UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
_____ OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED)
For the transition period from ___ to ___
Commission File Number 0-5556
CONSOLIDATED-TOMOKA LAND CO.
(Exact name of registrant as specified in its charter)
FLORIDA 59-0483700
(State or other jurisdiction of (I.R.S. Employer
149 South Ridgewood Avenue incorporation or organization)
Daytona Beach, Florida Identification No.)
(Address of principal executive offices) 32114
(Zip Code)
Registrant's telephone Number, including area code
(904) 255-7558
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF
THE SECURITIES EXCHANGE ACT OF 1934:
Name of each exchange on
Title of each class which registered
COMMON STOCK, $1 PAR VALUE AMERICAN STOCK EXCHANGE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT:
NONE
(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 ___
----
1
<PAGE>
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 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. X
___
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 10, 1999 was approximately $21,777,849.
The number of shares of the Registrant's Common Stock outstanding on
March 10, 1999 was 6,371,833.
Portions of the 1998 Annual Report to Stockholders of Registrant are
incorporated by reference in Part I, II, and IV of this report. Portions of
the Proxy Statement of Registrant dated March 22, 1999 are incorporated by
reference in Part III of this report.
2
<PAGE>
PART I
Item 1. Business
_______ ________
The Company is primarily engaged through its
wholly owned subsidiaries, Indigo Group Inc.,
Indigo Development Inc., Indigo International Inc.and Indigo
Group Ltd., in the real estate industry. Real esate operations
include commercial real estate, real estate development,
golf operations, property leasing, leasing properties for
oil and mineral exploration and the sale of forest products.
From time to time, the Company sells unimproved real estate
considered surplus to its operating needs. This latter function
is not considered part of the Company's ordinary operations.
On December 28, 1998, the Company entered into an agreement for
the sale of its citrus operations. The transaction is expected
to close on or about April 8, 1999 at a price approximating
$30,945,000. The results of the citrus operations have been
reported separately as discontinued operations in the Consolidated
Statements of Income. Prior year consolidated financial
statements have been restated to present citrus operations as
discontinued operations. The assets and liabilities associated
with the citrus operations as of December 31, 1998 and 1997 have
been presented separately on the consolidated balance sheets as
"Net Assets of Discontinued Citrus Operations." Summary
financial information of the citrus operations is as follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1998 1997 1996
<S> <C> <C> <C>
Revenues from Discontinued
Citrus Operations $11,726,251 $ 9,444,783 $13,862,864
========== ========== ==========
Income from Discontinued Citrus
Operations Before Tax $ 1,930,247 $ 1,092,217 $ 4,011,512
Income Tax Expense from Discontinued
Citrus Operations ( 726,352) ( 411,001) (1,509,532)
--------- --------- ---------
Net Income from Discontinued
Citrus Operations $ 1,203,895 $ 681,216 $ 2,501,980
========= ======== =========
</TABLE>
3
<PAGE>
Item 1. Business (continued)
- ------ --------
The Company also operated in the Resort industry until July
14, 1994 when the Resort complex at Indigo Lakes was sold.
Due to the pending sale of the citrus operations, the Company's
continuing operations include only one segment. Thus
segmental disclosures are not applicable.
CITRUS
- ------
Citrus groves. The Company, under the name Lake Placid Groves,
owns and operates approximately 3,900 acres of orange and grapefruit
groves located primarily in two large parcels in Highlands County,
Florida. The average age of grove trees is 16 years, well within
the average 45-year productive life. At December 31, 1998 all grove
acres were classified as fruit bearing. The groves require
expenditures chargeable to production expenses, such as fertilizer,
irrigation, and cultivation.
Citrus operations. The Company harvests and sells both fresh and
to-be-processed citrus from its groves. In connection
with the groves, the Company owns and operates an efficient fresh
fruit citrus packing plant, placed in service during the fall of
1969, in which the portion of the crop which is sold as fresh
fruit is packed. Fresh fruit sales are made by the Company to
wholesale produce distributors and retail grocery chains primarily
in the Eastern and Midwestern regions of the United States
and Canada. In an effort to achieve optimum utilization of the
packing facility, the Company also handles the fruit of other
growers in the area.
That portion of the Company's citrus crop which is not sold
as fresh fruit is processed by Citrus World Incorporated
("Citrus World"), an agricultural cooperative under a participating
marketing pool agreement. The agreement is a two year arrangement
which the Company may terminate on October 1 of any year by
giving written notice sixty days prior to such date with the
arrangement continuing for two additional years from the
notice of cancellation. Citrus World, one of the larger
processors of citrus products in the United States, pools its
own fruit with the fruit received from the Company and other
citrus growers, processes the pooled fruit, and sells the
products produced therefrom. Each participant in the pool,
including Citrus World, shares ratably in the proceeds from
the sales of these products, net of Citrus World's actual
processing and marketing costs, plus a per-unit handling fee.
Citrus World makes periodic payments to all participants
on their pro rata share of net sales proceeds and makes
final payment after all the products in the pool have
been sold. During the years 1998, 1997, and 1996, the Company's
sales under the above pooling agreement amounted to $4,321,531,
$3,107,919, and $5,203,787, respectively.
4
<PAGE>
Item 1. Business (continued)
- ------ --------
The percentages of the Company's citrus which are sold as fresh
fruit and which are diverted to the processing plant can vary
considerably from year to year, depending upon fruit size, exterior
appearance, and the relative profitability of the markets. During
the crop year ended August 31, 1998 approximately 38% of the
Company's citrus crop was sold as fresh fruit and the balance
was diverted to the cannery, as compared with 47% in the crop year
ended August 31, 1997 and 35% the crop year ended August 31, 1996.
The citrus industry, which is seasonal in nature as are other
agricultural pursuits, is subject to wide fluctuations in income
because of changes in demand, weather conditions, and other economic
factors. Also affecting income are the continuing large amounts
of frozen concentrate orange juice from Brazil which maintains
high supply levels and tend to lower selling prices. The Company's
sales of fresh citrus fruit can be affected adversely by marketing
orders issued by the United States Department of Agriculture under
the Agricultural Marketing Agreement Act, which can result in
periodic proration, controlled by grade and size, of interstate
shipment of Florida oranges and grapefruit. Also, tariffs
established by the International Tariff Commission and approved
by Congress can impact the cost of importing citrus products and
thus affect the supply and selling prices of processed citrus.
RESORT OPERATIONS
- -----------------
During 1994, the Company sold its resort operation known as the
Indigo Lakes Holiday Inn Crowne Plaza Resort located on U. S.
Highway 92 in Daytona Beach, Florida. The Resort had been under
a management contract with Sandcastle Resorts since August 17,
1990. A group associated with Sandcastle Resorts formed a
partnership named Indigo Lakes Resort, Ltd. and purchased the
145-unit inn, 8 separate buildings housing 64 condominium-style
units, tennis courts and pro shop, a conference center, several
small meeting rooms, two swimming pools, and other properties
related to those facilities. The 18-hole championship golf course,
fully equipped golf pro shop, restaurant and cocktail lounge, and
a 500-seat banquet and meeting room facility, were sold to The
Fairways Group, L.P.
REAL ESTATE OPERATIONS
- ----------------------
Commercial Development. In August of 1989, the Company reached
an agreement in principle with the Ladies Professional Golf
Association ("LPGA") and the City of Daytona Beach, which calls
for the planning and development of the site for the national
headquarters of the LPGA along with two championship golf
courses. The mixed-use development will also include a clubhouse,
resort facilities, and residential communities along with other
commercial uses. This development is on approximately 3,600
5
<PAGE>
Item 1. Business (continued
- ------ --------
acres of land owned by the Company's real estate development
subsidiary, Indigo Development Inc. ("IDI"), in Daytona Beach,
plus 730 acres owned by the City of Daytona Beach immediately
west of Interstate 95. The LPGA has successfully relocated its
headquarters to Daytona Beach and occupies their newly constructed
facilities within the development. The official opening of the
first LPGA International golf course occurred in July 1994 with
the second course opening in October 1998. In December 1994,
the first sale within the development was completed with the
closing of 60 acres of residential land located in the northern
section of the property. During 1995, the first residential units
within the community were completed. In early 1996,
the Interstate 95 interchange at LPGA Boulevard, which
is the north and main entrance to the project, was opened
for use. On September 1, 1997, responsibility for the
operations of the LPGA International golf courses was
transferred from the City of Daytona Beach to a wholly
owned subsidiary of the Company. The agreement with the City of
Daytona Beach provides for the second golf course and a clubhouse
to be constructed by the Company in return for a long-term lease
from the City on both golf courses. The design phase of the
clubhouse has begun and is projected to open by year-end 1999.
Indigo Commercial Realty, a commercial real estate brokerage
company formed in 1991, is the Company's agent in the marketing
and management of commercial properties. In addition to the LPGA
development, approximately 67 acres of fully developed sites,
owned by Indigo Group Inc. and Indigo Group Ltd. ("IG LTD") were
available for sale at December 31, 1998. All development and
improvement costs have been completed at these sites. All of
these commercial sites are located in the Daytona Beach area.
Residential. Until December 1993, the Company, through IG LTD,
operated in residential development, building and sales. At the
end of 1993 IG LTD closed down the development and building
functions. IG LTD continues to sell its remaining lot inventory
in the following communities:
Riverwood Plantation, a 180-acre community in Port Orange, Florida
with 61 lots remaining at December 31, 1998.
Indigo Lakes, a 200-acre development located in Daytona Beach
with 4 lots remaining at December 31, 1998. This community
also includes a 304 unit apartment complex constructed in 1989
by a joint venture between IG LTD and the Trammel Crow Company.
The apartment complex was sold to the mortgage holder in 1994.
Tomoka Heights, a 180-acre development adjacent to Lake Henry in
Highlands County, Florida. There are approximately 120 developable
lots remaining to be sold including 38 fully developed lots.
The sales and construction operations were assumed by third
third parties as of January 1994.
6
<PAGE>
Item 1. Business (continued
- ------ --------
IG LTD also has an inventory of 26 fully developed non-contiguous
lots in Palm Coast at December 31, 1998, which the Company continues
to sell.
Income Properties. Rental property is limited to a 17,000 square-foot,
three-story office building in downtown Daytona Beach. The building
is under a lease/purchase agreement, and is considered a financing lease.
Other leasing activities of the Company include ground leases for
billboards, leases of communication tower sites, and a hunting
lease covering approximately 8,300 acres.
Over the past several year the Company has successfully implemented
a strategy of disposing of its income properties. During 1998 the
Company sold its 50% interest in the 70,000 square-foot shopping
center located in Marion County, Florida. At the end of 1997,
the Company sold the office building located in Daytona Beach,
known as Consolidated Center. The Company continues to use a
portion of the building as its headquarters, as terms of the sale
include a commitment to lease 6,000 square feet for a period of at
least three years. Also in 1997, the 24,000 square-foot office
building at Palm Coast, Florida was sold. During 1996, the
Company sold the 24,000 square foot office building in Daytona Beach,
which had been leased to the LPGA as the principal tenant, along
with the 70,000 square-foot Mariner Village shopping center located
in Spring Hills, Florida.Mariner Towne Square, an adjacent 18,000
square-foot shopping center was sold during 1995.
Forest product sales. The timber lands encompass approximately
13,000 acres west of Daytona Beach. Geographic location of the
timber tract is excellent. In addition to access by major
highways (Interstate 95, State Road 40, and International
Speedway Boulevard), the internal road system for forestry
purposes is good. Income from sales of forest products varies
considerably from year-to-year depending on economic conditions
and rainfall, which sometimes limits access to portions of
the woodlands. In addition, drought conditions sharply increase
the potential of forest fires, as occurred during the summer
of 1998. The wildfires which ravaged central Florida burned
approximately 9,000 acres of the Company's timberland. This
and the sale of the approximately 11,000-acre parcel to St.
Johns River Water Management District in 1997 will reduce
the Company's potential for future income from sales of forest
products; although, sales should more than cover expenses
associated with the forestry operation. These expenses
consist primarily of real estate taxes, with additional
expenses including the costs of installing and maintaining
roads and drainage systems, reforestation, and wild fires
suppression.
7
<PAGE>
Item 1. Business (continued)
- ------ --------------------
Subsurface Interests. The Company owns full or fractional subsurface
oil, gas, and mineral interests in approximately 537,000 "surface"
acres of land owned by others in various parts of Florida, equivalent
to approximately 300,000 acres in terms of full interest. The
Company leases its interests to mineral exploration firms whenever
possible.
At December 31, 1998 mineral leases were in effect covering a total
of 28,821 surface acres. Although the leases are for three- to five-year
terms, they are terminable annually by the lessees; and the lessees
have no obligation to conduct drilling operations. Leases on 2,080
acres have reached maturity but, in accordance with their terms,
are held by the oil companies without annual rental payments because
of producing oil wells, on which the Company receives royalties.
The purchasers of 82,543 surface acres in which the Company has a
one-half reserved mineral interest are entitled to releases of
the Company's rights if such releases are required for residential
or business development. Consideration for such releases on 73,117
of those acres would be at the rate of $2.50 per surface acre.
On other acres in Lee and Hendry Counties (where producing oil
wells exist), the Company's current policy is to grant no release
rights with respect to its reserved mineral rights. In rare instances,
a release of surface entry rights might be granted upon request of a
surface owner who requires such a release for special financing or
development purposes. In counties other than Lee and Hendry, releases are
granted for a percentage of the surface value of a parcel of land.
At December 31, 1998 there were three producing oil wells on the
Company's interests. Volume in 1998 was 138,664 barrels and volume in
1997 was 125,356 barrels. Production for prior recent years
was: 1996 - 131,231, 1995 - 117,831 barrels, and 1994 - 141,488
barrels.
Real estate held and land transactions. More than 90% of the
Company's lands have been owned by the Company or its affiliates
for more than fifty years. To date, the Company has not been in
the business of acquiring and holding real estate for sale.
Instead, portions of the Company's lands are put to what
management believes is their best economic use. Unsolicited sales
are made of parcels which do not appear to offer opportunities for
use in the foreseeable future.
8
<PAGE>
Item 1. Business (continued)
- ------ --------
GENERAL, CORPORATE AND OTHER OPERATIONS
- ---------------------------------------
Land development beyond that discussed at "Business - Real Estate
Operations" will necessarily depend upon the long-range economic
and population growth of Florida and may be significantly affected
by fluctuations in economic conditions, prices of Florida real
estate, and the amount of resources available to the Company for
development.
Employees. The Company has approximately 145 employees, including
approximately 70 seasonal employees in citrus operations. During
the citrus harvesting season, these seasonal employees are hired
to pack and handle the citrus crop. No employees are represented
by unions. The Company considers its employee relations to be
satisfactory.
Item 2. Properties
- ------- ----------
Information concerning the Company's properties is included on
pages 2-3 of the Company's 1998 Annual Report to Shareholders
(the "Annual Report") under the captions "Land Holdings",
"Citrus", and "Real Estate Operations" and is incorporated
herein by reference. Except for parts of the Annual Report
expressly incorporated herein by reference, the annual report is
not to be deemed filed with the Securities and Exchange
Commission.
Item 3. Legal Proceedings
- ------ -----------------
There are no material pending legal proceedings to which
the Company or its subsidiaries are a party.
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
No matters were submitted to a vote of security holders
during the fourth quarter of the year ended December 31, 1998.
9
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters
- ------ ----------------------------------------------------
(a) Common Stock
Information concerning the Company's common stock and
dividends is included on page 28 of the Annual Report
under the caption "Common Stock Prices and Dividends"
and such discussion is incorporated herein by reference.
(b) Recent Sales of Unregistered Securities
None
Item 6. Selected Financial Data
- ------- -----------------------
Five-year financial statement data is included on page 4
of the Annual Report under the caption "Five-Year Financial
Highlights" and such information is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- ------------------------------------------------------------
and Results of Operations.
--------------------------
Management's Discussion and Analysis of Financial Condition
and Results of Operations is included on pages 25 through 27
of the Annual Report, under the captions "Management's Discussion
and Analysis," and "Financial Position" and such discussion is
incorporated herein by reference.
Item 7A Quantitative and Qualitative Disclosures about Market Risk
- ------- ---------------------------------------------------------
Not Applicable.
Item 8. Financial Statements and Supplementary Data
Financial Statements
--------------------------------------------------------
Financial statements incorporated by reference in this report
are listed at Part IV, Item 14 (a), "Financial Statements."
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures
- ------ -----------------------------------------------------
There were no disagreements with accountants on accounting and
financial disclosures.
10
<PAGE>
PART III
The information required by Items 10, 11, 12, and 13 is
incorporated herein by reference to the registrant's 1998 annual
meeting proxy statement pursuant to Instruction G to Form 10-K.
On March 22, 1999, the registrant anticipates filing with the
Commission, pursuant to Regulation 14A under the Securities Exchange
Act of 1934, its definitive proxy statement to be used in connection
with its 1999 annual meeting of shareholders at which directors will
be elected for the ensuing year.
Executive Officers of the Registrant
------------------------------------
The executive officers of the registrant, their ages at January 31,
1999, their business experience during the past five years, and the year
first elected as an executive officer of the Company are as follows:
Bob D. Allen, 64, president and chief executive officer, March 1990
to present.
Bruce W. Teeters, 53, senior vice president-finance and treasurer,
January 1988 to present.
Both of the above are elected annually as provided in the By-Laws.
11
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- ------- ---------------------------------------------------------------
(a.) 1. Financial Statements
--------------------
The Company's 1998, 1997, and 1996 consolidated financial
statements, together with the report of Arthur Andersen LLP,
dated February 3, 1999, appearing on pages 5 to 23 of the
accompanying 1998 Annual Report to Shareholders are incorporated
by reference in this Form 10-K Annual Report. The following is
a list of such financial statements with references to the pages
of the 1998 Annual Report to Shareholders on which they may be found:
Annual Report
Page No.
--------------
Report of Independent Certified Public Accounts 5
Consolidated Statements of Income for the
three years ended December 31, 1998 6
Consolidated Balance Sheets as of December 31,
1998 and 1997 7
Consolidated Statements of Shareholders' Equity
for the three years ended December 31, 1998 8
Consolidated Statements of Cash Flows for the three
years ended December 31, 1998 9-10
Notes to Consolidated Financial Statements 11-23
With the exception of (i) the aforementioned financial
statements and (ii) the information incorporated under
Items 2, 5, 6, and 7, the 1998 Annual Report to Shareholders
is not to be deemed filed as part of this report.
2. Financial Statement Schedules
-----------------------------
Included in Part IV of this Annual Report on
Form 10-K:
Report of Independent Certified Public Accountants
on Financial Statement Schedules on Page 15 of this
Annual Report on Form 10-K.
Schedule III - Real Estate and Accumulated
Depreciation on page 16 of this
Annual Report on Form 10-K
Schedule IV - Mortgage Loans on Real Estate
on page 17 of this Annual Report on
Form 10-K
12
<PAGE>
14. Exhibits, Financial Statements Schedules and
Reports on Form 8-K (continued)
--------------------------------------------
Other Schedules are omitted because of the absence of
conditions under which they are required, materially
or because the required information is given in the financial
statements or notes thereof.
3. Exhibits
See Index to Exhibits on page 19 of this
Annual Report on Form 10-K.
(b) Reports on Form 8-K
-------------------
A form 8-K under item 5 "Other Events," dated
December 28, 1998 was filed. The report dealt
with the signing of an agreement for the sale
of the citrus business.
13
<PAGE>
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.
CONSOLIDATED-TOMOKA LAND CO.
(Registrant)
3/22/99 By /s/ Bob D. Allen
Bob D. Allen, Chairman of the
Board, President, and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
3/22/99 Chairman of the Board, President,
and Chief Executive Officer
(Principal Executive
Officer), and Director /s/ Bob D. Allen
----------------
3/22/99 Senior Vice President-Finance
Treasurer (Principal Financial
and Accounting Officer), Director /s/ Bruce W. Teeters
--------------------
3/22/99 Director /s/ David D. Peterson
---------------------
3/22/99 Director /s/ John C. Adams, Jr.
----------------------
3/22/99 Director /s/ Robert F. Lloyd
-----------------------
14
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
TO CONSOLIDATED-TOMOKA LAND CO.:
We have audited in accordance with generally accepted auditing
standards, consolidated financial statements included in
Consolidated-Tomoka Land Co.'s 1998 Annual Report to Shareholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 3, 1999. Our audits were made
for the purpose of forming an opinion on these statements
taken as a whole. The schedules listed in item 14(a) 2 are
the responsibility of the Company's management and are presented
for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated
financial statements. These schedules have been subjected to
the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly
state in all material respects the financial data required to be
set forth therein in relation to the basic consolidated financial
statements taken as a whole.
Arthur Andersen LLP
Tampa, Florida
February 3, 1999
15
<PAGE>
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTIION>
COSTS CAPITALIZED
INITIAL COST TO COMPANY SUBSEQUENT TO ACQUISITION
------------------------- ------------------------------
DESCRIPTION ENCUMBRANCES LAND BUILDINGS &
- ----------- ----------- ---- IMPROVEMENTS IMPROVEMENTS CARRYING COSTS
------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
CITRUS FACILITY
AT:LAKE PLACID 8,911,124 1,485,974 1,335,426 9,939,808 -0-
MISCELLANEOUS -0- 735,433 26,956 841,543 -0-
--------------------------------------------------------------------------
8,911,124 2,221,407 1,362,382 10,781,351 -0-
==========================================================================
GROSS AMOUNT AT WHICH
CARRIED AT CLOSE OF PERIOD
DATE OF
--------------------------------- ACCUMULATED COMPLETION OF DATE DEF
LAND BUILDINGS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED LIFE
-------------------------------- ------------ -------------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
LAKE PLACID 1,485,974 11,275,234 12,761,208 3,225,844 VARIOUS N/A 5-30 Yrs.
MISCELLANEOUS 1,576,976 26,956 1,603,932 226,914 N/A VARIOUS 5-40 Yrs.
--------------------------------------------------
3,062,950 11,302,190 14,365,140 3,452,758
==================================================
1998 1997 1996
----------- ---------- ----------
<S> <C> <C> <C>
COST:
BALANCE AT BEGINNING OF YEAR 17,693,377 25,544,117 31,683,184
IMPROVEMENTS 172,322 657,688 182,985
COST OF REAL ESTATE SOLD (3,500,559) (8,508,428) (6,322,052)
----------- ----------- -----------
BALANCE AT END OF YEAR 14,365,140 17,693,377 25,544,117
===============================================
ACCUMULATED DEPRECIATION:
BALANCE AT BEGINNING OF YEAR 4,113,403 6,566,029 7,631,177
DEPRECIATION AND AMORTIZATION 423,570 731,962 833,994
DEPRECIATION ON REAL ESTATE
SOLD (1,084,215) (3,184,588) (1,899,142)
------------------------------------------------------
BALANCE AT END OF YEAR 3,452,758 4,113,403 6,566,029
======================================================
</TABLE>
16
<PAGE>
SCHEDULE IV
CONSOLIDATED-TOMOKA LAND CO.
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998
<TABLE>
<CAPTIONS>
PRINCIPAL
FINAL FINAL PERIODIC AMOUNT OF
DESCRIPTION INTEREST MATURITY PAYMENT PRIOR FACE CARRYING LOANS
RATE DATE TERMS LIENS AMT. AMOUNT (A) DELINQUENT
- ----------- -------- -------- -------- ----- ----- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
MORTGAGE N/R
SECURED BY
REAL ESTATE:
Volusia Co. 8.75% 03/99 Balloon of $304,293 -- 304,293 304,293 --
Volusia Co. 9.25% 09/03 Level, plus balloon of $224,737 -- 299,650 299,650 --
Volusia Co 9.25% 12/98 Balloon of $1,071,325 -- 1,969,541 1,071,325 --
Volusia Co 9.25% 12/00 Level, plus balloon of $611,200 -- 764,000 183,000 --
Volusia Co 9.25% 12/98 Balloon of $313,438 -- 356,250 313,438 --
Volusia Co 8.50% 12/01 Level, plus balloon of $974,083 -- 1,220,000 1,128,292 --
Hernando Co 9.00% 05/00 Leval, plus balloon of $888,516 -- 975,000 915,949 --
Other 6.25%-7.0% Various Balloon of $44,400 -- 44,400 44,400 --
-----------------------------------------
-- $ 5,933,134 $ 4,260,347 --
=========================================
(A) FOR FEDERAL INCOME TAX PURPOSES, THE AGGREGATE BASIS OF THE LISTED MORTGAGES WAS $4,260,347
(B) A RECONCILIATION OF THE CARRYING AMOUNT OF MORTGAGES FOR THE THREE YEARS ENDED DECEMBER 31, 1998 1997
AND 1996 IS AS FOLLOWS:
1998 1997 1996
------- ------- --------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $5,146,017 $10,944,356 $7,097,776
NEW MORTGAGE LOANS 628,343 12,900 4,911,607
COLLECTIONS OF PRINCIPAL ( 1,514,013) (5,811,239) ( 1,065,027)
------------------------------------
BALANCE AT END OF YEAR $ 4,260,347 $ 5,146,017 $ 10,944,356
====================================
</TABLE>
17
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
EXHIBITS
TO
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission File No. 0-5556
CONSOLIDATED-TOMOKA LAND CO.
(Exact name of registrant as specified in the charter)
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EXHIBIT INDEX
Page No.
(2.1) Agreement of Merger and Plan of Merger and Reorganization
dated April 28, 1993 between Consolidated-Tomoka Land Co.
and CTLC, Inc. filed with the registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1993 and
incorporated by this reference. *
(2.2) Certificate of Merger dated April 28, 1993 filed with the
registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1993 and incorporated by this reference. *
(3.1) Articles of Incorporation of CTLC, Inc. dated February 26,
1993 and Amended Articles of Incorporation dated March 30,
1993 filed with the registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993 and incorporated
by this reference. *
(3.2) By-laws of CTLC, Inc. filed with the registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993 and
incorporated by this reference. *
10 Material Contracts:
(10.1) 1998-1999 Citrus World Marketing Agreement dated
September 1, 1998 between Citrus World, Inc. and
and Consolidated-Tomoka Land Co. 20
(10.2) The Consolidated-Tomoka Land Co. Unfunded Deferred
Compensation Plan filed with the registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1981
and incorporated by this reference. *
(10.3) The Consolidated-Tomoka Land Co. Unfunded Deferred
Compensation Plan executed on October 25, 1982 filed with
the registrant's annual report on Form 10-K for the year
ended December 31, 1982 and incorporated by this reference. *
(10.4) The Consolidated-Tomoka Land Co. Stock Option Plan
effective April 26, 1990 filed with the registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1990 and incorporated by this reference. *
(10.5) Lease Agreement dated August 28, 1997 between the City
of Daytona Beach, and Indigo International Inc., a wholly
owned subsidiary of Consolidated-Tomoka Land Co. filed
on form 10-K for the year December 31, 1997 and
incorporated by reference. *
(10.6) Development Agreement dated August 18, 1997 between the
City of Daytona Beach and Indigo International Inc., a
wholly owned subsidiary of Consolidated-Tomoka Land Co.
filed on Form 10-K for the year December 31, 1997 and
incorporated by reference. *
(10.7) Purchase and Sale Agreement dated December 28, 1998
between Alton D. Roger and Wade H. Walker and
Consolidated-Tomoka Land Co. 30
(11) Statement of Computation of Per Share Earnings is include
on Page 22 of the 1998 Annual Report to Shareholders and
incorporated by this Reference *
(13) 1998 Annual Report to Shareholders 67
(21) Subsidiaries of the Registrant 109
(23) Consent of Arthur Andersen LLP 110
* - Incorporated by Reference
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EXHIBIT 10.1
MARKETING AGREEMENT
1998-1999
CITRUS WORLD, INC.
This Agreement, made as of the 1st day of September, 1998,
between CITRUS WORLD, INC., a cooperative association organized
under the laws of the State of Florida with its principal place
of business at Lake Wales, Florida (hereinafter referred to as
"Citrus World") and Consolidated-Tomoka Land Co. of Lake Placid,
Florida (hereinafter referred to as "Member").
WITNESSETH
WHEREAS, Citrus World owns and operates a citrus fruit
canning, packaging, and processing plant at Lake Wales, Florida,
as well as other facilities both within and without the State
of Florida for the extraction, canning, and/or processing,
warehousing, and marketing of processed citrus fruit products;
and
WHEREAS, Member is a member-stockholder of Citrus World
ad desires to arrange for the sale and delivery of citrus fruit
to Citrus world for processing and marketing of the products
derived therefrom.
NOW, THEREFORE, in consideration of the premises and other
valuable considerations, it is mutually agreed as follows:
1. Definitions. For the purpose of this Agreement:
(a) "Grower-Members" shall mean citrus fruit
growers who are members of Member where Member is a
cooperative association.
(b) "Non-Member Patrons" shall mean citrus fruit growers who
are not Grower-Members but who have agreed as of or prior to
October 1, 1992, to sell fruit to Member (if a cooperative) for
marketing; to allow pooling of such fruit on a cooperative basis;
and to accept the pool proceeds (after deduction of all costs and
expenses) as the total amount due for such fruit.
(c) "Growers" shall include both Grower-Members and Non-
Member Patrons.
(d) "Specified Acreage Fruit" shall mean all citrus fruit
from Member which is not packed as fresh fruit and which is either
produced by Member itself or which, where Member is a cooperative
association, is committed to Member by means of valid Grower
Marketing Agreements and is grown on Grove Property as hereinafter
defined. For the purposes of this definition and of this
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agreement fruit "packed as fresh fruit" shall mean all fruit and
is harvested into pallet boxes, delivered to Member's designated
packinghouse, washed, waxed, graded packed in cartons, bags, or
bulk containers, marketed and shipped in fresh fruit form.
(e) "Grower Marketing Agreements" shall mean valid agreements
between Member if a cooperative and Member's Growers whereby each
Grower will have agreed (i) to sell and deliver citrus fruit to
Member for marketing; (ii) that such fruit will be grown on
specific groves the description of which has been furnished to
Member; and (iii) that such agreements shall not be terminable
except upon two years notice (subject, however, to the provisions
of paragraph 17 hereof).
(f) "Limited Fruit" shall mean all citrus fruit from Member
and quantity of which has been set, in terms of a specified number
of boxes, by Citrus World's Board of Directors less an allowance,
not to exceed five percent (5%) of each variety of fruit
included in said total quantity of fruit as fixed by the Board,
it being the intent that the said 5% allowance be applicable to
each variety of fruit separately. If any fruit comprising said
5% allowance is packed as fresh all eliminations derived from
such packing operation (or equivalent quantity and variety) shall
be delivered to Citrus World.
(g) "Grove Property" shall mean all planted grove properties
owned or leased as of October 1, 1992 by Member, or by a Grower,
or which Member has been specifically permitted to acquire or add
to its membership after such date, the fruit from which will be
Specified Acreage Fruit. Such properties may be comprised of
actual producing groves or young groves not producing fruit as of
October 1, 1992. Former groves destroyed by blight, disease or
freeze that are to be replanted but which may not have been
replanted as of October 1, 1992, may be included provided they
are, in fact, replanted by September 1, 1998. But such acreage
that is not planted shall not be eligible for replacement as provided in
Paragraph 11 hereof.
(h) Fruit Owned or Controlled by Member" shall include all
Specified Acreage Fruit and Limited Fruit, either or both.
(i) "Florida Citrus Season" means the period each year
commencing on September 1 and ending on the following August 31.
2. Delivery and Transfer of Title. Subject to the terms of this
Agreement, Member agrees to deliver to Citrus World all Fruit
Owned or Controlled by Member, and Member hereby assigns and
transfers to Citrus World upon such delivery absolute title and
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ownership to all such fruit that is accepted by Citrus World.
Member agrees to deliver the same to such place as Citrus World
may direct and Member hereby warrants that Member will have good
and lawful authority to sell and transfer said fruit at the time
of such delivery and warrants title to said fruit against the
lawful claims of all persons whomsoever.
3. Estimate and Identity of Fruit. On or before October 1st of
each year this Agreement is in effect, Member agrees to furnish to
Citrus World the estimated quantity by varieties of Fruit Owned or
Controlled by Member. In addition, Member shall at the same time clearly
identify all Specified Acreage Fruit by delivering toCitrus World a list
specifying the Grove property (including the
information specified in paragraph 4 below) from whence the same
is to be harvested. And, except as provided in paragraph 10
hereof, Grove Property included in such list may not be removed
therefrom except upon 2 years written notice to Citrus World. If
applicable, Member will furnish at such time the varieties and
quantities of Limited Fruit to be delivered to Citrus World
pursuant to this Agreement, provided that any changes in the
varieties of fruit and quantities thereof from that delivered
during the previous Florida Citrus Season must be approved by
Citrus World's Board of Directors, unless management determines a
varietal change is beneficial to Citrus World.
4. Records. So as long as this agreement remains in effect,
Member will maintain adequate records, and will furnish copies thereof to
Citrus World, so as to be able to describe fully all
Grove Properties listed by Member pursuant to paragraph 3 above,
including acreage, block by variety, and the number and age of the
trees in each block. If Member is a cooperative, Member will also
furnish to Citrus World an up-to-date copy of Member's standard
Grower Marketing Agreement.
5. Certificate of Compliance. Each year, within 30 days
following the close of Member's fiscal year, Member will deliver
to Citrus World a certificate of compliance in the form of Exhibit "A" attached
hereto and made a part hereof signed by Member, and accompanied by an opinion
of Member's independent auditor to be based on Member's records and in the
form of Exhibit "B" also attached hereto and made a part hereof, attesting
to the fact (a) that all fruit delivered by Member to Citrus World during the
preceding Florida citrus season was in fact Fruit Owned or
Controlled by Member as herein defined; and (b) that the total
quantity of all such Fruit Owned or Controlled by member was in
fact delivered to Citrus World by Member.
6. Acceptance of Fruit by Citrus World. Subject to the
provisions of paragraph 13 hereof, Citrus World shall accept for
processing and marketing all Fruit Owned or Controlled by Member
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which is (a) included in the estimate made pursuant to paragraph 3
above and derived from the Grove property designated pursuant to
said paragraph; or (b) consists of Limited Fruit. However,
subject to the provisions of paragraph 12 of this Agreement,
Citrus World shall not accept any fruit which does not comprise
fruit from the Grove Property specified or is in excess of the
number of boxes of Limited Fruit, and no waiver of the provisions
of this paragraph shall be valid unless approved by Citrus World's
Board of Directors, Executive Committee or Marketing Committee.
7. Purchase Price. Citrus World agrees to sell the product
manufactured from fruit delivered by member hereunder, pooled with
products manufactured from fruit delivered by other members or any
other source, and to pay over ratably as the agreed purchase price
due Member hereunder the net amount received from such sale, as
final settlement in full to Member, less any and all advances to
Member and less Citrus World's usual uniform and regular charges
and expenses for handling and processing the fruit and from marketing the
products therefrom including all commonly acceptedbusiness expenses and
conventional reserves. Member further agrees
to accept capital equity certificates or credits of the type and
in the form authorized by the By-Laws of Citrus World as payment
of that part of such purchase price which is equal to the retained
amounts for capital purchases fixed by the Board of Directors of
Citrus World.
8. Advances. Citrus World agrees to make advances to Member upon the delivery
of fruit to it as may from time to time be established by Citrus World's Board
of Directors; however, Citrus
World shall not be obligated to make any final settlement on
account of such deliveries until the end of its fiscal year, or
later at the discretion of its Board of Directors.
9. Excess Fruit. Any and all fruit acquired by Member but which
Member could not include in the estimate made pursuant to
paragraph 3 above, shall first be offered to Citrus World for
purchase on a cash or participation basis and Member agrees not to
sell such fruit to others at a price lower than that offered by
Citrus World, or on a participation basis upon terms less
favorable than those offered by Citrus world.
10. Diversion of Fruit. Member agrees it will not permit any
citrus fruit now or hereafter comprising Fruit Owned or Controlled
by Member to be delivered to any canning or processing plant other
than those Citrus World or designated by Citrus world during the
period covered by this Agreement, except:
(a) where a Grower or Member has made a bona fide sale of all
or part of a grove such that the fruit therefrom is no longer
available to Member. For the purposes of this paragraph 10 (a),
"bona fide sale" shall mean an actual arms length sale for fair
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value and shall specifically exclude gifts, transfers to family
members, transfers among trustees, or among partners, or to
stockholders or any other transfer of whatsoever sort or nature
other than an arms length sale for fair value;
(b) Where a Grower dies and such deceased Grower's heirs,
administrators, or executors desire to withdraw the deceased
Grower's groves such that the fruit therefrom is no longer
available to Member;
(c) Where a Grower abandons all or part of a grove for
economic reasons such that the fruit therefrom is no longer
available to Member and such fact is certified by Citrus World.
(d) Where a Grower requests a transfer of membership from
Member to another member of Citrus World without complying with
the two year notice of termination requirement, provided (i) that
such transfer complies in all respects with all other provisions
of this agreement; and (ii) Member, the other member, and Citrus
World all consent in writing to such transfer thereby waiving said
two year notice requirement.
(e) Where the Board of Directors of Citrus World has
permitted Member to make specified deliveries to others.
(f) Member's obligation to deliver Limited Fruit hereunder,
if any, shall also be subject to the exceptions listed in
subparagraphs (a), (b), (c),(d), and (e) above, provided that
in the event any such instance occurs which affects the
quantity of Limited Fruit and Member is obligated to deliver
hereunder, such quantity may at Member's option be reduced:
(1) if Member is a cooperative, by the number of boxes actually
lost by Member; or (2) if Member is not a cooperative, then
by the number of boxes which is in the same proportion as the
sold or otherwise lost grove acres bears to the total number
of grove acres originally owned by Member."
11. Replacement of Grove Property. Whenever Member should
occasion a reduction in Member's designated Grove Property
pursuant to the provisions of paragraph 10(a) or (b) above, or
due to the withdrawal of a Grower or for any other reason, then
Member may replace such property, provided, however, that:
(a) Member has actually suffered a reduction in the amount
of Member's Grove Property;
(b) the property to be replaced consists only of planted
acreage;
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(c) the replacement shall be completed within two (2) years
from the date of the loss;
(d) Member will immediately notify Citrus World upon the
making of any such replacement;
(e) the varieties of citrus fruit grown on the replacement
acreage shall be substantially the same as that grown on the lost
property unless otherwise approved by Citrus World's Board of
Directors; and
(f) no replacement shall be allowed where the reduction in
Member's designated Grove Property (i) consists of property
located within any of the three grove developments known as
Cooperative Producers Inc., Ranch One, Inc., and Cooperative Three
Inc., AND (ii) the restrictive covenants and/or contractual
arrangements remain in effect whereby the marketing of fruit grown
on such property is restricted.
All grove property added as replacement property pursuant to
this paragraph shall be deemed to be Grove Property as herein
defined and included in the properties identified pursuant to
paragraph 3 hereof, but nothing herein shall be deemed or
construed as modifying the two year notice requirement from the
addition or removal of the replacement property or any other
properties as set forth in said paragraph 3, nor the obligation of
Member to deliver to Citrus World the quantities of fruit
specified by Member in the then current estimate delivered by
Member to Citrus World pursuant to said paragraph 3. In addition,
in the event the replacement of property has not taken place
within the two year period specified in subparagraph (c) above
Member's right of replacement pursuant to this paragraph 11 shall
terminate to the extent of the difference between the amount of
Member's designated Grove Property actually existing as of the May
31 next following the expiration of said two year period and 97%
of the Grove Property that existed before the loss.
12. Fruit Exchange. If for pooling considerations, or in the
interest of Citrus World's plant efficiency, Fruit Owned or
Controlled by Member is, with the knowledge and consent of Citrus
World, exchange for other fruit of like type and quality, then
such exchange fruit shall nevertheless be deemed to be Fruit Owned
or Controlled by Member for the purposes of this Agreement,
provided, however, that the fruit used for such exchange shall
consist only of fruit produced and owned by Member, or, where
Member is a cooperative, by Member's Growers. Any such exchanges
will be noted in the Certificate and Opinion to be submitted by
Member pursuant to paragraph 5 hereof.
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13. Origin and Rejection of Fruit. All fruit to be delivered by
Member under this agreement shall consist only of fruit grown upon
groves located within the State of Florida and such fruit,
together with the horticultural practices used in growing and
harvesting the same, shall conform in all respects to all
applicable laws and regulations of the United States and the State
of Florida. Citrus World may, at its option, reject any and all
fruit that fails to pass State and/or Federal inspection or to
conform with this Agreement, and any loss or additional cost
Citrus World may suffer thereby shall be charged against Member.
14. Increase or Decrease in Grove Property Acreage or Amount of
Fruit. The quantity of Member's Grove Property and/or the amount
of fruit may be increased or decreased but only in the following
manner:
(a) On or before June 1 of each year, Citrus World will
consider an increase in the amount of Grove Property acreage
and/or total quantity of fruit to be handled by it for the next
ensuing Florida Citrus Season. Beginning September 1, 1994,
should Citrus World determine to increase such acreage or fruit
quantity then such increase will be allocated to the then current
members of Citrus World in proportion to the total number of
shares of A, B, and C stock held by each such member as of the
preceding August 31.
(b) The quantity of Grove Property listed by Member pursuant
to paragraph 3 may be increased or decreased whenever such change
is to consist solely of grove properties located within any of the
three grove developments known as Cooperative Producers Inc.,
Ranch One Inc., and Cooperative Three Inc., provided that such
right shall terminate whenever the restrictive covenants and/or
contractual arrangements currently applicable to such properties
restricting the marketing of fruit grown thereon expire or
terminate.
(c) In the event an increase in acreage or fruit quantity is
allocated to the then current members of Citrus World as provided
in subparagraph (a) above, then each such member shall have until
the commencement of the next ensuing Florida Citrus Season
(September 1) after such allocation to utilize the same otherwise
the right to increase acreage or fruit quantity shall terminate.
With respect to Specified Acreage Fruit, Member's right to
increase acreage shall terminate to the extent the amount of Grove
Property actually designated by Member as of the commencement of
said Florida Citrus Season is less than 97% of the total amount of
Grove Property Member was at that time authorized to designate.
(d) Member's right to utilize any unused portion of the
allocation of acreage, or quantity of fruit, made to Member on or
about June 24, 1994 will terminate on May 31, 1997 but it is
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Agreed that such termination shall, as to Specified Acreage Fruit,
only be to the extent the amount of Grove Property actually
designated by Member as of such date is less than 97% of the total
amount of Grove Property Member was authorized to designate for
the 1996-1997 Florida Citrus Season.
15. Liquidated Damages. Inasmuch as the remedy at law would be
inadequate and inasmuch as it would be impracticable and extremely
difficult to determine the actual damage resulting to Citrus World
should Member fail to deliver fruit hereunder, regardless of the
cause of such failure (except as provided in paragraph 18 hereof)
Member hereby agrees to pay to Citrus World as liquidated damages
for breach of this agreement for all fruit which Member has agreed
to deliver hereunder for each Florida Citrus Season but which
Member has failed to deliver (a) as to Specified Acreage Fruit,
the sum of One Thousand and Twenty Five Dollars ($1,025.00) per
acre for each acre the fruit from which was not delivered in its
entirety or (b) as to Limited Fruit, the sum of Three Dollars ($3.00) per
standard field box for all diverted or undelivered
fruit. Both parties agree that this Agreement is one of a series
dependent for its true value upon the adherence by each and all of
the contracting parties to each and all of the said agreements,
but the cancellation of any other similar agreement or the failure
of any of the parties thereto to comply with the same, shall not
affect the validity of this Agreement.
16. Attorney's Fees. If any action whatsoever by reason of
breach or threatened breach of this Agreement is brought, the
party that does not prevail shall pay all costs thereof, including
reasonable attorneys fees expended or incurred in such
proceedings.
17. Term and Termination. This Agreement shall commence upon its
execution by both parties and shall remain in effect until
terminated by Member which may be accomplished only as of
September 1st of any year and only by notifying Citrus World in
writing at least two (2) years prior to the September 1st upon
which such termination is to be effective. Provided, however,
that Citrus World shall not be obligated to release Member from this Agreement
as long as Member is indebted to Citrus World in any sum.
18. Force Majeure. Neither party to this Agreement shall be
liable for damages for failure to perform hereunder to the extent
that performance by either of them is made impossible or delayed
by Act of God, war, fire, equipment breakdown, strike, embargo,
lockout inability to obtain materials, supplies or transportation
or any other cause beyond the control of either of said parties.
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19. Bylaws and Rules. The By-Laws of Citrus World now in
existence and as hereafter amended, and all rules, regulations and
orders promulgated by Citrus World from time to time shall be
parts of this Agreement and binding upon the parties thereto.
20. Right of Offset. Citrus World shall have the right to offset
and deduct any sums that may become due to it from Member from
amounts accruing to Member under this Agreement whether such
indebtedness to Citrus World arises under this Agreement or
otherwise.
21. No Oral Agreement. The parties agree that there are no oral
or other conditions, promises, covenants, representations or
inducements in addition to or at variance with any of the terms
hereof, and that this contract represents the voluntary and clear
understanding of both parties fully and completely.
22. Successors and Assigns. This Agreement shall inure to and be
binding upon the successors, assigns and/or legal representatives
of both of the parties hereto.
IN WITNESS WHEREOF, both parties have executed this agreement as of the
day and year first above written by their dulyauthorized representatives.
MEMBER-Consolidated-Tomoka Land Co. Attest or Witness:
By: /s/ Hugh J. Veley, VP /s/ James V. Percy
----------------------- ------------------
CITRUS WORLD, INC.
By: /s/ F. M. Hunt, Pres. /s/ N. T. Mitchell
---------------------- -------------------
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EXHIBIT A
CITRUS WORLD 1998-99 UNIFORM MARKETING AGREEMENT
CERTIFICATE OF COMPLIANCE
To the best of our knowledge and belief, the undersigned member of
Citrus World hereby certifies (a) that all fruit delivered to
Citrus World by the undersigned during the 1998-1999 Florida Citrus Season
consisted of Fruit Owned or Controlled by the undersigned as such terms are
defined in Paragraph 1 of the Citrus World Uniform Marketing Agreement; and
(b) that the total quantity of such fruit has been delivered to Citrus World
in accordance with paragraph 2 of said Agreement.
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EXHIBIT 10.7
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement") made as
of the 8th day of December, 1998 by and between ALTON D. ROGERS and
WADE H. WALKER ("Buyer"), having an address at 486 U.S. 27 South,
Lake Placid, lorida, and CONSOLIDATED-TOMOKA LAND CO., a
Florida corporation "Seller"), having an address of 149
S. Ridgewood Avenue, Daytona Beach, Florida 32114.
WITNESSETH:
In consideration of the mutual covenants herein contained
and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Buyer and Seller
hereby agree as follows:
1. AGREEMENTS TO SELL AND PURCHASE AND DESCRIPTION OF PROPERTY;
(a) Land. Seller agrees to sell and convey to Buyer and Buyer
agrees to buy from Seller that certain real property described in
Exhibit "A" attached hereto and made a part hereof ("Land"), together
with all easements benefitting the Land, all improvements including
but not limited to the citrus packing house, maintenance facilities,
storage tanks, wells, pumps, irrigation equipment, citrus trees,
citrus crop and other fixtures attached to the land ("Improvements"),
and all other rights, privileges, and appurtenances to the Land,
including, without limitation, any strips and gores of real property
adjoining or adjacent to the Land and any land lying in the bed of any
street; all oil, gas, mineral rights; all rights-of-way, and other
appurtenances used in connection with the beneficial use or enjoyment
of the Land; and all right, title and interest in and to all streets,
abutting or serving the Land ("Appurtenances"). The Land,
Improvements and Appurtenances are collectively referred to herein as
the "Real Property."
(b )Seller agrees to sell and convey to Buyer and Buyer agrees
to buy from Seller all personal property owned by Seller (as opposed
to leased by Seller or owned by employees of Seller), and used in
connection with the operation of the Real Property or of Seller's
fresh fruit packing business on the Real Property ("Citrus Business"),
including but not limited to, (A) all furniture, fixtures and
equipment; (B) cars, trucks and farm or grove maintenance or operating
equipment; (C) office equipment and supplies; (D) sprinkler systems,
plumbing systems, heating, air conditioning, electrical power and
lighting systems; (E) engines, motors, pipes, wiring, fire prevention
systems and apparatus; (F) chattels, machinery and signs; (G)
computers and computer software, excluding Quantel hardware and
software; (H) all inventory of supplies including fuels, fertilizers,
herbicides, pesticides, packing labels, pallets, bags, boxes, spare
vehicle and equipment parts, tires and the like used in connection
with the operation of the Real Property or the Citrus Business (under
Section 2(c) below, the "Operating Inventory" as defined therein, is
credited to Seller as an adjustment to the Purchase Price); and (I)
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architectural renderings, drawings, plans and specifications, building
and site plans, engineering plans, studies, floor plans and other
plans or studies of any kind regarding the Real Property,
including, without limitation, all personal property listed
on the schedule attached hereto as Exhibit "B" (collectively,
the "Personal Property");
(c) Seller agrees to convey and assign to Buyer,
to the extent assignable, and Buyer agrees to accept an assignment
from Seller of all governmental permits, licenses and approvals,
issued in connection with the operation, of or related to, the
Real Property or the Citrus Business, including, but not limited to
all permits, licenses and approvals issued to the Seller by
Highlands County, Florida ("County"), the South Florida or
Southwest Florida Water Management Districts ("WMD"), the Department
of Environmental Protection ("DEP"), or any other state, federal or
local governmental entity or agency, to the extent of Seller's
interest therein, (collectively the "Permits"). The Permits are
listed on Exhibit "C" attached hereto.
(d) The Seller shall convey and assign to Buyer, to the extent
assignable, and Buyer agrees to accept an assignment of all the
existing leases, equipment leases, contracts, agreements, warranties
and guaranties affecting the maintenance, management and operation of
the Real Property or Citrus Business, all as listed on Exhibit "D"
attached hereto ("Leases and Contracts").
(e) The Seller shall convey and assign to Buyer, to the extent
assignable, and Buyer agrees to accept an assignment of all intangible
property used in connection with the Real Property or the Citrus
Business including but not limited to all accounts receivable existing
at the close of business on November 30, 1998, attributable to sales
of the 1998-1999 citrus crop grown on the Land, good will, customer
lists and trade names and fictitious names owned by Seller (the
"Intangible Personal Property"). The Land, Improvements,
Appurtenances, Personal Property, Permits, Leases and Contracts, and
Intangible Personal Property are collectively referred to herein as
the "Property".
(f) The Property being purchased under this Agreement does not
include Seller's interest in Citrus World Inc. ("Citrus World"),
except for accounts receivable which accrue on or after November 30,
1998, for the 1998-1999 citrus crop grown on the Land. Buyer
acknowledges that Seller's interest in Citrus World, which is related
to its Citrus Business, has been specifically excluded from this
Agreement at Buyer's request.
2. PURCHASE PRICE; DEPOSIT; ADJUSTMENTS; ESCROW.
(a) Purchase Price: The agreed purchase price of the Property
is Thirty Million Six Hundred Forty Five Thousand and 00/100ths
Dollars ($30,645,000.00) (the "Purchase Price"), and shall be paid as
follows:
(i) A non-refundable deposit in the amount of One Million
Dollars ($1,000,000.00) shall be paid by Buyer to Escrow Agent, as
defined below, to be held pursuant to the terms of this Agreement,
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within two (2) days after the end of the Inspection Period
provided for in Section 5(b) below, and is to be delivered to Seller
by the Escrow Agent at the Closing on the Closing Date to Seller
the non-refundable deposit is referred to herein as the "Deposit"); and
(ii) The balance of the Purchase Price is to be paid by Buyer
to Seller at the time of Closing on the Closing Date together with
any adjustments and credits to the Purchase Price as provided in
Section 2(c). Payments at closing shall be made by wire transfer to
an account designated by Seller, which designation shall be made not
less than 48 hours prior to the Closing Date.
(iii) The Purchase Price of the Property shall be allocated as
follows:
(A) The allocation to the Real Property is $21,875,000.00.
(B) The allocation to the Personal Property is $6,325,000.00.
(c) The allocation to the Intangible Personal Property, Permits,
and Leases and Contracts is $2,445,000.00.
(b) Deposit.
(i) The Deposit shall be held in an interest bearing escrow
account as provided in Section 2(d) below, subject to the terms of
this Agreement, and shall be duly accounted for at the Closing (as
defined below). All interest on the Deposit is deemed to be included
in the term "Deposit"; is to delivered to Seller if Closing occurs
provided that Buyer shall receive a credit for the Deposit against the
Purchase Price; is to be paid to Buyer if the Deposit is returned to Buyer
under the terms of this Agreement; or if Seller shall be entitled to the
Deposit under the terms of the Agreement, then the Deposit shall be paid to
Seller.
(ii) If this Agreement is terminated by either party under
any provision granting such party a right to terminate this Agreement
after the Deposit is paid to Escrow Agent except for a termination in
the event of default under Section 7(b) of this Agreement, then the
Deposit shall be promptly refunded in full to Buyer, but in any event
not later than ten (10) calendar days after such notice of termination
is given.
(c) Adjustments. The Purchase Price at closing shall be adjusted
to reflect the following:
(i) Water and sewer use charges, charges for electricity,
gas and other utilities, operating expenses of the Real Property, any
operating expenses paid in advance and real property taxes including
any assessments on such tax bill on the Real Property for the then
current fiscal tax period and any personal property tax on the
Personal Property for the current fiscal tax period, shall be
apportioned as of the Closing Date, and the net amount shall be added
to or deducted from the Purchase Price, as the case may be. Any
deposits for utilities shall be paid by Buyer to the utility providers
and any utility deposits paid by Seller to any utility providers shall
be refunded to Seller.
(ii) If, on the Closing Date, the amount of real property
taxes including any assessments on such tax bill and personal property
taxes for the then current fiscal tax period is not known or is
estimated, the apportionment of real property taxes including any
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assessments on the tax bill and personal property taxes called for
herein shall be made on the basis of the real property taxes including
any assessments on such tax bill and personal property taxes for the
preceding fiscal tax period, respectively, and an appropriate
reapportionment shall be made as soon as the new rate and valuation
can be ascertained for the fiscal tax period for the year in which
Closing occurs, for any increase or decrease in real estate taxes
including any assessments on the tax bill and personal property taxes
from the prior tax year.
(iii) At Closing, Buyer shall purchase from Seller as an
adjustment to the Purchase Price the entire operating inventory of
supplies including but not limited to fuels, spare vehicle and
equipment parts, tires, herbicides, fertilizers, pesticides, packing
materials, pallets, pallet boxes and the like, used in connection with
the Real Property or the Citrus Business or the operation thereof,
(collectively, the "Operating Inventory"). The Operating Inventory
purchased by Buyer shall be priced at Seller's actual cost and the
total amount thereof shall be added to the Purchase Price and paid to
the Seller at Closing notwithstanding any provision hereof to the
contrary.
(iv) At closing, the Purchase Price shall be adjusted by an
amount equal to the difference between the gross receipts from citrus
fruit harvested from the Land between (and including) December 1,
1998, and the day before Closing, and (A) the sum of Seller's field
expenses, packinghouse costs, packing costs, cannery expense,
administrative expense, selling expense, and overhead allocation for
that same fruit during that same period of time, and (B) those same
expenses for all 1998-1999 fruit grown on the Land which had been
harvested and sold as of November 30, 1998, but for which payment
had not been made as of December 1, 1998. For purposes of the
preceding sentence, the term "overhead allocation" shall be
$12,000.00 per month, and the expense items referred to above exclude
all reasonable and customary growing expenses of Seller capitalized in
calendar year 1998, and amortized over the 1998-1999 citrus crop.
Buyer recognizes that the adjustment provided by this subparagraph may
increase the Purchase Price because final cannery returns for the
1998-1999 crop year will not be determined or paid as of the
Closing Date. Buyer, however, is entitled to any and all payments
for fruit harvested between and including December 1, 1998, and the
day before Closing. Buyer shall have the right to verify all of
Seller's expenses (as referred to above), and all returns on the fruit.
If there is a dispute between Buyer and Seller on any such expenses
or returns that can not be resolved by Buyer and Seller, either party
may consider such dispute a default under this Agreement and seek
any remedy available hereunder for such default.
(v) At closing, Seller shall receive a credit to the Purchase
Price for Seller's 1999/2000 Growing Costs as hereinafter defined.
"Seller's 1999/2000 Growing Costs" shall mean the reasonable and
customary costs and expenses incurred by Seller after December 31,
1998, through the day prior to the Closing Date associated with or
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related to production of the 1999/2000 citrus crop, including salaries
and any other benefits of Seller's employees related to producing its
1999/2000 citrus crop, cultivating, hoeing and herbiciding, material
and labor, pruning, irrigation, fertilizing material and labor,
spraying material and labor, tree removal and replacement material
and labor, depreciation, production costs (including labor, buildings
and equipment repairs and maintenance, insurance and other
miscellaneous costs), and any other normal and customary growing costs
and expenses of the citrus industry, but specifically excluding real
property taxes and personal property taxes considered as part of
growing costs (such taxes are to be prorated under other provisions of
this Agreement). Buyer shall have the right to verify Seller's
1999/2000 Growing Costs. If there is a dispute between Buyer and
Seller on the credit due Seller from Buyer for Seller's 1999/2000
Growing Costs that cannot be resolved by Buyer and Seller, either
party may consider such dispute a default under this Agreement and
seek any remedy available hereunder for such default. Buyer and
Seller acknowledge that Seller's 1999/2000 Growing Costs may be based
on an estimate at Closing to be subsequently adjusted when all
information is available which affects the final determination
thereof.
(vi) All accounts receivable, other than those which are part of
the Intangible Personal Property and other than those accounts
receivable dealt with in Section 2(c)(iv) above, received by Buyer in
connection with the operation of the Property after Closing shall be
prorated and Seller's prorated portion of such accounts receivable
through the day prior to Closing shall be promptly remitted upon
clearance of funds by Buyer to Seller post-closing. All accounts
payable related to the Property existing at the time of the Closing
which have accrued through the day prior to the Closing Date shall be
paid by Seller. Any payments made in advance by Seller of operating
expense for periods after closing which benefit Buyer shall be
prorated and credited to Seller at closing for the portion of such
advance payments applicable to periods after Closing.
(vii) Seller and Buyer acknowledge that it will not be possible
to make all necessary adjustments, prorations or credits at Closing,
including accounts receivable and payable, and Seller's 1999/2000
Growing Costs. As a result, all utility charges, accounts payable and
receivable, Seller's 1999/2000 Growing Costs, and other items of
income and expense as to which information is not readily available
prior to Closing shall be subject to a post-closing adjustment
procedure set forth in this Section 2(c)(vii). Accounts receivable
and payable, Seller's 1999/2000 Growing Costs, and other items of
income or expense shall be prorated, adjusted or credited as
applicable as to Seller for the period up to and including the day
prior to the Closing Date and as to Buyer for the period commencing on
the Closing Date and thereafter. Seller and Buyer agree that their
respective designated accounting personnel shall diligently proceed to
make such adjustments promptly following the Closing Date in order to
finalize all such adjustments within the later of (i) December 31,
1999, or (ii) ten (10) days from the date all information necessary to
make such adjustments is available to both parties. Each party
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agrees, within ten (10) days of such final adjustment determination,
to promptly pay to the other party any amounts due and owing to such
party. Seller shall indemnify and hold the Buyer harmless from any
such expense accruing on or before the day prior to the Closing Date
and Buyer shall indemnify and hold Seller harmless from any such
expenses accruing on or after the Closing Date. If at any time
following the making of any of the adjustments to the Purchase Price,
the amount thereof shall prove to be incorrect, or it should be
discovered that some adjustment which should have been made was
inadvertently omitted altogether, the party in whose favor the error
was made shall pay the sum necessary to correct such error to the
other party promptly following receipt of notice of such error from
such other party. The provisions of this Section 2(c) or any other
provision of this Agreement regarding adjustments, shall survive the
Closing until all such adjustment amounts are properly accounted for
and paid.
(viii) Buyer agrees that it shall assist Seller in closing out
Seller's books and records as of the Closing Date after closing,
consistent with generally accepted accounting practices.
(d) Escrow Account.
(i) The Deposit shall be held by Indigo Commercial Realty
Inc., as escrow agent (the "Escrow Agent"), in an interest bearing
account using Buyer's tax identification number for such account.
Upon receipt of the Deposit by Escrow Agent, Escrow Agent shall
provide a written notice of such receipt of the Deposit to Seller and
Buyer. The account shall be maintained until the Deposit has been
delivered to Buyer, Seller or to a court of competent jurisdiction in
accordance with the provisions hereof.
(ii) The Escrow Agent shall account for the Deposit in
accordance with the terms of this Agreement, or in such other manner
as may be directed in a joint written notice from Seller and Buyer
directing some other disbursement of the Deposit. If the Escrow Agent
receives written notice from either Buyer or Seller that the other
party has defaulted in the performance of its obligations under this
Agreement or that any condition to the performance of obligations
under this Agreement has not been fulfilled within the time period
stipulated, which notice shall describe in reasonable detail such
default or nonperformance, then the Escrow Agent shall (A) promptly
give notice to the party alleged to have defaulted or to have failed
to fulfill its obligation on the Escrow Agent's receipt of such notice
from the other party and shall enclose a copy of such notice from the
other party, and (B) subject to the provisions of Section 2(d)(iii)
below which shall apply if a conflict arises, on the fourteenth (14th)
day after the giving of the notice referred to in clause (A) above,
deliver the Deposit to the party claiming the right to receive it.
(iii) If the Escrow Agent is uncertain as to its duties or
actions hereunder, or receives instructions or a notice from Buyer or
Seller which are in conflict with instructions or a notice from the
other party or which, in the reasonable opinion of the Escrow Agent,
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are in conflict with any of the provisions of this Agreement, it shall
be entitled to deliver the Deposit to a court of competent
jurisdiction and commence an action for interpleader in such court,
whereupon the Escrow Agent shall have no further duty with respect to
the Deposit.
(iv) The Escrow Agent shall not be liable for any action
taken or omitted in good faith and may rely, and shall be protected in
acting or refraining from acting in reliance, upon an opinion of
counsel and upon any directions, instructions, notices, certificates,
instruments, requests, papers or other documents believed by Escrow
Agent to be genuine and to have been made, sent, signed or presented
by the proper party or parties.
(v) Notwithstanding any other provisions of this Agreement,
Buyer and Seller jointly indemnify and hold harmless the Escrow Agent
against any losses, costs, liabilities, claims and expenses incurred
by the Escrow Agent arising out of or in connection with its services
under the terms of this Agreement as Escrow Agent, including the costs
and expenses of any interpleader action involving the Deposit or of
defending itself against any claim or liability. The Escrow Agent
will not charge any fee for its services of holding and accounting for
the Deposit as Escrow Agent.
3. CLOSING, CLOSING EXPENSES AND PRE-CLOSING OPERATIONS.
(a) Closing Date and Place. The time for the delivery of the
deed and all other closing documents and for the performance of the
other terms and conditions of this Agreement (the "Closing"), shall be
10:00 A.M. on March 9, 1999, as the same may be extended pursuant to
any other provisions hereof or by mutual agreement of Buyer and Seller
(the "Closing Date") at the offices of the Seller, or at such other
place or time as shall be mutually agreed upon by Buyer and Seller.
(b) Closing Expenses. Seller shall pay the cost of all deed
stamps or transfer taxes assessed with respect to the portion of the
Purchase Price allocated to the sale of the Real Property, the premium
for the owner's title insurance policy on the portion of the Purchase
Price allocated to the Real Property, recording fees for releases,
other documents required to clear title or to comply with its
obligations hereunder and Seller's attorney's fees. Buyer shall pay
for recording costs of the deed, the costs of any survey, any lender's
title insurance policy, expenses related to Buyer's due diligence
during the Inspection Period, environmental site assessment or
appraisal which Buyer may elect to obtain in connection with its
acquisition of the Property, Buyer's attorney's fees, and any other
expenses not specifically enumerated herein to be paid by Seller.
(c) Management, Operation & Condition of the Property.
(i) As of the Closing Date, the Improvements and
Personal Property will be in as good a condition and state of repair
as existed on the Effective Date, ordinary wear and tear excepted, and
except for casualty and acts of God. Seller agrees to maintain the
Operating Inventory through the Closing Date at such levels as are
customary, normal and reasonable for the continued operation of the
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Real Property and Citrus Business, consistent with the manner in which
Seller has operated the Real Property and Citrus Business prior to the
Effective Date. Between the Effective Date and the Closing Date,
Seller agrees to maintain the Real Property and Personal Property
consistent with customary citrus industry standards and practices and
consistent with the same standard of care that Seller has used prior
to the Effective Date.
(ii) Between the Effective Date and the end of the Buyer's
Inspection Period as hereinafter defined, Seller shall have the right
to enter into new agreements of any type and nature related to the
Real Property or Citrus Business, to acquire new or substitute
Personal Property, to make repairs and capital expenditures to the
Property, to renew, modify, extend or amend any existing Leases and
Contracts, and to continue its business operation consistent with the
manner that Seller has previously operated the Property. Seller shall
notify Buyer of any actions taken under the immediately preceding
sentence and provide copies of any documents or such appropriate
information related to any such actions. Any exhibit to this
Agreement shall be deemed amended to include any action taken as
contemplated by this Section 3(c)(ii). If this Agreement is not
terminated for any reason on or before the end of Buyer's Inspection
Period under Section 5 (b) below, thereafter Seller shall obtain
Buyer's prior consent, which consent shall not be unreasonably
withheld or delayed, before taking any of the actions contemplated by
this Section 3(c)(ii).
4. REPRESENTATIONS AND WARRANTIES.
(a) Representations and Warranties of Seller. Seller warrants
and represents to, and covenants and agrees with Buyer as of the date
hereof, and on the Closing Date Seller shall reaffirm all such
representations and warranties as of that date as follows:
(i) The Seller holds the entire ownership interest in the
Real Property, free and clear of all liens and encumbrances except
those listed on Exhibit "E" attached hereto. The matters shown on
Exhibit "E" and as otherwise authorized herein, are sometimes referred
to herein as Permitted Encumbrances. Any portion of the Property
encumbered by Seller's loan with Prudential Insurance Company of
America ("Prudential") shall be released at Closing provided that this
Agreement is not terminated pursuant to the contingency set forth in
Section 5(c).
(ii) Seller is a duly organized and validly existing
corporation, in good standing under the laws of Florida. Seller has
the legal right, power and authority to enter into this Agreement and
to perform all of its respective obligations hereunder, and this
Agreement constitutes a legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, conditioned upon
satisfaction of the contingency contained in Section 5(c) below
regarding approval of this Agreement by the Board of Directors of
Seller. If approval of this Agreement is obtained from Seller's Board
of Directors as set forth in Section 5(c) below, the execution of the
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Agreement by Seller, and the performance by Seller of its obligations
hereunder will have been duly authorized by all necessary actions by
and on behalf of Seller, and will not conflict with, or result in a
breach of, any of the terms, covenants and provisions of the articles
of incorporation or by-laws of Seller, as any of the same may have
been amended, or any agreement or instrument to which Seller is a
party or by which Seller is bound.
(iii) There are no uncured notices, suits, orders, decrees
or judgments relative to violations of, nor to the best of Seller's
knowledge and belief without any independent investigation thereof,
any material violations of, (A) any easement, restrictive covenant or
other matter of record affecting the Real Property or; (B) any laws,
statutes, ordinances, codes, regulations, rules, orders, or other
requirements of any local, state or federal authority or any other
governmental entity or agency having jurisdiction over the Real
Property or over the Citrus Business, including, without limitation,
any of the foregoing affecting zoning, subdivision, building, health,
traffic, environmental, hazardous waste or flood control matters (all
of the foregoing, collectively, "Governmental Regulations"), or (c)
the Permits.
(iv)There are no suits, actions or proceedings pending or, to
the best of Seller's knowledge and belief without any independent
investigation thereof, threatened, against or affecting the Property
or the transaction provided for herein before any court or
administrative agency or officer, and Seller is not in default with
respect to any judgment, order, writ, injunction, rule or regulation
of any court or governmental agency or office to which Seller is
subject in any way affecting the Property or the transaction provided
for herein.
(v) Other than assessments for an existing fire district on
part of the Land and assessments for a proposed fire district for part
of the Land, there are not presently pending or, to the best of
Seller's knowledge, threatened with respect to the Real Property (A)
any special assessments, or (B) any condemnation or eminent domain
proceedings.
(vi) Seller is not a "foreign person" as that term is defined
in Section 1445(f)(3) of the Internal Revenue Code.
(vii) Except as disclosed on Exhibit "D" and as listed as part
of the Leases and Contracts, there are no leases, subleases, licenses
or other rental agreements or occupancy agreements (written or oral)
which grant any possessory interest in and to the Real Property or
that otherwise give rights with regard to the use of the Real
Property. Seller shall pay and deliver to Buyer all security deposits
under any existing leases, if any, and any prepaid rents, if any, or
other sums held by the Seller and not applied against the tenant's
obligations thereunder.
(viii) The amount necessary to discharge the Prudential loan
and any other monetary liens currently affecting the Real Property do
not exceed the net amount of the Purchase Price to be received by
Seller at the Closing, after the adjustments described in Section 2(c)
above or elsewhere in this Agreement.
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(ix) The Seller (except in material compliance with
Governmental Regulations) has never generated, stored, handled or
disposed of any hazardous substance, hazardous waste, hazardous
materials or oil (as any of such terms are defined under applicable
Governmental Regulations) except for pesticides, fertilizers,
herbicides, fuels, wax, chlorine and ammonia stored and used according
to the labeling instructions and in accordance with Governmental
Regulations in the normal maintenance and operation of the Real
Property, Personal Property and Seller's Citrus Business, and, to the
best of the Seller's knowledge and belief without any independent
investigation thereof, there has been no illegal release of any such
hazardous substance, hazardous waste, hazardous material or oil into
the environment from the Real Property or Personal Property, or in, on
or under the Real Property. If during the Inspection Period, Buyer
discovers any hazardous substances, hazardous wastes, hazardous
materials or oil on the Real Property, except as otherwise stated
above, Buyer may terminate the Agreement unless Seller agrees to
remediate or clean up the Real Property affected. If Seller agrees to
remediate or clean up the Real Property affected, it shall do so in a
diligent manner. Notwithstanding the foregoing, the Seller is under
no obligation to Buyer under this Agreement to remediate or clean up
the Real Property.
(x) No service, material or work has been supplied to the
Real Property for which payment has not been made in full and in a
timely manner.
(xi) Seller is not in default of any material obligations
under any of the Leases and Contracts and Permits.
(xii) Any State of Florida sales taxes levied on the
activities and operations conducted on the Property have been duly
collected and paid. Seller has applied for and received the
agricultural classification for Florida ad valorem tax purposes for
the tax year 1998 with respect to the Real Property except for two (2)
parcels which are wetlands. Seller agrees to use its best efforts to
preserve such agricultural classification on the Real Property through
the Closing Date.
(xiii) Seller will pay or cause to be paid in full, prior to
Closing, all due and payable bills and invoices for labor, goods,
material and services of any kind relating to the Property, utility
charges, and employee salary and other accrued benefits relating to
the period prior to Closing except as permitted otherwise under this
Agreement.
(xiv) All payroll taxes, sales taxes, license taxes, use
taxes and all other obligations arising from and as a result of the
operation of the Property which are the obligation of Seller are due
or to become due to any governmental or quasi-governmental authority,
whether municipal, state, county or federal, accruing prior to Closing
shall be paid in full by Seller and Seller shall not take or omit to
take any action with respect to said taxes which would prevent Buyer's
performance of its obligations hereunder or impose upon Buyer any
obligations not contemplated herein.
(xv) Seller shall pay and be responsible for accrued benefits,
accrued vacation time, accrued wages and accrued salaries of each
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employee of Seller's working in Seller's Citrus Business or employed
at the Real Property to the Closing Date. Seller shall not be
responsible for the payment of wages, salaries, vacation pay or
benefits of any employees of Seller's Citrus Business or employed at
the Real Property on or after the Closing Date.
(b) Representations and Warranties of Buyer. Buyer warrants and
represents to, and covenants and agrees with, Seller as follows:
(i) Buyer has the legal right, power and authority to enter
into this Agreement and to perform all of Buyer's obligations
hereunder. Buyer's performance hereunder will not conflict with, or
result in a breach of, any of the terms, covenants and provisions of
any order, judgment, writ, injunction or decree of any court or any
agreement or instrument to which Buyer is a party or by which Buyer is
bound.
(ii) Buyer agrees to purchase and accept the Property and
each and every part and component thereof, in an AS IS, WHERE IS
condition as of the Closing Date with no covenants, warranties or
representations of any type or nature from Seller, either express or
implied, except for the covenants, warranties and representations
expressly made by Seller in this Agreement.
(iii) If Buyer, on the Effective Date, elects to hire all
employees of Seller's Citrus Business as provided in Section 8(k)
below, Buyer covenants and agrees that Buyer intends to hire all
employees of Seller's Citrus Business; that Buyer has no plans to
terminate any employees of Seller's Citrus Business; and that Buyer
has no plans or intentions to close a major portion of Seller's Citrus
Business. Buyer acknowledges Buyer's obligation under the Workers
Adjustment and Retraining Notification ("WARN") Act (29 USC S 2101-
2109), to provide notice to all affected employees of any business
closing or mass layoff after the Closing Date, if Buyer elects to hire
all of Seller's Citrus Business employees. Further, Buyer agrees to
indemnify and hold Seller harmless against, and in respect of all
claims related to, or arising from or associated with Buyer's breach
of the representations and warranties under this Section 4(b)(iii) or
Buyer's obligations under the WARN Act.
(iv) On or after the Closing Date Buyer shall be solely
responsible for the payment of and obligation for all wages,
salaries, vacation pay and benefits of any of Seller's former
employees that Buyer employs.
(c) Liability for Warranties and Representations. Seller as to
each of the covenants, representations and warranties hereunder,
agrees to indemnify and hold Buyer harmless from and against any and
all claims, losses, liabilities, damages, expenses and costs,
including without limitation, reasonable attorneys' fees and expenses,
incurred by Buyer as the result of the material breach of any of the
warranties and representations expressly contained in this Article 4
or elsewhere in this Agreement or made in connection with Closing on
this Agreement, and from any claim, demand or litigation by or from a
third party relative to the Property and arising from acts or
omissions occurring before the Closing Date. Buyer, as to each of the
covenants, representations and warranties hereunder, agrees to
indemnify and hold Seller harmless from and against any and all
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claims, losses, liabilities, damages, expenses and costs, including
without limitation, reasonable attorneys' fees and expenses, incurred
by Seller as the result of the material breach of any of Buyer's
warranties and representations contained in this Article 4 or
elsewhere in this Agreement or made in connection with Closing on this
Agreement and from any claim, demand, loss, liability, or expense
arising out of, or in connection with the Property arising from acts
or omissions occurring on and after the Closing Date.
(d) The provisions of this Article 4 shall survive Closing
hereunder or the termination of this Agreement for a period of five
(5) years after the Closing Date.
5. RIGHTS AND OBLIGATIONS OF THE PARTIES PRIOR TO CLOSING;
CONDITIONS TO CLOSING.
(a) Seller's Covenants. Seller covenants that between the
Effective Date and the Closing Date:
(i) Buyer and its representatives, agents, contractors,
and engineers shall have access to the Property at any time and from
time to time, at Buyer's sole cost and expense: (A) to show the
Property to third parties (including, without limitation, contractors,
surveyors, engineers, attorneys, insurers, banks and other lenders or
investors), and (B) to perform any and all surveys, tests, borings,
inspections, environmental site assessments and measurements which
Buyer reasonably deems necessary or appropriate hereunder, including
without limitation, for purposes of making soil borings, performing
soil compaction tests, performing mechanical or structural
inspections, conducting any of the other tests described in Section
5(b) below, and making such surveys and other topographical and
engineering studies, and other tests, surveys and studies as Buyer or
Buyer's lender may deem necessary or appropriate. Promptly following
such tests and surveys, Buyer shall restore any disturbed Property as
nearly as possible to its condition that existed prior to such tests
and surveys. Buyer hereby indemnifies and holds Seller harmless from
any liability, claim, loss, damage, cost or expense suffered or
incurred by Seller caused by the entry upon the Property prior to the
Closing by Buyer, its agents, servants and employees, including but
not limited to death or any injury to any person arising therefrom or
damage to property arising therefrom, including environmental damage
to the Real Property.
(ii)Buyer may discuss the Property and the Citrus Business
of Seller with any federal, county, state or local officials or
authorities concerning variances, permits, certificates, consents,
approvals, and other Governmental Regulations for the use and
operation of the Property and of Seller's Citrus Business; provided
however, Buyer may not make any submittals for approvals of any nature
or type without Seller's prior written consent, to be given or denied
in Seller's sole discretion.
(iii) Promptly upon execution hereof by Seller, Seller will
furnish to Buyer for Buyer's review and approval complete and accurate
copies of all records and documentation and all information, in its
possession concerning the ownership and condition of the Property (for
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informational purposes, without warranty or representation regarding
its accuracy), including, without limitation, any available plans and
surveys, survey data, engineering reports, recorded title documents,
soil tests, service contracts, environmental site assessments,
permits, approvals and building specifications, and such other
available items as requested by Buyer. Buyer will hold all such
documents, data and information obtained from Seller, in confidence.
(iv) Seller shall not execute any new mortgage on the
Property or modify the Prudential mortgage on the Property, or
otherwise encumber the Property in an amount which, together with the
amount of all other mortgages and monetary liens, will exceed the
amount of the Purchase Price to be received by Seller at the Closing,
after the adjustments described in Section 2(c) above or elsewhere
herein or create any other new encumbrance or restriction affecting
the Property except as may otherwise be authorized herein. Seller
shall perform when due all of its obligations under the instruments
securing all mortgage liens on the Property.
(v)Seller shall not substantially modify or alter the Real
Property or Personal Property in any material respect except as
expressly provided herein or as authorized in this Agreement.
(vi) At all times prior to closing, Seller shall (a)
operate, maintain and manage the Real Property and Personal Property
in a good manner, (b) maintain present services, (c) keep on hand
sufficient materials, supplies, equipment and other personal property
in quantities and quality substantially the same as maintained on the
Effective Date, and (d) perform when due all of Seller's obligations
under the Permits, including any renewals thereof, and Leases and
Contracts and other agreements relating to the Real Property and
otherwise in accordance with applicable laws, ordinances, rules and
regulations affecting the Real Property. None of the Personal
Property, except for the Operating Inventory used or disposed of in
the ordinary course of business, shall be removed from the Real
Property unless replaced in the ordinary course of business by
personal property of equal or greater utility and value.
(vii) If Buyer does not elect on the Effective Date to hire
all employees of Seller's Citrus Business, as provided in Section 8(k)
below, Seller, on or before January 6, 1999, shall satisfy any
requirements of the WARN Act regarding providing all notices of the
transaction contemplated by this Agreement to Seller's employees of
its Citrus Business and others. Seller agrees to indemnify and hold
Buyer harmless against, and in respect of all claims related to, or
arising from or associated with Seller's obligations under the WARN
Act. Representatives of Seller and Buyer, at a mutually acceptable
date close in time to the issuance of Seller's WARN Act notice, will
meet with all of Seller's Citrus Business employees to explain the
acquisition of the Property by Buyer to Seller's affected employees.
Seller and Buyer agree that on the Closing Date Seller shall terminate
all persons employed in its Citrus Business and employed by Seller on
the Real Property and Buyer will employ only such persons it chooses
to employ.
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(b) Certain Conditions to Buyer's Obligations. Buyer's
obligations hereunder are expressly contingent upon fulfillment of all
of the following terms and conditions during the due diligence period
which shall commence on the Effective Date and terminate at 5:00 p.m.
on January 29, 1999, all of which shall be at Buyer's sole cost and
expense unless specifically provided otherwise herein:
(i) Buyer may make or cause to be made all site
assessments, tests, borings and inspections buyer deems necessary to
determine if there are any "hazardous wastes", "hazardous substances",
"oil" or "hazardous materials" (as all those terms are defined under
applicable Governmental Regulations), or any medical wastes,
radioactive materials, lead, asbestos, urea, formaldehyde or radon in,
on, about, or under the Real Property, and shall be satisfied in
Buyer's sole discretion with the results of all such site assessments,
tests, borings and inspections. If such hazardous wastes, oil,
hazardous substances or hazardous materials are found, Buyer may
terminate this Agreement. Seller is under no obligation to Buyer
under this Agreement to remediate or clean up the Real Property. If
such substances are found on the Real Property, Buyer's sole recourse
shall be termination of this Agreement.
(ii) Buyer may make or cause to be made an instrument
survey of the Real Property during the Inspection Period, and such
survey shall disclose no matters affecting the Real Property which are
reasonably determined by Buyer to adversely affect the title or value
of the Real Property, or the use of the Real Property.
(iii) Buyer shall have received from Seller a title
insurance commitment from a title insurance company licensed in
Florida, which commitment shall be acceptable to Buyer in form and
content, on or before ten (10) days prior to the end of the Inspection
Period, pursuant to which such company agrees to insure fee title to
the Real Property, at the promulgated rate, in ALTA form, which
commitment shall delete the printed exceptions for mechanics' and
materialman's liens, parties in possession except for those shown on
Exhibit "D" or Exhibit "E", and survey (if Buyer obtains a survey),
and shall (A) affirmatively insure that there will be no violation of
any applicable restrictions pertaining to the Real Property if used
and operated, as contemplated herein, and (B) insure that the Real
Property has legal access. Attached as Exhibit "E" are the Permitted
Encumbrances affecting the Real Property which will be exceptions to
Buyer's title. Other title exceptions may also be shown on the title
insurance commitment as the documents listed on Exhibit "E" may not
necessarily be all of the exceptions to title. If Buyer accepts the
title commitment or does not terminate this Agreement at the end of
the Inspection Period, such other title exceptions shown on the title
commitment not shown on Exhibit "E" shall be deemed to be included as
part of Exhibit "E". Further, Buyer agrees to take title subject to
the County's comprehensive land use plan, zoning, and any other
restrictions or prohibitions imposed by governmental authorities.
(iv) Buyer shall have obtained surveys, engineering
reports, physical inspection reports, percolation tests, tree counts,
production information, reports, information, studies, and other
evidence satisfactory to Buyer.
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(v) Buyer shall review and be satisfied with all zoning,
land use and environmental laws, permits affecting the Real Property,
including WMD permits, codes, ordinances, regulations affecting the
Real Property.
(vi) Buyer shall conduct such surveys, analyses,
inspections, and tests of the Land, Improvements and Personal Property
as reasonably deemed necessary by the Buyer and shall be satisfied
with the conditions of the Land, Improvements and Personal Property.
(vii) The Exhibits to this Agreement are preliminary.
Seller shall provide Buyer with any revised Exhibits on or before
January 15, 1999, and such revised Exhibits shall be deemed
substituted for any original Exhibit so revised.
If the foregoing conditions specified in subsections (i), (ii), (iii),
(iv), (v), (vi) and (vii) above are not fully satisfied in a manner
which is acceptable to Buyer in its sole discretion on or before
January 29, 1999, or if any records or documentation or information
obtained or provided are unsatisfactory to Buyer, Buyer shall have the
right to terminate this Agreement for any reason on or before 5:00
p.m. on January 29, 1999, by notice of termination delivered to
Seller, whereupon this Agreement shall be null, void and of no further
effect. If Buyer fails to terminate the Agreement in the manner and
by the time set forth herein, Buyer shall be deemed to have waived its
right to terminate this Agreement under this Section 5(b) and shall
pay the Deposit to Escrow Agent within two (2) days thereafter or
Buyer shall be in default hereunder. Upon termination under Section
5(b), Buyer shall return to Seller any surveys, tests, title
commitments, reports and the like, provided by Seller and Buyer shall deliver
to Seller copies of any tests, studies, reports, appraisals,
and the like related to the Property that Buyer or its agents,
contractors or engineers may have prepared or have obtained which
Seller may use at Seller's sole risk. Buyer shall notify all Buyer's
professionals and consultants of such termination and authorize them
to release their work product to Seller. Buyer shall obtain from such
professionals and consultants a statement that they have been paid in
full for all such work done by Buyer and authorize them to release
their work product to Seller for use at Seller's risk.
(c) Certain Conditions to Seller's Obligations. In addition
to the other conditions to be satisfied under this Agreement, Seller's
obligations are expressly contingent upon fulfillment of each of the
following conditions on or before 5:00 p.m. January 29, 1999:
(i)The Board of Directors of Seller shall have approved this Agreement
and the transaction contemplated by this Agreement. If Seller's Board
of Directors does not approve this Agreement on or before January 29,
1999, Seller shall notify Buyer of such failure to obtain the Board's
approval and upon such written notification, this Agreement shall
terminate, be null and void and of no further effect.
(ii) Seller shall have obtained any and all approvals,
waivers, or consents from Citrus World allowing all of the Real
Property and fruit to be withdrawn from any existing agreements with
Citrus World and allowing Seller to terminate or to transfer its
membership in Citrus World without any loss in the value of Seller's
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interest in Citrus World. Seller agrees to commence action to obtain
and to diligently pursue obtaining such approval , waiver or consent
immediately after the Effective Date. Such approval, waiver or
consent must be acceptable to Seller in its sole and absolute
discretion. If Citrus World does not approve or authorize the same,
Seller shall notify Buyer of such failure to obtain Citrus World's
approval and upon such notification this Agreement shall terminate, be
null and void and of no further force and effect.
(iii) Seller shall have obtained a waiver of , or reduction
of, the prepayment penalty in Seller's Prudential loan provisions on
terms and conditions acceptable to Seller in Seller's sole and
absolute discretion or shall have received from Prudential
alternatives or accommodations with respect to the loan on the terms
and conditions acceptable to Seller in its sole and absolute
discretion provided that the Prudential loan is released from the
Property. Seller agrees to commence action to obtain and to
diligently pursue obtaining such accommodation from Prudential
immediately after the Effective Date. If Seller does not obtain or
receive any such accommodation from Prudential which is acceptable to
Seller, Seller shall notify Buyer of such failure to obtain an
acceptable accommodation from Prudential, and upon such notification,
this Agreement shall terminate and be null and void and of no further
force and effect.
(iv) Seller shall have obtained any required consents to assign
to Buyer all of the Leases and Contracts and Permits. In all such
consents to assignment, Seller shall be released from all liability
thereunder. If Seller does not receive such consents to assignment or
releases from liability, Seller shall notify Buyer of such failure and
upon such notification, this Agreement shall terminate and be null and
void and of no further force and effect.
(v) If Seller fails to terminate this Agreement in the manner
and by the time set forth herein, Seller shall be deemed to have
waived its right to terminate this Agreement under Section 5(c).
6. CLOSING OBLIGATIONS; ESCROW INSTRUCTIONS.
(a) Seller's Closing Obligations. On the Closing Date,
Seller shall:
(i) Deliver to Buyer full possession of the Real Property
in the same condition as it is as of the Effective Date except as
expressly authorized or permitted otherwise hereunder, subject to the
Permitted Encumbrances.
(ii) Deliver to Buyer, in form and substance reasonably
satisfactory to Buyer, the following:
(A) a good and sufficient general warranty deed
executed by the Seller conveying good clear record and marketable
title to the Real Property, which shall convey title free from all
liens, encumbrances and encroachments except: (i) provisions of
building, land use and zoning laws existing as of the Closing Date;
(ii) the Permitted Encumbrances; and (iii) such real property taxes
and personal property taxes for the then current fiscal tax period as
are not yet due and payable on the Closing Date.
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(B) a Bill of Sale conveying to Buyer good and clear
unencumbered title to the Personal Property and to the Operating
Inventory and title transfer documents for any Personal Property owned
by Seller for which the Department of Motor Vehicles issues a title.
(c) an Assignment of all of Seller's rights and
obligations in, to and under the Leases and Contracts, together with
any required written consents to such assignments from the other party
to any of the Leases and Contracts. Seller shall indemnify and hold
the Buyer harmless from any costs, expenses, liabilities and
obligations related to the Leases and Contracts arising prior to the
Closing Date and Buyer shall indemnify and hold Seller harmless for
any matters related to the Leases and Contracts arising on and after
the Closing Date. Seller shall be released from any further liability
under all of the Leases and Contracts unless Seller agrees otherwise.
(D) an Assignment to Buyer of all the Seller's rights
and obligations in, to and under (i) all Intangible Personal Property,
and (ii) all Permits. In such assignment, Seller shall indemnify and
hold Buyer harmless from all costs, expenses, liabilities and
obligations related to such Intangible Personal Property and Permits
arising before the Closing Date and Buyer shall indemnify and hold
Seller harmless from all costs, expenses, liabilities and obligations
related to such Intangible Personal Property and Permits arising on or
after the Closing Date. Seller shall obtain any consents required to
any of the foregoing assignments and shall be released from any future
liability under the foregoing unless Seller agrees otherwise.
(E) Originals (or photocopies of the same if the
originals are not available) of all site plans, surveys, soil and
substrata studies, architectural drawings (including, without
limitation, any final "as built" architectural and engineering
drawings), plans and specifications, floor plans, and other plans or
studies of any kind that relate to the Real Property.
(F) Owner's Affidavit to Buyer's title insurer
as to parties in possession or with a right to possession of, and
mechanic's liens with respect to the Real Property, which affidavit
shall be sufficient to have the normal printed exceptions with respect
to such matters deleted from Buyer's and Buyer's lender's title
insurance policy(ies).
(G) An Affidavit certifying that Seller is not
a "foreign person" as of the Closing Date, as provided in Section
4(a)(vii) hereof.
(H) Duplicate original closing statements
taking into account all adjustments and credits to the Purchase Price
and closing expenses of Buyer and Seller.
(I) An IRS Form 1099.
(J) A secretary's certificate and corporate
resolution from Seller certifying the incumbent officers of Seller and
the due authorization and execution of this Agreement, and of the
sale, deed, assignment, and other transactions contemplated hereby.
(K) Certificates of legal existence and good
standing for Seller.
(L) To the extent not previously delivered to
Buyer, originals of any documents assigned to Buyer hereunder.
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(M) All duplicate and master keys to all
locks associated with the Real Property and for any Personal Property.
(iii)To enable Seller to make the
conveyances as herein provided, at the time of delivery of the deed
and other closing documents, Seller shall use the Purchase Price or
any portion thereof to clear title to the Real Property of any or all
mortgages or liens against the same and all instruments so procured
shall be recorded simultaneously with the delivery of the deed, or
provisions reasonably satisfactory to Buyer's attorney shall be made
prior to the Closing Date for recording thereof as soon as reasonably
practicable after the Closing Date. Seller shall pay all of its
closing expenses as set forth in Section 3(b) above.
(b) Buyer's Closing Obligations. At Closing,
Buyer shall:
(i) Deliver to Seller, by immediately
available wire transfer of funds, the balance of the Purchase Price,
as adjusted pursuant to Section 2 above or any other provisions
hereof.
(ii) Deliver to Seller a written assumption of
all obligations of Seller pursuant to the Leases and Contracts and
Permits.
(iii) Buyer shall pay all of its closing
expenses as set forth in Section 3(b) above.
7. FAILURE OR INABILITY TO PERFORM; DEFAULTS; REMEDIES.
(a) A Seller's Default. (i) If, on the Closing Date, (A)
Seller shall be unable to convey title, make conveyance or deliver
possession of the Property as required by this Agreement or to satisfy
any of the terms and conditions precedent to Closing solely the
responsibility of Seller set forth herein, or (B) the Property does
not then conform to the provisions hereof, or (C) any of Seller's
warranties and representations contained herein are not true in all
material respects as of the Closing Date (items (A) through (C),
collectively, called "Seller's Obligations"), the time for performance
hereunder shall be extended for thirty (30) days but in no event
beyond April 8, 1999, and Seller shall use diligent efforts to satisfy
and perform all of Seller's Obligations. If, at the expiration of such
extended time for performance, despite having used such diligent
efforts Seller shall remain unable to satisfy and perform all of
Seller's Obligations, then Buyer shall have the option, at Buyer's
sole discretion: (I) to terminate this Agreement by written notice
given to Seller, whereupon the Deposit and other sums paid by Buyer to
Escrow Agent hereunder, shall be promptly refunded by Escrow Agent to
Buyer and all obligations of the parties hereto shall cease and this
Agreement shall be null and void and without recourse to the parties
hereto, excluding, however, those provisions hereof which are
expressly provided herein to survive termination of the Agreement, or
(II) to accept title to the Property as provided in Section 7(a)(ii)
below. In addition to the foregoing rights, Buyer shall have the
right to obtain specific performance of this Agreement as well as any
other rights or remedies provided herein or by applicable law in the
event of any default herein by Seller (i.e., Seller's failure to
perform its obligations hereunder where such failure is not excused by
any of the express terms of this Agreement). Notwithstanding the
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foregoing and as a condition precedent to Buyer filing suit for
specific performance, Buyer shall deposit with the court in which such
specific performance suit is being filed one-third of the Purchase
Price of the Property plus a reasonable sum to reimburse Seller for
Seller's attorney's fees and costs in the event Seller prevails (to be
held in an interest bearing account) or deliver to the court an
irrevocable letter of credit payable to Seller in the amount of the
foregoing deposit plus a reasonable sum to reimburse Seller for
Seller's attorney's fees and costs in the event that Seller prevails.
Further, in connection with filing any suit asking for specific
performance, Buyer must file a sworn affidavit that Buyer had the then
present financial condition and has the current financial ability to
perform this Agreement and shall attach evidence thereto of Buyer's
current financial ability to perform this Agreement.
(ii) Buyer shall have the election, at Closing, to accept such title
to, and possession of, the Property as Seller can deliver in its then
condition and to thereupon pay the Purchase Price without any
deductions therefor, except such amount necessary to remove all
mortgages, liens or encumbrances which secure the payment of money and
such adjustments computed in accordance with Section 2(c) above or any
other provisions hereof, in which case Seller shall convey such title.
(b) Buyer's Default. If Buyer shall fail to fulfill
Buyer's agreements hereunder on the Closing Date, Seller's sole and
exclusive remedy, both at law and in equity, shall be to retain the
Deposit as full and complete agreed upon liquidated damages whereupon
this Agreement shall terminate without further recourse to either
party.
(c) Buyer and Seller agree that some provisions of this
Agreement are to survive closing or termination of this Agreement.
Notwithstanding any other provision of this Agreement to the contrary,
Buyer and Seller agree that in addition to any remedy that either
party may have under this Agreement which survives closing of this
Agreement or is available for a breach of, or default under,
contractual obligations that survive Closing or are to be performed
post closing, Buyer and Seller shall have the right of specific
performance and any other equitable or legal remedy for any breach of,
or default in, any obligation of a party to this Agreement which is
intended to survive closing of this Agreement or be performed post
closing.
8. MISCELLANEOUS.
(a) Agreement Not an Offer. The submission of any draft of
this Agreement or any portion thereof does not constitute an offer to
buy or sell the Property, it being acknowledged and agreed that
neither Buyer nor Seller shall be legally obligated with respect to
the purchase or sale of the Property unless and until this Agreement
has been executed by both Buyer and Seller with all exhibits attached
and a fully executed copy has been delivered to each of Buyer and
Seller.
(b) Exhibits. The Exhibits attached hereto are incorporated
herein by this reference and made a part hereof.
(c) Notices. All notices or communications required or
permitted hereunder shall be in writing and delivered (i) by hand,
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(ii) by certified U.S. mail, return receipt requested, postage and
registration or certification charges prepaid, (iii) by nationally
recognized overnight courier service, or (iv) by telefax, to the party
entitled thereto as follows:
If to Seller:
Bruce W. Teeters, Sr. Vice President
Consolidated-Tomoka Land Co.
149 South Ridgewood Avenue
Daytona Beach, Florida 32114
Telephone (904) 255-7558
Fax (904) 239-0555
With courtesy copy to:
Robert F. Apgar, Vice President
Consolidated-Tomoka Land Co.
149 South Ridgewood Avenue
Daytona Beach, Florida 32114
Telephone (904) 255-7558
Fax (904) 239-0555
If to Buyer:
Mr. Alton D. Rogers
486 U.S. 27 South
Lake Placid, Florida 33852
Telephone No. (941) 465-3681
Fax No. (941) 465-3681 + 465
With courtesy copy to:
Mr. Wade H. Walker
Oakley Groves, Inc.
101 ABC Road
Box 4170
Lake Wales, FL 33853
Telephone No. (941) 638-1435
Fax No. (941) 638-2073
M. David Alexander, Esquire
101 6th Street, N.W.
Winter Haven, FL 33881
Telephone No. (941) 297-5111
Fax No. (941) 293-4104
or such other party(ies), address(es) or telefax number(s) as either
party shall specify by written notice to the other from time to time.
Any such notice or communication shall be deemed to have been given as
of the date of its receipt or delivery.
(d) Broker. Each of Buyer and Seller hereby represents,
covenants and warrants to the other that the only real estate broker,
sales person or finder involved in this transaction is Tropical Realty
and Insurance T/A Rogers & Mallett Realty, 486 US 27 South, Lake
Placid, Florida 33852 ("Broker"). Seller shall pay to Broker a real
estate commission of $356,450.00, which has been negotiated between
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Broker and Seller and which has been based only on that part of the
Purchase Price allocated to the Real Property. No commission shall be
due to Broker unless the entire transaction contemplated by this
Agreement actually closes. Broker has signed this Agreement to
acknowledge Broker's agreement with this Section 8(d). Further, each
of Buyer and Seller agrees to indemnify, defend and hold the other
harmless from and against the payment of any further commissions or
fees or claims for commission or fees by virtue of any acts or
actions undertaken by them, including any attorney fees and costs
related thereto. This indemnification shall survive Closing for a
period of five (5) years after the Closing Date. The Broker
represents and warrants that it and its agents have no knowledge of
any involvement or claim to a commission of any other real estate
broker or agent under this Agreement.
(e) Entire Agreement; Rules of Construction. This Agreement
which may be executed in multiple counterparts, is to be construed as
a Florida contract; sets forth the entire agreement between Seller and
Buyer; merges all prior and contemporaneous agreements,
understandings, warranties, or representations; shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns; and may be modified or amended only by a
written instrument executed by both Seller and Buyer. The captions and
section headings are to be used only as a matter of convenience and
are not to be considered a part of this Agreement or to be used in
determining the intent of the parties. Whenever the context permits
or requires, the use of one gender in this Agreement shall include all
other genders and the use of the singular shall include the plural and
vice versa.
(f) Further Assurances. Upon either party's request, the other
party agrees to execute and deliver to the requesting party such
additional instruments, certificates and documents as such party may
reasonably require, whether or not after the Closing, in order to
provide that party with the rights and benefits to which that party is
entitled under this Agreement.
(g) Risk of Loss. If, prior to the end of the Inspection
Period, a material part of the Property is destroyed or damaged by a
fire or other casualty which is not covered by insurance, Seller shall
promptly notify Buyer of such fact and Buyer shall have the right to
terminate this Agreement by giving notice to Seller not later than ten
(10) days after receiving said notice. If the Buyer elects to
terminate this Agreement as aforesaid, this Agreement shall be
terminated and be of no further force and effect. If, prior to the
end of the Inspection Period, a material part of the Property is
damaged or destroyed by fire or other casualty which is covered by
insurance, Seller shall promptly notify Buyer of such fact and of
Seller's election under the provisions of the following sentence. In
that event, Seller shall either (i) repair the property so damaged to
its condition before such casualty, before Closing, or (ii) assign to
Buyer at Closing the rights of Seller to the insurance proceeds under
Seller's policies covering the Property with respect to such damage or
destruction, if such insurance proceeds are sufficient to complete the
repairs, and Buyer shall be entitled to receive and keep any monies
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received from such insurance policies. If Seller does not elect to
make the repairs and the insurance proceeds are insufficient to
complete the repairs, Buyer shall have the right to terminate this
Agreement and thereafter, it shall be null and void and of no further
force and effect. If, after the end of the Inspection Period, any
portion of the Property is destroyed by fire or other casualty,
whether covered by insurance or not, all risk of loss shall be borne
by the Buyer without any offset or reduction in the Purchase Price due
to such fire or other casualty, provided however, if such loss is
covered by insurance, Seller shall assign to Buyer at Closing the
Seller's right to such insurance proceeds.
(h) Eminent Domain. If prior to the Closing Date, any material
part of the Real Property is taken by eminent domain (or is the
subject of a taking and has yet to be consummated), Seller shall
notify Buyer of such fact promptly after obtaining knowledge thereof
and Buyer shall then have the right to terminate this Agreement by
giving notice to Seller not more than ten (10) days after receiving
Seller's notice. If the Buyer elects to terminate this Agreement as
aforesaid, this Agreement shall be terminated and be of no further
force and effect, and Seller shall instruct Escrow Agent to return the
deposit to Buyer. Should Buyer elect not to terminate the Agreement or
if a material part of the Real Property is not taken, Seller shall
assign to Buyer at the Closing the rights of Seller to the awards, if
any, for the taking, and Buyer shall be entitled to receive and keep
all awards to be delivered for the taking of the Real Property or such
portions thereof.
(i) Severability. If any term or provision of this Agreement
or the application thereof to any persons or circumstances shall, to
any extent, be invalid or unenforceable, the remainder of this
Agreement shall not be affected thereby, and each remaining term and
provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
(j) Notice of Agreement. Neither party shall have the right
to record this Agreement or a Notice or Memorandum of this Agreement
in any public records in the State of Florida.
(k) Time for Acceptance and Effective Date. If this Agreement
is not executed by and delivered to Buyer and Seller or the fact of
execution communicated in writing between the parties on or before
December 28, 1998, the first party executing this Agreement may
withdraw that party's offer, and neither party shall have any further
rights or obligations under this Agreement. The "Effective Date" of
this Agreement shall be the date on which the last of Buyer and Seller
executes this Agreement. Notwithstanding any provision of this
Agreement to the contrary, Buyer, simultaneous with execution of this
Agreement, shall notify Seller in writing whether Buyer intends or
does not intend to employ all employees of Seller's Citrus Business as
of the Closing Date. Failure by Buyer to notify Seller of Buyer's
intention simultaneous with the execution hereof shall be deemed an
election by Buyer to hire all employees of Seller's Citrus Business as
of the Closing Date.
(l) Time Periods. Buyer and Seller agree that time is of the
essence under this Agreement. In computing time periods of less than
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six (6) days, Saturdays, Sundays and state or national legal holidays
shall be excluded. Any time periods provided for herein which fall on
a Saturday, Sunday or legal holiday shall extend to 5:00 p.m. of the
next business day.
(m) Confidentiality. Seller and Buyer shall hold this
Agreement in strictest confidence. Except as required by federal or
state law including the WARN Act or SEC rules and regulations, by
financial accounting standards for public corporations, in connection
with corporate approvals by or reports to the Board of Directors of
Seller or to satisfy any contingency contained in Section 5(c) of this
Agreement, Seller covenants not to disclose this Agreement to any
other person or entity, and shall not divulge to anyone for any
purpose, use or benefit, any of the specific terms of this Agreement,
including its status or pricing. Seller covenants not to disclose
this Agreement to any other person or entity or any such information,
directly, indirectly or by inference, without the prior written
permission of the Buyer. Except as required by law or to induce
others to participate in this purchase, Buyer covenants not to
disclose to any other person or entity, and shall not divulge to
anyone for any purpose, use or benefit, any of the terms of this
Agreement or any other information obtained from Seller that is not a
public record or necessary for Buyer's consultants to evaluate the
feasibility of the Property for Buyer's use or to induce others to
participate in this purchase. In those instances where Buyer is
authorized to disclose information to induce others to participate in
this purchase, Buyer, prior to such disclosure, by contractual
provision, confidentiality agreement or other written agreement, shall
obtain, in writing from such other purchaser, an agreement to hold any
such information disclosed under this paragraph in the strictest
confidence without exception unless such exception is approved by
Seller.
(n) Radon Gas. Pursuant to Section 404.056, Florida Statutes
notice is hereby given that radon is a naturally occurring radioactive
gas that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed to it
over time. Levels of radon that exceed federal and state guidelines
have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from the County
public health unit.
(o) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
Florida.
(p) Attorney Fees. In the event of any litigation between the
parties hereto, the prevailing party in any such litigation shall be
entitled to receive its attorney fees and costs from the non-
Prevailing party.
(q) Assignment. This Agreement may be assigned, in whole or in
part, without the Seller's consent to an entity or entities provided
that Alton D. Rogers and Wade H. Walker have a controlling interest in
ownership and management of such entity or entities and Seller is
provided with notice thereof. In connection with such assignment,
Seller shall be provided with reasonable proof of Alton D. Rogers' and
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Wade H. Walker's controlling interest in ownership and management of
such assignee. Any other assignment of this Agreement, in whole or
in part, may only be made with the prior written consent of Seller to
be given or denied in Seller's sole and absolute discretion.
IN WITNESS WHEREOF, the parties have executed this Agreement, or
caused it to be executed by their respective duly authorized
representatives, as an instrument under seal as of the Effective Date.
WITNESS: BUYER:
Matthew D. Alexander /s/Alton D. Rogers
---------------------
Matthew D. Alexander /s/ Wade H. Walker
---------------------
DATE: 12/28/99
WITNESSES: SELLER:
CONSOLIDATED-TOMOKA LAND CO.,
/s/ Jill S. Lust a Florida corporation
/s/ Frances Massey
By:/s/Patricia Lagoni
Vice President
-----------------------
Date: 12/28/98
ESCROW AGENT:
INDIGO COMMERCIAL REALTY INC.
/s/ Jill S. Lust By: /s/ William H. McMunn
/s/ Frances Massey ---------------------------
Title: President
Broker has signed below to acknowledge Broker's agreement with the
provisions of Section 8(d) above regarding the commission due under
this Agreement including the amount of such commission, that such
commission shall be paid to Broker only if the transaction
contemplated by this Agreement actually closes and the representation
of Broker to the best of its knowledge that no other brokers are
involved in this transaction.
BROKER:
TROPICAL REALTY AND INSURANCE CO.
T/A ROGERS & MALLETT REALTY
/s/ Alton D. Rogers
--------------------------
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<PAGE>
FIRST MODIFICATION TO PURCHASE AND SALE AGREEMENT
This First Modification to Purchase and Sale Agreement ("Modification")
made effective as of the 28th day of January, 1999, by and between Alton
D. Rogers and Wade H. Walker ("Buyer"), and Consolidated-Tomoka Land Co.,
a Florida corporation ("Seller").
WHEREAS, Buyer and Seller entered into a Purchase and Sale Agreement with
an Effective Date of December 28, 1998 ("Agreement");
WHEREAS, Buyer and Seller have agreed to modify the Purchase Price of the
Property;
WHEREAS, Seller wishes to waive all of the conditions contained in
paragraph 5(c) of the agreement;
WHEREAS, Buyer and Seller have agreed to grant Seller a limited right to
extend the Closing Date as provided in this Modification; and
WHEREAS, Buyer and Seller wish to set forth the modifications and
amendments to the Agreement to which they agree in this Modification.
NOW, THEREFORE, for Ten and No/100ths Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Buyer and Seller hereby agree as follows:
1. The above recitations are true and correct and are incorporated
by reference herein. Any capitalized terms used in this Modification
shall have the same definition as contained in the Agreement unless a new
definition is contained in this Modification or the context clearly
requires otherwise.
2. The Purchase Price stated in Paragraph 2(a) of the Agreement is
modified and amended to Thirty Million Nine Hundred Forty Five Thousand
and No/100ths Dollars ($30,945,000).
3. Paragraph 2(a)(iii) of the Agreement is modified in its entirety
to read as follows:
(iii) The Purchase Price of the Property shall be allocated as
follows:
(A) The allocation to the Real Property is: $21,875,000.00
(B) The allocation to the Personal Property is: $6,625,000.00
(c) The allocation to the Intangible Personal
Property, Permits, and Leases and
Contracts is: $2,445,000.00"
4. The following sentence is added to the end of Paragraph
2(c)(iii) of the Agreement:
54
<PAGE>
"Notwithstanding the foregoing, Buyer and Seller agree that
the pallet boxes are used, that the pallet boxes are included as part of
the Operating Inventory, and that for purposes of this adjustment to the
Purchase Price, the price to be paid by Buyer to Seller for the used
pallet boxes shall be One Hundred Five Thousand and No/100ths Dollars
($105,000.00)."
5. Paragraph 3(a) of the Agreement is modified in its entirety to
read as follows:
(a) Closing Date and Place. The time for the delivery of the
deed and all other closing documents, and for the performance of the
other terms and conditions of this Agreement (the "Closing") shall be
10:00 a.m., March 9, 1999, as the same may be extended pursuant to any
other provisions hereof or by mutual agreement of Buyer and Seller (the
"Closing Date"), at the offices of Seller, or at such other place and
time as may be mutually agreed upon by Buyer and Seller. Notwithstanding
any provision of this Agreement to the contrary, Seller, at its sole
option, shall have the right to extend the Closing Date set forth above
to a date determined by Seller, provided that such Closing Date as
extended by Seller shall not be any later than April 8, 1999. Seller's
right to extend the Closing Date under this provision is for the sole
purpose of allowing Seller sufficient time to close on a modification of
Seller's existing loan with Prudential whereby the lien of Prudential's
mortgage is released from the Property and transferred to substitute
security upon such terms and conditions acceptable to Seller. If Seller
elects to exercise its rights under this provision, Seller shall provide
Buyer with prior written notice thereof, no later than March 2, 1999.
Such notice shall include the date to which the Closing Date is
extended."
6. Seller hereby waives any rights that Seller has to terminate the
Agreement pursuant to Paragraph 5(c) of the Agreement.
7. Signatures on this Modification received by telecopy shall be
deemed original signatures for all purposes regarding this Modification.
8. Except as specifically modified by this Modification, the
Agreement shall remain in full force and effect in accordance with
its terms as first made.
55
<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have executed this Modification
or have caused it to be executed by their duly authorized
representatives, as an instrument under seal effective as of the date
first above written.
WITNESSES: BUYER:
/s/ Robert F. Apgar /s/ Alton D. Rogers
----------------------
/s/ Michael M. Alexander Date: 1/28/99
/s/ Robert F. Apgar /s/ Wade H. Walker
------------------------
/s/ Michael M. Alexander Date: 1/28/99
SELLER:
CONSOLIDATED-TOMOKA LAND CO.,
a Florida corporation
/s/ Robert F. Apgar
By: /s/ Patricia Lagoni
/s/ Michael M. Alexander Vice President
---------------------------
56
<PAGE>
SECOND MODIFICATION TO PURCHASE AND SALE AGREEMENT
This Second Modification to Purchase and Sale Agreement ("Second
Modification") made effective as of the 29th day of January, 1999, by
and between Alton D. Rogers and Wade H. Walker ("Buyer") and
Consolidated-Tomoka Land Co., a Florida corporation ("Seller").
WHEREAS, Buyer and Seller entered into a Purchase and Sale
Agreement with an Effective Date of December 28, 1998 ("Agreement");
WHEREAS, Buyer and Seller entered into a First Modification to
Purchase and Sale Agreement with an effective date of January 28, 1999
("First Modification");
WHEREAS, Buyer and Seller have agreed to further modify the
Agreement as modified by the First Modification;
WHEREAS, Buyer and Seller have agreed to extend the date by which
the non-refundable deposit is to be paid to Escrow Agent;
WHEREAS, Buyer and Seller have agreed to extend the Closing Date
set forth in the Agreement;
WHEREAS, Buyer and Seller have agreed to extend the Inspection
Period for the sole purpose of allowing Buyer to make further
inspections of the Land regarding hazardous waste; and
WHEREAS, Buyer and Seller wish to set forth the modifications and
amendments to the Agreement to which they agree, in this Second
Modification.
NOW, THEREFORE, for Ten and No/100ths Dollars ($10.00), and other
good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Buyer and Seller agree as follows:
1. The above recitations are true and correct and are
incorporated by reference herein. Any capitalized terms used in this
Second Modification shall have the same definition as contained in the
Agreement, unless a new definition is contained in this Second
Modification or the context clearly requires otherwise.
2. Buyer and Seller agree that Paragraph 2(a)(i) of the
Agreement is modified in its entirety to read as follows:
(i) A non-refundable deposit in the amount of One Million
Dollars ($1,000,000.00) shall be paid by Buyer to Escrow Agent, as
defined below, to be held pursuant to the terms of this Agreement, on
or before 5:00 p.m. on February 25, 1999, and is to be delivered to
Seller by the Escrow Agent at the Closing on the Closing Date (the
non-refundable deposit is referred to herein as the "Deposit"); and".
57
<PAGE>
3. Buyer and Seller agree that Paragraph 5 of the First
Modification (which Paragraph 5 modified Paragraph 3(a) of the
Agreement in its entirety), is modified to extend the Closing Date
from March 9, 1999, to March 16, 1999, and modified to extend the
notice date contained therein from March 2, 1999, to March 9, 1999.
Buyer and Seller agree that the date of April 8, 1999, contained in
Paragraph 5 of the First Modification and the date of April 8, 1999,
contained in Paragraph 7(a) of the Agreement intentionally have not
been amended, modified or extended by Buyer and Seller in connection
with the extension of the Closing Date contained in this Second
Modification.
4. Buyer waives any right that Buyer has to terminate the
Agreement pursuant to subparagraphs 5(b)(ii), (iii), (iv), (v), (vi),
and (vii) of the Agreement. Buyer and Seller agree that Buyer
specifically has not waived Buyer's right to terminate the Agreement
pursuant to the provisions of Paragraph 5(b)(i) in connection with
this Second Modification. Buyer and Seller agree that the due
diligence period for inspections pursuant to Paragraph 5(b)(i) only is
modified and extended to 5:00 p.m. on February 23, 1999.
5. Buyer and Seller agree that the last paragraph of Paragraph
5(b) contained on the top of Page 15 of the Agreement is deleted in
its entirety, and the following is substituted therefor:
If the condition specified in subsection (i) above is not fully
satisfied in a manner which is acceptable to Buyer, in Buyer's
sole discretion, on or before February 23, 1999, or if any
records or documentation or information obtained or provided are
unsatisfactory to Buyer, Buyer shall have the right to terminate
this Agreement for any reason related to subsection (i) on or
before 5:00 p.m., February 23, 1999, by notice of termination
delivered to Seller, whereupon this Agreement shall be null, void
and of no further force and effect. If Buyer fails to terminate
the Agreement in the manner and time set forth herein, Buyer
shall be deemed to have waived its right to terminate this
Agreement under this section 5(b)(i), and shall pay the Deposit
to the Escrow Agent on or before 5:00 p.m. on February 25, 1999,
or Buyer shall be in default hereunder. Upon termination of this
Agreement under section 5(b)(i), Buyer shall return to Seller,
any surveys, tests, title commitments, reports, and the like
provided by Seller, and Buyer shall deliver to Seller copies of
any tests, studies, reports, appraisals, and the like, related to
the Property, that Buyer, its agents, contractors, or engineers
may have prepared, or may have obtained, which Seller may use at
Seller's sole risk. Buyer shall notify all Buyer's professionals
and consultants of such termination and authorize them to release
their work product to Seller. Buyer shall obtain from such
professionals and consultants, a statement that they have been
paid in full for all such work done by Buyer and authorize them
to release their work product to Seller for use at Seller's
risk."
58
<PAGE>
6. Signatures on this Second Modification received by telecopy
shall be deemed original signatures for all purposes regarding this
Second Modification.
7. Except as specifically modified by this Second Modification,
the Agreement and the First Modification shall remain in full force
and effect, in accordance with their respective terms.
8. Notwithstanding the date that this Second Modification may
be executed by Buyer and Seller, Buyer and Seller agree that the
effective date of this Second Modification is January 29, 1999.
IN WITNESS WHEREOF, Buyer and Seller have executed this Second
Modification or caused it to be executed by their duly authorized
representatives, as an instrument under seal, effective as of the date
first above written.
WITNESSES: BUYER:
/s/ Robert F. Apgar /s/ Alton D. Rogers
/s/ Robert Shaw -------------------------
/s/ Wade H. Walker
/s/ Robert F. Apgar -------------------------
/s/ Robert Shaw Date: 1/29/99
/s/ Robert F. Apgar SELLER:
/s/ Robert Shaw
CONSOLIDATED-TOMOKA LAND CO.,
a Florida corporation
By: /s/ Patricia Lagoni
Vice President
---------------------------
Date: 1/29/99
59
<PAGE>
THIRD MODIFICATION TO PURCHASE AND SALE AGREEMENT
This Third Modification to Purchase and Sale Agreement ("Third
Modification") made effective as of the 23rd day of February, 1999, by
and between Alton D. Rogers and Wade H. Walker ("Buyer") and
Consolidated-Tomoka Land Co., a Florida corporation ("Seller").
WHEREAS, Buyer and Seller entered into a Purchase and Sale Agreement
with an Effective Date of December 28, 1998 ("Agreement");
WHEREAS, Buyer and Seller entered into a First Modification to Purchase
and Sale Agreement with an effective date of January 28, 1999 ("First
Modification");
WHEREAS, Buyer and Seller entered into a Second Modification to Purchase
and Sale Agreement with an effective date of January 29, 1999 ("Second
Modification");
WHEREAS, Buyer and Seller have agreed to further modify the Agreement as
modified by the First Modification and the Second Modification;
WHEREAS, the principal purpose of this Third Modification is to address
certain issues which have arisen during Buyer's environmental
investigations of the Land and the parties' agreements with respect
thereto;
WHEREAS, Seller has agreed to provide Buyer with purchase money financing
on the Lake Francis Grove and other financing pursuant to the terms and
conditions set forth in this Third Modification;
WHEREAS, Buyer and Seller have agreed to reallocate the Purchase Price
with the Buyer paying certain increases in the closing costs arising from
such reallocation;
WHEREAS, Buyer and Seller have agreed to modify and extend the Closing
Date to April 8, 1999;
WHEREAS, Buyer and Seller have agreed to quantify the account receivable
for fresh fruit as of November 30, 1998, that is to be credited to Buyer
at Closing; and
WHEREAS, Buyer and Seller wish to set forth the modifications and
amendments to the Agreement as modified by the First Modification and the
Second Modification, to which they agree in this Third Modification.
NOW, THEREFORE, for Ten and No/100ths Dollars ($10.00), and other good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Buyer and Seller agree as follows:
60
<PAGE>
1. The above recitations are true and correct and are incorporated
by reference herein. Any capitalized terms used in this Third
Modification shall have the same definition as contained in the
Agreement, unless a new definition is contained in this Third
Modification or the context clearly requires otherwise.
2. Buyer and Seller agree that at Closing, a portion of the Land
described in Exhibit A to the Agreement shall not be conveyed to Buyer.
The parcel which Seller shall retain is approximately three quarters of
an acre to one acre in size and said parcel is a part of the South Grove
described in Exhibit A to the Agreement ("Retained Parcel"). The exact
legal description, size and configuration of the Retained Parcel shall
be agreed to by Seller and Buyer on or before the Closing Date. At
closing, Seller shall also reserve an access easement to the Retained
Parcel, the location of which shall be agreed to by Seller and Buyer on
or before the Closing Date. Buyer shall cause Buyer's surveyor to
describe the Retained Parcel and the access easement thereto. Seller
shall be obligated to convey the Retained Parcel to Buyer and to release
the reserved access easement upon completion of any remedial action that
may be required to remediate the environmental contamination on the
Retained Parcel, as more particularly set forth in, and pursuant to,
Paragraph 7 of this Third Modification. Upon satisfaction of the
conditions set forth in Paragraph 7 of this Third Modification, Seller
shall convey the Retained Parcel to Buyer by warranty deed without any
additional consideration. The Purchase Price of the Property shall not
be reduced at closing, even though Seller is not then conveying the
Retained Parcel to Buyer. This provision shall survive closing.
3. Paragraph 2(a) of the Agreement as modified by the First
Modification and Second Modification, is modified in its entirety to read
as follows:
(a)Purchase Price. The agreed Purchase Price of the Property is
Thirty Million Nine Hundred Forty Five Thousand and No/100ths Dollars
($30,945,000.00) (the "Purchase Price"), and shall be paid as follows:
(i) A non-refundable deposit in the amount of One Million and
No/100ths Dollars ($1,000,000.00) shall be paid by Buyer to Escrow Agent
as defined below, to be held pursuant to the terms of this Agreement, on
or before 5:00 p.m. on March 5, 1999, and is to be delivered to Seller
by the Escrow Agent at the Closing on the Closing Date (the non-
Refundable deposit is referred to herein as the "Deposit"); and
(ii) Buyer shall give to Seller and Seller agrees to accept
a purchase money first mortgage ("First Mortgage") and purchase money
note ("Lake Francis Note") in the amount of Two Million Five Hundred
Fifty Thousand and No/100ths Dollars ($2,550,000.00). The First Mortgage
and Lake Francis Note shall be secured only by that portion of the Land
identified in Exhibit A of the Agreement as the "Lake Francis Grove."
The Lake Francis Note shall be without recourse to Buyer, and Seller's
only security for repayment of the Lake Francis Note will be the Lake
Francis Grove. The Lake Francis Note shall bear interest at the rate of
six percent (6%) per annum except during periods of default, when it
61
<PAGE>
shall bear the highest lawful rate of interest. The Lake Francis Note
will provide that Buyer will make annual payments of principal and
interest as though the entire principal and interest on the Lake Francis
Note were being repaid in equal annual payments over twenty years. The
Lake Francis Note and First Mortgage shall be due and payable in full on
the earlier of ten (10) years from the Closing Date or one hundred eighty
(180) days after Seller provides to Buyer the letter contemplated under
Paragraph 7 below from the Department of Environmental Protection ("DEP")
or MDM Services Inc. ("MDM") for the Lake Francis Grove. The final
payment on the Lake Francis Note will be a balloon payment and will
exceed the periodic payments thereon. The First Mortgage and Lake
Francis Note shall provide for a thirty (30) day grace period in the
event of default; shall provide for the right of prepayment in whole or
in part without penalty; shall permit acceleration in the event of any
transfer of the Lake Francis Grove, in whole or in part; shall require
Buyer to maintain policies of insurance containing a standard mortgagee
clause covering all improvements located on the Lake Francis Grove
against fire and all perils included within the term "extended coverage
endorsements" and such other risks and perils Seller may reasonably
require in an amount equal to the highest insurable value; and the First
Mortgage and Lake Francis Note shall otherwise be in form and content
required by Seller, provided however, that Seller may only require
clauses and coverage customarily found in mortgages and notes for
agricultural loans in Highlands County, Florida, made by financial
institutions or insurance companies. Buyer's attorney shall be
responsible for preparation of the Lake Francis Note and First Mortgage,
and drafts shall be provided to Seller at the same time that other
closing documents may be required under the Agreement to be provided by
Seller to Buyer. The costs of recording of the First Mortgage and of the
documentary stamps and intangible tax on the First Mortgage and Lake
Francis Note shall be paid by Buyer.
(iii) Buyer shall give to Seller and Seller agrees to accept a
purchase money second mortgage ("Second Mortgage") and purchase money
note ("60 Day Note") in the amount of Five Hundred Thousand and No/100ths
Dollars ($500,000.00). The Second Mortgage and 60 Day Note shall be
secured by all of the Land identified in Exhibit A of the Agreement
except the "Lake Francis Grove." The Buyer or any person or entity to
whom this Agreement is assigned shall be personally liable for repayment
of the 60 Day Note. The 60 Day Note shall not bear interest except
during periods of default, when it shall bear the highest lawful rate
of interest. The 60 Day Note and Second Mortgage shall be due and
payable sixty (60) days from the Closing Date. The Second Mortgage and
60 Day Note shall provide for a fifteen (15) day grace period in the
event of default; shall provide for the right of prepayment in whole or
in part without penalty; shall permit acceleration in the event of any
transfer of the real property encumbered by the Second Mortgage, in whole
or in part; shall require Buyer to maintain policies of insurance
containing a standard mortgagee clause covering all improvements located
on the real property encumbered by the Second Mortgage against fire and
all perils included within the term "extended coverage endorsements" and
such other risks and perils Seller may reasonably require in an amount
equal to the highest insurable value; and the Second Mortgage and 60 Day
62
<PAGE>
Note shall otherwise be in form and content required by Seller, provided
however, that Seller may only require clauses and coverage customarily
found in mortgages and notes for agricultural loans in Highlands County,
Florida, made by financial institutions or insurance companies. Buyer's
attorney shall be responsible for preparation of the 60 Day Note and
Second Mortgage, and drafts shall be provided to Seller at the same time
that other closing documents may be required under the Agreement to be
provided by Seller to Buyer. The costs of recording of the Second
Mortgage and of the documentary stamps and intangible tax on the Second
Mortgage and 60 Day Note shall be paid by Buyer.
(iv) The balance of the Purchase Price is to be paid by Buyer
to Seller at the time of closing on the Closing Date, together with any
adjustments and credits to the Purchase Price as provided in Section
2(c). Payments at closing shall be made by wire transfer to an account
designated by Seller which designation shall be made not less than forty
eight (48) hours prior to the Closing Date.
(v) The Purchase Price of the Property shall be allocated as
described on Exhibit "1" attached to the Third Modification and made a
part hereof.
4. The following sentence is added at the end of Paragraph 2(c)(iv)
of the Agreement:
"Notwithstanding this provision or any other provision of
the Agreement to the contrary, Buyer and Seller agree that the account
receivable attributable to fresh fruit for the 1998/1999 crop year
existing on November 30, 1998, is Two Hundred Twenty Five Thousand and
No/100ths Dollars ($225,000.00), and that this agreed upon $225,000.00,
shall be an adjustment to the Purchase Price."
5. Buyer and Seller agree that Paragraph 3(a) of the Agreement, as
modified by Paragraph 5 of the First Modification and by Paragraph 3 of
the Second Modification, is modified in its entirety to read as follows:
"(a) Closing Date and Place. The time for delivery of the deed
and all other closing documents and for the performance of the other
terms and conditions of this Agreement (the "Closing") shall be 10:00
a.m., April 8, 1999, as the same may be extended pursuant to any other
provisions hereof, or by mutual agreement of Buyer and Seller (the
"Closing Date") at the offices of Seller or such other place and time as
may mutually be agreed upon by Buyer and Seller."
6. Buyer and Seller agree that the first sentence of Paragraph
7(a)(i) of the Agreement is modified and amended to read as follows:
"(i) If, on the Closing Date, (A) Seller shall be unable to
convey title, make conveyance or deliver possession of the Property as
required by this Agreement or to satisfy any of the terms and conditions
precedent to Closing solely the responsibility of Seller set forth
herein, or (B) the Property does not then conform to the provisions
hereof, or (c) any of Seller's warranties and representations contained
63
<PAGE>
herein are not true in all material respects as of the Closing Date
(items (A) through (C), collectively, called "Seller's Obligations"), the
Closing Date shall be extended for thirty (30) days and Seller shall use
diligent efforts to satisfy and perform all of Seller's Obligations."
7. Buyer and Seller agree that the due diligence period for
environmental inspections pursuant to Paragraph 5(b)(i) of the Agreement
as modified by Paragraph 4 of the Second Modification is modified and
extended to 5:00 p.m. on March 4, 1999.
8. (a) During Buyer's environmental inspections of the
Property, three (3) areas of the Land were identified by the Buyer which
have environmental concerns to the Buyer. Those areas are the Retained
Parcel described in Paragraph 2 of this Third Modification, the Lake
Francis Grove and the Veley Block as described in Exhibit A of the
Agreement (collectively these three (3) parcels are referred to herein
as the "Contaminated Parcels"). The letter related to the environmental
site assessment prepared by MDM dated February 22, 1999, addresses the
environmental concerns with respect to each of the Contaminated Parcels,
contains suggested remedial action and contains estimated costs of the
remediation ("Environmental Report").
(b) Seller, at its sole cost and expense, agrees to, and shall
be obligated to, obtain any further tests, assessments, reports or
studies regarding the environmental concerns related to the Contaminated
Parcels set forth in the Environmental Report as may be required by any
federal or state law, rule or regulation before implementing any clean
up of the Contaminated Parcels and to remediate the environmental
concerns regarding the Contaminated Parcels set forth in the
Environmental Report in accordance with the requirements of federal or
state laws, rules or regulations. Seller shall be permitted to select
any qualified environmental experts or contractors to perform any work
for Seller to satisfy Seller's obligations under this provision. Seller
shall not have any obligation to clean up or remediate any further
environmental contamination of any of the Contaminated Parcels caused by
Buyer after Closing. Seller's obligation and liability is limited to
the environmental concerns related to the Contaminated Parcels identified
in the Environmental Report. After Closing, Buyer shall take all
appropriate action and shall use appropriate caution to avoid any further
contamination of the Contaminated Parcels.
(c) Upon completion of any further tests or reports required
of, or obtained by Seller, Seller agrees to pursue with reasonable due
diligence the clean up or remediation of the Contaminated Parcels as may
be required by state or federal laws, rules or regulations. If there are
more than one approved, recommended or appropriate methods of remediation
or clean up of any of the Contaminated Parcels, Seller, in its sole
discretion, may select the method or procedure by which each of the
Contaminated Parcels shall be remediated, provided that the same shall
be pursued with all reasonable due diligence by Seller. Seller agrees
to not interfere unreasonably with Buyer's agricultural operations on
the Land in connection with Seller's remediation of the Contaminated
Parcels and then only to the extent such interference is reasonably
64
<PAGE>
required to clean up or remediate the Contaminated Parcels. Seller
agrees to keep Buyer reasonably informed of its remedial action and to
Coordinate any remedial actions with Buyer so as to not interfere with
Buyer's agricultural operations on the Land. Buyer shall provide Seller,
including Seller's experts and contractors, with reasonable access to the
Contaminated Parcels to satisfy Seller's obligations and to undertake any
work required to remediate the Contaminated Parcels, which right of
access shall be exercised by Seller, its experts and contractors in a
commercially reasonable manner.
(d) Seller shall have satisfied its obligations hereunder to
clean up or remediate each of the Contaminated Parcels on the earlier
of when the Department of Environmental Protection ("DEP"), its designee
or any successor agency issues a letter stating that no further action
is required to clean up or remediate that particular Contaminated Parcel,
or Buyer's environmental expert, MDM, issues a letter stating that Seller
has cleaned up or remediated that particular Contaminated Parcel in
accordance with all requirements of the appropriate governmental
authorities. Buyer and Seller acknowledge and agree that each
Contaminated Parcel shall be treated independently under this provision
and that Seller may satisfy its obligations hereunder as to each
Contaminated Parcel at different times. As provided in Paragraph 2 of
this Third Modification, once Seller has satisfied its remediation or
clean up obligations as to the Retained Parcel, Seller shall convey the
same to Buyer by warranty deed without further consideration.
(e) Seller agrees to indemnify and hold Buyer harmless from
any and all claims, losses, liabilities, damages, expenses and costs
including without limitation attorney fees and costs incurred by Buyer
arising out of the environmental issues related to the Contaminated
Parcels as described in the Environmental Report, which existed prior to
Closing or arising out of the remedial action undertaken by Seller on the
Contaminated Parcels in connection with its performance of its
obligations under this Paragraph 7.
(f) This Paragraph 7 shall survive closing.
9. Signatures on this Third Modification received by telecopy shall
be deemed original signatures for all purposes regarding this Third
Modification.
10. Except as specifically modified by this Third Modification, the
Agreement, the First Modification and the Second Modification shall
remain in full force and effect, in accordance with their respective
terms.
11.Notwithstanding the date that this Third Modification may be
executed by Buyer and Seller, Buyer and Seller agree that the effective
date of this Third Modification is February 23, 1999.
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<PAGE>
IN WITNESS WHEREOF, Buyer and Seller have executed this Third
Modification or caused it to be executed by their duly authorized
representatives, as an instrument under seal, effective as of the date
first above written.
WITNESSES: BUYER:
/s/ Val Kancors /s/ Alton D. Rogers
/s/ Buddy Birge ---------------------
SELLER:
/s/ Thomas E. Oakley /s/ Wade H. Walter
/s/ Robert Osburn -----------------------
Date: 2/23/99
SELLER:
/s/ Jill S. Lust
/s/ Frances Massey CONSOLIDATED-TOMOKA LAND CO.
a Florida corporation
By: /s/ Patricia Lagoni
Vice President
------------------------
Date: 2/23/99
66
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CONSOLIDATED-TOMOKA LAND CO.
ANNUAL REPORT
1998
67
<PAGE>
CONSOLIDATED-TOMOKA LAND CO.
MISSION - To originate optimum development plans and establish development
rights for the company's land holdings generating increased land
values recognized in sales to site specific developers.
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS COUNSEL
<S> <C> <C>
John C. Adams, Jr.(2) Bob D. Allen Holland & Knight LLP
Executive Vice President of Chairman of the Board, 200 South Orange Ave.,#2600
Poe and Brown, Inc. (an insurance President, and Chief Orlando, FL 32801
agency) Executive Officer
Bob D. Allen(1) Bruce W. Teeters
Chairman of the Board, President and Senior vice President-Finance REGISTRAR AND STOCK TRANSFER
Chief Executive Officer of the Company and Treasurer
Registrar and Transfer Company
10 Commerce Drive
Jack H. Chambers(3) Robert F. Apgar Cranford, New Jersey 07016-3752
Retired Vice President-General Counsel
James P. Gorter
Chairman of the Board of Baker Joseph Benedict III
Fentress & Company; limited partner Vice President-Government Relations
of Goldman, Sachs & Co.
Patricia Lagoni AUDITORS
William O. E. Henry(3) Vice President-Administration
Praciting attorney and partner and Corporate Secretary Arthur Andersen LLP
in law firm of Holland & Knight 101 East Kennedy Boulevard
Baker Fentress & Company; limited Linda Crisp Tampa, Florida 33602
partner of Goldman, Sachs & Co. Assistant Secretary
William O. E. Henry(3)
Practicing attorney and partner Gary Moothart MAILING ADDRESS
in law firm of Holland & Knight LLP, Controller
counsel for the Company Consolidated-Tomoka Land Co.
Post Office Box 10809
Robert F. Lloyd (2) INDIGO DEVELOPMENT INC. Daytona Beach, Florida 32120-0809
Chairman of the Board and William H. McMunn
Chief Executive Officer of President
Lloyd Buick-Cadillac Inc.
John H. Pace, Jr.(3)
Chairman of Cardinal Investment
Company (investor in securities
and real estate)
David D. Peterson(1)
Chairman of the Board of the Company;
Retired President and Chief Executive
Officer of Baker Fentress & Company (1) Member of the Executive Committee
(2) Member of the Compensation and
Bruce W. Teeters Stock Option Committee
Senior Vice President-Finance (3) Member of the Audit Committee
and Treasurer of the Company
</TABLE>
68
<PAGE>
TO OUR SHAREHOLDERS
Several significant events affecting Company operations occurred
during 1998. Potentially, the most significant event was an agreement
to sell Lake Placid Groves, the Company's citrus division. An
improved outlook for the citrus business due to the expectation
of lower worldwide supply precipitated an unsolicited offer
to purchase Lake Placid Groves. Long recognized as a high quality
grower and packer of fresh citrus fruit for distribution by
supermarkets primarily located in the eastern half of the United
States and Canada, Lake Placid Groves has been a major business
segment of the Company. An agreement to sell Lake Placid Groves was
signed on December 28, 1998, the inspection period allowed under terms
of the agreement has ended, and a substantial non-refundable deposit
has been received. The sales price of $30,945,000 would result in a
gain, net of income taxes of approximately $8,000,000. Both the sale
proceeds and the gain are subject to post-closing adjustments. The
sale is scheduled to close on or about April 8, 1999.
Due to the pending citrus business sale, citrus operations
are reported as discontinued operations in the Company's 1998
financial statements presented in this annual report. Citrus
operations produced improved results in 1998 as income before income
taxes rose to $1,930,247 compared to $1,092,217 for 1997. Real Estate
operations generated only minimal results in 1998 due primarily to the
delayed closing of several large transactions. Net income from
continuing operations totaled $100,219 or $.01 per share for 1998
compared to net income from continuing operations of $3,330,151 or
$.53 per share in 1997. Results for 1997 were significantly impacted
by the sale of approximately 11,000 acres to the St. Johns River Water
Management District for a gain of approximately $7.7 million. Net
income for 1998 was $1,304,114 or $.20 per share compared to
$4,011,367 or $.64 per share in the prior year.
A number of milestones were reached during the year at
LPGA International, the Company's major real estate activity. A new
residential area was opened in the first quarter offering a new
housing product, which was well received by the market. The project's
second championship golf course, designed by Arthur Hills, opened for
play in October, and the course has received very good reviews from
club members and public customers. Efforts to attract a destination
resort hotel continue and a permanent clubhouse will be constructed
during 1999.
One of the real estate transactions delayed beyond year-end
was the Daytona Auto Mall. An unresolved contingency was a stormwater
permit which has since been obtained in early February, 1999. This
60-acre project incorporates a new design for the attractive
presentation of auto dealerships at a location, which would produce
very high traffic and afford a higher sales volume than traditional
69
<PAGE>
sites. The success of this project, which would be the first major
development at the LPGA Boulevard interchange on I-95 around which
the Company owns most of the land, should create an interest in
additional development.
Wetland determinations were obtained on four industrial sites
during 1998. These sites, along with an industrial site fully pre-
permitted in 1997, will provide potential users an expedited
development process due to the permitting already attained. The
pre-permitting process improves the marketability of Company land.
As the largest land owner in the Daytona Beach area, supporting
economic development efforts to attract new businesses that will
create quality jobs is always given a high priority.
During 1998, dividends paid were $.70 per share which
represented an increase of 8 percent over the $.65 paid in 1997.
The Company's development activity usually starts with its
undeveloped land holdings. The Company builds roads and installs
utility lines to the proximity of parcels in the path of development
and then sells sites to developers of shopping centers, office
buildings, etc. Since Daytona Beach is blocked from growth to
the North, South and East, it can only grow to the West where the
Company's land is located. Hence, the opportunity to participate
in the future growth of the area will continue for several decades
to come.
Bob D. Allen
Chairman, President and
Chief Executive Officer
70
<PAGE>
SHAREHOLDERS' REPORT
LAND HOLDINGS
Land holdings of Consolidated-Tomoka Land Co. (the "Company")
and its affiliates, all of which are located in Florida, include:
approximately 15,550 acres in the Daytona Beach area of Volusia
County; approximately 4,080 acres in Highlands County, near Lake
Placid; commercial/retail sites in Volusia County; and full
or fractional subsurface oil, gas, and mineral interests in
approximately 537,000 "surface acres" in 20 Florida counties.
The conversion and subsequent utilization of these assets provides
the base of the Company's operations.
The remaining holdings of approximately 15,550 acres in
Volusia County include approximately 14,700 acres within the
city limits of Daytona Beach, approximately 800 acres within the
unincorporated area of Volusia County, and small acreages in
the Cities of Ormond Beach and Port Orange. Of the 14,700 acres
inside the city limits of Daytona Beach, approximately 3,600
acres have received development approval by governmental agencies.
The 3,600 acres plus approximately 730 acres owned by the City
of Daytona Beach, 15 acres owned by Indigo Community Development
District, and 165 acres sold to others for development are the
site of a long-term, mixed-use development known as "LPGA
International," which includes the national headquarters of the
Ladies Professional Golf Association along with two "Signature"
golf courses and a residential community, a maintenance facility,
an interim clubhouse, and main entrance roads to serve the LPGA
community. Construction of several homes around the first
golf course, on 70 acres of land sold to a residential developer,
began in 1995 with the first residences completed in early 1996.
The LPGA completed construction of its headquarters in April 1996.
The lands not currently being developed, including those on which development
approvals have been received, are involved in an active
forestry operation. Except for a 15-acre parcel at the Interstate
95 and Taylor Road interchange in the Port Orange area south of
Daytona Beach, the tract straddles Interstate 95 for 6-1/2 miles
between International Speedway Boulevard (U. S. Highway 92) and
State Road 40, with approximately 13,800 acres west and 1,750 east
of the interstate.
Subsidiaries of the Company are holders of the developed
Volusia County properties and are involved in the development
of additional lands zoned for residential, commercial, or
industrial purposes.
In Highlands County, located in south central Florida along
U.S. Highway 27, the Company utilizes approximately 3,900 acres in
its citrus operation, which is currently under contract for sale.
71
<PAGE>
The citrus groves and most of the other Highlands County lands are
near Lake Placid, Florida, which is about 75 miles east of Sarasota
and 150 miles northwest of Miami. The remaining lands, approximately
180 acres, are mostly in a subsidiary's inventory of residential or
industrial lands.
The Company's oil, gas, and mineral interests, which are equivalent
to full rights of 300,000 acres, were acquired by retaining
subsurface rights when acreage was sold many years ago.
CITRUS
Under the name "Lake Placid Groves," the Citrus Division of
Consolidated-Tomoka Land Co. has since the 1920's grown and
packed fresh whole citrus fruit. The brand names "Lake Placid"
and "Winding Waters" have been used in marketing fruit packed in
the Company's fresh fruit packing plant, and fruit not suitable
for packing has been shipped to the Citrus World (now Florida's
Natural) cooperative in Lake Wales, Florida, where it is processed
into juice and juice concentrate.
The cooperative is owned by the Company and twelve other
organizations; and the Citrus Division has shared in net proceeds
from processed products according to the amount and content of
fruit delivered to the cooperative's plant.
In December of 1998, the Company entered into a contract for
sale of the citrus operations. The sale does not include sale of
the Company's interest in the cooperative. The sale is scheduled
to close on or about April 8, 1999.
REAL ESTATE OPERATIONS
One of the Company's major achievements was the relocation of
the Ladies Professional Golf Association ("LPGA") to Daytona
Beach in 1989 with planned construction of its national
headquarters on Company lands. The LPGA signed a four-party
agreement with the Company, Indigo Group Ltd., a wholly owned
subsidiary ("IG LTD"), and the City of Daytona Beach, which
includes development of a mixed-use community on approximately
3,800 acres of land. Development plans were approved by the
governmental agencies in 1993. The City of Daytona Beach
completed construction of a Rees Jones designed "Signature"
golf course in 1994, and the Company completed construction of
an Arthur Hills designed course in 1998. The Rees Jones course
has been ranked by Golf Magazine as one of the ten best municipal
golf courses in the country. On September 1, 1997, responsibility
for the operations of the LPGA International golf courses was
transferred from the City of Daytona Beach to a wholly owned
subsidiary of Consolidated-Tomoka. The agreement with the City of
72
<PAGE>
Daytona Beach provided for the second golf course and a clubhouse to
be constructed by the Company in return for a long-term lease from the
City on both golf courses. The clubhouse will be constructed in 1999.
The Titleholders Championship Tournament, held last year at LPGA
International and nationally televised, was sponsored by Mercury, a
division of Ford Motor Company, and known as the Mercury Titleholders
Championship, with Budget Rent A Car as secondary sponsor. The
tournament will again be held at LPGA May 6-9, 1999, with the same
sponsorship.
Significant to the City of Daytona Beach and to development of the
Company's lands has been the dramatically landscaped interchange at
Interstate 95 and LPGA Boulevard which opened in early 1996, providing
a new gateway to the LPGA International development and other Company
land.
From October 1990 until December 1993, IG LTD centered its operations
on residential community development, construction, and sales. In
December of 1993, IG LTD discontinued its home building and sales
activities in two communities under lot marketing and sales
arrangements. Residential lots owned by IG LTD at December 31, 1998
are:
61 lots in Riverwood Plantation, a community of 180 acres in Port
Orange, Florida.
4 lots at the 200-acre Indigo Lakes development in Daytona Beach.
38 lots at the 180-acre Tomoka Heights development in Highlands
County, Florida. IG LTD is developing this community, located
adjacent to Lake Henry consists of single-family and duplex units now
selling in the $89,000 to $135,000 price range. The development
features controlled access and has appeal for active retired couples.
After the sale of the Consolidated Center and the Palm Coast office
building in 1997 and the 1998 sale of the Company's 50% interest in
the shopping center in Marion County, Florida, rental property is
limited to a three-story office building in downtown Daytona Beach,
adjacent to the Consolidated Center. The office building, containing
17,000 square feet, is under a lease/purchase agreement, and is
considered a financing lease. Terms of the sale of the Consolidated
Center included a commitment by the Company to lease the space now
occupied as corporate offices in the building for a period of at
least three years from December 15, 1997.
Other leasing activities of the Company include ground leases for
billboards, leases of communication tower sites, and a hunting lease
covering approximately 8,300 acres.
Another source of income is from subsurface interests which are leased
for mineral exploration, as described under "Land Holdings." At
December 31, 1998, oil and gas leases were in effect covering a total
of 28,821 surface acres in Lee and Hendry Counties, Florida. At
December 31, 1998, there were three producing oil wells on the
Company's interests. Volume produced in 1998 from these wells was
73
<PAGE>
138,664 barrels, compared with 125,356 barrels in 1997; however,
because of lower oil prices, royalty income declined from $92,577
to $35,455. Oil lease income and oil royalty income have in the past
been much more significant sources of income for the Company than in
recent years. The Company's current policy is to grant no releases of
its reserved mineral rights in oil-producing counties unless required
to do so through contractual obligations; however, releases of surface
entry rights might be sold upon request of a surface owner who
requires such a release for financing or development purposes; and
rights in non-oil-producing counties will be sold as opportunities to
do so arise. As Florida develops, such requests will no doubt
increase. Sales and releases of surface entry rights in 1998 produced
revenues of $132,000.
Income from sales of forest products varies considerably from year to
year depending on economic conditions and weather. Geographic
location of the timber tract is excellent. In addition to access by
major highways (Interstate 95, State Road 40, and International
Speedway Boulevard), the internal road system for forestry purposes is
good. Wildfires which ravaged Florida in 1998 burned approximately
9,000 acres of the Company's timberland. This and the sale of the
approximately 11,000-acre parcel to St. Johns River Water Management
District in 1997 will reduce the Company's potential for future income
from sales of forest products.
74
<PAGE>
Five-Year Financial Highlights
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Revenues:
Real Estate 6,388 5,412 7,642 7,743 16,528
Profit on Sales of
Undeveloped Real Estate
Interest 132 7,725 385 4,718 1,400
Interest and Other Income 785 1,369 6,123 2,404 2,624
------------------------------------------
TOTAL 7,305 14,506 14,150 14,865 20,552
------------------------------------------
Real Estate Operating Costs
and Expenses 4,867 3,408 4,170 4,854 6,891
General and Administrative
Expenses 2,319 5,932 3,386 3,484 3,478
Income Taxes 19 1,836 2,493 2,499 3,746
------------------------------------------
Income from Continuing Operations 100 3,330 4,101 4,028 6,437
Income (Loss) from Discontinued
Operations (net of tax) 1,204 681 2,502 392 ( 82)
------------------------------------------
Net Income 1,304 4,011 6,603 4,420 6,355
==========================================
Basic Earnings per Share:
Income from Continuing
Operations 0.01 0.53 0.65 0.64 1.03
Net Income 0.20 0.64 1.05 0.71 1.01
Diluted Earning Per Share:
Income from Continuing
Operations 0.01 0.53 0.65 0.63 1.03
Net Income 0.20 0.64 1.04 0.70 1.01
Dividends Paid Per Share 0.70 0.65 0.55 0.45 0.35
Summary of Financial Position:
Total Assets 50,101 58,026 59,454 59,402 61,253
Shareholders' Equity 34,698 37,854 35,791 32,633 31,030
</TABLE>
* Restated for Discontinued Operations - See Note 2 to Consolidated
Financial Statements. Discontinued operations in 1994 include a
loss of $135,611 from Discontinued Resort Operations.
75
<PAGE>
REPORT TO INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of Consolidated-Tomoka Land Co.
We have audited the accompanying consolidated balance sheets of
Consolidated-Tomoka Land Co. and subsidiaries as of December 31, 1998 and 1997,
and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1998. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Consolidated-Tomoka Land Co. and subsidiaries as
of December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Tampa, Florida
February 3, 1999
76
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTIONS>
Calendar Year
------------------------------------------
1998 1997 1996
------------ ---------- ---------
<S> <C> <C> <C>
Income
Real Estate Operations:
Sales and Other Income 6,388,289 5,411,787 7,641,898
Costs and Other Expenses ( 4,866,888) ( 3,408,109) ( 4,169,717)
---------- ---------- ----------
1,521,401 2,003,678 3,472,181
---------- ---------- ----------
Profit On Sales of Undeveloped
Real Estate Interests 132,033 7,725,007 384,756
---------- ---------- ----------
Interest and Other Income 784,471 1,369,086 6,123,025
---------- ---------- ----------
2,437,905 11,097,771 9,979,962
General and Administrative Expenses ( 2,318,730) ( 5,932,023) ( 3,386,296)
---------- ---------- ----------
Income From Continuing Operations Before
Income Taxes 119,175 5,165,748 6,593,666
Income Taxes ( 18,956) ( 1,835,597) ( 2,493,088)
---------- ---------- ----------
Net Income From Continuing Operations 100,219 3,330,151 4,100,578
Income From Discontinued Citrus Operations,
Net of Tax (Note 2) 1,203,895 681,216 2,501,980
---------- ---------- ----------
Net Income 1,304,114 4,011,367 6,602,558
========== ========== ==========
Per Share Information:
Basic
Income From Continuing Operations $ 0.01 $ 0.53 $ 0.65
Income From Discontinued Citrus Operations $ 0.19 $ 0.11 $ 0.40
---------- ---------- ----------
Net Income $ 0.20 $ 0.64 $ 1.05
========== ========== ==========
Diluted
Income From Continuing Operations $ 0.01 $ 0.53 $ 0.65
Income From Discontinued Citrus Operations $ 0.19 $ 0.11 $ 0.39
---------- ----------- ----------
Net Income $ 0.20 $ 0.64 $ 1.04
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
77
<PAGE>
Consolidated Balance Sheets
<TABLE> December 31
<CAPTION> -----------------------------
1998 1997
----------- -------------
<S> <C> <C>
Assets
Cash and Cash Equivalents $ 283,200 $ 9,385,327
Investment Securities (Note 3) 1,191,390 1,026,679
Notes Receivable (Note 5) 9,115,868 10,018,350
Real Estate Held for Development and Sale (Note 6) 13,597,967 13,819,068
Deferred Income Taxes (Note 4) 1,826,761 1,732,278
Refundable Income Taxes (Note 4) 285,199 --
Net Investment in Direct Financing Lease (Note 7) 542,123 625,256
Other Assets 1,111,871 995,112
Net Assets of Discontinued Citrus Operations(Notes 2 & 14) 14,792,453 15,281,497
---------- ----------
42,746,832 52,883,567
---------- ----------
Property, Plant and Equipment
Land, Timber and Subsurface Interests 1,576,976 1,412,498
Income Properties -- 3,527,515
Other Buildings, Equipment and Land Improvements 6,632,686 1,956,469
---------- ----------
Total Property, Plant and Equipment 8,209,662 6,896,482
Less Accumulated Depreciation and Amortization ( 855,043) ( 1,754,444)
---------- ----------
Net Property, Plant and Equipment 7,354,619 5,142,038
---------- ----------
Total Assets $50,101,451 $58,025,605
========== ==========
Liabilities
Accounts Payable $ 292,646 $ 710,704
Notes Payable (Notes 8 and 14) 10,742,063 13,497,523
Accrued Liabilities 4,368,464 3,853,403
Income Taxes Payable (Note 4) -- 2,109,528
---------- ----------
Total Liabilities 15,403,173 20,171,158
---------- ----------
Shareholders' Equity
Preferred Stock - 50,000 Shares Authorized,
$100 Par Value; None Issued - -
Common Stock - 10,000,000 Shares Authorized,
$1 Par Value; 6,371,833 Shares Issued and
Outstanding December 31, 1998 and 1997 6,371,833 6,371,833
Additional Paid-In Capital 3,793,066 3,793,066
Retained Earnings 24,533,379 27,689,548
---------- ----------
Total Shareholders' Equity 34,698,278 37,854,447
---------- ----------
Total Liabilities and Shareholders' Equity $50,101,451 $58,025,605
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements
78
<PAGE>
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings Total
---------- ----------- ---------- ----------
<S> <C> <C> ,C> <C>
Balance, December 31, 1995 $6,261,272 $1,782,105 $24,589,150 $32,632,527
Net Income - - 6,602,558 6,602,558
Cash Dividends ($.55 per share) - - ( 3,443,700) ( 3,443,700)
--------- --------- ---------- ----------
Balance, December 31, 1996 6,261,272 1,782,105 27,748,008 35,791,385
Net Income - - 4,011,367 4,011,367
Cash Dividends ($.65 per share) - - ( 4,069,827) ( 4,069,827)
Issuance of 110,561 Shares
Pursuant to Exercise of Stock
Options (Note 11) 110,561 1,717,437 - 1,827,998
Tax Benefit of Stock Options
Exercised (Note 11) - 293,524 - 293,524
--------- --------- ---------- ----------
Balance, December 31, 1997 6,371,833 3,793,066 27,689,548 37,854,447
Net Income -- -- 1,304,114 1,304,114
Cash Dividends ($.70 per share) -- -- ( 4,460,283) ( 4,460,283)
--------- --------- ---------- ----------
Balance, December 31, 1998 $6,371,833 $3,793,066 $24,533,379 $34,698,278
========= ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
79
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Calendar Year
-----------------------------------------
1998 1997 1996
----------- ---------- ------------
<S> <C> <C> <C>
Cash Flow from Operating Activities
Net Income $ 1,304,114 $ 4,011,367 $ 6,602,558
Adjustments to Reconcile Net Income to Net
Cash (Used In) Provided by Operating
Activities:
Discontinued Citrus Operations ( 1,203,895) ( 681,216) ( 2,501,980)
Depreciation and Amortization 186,886 448,272 609,082
Loss(Gain)on Sale of Property, Plant
and Equipment 114,973 ( 260,490) ( 838,461)
Compensation Expense on Exercise of
Stock Options -- 1,822,992 --
Decrease (Increase)in Assets
Notes Receivable 902,482 4,751,931 ( 112,667)
Real Estate Held for Development 221,101 680,427 ( 698,018)
Other Assets ( 116,759)( 507,145) 306,146
(Decrease)Increase in Liabilities
Accounts Payable ( 418,058) 248,156 ( 460,000)
Accrued Liabilities 515,061 201,896 918,713
Deferred Income Taxes (Note 4) ( 94,483) ( 806,774) 140,942
Income Taxes Payable and Refundable (Note 4) ( 2,394,727) 1,209,058 ( 929,697)
---------- --------- ----------
Net Cash (Used In) Provided by
Operating Activities ( 983,305) 11,118,474 3,036,618
---------- ---------- ----------
Cash Flow from Investing Activities
Acquisition of Property, Plant and Equipment ( 4,818,717) (1,941,415) ( 203,936)
Net Increase (Decrease) in Investment
Securities (Note 3) ( 164,711) 369,736 ( 756,072)
Direct Financing Lease (Note 7) 83,133 85,734 81,540
Proceeds from Sale of Property, Plant and
Equipment 2,304,277 5,617,082 1,403,872
Cash From Discontinued Citrus Operations (Note 2) 1,692,939 889,914 3,446,257
---------- ---------- ---------
Net Cash (Used In) Provided by
Investing Activities ( 903,079) 5,021,051 3,971,661
---------- ---------- ----------
</TABLE>
80
<PAGE>
Consolidated Statement of Cash Flow
continued
<TABLE> Calendar Year
<CAPTION> ---------------------------------------
1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
Cash Flow from Financing Activities
Proceeds from Notes Payable (Note 8) 5,577,000 7,760,000 6,800,000
Payments on Notes Payable (Note 8) ( 8,332,460)(12,210,248) ( 9,773,527)
Cash Proceeds from Exercise of Stock Options -- 5,006 --
Dividends Paid ( 4,460,283)( 4,069,827) (3,443,700)
---------- ---------- ----------
Net Cash Used in Financing Activities ( 7,215,743)( 8,515,069) (6,417,227)
---------- ---------- ----------
Net (Decrease) Increase in Cash and
Cash Equivalents ( 9,102,127) 7,624,456 591,052
Cash and Cash Equivalents, Beginning of Year 9,385,327 1,760,871 1,169,819
---------- ---------- ----------
Cash and Cash Equivalents, End of Year $ 283,200 $ 9,385,327 $ 1,760,871
========== ========== ==========
</TABLE>
Supplement Disclosure of Noncash Operating Activities:
In connection with the sale of real estate, the Company received,
as consideration, mortgage notes receivable of $628,343, $12,900,
and $1,143,607, for the years 1998, 1997 and 1996, respectively.
In connection with the sale of property, plant and equipment, the Company
received as consideration, mortgage notes receivable of
$3,720,000 for the year 1996.
In connection with the exercise of stock options, the Company recorded
compensation expense and income tax benefit of $1,822,992 and
$293,524, respectively for the year 1997.
Total interest paid was $1,040,737, $1,507,246 and $1,402,767 for the
years 1998, 1997 and 1996, respectively.
Total income taxes paid were $3,069,525, $1,780,000 and $4,594,853 for
the years 1998, 1997, and 1996, respectively.
The accompanying notes are an integral part of these consolidated statements.
81
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Consolidated- Tomoka Land Co. and its wholly owned
subsidiaries: Indigo Group Inc., Indigo Group Ltd., Indigo
International Inc., and Indigo Development Inc.
(collectively, the Company). All significant intercompany
accounts and transactions have been eliminated in
consolidation.
Nature of Operations
The Company is primarily engaged, through its wholly owned
subsidiaries, in the real estate industry. Real estate
operations, which are primarily commercial in nature, also
include residential, golf operations, income properties and
forestry operations. These operations are predominantly
located in Volusia and Highlands Counties in Florida. From
time to time the Company sells unimproved real estate
considered surplus to its operating needs. The latter
function is not considered part of the Company's ordinary
operations. See Note 2, "Discontinued Citrus Operations"
regarding citrus activities.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
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.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased
with a maturity of three months or less to be cash
equivalents. Due to the short maturity period of the cash
equivalents, the carrying amount of these instruments
approximates their fair values.
Real Estate Held for Development and Sale
The carrying value of real estate held for development and
sale includes the initial acquisition costs of land,
improvements thereto and other costs incidental to the
acquisition or development of land. These costs are
82
<PAGE>
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUTNING POLICIES (CONTINUED
allocated to properties on a relative sales value basis and
are charged to costs of sales as specific properties are
sold. Approximately $330,273, $359,407 and $261,068 of
interest and $321,067, $465,506, and $439,706 of
of property taxes were capitalized during 1998, 1997, and
1996, respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less
accumulated depreciation and amortization. Such properties
are depreciated on a straight-line basis over their estimated
useful lives. Renewals and betterments are capitalized to
property accounts. The cost of maintenance and repairs is
expensed as incurred. The cost of property retired or
otherwise disposed of, and the related accumulated
depreciation or amortization, are removed from the accounts,
and any resulting gain or loss is taken into income.
The amount of depreciation and amortization taken for the
years 1998, 1997, and 1996, was $186,886, $448,272, and
$609,082, respectively.
The range of estimated useful lives for property, plant and
equipment is as follows:
Citrus Trees 20-40 years
Citrus Buildings and Roads 10-30 Years
Citrus Irrigation Equipment 5-20 Years
Citrus Other Equipment 3-30 Years
Income Properties 3-30 Years
Other Buildings 10-30 Years
Other Equipment 3-30 Years
Land Improvements 10-20 years
Long-Lives Assets
The company has reviewed the recoverability of long-lived
assets, including real estate held for development and sale
and certain identifiable intangibles to be held and used for
impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. There has been no material impairment of long-
lived assets reflected in the consolidated financial
statements for the three years ended December 31, 1998.
83
<PAGE>
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Sale of Real Estate
The profit on sales of real estate is accounted for in
accordance with the provisions of the Statement of Financial
Accounting Standards No. 66, "Accounting for Sales of Real
Estate (SFAS 66)." The Company recognizes revenue from the
sale of real estate at the time the sale is consummated
unless the property is sold on a deferred payment plan and
the initial payment does not meet criteria established under
SFAS 66. No income was deferred for the three years in the
period ended December 31, 1998.
Rental income from income properties is recognized ratably
over the periods of the related property leases.
Unfunded Deferred Compensation Plans
The Company maintains two unfunded deferred compensation
plans. One plan is established for the Board of Directors of
the Company, with the second plan established for the
officers and key employees of the Company. Under the plans,
any member of the Board of Directors, officer or key employee
may elect to defer all or a portion of his compensation. The
amount of deferred compensation shall increase annually by an
amount which is equal to interest on the deferred
compensation at the rate of return earned by the Company on
its short-term investments. Compensation credited to a
participant shall be deferred until such participant ceases
to be a member of the board of directors, officer or key
employee, at which time the amounts accumulated shall be
distributed in the manner elected. The plans are
nonqualified plans as defined by the Internal Revenue
Service. The amount of deferred compensation
reflected in accrued liabilities on the balance sheet at
December 31, 1998 and 1997 was $3,155,307 and $2,677,007,
respectively.
Pensions
The Company has a funded, non-contributory defined benefit
pension plan covering all eligible full-time employees. The
Company's method of funding and accounting for pension costs
is to fund and accrue all normal costs plus an amount
necessary to amortize past service cost over a period of 30
years.
Concentration of Credit Risk
Financial instruments which potentially subject the Company
to concentrations of credit risk consist principally of cash
and cash equivalents, investment securities, accounts
receivables and notes receivable.
84
<PAGE>
NOTE 1 SUMMARY OF SIGNIFICATN ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments
The carrying amounts of the Company's financial assets and
liabilities, including cash and cash equivalents, accounts
receivable and accounts payable at December 31, 1998 and
1997, approximate fair value because of the short maturity of
these instruments. The carrying amount of the Company's
notes receivable and notes payable approximates fair value at
December 31, 1998 and 1997, since the notes are at floating
rates or fixed rates which approximate current market rates
for notes with similar risks and maturities.
Comprehensive Income
On January 1, 1998, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting
comprehensive Income" (SFAS 130). SFAS 130 establishes new
standards for reporting and display of comprehensive income
and its components. Comprehensive income, as defined,
includes all changes in equity (net assets) during a period
from non-owner sources. Adoption of this Statement had no
impact on the Company's consolidated financial statements.
Segment Information and Disclosure
SFAS No. 131, "Disclosure About Segments of an Enterprise and
Related Information, (SFAS 131) requires companies to report
summarized financial information concerning reportable
segments. The Company has not presented this information, as
only one reportable segment remains due to the pending sale
of the citrus operations and its presentation as
"Discontinued Citrus Operations" in the consolidated
financial statements. (See Note 2 "Discontinued Citrus
Operations".)
NOTE 2 DISCONTINUED CITRUS OPERATIONS
On December 28, 1998, the Company entered into an agreement
for the sale of its citrus operations. The transaction is
expected to close on or about April 8, 1999 at a price
approximating $30,945,000. The results of the citrus
operations have been reported separately as discontinued
operations in the Consolidated Statements of Income. Prior
year consolidated financial statements have been restated to
present citrus operations as discontinued operations.
The assets and liabilities associated with the citrus
operations as of December 31, 1998 and 1997 have been
presented separately on the consolidated balance sheets as
"Net Assets of Discontinued Citrus Operations." Summary
financial information of the citrus operations is as follows:
85
<PAGE>
NOTE 2 DISCONTINUED CITRUS OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1998 1997 1996
<S> <C> <C> <C>
Revenues from Discontinued
Citrus Operations $11,726,251 $ 9,444,783 $13,862,864
========== ========== ==========
Income from Discontinued Citrus
Operations Before Tax $ 1,930,247 $ 1,092,217 $ 4,011,512
Income Tax Expense from Discontinued
Citrus Operations ( 726,352) ( 411,001) (1,509,532)
--------- --------- ---------
Net Income from Discontinued
Citrus Operations $ 1,203,895 $ 681,216 $2,501,980
========= ======== =========
</TABLE>
Following is a summary of significant accounting policies
related to the citrus operations.
The Company harvests and sells both fresh and to-be-processed
citrus from its bearing groves, all of which are located in
Highlands County, Florida. Fresh fruit sales are made by the
Company through the Company-owned packing plant to wholesale
produce distributors and retail grocery chains
primarily in the Eastern and Midwestern regions of the United
States and Canada. Revenues and related costs of sales are
recognized at time of shipment. The to-be-processed
fruit is sent to Citrus World, Inc.(Citrus World), an
agricultural cooperative owned by the Company and twelve
other growers. The cooperative processes the fruit and
markets it under several names on a regional and national
basis. Citrus World pools its own fruit with the fruit
purchased from the Company and other citrus growers,
processes the pooled fruit and sells the products produced.
Each participant in the pool, including Citrus World, shares
ratably in the proceeds from the sale of products, net of
Citrus World's actual processing and marketing costs, plus a
per-unit handling fee. Citrus World makes periodic payments
to all participants based on their pro rata share of net
sales proceeds and makes final payment after all the products
in the pool have been sold. The Company records estimated
revenues at the time of delivery of the fruit to Citrus
86
<PAGE>
NOTE 2 DISCONTINUED CITRUS OPERATIONS (CONTINUED)
World and finalizes revenues after all the products in the
pool have been sold. During the years 1998, 1997, 1996, the
Company's estimated pro rata share of said net sales proceeds
under the above pooling agreement amounted to $4,321,531,
$3,107,919, and $5,203,787, respectively.
Direct and allocated indirect costs incurred in connection
with the production of crops are capitalized into cost of
fruit on trees. As the crop is harvested and sold, the
related costs are charged to production expense, pro-rata
based on the boxes harvested and sold to the estimated total
boxes expected to be harvested and sold. The cost of fruit
on trees is carried at the lower of cost or market.
NOTE 3 INVESTMENT SECURITIES
The Company Accounts for Investment Securities under
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities (SFAS 115)". This standard requires
classification of the investment portfolio into three
categories: held to maturity, trading and available for sale.
The Company classifies as held to maturity those securities
for which the Company has the intent and ability to hold
through their stated maturity date. Investment securities
which are classified as held to maturity are carried at cost,
adjusted for amortization of premiums and accretion of
discounts. Realized gains and losses are determined using
the specific identification method. Investment securities
as of December 31, 1998 and 1997, all of which are classified
as held to maturity, are as follows:
87
<PAGE>
NOTE 3 INVESTMENT SECURITIES(CONTINUED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Debt Securities Issued by States
and Political Subdivisions of States $1,134,018 $ 951,268
Mortgage-Backed Securities 57,372 75,411
--------- ---------
$1,191,390 $1,026,679
========= =========
The contractual maturities of these securities are as follows:
Maturity Date Amount
---------------- -----------
Within 1 year $ 254,403
1-5 Years 278,515
6-10 Years 169,271
After 10 Years 489,201
---------
$1,191,390
=========
</TABLE>
NOTE 4 INCOME TAXES
The Company accounts for income taxes under SFAS No. 109,
"Accounting for Income Taxes."
The provision for income taxes is summarized as follows:
<TABLE>
<CAPITON>
1998 1997 1996
---- ---- ----
Current Deferred Current Deferred Current Deferred
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal $ 134,271 $( 122,538) $2,354,615 $( 803,103) $2,077,359 $ 53,901
State ( 20,832) 28,055 287,756 ( 3,671) 274,787 87,041
--------- -------- --------- --------- --------- ---------
Total $ 113,439 $( 94,483) $2,642,371 $ (806,774) $2,352,146 $140,942
========= ======== ========= ========= ========= =========
</TABLE>
88
<PAGE>
NOTE 4 INCOME TAXES (CONTINUED)
Deferred income taxes have been provided to reflect temporary
differences that represent the cumulative difference between
taxable or deductible amounts recorded in the financial
statements and in the tax returns. The sources of these
differences and the related provision (credit) and
deferred income tax assets (liabilities) are summarized as
follows:
<TABLE>
Provision (Credit) Deferred Taxes
------------------ ---------------
1998 1997 1996 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Depreciation $ 66,778 $ 117,562 $( 117,475) $( 205,742) $( 138,964)
Sales of Real
Estate ( 103,981) (1,278,181) 392,438 416,004 312,023
Deferred
Compensation ( 179,984) (197,463) ( 181,590) 1,187,342 1,007,358
Basis
Difference in
Joint Venture 79,707 81,454 ( 219,858) 1,166,957 1,246,664
Revolving Fund
Certificates ( 13,798) ( 58,112) ( 24,985) 352,043 338,245
Charitable
Contributions
Carryforward 700,043 ( 1,961,789) 391,210 2,415,681 3,115,724
Other ( 34,418) 115,093 ( 258,551) 294,157 259,739
Less-Valuation
Allowance ( 608,830) 2,374,662 159,753 (3,799,681) (4,408,511)
--------- --------- --------- --------- ---------
$( 94,483) $( 806,774) $ 140,942 $ 1,826,761 $ 1,732,278
========= ======== ========= ========== =========
</TABLE>
89
<PAGE>
NOTE 4 INCOME TAXES (CONTINUED)
Following is a reconciliation of the income tax computed at
the federal statutory rate of 34 percent.
<TABLE>
<CAPTION>
Calendar Year
-------- ----
1998 1997 1996
---- ---- -----
<S> <C> <C> <C>
Income Tax Computed at
Federal Statutory Rate $ 40,520 $1,756,354 $2,241,846
Increase (Decrease) Resulting
from:
State Income Tax, Net of
Federal Income Tax Benefit 4,768 187,497 239,351
Other Reconciling Items ( 26,332) ( 108,254) 11,891
--------- --------- ---------
Provision for Income Taxes $ 18,956 $1,835,597 $2,493,088
========= ========= =========
NOTE 5 NOTES RECEIVABLE
Notes Receivable consisted of the following:
</TABLE>
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
----------- ----------
<S> <C> <C>
Mortgage Notes Receivable
Various notes with interest rates ranging
from 8.5% to 9.5% with payments due from 1999
through 2003. Collateralized by real
estate mortgages held by the Company $ 4,260,347 $ 5,146,017
Other Notes Receivable
Interest at 6.2%, total principal and
accrued interest due September 2000 4,740,497 4,740,497
Interest at prime rate, receivable in
monthly installments of principal and
interest to amortize the original note
over a period of 15 years, due January
2006 115,024 131,836
---------- ----------
Total Notes Receivable $ 9,115,868 $10,018,350
========== ==========
</TABLE>
90
<PAGE>
NOTE 5 NOTES RECEIVABLE (CONTINUED)
The prime rate of interest was 7.75% and 8.5% at
December 31, 1998 and 1997, respectively.
The required annual principal receipts are as follows:
<TABLE>
<CAPTION>
Year ending December 31, Amount
-----------
<S> <C>
1999 $ 1,833,168
2000 5,909,148
2001 1,064,952
2002 39,530
2003 266,704
2004 and Thereafter 2,366
----------
$ 9,115,868
==========
</TABLE>
NOTE 6 REAL ESTATE HELD FOR DEVELOPMENT AND SALE
Real estate held for development and sale as of
December 31, 1998 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
December 31
-----------------------
1998 1997
---------- ---------
<S> <C> <C>
Undeveloped Land $ 961,674 $ 1,504,926
Land and Land Development 12,539,268 12,217,117
Completed Houses 97,025 97,025
---------- ----------
$13,597,967 $13,819,068
========== ==========
</TABLE>
NOTE 7 NET INVESTMENT IN DIRECT FINANCING LEASE
On December 31, 1987, the Company acquired certain real
estate and equipment subject to a direct financing lease.
The aggregate amounts due under the lease are identical in
amount to the payments required to be made by the Company
in order to amortize the debt applicable to the properties.
The required annual payments on the lease at December 31,
1998, are summarized as follows:
91
<PAGE>
NOTE 7 NET INVESTMENT IN DIRECT FINANCING LEASE (CONTINUED)
<TABLE>
<CAPTION>
Amount
Aggregate Representing Net
Year Ended December 31, Payment Interest Investment
----------------------- ---------- ------------ ----------
<S> <C> <C> <C>
1999 $124,369 $ 34,338 $ 90,031
2000 125,446 27,942 97,504
2001 126,611 21,014 105,597
2002 127,874 13,512 114,362
2003 129,242 5,388 123,854
2004 and Thereafter 10,836 61 10,775
------- ------- -------
$644,378 $102,255 $542,123
======== ======= =======
The interest rate stated in the lease agreement is 80.65% of prime.
</TABLE>
92
<PAGE>
NOTE 8 NOTES PAYABLE
Notes Payable consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
---- ----
<S> <C> <C>
Mortgage Notes Payable
Mortgage notes payable are collateralized
by real estate mortgages held by the
lender. As of December 31, 1998 and 1997,
mortgage notes payable consisted of the
following:
Payments of $266,783, including interest
at 8.8% payable quarterly through
April 2002; principal balance due
July 2002 $ 8,911,124 $ 9,179,173
Interest payable quarterly at 10%,
principal and outstanding interest
due October 2005 1,200,000 1,200,000
Industrial Revenue Bonds
Industrial revenue bonds payable are
collateralized by real estate.
Interest at 80.56% of prime rate,
payable in monthly installments of
principal and interest to amortize
the original debt over a period
of 18 years, due January 2004 534,939 618,580
Line of Credit
A line of credit totaling $7,000,000
payable on demand, with interest at
the lower of prime rate minus .75% or
the LIBOR Market Index rate plus 1.5% 96,000 --
Note Payable to Related Party
Principal and interest payable in
monthly installments of $23,268,
interest at 9.68%. Collateralized
by developed real estate in a joint
venture. The venture partner
is jointly liable on the note. -- 2,499,770
Paid in full during 1998. ---------- ----------
$10,742,063 $13,497,523
========== ==========
</TABLE>
93
<PAGE>
NOTE 8 NOTES PAYABLE (CONTINUED)
The required annual principal payments on notes payable
as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Amount
- ----------------------- ----------
<S> <C>
1999 $ 466,421
2000 416,529
2001 453,634
2002 8,065,999
2003 123,854
2004 and Thereafter 1,215,626
----------
$10,742,063
==========
</TABLE>
Interest expense was $1,070,737, $1,507,246, $1,402,767 for
1998, 1997, and 1996, respectively.
NOTE 9 PENSION PLAN
The company maintains a defined benefit plan for all
employees who have attained the age of 21 and completed
one year of service. The pension benefits are based
primarily on years of service and the average
compensation for the highest five years during the
final 10 years of employment. The benefit formula
generally provides for a life annuity benefit. During
1998 the Company adopted SFAS No. 132 "Employer's
Disclosures About Pension and Other Post-Retirement
Benefits."
The Company's net periodic pension cost included the
following components:
94
<PAGE>
NOTE 9 PENSION PLAN (CONTINUED)
<TABLE>
<CAPTION>
December 31,
------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service Cost $ 251,669 $198,123 $175,363
Interest Cost on Projected Benefit
Obligation 315,598 289,424 257,745
Actual Return on Plan Assets (581,457) (759,642) (577,221)
Net Amortization 133,627 348,622 260,594
-------- ------- -------
Net Periodic Pension Cost $ 119,437 $ 76,527 $116,481
======= ======= =======
The change in benefit obligation is as follows:
1998 1997
---------- ---------
Benefit Obligation at Beginning of Year $4,584,714 $3,540,754
Service Cost 251,669 198,123
Interest Cost 315,598 289,424
Actuarial (Gain) Loss ( 25,943) 753,821
Benefits Paid ( 341,950) ( 197,408)
--------- ---------
Benefit Obligation at End of Year 4,784,088 4,584,714
========= =========
The change in plan assets is as follows:
Fair Value of Plan Assets at Beginning of
Year 4,862,398 4,136,008
Actual Return on Plan Assets 581,457 759,642
Employer Contribution -- 164,156
Plan Expenses Paid ( 86,934) ( 75,768)
Benefits Paid ( 255,016) ( 121,640)
-------- ---------
Fair Value of Plan Assets at End of Year 5,101,905 4,862,398
========= =========
The accrued pension liability consists
of the following:
Plan Assets In Excess of
Projected Benefit Obligation 317,817 277,684
Unrecognized Prior Service Cost 5,029 5,695
Unrecognized Net Gain ( 515,441) ( 341,137)
Unrecognized Transition Asset ( 116,272) ( 131,672)
--------- ---------
Accrued Pension Liability $( 308,867) $( 189,430)
========= =========
</TABLE>
95
<PAGE>
NOTE 9 PENSION PLAN
The actuarial assumptions made to determine the projected
benefit obligation and the fair value of plan assets are as
follows:
<TABLE>
<CAPTION>
December 31,
------------
1998 1997
----- ----
<S> <C> <C>
Weighted Average Discount Rate 7.0% 7.0%
Weighted Average Asset Rate of Return 9.0% 9.0%
Compensation Scale 5.0% 5.0%
NOTE 10 POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS
The Company sponsors two defined benefit postretirement
plans of certain health care and life insurance benefits
for eligible retired employees. All full-time
employees become eligible to receive these benefits if they
retire after reaching age 55 with 20 or more years of
service. The postretirement health care plan is
contributory, with retiree contributions adjusted annually;
the life insurance plan is non- contributory up to $5,000
of coverage. The accounting for the health care plan
reflects caps on the amount of annual benefit to be paid to
retirees as stipulated by the plan. The Company pays
for the plan as costs are incurred.
The Company recognizes postretirement expenses in
accordance with adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," which
requires that expected costs of postretirement benefits be
charged to expense during the years the employees render
service. The Company elected to amortize the unfunded
obligation measured at adoption of SFAS 106 over a period of
20 years. The effect of this amortization expense
Recognized in 1998, 1997, and 1996 was $98,532, $102,639,
and $89,670, respectively. The accrued post retirement
benefit cost reflected in the balance sheet at
December 31, 1998 and 1997 was $240,129 and $235,906,
respectively.
96
<PAGE>
NOTE 11 STOCK OPTION PLAN
The Company maintains a stock option plan (the Plan)
pursuant to which 530,000 shares of the Company's common
stock may be issued. Under the Plan the option exercise
price equals the stock's market price on the date
of grant. The Options vest over five years and all expire
after ten years. The Plan provides for the grant of (1)
incentive stock options which satisfy the requirements of
Internal Revenue Code (IRC) Section 422, and (2)
nonqualified options which are not entitled to favorable
tax treatment under IRC Section 422. No optionee may
exercise incentive stock options in any calendar year for
shares of common stock having a total market value of more
than $100,000 on the date of grant (subject to
certain carryover provisions). In connection with the
grant of nonqualified options, a stock appreciation right
for each share covered by the option may also be granted.
The stock appreciation right will entitle the optionee to
receive a supplemental payment which may be paid
in whole or in part in cash or in shares of common stock
equal to all or a portion of the spread between the
exercise price and the fair market value of the underlying
share at the time of exercise.
The Company accounts for the Plan under APB Opinion No. 25.
Had compensation cost for the Plan been determined
consistent with FASB Statement No. 123, the Company's net
income and earnings per share would not have been
materially different than reported.
A summary of the status of the Company's stock option plan
for the three years ended December 31, 1998 and changes
during the years then ended is as follows:
97
<PAGE>
NOTE 11 STOCK OPTION PLAN (CONTINUED)
</TABLE>
<TABLE>
1998 1997 1996
-------------- -------------- -------------
Shares Wtd Avg Shares Wtd Avg Shares Wtd Avg
Ex Price Ex Price Ex Price
------- ------- ------ ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 148,800 $15.36 327,300 $12.87 279,300 $12.14
Granted 48,000 $17.62 48,000 $16.87 48,000 $17.15
Exercised -- (226,500) $12.09 --
------ ------ -------
Outstanding at end of year 196,800 $15.91 148,800 $15.36 327,300 $12.87
======= ======= =======
Exercisable at end of year 108,480 $15.07 71,680 $14.52 226,500 $12.09
======= ======= =======
Weighted average fair value
options granted during
the year $5.58 $5.13 $4.98
</TABLE>
Of the 226,500 options exercised in 1997, 115,939 options were
surrendered in payment of the cash exercise price of the
remaining options. The option exercise and accrual of stock
appreciation rights Resulted in compensation expense of $1,822,992
and $1,409,109, respectively, included in general and administrative
expenses primarily during the fourth quarter. Additionally, the
exercise resulted in $1,216,240 of income tax benefit,
of which $293,524 was recorded as an addition to additional
paid-in capital.
Of the 196,800 options outstanding at December 31, 1998, 62,400 have
exercise prices between $12.12 and $14.87 with a weighted average
exercise price of $13.09 and a weighted average contractual life of
5.3 years. Of these 62,400 options, 56,640 are exercisable with a
weighted average exercise price of $13.19. The remaining 134,400
options have exercise prices between $16.87 and $17.62, with a
weighted average exercise price of $17.22 and a weighted average
contractual life of 8.1 years. Of these 134,400 options
51,840 are exercisable and their weighted average exercise price is
$17.13.
98
<PAGE>
NOTE 12 EARNINGS PER SHARE (CONTINUED)
Basic earnings per common share were computed by dividing
income by the weighted average number of shares of common
stock outstanding during the year. Diluted earnings per
common share were determined based on assumption
of the conversion of stock options using the treasury stock
method at average cost for the periods.
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Income Available to Common Shareholders:
Income from Continuing Operations $ 100,219 $3,330,151 $4,100,578
Income from Discontinued Citrus Operations 1,203,895 681,216 2,501,980
--------- --------- ---------
Net Income 1,304,114 4,011,367 6,602,558
========= ========= =========
Weighted Average Shares Outstanding 6,371,833 6,288,452 6,261,272
Common shares Applicable to Stock Options
Using the Treasury Stock Method 11,834 22,789 90,159
--------- --------- ---------
Total Shares Applicable to Diluted Earnings
Per Share 6,383,667 6,311,241 6,351,431
========= ========= =========
Basic Earnings Per Share
Income from Continuing Operations $ .01 $ .53 $ .65
Income from Discontinued Citrus Operations $ .19 $ .11 $ .40
--------- --------- --------
Net Income $ .20 $ .64 $ 1.05
========= ========= =========
Diluted Earnings Per Share
Income from Continuing Operations $ .01 $ .53 $ .65
Income from Discontinued Citrus Operations $ .19 $ .11 $ .39
-------- --------- --------
Net Income $ .20 $ .64 $ 1.04
======== ========= =======
</TABLE>
99
<PAGE>
NOTE 13 LEASE OBLIGATIONS
The Company leases certain equipment, land and improvements
under operating leases.
Minimum future rental payments under non-cancelable
operating leases having remaining terms in excess of one
year as of December 31, 1998, are summarized as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Amounts
--------
<S> <C>
1999 $ 281,108
2000 224,806
2001 188,358
2002 88,049
2003 100,000
2004 and Thereafter 6,650,000
---------
$7,532,321
=========
</TABLE>
Rental expense under all operating leases amounted to
$347,958,$351,785,and $315,528 for the years ended December
31, 1998, 1997 and 1996, respectively.
NOTE 14 RELATED PARTIES
Baker, Fentress & Company, a publicly owned, closed-end
investment company, owned approximately 79 percent of the
Company's outstanding common stock at December 31, 1998 and
1997.
The Company sells, under a participating marketing pool
agreement, a significant portion of its citrus fruit to
Citrus World, an agricultural cooperative of which
the Company owns a 4 percent equity interest. The Company
accounts for this equity interest at cost. Non-voting
stock, in the aggregate amount of $935,538 issued by
Citrus World is owned by the Company. This non-voting stock
represents per unit retain contributions and are considered
to have no value for financial statement purposes until
redeemed. (See Note 2 "Discontinued Citrus Operations.")
100
<PAGE>
QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
(In thousands except per share amounts)
THREE MONTHS ENDED
March 31, June 30, September 30, December 31,
--------------- --------------- ---------------- -----------
1998 1997 1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Real Estate Operations:
Sales and Other Income $1,376,649 $ 848,770 $ 1,533,071 $1,474,824 1,515,308 $1,242,735 $ 1,963,261 $ 1,845,458
Costs and Other Expenses ( 931,554) (793,629) (1,351,771) ( 748,794)( 792,639) ( 805,745) (1,790,924)(1,059,941)
--------- ------- -------- -------- --------- -------- --------- ---------
445,095 55,141 181,300 726,030 722,669 436,990 172,337 785,517
--------- -------- -------- -------- --------- -------- --------- ---------
Profit on Sales of
Undeveloped Real
Estate Interests 96,415 2,000 17,923 16,000 10,385 1,700 7,310 7,705,307
-------- ------- -------- ------- -------- ------- -------- ---------
Interest and Other
Income 257,473 298,634 78,458 531,906 242,622 274,415 205,918 264,131
-------- ------- ------- ------- ------- ------- -------- -------
798,983 355,775 277,681 1,273,936 975,676 713,105 385,565 8,754,955
General and Administrative
Expenses ( 840,550) (882,933) ( 585,789) ( 765,351) ( 596,427)(1,020,685)( 295,964) (3,263,054)
-------- ------- -------- ------- ------- --------- -------- ---------
Income From Continuing
Operations Before
Income Taxes ( 41,567)( 527,158) ( 308,108) 508,585 379,249 ( 307,580) 89,601 5,491,901
Income Taxes 24,841 207,798 119,220 ( 151,869) ( 144,197) 79,695 ( 18,820) (1,971,221)
------- -------- -------- -------- -------- --------- -------- ---------
Net Income From Continuing
Operations ( 16,726)( 319,360) ( 188,888) 356,716 235,052 ( 227,885) 70,781 3,520,680
Income From Discontinued
Citrus Operations 446,877 545,664 409,886 159,298 ( 307,737) ( 285,369) 654,869 261,623
------- -------- -------- -------- -------- -------- -------- ---------
Net Income $ 430,151 $ 226,304 $220,998 $516,014 $( 72,685) $(513,254) $ 725,650 $ 3,782,303
======== ======= ======= ======== ======= ======== ======= =========
Per Share Information:
Basic and Diluted
Income From Continuing
Operations $0.00 ($0.05) ($0.03) $0.06 $0.03 ($0.04) $0.01 $0.56
Income From Discontinued
Citrus Operations $0.07 $0.09 $0.06 $0.02 $(0.04) $(0.04) $0.10 $0.04
--------- ------- ------ ------ ------- ------- ----- -----
Net Income $0.07 $0.04 $0.03 $0.08 $(0.01) $(0.08) $0.11 $0.60
========= ======= ====== ====== ======= ====== ===== =====
</TABLE>
101
<PAGE>
Management's Discussion and Analysis
Results of Operations
1998 Compared to 1997
Real Estate Operations
Profits from real estate operations declined 24%, to $1,521,401,
for the calendar year 1998 when compared to 1997. The decrease in
profits, from $2,003,678 one year earlier, is primarily attributable
to lower gross profits recognized on the sale of commercial property.
During 1998, 90 acres of property were sold providing gross profits
approximating $1,330,000. This compares to prior year gross profits
amounting to $1,745,000 generated on the sale of 63 acres of
commercial property. The 1997 sales consisted of higher profit margin
transactions as pricing and profit margins vary from property to
property based on location and intended use.
Golf operations contributed an additional $158,000 in profits during
1998, while revenues increased 300% to $2,454,000. These increases
are due to a full year of operating the north "Champions" course
coupled with the opening of the new south "Legends" course in October
of 1998. The company took over the operation of the "Champions"
course in September 1997.
The wildfires which struck Volusia County during the summer of 1998
had a negative impact on income generated from forestry operations.
Profits fell 16% for the year, to $626,000 on a 16% reduction in
revenues. The fall in revenue is attributed to lower prices due to
the oversupply of timber harvested immediately after the fires and a
slowdown in harvesting during the fourth quarter of the year.
Profit from income properties increased $80,000 over 1997 break-even
results, while leasing revenues fell 72% due to the sale of properties
during 1997 and 1998. The sale of the 24,000 square foot Palm Coast
office building occurred in May 1997, while the sale of the 70,000
square foot shopping center located in Marion County took place in
June 1998.
General, Corporate and Other
The release of surface entry rights on 2,229 acres produced profits on
sale of undeveloped real estate interests totaling $132,033 during
1998. This represents a significant downturn in profits from 1997
when the sale of approximately 11,000 acres of the Company's western
most Volusia County lands along with releases on surface entry rights
on 48 acres during 1997 generated profits of $7,725,007.
Interest and other income decreased 43% to $784,471 in 1998, compared
to 1997's interest and other income totaling $1,369,086. This fall is
due to a $330,000 reduction in interest on mortgage notes receivable,
102
<PAGE>
a $80,000 loss posted on the sale of the shopping center in Marion
County, and a $250,000 gain realized on the May 1997 sale of the Palm
Coast office building. These reductions are offset by an increase in
interest earned on investment securities of $124,000.
A 61% decrease in general and administrative expenses is primarily the
result of the 1997 exercise of stock options along with an increase
in expense from stock appreciation rights, due to the rise in the
Company's stock price at the time of exercise.
Discontinued Citrus Operations
For the twelve months of 1998, profits from citrus operations before
income tax rose 77% to $1,930,247. Revenues of $11,726,251 were
posted during 1998, compared to revenues of $9,444,783 one year
earlier. This 24% increase in revenues is directly the result of a
24% rise in fruit harvested and sold. During 1998 fruit volume
totaled 1,289,000 boxes compared to 1,042,000 boxes produced during
1997. Average fruit pricing showed a 2% increase over prior year's
prices. The rise in pricing was achieved in the fourth quarter due to
the significantly lower state crop forecast for the 1998-1999 season.
Production and selling expenses increased 17% on the higher fruit
volume, although economies of scale were achieved as fixed and semi-
variable costs were absorbed over the greater number of boxes of
fruit.
103
<PAGE>
Management's Discussion and Analysis
Results of Operations
1997 Compared to 1996
Real Estate Operations
Reduced commercial land sales volume resulted in a 42% fall in profits
from real estate operation to $2,003,678 for the year ended December
31, 1997. This profit compares to the $3,472,181 recorded during
1996's same period. A total of 63 acres of commercial land sales were
closed during 1997, producing gross profits approximating $1,745,000,
while gross profits of $3,125,000 were realized on the sale of 92
acres during 1996.
The sale of the 70,000-square-foot Mariner Village shopping center in
June 1996, the 24,000 square-foot office building in Daytona Beach in
December 1996, the 24,000-square-foot Palm Coast office building in
May 1997 and the December 1997 sale of the 47,000-square-foot Daytona
Beach office building resulted in income properties revenues and
expenses falling 39% and 35%, respectively. Bottom line results from
income properties for the twelve months of 1997 were break-even,
compared to a $127,000 profit posted in 1996.
Forestry operating income rose 25% to $748,000 during 1997 on a 20% as
revenues rose 20% from increased harvesting. A 10% increase in
subsurface revenue to $184,000 was produced on higher mineral lease
income offset to some extent by lower oil royalty income.
General, Corporate and Other
The sale of 11,000 acres of the Company's western most Volusia County
lands along with releases on surface entry rights on 48 acres produced
profits from undeveloped real estate interests of $7,725,007 for 1997.
This compares to the sale of 25 acres of land and the release of
surface entry rights on 11,767 acres which produced income for 1996 of
$384,756.
Interest and other income declined 78% for 1997 to $1,369,086 when compared to
1996's profit of $6,123,025. Results for 1997 include a profit of $250,000
realized on the sale of the 24,000 square-foot Palm Coast office building
along with increases from interest on mortgage notes receivable and investment
income of $260,000 and $70,000, respectively when compared to the prior year.
Interest and other income posted during 1996 includes $4,550,000 recognized on
the sale of 479 acres including citrus groves in Highlands County, and $450,000
and $340,000 realized on the sale of the 70,000-square-foot Mariner Village
shopping center and 24,000-square Daytona Beach office building, respectively.
104
<PAGE>
The exercise of stock options along with an increase in expense
from stock appreciation rights, due to the rise in the Company's
stock price at time of exercise, primarily resulted in a 75%
increase in general and administrative expenses for the twelve
months of 1997.
Discontinued Citrus Operations
Citrus operations for the years ended December 31, 1997 and 1997 have
been restated as Discontinued Citrus Operations.
Profits from citrus operations totaling $1,092,217 for calendar year
1997 represent a 73% downturn from the $4,011,512 profit posted during
1996. A 26% reduction in fruit harvested and sold resulted in a 32%
decline in revenues realized and was the primary reason for the fall
in profitability. A total of 1,042,000 boxes of fruit were sold
during 1997 compared to 1,401,000 sold one year earlier. Also
contributing to the revenue and profit reductions was an 8% decrease
in average fruit pricing for the year, with pricing of both fresh and
processed fruit contributing to the decline. Production and selling
expenses fell 15% during the period on the lower fruit volume;
although, this was offset to some extent by reduced handling credits
received due to a 58% decline in fruit handled for outside growers.
Lower fruit production reduced profit margins as fixed and
semi-variable costs were allocated by fewer boxes.
105
<PAGE>
Financial Position
Overall calendar year 1998 Company profits totaling $1,304,114,
equivalent to $.20 per share, represent a 67% downturn from 1997's
twelve-month income of $4,011,367, equivalent to $.64 per share. The
unfavorable results are due to a 24% reduction in profits from real
estate operations, on lower commercial sales volume, and a $7,600,000
downturn in profits on the sale of undeveloped real estate interests.
The variance from undeveloped real estate interests is attributed to
the 1997 sale of approximately 11,000 acres of the Company's western
most Volusia county lands. Citrus operations, which are reported as
discontinued operations due to the previously reported pending sale of
the citrus division, generated an increase in profits of 77% on a 24%
jump in fruit volume. Cash and cash equivalents decreased $9,102,127
during 1998. This cash outflow resulted from the payment of dividends
totaling $4,460,283, equivalent to $.70 per share, $4,818,717
expended for the acquisition of property, plant, and equipment, and
$2,394,727 of income taxes paid on continuing operations, while debt
was reduced $2,755,460. Offsetting these cash outflows was $2,304,277
of proceeds received on sale of property, plant and equipment,
$1,692,939 generated from the discontinued citrus operations, and
$902,482 received on the reduction of outstanding notes receivable.
The construction of the second golf course at the LPGA International
mixed-use development accounted for the majority of the funds used for
acquisition of property, plant, and equipment, while the sale of the
shopping center in Marion County was the primary source of proceeds on
the sale of property, plant and equipment.
As previously stated, the citrus division is under contract for sale
with the closing scheduled on or about April 8, 1999. The contract
price is $30,945,000 which will generate an after-tax gain of
approximating $8,000,000. Both the sales price and gain are subject
to post-closing adjustments. The cash proceeds generated from the
sale will be used to fund capital expenditures with the excess funds
to be invested in quality investment securities. Capital requirements
for 1999 are projected at $6,000,000. Of this amount $4,800,000 is
scheduled to be expended at the golf operations including the
construction of the clubhouse and amenities, and $980,000 is to be
spent on development work in and around the LPGA development.
The second golf course within the LPGA International development, the
Arthur Hills signature "Legends" course, was opened for play on
October 1, 1998. The course has received rave reviews from both the
public and golf writers. The design and permitting stage for the
clubhouse facilities is nearing completion, with the construction of
the clubhouse anticipated to be completed by year- end 1999. With the
completion of the second golf course and construction activity on the
clubhouse renewed sales interest within the community is expected.
106
<PAGE>
Commercial sales contract conversion to closings was slower than
anticipated during 1998. The process for closing, which includes
obtaining regulatory approvals and permits, has become a complicated
process. Management continues to work with buyers to ensure approvals
and permits are received and other requirements are met to enable the
closing of contracts. Several properties are under contract for
closing in 1999. These contracts, when closed, will provide
significant income and cash to the Company. In addition to properties
which are under contract negotiations, sales discussions continue on
numerous additional properties.
Approximately 9,000 acres of Company lands were damaged by the
wildfires experienced in Volusia County during the summer of 1998.
The damage was limited to timber on lands held for future development.
The immediate financial impact has been minimal; although, future
economic gain has been sacrificed due to earlier than planned
harvesting and loss of immature trees planted in recent years which
were not of sufficient size to harvest. The forestry operation is
still projected to generate profits for the Company; however, the
income produced will be less than anticipated before the fire damage
occurred.
The Company has evaluated and identified the risks of software and
hardware failure due to processing errors arising from calculations
using the Year 2000 date. With the new structure of the Company,
the risks of these software and hardware failures is not judged to
have a material effect on the Company's business, results of
operations, or financial position. A plan for conversion has been
established to maintain the integrity of its financial systems and
ensure the reliability of its operating systems. The cost of
achieving Year 2000 compliance, which includes software and hardware
installation, is not expected to be material in relation to the
Company's financial statements.
With the sale of the citrus operations the face of the Company will have
changed. The Company will be in a strong financial position with the funds
generated from the sale of the citrus operations and a debt
level below $11 million. Management can now focus its entire efforts
on the real estate business and in particular the lands in and around
the LPGA International project and Interstate 95 in the Daytona Beach
and Ormond Beach area.
107
<PAGE>
COMMON STOCK PRICES AND DIVIDENDS
The Company's common stock trades on the American Stock Exchange
(AMEX) under the symbol CTO. The Company has paid dividends annually
on a continuous basis since 1976, the year in which its initial
dividends were paid. The following table summarizes aggregate annual
dividends paid (on a semi-annual basis) over the five years ended
December 31, 19987.
1994 $.35
1995 $.45
1996 $.55
1997 $.65
1998 $.70
Indicated below are high and low sales prices for the quarters of the
last two fiscal years. All quotations represent actual transactions.
<TABLE>
<CAPTION>
1998 1997
------------- --------------
$ $ $ $
<S> <C> <C> <C> <C>
First Quarter 21-5/8 17 17-5/8 16-1/2
Second Quarter 19-1/4 17-1/8 17-1/4 15-1/2
Third Quarter 17-5/8 11-1/2 24-1/4 16-3/8
Fourth Quarter 14-3/4 11-7/8 25 17-5/8
</TABLE>
Approximate number of shareholders of record as of
December 31, 1998without regard to shares held in nominee or
street name): 250
108
<PAGE>
EXHIBIT 21
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Percentage of
Organized voting securities
under owned by
laws of immediate parent
<S> <S> <S>
Consolidated-Tomoka Land Co. Florida --
Placid Utilities Florida 100.0
Indigo Group Inc. Florida 100.0
Indigo Group Ltd. Florida 99.0*
(A Limited Partnership)
Indigo Development Inc. Florida 100.0
Indigo Lakes Realty, Inc. Florida 100.0
Palms Del Mar Inc. Florida 100.0
Indigo International Inc. Florida 100.0
</TABLE>
*Consolidated-Tomoka Land Co. is the limited partner of Indigo Group Ltd., and
owns 99.0% of the total partnership equity. Indigo Group Inc. is the managing
general partner of the partnership and owns an additional 1.0% of the
partnership equity.
All subsidiaries are included in the Consolidated Financial Statements of the
Company and its subsidiaries appearing elsewhere herein.
109
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTS
TO: CONSOLIDATED-TOMOKA LAND CO.
As independent certified public accountants, we hereby consent
to the incorporation of our reports included and incorporated by
reference in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 (File 33-62679 (prior
registration number 33-50954)).
Arthur Andersen LLP
Tampa, Florida
March 22, 1999
110
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
Consolidated-Tomoka Land Co.'s December 31, 1998 10-K and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 283,200
<SECURITIES> 1,191,390
<RECEIVABLES> 9,115,868
<ALLOWANCES> 0
<INVENTORY> 13,597,967
<CURRENT-ASSETS> 0
<PP&E> 8,209,662
<DEPRECIATION> 855,043
<TOTAL-ASSETS> 50,101,451
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 6,371,833
<OTHER-SE> 28,326,445
<TOTAL-LIABILITY-AND-EQUITY> 50,101,451
<SALES> 6,388,289
<TOTAL-REVENUES> 7,304,793
<CGS> 1,589,209
<TOTAL-COSTS> 4,866,888
<OTHER-EXPENSES> 1,488,620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 830,110
<INCOME-PRETAX> 119,175
<INCOME-TAX> 18,956
<INCOME-CONTINUING> 100,219
<DISCONTINUED> 1,203,895
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,304,114
<EPS-PRIMARY> .2
<EPS-DILUTED> .2
</TABLE>
