SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended April 30, 1999
Commission file number 0-10146
ABRAMS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-0522129
- -------------------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1945 The Exchange, Suite 300, Atlanta, GA 30339
- -------------------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 953-0304
---------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
Title of each class: which registered:
NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $1.00 Par Value Per Share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _____
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES OF THE
REGISTRANT AS OF JUNE 15, 1999, WAS $7,032,322. SEE PART III. THE NUMBER OF
SHARES OF COMMON STOCK OF THE REGISTRANT OUTSTANDING AS OF JUNE 15, 1999, WAS
2,936,356.
DOCUMENTS INCORPORATED BY REFERENCE
THE INFORMATION CALLED FOR BY PART III (ITEMS 10, 11, AND 12) IS
INCORPORATED HEREIN BY REFERENCE TO THE REGISTRANT'S DEFINITIVE PROXY STATEMENT
FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS WHICH IS TO BE FILED PURSUANT TO
REGULATION 14A.
<PAGE>
PART I
ITEM 1. BUSINESS.
Abrams Industries, Inc. engages in (i) construction of retail and
commercial projects; (ii) manufacturing store fixtures, bank fixtures and
display units for retail outlets; and (iii) asset management, development and
re-development of income-producing properties, including acquisition,
investment, management and sale.
The Company was organized under Delaware law in 1960 to succeed to the
business of A. R. Abrams, Inc., which was founded in 1925 by Alfred R. Abrams as
a sole proprietorship. In 1984, the Company changed its state of incorporation
from Delaware to Georgia. As used herein, the term "Company" refers to Abrams
Industries, Inc. and its subsidiaries and predecessors, unless the context
indicates otherwise.
Financial information by operating segment is set forth in Note 13 to
the Consolidated Financial Statements of the Company.
CONSTRUCTION SEGMENT
The Company, through its wholly owned subsidiary, Abrams Construction,
Inc., has engaged in the construction business since 1925. Although the Company
does work throughout much of the United States, it concentrates its activities
principally in the South. Construction activities consist primarily of new
construction, expansion, and remodeling of retail store buildings, banks, and
shopping centers.
Construction contracts are obtained by competitive bid and by
negotiation. Generally, purchasing of materials and services for the Company's
construction operations is done on a project-by-project basis.
MANUFACTURING SEGMENT
The Company, through its wholly owned subsidiary, Abrams Fixture
Corporation, has engaged in manufacturing and selling store fixtures since 1946,
and has been designing and producing point-of-purchase and other displays since
1975. The Company engineers and fabricates displays, check-out counters,
cabinets, tables and other store fixtures of wood, metal and plastic laminate
for sale primarily to several of the larger national retail store chains.
Substantially all of the store fixtures are fabricated to meet the customer's
requirements for type, size, shape and color and are generally produced against
specific orders. The Company also produces custom-designed point-of-purchase
display units which are sold to floorcovering and wallcovering manufacturers,
distributors, and retailers.
In 1997, the Company began manufacturing and installing custom designed
bank fixtures, including structural wall and ceiling components, for branch
banks in supermarkets throughout the United States.
During the summer of 1998, the Company moved into its new manufacturing
facility. This facility is owned by the Real Estate Segment and leased to the
Manufacturing Segment. See "ITEM 2. PROPERTIES".
The Company maintains raw material inventories of items such as lumber,
plywood, metals, particle board, laminates, and hardware. In the opinion of
management, the raw materials and supplies utilized by this Segment of the
Company are available from numerous sources.
REAL ESTATE SEGMENT
The Company, through its wholly owned subsidiary, Abrams Properties,
Inc., has engaged in real estate development, redevelopment and asset management
activities since 1960. These activities have involved primarily the development
and management of shopping centers in the Southeast and Midwest. Selection of
target markets; evaluation and acquisition of sites; marketing to prospective
tenants; negotiation of tenant leases; securing construction and permanent
financing; contracting for design and construction; management of construction;
expansion, renovation and re-tenanting of properties; maintenance of buildings
and grounds of owned and leased properties; and marketing and sale of properties
to investors are all part of the Company's asset management and development
activities. In 1998, the Company began investing in existing income-producing
properties, including office and retail originally developed by others. Also in
1998, the Company developed an industrial facility for the Manufacturing Segment
and in order to diversify the Company's real estate portfolio.
Excluding the Newnan, Georgia shopping center, which was sold
subsequent to April 30, 1999, the Company currently owns and manages six
shopping centers, all of which are held as long-term investments. Five of the
centers were developed by the Company, and one was purchased. See "ITEM 2.
PROPERTIES - Owned Shopping Centers". The Company is also lessee and manager of
nine Company- developed shopping centers which were sold and leased back by the
Company. See "ITEM 2. PROPERTIES - Leaseback Shopping Centers". Kmart
Corporation is an anchor tenant in most of the Company's shopping centers. The
Company also owns two office properties. See "ITEM 2. PROPERTIES - Office
Buildings".
EMPLOYEES AND EMPLOYEE RELATIONS
At April 30, 1999, the Company employed 171 salaried employees and 163
hourly employees. The hourly employees at Abrams Fixture Corporation were
formerly represented by one union pursuant to a contract which expired in April
1999. The Company has no other union agreements. On its construction jobs, the
Company utilizes local labor whenever practicable, paying the prevailing wage
scale. The Company believes that its relations with its employees are good.
<PAGE>
SEASONAL NATURE OF BUSINESS
The Company's business has historically been slightly seasonal, with
the Construction Segment being affected by weather conditions. The Company
limits this exposure by operating in several regions of the country, with
operations primarily in the southern United States where favorable weather
conditions prevail for most of the year. The business of the Real Estate Segment
and Manufacturing Segment is generally less seasonal.
COMPETITION
The businesses of the Company are highly competitive. In its
Construction and Manufacturing Segments, the Company competes with a large
number of national and local construction companies and fixture manufacturers
and suppliers, many of which have greater financial resources than the Company.
The Company also competes with smaller specialized companies. The Real Estate
Segment also operates in an extremely competitive environment, with numerous
companies competing for available financing, properties, tenants and investors.
PRINCIPAL CUSTOMERS
During fiscal 1999, the Company derived approximately 53%
($100,585,000) of its consolidated revenues from direct transactions with The
Home Depot, Inc. These revenues resulted principally from construction
activities and sales of manufactured store fixtures. See Note 13 to the
Consolidated Financial Statements of the Company. No other single customer
accounted for 10% or more of the Company's consolidated revenues during the
year.
BACKLOG
The following table indicates the backlog of contracts, orders,
expected rentals and real estate sales for the next twelve months by industry
segment:
<TABLE>
<CAPTION>
April 30, April 30,
1999 1998
--------------------------------------------------------------------------
<S> <C> <C>
Construction $54,460,000 $50,880,000
Manufacturing 12,890,000 4,603,000
Real Estate 16,876,000 9,928,000
-------------------------------------------------------------------------
Total Backlog $84,226,000 $65,411,000
=========================================================================
</TABLE>
The Company estimates that most of the backlog at April 30, 1999, will
be completed prior to April 30, 2000. No assurance can be given as to future
backlog levels or whether the Company will realize earnings from the revenues
resulting from the backlog at April 30, 1999.
REGULATION
The Company is subject to the authority of various state and local
regulatory agencies concerned with the licensing of contractors, but it has
experienced no material difficulty in complying with such requirements. The
Company is also subject to local zoning regulations and building codes in
performing its construction and real estate activities. Management believes that
it is in substantial compliance with all such governmental regulations.
Management believes that compliance with federal, state and local provisions
which have been enacted or adopted for regulating the discharge of materials
into the environment does not have a material effect upon the capital
expenditures, earnings and competitive position of the Company.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
Name and Age Positions with the Company Officer Since
___________________________________________________________________________________________________________________________
<S> <S> <C>
Alan R. Abrams (44) Co-Chairman of the Board since August 1998 and a Director of the 1988
Company since 1992, he has been Chief Executive Officer since
July 1999. From May 1998 to July 1999, he was President and
Chief Operating Officer. He served as Executive Vice President
from August 1997 to May 1998. From 1994 to 1998 he served as
President and from 1997 to 1998 as Chief Executive Officer of
Abrams Properties, Inc. Prior to that he served as Vice
President of Abrams Properties, Inc.
____________________________________________________________________________________________________________________________
J. Andrew Abrams (39) Co-Chairman of the Board since August 1998 and a Director of the 1988
Company since 1992, he has been President and Chief Operating
Officer since July 1999. From August 1997 to July 1999, he was
Executive Vice President. He has also served as Chief Executive
Officer of Abrams Fixture Corporation since July 1997. From
1994 to July 1997, he served as Vice President of Abrams
Fixture Corporation. Prior to that he served as Vice President
of Abrams Properties, Inc.
____________________________________________________________________________________________________________________________
<PAGE>
Name and Age Positions with the Company Officer Since
____________________________________________________________________________________________________________________________
B. Michael Merritt (49) President, Abrams Construction, Inc. since May 1995. Prior to that he 1986
served as Executive Vice President of Abrams Construction, Inc.
____________________________________________________________________________________________________________________________
Richard V. Priegel (46) President, Abrams Fixture Corporation since 1990 and Chief 1988
Operating Officer, Abrams Fixture Corporation since 1997. Prior
to 1990, he served as Executive Vice President and Chief
Financial Officer of Abrams Fixture Corporation.
____________________________________________________________________________________________________________________________
Gerald T. Anderson, II (36) President and Chief Executive Officer, Abrams Properties, Inc. 1995
since May 1998. Prior to that he served as Executive Vice
President and Vice President of Abrams Properties, Inc. Before
joining Abrams Properties, Inc. in 1995, he was employed for
four years by JDN Realty Corporation as Vice
President/Development Leasing.
____________________________________________________________________________________________________________________________
Melinda S. Garrett (43) Chief Financial Officer since February 1997. She has also served 1990
Abrams Properties, Inc. as Chief Financial Officer since May
1998, Vice President since 1993 and Treasurer since 1990.
</TABLE>
Executive Officers of the Company are elected by the Board of Directors
of the Company or the Board of Directors of the respective subsidiary to serve
at the pleasure of the Board. Bernard W. Abrams, a member of the Board of
Directors, and Edward M. Abrams, also a member of the Board of Directors, are
brothers. Alan R. Abrams and J. Andrew Abrams are sons of Edward M. Abrams and
nephews of Bernard W. Abrams. There are no other family relationships between
any Executive Officer or Director and any other Executive Officer or Director of
the Company.
ITEM 2. PROPERTIES.
In October 1997, the Company, through its Real Estate Segment,
purchased its corporate headquarters building, which contains approximately
66,000 square feet of office space. The building is located in the North X
Northwest Office Park, 1945 The Exchange, in suburban Atlanta, Georgia. The
Parent Company and the Real Estate and Construction Segments are located in this
building. In addition to the 29,200 square feet of offices occupied by the
Abrams entities, another 34,800 square feet is leased to unrelated tenants, and
the remaining 2,000 square feet is available for lease.
During the summer of 1998, the Manufacturing Segment relocated its wood
manufacturing, warehousing and metal fabrication facilities to a 250,000 square
foot facility, owned by the Real Estate Segment and located in Lithia Springs,
Georgia, a suburb of Atlanta. The former wood manufacturing facility, which
contains approximately 255,000 square feet of light industrial, warehouse and
office space, has been marketed for sale. In June 1999, the Company received
notice from the Georgia State Properties Commission that the former wood
manufacturing facility is needed for public use. The Georgia World Congress
Center Authority (GWCCA) has made the determination to acquire the property and
has offered to acquire the property for $3,500,000. The Company has responded
with what it believes to be a reasonable counterproposal. GWCCA, in its sole
discretion, may choose to accept the counterproposal, negotiate further, or
proceed with eminent domain.
In May 1999, the Company sold its shopping center located in Newnan,
Georgia. The sale was structured as a tax-deferred, like-kind exchange pursuant
to Internal Revenue Code Section 1031, which allows a deferral of the tax gain
if the Company utilizes the proceeds of the sale to purchase other real estate
within 180 days of the sale. The Company recognized a gain on the sale of this
property for financial statement purposes in the first quarter of fiscal year
ending 2000. See "ITEM 7. LIQUIDITY AND CAPITAL RESOURCES" for discussion
regarding the purchase in July 1999, of other real estate located in
Jacksonville, Florida.
In addition, the Company owns, or has an interest in, the following
properties:
<PAGE>
OWNED SHOPPING CENTERS
As of April 30, 1999, the Company's Real Estate Segment owned six
shopping centers which it developed and one which it purchased. The following
chart provides relevant information relating to the owned shopping centers:
<TABLE>
<CAPTION>
Principal
Amount of
Leasable Debt Debt
Square Rental Cash Service Outstanding
Feet In Year(s) Income Flow Payments As Of April 30,
Location Acres Building(s) Completed 1999 1999 <F1> 1999 <F2> 1999 <F3>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1100 W. Argyle Street 10.5 110,046 1972, 1996 $ 508,148 $ 393,890 $ 397,249 $ 3,293,584
Jackson, MI
- ------------------------------------------------------------------------------------------------------------------------------------
44-56 Bullsboro Drive 16.3 174,059 1974, 1987, 1,024,152 843,213 655,671 5,331,968
Newnan, GA <F4> 1989
- ------------------------------------------------------------------------------------------------------------------------------------
1075 W. Jackson Street 7.3 92,120 1980, 1992 475,047 433,707 405,764 3,099,490
Morton, IL <F5>
- ------------------------------------------------------------------------------------------------------------------------------------
2500 Airport Thruway 8.0 87,543 1980, 1988 441,286 401,755 391,872 2,609,719
Columbus, GA<F5><F6>
- ------------------------------------------------------------------------------------------------------------------------------------
1500 Placida Road 28.7 213,739 1990 1,956,705 1,658,698 1,352,167 12,706,660
Englewood, FL
- ------------------------------------------------------------------------------------------------------------------------------------
15201 N. Cleveland 72.3 293,801 1993, 1996 2,709,807 2,078,001 1,558,105 13,727,932
North Fort Myers, FL
- ------------------------------------------------------------------------------------------------------------------------------------
5700 Harrison Avenue 10.8 86,396 1982 518,426 317,219 -- --
Cincinnati, OH <F7>
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Cash flow is defined as net operating income before the following:
depreciation, amortization of loan and lease costs, interest and
principal payments on mortgage notes or other debt.
<F2> Includes principal and interest.
<F3> Exculpatory provisions limit the Company's liability to the respective
mortgaged properties, except for the North Fort Myers, Florida loan
which has been guaranteed by Abrams Properties, Inc. See Notes 8 and 9
to the Consolidated Financial Statements of the Company.
<F4> Shopping center sold in May 1999, as stated above.
<F5> Land is leased, not owned.
<F6> The Columbus, Georgia center is owned by Abrams-Columbus Limited
Partnership, in which Abrams Properties, Inc. serves as general partner
and owns an 80% interest.
<F7> Acquired by the Company in 1998.
</FN>
</TABLE>
The two centers located in Morton, Illinois, and Columbus, Georgia, are
leased exclusively to Kmart. The Columbus, Georgia Kmart lease expires in 2008
and has ten five-year renewal options, and the Morton, Illinois Kmart lease
expires in 2016 and has eight five-year renewal options. Anchor lease terms for
the centers not leased exclusively to Kmart are shown in the table below.
<TABLE>
<CAPTION>
Lease Options
Anchor Square Expiration To
Location Tenant Footage Date Renew
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
Jackson, MI Big Lots 26,022 2007 2 for 5 years each
Kroger 63,024 2021 6 for 5 years each
- ------------------------------------------------------------------------------------------------------------------------------------
Newnan, GA <F1> Hastings 24,986 2009 3 for 5 years each
Kmart 82,779 2017 10 for 5 years each
Kroger 49,319 2012 6 for 5 years each
- ------------------------------------------------------------------------------------------------------------------------------------
Englewood, FL Beall's 31,255 2006 4 for 5 years each
Kmart 86,479 2015 10 for 5 years each
Publix 48,555 2010 4 for 5 years each
Walgreens 13,500 2040 <F2> None
- ------------------------------------------------------------------------------------------------------------------------------------
North Fort Myers, FL AMC 54,805 2016 4 for 5 years each
Beall's 35,600 2009 9 for 5 years each
Food Lion 33,000 2013 4 for 5 years each
Jo-Ann Fabrics 16,000 2004 3 for 5 years each
Kmart 107,806 2018 10 for 5 years each
- ------------------------------------------------------------------------------------------------------------------------------------
Cincinnati, OH Kroger 42,456 2000 4 for 5 years each
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Property was sold in May 1999, as stated above.
<F2> Tenant may terminate its lease with six months notice at five year
intervals beginning in 2010.
</FN>
</TABLE>
<PAGE>
With the exception of the Kmart lease in Columbus, Georgia, all of the
anchor tenant and most of the small shop leases provide for contingent rentals
if sales exceed specified amounts. Most major tenants have rights to offset
those contingent rentals against certain annual operating expenses paid by them.
In 1999, the Company received $85,152 in contingent rentals, net of offsets,
which amounts are included in the aggregate rentals set forth above.
Typically, tenants are responsible for their pro rata share of ad
valorem taxes, insurance and common area maintenance (subject to the right of
offset discussed above). Kmart has complete maintenance responsibility for the
Morton, Illinois and Columbus, Georgia centers.
LEASEBACK SHOPPING CENTERS
The Company, through its Real Estate Segment, is lessee of nine
shopping centers which it developed, sold, and leased back under leases expiring
from years 2001 to 2014. The nine centers are subleased by the Company to Kmart
Corporation for periods corresponding to the Company's leases. The Kmart
subleases provide for contingent rentals if sales exceed specified amounts, and
contain ten five-year renewal options, except Jacksonville, Florida, which has
eight five-year renewal options. The Company's leases with the fee owners
contain renewal options coextensive with Kmart's renewal options. Kmart is
responsible for insurance and ad valorem taxes, but has the right to offset
against contingent rentals any such taxes paid in excess of specified amounts.
In 1999, the Company received $86,121 in contingent rentals, net of offsets,
which amounts are included in the aggregate annual rentals set forth below. The
Company has responsibility for structural and roof maintenance of the buildings.
The Company also has responsibility for parking lots and driveways, except
routine upkeep, which is the responsibility of the tenant, Kmart. The Company's
leases contain exculpatory provisions which limit the Company's liability to its
interest in the respective subleases.
The following chart provides certain information relating to the
leaseback shopping centers:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Square Rental Rent
Feet in Year(s) Income Expense
Location Acres Building(s) Completed 1999 1999
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Bayonet Point, FL 10.8 109,340 1976, 1994 $366,658 $269,564
- ---------------------------------------------------------------------------------------------------------------------------------
Orange Park, FL 9.4 84,180 1976 264,000 226,796
- ---------------------------------------------------------------------------------------------------------------------------------
Davenport, IA 10.0 84,180 1977 284,771 211,011
- ---------------------------------------------------------------------------------------------------------------------------------
Minneapolis, MN 7.1 84,180 1978 342,920 230,570
- ---------------------------------------------------------------------------------------------------------------------------------
West St. Paul, MN 10.0 84,180 1978 298,465 229,630
- ---------------------------------------------------------------------------------------------------------------------------------
Ft. Smith, AR 9.2 106,141 1979, 1994 255,350 223,195
- ---------------------------------------------------------------------------------------------------------------------------------
Jacksonville, FL 11.6 97,032 1979 303,419 258,858
- ---------------------------------------------------------------------------------------------------------------------------------
Louisville, KY 9.3 72,897 1979 290,000 251,279
- ---------------------------------------------------------------------------------------------------------------------------------
Richfield, MN 5.7 74,217 1979 300,274 241,904
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
OFFICE BUILDINGS
The Company, through its Real Estate Segment, owns two office
properties: the corporate headquarters building located at 1945 The Exchange,
Atlanta, Georgia, and an office park in northwest suburban Atlanta, Georgia.
Both were acquired in fiscal year 1998. The following chart provides pertinent
information relating to the office buildings:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount of
Leasable Debt Debt
Square Rental Cash Service Outstanding
Feet In Year(s) Income Flow Payments As Of April 30,
Location Acres Building(s) Completed 1999 1999 <F1> 1999 <F2> 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1945 The Exchange 3.12 65,880 1974, 1997 $1,078,842 $609,980 $371,578 $5,028,153
Atlanta, GA <F3>
- ------------------------------------------------------------------------------------------------------------------------------------
1501-1523 Johnson Ferry Rd. 8.82 121,476 1980,1985 1,703,676 971,644 539,270 6,404,873
Marietta, GA <F4>
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Cash flow is defined as net operating income before the following:
depreciation, amortization of loan and lease costs, interest and
principal payments on mortgage notes and other debt.
<F2> Includes principal and interest.
<F3> Corporate headquarters building of which the Parent Company,
Construction Segment, and Real Estate Segment occupy approximately
29,200 square feet. Rental income and cash flow includes
intercompany rent at market rates of $523,015 paid by the Parent
Company and the Construction and Real Estate Segments. The debt is
guaranteed by Abrams Properties, Inc.
<F4> The Company, through a subsidiary of its Real Estate Segment, is the
lessee of 16,859 square feet of space under a master lease agreement to
satisfy a condition required by the lender. Rental income and cash flow
include intercompany rent at market rates of $166,076 paid by the Real
Estate Segment.
</FN>
</TABLE>
<PAGE>
LAND LEASED OR HELD FOR FUTURE DEVELOPMENT OR SALE
The Company, through its Real Estate Segment, owns or has an interest
in the following land leased or held for future development or sale:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Year Intended
Location Acres Acquired Use <F1>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S>
W. Argyle Street 0.9 1972 <F2> One outlot or retail shops
Jackson, MI
- -----------------------------------------------------------------------------------------------------------------------------------
Kimberly Road & Fairmont Street 6.0 1977 Outlot, plus food store and/or retail shops
Davenport, IA
- -----------------------------------------------------------------------------------------------------------------------------------
Dixie Highway 4.7 1979 Food store and/or retail shops
Louisville, KY
- -----------------------------------------------------------------------------------------------------------------------------------
West 15th Street 1.4 1979 Two outlots<F3>
Washington, NC
- -----------------------------------------------------------------------------------------------------------------------------------
Mundy Mill Road 5.3 1987 Retail shops and/or four outlots
Oakwood, GA
- -----------------------------------------------------------------------------------------------------------------------------------
North Cleveland Avenue 12.4 1993 Six outlots, anchor pads and retail shops
North Fort Myers, FL
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> "Outlot" as used herein refers to a small parcel of land reserved
from the shopping center parcel and is generally sold for,
leased for, or developed as, a fast-food operation, bank or similar use.
<F2> Originally part of Jackson, Michigan shopping center. Redevelopment
created separate outlot in 1996.
<F3> Leased under leases terminating in years 2005 and 2010 with a right
to extend for three additional five-year periods. Both outlots are
subleased for terms coextensive with the Company's lease.
</FN>
</TABLE>
There is no debt on any of the above properties, except for the North
Fort Myers, Florida retail shop land. See Note 9 to the Consolidated Financial
Statements of the Company. The Company will either develop the properties
described above or will hold them for sale or lease to others.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to, nor is any of its property the subject
of, any pending legal proceedings which are likely, in the opinion of
management, to have a material, adverse effect on the Company's operations or
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
<TABLE>
<CAPTION>
____________________________________________________________________________________________________________________
| | DIVIDENDS PAID
| CLOSING MARKET PRICES | PER SHARE
|______________________________________________________________|___________________________
| FISCAL | FISCAL | FISCAL | FISCAL
| 1999 | 1998 | 1999 | 1998
|______________________________|_______________________________|_____________|_____________
| HIGH LOW | HIGH LOW | |
| TRADE TRADE | TRADE TRADE | |
_________________________|______________________________|_______________________________|_____________|_____________
<S> | <C> <C> | <C> <C> | <C> | <C>
First Quarter | $7.500 $6.250 | $7.875 $5.000 | $.050 | $.070
_________________________|______________________________|_______________________________|_____________|_____________
Second Quarter | 7.750 5.500 | 7.625 5.375 | .050 | .040
_________________________|______________________________|_______________________________|_____________|_____________
Third Quarter | 7.750 4.125 | 8.406 6.000 | .050 | .040
_________________________|______________________________|_______________________________|_____________|_____________
Fourth Quarter | 6.875 3.031 | 8.813 6.500 | .050 | .040
_________________________|______________________________|_______________________________|_____________|_____________
</TABLE>
The common stock of Abrams Industries, Inc. is traded over-the-counter
in the NASDAQ National Market System (Symbol: ABRI). The approximate number of
holders of common stock was 500 (including shareholders of record and shares
held in street name) at May 31, 1999.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data for the Company
and should be read in conjunction with the consolidated financial statements and
notes thereto.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Revenues $188,971,527 $178,590,842 $136,123,601 $134,299,240 $122,608,682
- ----------------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ (676,031) $ 2,999,478 $ 2,391,398 $ (304,188) $ (331,019)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Share* $ (.23) $ 1.02 $ .81 $ (.10) $ (.11)
- ----------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding at Year-End 2,936,356 2,936,356 2,938,356 2,970,856 2,993,540
- ----------------------------------------------------------------------------------------------------------------------------------
Cash Dividends Paid Per Share $ .20 $ .19 $ .07 $ .105 $ .12
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity $ 23,272,560 $ 24,535,863 $ 22,125,214 $ 20,152,376 $ 20,872,035
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity Per Share* $ 7.93 $ 8.36 $ 7.53 $ 6.78 $ 6.97
- ----------------------------------------------------------------------------------------------------------------------------------
Working Capital $ 9,885,902 $ 15,283,031 $ 13,075,119 $ 10,417,697 $ 11,447,872
- ----------------------------------------------------------------------------------------------------------------------------------
Depreciation and Amortization Expense $ 3,123,369 $ 2,853,634 $ 3,401,334 $ 3,242,738 $ 3,078,878
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets $126,132,540 $121,309,444 $ 91,499,438 $ 90,635,098 $ 88,576,745
- ----------------------------------------------------------------------------------------------------------------------------------
Income-Producing Property Under
Development, Income-Producing
Properties and Property, Plant and
Equipment, net $ 64,680,003 $ 67,119,159 $ 45,028,355 $ 54,493,842 $ 55,065,157
- ----------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt $ 56,554,488 $ 62,938,807 $ 41,118,885 $ 51,202,536 $ 51,580,229
- ----------------------------------------------------------------------------------------------------------------------------------
Return on Average Shareholders' Equity (2.8%) 12.9% 11.3% (1.5%) (1.6%)
==================================================================================================================================
<CAPTION>
1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Revenues $123,602,954 $82,878,911 $83,818,090 $78,020,796 $54,887,568 $50,331,871
- ----------------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ 1,359,408 $ 1,710,381 $ 1,021,303 $ 1,027,373 $ 1,534,063 $ 1,435,567
- ----------------------------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Share* $ .46 $ .57 $ .34 $ .34 $ .51 $ .48
- ----------------------------------------------------------------------------------------------------------------------------------
Shares Outstanding at Year-End 2,993,540 2,977,540 2,977,540 2,977,540 2,994,039 2,978,039
- ----------------------------------------------------------------------------------------------------------------------------------
Cash Dividends Paid Per Share $ .11 $ .11 $ .20 $ .20 $ .20 $ .18
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity $ 21,562,279 $20,484,880 $19,102,028 $18,676,233 $18,304,102 $17,310,146
- ----------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity Per Share* $ 7.20 $ 6.84 $ 6.38 $ 6.24 $ 6.11 $ 5.78
- ----------------------------------------------------------------------------------------------------------------------------------
Working Capital $ 9,445,073 $ 8,030,898 $ 2,783,427 $ 3,140,650 $21,575,826 $18,830,026
- ----------------------------------------------------------------------------------------------------------------------------------
Depreciation and Amortization Expense $ 2,787,078 $ 2,162,472 $ 2,106,703 $ 1,938,687 $ 1,707,985 $ 1,668,105
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 92,732,567 $90,537,249 $78,260,810 $76,606,498 $64,047,108 $56,318,968
- ----------------------------------------------------------------------------------------------------------------------------------
Income-Producing Property Under
Development, Income-Producing
Properties and Property, Plant and
Equipment, net $ 56,787,858 $64,340,348 $52,976,540 $49,999,625 $22,797,353 $24,088,285
- ----------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt $ 52,637,298 $55,197,178 $41,513,804 $39,104,720 $29,955,918 $30,071,322
- ----------------------------------------------------------------------------------------------------------------------------------
Return on Average Shareholders' Equity 6.5% 8.6% 5.4% 5.6% 8.6% 8.5%
==================================================================================================================================
*Adjusted to reflect stock dividends and stock splits.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED APRIL 30, 1999, 1998 AND 1997.
RESULTS OF OPERATIONS
REVENUES
Revenues for 1999 were $188,971,527, compared to $178,590,842 and
$136,123,601, for 1998 and 1997, respectively. This represents an increase in
Revenues of 6% and 39% from those of 1998 and 1997, respectively. Revenues
include Interest income of $431,147, $684,270, and $452,992, for 1999, 1998, and
1997, respectively, and Other income of $56,532, $124,357, and $46,262, for
1999, 1998, and 1997, respectively. The figures in Chart A below do not include
Interest income, Other income or Intersegment revenues. When more than one
segment is involved, Revenues are reported by the segment that sells the product
or service to an unaffiliated purchaser.
<TABLE>
<CAPTION>
REVENUE SUMMARY BY SEGMENT
(Dollars in Thousands)
CHART A
Years Ended Increase Years Ended Increase
April 30, (Decrease) April 30, (Decrease)
-------------------------------------------------- ----------------------------------------------------
1999 1998 Amount Percent 1999 1997 Amount Percent
-------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Construction <F1> $159,273 $ 141,453 $ 17,820 13 $159,273 $ 97,977 $ 61,296 63
Manufacturing <F2> 16,761 14,970 1,791 12 16,761 16,662 99 1
Real Estate <F3> 12,450 21,359 (8,909) (42) 12,450 20,985 (8,535) (41)
------------------------------------ ------------------------------------
Total $188,484 $ 177,782 $ 10,702 6 $188,484 $ 135,624 $ 52,860 39
==================================== ====================================
<FN>
NOTES:
<F1> The increases in 1999 from those in 1998 and 1997 primarily are
attributable to the addition of new customers. The amounts reported
exclude $1,114,823 in 1999 and $5,026,181 in 1998 related to construction
of a new facility for the Manufacturing Segment, and $345,000 in 1997
related to construction work at two shopping centers developed by the Real
Estate Segment.
<F2> The increase in 1999 from that in 1998 primarily is attributable to an
increase in business from an existing customer. The amounts reported
exclude $501,220 in 1999 and $181,003 in 1998 related to manufactured items
supplied to one of the Construction Segment's customers.
<F3>Rental revenues for 1999 were $12,449,850, compared to $11,334,279 in 1998
and $11,770,889 in 1997. Rental revenues exclude $1,485,038 in 1999 and
$200,615 in 1998 received from affiliated companies. Revenues from sales of
real estate were $10,024,650 in 1998 and $9,214,758 in 1997. There were no
sales of real estate in 1999. The 1998 real estate revenues include sales of
a shopping center in Oakwood, Georgia, freestanding Kmarts in Tifton,
Georgia, and Newark, Ohio, and an outparcel in North Fort Myers, Florida.
The 1997 real estate sales include outparcel sales in Englewood, Florida,
and Oakwood, Georgia, and freestanding Kmarts in Niles, Michigan, Shawnee,
Oklahoma, and Warner Robins, Georgia.
</FN>
</TABLE>
COSTS: APPLICABLE TO SEGMENT REVENUES
As a percentage of total Segment Revenues (See Chart A), the applicable
total Segment Costs (See Chart B) of $171,114,071 for 1999, $155,520,419 for
1998, and $115,412,086 for 1997, were 91%, 87%, and 85%, respectively.
<TABLE>
<CAPTION>
COSTS: APPLICABLE TO REVENUES SUMMARY BY SEGMENT
(Dollars in Thousands)
CHART B
Percent of
Segment Revenues
Years Ended For Years Ended
April 30, April 30,
------------------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Construction $150,603 $133,430 $ 91,638 95 94 94
Manufacturing <F1> 13,589 10,547 10,412 81 70 62
Real Estate <F2> 6,922 11,543 13,362 56 54 64
-------------------------------------------------
Total $171,114 $155,520 $115,412 91 87 85
=================================================
<FN>
NOTES:
<F1> The increases in costs and percentages in 1999 as compared to 1998 and
1997 are a result of a loss in production efficiencies and increased labor
costs incurred during and after the move to the new manufacturing
facility. As of May 31, 1999, the Company had reduced its Manufacturing
labor force by 27% since it reached its peak in December, 1998. Management
is continuing its review of operations to identify cost saving
opportunities which would generate increased gross margins.
<F2> The decrease in the dollar amount in 1999 is attributable to the absence
of real estate sales during the year, as compared to $5,157,462 and
$4,085,881 in costs attributable to real estate sales in 1998 and 1997,
respectively. The decrease in the dollar amount and percentage in 1999 as
compared to 1997 is also attributable to a 1997 provision for impairment
loss of $2,750,000 to reduce the net carrying value of the North Fort
Myers, Florida shopping center to estimated fair value. There was no
impairment loss provision in 1999 or 1998. See Note 6 to the Consolidated
Financial Statements for further discussion.
</FN>
</TABLE>
SELLING, SHIPPING, GENERAL AND ADMINISTRATIVE EXPENSES
For the years 1999, 1998 and 1997, Selling, shipping, general and
administrative expenses (See Chart C) were $13,558,676, $13,571,655 and
$12,084,015, respectively. As a percentage of Consolidated Revenues, these
expenses were 7% for 1999, 8% for 1998, and 9% for 1997. In reviewing Chart C,
the reader should recognize that the volume of revenues generally will affect
these amounts and percentages. The percentages in Chart C are based on expenses
as they relate to segment revenues in Chart A, with the exception that Parent
expenses and total expenses relate to Consolidated Revenues.
<TABLE>
<CAPTION>
SELLING, SHIPPING, GENERAL AND ADMINISTRATIVE EXPENSES SUMMARY BY SEGMENT
(Dollars in Thousands)
CHART C
Percent of
Segment Revenues
Years Ended For Years Ended
April 30, April 30,
------------------------------------------------- -----------------------------------------
1999 1998 1997 1999 1998 1997
------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Construction <F1> $ 4,584 $ 4,525 $ 3,386 3 3 3
Manufacturing 4,100 3,941 4,470 24 26 27
Real Estate <F2> 2,325 2,500 1,905 19 12 9
Parent 2,550 2,606 2,323 1 2 2
-------------------------------------------------
Total $13,559 $13,572 $12,084 7 8 9
=================================================
<FN>
NOTES:
<F1> On a dollar basis comparison, the higher expenses in 1999 and 1998 as
compared to 1997 stemmed from increased incentive-based compensation
expenses which were a result of increased Segment profits.
<F2> The increase in the dollar amount of expenses in 1998 as compared to 1997
was attributable to increased employee compensation expenses which were a
result of increased Segment profits.
</FN>
</TABLE>
INTEREST COSTS
The majority of interest costs expensed of $5,262,399, $4,666,290, and
$4,779,102, in 1999, 1998, and 1997, respectively, is related to debt on real
estate and utilization of lines of credit. Interest costs increased in 1999
primarily due to the debt service on the $11,000,000 industrial development
revenue bonds issued to finance the Manufacturing Segment's new facility. See
"LIQUIDITY AND CAPITAL RESOURCES" below. Interest costs of $199,000, $112,000,
and $25,000, relating to properties under development in 1999, 1998, and 1997,
respectively, were capitalized.
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION
Property held for sale increased by $3,576,714 in 1999 as a result of
the reclassification of the shopping center in Newnan, Georgia, which was sold
in May 1999, as discussed in "Item 2. Properties." This property was previously
included in Income-producing properties. The only other property held for sale
at April 30, 1999, was the Company's former wood manufacturing facility in
Atlanta, Georgia. See previous discussion in "Item 2. Properties" regarding the
potential sale or eminent domain proceedings to acquire this facility. The
mortgage debt associated with both properties has been reclassified as
short-term.
Property, plant and equipment increased by $2,511,777 during 1999,
primarily as a result of the construction costs related to the completion of the
Manufacturing Segment's new facility. The facility was completed in early summer
1998 and is now fully operational. For further information related to the
financing of this property, see "LIQUIDITY AND CAPITAL RESOURCES".
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Except for certain real estate construction loans and occasional
short-term operating loans, the Company normally has been able to finance its
working capital needs through funds generated internally. If adequate funds are
not generated through normal operations, the Company has available bank lines of
credit. The Company has also developed relationships with various banks which
management believes could be sources for other short-term and long-term
financing, if required. Working capital decreased to $9,885,902 at the end of
1999, from $15,283,031 and $13,075,119, at the end of 1998 and 1997,
respectively. Operating activities used cash of $8,185,746. Investing activities
used cash of $3,855,868, primarily for construction of the Company's new
manufacturing facility. Financing activities provided cash of $6,249,694.
In April 1992, the Company secured a construction loan for the North
Fort Myers, Florida development from SunTrust Bank, Atlanta. The loan was
amended in April 1994, August 1995, March 1996, July 1997, March 1998, July
1998, and December 1998. The primary term of the construction financing was five
years, and the loan has been extended to June 2000, in accordance with the loan
agreement. The loan carries a floating interest rate of prime plus .375%. The
maximum amount to be funded will be determined by a formula based on future
development. As of April 30, 1999, the principal amount outstanding was
$13,727,933. Although the Company has periodically received extensions on this
loan, there can be no assurance it will be able to continue to do so. If future
extensions were not granted, it would be necessary for the Company to either
refinance or sell the development and pay off this loan prior to its due date.
There can be no assurance that sufficient proceeds from a refinancing or sale
will be available to pay off the loan prior to its maturity.
In August 1997, the Company refinanced the $2,100,000 construction loan
on its Jackson, Michigan shopping center with a permanent loan for $3,500,000.
The permanent loan has a term of 22 years and bears interest at 8.625%. The
provisions of the loan, as amended in August 1998, required the establishment of
a $500,000 letter of credit at closing which is to be used to pay down the loan
in August 1999, if certain leasing requirements are not met. As of April 30,
1999, these requirements have not been met, and there can be no assurance that
they will be met by August 1999.
In October 1997, the Company entered into an acquisition and
construction loan with SunTrust Bank, Atlanta, to fund the purchase and
renovations of the corporate headquarters building in Atlanta, Georgia. The
maximum amount of the loan is $5,200,000. The loan was amended in December 1998
to extend the maturity date to May 2000. There can be no assurance further
extensions will be granted. The Company has the option of paying interest at the
prime rate or based on the Eurodollar rate plus 2.0%, which may be locked in for
one, two, three, or six month periods at the Company's discretion. The Company
plans to refinance this loan prior to maturity, however, there can be no
assurance that a refinancing will take place prior to the loan's due date.
In November 1997, the Company closed on the $11,000,000, twenty-one
year bond financing for its new manufacturing facility. The bonds bear interest
at prevailing market rates, reset weekly. In an effort to minimize exposure to
interest rate fluctuations in connection with the bonds, the Company entered
into two separate interest rate swap agreements with SunTrust Bank, Atlanta, in
February 1998. The first swap agreement terminates in February 2001. The
notional amount reduces annually from $5,500,000 at inception to $5,300,000 at
the expiration of the agreement. The agreement calls for the Company to make
fixed rate payments to SunTrust of 5.57% per annum of the notional amount, in
exchange for SunTrust making floating rate payments based on the 30-day
Non-financial AA Commercial Paper rate. The second interest rate swap agreement
terminates in February 2003. The notional amount reduces annually from
$5,500,000 at inception to $5,057,500 at the expiration of the agreement. The
remaining terms of the second agreement are identical to the terms of the first
except the fixed rate payment is 5.67% per annum. The notional amounts of the
swap agreements are set to match the outstanding principal amount of the bonds.
The swap floating rates are reset weekly, and the Company settles with the
counterparty monthly. The Company expects the counterparty to the agreements to
abide by the terms of the agreements.
At April 30, 1999, the Company had unsecured committed lines of credit
totaling $13,000,000, of which $7,600,000 was outstanding and an additional
$500,000 was reserved for the letter of credit issued for the Jackson, Michigan
loan discussed above. The Company also had a committed line of credit totaling
$2,500,000, secured by the Manufacturing Segment's inventory and receivables, of
which $448,222 was outstanding at year end.
On April 30, 1999, in order to facilitate the sale of the Newnan,
Georgia shopping center, the Company drew $5,600,000 on the lines of credit to
have funds available to pay the related mortgage debt. This draw was repaid in
May 1999. In July 1999, the Company purchased an approximately 174,000 square
foot shopping center located in Jacksonville, Florida, for $9,000,000. The
purchase was financed with funds received from the sale of the Newnan, Georgia
shopping center, cash held by the Company, and the Company's lines of credit.
Subsequently, the Company closed on a permanent mortgage loan secured by the
property and used the proceeds to pay back the lines of credit. The permanent
loan, in the amount of $9,500,000, bears interest at 7.375% and is fully
amortizable over twenty years. Loan proceeds received in excess of the purchase
price were used to pay financing costs and are available for use for tenant
improvements and commissions on future leases. The loan may be called at any
time by the lender after September 1, 2002. If the loan were called, the Company
would have up to thirteen months to prepay the loan without penalty. In
conjunction with the loan, an Additional Interest Agreement was executed which
entitles the lender to be paid additional interest equal to fifty percent of the
quarterly net cash flow and fifty percent of the appreciation in the property
upon sale or refinance.
EFFECTS OF INFLATION ON REVENUES AND OPERATING PROFITS
The effects of inflation upon the Company's operating results are
varied. Inflation in the current year has been modest and has had minimal effect
on the Company. The Construction Segment subcontracts most of its work at fixed
prices, which normally will help that segment protect its profit margin
percentage.
In the Manufacturing Segment, the raw material prices were stable.
In the Real Estate Segment, many of the leases are long-term (over 20
years) with fixed rents except for contingent rent provisions by which the
Company may earn additional rent as a result of increases in tenants' sales. In
most cases, however, the contingent rent provisions permit the tenant to offset
against contingent rents any increases in ad valorem taxes over a specified
amount. If inflation were to rise, ad valorem taxes would probably increase
which, in turn, would cause a decrease in the contingent rents. Furthermore, the
Company has certain repair obligations, and the costs of repairs increase with
inflation.
Inflation causes a rise in interest rates, which has a positive effect
on investment income, but has a negative effect on profit margins because of the
increased costs of contracts, production, and operations. Overall, inflation
will tend to limit the Company's markets and, in turn, will reduce revenues as
well as operating profits.
<PAGE>
YEAR 2000
The Year 2000 has presented a problem for companies who use computer
systems which were developed without the ability to properly recognize and
process data relating to the year 2000 and beyond. Such systems may include
hardware, software and other telecommunications information systems (IT), as
well as computer systems that do not relate to information technology, such as
building and other ancillary systems (non-IT). The Company, its vendors,
suppliers, and other significant third party service providers are all exposed
to the potential disruption of operations if such systems are not replaced or
remediated.
The Company substantially has completed its assessment and remediation
efforts for achieving Year 2000 compliance in its IT and non-IT systems. All
computer hardware and software have been inventoried and tested. The
Construction Segment has purchased a new Year 2000 compliant accounting software
package and upgraded its computer hardware system. The cost of the software and
hardware and the installation thereof is not considered to be material. The
Company installed the new hardware and software during the second quarter 1999
and began using it in the third quarter 1999. The Manufacturing Segment, at a
nominal cost, plans to upgrade its current accounting software to be Year 2000
compliant by August 1999, and the Real Estate Segment's accounting software is
Year 2000 compliant. Other non-compliant hardware and software review and
remediation costs are considered to be minimal.
The Company has conducted a written survey of its IT and non-IT
significant third party vendors and service providers to determine their Year
2000 compliance status. The responses have indicated these businesses will be
substantially compliant on a timely basis. The Company, however, cannot ensure
that various third parties with which it deals will be Year 2000 compliant. The
failure of such third parties, such as banks, significant customers, tenants and
vendors to become Year 2000 compliant on a timely basis could have an adverse
impact on the Company's business.
Uncertainty exists concerning the scope and magnitude of the most
reasonably likely worst case scenario. The Company has not developed a
contingency plan for dealing with any catastrophic failure of the government,
utility companies, lending institutions or other regulated agencies, but will
consider the need for such if public or other information regarding the state of
readiness of these entities or other significant third parties indicates
imminent problems.
There can be no assurance that the Company will be able to identify and
correct all aspects of the effect of the Year 2000 issue on the Company.
Management, however, does not believe that the Year 2000 issue will pose
significant problems in its IT or non-IT systems, or that resolution of any
potential problems with respect to these systems will have a material effect on
the Company's financial condition or results of operations. Readers are
cautioned that forward-looking statements regarding Year 2000 issues should be
read in conjunction with the Company's disclosures under the heading "Cautionary
statement regarding forward-looking information."
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained or incorporated by reference in this
Annual Report on Form 10-K, including without limitation, statements containing
the words "believes," "anticipates," "expects," and words of similar import, are
forward-looking statements within the meaning of the federal securities laws.
Such forward-looking statements involve known and unknown risks, uncertainties
and other matters which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or uncertainties expressed or implied by such forward-looking
statements. Such risks, uncertainties and other matters include, but are not
limited to, Year 2000 compliance issues.
CONSIDERATION OF STRATEGIC ALTERNATIVES
The Company announced on June 8, 1999, that the Board of Directors
decided to investigate a wide range of possible strategic and financial
alternatives that may be available to maximize shareholder value. In connection
with this activity, the management of the Construction Segment approached the
Company in order to begin discussing the possibility of purchasing their
segment's business. After a period of investigation and deliberation, those
discussions were terminated. The Company has not formalized any alternative
strategy, and although the investigation of other possible strategic and
financial alternatives is ongoing, there is no assurance whatsoever that any
transaction ultimately will result.
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's major market risk exposure is the potential loss arising
from changes in interest rates and its impact on variable rate debt instruments.
The following table summarizes information related to the Company's market risk
sensitive debt instruments as of April 30, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Principal Total Interest
Debt Instrument Balance Availability Maturity Rate
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industrial Development
Revenue Bond <F1> $11,000,000 $ 11,000,000 11/1/18 Variable, repricing weekly
- --------------------------------------------------------------------------------------------------------------------------------
Note Payable to Bank $ 5,028,153 $ 5,200,000 5/30/00 Prime rate or LIBOR plus 2%,
at the Company's option
- --------------------------------------------------------------------------------------------------------------------------------
Industrial Development Bond $ 228,564 $ 228,564 3/1/00 79% of Prime rate
- --------------------------------------------------------------------------------------------------------------------------------
Construction Loan $ 8,963,340 $ 8,963,340 6/30/00 Prime rate plus .375%
- --------------------------------------------------------------------------------------------------------------------------------
Amendment to Construction Loan $ 4,764,593 To be determined 6/30/00 Prime rate plus .375%
per formula in
Loan Agreement
- --------------------------------------------------------------------------------------------------------------------------------
Unsecured Lines of Credit $ 7,600,000 $12,000,000 <F2> 10/31/99 Prime rate or LIBOR plus 2%,
at the Company's option
- --------------------------------------------------------------------------------------------------------------------------------
Unsecured Lines of Credit $ 0 $ 1,000,000 9/30/99 Prime rate or LIBOR plus
2.7%, at the Company's option
- --------------------------------------------------------------------------------------------------------------------------------
Secured Line of Credit $ 448,222 $ 2,500,000 9/30/99 Prime rate or LIBOR plus
2.7%, at the Company's option
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1> In an effort to minimize exposure to interest rate fluctuations in
connection with these bonds, the Company entered into two separate
interest rate swap agreements with SunTrust Bank, Atlanta, in February
1998. The first swap agreement terminates in February 2001. The notional
amount reduces annually from $5,500,000 at inception to $5,300,000 at the
expiration of the agreement. The agreement calls for the Company to make
fixed rate payments to SunTrust of 5.57% per annum of the notional amount,
in exchange for SunTrust making floating rate payments based on the 30-day
Non-financial AA Commercial Paper rate. The second interest rate swap
agreement terminates in February 2003. The notional amount reduces
annually from $5,500,000 at inception to $5,057,500 at the expiration of
the agreement. The remaining terms of the second agreement are identical
to the terms of the first except the fixed rate payment is 5.67% per
annum. The notional amounts of the swap agreements are set to match the
outstanding principal amount of the bonds. The swap floating rates are
reset weekly, and the Company settles with the counterparty monthly.
<F2> $500,000 is restricted as it secures a letter of credit. See Note 9 to the
Consolidated Financial Statements of the Company.
</FN>
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
<S> <C>
Independent Auditors' Report 18
Consolidated Balance Sheets - April 30, 1999 and 1998 19
Consolidated Statements of Operations - For the years ended April 30, 1999,
1998 and 1997 20
Consolidated Statements of Shareholders' Equity - For the years ended April
30, 1999, 1998 and 1997 21
Consolidated Statements of Cash Flows - For the years ended April 30, 1999,
1998 and 1997 22
Notes to Consolidated Financial Statements - April 30, 1999, 1998 and 1997 23
Schedules:
Schedule Number
- ---------------
II Valuation and Qualifying Accounts 35
III Real Estate and Accumulated Depreciation 36
</TABLE>
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Abrams Industries, Inc.:
We have audited the consolidated financial statements of Abrams
Industries, Inc. and subsidiaries (the "Company") as listed in the accompanying
index. In connection with our audits of the consolidated financial statements,
we also have audited the financial statement schedules as listed in the
accompanying index. These consolidated financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Abrams
Industries, Inc. and subsidiaries as of April 30, 1999 and 1998, and the results
of their operations and cash flows for each of the years in the three-year
period ended April 30, 1999, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
/s/ KPMG LLP
June 4, 1999
Atlanta, Georgia
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
April 30,
-----------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash of $95,673
and $4,860,226 in 1999 and 1998, respectively $ 7,448,551 $ 13,240,471
Receivables:
Trade notes and accounts, net 3,298,545 1,996,831
Contracts, net, including retained amounts of
$4,983,746 in 1999 and $5,480,974 in 1998 (note 4) 27,981,694 19,148,413
Inventories, net (note 3) 2,972,663 1,495,063
Costs and earnings in excess of billings (note 4) 3,188,100 5,637,599
Property held for sale (note 5) 5,268,478 1,691,764
Deferred income taxes (note 10) 820,829 848,939
Other 599,715 614,244
- ----------------------------------------------------------------------------------------------------------------------------
Total current assets 51,578,575 44,673,324
- ----------------------------------------------------------------------------------------------------------------------------
INCOME-PRODUCING PROPERTIES, NET (notes 6, 8, and 9) 52,311,607 57,262,540
PROPERTY, PLANT AND EQUIPMENT, NET (notes 7 and 9) 12,368,396 9,856,619
OTHER ASSETS:
Land held for future development or sale 4,237,845 4,237,845
Notes receivable 297,209 415,538
Cash surrender value of officers life insurance, net 1,473,963 1,282,790
Deferred loan costs, net 788,356 814,405
Other 3,076,589 2,766,383
- ----------------------------------------------------------------------------------------------------------------------------
$126,132,540 $ 121,309,444
============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade and subcontractors payables, including
retained amounts of $2,513,281 in 1999 and
$3,797,162 in 1998 $18,391,697 $ 19,445,101
Accrued expenses 2,834,831 13,664,863
Billings in excess of costs and earnings (note 4) 2,947,814 1,369,148
Accrued profit-sharing (note 11) 2,593,654 3,325,048
Short-term borrowings (note 9) 8,048,222 ---
Current maturities of long-term debt 6,876,455 1,586,133
- ----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 41,692,673 29,390,293
- ----------------------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES (note 10) 2,910,771 3,018,429
OTHER LIABILITIES 1,702,048 1,426,052
MORTGAGE NOTES PAYABLE, less current maturities (note 8) 27,447,977 33,433,945
OTHER LONG-TERM DEBT, less current maturities (note 9) 29,106,511 29,504,862
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 102,859,980 96,773,581
- ----------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (notes 5, 6, 8, and 9)
SHAREHOLDERS' EQUITY (note 12):
Common stock, $1 par value; 5,000,000 shares authorized;
3,014,039 shares issued and 2,936,356 shares outstanding in
1999 and 1998 3,014,039 3,014,039
Additional paid-in capital 2,019,690 2,019,690
Retained earnings 18,651,382 19,914,685
Treasury stock, 77,683 common shares in 1999 and 1998 (412,551) (412,551)
- ----------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 23,272,560 24,535,863
- ----------------------------------------------------------------------------------------------------------------------------
$126,132,540 $121,309,444
============================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended April 30,
----------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Construction $159,273,393 $141,453,025 $ 97,976,902
Manufacturing 16,760,605 14,970,261 16,661,798
Rental income 12,449,850 11,334,278 11,770,889
Real estate sales --- 10,024,651 9,214,758
Interest 431,147 684,270 452,992
Other 56,532 124,357 46,262
- ------------------------------------------------------------------------------------------------------------------------------
188,971,527 178,590,842 136,123,601
- ------------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Construction 150,603,062 133,430,395 91,637,636
Manufacturing 13,588,788 10,547,381 10,412,263
Rental property operating expenses,
excluding interest 6,922,221 6,385,181 6,526,306
Cost of real estate sold --- 5,157,462 4,085,881
Provision for impairment on income-producing
property (note 6) --- --- 2,750,000
- ------------------------------------------------------------------------------------------------------------------------------
171,114,071 155,520,419 115,412,086
- ------------------------------------------------------------------------------------------------------------------------------
Selling, shipping, general and administrative 13,558,676 13,571,655 12,084,015
Interest costs incurred, less interest capitalized of
$199,000, $112,000, and $25,000 in 1999, 1998 and
1997, respectively 5,262,399 4,666,290 4,779,102
- ------------------------------------------------------------------------------------------------------------------------------
189,935,146 173,758,364 132,275,203
- ------------------------------------------------------------------------------------------------------------------------------
(LOSS) EARNINGS BEFORE INCOME TAXES (963,619) 4,832,478 3,848,398
- ------------------------------------------------------------------------------------------------------------------------------
INCOME TAX (BENEFIT) EXPENSE (note 10):
Current (208,040) 865,642 968,782
Deferred (79,548) 967,358 488,218
- ------------------------------------------------------------------------------------------------------------------------------
(287,588) 1,833,000 1,457,000
- ------------------------------------------------------------------------------------------------------------------------------
NET (LOSS) EARNINGS $ (676,031) $ 2,999,478 $ 2,391,398
==============================================================================================================================
NET (LOSS) EARNINGS PER SHARE (note 12):
Basic $ (.23) $ 1.02 $ .81
- ------------------------------------------------------------------------------------------------------------------------------
Diluted $ (.23) $ 1.02 $ .80
==============================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Additional
Common Stock Paid-In Retained Treasury
Shares Amount Capital Earnings Stock Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES at April 30, 1996 3,010,039 $3,010,039 $2,012,190 $ 15,289,448 $ (159,301) $ 20,152,376
Net earnings --- --- --- 2,391,398 --- 2,391,398
Cash dividends declared -
$.07 per share --- --- --- (207,310) --- (207,310)
Acquisition of 32,500 shares
of treasury stock --- --- --- --- (211,250) (211,250)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES at April 30, 1997 3,010,039 3,010,039 2,012,190 17,473,536 (370,551) 22,125,214
Net earnings --- --- --- 2,999,478 --- 2,999,478
Cash dividends declared -
$.19 per share --- --- --- (558,329) --- (558,329)
Exercise of stock options 4,000 4,000 7,500 --- --- 11,500
Acquisition of 6,000 shares
of treasury stock --- --- --- --- (42,000) (42,000)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES at April 30, 1998 3,014,039 3,014,039 2,019,690 19,914,685 (412,551) 24,535,863
Net loss --- --- --- (676,031) --- (676,031)
Cash dividends declared -
$.20 per share --- --- --- (587,272) --- (587,272)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCES at April 30, 1999 3,014,039 $3,014,039 $2,019,690 $ 18,651,382 $ (412,551) $ 23,272,560
===================================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended April 30,
--------------------------------------------------
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) earnings $ (676,031) $ 2,999,478 $ 2,391,398
Adjustments to reconcile net (loss) earnings
to net cash (used in) provided by operating activities:
Depreciation and amortization 3,123,369 2,853,634 3,401,334
Deferred tax (benefit) expense (79,548) 967,358 488,218
Gain on sales of real estate and property, plant,
and equipment (25,847) (4,867,189) (5,128,877)
Provision for impairment on income-producing property --- --- 2,750,000
Changes in assets and liabilities:
Receivables, net (10,125,120) (2,230,083) (2,840,330)
Inventories, net (1,477,600) 62,901 118,577
Costs and earnings in excess of billings 2,449,499 (2,852,259) 73,049
Other current assets 14,529 (146,511) (83,441)
Other assets (628,829) (1,112,638) (790,074)
Trade and subcontractors payable (1,053,404) 9,060,022 (861,657)
Accrued expenses (830,032) 226,451 1,542,646
Accrued profit-sharing (731,394) 194,951 1,512,165
Billings in excess of costs and earnings 1,578,666 220,483 366,847
Other liabilities 275,996 577,590 309,199
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (8,185,746) 5,954,188 3,249,054
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of real estate and property, plant,
and equipment 67,355 3,818,393 1,496,831
Additions to income-producing properties (465,385) (16,045,209) (5,205,926)
Additions to property, plant and equipment, net (3,566,292) (8,911,039) (622,667)
Repayments received on notes receivable 108,454 100,294 108,815
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (3,855,868) (21,037,561) (4,222,947)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Short-term borrowings, net 8,048,222 --- ---
Debt proceeds 234,570 32,145,583 5,061,143
Debt repayments (1,328,567) (10,425,800) (1,486,522)
Deferred loan costs paid (117,259) (418,161) (23,570)
Cash dividends (587,272) (558,329) (207,310)
Repurchases of common stock --- (42,000) (211,250)
Proceeds from exercise of stock options --- 11,500 ---
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 6,249,694 20,712,793 3,132,491
- ---------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (5,791,920) 5,629,420 2,158,598
Cash and cash equivalents at beginning of year 13,240,471 7,611,051 5,452,453
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 7,448,551 $ 13,240,471 $ 7,611,051
=================================================================================================================================
Supplemental disclosure of noncash investing activities:
Transfer of income-producing property to property
held for sale $ 3,576,714 $ --- $ ---
Supplemental disclosure of noncash financing activities:
Assumption of mortgage loans by purchasers in
conjunction with sale of income-producing properties $ --- $ 5,733,899 $ 7,723,758
Supplemental cash flow information:
Cash paid during the year for interest,
net of amounts capitalized $ 5,218,298 $ 4,817,206 $ 4,829,201
Cash paid during the year for income taxes $ 118,553 $ 726,733 $ 382,873
=================================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999, 1998, AND 1997
(1) ORGANIZATION AND BUSINESS
Abrams Industries, Inc. (the "Company") was organized under Delaware
law in 1960. In 1984, the Company changed its state of incorporation from
Delaware to Georgia. The Company engages in (i) construction of retail and
commercial projects, (ii) manufacturing of store fixtures, bank fixtures and
display units for retail outlets, and (iii) asset management, development, and
redevelopment of income-producing properties, including acquisition, investment,
management and sale. The Company's wholly owned subsidiaries include Abrams
Construction, Inc., Abrams Fixture Corporation, and Abrams Properties, Inc. and
subsidiaries.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Abrams
Industries, Inc., its wholly owned subsidiaries and its 80% investment in
Abrams-Columbus Limited Partnership. All significant intercompany balances
and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(b) INCOME RECOGNITION
Construction revenues are reported on the percentage-of-completion method,
using costs incurred to date in relation to estimated total costs of the
contracts to measure the stage of completion. The cumulative effects of
changes in estimated total contract costs and revenues are recorded in the
period in which the facts requiring the revisions become known. At the time
it is determined that a contract will result in a loss, the entire
estimated loss is recorded.
Revenues from the sales of real estate are recognized at the time of
closing. When a portion or unit of a development property is sold, a
proportionate share of the projected total cost of the development is
charged to cost of sales. Costs of sales related to real estate are based
on the specific property sold.
Generally, revenues from the sale of manufactured goods are recognized on
the date products are shipped to the customer. Revenues from certain sales,
on which delivery is delayed at the customer's explicit request, are
recognized when conditions for revenue recognition are met; principally,
the completed product is ready for delivery and transfer of both title and
risk of ownership has passed to the buyer.
(c) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include money market funds and other financial
instruments. The Company considers all highly liquid debt instruments with
maturities of three months or less to be cash equivalents.
In 1999, restricted cash consists of a bond sinking fund which will be used
to pay down the principal on the industrial development revenue bonds. In
1998, restricted cash included proceeds from the issuance of the industrial
development revenue bonds. The proceeds of these bonds were restricted for
use in constructing and equipping the Company's new manufacturing facility.
(d) INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market. To reflect the inventory at the lower of cost or market, valuation
reserves are established. Management periodically evaluates the adequacy of
reserves based on aging, sales and other relevant factors.
(e) PROPERTY HELD FOR SALE
Property held for sale is expected to be sold in the near term and is
carried at the lower of cost or fair value less costs to sell. Depreciation
and amortization are suspended during the sale period except for
manufacturing facilities that are necessary for operation.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(F) INCOME-PRODUCING PROPERTIES AND PROPERTY, PLANT AND EQUIPMENT
Income-producing properties are stated at the lower of cost or fair value
and are depreciated for financial reporting purposes using the
straight-line method over the estimated useful lives of the properties and
related assets.
Property, plant, and equipment is recorded at cost and is depreciated for
financial reporting purposes using the straight-line method over the
estimated useful lives of the assets. Significant additions which extend
asset lives are capitalized. Normal maintenance and repair costs are
expensed as incurred.
Interest and other carrying costs related to assets under construction are
capitalized. Costs of development and construction are also capitalized.
Capitalization of interest and other carrying costs is discontinued when a
project is substantially completed or if active development ceases.
(G) LAND HELD FOR FUTURE DEVELOPMENT OR SALE
Land held for future development or sale is carried at the lower of cost or
fair value less costs to sell.
(H) DEFERRED LOAN COSTS
Costs incurred to obtain loans have been deferred and are being amortized
over the terms of the related loans.
(I) IMPAIRMENT OF LONG-LIVED ASSETS AND ASSETS TO BE DISPOSED OF
The Company reviews income-producing properties, property, plant, and
equipment, land held for future development or sale, assets to be disposed
of and certain intangible assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the asset to future net cash flows
expected to be generated by the asset. If an asset is considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the asset exceeds the asset's fair value.
Assets to be disposed of are reported at the lower of their carrying amount
or fair value less cost to sell.
(J) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
of a change in tax rates on deferred tax assets and liabilities is
recognized in income in the period that includes the enactment date.
(K) FAIR VALUE OF FINANCIAL INSTRUMENTS
Management believes that the carrying amounts of cash and cash equivalents,
receivables, other assets, accounts payable, accrued expenses and current
portions of debt instruments are reasonable approximations of their fair
value because of the short-term nature of these instruments.
The fair value of the Company's noncurrent portions of debt instruments is
estimated by discounting the future cash flows of each instrument at rates
currently offered to the Company for similar debt instruments of comparable
maturities by the Company's bankers. Based on this valuation methodology,
management believes that the carrying amount of the noncurrent portions of
debt instruments is a reasonable estimation of their fair value.
(L) STOCK OPTIONS
Prior to May 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB Opinion 25"), and
related interpretations. As such, compensation expense was recorded only to
the extent that the market price of the underlying stock at the date of
grant exceeded the exercise price. On May 1, 1996, the Company adopted the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation. SFAS No. 123 encourages entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 allows
entities to continue to apply the provisions of APB Opinion 25 for
recognizing stock-based compensation expense in the basic financial
statements. Companies not following the fair value based method are
required to provide expanded disclosures in the footnotes. The Company
elected to continue to apply the provisions of APB Opinion 25 and provide
the pro forma disclosure of SFAS No. 123.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(M) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, REPORTING COMPREHENSIVE INCOME. This statement establishes
standards for reporting and displaying comprehensive income and its
components in a full set of general purpose financial statements. SFAS No.
130 requires all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed in equal prominence with the other financial
statements. The term "comprehensive income" is used in the statement to
describe the total of all components of comprehensive income including net
income. "Other comprehensive income" refers to revenues, expenses, gains,
and losses that are included in comprehensive income but excluded from
earnings under current accounting standards. SFAS No. 130 is effective for
financial statements for years beginning after December 15, 1997. The
Company adopted SFAS No. 130 effective May 1, 1998. Adoption of this
statement did not have an impact on the Company's financial position,
results of operations or liquidity, as the pronouncement only requires
additional disclosure. The Company did not have any components of other
comprehensive income in any of the periods presented in the accompanying
financial statements.
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information. This statement establishes standards
for the way public business enterprises are to report information about
operating segments in annual financial statements and requires those
enterprises to report selected information about operating segments using
the "management approach" concept. It also establishes standards for
related disclosures about products and services, geographic areas, and
major customers. SFAS No. 131 is effective for financial statements for
periods beginning after December 15, 1997. The Company adopted SFAS No. 131
effective May 1, 1998.
(N) RECLASSIFICATIONS
Certain reclassifications have been made to the 1998 and 1997 consolidated
financial statements to conform with classifications adopted in 1999.
(3) INVENTORIES
The balances of major classes of inventory, net of their related valuation
reserves, at April 30, were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------------
<S> <C> <C>
Finished goods $1,268,048 $ 787,520
Work-in-progress 845,495 219,802
Raw materials 859,120 487,741
---------------------------------
$2,972,663 $1,495,063
=================================
</TABLE>
(4) CONTRACTS IN PROGRESS
Assets and liabilities related to contracts in progress, including
contracts receivable, are included in current assets and current
liabilities as they will be liquidated in the normal course of contract
completion, which is expected to occur within one year. Amounts billed and
costs recognized on contracts in progress, at April 30, were:
<TABLE>
<CAPTION>
1999 1998
---------------------------
<S> <C> <C>
Costs and earnings in excess of
billings:
Accumulated costs and earnings $ 27,841,460 $ 48,672,342
Amounts billed 24,653,360 43,034,743
---------------------------
$ 3,188,100 $ 5,637,599
===========================
Billings in excess of costs and
earnings:
Amounts billed $ 33,961,588 $ 27,774,973
Accumulated costs and earnings 31,013,774 26,405,825
---------------------------
$ 2,947,814 $ 1,369,148
===========================
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(5) PROPERTY HELD FOR SALE
As of April 30, 1999, the Company has classified its shopping center
located in Newnan, Georgia, as property held for sale. This property was
subsequently sold on May 14, 1999 (note 14). As of April 30, 1998, only the
Company's former manufacturing facility was classified as property held for
sale.
The results of operations for the year ended April 30, 1999, for the
rental property in the Real Estate Segment that is held for sale is summarized
below:
<TABLE>
<CAPTION>
<S> <C>
Revenues $1,024,152
Operating expenses, including depreciation
and interest 746,872
----------
Results of operations $ 277,280
==========
</TABLE>
(6) INCOME-PRODUCING PROPERTIES
Income-producing properties and their estimated useful lives, at
April 30 were as follows:
<TABLE>
<CAPTION>
Estimated
useful lives 1999 1998
--------------------------------------------------
<S> <C> <C> <C>
Land $15,883,977 $ 16,580,806
Buildings and improvements 7-39 years 50,034,275 55,472,762
------------------------------
65,918,252 72,053,568
Less - accumulated depreciation
and amortization 13,606,645 14,791,028
------------------------------
$52,311,607 $ 57,262,540
==============================
</TABLE>
During 1999, the Company reclassified its shopping center located in
Newnan, Georgia, from income-producing properties to Property held for sale. The
shopping center was sold May 14, 1999 (note 14).
During 1998, the Company sold income-producing properties located in
Oakwood, Georgia, Newark, Ohio, and Tifton, Georgia, and recognized gains for
financial statement purposes. During fiscal year 1997, income-producing
properties located in Shawnee, Oklahoma, Warner Robins, Georgia, and Niles,
Michigan, were also sold for gains. These sales transactions were structured as
tax-deferred, like-kind exchanges pursuant to Internal Revenue Code Section
1031, which allows a deferral of the tax gain if the Company utilizes proceeds
of the sale to purchase other real estate within 180 days of sale.
During the fourth quarter of fiscal year 1997, management received
market information which it believed indicated that the carrying value of its
shopping center in North Fort Myers, Florida, had been impaired. Management
completed a recoverability review of the carrying value of the shopping center
based upon an estimate of undiscounted future cash flows expected to result from
its use and eventual disposition. As of April 30, 1997, management concluded
that the sum of the undiscounted future cash flows estimated to be generated by
the shopping center was less than the carrying value and, as a result, the
Company recorded a provision for impairment of $2,750,000 which reduced the
shopping center's carrying value to its estimated fair value. The estimated fair
value was determined by using market value studies compiled by two independent
commercial real estate brokerage firms. This shopping center is classified as an
Income-producing property in the accompanying April 30, 1999 and 1998
consolidated balance sheets and is included in the Real Estate Segment.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(7) PROPERTY, PLANT, AND EQUIPMENT
The major components of property, plant, and equipment and their
estimated useful lives at, April 30, were as follows:
<TABLE>
<CAPTION>
Estimated
useful lives 1999 1998
--------------------------------------------------
<S> <C> <C> <C>
Land $ 1,984,405 $ 92,226
Buildings and improvements 3-39 years 8,579,274 1,729,884
Machinery and equipment 3-10 years 7,407,729 5,684,239
-------------------------------
17,971,408 7,506,349
Less - accumulated depreciation 5,603,012 5,505,291
-------------------------------
12,368,396 2,001,058
Construction in progress -
manufacturing facility --- 7,855,561
-------------------------------
$ 12,368,396 $ 9,856,619
===============================
</TABLE>
In July 1998, when the construction of the new manufacturing facility
was completed, the Company began depreciating the facility.
(8) MORTGAGE NOTES PAYABLE AND LEASES
As of April 30, 1999, the Company owns five shopping centers and an
office park which are pledged as collateral on related mortgage notes payable.
It is also lessee of nine shopping centers under leaseback arrangements expiring
from 2001 to 2014. Each mortgage note and leaseback arrangement contains an
exculpatory provision limiting the Company's liability to its interest in the
respective mortgaged property or lease.
All of the leaseback centers are leased to the Kmart Corporation, and
Kmart is a tenant in five of the seven owned shopping centers. The owned
shopping centers are leased for periods expiring from fiscal years 2000 to 2040,
while leases on the owned office properties expire from fiscal years 2000 to
2003. Leases on the leaseback centers correspond to the leaseback periods. All
leases are operating leases. The shopping center leases typically require that
the tenant make fixed rental payments over a 5- to 25-year period, and provide
for renewal options and for contingent rentals if the tenants' sales volumes
exceed predetermined amounts. In some cases, the shopping center leases provide
that the tenant bear the cost of insurance, repairs, maintenance and taxes. Base
rental revenue received from owned shopping centers and office properties in
1999, 1998, and 1997 was approximately $10,226,000, $7,708,000, and $7,829,000,
respectively. Base rental revenue received from leaseback centers in 1999, 1998,
and 1997 was approximately $2,620,000, $2,620,000, and $2,694,000, respectively.
Contingent rental revenue received on all centers in 1999, 1998, and 1997 was
approximately $171,000, $195,000, and $164,000, respectively.
Approximate future minimum annual rental receipts from all rental
properties are as follows:
<TABLE>
<CAPTION>
Years ending April 30, Owned Leaseback
------------------------------------------------------------------
<S> <C> <C>
2000 $ 8,455,000 $ 2,620,000
2001 7,795,000 2,620,000
2002 7,283,000 2,138,000
2003 6,412,000 1,911,000
2004 5,456,000 1,323,000
Thereafter 53,430,000 3,553,000
-----------------------------------------------------------------
$ 88,831,000 $14,165,000
=================================================================
</TABLE>
The Company leases office space from one of its subsidiaries. In
accordance with the noncancelable leases, the subsidiary will receive
approximately $1,550,000 in rental payments from the Company over the term of
the leases. These rental receipts have been reflected in the future minimum
rental receipts from owned properties.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The expected future minimum principal and interest payments on mortgage
notes payable on the owned rental properties and the future minimum rentals to
be paid on leaseback centers are as follows:
<TABLE>
<CAPTION>
Owned Rental Properties
Mortgage Payments Leaseback
----------------------------- Centers
Years ending April 30, Principal Interest Rental Payments
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
2000 $ 5,998,316 $ 2,935,133 $ 2,136,000
2001 726,256 2,858,409 2,136,000
2002 12,990,580 2,877,975 1,719,000
2003 659,875 1,542,034 1,536,000
2004 716,663 1,466,975 1,109,000
Thereafter 12,354,603 6,048,056 3,214,000
---------------------------------------------------------------------------------------
$ 33,446,293 $ 17,728,582 $ 11,850,000
======================================================================================
</TABLE>
The mortgage notes payable are due at various dates between April 1,
2002, and September 1, 2019, and bear interest at rates ranging from 7.25% to
9.75%, with a weighted average rate of 8.85% at April 30, 1999.
The outstanding principal balance on the Newnan, Georgia shopping
center mortgage loan of $5,331,968 has been included in the Current maturities
of long-term debt at April 30, 1999, as the property is classified as Property
held for sale in the accompanying balance sheet at April 30, 1999
(note 5).
<PAGE>
(9) OTHER LONG-TERM DEBT AND CREDIT FACILITIES
<TABLE>
<CAPTION>
Other long-term debt, at April 30, was as follows:
1999 1998
--------------------------------
<S> <C> <C>
Industrial development revenue bonds with a variable interest rate, repricing
on a weekly basis, based on rates available for debt instruments of a similar
nature and comparable terms (5.05% at April 30, 1999); required monthly
interest only payments until November 1, 1998, thereafter interest and bond
sinking fund payments required monthly; matures on November 1, 2018;
secured by irrevocable letter of credit $11,000,000 $11,000,000
Note payable to bank with variable interest rate of LIBOR plus 2% (6.90% at
April 30, 1999); requires monthly interest only payments with principal due
May 30, 2000; secured by real property, guaranteed by a subsidiary
of the Company 5,028,153 4,793,583
Industrial development bond bearing interest at 79% of prime rate (6.12% at
April 30, 1999); requires quarterly principal payments of $57,143 plus interest;
matures March 1, 2000; secured by real property 228,564 457,136
Construction loan bearing interest at the prime rate plus .375% (8.125% at
April 30, 1999); requires monthly principal and interest payments of $87,729,
principal matures June 30, 2000; secured by real property and assignment of
leases and rents; guaranteed by a subsidiary of the Company 8,963,340 9,231,297
Amendment to construction loan shown above permitting borrowings of up to
$4,942,419; bearing interest at the prime rate plus .375% (8.125% at
April 30, 1999); requires monthly principal and interest payments of
$42,113; matures June 30, 2000; secured by real property and assignment
of leases and rents; guaranteed by a subsidiary of the Company 4,764,593 4,855,295
--------------------------------
Total other long-term debt 29,984,650 30,337,311
Less current maturities 878,139 832,449
--------------------------------
Total other long-term debt, excluding current maturities $29,106,511 $29,504,862
================================
</TABLE>
The future minimum principal payments due on other long-term debt
are as follows:
<TABLE>
<CAPTION>
Year ending April 30,
-------------------------------------------------------
<S> <C>
2000 $ 878,139
2001 18,506,511
2002 230,000
2003 255,000
2004 280,000
Thereafter 9,835,000
--------------------------------------------------------
$ 29,984,650
========================================================
</TABLE>
The outstanding principal balance of $228,564 and $457,136 at April 30,
1999 and 1998, respectively, on the industrial development bond payable have
been included in the current maturities of long-term debt, as the former wood
manufacturing facility securing this bond is included in Property held for sale
in the accompanying consolidated balance sheet at April 30, 1999 and 1998 (note
5).
At April 30, 1999, the Company had commitments from a bank for
unsecured lines of credit totaling $12,000,000, of which $7,600,000 was
outstanding. An additional $500,000 was restricted as it secures a letter of
credit described below. These lines of credit, which expire during fiscal year
2000, bear interest at the prime rate (7.75% at April 30, 1999) and have a 3/8%
commitment fee on the unused portion. In addition, the Company had a commitment,
which expires during fiscal year 2000, for an unsecured $1,000,000 line of
credit from a bank, of which none was outstanding at April 30, 1999. This line
of credit bears interest at the prime rate or at LIBOR (4.90% at April 30, 1999)
plus 2.7% and has a 3/8% commitment fee on the unused portion. The Company also
had a commitment for a line of credit, which expires during fiscal year 2000,
totaling $2,500,000, secured by the Manufacturing Segment's inventory and
receivables, of which $448,222 was outstanding at April 30, 1999. The secured
line of credit bears interest at the prime rate or at LIBOR plus 2.7% and has a
3/10% commitment fee on the unused portion.
The Company has entered into two interest rate swap agreements related
to the $11,000,000 industrial development revenue bonds shown above. The first
interest rate swap agreement was effective February 4, 1998, and terminates
February 1, 2001. The notional amount reduces annually from $5.5 million, at the
effective date, to $5.3 million prior to expiration of the agreement. The
agreement requires the Company to pay a fixed rate of 5.57% in exchange for
floating rate payments based on the 30-day Non-financial AA Commercial Paper
rate (4.79% at April 30, 1999).
The second interest rate swap agreement was effective February 4, 1998,
and terminates February 1, 2003. The notional amount reduces annually from $5.5
million at the effective date to $5,057,500 prior to the expiration of the
agreement. The interest rate terms of the second agreement are identical to the
terms of the first except that the fixed interest rate paid by the Company is
5.67%. The notional amounts of the swap agreements are set to match the
outstanding principal amounts of the bonds. The swap floating rates are reset
weekly, and the Company settles with the counterparty monthly.
In connection with the issuance of the industrial development revenue
bonds, the Company was required to obtain an irrevocable letter of credit in the
amount of $11,162,740. The letter of credit was issued November 12, 1997, and
expires on November 15, 2002. The letter of credit can be extended for three
additional five-year terms. The letter of credit is guaranteed by the Company
and a subsidiary of the Company. The letter of credit contains covenants that
require the maintenance of certain financial ratios. As of April 30, 1999, the
Company was in compliance with all debt covenants or has obtained waivers in
cases of non-compliance.
In addition, in conjunction with the origination of a mortgage on an
income-producing property, the Company obtained an irrevocable, standby letter
of credit in the amount of $500,000. The letter of credit was originally issued
on July 30, 1997, and amended during August 1998. The amendment extended the
maturity date to November 30, 1999. The mortgage lender is allowed to draw on
the letter in order to paydown the related mortgage loan if certain leasing
requirements are not met. The letter of credit is secured by a portion of a bank
line of credit, discussed above.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(10) INCOME TAXES
The provision for income tax expense (benefit) consists of the
following:
<TABLE>
<CAPTION>
Current Deferred Total
--------------------------------------------
<S> <C> <C> <C>
Year ended April 30, 1999:
Federal $(325,487) $(17,215) $ (342,702)
State and local 117,447 (62,333) 55,114
--------------------------------------------
$(208,040) $(79,548) $ (287,588)
===========================================
Year ended April 30, 1998:
Federal $ 712,383 $843,817 $1,556,200
State and local 153,259 123,541 276,800
-------------------------------------------
$ 865,642 $967,358 $1,833,000
===========================================
Year ended April 30, 1997:
Federal $ 908,173 $436,827 $1,345,000
State and local 60,609 51,391 112,000
-------------------------------------------
$ 968,782 $488,218 $1,457,000
===========================================
</TABLE>
Total income tax expense (benefit) recognized in the consolidated
statements of operations differs from the amounts computed by applying the
Federal income tax rate of 34% to pretax earnings (loss) as a result of the
following:
<TABLE>
<CAPTION>
Years ended
April 30,
---------------------------------------------
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) $(327,630) $ 1,643,043 $ 1,308,455
Increase in income taxes resulting from:
State and local income taxes, net
of Federal income tax benefit 36,375 182,688 73,920
Other, net 3,667 7,269 74,625
---------------------------------------------
$(287,588) $ 1,833,000 $ 1,457,000
=============================================
</TABLE>
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and deferred income tax liabilities,
at April 30, are presented below:
<TABLE>
<CAPTION>
1999 1998
---------------------------------------
<S> <C> <C>
Deferred income tax assets:
Inventories, primarily because of additional costs
capitalized for tax purposes and the allowance for
decline in net realizable value $ 275,494 $ 203,760
Items not currently deductible for tax purposes:
Provision for impairment on income-
producing property 1,026,816 1,026,816
Net operating loss carryforwards, state 404,585 307,141
Capitalized costs 594,156 663,566
Accrued directors' fees 223,032 343,907
Deferred compensation plan 419,740 283,250
Compensated absences 174,385 170,450
Other accrued expenses 413,233 472,844
Other 419,524 216,451
---------------------------------------
Gross deferred income tax assets 3,950,965 3,688,185
---------------------------------------
Deferred income tax liabilities:
Income-producing properties and property, plant and
equipment, principally because of differences in
depreciation and capitalized interest 2,355,180 2,230,575
Gain on real estate sales structured as tax-deferred
like-kind exchanges 3,500,887 3,469,700
Profit on installment sale 94,265 124,572
Other 90,575 32,828
---------------------------------------
Gross deferred income tax liabilities 6,040,907 5,857,675
---------------------------------------
Net deferred income tax liability $ 2,089,942 $ 2,169,490
=======================================
</TABLE>
The valuation allowance was $0 at April 30, 1999 and 1998.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
(11) STOCK OPTION PLAN AND DEFERRED PROFIT-SHARING PLAN
The Company adopted a Key Employee Incentive Stock Option Plan which
expired in May 1996, and which provided that stock options could have been
awarded to officers and key employees with exercise prices no less than the fair
market value of the common stock at the date of grant.
As of April 30, 1999, there were no stock options outstanding, as all
options had been exercised or canceled prior to April 30, 1998.
Information relating to the Company's stock option plan, as adjusted
for stock dividends for the years ended April 30, 1998 and 1997, is summarized
as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------
<S> <C> <C>
Options outstanding at beginning of year 17,666 17,666
Options granted --- ---
Options canceled 13,666 ---
Options exercised 4,000 ---
----------------------------
Options outstanding at end of year --- 17,666
============================
Option prices per share:
Options granted during the year $ --- $ ---
Options canceled $ 2.875-4.50 $ ---
Options exercised $ 2.875 $ ---
Options outstanding at end of year $ --- $ 2.875-4.50
============================
</TABLE>
The Company has a deferred Profit-Sharing Plan ("the Plan") which
covers substantially all of its employees. Funded employer contributions to
the Plan for 1999, 1998, and 1997 were approximately $814,000, $843,000, and
$1,032,000, respectively. The net assets in the Plan, which is administered
by an independent trustee, were approximately $18,172,000, $18,962,000, and
$14,304,000 at April 30, 1999, 1998, and 1997, respectively.
<PAGE>
(12) NET (LOSS) EARNINGS PER SHARE
The following tables set forth the computations of basic and diluted
net (loss) earnings per share:
<TABLE>
<CAPTION>
For the year ended April 30, 1999
----------------------------------------------------
Loss Shares Per share
(numerator) (denominator) amount
----------------------------------------------------
<S> <C> <C> <C>
Basic EPS - loss per share $ (676,031) 2,936,356 $ (.23)
Effect of dilutive securities --- --- ==========
- ---------------------------------------------------------------------------------------------------
Diluted EPS - loss per share plus assumed conversions $ (676,031) 2,936,356 $ (.23)
=======================================================================================================================
<CAPTION>
For the year ended April 30, 1998
----------------------------------------------------
Earnings Shares Per share
(numerator) (denominator) amount
----------------------------------------------------
<S> <C> <C> <C>
Basic EPS - earnings per share $ 2,999,478 2,937,712 $ 1.02
==========
Effect of dilutive securities - weighted-
average outstanding stock options --- 3,851
- ---------------------------------------------------------------------------------------------------
Diluted EPS - earnings per share plus assumed conversions $ 2,999,478 2,941,563 $ 1.02
=======================================================================================================================
<CAPTION>
For the year ended April 30, 1997
--------------------------------------------------
Earnings Shares Per share
(numerator) (denominator) amount
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic EPS - earnings per share $ 2,391,398 2,971,442 $ .81
=========
Effect of dilutive securities - outstanding
stock options --- 2,129
- ---------------------------------------------------------------------------------------------------
Diluted EPS - earnings per share plus
assumed conversions $ 2,391,398 2,973,571 $ .80
======================================================================================================================
</TABLE>
(13) OPERATING SEGMENTS
The Company has three operating segments: construction, manufacturing
and real estate. The Construction Segment provides construction services for
commercial and industrial projects. The Manufacturing Segment produces store
fixtures for retail outlets, display fixtures for point-of-sale merchandising
and other products. The Real Estate Segment develops or acquires
income-producing properties for investment and usually provides property
management for the properties after development or acquisition.
The operating segments are managed separately and maintain separate
personnel due to the differing products offered by each segment. Management of
each of the segments evaluates and monitors the performance of the segments
based on the earnings or losses prior to income taxes. The significant
accounting policies utilized by the operating segments are the same as those
summarized in note 2 to the accompanying financial statements of the Company.
Total revenue by operating segment includes both revenues from
unaffiliated customers, as reported in the Company's consolidated statements of
operations, and intersegment revenues, which are generally at prices negotiated
between segments.
Segment assets are those that are used in the Company's operations in
each segment, including receivables due from other segments. The Parent
Company's segment assets are primarily cash and cash equivalents, cash surrender
value of life insurance, and receivables.
Operating (loss) earnings is total revenue less operating expenses,
including depreciation and interest. Selling, shipping, general and
administrative and interest costs, deducted in the computation of operating
(loss) earnings of each segment, represent the actual costs incurred by that
segment. Parent expenses and income taxes have not been allocated to the other
subsidiaries.
The Company had revenues from The Home Depot, Inc., primarily
representing revenues in the Construction Segment, aggregating 53%, 61%, and 51%
of consolidated revenues in 1999, 1998, and 1997, respectively.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
<TABLE>
<CAPTION>
Construction Manufacturing Real Estate Parent Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999
Revenues from unaffiliated customers $159,273,393 $ 16,760,605 $12,449,850 $ --- $ --- $188,483,848
Interest and other income 223,196 9,832 267,690 40,516 (53,555) 487,679
Intersegment revenue 1,114,823 501,220 1,485,038 --- (3,101,081) ---
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenue $160,611,412 $ 17,271,657 $14,202,578 $ 40,516 $ (3,154,636) $188,971,527
==================================================================================================================================
Operating earnings (loss) $ 4,084,633 $ (1,760,238) $ (226,053) $(3,074,905) $ 12,944 $ (963,619)
==================================================================================================================================
Segment assets $ 33,451,167 $ 10,016,891 $84,572,912 $11,770,775 $(13,679,205) $126,132,540
==================================================================================================================================
Interest expense $ 1,053 $ 156,495 $ 5,144,444 $ 13,962 $ (53,555) $ 5,262,399
==================================================================================================================================
Depreciation and amortization $ 326,053 $ 432,634 $ 2,383,194 $ 30,634 $ (49,146) $ 3,123,369
==================================================================================================================================
Capital expenditures $ 470,807 $ 743,188 $ 2,740,563 $ 77,119 $ --- $ 4,031,677
==================================================================================================================================
1998
Revenues from unaffiliated customers $141,453,025 $ 14,970,261 $21,358,929 $ --- $ --- $177,782,215
Interest and other income 139,672 42,389 522,468 207,999 (103,901) 808,627
Intersegment revenue 5,026,181 181,003 200,615 --- (5,407,799) ---
- ---------------------------------------------------------------------------------------------------------------------------------
Total revenue $146,618,878 $ 15,193,653 $22,082,012 $ 207,999 $ (5,511,700) $178,590,842
==================================================================================================================================
Operating earnings (loss) $ 3,506,217 $ 459,468 $ 2,882,496 $(2,580,307) $ 564,604 $ 4,832,478
==================================================================================================================================
Segment assets $ 30,834,340 $ 8,185,294 $83,017,169 $ 9,470,541 $(10,197,900) $121,309,444
==================================================================================================================================
Interest expense $ 5,638 $ 53,284 $ 4,604,095 $ 54,509 $ (51,236) $ 4,666,290
==================================================================================================================================
Depreciation and amortization $ 276,259 $ 586,629 $ 2,029,121 $ 28,825 $ (67,200) $ 2,853,634
==================================================================================================================================
Capital expenditures $ 771,808 $ 81,164 $24,021,793 $ 81,483 $ --- $ 24,956,248
==================================================================================================================================
1997
Revenues from unaffiliated customers $ 97,976,902 $ 16,661,798 $20,985,647 $ --- $ --- $135,624,347
Interest and other income 138,096 41,460 146,512 257,519 (84,333) 499,254
Intersegment revenue 345,048 --- --- 300,000 (645,048) ---
- ----------------------------------------------------------------------------------------------------------------------------------
Total revenue $ 98,460,046 $ 16,703,258 $21,132,159 $ 557,519 $ (729,381) $136,123,601
==================================================================================================================================
Operating earnings (loss) $ 3,088,094 $ 1,749,033 $ 1,003,370 $(1,778,337) $ (213,762) $ 3,848,398
==================================================================================================================================
Segment assets $ 19,582,800 $ 10,300,421 $59,833,984 $ 8,692,770 $ (6,910,537) $ 91,499,438
==================================================================================================================================
Interest expense $ 2,779 $ 59,366 $ 4,788,291 $ 12,999 $ (84,333) $ 4,779,102
==================================================================================================================================
Depreciation and amortization $ 226,929 $ 600,628 $ 2,633,151 $ 25,382 $ (84,756) $ 3,401,334
==================================================================================================================================
Capital expenditures $ 176,539 $ 467,771 $ 5,184,283 $ --- $ --- $ 5,828,593
==================================================================================================================================
</TABLE>
(14) SUBSEQUENT EVENT
On May 14, 1999, the Company sold the shopping center property located
in Newnan, Georgia. The property was classified as Property held for sale at
April 30, 1999, in the accompanying balance sheet. The Company recognized a
pre-tax gain of approximately $2,900,000 upon its sale.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Additions
-----------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Accounts Deductions of Year
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended
April 30, 1999 $ 134,870 $ 96,853 $ --- $ 109,327<F1> $ 122,396
- ---------------------------------------------------------------------------------------------------------------------------------
Year ended
April 30, 1998 $ 65,584 $ 90,496 $ --- $ 21,210<F1> $ 134,870
- ---------------------------------------------------------------------------------------------------------------------------------
Year ended
April 30, 1997 $ 57,541 $ 117,426 $ --- $ 109,383<F1> $ 65,584
=================================================================================================================================
INVENTORY RESERVES
Year ended
April 30, 1999 $ 317,641 $ 662,343 $ --- $ 584,559<F2> $ 395,425
- ---------------------------------------------------------------------------------------------------------------------------------
Year ended
April 30, 1998 $ 374,447 $ 147,564 $ --- $ 204,370<F2> $ 317,641
- ---------------------------------------------------------------------------------------------------------------------------------
Year ended
April 30, 1997 $ 757,896 $ 203,561 $ --- $ 587,010<F2> $ 374,447
=================================================================================================================================
<FN>
<F1> Allowance for doubtful accounts deductions resulted from the subsequent
write-off and/or recovery of the related receivable.
<F2> Inventory reserve deductions resulted from the subsequent sale and/or
write-off of the related inventory.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
APRIL 30, 1999
Costs
Capitalized
Subsequent
Initial Cost to Company to Acquisition
-------------------------- --------------- ------
Building
and
Description Encumbrances Land Improvements Improvements Land
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME-PRODUCING PROPERTIES:
Shopping Center - Jackson, MI $ 3,293,584 $ 401,195 $ 1,788,183 $ 1,167,903 $ 453,293
Kmart - Morton, IL 3,099,490 18,005 2,767,765 (220,638) 18,005
Kmart - Columbus, GA 2,609,719 11,710 2,356,920 10,078 11,710
Shopping Center - Englewood, FL 12,706,660 6,072,805 8,823,506 (80,073) 6,072,805
Shopping Center - N. Fort Myers, FL 13,727,933 5,940,143 11,290,778 3,169,051 5,218,754
Leaseback Shopping Center - Davenport, IA --- --- 2,150 193,261 ---
Leaseback Shopping Center - Jacksonville, FL --- --- 42,151 --- ---
Leaseback Shopping Center - Orange Park, FL --- --- 127,487 35,731 ---
Leaseback Shopping Center - W. St. Paul, MN --- --- --- 86,983 ---
Leaseback Shopping Center - Bayonet Point, FL --- --- --- 9,384 ---
Leaseback Shopping Center - Minneapolis, MN --- --- --- 19,818 ---
Office Building - Atlanta, GA 5,028,153 660,000 4,338,102 656,741 660,000
Office Park - Marietta, GA 6,404,873 1,750,000 6,417,275 228,388 1,750,000
Shopping Center - Cincinnati, OH --- 1,699,410 617,102 40,331 1,699,410
- -----------------------------------------------------------------------------------------------------------------------------------
46,870,412 16,553,268 38,571,419 5,316,958 15,883,997
- -----------------------------------------------------------------------------------------------------------------------------------
PROPERTY HELD FOR SALE: <F2>
Shopping Center - Newnan, GA 5,331,968 696,829 5,291,120 301,224 696,829
- -----------------------------------------------------------------------------------------------------------------------------------
LAND HELD FOR FUTURE DEVELOPMENT OR SALE:
Davenport, IA --- 183,572 --- --- 183,572
Louisville, KY --- 80,011 --- --- 80,001
Oakwood, GA --- 234,089 --- 543,330 777,419
North Fort Myers, FL --- 2,760,187 --- 345,325 3,105,512
Jackson, MI --- --- --- 74,687 74,687
- -----------------------------------------------------------------------------------------------------------------------------------
--- 3,257,859 --- 963,342 4,221,201
- -----------------------------------------------------------------------------------------------------------------------------------
$52,202,380 $20,507,956 $ 43,862,539 $ 6,581,524 $20,802,007
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
APRIL 30, 1999 (CONTINUED)
Gross Amounts at Which Life on Which
Carried at Close of Year Depreciation
---------------------------------- In Latest
Building Net Earnings
and Capitalized Accumulated Date(s) of Date Statement
Improvements Interest Total <F1> Depreciation Construction Acquired is Computed
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME-PRODUCING PROPERTIES:
Shopping Center - Jackson, MI $ 2,956,086 $ 89,866 $ 3,499,245 $ 1,956,484 1972, 1996 --- 39 years
Kmart - Morton, IL 2,547,127 --- 2,565,132 2,103,552 1980, 1992 --- 25 years
Kmart - Columbus, GA 2,366,998 238,970 2,617,678 1,932,865 1980, 1988 --- 25 years
Shopping Center - Englewood, FL 8,743,433 1,346,273 16,162,511 3,040,847 1990 --- 32 years
Shopping Center - N. Fort Myers, FL 14,459,829 4,470,789 24,149,372 3,755,919 1993, 1996 --- 31.5 years
Leaseback Shopping Center - Davenport, IA 195,411 --- 195,411 93,124 1995 --- 7 years
Leaseback Shopping Center - Jacksonville, FL 42,151 --- 42,151 10,959 1994 --- 25 years
Leaseback Shopping Center - Orange Park, FL 163,218 --- 163,218 104,013 1995 --- 7 years
Leaseback Shopping Center - W. St. Paul, MN 86,983 --- 86,983 28,812 1996 --- 8 years
Leaseback Shopping Center - Bayonet Point, FL 9,384 --- 9,384 -- 1997 --- ---
Leaseback Shopping Center - Minneapolis, MN 19,818 --- 19,818 1,332 1997 --- 15 years
Office Building - Atlanta, GA 4,994,843 --- 5,654,843 283,572 1974, 1997 1997 39 years
Office Park - Marietta, GA 6,645,663 --- 8,395,663 275,522 1980, 1985 1997 39 years
Shopping Center - Cincinnati, OH 657,433 --- 2,356,843 19,644 1982 1998 39 years
- -------------------------------------------------------------------------------------------------
43,888,377 6,145,898 65,918,252 13,606,645
- -------------------------------------------------------------------------------------------------
PROPERTY HELD FOR SALE <F2>
Shopping Center - Newnan, GA 5,592,344 311,528 6,600,701 2,980,564 1974, 1987, 1989 --- 31.5 years
- -------------------------------------------------------------------------------------------------
LAND HELD FOR FUTURE DEVELOPMENT OR SALE:
Davenport, IA --- --- 183,572 --- --- 1977 ---
Louisville, KY --- --- 80,011 --- --- 1979 ---
Oakwood, GA --- 16,644 794,063 --- --- 1987 ---
North Fort Myers, FL --- --- 3,105,512 --- --- 1994 ---
Jackson, MI --- --- 74,687 --- --- 1997 ---
- -------------------------------------------------------------------------------------------------
--- 16,644 4,237,845 ---
- -------------------------------------------------------------------------------------------------
$49,480,721 $6,474,070 $76,756,798 $16,587,209
=================================================================================================
</TABLE>
<PAGE>
Reconciliations of total real estate carrying value and accumulated
depreciation for the three years ended April 30, 1999, are as follows:
<TABLE>
<CAPTION>
Real Estate Accumulated Depreciation
---------------------------------------- ------------------------------------------
1999 1998 1997 1999 1998 1997
---------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $76,291,413 $69,380,403 $75,750,977 $14,791,028 $17,462,301 $20,108,134
ADDITIONS DURING YEAR
Real estate 465,385 16,803,252<F4> 4,771,612<F3> --- --- ---
Depreciation --- --- --- 1,796,181 1,800,747 2,102,932
---------------------------------------- ----------------------------------------
465,385 16,803,252 4,771,612 1,796,181 1,800,747 2,102,932
DEDUCTIONS DURING YEAR
Accumulated depreciation on
properties sold or transferred --- --- --- --- 4,472,020 4,748,765
Carrying value of real estate
sold, transferred, or retired --- 9,892,242<F7> 8,392,186<F5> --- --- ---
Provision for impairment on income-
producing property --- --- 2,750,000> --- --- ---
---------------------------------------- ------------------------------------------
--- 9,892,242 11,142,186 --- 4,472,020 4,748,765
---------------------------------------- ------------------------------------------
BALANCE AT CLOSE OF YEAR $76,756,798 $76,291,413 $69,380,403 $16,587,209 $14,791,028 $17,462,301
======================================== =========================================
NOTES:
<FN>
<F1> The aggregated cost for land and building and improvements for federal
income tax purposes at April 30, 1999, is $66,575,198.
<F2> The former wood manufacturing facility, which is classified as property
held for sale in the April 30, 1999, and 1998, consolidated balance sheets
included herein, is not included in this schedule as it is not part of the
Company's real estate operations.
<F3> Primarily represents additions to a shopping center development in North
Fort Myers, Florida, and a Kroger in Jackson, Michigan.
<F4> Primarily represents the acquisitions of an office building in Atlanta,
Georgia; an office park in Marietta, Georgia; and a shopping center in
Cincinnati, Ohio.
<F5> Primarily represents sales of three freestanding Kmarts in Niles,
Michigan; Warner Robins, Georgia; and Shawnee, Oklahoma.
<F6> Represents a provision for impairment which was recorded to reduce the
carrying value of a shopping center in North Fort Myers, Florida, to its
estimated fair value.
<F7> Primarily represents sales of two freestanding Kmarts in Newark, Ohio,
and Tifton, Georgia, and a shopping center located in Oakwood, Georgia.
</FN>
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
<PAGE>
PART III
ITEMS 10-13.
The information contained under the headings "Nomination and Election
of Directors," "Principal Holders of the Company's Securities" and "Compensation
of Executive Officers and Directors" in the Company's definitive proxy materials
for its 1999 Annual Meeting of Shareholders, will be filed with the Securities
and Exchange Commission under a separate filing.
For purposes of determining the aggregate market value of the Company's
voting stock held by nonaffiliates, shares held directly or indirectly by all
Directors and Executive Officers of the Company have been excluded. The
exclusion of such shares is not intended to, and shall not, constitute a
determination as to which persons or entities may be "affiliates" of the Company
as defined by the Securities and Exchange Commission.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
1. Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets at April 30, 1999 and 1998
Consolidated Statements of Operations for the Years Ended April 30,
1999, 1998 and 1997
Consolidated Statements of Shareholders' Equity for the Years
Ended April 30, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the Years Ended April 30,
1999, 1998 and 1997
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts
Schedule III - Real Estate and Accumulated Depreciation
3. Exhibits:
Exhibit No.
3a. Articles of Incorporation (1)
3b. Restated Bylaws (2), Amendment to Bylaws (9)
10a. Project Financing Agreement by and among Development
Authority of Fulton County, Abrams Fixture Corporation,
and SunTrust Bank, dated as of June 3, 1985 (3)
10b. Abrams Industries, Inc. 1986 Key Employee Incentive Stock
Option Plan (4), as amended by Amendment No. 1 to
Abrams Industries, Inc. 1986 Key Employee Stock Option Plan,
dated May 24, 1988#
10c. Directors' Deferred Compensation Plan (5)#
10d. Edward M. Abrams Split Dollar Life Insurance Agreement dated
July 29, 1991 (6)#
10e. Joseph H. Rubin Split Dollar Life Insurance Agreement dated
August 27, 1991 (6)#
10f. Bernard W. Abrams Split Dollar Life Insurance Agreement dated
July 16, 1993 (7)#
10g. Bernard W. Abrams Employment Agreement dated August 23,
1995 (8)#
10h. Edward M. Abrams Employment Agreement dated November 18,
1998 #
10i. Lease Agreement between Development Authority of Douglas
County, Georgia, and Abrams Riverside, LLC, dated
as of November 1, 1997
10j. Letter of Credit and Reimbursement Agreement by and between
Abrams Riverside, LLC, and NationsBank, N.A.,
dated as of November 1, 1997.
10k. Amendment to Letter of Credit and Reimbursement Agreement
dated September 1, 1998
10l. Second Amendment to Letter of Credit and Reimbursement
Agreement dated as of October 31, 1998
10m. Guaranty dated as of November 1, 1997, executed and
delivered by Abrams Properties, Inc. (the Guarantor) in
favor of NationsBank, N.A.
10n. Guaranty dated as of November 1, 1997, executed and delivered
by Abrams Industries, Inc. (the Guarantor) in
favor of NationsBank, N.A.
13. Annual Report to Shareholders for the fiscal year ended
April 30, 1999
21. List of the Company's Subsidiaries
27. Financial Data Schedule (For SEC use only)
99. Proxy Statement for 1999 Annual Meeting of Shareholders*
Explanation of Exhibits
(1) These exhibits are incorporated by reference to the
Company's Form 10-K for the year ended April 30, 1985.
(2) This exhibit is incorporated by reference to the Company's
Form 10-K for the year ended April 30, 1997.
(3) This exhibit is incorporated by reference to the Company's
Form 10-Q for the quarter ended July 31, 1985.
(4) This exhibit is incorporated by reference to the Company's
Form 10-K for the year ended April 30, 1986.
(5) This exhibit is incorporated by reference to the Company's
Form 10-K for the year ended April 30, 1991.
(6) These exhibits are incorporated by reference to the
Company's Form 10-K for the year ended April 30, 1993.
(7) This exhibit is incorporated by reference to the Company's
Form 10-K for the year ended April 30, 1994.
(8) This exhibit is incorporated by reference to the Company's
Form 10-Q for the quarter ended October 31, 1995.
(9) This exhibit is incorporated by reference to the Company's
Form 10-K for the year ended April 30, 1998.
# Management compensatory plans or arrangement.
* To be filed by amendment.
<PAGE>
(b) Reports on Form 8-K: None filed during the fourth quarter of fiscal 1999.
(c) The Company hereby files as exhibits to this Annual Report on Form 10-K the
exhibits set forth in Item 14(a)3 hereof.
(d) The Company hereby files as financial statement schedules to this Annual
Report on Form 10-K the financial statement schedules set forth in Item
14(a)2 hereof.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ABRAMS INDUSTRIES, INC.
Dated: July 22, 1999 By: /s/ Alan R. Abrams
----------------------------
Alan R. Abrams
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
Dated: July 22, 1999 /s/ Alan R. Abrams
-----------------------------------------
Alan R. Abrams
Co-Chairman of the Board of Directors,
Chief Executive Officer
Dated: July 22, 1999 /s/ J. Andrew Abrams
-----------------------------------------
J. Andrew Abrams
Co-Chairman of the Board of Directors,
President and Chief Operating Officer
Dated: July 22, 1999 /s/ Edward M. Abrams
-----------------------------------------
Edward M. Abrams
Director, Chairman of the Executive Committee
Dated: July 22, 1999 /s/ Bernard W. Abrams
-----------------------------------------
Bernard W. Abrams
Director, Chairman Emeritus of the
Executive Committee
Dated: July 22, 1999 /s/ Paula Lawton-Bevington
-----------------------------------------
Paula Lawton-Bevington
Director
Dated: July 22, 1999 /s/ Donald W. MacLeod
-----------------------------------------
Donald W. MacLeod
Director
Dated: July 22, 1999 /s/ Anthony Montag
-----------------------------------------
Anthony Montag
Director
Dated: July 22, 1999 /s/ Joseph H. Rubin
-----------------------------------------
Joseph H. Rubin
Director
Dated: July 22, 1999 /s/ Felker W. Ward, Jr.
-----------------------------------------
Felker W. Ward, Jr.
Director
Dated: July 22, 1999 /s/ Melinda S. Garrett
-----------------------------------------
Melinda S. Garrett
Chief Financial Officer and
Chief Accounting Officer
</TABLE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10h. Edward M. Abrams Employment Agreement dated November 18,
1998
10i. Lease Agreement between Development Authority of Douglas
County, Georgia, and Abrams Riverside, LLC, dated
as of November 1, 1997
10j. Letter of Credit and Reimbursement Agreement by and between
Abrams Riverside, LLC, and NationsBank, N.A.,
dated as of November 1, 1997.
10k. Amendment to Letter of Credit and Reimbursement Agreement
dated September 1, 1998
10l. Second Amendment to Letter of Credit and Reimbursement
Agreement dated as of October 31, 1998
10m. Guaranty dated as of November 1, 1997, executed and
delivered by Abrams Properties, Inc. (the Guarantor) in
favor of NationsBank, N.A.
10n. Guaranty dated as of November 1, 1997, executed and delivered
by Abrams Industries, Inc. (the Guarantor) in
favor of NationsBank, N.A.
13. Annual Report to Shareholders for the fiscal year ended
April 30, 1999
21. List of the Company's Subsidiaries
27. Financial Data Schedule (For SEC use only)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 18th day of November
1998, by and between ABRAMS INDUSTRIES, INC., a Georgia corporation (the
"Company"), and EDWARD M. ABRAMS ("Executive").
W I T N E S S E T H:
-------------------
WHEREAS, Executive has devoted over forty-five years of valuable service to
the Company and has during such time accumulated significant knowledge and
understanding of the Company's operations, markets, industries, suppliers and
employees, to which knowledge the Company desires to have long-term access;
WHEREAS, the parties hereto desire to enter into an agreement for the
employment of Executive by the Company on the terms and conditions hereinafter
stated;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Employment, Duties and Term. (a) Subject to the terms and
---------------------------
conditions of this Agreement, the Company hereby employs Executive, and
Executive hereby accepts such employment. Executive shall serve initially as
Chairman of the Executive Committee, and shall perform such duties and functions
for the Company as are customarily incident to such position. Executive may
serve in other mutually agreeable positions with the Company during the Term (as
defined below). To facilitate the performance of such duties and functions, the
Company will provide Executive with reasonable office space and secretarial
assistance.
(b) Unless earlier terminated as provided herein, Executive's
employment under this Agreement shall be for a term commencing as of August 19,
1998 (the "Effective Date") and ending on August 19, 2008. The date on which
Executive's employment terminates as provided in this Agreement is herein called
the "Termination Date", and the period from the Effective Date through the
Termination Date is herein called the "Term".
(c) Executive shall not, without the prior written consent of the
Company, directly or indirectly, at any time during the Term, engage in any
venture or activity which is competitive with or adverse to the business of the
Company, whether alone, as a partner, or as an officer, director, employee,
consultant, shareholder of a non-publicly held company, or otherwise.
2. Compensation. In consideration of Executive' services hereunder,
------------
Company shall pay to Executive compensation as set forth below (which
compensation shall be paid, except as otherwise provided herein, in accordance
with the normal compensation practices of the Company and shall be subject to
<PAGE>
such deductions and withholdings as are required by law or general policies of
the Company in effect from time to time):
(a) The Company shall pay to Executive an annual salary which shall be
paid on a weekly basis and shall initially be $231,525 per annum ("Base
Compensation"). On each anniversary of the Effective Date, Base Compensation
shall be increased by five percent (5%) over the Base Compensation for the year
preceding such anniversary.
(b) The Company shall pay those membership dues and subscriptions on
behalf of Executive as are currently provided to Executive by the Company, and
as are provided to executive officers of the Company from time to time.
(c) Executive shall be entitled to the medical and dental benefits
that are provided from time to time by the Company's medical insurance plan and
dental insurance plan. Such medical benefits may also be provided through
Medicare coverage available to Executive or supplemental medical insurance, or a
combination of both, so long as the benefits provided to Executive and the out
of pocket costs incurred by Executive are substantially the same as those that
would be provided and incurred by Executive under the Company's medical
insurance plan.
(d) Executive shall be entitled to participate in the Company's Profit
Sharing Plan on the same basis as other employees for so long as Executive
continues to work the annual minimum number of hours during each fiscal year
necessary to qualify as an eligible participant in the Company's Profit Sharing
Plan. If in any fiscal year Executive fails to work the annual minimum number of
hours necessary to qualify as an eligible participant in the Company's Profit
Sharing Plan, then thereafter the Company shall pay to Executive each fiscal
year an amount all in cash that is equal to the total cash and deferred
payments, if any, which would have been paid or credited to Executive for that
fiscal year had he been an eligible participant in the Company's Profit Sharing
Plan.
(e) Executive shall be entitled to participate in any other employee
benefit plans generally provided by the Company to its executive officers, but
only if and to the extent provided in such employee benefit plans and for so
long as the Company provides or offers such benefit plans. For purposes of
determining his eligibility to participate in such other employee benefit plans,
Executive shall be deemed a regular full-time salaried employee.
(f) The compensation and benefits set forth above in this Section 2
shall cease on the Termination Date, except amounts payable for any period prior
to the Termination Date and except as required by law or the express terms of
any employee benefit plan in which Executive participates pursuant hereto.
Nothing herein shall affect Executive's right to COBRA benefits, Short-Term
Disability Plan benefits and Long-Term Disability Plan benefits, nor affect the
rights of beneficiaries under any life insurance policies insuring Executive's
life.
3. Confidential Information. (a) During the Term, Executive agrees
------------------------
that he shall not disclose to any person, or otherwise use, except in connection
with and as necessary for his duties performed for the Company, any Company
Confidential Information; provided, however, that Executive may
<PAGE>
make disclosures required by a valid order or subpoena issued by a court or
administrative agency of competent jurisdiction, in which event Executive will
promptly notify the Company of such order or subpoena to provide the Company an
opportunity to protect its interests.
(b) "Company Confidential Information," as used in this Agreement,
means information relating to the business of the Company which derives value,
actual or potential, from not being generally known to other persons. Company
Confidential Information does not include information which becomes generally
known to the public without breach of this Agreement.
4. Termination. Executive's employment under this Agreement may be
-----------
terminated only in accordance with the following provisions:
(a) Executive's employment hereunder shall be deemed to be terminated
as of the date of Executive's death. In the event of Executive's total
disability, the Executive's employment hereunder shall be deemed to be
terminated on the second August 19th following the date of total disability,
except that in no event shall this contract extend beyond August 19, 2008.
(b) The Company may terminate Executive's employment hereunder for
"Cause," which shall mean (i) Executive's gross negligence or willful misconduct
in the performance of his duties hereunder which results in material harm to the
Company, or (ii) Executive's conviction of a felony or crime involving moral
turpitude. A termination of Executive with Cause based on clause (i) of the
preceding sentence shall take effect 90 days after the Company gives written
notice of such termination to Executive unless Executive shall, during such
90-day period, remedy the events or circumstances constituting Cause.
5. Interpretation; Severability of Invalid Provisions. All rights
--------------------------------------------------
and restrictions contained in this Agreement may be exercised and shall be
applicable and binding only to the extent that they do not violate any
applicable laws and are intended to be limited to the extent necessary so that
they will not render this Agreement illegal, invalid or unenforceable. If any
term of this Agreement shall be held to be illegal, invalid or unenforceable by
a court of competent jurisdiction, the remaining terms shall remain in full
force and effect.
6. Notice. All notices, demands and requests, where permitted to be
------
given under this Agreement, shall be deemed sufficient if delivered in person or
mailed by registered or certified mail, postage prepaid, addressed as follows,
or to such other address as a party may have furnished to the other party in
accordance herewith:
To the Company: To Executive:
Abrams Industries, Inc. Mr. Edward M. Abrams
Attention: Chief Executive Officer 3770 Paces Ferry Rd. NW
Suite 300 Atlanta, Georgia 30327
1945 The Exchange
Atlanta, Georgia 30339
<PAGE>
The parties agree to promptly notify the other of any changes in their
addresses.
7. Agreement Binding; Assignment. This Agreement shall inure to the
-----------------------------
benefit of and be binding upon the Company, Executive, and their respective
permitted successors, or legal representatives. The parties hereto shall not,
without the consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder, except that the Company may assign its rights
or obligations under this Agreement without such consent to any successor to the
business of the Company by merger, consolidation, transfer of substantially all
the assets of the Company or otherwise.
8. Nonwaiver. The failure of either party to insist upon strict
---------
performance of the terms of this Agreement or to exercise any right herein,
shall not be construed as a waiver or a relinquishment for the future of such
term or right, but the same shall continue in full force and effect.
9. Entire Agreement. This Agreement contains the entire agreement
----------------
between the parties and no statement, promises or inducements made by any party
hereto, or agent of either party, which is not contained in this Agreement,
shall be valid or binding. This Agreement may not be enlarged, modified or
altered except in writing signed by the parties.
10. Governing Law. This Agreement has been executed and delivered in
-------------
and is to be performed in the State of Georgia and it and the rights and
obligations of the parties hereunder shall be construed under and governed by
the laws of the State of Georgia without giving effect to principles of
conflicts of laws.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and Executive has executed this Agreement, as of
the date first written above.
ABRAMS INDUSTRIES, INC.
By: /s/ Joseph H. Rubin Edward M. Abrams
JOSEPH H. RUBIN EDWARD M. ABRAMS
After recording, return to:
Caryl G. Smith HUNTON & WILLIAMS
NationsBank Plaza, Suite 4100
600 Peachtree Street, N.E.
Atlanta, Georgia 30308-2216
LEASE AGREEMENT
BETWEEN
DEVELOPMENT AUTHORITY OF DOUGLAS COUNTY, GEORGIA
AND
ABRAMS RIVERSIDE, LLC
DATED AS OF NOVEMBER 1, 1997
Certain rights of the Development Authority of Douglas County, Georgia (the
"Issuer") under this Lease Agreement have been assigned and pledged to, and are
subject to a security interest in favor of AmSouth Bank, Birmingham, Alabama, as
trustee under the Indenture of Trust (the "Trustee"), dated as of even date
herewith, as amended or supplemented from time to time, between the Issuer and
the Trustee, which secures $11,000,000 in aggregate principal amount of
Development Authority of Douglas County, Georgia Taxable Industrial Development
Revenue Bonds (Abrams Riverside, LLC Project), Series 1997.
<PAGE>
LEASE AGREEMENT
TABLE OF CONTENTS
(The Table of Contents for this Lease Agreement is for convenience of reference
only and is not intended to define, limit or describe the scope or intent of any
provisions of this Lease Agreement.)
<TABLE>
<CAPTION>
PAGE
ARTICLE I.
DEFINITIONS AND CERTAIN RULES OF INTERPRETATION
<S> <S> <C>
Section 1.1. Definitions......................................................................................1
Section 1.2. Rules of Construction............................................................................4
ARTICLE II.
REPRESENTATIONS
Section 2.1. Representations by the Issuer....................................................................5
Section 2.2. No Representation or Warranty by Issuer as to Project............................................6
Section 2.3. Representations by the Lessee....................................................................6
ARTICLE III.
ISSUANCE OF THE BONDS, ACQUISITION, CONSTRUCTION, INSTALLATION
AND FINANCING OF PROJECT
Section 3.1. Lease of the Project; Agreement to Acquire, Construct and Equip the Project......................8
Section 3.2. Agreement to Issue Bonds; Application of Proceeds; Construction Fund.............................8
Section 3.3. Establishment of Completion Date.................................................................8
Section 3.4. Lessee Required to Complete Project..............................................................8
Section 3.5. Limitation of Issuer's Liability.................................................................8
Section 3.6. Disclaimer of Warranties.........................................................................9
Section 3.7. Payments from Construction Fund..................................................................9
Section 3.8. Investment of Funds..............................................................................9
Section 3.9. Depositories of Moneys and Security for Deposit..................................................9
Section 3.10. Warranty of Title................................................................................9
Section 3.11. Quiet Enjoyment..................................................................................10
ARTICLE IV.
PROVISIONS FOR PAYMENT
Section 4.1. Effective Date of this Agreement; Duration of Lease Term; Delivery and Acceptance
of Possession....................................................................................11
Section 4.2. Rents and other Amounts Payable..................................................................11
Section 4.3. Credit Facility; Alternate Credit Facility.......................................................11
Section 4.4. Additional Rent..................................................................................12
Section 4.5. Obligations of the Lessee Absolute and Unconditional.............................................12
Section 4.6. Lessee Consent to Assignment of Agreement and Execution of Indenture.............................13
Section 4.7. Lessee's Performance Under Indenture.............................................................13
Section 4.8. Interest Rate Determination Method...............................................................13
Section 4.9. Prepayments......................................................................................13
<PAGE>
ARTICLE V.
PARTICULAR AGREEMENTS
Section 5.1. Maintenance, Operation, Modification and Insuring of Project; No Operation
of Project by Issuer..........................................................................14
Section 5.2. Issuer's and Trustee's Expenses; Release and Indemnification Provisions..........................14
Section 5.3. Maintenance of Existence.........................................................................15
Section 5.4. Annual Audit.....................................................................................15
Section 5.5. Agreement of Issuer Not to Assign or Pledge......................................................15
Section 5.6. Redemption of Bonds..............................................................................15
Section 5.7. Reference to Bonds Ineffective After Bonds Paid..................................................16
Section 5.8. Assignment, Sale or Lease of Project.............................................................16
Section 5.9. Removal of Leased Equipment......................................................................16
Section 5.10. Taxes, Other Governmental Charges and Utility Charges............................................17
Section 5.11. Compliance with Credit Agreement and Security Deed...............................................17
Section 5.12. Inspection of Project............................................................................17
Section 5.13. Project List.....................................................................................17
Section 5.14. No Warranty of Condition or Suitability by Issuer................................................18
Section 5.15. Special Covenants Related to Ad Valorem Taxation.................................................18
ARTICLE VI.
EVENTS OF DEFAULT AND REMEDIES
Section 6.1. Events of Default Defined........................................................................20
Section 6.2. Remedies.........................................................................................20
Section 6.3. No Remedy Exclusive..............................................................................21
Section 6.4. Agreement to Pay Counsel Fees and Expenses.......................................................21
Section 6.5. Waiver of Events of Default and Rescission of Acceleration.......................................21
ARTICLE VII.
PREPAYMENTS
Section 7.1. Optional Prepayments.............................................................................23
Section 7.2. Optional Purchase of Bonds.......................................................................23
Section 7.3. Relative Priorities..............................................................................23
Section 7.4. Prepayment to Include Fees and Expenses..........................................................23
Section 7.5. Obligations After Payment and Termination of Agreement...........................................23
Section 7.6. Purchase of Bonds................................................................................23
ARTICLE VIII.
OPTIONS IN FAVOR OF LESSEE; OBLIGATION OF LESSEE
Section 8.1. Options to Terminate the Lease Term; Purchase Project............................................25
Section 8.2. Conveyance on Purchase...........................................................................25
Section 8.3. Obligation to Purchase Project...................................................................25
ARTICLE IX.
RIGHTS OF CREDIT ISSUER
Section 9.1. Rights of Credit Issuer..........................................................................26
ii
<PAGE>
ARTICLE X.
MISCELLANEOUS
Section 10.1. Term of Agreement................................................................................27
Section 10.2. Notices..........................................................................................27
Section 10.3. Binding Effect...................................................................................28
Section 10.4. Severability.....................................................................................28
Section 10.5. Amounts Remaining in Bond Fund...................................................................28
Section 10.6. Reliance by Issuer...............................................................................28
Section 10.7. Issuer's Obligations Limited.....................................................................28
Section 10.8. Immunity of Directors, Officers and Employees of Issuer..........................................29
Section 10.9. Payments by Credit Issuer........................................................................29
Section 10.10. Amendments, Changes and Modifications............................................................29
Section 10.11. Counterparts.....................................................................................29
Section 10.12. Captions.........................................................................................29
Section 10.13. Amendment of Agreement...........................................................................29
Section 10.14. Law Governing Construction of Agreement..........................................................29
Section 10.15. Relationship of Parties; Estate for Years........................................................29
</TABLE>
EXHIBIT A DESCRIPTION OF PROJECT
EXHIBIT A-1 LEASED LAND
EXHIBIT A-2 LEASED EQUIPMENT
EXHIBIT A-3 PERMITTED EXCEPTIONS
EXHIBIT B CONSTRUCTION FUND CERTIFICATE AND REQUISITION
EXHIBIT C CERTIFICATE OF COMPLETION
EXHIBIT D LIMITED WARRANTY DEED
iii
<PAGE>
STATE OF GEORGIA )
DOUGLAS COUNTY )
THIS LEASE AGREEMENT (the "Agreement") is entered into as of November 1,
1997, by and between the DEVELOPMENT AUTHORITY OF DOUGLAS COUNTY, GEORGIA
(the "Issuer"), a public body corporate and politic created and existing under
the laws of the State of Georgia, and ABRAMS RIVERSIDE, LLC, a Georgia limited
liability company (the "Lessee"), with its principal place of business in
Atlanta, Georgia;
W I T N E S S E T H:
In consideration of the respective representations and agreements
hereinafter contained, the Issuer and the Lessee agree as follows (provided,
that in the performance of the agreements of the Issuer herein contained, any
obligation it may thereby incur for the payment of money shall not be a general
obligation on its part but shall be payable solely out of the rents, revenues
and receipts derived from this Agreement, the sale of the Bonds (defined
herein), the insurance and condemnation awards as herein described and any other
rents, revenues and receipts arising out of or in connection with its ownership
of the Project as hereinafter defined):
ARTICLE I.
DEFINITIONS AND CERTAIN RULES OF INTERPRETATION
SECTION 1.1. DEFINITIONS. In addition to the words and terms elsewhere
defined herein, the following words and terms as used herein shall have the
following meanings unless the context or use clearly indicates another or
different meaning or intent, and any other words and terms defined in the
Indenture shall have the same meanings when used herein as assigned them in the
Indenture unless the context or use clearly indicates another or different
meaning or intent:
"ACT" means the Development Authorities Law (codified as amended, at
O.C.G.A. Section 36-62-1 ET SEQ.).
"ADDITIONAL RENT" means those payments payable by the Lessee pursuant
to Section 4.4 hereof.
"AGREEMENT" means this Lease Agreement, dated as of November 1, 1997,
between the Issuer and the Lessee, and any amendments and supplements thereto.
"ALTERNATE CREDIT FACILITY" means the Alternate Credit Facility issued
in accordance with Section 4.3.
"BOND COUNSEL" means an attorney, or firm of attorneys, nationally
recognized and experienced in legal work relating to the issuance of municipal
bonds acceptable to the Issuer.
"BOND FUND" means the fund created by Section 4.01 of the Indenture.
"BONDHOLDER" or "HOLDER OF THE BONDS" means the Person who shall be
the registered owner of any Bond.
"BONDS" means the Taxable Industrial Development Revenue Bonds of the
Issuer authorized by the Indenture. Any percentage of Bonds specified herein for
any purpose is to be figured on the aggregate principal amount of Bonds then
outstanding.
"BUILDING" means that certain building or buildings, all fixtures
therein and all improvements, renovations and expansions thereto forming a part
of the Project and not constituting part of the Leased Equipment which has been
acquired by the Issuer hereof and is situated on the Leased Land, as it may at
any time exist.
<PAGE>
"CHAIRMAN" means the Chairman or the Vice Chairman of the Issuer.
"COMPLETION DATE" means the date determined pursuant to Section 3.3.
"COST OF PROJECT" with respect to the Project shall be deemed to
include the cost of all items permitted to be financed under the provisions of
the Act.
"COUNTY" means Douglas County, Georgia.
"COUNSEL" means an attorney, or firm thereof, admitted to practice law
before the highest court of any state in the United States of America or the
District of Columbia.
"CREDIT AGREEMENT" means that certain Reimbursement Agreement, of even
date herewith, between the Lessee and the Credit Issuer, under the terms of
which the Credit Issuer agrees to issue and deliver the Credit Facility to the
Trustee, and any amendment or supplement thereto, and if an Alternate Credit
Facility is issued, the agreement between the Credit Issuer and the Lessee
pursuant to which such Alternate Credit Facility is issued.
"CREDIT ISSUER" means NationsBank, N.A. in its capacity as the issuer
of the Credit Facility, and its successors in such capacity and their assigns,
and if an Alternate Credit Facility is issued, the issuer thereof.
"CREDIT ISSUER DOCUMENTS" means the Credit Agreement and the Security
Deed.
"CREDIT ISSUER REPRESENTATIVE" means each person at the time designated
to act on behalf of the Credit Issuer by written Certificate furnished to the
Lessee and the Trustee containing the specimen signature of each such person and
signed on behalf of the Credit Issuer by a Vice President or its President. Such
Certificate may designate an alternate or alternates.
"DEFAULT" means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an event of
default hereunder.
"EVENT OF DEFAULT" means one of the events so denominated and
described in Section 6.1.
"FINANCING STATEMENTS" means any and all financing statements
(including continuation statements) filed for record from time to time to
perfect the security interests created or assigned.
"GOVERNMENT OBLIGATIONS" means (a) direct obligations of the United
States of America for the payment of which the full faith and credit of the
United States of America is pledged, or (b) obligations issued by a person
controlled or supervised by and acting as an instrumentality of the United
States of America, the full and timely payment of the principal of, premium, if
any, and the interest on which is fully guaranteed as a full faith and credit
obligation of the United States of America (including any securities described
in (a) or (b) issued or held in book-entry form on the books of the Department
of the Treasury of the United States of America), which obligations, in either
case, are not subject to redemption prior to maturity at less than par by anyone
other than the holder, excluding unit trusts.
"INDENTURE" means the Indenture of Trust, of even date herewith,
between the Issuer and the Trustee, pursuant to which the Bonds are to be issued
and secured, including any indentures supplemental thereto.
"INDEPENDENT COUNSEL" means an attorney, or firm thereof, admitted to
practice law before the highest court of any state in the United States of
America or the District of Columbia, including any Bond Counsel.
"ISSUER" means the Development Authority of Douglas County, Georgia, a
public body corporate and politic duly organized and existing under the
Constitution and the laws of the State of Georgia, including the Act or any
successor to its rights and obligations under this Agreement and the Indenture.
2
<PAGE>
"ISSUER DOCUMENTS" means this Agreement, the Indenture, the Security
Deed and the Remarketing Agreement.
"ISSUER'S FEE" means a one time up front fee of $12,500 payable on the
day of issuance of the Bonds.
"LEASE TERM" means the duration of the leasehold interest created by
this Agreement as specified in Section 4.1.
"LEASED EQUIPMENT" means those items of machinery, equipment and
related property either previously acquired by the Issuer or required herein to
be acquired and installed in the Building or on the Leased Land with proceeds
from the sale of the Bonds or the proceeds of any payment by the Lessee pursuant
to Section 3.4 and any item of machinery, equipment and related property
acquired and installed by Lessee in the Building or on the Leased Land in
substitution therefor and renewals and replacements thereof pursuant to the
provisions of Sections 5.1(b), less such machinery, equipment and related
property taken by the exercise of the power of eminent domain, and is further
defined as all property owned by the Issuer and leased to the Lessee which is
not included in the definition of Leased Land or Building, and the Lessee's (but
not the Sublessee's) own machinery, equipment and related property installed
under the provisions of Section 5.1(b) but excluding Sublessee's machinery,
equipment and related property. No "Leased Equipment," other than fixtures,
building equipment and systems (such as electrical, plumbing, heating,
ventilation and air conditioning systems) which are necessary for the operation
of the Building, has been acquired or installed for or at the Project, Building
or Leased Land as of the date hereof but any such Leased Equipment to be
acquired and installed as a part of the Project so as to qualify as "Leased
Equipment" in accordance with the definition set forth herein at the time of
such acquisition and installation shall be detailed in Exhibit "A-2" attached
hereto and by this reference made a part hereof.
"LEASED LAND" means the real property described in Exhibit "A-1"
attached hereto and by this reference made a part of this Agreement.
"LESSEE" means Abrams Riverside, LLC, a Georgia limited liability
company, and its successors and assigns.
"LESSEE DOCUMENTS" means this Agreement, the Bond Purchase Agreement,
the Remarketing Agreement, and the Credit Issuer Documents.
"LESSEE REPRESENTATIVE" means each person at the time designated to act
on behalf of the Lessee by written certificate furnished to the Issuer and the
Trustee containing the specimen signature of such person and signed on behalf of
the Lessee by an authorized officer of the Lessee. Such certificate may
designate an alternate or alternates.
"LIMITED WARRANTY DEED" means the Limited Warranty Deed to be dated the
date of actual execution and delivery thereof, held in trust by the Trustee in
accordance with the provisions hereof. The Limited Warranty Deed, in
substantially the form it is to be executed and delivered, is attached as
Exhibit "D" hereto.
"NET PROCEEDS OF SALE OF THE BONDS" means those proceeds of the sale of
the Bonds remaining after payment of all expenses in connection with the
issuance of the Bonds and the deposit of all accrued interest (if any) received
from the sale of the Bonds in the Bond Fund, together with investment earnings
on such net proceeds earned prior to the Completion Date.
"OUTSTANDING," when used with reference to the Bonds, shall have the
meaning set forth in Article I of the Indenture.
"PAYMENT IN FULL OF THE BONDS" specifically encompasses the situations
referred to in Section 5.01 of the Indenture.
"PERMITTED EXCEPTIONS" means those items listed on Exhibit A-3 hereto.
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"PERSON" means any natural person, firm, partnership, association,
corporation or public body.
"PLEDGED REVENUES" means and shall include:
(a) the Lease Payments required to be made by or on behalf of the
Lessee under this Agreement, (but not the Sublease) except
payments to (i) the Trustee for services rendered as Trustee
under the Indenture and payments to be made to any Co-Trustee for
services rendered under the Indenture, and (ii) expenses,
indemnification and other payments required to be made pursuant
to Sections 5.2 and 6.4 hereof, and
(b) any proceeds which arise with respect to any disposition of any
of the property, money, securities and interests granted by the
Issuer to the Trustee under the Granting Clause of the Indenture.
"PROJECT" means the acquisition, construction and equipping of a
250,000 sq. ft. facility for the manufacture of store fixtures in Douglas
County, Georgia, as more fully described on Exhibit A hereto, including the
Leased Land, Building and Leased Equipment.
"SECRETARY" means the Secretary of the Issuer.
"SECURITY DEED" means the Deed to Secure Debt and Security Agreement,
dated as of November 1, 1997, among the Issuer, the Lessee and the Credit
Issuer.
"STATE" means the State of Georgia.
"SUBLEASE" means the Sublease, dated as of November 1, 1997 between the
Lessee and the Sublessee.
"SUBLESSEE" means Abrams Fixture Corporation, a Georgia corporation,
or any successor thereto.
"TRUSTEE" means AmSouth Bank, or any successor trustee appointed under
the Indenture.
"TRUSTEE FEES" means the periodic fees and expenses charged by the
Trustee in order to serve as Trustee under the Indenture.
"U.C.C." means the Uniform Commercial Code of the State as now in
effect or hereafter amended.
SECTION 1.3. RULES OF CONSTRUCTION. Unless the context clearly
indicates to the contrary, the following rules shall apply to the construction
of this Agreement:
(a) Capitalized terms used but not defined in this Agreement shall have
the meaning ascribed to them in the Indenture.
(b) Words importing the singular number shall include the plural number
and vice versa.
(c) The table of contents, captions and headings herein are solely for
convenience of reference only and shall not constitute a part of this Agreement
nor shall they affect its meaning, construction or effect.
(d) Words of the masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders, and words of the
neuter gender shall be deemed and construed to include correlative words of the
masculine and feminine genders.
(e) All references in this Agreement to particular Articles or Sections
are references to Articles and Sections of this Agreement, unless otherwise
indicated.
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ARTICLE II.
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS BY THE ISSUER. The Issuer makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) ORGANIZATION. The Issuer is a public body corporate and politic,
created and validly existing pursuant to the provisions of the Act. The Issuer
has been activated as required by the terms of the Development Authorities law,
its directors have been appointed as provided therein and are currently acting
in that capacity, and a copy of said activating resolution has been filed with
the Secretary of State of the State of Georgia as required by law. The Issuer
has been created to develop and promote for the public good and general welfare
trade, commerce, industry and employment opportunities and to promote the
general welfare of the State of Georgia. The aforementioned authorities empower
the Issuer to issue its revenue bonds, in accordance with the applicable
provisions of the Revenue Bond Law of the State of Georgia (Ga. Laws 1937, p.
761, ET SEQ.), as heretofore or hereafter amended, for the purpose of acquiring,
constructing and installing any project (as defined in the Act) for lease or
sale to prospective tenants or purchasers in furtherance of the public purposes
for which it was created.
(b) AUTHORITY. The Issuer has all requisite power and authority under
the Act to (i) issue the Bonds, (ii) to assist the Lessee in financing the cost
of acquiring, constructing and equipping the Project, and (iii) enter into, and
perform its obligations under the Issuer Documents.
(c) PENDING LITIGATION. There are no actions, suits, proceedings,
inquiries or investigations pending, or to the knowledge of the Issuer
threatened, against or affecting the Issuer in any court or before any
governmental authority or arbitration board or tribunal, which involve the
possibility of materially and adversely affecting the transactions contemplated
by the Issuer Documents or which, in any way, would materially and adversely
affect the validity or enforceability of the Bonds, the Issuer Documents or any
agreement or instrument to which the Issuer is a party and which is used or
contemplated for use in the consummation of the transactions contemplated hereby
or thereby.
(d) ISSUE, SALE AND OTHER TRANSACTIONS ARE LEGAL AND AUTHORIZED. The
issuance and sale of the Bonds and the execution and delivery by the Issuer of
the Issuer Documents, and the compliance by the Issuer with all of the
provisions of each thereof and of the Bonds (i) are within the purposes, powers
and authority of the Issuer, (ii) have been done in full compliance with the
provisions of the Act, are legal and will not conflict with or constitute on the
part of the Issuer a violation of or a breach of or default under, or result in
the creation of any lien, charge or encumbrance upon any property of the Issuer
(other than as contemplated in the Indenture) under the provisions of, any
activating resolution, by-law, indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which the Issuer is a party or by
which the Issuer is bound, or to the best of Issuer's knowledge any license,
judgment, decree, law, statute, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Issuer or any of its
activities or properties, and (iii) have been duly authorized by all necessary
corporate action on the part of the Issuer.
(e) GOVERNMENTAL CONSENTS. Neither the nature of the Issuer nor any of
its activities or properties, nor any relationship between the Issuer and any
other person, nor any circumstance in connection with the issue, sale or
delivery of any of the Bonds is such as to require the consent, approval or
authorization of, or the filing, registration or qualification with, any
governmental authority on the part of the Issuer in connection with the
execution, delivery and performance of the Issuer Documents or the issue, sale
or delivery of the Bonds, other than those already obtained; provided, however,
no representation is made as to compliance with any federal or state securities
or "blue sky" law.
(f) NO DEFAULTS. To the best of Issuer's knowledge, no event has
occurred and no condition exists with respect to the Issuer which would
constitute an "event of default" as defined in any of the Issuer Documents or
which, with the lapse of time or with the giving of notice or both, would become
such an "event of default." The Issuer is not in default under the Act or under
any charter instrument, by-law or other agreement or instrument to which it is a
party or by which it is bound which default would adversely affect the
enforceability or taxability of the Bonds.
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(g) NO PRIOR PLEDGE. Neither this Agreement nor any of the Pledged
Revenues have been pledged or hypothecated in any manner or for any purpose
other than as provided in the Indenture as security for the payment of the
Bonds.
(h) NATURE AND LOCATION OF PROJECT. The financing of the costs of the
Project, together with related expenses, is authorized under the Act, is in
furtherance of the public purpose for which the Issuer was created and will
increase employment in the area served by the Issuer.
(i) LIMITED OBLIGATIONS. Notwithstanding anything herein contained to
the contrary, any obligation the Issuer may hereby incur for the payment of
money shall not constitute an indebtedness of the County or of the State or of
any political subdivision thereof within the meaning of any state constitutional
provision or statutory limitation and shall not give rise to a pecuniary
liability of the State or the County or any political subdivision thereof, or
constitute a charge against the general credit or taxing power of said State or
County or any political subdivision thereof, but shall be limited obligations of
the Issuer payable solely from (i) the Pledged Revenues, (ii) revenues derived
from the sale of the Bonds, and (iii) amounts on deposit from time to time in
the Bond Fund, subject to the provisions of this Agreement and the Indenture
permitting the application thereof for the purposes and on the terms and
conditions set forth herein and therein. No officer or director of the Issuer
shall be personally liable on this Agreement or any of the Issuer Documents. The
Issuer has no taxing power.
SECTION 2.2. NO REPRESENTATION OR WARRANTY BY ISSUER AS TO PROJECT. The
Issuer makes no representation or warranty concerning the suitability of the
Project for the purpose for which it is being undertaken by the Lessee. The
Issuer has not made any independent investigation as to the feasibility of the
Project or creditworthiness of the Lessee, and any bond purchaser, assignee of
the Agreement or any other party with any interest in this transaction shall
make its own independent investigation as to the creditworthiness of the Lessee
and feasibility of the Project, independent of any representation or warranties
of the Issuer.
SECTION 2.3. REPRESENTATIONS BY THE LESSEE. The Lessee makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) ORGANIZATION AND POWER. The Lessee (i) is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the State of Georgia, and (ii) has all requisite power and authority and all
necessary licenses and permits to own its properties and to carry on its
business as now being conducted and as presently proposed to be conducted, and
(iii) has the power to enter into this Agreement and the transactions
contemplated hereby and to perform its obligations hereunder.
(b) PENDING LITIGATION. There are no proceedings pending, or to the
knowledge of the Lessee threatened, against or affecting the Lessee in any court
or before any governmental authority, arbitration board or tribunal which if
adversely determined, would materially and adversely affect the transactions
contemplated by the Lessee Documents or the Indenture or which, in any way,
would materially and adversely affect the properties, business, prospects,
profits or condition (financial or otherwise) of the Lessee, or the ability of
the Lessee to perform its obligations under the Lessee Documents. The Lessee is
not in default with respect to an order of any court, governmental authority,
arbitration board or tribunal.
(c) AGREEMENTS ARE LEGAL AND AUTHORIZED. The execution and delivery by
the Lessee of each of the Lessee Documents and the compliance by the Lessee with
all of the provisions hereof and thereof (i) are within the power of the Lessee
as a limited liability company, (ii) will not conflict with or result in any
breach of any of the provisions of, or constitute a default under, or result in
the creation of any lien, charge or encumbrance upon any property of the Lessee
under the provisions of, any agreement, articles of organization, by-laws,
operating agreement or other instrument to which the Lessee is a party or by
which it may be bound, or any license, judgment, decree, law, statute, order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Lessee or any of its activities or properties, and (iii)
have been duly authorized by all necessary corporate action on the part of the
Lessee.
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(d) GOVERNMENTAL CONSENT. Neither the Lessee nor any of its business or
properties, nor any relationship between the Lessee and any other person, nor
any circumstances in connection with the execution, delivery and performance by
the Lessee of the Lessee Documents or the offer, issue, sale or delivery by the
Issuer of the Bonds, is such as to require the consent, approval or
authorization of, or the filing, registration or qualification with, any
governmental authority on the part of the Lessee other than those already
obtained; provided, however, that no representation is made as to any consents,
approvals or authorizations required in connection with the construction or
occupancy of the Project.
(e) NO DEFAULTS. No event has occurred and no condition exists with
respect to the Lessee that would constitute an "event of default" under any of
the Lessee Documents or which, with the lapse of time or with the giving of
notice or both, would become such an "event of default." The Lessee is not in
violation in any material respect of any articles of organization, operating
agreement or other instrument to which it is a party or by which it may be
bound.
(f) COMPLIANCE WITH LAW. The Lessee is not in violation in any material
way of any laws, ordinances, governmental rules or regulations to which it is
subject and has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its business, which business consists solely of leasing and
subleasing the Project, which violation or failure to obtain might materially
and adversely affect the properties, business, prospects, profits or conditions
(financial or otherwise) of the Lessee.
(g) RESTRICTIONS ON THE LESSEE. The Lessee is not a party to any
contract or agreement that materially and adversely affects the business of the
Lessee. Except for the Credit Agreement, the Lessee is not a party to any
contract or agreement that restricts the right or ability of the Lessee to incur
or guarantee indebtedness for borrowed money.
(h) INDUCEMENT. The issuance of the Bonds by the Issuer, the
acquisition, construction and equipping of the Project by the Issuer and the
leasing of the Project by the Issuer to the Lessee have induced the Lessee to
locate the Project in the County. The issuance of the Bonds by the Issuer, the
acquisition, construction and equipping of the Project by the Issuer and the
leasing of the Project by the Issuer to the Lessee shall assist the Lessee in
providing employment and industry in the County.
(i) ESTIMATED TIME OF COMPLETION OF THE PROJECT. The Lessee estimates
that the Project will be completed and ready for occupancy by November 1, 1998.
(j) LOCATION OF PROJECT. The Project is located entirely within the
geographical boundaries of the County.
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ARTICLE III.
ISSUANCE OF THE BONDS; ACQUISITION, CONSTRUCTION,
INSTALLATION AND FINANCING OF PROJECT
SECTION 3.1. LEASE OF THE PROJECT; AGREEMENT TO ACQUIRE, CONSTRUCT AND
EQUIP THE PROJECT.
(a) The Issuer hereby leases to the Lessee, and the Lessee hereby
leases from the Issuer, the Project at the rental set forth in Section 4.2
hereof and in accordance with the provisions of this Agreement.
(b) The Issuer has appointed the Lessee to proceed with the
acquisition, construction and equipping of the Project, as described in Exhibit
A. The Lessee has obtained or has caused to be obtained all licenses, permits
and consents required for the acquisition, construction and equipping of the
Project, obtainable to date and has no reason to believe it cannot obtain all
other permits when needed. The Issuer shall have no responsibility for any such
permits.
(c) The Issuer agrees that the Building will consist of a manufacturing
facility which is described on Exhibit A-1 and shall be the property of the
Issuer and subject to the terms of this Agreement and the other Permitted
Exceptions.
(d) The Lessee will not take any action or fail to take any action
which would adversely affect the qualification of the Project under the Act.
SECTION 3.2. AGREEMENT TO ISSUE BONDS; APPLICATION OF PROCEEDS;
CONSTRUCTION FUND. In order to provide funds for payment of the Cost of the
Project, the Issuer shall simultaneously with the execution and delivery hereof,
authorize, validate, sell and cause to be delivered to the initial purchaser or
purchasers thereof, the Bonds, bearing interest and maturing as set forth in
Article II of the Indenture, at a price to be approved by the Lessee and Credit
Issuer. The moneys in the Construction Fund shall be used to finance the
acquiring, constructing and equipping of the Project and for paying certain of
the costs of issuing the Bonds. The obligation of the Issuer to pay for the Cost
of the Project shall be limited to the proceeds in the Construction Fund derived
from the sale of the Bonds in accordance with the Indenture.
SECTION 3.3. ESTABLISHMENT OF COMPLETION DATE. The Completion Date
shall be evidenced to the Issuer and the Trustee by a certificate in the form
attached hereto as Exhibit C, signed by a Lessee Representative stating (a) the
Cost of Project, (b) that the acquisition, construction and equipping of the
Project have been completed substantially in accordance with Section 3.1, and
(c) that, except for amounts retained by the Trustee for the Cost of Project not
then due and payable, if any, the full Cost of Project has been paid.
Notwithstanding the foregoing, such certificate shall state that it is given
without prejudice to any rights against third parties which exist at the date of
such certificate or which may subsequently come into being.
SECTION 3.4. LESSEE REQUIRED TO COMPLETE PROJECT. If the proceeds
derived from the sale of the Bonds issued for such purpose are not sufficient to
pay in full the Cost of Project, the Lessee shall pay so much of the cost
thereof as may be in excess of the proceeds of the Bonds and any investment
income thereon available therefor. The Lessee agrees that if, after exhaustion
of the proceeds derived from the sale of the Bonds and investment income
thereon, the Lessee should pay any portion of the Cost of Project pursuant to
the provisions of this Section, it shall not be entitled to any reimbursement
therefor from the Issuer or the Trustee nor shall it be entitled to any
abatement, diminution or postponement of its rental payments hereunder.
SECTION 3.5. LIMITATION OF ISSUER'S LIABILITY. Anything contained in
this Agreement to the contrary notwithstanding, any obligation the Issuer may
incur in connection with the undertaking of the Project for the payment of money
shall not be deemed to constitute a debt or general obligation of the Issuer,
the State or any political subdivision thereof, but shall be payable solely from
the rents, revenues and receipts derived by it from this Agreement, and from
payments made pursuant to the Credit Facility. No provision in this Agreement or
any obligation herein imposed upon the Issuer, or the breach thereof, shall
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constitute or give rise to or impose upon the Issuer, the County, the State or
any political subdivision thereof a pecuniary liability or a charge upon its
general credit or taxing powers. No officer or member of the Issuer shall be
personally liable on this Agreement or any of the Issuer Documents.
SECTION 3.6. DISCLAIMER OF WARRANTIES. The Lessee recognizes that since
the Project has been or will be acquired, constructed and equipped by or on
behalf of the Lessee or the Sublessee on behalf of the Issuer and by contractors
and suppliers selected by the Lessee or the Sublessee, NEITHER THE ISSUER NOR
THE TRUSTEE MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE MERCHANTABILITY, CONDITION OR WORKMANSHIP OF ANY PART OF THE
PROJECT OR ITS SUITABILITY FOR THE PURPOSES OF THE LESSEE OR THE EXTENT TO WHICH
PROCEEDS DERIVED FROM THE SALE OF THE BONDS WILL PAY THE COST TO BE INCURRED IN
CONNECTION THEREWITH.
SECTION 3.7. PAYMENTS FROM CONSTRUCTION FUND. The Trustee shall use
moneys in the Construction Fund solely to pay the Cost of Project. Before any
payment shall be made from the Construction Fund, there shall be filed with the
Trustee:
(a) A requisition, in the form attached hereto as Exhibit B, signed by
a Lessee Representative and approved in writing by an officer of the Credit
Issuer, stating to whom the payment is to be made, the amount of payment, the
purpose in reasonable detail for which the obligation to be paid was incurred,
and that the obligation stated on the requisition has been incurred by the
Lessee in or about the acquisition, construction or equipping of the Project,
each item is a proper charge against the Construction Fund and the obligation
has not been the basis for a prior requisition which has been paid, together
with a certificate attached to such requisition and signed by a Lessee
Representative stating that:
(1) there has been received no written notice of any lien,
right to lien or attachment upon, or claim affecting the
right of the payee to receive payment of, any of the
moneys payable under such requisition to any of the
persons, firms, or corporation named therein;
(2) such requisition contains no items representing payment on
account of any percentage entitled to be retained at the
date of the certificate; and
(3) no Event of Default hereunder or under the Indenture or
event which after notice or lapse of time or both would
constitute an Event of Default hereunder or under the
Indenture has occurred and not been waived or cured.
(b) An invoice or other appropriate evidence of the obligation
described in the requisition required by subsection (a) above.
Upon receipt of each such requisition and accompanying certificate, the
Trustee shall make payment from the Construction Fund in accordance with such
requisition.
SECTION 3.8. INVESTMENT OF FUNDS. Any moneys held in the Bond Fund or
the Construction Fund or any other fund created under the Indenture shall be
invested or reinvested by the Trustee as set forth in Section 4.07 of the
Indenture, to the extent permitted by law, or in the Permitted Investments (as
defined in the Indenture), at the telephonic or oral direction (confirmed in
writing) of the Lessee Representative. All such investments shall at all times
be a part of the fund (the Construction Fund, the Bond Fund or such other fund
created under the Indenture, as the case may be) from where the moneys used to
acquire such investments shall have come, and all income and profits on such
investments shall be credited to, and losses thereon shall be charged against,
such fund.
SECTION 3.9. DEPOSITORIES OF MONEYS AND SECURITY FOR DEPOSIT. All
moneys received by the Issuer in connection with the issuance of the Bonds
(other than for its fees and expenses) shall be deposited in the Construction
Fund created under the Indenture. All such moneys deposited shall be applied in
accordance with the terms and for the purposes herein set forth and shall not be
subject to lien or attachment by any creditor of the Issuer.
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SECTION 3.10. WARRANTY OF TITLE. The Issuer for itself, its successors
and assigns, based solely on the Title Insurance Policy to be delivered by
Commonwealth Land Title Insurance Company, represents that it has good and
marketable fee simple title in and to the Leased Land free from all encumbrances
except Permitted Exceptions. Upon the execution and delivery of this Lease, the
Issuer agrees that it will furnish to the Lessee an opinion of the Issuer's
Counsel given in reliance on the Title Insurance Policy, stating that the Issuer
holds such title in and to the Leased Land.
SECTION 3.11. QUIET ENJOYMENT. The Issuer warrants and covenants that
it will defend the Lessee at the Lessee's expense (except as to claims by the
Issuer) in the quiet enjoyment and peaceable possession of the Leased Land, and
all appurtenances thereto belonging, including the Building, free from all
claims of all persons whomsoever, throughout the Lease Term, so long as the
Lessee shall perform the covenants, conditions and agreements to be performed by
it hereunder, or so long as the period for remedying any failure of performance
shall not have expired.
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ARTICLE IV.
PROVISIONS FOR PAYMENT
SECTION 4.1. EFFECTIVE DATE OF THIS AGREEMENT; DURATION OF LEASE TERM;
DELIVERY AND ACCEPTANCE OF POSSESSION.
(a) This Agreement shall become effective upon its delivery and the
leasehold interest created by this Agreement shall then begin, and, subject to
the other provisions of this Agreement, shall expire at midnight on October 1,
2018.
(b) The Issuer agrees to deliver to the Lessee sole and exclusive
possession of the Project (subject to the right of the Trustee to enter thereon
for inspection purposes and to other provisions hereof) on the date of initial
issuance of the Bonds and the Lessee hereby accepts possession of the Project.
SECTION 4.2. RENTS AND OTHER AMOUNTS PAYABLE.
(a) The Lessee agrees (i) except as provided in subsection (b) of this
Section, to make prompt payment to the Trustee, as assignee and pledgee of the
Issuer, and as rent for the Project, for deposit in the Bond Fund, the amounts
which are necessary to pay the principal and Purchase Price of, premium, if any,
or interest on the Bonds (whether at maturity, upon redemption or acceleration,
or otherwise) when and as the same shall be due and payable. All such rental
payments shall be made to the Trustee at its principal office in lawful money of
the United States of America, except as may be otherwise agreed to by the
Trustee.
(b) In order to provide for the rental payments required in subsection
(a) of this Section, the Lessee shall cause the Credit Issuer to deliver the
Credit Facility to the Trustee simultaneously with the original issue and
delivery of the Bonds, and hereby authorizes and directs the Trustee to draw
moneys under the Credit Facility in accordance with the provisions of the
Indenture to the extent necessary to make the payments of principal and purchase
price of, and interest on the Bonds as and when the same become due. The Lessee
shall receive as a credit against its rental obligations described in subsection
(a) of this Section all payments made by the Credit Issuer under the Credit
Facility and all other amounts described in Section 3.08(a) of the Indenture.
(c) If the Lessee should fail to make any of the rental payments
required in subsection (a) and (b) above, the rental payment which the Lessee
has failed to make shall continue as an obligation of the Lessee until the same
shall have been fully paid, and the Lessee agrees to pay the same with interest
thereon at the rate per annum borne by the Bonds until paid in full.
(d) In addition, the Lessee agrees to pay any costs of issuing the
Bonds that are not paid with the proceeds of the sale of the Bonds by depositing
the same with the Trustee. Said monies shall be disbursed by the Trustee in
accordance with written instructions from the Lessee.
(e) Anything herein, in the Indenture or in the Bonds to the contrary
notwithstanding, the obligations of the Lessee hereunder shall be subject to the
limitation that payments constituting interest under this Section shall not be
required to the extent that the receipt of such payment by the holder of any
Bond would be contrary to the provisions of law applicable to such holder which
limit the maximum rate of interest which may be charged or collected by such
holder.
SECTION 4.3. CREDIT FACILITY; ALTERNATE CREDIT FACILITY.
(a) The Credit Facility delivered to the Trustee simultaneously with
the original issuance and delivery of the Bonds constitutes an irrevocable
obligation of the Credit Issuer to pay to the Trustee, upon request and in
accordance with the terms thereof, up to an amount equal to the sum of (i) the
principal amount of the Bonds then outstanding plus (ii) an amount equal to
interest for 36 days on the principal amount of each Bond then outstanding at
the rate of fifteen percent (15%) per annum.
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(b) The Lessee shall have the option from time to time to provide the
Trustee with an Alternate Credit Facility in accordance with the provisions of
Section 3.08(e) of the Indenture. If at any time there shall have been delivered
to the Trustee an Alternate Credit Facility, together with the other documents
and opinions required by Section 3.08(e) of the Indenture, then the Trustee
shall accept such Alternate Credit Facility and promptly surrender the
previously held Credit Facility to the issuer thereof for cancellation, in
accordance with the terms of such Credit Facility. If at any time there shall
cease to be any Bonds outstanding under the Indenture, the Trustee shall
promptly surrender the Credit Facility to the issuer thereof, in accordance with
the terms of such Credit Facility, for cancellation. The Trustee shall comply
with the procedures set forth in the Credit Facility relating to the termination
thereof.
SECTION 4.4. ADDITIONAL RENT. The Lessee shall also pay as Additional
Rent hereunder, to the persons entitled thereto, until the principal of and
interest on the Bonds shall have been fully paid or provision for the payment
thereof shall have been made in accordance with the provisions of the Indenture:
(i) the fees and charges of the Trustee incurred in connection with the
rendering of its ordinary and extraordinary services as Trustee under the
Indenture, as and when the same become due, including the reasonable fees and
expenses of its Counsel, (ii) the fees and expenses of the Remarketing Agent for
serving as Remarketing Agent for the Bonds, including the reasonable fees and
expenses of its Counsel, and any other amounts due and payable to the
Remarketing Agent under the Remarketing Agreement, (iii) the fees and expenses
of the Rating Agency for issuing and maintaining its securities rating on the
Bonds, if any, (iv) [the Issuer's Fee,] the out-of-pocket expenses,
administrative expenses and Counsel fees of the Issuer and Bond Counsel, (v) all
utility rents and charges incurred in connection with the Project or any part
thereof, (vi) charges for the operation and maintenance of the Project,
including, but not limited to, sanitation, repair, electricity, gas, security,
and other items deemed necessary for the efficient operation of the Project, and
(vii) any and all taxes and assessments or other governmental charges which may
be lawfully taxed, charged, levied or assessed against the Project or any part
thereof or the revenues derived therefrom including any new taxes and assessment
not of the kind enumerated above to the extent that the same are lawfully made,
levied, charged or assessed in lieu of or in addition to taxes or assessments
now customarily levied against real or personal property, and further including
all water and sewer charges, assessments and other general governmental charges
and impositions whatsoever, foreseen or unforeseen, which if not paid when due
would impair the security of the Bonds or encumber the Issuer's title to the
Project. The Lessee may, without constituting grounds for an Event of Default
hereunder, withhold payment of any such fees and charges of the Trustee, to
contest in good faith the necessity for any extraordinary services of the
Trustee and the reasonableness of any extraordinary expenses of the Trustee. If
the Lessee should fail to make any payment of Additional Rent required in this
Section, the Additional Rent which the Lessee has failed to make shall continue
as an obligation of the Lessee until the same shall have been fully paid, with
interest thereon at the rate per annum borne by the Bonds until paid in full.
SECTION 4.5. OBLIGATIONS OF THE LESSEE ABSOLUTE AND UNCONDITIONAL.
Subject to the provisions of Section 6.5 hereof, the obligations of the Lessee
to make or to cause (pursuant to the Credit Facility) to be made the rental
payments required in Sections 4.2 and 4.4 and to perform and observe the other
agreements on its part contained herein shall be absolute and unconditional and
shall not be subject to diminution by set-off, counterclaim, abatement or
otherwise by reason of any action or inaction of the Trustee, the Issuer or any
third party. Until such time as the principal of, and the interest on, the Bonds
shall have been paid in full, the Lessee (a) will not suspend or discontinue any
rental payments provided for in Sections 4.2 and 4.4 except to the extent the
same have been prepaid, (b) will perform and observe all its other agreements
contained herein, and (c) except as provided in Article VII, will not terminate
this Agreement for any cause, including, without limiting the generality of the
foregoing, any acts or circumstances that may constitute failure of
consideration, sale, loss, eviction or constructive eviction, destruction of or
damage to the Project, condemnation, commercial frustration of purpose, any
change in the tax or other laws of the United States of America or of the State
or any political subdivision of either, or any failure of the Issuer to perform
and observe any agreement, whether express or implied, or any duty, liability or
obligation arising out of or in connection herewith or with the Indenture.
Notwithstanding the foregoing, the obligation of the Lessee to make payments
hereunder shall be satisfied and discharged to the extent moneys are received by
the Trustee pursuant to the Credit Facility. Nothing contained in this Section
shall be construed to release the Issuer from the performance of any of the
agreements on its part herein contained; and if the Issuer should fail to
perform any such agreement, the Lessee may institute such action against the
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Issuer as the Lessee may deem necessary to compel performance so long as such
action shall not impair the agreements on the part of the Lessee hereunder.
Nothing contained herein shall be construed as a waiver of any rights
which the Lessee may have against the Issuer under this Agreement, or against
any person under this Agreement, the Indenture or otherwise, or under any
provision of law; provided, however, that the Lessee shall pursue any rights or
remedies against the Issuer, the Trustee, any Bondholder or any third party in
connection herewith, or in connection with the Indenture, the Lessee Documents,
the Credit Issuer Documents or otherwise relating to the Bonds and security
therefor only in a separate action, and not by way of any set-off, counterclaim,
cross-claim or third party action in any suit brought to enforce the rights of
the bondholders, the Trustee or the Issuer under this Agreement, the Indenture,
the Lessee Documents, the Credit Issuer Documents or otherwise in connection
herewith; and provided further, that in order to preserve the right of the
Lessee to raise such issues in any separate suit, any claim of the Lessee which,
but for this Section 4.5, would be a compulsory counterclaim, shall be
identified as such in the first responsive pleading filed by the Lessee to any
action brought by the Issuer, Trustee, any Bondholder or any person.
SECTION 4.6. LESSEE CONSENT TO ASSIGNMENT OF AGREEMENT AND EXECUTION OF
INDENTURE. The Lessee acknowledges and agrees that the Issuer will, pursuant to
the Indenture and as security for the payment of the principal of, premium, if
any, and the interest on the Bonds, assign and pledge to the Trustee, and create
a security interest in favor of the Trustee in certain of its rights, title and
interest in and to this Agreement (including all Pledged Revenues) reserving,
however, the Reserved Rights; and the Lessee hereby agrees and consents to such
assignment and pledge. The Lessee acknowledges that it has received a copy of
the Indenture and consents to the execution of the same by the Issuer; provided,
however, such consent does not constitute a representation as to the accuracy of
any representations or warranties made thereunder.
SECTION 4.7. LESSEE'S PERFORMANCE UNDER INDENTURE. The Lessee agrees,
for the benefit of the Bondholders, to do and perform all acts and things
contemplated in the Indenture to be done or performed by it.
SECTION 4.8. INTEREST RATE DETERMINATION METHOD. The Lessee, with the
consent of the Credit Issuer, is hereby granted the right to designate from time
to time (i) changes in the Interest Rate Determination Method in the manner and
to the extent set forth in Section 2.04 of the Indenture and (ii) the length of
the Medium-Term Rate Period or the Maximum Term Rate, as applicable, in the
manner and to the extent set forth in Section 2.03(e) of the Indenture.
SECTION 4.9. PREPAYMENTS. The Lessee may prepay all or any part of the
Lease Payments required to be paid by it under this Agreement, at the times and
in the amounts provided in Article VII for redemption of the Bonds, and in the
case of mandatory redemptions of the Bonds, the Lessee shall cause to be
furnished to the Issuer such amounts on or prior to the applicable redemption
dates. Prepayment of amounts due hereunder pursuant to this Section 4.9 shall be
deposited in the Bond Fund.
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ARTICLE V.
PARTICULAR AGREEMENTS
SECTION 5.1. MAINTENANCE, OPERATION, MODIFICATION AND INSURING OF
PROJECT; NO OPERATION OF PROJECT BY ISSUER.
(a) Throughout the Lease Term, the Lessee shall at its own expense,
maintain and operate all portions of the Project during their useful lives or
until they are replaced with facilities necessary in their operation. This
Agreement does not prevent the Lessee from merging or consolidating with another
entity as permitted by Section 5.3. The Lessee further agrees that it will at
its own expense keep the Project properly insured against loss or damage from
such perils usually insured against by businesses operating or owning like
properties and maintain public liability insurance and all such worker's
compensation or other similar insurance as may be required by law. Evidence of
such insurance will be furnished to the Issuer, the Trustee and the Credit
Issuer upon request. Nothing contained in this Agreement shall be deemed to
authorize or require the Issuer to operate the Project or to conduct any
business enterprise in connection therewith.
(b) The Lessee may from time to time, in its sole discretion and at its
own expense, but subject to the provisions of Section 5.9, make any additions,
modifications or improvements to the Project, including installation of
machinery, equipment, and related property, which it may deem desirable;
provided that all such additions, modifications and improvements do not
adversely affect the structural integrity of the Building and are located wholly
within the boundary lines of the Leased Land. With the exception of any
machinery, equipment and related property which shall be transferred to the
Issuer at the option of the Lessee pursuant to Section 5.9 hereof, all
machinery, equipment and related property owned and installed by the Lessee
which is not financed with Bond proceeds, shall be the sole property of the
Lessee in which neither the Issuer nor the Trustee shall have any interest and
may be modified or removed at any time while the Lessee is not in default under
this Lease; provided that any damage to the Project occasioned by such
modification or removal shall be repaired by the Lessee at its own expense.
Furthermore, all machinery, equipment and related property owned and installed
by the Sublessee which is neither owned by the Lessee nor financed with Bond
proceeds, shall be and remain the sole property of Sublessee in which neither
the Issuer, the Trustee nor the Lessee shall have any interest and may be
modified or removed at any time while the Sublessee is not in default under the
Sublease.
SECTION 5.2. ISSUER'S AND TRUSTEE'S EXPENSES; RELEASE AND
INDEMNIFICATION PROVISIONS. The Lessee agrees, whether or not the transactions
contemplated by the Lessee Documents and the Indenture shall be consummated, to
indemnify and hold harmless the Issuer and its officers, commissioners,
directors, officials, employees and agents, including the Trustee, counsel to
the Issuer and financial advisor to the Issuer (any and all of the foregoing
being hereinafter referred to as the "Indemnified Persons"), from and against
any and all claims, actions, suits, proceedings, expenses, judgments, damages,
penalties, fines, assessments, liabilities, charges or other costs (including,
without limitation, all attorneys' fees and expenses incurred in connection with
enforcing this Agreement or collecting any rents due hereunder and any claim or
proceeding or any investigation in connection therewith) relating to, resulting
from or in connection with (i) any cause whatsoever in connection with the
Project, including, without limitation, the acquisition, design, construction,
installation, equipping, operation, maintenance or use thereof or the financing
thereof including any expenses arising from the failure to make payment of
principal and interest on the Bonds; (ii) any act or omission of the Lessee or
any of its agents, contractors, servants, employees or licensees, in connection
with the Project; (iii) the issuance and sale of the Bonds, and (iv) a
misrepresentation or breach of warranty by the Lessee hereunder or under any of
the Lessee Documents, or any violation by the Lessee of any of its covenants
hereunder or under any of the other Lessee Documents. This indemnity is
effective only with respect to any loss incurred by the Indemnified Persons not
due to willful misconduct, gross negligence, or bad faith on the part of such
Indemnified Persons. In case any action or proceeding shall be brought against
one or more of the Indemnified Persons and in respect of which indemnity may be
sought as provided herein, such Indemnified Person or Indemnified Persons shall
promptly notify the Lessee in writing and the Lessee shall promptly assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Person or Indemnified Persons, payment of all expenses and the
right to negotiate and consent to settlement; but the failure to notify the
Lessee as provided herein shall not relieve the Lessee from any liability that
it may have (i) under this Section, so long as the Lessee is given the
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reasonable opportunity to defend such claim, and (ii) otherwise than under this
Section. Any one or more of the Indemnified Persons shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the reasonable fees and expenses of such counsel shall be at the
expense of such Indemnified Persons or Indemnified Persons unless (x) the
employment of such counsel has been specifically authorized in writing by the
Lessee, (y) the named parties to any such action (including any impleaded
parties) include both the Lessee and such Indemnified Person or Indemnified
Persons and representation of both the Lessee and such Indemnified Person or
Indemnified Persons by the same counsel would be inappropriate due to actual or
potential differing interests between them, or (z) the Indemnified Person or
Indemnified Persons have been advised that one or more legal defenses may be
available to any or all of them which may not be available to the Lessee in
which case the Lessee shall not be entitled to assume the defense of such suit
notwithstanding its obligation to bear the fees and expenses of such counsel.
The Lessee shall not be liable for any settlement of any such action effected
without its consent, but if settled with such consent or if there is a final
judgment in any such action with or without consent, the Lessee agrees to
indemnify and hold harmless the Indemnified Person or Indemnified Persons from
and against any loss by reason of such settlement or judgment, subject to the
limitations set forth above. Notwithstanding the foregoing, this indemnity is
not intended and does not pertain to principal, Purchase Price and interest on
the Bonds.
The provisions of this Section shall survive the Lease Term.
SECTION 5.3. MAINTENANCE OF EXISTENCE. The Lessee agrees that
throughout the Lease Term it shall maintain its existence as a limited liability
company organized under the laws of the State of Georgia and shall not merge or
consolidate with any other entity and shall not transfer or convey all or
substantially all of its property, assets and licenses; provided, however, the
Lessee may, with the written consent of the Issuer and without violating any
provision hereof, consolidate with or merge into another domestic entity (I.E.,
an entity existing under the laws of one of the states of the United States of
America or the District of Columbia) or permit one or more other domestic
entities to consolidate with or merge into it, or transfer all or substantially
all of its assets to another domestic entity, but only on the condition that
(a) the assignee entity or the entity resulting from or surviving
such merger (if other than the Lessee) or consolidation or the
entity to which such transfer is made expressly assumes in
writing and agrees to perform all of the Lessee's obligations
hereunder and under the Credit Issuer Documents and the other
Lessee Documents,
(b) in connection with any such consolidation, merger or transfer,
the Credit Issuer shall expressly ratify and affirm that the
Credit Facility remains in full force and effect, and
(c) the surviving entity shall preserve and keep in full force and
effect all licenses and permits necessary to the proper conduct
of its business.
SECTION 5.4. ANNUAL AUDIT. The Lessee agrees to cause the annual report
of the Credit Issuer (or its holding company) furnished to the stockholders of
the Credit Issuer (or its holding company) to be furnished to the Trustee as
soon as practicable after it is furnished to the Credit Issuer's (or its holding
company's) shareholders and upon request to furnish such annual report to any
bondholder who shall have filed his name and address with the Trustee for the
purpose of receiving such annual report and whose name and address shall have
been transmitted to the Lessee by the Trustee.
SECTION 5.5. AGREEMENT OF ISSUER NOT TO ASSIGN OR PLEDGE. Except for
the Issuer's assignment and pledge of the Security, as defined in the Indenture,
and its conveyance of security title to the Project pursuant to the Security
Deed, the Issuer agrees that it will not attempt to further assign, pledge,
transfer or convey its interest in or create any assignment, pledge, lien,
charge or encumbrance of any form or nature with respect to the Project or any
of the property, moneys, securities and rights granted by the Issuer to the
Trustee under the Granting Clause of the Indenture.
SECTION 5.6. REDEMPTION OF BONDS. The Issuer or the Trustee, at the
request at any time of the Lessee and if the same are then redeemable, shall
forthwith take all steps that may be necessary under the applicable redemption
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provisions of the Indenture to effect redemption of all or any portion of the
Bonds, as may be specified by the Lessee, on the earliest redemption date on
which such redemption may be made under such applicable provisions or upon the
date set for the redemption by the Lessee pursuant to Article VII. As long as
the Lessee is not in default hereunder and the Issuer is not obligated to call
Bonds pursuant to the terms of the Indenture, neither the Issuer nor the Trustee
shall redeem any Bond prior to its stated maturity unless requested to do so in
writing by the Lessee.
SECTION 5.7. REFERENCE TO BONDS INEFFECTIVE AFTER BONDS PAID. Upon
Payment in Full of the Bonds and of all fees and charges of the Trustee and the
Remarketing Agent, all references herein to the Bonds and the Trustee shall be
ineffective and neither the Issuer, the Trustee nor the holders of any of the
Bonds shall thereafter have any rights hereunder and, subject to Article VIII
the Lessee shall have no further obligation hereunder, saving and excepting
those that shall have theretofore vested and any right of any Indemnified Person
(as defined in Section 5.2) to indemnification under Section 5.2, which right
shall survive the payment of the Bonds and the termination of this Agreement.
Reference is hereby made to Article V of the Indenture which sets forth the
conditions upon the existence or occurrence of which Payment in Full of the
Bonds shall be deemed to have been made.
SECTION 5.8. ASSIGNMENT, SALE OR LEASE OF PROJECT. The Lessee may
assign or otherwise transfer its interest in this Agreement and may sublease the
Project provided that (i) if the Sublessee is other than a wholly owned
subsidiary of Abrams Industries, Inc. or a subsidiary thereof the written
consent of the Issuer is obtained, (ii) the purchaser, sublessee or transferee
in such transaction shall be bound by the terms and provisions of this
Agreement, and (iii) such transaction shall not affect the liability of the
Credit Issuer under the Credit Facility.
SECTION 5.9. REMOVAL OF LEASED EQUIPMENT. The Issuer shall not be under
any obligation to renew, repair or replace any inadequate, obsolete, worn out,
unsuitable, undesirable, inappropriate or unnecessary Leased Equipment to the
extent any Leased Equipment exists at the Project. If the Lessee in its sole
discretion determines that any such items of Leased Equipment have become
inadequate, obsolete, worn out, unsuitable, undesirable, inappropriate or
unnecessary for its purposes at such time, the Lessee may remove such items from
the Building and the Leased Land and (on behalf of the Issuer) sell, trade-in or
otherwise dispose of them (as a whole or in part) without any responsibility or
accountability to the Issuer or the Trustee therefor, provided that the Lessee
shall either:
(a) substitute (either by direct payment of the costs thereof or by
advancing to the Issuer the moneys necessary therefor) and
install anywhere in the Building or on the Leased Land other
machinery, equipment or related property having similar utility
(but not necessarily having the same function or value) in the
operation of the Building as a modern industrial facility
(provided such removal and substitution shall not impair
operating unity), all of which substituted machinery, equipment
or related property shall be free of all liens and encumbrances
(other than Permitted Exceptions) but shall become a part of the
Leased Equipment; or
(b) not make any such substitution and installation, provided (i)
that in the case of the sale of any such machinery, equipment or
related property to anyone other than itself or in the case of
the scrapping thereof, the Lessee shall pay into the Bond Fund
the proceeds from such sale or the scrap value thereof, as the
case may be, (ii) that in the case of the trade-in of such
machinery, equipment or related property for other machinery,
equipment or related property not to be installed in the Building
or on the Leased Land, the Lessee shall pay into the Bond Fund
the amount of the credit received by it in such trade-in, and
(iii) that in the case of the sale of any such machinery,
equipment or related property to the Lessee or in the case of any
other disposition thereof, the Lessee shall pay into the Bond
Fund an amount equal to the original cost thereof less
depreciation at rates calculated in accordance with generally
accepted accounting principles.
The removal from the Project of any portion of the Leased Equipment pursuant to
the provisions of this Section shall not entitle the Lessee to any diminution in
or postponement or abatement of the amount of the rents payable under Section
4.2 hereof.
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The Lessee shall report to the Trustee and the Board of Assessors of
the County each such removal, substitution, sale, trade-in or other disposition
of Leased Equipment and shall pay to the Trustee such amounts as are required by
the provisions of the preceding subsection (b) of this Section to be paid into
the Bond Fund promptly after the sale, trade-in or other disposition requiring
such payment; provided, however, that no such payment or report need be made
until the amount with respect to items not replaced on account of all such
sales, trade-ins or other dispositions and not previously paid aggregates at
least $2,000,000. The Lessee shall not remove or permit the removal of any item
of Leased Equipment except in accordance with the provisions of this Section.
The Lessee shall deliver to the Issuer appropriate documents,
including, but not limited to bills of sale, conveying to the Issuer title to
any machinery, equipment or related property installed or placed in the Building
or on the Leased Land pursuant to this Section, and upon request of the Lessee,
the Issuer shall deliver and cause or direct the Trustee to deliver to the
Lessee appropriate documents conveying to the Lessee title to any property
removed from the Building or the Leased Land pursuant to this Section and
releasing the same from the lien of the Indenture and canceling any security
interest with respect thereto. The Lessee shall take or cause to be taken such
action, if any, as may be necessary to perfect a security interest with respect
to any property placed in the Building or on the Leased Land pursuant to this
Section.
SECTION 5.10. TAXES, OTHER GOVERNMENTAL CHARGES AND UTILITY CHARGES.
The Issuer and the Lessee acknowledge that under present law no part of the fee
simple title in and to the Project owned by the Issuer will be subject to ad
valorem taxation by the State of Georgia or by any political or taxing
subdivision thereof, and that under present law the income and profits (if any)
of the Issuer from the Project are not subject to either Federal or Georgia
taxation. The Lessee shall pay, as the same become lawfully due and payable, (i)
all taxes and governmental charges of any kind whatsoever upon or with respect
to the interest held by the Lessee under this Lease, (ii) all taxes and
governmental charges of any kind whatsoever upon or with respect to the Project
or any machinery, equipment or related property installed or brought by the
Lessee therein or thereon (including, without limiting the generality of the
foregoing, any taxes levied upon or with respect to the income or profits of the
Issuer from the Project which, if not paid, will become a charge on the rents,
revenues and receipts from the Project prior to or on a parity with the lien
thereon and the pledge or assignment thereof created and made in the Indenture),
(iii) all utility and other charges incurred in the operation, maintenance, use,
occupancy and upkeep of the Project, and (iv) all assessments and charges
lawfully made by any governmental body for public improvements that may be
secured by a lien on the Project; provided, that with respect to special
assessments or other governmental charges that may lawfully be paid in
installments over a period of years, the Lessee shall be obligated to pay only
such installments as are required to be paid during the Lease Term.
The Lessee may, at its own expense and in its own name and behalf or in
the name and behalf of the Issuer, in good faith contest any such taxes,
assessments and other charges and, in the event of any such contest, may permit
the taxes, assessments and other charges so contested to remain unpaid during
the period of such contest and any appeal therefrom unless the Issuer, the
Credit Issuer or the Trustee shall notify the Lessee that, in the opinion of
Independent Counsel, by nonpayment of any such items the lien and/or security
interest afforded by the Indenture as to any part of the Project or the rents,
revenues or receipts derived from the Project will be materially endangered or
the Project or any part thereof will be subject to loss or forfeiture, in which
event such taxes, assessments or charges shall be paid promptly. The Issuer
shall cooperate fully with the Lessee in any such contest. If the Lessee shall
fail to pay any of the foregoing items required by this Section to be paid by
the Lessee, the Issuer or the Trustee may (but shall be under no obligation to)
pay the same and any amounts so advanced therefor by the Issuer or the Trustee
shall become an additional obligation of the Lessee to the one making the
advancement, which amounts, together with interest thereon at the rate of ten
per centum (10%) per annum from the date thereof, the Lessee agrees to pay.
SECTION 5.11. COMPLIANCE WITH CREDIT AGREEMENT AND SECURITY DEED. The
Lessee hereby covenants and agrees that it will comply with all covenants and
obligations applicable to it in the Credit Agreement from time to time in effect
or, if the Credit Agreement is terminated prior to the termination of this
Agreement, the Lessee agrees to comply with all covenants and obligations
applicable to it in the Credit Agreement as in effect immediately prior to the
termination thereof until the termination of this Agreement and the payment of
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the Lessee's obligation hereunder. Issuer and Lessee covenant to comply with
their respective covenants and obligations in the Security Deed.
SECTION 5.12. INSPECTION OF PROJECT. The Issuer, the Trustee and their
duly authorized agents shall have the right at all reasonable times to enter
upon any part of the premises of the Lessee at which the Project is located and
examine and inspect the same as may be reasonably necessary for the purpose of
determining whether the Lessee is in compliance with its obligations under
Section 5.1 or in the event of failure of the Lessee to perform its obligations
under Section 5.1, and the Issuer, the Trustee and their duly authorized agents
shall also have the right at all reasonable times to examine the books and
records of the Lessee insofar as such books and records relate to the
acquisition, construction, installation and maintenance of the Project.
SECTION 5.13. PROJECT LIST. The Lessee shall maintain at the Project
site a list setting forth in reasonable detail all items constituting the
Project.
SECTION 5.14. NO WARRANTY OF CONDITION OR SUITABILITY BY ISSUER. The
Lessee recognizes that the Issuer does not deal in goods of the kind comprising
components of the Project or otherwise hold itself out as having knowledge or
skill peculiar to the practices or goods involved in the Project, and that the
Issuer is not one to whom such knowledge or skill may be attributed by its
employment of an agent or broker or other intermediary who by his occupation
holds himself out as having such knowledge or skill. The Lessee further
recognizes that since the components of the Project have been and are to be
designated and selected by the Lessee, THE ISSUER HAS NOT MADE AN INSPECTION OF
THE PROJECT OR OF ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION THEREOF, AND,
EXCEPT AS OTHERWISE PROVIDED HEREIN, THE ISSUER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED OR OTHERWISE, WITH RESPECT TO THE SAME OR TO
THE LOCATION, USE, DESCRIPTION, DESIGN, MERCHANTABILITY, FITNESS FOR USE FOR ANY
PARTICULAR PURPOSE, CONDITION OR DURABILITY THEREOF, TO THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, IT BEING AGREED THAT ALL RISKS INCIDENT THERETO
ARE TO BE BORNE BY THE LESSEE. IN THE EVENT OF ANY DEFECT OR DEFICIENCY OF ANY
NATURE IN THE PROJECT OR ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION
THEREOF, WHETHER PATENT OR LATENT, THE ISSUER SHALL HAVE NO RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION HAVE BEEN
NEGOTIATED AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY
WARRANTIES OR REPRESENTATIONS BY THE ISSUER, EXPRESS OR IMPLIED (TO THE EXTENT
PERMITTED BY APPLICABLE LAW), WITH RESPECT TO THE PROJECT OR ANY FIXTURE OR
OTHER ITEM CONSTITUTING A PORTION THEREOF, WHETHER ARISING PURSUANT TO THE
U.C.C. OR ANOTHER LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE.
SECTION 5.15. SPECIAL COVENANTS RELATED TO AD VALOREM TAXATION.
(a) The Issuer and the Lessee understand that the Project costs will
total at least $11,000,000 and that the Project will consist of a manufacturing
facility.
(b) The parties acknowledge that the Lessee's leasehold interest in the
Project is subject to taxation pursuant to the principles enunciated by W. C.
Harris, et al. v. Douglas County Board of Tax Assessors, 240 Ga. 277; 282 S.E.2d
880 (1981) (the "Harris Case"). The parties further agree that, pursuant to the
Harris Case, the fair market value of the Lessee's leasehold interests in the
Project for real property and for equipment shall be determined by the formula
set forth in the Harris Case. The valuation of the Lessee's leasehold interests
as specified in Exhibit A will be returned for ad valorem taxation at forty
percent (40%) of the fair market value (the "assessed value") and the ad valorem
tax payable by the Lessee shall be the product of such assessed value multiplied
by the Douglas County millage rate for the applicable tax year.
The property of which the Project is a part will be valued in
accordance with the usual procedures and as if the Project were not included
therein.
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(c) The Lessor and the Issuer acknowledge that taxes payable by Lessee
on its leasehold interest takes into account the terms of this Agreement and the
fair market value of similar leasehold interests in similar property and the
prevailing rents charged in the geographic area of the Project.
(d) At the end of the Lease Term with respect to the Project as
determined by application of paragraphs (b) and (c) and assuming that Payment in
Full of the Bonds has been made, the Issuer shall, for a consideration of $10.00
to be paid by the Lessee, convey the Project to the Lessee and thereafter. The
Lessee shall own the Project and shall pay ad valorem taxes in each year in an
amount required through the standard assessment procedures of the aforementioned
Board of Tax Assessors, said Project to be valued at its fee simple value upon
termination of this Agreement.
(e) The Issuer agrees that if the Tax Commissioner bills the Issuer it
will invoice the Lessee for the amount of ad valorem taxes relating to Lessee's
interests in the Project in the amounts Lessee has agreed to pay, as described
above and the Lessee will pay such amounts directly to the Issuer as a portion
of its Additional Rent owing hereunder, for transmittal by the Issuer to the Tax
Commissioner of Douglas County, as required by law. In the event that in any
year the Board of Tax Assessors values the Lessee's leasehold interest in the
Project in a manner which causes the taxes payable on such leasehold interest to
exceed the amounts the parties agree are payable by Lessee, the Lessee shall
have the right to appeal on behalf of the Issuer or in the Issuer's name, place
and stead.
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ARTICLE VI.
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT DEFINED. The following shall be "events
of default" hereunder and the term "event of default" shall mean, whenever it is
used herein, any one or more of the following events:
(a) failure by the Lessee to make any rental payment required to be
made under Section 4.2(a) when the same becomes due and payable.
(b) failure by the Lessee to observe or perform any agreement
hereunder or on its part to be observed or performed, other than
as referred to in subsection (a) or (b) of this Section, for a
period of thirty (30) days after written notice, specifying such
failure and requesting that it be remedied, given to the Lessee
and to the Credit Issuer by the Issuer or the Trustee, unless the
Issuer and the Trustee shall agree in writing to an extension of
such time prior to its expiration; provided, however, if the
failure stated in the notice cannot be corrected within the
applicable period, the Issuer and the Trustee will not
unreasonably withhold their consent to an extension of such time
if it is possible to correct such failure and corrective action
is instituted by the Lessee or the Credit Issuer within the
applicable period and diligently pursued until the failure is
corrected; or in the case of any such default which can be cured
with due diligence but not within such thirty-day period, the
Lessee's or Credit Issuer's failure to proceed promptly to cure
such default and thereafter prosecute the curing of such default
with due diligence;
(c) any representation by or on behalf of the Lessee contained in
this Agreement or in any instrument furnished in compliance with
or in reference to this Agreement, the Indenture or the Credit
Agreement proves false or misleading in any material respect as
of the date of the making or furnishing thereof; and
(d) an "event of default" occurs and is continuing under the Indenture.
The Lessee and the Issuer hereby authorize the Credit Issuer to do any
and all things necessary to correct any default described in paragraph (c) above
on behalf of the Lessee.
The foregoing provisions of subsection (c) of this Section are subject
to the following limitations: If by reason of force majeure, the Lessee is
unable in whole or in part to carry out the agreements on its part therein
referred to, the failure to perform such agreements due to such inability shall
not constitute an event of default nor shall it become an event of default upon
appropriate notification to the Issuer or the passage of the stated period of
time. The term "force majeure" as used herein shall mean, without limitation,
the following: acts of God; strikes, lockouts or other industrial disturbances;
acts of public enemies; orders of any kind of the government of the United
States of America or of the State or any of their departments, agencies,
political subdivisions or officials, or any civil or military authority;
insurrections; riots; epidemics; landslides; lightning; earthquakes; fires;
hurricanes; tornadoes; storms; floods; washouts; droughts; arrests; restraint of
government and people; civil disturbances; explosions; breakage or accident to
machinery, transmission pipes or canals; partial or entire failure of utilities;
or any other cause or event not reasonably within the control of the Lessee. The
Lessee agrees, however, to remedy with all reasonable dispatch the cause or
causes preventing the Lessee from carrying out its agreements; provided, that
the settlement of strikes, lockouts and other industrial disturbances shall be
entirely within the discretion of the Lessee, and the Lessee shall not be
required to make settlement of strikes, lockouts and other industrial
disturbances by acceding to the demands of the opposing party or parties when
such course is, in the judgment of the Lessee, unfavorable to the Lessee.
SECTION 6.2. REMEDIES. Whenever an event of default shall have happened
and be continuing, the Trustee, as the assignee and pledgee of the Issuer under
the Indenture, shall take any one or more of the following remedial steps:
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(a) In the event the Trustee has accelerated payment of the Bonds
pursuant to the Indenture, without terminating this Lease and
without retaking possession of the Project, the Trustee may at
its option, demand immediate payment of all Lease Payments due
and payable pursuant to Section 4.2 and all Additional Rent due
and payable pursuant to Section 4.4. The Lessee acknowledges and
agrees that upon any such acceleration of the Bonds, the Lease
Payments and the Additional Rent due and payable pursuant hereto
shall consist of (i) the aggregate principal amount of the
outstanding Bonds, (ii) all accrued and unpaid interest on the
Bonds to the date of payment of the principal of the outstanding
Bonds (but not any interest that would have accrued on the Bonds
for the remainder of the Lease term if the Bonds had remained
outstanding) and (iii) all other amounts then due and payable to
the Issuer or the Trustee pursuant to Section 4.4, including fees
of Counsel actually incurred. The Lessee and the Trustee
acknowledge and agree that the foregoing payments constitute an
advance payment of rent, and not liquidated damages or a penalty,
and that such payments have been discounted to present value by
virtue of the exclusion from the calculation thereof of the
rental payments for the remainder of the Lease term corresponding
to the interest that would have accrued on the Bonds for the
remainder of the Lease term if the Bonds remained outstanding.
The Lessee shall receive as a credit against such Lease Payments
and Additional Rent all payments made by the Credit Issuer
pursuant to the Credit Facility and all other amounts described
in Section 3.08(a) of the Indenture. The Trustee shall have no
right to exercise the remedy provided herein if the Trustee
terminates this Lease or the Trustee retakes possession of the
Project. Upon payment of all such amounts, the Lessee shall have
no further rental obligations under this Lease and the payment of
such amounts shall constitute Payment in Full of the Bonds for
purposes of this Lease.
(b) Subject to the provisions of Section 6.5 hereof, the Trustee may
take whatever action at law or in equity may appear necessary or
desirable to collect any sums then due and thereafter to become
due hereunder or to enforce performance and the observance of any
agreement of the Lessee hereunder.
(c) The Trustee may exercise any remedies provided under the Indenture.
Any amounts collected pursuant to action taken under this Section shall be paid
into the Bond Fund and applied in accordance with the provisions of the
Indenture and after Payment in Full of the Bonds and the payment of any costs
occasioned by an event of default hereunder, any excess moneys in the Bond Fund
shall be returned to the Lessee.
The Lessee hereby authorizes the Trustee to draw moneys under the
Credit Facility in accordance with the Indenture upon a declaration of
acceleration of payment of the Bonds in an amount equal to (i) the aggregate
principal amount of all outstanding Bonds and (ii) all interest on the Bonds due
and to become due to the date of payment. The obligation of the Lessee to make
accelerated payment of all rental payments required to be made by the Lessee
pursuant to Section 4.2 upon a declaration of acceleration of payment of the
Bonds shall be deemed satisfied and discharged by a corresponding drawing and
payment under the Credit Facility.
SECTION 6.3. NO REMEDY EXCLUSIVE. Subject to the provisions of Section
6.5, no remedy herein conferred upon or reserved to the Trustee is intended to
be exclusive of any other remedy, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy hereunder or now or
hereafter existing at law, in equity or by statute. No delay or omission to
exercise any right or power accruing upon the occurrence of any event of default
shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right or power may be exercised from time to time and as
often as may be deemed expedient. The Trustee and the holders of the Bonds,
subject to the provisions of the Indenture, shall be entitled to the benefit of
all agreements herein contained.
SECTION 6.4. AGREEMENT TO PAY COUNSEL FEES AND EXPENSES. If there
should occur a default or an event of default hereunder and the Trustee or the
Issuer should employ Counsel or incur other expenses for the collection of sums
due hereunder or the enforcement of performance or observance of any agreement
on the part of the Lessee herein contained, the Lessee agrees that it will on
demand therefor pay to the Trustee or the Issuer the reasonable fees and
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expenses of such Counsel actually incurred and billed and such other expenses so
incurred by the Trustee or the Issuer.
If the Lessee should fail to make any payments required in this
Section, such item shall continue as an obligation of the Lessee until the same
shall have been paid in full, with interest thereon from the date such payment
was due at the rate per annum borne by the Bonds until paid in full.
SECTION 6.5. WAIVER OF EVENTS OF DEFAULT AND RESCISSION OF
ACCELERATION. If, in compliance with the requirements of Section 6.06 of the
Indenture, the Trustee shall waive any event of default as therein defined with
the written consent of the Credit Issuer and its consequences or rescind any
declaration of acceleration of payments of the principal of and interest on the
Bonds, such waiver shall also waive any event of default hereunder and its
consequences and such rescission of a declaration of acceleration of the
principal of and interest on the Bonds shall also rescind any declaration of any
acceleration of all payments required to be made under Section 4.2. In case of
any such waiver or rescission, or in case any proceeding taken by the Trustee on
account of any such event of default shall have been discontinued or abandoned
or determined adversely, then and in every such case the Issuer, the Lessee, the
Trustee, the Credit Issuer and the holders of the Bonds shall be restored to
their former positions and rights hereunder, but no such waiver or rescission
shall extend to any subsequent or other event of default or impair any right
consequent thereon.
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ARTICLE VII.
PREPAYMENTS
SECTION 7.1. OPTIONAL PREPAYMENTS.
(a) The Lessee shall have, and is hereby granted, with the consent of
the Credit Issuer, if any, the option to prepay Lease Payments in whole,
together with interest thereon to the date of redemption of the Bonds, at any
time by taking, or causing the Issuer to take, the actions required by the
Indenture for the redemption of all Bonds then outstanding, upon the occurrence
of any of the events set forth in Section 2.18(b) of the Indenture.
(b) The Lessee shall have, and is hereby granted, with the consent of
the Credit Issuer, if any, the option to prepay all or any portion of the Lease
Payments, together with interest thereon to the date of redemption of the Bonds,
at any time permitted by Section 2.18(a) of the Indenture by taking, or causing
the Issuer to take, the actions required by the Indenture (i) to discharge the
lien thereof through the redemption, or provision for payment of redemption of
all Bonds then outstanding or (ii) to effect the redemption, or provision for
payment or redemption, of less than all Bonds then outstanding.
(c) To make a prepayment pursuant to this Section 7.1, the Lessee shall
give written notice, consented to by the Credit Issuer, if any, to the Issuer
and the Trustee which shall specify therein (i) the date of the intended
prepayment, which shall not be less than 45 days from the date any Bonds are to
be redeemed from such prepayment, and (ii) the principal amount to be prepaid
and the date or dates on which the prepayment is to occur. All such prepayments
shall be in the amount of the unpaid amount of the Lease Payments if made
pursuant to Section 7.1(a) or in the amount of an Authorized Denomination if
made pursuant to Section 7.1(b) and the Lessee shall furnish additional funds,
if necessary, to make such prepayments in such amounts. In addition, the Lessee
shall make such additional Lease Payments as shall be necessary to pay any
redemption premium on the Bonds in connection with such redemption.
SECTION 7.2. OPTIONAL PURCHASE OF BONDS. Subject to the terms of the
Indenture regarding the use of Eligible Funds, the Lessee may at any time, and
from time to time, furnish moneys to the Tender Agent accompanied by a notice
directing such moneys to be applied to the purchase of Bonds delivered for
purchase pursuant to terms thereof, which Bonds shall be delivered in accordance
with Section 2.08 of the Indenture. The Lessee shall deliver to the Remarketing
Agent and the Credit Issuer a copy of any such notice.
SECTION 7.3. RELATIVE PRIORITIES. The obligations of the Lessee in
Section 7.2 of this Article shall be and remain superior to the rights,
obligations and options of the Lessee in Section 7.1 of this Article.
SECTION 7.4. PREPAYMENT TO INCLUDE FEES AND EXPENSES. Any prepayment
under this Article shall also include any expenses of prepayment, as well as all
expenses and costs provided for herein.
SECTION 7.5. OBLIGATIONS AFTER PAYMENT AND TERMINATION OF AGREEMENT.
Anything contained herein to the contrary notwithstanding, the obligations of
the Lessee contained in 5.2 and 6.4 shall continue after Payment in Full of the
Bonds and termination of this Agreement.
SECTION 7.6. PURCHASE OF BONDS.
(a) In consideration of the issuance of the Bonds by the Issuer, but
for the benefit of the Holders, the Lessee has agreed, and does hereby covenant,
to cause the necessary arrangements to be made and to be thereafter continued
whereby the Holders from time to time may deliver, or may be required to deliver
Bonds for purchase and whereby such Bonds shall be so purchased. In furtherance
of the foregoing covenant of the Lessee, the Issuer, at the request of the
Lessee, has set forth in the Indenture the terms and conditions relating to the
delivery of Bonds by the Holders thereof for purchase, has set forth in the
Indenture the duties and responsibilities of the Tender Agent with respect to
the purchase of Bonds, and of the Remarketing Agent with respect to the
remarketing of Bonds and has therein provided for the appointment of the Tender
Agent and Remarketing Agent. The Lessee hereby authorizes and directs the Tender
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Agent and the Remarketing Agent to purchase, offer, sell and deliver Bonds in
accordance with the provisions of the Indenture.
Without limiting the generality of the foregoing covenant of the
Lessee, and in consideration of the Issuer's having set forth in the Bonds and
the Indenture the aforesaid provisions, the Lessee, covenants, for the benefit
of the Holders, to provide for arrangements to pay, or cause to be paid, such
amounts as shall be necessary to effect the payment of the Purchase Price of
Bonds delivered for purchase, all as more particularly described in the
Indenture.
(b) Notwithstanding the provisions of subsection (a) of this Section,
the obligations of the Lessee under subsection (a) of this Section with respect
to the purchase of Bonds shall be terminated on the date the Bonds begin to bear
interest at the Fixed Rate in accordance with the Indenture.
(c) In furtherance of the obligations of the Lessee under subsection
(a) of this Section, the Lessee shall provide for the payment of its obligations
under said subsection (a) by the delivery of the Original Credit Facility
simultaneously with the original delivery of the Bonds. In order to implement
such undertaking of the Lessee, the Issuer, at the direction of the Lessee, has
set forth in the Indenture the terms and conditions relating to drawings under
the Credit Facility to provide moneys for the purchase of Bonds. The Lessee
hereby authorizes and directs the Trustee to draw moneys under the Credit
Facility in accordance with the provisions of the Indenture to the extent
necessary to provide moneys payable under Section 2.07 of the Indenture if and
when due.
(d) The Issuer shall have no obligation or responsibility, financial or
otherwise, with respect to the purchase of Bonds or the making or continuation
of arrangements therefor other than as expressly set forth in subsection (a) of
this Section 7.7, except that the Issuer shall generally cooperate with the
Lessee, the Trustee and the Remarketing Agent as contemplated in Section 2.07 of
the Indenture.
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ARTICLE VIII.
OPTIONS IN FAVOR OF LESSEE; OBLIGATION OF LESSEE
SECTION 8.1. OPTIONS TO TERMINATE THE LEASE TERM; PURCHASE PROJECT. The
Lessee shall have the option to terminate the Lease Term at any time after
payment in full of the Bonds, in accordance with the provision of this Agreement
and the Indenture by giving the Issuer notice in writing of such termination and
such termination shall forthwith become effective. The Lessee shall have, and is
hereby granted the option to purchase the Project following the termination of
the Lease Term by paying the sum of $10.00 to the Issuer.
SECTION 8.2. CONVEYANCE ON PURCHASE. At the closing of the purchase
pursuant to Section 8.1 hereof or pursuant to the exercise of any option to
purchase granted herein, the Issuer will upon receipt of the purchase price
deliver to the Lessee the following:
(a) if the Indenture shall not at the time have been satisfied in
full, a release by the Trustee from the lien and/or security
interest of the Indenture in the property with respect to which
such purchase is being consummated;
(b) Limited Warranty Deed or other documents conveying to the Lessee
good and marketable fee simple title in and to the property
included in the Project with respect to which such purchase is
being consummated, as such property then exists, subject to the
following, (i) those liens, security interests and encumbrances
(if any) to which such title in and to said property was subject
when conveyed to the Issuer, (ii) those liens, security interests
and encumbrances created by the Lessee or to the creation or
suffering of which the Lessee consented other than the Security
Deed, (iii) those liens, security interests and encumbrances
resulting from the failure of the Lessee to perform or observe
any of the agreements on its part contained in this Agreement,
(iv) Permitted Liens other than the Indenture, and (v) the rights
and title of any condemning authority;
(c) assignment of licenses, permits, warranties, etc.; and
(d) customary owner's affidavit.
SECTION 8.3. OBLIGATION TO PURCHASE PROJECT. The Lessee hereby agrees
to purchase, and the Issuer hereby agrees to sell, the Project for ten dollars
($10.00) at the expiration or sooner termination of the Lease Term following
payment in full of the Bonds. The Issuer has delivered to the Trustee an
executed Limited Warranty Deed to be delivered to the Lessee upon the Lessee's
termination of this Agreement in accordance with this Article and Section 7.18
of the Indenture.
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ARTICLE IX.
RIGHTS OF CREDIT ISSUER
SECTION 9.1. RIGHTS OF CREDIT ISSUER.
(a) For purposes of this Section 9.1 "Lender" means the current holder
of the Security Deed.
(b) This Agreement and all rights of the Lessee hereunder are and shall
be subject and subordinate to the lien and security title of the Security Deed.
The Lessee recognizes and acknowledges the right of Lender to foreclose or
exercise the power of sale against the Project under the Security Deed.
(c) The Lessee shall, in confirmation of the subordination set forth in
Section 9.1(b) and notwithstanding the fact that such subordination is
self-operative, and no further instrument or subordination shall be necessary
upon demand, at any time or times, execute, acknowledge and deliver to the
Issuer or to Lender any and all instruments requested by either of them to
evidence such subordination.
(d) If requested by Lender, the Lessee shall, upon demand, at any time
or times, execute, acknowledge and deliver to Lender, any and all instruments
that may be necessary to make this Agreement superior to the lien of the
Security Deed.
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<PAGE>
ARTICLE X.
MISCELLANEOUS
SECTION 10.1. TERM OF AGREEMENT. Except as provided in Sections 5.2 and 6.4
and Article VIII, this Agreement shall terminate when Payment in Full of the
Bonds shall have been made.
SECTION 10.2. NOTICES. All notices, approvals, consents, requests and
other communications hereunder shall be in writing and shall be deemed to have
been given when delivered by hand or mailed by first class registered or
certified mail, return receipt requested, postage prepaid, and addressed as
follows or (unless specifically prohibited) when telexed or telecopies to the
telex or telecopy numbers as follows:
(1) If to the Issuer: Development Authority of Douglas County, Georgia
2145 Slater Mill Road
Douglasville, Georgia 30135
Telephone: (770) 942-5022
Telecopier: (770) 942-5876
Attention: Chairman
(2) If to the Lessee: Abrams Riverside, LLC
c/o Abrams Properties, Inc.
1945 The Exchange, Suite 400
Atlanta, Georgia 30339-2029
Telephone: (770) 953-1777
Telecopier: (770) 953-9922
Attention: Melinda S. Garrett
With a copy to: Holt Ney Zatcoff & Wasserman
100 Galleria Parkway, Suite 600
Atlanta, Georgia 30339
Telephone: (770) 956-9600
Telecopier: (770) 956-1490
Attention: Sanford H. Zatcoff, Esq.
(3) If to the Trustee: AmSouth Bank
1901 Sixth Avenue North - 7th Floor
Birmingham, Alabama 35203
Telephone: (205) 326-5381
Telecopier: (205) 581-7661
Attention: Corporate Trust Department
(4) If to the Remarketing
Agent: Merchant Capital, L.L.C.
250 Commerce Street
Montgomery, Alabama 36104
Telephone: (334) 834-5100
Telecopier (334) 269-0902
Attention: Municipal Syndicate
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(5) If to the Credit
Issuer: NationsBank, N.A.
Northwest Commercial Banking Center
Riverwood 100
3350 Riverwood Circle NW
Atlanta, Georgia 30339-3340
Telephone: (770) 850-8490
Telecopier: (770) 850-5496
Attention: Helen Cease
With a copy to: Alston & Bird
1201 West Peachtree Street, 40th Floor
Atlanta, Georgia 30309
Telephone: (404) 881-7941
Telecopier: (404) 881-7777
Attention: Rosalind Drakeford, Esq.
A duplicate copy of each notice, approval, consent, request or other
communication given hereunder by the Issuer, the Lessee, the Trustee, the
Remarketing Agent or the Credit Issuer to any one of the others shall also be
given to all of the others. The Issuer, the Lessee, the Trustee and the Credit
Issuer may, by notice given hereunder, designate any further or different
addresses to which subsequent notices, approvals, consents, requests or other
communications shall be sent or persons to whose attention the same shall be
directed.
SECTION 10.3. BINDING EFFECT. This Agreement shall inure to the benefit
of and shall be binding upon the Issuer, the Lessee and their respective
successors and assigns.
SECTION 10.4. SEVERABILITY. If any provision hereof shall be held
invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision hereof.
SECTION 10.5. AMOUNTS REMAINING IN BOND FUND. It is agreed by the
parties hereto that any amounts remaining in the Bond Fund and Construction Fund
upon expiration or sooner termination of this Agreement, after Payment in Full
of the Bonds, payment of the fees, charges and expenses of the Trustee, the
Remarketing Agent and the Credit Issuer (including, without limitation, the fees
and expenses of their respective Counsel), and payment of all other amounts
required to be paid under the Indenture and under the Credit Agreement,
including payment of rebatable arbitrage, shall be paid immediately to the
Lessee by the Trustee.
SECTION 10.6. RELIANCE BY ISSUER. The Issuer shall have the right at
all times to act in reliance upon the authorization, representation or
certification of the Authorized Lessee Representative or the Trustee.
SECTION 10.7. ISSUER'S OBLIGATIONS LIMITED. Except for the interest of
the Issuer in the Trust Estate and as otherwise expressly herein provided, no
recourse under or upon any obligation or agreement contained in this Agreement
or in any Bond or under any judgment obtained against the Issuer, or by the
enforcement of any assessment or by any legal or equitable proceeding by virtue
of any constitution or statute or otherwise or under any circumstances, under or
independent of the Indenture, shall be had against the Issuer.
Anything in this Agreement to the contrary notwithstanding, it is
expressly understood and agreed by the parties hereto that (a) the Issuer may
rely conclusively on the truth and accuracy of any certificate, opinion, notice
or other instrument furnished to the Issuer by the Trustee or the Authorized
Representative as to the existence of any fact or state of affairs required
hereunder to be noticed by the Issuer; (b) the Issuer shall not be under any
obligation hereunder to perform any record-keeping or to provide any legal
services, it being understood that such services shall be performed either by
the Trustee or the Lessee; and (c) none of the provisions of this Agreement
shall require the Issuer to expend or risk its own funds or to otherwise incur
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers hereunder, unless it shall first have been
adequately indemnified to its satisfaction against the cost, expenses and
liability which may be incurred thereby.
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Notwithstanding anything herein contained to the contrary, any
obligation which the Issuer may incur under this Agreement or under any
instrument executed in connection herewith which shall entail the expenditure of
money shall not be a general obligation of the Issuer but shall be a limited
obligation payable solely from the Pledged Revenues.
SECTION 10.8. IMMUNITY OF DIRECTORS, OFFICERS AND EMPLOYEES OF ISSUER.
No recourse shall be had for the enforcement of any obligation, promise or
agreement of the Issuer contained in the Indenture, this Agreement or in any
Bond issued under the Indenture for any claim based thereon or otherwise in
respect thereof, against any director, officer, employee or agent, as such, in
his individual capacity, past, present or future, of the Issuer or of any
successor corporation, either directly or through the Issuer or any successor
corporation, whether by virtue of any constitutional provision, statute or rule
of law, or by the enforcement of any assignment or penalty or otherwise; it
being expressly agreed and understood that the Bonds, the Indenture and this
Agreement are solely corporate obligations, and that no personal liability
whatsoever shall attach to, or be incurred by, any director, officer, employee
or agent, as such, past, present or future, of the Issuer or of any successor
corporation, either directly or through the Issuer or any successor corporation,
under or by reason of any of the obligations, promises or agreements entered
into between the Issuer and the Lessee whether contained in this Agreement or to
be implied therefrom as being supplemental hereto or thereto, and that all
personal liability of that character against every such director, officer,
employee or agent is, by the execution of this Agreement and the Indenture, and
as a condition of, and as part of the consideration for, the execution of this
Agreement and the Indenture, expressly waived and released.
SECTION 10.9. PAYMENTS BY CREDIT ISSUER. The Credit Issuer shall, to
the extent of any payments made by it pursuant to the Credit Facility, be
subrogated to all rights of the Issuer or its assigns (including, without
limitation, the Trustee) as to all obligations of the Lessee with respect to
which such payments shall be made by the Credit Issuer, but, so long as any of
the Bonds remain outstanding under the terms of the Indenture, such right of
subrogation on the part of the Credit Issuer shall be in all respects
subordinate to all rights and claims of the Issuer for all payments which are
then due and payable under the Indenture or otherwise arising under this
Agreement, the Indenture or the Bonds. The Trustee will, upon request, execute
and deliver any instrument reasonably requested by the Credit Issuer to evidence
such subrogation and the Trustee shall assign to the Credit Issuer its rights in
any obligations of the Lessee with respect to which payment of the entire
principal balance and accrued interest thereon shall be made by the Credit
Issuer.
SECTION 10.10. AMENDMENTS, CHANGES AND MODIFICATIONS. Except as
otherwise provided herein or in the Indenture, subsequent to the date of
issuance and delivery of the Bonds and prior to their payment in full, this
Agreement may not be effectively amended or terminated without the written
consent of the Issuer, the Lessee and the Credit Issuer.
SECTION 10.11. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
SECTION 10.12. CAPTIONS. The captions and headings herein are for
convenience only and in no way define, limit or describe the scope or intent of
any provisions hereof.
SECTION 10.13. AMENDMENT OF AGREEMENT. This Agreement may be modified,
altered, amended or supplemented in accordance with the Indenture in order to
obtain a rating of the Bonds by the Rating Agency.
SECTION 10.14. LAW GOVERNING CONSTRUCTION OF AGREEMENT. This Agreement
shall be governed by, and construed and enforced in accordance with, the laws of
the State.
SECTION 10.15. RELATIONSHIP OF PARTIES; ESTATE FOR YEARS. This
Agreement shall create the relationship of lessor and lessee between Issuer and
Lessee and this Agreement grants to Lessee an estate for years in the Project
and not a usufruct. This Agreement shall not be deemed to create or constitute a
partnership or joint venture between Issuer and Lessee or a loan or other
financing arrangement.
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IN WITNESS WHEREOF, the Issuer and the Lessee have caused this
Agreement to be executed in their respective corporate names and their
respective corporate seals to be affixed hereto and attested by their authorized
officers, all as of the day and year first above written.
DEVELOPMENT AUTHORITY OF DOUGLAS
COUNTY, GEORGIA
By: /s/ Carl Battles
Chairman
(SEAL)
Attest: /s/ Michael Ghif
Assistant Secretary
Signed, sealed and delivered in presence of:
/s/ Susan E. Selby
Unofficial Witness
/s/ Barbara M. Williams
Notary Public
My commission expires:________________
(NOTARIAL SEAL)
<PAGE>
AMSOUTH BANK
Acknowledges receipt of the foregoing Lease
Agreement
By: /s/ Charles Northen
Title: Vice President
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<PAGE>
ABRAMS RIVERSIDE, LLC,
a Georgia limited liability company
By: Abrams Properties, Inc.,
Sole Member
By: /s/ Alan R. Abrams
President
Attest:
/s/ Melinda S. Garrett
Assistant Secretary
Signed, sealed and delivered in presence of:
______________________________
Unofficial Witness
Notary Public
/s/ Katz Roper Davis
My commission expires:
(NOTARIAL SEAL)
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EXHIBIT A DESCRIPTION OF PROJECT
EXHIBIT A-1 LEASED LAND
EXHIBIT A-2 LEASED EQUIPMENT
EXHIBIT A-3 PERMITTED EXCEPTIONS
EXHIBIT B CONSTRUCTION FUND CERTIFICATE AND REQUISITION
EXHIBIT C CERTIFICATE OF COMPLETION
EXHIBIT D LIMITED WARRANTY DEED
================================================================
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
by and between
ABRAMS RIVERSIDE, LLC
and
NATIONSBANK, N.A.
Dated as of November 1, 1997
================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Article Definitions........................................................................ 1
Section 1.1 Definitions........................................................................ 1
Section 1.2 General............................................................................ 9
Article 2. Amount and Terms of the Letter of Credit........................................... 10
Section 2.1 Issuance of the Letter of Credit................................................... 10
Section 2.2 Reimbursement Obligation........................................................... 10
Section 2.3 Letter of Credit Commission........................................................ 10
Section 2.4 Payments and Computations.......................................................... 11
Section 2.5 Obligations Absolute............................................................... 12
Section 2.6 Commercial Practices............................................................... 12
Section 2.7 Increased Costs.................................................................... 13
Section 2.8 Payments Net of Taxes, Etc......................................................... 13
Section 2.9 AGREEMENT REGARDING INTEREST AND CHARGES........................................... 14
Section 2.10 Evidence of Obligations............................................................ 14
Section 2.11 Extension of Stated Expiration Date................................................ 15
Section 2.12 Alternate Letter of Credit......................................................... 15
Section 2.13 Remarketing........................................................................ 15
Article 3. Conditions of Issuance............................................................. 16
Section 3.1 Condition Precedent to Issuance of the Letter of Credit............................ 16
Section 3.2 Additional Conditions Precedent to Issuance of the Letter of Credit................ 22
<PAGE>
Section 3.3 Covenant to Deliver................................................................ 22
Section 3.4 Conditions Precedent to Approval of Requisitions and Related Matters............... 23
Article 4. Representations and Warranties..................................................... 28
Section 4.1 Representations and Warranties of the Company...................................... 28
Section 4.2 Survival of Representations and Warranties........................................ 32
Article 5. Affirmative Covenants.............................................................. 32
Section 5.1 Preservation of Existence and Similar Matters...................................... 32
Section 5.2 Compliance with Applicable Law..................................................... 32
Section 5.3 Maintenance of Property............................................................ 32
Section 5.4 Conduct of Business................................................................ 32
Section 5.5 Insurance.......................................................................... 33
Section 5.6 Payment of Taxes and Claims........................................................ 33
Section 5.7 Accounting Methods and Financial Records........................................... 33
Section 5.8 Visits and Inspections............................................................. 33
Section 5.9 Remarketing Agent, Underwriter and Trustee......................................... 33
Section 5.10 Environmental Law Compliance....................................................... 34
Section 5.11 Registration of Bonds.............................................................. 34
Section 5.12 Financial Covenants................................................................ 34
Article 6 Information........................................................................ 35
Section 6.1 Information........................................................................ 35
Article 7. Negative Covenants................................................................. 37
Section 7.1 Indebtedness for Borrowed Money.................................................... 37
Section 7.2 Guaranties......................................................................... 37
- 5 -
<PAGE>
Section 7.3 Investments........................................................................ 37
Section 7.4 Liens ............................................................................ 37
Section 7.5 Merger, Consolidation and Sale of Assets........................................... 37
Section 7.6 Transaction with Affiliates........................................................ 37
Section 7.7 Plans ................................................................................38
Section 7.8 Loans.................................................................................38
Section 7.9 Change of Name; Change of Address of
Chief Executive Office or Principal Place
of Business in Georgia............................................................. 38
Section 7.10 Judgment........................................................................... 38
Section 7.11 Attachment......................................................................... 38
Article 8. Default............................................................................ 38
Section 8.1 Events of Default.................................................................. 38
Section 8.2 Remedies........................................................................... 40
Section 8.3 Additional Rights.................................................................. 41
Section 8.4 Cash Collateral Account............................................................ 41
Article 9. Miscellaneous...................................................................... 43
Section 9.1 Notices............................................................................ 43
Section 9.2 Fees and Expenses.................................................................. 44
Section 9.3 Litigation......................................................................... 45
Section 9.4 Right of Set Off................................................................... 46
Section 9.5 Indemnification.................................................................... 47
Section 9.6 Amendments......................................................................... 48
Section 9.7 Survival........................................................................... 48
Section 9.8 Titles and Captions................................................................ 48
Section 9.9 Severability of Provisions......................................................... 48
-6-
<PAGE>
Section 9.10 GOVERNING LAW...................................................................... 49
Section 9.11 Assignment......................................................................... 49
Section 9.12 Participations..................................................................... 49
Section 9.13 Further Assurances................................................................. 49
Section 9.14 Counterparts....................................................................... 49
Section 9.15 ENTIRE AGREEMENT................................................................... 50
</TABLE>
EXHIBIT A Form of Letter of Credit
EXHIBIT B Form of Pledge Agreement
EXHIBIT C Form of Extension Request
EXHIBIT D Form of Opinion of Counsel
EXHIBIT E Development Cost Breakdown
EXHIBIT F Amortization Schedule
- 7 -
<PAGE>
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of November 1,
1997, by and between ABRAMS RIVERSIDE, LLC, a Georgia limited liability company
(the "Company"), and NATIONSBANK, N.A. (the "Bank").
WHEREAS, the Development Authority of Douglas County (the "Issuer") is
to issue $11,000,000 in aggregate principal amount of its Taxable Industrial
Development Revenue Bonds (Abrams Riverside, LLC Project), Series 1997, (the
"Bonds"), pursuant to a Trust Indenture, dated as of November 1, 1997 (the
"Indenture"), by and between the Issuer and AmSouth Bank, as trustee (the
"Trustee"), for the purpose of financing the acquisition, construction and
equipping of a facility for the manufacturing of store fixtures, bank fixtures
and display units for retail outlets, to be owned by the Company and to be
leased to and operated by Abrams Fixture Corporation, a corporation organized
under the laws of the State of Georgia;
WHEREAS, pursuant to the terms of a Lease Agreement, dated as of
November 1, 1997 (the "Agreement"), by and between the Issuer and the Company,
the Issuer has leased the Project to the Company and has agreed to allow the
Company to use the proceeds received by the Issuer from the issuance of the
Bonds to finance the Project and the Company has agreed to pay amounts under the
Agreement to the Issuer at such times and in such amounts as necessary to
provide for the payment of the principal of, premium (if any) and interest on,
and the purchase price of, the Bonds when due;
WHEREAS, in order to fulfill the requirements of the Indenture, the
Company has requested that the Bank issue an irrevocable, direct-pay letter of
credit for the benefit of the Trustee and for the account of the Company, to
provide a credit facility for payment of the principal of and interest on the
Bonds on the scheduled due dates and upon redemption or acceleration and upon
tender for purchase; and
WHEREAS, the obligations of the Company under this Reimbursement
Agreement and the other Related Documents shall be secured by the guaranties
(the "Affiliate Guaranties") of Abrams Industries, Inc. ("Abrams Industries")
and Abrams Properties, Inc. ("Abrams Properties"), corporations organized under
the laws of the State of Georgia sometimes referred to hereinafter,
individually, as an "Affiliate Guarantor" and, collectively, as the "Affiliate
Guarantors"), and the grant of a Lien in the other Collateral.
NOW, THEREFORE, in consideration of the premises, in order to induce
the Bank to issue such letter of credit and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS.
Section 1.1. Definitions.
-----------
For the purposes of this Reimbursement Agreement, the following terms
have the following meanings:
<PAGE>
"Acquisition," as applied to any Business Unit or Investment, means the
-----------
acquiring or acquisition of a controlling interest in such Business Unit or
Investment by purchase, exchange, issuance of stock or other securities, or by
merger, reorganization or any other method.
"Affiliate" means, with respect to any Person, any entity which
---------
directly or indirectly controls, is controlled by, or is under common control
with, such Person or any Subsidiary of such Person or any Person who is a
director, officer or partner of such Person or any Subsidiary of such Person.
For purposes of this definition, "control" means the possession, directly or
indirectly, of the power to (a) vote ten percent (10%) or more of the securities
having ordinary voting power for the election of directors of such Person or (b)
direct or cause the direction of management and policies of a business, whether
through the ownership of voting securities, by contract or otherwise and either
alone or in conjunction with others or any group.
"Affiliate Guaranties" means the Guaranties of Abrams Industries, Inc.
--------------------
and Abrams Properties, Inc. guaranteeing the obligations of the Company
hereunder.
"Affiliate Guarantors" means Abrams Industries, Inc. and Abrams
---------------------
Properties, Inc. who shall execute and deliver their respective Affiliate
Guaranties guaranteeing the obligations of the Company hereunder.
"Agreement" means the Lease Agreement, dated as of November 1, 1997,
---------
by and between the Issuer and the Company.
"Applicable Law" means all applicable provisions of constitutions,
---------------
statutes, rules, regulations and orders of all governmental bodies and all
orders and decrees of all courts and arbitrators.
"Bank" means NationsBank, N.A.
----
"Bond Purchase Agreement" means the Bond Purchase Agreement, dated as
-----------------------
of November 12, 1997, by and among the Company, the Issuer and the Underwriter.
"Bond Purchasers" means the purchasers of the Bonds.
---------------
"Bonds" has the meaning given that term in the Indenture.
-----
"Business Day" means any Monday, Tuesday, Wednesday, Thursday or Friday
------------
on which each of the Bank, the Trustee and the Remarketing Agent is open for
business; provided, that for purposes of counting the number of Business Days
prior to a given day, "Business Day" means any Monday, Tuesday, Wednesday,
Thursday or Friday on which each of the Bank, the Trustee and the Remarketing
Agent is scheduled to be open for business regardless of whether each such
entity is in fact open for business on such day.
-2-
<PAGE>
"Business Unit" means the assets constituting the business or a
--------------
division or operating unit thereof of any Person.
"Capitalized Lease Obligation" means Indebtedness represented by
------------------------------
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles,
and the amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with such principles.
"Cash Collateral Account" means a special non-interest-bearing cash
-------------------------
collateral account maintained with the Bank, in the name of the Company (as cash
collateral account) but under the sole dominion and exclusive control of the
Bank, subject to the provisions of Section 8.4 hereof.
"Closing Date" means November 12, 1997.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collateral" means any real or personal property in which the Company
----------
or any other Person has granted a Lien as security for any of the Obligations,
including, without limitation, Collateral Securities, Pledged Collateral (as
defined in the Pledge Agreement), the Land, Improvements, Personal Property and
other items set forth in the Deed to Secure Debt and the Trust Estate.
"Collateral Security" has the meaning given that term in Section 8.4.
-------------------
(a).
"Company" has the meaning given that term in the introductory paragraph
-------
of this Reimbursement Agreement.
"Deed to Secure Debt" shall mean that certain Deed to Secure Debt,
--------------------
Security Agreement and Assignment of Leases, dated as of November 1, 1997,
executed by the Company in favor of the Bank.
"Default" means the occurrence of any event or occurrence described in
-------
Section 8.1. hereof which, with the giving of notice or the passage of time or
both, would constitute an Event of Default.
"Default Rate" means a per annum rate equal to the Prime Rate plus one
-------------
percent (1.0%).
"Eligible Securities" means (i) United States Treasury bills with a
--------------------
remaining maturity not in excess of 90 days, (ii) negotiable certificates of
deposit of the Bank or of other prime United States commercial banks with a
remaining maturity not in excess of 90 days and (iii) such other instruments
-3-
<PAGE>
(within the meaning of Article 9 of the Uniform Commercial Code) as the Company
may request and the Bank may approve in writing.
"Environmental Laws" means any federal, state or local laws, rules or
-------------------
ordinances relating to environmental protection, including without limitation,
the following: Clean Air Act, 42 U.S.C. Sections 7401, ET SEQ.; Federal Water
Pollution Control Act, 33 U.S.C. Sections 1251, ET SEQ.; Solid Waste Disposal
Act, 42 U.S.C. Sections 6901, ET SEQ.; Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601, ET SEQ.; National
Environmental Policy Act, 42 U.S.C. Sections 4321, ET SEQ.; regulations of the
Environmental Protection Agency and any applicable rule of common law and any
judicial interpretation thereof relating primarily to the environment or
Hazardous Materials.
"Event of Default" means the occurrence of any of the events specified
----------------
in Section 8.1., provided that any requirement for notice or lapse of time or
any other condition has been satisfied.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
in effect from time to time.
"Governmental Approvals" means all authorizations, consents, approvals,
----------------------
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any national, state or local government
-----------------------
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, bureau or entity (including, without limitation, the
Federal Deposit Insurance Corporation, the Comptroller of the Currency or the
Federal Reserve Board, any central bank or any comparable authority) or any
arbitrator with authority to bind a party at law.
"Guaranty," "Guaranties," "Guaranteed" or to "Guarantee" as applied to
--------- ----------- ---------- ---------
any obligation means and includes:
(a) a guaranty (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), directly or indirectly, in any
manner, of any part or all of such obligation; or
(b) an agreement, direct or indirect, contingent or otherwise, and
whether or not constituting a guaranty, the practical effect of which is to
assure the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation whether by
(i) the purchase of securities or obligations,
-4-
<PAGE>
(ii) the purchase, sale or lease (as lessee or lessor) of
property or the purchase or sale of services primarily for the purpose
of enabling the obligor with respect to such obligation to make any
payment or performance (or payment of damages in the event of
nonperformance) of or on account of any part or all of such obligation,
or to assure the owner of such obligation against loss,
(iii) the supplying of funds to or in any other manner
investing in the obligor with respect to such obligation,
(iv) repayment of amounts drawn down by beneficiaries of
letters of credit, or
(v) the supplying of funds to or investing in a Person on
account of all or any part of such Person's obligation under a Guaranty
of any obligation or indemnifying or holding harmless, in any way, such
Person against any part or all of such obligation.
"Hazardous Materials" means and includes, without limitation, (a)
--------------------
hazardous waste as defined in the Resource Conservation and Recovery Act of
1976, or in any other applicable Environmental Laws, (b) hazardous substances,
as defined in the Comprehensive Environmental Response, Compensation and
Liability Act, or in any other applicable Environmental Laws, (c) gasoline, or
any other petroleum product or by-product, (d) toxic substances, as defined in
the Toxic Substances Control Act of 1976, or in any other applicable
Environmental Laws, (e) insecticides, fungicides, or rodenticides, as defined in
the Federal Insecticide, Fungicide, and Rodenticide Act of 1975, or in any other
applicable Environmental Laws, or (f) any hazardous waste, hazardous substances,
hazardous materials, toxic substances or toxic pollutants, as those terms are
used or defined in the Hazardous Materials Transportation Act, the Clean Air Act
or the Clean Water Act, as each such Act, statute or regulation may be amended
from time to time.
"Improvements" means any improvements presently, or hereafter to be
------------
constructed, on the Land, as more fully described in the Deed to Secure Debt.
"Indebtedness" means and includes, with respect to any Person, all
------------
items of indebtedness which, in accordance with generally accepted accounting
principles would be included in the determination of liabilities as shown on the
liability side of the balance sheet of such Person as of the date on which
Indebtedness is to be determined.
"Indenture" means the Trust Indenture, dated as of November 1, 1997, by
---------
and between the Issuer and the Trustee.
"Investment" means, with respect to any Person: (a) any share of
----------
capital stock, evidence of Indebtedness or other security issued by any other
Person; (b) any loan, advance or extension of credit to, or contribution to the
capital of, any other Person; (c) any Guaranty of the obligation of any other
Person; (d) any other investment (other than the Acquisition of a Business Unit)
-5-
<PAGE>
in any other Person (excluding financial instruments utilized solely for cash
management) and (e) any commitment or option to make an Investment in any other
Person.
"Land" means the property to be developed with the proceeds of the
----
Bonds, as more fully described in the Deed to Secure Debt.
"Letter of Credit" means the irrevocable, direct-pay Letter of Credit,
----------------
dated November 12, 1997, issued by the Bank for the benefit of the Trustee and
for the account of the Company, in substantially the form of Exhibit A attached
to this Reimbursement Agreement.
"Lien" as applied to the property of any Person means: (a) any
----
mortgage, deed to secure debt, deed of trust, pledge, lien, charge or lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest, security title or encumbrance
of any kind in respect of any property of such Person, or upon the income or
profits therefrom; (b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to the payment of the general, unsecured
creditors of such Person; and (c) the filing of, or any agreement to give, any
financing statement under the Uniform Commercial Code or its equivalent in any
jurisdiction.
"Material Adverse Effect," with respect to the Company, means (i) a
-------------------------
material adverse effect on the business, operations, properties, prospects,
profits or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, (ii) the incurrence of liabilities or
obligations of the Company and its Subsidiaries (other than current liabilities
incurred in the ordinary course of business and Indebtedness incurred in
accordance with the provisions of this Reimbursement Agreement), (iii) an
impairment of the ability of the Company to perform its obligations under this
Reimbursement Agreement or (iv) an impairment of the ability of the Bank to
enforce such obligations.
"Money Borrowed" means, as applied to the Indebtedness of a Person: (a)
--------------
Indebtedness for money borrowed; (b) Indebtedness, whether or not in any such
case the same was for money borrowed, but other than trade debt of such Person
incurred in the ordinary course of business (i) represented by notes payable,
and drafts accepted, that represent extensions of credit, (ii) constituting
obligations evidenced by bonds, debentures, notes or similar instruments, or
(iii) upon which interest charges are customarily paid or that was issued or
assumed as full or partial payment for property; or (c) Indebtedness that
constitutes a Capitalized Lease Obligation.
"Multiemployer Plan" has the meaning given that term in Section
-------------------
4001(a)(3) of ERISA, as amended or revised from time to time.
-6-
<PAGE>
"Obligations" means and includes, with respect to the Company, all
-----------
loans, advances, debts, liabilities, and obligations, howsoever arising, owed by
the Company to the Bank in any capacity of every kind and description (whether
or not evidenced by any note or instrument and whether or not for the payment of
money), direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising pursuant to the terms of this Reimbursement
Agreement or any of the Related Documents, including without limitation, (a) any
obligation of the Company to repay the Bank for any drawing under the Letter of
Credit and (b) all interest, fees, charges, expenses, attorneys' fees and
accountants' fees chargeable to the Company in connection with its dealings with
the Bank and payable by the Company hereunder or thereunder.
"Official Statement" means that certain Official Statement, dated
-------------------
November 12, 1997, relating to the Bonds.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
----
agency.
"Permitted Liens" means, as to any Person or such Person's property:
----------------
(a) inchoate Liens securing taxes, assessments and other charges or levies
imposed by any Governmental Authority (excluding any Lien imposed pursuant to
any of the provisions of ERISA) or the claims of materialmen, mechanics,
carriers, warehousemen or landlords for labor, materials, supplies or rentals
incurred in the ordinary course of business; (b) Liens consisting of deposits or
pledges made, in the ordinary course of business, in connection with, or to
secure payment of, obligations under workmen's compensation, unemployment
insurance or similar Applicable Laws; (c) Liens consisting of encumbrances in
the nature of zoning restrictions, easements, and rights or restrictions of
record on the use of real property, which do not materially detract from the
value of such property or impair the use thereof in the business of such Person;
and (d) Liens in favor of the Bank.
"Person" means an individual, corporation, partnership, association,
------
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"Personal Property" means, generally, the equipment to be purchased
------------------
with the proceeds of the Bonds, as more fully described in the Deed to Secure
Debt.
"Plan" means an "employee pension benefit plan" (as defined in Section
---- ------------------------------
3 of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by the Company or by any trade or business,
whether or not incorporated, which, together with the Company, is under common
control, as described in Section 414(b) or (c) of the Code.
"Plans and Specifications" has the meaning given that term in Section
-------------------------
3.1(r) of this Reimbursement Agreement.
-7-
<PAGE>
"Pledge Agreement" means the Pledge Agreement, dated as of November 1,
----------------
1997, by and among the Company, the Trustee and the Bank, substantially in the
form of Exhibit B attached to this Reimbursement Agreement.
"Preliminary Official Statement" means that certain Preliminary
---------------------------------
Official Statement, dated October 27, 1997 relating to the Bonds.
"Prime Rate" means the rate of interest publicly announced by
-----------
NationsBank, N.A. in Atlanta, Georgia, from time to time as its "prime rate."
"Project" has the meaning given that term in the Agreement.
-------
"Project Site" has the meaning given that term in the Deed to Secure
------------
Debt.
"Reimbursement Agreement" means this Letter of Credit and
-------------------------
Reimbursement Agreement.
"Related Documents" means the Letter of Credit, the Bonds, the
------------------
Indenture, the Agreement, the Deed to Secure Debt, the Remarketing Agreement,
the Pledge Agreement, the Note and any other agreement or instrument executed
and delivered in connection with any of the foregoing.
"Remarketing Agent" has the meaning given that term in the Indenture.
-----------------
"Remarketing Agreement" has the meaning given that term in the
---------------------
Indenture.
"Reportable Event" has the meaning given that term in Section 4043(b)
-----------------
of ERISA, but shall not include a Reportable Event to which the provision for 30
days' notice to the PBGC is waived under applicable regulations.
"Responsible Officer" means the President or any Vice President of the
--------------------
Company or, with respect to financial matters, the Chief Financial Officer,
Treasurer or Controller of the Company.
"Stated Expiration Date" means the date set forth as such on the first
-----------------------
page of the Letter of Credit and any such later date to which it may be extended
in accordance with Section 2.11.
"Sublease" means the Sublease, dated as of October 1, 1997 between the
--------
Company and Abrams Fixture Corporation.
"Subsidiary" means, when used to determine the relationship of a Person
----------
to another Person, a Person of which an aggregate of 50% or more of the stock of
any class or classes or 50% or more of other ownership interests is owned of
record or beneficially by such other Person, or by one or more Subsidiaries of
such other Person, or by such other Person and one or more Subsidiaries of such
-8-
<PAGE>
Person, (i) if the holders of such stock, or other ownership interests, (A) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the directors (or individuals performing similar functions) of
such Person, even though the right so to vote has been suspended by the
happening of such contingency or (B) are entitled, as such holders, to vote for
the election of a majority of directors (or individuals performing similar
functions) of such Person, whether or not the right to so vote exists by reason
of the happening of a contingency, or (ii) in the case of such other ownership
interests, if such ownership interests constitute a majority voting interest.
"Termination Event" means (a) a Reportable Event; (b) the filing of a
------------------
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA or (c) the institution of proceedings to
terminate a Plan by the PBGC under Section 4042 of ERISA, or the appointment of
a trustee to administer any Plan.
"Trust Estate" has the meaning given that term in the Indenture.
------------
"Trustee" has the meaning given that term in the Indenture.
-------
"Underwriter" means Merchant Capital, L.L.C., as Underwriter.
-----------
"Unfunded Vested Accrued Benefits" means with respect to any Plan at
----------------------------------
any time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code as
----------------------- ---
in effect from time to time in the State of Georgia.
Section 1.2. General.
-------
Unless otherwise indicated, all accounting terms, ratios and
measurements shall be interpreted or determined in accordance with generally
accepted accounting principles. All terms defined in the UCC and not otherwise
defined herein are used herein as defined in the UCC. References in this
Reimbursement Agreement to "Sections," "Articles," "Exhibits" and "Schedules"
are to sections, articles, exhibits and schedules herein and hereto unless
otherwise indicated. references in this Reimbursement Agreement to any document,
instrument or agreement (a) shall include all exhibits, schedules and other
attachments thereto, (b) shall include all documents, instruments or agreements
issued or executed in replacement thereof, and (c) shall mean such document,
instrument or agreement, or replacement or predecessor thereto, as amended,
modified or supplemented from time to time and in effect at any given time.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
-9-
<PAGE>
feminine and the neuter. Unless explicitly set forth to the contrary, a
reference to "Subsidiary" shall mean a Subsidiary of the Company or a Subsidiary
of such Subsidiary and a reference to an "Affiliate" shall mean a reference to
an Affiliate of the Company. Unless otherwise indicated, all references to time
are references to Atlanta, Georgia time.
ARTICLE 2. AMOUNT AND TERMS OF THE LETTER OF CREDIT
Section 2.1. Issuance of the Letter of Credit.
--------------------------------
Upon fulfillment of the applicable conditions set forth in Article 3,
and subject to the terms and conditions of this Reimbursement Agreement, the
Bank agrees to issue the Letter of Credit on November 12, 1997, for the account
of the Company, naming the Trustee as beneficiary and having an initial stated
amount of $11,162,739.72. Such stated amount shall reduce and be reinstated in
accordance with the terms of the Letter of Credit.
Section 2.2. Reimbursement Obligation.
------------------------
The Company hereby agrees to pay to the Bank on the date on which the
Bank shall pay any draft presented under the Letter of Credit (but only after
payment by the Bank under the Letter of Credit) a sum equal to the amount so
paid under the Letter of Credit; provided, however, in the event of a drawing
under the Letter of Credit to pay the Purchase Price (as defined in the
Indenture) of any Bonds tendered for purchase pursuant to Section 3.08 of the
Indenture, the Company agrees to pay to the Bank on or before the 30th day
following the date on which the Bank shall pay any such draft, a sum equal to
the amount so paid under the Letter of Credit, plus interest from the date
payment is so made by the Bank until payment in full, at a per annum rate equal
to the Prime Rate plus one percent (1.0%); provided, further, however, that no
interest shall be payable pursuant to the immediately preceding clause on any
amounts repaid by 10:00 a.m. on the Business Day immediately succeeding the day
on which any such drawing is honored.
Section 2.3. Letter of Credit Commission.
----------------------------
The Company hereby agrees to pay to the Bank a letter of credit
commission with respect to the amount available to be drawn under the Letter of
Credit, in an amount equal to 0.55% per annum of the maximum amount available
under the Letter of Credit as of the Closing Date and on each November 15th
thereafter. Such letter of credit commission shall be payable on the Closing
Date and on November 15, 1998 and each November 15 thereafter. Upon any
extension of the Letter of Credit, the amount of the letter of credit commission
shall be determined by the Bank; provided, however, that the Letter of Credit
commission will not exceed 0.75% per annum of the maximum amount available under
the Letter of Credit.
Section 2.4 Payments and Computations.
-------------------------
-10-
<PAGE>
(a) The Company shall make each payment hereunder not later than 12:00
noon on the day when due in lawful money of the United States of America to the
Bank at its address referred to in Section 9.1.(c) in immediately available
funds. The Company hereby authorizes the Bank, if and to the extent payment is
not made when due hereunder, to charge from time to time against any of the
Company's accounts with the Bank any amount so due. Computations of interest and
letter of credit commission hereunder shall be made by the Bank on the basis of
a year of 365 or 366 days, as the case may be, for the actual number of days
(including the first day but excluding the last day) elapsed. Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
payment of interest or letter of credit commission, as the case may be. If any
amount required to be paid by the Company to the Bank under this Reimbursement
Agreement or any Related Document remains unpaid after such amount is due
(whether because of operation of law or otherwise), the Company shall pay
interest on such past due amount from the date due until such amount is paid in
full at the Default Rate. All such interest shall be due and payable on demand.
(b) On the first Business Day of each month, beginning November 1,
1998, the Company shall deliver monies equal to one-twelfth (1/12) of the
principal amount coming due on the next November 1st, to the Bank. In addition,
not later than the Business Day prior to each Interest Payment Date and each
Redemption Date, the Company shall deliver monies sufficient to pay the interest
due and payable on such Interest Payment Date or Redemption Date. In any event
and notwithstanding anything herein to the contrary, not later than the Business
Day prior to each Interest Payment Date and each Redemption Date, the Company
shall deliver monies sufficient to pay the principal and interest due and
payable on such Interest Payment Date or Redemption Date.
(c) Notwithstanding anything herein to the contrary, the Company shall
receive as a credit against its obligation to make the interest payments
described in this Section 2.4 all payments made by the Trustee from the
Construction Fund to reimburse the Bank for interest drawings under the Letter
of Credit.
(d) All monies delivered to the Bank pursuant to Section 2.4(c) above
shall be deposited in the sinking fund account described in Section 3.2(a) of
this Agreement, and shall be used by the Bank to reimburse the Bank for draws
under the Letter of Credit. While in such account, such monies shall be invested
in such short-term investments as may be directed by the Company with the
consent of the Bank (but in any event so that the monies will be available on
the payment dates for which reimbursement will be required), and all earnings on
such monies shall be deposited in the sinking fund account and used to reimburse
the Bank for draws under the Letter of Credit.
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<PAGE>
Section 2.5 Obligations Absolute.
--------------------
The obligations of the Company under Section 2.2. of this Reimbursement
Agreement shall be absolute, unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Reimbursement Agreement under all
circumstances whatsoever, including, without limitation, the following
circumstances: (a) any lack of validity or enforceability of any Related
Document or any term or provisions therein; (b) any amendment or waiver of or
any consent to departure from all or any of the Related Documents; (c) the
existence of any claim, setoff, defense or other right which the Company may
have at any time against the Trustee, any other beneficiary or any transferee of
the Letter of Credit (or any Persons for whom the Trustee, any such beneficiary
or any such transferee may be acting), the Bank or any other Person, whether in
connection with this Reimbursement Agreement, the transactions contemplated
herein or in the Related Documents or any unrelated transaction; (d) any breach
of contract or dispute between the Company, the Trustee, the Issuer, the Bank,
the Remarketing Agent or any other Person; (e) any demand, statement or any
other document presented under the Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein or
made in connection therewith being untrue or inaccurate in any respect
whatsoever; (f) any non-application or misapplication by the Trustee or
otherwise of the proceeds of any drawing under the Letter of Credit; (g) payment
by the Bank under the Letter of Credit in good faith against presentation of a
draft or certificate which does not strictly comply with the terms of the Letter
of Credit; and (h) any other act, omission to act, delay or circumstance
whatsoever that might, but for the provisions of this Section, constitute a
legal or equitable defense to or discharge of the Company's obligations
hereunder. Nothing in this Section shall abrogate any right which the Company
may have to recover damages from the Bank under Section 2.6.
Section 2.6 Commercial Practices.
--------------------
The Company agrees that neither the Bank nor any of its directors,
officers, employees or agents shall be liable or responsible for: (a) the use
which may be made of the Letter of Credit or for any acts or omissions of the
Trustee or any other beneficiary or transferee in connection therewith; (b) any
reference which may be made to this Reimbursement Agreement or to the Letter of
Credit in any agreements, instruments or other documents relating to the Bonds;
(c) the validity, sufficiency or genuineness of documents other than the Letter
of Credit, or of any endorsement thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged
or any statement therein proves to be untrue or inaccurate in any respect
whatsoever; (d) payment by the Bank against presentation of documents which do
not comply with the terms of the Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the Letter of Credit;
or (e) any other circumstances whatsoever in making or failing to make payment
under the Letter of Credit, except only that the Bank shall be liable to the
Company for acts or events described in clauses (a) through (e) above, to the
extent, but only to the extent, of any direct, as opposed to consequential,
damages suffered by the Company which the Company proves were caused by (i) the
Bank's willful misconduct or gross negligence in determining whether a drawing
made under the Letter of Credit complies with the terms and conditions therefor
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<PAGE>
stated in the Letter of Credit or (ii) the Bank's willful failure to pay under
the Letter of Credit after presentation of a drawing by the beneficiary thereof
strictly complying with the terms and conditions of the Letter of Credit. The
Company understands and agrees that the Bank may accept a drawing that appears
on its face to be in order, without responsibility for further investigation.
The determination of whether a drawing has been made under the Letter of Credit
prior to its expiration or whether a drawing made under the Letter of Credit is
in proper and sufficient form shall be made by the Bank in its sole discretion,
which determination shall be conclusive and binding upon the Company. The
Company hereby waives any right to object to any payment made under the Letter
of Credit with regard to a drawing that is in the form provided in the Letter of
Credit but which varies with respect to punctuation, capitalization, spelling or
similar matters of form.
Section 2.7 Increased Costs.
---------------
If any change in any law or regulation or in the interpretation thereof
by any court or administrative or governmental authority charged with the
administration thereof or any compliance by the Bank with any new guideline or
request from any central bank or administrative or governmental authority
(whether or not having the force of law) shall either (a) affect, impose, modify
or deem applicable any reserve, special deposit, capital maintenance or similar
requirement against letters of credit (or similar contingent obligations) issued
by, or amount of capital required or expected to be maintained by, or assets
held by, or deposits in or for the account of, the Bank or any corporation
controlling the Bank or (b) impose on the Bank or any corporation controlling
the Bank any other condition regarding this Reimbursement Agreement or the
Letter of Credit, and the result of any event referred to in the preceding
clause (a) or (b) shall be to increase the cost to the Bank or any corporation
controlling the Bank of issuing or maintaining the Letter of Credit (which
increase in cost shall be determined by the Bank's reasonable allocation of the
aggregate of such cost increases resulting from any such event), then, upon
demand by the Bank, the Company shall immediately pay to the Bank, from time to
time as specified by the Bank, additional amounts which shall be sufficient to
compensate the Bank or any corporation controlling the Bank for such increased
cost. A certificate as to such increased cost incurred by the Bank as a result
of any event mentioned in clause (a) or (b) above, submitted by the Bank to the
Company, shall, in the absence of manifest error, be conclusive and binding for
all purposes.
Section 2.8 Payments Net of Taxes, Etc.
---------------------------
All payments to the Bank under this Reimbursement Agreement and the
Related Documents shall be made free and clear of and without deduction, setoff
or counterclaim of any kind whatsoever and in such amounts as may be necessary
in order for all such payments, after deduction or withholding for or on account
of any present or future taxes, levies, imposts, deductions, duties or other
charges or withholdings of whatsoever nature imposed by any Person, except in
the case of the Bank, any tax (or portion thereof) imposed on, or measured by,
the net income of the Bank pursuant to Applicable Laws (such taxes, levies,
imposts, deductions, duties or other charges or withholdings are referred to
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<PAGE>
hereinafter, collectively, as the "Taxes"), to be not less than the amounts
otherwise specified to be paid under this Reimbursement Agreement and the
Related Documents. The Company shall indemnify the Bank against liability for
all Taxes as and when due and shall promptly (and in any event not later than
thirty days after payment thereof) furnish to the Bank as the case may be, such
certificates, receipts and other documents as may be required (in the judgment
of the Bank) to establish the payment of such Taxes and any tax credit to which
the Bank may be entitled. The Company agrees to pay any present or future stamp,
recording or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the execution
or delivery or otherwise with respect to, this Reimbursement Agreement. The
obligations of the Company under this Section shall survive the termination of
this Reimbursement Agreement and the repayment of the Obligations.
SECTION 2.9 AGREEMENT REGARDING INTEREST AND CHARGES.
----------------------------------------
ALL CHARGES IMPOSED BY THE BANK ON THE COMPANY IN CONNECTION WITH THIS
REIMBURSEMENT AGREEMENT, INCLUDING ALL LETTER OF CREDIT COMMISSIONS, DEFAULT
CHARGES, LATE CHARGES, ATTORNEYS' FEES AND REIMBURSEMENT FOR COSTS AND EXPENSES
PAID BY THE BANK TO THIRD PARTIES OR FOR DAMAGES INCURRED BY THE BANK, ARE
CHARGES MADE TO COMPENSATE THE BANK FOR ADMINISTRATIVE SERVICES AND COSTS OR
LOSSES PERFORMED OR INCURRED, AND TO BE PERFORMED OR INCURRED, BY THE BANK IN
CONNECTION WITH THIS REIMBURSEMENT AGREEMENT AND THE RELATED DOCUMENTS AND SHALL
UNDER NO CIRCUMSTANCES BE DEEMED TO BE CHARGES FOR THE USE OF MONEY PURSUANT TO
OFFICIAL CODE OF GEORGIA ANNOTATED SECTIONS 7-4-2 OR 7-4-18. ALL CHARGES SHALL
BE FULLY EARNED AND NONREFUNDABLE WHEN DUE. In no event shall the amount of any
interest payable hereunder exceed the maximum rate of interest allowed by
Applicable Law. It is the express intent of the parties hereto that the Company
not pay and the Bank not receive, directly or indirectly, in any manner
whatsoever, interest in excess of that which may be lawfully paid by the
Borrower under Applicable Law.
Section 2.10 Evidence of Obligations.
-----------------------
The Bank may maintain in accordance with its usual practice a record of
account evidencing the indebtedness of the Company resulting from each drawing
under the Letter of Credit. In any legal action or proceeding in respect of this
Reimbursement Agreement, the entries made in such record shall be conclusive
evidence, absent manifest error, of the existence and amounts of the obligations
of the Company therein recorded. Failure of the Bank to maintain any such record
shall not excuse the Company from any of its obligations under this
Reimbursement Agreement or any of the Related Documents.
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Section 2.11 Extension of Stated Expiration Date.
-----------------------------------
The Company may request the Bank to extend the Stated Expiration Date
of the Letter of Credit for successive five-year periods. On or before November
15, 2000, the Company shall request such an extension by executing and
delivering to the Bank a written request in the form of Exhibit C attached
hereto (an "Extension") executed by the Company. On or before November 15, 2005
and on or before November 15, 2010, provided the Bank has previously extended
the stated Expiration Date, the Company shall request an extension in each
instance by executing and delivering to the Bank an Extension executed by the
Company. Upon receipt of an Extension, the Bank shall then determine whether or
not there is an Event of Default as defined herein or in any of the Related
Documents. If an Event of Default exists under Section 8.1(a), (f) or (g) of
this Reimbursement Agreement, or a payment default exists under any Related
Document, the Bank shall not be obligated to extend the Stated Expiration Date
of the Letter of Credit. If any other Event of Default exists under the
Reimbursement Agreement or any Related Document, the Bank shall provide written
notice to the Company of such Event of Default and the Company shall have a
period of thirty (30) days after receipt of said notice to cure such Event of
Default. If there is no Event of Default or if such Event of Default is cured
within such thirty (30) day period, the Bank shall extend the Stated Expiration
Date by five (5) years by delivering to the Trustee, on or before December 31,
2000 and on or before December 31, 2005 and December 31, 2010, as applicable, an
Extension Certificate in the form of Annex F to the Letter of Credit. If there
is an Event of Default that is not cured as provided in this Section 2.11, then
the Bank will not be obligated to extend the Letter of Credit and the Bank shall
not deliver an Extension Certificate in accordance with this Section 2.11. Such
failure shall be deemed to be a denial of the Company's extension request.
Section 2.12 Alternate Letter of Credit.
--------------------------
The Company may cause the Letter of Credit to be terminated by
providing an Alternate Letter of Credit to the Trustee in accordance with the
terms of the Indenture.
Section 2.13. Remarketing.
-----------
Bonds purchased by the Remarketing Agent pursuant to a tender
drawing to pay the purchase price of Bonds tendered for purchase upon failed
remarketing shall be owned by the Bank and delivered to the Trustee and
registered in the Bank's name or in the name of its nominee, pursuant to the
Pledge Agreement. Such delivery and registration shall constitute a purchase by
the Bank of the Bonds ("Bank Bonds"). Interest on the Bank Bonds shall be paid
to the Bank from the date of the tender drawing until paid in full or remarketed
in accordance with the provisions of the Indenture at the rate referred to as
the Alternate Weekly Index, and such interest shall be payable on the first
business day of each month; provided that on any overdue installment of
principal, the Company shall pay interest on Demand, at the default rate. (The
default rate shall be a per annum rate of interest equal to the Prime Rate plus
2% per annum.) If the Bank Bonds have not been remarketed on the 10th day
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<PAGE>
following the tender date, the Company agrees to make principal payments to the
Bank in accordance with the remaining portion of the twenty (20) year principal
amortization schedule attached hereto as Exhibit F.
ARTICLE 3. CONDITIONS OF ISSUANCE
Section 3.1. Condition Precedent to Issuance of the Letter of Credit.
The obligation of the Bank to issue the Letter of Credit is subject to
the condition precedent that the Bank shall have received on or before the
Closing Date the following, each dated or dated as of such day and each in form
and substance satisfactory to the Bank:
(a) This Reimbursement Agreement, duly executed by the Company.
(b) The Bond Purchase Agreement, duly executed by the Underwriter, the
Company and the Issuer.
(c) The Remarketing Agreement, duly executed by the Remarketing Agent,
the Company and the Issuer.
(d) The Pledge Agreement, duly executed by the Company, the Trustee and
the Bank.
(e) The Deed to Secure Debt, duly executed by the Company and the
Issuer.
(f) The Affiliate Guaranties, duly executed by the respective Affiliate
Guarantors.
(g) The Financing Statements, duly executed by the Company.
(h) A Title Insurance Commitment (the "Title Commitment") on the
American Land Title Association's standard loan policy form, written by
Commonwealth Land Title Insurance Company (the "Title Insurance Company"),
insuring the Bank in an amount not less than the appraised value of the Land and
Improvements as reviewed and approved by the Bank's in-house appraisal
department. The Title Commitment shall commit to insure the security deed(s)
conveying any real estate collateral required hereunder to be a valid first in
priority security title subject only to such exceptions and conditions of title
as the Bank sees fit to approve, in its sole discretion. The title insurance
policy (the "Title Policy"), when issued, shall not contain any exception for
matters of survey, mechanic's or materialmen's liens or taxes and assessments
which are due and payable, and shall contain an endorsement which shall provide
for increasing coverage under the Title Policy upon subsequent disbursements of
the Bond proceeds in good faith and without knowledge of title defects and any
other endorsements required by the Bank.
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<PAGE>
Copies of any instruments creating any lien or encumbrance excepted
from the coverage outlined in the Title Commitment shall be attached to the
Title Commitment. A tax report or other evidence of payment of all taxes and
assessments on the Land shall be attached to the Title Commitment.
Prior to the advance of any Bond proceeds, the Bank must receive an
endorsement to the Title Policy insuring any and all modifications of security
deeds as of the date recorded, subject to no intervening liens or interests.
(i) Approval by the Bank of the general contractor responsible for
constructing the Project. The Bank hereby approves Abrams Construction, Inc. as
the general contractor.
(j) A fully executed construction contract for the construction of the
Improvements, which contract shall be satisfactory to the Bank in all respects.
The Bank may appoint, at the Company's sole cost and expense, an inspecting
consultant who shall review the construction contract and all other materials
related thereto, and who shall continue to serve as inspecting architect
throughout the construction of the Improvements.
(k) Consents to the assignment of construction documents, including
consents by the construction contractor, architect and all other parties to
contracts and documents concerning or affecting the Land and Improvements,
including undertakings of the general contractor and architect to continue
performance on the Bank's behalf without additional cost in the event of default
by the Company.
(l) A development cost breakdown and construction and non-construction
costs breakdowns on the Bank's forms (or upon AIA Standard Document No. G 703)
showing details of all construction and non-construction costs including a
specification of which items are to be funded from sources other than Bond
proceeds.
(m) An owner's affidavit with respect to the Project Site, such
affidavit to be in form sufficient to remove from the foregoing Policy of Title
Insurance the "standard exceptions."
(n) Two (2) sealed copies of a current survey of the proposed Project,
including all adjoining alleys and appurtenant easements, prepared and certified
by a duly registered land surveyor of the State of Georgia. Said survey, which
shall be subject to the approval of the Bank and Bank's counsel, shall be
prepared in accordance with the Bank's standard survey instructions. The survey
shall contain a satisfactory Surveyor's Certificate and shall be accompanied by
a standard Surveyor's Inspection Report as may be required by the title insurer
so as to allow the deletion of the standard survey exceptions from the Bank's
title insurance policy. During the course of construction, the Company shall be
required to furnish to the Bank such additional surveys as it may from time to
time require, including one or more "foundation surveys" prior to the first
disbursement of Bond proceeds, and upon completion of construction of the
Project, the Borrower shall furnish a final "as-built" survey showing all
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improvements on the Project, and all appurtenances thereto as actually
constructed, as well as such other information as may be required by the Bank.
All surveys shall be certified to "NationsBank of Georgia, National
Association," the Company and the title insurance company insuring the interest
of the Bank's security instrument, and shall also be certified to comply with
the minimum technical standards for surveys established by the State of Georgia.
In addition, the survey must show whether or not the Project, and specifically
any building improvements are located in a U.S. Department of Housing and Urban
Development ("H.U.D.") identified "Special Flood Hazard Area" or "Floodway
Area." The survey must identify the specific flood zone in which the Project,
and/or the improvements are located, the finished ground floor elevations of the
improvements, and the base flood elevation. Flood Hazard Certification must
comply with the National Flood Insurance Act of 1968, the Flood Disaster
Protection Act of 1973, and the Housing and Community Development Acts of 1974
and 1977, all as amended, as applicable.
(o) A letter from the appropriate governmental zoning authority
indicating that the Land is zoned to allow the use contemplated by the Company
and by a site plan and plans and specifications (the "Plans and Specifications")
and attaching copies of any restrictions, conditions and variances applicable to
the Land.
(p) If, on or prior to the date of the issuance of the Letter of
Credit, any contractors, subcontractors, materials suppliers or others have
worked on the Land or delivered materials to the Land, the Company shall secure
their execution of any affidavits and lien waivers which may be required by the
Bank's counsel or the Title Insurance Company in order to comply with the title
insurance provisions hereof.
(q) A UCC-1, tax, judgment and lien search report conducted on the
Company and any other owner or holder of collateral hereunder (and under any
other names by which such entity or individual has been known in the last 5
years) in the counties in which such entities have operated (or such individual
has resided) during the last 5 years.
(r) If any secured note or other loan or lien is to be paid from the
Bond proceeds, the Company shall present to the Bank a pay-off letter from each
individual or entity holding a lien on the Land. The letter shall be signed by
the holder of the lien and shall indicate:
(i) the amount required to satisfy and release the lien as of
the proposed date of closing (the unpaid balance, including interest, accrued to
the proposed date of closing),
(ii) the "per diem" or the amount of interest accruing daily
--------
upon the unpaid balance for each day following the date of the proposed closing
of the loan; and
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<PAGE>
(iii) an affirmation that upon receipt of such amount, the
holder of the lien shall consider the lien satisfied and shall release the lien
by the execution of any and all appropriate instruments.
(s) Current and present originals or certified copies of all Project
soil test reports containing the findings and recommendations of a registered
soils engineer. Such report must be acceptable in scope and content to the Bank.
(t) An environmental assessment of the Project prepared for the Bank by
an environmental consultant engaged by the Bank, at the expense of the Company,
which assessment shall be in form and content satisfactory to the Bank in its
absolute and sole discretion. This report will be used by the Bank but will not
be deemed to be conclusive. The Bank shall have no obligation to issue the
Letter of Credit if the Project or any adjacent property contains any
environmentally hazardous substances, underground or above ground storage tanks,
or other environmental conditions deemed by the Bank, in the exercise of its
absolute and sole discretion, to be unsafe or constitute an undue risk to the
Bank.
(u) Evidence satisfactory to the Bank that the Company has obtained all
permits, licenses and other authorizations which are then required under all
Environmental Laws relating to the Project, and that the Company is in
compliance in all material respects with all such Environmental Laws.
(v) An As-Built Appraisal of the Project, ordered at the expense of the
Company, which shall be satisfactory in all respects to the Bank (and reviewed
and approved by the Bank's in-house appraisal department).
(w) Good Standing certificates with respect to each of the Company and
the Affiliate Guarantors issued by the Secretary of State of the State of
Georgia.
(x) A certificate of the Member of the Company, dated the Closing Date,
certifying among other things: (i) that the articles of organization and the
operating agreement of the Company, in the form attached thereto, are in full
force and effect and have not been amended, supplemented, revoked or repealed
since the date of such certification; (ii) that attached thereto are true and
correct copies of resolutions duly adopted by the sole member of the Company and
continuing in effect, which authorize the execution, delivery and performance by
the Company of this Reimbursement Agreement and the Related Documents to which
the Company is a party; (iii) that the Company is in good standing with all
licenses, income and franchise taxes paid; (iv) that there are no proceedings
for dissolution or liquidation of the Company (commenced or threatened); and (v)
the incumbency, signatures and authority of the officers of the Company
authorized to execute and deliver this Reimbursement Agreement and the Related
Documents to which the Company is a party.
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<PAGE>
(y) A certificate of the Secretary or an Assistant Secretary of each
Affiliate Guarantor, dated the Closing Date, certifying among other things: (i)
that the articles of incorporation and bylaws of the Affiliated Guarantors, in
the form attached thereto, are in full force and effect and have not been
amended, supplemented, revoked or repealed since the date of such certification;
(ii) that attached thereto are true and correct copies of resolutions duly
adopted by the Board of Directors of the Affiliated Guarantors and continuing in
effect, which authorize the execution, delivery and performance by the
Affiliated Guarantors; (iii) that the Affiliated Guarantors are in good standing
with all licenses, income and franchise taxes paid; (iv) that there are no
proceedings for dissolution or liquidation of the Affiliated Guarantors
(commenced or threatened); and (v) the incumbency, signatures and authority of
the officers of the Affiliated Guarantors authorized to execute and deliver the
Affiliated Guarantees and the Related Documents to which the Affiliate Guarantor
is a party.
(z) A certificate of a Responsible Officer of the Company, dated the
Closing Date, certifying that:
(i) The representations and warranties set forth in this
Reimbursement Agreement and the Related Documents to which the Company
is a party are true and correct as of such date;
(ii) No Event of Default or Default has occurred and is
continuing as of such date; and
(iii) No material adverse change in the financial condition or
business affairs of the Company and the Affiliate Guarantors has
occurred since August 31, 1997.
(aa) Certified copies of all governmental approvals (including
approvals or orders of the Issuer) necessary with respect to this Reimbursement
Agreement and the transactions contemplated hereby.
(bb) Original, signed copies of the financial statements of the Company
and original, signed copies of the financial statements of each Guarantor as
requested by the Bank, together with the unqualified opinion of the accountants
preparing such statements regarding such financial statements and any current
credit reports and other financial data required in order to evidence no
significant financial deterioration from the date of any initial financial
statements, as and when requested by the Bank.
(cc) A certificate of public liability insurance from an insurance
company acceptable to the Bank and containing minimum limits of public liability
coverage of $1,000,000.00, one person, with respect to one incident, and with
respect to property damage. The Borrower shall also present a certificate of
worker's compensation insurance, if required by the Bank at any time during the
term of the Letter of Credit.
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The certificate required under the immediately preceding paragraph
shall contain an endorsement clause showing the Bank as an additional insured or
loss payee, as appropriate, and shall list the address of the Bank as shown
above.
All policies must be issued by insurance companies and agencies
licensed by the Insurance Commissioner of the State of Georgia.
The Bank shall have the right to approve each and every insurance
carrier and policy. all policies shall be in the amounts, form and content
(including mortgagee clauses) and issued by such companies as are acceptable to
the Bank. Each insurance company must have a rating of A- or better (Excellent
or Superior), and Class IX or better, in A.M. Best's Insurance Reports.
All policies must contain provisions obligating the insurance
carrier(s) to provide the Bank at least thirty (30) days' advance written notice
of the expiration, termination or cancellation of any such policy or policies.
Policy premiums for all coverages (including personal property if given
as security) must be current and the Bank may require paid receipts or other
evidence as proof of payment.
Except for liability insurance, the above-referenced insurance policies
shall contain a standard mortgagee clause naming "NATIONSBANK, N.A., ITS
SUCCESSORS AND/OR ASSIGNS" as first mortgagee, which states that the insurance
coverage shall not be affected by any act or neglect of the Borrower or owner of
the improvements.
The applicable policies must be maintained during the term of the
Letter of Credit. All annual policy renewals must be forwarded to NationsBank,
N.A., at the address first above written or such other address as designated by
the Bank from time to time.
The Bank reserves the right to require the escrow of insurance premiums
during the term of the Letter of Credit.
(dd) The Company shall present evidence satisfactory to the Bank that
the Land has direct access to public roads by curb cuts adequate for the use
contemplated in the Plans and Specifications (or other access satisfactory to
the Bank), and that storm and sanitary sewer facilities, gas, water, electric
and telephone services adequate for the use contemplated in the Plans and
Specifications are available on or at the boundary of the Land. If sanitary
services are to be provided through the use of a septic tank, the Borrower shall
present to the Bank for its approval the results of a percolation test.
(ee) An executed copy of each of the Indenture and the Agreement
and specimens of the Bonds.
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(ff) A certificate from the Issuer stating that the Issuer has duly
executed and delivered the Bonds to the Trustee.
(gg) An opinion of Hunton & Williams, Atlanta, Georgia, Bond Counsel,
in form and substance satisfactory to the Bank, which shall include advice from
such Bond Counsel to the Bank that the Bank may rely on such opinion.
(hh) An opinion letter from Holt, Ney, Zatcoff & Wasserman, LLP,
Atlanta, Georgia, counsel to the Company, dated the Closing Date and
substantially in the form of Exhibit D attached to this Reimbursement Agreement.
(ii) An opinion letter from Holt, Ney, Zatcoff & Wasserman, LLP,
counsel to each of the Affiliate Guarantors, dated the Closing Date, in form and
substance satisfactory to the Bank.
(jj) Payment of all fees due and payable on the Closing Date under the
terms of any of the Related documents.
Section 3.2. Additional Conditions Precedent to Issuance of the Letter
---------------------------------------------------------
of Credit.
- ---------
The obligation of the Bank to issue the Letter of Credit shall be
subject to the further condition precedent that on the date of the issuance of
the Letter of Credit:
(a) Simultaneously with the issuance of the Letter of Credit, as
security for the Bonds, the Company shall create and maintain an
interest-bearing sinking fund account with the Bank, controlled exclusively by
the Bank, and the Company hereby grants the Bank a first priority security
interest in and a collateral assignment of the amounts on deposit in such
account. The Company hereby covenants and agrees to take any and all actions
necessary to cause the Bank to have a perfected first priority security interest
in and a collateral assignment of the amounts on deposit in such account.
(b) No change or prospective change in Applicable Law, or any
interpretation thereof by any court or administrative, banking or governmental
authority charged or claiming to be charged with the administration thereof
applicable to the Bank or the Bonds, has occurred which, in the opinion of the
Bank, would have any effect described in Section 2.7. or would increase the risk
to the Bank with respect to payments under this Reimbursement Agreement or the
security therefor; and
(c) The Bank shall have received such other approvals, opinions or
documents as the Bank may reasonably request.
Section 3.3. Covenant to Deliver.
-------------------
The Company agrees (not as a condition but as a covenant) to deliver to
the Bank each item required to be delivered to the Bank as a condition to the
issuance of the Letter of Credit notwithstanding the fact that the Bank may
issue the Letter of Credit. The Company expressly agrees that the issuance of
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the Letter of Credit prior to the receipt by the Bank of any such item shall not
constitute a waiver of the Company's obligation to deliver such item.
Section 3.4. Conditions Precedent to Approval of Requisitions and
-------------------------------------------------------
Related Matters.
- ---------------
The Bank's approval of requisitions for the disbursement of moneys from
the Construction Fund as provided in the Indenture and the Agreement is subject
to the further conditions that:
(a) The Bank shall have received the following, each dated or dated as
of such day and each in form and substance satisfactory to the Bank:
(i) A certificate from the project architect, if any, in the
form required by the Bank;
(ii) The Plans and Specifications for the construction of the
Improvements to be constructed upon the Land, which must be approved by
both the Bank and its inspecting agent, if any. Any modifications to
these items effected after such submission to the Bank (with the
exception of any change order in a maximum amount of $50,000 that will
not diminish the value of the Project, unless the Company has reached a
cumulative amount of change orders in the amount of $250,000) shall be
subject to the written approval of the Bank or its inspecting agent, if
any.
(iii) A building permit covering all of the Improvements
contemplated by the Plans and Specifications, issued by the appropriate
governmental authority and, upon completion of construction of the
Project, a certificate of occupancy and any other license or permits
which may be required.
(iv) A duplicate original Builder's Risk, All Risk Completed
Value Insurance Policy (the "Builder's Risk Policy"), in an amount
equal to 100% of the replacement cost of the Improvements but in no
event less than the amount of the Construction Contract, including, but
not limited to, coverage for damage by fire, extended coverages,
vandalism and malicious mischief, issued by an insurance company
acceptable to the Bank. "Reporting Form" insurance is not acceptable to
the Bank. The Builder's Risk Policy must provide for thirty (30) days'
notice of cancellation to the Bank and must contain a standard
mortgagee clause satisfactory to the Bank, in favor of the Bank in the
priority position of the Bank's security title, and showing the address
of the Bank as:
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NationsBank, N.A.
Northwest Commercial Banking Center
Riverwood 100
3350 Riverwood Cir., N.W.
Atlanta, Georgia 30339
The certificate required under the immediately preceding
paragraph shall contain an endorsement clause showing the Bank as an
additional insured or loss payee, as appropriate, and shall list the
address of the Bank as shown above.
All policies must be issued by insurance companies and
agencies licensed by the Insurance Commissioner of the State of
Georgia.
The Bank shall have the right to approve each and every
insurance carrier and policy. all policies shall be in the amounts,
form and content (including mortgagee clauses) and issued by such
companies as are acceptable to the Bank. Each insurance company must
have a rating of A- or better (Excellent or Superior), and Class IX or
better, in A.M. Best's Insurance Reports.
All policies must contain provisions obligating the insurance
carrier(s) to provide the Bank at least thirty (30) days' advance
written notice of the expiration, termination or cancellation of any
such policy or policies.
Policy premiums for all coverages (including personal property
if given as security) must be current and the Bank may require paid
receipts or other evidence as proof of payment.
Except for liability insurance, the above-referenced insurance
policies shall contain a standard mortgagee clause naming "NATIONSBANK,
N.A., ITS SUCCESSORS AND/OR ASSIGNS" as first mortgagee, which states
that the insurance coverage shall not be affected by any act or neglect
of the Borrower or owner of the improvements.
The applicable policies must be maintained during the term of
the Letter of Credit. All annual policy renewals must be forwarded to
NationsBank, N.A., at the address first above written or such other
address as designated by the Bank from time to time.
The Bank reserves the right to require the escrow of insurance
premiums during the term of the Letter of Credit.
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<PAGE>
(v) A schedule of values prepared and delivered by the
construction contractor.
(iv) A Certificate of an inspecting agent stating that the
work is being completed in substantial compliance with the Plans and
Specifications.
(b) Requisitions shall be submitted to the Bank in the form attached as
Exhibit B to the Agreement, signed by the Company. Each requisition shall be
accompanied by a statement showing the percentage of completion of the Project
and setting forth in detail the amounts expended or costs incurred for work done
and materials incorporated in the Project. All disbursements from the
Construction Fund shall be made in accordance with the Development Cost
Breakdown attached hereto as Exhibit E (the "Development Cost Breakdown"). If
requested by the Bank, each requisition shall be accompanied by a letter,
certificate of endorsement from the Title Insurance Company or an attorney
certifying title stating that a search of the public records has been made and
that such search reveals no claims which constitute a cloud on the Bank's
secured position established by the Deed, and that the amount of the
disbursement sought under the requisition will be covered by the Title Policy.
If an endorsement to the Title Policy is necessary for the amount of the
disbursement sought under the requisition to be covered, the endorsement shall
accompany the requisition.
(c) The Company shall not submit to the Bank for its approval more than
one requisition per calendar month. Each request for advance must be received by
the Bank at least five (5) Business Days prior to the date the disbursement
sought under the requisition is to be paid.
(d) Each submission of a requisition by the Company to the Bank shall
constitute an affirmation that the warranties and representations contained in
Article 4 of this Reimbursement Agreement remain true and correct and that no
breach of the covenants contained in Articles 5 and 7 of this Reimbursement
Agreement has occurred as of the date of submission of such requisition, unless
the Bank is notified and approves exceptions to the contrary prior to the
disbursement of the amount sought under such requisition.
(e) The amount of each advance shall be based on the percentage of
completion of work in place, as determined by the Bank on the basis of the
Company's requisition. No funds will be disbursed for materials stored on the
Premises, with the exception of steel, unless said materials are to be put in
place within forty-five (45) days. The Bank will at all times have final
determination of amounts to be disbursed.
(f) The Bank shall approve a requisition seeking disbursement of the
last 10% (or any greater percentage including the last 10%) of the proceeds of
the Bonds on deposit in the Construction Fund, but only on the date which is
seven (7) Business Days after the date on which the Bank has received the last
of the following items:
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<PAGE>
(i) A Certificate of an inspecting agent stating that the work has been
completed in substantial compliance with the Plans and Specifications;
(ii) Affidavits of the Company and the construction contractor, stating
that each person providing any material or performing any work in
connection with the Project has been paid in full;
(iii) An as-built survey showing all improvements, encroachments,
rights-of-way, easements and other matters of survey;
(iv) Any permits, licenses or other evidence of compliance with any
requirements of Governmental Authorities necessary for the use of the
Project as contemplated in the Plans and Specifications.
(v) A duplicate original Hazard Insurance Policy (the "Hazard Insurance
Policy"), in an amount equal to 100% of the replacement cost of the
Improvements but in no event less than the amount of the Construction
Contract, including, but not limited to, coverage for damage by fire,
extended coverages, vandalism and malicious mischief, issued by an
insurance company acceptable to the Bank. "Reporting Form" insurance is
not acceptable to the Bank. The Hazard Insurance Policy must provide
for thirty (30) days' notice of cancellation to the Bank and must
contain a standard mortgagee clause satisfactory to the Bank, in favor
of the Bank in the priority position of the Bank's security title, and
showing the address of the Bank as:
NationsBank, N.A.
Northwest Commercial Banking Center
Riverwood 100
3350 Riverwood Cir., N.W.
Atlanta, Georgia 30339
The certificate required under the immediately preceding
paragraph shall contain an endorsement clause showing the Bank as an
additional insured or loss payee, as appropriate, and shall list the
address of the Bank as shown above.
All policies must be issued by insurance companies and
agencies licensed by the Insurance Commissioner of the State of
Georgia.
The Bank shall have the right to approve each and every
insurance carrier and policy. all policies shall be in the amounts,
form and content (including mortgagee clauses) and issued by such
companies as are acceptable to the Bank. Each insurance company must
have a rating of A- or better (Excellent or Superior), and Class IX or
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<PAGE>
better, in A.M. Best's Insurance Reports.
All policies must contain provisions obligating the insurance
carrier(s) to provide the Bank at least thirty (30) days' advance
written notice of the expiration, termination or cancellation of any
such policy or policies.
Policy premiums for all coverages (including personal property
if given as security) must be current and the Bank may require paid
receipts or other evidence as proof of payment.
Except for liability insurance, the above-referenced insurance
policies shall contain a standard mortgagee clause naming "NATIONSBANK,
N.A., ITS SUCCESSORS AND/OR ASSIGNS" as first mortgagee, which states
that the insurance coverage shall not be affected by any act or neglect
of the Borrower or owner of the improvements.
The applicable policies must be maintained during the term of
the Letter of Credit. All annual policy renewals must be forwarded to
NationsBank, N.A., at the address first above written or such other
address as designated by the Bank from time to time.
The Bank reserves the right to require the escrow of insurance
premiums during the term of the Letter of Credit.
(vi) Such other items as may be reasonably required by the Bank.
(g) By execution of this Reimbursement Agreement, the Company agrees
that: (i) the Bank is not acting as agent or trustee for the Company; (ii) the
Bank will not be held accountable for any requisition approved in good faith;
and (iii) all requisitions approved prior to receipt of written notice of
revocation shall be deemed approvals made in good faith.
(h) In its sole discretion, the Bank, at any time prior to granting its
approval of any requisition submitted to it by the Company, may require that the
Company obtain and deliver to the Bank written waivers or subordinations of
liens from the construction contractor or any other subcontractor.
(i) The Bank shall approve requisitions submitted by the Company up to
the aggregate amount of the direct costs specified in the Development Cost
Breakdown, for the purposes and in the amounts described therein, and not in
excess of the budgeted amount thereof, and the Bank shall approve requisitions
submitted by the Company for indirect costs up to the aggregate amount of the
indirect costs specified in the Development Cost Breakdown for the purposes and
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<PAGE>
in the amounts described therein and not in excess of the budgeted amount
thereof. The foregoing notwithstanding, the Bank agrees that should any aspect
of development of the Project be completed at a cost less than the amount
allocated to such item or category in the Development Cost Breakdown, the
surplus shall be available to fund overruns in other items or categories of
items provided, in the Bank's reasonable discretion, the remaining undisbursed
balance of the Construction Fund will be sufficient to complete construction of
the Improvements in accordance with the provisions of this Reimbursement
Agreement. The Bank further agrees that amounts in the contingency established
pursuant to the Development Cost Breakdown may be used to fund overruns.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.
Section 4.1. Representations and Warranties of the Company.
The Company represents and warrants to the Bank as follows:
(a) Organization; Power; Qualification. The Company is a limited
------------------------------------
liability company, duly organized, validly existing and in good standing under
the laws of its jurisdiction of the State of Georgia, has the power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and authorized to do
business in the State of Georgia and in each jurisdiction in which (i) the
character of its properties or the nature of its business requires such
qualification or authorization and (ii) the absence of such qualification or
authorization would have a Material Adverse Effect.
(b) Subsidiaries. The Company has no subsidiaries.
------------
(c) Authorization. The Company has the right and power, and has taken
-------------
all necessary action to authorize it, to execute, deliver and perform this
Reimbursement Agreement and the Related Documents to which it is a party in
accordance with their respective terms. This Reimbursement Agreement and such
Related Documents have been duly executed and delivered by the duly authorized
officers of the Company and each is, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its respective
terms.
(d) Compliance of Agreement and Related Documents With Laws, Etc. The
---------------------------------------------------------------
execution, delivery and performance of this Reimbursement Agreement and the
Related Documents in accordance with their respective terms do not and will not,
by the passage of time, the giving of notice or otherwise, (i) require any
Governmental Approval or violate any Applicable Law relating to the Company,
(ii) conflict with, result in a breach of or constitute a default under the
articles of incorporation or bylaws of the Company, or any indenture, lease,
loan or credit agreement, instrument or other contract or agreement to which the
Company is a party or by which the Company or any of its properties may be
bound, which conflict, breach or default would have a Material Adverse Effect,
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<PAGE>
or (iii) result in or require the creation or imposition of any Lien upon or
with respect to any property now owned or hereafter acquired by the Company.
(e) Business. Neither the Company nor any of its Subsidiaries is
--------
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations U and X of the Board of Governors of the
Federal Reserve System). The correct corporate name of the Company is "Abrams
Riverside, LLC" and the Company does not conduct and, during the five-year
period immediately preceding the Closing Date, has not conducted, business under
any trade name or other fictitious name. The Company's chief executive office is
located at 1945 The Exchange, Suite 400, Atlanta, Georgia 30339.
(f) Compliance With Law; Governmental Approvals. The Company (i) has
---------------------------------------------
all Governmental Approvals required by any Applicable Law relating to the
Company, each of which is in full force and effect, is final and not subject to
review on appeal and is not the subject of any pending or threatened attack by
direct or collateral proceeding and (ii) is in compliance with each Governmental
Approval applicable to it and in compliance with all other Applicable Law
relating to the Company, the failure to comply with which would have a Material
Adverse Effect.
(g) Titles to Properties. The Company has good, marketable and legal
---------------------
title to, or a valid leasehold interest in, its properties and assets, including
but not limited to those reflected on the balance sheets of the Company referred
to in Section 4.1.(l) except those which have been disposed of by the Company
subsequent to the date of such balance sheets in the ordinary course of
business.
(h) Liens. Except as set forth in Part I of Schedule 4.1.(h), none of
-----
the properties of the Company is, as of the Closing Date, subject to any Lien,
except Permitted Liens. Except as set forth in Part II of Schedule 4.1.(h), no
financing statement under the Uniform Commercial Code as enacted in any
jurisdiction which names the Company as debtor or covers any property of the
Company has been filed and is still effective in any state or other jurisdiction
and the Company has not signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement except for financing statements and security agreements in favor of
the Bank.
(i) Indebtedness and Guaranties. There is no indebtedness for Money
----------------------------
Borrowed. The Company has performed and is in material compliance with all of
the terms of such Indebtedness and Guaranties and all instruments and agreements
relating thereto, and no default or event of default, or event or condition
which with notice or lapse of time or both would constitute such a default or
event of default, exists as of the Closing Date with respect to any such
Indebtedness or Guaranty.
(j) Litigation. There are no actions, suits or proceedings pending
----------
(nor, to the knowledge of the Company, are there any actions, suits or
proceedings threatened, nor is there any basis therefor) against or in any other
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<PAGE>
way relating adversely to or affecting the Company or any of its property in any
court or tribunal or before any arbitrator of any kind or before or by any
governmental body except actions, suits or proceedings of the character normally
incident to the kind of business conducted by the Company which, if adversely
determined, would not singly or in the aggregate have a materially adverse
effect on the financial condition or operations of the Company and there are no
strikes or walkouts in progress relating to any labor contracts to which the
Company is a party.
(k) Tax Returns and Payments. All federal, state and other tax returns
------------------------
of the Company required by Applicable Law to be filed have been duly filed, and
all federal, state and other taxes, assessments and other governmental charges
or levies upon the Company and its properties, income, profits and assets which
are due and payable have been paid except any such nonpayment which is at the
time permitted under Section 5.6.
(l) Adverse Change. Since August 31, 1997, no material adverse change
--------------
in the business, assets, liabilities, financial condition, results of operations
or business prospects of the Company and the Affiliate Guarantors has occurred.
(m) ERISA. The Company and its Subsidiaries have no Plans and,
-----
consequently, are in compliance with ERISA, to the extent applicable, in all
material respects. No material liability to the PBGC or to a Multiemployer Plan
has been, or is expected by the Company to be, incurred by the Company or any
Subsidiary.
(n) Absence of Defaults. The Company is not in default under its
--------------------
articles of incorporation or bylaws, and no event has occurred, which has not
been remedied, cured or waived, (i) which constitutes a Default or Event of
Default, or (ii) which constitutes, or which with the passage of time or giving
of notice or both would constitute, a default or event of default by the Company
under any indenture, lease, loan or credit agreement, instrument or other
contract or agreement or judgment, decree or order to which the Company is a
party or by which the Company or any of its properties may be bound.
(o) Accuracy and Completeness of Information. All written information,
----------------------------------------
reports and other papers and data furnished to the Bank were, at the time the
same were so furnished, complete and correct in all material respects, to the
extent necessary to give the recipient a true and accurate knowledge of the
subject matter, or, in the case of financial statements, present fairly, in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, the financial position of the Persons involved
as at the date thereof and the results of operations for such periods. No fact
is known to the Company which has had, or may in the future have (so far as the
Company can foresee), a materially adverse effect upon the financial condition
or operations of the Company or any Subsidiary which has not been set forth in
such information, reports or other papers or data or otherwise disclosed in
writing to the Bank prior to the Closing Date. No document furnished or written
statement made to the Bank in connection with the negotiation, preparation or
execution of this Reimbursement Agreement or any of the Related Documents
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<PAGE>
contains or will contain any untrue statement of a fact material to the
creditworthiness of the Company or omits or will omit to state a material fact
necessary in order to make the statements contained therein not misleading.
(p) Environmental Laws. The Company has obtained all permits, licenses
-------------------
and other authorizations which are required under Environmental Laws and is in
compliance in all material respects with all terms and conditions of the
required permits, licenses, and authorizations, and it is also in compliance in
all material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
contained in the Environmental Laws. The Company is not aware of, and has not
received notice of, any past, present, or future events, conditions,
circumstances, activities, practices, incidents, actions, or plans which, with
respect to the Company, may interfere with or prevent compliance or continued
compliance with Environmental Laws, or may give rise to any common-law or legal
liability, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study, or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling or the emission, discharge, release or threatened release
into the environment, of any pollutant, contaminant, chemical, or industrial,
toxic, or hazardous substance or waste; and there is no civil, criminal, or
administrative action, suit, demand, claim, hearing, notice, or demand letter,
notice or violation, investigation, or proceeding pending or, to the Company's
knowledge, threatened, against the Company relating in any way to Environmental
Laws.
(q) Official Statement. Except for information contained therein
-------------------
describing the Bank, the Underwriter, the Issuer or exemption from taxation, as
to which no representation is made: (i) the Official Statement of the Issuer
relating to the Bonds is, and the Preliminary Official Statement of the Issuer
relating to the Bonds as of its issuance date was, and any supplement or
amendment to either thereof shall be, accurate in all material respects for the
purposes for which its use is, was, or shall be, authorized; and (ii) the
Official Statement does not, the Preliminary Official Statement as of its
issuance date did not, and any such supplement or amendment shall not, contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements made therein, in the light of the circumstances
under which they are or were made, not misleading.
(r) Representations and Warranties. None of the representations or
-------------------------------
warranties made by the Company in this Reimbursement Agreement, any other
Related Document to which it is a party or in any financial statement, exhibit
or document furnished in connection with this Reimbursement Agreement or any
other Related Document to which it is a party as of the respective dates of such
representations and warranties, contains any untrue statement of a material fact
or omits any material fact necessary to make the statements made not misleading.
(s) Representations and Warranties in Related Documents. Each
---------------------------------------------------------
representation and warranty made by the Company in the Related Documents are
hereby made to and for the benefit of the Bank as if the same were set forth
herein in full.
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<PAGE>
Section 4.2. Survival of Representations and Warranties.
------------------------------------------
All statements contained in any certificate, financial statement, legal
opinion or other instrument delivered by or on behalf of the Company pursuant to
or in connection with this Reimbursement Agreement or any Related Document to
which it is a party shall constitute representations and warranties made under
this Reimbursement Agreement. All representations and warranties made under this
Reimbursement Agreement shall be deemed to be made at and as of the Closing Date
and at and as of the date of any drawing under the Letter of Credit.
ARTICLE 5. AFFIRMATIVE COVENANTS.
Until the termination of this Reimbursement Agreement and the
expiration or cancellation of the Letter of Credit and the indefeasible
satisfaction and payment in full of all Obligations, the Company will, unless
the Bank shall otherwise consent in writing:
Section 5.1. Preservation of Existence and Similar Matters.
---------------------------------------------
Preserve and maintain its existence, rights, franchises, licenses and
privileges in the jurisdiction of its organization and qualify and remain
qualified as a limited liability company and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization.
Section 5.2. Compliance With Applicable Law.
------------------------------
Comply with all Applicable Law, including the obtaining of all
Governmental Approvals, relating to the Company.
Section 5.3. Maintenance of Property.
-----------------------
In addition to, and not in derogation of, the requirements of any of
the Related Documents, (a) protect and preserve all its trademarks, and maintain
in good repair, working order and condition all tangible properties utilized in
the Company's business operations, and (b) from time to time make or cause to be
made all needed and appropriate repairs, renewals, replacements and additions to
such properties, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
Section 5.4. Conduct of Business.
-------------------
At all times carry on its business in an efficient manner and engage
only in businesses in substantially the same fields as the business conducted on
the Closing Date.
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<PAGE>
Section 5.5. Insurance.
---------
Maintain, in addition to that required by the Deed to Secure Debt or
any of the other Related Documents, insurance with responsible insurance
companies against such risks and in such amounts as is customarily maintained by
similar businesses or as may be required by Applicable Law, and from time to
time deliver to the Bank upon its request a detailed list of the insurance then
in effect, stating the names of the insurance companies, the amounts and rates
of the insurance, the dates of the expiration thereof and the properties and
risks covered thereby.
Section 5.6. Payment of Taxes and Claims.
---------------------------
Pay or discharge when due: (a) all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or upon any
properties belonging to it, and (b) all lawful claims of materialmen, mechanics,
carriers, warehousemen and landlords for labor, materials, supplies and rentals
which, if unpaid, might become a Lien on any properties of the Company or any of
its Subsidiaries; provided, however, that this Section shall not require the
payment or discharge of any such tax, assessment, charge, levy or claim which
the Company is contesting in good faith by appropriate proceedings which operate
to suspend the collection thereof and for which adequate reserves have been
established on the appropriate books of the Company.
Section 5.7. Accounting Methods and Financial Records.
----------------------------------------
Maintain a system of accounting, and keep such books, records and
accounts (which shall be true and complete), as may be required or as may be
necessary to permit the preparation of financial statements in accordance with
generally accepted accounting principles consistent with those followed in the
preparation of the financial statements referred to in Section 4.1.(l).
Section 5.8. Visits and Inspections.
----------------------
Permit representatives of the Bank, from time to time, as often as may
be reasonably requested, but only during normal business hours and subject to
reasonable procedures for the protection of proprietary processes, to: (a) visit
and inspect the properties of the Company, (b) inspect and make extracts from
its relevant books and records, including but not limited to management letters
prepared by independent accountants, and (c) discuss with its principal
officers, and its independent accountants, the business, assets, liabilities,
financial conditions, results of operations and business prospects of the
Company.
Section 5.9. Remarketing Agent, Underwriter and Trustee.
------------------------------------------
The Company will maintain a Remarketing Agent, Underwriter and Trustee
acceptable to the Bank.
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<PAGE>
Section 5.10. Environmental Law Compliance.
---------------------------
Comply in all material respects with all applicable Environmental Laws.
The Company will not permit any Person to use any Hazardous Materials at the
Project Site or at any of the Company's other places of business except such
materials as are incidental to the Company's normal course of business. The
Company shall provide the Bank, its agents, contractors, employees and
representatives with access to and copies of any and all data and documents
relating to or dealing with any Hazardous Materials used, generated,
manufactured, stored or disposed of by the Company's business operations within
5 days of the request therefor.
Section 5.11. Registration of Bonds.
---------------------
Cause all Bonds which it acquires, or which it has had acquired for its
account, to be registered forthwith in accordance with the Indenture in the name
of the Company and pledged to the Bank under the Pledge Agreement.
Section 5.12 Financial Covenants.
-------------------
Until the termination of this Reimbursement Agreement and the
expiration or cancellation of the Letter of Credit and the indefeasible
satisfaction and payment in full of all Obligations, the following financial
covenants will be maintained:
(i) Total Liabilities to Tangible Net Worth. Abrams Industries,
Inc. must maintain a ratio of Total Liabilities to Tangible Net Worth of not
greater than 3.80 to 1:0 quarterly, commencing April 30, 1998 and on each fiscal
quarter end thereafter.
As used above, Tangible Net Worth shall be calculated quarterly,
commencing April 30, 1998 and on each fiscal quarter end thereafter and shall be
defined as the sum of (a) common stock, paid-in capital and retained earnings
shown on the balance sheet of Abrams Industries, Inc. minus (b) the treasury
stock and intangible assets of Abrams Industries, Inc. as determined in
accordance with generally accepted accounting principles, which includes but is
not limited to, goodwill, covenants not to compete, capitalized patents and
trademarks.
(ii) Debt Service Coverage Ratio. Abrams Industries, Inc. shall
maintain a Debt Service Coverage Ratio of not less than 1.10 to 1.0 at the end
of each fiscal quarter commencing April 30, 1998, based upon the present fiscal
quarter and the previous three fiscal quarters. Debt Service Coverage shall be
defined as earnings before interest, taxes, depreciation, amortization and other
non-cash expenses, less distributions or dividends divided by the sum of
interest expense plus current maturities of long term debt and capital leases.
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ARTICLE 6. INFORMATION
Section 6.1. Information.
-----------
Until the termination of this Reimbursement Agreement and the
expiration or cancellation of the Letter of Credit and the indefeasible
satisfaction and payment in full of all Obligations, the Company will, unless
the Bank shall otherwise consent in writing, furnish to the Bank at its office
then designated for notices pursuant to Section 9.1.:
(a) Quarterly Financial Statements. Within 45 days after the close of
-------------------------------
each fiscal quarter, the balance sheet and income statement of the Company and
the Affiliate Guarantors as of the end of such quarter and setting forth in each
case the financial position of the Company, or the Affiliate Guarantors, as
applicable, as of the date thereof and the results of operation for such period,
in comparative form including the figures for the corresponding periods of the
previous fiscal year, all of which shall be certified as true and correct by the
Chief Financial Officer or President of the Company.
(b) Audited Year-End Statements. Within 120 days after the end of each
---------------------------
fiscal year of the Company and the Affiliate Guarantors, the balance sheet of
the Company and the Affiliate Guarantors, as applicable, as at the end of such
fiscal year and the related statements of income, and with respect to the
Affiliate Guarantors only, the retained earnings and cash flow of the Affiliate
Guarantors for such fiscal year, setting forth in comparative form the figures
as at the end of and for the previous fiscal year, certified by independent
certified public accountants whose certificate shall be in scope and substance
satisfactory to the Bank and who shall have authorized the Affiliate Guarantors
to deliver such financial statements and certification thereof to the Bank
pursuant to this Reimbursement Agreement.
(c) Officer's Certificate. At the time the financial statements are
----------------------
furnished pursuant to Sections 6.1.(a) and (b), the Company and the Affiliate
Guarantors shall also furnish a certificate of their respective Chief Financial
Officer or President: (i) setting forth as at the end of such fiscal year, in
the case of financial statements furnished pursuant to Section 6.1.(b), with
respect to the Company, the calculations required to establish whether or not
the Company was in compliance with the requirements of Section 7.1. hereof, and
with respect to Abrams Industries, Inc., the calculations required to establish
whether or not Abrams Industries, Inc. was in compliance with the requirements
of Section 5.12 hereof and (ii) in all cases, stating that, to the best of such
officer's knowledge, information and belief, no Default or Event of Default
exists, or if such is not the case, specifying such Default or Event of Default
and its nature, when it occurred, whether it is continuing and the steps being
taken by the Company with respect to such event, condition or failure.
(d) Copies of Other Reports. (i) Promptly upon receipt thereof, copies
-----------------------
of all reports, if any, submitted to the Company by its independent public
accountants, including, without limitation, any management report; (ii) as soon
as practicable, copies of all financial statements and reports as the Company
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shall send to its stockholders and of all registration statements and all
regular or periodic reports which the Company shall file, with the Securities
and Exchange Commission or any successor commission and (iii) from time to time
and promptly upon each request, such data, certificates, reports, statements,
opinions of counsel, documents or further information regarding the business,
assets, liabilities, financial condition, results of operations or business
prospects of the Company as the Bank may reasonably request and that the Company
has or without unreasonable expense can obtain.
(e) Notice of Litigation and Other Matters. Prompt notice of: (i) to
----------------------------------------
the extent the Company is aware of the same, the commencement of all proceedings
and investigations by or before any governmental or nongovernmental body and all
actions and proceedings in any court or other tribunal or before any arbitrator
against or in any other way relating adversely to, or adversely affecting, the
Company or any of its Subsidiaries or any of their respective properties, assets
or businesses, the adverse determination of which would have a materially
adverse effect on the financial condition or operations of the Company; (ii) any
amendment to the articles of incorporation or bylaws of the Company; (iii) any
change in the management of the Company and any change in the business, assets,
liabilities, financial condition, results of operations or business prospects of
the Company or any of its Subsidiaries which has had or may have any material
adverse effect on the financial condition or operations of the Company and (iv)
any Default or Event of Default or any event which constitutes or which with the
passage of time or giving of notice or both would constitute a default or event
of default by the Company under any indenture, lease, loan or credit agreement,
instrument or other contract or agreement to which the Company is a party or by
which the Company or any of its properties may be bound.
(f) ERISA. As soon as possible and in any event within 30 days after
-----
the Company knows, or has reason to know, that: (i) any Termination Event with
respect to a Plan has occurred or will occur; (ii) any Unfunded Vested Accrued
Benefits exist or (iii) the Company is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan required
by reason of its complete or partial withdrawal (as described in Section 4203 or
4205 of ERISA) from such Plan, a certificate of the President or Chief Executive
Officer of the Company setting forth the details of such of the events described
in clauses (i) through (iii) as applicable and the action which is proposed to
be taken with respect thereto, together with any notice or filing which may be
required by the PBGC or other agency of the United States government with
respect to such of the events described in clauses (i) through (iii) as
applicable.
(g) Notification of Environmental Matters. Prompt notice of (i) any and
-------------------------------------
all enforcement, cleanup, remedial, removal, or other governmental or regulatory
actions instituted or threatened against or otherwise affecting the Collateral
or the Company's other business operations pursuant to any applicable
Environmental Laws; and (ii) all claims made or threatened by any Person against
the Company relating to damages, contribution, cost recovery compensation, loss
or injury resulting from any Hazardous Materials.
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ARTICLE 7. NEGATIVE COVENANTS
Until the termination of this Reimbursement Agreement and the
expiration or cancellation of the Letter of Credit and the satisfaction in full
of all Obligations, the Company will not, unless the Bank shall give its prior
written consent:
Section 7.1. Indebtedness for Borrowed Money.
-------------------------------
Create, assume, or otherwise become or remain obligated in respect of,
or permit or suffer to exist or to be created, assumed or incurred or to be
outstanding any Indebtedness for Money Borrowed other than Indebtedness owing to
the Bank.
Section 7.2. Guaranties.
----------
Become or remain liable on or under any Guaranty.
Section 7.3. Investments.
-----------
Acquire, after the date hereof, any Business Unit or Investment or,
after such date, permit any Investment to be outstanding.
Section 7.4. Liens.
-----
Create, assume, incur or permit or suffer to exist or to be created,
assumed or incurred, any Lien upon any of its properties or assets of any
character whether now owned or hereafter acquired other than Permitted Liens.
In addition, Abrams Industries, Abrams Fixture Corporation and Abrams
Construction, Inc., the general contractor of the Project, shall not be liable
for recourse real estate debt other than Abrams Industries on the Project and
Abrams Fixture Corporation and Abrams Industries, Inc. for the existing debt on
the Jones Ave. building owned by Abrams Fixture Corporation and any debt
resulting from the tax free exchange of the Jones Ave. building.
Section 7.5. Merger, Consolidation and Sale of Assets.
----------------------------------------
Merge or consolidate with any other Person or sell, lease or transfer
or otherwise dispose of all or a substantial portion of its assets, or sell or
otherwise transfer all or a portion of the Project or of the Collateral or any
of the Company's interest therein, to any Person.
Section 7.6. Transaction With Affiliates.
---------------------------
Effect any transaction with any Affiliate or Subsidiary by which
inventory or any other asset or services of the Company is transferred to such
Affiliate or Subsidiary, or any similar item is transferred from such Affiliate
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or Subsidiary to the Company, at less than FIFO cost or for more than fair
salable value, or enter into any other transaction with an Affiliate or
Subsidiary on terms more favorable to such Affiliate or Subsidiary than would be
reasonably expected to be given in a similar transaction with an unrelated
entity.
Section 7.7. Plans.
-----
Take any action which would result in the existence of any Unfunded
Vested Accrued Benefits under any Plans.
Section 7.8. Loans.
-----
Extend credit to or make any advance, loan, contribution or payment of
money or goods (other than normal compensation for personal services and travel
expenses in the ordinary course of business) to any Person.
Section 7.9. Change of Name; Change of Address of Chief Executive
---------------------------------------------------------
Office or Principal Place of Business in Georgia.
- ------------------------------------------------
Change (i) the Company's legal name or (ii) the address of the
Company's (a) chief executive office or (b) principal place of business in
Georgia.
Section 7.10. Judgment.
--------
Allow a judgment or order for the payment of money to be entered
against the Company or any Subsidiary by any court which exceeds $50,000 in
amount and allow such judgment or order to continue undischarged or unstayed for
thirty (30) days.
Section 7.11. Attachment.
----------
Allow a warrant or writ of attachment or execution or similar process
to be issued against (i) any property of the Company which warrant, writ,
execution or process exceeds $50,000 in value and allow said warranty, writ,
execution or process to continue undischarged or unstayed for ten (10) days or
(ii) any of the Collateral.
ARTICLE 8. DEFAULT.
Section 8.1. Events of Default.
-----------------
Each of the following shall constitute an Event of Default, whatever
the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any governmental or nongovernmental body:
(a) Default in Payment. The Company shall fail to pay any amount
--------------------
payable to the Bank under any provision of Section 2.2., or any of the other
Obligations, when and as due (whether upon demand, at maturity, by reason of
acceleration or otherwise) which failure shall continue for a period of three
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<PAGE>
(3) days after written notice, specifying such failure and requesting that it be
remedied, given by the Bank to the Company and the Affiliate Guarantors, or
given by the Trustee to the Company; provided, however, that said notice may be
delivered by the Bank to the Company and the Affiliate Guarantors via facsimile
transmitted and confirmed by telephone.
(b) Misrepresentations. Any statement, representation or warranty made
------------------
by or on behalf of the Company orally or in writing under this Reimbursement
Agreement or under any Related Document, or in any other writing or statement at
any time furnished or made by or on behalf of the Company to the Bank, shall
prove to have been incorrect or misleading in any material respect when
furnished or made.
(c) Default in Performance. The Company shall fail to perform or
------------------------
observe any term, covenant, condition or agreement contained in this
Reimbursement Agreement or in any Related Document to which it is a party, or in
any other agreement between the Company and the Bank which failure shall
continue for a period of thirty (30) days after written notice, specifying such
failure and requesting that it be remedied, given by the Bank to the Company and
the Affiliates Guarantors or given by the Trustee to the Company, unless the
Bank shall agree in writing to an extension of such time prior to the expiration
thereof.
(d) [Intentionally Omitted]
(e) [Intentionally Omitted]
(f) Voluntary Bankruptcy Proceeding. The Company, any Subsidiary or any
-------------------------------
Affiliate shall: (i) commence a voluntary case under the United States
Bankruptcy Code; (ii) file a petition seeking to take advantage of any other
Applicable Laws relating to bankruptcy, insolvency, reorganization, winding up
or composition for adjustment of debts; (iii) apply for or consent to, or fail
to contest in a timely and appropriate manner, the appointment of, or the taking
of possession by, a receiver, custodian, trustee or liquidator of itself or of a
substantial part of its property, domestic or foreign; (iv) admit in writing its
inability to pay its debts as they become due; (v) make a general assignment for
the benefit of creditors; (vi) make a conveyance fraudulent as to creditors
under any Applicable Law or (vii) take any corporate action for the purpose of
effecting any of the foregoing.
(g) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
---------------------------------
be commenced against the Company, any Subsidiary or any Affiliate in any court
of competent jurisdiction seeking (i) relief under the United States Bankruptcy
Code or under any other Applicable Laws relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts or (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Company, such
Subsidiary or such Affiliate or of all or any substantial part of the assets,
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<PAGE>
domestic or foreign, of the Company, such Subsidiary or such Affiliate and such
case or other proceeding shall continue undischarged, undismissed and unstayed
for sixty (60) days.
(h) Litigation. The Company or any other Person a party thereto shall
----------
challenge or contest in any action, suit or proceeding in any court or before
any arbitrator or governmental body the validity or enforceability of this
Reimbursement Agreement or any Related Document or the enforceability of, or the
perfection or priority of the Bank's Lien in any of the Collateral.
(i) [Intentionally Omitted]
(j) [Intentionally Omitted]
(k) ERISA. (i) Any Termination Event with respect to a Plan shall
-----
occur; (ii) any Plan shall incur an "accumulated funding deficiency" (as defined
in Section 412 of the Code or Section 302 of ERISA) for which a waiver has not
been obtained in accordance with the applicable provisions of the Code and ERISA
or (iii) the Company is in "default" (as defined in Section 4219(c)(5) of ERISA)
with respect to payments to a Multiemployer Plan resulting from the Company's
complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA)
from such Multiemployer Plan.
(l) [Intentionally Omitted]
(m) Sale of Project. The Company or the Issuer shall sell, convey or
---------------
otherwise transfer any of its interest in all or a portion of the Project
provided, however, that the Company may transfer personal property in the
ordinary course of business.
(n) Related Documents Defaults. Any "Event of Default" under and as
----------------------------
defined in any Related Document shall occur.
(o) Priority of Bank's Lien. The Bank's Lien in any of the Collateral
-----------------------
shall for any reason cease to be a valid, enforceable and first-priority Lien,
subject only to Permitted Liens.
(p) Affiliate Guaranties Defaults. Any "Event of Default" under and as
-----------------------------
defined in any Affiliate Guaranty shall occur.
Section 8.2. Remedies.
--------
(a) If any Event of Default (other than any Event of Default specified
in Section 8.1.(f) or (g)) shall have occurred and be continuing, the Bank may
(i) give notice to the Trustee pursuant to Section 6.02 of the Indenture
requesting the Trustee to declare the principal of all Bonds then outstanding
and all interest accrued and unpaid thereon to be due and payable, or (ii) make
demand upon the Company to, and forthwith upon such demand the Company shall,
pay to the Bank in same day funds at the Bank's office designated in such
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<PAGE>
demand, for deposit into the Cash Collateral Account, an amount equal to the
maximum amount then available to be drawn under the Letter of Credit. If any
Event of Default specified in sections 8.1.(f) or (g) shall have occurred and be
continuing, (x) the Bank shall give notice to the Trustee pursuant to Section
6.02 of the Indenture requesting the Trustee to declare the principal of all
Bonds then outstanding and all interest accrued and unpaid thereon to be due and
payable and (y) the Company shall pay to the Bank, immediately and without any
demand or notice by the Bank whatsoever, in same day funds at the Bank's office
designated in Section 9.1., for deposit in the Cash Collateral Account, an
amount equal to the maximum amount then available to be drawn under the Letter
of Credit.
Section 8.3. Additional Rights.
-----------------
The Bank shall have the right, upon the happening of any Event of
Default, in addition to any rights or remedies available to it hereunder, under
the Deed to Secure Debt and any other Related Document, to exercise all other
rights and remedies available to it by agreement, at law or in equity.
Section 8.4. Cash Collateral Account.
-----------------------
(a) Upon the happening of any Event of Default, in addition to any
other rights or remedies available to it hereunder, the Bank may require the
Company to create and the Company hereby agrees to create a demand deposit
account with the Bank (the "Cash Collateral Account"). The Cash Collateral
Account shall be in the name of the Company, but under the sole dominion and
control of the Bank and subject to the terms hereof.
(b) If requested by the Company and subject to the right of the Bank to
withdraw funds from the Cash Collateral Account as provided below, the Bank
will, so long as no Event of Default referred to Sections 8.1.(a), (f) or (g)
shall have occurred and be continuing, from time to time invest funds on deposit
in the Cash Collateral Account, reinvest proceeds of any such investments which
may mature or be sold, and invest interest or other income received from any
such investments, in each case in such Eligible Securities as the Company may
select and notify to the Bank. Such proceeds, interest or income which are not
so invested or reinvested in Eligible Securities shall, except as otherwise
provided in this Section, be deposited and held by the Bank in the Cash
Collateral Account. Eligible Securities from time to time purchased and held
pursuant to this subsection shall be referred to as "Collateral Securities" and
shall, for purposes of this Reimbursement Agreement, constitute part of the
funds held in the Cash Collateral Account in amounts equal to their respective
outstanding principal amounts.
(c) If at any time the Bank determines that any funds held in the Cash
Collateral Account are subject to any right or claim of any Person other than
the Bank or that the total amount of such funds is less than the maximum amount
at such time available to be drawn under the Letter of Credit, the Company will,
forthwith upon demand by the Bank, pay to the Bank, as additional funds to be
deposited and held in the Cash Collateral Account, an amount equal to the excess
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<PAGE>
of (i) such maximum amount at such time available to be drawn under the Letter
of Credit over (ii) the total amount of funds, if any, then held in the Cash
Collateral Account which the Bank determines to be free and clear of any such
right and claim.
(d) The Company hereby pledges and collaterally assigns to the Bank,
and grants to the Bank a security interest in, all funds held in the Cash
Collateral Account (including Collateral Securities) from time to time and all
proceeds thereof, as security for the Obligations. Nothing in this Section,
however, shall either obligate the Bank to require any funds to be deposited in
the Cash Collateral Account or limit the right of the Bank, which it may
exercise at any time and from time to time, to release to the Company any funds
held in the Cash Collateral Account pursuant to the other provisions of this
Section.
(e) The Bank may, at any time or from time to time after funds are
either deposited in the Cash Collateral Account or invested in Collateral
Securities, after selling, if necessary, any Collateral Securities, apply funds
then held in the Cash Collateral Account to the payment of any amounts, in such
order as the Bank may elect, as shall have become or shall become due and
payable by the Company to the Bank under this Reimbursement Agreement; provided,
however, the Bank shall not use any such funds to pay any drawings under the
Letter of Credit. The Company agrees that, to the extent notice of sale of any
Collateral Securities shall be required by law, at least five Business Days'
notice to the Company of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Bank may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it will so adjourned.
(f) Neither the Company nor any Person claiming on behalf of or through
the Company shall have any right to withdraw any of the funds held in the Cash
Collateral Account, except as otherwise provided in subsection (f) below and
except that upon the termination of the Letter of Credit in accordance with its
terms and the indefeasible payment and satisfaction in full of all Obligations,
any funds remaining in the Cash Collateral Account shall be returned by the Bank
to the Company or paid to whomever may be legally entitled thereto.
(g) So long as no Event of Default shall have occurred and be
continuing but subject to the immediately preceding subsection (b), the Bank
will release to the Company or at its order (i) interest or other income
received on Collateral Securities and (ii) at the written request of the
Company, funds held in the Cash Collateral Account in an amount up to but not
exceeding the excess, if any (immediately prior to the release of any such
funds), of (x) the total amount of funds held in the Cash Collateral Account
over (y) the maximum amount available to be drawn under the Letter of Credit.
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<PAGE>
(h) The Company agrees that it will not (i) sell or otherwise dispose
of any interest in the Cash Collateral Account or any funds held therein, or
(ii) create or permit to exist any Lien upon or with respect to the Cash
Collateral Account or any funds held therein, except as provided in or
contemplated by this Reimbursement Agreement.
(i) The Bank shall exercise reasonable care in the custody and
preservation of any funds held in the Cash Collateral Account and shall be
deemed to have exercised such care if such funds are accorded treatment
substantially equivalent to that which the Bank accords its own property, it
being understood that the Bank shall not have any responsibility for taking any
necessary steps to preserve rights against any parties with respect to any such
funds.
ARTICLE 9. MISCELLANEOUS
Section 9.1. Notices.
-------
Unless otherwise provided herein, notices and other communications provided for
or permitted hereunder shall be in writing and shall be mailed, telecopied or
delivered as follows:
If to the Company:
Abrams Riverside, LLC
c/o Abrams Properties, Inc.
1945 The Exchange, Suite 400
Atlanta, Georgia 30339-2029
Attention: Melinda S. Garrett
Telephone: (770) 953-1777
Telecopy: (770) 953-9922
with a copy to:
Holt, Ney, Zatcoff & Wasserman, LLP
100 Galleria Parkway, Suite 600
Atlanta, Georgia 30339
Attention: Sanford H. ("Sandy") Zatcoff
Telephone: (770) 956-9600
Telecopy: (770) 956-1490
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<PAGE>
If to the Bank:
NationsBank, N.A.
Northwest Commercial Banking Center
Riverwood 100
3350 Riverwood Cir., N.W.
Atlanta, Georgia 30339-3340
Attention: Helen T. Cease
Telephone: (770) 850-8490
Telecopier: (770) 850-5496
with a copy to:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Karol V. Mason
Telephone: (404) 881-7000
Telecopier: (404) 881-7777
or, as to each party at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and other
communications shall be effective when received. In the case of notice permitted
by telephone, all such notices shall be confirmed in writing within one Business
Day upon the giving thereof; provided, however, the terms of any such telephonic
notice shall be controlling over any conflicting terms contained in the
confirmatory written notice.
Section 9.2. Fees and Expenses.
-----------------
The Company will pay all out-of-pocket expenses of the Bank in
connection with:
(a) the preparation, execution and delivery of this Reimbursement
Agreement and each of the Related Documents, whenever the same shall be executed
and delivered, including appraisers' fees, title insurance fees, search fees,
recording fees and the reasonable fees and disbursements of Alston & Bird LLP,
counsel for the Bank, as actually incurred based upon the total number of hours
of work performed and not based upon the statutory limit set forth in Official
Code of Georgia Annotated Section 13-1-11;
(b) the preparation, execution and delivery of any waiver, amendment or
consent by the Bank relating to this Reimbursement Agreement or any of the
Related Documents including reasonable fees and disbursements of counsel to the
Bank;
-44-
<PAGE>
(c) any restructuring, refinancing or "workout" of the indebtedness
evidenced by this Reimbursement Agreement and the Related Documents including
the reasonable fees and disbursements of counsel to the Bank;
(d) following an Event of Default, consulting with one or more Persons,
including accountants and lawyers, concerning or related to the nature, scope or
value of any right or remedy of the Bank hereunder or under any of the Related
Documents, including any review of factual matters in connection therewith,
which expenses shall include the reasonable fees and disbursements of such
Persons and which consultations in any event shall be reasonable given the facts
and circumstances;
(e) the collection or enforcement of the obligations of the Company
under this Reimbursement Agreement or any Related Document including the
reasonable fees and disbursements of counsel to the Bank if such collection or
enforcement is done by or through an attorney;
(f) prosecuting or defending any claim in any way arising out of,
related to, or connected with this Reimbursement Agreement or any of the Related
Documents, which expenses shall include the reasonable fees and disbursements of
legal counsel, experts and other consultants retained by the Bank;
(g) the exercise by the Bank of any right or remedy granted to it under
this Reimbursement Agreement or any of the Related Documents, including the
reasonable fees and disbursements of counsel to the Bank; and
(f) to the extent not already covered by any of the preceding
subsections, any bankruptcy or other proceeding of the type described in
Sections 8.1.(f) or (g), and the fees and disbursements of counsel to the Bank
incurred in connection with the representation of the Bank in any matter
relating to or arising out of any such proceeding, including without limitation
(i) any motion for relief from any stay or similar order, (ii) the negotiation,
preparation, execution and delivery of any document relating to the Bank and
(iii) the negotiation and preparation of any plan of reorganization of the
Company, whether proposed by the Company, the Bank or any other Person, and
whether such fees and expenses are incurred prior to, during or after the
commencement of such proceeding or the confirmation or conclusion of any such
proceeding.
Section 9.3. Litigation.
----------
(a) EACH PARTY HERETO ACKNOWLEDGES THAT ANY DISPUTE OR CONTROVERSY
BETWEEN THE COMPANY AND THE BANK WOULD BE BASED ON DIFFICULT AND COMPLEX ISSUES
OF LAW AND FACT AND LIKELY TO RESULT IN UNDESIRABLE EXPENSE AND DELAY.
ACCORDINGLY, THE BANK AND THE COMPANY HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR TRIBUNAL IN WHICH
AN ACTION MAY BE COMMENCED BY OR AGAINST THE COMPANY ARISING OUT OF, OR RELATING
TO, THIS REIMBURSEMENT AGREEMENT OR ANY OF THE RELATED DOCUMENTS.
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<PAGE>
(b) EACH OF THE COMPANY AND THE BANK HEREBY AGREES THAT THE FEDERAL
COURT OF THE NORTHERN DISTRICT OF GEORGIA, OR AT THE OPTION OF THE BANK ANY
STATE COURT LOCATED IN DOUGLAS COUNTY, GEORGIA, SHALL HAVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE BANK PERTAINING
DIRECTLY OR INDIRECTLY TO THIS REIMBURSEMENT AGREEMENT OR ANY OF THE RELATED
DOCUMENTS OR TO ANY MATTER ARISING HEREFROM OR THEREFROM. THE COMPANY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED IN SUCH COURT, HEREBY WAIVING PERSONAL SERVICE OF THE SUMMONS AND
COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREEING THAT SERVICE
OF SUCH SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE COMPANY'S ADDRESS
FOR NOTICES. SHOULD THE COMPANY FAIL TO APPEAR OR ANSWER ANY SUMMONS, COMPLAINT,
PROCESS OR PAPERS SERVED IN ACCORDANCE WITH APPLICABLE LAW WITHIN THIRTY DAYS
AFTER THE SERVICE THEREOF, IT SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR
JUDGMENT MAY BE ENTERED AGAINST IT AS DEMANDED OR PRAYED FOR IN SUCH SUMMONS,
COMPLAINT, PROCESS OR PAPERS. THE CHOICE OF FORUM SET FORTH IN THIS SECTION
SHALL NOT BE DEEMED TO PRECLUDE THE BRINGING OF ANY ACTION BY THE BANK OR THE
ENFORCEMENT BY THE BANK OF ANY JUDGMENT OBTAINED IN SUCH FORUM IN ANY OTHER
APPROPRIATE JURISDICTION.
(c) THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF COUNSEL AND
WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF.
Section 9.4. Right of Set-Off.
----------------
The Bank is hereby authorized at any time and from time to time, to the
fullest extent permitted by Applicable Law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held, and other Indebtedness at any time owing, by the Bank to or for the credit
or the account of the Company against any and all of the obligations,
irrespective of whether or not the Bank shall have made any demand hereunder and
although such Obligations may be contingent or unmatured. The Bank agrees
promptly to notify the Company after any such set-off and application above,
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<PAGE>
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Bank under this Section are in
addition to other rights and remedies (including without limitation, other
rights of set-off) which the Bank may have.
Section 9.5. Indemnification.
---------------
The Company hereby agrees to indemnify the Bank and any of its
officers, directors, shareholders, controlling Persons, employees, agents and
attorneys (collectively, "Indemnified Persons") and to hold such Indemnified
Persons harmless from and against, any and all claims, damages, losses,
liabilities, costs or expenses which any Indemnified Person may incur or which
may be claimed by any Person against any Indemnified Person:
(a) by reason of any inaccuracy in any material respect, or any untrue
statement or alleged untrue statement of any material fact, contained in the
Preliminary Official Statement or the Official Statement or any amendment or
supplement thereto, or by reason of the omission or alleged omission to state
therein a material fact necessary to make such statements, in the light of the
circumstances under which they were made, not misleading; provided, however,
that, in the case of any action or proceeding alleging an inaccuracy in a
material respect, or an untrue statement, with respect to information supplied
by and describing the Bank in the Preliminary Official Statement or the Official
Statement (the "Bank Information"), (i) indemnification by the Company pursuant
to this Section shall be limited to the costs and expenses of the Indemnified
Person (including fees and expenses of Bank's counsel) of defending itself
against such allegation, (ii) if in any such action or proceeding it is finally
determined that the Bank Information contained an inaccuracy in a material
respect or an untrue statement, then the Company shall not be required to
indemnify the Indemnified Person for any claims, damages, losses, liabilities,
costs or expenses to the extent caused by such inaccuracy or untrue statement,
and (iii) if any such action or proceeding shall be settled by the Indemnified
Person without there being a final determination to the effect described in the
preceding clause (ii), then the Company shall be required to indemnify the
Indemnified Person pursuant to this Section only if such action or proceeding is
settled with the Company's consent; or
(b) by reason of or in connection with the execution, delivery or
performance of the Bonds, the Indenture, or the Agreement, or any transaction
contemplated by the Indenture or the Agreement; or
(c) by reason of or in connection with the lawful execution and
delivery or transfer of, or payment or failure to make lawful payment under, the
Letter of Credit;
provided, however, that the Company shall not be required to indemnify or hold
- -------- -------
harmless an Indemnified Person pursuant to this Section for any claims, damages,
losses, liabilities, costs or expenses to the extent caused by such Indemnified
Person's willful misconduct or gross negligence. Nothing in this Section is
intended to limit the Company's obligations contained in Section 2.2. Without
-47-
<PAGE>
prejudice to the survival of any other obligation of the Company hereunder, the
indemnities and obligations of the Company contained in this Section shall
survive the payment in full the Obligations and the termination of the Letter of
Credit.
Section 9.6. Amendments.
----------
Except as otherwise expressly provided in this Reimbursement Agreement,
any consent or approval required or permitted by this Reimbursement Agreement or
in any Related Document to be given by the Bank may be given, and any term of
this Reimbursement Agreement or of any Related Document may be amended, and the
performance or observance by the Company of any terms of this Reimbursement
Agreement or such Related Document or the continuance of any Default or Event of
Default may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of the
Company and the written consent of the Bank. No waiver shall extend to or affect
any obligation not expressly waived or impair any right consequent thereon. No
course of dealing or delay or omission on the part of the Bank in exercising any
right shall operate as a waiver thereof or otherwise be prejudicial thereto. No
notice to or demand upon the Company shall entitle the Company to other or
further notice or demand in similar or other circumstances.
Section 9.7. Survival.
--------
Notwithstanding any termination of this Reimbursement Agreement or of
any of the Related Documents, the indemnities to which the Bank and the other
Indemnified Persons are entitled under the provisions of Sections 9.2. and 9.5.
and any other provision of this Reimbursement Agreement and the Related
Documents, shall continue in full force and effect and shall protect the Bank
and the other Indemnified Persons against events arising after such termination
as well as before.
Section 9.8. Titles and Captions.
-------------------
Titles and captions of Articles, Sections, subsections and clauses in
this Reimbursement Agreement are for convenience only, and neither limit nor
amplify the provisions of this Reimbursement Agreement.
Section 9.9. Severability of Provisions.
--------------------------
To the greatest extent permitted by law, any provision of this
Reimbursement Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating the remainder of such
provision or the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
-48-
<PAGE>
Section 9.10. GOVERNING LAW.
-------------
THIS REIMBURSEMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
Section 9.11. Assignment.
----------
The provisions of this Reimbursement Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, except that the Company may not assign or transfer any of its
rights under this Reimbursement Agreement or any Related Document.
Section 9.12. Participations.
--------------
The Bank may at any time sell, assign, transfer, negotiate, and grant
participations in, or otherwise dispose of, all or any portion of its rights,
benefits and/or obligations under this Reimbursement Agreement and under any
Related Document to any Person and in the event of any such disposition by the
Bank, all references herein to the Bank shall be deemed a reference to the
Bank's transferee or participant to the extent of its participation. The Company
hereby consents to the disclosure of financial or other information received by
the Bank concerning the Company to the Bank's transferee or participant (or
prospective transferees and participants). The Company hereby agrees that any
transferee or participant purchasing a participation in the Bank's rights under
this Reimbursement Agreement may exercise all rights of offset, banker's lien
and counterclaim with respect to such participation. In the case of any such
transfer, participation or disposition, such transferee or participant shall
have all rights and duties under this Reimbursement Agreement as if such
transferee or participant were the Bank.
Section 9.13. Further Assurances.
------------------
The Company will, at any and all times, pass, execute and deliver all
such further documents, resolutions, assignments, recordings, filings, transfers
and assurances as may be necessary or desirable in the reasonable judgment of
the Bank for the better assuring and confirming of all of the rights, revenues
and other funds pledged or assigned to or mortgaged for the payment of the
Company's obligations hereunder, or intended so to be. The Company hereby
authorizes and empowers the Bank to sign on behalf of the Company as its
attorney-in-fact, and to file, any financing or continuation statement or any
amendments thereto with respect to any security pledged or assigned to the Bank
in accordance with the Uniform Commercial Code or any applicable jurisdiction.
Section 9.14. Counterparts.
------------
This Reimbursement Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and which shall
constitute the same agreement.
-49-
<PAGE>
Section 9.15. ENTIRE AGREEMENT.
----------------
THIS REIMBURSEMENT AGREEMENT AND THE OTHER RELATED DOCUMENTS SET FORTH
AND CONSTITUTE THE ENTIRE AGREEMENT BETWEEN HE PARTIES HERETO WITH RESPECT TO
THE TRANSACTIONS SET FORTH HEREIN AND THE CREDIT FACILITY DESCRIBED HEREBY.
(Signatures on following page)
-50-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Letter of
Credit and Reimbursement Agreement to be duly executed and delivered under seal
as of the date first above written.
ABRAMS RIVERSIDE, LLC
By: ABRAMS PROPERTIES, INC., its sole member
By: /s/ Alan R. Abrams
Title: President
ATTEST:
By: /s/ Melinda S. Garrett
Title: Asst. Secretary
(CORPORATE SEAL)
(Signatures continued on following page)
<PAGE>
(Signature page to Letter of Credit and Reimbursement Agreement)
NATIONSBANK, N.A.
By: /s/ Helen Cease
Title: Senior Vice President
<PAGE>
EXHIBIT A to LETTER OF CREDIT
AND REIMBURSEMENT AGREEMENT
IRREVOCABLE LETTER OF CREDIT
NATIONSBANK, N.A.
Letter of Credit No. Issue Date Stated Expiration Date Maximum Amount
931974 November 12, 1997 November 15, 2002 $11,162,739.72
AmSouth Bank
1901 Sixth Avenue North - 7th Floor
Birmingham, Alabama 35203
Attention: Corporate Trust Department
Ladies and Gentlemen:
At the request and on the instructions of our customer, Abrams
Riverside, LLC, a Georgia limited liability company (the "Company"), we hereby
establish this Irrevocable Letter of Credit (the "Letter of Credit") in the
amount not to exceed $11,162,739.72 (the "Initial Stated Amount"; and, as the
same may from time to time be reduced and thereafter reinstated as hereinafter
provided, the "Available Amount"), consisting of (i) an aggregate amount not
exceeding $11,000,000, which may be drawn upon with respect to payment of the
unpaid principal amount of, or portion of, the purchase price corresponding to
the principal of, the Bonds, as certified to us and (ii) an aggregate amount not
exceeding $162,739.72, which may be drawn upon with respect to the payment of
interest on the Bonds or portion of the purchase price representing accrued
interest on the Bonds, as certified to us, in your favor, as Trustee under that
certain Trust Indenture, dated as of October 1, 1997 (the "Indenture"), by and
between you, as Trustee, and Development Authority of Douglas County, Georgia
(the "Issuer"), pursuant to which the Issuer has issued $11,000,000 in aggregate
principal amount of its Taxable Industrial Development Revenue Bonds (Abrams
Riverside, LLC Project), Series 1997 (the "Bonds"). This Letter of Credit is
effective immediately and expires on November 15, 2002, or such later date to
which the Stated Expiration Date has been extended in accordance with the terms
hereof (the "Stated Expiration Date").
We hereby irrevocably authorize you to draw on us, in accordance with
the terms and conditions hereinafter set forth, (1) in one or more drawings by
your draft payable one Business Day (as hereinafter defined) after sight, drawn
on us, and accompanied by your written and completed certificate signed by you
in substantially the form of Annex A attached hereto (such draft being your
<PAGE>
"Interest Draft"), an amount not to exceed $162,739.72 (representing 36-days'
interest on the Bonds at a maximum rate of 15% per annum, computed on the basis
of actual number of days elapsed over a year of 365 or 366 days, as applicable),
subject to reduction or reinstatement, if applicable, as hereinafter provided,
(2) in one or more drawings by your draft or drafts payable one Business Day
after sight, drawn on us, and, for each such drawing, accompanied by your
written and completed certificate signed by you in substantially the form of
Annex B attached hereto (any such draft being your "Partial Redemption Draft"),
an aggregate amount not to exceed $11,000,000, subject to reduction as
hereinafter provided, (3) in one or more drawings by your draft or drafts
payable one Business Day (or in certain circumstances as-described herein on-the
same Business Day) after sight, drawn on us, and, for each such drawing,
accompanied by your written and completed certificate signed by you in
substantially the form of Annex C attached hereto (any such draft being your
"Mandatory Purchase Draft"), an aggregate amount not to exceed $11,162,739.72
(representing the principal amount of the Bonds plus 36 days' interest coverage
at a maximum rate of 15% per annum, computed on the basis of actual number of
days elapsed over a year of 365 or 366 days, as applicable), subject to
reduction or reinstatement, if applicable, as hereinafter provided, and (4) in a
single drawing by your draft payable one Business Day after sight, drawn on us,
and accompanied by your written and completed certificate signed by you in the
form of Annex D attached hereto (such draft being your "Final Draft"), an amount
not to exceed $11,162,739.72 (representing the principal amount of the Bonds
plus 36-days' interest coverage at a maximum rate of 15% per annum, computed on
the basis of actual number of days elapsed over a year of 365 or 366 days, as
applicable), subject to reduction as hereinafter provided. Any such draft, with
the accompanying certificate, drawn in strict conformity with the terms and
conditions of this Letter of Credit and presented at our office as hereinafter
set forth prior to 11:00 a.m. (Atlanta, Georgia time) on any Business Day shall
be honored by us not later than 3:00 p.m. (Atlanta, Georgia time) on the same
day or on such later Business Day as you may specify. Any such draft, with the
accompanying certificate, drawn in strict conformity with the terms and
conditions of this Letter of Credit and presented at our office as hereinafter
set forth after the time specified hereinabove shall be honored by us not later
than 3:00 p.m. (Atlanta, Georgia time) on the next Business Day thereafter or on
such later Business Day as you may specify.
Your right to draw on us by your Interest Draft(s) shall be reduced by
the amount of any drawing or drawings theretofore made on us by your Mandatory
Purchase Draft(s) and attributable to interest on the Bonds, unless reinstated.
Your right to draw on us by your Partial Redemption Draft(s), your Mandatory
Purchase Draft(s) and your Final Draft shall also be reduced by the amount of
any drawing or drawings theretofore made on us by your Partial Redemption
Draft(s) and, unless reinstated, your Mandatory Purchase Draft(s).
Your right to draw on us in a single drawing by your Interest Draft
under clause (1) above shall be automatically and irrevocably reinstated and,
effective the first Business Day following the date of our honoring such
Interest Draft and you shall again be irrevocably authorized to draw on us in
accordance with clause (1) and the other terms and conditions referred to or set
2
<PAGE>
forth above, in a drawing by your Interest Draft; and this automatic
reinstatement of your right to draw on us by your Interest Draft under clause
(1) above shall be applicable to successive drawings by your Interest Drafts
under clause (1) so long as this Letter of Credit shall not have terminated as
set forth below.
If you shall draw on us by your Mandatory Purchase Draft and thereafter
you shall receive and confirm to us by telephone at telephone number (214)
508-3153 that you hold in trust for our account collected and immediately
available funds constituting the proceeds of the remarketing of all or a portion
of the Bonds tendered to you for purchase in accordance with the terms of the
Indenture, such confirmation shall automatically reinstate your right to draw on
us (i) by your Interest Draft under clause (1) above in the amount of the
drawing made on us by such Mandatory Purchase Draft and attributable to interest
on the Bonds that have been remarketed and for which you are holding proceeds,
(ii) by your Partial Redemption Draft(s) under clause (2) above, in the amount
of the drawing made on us by such Mandatory Purchase Draft and attributable to
principal on the Bonds that have been remarketed and for which you are holding
proceeds and (iii) by your Mandatory Purchase Draft(s) under clause (3) above
and your Final Draft under clause (4) above, in the amount of the drawing made
on us by such Mandatory Purchase Draft and attributable to the Bonds that have
been remarketed and for which you are holding proceeds. Upon the resale and
delivery of the Bonds in such amount under the Indenture and your telephonic
confirmation to us, you shall again be irrevocably authorized to draw on us in
accordance with clauses (1) through (4) in the second paragraph hereof, and the
other terms and conditions referred to or set forth above, in a single or
multiple drawing as set forth above; and this automatic reinstatement of your
right to draw on us shall be applicable to successive drawings hereunder so long
as this Letter of Credit shall not have been terminated as set forth below. We
shall thereafter promptly confirm such reinstatement in writing, but such
written confirmation to you by us shall not be required to effect such
reinstatement.
Subject to the provisions set forth above for reinstatement of amounts
drawn under the Letter of Credit by your Mandatory Purchase Draft(s), drawings
under the Letter of Credit honored by us shall not, in the aggregate, exceed the
face amount of this Letter of Credit as reduced from time to time as hereinabove
provided.
Funds under this Letter of Credit are available to you against (1) your
Interest Draft accompanied by your written and completed certificate signed by
you in substantially the form of Annex A attached hereto, (2) your Partial
Redemption Draft accompanied by your written and completed certificate signed by
you in substantially the form of Annex B attached hereto, (3) your Mandatory
Purchase Draft accompanied by your written and completed certificate signed by
you in substantially the form of Annex C attached hereto, and (4) your Final
Draft accompanied by your written and completed certificate signed by you in
substantially the form of Annex D attached hereto. To the extent that amounts
are available to be drawn by your Interest Draft, such Interest Draft may be
presented together with your Partial Redemption Draft (but not your Final
3
<PAGE>
Draft). Each such draft shall include thereon a reference to the number of this
Letter of Credit and each such draft and certificate shall be dated the date of
its presentation and shall be presented at our office located at NationsBank of
Texas, N.A., Letter of Credit Dept., 901 Main Street, 9th Floor, Dallas, Texas
75202, Attention: Standby Letter of Credit Department, or if delivered via
facsimile, to facsimile number (214) 508-3928, or at any other office which may
be designated by us on at least five Business Days' prior written notice to you.
Demand for payment hereunder may also be made in the form of facsimile
transmission of the final Draft hereunder to the address and telecopy number
shown above, but only after first giving notice to us in the form of a facsimile
transmission at (214) 508-3928, and receiving verbal approval to telecopy such
Final Draft to us at telephone number (214) 508-3153. You must confirm our
receipt of each telecopied Final Draft by telephoning the above numbers Only
upon such confirmation shall the demand under the Final Draft be deemed made. We
agree that all payments made by us hereunder will be made with our own funds.
This Letter of Credit shall automatically terminate upon the earliest
to occur of: (i) our honoring your Final Draft hereunder; (ii) your surrendering
this Letter of Credit to us for cancellation as a result of (A) the payment in
full of the Bonds (whether by maturity, acceleration, redemption or otherwise)
pursuant to the provisions of the Indenture or (B) the acceptance by you of an
Alternate Credit Facility (as defined in the Indenture), as certified by you to
us; (iii) the Stated Expiration Date; or (iv) the Business Day following the
Conversion Date (as defined in the Indenture), unless waived in writing by us
prior to the Conversion Date.
If a demand for payment made by you hereunder does not, in any
instance, conform to the terms and conditions of this Letter of Credit, we shall
give you prompt written notice that the demand was not effected in accordance
with the terms and conditions of this Letter of Credit, stating the reasons
therefor and that we are holding any documents at your disposal or are returning
the same to you, as we may elect. Such notice shall be sent to you by telecopy
to the following number: (205) 581-7661, Attention: Corporate Trust Department.
Upon being notified that the demand was not effected in conformity with this
Letter of Credit, you may attempt to correct any such non-conforming demand for
payment if, and to the extent that, you are able to do so in accordance with
terms of this Letter of Credit and within the expiration date of the Letter of
Credit.
Communications with respect to this Letter of Credit shall be in
writing and shall be addressed to us at NationsBank of Texas, N.A., Letter of
Credit Department, 901 Main Street, 9th Floor, Dallas 75202, Attention: Standby
Letter of Credit Department, and specifically referring to the number of this
Letter of Credit. The term "Business Day" as used herein shall mean any Monday,
Tuesday, Wednesday, Thursday or Friday on which each of the Trustee, the
Remarketing Agent and us is open for business; provided, that for purposes of
counting the number of Business Days prior to a given day, "Business Day" means
any Monday, Tuesday, Wednesday, Thursday or Friday on which each of the Trustee,
the Remarketing Agent and we are scheduled to be open for business regardless of
whether each such entity is in fact open for business on such day.
4
<PAGE>
This Letter of Credit is subject to the Uniform Customs and Practice
for Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (the "Uniform Customs") with the exceptions of Articles
48(f) and 48(g) thereof. This Letter of Credit shall be deemed to be a contract
made under the laws of the State of Georgia and shall, as to matters not
governed by the Uniform Customs, be governed by and constructed in accordance
with the laws of the State of Georgia, including the Uniform Commercial Code as
in effect in the State of Georgia.
Any drawing under this Letter of Credit will be paid from our general
funds and not directly or indirectly from funds or collateral deposited with us
for our account by the Company, or pledged with or for our account by the
Company.
This Letter of Credit is transferable in its entirety to any transferee
who has succeeded you as Trustee under the Indenture. Each letter of credit
issued upon any such transfer may be successively transferred. Transfer of the
available drawing(s) under this Letter of Credit to such transferee shall be
effected by the presentation to us of this Letter of Credit accompanied by a
written and completed certificate signed by you in the form of Annex E attached
hereto. Upon such presentation we shall forthwith transfer the same to your
transferee or, if so requested by your transferee, issue an irrevocable letter
of credit to your transferee in the form of this Letter of Credit.
The Stated Expiration Date may be extended from time to time, at our
sole discretion, by our delivery to you of a written and completed certificate
in the form of Annex F hereto. Each such extension of the Stated Expiration Date
shall become effective on the Business Day following delivery of such notice to
you and thereafter all references in this Letter of Credit to the Stated
Expiration Date shall be deemed to be references to the date designated as such
in such notice. Any date to which the Stated Expiration Date has been extended
as herein provided may, at our sole discretion, be extended in a like manner. No
further action shall be required to extend such expiration date, and no
substitute letter of credit shall be issued to effect such extension.
5
<PAGE>
This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds), other than the certificates and the
drafts referred to herein; and any such reference shall not be deemed to
incorporate herein by reference any document, instrument or agreement except for
such certificates and such drafts.
Very truly yours,
NATIONSBANK, N.A.
By:_______________________
Its:_________________
<PAGE>
ANNEX A
CERTIFICATE FOR DRAWING IN CONNECTION
WITH THE PAYMENT OF INTEREST ON THE
DEVELOPMENT AUTHORITY OF DOUGLAS COUNTY, GEORGIA
TAXABLE INDUSTRIAL DEVELOPMENT REVENUE BONDS
(ABRAMS RIVERSIDE, LLC PROJECT), SERIES 1997
The undersigned, a duly authorized officer of AmSouth Bank, a state
banking corporation organized and existing under the laws of the State of
Alabama, as trustee (the "Trustee"), hereby certifies to NationsBank, N.A., a
national banking association, as issuer of the Letter of Credit (the "Bank"),
with reference to Irrevocable Letter of Credit No. ____________ (the "Letter of
Credit") issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the trustee under the Indenture for the holders of
the Bonds.
(2) The Trustee is making a drawing under the Letter of Credit with
respect to a payment, pursuant to the terms of the Indenture, of interest on the
Bonds, which payment is due and payable on a regular interest payment date on
the record date for such interest payment date, and none of such Bonds for which
interest is drawn pursuant to the draft were held of record by the Company or by
the Bank, its designees, as pledgee of the Company.
(3) The amount of the Interest Draft accompanying this Certificate is
$___________, being drawn in respect of such interest, and does not include any
amount of interest on the Bonds included in any Interest Draft or Mandatory
Purchase Draft (that has not been reinstated) presented to you and not
dishonored by you on or prior to the date of presentation hereof.
(4) [The Interest Draft accompanying this Certificate is the first
Interest Draft presented by the Trustee under the Letter of Credit.]<F1>
[The Interest Draft accompanying this Certificate is an Interest Draft
presented by the Trustee under the Letter of Credit.]<F2>
(5) The amount of the Interest Draft accompanying this Certificate was
computed in accordance with the terms and conditions of the Bonds and the
Indenture and does not exceed the amount available to be drawn by an Interest
Draft under the Letter of Credit.
- -----------------------------
[FN]
<F1> To be used in the Certificate relating to the first interest Draft only.
<F2> To be used in each Certificate relating to each Interest Draft other
than the first Interest Draft.
</FN>
<PAGE>
(6) This Certificate and the Interest Draft it accompanies are dated,
and are being presented to the Bank on, the date that is one Business Day prior
to the date on which interest on the Bonds with respect to which this drawing is
being made is due and payable under the terms of the Bonds and the Indenture.
All capitalized terms used but not defined herein shall have the
meaning assigned thereto in the Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed this Certificate as of the
____ day of _________________, 19__.
AMSOUTH BANK, as Trustee
By:____________________________
Its: Authorized Officer
<PAGE>
ANNEX B
CERTIFICATE FOR DRAWING IN CONNECTION WITH
THE PAYMENT OF PRINCIPAL AND UP TO THIRTY-SIX (36) DAYS'
INTEREST UPON PARTIAL REDEMPTION OF THE
DEVELOPMENT AUTHORITY OF DOUGLAS COUNTY, GEORGIA
TAXABLE INDUSTRIAL DEVELOPMENT REVENUE BONDS
(ABRAMS RIVERSIDE, LLC PROJECT), SERIES 1997
The undersigned, a duly authorized officer of AmSouth Bank, a state
banking corporation organized and existing under the laws of the State of
Alabama (the "Trustee"), hereby certifies to NationsBank, N.A., a national
banking association, as issuer of the Letter of Credit (the "Bank"), with
reference to Irrevocable Letter of Credit No. ______________ (the "Letter of
Credit") issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the trustee under the Indenture for the holders of
the Bonds.
(2) The Trustee is making a drawing under the Letter of Credit with
respect to the payment, pursuant to the terms of the Indenture, of less than all
of the unpaid principal of the Bonds which are outstanding under the Indenture,
of the unpaid principal amount of and up to thirty-six (36) days' accrued and
unpaid interest on, the Bonds to be redeemed pursuant to the Indenture (other
than Bonds presently held of record by the Company or by the Bank, or its
designee, as pledgee of the Company).
(3) The amount of the Partial Redemption Draft accompanying this
Certificate is equal to the sum of (i) $__________ being drawn in respect of the
payment of unpaid principal of the Bonds to be redeemed and (ii) $____________
being drawn in respect of the payment of thirty-six (36) days accrued and unpaid
interest on such Bonds, and does not include any amount of principal on the
Bonds included in any Partial Redemption Draft, Mandatory Purchase Draft that
has not been reinstated or Final Draft presented to you and not dishonored by
you on or prior to the date of presentation hereof.
(4) The amount of the Partial Redemption Draft accompanying this
Certificate was computed in accordance with the terms and conditions of the
Bonds and the Indenture and does not exceed the amount available to be drawn
with respect to principal of the Bonds under the Letter of Credit.
(5) This Certificate and the Partial Redemption Draft it accompanies
are dated, and are being presented to the Bank on, the date that is one Business
Day prior to the date on which unpaid principal of the Bonds with respect to
which this drawing is being made is due and payable under the terms of the Bonds
and the Indenture.
The Trustee acknowledges that, pursuant to the terms of the Letter of
Credit, upon your honoring the Partial Redemption Draft accompanying this
<PAGE>
Certificate, (a) the total amount available under the Letter of Credit and the
amounts available to be drawn by the Trustee thereunder by any subsequent
Partial Redemption Draft and Final Draft are automatically decreased by an
amount equal to the amount specified in paragraph (3) above as being drawn in
respect of the payment of unpaid principal and accrued interest thereon of the
Bonds.
All capitalized terms used but not defined herein shall have the
meaning assigned thereto in the Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed this Certificate as of the
____ day of _________________, 19__.
AMSOUTH BANK, as Trustee
By:___________________________
Its: Authorized Officer
B-2
<PAGE>
ANNEX C
CERTIFICATE FOR DRAWING IN CONNECTION WITH
THE PAYMENT OF THE PURCHASE PRICE UPON MANDATORY PURCHASE
OF THE DEVELOPMENT AUTHORITY OF DOUGLAS COUNTY, GEORGIA
TAXABLE INDUSTRIAL DEVELOPMENT REVENUE BONDS
(ABRAMS RIVERSIDE, LLC PROJECT), SERIES 1997
The undersigned, a duly authorized officer of AmSouth Bank, a state
banking corporation organized and existing under the laws of the State of
Alabama, as trustee (the "Trustee"), hereby certifies to NationsBank, N.A., a
national banking association, as issuer of the Letter of Credit (the "Bank"),
with reference to Irrevocable Letter of Credit No. _____________ (the "Letter of
Credit") issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the trustee under the Indenture for the holders of
the Bonds.
(2) The Trustee is making a drawing under the Letter of Credit with
respect to a payment of the purchase price of the Bonds which are outstanding
within the meaning of the Indenture (other than Bonds presently held of record
by the Company or an affiliate, or by the Bank, or its designee, as pledgee of
the Company) upon mandatory purchase or optional or mandatory tender.
(3) The amount of the Mandatory Purchase Draft accompanying this
Certificate is $__________ (representing $___________ of principal and
$__________ of interest), being drawn in respect of the payment of the purchase
price of Bonds properly tendered or deemed tendered for purchase, and does not
include any amount of principal on the Bonds included in any other Mandatory
Purchase Draft (except to the extent of your reinstatement of the amount which
may be drawn thereby under the terms of the Letter of Credit), or in any Partial
Redemption Draft or Final Draft presented to you, and not dishonored by you, on
or prior to the date of presentation hereof.
(4) The Bonds being purchased with the proceeds of the Mandatory
Purchase Draft accompanying this Certificate are being registered in the name of
the Company or its nominee and held by the Trustee subject to the pledge of such
Bonds to the Bank, all in accordance with the Indenture, the Pledge Agreement,
dated as of October 1, 1997, by and among Abrams Riverside, LLC (the "Company"),
the Bank and the Trustee, and the Letter of Credit and Reimbursement Agreement,
dated as of October 1, 1997, by and between the Company and the Bank.
(5) The amount of the Mandatory Purchase Draft accompanying this
Certificate was computed in accordance with the terms and conditions of the
Bonds and the Indenture and does not exceed the amount available to be drawn
under the Letter of Credit with respect to the purchase price of the Bonds.
<PAGE>
(6) This Certificate and the Mandatory Purchase Draft it accompanies
are dated, and are being presented to the Bank on, the date that is not more
than one Business Day prior to the date on which the purchase price of the Bonds
with respect to which this drawing is being made is due and payable under the
terms of the Bonds and the Indenture.
The Trustee acknowledges that, pursuant to the terms of the Letter of
Credit, upon your honoring the Mandatory Purchase Draft accompanying this
Certificate, the total amount of the Letter of Credit and the amounts available
to. be drawn by the Trustee thereunder by (i) any subsequent Mandatory Purchase
Draft, Partial Redemption Draft, and Final Draft are automatically decreased by
an amount equal to the amount specified in paragraph (3) above as being drawn in
respect of the payment of unpaid principal of the Bonds, unless such amount is
reinstated in the manner provided in the Letter of Credit, and (ii) any
subsequent Interest Draft, Mandatory Purchase Draft and Final Draft is
automatically decreased by an amount equal to the amount specified in paragraph
(3) above as being drawn in respect of the payment of unpaid interest on the
Bonds, unless such amount is reinstated in the manner provided in the Letter of
Credit.
All capitalized terms used but not defined herein shall have the
meaning assigned thereto in the Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed this Certificate as of the
____ day of _________________, 19__.
AMSOUTH BANK, as Trustee
By:___________________________
Its: Authorized Officer
C-2
<PAGE>
ANNEX D
CERTIFICATE FOR DRAWING IN CONNECTION WITH
THE PAYMENT OF ENTIRE OUTSTANDING
PRINCIPAL OF AND INTEREST ON THE
DEVELOPMENT AUTHORITY OF DOUGLAS COUNTY, GEORGIA
TAXABLE INDUSTRIAL DEVELOPMENT REVENUE BONDS
(ABRAMS RIVERSIDE, LLC PROJECT), SERIES 1997
---------------------------------------------
The undersigned, a duly authorized officer of AmSouth Bank, a state
banking corporation organized and existing under the laws of the State of
Alabama, as trustee (the "Trustee"), hereby certifies to NationsBank, N.A., a
national banking association, as issuer of the Letter of Credit (the "Bank"),
with reference to Irrevocable Letter of Credit No. ____________ (the "Letter of
Credit") issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the trustee under the Indenture for the holders of
the Bonds.
(2) The Trustee is making a drawing under the Letter of Credit with
respect to a payment, either at stated maturity of the last Bonds to mature or
upon acceleration or as a result of a redemption as a whole pursuant to the
Indenture of the unpaid principal amount of, and up to thirty-six (36) days'
accrued and unpaid interest on all of the Bonds which are outstanding within the
meaning of the Indenture (other than Bonds presently held of record by the
Company or by the Bank, or its designee, as pledgee of the Company) and any
premium applicable to the Bonds upon such redemption or acceleration.
(3) The amount of the Final Draft accompanying this Certificate is
equal to the sum of (i) $__________ of the Bonds being drawn in respect of
unpaid principal of the Bonds and (ii) $__________ being drawn in respect of
unpaid interest on the Bonds, and does not include any amount of principal of or
interest on the Bonds included in any Interest Draft or Mandatory Purchase Draft
that has not been reinstated, or Partial Redemption Draft presented and not
dishonored by you on or prior to the date of this Certificate.
(4) The amount of the Final Draft accompanying this Certificate was
computed in accordance with the terms and conditions of the Bonds and the
Indenture and does not exceed the amount available to be drawn by a Final Draft
under the Letter of Credit.
(5) This Certificate and the Final Draft it accompanies are dated, and
are being presented to the Bank on, the date that is one Business Day prior to
the date on which the unpaid principal of, and interest on, all of the Bonds
which are outstanding under the Indenture is due and payable under the terms of
the Bonds and the Indenture.
<PAGE>
The Trustee acknowledges that, pursuant to the terms of the Letter of
Credit, upon your honoring the Final Draft accompanying this Certificate, the
entire amount available to be drawn by the Trustee under the Letter of Credit
shall have been drawn and the Letter of Credit shall terminate automatically.
All capitalized terms used but not defined herein shall have the
meaning assigned thereto in the Letter of Credit.
IN WITNESS WHEREOF, the Trustee has executed this Certificate as of the
____ day of _________________, 19__.
AMSOUTH BANK, as Trustee
By:___________________________
Its: Authorized Officer
D-2
<PAGE>
ANNEX E
INSTRUCTIONS TO TRANSFER
------------------------
__________________, 19__
NationsBank of Texas, N.A.
Letter of Credit Dept.
901 Main Street, 9th Floor
Dallas, Texas 75202
Attention: Standby Letter of Credit Department
Re: Irrevocable Letter of Credit No. ______________
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
(Name of Transferee)
(Address)
all rights of the undersigned beneficiary to draw under the above Letter of
Credit. Such transferee has succeeded the undersigned beneficiary as Trustee
under the Indenture.
By this transfer, all rights of the undersigned beneficiary in such
Letter of Credit are transferred to the transferee and the transferee shall
hereafter have the sole rights as beneficiary thereof; provided, however, that
no rights shall be deemed to have been transferred to the transferee until such
transfer complies with the requirements of such Letter of Credit pertaining to
transfers.
Such Letter of Credit is returned herewith and in accordance therewith
we ask you to transfer the same to the transferee or, if so requested by the
transferee, to issue a new irrevocable letter of credit in favor of the
transferee with provisions consistent with such Letter of Credit.
All capitalized terms used but not defined herein shall have the
meaning assigned thereto in such Letter of Credit.
AMSOUTH BANK, as Trustee
By:__________________________
Its: Authorized Officer
E-1
<PAGE>
ANNEX F
EXTENSION CERTIFICATE
---------------------
__________________, 19__
AmSouth Bank
1901 Sixth Avenue North - 7th Floor
Birmingham, Alabama 35203
Attention: Corporate Trust Department
Re: NationsBank, N.A.
Irrevocable Letter of Credit No. _____________
Securing the Development Authority of Douglas County,
Georgia Taxable Industrial Development Revenue Bonds (Abrams
Riverside, LCC Project), Series 1997
Ladies and Gentlemen:
Reference is made to that certain Irrevocable Letter of Credit No.
____________, dated October ___, 1997 (the "Letter of Credit"), issued by
NationsBank, N.A. in your favor as beneficiary. We hereby extend the Stated
Expiration Date (as defined in the Letter of Credit) from _______________,
_____, to _______________, _____.
Other than as set forth above, all rights of the beneficiary to draw
under the above Letter of Credit shall remain as set forth in such Letter of
Credit.
NATIONSBANK, N.A., as issuer of
the Letter of Credit
By:___________________________
Its: Authorized Officer
F-1
<PAGE>
EXHIBIT B
FORM OF PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of November 1, 1997 (this "Pledge
Agreement"), by and among ABRAMS RIVERSIDE, LLC, a Georgia limited liability
company (the "Company"), AMSOUTH BANK, as trustee (the "Trustee") and
NATIONSBANK, N.A., as issuer of the Letter of Credit (the "Bank").
WHEREAS, the Development Authority of Douglas County, Georgia (the
"Issuer") is to issue $11,000,000 in aggregate principal amount of its Taxable
Industrial Development Revenue Bonds (Abrams Riverside, LLC Project), Series
1997, (the "Bonds"), pursuant to that certain Trust Indenture, dated as of
November 1, 1997 (the "Indenture"), by and between the Issuer and the Trustee,
for the purpose of financing the acquisition, construction and equipping of a
facility for the manufacturing of store fixtures, located in Douglas County,
Georgia;
WHEREAS, pursuant to the terms of that certain Lease Agreement, dated
as of November 1, 1997 (the "Agreement"), by and between the Issuer and the
Company, the Issuer will lease the Project to the Company and the Company has
agreed to pay amounts under the Agreement to the Issuer at such times and in
such amounts as necessary to provide for the payment of the principal of,
premium (if any) and interest on, and the purchase price of, the Bonds when due;
WHEREAS, in order to fulfill the requirements of the Indenture, the
Company has requested that the Bank issue its Irrevocable Letter of Credit No.
931974, dated November 12, 1997 (the "Letter of Credit"), for the benefit of the
Trustee and for the account of the Company, to provide a credit facility for
payment of the principal of and interest on the Bonds on the scheduled due dates
and upon redemption or acceleration;
WHEREAS, the Bank is willing to issue the Letter of Credit subject to
and on the terms and conditions of that certain Letter of Credit and
Reimbursement Agreement, dated as of November 1, 1997 (as the same may be
amended, supplemented, restated or otherwise modified from time to time in
accordance with its terms, the "Reimbursement Agreement"), by and between the
Bank and the Company;
WHEREAS, to secure its obligations to the Bank under the Reimbursement
Agreement, the Company is willing to grant to the Bank a security interest in,
among other things, the Pledged Bonds (as defined below); and
WHEREAS, it is a condition precedent to the effectiveness of the
Reimbursement Agreement and the issuance by the Bank of the Letter of Credit
that the Company and the Trustee execute and deliver this Pledge Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises, in order to induce
the Bank to issue the Letter of Credit and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, the parties hereto agree as follows:
Section 1. Grant of Security Interest. As security for the payment and
--------------------------
performance of the Obligations, the Company hereby grants to the Bank a security
interest in, and pledges, assigns, transfers and delivers to the Bank, all of
the Company's right, title and interest (if any) in and to all of the following
(collectively, the "Pledged Bonds"): (a) any Bond during the period from and
including the date of its purchase with amounts realized under the Letter of
Credit to but excluding the date on which such Bond is remarketed to any Person
other than the Bank, or the Company reimburses the Bank for the amounts drawn on
the Letter of Credit to purchase such Bond, together with all proceeds thereof,
and (b) all documents, books and records of the Company relating thereto.
Section 2. Representations and Warranties of the Company. The Company
---------------------------------------------
hereby represents and warrants to the Trustee and the Bank that: The execution,
delivery and performance of this Pledge Agreement by the Company in accordance
with its terms do not and will not, by the passage of time, the giving of notice
or otherwise; (a) require any Governmental Approval or violate any Applicable
Law relating to the Company; (b) conflict with, result in a breach of or
constitute a default under the articles of incorporation or bylaws of the
Company, or any indenture, lease, loan or credit agreement, instrument or other
contract or agreement to which the Company is a party or by which the Company or
any of its properties may be bound; (c) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Company; (d) no financing statement, mortgage, notice
of lien, security agreement or any other agreement or instrument creating or
giving notice of any Lien against any of the Pledged Bonds is in existence or on
file in any public office; (e) on the date of delivery to the Bank or the
Trustee, on behalf of the Bank, of any Pledged Bonds, neither the Issuer, the
Remarketing Agent, nor the Trustee will have any right, title or interest in or
to the Pledged Bonds; (f) the Company has, and on the date of delivery to the
Bank or the Trustee, on behalf of the Bank, of any Pledged Bonds will have, full
power, authority and legal right to grant to the Bank a security interest in all
of the Company's right, title and interest (if any) in and to the Pledged Bonds
pursuant to this Pledge Agreement and the terms of the Reimbursement Agreement;
and (g) the pledge, assignment, transfer and delivery of the Pledged Bonds
pursuant to this Pledge Agreement and the Reimbursement Agreement will create a
valid, perfected and first-priority security interest in favor of the Bank in
all right, title and interest of the Company (if any) in and to the Pledged
Bonds.
Section 3. Covenants of the Company and the Trustee. The Company and
----------------------------------------
the Trustee hereby covenant and agree that:
2
<PAGE>
(a) The Company will not create, assume, incur or permit or suffer
to exist or to be created, assumed or incurred, any Lien on any of the Pledged
Bonds other than the security interest herein granted (if any), and will not
sell, assign, transfer or otherwise dispose of any of the Pledged Bonds (or any
interest therein).
(b) The Trustee will at all times keep the Pledged Bonds separate
and distinct from other property of the Trustee and shall keep accurate and
complete records of the Pledged Bonds.
(c) The Company will defend its right, title and interest (if any)
in and to, and the Bank's security interest (if any) in, the Pledged Bonds
against claims and demands of all Persons.
Section 4. The Pledged Bonds.
-----------------
(a) Payments on the Pledged Bonds. If while this Pledge Agreement
------------------------------
is in effect the Company shall become entitled to receive or shall receive any
principal or interest payment in respect of any of the Pledged Bonds, the
Company agrees to accept the same as the Bank's agent and to hold the same in
trust on behalf of the Bank and to deliver the same forthwith to the Bank or to
the Bank's nominee as directed by the Bank. All monies so paid in respect of the
Pledged Bonds which are received by the Company and paid to the Bank or its
nominee or received directly by the Bank or its nominee shall be credited
against the Company's Obligations under the Reimbursement Agreement in
accordance with the Reimbursement Agreement.
(b) Release of Pledged Bonds. If the Company makes or causes to be
------------------------
made a payment to the Bank in respect of its reimbursement obligations under the
Reimbursement Agreement with respect to the Pledged Bonds, the Bank agrees to
release its security interest under this Pledge Agreement to the extent, in the
manner and under the terms and conditions set forth below and to treat such
payment in the manner set forth herein and to take all such other actions
required to be taken by the Bank hereunder. Pledged Bonds shall be released
hereunder and shall be delivered to the Company or on its order upon (i) payment
in full to the Bank by the Company, or from the proceeds of remarketing of
Pledged Bonds, of the amount of the drawing made by the Trustee with respect to
such Pledged Bonds plus interest as provided in the Reimbursement Agreement to
and through the date of such payment to the Bank, and (ii) receipt by the Bank
thereafter of a notice directing the Bank to deliver to the Company or on its
order, on the date specified in such notice, a principal amount of such Pledged
Bonds equal to the principal portion of the amount so paid and setting forth the
particular Pledged Bonds to be delivered. The Company shall (x) receive a credit
against its obligations to pay interest pursuant to the Reimbursement Agreement
to the extent of any amounts received by the Bank or its nominee as interest on
any Pledged Bonds, and (y) receive a credit against its payment obligations
under the Reimbursement Agreement to the extent of any amounts received by the
Bank or its nominee as the principal due on any Pledged Bonds. The Trustee and
the Bank shall not release any Pledged Bonds unless the Letter of Credit has
3
<PAGE>
terminated and any and all amounts due to the Bank have been paid in full or
unless the Principal Component (as defined in the Letter of Credit) of the
Stated Amount is reinstated in an amount equivalent to the sum of the
outstanding principal amount of the Pledged Bonds to be released or sold, and
the Interest Component (as defined in the Letter of Credit) of the Stated Amount
is reinstated in an amount equal to 60-days' interest on such principal amount
calculated at the Maximum Rate (as defined in the Letter of Credit) on the basis
of a 365 or 366 day year, as applicable.
Section 5. Remedies Upon Default. In addition to any right or remedy
-----------------------
that the Bank may have under the Reimbursement Agreement, the other Related
Documents or otherwise under Applicable Law, if an Event of Default shall have
occurred, the Bank may exercise any and all the rights and remedies of a secured
party under the Uniform Commercial Code as in effect in any applicable
jurisdiction (the "Code") and may otherwise sell, assign, transfer, endorse and
deliver the whole or, from time to time, any part of the Pledged Bonds at a
public or private sale or on any securities exchange, for cash, upon credit or
for other property, for immediate or future delivery, and for such price or
prices and on such terms as the Bank in its discretion shall deem appropriate.
The Bank shall be authorized at any sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent and
agree that they are purchasing the Pledged Bonds for their own account in
compliance with the Securities Act of 1933, as amended, and upon consummation of
any such sale the Bank shall have the right to assign, transfer, endorse and
deliver to the purchaser or purchasers thereof the Pledged Bonds so sold. Each
purchaser at any sale of Pledged Bonds shall take and hold the property sold
absolutely free from any claim or right on the part of the Company, and the
Company hereby waives (to the fullest extent permitted by Applicable Law) all
rights of redemption, stay and/or appraisal which the Company now has or may at
any time in the future have under any Applicable Law now existing or hereafter
enacted. The Company agrees that, to the extent notice of sale shall be required
by Applicable Law, at least ten days' prior written notice to the Company of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification, but notice given in any other
reasonable manner or at any other reasonable time shall constitute reasonable
notification. At any such sale, the Pledged Bonds, or portion thereof to be
sold, may be sold in one lot as an entirety or in separate parcels, as the Bank
may determine in its sole and absolute discretion. In addition to exercising the
power of sale herein conferred upon it, the Bank shall also have the option to
proceed by suit or suits at law or in equity to foreclose this Pledge Agreement
and sell the Pledged Bonds or any portion thereof pursuant to judgment or decree
of a court or courts having competent jurisdiction.
Section 6. Application of Proceeds. The proceeds of any sale of the
-------------------------
whole or any part of the Pledged Bonds shall be applied by the Bank in payment
of any of the Obligations, in any order which the Bank may elect. The Company
shall remain liable and will pay, on demand, any deficiency remaining in respect
of the Obligations.
4
<PAGE>
Section 7. Bank Appointed Attorney-in-Fact. The Company hereby
----------------------------------
constitutes and appoints the Bank as the attorney-in-fact of the Company with
full power of substitution either in the Bank's name or in the name of the
Company to do any of the following: (a) to perform any obligation of the Company
hereunder in the Company's name or otherwise; (b) to ask for, demand, sue for,
collect, receive, receipt and give acquittance for any and all moneys due or to
become due under and by virtue of any Pledged Bonds; (c) to prepare, execute,
file, record or deliver notices, assignments, financing statements, continuation
statements or like papers to perfect, preserve or release the Bank's security
interest in the Pledged Bonds or any of the documents, instruments, certificates
and agreements described in Section 8; (d) to endorse checks, drafts, orders and
other instruments for the payment of money payable to the Company, representing
any interest or other distribution payable in respect of the Pledged Bonds or
any part thereof or on account thereof and to give full discharge for the same;
(e) to exercise all rights, powers and remedies which the Company would have,
but for this Pledge Agreement, under the Pledged Bonds; and (f) to carry out the
provisions of this Pledge Agreement and to take any action and execute any
instrument which the Bank may deem necessary or advisable to accomplish the
purposes hereof, and to do all acts and things and execute all documents in the
name of the Company or otherwise, deemed by the Bank as necessary, proper and
convenient in connection with the preservation, perfection or enforcement of its
rights hereunder. Nothing herein contained shall be construed as requiring or
obligating the Bank to make any commitment or to make any inquiry as to the
nature or sufficiency of any payment received by it, or to present or file any
claim or notice, or to take any action with respect to the Pledged Bonds or any
part thereof or the moneys due or to become due in respect thereof or any
property covered thereby, and no action taken by the Bank or omitted to be taken
with respect to the Pledged Bonds or any part thereof shall give rise to any
defense, counterclaim or offset in favor of the Company or to any claim or
action against the Bank. The power of attorney granted herein is irrevocable and
coupled with an interest.
Section 8. Further Assurances. The Company shall, at its sole cost and
------------------
expense, take all action that may be necessary or desirable in the Bank's
opinion, or that the Bank may request, so as at all times to maintain the
validity, perfection, enforceability and priority of the Bank's security
interest in the Pledged Bonds (if any), or to enable the Bank to exercise or
enforce its rights hereunder, including without limitation, executing and
delivering financing statements, pledges, designations, notices and assignments,
in each case in form and substance satisfactory to the Bank, relating to the
creation, validity, perfection, priority or continuation of the security
interest granted hereunder (if any). The Company agrees to take, and authorizes
the Bank to take on the Company's behalf, any or all of the following actions
with respect to any Pledged Bonds as the Bank shall deem reasonably necessary to
perfect the security interest and pledge created hereby or to enable the Bank to
enforce its rights and remedies hereunder: (a) to register in the name of the
Bank any Pledged Bonds in certificated or uncertificated form; (b) to endorse in
the name of the Bank any Pledged Bonds issued in certificated form; and (c) by
book entry or otherwise, identify as belonging to the Bank a quantity of
securities that constitutes all or part of the Pledged Bonds registered in the
name of the Bank. Notwithstanding the foregoing the Company agrees that Pledged
5
<PAGE>
Bond which is not in certificated form or is otherwise in book-entry form shall
be held for the account of the Bank. The Company hereby authorizes the Bank to
execute and file in all necessary and appropriate jurisdictions (as determined
by the Bank) one or more financing or continuation statements in the name of the
Company and to sign the Company's name thereto. The Company authorizes the Bank
to file any such financing statement, document or instrument without the
signature of the Company to the extent permitted by applicable law. Any property
comprising part of the Pledged Bonds required to be delivered to the Bank
pursuant to this Pledge Agreement shall be accompanied by proper instruments of
assignment duly executed by the Company and by such other instruments or
documents as the Bank or its counsel may request.
Section 9. Rights Cumulative; Non-Waiver of Rights. The rights and
-------------------------------------------
remedies of the Bank under this Pledge Agreement are cumulative and not
exclusive of any rights or remedies which it would otherwise have. No delay or
failure on the part of the Secured Party in the exercise of any right or remedy
shall operate as a waiver thereof, no single or partial exercise by the Secured
Party of any right or remedy shall preclude other or further exercise thereof or
the exercise of any other right or remedy and no course of dealing between the
parties shall operate as a waiver of any right or remedy of the Secured Party.
Section 10. Indemnification. The Company agrees to indemnify and hold
---------------
the Bank and any corporation controlling, controlled by, or under common control
with, the Bank and any officer, attorney, director, shareholder, agent or
employee of the Bank or any such corporation (each an "Indemnified Person"),
harmless from and against any claim, loss, damage, action, cause of action,
liability, cost and expense or suit of any kind or nature whatsoever
(collectively, "Losses"), brought against or incurred by an Indemnified Person,
in any manner arising out of or, directly or indirectly, related to or connected
with this Pledge Agreement, including without limitation, the exercise by the
Bank of any of its rights and remedies under this Pledge Agreement or any other
action taken by the Bank pursuant to the terms of this Pledge Agreement;
provided, however, the Company shall not be liable to an Indemnified Person for
any Losses to the extent that such Losses result from the gross negligence or
willful misconduct of such Indemnified Person. The Company's obligations under
this section shall survive the termination of this Pledge Agreement and the
payment in full of the Obligations.
Section 11. Continuing Security Interest. This Pledge Agreement shall
-----------------------------
create a continuing security interest in the Pledged Bonds and shall remain in
full force and effect until indefeasible payment and performance in full of the
Obligations. The Company and the Bank hereby agree that the security interest
created by this Pledge Agreement in the Pledged Bonds shall not terminate and
shall continue and remain in full force and effect notwithstanding the transfer
to the Company or any Person designated by it of all or any portion of the
Pledged Bonds.
6
<PAGE>
Section 12. Notices. Notices, requests and other communications
-------
required or permitted hereunder shall be given in accordance with the applicable
terms of the Reimbursement Agreement.
Section 13. Governing Law. This PLEDGE Agreement shall be governed by,
-------------
and construed in accordance with, the laws of the State of Georgia.
Section 14. Amendments. No amendment or waiver of any provision of this
----------
Pledge Agreement nor consent to any departure by the Company herefrom shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 15. Binding Agreement; Assignment. This Pledge Agreement shall
------------------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company shall not be
permitted to assign this Pledge Agreement or any interest herein or in the
Pledged Bonds, or any part thereof, or any cash or property held by the Bank as
collateral under this Pledge Agreement.
Section 16. Termination. Upon indefeasible payment and performance in
-----------
full of all of the Obligations, this Pledge Agreement shall terminate. Upon
termination of this Pledge Agreement in accordance with its terms the Bank
agrees to take such actions as the Company may reasonably request, and at the
sole cost and expense of the Company, (a) to return Pledged Bonds in the Bank's
possession to the Company, and (b) to evidence the termination of this Pledge
Agreement, including, without limitation, the filing of any releases or any
termination statements under the Uniform Commercial Code.
Section 17. Severability. Whenever possible, each provision of this
------------
Pledge Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under applicable law, such provisions shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Pledge Agreement to the greatest extent permitted by law.
Section 18. Headings. Section headings used herein are for convenience
--------
only and are not to affect the construction of or be taken into consideration in
interpreting this Pledge Agreement.
Section 19. Counterparts. This Pledge Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed an original and all of
which shall constitute but one agreement.
7
<PAGE>
Section 20. Definitions. All terms not otherwise defined herein shall
-----------
have the respective meanings given them in, or by reference in, the
Reimbursement Agreement.
(Signatures on following page)
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
under seal this Pledge Agreement as of the date first written above.
THE COMPANY:
ABRAMS RIVERSIDE, LLC
By: ABRAMS PROPERTIES, INC.,
sole member
By:_________________________________
Title:_________________________
(Signatures continued on following page)
9
<PAGE>
(Signature page to Pledge Agreement)
THE BANK:
NATIONSBANK, N.A.
By:_________________________________
Title:_________________________
(Signatures continued on following page)
10
<PAGE>
(Signature page to Pledge Agreement)
THE TRUSTEE:
AMSOUTH BANK, as Trustee
By:________________________________
Title:_________________________
11
<PAGE>
EXHIBIT C
FORM OF EXTENSION REQUEST
----------, -----
NationsBank, N.A.
Northwest Commercial Banking Center
Riverwood 100
3350 Riverwood Cir., N.W.
Atlanta, Georgia 30339
Attention: Helen T. Cease
1. Reference is made to that certain Letter of Credit and
Reimbursement Agreement, dated as of November 1, 1997 (as amended from time to
time, the "Reimbursement Agreement"), by and between Abrams Riverside, LLC (the
"Company") and NationsBank, N.A. (the "Bank"). Unless otherwise indicated, all
terms defined in the Reimbursement Agreement have the same respective meanings
when used herein.
2. Pursuant to Section 2.11. of the Reimbursement Agreement, the
Company hereby requests (a) the Bank to consent to the extension of the Stated
Expiration Date of the Letter of Credit from ____________, 19__ to
_____________, 19__ and (b) the Bank to evidence such extension by delivering to
the Trustee an amendment to the Letter of Credit which effects the extension of
the Stated Expiration Date.
3. The Company hereby certifies to the Bank, that, on the date of
this Extension Request: (a) the representations and warranties set forth in the
Reimbursement Agreement and the Related Documents to which the Company is a
party are true and correct as if made on such date; (b) no Event of Default or
Default has occurred and is continuing; and (c) each of the Related Documents
remains in full force and effect.
IN WITNESS WHEREOF, the Company has duly executed under seal this
Extension Request on the date set forth above.
ABRAMS RIVERSIDE, LLC
By: Abrams Properties, Inc., its sole member
By: ______________________________________
Title:
[CORPORATE SEAL]
<PAGE>
EXHIBIT D
ATTACH FORM OF OPINION OF COMPANY COUNSEL
D-1
<PAGE>
EXHIBIT E
DEVELOPMENT COST BREAKDOWN
Company: Abrams Riverside, LLC
Project: The Project, as defined in the Trust Indenture, dated as of November 1,
1997, by and between the Development Authority of Douglas County, Georgia and
AmSouth Bank, as trustee
Part A -- Cost Items
<TABLE>
<CAPTION>
PART A-COST ITEMS TOTAL AMOUNT OF ITEM
--------- ----------------------------------------------------- -- -------------------------
| <C> | <S> | | <C> |
| 1 | Construction Costs | | 6,444,201 |
|---------|-----------------------------------------------------|--|-------------------------|
| 2 | Land Purchase Costs | | 1,820,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 3 | Site Preparation (included in #1) | | 0 |
|---------|-----------------------------------------------------|--|-------------------------|
| 4 | Tenant Finish Allowance | | 0 |
|---------|-----------------------------------------------------|--|-------------------------|
| 5 | Architect's Fees (Borrower) | | 226,404 |
|---------|-----------------------------------------------------|--|-------------------------|
| 6 | Real Estate Taxes | | 633 |
|---------|-----------------------------------------------------|--|-------------------------|
| 7 | Title Insurance & Exam-Owner | | 12,617 |
|---------|-----------------------------------------------------|--|-------------------------|
| 8 | Attorney's Fees/Recording Fees | | 33,429 |
|---------|-----------------------------------------------------|--|-------------------------|
| 9 | Appraisal Fee | | 3,750 |
|---------|-----------------------------------------------------|--|-------------------------|
| 10 | Real Estate Commissions | | |
|---------|-----------------------------------------------------|--|-------------------------|
| 11 | Surveyor's/Soil Test Fees/EPA | | 22,355 |
|---------|-----------------------------------------------------|--|-------------------------|
| 12 | Inspecting Agent's Fees | | 4,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 13 | Contingency Reserve | | 366,866 |
|---------|-----------------------------------------------------|--|-------------------------|
| 14 | Land/A&E Int. Before NB Closing | | 14,642 |
|---------|-----------------------------------------------------|--|-------------------------|
| 15 | Loan Interest | | 253,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 16 | Underwriting | | 49,500 |
|---------|-----------------------------------------------------|--|-------------------------|
| 17 | Printing | | 1,125 |
|---------|-----------------------------------------------------|--|-------------------------|
| 18 | Bond/Underwriter Counsel | | 37,500 |
|---------|-----------------------------------------------------|--|-------------------------|
| 19 | Bank Counsel | | 20,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 20 | Development Authority Fee | | 12,500 |
|---------|-----------------------------------------------------|--|-------------------------|
| 21 | Development Authority Counsel | | 6,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 22 | Borrower Counsel | | 20,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 23 | Rating Agency | | 10,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 24 | Trustee Acceptance Fee | | 4,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 25 | Trustee Annual Fee-first year | | 4,325 |
|---------|-----------------------------------------------------|--|-------------------------|
| 26 | Letter of Credit Fee-first year | | 60,500 |
|---------|-----------------------------------------------------|--|-------------------------|
| 27 | DTC, CUSIP, SDF | | 2,100 |
|---------|-----------------------------------------------------|--|-------------------------|
| 28 | Legal Out of Pocket | | 5,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 29 | Remarketing-first year | | 6,875 |
|---------|-----------------------------------------------------|--|-------------------------|
| 30 | Finishing Systems | | 1,039,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 31 | Dust Collection System | | 261,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 32 | Layout Design Consultant | | 64,290 |
|---------|-----------------------------------------------------|--|-------------------------|
| 33 | Legal-Sublease & Miscellaneous | | 15,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| 34 | Title Insurance Premium-Lender | | 50 |
|---------|-----------------------------------------------------|--|-------------------------|
| 35 | Annual Assessment-Riverside | | 1,131 |
|---------|-----------------------------------------------------|--|-------------------------|
| 36 | Permits/Fees | | 25,830 |
|---------|-----------------------------------------------------|--|-------------------------|
| 37 | Miscellaneous | | 2,377 |
|---------|-----------------------------------------------------|--|-------------------------|
| 38 | Developer Overhead | | 150,000 |
|---------|-----------------------------------------------------|--|-------------------------|
| | TOTALS | | $11,000,000 |
---------- ----------------------------------------------------- -- -------------------------
</TABLE>
E-1
<PAGE>
EXHIBIT E
DEVELOPMENT COST BREAKDOWN
[TO BE ATTACHED]
E-2
<PAGE>
EXHIBIT F
AMORTIZATION SCHEDULE
---------------------
YEAR PRINCIPLE
1999 190,000
2000 210,000
2001 230,000
2002 255,000
2003 280,000
2004 310,000
2005 340,000
2006 375,000
2007 410,000
2008 450,000
2009 500,000
2010 545,000
2011 600,000
2012 665,000
2013 730,000
2014 800,000
2015 885,000
2016 970,000
2017 1,075,000
2018 1,180,000
---------
TOTAL $11,000,000
E-3
AMENDMENT TO
LETTER OF CREDIT AND
REIMBURSEMENT AGREEMENT
THIS AMENDMENT TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT (this
"Amendment") is made and entered into as of September 1, 1998 by and between
ABRAMS RIVERSIDE, LLC (the "Company") and NATIONSBANK, N.A. (the "Bank").
WITNESSETH:
----------
WHEREAS, pursuant to an Indenture of Trust, dated as of November 1,
1997 (the "Indenture"), between the Development Authority of Douglas County,
Georgia (the "Issuer") and AmSouth Bank (the "Trustee"), the Issuer has issued
$11,000,000 in aggregate principal amount of the Issuer's Taxable Industrial
Development Revenue Bonds (Abrams Riverside, LLC Project), Series 1997 (the
"Bonds") to provide funds to finance the acquisition, construction and equipping
of a facility for the manufacturing of store fixtures, located in Douglas
County, Georgia (the "Project"); and
WHEREAS, pursuant to a Lease Agreement, dated as of November 1, 1997,
between the Issuer and the Company, the Issuer has leased the Project to the
Company; and
WHEREAS, the Bank has issued to the Trustee, for the account of the
Company, an irrevocable direct pay letter of credit (the "Letter of Credit") to
pay the principal and interest on the Bonds, as the same become due and payable;
and
WHEREAS, pursuant to a Letter of Credit and Reimbursement Agreement,
dated as of November 1, 1997 (the "Reimbursement Agreement"), between the
Company and the Bank, the Company has agreed to pay to the Bank all amounts paid
under the Letter of Credit; and
WHEREAS, the Bank and the Company desire to amend a certain provision
of the Reimbursement Agreement to clarify that the expiration date of the Letter
of Credit may be extended through the maturity date of the Bonds.
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) in hand paid this day by the Bank to the Company, and in
consideration of other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Company and the Bank, the
parties hereto do hereby agree as follows:
1. AMENDMENT OF SECTION 2.11. Section 2.11 of the Reimbursement
--------------------------- Agreement is hereby deleted in
its entirety and replaced by the following:
<PAGE>
"(a) The Company may request the Bank to extend the Stated
Expiration Date of the Letter of Credit for successive periods. On or
before November 15, 2000, the Company shall request such an extension
by executing and delivering to the Bank a written request in the form
of Exhibit C attached hereto (an "Extension Request") executed by the
Company. On or before November 15, 2005, on or before November 15,
2010, and on or before November 15, 2015, provided the Bank has
previously extended the Stated Expiration Date, the Company shall
request an extension in each instance by executing and delivering to
the Bank an Extension Request executed by the Company.
(b) Upon receipt of an Extension Request, the Bank shall then
determine whether or not there is an Event of Default as defined herein
or in any of the Related Documents. IF AN EVENT OF DEFAULT EXISTS UNDER
SECTION 8.1(A), (F) OR (G) OF THIS REIMBURSEMENT AGREEMENT, OR A
PAYMENT DEFAULT EXISTS UNDER ANY RELATED DOCUMENT, THE BANK SHALL NOT
BE OBLIGATED TO EXTEND THE STATED EXPIRATION DATE OF THE LETTER OF
CREDIT. If any other Event of Default exists under the Reimbursement
Agreement or any Related Document, the Bank shall provide written
notice to the Company of such Event of Default and the Company shall
have a period of thirty (30) days after receipt of said notice to cure
such Event of Default. If any such Event of Default has not been cured
as provided in this Section 2.11, then the Bank will not be obligated
to extend the Letter of Credit, and the Bank shall not deliver an
Extension Certificate in accordance with this Section 2.11.
(c) If there is no Event of Default or if an Event of Default
(other than an Event of Default under Section 8.1(a), (f) or (g) of
this Reimbursement Agreement, or a payment default under any Related
Document) is cured within such thirty (30) day period, the Bank shall
extend the Stated Expiration Date by five (5) years by delivering to
the Trustee, on or before December 31, 2000, December 31, 2005 and
December 31, 2010, as applicable, an Extension Certificate in the form
of Annex F to the Letter of Credit; provided, however, with respect to
the Extension Request delivered to the Bank on or before November 15,
2015, the Bank shall extend the Stated Expiration Date by six (6) years
to November 15, 2018, by delivering to the Trustee on or before
December 31, 2015, an Extension Certificate in the form of Annex F to
the Letter of Credit. Any failure by the Bank to deliver an Extension
Certificate to the Trustee by December 31, 2005, December 31, 2010 or
December 31, 2015 shall be deemed to be a denial of the Company's
extension request."
2. EFFECT. Except as expressly herein amended, the terms and conditions
------
of the Reimbursement Agreement and the other Loan Documents remain in full force
and effect.
- 2 -
<PAGE>
3. BENEFITS. This Amendment shall be binding upon and shall inure to
--------
the benefit of the parties hereto and their respective successors and assigns.
4. DEFINITIONS. All capitalized terms not otherwise defined herein are
-----------
used herein with the respective definitions given them in the Reimbursement
Agreement.
5. CERTAIN REFERENCES. Each reference to the Reimbursement Agreement in
------------------
any of the Loan Documents shall be deemed to be a reference to the Reimbursement
Agreement as amended by this Amendment.
6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA.
7. EXECUTION COUNTERPARTS. This Amendment may be simultaneously
-----------------------
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
[Remainder of this page intentionally left blank]
- 3 -
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed and sealed by
the parties the day and year first above written.
COMPANY:
ABRAMS RIVERSIDE, LLC
BY: ABRAMS PROPERTIES, INC., SOLE MEMBER
By: /s/ Jerry T. Anderson
Name: Jerry T. Anderson
Title: President/CEO
Attest:
Name: /s/ Melinda S. Garrett
Title: Secretary
(CORPORATE SEAL)
<PAGE>
LENDER:
NATIONSBANK, N.A.
By: /s/ Helen Cease
Name: Helen Cease
Title: Senior Vice President
(BANK SEAL)
[Signature Page to Amendment to Reimbursement Agreement]
SECOND AMENDMENT TO LETTER OF CREDIT AND
REIMBURSEMENT AGREEMENT
This Second Amendment to Letter of Credit and Reimbursement Agreement
dated as of October 31, 1998 (the "Amendment"), between Abrams Riverside, LLC
(the "Company") and NationsBank, N.A. (the "Bank").
RECITALS
The Bank agreed to issue a Letter of Credit on November 12, 1997 in the
amount of $11,000,000.00, for the benefit of certain trustees as set forth
therein, and for the account of the Company (the "Letter of Credit").
The obligation of the Company to repay the Letter of Credit is
evidenced by a Letter of Credit and Reimbursement Agreement dated November 1,
1997 (the "Agreement") as amended by that certain Amendment to Letter of Credit
and Reimbursement Agreement dated September 1, 1998.
The Company and the Bank wish to amend certain terms of the Agreement
as herein provided.
NOW THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties agree as follows:
Section 1. Definitions. Unless otherwise defined herein, terms defined
in the Agreement shall have the same meanings when used herein.
Section 2. Amendments. Effective as provided in Section 3 hereof and
subject to the provisions of Section 3 hereof, the Agreement is hereby amended
as follows:
A. Section 5.12 hereby deleted in its entirety, with the following
being substituted in lieu thereof:
"Section 5.12 FINANCIAL COVENANTS.
Until the termination of this Reimbursement Agreement and the
expiration or cancellation of the Letter of Credit and the indefeasible
satisfaction and payment in full of all Obligations, the following
financial covenants will be maintained:
<PAGE>
(i) TOTAL LIABILITIES TO TANGIBLE NET WORTH. The Company and
Abrams Fixture Corporation, ("Fixture"), a wholly owned subsidiary of
Abrams Industries, Inc., shall maintain on a combined basis a ratio of
Total Liabilities to Tangible Net Worth of not greater than 3.0 to 1.0,
quarterly, commencing October 31, 1998 and on each fiscal quarter-end
thereafter.
As used above, Tangible Net Worth shall be calculated
quarterly, commencing October 31, 1998 and on each fiscal quarter-end
thereafter and shall be defined (A) for Fixture as the sum of (i)
common stock, paid-in capital and retained earnings shown on the
Fixture's balance sheets, minus (ii) the intangible assets of the
Fixture as determined in accordance with generally accepted accounting
principles, which includes, but is not limited to, goodwill, covenants
not to compete, capitalized patents and trademarks, and (B) for the
Company as the sum of (i) common stock and paid-in capital shown on the
Company's balance sheets, minus (ii) the intangible assets of the
Company as determined in accordance with generally accepted accounting
principles, which includes, but is not limited to, goodwill, covenants
not to compete, capitalized patents and trademarks.
(ii) DEBT SERVICE COVERAGE RATIO. Abrams Industries, Inc.
shall maintain a Debt Service Coverage Ratio of not less than 1.10 to
1.0 at the end of each fiscal quarter commencing April 30, 1998 and
ending April 30, 2000, and of not less than 1.15 to 1.0 at the end of
each fiscal quarter commencing July 31, 2000, based upon the present
fiscal quarter and the previous three quarters. Debt Service Coverage
shall be defined as earnings before interest, depreciation,
amortization and other non-cash expenses, less distributions or
dividends divided by the sum of interest expense plus current
maturities of long-term debt and capital leases."
B. Section 9.1 shall be amended by changing the address of the Company
to read as follows:
Abrams Riverside, LLC
c/o Abrams Properties, Inc.
1945 The Exchange, Suite 400
Atlanta, Georgia 30339
Attn: Melinda S. Garrett
Telephone: (770) 953-1777
Telecopy: (770) 953-9922
Section 3. Effective Date. The amendments to the Agreement set forth in
Section 2 hereof shall be effective and binding on all the parties on and as of
October 31, 1998 (the "Effective Date"), provided that all the following
conditions precedent have been satisfied on such date:
<PAGE>
(a) The Bank shall have received one or more counterparts of this Amendment
executed by each of the parties hereto.
(b) No Event of Default shall have occurred and be continuing and no status
or condition exists which with the giving of notice or the passage of time or
both would constitute an Event of Default, Section 5.12 (i) and (ii) of this
Amendment will not be maintained for the fiscal quarter ending January 31, 1999,
and the representations of the Company in Section 4 hereof shall be true on and
as of the Effective Date with the same force and effect as if made on and as of
the Effective Date; and no lawsuit or proceeding shall be pending (or, to the
knowledge of the Company, threatened) against the Company which is likely to
have a material adverse effect upon the financial condition of the Company or
upon the ability of the Company to carry out the transactions contemplated by
this Amendment and the Agreement as amended hereby.
Section 4. Representations, Etc. The Company represents, covenants and
warrants to the Bank that: (i) as of the date hereof no Event of Default has
occurred and is continuing and no status or condition exists which with the
giving of notice or the passage of time or both would constitute an Event of
Default, Section 5.12 (i) and (ii) of this Amendment will not be maintained for
the fiscal quarter ending January 31, 1999 and (ii) the representations and
warranties contained in Article 4 of the Agreement as amended hereby, with each
reference in such Article 4 to "this Agreement", "hereto", "hereof" and terms of
similar import taken as a reference to the Agreement as amended hereby.
Section 5. Agreement.
(a) Except as specifically amended hereby, the Agreement shall remain
unchanged and continue in full force and effect in accordance with the
provisions thereof as in existence on the date hereof. From and after the
Effective Date, each reference in the Agreement (including all Exhibits and
Schedules thereto) to "this Agreement," "hereto," "hereof" and terms of similar
import taken as a reference to the Agreement and all references to the Agreement
in any documents, instruments, certificates, notes, bonds or other agreements
executed in connection therewith shall be deemed to refer to the Agreement as
amended hereby.
(b) The Company agrees that all collateral given as security for the
Agreement secures, and shall continue to secure, the Agreement, as amended
hereby.
(c) The Company waives and releases the Bank from any and all claims and
defenses with respect to the Agreement and any and all documents, instruments,
certificates, notes, bonds or other agreements executed in connection therewith.
(d) This Amendment (i) is limited precisely as specified herein and does
not constitute nor shall be deemed to constitute a modification, acceptance or
waiver of any other provision of the Agreement, or any documents, instruments,
<PAGE>
certificate, notes, bonds or agreements delivered in connection therewith and
(ii) shall not prejudice or be deemed to prejudice any right(s) the Bank may now
have or may in the future have under or in connection with the Agreement or any
documents, instruments, certificates, notes, bonds or agreements executed in
connection therewith.
Section 6. Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Georgia.
Section 7. Expenses. The Company will pay: (i) all out-of-pocket
expenses of the Bank in connection with the preparation, execution and delivery
of this Amendment; (ii) the reasonable fees of counsel to the Bank, including
the allocated cost of in-house counsel; and (iii) all taxes, if any, upon any
documents or transactions pursuant to this Amendment.
Section 8. Counterparts. This Amendment may be executed in any number
of counterparts, all of which taken together will constitute one agreement, and
any of the parties hereto may execute this Amendment by signing any such
counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
Abrams Riverside, LLC
By: Abrams Properties, Inc.,
Sole member
By: /s/ Gerald T. Anderson, II
Title: PRESIDENT & CEO
Attest: /s/ Melinda S. Garrett
Title: SECRETARY
[SEAL]
NationsBank, N.A.
By: /s/ Helen Cease
Title: SENIOR VICE PRESIDENT
GUARANTY
THIS GUARANTY, dated as of November 1, 1997, executed and delivered by
Abrams Properties, Inc. (the "Guarantor") in favor of NationsBank, N.A. (the
"Bank").
WHEREAS, the Development Authority of Douglas County, Georgia (the
"Issuer") will issue its Taxable Industrial Development Revenue Bonds (Abrams
Riverside, LLC Project), Series 1997 in the aggregate principal amount of
$11,000,000 (the "Bonds") pursuant to that certain Indenture of Trust dated
November 1, 1997 (the "Indenture") among the Issuer and AmSouth Bank, as trustee
(the "Trustee") for the purpose of financing the acquisition, construction and
equipping of a manufacturing facility for the manufacturing of store fixtures
located in Douglas County, Georgia (the "Project"); and
WHEREAS, in connection with the issuance of the Bonds, the Issuer and
Abrams Riverside, LLC (the "Lessee") will enter into that certain Lease
Agreement dated as of November 1, 1997 (the "Lease Agreement"), under which the
Lessee agreed to make payments in an amount sufficient to pay the principal of,
premium, if any, and interest on the Bonds; and
WHEREAS, under the Lease Agreement, the Lessee has agreed to pay as
rental payments amounts sufficient to pay the principal and purchase price of,
premium, if any, and interest on the Bonds as and when the same are due and
payable; and
WHEREAS, as security for the payment of the Bonds, the Bank will issue
its direct-pay irrevocable letter of credit in favor of the Trustee in the
original stated amount of $11,162,739.72 (the "Letter of Credit"), pursuant to
that certain Letter of Credit and Reimbursement Agreement dated as of November
1, 1997 (the "Reimbursement Agreement"), between the Lessee and the Bank; and
WHEREAS, the Guarantor is the sole member of the Lessee;
WHEREAS, it is a condition precedent to the Bank issuing its Letter of
Credit, that the Guarantor execute and deliver this Guaranty; and
WHEREAS, the Guarantor is therefore willing to guarantee the payment in
full of the principal of, and interest on, all Guaranteed Obligations (as
defined below).
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor
agrees as follows:
SECTION 1. GUARANTY. The Guarantor hereby, irrevocably and
--------
unconditionally, guarantees the due and punctual payment and performance when
due, whether at stated maturity, by acceleration or otherwise, of the following
(the following collectively referred to as the "Guaranteed Obligations"): (a)
all Obligations (as defined in the Reimbursement Agreement); and (b) any and all
extensions, renewals, modifications, amendments or substitutions of the
foregoing.
SECTION 2. GUARANTY OF PAYMENT AND NOT OF COLLECTION. This Guaranty is
-----------------------------------------
a guaranty of payment, and not of collection, and a debt of the Guarantor for
its own account. Accordingly, the Bank shall not be obligated or required before
enforcing this Guaranty against the Guarantor: (a) to pursue any right or remedy
the Bank may have against the Lessee or any other guarantor of the Guaranteed
Obligations or commence any suit or other proceeding against the Lessee or any
other guarantor of the Guaranteed Obligations in any court or other tribunal;
(b) to make any claim in a liquidation or bankruptcy of the Lessee or any other
guarantor of the Guaranteed Obligations; or (c) to make demand of the Lessee or
any other guarantor of the Guaranteed Obligations or to enforce or seek to
enforce or realize upon any collateral security held by the Bank which may
secure any of the Guaranteed Obligations. In this connection, the Guarantor
hereby waives the right of the Guarantor to require any holder of the Guaranteed
Obligations to take action against the Lessee as provided in Official Code of
Georgia Annotated Section 10-7-24.
SECTION 3. GUARANTY ABSOLUTE. The Guarantor guarantees that the
------------------
Guaranteed Obligations will be paid strictly in accordance with the terms of the
documents evidencing the same, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Bank with respect thereto. The liability of the Guarantor under
this Guaranty shall be absolute and unconditional in accordance with its terms
and shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation, the
following (whether or not the Guarantor consents thereto or has notice thereof):
(a) (i) any change in the amount, interest rate or due date or other
term of any Guaranteed Obligations, or (ii) any change in the time, place or
manner of payment of all or any portion of the Guaranteed Obligations, or (iii)
any amendment or waiver of, or consent to the departure from or other indulgence
with respect to, the Reimbursement Agreement, the Related Documents (as defined
in the Reimbursement Agreement) or any other document or instrument evidencing
any Guaranteed Obligations, or (iv) any renewal, extension, addition, or
supplement to, or deletion from, or any other action or inaction under or in
- 2 -
<PAGE>
respect of, the Reimbursement Agreement, the Related Documents or any other
documents, instruments or agreements relating to the Guaranteed Obligations or
any other instrument or agreement referred to therein or evidencing any
Guaranteed Obligations or any assignment or transfer of any of the foregoing;
(b) any lack of validity or enforceability of the Reimbursement
Agreement, the Related Documents, or any other document, instrument or agreement
referred to therein or evidencing any Guaranteed Obligations or any assignment
or transfer of any of the foregoing;
(c) any furnishing to the Bank of any additional security for the
Guaranteed Obligations, or any sale, exchange, release or surrender of, or
realization on, any collateral security for the Guaranteed Obligations;
(d) any settlement or compromise of any of the Guaranteed Obligations,
any security therefor, or any liability of any other party with respect to the
Guaranteed Obligations, or any subordination of the payment of the Guaranteed
Obligations to the payment of any other liability of the Lessee;
(e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to the
Guarantor or the Lessee or any other Person (as defined in the Reimbursement
Agreement), or any action taken with respect to this Guaranty by any trustee or
receiver, or by any court, in any such proceeding;
(f) any nonperfection of any security interest or lien on any
collateral securing any of the Guaranteed Obligations;
(g) any application of sums paid by the Lessee or any other Person with
respect to the liabilities of the Lessee to the Bank, regardless of what
liabilities of the Lessee remain unpaid;
(h) any defect, limitation or insufficiency in the borrowing power of
the Lessee or in the exercise thereof;
(i) any act or failure to act by the Bank which may adversely affect
the Guarantor's subrogation rights, if any, against the Lessee to recover
payments made under this Guaranty;
(j) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Guarantor.
SECTION 4. ACTION WITH RESPECT TO GUARANTEED OBLIGATIONS. The Bank may,
---------------------------------------------
at any time and from time to time, without the consent of, or notice to, the
- 3 -
<PAGE>
Guarantor, and without discharging the Guarantor from its obligations hereunder
take any and all actions described in Section 3 above and may otherwise: (a)
amend, modify, alter or supplement the terms of any of the Guaranteed
Obligations, including, but not limited to, extending or shortening the time of
payment of any of the Guaranteed Obligations or increasing, decreasing or
otherwise changing the interest rate or fees that may accrue on any of the
Guaranteed Obligations; (b) amend, modify, alter or supplement the Reimbursement
Agreement, the Related Documents or any other document evidencing any Guaranteed
Obligations; (c) sell, exchange, release or otherwise deal with all, or any
part, of any Collateral; (d) release any Person liable in any manner for the
payment or collection of the Guaranteed Obligations; (e) exercise, or refrain
from exercising, any rights against the Lessee or any other Person (including,
without limitation, any other guarantor of the Guaranteed Obligations); and (f)
apply any sum, by whomsoever paid or however realized, to the Guaranteed
Obligations in such order as the Bank shall elect.
SECTION 5. WAIVER. The Guarantor, to the fullest extent permitted by
------
law, hereby waives notice of acceptance hereof or any presentment, demand,
protest or notice of any kind, and any other act or thing, or omission or delay
to do any other act or thing, which in any manner or to any extent might vary
the risk of the Guarantor or which otherwise might operate to discharge the
Guarantor from its obligations hereunder; provided, however, that the Guarantor
shall be provided with copies of all notices delivered to the Lessee pursuant to
Section 8.1 of the Reimbursement Agreement.
SECTION 6. INABILITY TO ACCELERATE LOAN. If the Bank or the holder of
-----------------------------
any of the Guaranteed Obligations is prevented under Applicable Law or otherwise
from demanding or accelerating payment thereof by reason of any automatic stay
or otherwise, the Bank or such holder shall be entitled to receive from the
Guarantor, upon demand therefor, the sums which otherwise would have been due
had such demand or acceleration occurred.
SECTION 7. REINSTATEMENT OF GUARANTEED OBLIGATIONS. If claim is ever
----------------------------------------
made upon the Bank for repayment or recovery of any amount or amounts received
in payment or on account of any of the Guaranteed Obligations, and the Bank
repays all or part of said amount by reason of (a) any judgment, decree or order
of any court or administrative body having jurisdiction over the Bank or any of
its property, or (b) any settlement or compromise of any such claim effected by
the Bank with any such claimant (including the Lessee or a trustee in bankruptcy
for the Lessee), then, and in such event, the Guarantor agrees that any such
judgment, decree, order, settlement or compromise shall be binding on it,
notwithstanding any revocation hereof or the cancellation of the Reimbursement
Agreement, the other Related Documents, or any other instrument evidencing any
liability of the Lessee, and the Guarantor shall be and remain liable to the
Bank for the amounts so repaid or recovered to the same extent as if such amount
had never originally been paid to the Bank.
SECTION 8. WAIVER OF SUBROGATION. The Guarantor hereby forever waives
---------------------
and releases any and all claims or causes of action the Guarantor may have
against the Lessee or any other Person arising by reason of any payment by the
- 4 -
<PAGE>
Guarantor to the Bank pursuant to this Guaranty, whether such claim or cause of
action arises by way of any common-law right of subrogation, by way of any other
applicable law or statutes, or by way of any written or oral agreement between
the Guarantor and the Lessee or any other Person. This waiver of subrogation is
for the benefit of the Lessee and the Bank and the foregoing waiver may not be
revoked by the Guarantor without the prior, written consent of Bank.
SECTION 9. PAYMENTS FREE AND CLEAR. All sums payable by the Guarantor
------------------------
hereunder, whether of principal, interest, fees, expenses, premiums or
otherwise, shall be paid in full, without set-off or counterclaim or any
deduction or withholding whatsoever (including any withholding tax or liability
imposed by any governmental agency or authority, wherever located, or any
statute, rule or regulation promulgated thereby), and in the event that the
Guarantor is required by such applicable law or by such governmental agency or
authority to make any such deduction or withholding, the Guarantor shall pay to
the Bank such additional amount as will result in the receipt by the Bank of the
full amount payable hereunder had such deduction or withholding not occurred or
been required.
SECTION 10. SET-OFF. The Guarantor authorizes the Bank at any time and
-------
from time to time, without notice to the Guarantor, which notice the Guarantor
hereby expressly waives, to set off and apply any and all deposits (whether
general or special, time or demand, provisional or final, including any
negotiable or non-negotiable certificate of deposit now or hereafter issued by
the Bank to the Guarantor) or other indebtedness owing by the Bank to the
Guarantor, to the then outstanding Guaranteed Obligations then due and payable.
The Bank may exercise this right of setoff whether or not the Bank has made
demand for, or accelerated, any Guaranteed Obligations. The rights of the Bank
under this Section are in addition to, and not in limitation or substitution of,
other rights and remedies (including, but not limited to, other rights of
set-off) that the Bank may have.
SECTION 11. SUBORDINATION OF THE LESSEE'S OBLIGATIONS TO THE
--------------------------------------------------------
GUARANTORS. As an independent covenant, the Guarantor hereby expressly covenants
- ----------
and agrees for the benefit of the Bank that all obligations and liabilities
owing by the Lessee to the Guarantor, if any of whatsoever description
including, without limitation, all intercompany receivables owing to the
Guarantor from the Lessee ("Junior Claims") shall be subordinate and junior in
right of payment to all obligations of the Lessee to the Bank under the terms of
the Reimbursement Agreement and the other Related Documents ("Senior Claims").
If an Event of Default shall occur, then, unless and until such Event
of Default shall have been cured, waived, or shall have ceased to exist, no
direct or indirect payment (in cash, property, securities by setoff or
otherwise) shall be made by the Lessee to the Guarantor on account of or in any
manner in respect of any Junior Claim and the Guarantor shall not receive or
accept any such direct or indirect payment.
- 5 -
<PAGE>
In the event of a Proceeding (as hereinafter defined), all Senior
Claims shall first be paid in full before any direct or indirect payment or
distribution (in cash, property, securities by setoff or otherwise) shall be
made to any Guarantor on account of or in any manner in respect of any Junior
Claim. For the purposes of the previous sentence, "Proceeding" means the Lessee
or the Guarantor shall commence a voluntary case concerning itself under the
Bankruptcy Code of 1978, as amended (the "Bankruptcy Code") or any other
applicable bankruptcy laws; or any involuntary case is commenced against the
Lessee or the Guarantor; or a custodian (as defined in the Bankruptcy Code or
any other applicable bankruptcy laws) is appointed for, or takes charge of, all
or any substantial part of the property of the Lessee or the Guarantor, or the
Lessee or the Guarantor commences any other proceedings under any reorganization
arrangement, adjustment of debt, relief of debtor, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Lessee or the Guarantor, or any such proceeding is
commenced against the Lessee or the Guarantor, or the Lessee or the Guarantor is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Lessee or the Guarantor
suffers any appointment of any custodian or the like for it or any substantial
part of its property; or the Lessee or the Guarantor makes a general assignment
for the benefit of creditors; or the Lessee or the Guarantor shall fail to pay,
or shall state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Lessee or the Guarantor shall call a
meeting of its creditors with a view to arranging a composition or adjustment of
its debts; or the Lessee or the Guarantor shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of the foregoing; or
any corporate action shall be taken by the Lessee or the Guarantor for the
purpose of effecting any of the foregoing.
In the event any direct or indirect payment or distribution is made to
the Guarantor in contravention of this Section 11, such payment or distribution
shall be deemed received in trust for the benefit of the Bank and shall be
immediately paid over to the Bank for application against the Guaranteed
Obligations in accordance with the terms of the Reimbursement Agreement.
The Guarantor agrees to execute such additional documents as the Bank
may reasonably request to evidence the subordination provided for in this
Section 11.
SECTION 12. AUTOMATIC ACCELERATION IN CERTAIN EVENTS. Upon the
---------------------------------------------
occurrence of an Event of Default specified in Section 8.1 of the Reimbursement
Agreement, all Guaranteed Obligations shall automatically become immediately due
and payable by the Guarantor, without notice or other action on the part of the
Bank, and regardless of whether payment of the Guaranteed Obligations by the
Lessee has then been accelerated. In addition, if any of the Events of Default
described in Sections 8.1(f) and (g) of the Reimbursement Agreement should occur
with respect to the Guarantor, then the Guaranteed Obligations shall
automatically become immediately due and payable by the Guarantor, without
- 6 -
<PAGE>
notice or other action on the part of the Bank, and regardless of whether
payment of the Guaranteed Obligations by the Lessee has then been accelerated.
SECTION 13. INFORMATION. The Guarantor assumes all responsibility for
-----------
being and keeping itself informed of the Lessee's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks that
the Guarantor assumes and incurs hereunder, and agrees that the Bank will not
have any duty to advise the Guarantor of information known to it or any of them
regarding such circumstances or risks.
SECTION 14. GOVERNING LAW. This Guaranty shall be governed by, and
--------------
construed in accordance with, the laws of the State of GEORGIA.
SECTION 15. JURISDICTION/JURY TRIAL WAIVER/OTHER MATTERS.
--------------------------------------------
(a) EACH OF THE BANK AND THE GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS GUARANTY OR THE RELATIONSHIP OF THE
GUARANTOR AND THE BANK ESTABLISHED HEREBY, WOULD BE BASED UPON DIFFICULT AND
COMPLEX ISSUES. ACCORDINGLY, TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE
GUARANTOR AND THE BANK HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING
OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR
AGAINST THE GUARANTOR ARISING OUT OF THIS GUARANTY OR BY REASON OF ANY OTHER
CAUSE OR DISPUTE WHATSOEVER BETWEEN THE GUARANTOR AND THE BANK OF ANY KIND OR
NATURE.
(b) EACH OF THE GUARANTOR AND THE BANK AGREES THAT THE FEDERAL COURT OF
THE NORTHERN DISTRICT OF GEORGIA OR ANY STATE COURT LOCATED IN DOUGLAS COUNTY
SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE
GUARANTOR AND THE BANK PERTAINING DIRECTLY OR INDIRECTLY TO THIS GUARANTY OR TO
ANY MATTER ARISING HEREFROM. THE GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH
COURT. THE GUARANTOR AND THE BANK WAIVE ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY PROCEEDING IN ANY SUCH COURT OR THAT SUCH
PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND EACH AGREES NOT TO PLEAD OR
CLAIM THE SAME.
(c) THE GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY SUMMONS AND
COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF
- 7 -
<PAGE>
SUCH SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS MAY BE MADE BY UNITED
STATES MAIL, POSTAGE PREPAID ADDRESSED TO THE GUARANTOR AT THE ADDRESS SET FORTH
BELOW ITS SIGNATURE HERETO. SHOULD THE GUARANTOR FAIL TO APPEAR OR ANSWER ANY
SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY DAYS AFTER THE
MAILING THEREOF, IT SHALL BE DEEMED IN DEFAULT AN ORDER AND/OR JUDGMENT MAY BE
ENTERED AGAINST IT AS PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS.
(d) THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED
TO PRECLUDE THE BRINGING OF ANY ACTION BY THE BANK OR THE ENFORCEMENT BY THE
BANK OF ANY JUDGMENT OBTAINED IN SUCH FORUM IN ANY OTHER APPROPRIATE
JURISDICTION.
(e) THE GUARANTOR AGREES THAT ALL OF ITS PAYMENT OBLIGATIONS HEREUNDER
SHALL BE ABSOLUTE, UNCONDITIONAL AND, FOR THE PURPOSES OF MAKING PAYMENTS
HEREUNDER, THE GUARANTOR HEREBY WAIVES ANY RIGHT TO ASSERT ANY SETOFF,
COUNTERCLAIM OR CROSS-CLAIM TO THE EXTENT PERMITTED BY LAW.
(f) THE GUARANTOR ACKNOWLEDGES THAT ALL OF THE WAIVERS IN THIS SECTION
HAVE BEEN MADE WILLINGLY, WITH THE ADVICE OF LEGAL COUNSEL AND WITH A FULL
UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF.
SECTION 16. LOAN ACCOUNTS. The Bank may maintain books and accounts
--------------
setting forth the amounts of principal, interest and other sums paid and payable
with respect to the Guaranteed Obligations, and in the case of any dispute
relating to any Guaranteed Obligation, the entries in such account shall be
binding upon the Guarantor as to the outstanding amount of such Guaranteed
Obligations and the amounts paid and payable with respect thereto absent
manifest error. The failure of the Bank to maintain such books and accounts
shall not in any way relieve or discharge the Guarantor of any of its
obligations hereunder.
SECTION 17. WAIVER OF REMEDIES. No delay or failure on the part of the
------------------
Bank in the exercise of any right or remedy it may have against the Guarantor
hereunder or otherwise shall operate as a waiver thereof, and no single or
partial exercise by the Bank of any such right or remedy shall preclude other or
further exercise thereof or the exercise of any other such right or remedy.
SECTION 18. WAIVER OF EXEMPTIONS. To the fullest extent permitted by
--------------------
law, the Guarantor hereby waives and agrees not to claim any and all homestead
- 8 -
<PAGE>
and other exemptions allowed by the Constitution or laws of the United States of
America, the State of Georgia or any other state or district of the United
States of America.
SECTION 19. SUCCESSORS AND ASSIGNS. Each reference herein to the Bank
----------------------
shall be deemed to include the Bank's successors and assigns (including, but not
limited to, any holder of the Guaranteed Obligations) in whose favor the
provisions of this Guaranty also shall inure, and each reference herein to the
Guarantor shall be deemed to include the Guarantor's executors, administrators,
successors and assigns, upon whom this Guaranty also shall be binding. The Bank
may assign, transfer or sell any Guaranteed Obligation, or grant or sell
participation in any Guaranteed Obligations, pursuant to the terms of the
Reimbursement Agreement or the Related Documents, to any Person or entity
without the consent of, or notice to, the Guarantor and without releasing,
discharging or modifying the Guarantor's obligations hereunder. The Guarantor
hereby consents to the delivery by the Bank to any assignee, transferee or
participant of any financial or other information regarding the Lessee or the
Guarantor. The Guarantor may not assign or transfer its obligations hereunder to
any Person or entity.
SECTION 20. FINANCIAL STATEMENTS. The Guarantor agrees to deliver the
--------------------
financial statements that it is required to give pursuant to the Reimbursement
Agreement.
SECTION 21. JOINT AND SEVERAL GUARANTEED OBLIGATIONS. This Guaranty
-----------------------------------------
shall be continuing, absolute and unconditional and shall remain in full force
and effect as to the Guarantor hereunder, despite the fact that any other
guarantor of the Guaranteed Obligations shall become deceased or incompetent or
shall otherwise be released or discharged from its obligations; the obligation
of the Guarantor and any other guarantor of the Guaranteed Obligations being
joint and several and each of the Guarantor and any other guarantor of the
Guaranteed Obligations is liable for the full amount of the Guaranteed
Obligations.
SECTION 22. SURVIVAL OF AGREEMENT. All agreements, representations and
---------------------
warranties made herein shall survive the execution and delivery of this Guaranty
and the Reimbursement Agreement, the making of the Loans and the execution and
delivery of the other Related Documents.
SECTION 23. AMENDMENTS. This Guaranty may not be amended except in
----------
writing signed by the Bank and the Guarantor.
SECTION 24. PAYMENTS/EXPENSES. All payments made by the Guarantor
-----------------
pursuant to this Guaranty shall be made in the lawful currency of the United
States of America, in immediately available funds to the main office of the
Bank, not later than 11:00 a.m., Atlanta, Georgia time, on the date three (3)
business days after demand therefor. The Guarantor shall pay, on demand, all
costs and expenses incurred by the Bank in the collection and enforcement of
this Guaranty, including the reasonable fees and disbursements of counsel to the
Bank actually incurred and based upon the total number of hours performed and
- 9 -
<PAGE>
not upon the statutory limit set forth in Official Code of Georgia Annotated
Section13-1-11, if collection is sought by or through an attorney.
SECTION 25. NOTICES. All notices, demands or other communications to
-------
the Guarantor hereunder shall be in writing and shall be mailed or hand
delivered or sent via facsimile transmission to the address for the Guarantor
set forth below its signature hereto. All such notices, demands and
communications shall be deemed received by the Guarantor (a) if personally
delivered or by messenger or overnight courier or delivered via facsimile
transmission, on the date of delivery thereof or (b) if through the United
States mail, on the earlier of (i) the date three days after the posting thereof
and (ii) the date of actual receipt by the Guarantor.
SECTION 26. SEVERABILITY. In case any provision of this Guaranty shall
------------
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 27. HEADINGS. Section headings used in this Guaranty are for
--------
convenience only and shall not affect the construction of this Guaranty.
SECTION 28. REVIEW OF REIMBURSEMENT AGREEMENT/RELATED DOCUMENTS. The
----------------------------------------------------
Guarantor acknowledges that, prior to the execution and delivery of this
Guaranty, the Guarantor has had the opportunity to review and ask questions
regarding the Reimbursement Agreement and the other Related Documents referred
to therein and to discuss the same and this Guaranty with its counsel.
- 10 -
<PAGE>
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Guaranty under seal as of the date and year first written above.
GUARANTOR:
ABRAMS PROPERTIES, INC.
By: /s/ Alan R. Abrams
Name: Alan R. Abrams
Title: President
[CORPORATE SEAL]
Attest:
By: /s/ Melinda S. Garrett
Name: Melinda S. Garrett
Title: Asst. Secretary
Address for Notices:
Abrams Properties, Inc.
1945 The Exchange, Suite 400
Atlanta, Georgia 30339-2029
Attn: Melinda S. Garrett
Telephone: (770) 953-1777
Telecopy: (770) 953-9922
GUARANTY
THIS GUARANTY, dated as of November 1, 1997, executed and delivered by
Abrams Properties, Inc. (the "Guarantor") in favor of NationsBank, N.A. (the
"Bank").
WHEREAS, the Development Authority of Douglas County, Georgia (the
"Issuer") will issue its Taxable Industrial Development Revenue Bonds (Abrams
Riverside, LLC Project), Series 1997 in the aggregate principal amount of
$11,000,000 (the "Bonds") pursuant to that certain Indenture of Trust dated
November 1, 1997 (the "Indenture") among the Issuer and AmSouth Bank, as trustee
(the "Trustee") for the purpose of financing the acquisition, construction and
equipping of a manufacturing facility for the manufacturing of store fixtures
located in Douglas County, Georgia (the "Project"); and
WHEREAS, in connection with the issuance of the Bonds, the Issuer and
Abrams Riverside, LLC (the "Lessee") will enter into that certain Lease
Agreement dated as of November 1, 1997 (the "Lease Agreement"), under which the
Lessee agreed to make payments in an amount sufficient to pay the principal of,
premium, if any, and interest on the Bonds; and
WHEREAS, under the Lease Agreement, the Lessee has agreed to pay as
rental payments amounts sufficient to pay the principal and purchase price of,
premium, if any, and interest on the Bonds as and when the same are due and
payable; and
WHEREAS, as security for the payment of the Bonds, the Bank will issue
its direct-pay irrevocable letter of credit in favor of the Trustee in the
original stated amount of $11,162,739.72 (the "Letter of Credit"), pursuant to
that certain Letter of Credit and Reimbursement Agreement dated as of November
1, 1997 (the "Reimbursement Agreement"), between the Lessee and the Bank; and
WHEREAS, the Guarantor is the sole member of the Lessee;
WHEREAS, it is a condition precedent to the Bank issuing its Letter of
Credit, that the Guarantor execute and deliver this Guaranty; and
WHEREAS, the Guarantor is therefore willing to guarantee the payment in
full of the principal of, and interest on, all Guaranteed Obligations (as
defined below).
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Guarantor, the Guarantor
agrees as follows:
SECTION 1. GUARANTY. The Guarantor hereby, irrevocably and
--------
unconditionally, guarantees the due and punctual payment and performance when
due, whether at stated maturity, by acceleration or otherwise, of the following
(the following collectively referred to as the "Guaranteed Obligations"): (a)
all Obligations (as defined in the Reimbursement Agreement); and (b) any and all
extensions, renewals, modifications, amendments or substitutions of the
foregoing.
SECTION 2. GUARANTY OF PAYMENT AND NOT OF COLLECTION. This Guaranty is
-----------------------------------------
a guaranty of payment, and not of collection, and a debt of the Guarantor for
its own account. Accordingly, the Bank shall not be obligated or required before
enforcing this Guaranty against the Guarantor: (a) to pursue any right or remedy
the Bank may have against the Lessee or any other guarantor of the Guaranteed
Obligations or commence any suit or other proceeding against the Lessee or any
other guarantor of the Guaranteed Obligations in any court or other tribunal;
(b) to make any claim in a liquidation or bankruptcy of the Lessee or any other
guarantor of the Guaranteed Obligations; or (c) to make demand of the Lessee or
any other guarantor of the Guaranteed Obligations or to enforce or seek to
enforce or realize upon any collateral security held by the Bank which may
secure any of the Guaranteed Obligations. In this connection, the Guarantor
hereby waives the right of the Guarantor to require any holder of the Guaranteed
Obligations to take action against the Lessee as provided in Official Code of
Georgia Annotated Section 10-7-24.
SECTION 3. GUARANTY ABSOLUTE. The Guarantor guarantees that the
------------------
Guaranteed Obligations will be paid strictly in accordance with the terms of the
documents evidencing the same, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Bank with respect thereto. The liability of the Guarantor under
this Guaranty shall be absolute and unconditional in accordance with its terms
and shall remain in full force and effect without regard to, and shall not be
released, suspended, discharged, terminated or otherwise affected by, any
circumstance or occurrence whatsoever, including, without limitation, the
following (whether or not the Guarantor consents thereto or has notice thereof):
(a) (i) any change in the amount, interest rate or due date or other
term of any Guaranteed Obligations, or (ii) any change in the time, place or
manner of payment of all or any portion of the Guaranteed Obligations, or (iii)
any amendment or waiver of, or consent to the departure from or other indulgence
with respect to, the Reimbursement Agreement, the Related Documents (as defined
in the Reimbursement Agreement) or any other document or instrument evidencing
any Guaranteed Obligations, or (iv) any renewal, extension, addition, or
supplement to, or deletion from, or any other action or inaction under or in
- 2 -
<PAGE>
respect of, the Reimbursement Agreement, the Related Documents or any other
documents, instruments or agreements relating to the Guaranteed Obligations or
any other instrument or agreement referred to therein or evidencing any
Guaranteed Obligations or any assignment or transfer of any of the foregoing;
(b) any lack of validity or enforceability of the Reimbursement
Agreement, the Related Documents, or any other document, instrument or agreement
referred to therein or evidencing any Guaranteed Obligations or any assignment
or transfer of any of the foregoing;
(c) any furnishing to the Bank of any additional security for the
Guaranteed Obligations, or any sale, exchange, release or surrender of, or
realization on, any collateral security for the Guaranteed Obligations;
(d) any settlement or compromise of any of the Guaranteed Obligations,
any security therefor, or any liability of any other party with respect to the
Guaranteed Obligations, or any subordination of the payment of the Guaranteed
Obligations to the payment of any other liability of the Lessee;
(e) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to the
Guarantor or the Lessee or any other Person (as defined in the Reimbursement
Agreement), or any action taken with respect to this Guaranty by any trustee or
receiver, or by any court, in any such proceeding;
(f) any nonperfection of any security interest or lien on any
collateral securing any of the Guaranteed Obligations;
(g) any application of sums paid by the Lessee or any other Person with
respect to the liabilities of the Lessee to the Bank, regardless of what
liabilities of the Lessee remain unpaid;
(h) any defect, limitation or insufficiency in the borrowing power of
the Lessee or in the exercise thereof;
(i) any act or failure to act by the Bank which may adversely affect
the Guarantor's subrogation rights, if any, against the Lessee to recover
payments made under this Guaranty;
(j) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Guarantor.
SECTION 4. ACTION WITH RESPECT TO GUARANTEED OBLIGATIONS. The Bank may,
---------------------------------------------
at any time and from time to time, without the consent of, or notice to, the
- 3 -
<PAGE>
Guarantor, and without discharging the Guarantor from its obligations hereunder
take any and all actions described in Section 3 above and may otherwise: (a)
amend, modify, alter or supplement the terms of any of the Guaranteed
Obligations, including, but not limited to, extending or shortening the time of
payment of any of the Guaranteed Obligations or increasing, decreasing or
otherwise changing the interest rate or fees that may accrue on any of the
Guaranteed Obligations; (b) amend, modify, alter or supplement the Reimbursement
Agreement, the Related Documents or any other document evidencing any Guaranteed
Obligations; (c) sell, exchange, release or otherwise deal with all, or any
part, of any Collateral; (d) release any Person liable in any manner for the
payment or collection of the Guaranteed Obligations; (e) exercise, or refrain
from exercising, any rights against the Lessee or any other Person (including,
without limitation, any other guarantor of the Guaranteed Obligations); and (f)
apply any sum, by whomsoever paid or however realized, to the Guaranteed
Obligations in such order as the Bank shall elect.
SECTION 5. WAIVER. The Guarantor, to the fullest extent permitted by
------
law, hereby waives notice of acceptance hereof or any presentment, demand,
protest or notice of any kind, and any other act or thing, or omission or delay
to do any other act or thing, which in any manner or to any extent might vary
the risk of the Guarantor or which otherwise might operate to discharge the
Guarantor from its obligations hereunder; provided, however, that the Guarantor
shall be provided with copies of all notices delivered to the Lessee pursuant to
Section 8.1 of the Reimbursement Agreement.
SECTION 6. INABILITY TO ACCELERATE LOAN. If the Bank or the holder of
-----------------------------
any of the Guaranteed Obligations is prevented under Applicable Law or otherwise
from demanding or accelerating payment thereof by reason of any automatic stay
or otherwise, the Bank or such holder shall be entitled to receive from the
Guarantor, upon demand therefor, the sums which otherwise would have been due
had such demand or acceleration occurred.
SECTION 7. REINSTATEMENT OF GUARANTEED OBLIGATIONS. If claim is ever
----------------------------------------
made upon the Bank for repayment or recovery of any amount or amounts received
in payment or on account of any of the Guaranteed Obligations, and the Bank
repays all or part of said amount by reason of (a) any judgment, decree or order
of any court or administrative body having jurisdiction over the Bank or any of
its property, or (b) any settlement or compromise of any such claim effected by
the Bank with any such claimant (including the Lessee or a trustee in bankruptcy
for the Lessee), then, and in such event, the Guarantor agrees that any such
judgment, decree, order, settlement or compromise shall be binding on it,
notwithstanding any revocation hereof or the cancellation of the Reimbursement
Agreement, the other Related Documents, or any other instrument evidencing any
liability of the Lessee, and the Guarantor shall be and remain liable to the
Bank for the amounts so repaid or recovered to the same extent as if such amount
had never originally been paid to the Bank.
SECTION 8. WAIVER OF SUBROGATION. The Guarantor hereby forever waives
---------------------
and releases any and all claims or causes of action the Guarantor may have
against the Lessee or any other Person arising by reason of any payment by the
- 4 -
<PAGE>
Guarantor to the Bank pursuant to this Guaranty, whether such claim or cause of
action arises by way of any common-law right of subrogation, by way of any other
applicable law or statutes, or by way of any written or oral agreement between
the Guarantor and the Lessee or any other Person. This waiver of subrogation is
for the benefit of the Lessee and the Bank and the foregoing waiver may not be
revoked by the Guarantor without the prior, written consent of Bank.
SECTION 9. PAYMENTS FREE AND CLEAR. All sums payable by the Guarantor
------------------------
hereunder, whether of principal, interest, fees, expenses, premiums or
otherwise, shall be paid in full, without set-off or counterclaim or any
deduction or withholding whatsoever (including any withholding tax or liability
imposed by any governmental agency or authority, wherever located, or any
statute, rule or regulation promulgated thereby), and in the event that the
Guarantor is required by such applicable law or by such governmental agency or
authority to make any such deduction or withholding, the Guarantor shall pay to
the Bank such additional amount as will result in the receipt by the Bank of the
full amount payable hereunder had such deduction or withholding not occurred or
been required.
SECTION 10. SET-OFF. The Guarantor authorizes the Bank at any time and
-------
from time to time, without notice to the Guarantor, which notice the Guarantor
hereby expressly waives, to set off and apply any and all deposits (whether
general or special, time or demand, provisional or final, including any
negotiable or non-negotiable certificate of deposit now or hereafter issued by
the Bank to the Guarantor) or other indebtedness owing by the Bank to the
Guarantor, to the then outstanding Guaranteed Obligations then due and payable.
The Bank may exercise this right of setoff whether or not the Bank has made
demand for, or accelerated, any Guaranteed Obligations. The rights of the Bank
under this Section are in addition to, and not in limitation or substitution of,
other rights and remedies (including, but not limited to, other rights of
set-off) that the Bank may have.
SECTION 11. SUBORDINATION OF THE LESSEE'S OBLIGATIONS TO THE
--------------------------------------------------------
GUARANTORS. As an independent covenant, the Guarantor hereby expressly covenants
- ----------
and agrees for the benefit of the Bank that all obligations and liabilities
owing by the Lessee to the Guarantor, if any of whatsoever description
including, without limitation, all intercompany receivables owing to the
Guarantor from the Lessee ("Junior Claims") shall be subordinate and junior in
right of payment to all obligations of the Lessee to the Bank under the terms of
the Reimbursement Agreement and the other Related Documents ("Senior Claims").
If an Event of Default shall occur, then, unless and until such Event
of Default shall have been cured, waived, or shall have ceased to exist, no
direct or indirect payment (in cash, property, securities by setoff or
otherwise) shall be made by the Lessee to the Guarantor on account of or in any
manner in respect of any Junior Claim and the Guarantor shall not receive or
accept any such direct or indirect payment.
- 5 -
<PAGE>
In the event of a Proceeding (as hereinafter defined), all Senior
Claims shall first be paid in full before any direct or indirect payment or
distribution (in cash, property, securities by setoff or otherwise) shall be
made to any Guarantor on account of or in any manner in respect of any Junior
Claim. For the purposes of the previous sentence, "Proceeding" means the Lessee
or the Guarantor shall commence a voluntary case concerning itself under the
Bankruptcy Code of 1978, as amended (the "Bankruptcy Code") or any other
applicable bankruptcy laws; or any involuntary case is commenced against the
Lessee or the Guarantor; or a custodian (as defined in the Bankruptcy Code or
any other applicable bankruptcy laws) is appointed for, or takes charge of, all
or any substantial part of the property of the Lessee or the Guarantor, or the
Lessee or the Guarantor commences any other proceedings under any reorganization
arrangement, adjustment of debt, relief of debtor, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Lessee or the Guarantor, or any such proceeding is
commenced against the Lessee or the Guarantor, or the Lessee or the Guarantor is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Lessee or the Guarantor
suffers any appointment of any custodian or the like for it or any substantial
part of its property; or the Lessee or the Guarantor makes a general assignment
for the benefit of creditors; or the Lessee or the Guarantor shall fail to pay,
or shall state that it is unable to pay, or shall be unable to pay, its debts
generally as they become due; or the Lessee or the Guarantor shall call a
meeting of its creditors with a view to arranging a composition or adjustment of
its debts; or the Lessee or the Guarantor shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of the foregoing; or
any corporate action shall be taken by the Lessee or the Guarantor for the
purpose of effecting any of the foregoing.
In the event any direct or indirect payment or distribution is made to
the Guarantor in contravention of this Section 11, such payment or distribution
shall be deemed received in trust for the benefit of the Bank and shall be
immediately paid over to the Bank for application against the Guaranteed
Obligations in accordance with the terms of the Reimbursement Agreement.
The Guarantor agrees to execute such additional documents as the Bank
may reasonably request to evidence the subordination provided for in this
Section 11.
SECTION 12. AUTOMATIC ACCELERATION IN CERTAIN EVENTS. Upon the
---------------------------------------------
occurrence of an Event of Default specified in Section 8.1 of the Reimbursement
Agreement, all Guaranteed Obligations shall automatically become immediately due
and payable by the Guarantor, without notice or other action on the part of the
Bank, and regardless of whether payment of the Guaranteed Obligations by the
Lessee has then been accelerated. In addition, if any of the Events of Default
described in Sections 8.1(f) and (g) of the Reimbursement Agreement should occur
with respect to the Guarantor, then the Guaranteed Obligations shall
automatically become immediately due and payable by the Guarantor, without
- 6 -
<PAGE>
notice or other action on the part of the Bank, and regardless of whether
payment of the Guaranteed Obligations by the Lessee has then been accelerated.
SECTION 13. INFORMATION. The Guarantor assumes all responsibility for
-----------
being and keeping itself informed of the Lessee's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks that
the Guarantor assumes and incurs hereunder, and agrees that the Bank will not
have any duty to advise the Guarantor of information known to it or any of them
regarding such circumstances or risks.
SECTION 14. GOVERNING LAW. This Guaranty shall be governed by, and
--------------
construed in accordance with, the laws of the State of GEORGIA.
SECTION 15. JURISDICTION/JURY TRIAL WAIVER/OTHER MATTERS.
--------------------------------------------
(a) EACH OF THE BANK AND THE GUARANTOR ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS GUARANTY OR THE RELATIONSHIP OF THE
GUARANTOR AND THE BANK ESTABLISHED HEREBY, WOULD BE BASED UPON DIFFICULT AND
COMPLEX ISSUES. ACCORDINGLY, TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE
GUARANTOR AND THE BANK HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING
OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION MAY BE COMMENCED BY OR
AGAINST THE GUARANTOR ARISING OUT OF THIS GUARANTY OR BY REASON OF ANY OTHER
CAUSE OR DISPUTE WHATSOEVER BETWEEN THE GUARANTOR AND THE BANK OF ANY KIND OR
NATURE.
(b) EACH OF THE GUARANTOR AND THE BANK AGREES THAT THE FEDERAL COURT OF
THE NORTHERN DISTRICT OF GEORGIA OR ANY STATE COURT LOCATED IN DOUGLAS COUNTY
SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE
GUARANTOR AND THE BANK PERTAINING DIRECTLY OR INDIRECTLY TO THIS GUARANTY OR TO
ANY MATTER ARISING HEREFROM. THE GUARANTOR EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH
COURT. THE GUARANTOR AND THE BANK WAIVE ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY PROCEEDING IN ANY SUCH COURT OR THAT SUCH
PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND EACH AGREES NOT TO PLEAD OR
CLAIM THE SAME.
(c) THE GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY SUMMONS AND
COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN, AND AGREES THAT SERVICE OF
- 7 -
<PAGE>
SUCH SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS MAY BE MADE BY UNITED
STATES MAIL, POSTAGE PREPAID ADDRESSED TO THE GUARANTOR AT THE ADDRESS SET FORTH
BELOW ITS SIGNATURE HERETO. SHOULD THE GUARANTOR FAIL TO APPEAR OR ANSWER ANY
SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY DAYS AFTER THE
MAILING THEREOF, IT SHALL BE DEEMED IN DEFAULT AN ORDER AND/OR JUDGMENT MAY BE
ENTERED AGAINST IT AS PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS.
(d) THE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED
TO PRECLUDE THE BRINGING OF ANY ACTION BY THE BANK OR THE ENFORCEMENT BY THE
BANK OF ANY JUDGMENT OBTAINED IN SUCH FORUM IN ANY OTHER APPROPRIATE
JURISDICTION.
(e) THE GUARANTOR AGREES THAT ALL OF ITS PAYMENT OBLIGATIONS HEREUNDER
SHALL BE ABSOLUTE, UNCONDITIONAL AND, FOR THE PURPOSES OF MAKING PAYMENTS
HEREUNDER, THE GUARANTOR HEREBY WAIVES ANY RIGHT TO ASSERT ANY SETOFF,
COUNTERCLAIM OR CROSS-CLAIM TO THE EXTENT PERMITTED BY LAW.
(f) THE GUARANTOR ACKNOWLEDGES THAT ALL OF THE WAIVERS IN THIS SECTION
HAVE BEEN MADE WILLINGLY, WITH THE ADVICE OF LEGAL COUNSEL AND WITH A FULL
UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF.
SECTION 16. LOAN ACCOUNTS. The Bank may maintain books and accounts
--------------
setting forth the amounts of principal, interest and other sums paid and payable
with respect to the Guaranteed Obligations, and in the case of any dispute
relating to any Guaranteed Obligation, the entries in such account shall be
binding upon the Guarantor as to the outstanding amount of such Guaranteed
Obligations and the amounts paid and payable with respect thereto absent
manifest error. The failure of the Bank to maintain such books and accounts
shall not in any way relieve or discharge the Guarantor of any of its
obligations hereunder.
SECTION 17. WAIVER OF REMEDIES. No delay or failure on the part of the
------------------
Bank in the exercise of any right or remedy it may have against the Guarantor
hereunder or otherwise shall operate as a waiver thereof, and no single or
partial exercise by the Bank of any such right or remedy shall preclude other or
further exercise thereof or the exercise of any other such right or remedy.
SECTION 18. WAIVER OF EXEMPTIONS. To the fullest extent permitted by
--------------------
law, the Guarantor hereby waives and agrees not to claim any and all homestead
- 8 -
<PAGE>
and other exemptions allowed by the Constitution or laws of the United States of
America, the State of Georgia or any other state or district of the United
States of America.
SECTION 19. SUCCESSORS AND ASSIGNS. Each reference herein to the Bank
----------------------
shall be deemed to include the Bank's successors and assigns (including, but not
limited to, any holder of the Guaranteed Obligations) in whose favor the
provisions of this Guaranty also shall inure, and each reference herein to the
Guarantor shall be deemed to include the Guarantor's executors, administrators,
successors and assigns, upon whom this Guaranty also shall be binding. The Bank
may assign, transfer or sell any Guaranteed Obligation, or grant or sell
participation in any Guaranteed Obligations, pursuant to the terms of the
Reimbursement Agreement or the Related Documents, to any Person or entity
without the consent of, or notice to, the Guarantor and without releasing,
discharging or modifying the Guarantor's obligations hereunder. The Guarantor
hereby consents to the delivery by the Bank to any assignee, transferee or
participant of any financial or other information regarding the Lessee or the
Guarantor. The Guarantor may not assign or transfer its obligations hereunder to
any Person or entity.
SECTION 20. FINANCIAL STATEMENTS. The Guarantor agrees to deliver the
--------------------
financial statements that it is required to give pursuant to the Reimbursement
Agreement.
SECTION 21. JOINT AND SEVERAL GUARANTEED OBLIGATIONS. This Guaranty
-----------------------------------------
shall be continuing, absolute and unconditional and shall remain in full force
and effect as to the Guarantor hereunder, despite the fact that any other
guarantor of the Guaranteed Obligations shall become deceased or incompetent or
shall otherwise be released or discharged from its obligations; the obligation
of the Guarantor and any other guarantor of the Guaranteed Obligations being
joint and several and each of the Guarantor and any other guarantor of the
Guaranteed Obligations is liable for the full amount of the Guaranteed
Obligations.
SECTION 22. SURVIVAL OF AGREEMENT. All agreements, representations and
---------------------
warranties made herein shall survive the execution and delivery of this Guaranty
and the Reimbursement Agreement, the making of the Loans and the execution and
delivery of the other Related Documents.
SECTION 23. AMENDMENTS. This Guaranty may not be amended except in
----------
writing signed by the Bank and the Guarantor.
SECTION 24. PAYMENTS/EXPENSES. All payments made by the Guarantor
-----------------
pursuant to this Guaranty shall be made in the lawful currency of the United
States of America, in immediately available funds to the main office of the
Bank, not later than 11:00 a.m., Atlanta, Georgia time, on the date three (3)
business days after demand therefor. The Guarantor shall pay, on demand, all
costs and expenses incurred by the Bank in the collection and enforcement of
this Guaranty, including the reasonable fees and disbursements of counsel to the
Bank actually incurred and based upon the total number of hours performed and
- 9 -
<PAGE>
not upon the statutory limit set forth in Official Code of Georgia Annotated
Section13-1-11, if collection is sought by or through an attorney.
SECTION 25. NOTICES. All notices, demands or other communications to
-------
the Guarantor hereunder shall be in writing and shall be mailed or hand
delivered or sent via facsimile transmission to the address for the Guarantor
set forth below its signature hereto. All such notices, demands and
communications shall be deemed received by the Guarantor (a) if personally
delivered or by messenger or overnight courier or delivered via facsimile
transmission, on the date of delivery thereof or (b) if through the United
States mail, on the earlier of (i) the date three days after the posting thereof
and (ii) the date of actual receipt by the Guarantor.
SECTION 26. SEVERABILITY. In case any provision of this Guaranty shall
------------
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 27. HEADINGS. Section headings used in this Guaranty are for
--------
convenience only and shall not affect the construction of this Guaranty.
SECTION 28. REVIEW OF REIMBURSEMENT AGREEMENT/RELATED DOCUMENTS. The
----------------------------------------------------
Guarantor acknowledges that, prior to the execution and delivery of this
Guaranty, the Guarantor has had the opportunity to review and ask questions
regarding the Reimbursement Agreement and the other Related Documents referred
to therein and to discuss the same and this Guaranty with its counsel.
- 10 -
<PAGE>
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered this
Guaranty under seal as of the date and year first written above.
GUARANTOR:
ABRAMS PROPERTIES, INC.
By: /s/ Alan R. Abrams
Name: Alan R. Abrams
Title: President
[CORPORATE SEAL]
Attest:
By: /s/ Melinda S. Garrett
Name: Melinda S. Garrett
Title: Asst. Secretary
Address for Notices:
Abrams Properties, Inc.
1945 The Exchange, Suite 400
Atlanta, Georgia 30339-2029
Attn: Melinda S. Garrett
Telephone: (770) 953-1777
Telecopy: (770) 953-9922
ABRAMS INDUSTRIES, INC.
[logo]
SINCE 1925
1999 ANNUAL REPORT
<PAGE>
SUMMARY FINANCIAL DATA*
<TABLE>
<CAPTION>
% %
1999 1998 CHANGE 1998 1997 CHANGE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $188,971,527 $178,590,842 +6 $ 178,590,842 $136,123,601 +31
- ----------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ (676,031) $ 2,999,478 N/A $ 2,999,478 $ 2,391,398 +25
- ----------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) per Share $ (0.23) $ 1.02 N/A $ 1.02 $ 0.81 +26
- ----------------------------------------------------------------------------------------------------------------
Cash Dividends per Share $ 0.20 $ 0.19 +5 $ 0.19 $ 0.07 +171
- ----------------------------------------------------------------------------------------------------------------
Shareholders' Equity $ 23,272,560 $ 24,535,863 (5) $ 24,535,863 $ 22,125,214 +11
- ----------------------------------------------------------------------------------------------------------------
Return on Average
Shareholders' Equity (2.8)% 12.9% N/A 12.9% 11.3% +14
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
*For complete 11 year review, see Selected Financial Data, Item 6 of this Report
on Form 10-K.
Dear Shareholders:
Abrams Industries' 74th year was a period of transition, evaluation and
disappointing operating results. Although revenues once again grew to record
levels, the Company suffered a net loss in 1999, a reversal from the record
earnings achieved in the prior two years. The loss resulted primarily from
greater than anticipated costs and challenges of adapting to the Company's new
manufacturing facility. Earnings in the prior two years also included gains on
real estate sales, whereas there were no such sales completed before April 30,
1999, the fiscal year-end. The Construction Segment once again achieved record
revenues and profits. Real Estate operating earnings, exclusive of asset sales,
and cash flow from owned properties surged to record levels. Fiscal 1999 ended
with strong earnings in the fourth quarter.
For the full fiscal year, consolidated revenues were $188,971,527, 5.8%
above last year's $178,590,842. The net loss was $676,031, or $.23 per share,
compared to earnings in 1998 of $2,999,478, or $1.02 per share. Per share
figures are based on weighted average shares outstanding of 2,936,356 during
1999 and 2,937,712 during 1998.
Contents
Letter to Shareholders ...................................... IFC-4
Summary Financial Data ...................................... IFC
Form 10-K ................................................... 5-40
Directors, Officers
and Directory ............................................. 40
Abrams Philosophy,
Annual Meeting and
Other Information ......................................... IBC
<PAGE>
CONSTRUCTION
- ------------
<TABLE>
<CAPTION>
TOTAL OPERATING
REVENUES EARNINGS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
1999 $160,611,412 $4,084,633
- -----------------------------------------------------------------------------------------
1998 $146,618,878 $3,506,217
- -----------------------------------------------------------------------------------------
1997 $ 98,460,046 $3,088,094
- -----------------------------------------------------------------------------------------
1996 $108,437,335 $2,806,030
- -----------------------------------------------------------------------------------------
1995 $ 94,128,795 $2,550,806
- -----------------------------------------------------------------------------------------
NOTE: Total revenues and operating earnings include revenues generated from
intercompany sources of $1,114,823, $5,026,181, $345,048, and $792,213 in 1999,
1998, 1997 and 1996, respectively. In computing operating earnings, allocated
parent expenses and income taxes have not been considered. (For additional
information, see note 13 to consolidated financial statements herein.)
</TABLE>
OUR CONSTRUCTION ACTIVITIES BEGAN IN 1925. ABRAMS CONSTRUCTION, INC. OPERATES AS
A GENERAL CONTRACTOR FOCUSING ON BUILDING AND RENOVATING RETAIL STORES, SHOPPING
CENTERS, FINANCIAL INSTITUTIONS, DISTRIBUTION CENTERS, MANUFACTURING FACILITIES,
OFFICE BUILDINGS AND OTHER TYPES OF COMMERCIAL CONSTRUCTION.
In an increasingly competitive construction marketplace, we are pleased
that we were able to achieve record levels of revenues and profits. Construction
revenues grew 9.5% in 1999, increasing to $160,611,412 from $146,618,878 last
year. Gross profit increased by 8.1% to $8,670,331 in 1999, compared to
$8,022,630 in 1998. Operating earnings rose at an even faster pace, expanding
16.5% to $4,084,633 from the year earlier $3,506,217.
We increased volume with our existing customers, including Academy Sports,
Borders, CompUSA, Garden Ridge, Kmart, NationsBank, Office Depot, Service
Merchandise, Staples, Stein Mart, SunTrust Bank, The Home Depot, Upton's,
Wal-Mart and Ward's. We also built projects for several new customers, including
Bassett, Best Buy, Dick's Sporting Goods, Mars Music, Pamida and Urban Retail.
Our broadened customer base allows us more flexibility when individual retail
customers modify growth strategies or change store renovation plans.
In 1999 we completed 113 projects in 25 states, striving throughout the
year to maintain our reputation of delivering completed projects on schedule.
Operating earnings grew faster than revenues, the result of our
effectiveness in employing our resources and people despite ever-increasing
competitive forces and a very tight labor market. We have been successful in
retaining an outstanding workforce, adding new employees that meet our high
standards of professionalism and integrity, while continuing the atmosphere of
trust and teamwork that pervades our Company.
We acquired new computer hardware and software, as we converted to a new
accounting system, and we began the implementation of a new project
administration system. Our ongoing investments in technology are necessary for
us to continue to increase our effectiveness and efficiency.
As we enter the new millennium we will endeavor to continue meeting the
challenge of profitably managing scarce resources and people while adding to
shareholder value.
<PAGE>
MANUFACTURING
- -------------
<TABLE>
<CAPTION>
OPERATING
TOTAL EARNINGS
REVENUES (LOSS)
- ---------------------------------------------------------------------------------
<S> <C> <C>
1999 $ 17,271,657 $ (1,760,238)
- ---------------------------------------------------------------------------------
1998 $ 15,193,653 $ 459,468
- ---------------------------------------------------------------------------------
1997 $ 16,703,258 $ 1,749,033
- ---------------------------------------------------------------------------------
1996 $ 15,008,358 $ (160,226)
- ---------------------------------------------------------------------------------
1995 $ 16,356,539 $ (478,235)
- ---------------------------------------------------------------------------------
NOTE: Total revenues and operating earnings include revenues generated from
intercompany sources of $501,220 in 1999 and $181,003 in 1998. In computing
operating earnings (loss), allocated parent expenses and income taxes have not
been considered. (For additional information, see note 13 to consolidated
financial statements herein.)
</TABLE>
OUR MANUFACTURING OPERATIONS BEGAN IN 1946. ABRAMS FIXTURE CORPORATION PRODUCES
AND INSTALLS STORE FIXTURES FOR SEVERAL OF THE NATION'S LEADING RETAILERS. IN
ADDITION, WE PRODUCE AND INSTALL DISPLAYS FOR THE BANKING INDUSTRY. ALL
MANUFACTURING OPERATIONS WERE RELOCATED TO ABRAMS RIVERSIDE, OUR NEW 250,000
SQUARE FOOT MANUFACTURING FACILITY IN LITHIA SPRINGS, GEORGIA, IN EARLY FISCAL
1999.
Relocating any operating business is a challenging task. In 1999, we
actually relocated two, combining our formerly separate wood and metal
operations in a unified manufacturing facility, and it proved to be a much
larger and more costly task than we anticipated. Leaving our two long-time homes
in downtown Atlanta, we moved into our new state-of-the-art facility in suburban
metro-Atlanta during the first quarter of fiscal year 1999. We were not
productively "settled" into operations, however, until well into the fourth
fiscal quarter.
During the first two fiscal months, prior to completion of the move,
customer orders were at very low levels, allowing us to focus on packing and
scheduling. Immediately after we went on-line in the new plant, however, with
many unopened "boxes" still lining production areas, the volume of orders from
existing customers accelerated dramatically. As volume soared, we continued to
meet customer demand, including commencing work on a long-delayed order, but
many planned refinements and modifications of plant layout were delayed, and
production workflow could not be optimally scheduled. Despite steady volume,
numerous operating inefficiencies throughout much of the first three quarters
led to excessive labor and material costs, much lower gross margins, and
disappointing operating losses.
Through the first three quarters of the year, Abrams Fixture Corporation
incurred an operating loss of just under $2.4 million. In the fourth quarter,
however, we achieved operating earnings of $605,702, which reduced the operating
loss for the entire year to $1,760,238. Total annual revenues increased 13.7% to
$17,271,657 from last year's $15,193,653. Exclusive of revenues from
installation services, revenues from fixture sales in 1999 actually grew to
$16,100,608, 20.5% above 1998's $13,364,357. Because of increased labor and
overhead costs in 1999, gross manufacturing margin was 15.7%, slightly better
than half the prior year's 29.2%. By the end of fiscal 1999, however, the gross
margin showed some improvement.
We are improving the level of production completions without sacrificing
product quality. The new plant has reduced inefficient and costly inventory
handling through the elimination of trucking between separate metal and wood
shop locations.
Revenues in 1999 came from a number of existing fixture customers,
including Aaron Rents, Domino's, John Ryan (NationsBank), Kmart, Sears, Simmons,
Stein Mart, Stiffel, Sutton, The Athlete's Foot Group and The Home Depot. New
customers included Bassett, Best Buy, Shaw Industries and U.S. Vision.
In an effort to address the decline in our gross margins, management is
focusing on more efficient plant utilization, optimizing production scheduling,
more proficient purchasing, continuous employee training, and controlling
overhead and expenses. We are directing marketing efforts toward those
opportunities that best can leverage our high capacity/high quality production
capability, as we endeavor to return to profitability.
<PAGE>
REAL ESTATE
- -----------
<TABLE>
<CAPTION>
OPERATING
TOTAL EARNINGS
REVENUES (LOSS)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
1999 $14,202,578 $ (226,053)
- ------------------------------------------------------------------------------------------
1998 $22,082,012 $ 2,882,496
- ------------------------------------------------------------------------------------------
1997 $21,132,159 $ 1,003,370
- ------------------------------------------------------------------------------------------
1996 $11,473,415 $(1,261,552)
- ------------------------------------------------------------------------------------------
1995 $11,982,530 $ (900,864)
- ------------------------------------------------------------------------------------------
NOTE: Total revenues and operating earnings include revenues generated from
intercompany sources of $1,485,038 in 1999 and $200,615 in 1998. In computing
operating earnings, allocated parent expenses and income taxes have not been
considered. (For additional information, see note 13 to consolidated financial
statements herein.)
</TABLE>
OUR REAL ESTATE ACTIVITIES BEGAN IN 1960. ABRAMS PROPERTIES, INC. ENGAGES
IN REAL ESTATE DEVELOPMENT, REDEVELOPMENT, ACQUISITION, DISPOSITION, AND
MANAGEMENT OF INCOME-PRODUCING PROPERTIES, PRIMARILY SHOPPING CENTERS, AS WELL
AS OFFICE AND INDUSTRIAL PROPERTIES. THE COMPANY ACQUIRES OR DEVELOPS PROPERTIES
FOR SALE TO OTHERS AND FOR OUR OWN INVESTMENT PURPOSES. ABRAMS PROPERTIES'
PORTFOLIO OF INCOME-PRODUCING PROPERTIES ON APRIL 30, 1999, CONTAINED
APPROXIMATELY 2.3 MILLION SQUARE FEET, IN NINE STATES, CONSISTING OF SIXTEEN
RETAIL PROPERTIES, TWO OFFICE PROPERTIES AND ONE INDUSTRIAL PROPERTY.
After several years of strategic repositioning through acquisitions,
dispositions and re-developments, 1999 was devoted to integrating the properties
into our real estate portfolio. The pause in transactions allowed management to
focus on improving portfolio productivity. The results are encouraging.
Cash flow after debt service from owned properties in 1999 increased
$793,000 or 64% over last year, and was 109% higher than the levels of 1995, the
final year before we began the overhaul of the portfolio. Similarly, operating
earnings excluding real estate sales and depreciation surged $1,459,000 or 396%
in 1999, and was $891,000 or 95% above 1995. The return on average cash invested
in real estate tripled in 1999 to 15.06%.
A key component of our strategy in recent years has been to use strategic
sales, reinvestments and redevelopments to help diversify the mix of portfolio
revenues and reduce reliance on any single customer. The percentage of portfolio
revenues (total revenues less interest income and gains on sale) represented by
Kmart, our largest source of rental revenue, was 36% in 1999, a 20% reduction
from last year's figure of 45%, and 36% below 1997's Kmart revenue concentration
of 56%.
During the year Merchants Crossing Shopping Center of Newnan, Georgia,
originally developed by the Company in 1974 and expanded in 1987 and 1989, was
marketed for sale. Before a sale transaction could be structured, however,
Goody's elected to end its anchor tenancy in the center, creating a 24,986
square foot vacancy. While continuing efforts to sell the center, we identified
a suitable replacement anchor tenant to fill the space. In the closing weeks of
the year, we successfully executed a new lease with Hastings Entertainment, Inc.
Subsequently, in the first weeks of fiscal 2000, the Company closed on the sale
of the Newnan center for a price of $6.74 million, earning a gross profit on the
sale of $2.9 million.
In continuation of our strategy to vary the mix of real estate assets, and
to defer the income tax otherwise payable on the gain on sale, in July 1999 we
reinvested the proceeds from the Newnan sale in the purchase of Crossroads
Square Shopping Center in Jacksonville, Florida.
Effective leasing and a reduction in overall operating costs contributed to
the gains in operating cash flow and operating earnings. Additional increases in
productivity can be achieved by more leasing, effective property management, and
additional cost reductions.
The successful implementation of our strategic plan is the result of the
leadership, talents and efforts of our team of top-notch real estate
professionals. One such executive, Brennon E. Smith, Assistant Vice President
and Director of Construction, earned a promotion to Vice President. We continue
to seek to improve the abilities and productivity of our people.
As an additional vehicle to grow Real Estate cash flow and return on
assets, and in order to expand the productivity of the Company's cash invested
in real estate, the Company is considering opportunities to work with sources of
outside equity capital. We continue to seek diversification and will look for
other ways to improve investment returns as part of our pursuit of higher
shareholder value.
<PAGE>
CONSTRUCTION
MANUFACTURING
REAL ESTATE
In June 1999, your Board of Directors declared a dividend in the amount of
$.04 per share, the Company's 80th consecutive quarterly dividend. The dividend
was paid on June 30, 1999, to shareholders of record as of June 16, 1999.
The Board of Directors also decided to commence an in-depth investigation
of strategic and financial alternatives that may be available to maximize
shareholder value. That investigation is now underway.
In July 1999, Alan R. Abrams, Co-Chairman of the Board of Directors, was
promoted to the post of Chief Executive Officer. Mr. Abrams succeeds Joseph H.
Rubin, who is leaving after twenty years of service to the Company to pursue
other business interests. J. Andrew Abrams, Co-Chairman of the Board of
Directors, became President and Chief Operating Officer, while remaining as
Chief Executive Officer of the Manufacturing Segment.
As brothers, we represent the third generation of the Abrams family to lead
our Company. We are honored and proud to continue our 74-year tradition of
creating value for you, the shareholders.
SINCERELY,
/s/ Alan R. Abrams /s/ J. Andrew Abrams
Alan R. Abrams J. Andrew Abrams
Co-Chairman of the Board Co-Chairman of the Board
Chief Executive Officer President and Chief Operating Officer
<PAGE>
FOUNDER
Alfred R. Abrams
(1899-1979)
BOARD OF DIRECTORS
*Alan R. Abrams (E)
Co-Chairman of the Board
Chief Executive Officer
Abrams Industries, Inc.
*J. Andrew Abrams (E)
Co-Chairman of the Board
President and Chief Operating Officer
Abrams Industries, Inc.
Chief Executive Officer
Abrams Fixture Corporation
Edward M. Abrams (E)
Chairman of the Executive Committee
Abrams Industries, Inc.
Bernard W. Abrams (E)
Chairman Emeritus of the Executive
Committee
Abrams Industries, Inc.
Paula Lawton-Bevington (A)(C)
Chairman
Servidyne Systems, Inc.
Donald W. MacLeod (A)(C)
Former Chairman of the Board
IRT Property Company
Anthony Montag (A)(C)
Chief Executive Officer
A. Montag & Associates, Inc.
Joseph H. Rubin (E)
Consultant
Abrams Industries, Inc.
Felker W. Ward, Jr. (A)(C)
Chairman of the Board
Pinnacle Investment Advisors, Inc.
Committees:
E-Executive
A-Audit
C-Compensation
*Executive Officer
OFFICERS OF ABRAMS INDUSTRIES, INC.
AND SUBSIDIARIES
Alan R. Abrams
J. Andrew Abrams
Gerald T. Anderson, II
Michael W. Arasin
Sarah M. Edwards
Janis H. Fowler
Melinda S. Garrett
George W. Hodges, Jr.
B. Michael Merritt
James D. O'Donnell
Richard V. Priegel
Brennon E. Smith
Thomas F. Stock
CONSTRUCTION SEGMENT
ABRAMS CONSTRUCTION, INC.
1945 The Exchange
Suite 350
Atlanta, Georgia 30339
(770) 952-3555
www.aciatl.com
MANUFACTURING SEGMENT
ABRAMS FIXTURE CORPORATION
375 Riverside Parkway
Lithia Springs, Georgia 30057
(770) 372-1000
www.abramsfixture.com
REAL ESTATE SEGMENT
ABRAMS PROPERTIES, INC.
1945 The Exchange
Suite 400
Atlanta, Georgia 30339
(770) 953-1777
www.abramsproperties.com
<PAGE>
[back page]
ABRAMS INDUSTRIES, INC.
Corporate Headquarters
1945 The Exchange
Suite 300
Atlanta, Georgia 30339
(770) 953-0304
FAX (770) 953-0302
www.abramsindustries.com
[inside back cover]
BUSINESS DESCRIPTION
Abrams Industries, Inc. (the "Company") consists of three industry segments
(Construction, Manufacturing, and Real Estate) which work for the betterment of
the whole. The business of the Company, therefore, is the business of its
segments.
ABRAMS PHILOSOPHY
Make a profit so that the Company will remain financially sound.
Help to develop the people in our organization to achieve their maximum
potential in a climate that creates good working conditions, mutual trust and
happiness.
Encourage our people to practice thrift, to take an active interest in
their church or synagogue, community projects and government and to be good
citizens.
Manufacture products and provide services of the highest quality, so that
we may merit the respect, confidence and loyalty of our customers. Be a source
of strength to our customers and suppliers, conducting all of
our transactions with them with fairness.
Plan and carry out all of our activities so that the Company can expand its
leadership and be regarded as a model in industry.
ANNUAL MEETING INFORMATION
The Annual Meeting of Shareholders of Abrams Industries, Inc. will be held
at 4:00 p.m. on Wednesday, September 22, 1999, at the Corporate Headquarters,
1945 The Exchange, Suite 300, Atlanta, Georgia.
TRANSFER AGENT:
SunTrust Bank, Atlanta
Post Office Box 4625
Atlanta, Georgia 30302
Exhibit 21
ABRAMS INDUSTRIES, INC. SUBSIDIARIES
Abrams Construction, Inc.
Abrams Fixture Corporation
Abrams Properties, Inc.
Merchants Crossing of Englewood, Inc.
Merchants Crossing of North Fort Myers, Inc.
Merchants Crossing, Inc.
Merchants Crossing of Jackson, Inc.
1945 The Exchange, LLC
Abrams Riverside, LLC
Benncoff, LLC
Cinci Odonnett, LLC
CHIPJAX, LLC
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<NAME> ABRAMS INDUSTRIES, INC.
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