in response to the Subsidiary's entering into
a lease agreement with Publix Supermarkets, Inc. ("Publix") respecting Publix's
lease of anchor space at Sky Lake. Among other things, the complaint alleged
that Albertsons and the Subsidiary entered into a letter agreement which the
parties intended to be memorialized into a formal lease agreement and as to
which the parties intended to be bound. In February, 1999, Albertsons
voluntarily dismissed its complaint relating to this action in its entirety.
Except as described above, neither the Company nor the Company's
properties are subject to any material litigation. Further, to the Company's
knowledge, except as described above, there is no litigation threatened against
the Company or any of its properties, other than routine litigation and
administrative proceedings arising in the ordinary course of business, which
collectively are not expected to have a material adverse affect on the business,
financial condition, results of operations or cash flows of the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 1, 1999 a wholly owned subsidiary of the Company, Equity One
(Walden Woods) Inc., entered into a limited partnership as a general partner.
The limited partners contributed an income producing shopping center (Walden
Woods Village) and the Company contributed 93,656 shares of common stock to the
limited partnership at an agreed upon price of $10.30 per share. Based on this
per share price and the net value of property contributed by the limited
partners, each of the partners received 93,656 limited partnership units. The
Company and the limited partners have entered into a Redemption Agreement
whereby the limited partners can request that the Company purchase back all or
part of the common stock at $10.30 per share no earlier than two years nor later
than fifteen years after the exchange date of January 1, 1999. As a result of
the Redemption Agreement, the minority interest has been presented as a
liability. In addition, under the terms of the limited partnership agreement,
the minority interest does not have an interest in the common stock of the
Company except to the extent of dividends declared on such common stock.
Accordingly, a preference in earnings has been allocated to the minority
interest to the extent of the dividends declared. The shares of the Company held
by the consolidated limited partnership are not considered outstanding in the
condensed consolidated financial statements.
On March 10, 1999, Gazit (1995), Inc. exercised 242,136 Series C
Warrants at an exercise price of $8.25 per share producing total proceeds to the
Company of $2.0 million. Approximately $1.1 million of these proceeds were used
to pay down the Company's line of credit, while the remaining balance was
applied towards the April 6, 1999 purchase of a K-Mart Lease at its Lantana
Village Shopping Center for a purchase price of $2.6 million.
14
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
10.33 - Master Revolving Credit Agreement, by and between City
National Bank and the Company, dated February 4, 1999
27.1 - Financial Data Schedule
(B) Report on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 14, 1999 EQUITY ONE, INC.
/s/ CHAIM KATZMAN
------------------------------------------------
Chaim Katzman
Chief Executive Officer
(Principal Executive Officer:
/s/ PETER SACKMANN
------------------------------------------------
Peter Sackmann
Controller
(Principal Accounting Financial Officer)
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EXHIBIT INDEX
EXHIBITS DESCRIPTION
- -------- -----------
10.33 - Master Revolving Credit Agreement, by and between City National Bank and
the Company, dated February 4, 1999
27.1 - Financial Data Schedule
EXHIBIT 10.33
MASTER REVOLVING CREDIT AGREEMENT
THIS MASTER CREDIT AGREEMENT, dated as of February __, 1999, (the
"Agreement"), is by and among EQUITY ONE, INC., a Maryland corporation, c/o
Chaim Katzman, 1600 Miami Gardens Drive, Miami, Florida 33179 (the "Borrower")
and CITY NATIONAL BANK OF FLORIDA, a national banking association, with its
principal address at 25 West Flagler Street, Miami, Florida 33130 (the
"Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has obtained a commitment from the Lender to make
available to the Borrower a revolving line of credit facility (the "RLOC Loan")
in the aggregate principal amount of THIRTY FIVE MILLION DOLLARS AND 00/100
($35,000,000.00) DOLLARS; and
WHEREAS, advances under the Loan in excess of SIXTEEN MILLION FIVE
HUNDRED NINETY THOUSAND ($16,590,000.00) DOLLARS ("CNB Availability") are
conditioned upon Lender securing participation in the Loan from the Lenders for
all advances in excess of the CNB Availability; and,
WHEREAS, the Lender has agreed that the proceeds of loans made under
such RLOC Loan shall be used by the Borrower and/or its affiliates to finance
commercial real estate acquisitions, payment of dividends, development
activities for Borrower's properties, and working capital for general corporate
purposes;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, he parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms have the meanings indicated which meanings shall
be equally applicable to both the singular and the plural forms of such terms:
ADVANCE: Advances of funds under the RLOC which shall be
conditioned upon the satisfaction of certain conditions precedent specified in
Section 3.2 hereof.
AFFILIATES: Any Person which directly or indirectly, is in
control of, is controlled by or is under common control with, another Person.
For purposes of this definition, a Person shall be deemed to be "controlled by"
the Person (the "Controlling Person") if the Controlling Person possesses,
directly or indirectly, power either to (i) vote Fifty-One Percent (51%) or more
of the securities having ordinary voting power for the election of directors of
such Person, or (ii) direct or cause the direction of the management and
policies of such Person whether by contract, through the ownership of voting
securities or otherwise.
<PAGE>
AFFILIATED BORROWER: An affiliated entity of Borrower that may
borrow money under the terms of this Master Credit Agreement. An affiliated
Borrower is sometimes referred to as a Borrowing Entity, Related Entity or
Affiliated Entity.
AGREEMENT: This Master Credit Agreement, as the same may from
time to time be amended.
ASSETS: At a particular date, the fair value of the total assets
of a particular person that would be set forth on a balance sheet of such person
prepared at such date, and with respect to entities other than individuals, in
accordance with GAAP.
AVAILABILITY FEE: In addition to the Commitment Fee, Borrower
shall pay Lender an available fee, which is calculated at 25% of the unused CNB
Availability together with any additional sums for which Lender has obtained
participants (the "Total Availability"). The Availability Fee shall be paid
every ninety (90) days commencing from the date of execution of the Note. In
determining the amount of the Availability Fee, the holdback for taxes and
insurance shall be deducted, and the amount of the Total Availability shall be
calculated on an annualized basis.
AVAILABLE COMMITMENT: On any date, an amount equal to the
difference between (a) the amount of the Commitment (subject to the limitations
of the CNB Availability) and (b) the total of the outstanding advances under the
line of credit.
BORROWER: Equity One, Inc., a Maryland corporation, and/or is
affiliates.
BORROWING REQUEST: A written request by the Borrower for a Loan
specifying (i) the proposed Loan Closing Date, (ii) the amount of the proposed
Loan, (iii) a legal description of the Property to be financed with the proceeds
of the proposed Loan, and (iv) a copy of the executed Purchase and Sale
Agreement.
COMMITMENT: The obligation of Lender to make Loans to Borrower in
a maximum aggregate principal amount of $35,000,000.00 at any time, subject to
obtaining loan participation's for loans in excess of the CNB Availability.
COMMITMENT EXPIRATION DATE: All advances made pursuant to this
Master Credit Agreement shall be repaid on or before January ___, 2002.
COMMITMENT FEES: Borrower has paid lender the initial commitment
fee in the sum of $18,750.00.
COMMITMENT LETTER: shall mean the commitment letter from Lender
to Borrower, dated November 23, 1998, and accepted and as modified by Borrower
on December 10, 1998, regarding the Line of Credit.
COMMONLY CONTROLLED ENTITY: An entity, whether or not
incorporated, which is under common control with the Borrower with in the
meaning of Section 4001 of ERISA.
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ERISA: The Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended, or any successor legislation thereto
which may replace, amend or otherwise modify provisions thereof.
EVENT OF DEFAULT: As defined in Section 7.1 hereof.
GAAP: Those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board or through other appropriate boards or
committees thereof and which are consistently applied for all periods after the
date hereof.
HAZARDOUS SUBSTANCES: Any substance or material (a) identified in
the Section 101(14) of the Comprehensive Environmental Response Compensation and
Liability Act of 1980, 42 USC ss. 9601(14) and as set forth in Title 40, Code of
Federal Regulations, Part 302, as the same may be amended from time to time, or
(b) determined to be toxic, a pollutant or contaminant, under Federal, state or
local statute, law, ordinance, rule or regulation or judicial or administrative
order or decision, as the same may be amended from time to time, including but
not limited to, petroleum and petroleum products as defined in Sec. 376.301(10),
Florida Statues, as may be amended from time to time, (c) asbestos, (d) radon,
(e) polychlorinated biphenyls and such other materials, substances or waste
which are otherwise dangerous, hazardous, harmful or deleterious to human health
or the environment.
INCREASE PROMISSORY NOTE: Promissory note executed by Borrower to
evidence any advances above the CNB Availability.
INDEBTEDNESS: (a) all indebtedness, whether present or future,
for borrowed money or for the deferred purchase price of any property, (b) all
indebtedness, whether present or future, secured by a lien on property, and (c)
all obligations of partnerships or joint ventures in respect of which the Person
is primarily or secondarily liable as a partner or joint venturer or otherwise
(provided that, for purposes of determining the amount of the indebtedness, the
full amount of such obligations, without giving effect to the counterpart
liability or contributions of other participants in the partnership or joint
venture, shall be included).
LENDER: City National Bank of Florida, a national banking
association.
LIABILITIES: At a particular date, the amount of liabilities,
including without limitation contingent liabilities, of a particular person that
would be set forth on a balance sheet of such person prepared at such date, and
with respect to entities other than individuals, otherwise in accordance with
GAAP.
LIBOR: The term LIBOR Rate means the fluctuating rate per annum
equal to the rate published in The Wall Street Journal as determined by the
Lender as the average London Interbank Market Offering Rate (LIBOR) at which
deposits in United States dollar with a term equal to thirty (30) days were
offered in the London Interbank Market.
3
<PAGE>
LINE OF CREDIT: The $35,000,000.00 revolving line of credit made
available by Lender to Borrower pursuant to the terms, provisions and conditions
of this Agreement.
LINE OF CREDIT CLOSING DATE: The date set forth in the
introduction to this Agreement.
LOAN: The Loan evidenced by the RLOC Note.
LOAN ADVANCE: Any principal amount advanced by Lender to or on
behalf of Borrower or any affiliated Borrower under the Line of Credit pursuant
to the terms, provisions and conditions of this Agreement and the Loan
Documents.
LOAN CLOSING DATE: The closing date and time of each Loan, which
shall be satisfactory to Lender but in no event later than 30 days after the
delivery to Lender of a Borrowing Request, assuming that the Borrower has
satisfied all of the conditions set forth in Section 3.2 hereof.
LOAN DOCUMENTS: As such term is defined in Section 2.3 hereof.
PBGC: The Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any successor corporation
established under ERISA.
PERSON: Any natural person, corporation, unincorporated
organization, trust, joint-stock company, joint venture, association, company,
partnership or government, or any agency or political subdivision of any
government.
PLAN: At any particular time, any employee benefit plan which is
subject to the provisions of Title IV of ERISA and which is maintained in whole
or in part for employees of the Borrower, any of its Subsidiaries or any
Commonly Controlled Entity, and in respect of which the Borrower or a Commonly
Controlled Entity is (or if such Plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
RELEASE PRICE: Borrower shall be entitled to release any property
which is encumbered b y the lien of the Mortgage, provided that, after payment
of the release price, the property which remains encumbered by the lien of the
Mortgage has a Fair Market Value, as determined under this Agreement, which
results in a loan to value ratio of no greater than Seventy (70%) Percent for
improved property and Fifty (50%) Percent for vacant property.
REVOLVING LINE OF CREDIT PROMISSORY: The Promissory Note executed
simultaneously herewith in the original principal sum of $16,590,000.00.
SOLVENT: With respect to any person on a particular date, on such
date (a) the faire value of the Assets of such person, exclusive of (i) Assets
transferred, concealed, or removed with intent to hinder, delay, or defraud such
person's creditors and (ii) Assets that may be exempted under 11 U.S.C. ss. 522,
is greater than the total amount of Liabilities of such person,
4
<PAGE>
(b) the present fair salable value of the assets of such person is not less than
the amount that will be required to pay the probable liability of such person on
its debts as they become absolute and matured, (c) such person is able to
realize upon its assets and pay its debts and other liabilities beyond such
person's ability to pay as such debts and other liabilities, beyond such
person's ability to pay as such debts and liabilities mature, (d) such person is
not engaged in business or a transaction, and is not about to engage in business
or a transaction, for which such person's property would constitute unreasonably
small capital and (e) such person does not intend to incur, and does not believe
that it will incur, debts that would be beyond its ability to pay as they
mature.
SUBSIDIARY: Any Person in which other Person may own, directly or
indirectly, an equity interest of more than 50%, or which may effectively be
controlled by such Person.
TANGIBLE NET WORTH: At a particular date, Assets of a particular
person (excluding goodwill and such assets which are properly classified as
tangible assets on a balance sheet of such person prepared in accordance with
GAAP) less Liabilities of such person at such date.
Section 1.2 OTHER DEFINITIONAL PROVISIONS. The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and section, subsection and exhibit references are references to this
Agreement unless otherwise specified.
ARTICLE II
LOANS
Section 2.1 COMMITMENT TO MAKE LOANS
(a) ADVANCES. The Lender agrees, on the terms of this Agreement, to make
make Advances in United States dollars to the Borrower and/or an Affiliated
Borrower for a period commencing on the Line of Credit Closing Date and
terminating on the Commitment Expiration Date, or, if an Event of Default
has occurred prior to such date, on the date on which the Borrower receives
notification that the Lender's Commitment has been terminated in full
pursuant to Article VII hereof.
(b) PRE-COMMITTED ADVANCES.
Lender has approved advances totalling the sum of SIXTEEN MILLION
FIVE HUNDRED NINETY THOUSAND AND NO/100 ($16,590,000.00) DOLLARS to the
following entities and in the amounts set forth below:
Equity One (Sky Lake) Inc., a
Florida corporation, to be secured
by a mortgage on the real property
described on Exhibit "A". Improved Parcel: $ 1,155,000.00
Vacant Parcel $ 6,352,000.00
Equity One (Beta) Inc., a Florida
corporation, to be secured by a
mortgage on the real property
described on Exhibit "B". $ 3,815,000.00
Equity One (Beauclerc) Inc., a
Florida corporation, to be secured
by a mortgage on the real property
described on Exhibit "C". $ 2,030,000.00
Gazit (Meridian) Inc., a Florida
corporation, to be secured by a
mortgage on the real property
described on Exhibit "D". Improved Parcel: $ 2,225,500.00
Vacant Parcel $ 1,115,000.00
---------------
TOTAL: $16,590,000.00
Section 2.2 NOTICE AND MANNER OF BORROWING. Each Advance shall be funded
upon satisfaction of all pre-closing conditions contained in this Agreement.
Lender acknowledges that the pre-closing condition for the Pre-Committed
Advances has been satisfied.
Section 2.3 ADVANCE DOCUMENTS. With respect to each Advance, including
the Pre-committed Advances, the Borrower shall execute and deliver to Lender on
the applicable Loan Closing Date the following documents (collectively, the
"Loan Documents") to evidence and/or secure such Loan:
(a) NOTE. Promissory Note in the form of Exhibit "E"
attached hereto and made a part hereof, with appropriate insertions, in the
amount of the Loan.
(b) MORTGAGE. First mortgage encumbering the fee interest
in the Land and Building (if improved) financed with the proceeds of such Loan,
and creating a perfected first security interest in any improvements constructed
on the Land and all furniture, furnishings, equipment, fixtures, building
supplies and materials installed in, affixed to, placed upon or otherwise
utilized in the operation of such land, including all additions hereto,
substitutions therefor and replacements thereof, which mortgage shall be in the
form of Exhibit "F" attached
5
<PAGE>
hereto and made a part hereof, with appropriate insertions. Furthermore,
Borrower shall execute appropriate UCC-1 financing statements as required by
Lender. For all Advances above the Pre-Committed Advances, Borrower and the
Affiliated Borrower, if applicable, shall execute and deliver a Promissory note
(evidencing the amount of the increase) on the same terms as the Note and a
Mortgage Modification and Spreader Agreement, prepared by Lender's counsel, if
the Added Parcel is located in the State of Florida. If the Added Parcel is
located outside the State of Florida, Borrower and Affiliated Borrower, if
applicable, shall execute such security documents as Lender and its counsel may
require.
(c) ASSIGNMENT OF RENTS AND LEASES. An assignment of all
rents, issues and profits with respect to he Building and Land financed with the
process of such Advance, which assignment shall be in the form of Exhibit "G"
attached hereto and by this reference made a part hereof, with appropriate
insertions.
(d) ENVIRONMENTAL COMPLIANCE AND INDEMNITY AGREEMENT. An
Environmental Compliance and Indemnity Agreement with respect to the Building
and Land financed with the proceeds of such Advance in the form of Exhibit "H"
attached hereto and by this reference made a part hereof, with appropriate
insertions.
(e) ADVANCES ABOVE CNB AVAILABILITY. For all advances
above the CNB Available and as a condition thereto, Borrower and the Affiliated
Borrower, if applicable, and if the Real Property which is to serve as
additional collateral ("Added Parcel") is located within the State of Florida, a
Mortgage Modification and Spreader Agreement shall be executed and recorded in
the County where the Added Parcel is located so that said advance will be
secured by a first lien under the Mortgage. If the Property is located outside
of the State of Florida, then Borrower shall cause the advance to be secured by
a first lien on the Property through a Mortgage or Deed of Trust according to
the laws of the State in which the Property is situated.
(f) LIMITATIONS ON ADVANCES. Notwithstanding anything to
the contrary contained herein, the total value for advance purposes, of vacant
land shall not exceed $7,400,000.00.
(g) OTHER DOCUMENTS. Such other documents customarily
required by Lender, including, without limitation, affidavits, UCC-1 Financing
Statements, anti-coercion statements, flood notices and closing statements.
Section 2.4 INTEREST. Each Advance shall bear interest on the unpaid
principal balance thereof at a variable rate per annum equal to Two Hundred
Twenty Five (2.25%) Basis Points over the one month (30-day) LIBOR Rate in
effect on the first day of each interest period.
Section 2.5 PAYMENTS.
(a) INTEREST. During the entire term of this RLOC Loan,
interest shall be payable in arrears on the principal balance thereof
outstanding from time to time.
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<PAGE>
(b) PRINCIPAL. The outstanding principal balance and all
accrued and unpaid interest and any and all other payments due under this RLOC
Loan shall be due and payable in full on the Maturity Date.
(c) BORROW AND REBORN. Prior to maturity, and provided the
Loan is current and no Event of Default has occurred, as such term is defined in
the Note (a copy of the form of Note is attached hereto and made a part hereof
as Exhibit "E"), Maker may use the revolving line of credit by borrowing on,
paying or prepaying the Note, in whole or in part, and reborrowing all in
accordance with and subject to the terms and conditions of the Mortgage (a copy
of the form of Mortgage is attached hereto and made a part hereof as Exhibit
"F"0.
Section 2.6 SUBSTITUTE COLLATERAL. Borrower may, subject to Lender's
prior approval, which approval may be given or withheld in Lender's sole and
absolute discretion, substitute, collateral, whereby Lender will release the
property to be substituted from the lien of the Mortgage and Lender shall
simultaneously be given a first mortgage lien on the substituted property,
provided, with respect to the substituted property, all the terms and conditions
to an Advance have occurred to the Lender and its counsel's satisfaction. If
Lender agrees to substitute collateral, Borrower shall pay Lender an
administrative fee, at the time of closing on the substituted collateral, in the
sum of $5,000.00, together with all out of pocket expenses incurred by Lender
including counsel fees, for each transaction in which collateral is substituted.
Section 2.7 HOLDBACK FOR REAL ESTATE TAXES AND INSURANCE. For all Loans,
Lender shall hold back from availability under the RLOC Loan an amount which
would be sufficient to pay one year's real estate taxes on all property which is
encumbered b the lien of the Mortgage, and for all improved property encumbered
by the lien of the Mortgage, an amount equal to one year's insurance premium for
the casualty insurance. No interest shall be paid on the foregoing holdbacks
unless said sums are actually advanced for the payment of real estate taxes
and/or insurance. If Borrower fails to provide Lender with proof of payment of
real state taxes on or before December 31 of the year in which the taxes are
due, Lender may advance the sum held back for payment of the real estate taxes,
which swum shall be secured by the lien of the Mortgage. Likewise, if Borrower
fails to provide proof of payment of the casualty insurance premium, on or
before the date that the premiums is payable, Lender may advance the sum held
back in payment of the insurance premium and it shall also be secured by the
lien of the Mortgage.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 INITIAL CONDITIONS PRECEDENT. The Lender shall not be
obligated to make any Advances hereunder unless the following conditions have
been satisfied in the sole opinion of the Lender and its counsel:
(a) AGREEMENT. This Agreement shall be been duly executed
and delivered by both Borrower and Lender.
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(b) AUTHORIZATION DOCUMENTS. Borrower and/or an Affiliated
Borrower shall, with respect to the Pre-Committed Advances, and as a condition
precedent to adding additional property as collateral under this Agreement, have
delivered to Lender a certified copy of the articles of incorporation of the
entity owning the Property for which an advance is requested and a certificate
of good standing from the appropriate governmental authority, a copy of the
by-laws of said entity, a certified copy of the resolution of the board of
directors authorizing execution of the Loan Documents and an incumbency
certificate stating the offices held by each signatory.
(c) OPINION LETTER. Borrower shall have delivered to
Lender an opinion of Borrower's counsel reasonably acceptable to Lender and its
counsel.
(d) FINANCING STATEMENT. Borrower shall have delivered to
Lender current certified financial statements, reflecting its Assets, all its
Liabilities and showing Borrower has a debt to net worth ratio of no less than
1.85 to 1.
(e) OTHER DOCUMENTS. Borrower shall have delivered to
Lender of such other documents reasonably deemed necessary by Lender, which must
be in form and substance acceptable to Lender and its counsel.
Section 3.2 CONDITIONS, PRECEDENT TO THE FUNDING OF ADVANCES. Lender's
obligation to make such Advance shall be subject to the following conditions
precedent.
(a) LOAN DOCUMENTS. All Loan Documents shall have been
duly executed and delivered by Borrower to Lender.
(b) NO DEFAULT. No Event of Default hereunder or under any
of the documents which secure payment of this RLOC Loan or any Loan Document
shall have occurred and be continuing or will occur upon the making of the
Advance, and all representations and warranties made by the Borrower or an
Affiliated Borrower hereunder and/or in any Loan Documents shall be true and
correct with the same effect as though the representations and warranties had
been made on and as of the Loan Closing Date.
(c) FINANCIAL CONDITION. The financial condition or
operations of the Borrower shall not have changed adversely in any material
respect. In addition, Chaim Katzman or Doron Valero shall be the chief executive
officer of Borrower and shall be responsible for managing and controlling the
operations of Borrower.
(d) AUTHORIZATION DOCUMENTS. Borrower shall have delivered
to Lender at least five (5) business days prior to the Date on which Borrower
shall complete the closing which adds the Added Parcel as security for payment
of the RLOC Loan copies of the articles of incorporation (or other
organizational documents), good standing certificates and bylaws of the
Borrowing Entity, certified copies of resolutions of the board of directors (or
other governing Person(s)) of the borrowing entity approving the execution of
the Loan Documents and authorizing the individual signatories to execute the
Loan Documents on behalf of
8
<PAGE>
Borrowing entity, together with a certificate of incumbency stating the offices
or positions held by each such signatory.
(e) OPINION LETTER. Borrower shall have deliver to Lender
an opinion of Borrower's counsel reasonably acceptable to Lender and its
counsel.
(f) APPRAISAL. Prior to closing on the Added Parcel,
Lender must receive a current appraisal of the Added parcel securing payment of
the Loan expressing an opinion of market value which results in a loan to value
ratio for income producing properties of no greater than seventy (70%) percent s
determined by Lender and a loan to value ratio for vacant land of no greater
than (50%) percent as determined by Lender. The Lender must arrange for the
appraisal and engage the appraiser. Each appraisal must be ordered directly by
the Lender and must conform to the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) and the related rules and regulations of the
Officer of the Comptroller of the Currency (the OCC), 12 CFT part 34, effective
August 24, 1990, as amended. Each appraisal, including without limitation, the
appraiser and appraisal methodology and the conclusion(s) of market value, shall
be subject to Lender's review and approval. All appraisal costs and fees shall
be paid by Borrower and Borrower hereby agrees to immediately pay or prepay such
appraisal costs or fees upon the request of Lender.
(g) ENVIRONMENTAL AUDIT. Receipt and satisfactory review
and approval of Lender of a phase I environmental audit or assessment report, at
Borrower's expense, of the condition of the Added Parcel, performed to the
Lender's satisfaction by a qualified environmental consultant or the independent
engineer acceptable to Lender in its sole and absolute discretion, verifying
that no environmental contamination on the Land has occurred or is imminent and
containing adequately supported and documented conclusions (which conclusions
must be satisfactory to the Lender, in its sole discretion) which evaluates (i)
whether any hazardous or toxic substances, hazardous wastes, pollutants,
contaminants, or any other environmental hazards are present in the soil,
surface water or groundwater at or adjacent to the Land; (ii) whether operations
at the Land are in compliance with all federal, state and local air quality and
water quality regulations and other applicable environmental laws; and (iii)
whether there are any other potential or actual environmental concerns from
current or prior ownership and uses of the Land. The contract with the
consultant for the conduct of an environmental audit or assessment shall contain
a provision which expressly states that the Lender is an intended beneficiary of
the contract and is entitled to rely on any report of findings or conclusions or
the results of the environmental audit.
(h) ASBESTOS INSULATION. It is also a condition of the
Lender's obligation to close on each advance or accept an added Parcel as
collateral hereunder encumbering improved property, that the Borrower furnish
the Lender with evidence, satisfactory to the Lender and its attorneys, that
there is no asbestos insulation in the improvements to the mortgaged property.
(i) DOCUMENTARY STAMPS AND INTANGIBLE TAX. Borrower shall
indemnify and hold Lender harmless of and from any and all liability in
connection with the
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payment of documentary stamp r intangible tax in connection with advances made
hereunder, which indemnification shall survive closing or a repayment of the
Loan.
(j) PROPERTY EVALUATION REPORT. For each Loan encumbering
improved property which secures repayment of the Loan, Borrower shall provide
Lender a Property Evaluation Report prepared by a licensed engineer showing the
Property in a condition reasonably acceptable to Lender.
(k) TITLE SURVEY. For each property which __________
repayment of the RLCO Loan, Borrower shall provide Bank with a title survey of
the premises by a licensed or registered land surveyor who shall be acceptable
to Lender, certified to Borrower, Lender and the title insurance company, which
shall show a state of facts in form, scope and substance acceptable to Bank,
including but not limited to, an adequate and accurate legal description,
interior lot lines, if any, the location of all adjoining streets, gores and
overlaps with adjacent property, the location of all improvements on the
Mortgaged Property, location of utilities, elevations, high water marks,
easements and rights-of-way, whether of record or apparent, ingress and egress
to and from each of the Mortgaged Properties and natural and constructed objects
affecting the premises and showing any encroachments and/or discrepancies with
any record instruments or existing boundary markers and shall contain a
calculation of the amount of land included in the survey.
(l) TITLE INSURANCE. Borrower shall provide Lender with a
title insurance policy with a liability limit of no less than Seventy (70%)
Percent of Fair Market Value of improved property and Fifty (50%) Percent of
Fair Market Value of vacant land insuring the Mortgage and if modified and
spread to Lender as a first lien on the good and marketable fee simple title to
each of the mortgaged properties and issued by a title insurance company (with
co-insurance or re-insurance with direct access agreements as Lender may
require) in such forms, amounts and by such title insurance companies as shall
then be satisfactory to Lender o in the event of advances above the CNB
Availability and the Property is located in Florida, an endorsement to the
existing policy of title insurance insuring that the mortgage constitutes a
first lien on the good and marketable fee simple title to the Property for which
the lien of the mortgage has been spread. The title insurance policies shall be
subject only to such exceptions as shall be approved by Lender's counsel subject
to Borrower's right to transfer a lien to security in accordance with Florida
Statute 713.24 so as not to affect the Lender's first lien on the good and
marketable fee simple title to the mortgage properties and shall have a variable
rate, environmental lien, Florida form 9 endorsements and such other endorsement
required by Lender's counsel. If land is vacant, Borrower shall provided general
liability insurance naming Lender as an additional insured in amounts acceptable
to Lender and written insurance companies authorized to do business in Florida
and acceptable to Lender.
(m) OTHER DOCUMENTS. Borrower shall have delivered to
Lender such other documents reasonably deemed necessary to Lender, which must be
in form and substance acceptable to Lender.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to make
Loans, Borrower and each of the Borrowing Entities shall have been deemed to
have made the following representations and warranties to the Lender, all of
which shall survive the execution and delivery of this Agreement and any Loan
Documents:
Section 4.1 DUE EXISTENCE AND POWER OF BORROWER ENTITY.
(a) The Borrower is a Maryland corporation authorized to
do business in the State of Florida and validly existing and in good standing
under the laws of the State of Maryland;
(b) Each of the Borrowing Entitles is a cooperation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has all requisite corporate power and authority to own its
properties and to carry on its business as now being conducted;
(c) Borrower and each of the Borrowing Entities have
compiled with all filing, registration and other requirements of state and local
laws, insofar as such laws relate to doing business;
(d) Borrower has the full power and authority to execute,
deliver and perform its obligations under this Agreement; and
(e) Borrower has the power and the authority to make and
perform this Agreement, and this Agreement does, and the Loan Documents when
executed and delivered for value will, constitute the legal, valid and binding
obligations of Borrower and the Borrowing Entities enforceable with accordance
with their respective terms.
Section 4.2 FINANCIAL CONDITION. The financial statements previously
delivered by Borrower to Lender are complete and correct in all material
respects and fairly present the financial condition of Borrower as of the dates
thereof and the results of its/their operations. Other than as disclosed by
those financial statements, Borrower has no direct or contingent obligations or
liabilities which would be material to the financial position of the Borrower or
any material unrealized or anticipated losses from any commitments of the
Borrower. Since the date of such financial statements, there has been no
material adverse change in the business or financial condition of the Borrower
of any Borrowing Entity.
Section 4.3 FULL DISCLOSURE. The financial statements referred to in
Section 4.02 do not, nor does this Agreement, or any written statement furnished
by the Borrower or any Borrowing Entity to the Lender in connection wit the
negotiation of this Agreement, contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained therein or
herein not misleading. There is no fact which is known or should be known in the
exercise of due diligence which the Borrower or any Borrowing Entity has not
disclosed to
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the Lender in writing which materially and adversely affects nor,
so far as the Borrower can now foresee, is reasonably likely to prove to
materially and adversely affect the business or financial condition of the
Borrower, or the ability of the Borrower to perform this Agreement.
Section 4.4 LITIGATION. There is no suits or proceedings pending, or to
the knowledge of the Borrower or any Borrowing Entity, threatened before any
court or by or before any governmental authority against or affecting the
Borrower or any Borrowing Entity, which, if adversely determined, would have a
material adverse effect on the business or financial condition of Borrower.
Section 4.5 PAYMENT OF TAXES. The Borrower and each Borrowing Entity
have filed or cause to be filed, or have obtained extensions to file all
federal, state and local tax returns which are required to be filed, and have
paid or caused to be paid, or have reserved on its books amounts sufficient for
the payment of, all taxes as shown on said returns or on any assessment received
by it, to the extent that the taxes have become due, except as otherwise
permitted by the provisions hereof. No tax liens have been filed and the
Borrower has not been notified of, or otherwise ha knowledge of, any claim being
asserted with respect to any such taxes, fees or other charges which could have
a material adverse effect on the business or financial condition of the
Borrower.
Section 4.6 NO ADVERSE RESTRICTIONS OR DEFAULTS. Neither Borrower nor
any Borrowing Entity is a party to any agreement or instrument or subject to any
court order or judgment, governmental decree, charter or other corporate
restriction which is likely to have material adverse affect on its/their
business, properties or assets, operations or condition (financial or
otherwise). Neither Borrower nor any Borrowing Entity is in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any agreement or instruments to which it/he
is a party or by which the Borrower or any Borrowing Entity or its/his
respective properties may be bound or affected, or under any law, regulation
decree, order or the like.
Section 4.7 INVESTMENT COMPANY ACT. Borrower is not any "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
Section 4.8 AUTHORIZATIONS. All authorizations, consents, approvals and
licenses required under applicable law or regulation for the ownership or
operation of the property owned or operated by the Borrower or any Borrowing
Entity or for the conduct of business in which the Borrower is engaged, have
been duly issued and are in full force and effect, and the Borrower has received
no notice that the Borrower is in default under any order, decree, ruling,
regulation, or other decision or instrument of any governmental authority having
jurisdiction over the Borrower, which deferral which have a material adverse
effect on the Borrower. No approval, consent or authorization of, or filing or
registration with any governmental authority is required with respect to the
execution, delivery or performance of this Agreement.
Section 4.9 USE OF PROCEEDS OF ADVANCES. The proceeds of the Loan shall
be used by the Borrower exclusively for the purposes set forth in this
Agreement. Borrower is not engaged
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principally, or as one of its important activities, in the business or extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Loan hereunder will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock. If requested by the Lender, the
Borrower will furnish to the Lender in connection with the Loan hereunder a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in said Regulation.
Section 4.10 ERISA. The Borrower does not have any Plans under ERISA,
the unfunded liabilities of which upon termination could be held to be a
liability of Borrower by the PBGC.
Section 4.11 FAIR LABOR STANDARDS ACT. The Borrower has complied with,
and will continue to comply with, the provisions of the Fair Labor Standard Act
of 1938, 29 U.S.C. ss. 200, et seq., as amended from time to time (the "FSLA").
Section 4.12 SOLVENCY. The Borrower and each Borrowing Entity is
Solvent, and has capital sufficient to carry on its business. The Borrower and
each Borrowing Entity shall remain Solvent after the consummation of the
transactions contemplated hereby.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower and each Borrowing Entity (if applicable) covenant and
agree that from the Line of Credit Closing Date and until payment in full of the
principal of and interest on each Loan and the termination in full of the
Commitment, unless the Lender shall otherwise consent in writing, the Borrower
and each Borrowing Entitle will:
Section 5.1 LOAN PROCEEDS. Use the proceeds of the Loans only for the
purposes set forth in this Agreement and furnish the Lender with all evidence
that it may reasonably require with respect to such use.
Section 5.2 MAINTENANCE OF BUSINESS AND PROPERTIES. Continue to conduct
and operate its business substantially as conducted and operated during the
present and preceding fiscal year; at all times maintain, preserve and protect
all rights, licenses, privileges, patents, franchises and trade names necessary
in the conduct of its business and preserve all the remainder of its 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, replacements, betterments and improvements
thereto so that the business carried on in connection therewith may be conducted
properly and advantageously at all times.
Section 5.3 PAYMENT OF INDEBTEDNESS, TAXES, ETC. Pay all of its
Indebtedness and obligations promptly and in accordance with normal terms and
comply in all material respects with all material agreements, indentures,
mortgages or documents binding on it or affecting its properties or business;
and pay and discharge or cause to be paid and discharged promptly all
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taxes, assessments and governmental charges or levies imposed upon it or upon
its property or upon any part thereof, before the same shall become in default,
except for real estate taxes which shall be paid prior to December 31 in the
year for which they are assessed, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might become a lien upon
such properties or any part thereof, all of the foregoing to be performed in
accordance with the Loan Documents. In addition, Borrower shall be reasonable
for all intangible taxes when the total of all advances including advances for
monies which have been re-borrowed under the RLOC exceed the sum of Thirty Five
Million ($35,000,000.00) Dollars. Borrower, with each advance over
$35,000,000.00, shall pay the intangible tax calculated on such advance to
Lender.
Section 5.4 COMPLIANCE WITH LAWS. Duly observe, conform and comply with
all laws, decisions, judgments, rules, regulations and order of all governmental
authorities relative to the conduct of its business, its properties, and as
assets, except those being contested in good faith by appropriate proceedings
diligently pursued; and obtain, maintain and keep in full force and effect all
governmental licenses, authorizations, consents and permits necessary to the
proper conduct of its business.
Section 5.5 FINANCIAL STATEMENTS, REPORTS, ETC. Borrower shall furnish
or cause to be furnished to Lender (a) within 120 days after the end of each
fiscal year of Borrower, audited financial statements of profit and loss for
each such fiscal year and balance sheets as of the end of each such year of the
Borrower, in reasonable detail, prepared in accordance with GAAP consistently
applied, and certified by independent public accountants acceptable to Lender;
(b) annual operating statements respecting each income producing property,
including, annual leasing and occupancy reports, certified to by the chief
financial officer of Borrower; (c) on the latter of May 1 or 30 days after the
same are filed, a copy of the tax return of Borrower; and (d) reports in form
and content satisfactory to Lender with respect to operating results as
requested from time to time by Lender.
Section 5.6 RIGHT OF ACCESS TO ACCOUNTING RECORDS. No more frequently
than one time per year, allow Lender to audit all of Borrower's books and
accounting records at Lender's expense. Such books and accounting records shall
be maintained at all times at the offices of Borrower or at such other locations
as shall be acceptable to Lender.
Section 5.7 NOTICE OF LITIGATION AND OTHER PROPERTIES. Give prompt
notice in writing to the Lender of the commencement of (a) all material
litigation which, if adversely determined, might materially and adversely affect
the business or financial condition of the Borrower or any Borrowing Entity; and
(b) any citation, order, decree, ruling or decision issued by, or any denial of
any application or petition to, or any proceedings before any governmental
commission, bureau or other administrative agency or public regulatory body
against or affecting the Borrower or any property of the Borrower, or any lapse,
suspension or other termination or modification of any certification, license,
consent or other authorization of any agency or public regulatory body, or any
refusal of any thereof to grant any application therefor or renewal thereof, in
connection with the operation of any business conducted by the Borrower or any
Borrowing Entity, which might have a material and adverse effect upon the
business or financial condition of the Borrower or any Borrowing Entity.
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Section 5.8 APPRAISALS. Notwithstanding any term or provision hereof or
any Loan Document to the contrary, if at any time and for any reason Lender in
its sole discretion determines that the value of any Land or Buildings financed
with the process of any Loan may have declined or be less than Lender previously
anticipated, Lender shall order, at Borrower's sole cost and expense, a current
appraisal of such Land from an appraiser designated by Lender and inform an
content as required by Lender. Borrower shall cooperate fully with any such
appraiser and provide all such documents and information as such appraiser may
request in connection with such appraiser's performance and preparation of such
appraisal. Borrower's failure to promptly and fully comply with Lender's
requirements under this Section 5.8 shall upon ten (10) days' notice, constitute
an Event of Default.
Section 5.9 YEAR 2000 COMPLIANCE.
(a) Borrower represents and warrants as follows: The
Borrower has (i) initiated a review and assessment of all areas within its and
each of its respective affiliates', subsidiaries' and other related entities
(the "Related Entities") business and operations (including those affected by
suppliers and vendors) that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by the Borrower, or
any of its respective Related Entities (or their suppliers and vendors) may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) developed a
plan and timeline for addressing the Year 2000 Problem on a timely basis, and
(iii) to date, implemented that plan in accordance with that timetable. The
Borrower reasonably believes that all computer applications (including those of
its suppliers and vendors) that are material to its, or any of its Related
Entities' business and operations will on a timely basis be able to perform
properly date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 compliant"), except to the extent that a failure to do
so could not reasonably be expected to have material adverse effect on the
Borrower's, or any Related Entities' business, operations, creditworthiness or
financial status.
(b) Borrower covenants as follows: The Borrower will
promptly notify the lender in the event the Borrower discovers or determines
that any computer application (including those of its suppliers and vendors)
that is a material to its or any of its respective affiliates', subsidiaries',
or other Related Entities' business and operations will not be Year 2000
compliant on a timely basis, except to the extent that such failure could not
reasonably be expected to have a material adverse effect on the Borrower's, or
any Related Entities' business, operations, creditworthiness or financial
status.
Section 5.10 SINGLE PURPOSE ENTITY. The Mortgage shall contain the
following clauses:
(a) MAINTENANCE OF EXISTENCE.
(i) Each Mortgagor any Related Entity, as such term
is defined in the Loan Agreement, at all times since their formation have been
duly formed and existing and shall preserve and keep in full force and effect
their existence as a Single Purpose Entity, as such term is defined in the Loan
Agreement.
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(ii) Each Mortgagor and any Related Entity, at all
times since their organization, have complied and will continue to comply with
the provisions of its certificate of incorporation and by-laws or articles of
organization, as applicable, and the laws of its jurisdiction of organization
relating to corporations.
(iii) All customary formalities regarding the
corporate existence of each Mortgagor and any Related Entity have been observed
at all times since its formation and will continue to be observed.
(iv) Each Mortgagor and Related Entity have, at all
times, accurately maintained and will continue to accurately maintain their
respective financial statements, accounting records and other corporate
documents separate from those of each other or of any other Person. Each
Mortgagor and Related Entity have not, at any time since their formation,
commingled and will not commingle, their respective assets with those of any
other persons. Each Mortgagor and Related Entity have, at all times since their
formation, accurately maintained, and will continue to accurately maintain,
their respective bank accounts, payroll and separate books of account.
(v) Each Mortgagor and Related Entity have, at all
times, paid, and will continue to pay, their own liabilities from their own
separate assets.
(vi) Each Mortgagor and Related Entity have been,
at all times, and will continue to be, adequately capitalized in light of the
nature of their respective businesses.
(vii) Each Mortgagor (a) does not own and will not
own any encumbered asset other than its present interest in the Mortgaged
Property described in Exhibits attached hereto; (b) is not engaged and will not
engage in any business other than the ownership, management and operation of the
Mortgaged Property; (c) will not enter into any contract or agreement with any
affiliate of any Mortgagor, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arm's length basis with third parties other than an Affiliate; (d) has not
incurred and will not incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation) other than the Loan; and (e) has not
made and will not make any loans on advances to any Person [including
Affiliate].
(viii) Mortgagors will not change its name or
county of principal place of business.
(ix) Related Entity does not have and will not have
any subsidiaries or partnership or membership interests in any Person other than
in Borrower or the Other Mortgagors.
(x) Each Mortgagor will preserve and maintain its
existence as a corporation and all material rights, privileges, trade names and
franchises.
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(xi) No Mortgagor or Related Entity will merge or
consolidate with, or sell all or substantially all of its respective assets to
any person, or liquidate, wind up or dissolve itself (or suffer any liquidation,
winding up or dissolution).
(xii) No Mortgagor or Related Entity has, at any
time since its formation, assumed or guaranteed, and will assume or guarantee,
the liabilities of its shareholders or any predecessor corporation, each as
applicable, any affiliates, or any other Person. No Mortgagor or Related Entity
has, at any time since its formation, acquired, and will not acquire,
obligations or securities of its shareholders, any Affiliates or any other
Person. No Mortgagor or Related Entity has, at any time since its formation,
made, and will not make loans to its shareholders, any Affiliates or any other
Person. No Mortgagor or Related Entity has any known contingent liabilities nor
does either have any material financial liabilities under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which either is a party or by which either is otherwise bound, other than
obligations incurred in the ordinary course of the operation of the Mortgaged
Property and other than obligations under the Loan Documents.
(xiii) No Mortgagor or Related Entity has, at any
time since its formation entered into and was not a party to, and will not enter
into or be a party to any transaction with its shareholders or any Affiliates
thereof except in the ordinary course of business on terms which are no less
favorable than would be obtained in a comparable arm's length transaction with
an unrelated third party.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower covenants and agrees that from the Line of Credit Closing
Date and until payment in full of the principal of and interests on each Loan
and the termination in full of the Commitment, unless the Lender shall otherwise
consent in writing, the Borrower will not:
Section 6.1 CHANGE IN MANAGEMENT OF BORROWER AND OWNERSHIP OF ANY
BORROWING ENTITY. For so long as any Loan is outstanding under this Agreement,
Chaim Katzman or Doron Valero ("Katzman" and "Valero") shall continue to control
the operations of the Borrower, including the day to day affairs. This
continuity in management is a material inducement to Lender to close on this
Agreement as it is relying on the experience and expertise of Katzman and Valero
in the Borrower's principal place activities. Likewise, there shall be no change
in the ownership or control of any Borrowing Entity that owns property which
remains encumbered by the lien of Lender's Mortgage during the term of this
Agreement.
Section 6.2 LIMITATIONS ON SALE, ETC. Without Lender's prior written
consent, no Mortgagor shall sell, convey, mortgage or encumber (or contract to
sell, convey or transfer in exchange for installment payments) any Land or
Building encumbered by the lien of the Mortgage securing payment of the Note, or
any interest therein (legal or beneficial), or be divested of title or any
interest therein (legal or beneficial) in any manner or way, whether voluntary
or involuntary, by operation or law or otherwise.
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Section 6.3 LIMITATION ON FINANCING. Permit any secondary financing or
any other encumbrance of any nature whatsoever to be placed, levied or otherwise
imposed on any of the security or collateral for any Loan.
Section 6.4 NAME. Change its name without Lender's prior written
consent, not to be unreasonably withheld or delayed.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 EVENTS OF DEFAULT. If any one of the following "Events of
Default" shall occur:
(a) Any representation or warranty made by the Borrower or
any Affiliated Entity in any Loan Document or in any certificate or report
furnished by the Borrower or any Affiliated Entity hereunder shall prove to have
been false or misleading in any material respect as of the date on which same
was made; or
(b) The Borrower or any Affiliated Entity shall fail to
pay (i) any payment of interest under the Note evidencing the Loan made
hereunder within 10 days after the due date thereof, or any payment of principal
on the due date thereof; and (ii) any other sums to be paid by Borrower
hereunder within 10 days after the due date; or
(c) The Borrower or any Affiliated Entity shall default in
the performance of any agreement, covenant, condition, agreement contained
herein (other than the payment of money) and such default shall not be curable
or shall consist of a violation of the provisions of Sections 6.2 or 6.3 hereof,
in which case no grace period shall be applicable, or if curable and relating to
defaults other than a failure to observe the provisions of Sections 6.2 or 6.3
hereof, shall continue beyond any grace period specifically applicable to such
default, and if no grace period is specifically applicable, for a period of 10
days in the event of a violation of the provisions of Section 6.1 hereof,
otherwise for 30 days after written notice thereof from Lender to Borrower
(unless such default, if curable, requires work to be performed, acts to be done
or conditions to be remedied which by their nature cannot be performed, done or
remedied, as the case may be, within such 30 days period, in which case Borrower
shall have an additional time to cure, and Borrower shall diligently and
continuously process the same to completion; provided, however, that in no event
shall such cure period in its entirety exceed 60 days); or
(d) Borrower or any Affiliated Entity shall file, or there
shall be filed against such Entity, a petition in bankruptcy or insolvency or a
petition or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the bankruptcy
laws of the United States or under any other applicable Federal, state or other
statute or law (hereinafter collectively or individually Federal, state or other
statute or law (hereinafter collectively or individually referred to as
"Insolvency Proceedings"), or a receiver, trustee or liquidator shall have been
appointed with respect to any such Entity. Notwithstanding the foregoing, in the
event of an involuntary Proceeding against any such Person, such Entity
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shall have a period of ninety (90) days within which to cause such involuntary
Insolvency Proceeding to be vacated, dismissed, discharged or bonded pending
appeal, in which case such involuntary Insolvency Proceeding shall not be an
Event of Default hereunder; or
(e) The financial condition or operations of Borrower or
any Affiliated Entity shall have changed adversely in any material respect from
its condition as heretofore represented to Lender; or
(f) Final judgment for the payment of money in an amount
in excess of $200,000.00 shall be rendered against Borrower and in excess of
$50,000.00 for any Affiliated entity and the same shall not have been
discharged, bonded or stayed within thirty (30) days thereof; or
(g) An "Event of Default" shall occur under the terms of
any of the Loan Documents.
THEREUPON, in the case of any such event other than an event described
in subsection (d) of this Section 7.1, the Lender may, by written notice to the
Borrower, at the Lender's option; (A) immediately terminate the Commitment of
the Lender hereunder, and/or (B) immediately declare the principal of, and
interest accrued on, all notes evidencing outstanding Loans forthwith due and
payable, whereupon the same shall become forthwith due and payable, both as to
principal and interest, without presentment, demand, protest, or other notice of
any kind, all of which are hereby expressly waived, anything contained herein or
in any note to the contrary notwithstanding.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 NO WAIVER; REMEDIES CUMULATIVE. No failure on the part of
the Lender to exercise and no delay in exercising any right granted hereunder or
in any Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law.
Section 8.2 SURVIVAL OF REPRESENTATIONS. All representations and
warranties made herein shall survive the making of Loans hereunder and the
delivery of Loan Documents, and shall continue in full force and effect so long
as any Loan is outstanding and unpaid and the Commitment has not been
terminated.
Section 8.3 NOTICES. Any notice or other communication hereunder to any
party hereto shall be by telegram, telex or registered or certified mail and
shall be deemed to have been given or made when telegraphed, telexed or
deposited in the mails, postage prepaid, addressed to the party at its address
specified in the introduction to this Agreement (or at any other address that
the party may hereafter specify to the other parties in writing), except that
notices by the Borrower under Section 2.02 hereof shall not be effective until
received.
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Section 8.4 CONSTRUCTION. This Agreement and each of the Loan Documents
shall be deemed contracts made under the law of the State of Florida and shall
be governed by and construed in accordance with the law of said state, without
regard to principles of conflicts of law.
Section 8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the Borrower, Affiliated Entities and the
Lender, and their respective successors and assigns; provided, that Borrower may
not assign any of their respective rights hereunder without the prior written
consent of the Lender, which Lender may withhold in its sole and absolute
discretion.
Section 8.6 JURISDICTION; SERVICE OF PROCESS.
(a) Any suit, action or proceeding against the Borrower or
any Guarantor with respect to this Agreement, or any Loan Document, or any
judgment entered by any court in respect of any thereof may be brought in the
courts of the State of Florida or in the U.S. District Court for the Southern
District of Florida as the Lender (in its sole discretion) may elect, and the
Borrower hereby accepts the nonexclusive jurisdiction of those courts for the
purpose of any suit, action or proceeding.
(b) In addition, the Borrower and Affiliated Entities
hereby irrevocably waive, to the fullest extent permitted by law, any objection
which it or they may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any Loan
Document, or any judgment entered by any court in respect of any claim that any
suit, action or proceeding brought in the State of Florida has been brought in
an inconvenient forum.
Section 8.7 PAYMENT ON OTHER THAN A BUSINESS DAY. Should any payment
required by this Agreement or under any Loan Document become due and payable
other than on a business day, the maturity thereof shall be extended to the next
succeeding business day, and in the case of principal, with interest thereon at
the rate specified in this Agreement.
Section 8.8 HEADINGS. The headings and the Tables of Contents of this
Agreement are for convenience only and are not to affect the construction of or
to be taken into account in interpreting the substance of this Agreement.
Section 8.9 SEVERABILITY. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
Section 8.10 COURSE OF DEALING; AMENDMENT; SUPPLEMENTAL AGREEMENTS. No
course of dealing among the Lender the Borrower and any Affiliated Entity shall
be effective to amend, modify or change any provision of this Agreement. This
Agreement may not be amended, modified, or changed in any respect except by an
agreement in writing signed by the Lender, the
20
<PAGE>
Borrower and any Affiliated Entity. The Lender and the Borrower may, subject to
the provisions to this Section 8.10, from time to time, enter into written
agreements supplemental hereto for the purpose of adding any provisions to this
Agreement or changing in any manner the rights and obligations of the parties
hereto. Any such supplemental agreement in writing shall be binding upon said
parties.
Section 8.11 COMMITMENT LETTER. All obligations and requirements of the
Commitment Letter are incorporated herein and obligations of the parties hereto
perform same shall survive the execution of this Agreement and the closing of
Loans and shall continue in full force and effect until all Loans are paid in
full. Whenever possible, the provisions of the Commitment Letter shall be deemed
supplemental to and no in derogation of this Agreement and any Loan Documents,
and in the event of conflict, the terms of this Agreement and the other Loan
Documents shall control.
Section 8.12 EXPENSES. Borrower agrees, on demand, to pay, irrespective
of whether a Loan is ultimately closed, all fees, expenses, taxes, or other
charges and any out-of-pocket expenses that may be incurred by Lender in
connection with the making and closing of the Loan and the transactions
contemplated thereby or incidental thereto including, without limitation, the
fees and disbursements (including travel expenses, photocopying charges,
overtime word processing and secretarial charges, courier fees and long distance
telephone charges) for Lender's counsel, premiums for title insurance and
recording fees, abstracting charges, documentary stamps and all intangible and
recording taxes with respect to the Loan Documents (including any and all
promissory notes and any other evidence of indebtedness), appraisal fees, survey
costs, and all other costs customarily paid by borrowers in connection with
similar commercial loans. In the event that Lender is made or becomes a party to
any litigation arising out of this Agreement or any of the Loan Documents,
Borrower agrees to pay Lender's court costs and attorneys' fees in connection
with such litigation through and including the cost of any appeals. The
obligations of Borrower under this Section 8.12 shall survive the expiration,
cancellation or termination of this Agreement and the repayment of the Loans.
Section 8.13 WAVIER OF JURY TRIAL. THE LENDER AND THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT AND NAY AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
EQUITY ONE, INC., a Maryland corporation
By:_________________________________
CITY NATIONAL BANK OF FLORIDA
By:_________________________________
Signed, sealed and delivered
in the presence of: EQUITY ONE, INC., a Maryland corporation
- ---------------------------------
Name:
By:_________________________________
Chiam Katzman, President
- ---------------------------------
Name
22
<PAGE>
STATE OF FLORIDA
COUNTY OF MIAMI-DADE
The foregoing document was acknowledged before me this ___ day of
January, 1999, by CHAIM KATZMAN as President of EQUITY ONE, INC., a Maryland
corporation, on behalf of the corporation. He is personally known to me or has
produced _____________________ as identification.
------------------------------
Name:
Notary Public, State of Florida
My commission expires:
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,002,000
<SECURITIES> 1,740,000
<RECEIVABLES> 832,000
<ALLOWANCES> 0
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<PP&E> 116,505,000
<DEPRECIATION> 10,655,000
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0
0
<COMMON> 106,000
<OTHER-SE> 82,645,000
<TOTAL-LIABILITY-AND-EQUITY> 163,464,000
<SALES> 5,985,000
<TOTAL-REVENUES> 6,095,000
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