UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
Number 0-9209
For Quarter Ended June 30, 2000
------------- ---------------
RIVERSIDE GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1144172
------------------------------------------ ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7800 Belfort Parkway, Jacksonville, Florida 32256
------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code number
904-281-2200
------------
Indicate by a 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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-----
On September 30, 2000, there were 4,767,123 shares of the Registrant's common
stock outstanding.
<PAGE>
RIVERSIDE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 2000 (Unaudited)
and December 31, 1999 3
Condensed Consolidated Statements
of Operations
Six months ended
June 30, 2000 and 1999 (Unaudited) 4
Condensed Consolidated Statements of
Cash Flows
Six months ended
June 30, 2000 and 1999 (Unaudited) 5
Notes to Condensed Consolidated
Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 17
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 26
PART II.
Item 2. Changes in Securities 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
</TABLE>
2
<PAGE>
RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------------- --------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 289 $ 277
Accounts receivable, less allowance for doubtful
accounts of $14 at 2000 and $3 at 1999 375 259
Investment in Greenleaf Technologies Corp. 6,747 1,253
Notes receivable 26 30
Prepaid expenses 117 19
-------------- --------------
Total current assets 7,554 1,838
Investment in Wickes Inc. 14,564 15,799
Investment in Buildscape Inc. (947) (947)
Real Estate held for sale 7,387 8,996
Property, plant and equipment, net 259 340
Other assets (net of accumulated amortization of
$59 in 2000 and $46 at 1999) 147 157
-------------- --------------
Total assets $ 28,964 $ 26,183
============== ==============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current debt and current maturities of long-term debt $ 11,806 $ 11,813
Accounts payable 477 430
Accrued liabilities 1,058 1,758
-------------- --------------
Total current liabilities 13,341 14,001
Long-term debt 268 469
Mortgage debt 11,345 11,345
Net liabilities of discontinued operations 20 21
Other long-term liabilities 84 83
-------------- --------------
Total liabilities 25,058 25,919
Commitments and contingencies (see Note 5)
COMMON STOCKHOLDERS' EQUITY :
Common stock, $.10 par value; 20,000,000 shares authorized; 477 477
4,767,123 issued and outstanding in 2000 and 1999
Additional paid in capital 16,468 16,468
Accumulated other comprehensive income 6,747 1,253
Retained earnings (deficit) (19,786) (17,934)
-------------- --------------
Total common stockholders' equity 3,906 264
-------------- --------------
Total liabilities and common stockholders' equity $ 28,964 $ 26,183
============== ==============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
REVENUES:
<S> <C> <C> <C> <C>
Sales and service revenues $ 344 $ 270 $ 748 $ 751
Net investment loss (9) (7) (27) (36)
Net realized investment gains 587 -- 1,163 --
Other operating income 44 24 47 49
--------- ---------- -------- ---------
966 287 1,931 764
--------- ---------- -------- ---------
COSTS AND EXPENSES:
Cost of sales 164 140 288 218
Provision for doubtful accounts 9 63 11 4
Depreciation, goodwill and trademark amortization 63 94 125 154
Selling, general and administrative expenses 665 1,732 1,145 3,316
Interest expense 723 650 1,334 1,303
--------- ---------- -------- ---------
1,624 2,679 2,903 4,995
--------- ---------- -------- ---------
LOSS BEFORE EQUITY IN EARNINGS (LOSSES) OF
RELATED PARTIES (658) (2,392) (972) (4,231)
Equity in earnings (losses) of Wickes, Inc. 417 1,178 (880) (147)
--------- ---------- --------- ----------
NET LOSS $ (241) $ (1,214) $ (1,852) $ (4,378)
========= ========== ========= ==========
BASIC AND DILUTED LOSS PER COMMON SHARE:
Loss per share $ (0.05) $ (0.23) $ (0.39) $ (0.84)
Weighted average number of common shares
used in computing earnings per share 4,759,123 5,213,186 4,759,123 5,213,186
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
</TABLE>
<PAGE>
RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the Six Months Ending June 30,
----------------------------------
2000 1999
----- ----
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $ (1,852) $ (4,378)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation expense 102 93
Amortization expense 23 321
Amortization of bond discount -- 113
Provision for doubtful accounts 11 (4)
Net realized investment gains (1,058) --
Equity in earnings (losses) of unconsolidated subsidiaries 880 (113)
Change in other assets and liabilities:
Increase in accounts receivable (127) (8)
Decrease in notes receivable 4 167
Increase in other assets (107) (230)
Increase(decrease) in accounts payable and accrued liabilities (654) 1,082
Increase in discontinued operations, other liabilities
and current income taxes -- (111)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (2,778) (3,068)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments:
Property, plant and equipment (17) (131)
Investment in real estate -- --
Proceeds from sales of investments
Investment in real estate 1,599 44
Securities of Greenleaf Technologies Corp. 977 --
Securities of Wickes Inc. 439 1,186
---------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,998 1,099
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of debt (208) (153)
Increase in borrowings -- 2,032
---------- -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (208) 1,879
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12 (90)
Cash and cash equivalents at beginning of period 277 509
---------- ----------
Cash and cash equivalents at end of period $ 289 $ 419
========== ==========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Non-cash compensation expense (Greenleaf Option) $ 105 $ --
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
RIVERSIDE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Basis of Financial Statement Presentation
-----------------------------------------
The Company has amended its Form 10-Q for the period ending June 30,
2000, this is to correct the amount erroneously reported on the original 10-Q
(See Note 5. "Commitments and Contingencies"). The correct number of shares of
Wickes common stock pledged to secured various obligations of the Company is
2,918,543.
The condensed consolidated financial statements present the financial
position, results of operations, and cash flows of Riverside Group, Inc. and its
wholly-owned and majority-owned subsidiaries (the "Company"). The Company no
longer owns a majority interest in Buildscape, Inc. ("Buildscape") and at
October 21, 1999, the Company began to report its investment in Buildscape on
the equity method (see Note 3. "Investment in Buildscape"). Accordingly, the
Company's consolidated balance sheet as of December 31, 1999 does not include
the accounts of Buildscape. The Company's condensed consolidated statements of
operations and cash flows for the period ending June 30, 1999, include
Buildscape on a consolidated basis.
The condensed consolidated balance sheets as of June 30, 2000, the
condensed consolidated statements of operations for the six months ended June
30, 2000 and 1999 and the condensed consolidated statements of cash flows for
the six months ended June 30, 2000 and 1999, have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows as of June 30, 2000, and for all
periods presented have been made. The results for the six month period ended
June 30, 2000 are not necessarily indicative of the results to be expected for
the full year or for any interim period.
The Company accounts for its investment in Greenleaf Technologies
Corporation ("Greenleaf") securities according to the provisions of FAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." This
statement requires that all applicable investments be classified as trading
securities, available-for-sale, or held-to-maturity securities. Greenleaf
securities have been classified as available-for-sale securities, and as such,
will be reported at fair value based upon the closing price on the exchange on
which they are traded on the last day of the quarter. The unrealized gains and
losses are excluded from earnings, but reported within shareholders' equity in
accumulated other comprehensive income (net of the effect of income taxes) until
they are sold. At the time of sale, any gains or losses, calculated by the
specific identification method, will be recognized as a component of operating
results.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements, the related Auditor's report, and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 filed with the Securities and Exchange Commission.
6
<PAGE>
Comprehensive Income
--------------------
Changes in the components of other comprehensive income and in
accumulated other comprehensive income for the first six months of 2000 are as
follows:
<TABLE>
<CAPTION>
Unrealized Total
Gains on Comprehensive
Securities Income
---------- ------------
<S> <C> <C>
Balance at December 31, 1999 $ 1,253 $ (1,425)
Change during the first six months of 2000 5,494 3,642
---------- ----------
Balance at June 30, 2000 $ 6,747 $ 2,217
========== ==========
</TABLE>
The change in comprehensive income includes the change in unrealized gains and
the net loss for the first six months of 2000.
Earnings Per Share
------------------
Basic and diluted earnings per common share are calculated in
accordance with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share". Earnings per share is based on the weighted average number of shares
of common stock outstanding during each period (4,759,123 shares in 2000 and
5,213,186 shares in 1999). Since the Company had a net loss, the options had an
anti-dilutive effect, and therefore, are excluded from the calculation of
diluted earnings per share.
2. INVESTMENT IN WICKES INC.
-------------------------
As of June 30, 2000, Riverside beneficially owned 2,925,113 shares of
Wickes Inc.'s ("Wickes") common stock, which constituted 36% of Wickes'
outstanding voting and non-voting common stock.
Summary financial information of Wickes for the first quarter of 2000
follows (in thousands):
<TABLE>
<CAPTION>
(unaudited) (audited)
June 24, 2000 Dec. 25, 1999
------------- -------------
<S> <C> <C>
Balance Sheet Data:
Current assets $ 261,658 $ 241,835
Total assets 355,893 334,636
Current liabilities 73,176 79,312
Long-term debt and other long-term liabilities 253,451 224,505
Common stockholders' equity 29,266 30,819
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(unaudited) (unaudited) (unaudited) (unaudited)
June 24 June 26 June 24 June 26
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 279,703 $ 288,764 $ 495,479 $ 479,934
Cost of sales 210,386 222,425 372,467 367,628
Gross profit 69,317 66,339 123,012 112,306
Selling, general & administrative 59,290 54,810 110,746 99,480
Other expenses 8,171 7,532 16,104 14,714
Other income (917) (2,187) (1,703) (3,043)
Income(loss) before income tax 2,773 6,184 (2,135) 1,155
Net income (loss) 1,532 3,587 (1,667) 311
</TABLE>
3. INVESTMENT IN BUILDSCAPE
------------------------
On October 21, 1999, Imagine Investments, Inc. ("Imagine") made a $10
million investment in Buildscape which prior to the investment was a
wholly-owned subsidiary of the Company. Imagine converted $3 million of
convertible debt into common stock, exchanged 520,000 shares of Riverside common
stock for Buildscape common stock and purchased an additional $5 million of
Buildscape Series A Preferred Stock.
In connection with the transaction, Imagine was granted the right to
vote the Company's common shares on all matters with the exception of a change
in control. As of October 22, 1999, the Company owned 62% of the Buildscape
common stock; however, because the Company's voting rights were controlled by
Imagine as of October 22, 1999, the Company accounted for its investment in
Buildscape on the equity method. The Company retained 3,119,067 outstanding
shares of Buildscape's common stock. As a result of this transaction, the
Company owned (before Buildscape employee's stock options) 47% of Buildscape on
a fully converted basis. Imagine owned 38% of the common and 100% of the
preferred stock of Buildscape, or 53% on a fully converted basis.
On May 12, 2000, Buildscape entered into a stock purchase agreement
with Imagine and the Dow Chemical Company ("Dow") pursuant to which Dow
purchased Series A Preferred Stock and common stock of Buildscape from Imagine
and also purchased newly issued Series B Preferred Stock directly from
Buildscape. As a result of these transactions, Imagine's right to vote the
Company's common shares of Buildscape was terminated. Dow purchased one tranche
of Series B Preferred Stock and will purchase a second tranche upon the
completion of certain milestones by Buildscape. Dow also has an option to
acquire additional shares in Buildscape that will increase its ownership to
50.1%. Upon the completion of all of these transactions, Riverside's ownership
in Buildscape will be reduced from 47% to 35%, on a fully converted basis.
Summary financial information of Buildscape for the second quarter of
2000 follows (in thousands):
8
<PAGE>
<TABLE>
<CAPTION>
(unaudited) (audited)
June 30, 2000 December 30, 1999
------------- -----------------
<S> <C> <C>
Balance Sheet Data:
Current assets $ 6,860 $ 2,677
Total assets 8,691 3,587
Current liabilities 1,818 1,592
Common stockholders' equity 6,873 1,995
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income Statement Data:
Net sales $ 122 $ 114 $ 249 $ 179
Cost of goods 91 91 196 123
Gross profit 31 23 53 56
Selling, general & administrative 3,054 1,262 4,948 2,365
Other expenses 175 85 299 135
Other income (54) -- (72) --
Loss before income tax (3,144) (1,324) (5,122) (2,444)
Net loss (3,144) (1,324) (5,122) (2,444)
</TABLE>
4. INVESTMENT IN GREENLEAF
As of September 30, 1998, the Company completed a transaction with
Greenleaf, based in Iselin, New Jersey, whereby the Company acquired common
shares of Greenleaf in exchange for 100% of the common stock of the Company's
former wholly-owned subsidiary, Gameverse, Inc. As a result of Greenleaf's
dissatisfaction with the transaction, on January 28, 2000, the Company and
Greenleaf executed a Settlement Agreement (the "Greenleaf Settlement"). In the
Greenleaf Settlement, the Company retained 10,000,000 shares of the 14,687,585
shares that it had originally received. The Company also retained a five year
option to acquire 2,000,000 additional newly issued shares of Greenleaf common
stock at an exercise price of $.25 per share. In addition to the 10,000,000
retained shares, 3,000,000 of the Greenleaf shares are held in an escrow account
(the "Escrow Shares"), pursuant to an Escrow Agreement acceptable to Greenleaf
and the Company. The proceeds from the sale of the Escrow Shares are to be used
to fund a mutually agreeable joint venture for the marketing of technology and
internet-related products, to be owned in equal amounts by Greenleaf and the
Company. In connection with the settlement, Riverside granted Greenleaf a stock
option to purchase 5% of the issued and outstanding shares of Cybermax, Inc.
("Cybermax"), a wholly-owned subsidiary of the Company. The exercise price is
$1,000,000 and the expiration date of the option is September 30, 2003. In
addition, the Company entered into an agreement
9
<PAGE>
with a subsidiary of Greenleaf, Future Com., South Florida, Inc. for use of
satellite air time, related technology, hardware and software, on an as-needed
basis, at fair market value.
INVESTMENT SECURITIES - AVAILABLE FOR SALE
------------------------------------------
In accordance with SFAS 115 and Rule 144, under the Securities Act of
1933, as amended (the "'33 Act") 4,558,680 shares of the Company's common stock
in Greenleaf are classified as available for sale as of June 30, 2000. The cost
basis is $0 and the estimated fair market value is $6,747,000, resulting in
gross unrealized gains of $6,747,000. Sales of Greenleaf shares are limited by
Rule 144 under the '33 Act to (i) the greater of the average weekly reported
volume of trading in such securities during the four calendar weeks preceding
such a sale or (ii) 1% of Greenleaf's outstanding shares during a 90 day period.
Based on the Company's intention to sell the maximum number of shares allowed in
order to fund current operations and debt, such shares have been classified as
available for sale and accordingly the value of such shares has been reflected
as a component of comprehensive income, net of applicable tax of $0. No taxes
have been provided as the Company has available net operating loss carryforwards
and strategies which would result in no tax liability upon the sale of these
securities.
5. COMMITMENTS AND CONTINGENCIES
-----------------------------
WICKES INC.
As of June 24, 2000, Wickes had accrued approximately $131,000
(included in accrued liabilities as of June 24, 2000) for remediation of certain
environmental and product liability matters, principally underground storage
tank removal.
Many of the sales and distribution facilities presently and formerly
operated by Wickes contained underground petroleum storage tanks. All such tanks
known to Wickes located on facilities owned or operated by Wickes have been
filled or removed in accordance with applicable environmental laws in effect at
the time. As a result of reviews made in connection with the sale or possible
sale of certain facilities, Wickes has found petroleum contamination of soil and
ground water on several of these sites and has taken, and expects to take,
remedial actions with respect thereto. In addition, it is possible that similar
contamination may exist on properties no longer owned or operated by Wickes, the
remediation of which Wickes could, under certain circumstances, be held
responsible. Since 1988, Wickes has incurred approximately $2.0 million of
costs, net of insurance and regulatory recoveries, with respect to the filling
or removing of underground storage tanks and related investigatory and remedial
actions. Insignificant amounts of contamination have been found on excess
properties sold over the past four years. Wickes currently has reserved
approximately $43,000 for estimated clean up costs at 11 of its locations.
Wickes has been identified as having used two landfills which are now
Superfund clean up sites, for which it has been requested to reimburse a portion
of the clean-up costs. Based on the amounts claimed and Wickes' prior
experience, Wickes has established a reserve of $28,000 for these matters.
10
<PAGE>
Wickes is one of many defendants in two multi-plaintiff suits filed in
August of 1996 by approximately 200 claimants for unspecified damages as a
result of health problems claimed to have been caused by inhalation of silica
dust, a byproduct of concrete and mortar mix, allegedly generated by a cement
plant with which Wickes has no connection other than as a customer. Wickes has
entered into a cost sharing agreement with its insurers, and any liability is
expected to be minimal.
Wickes is one of many defendants in approximately 196 actions, each of
which seeks unspecified damages, in various Michigan state courts against
manufacturers and building material retailers by individuals who claim to have
suffered injuries from products containing asbestos. Each of the plaintiffs in
these actions is represented by one of two law firms. Wickes is aggressively
defending these actions and does not believe that these actions will have a
material adverse effect on Wickes. Since 1993, Wickes has settled 24 similar
actions for insignificant amounts, and another 224 of these actions have been
dismissed. As of June 24, 2000, none of these suits have made it to trial.
Losses in excess of the amounts accrued as of June 24, 2000 are possible
but an estimate of these amounts cannot be made.
Wickes is involved in various other legal proceedings which are
incidental to the conduct of its business. Certain of these proceedings involve
potential damages for which Wickes' insurance coverage may be unavailable. While
Wickes does not believe that any of these proceedings will have a material
adverse effect on Wickes' financial position, annual results of operations or
liquidity, there can be no assurance of this.
Wickes' assessment of the matters described in this note and other
forward-looking statements in this Form 10-Q are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995
("Forward-Looking Information") and are inherently subject to uncertainty. The
outcome of the matters described in this note may differ from Wickes' assessment
of these matters as a result of a number of factors including, but not limited
to, matters unknown to Wickes at the present time, development of losses
materially different from Wickes' experience, Wickes' ability to prevail against
its insurers with respect to coverage issues to date, the financial ability of
those insurers and other persons from whom Wickes may be entitled to indemnity,
and the unpredictability of matters in litigation.
THE COMPANY AND WICKES
The Company and Wickes are involved in various other legal proceedings
which are incidental to the conduct of their businesses. The Company does not
believe that any of these proceedings will have a material adverse effect on the
Company.
In connection with the sale of Dependable Insurance Company, a former
property and casualty subsidiary of the Company, the Company agreed to indemnify
11
<PAGE>
the purchaser for certain losses on various categories of liabilities. Terms of
the indemnities provided by the Company vary with regard to time limits and
maximum amounts. American Financial Acquisition Corporation subordinated
debentures in the amount of $2.1 million are pledged as collateral on these
indemnities. Although future loss development will occur over a number of years,
the Company believes, based on all information presently available, that these
indemnities will not have a material adverse effect on the Company's financial
position or results of operations.
On December 1, 1997, the Company completed the sale of its mortgage
lending operation to an unrelated third party. The Company did not realize any
gain or loss from the transaction, but agreed to indemnify the purchaser against
losses on the construction loan portfolio that was transferred. The Company
currently has 62,500 shares of its Wickes' common stock pledged as collateral
for this indemnification obligation. As the construction loan portfolio
decreases, the shares held as collateral will be released. The Company believes
that these indemnities will not have a material adverse effect on the Company's
financial position or results of operations.
LIQUIDITY AND MANAGEMENT'S PLANS
The Company's $1.8 million debt to Imagine due to mature on August 31,
2000 has been extended to December 15, 2000 and increased for the amount of
unpaid interest and refinancing costs of $221,000. The Company has entered into
a Amendment to Forbearance Agreement with the agent for its 11% Noteholders that
will allow the principal and interest due on the 11% Notes on September 30, 2000
to be paid on December 31, 2000. The terms of this agreement provide (i) the
Company will continue to sell Greenleaf common stock in a reasonable manner,
(ii) the Company will apply the proceeds from such sales first to the unpaid
interest and second to the principal, (iii) the interest rate will remain at 17%
and the Noteholders will receive a second lien behind Imagine on the 3,119,067
shares of Buildscape common stock. The Company continues to have discussions
with other present and prospective lenders regarding refinancing all, or a
portion of these debts. However, there can be no assurance that the Company will
be able to refinance any of these debts prior to the extended due dates for
these loans.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company is primarily
a holding company, which derives its financial resources through asset sales,
additional borrowings or other financings. As described below, the principal
source of funds in the past has been borrowings and sales of shares of Wickes
common stock. However, because the Company has executed the Greenleaf Settlement
(see Note 4, "Investment in Greenleaf"), the Company is now able to sell shares
of its Greenleaf stock to cover some of its debt obligations, subject to the
limitations and restrictions described below. The Company is currently working
on additional options as discussed below. The primary use of funds is interest
and principal payments on the Company's debt and to fund the operations of its
wholly-owned subsidiary, Cybermax. Cybermax is generating sales and the Company
projects that by the end of this year, Cybermax will generate cash from
operations sufficient to fund its operations. However, there can be no assurance
that this will occur.
12
<PAGE>
The Company estimates that as of September 30, 2000, it will have
approximately $670,000 of accounts payable and other current liabilities
(excluding interest payable), approximately $279,000 of which are past due. In
March of 2000, the Company and Wickes renegotiated the terms of the Company's
note to Wickes, deferring all principal payments due for one year, including the
delinquent principal payments for November of 1999 and February of 2000.
As stated above, the two assets that the Company may sell to cover
immediate cash needs are Wickes and Greenleaf common stock. However, as of
September 30, 2000, all of the Company's 2,918,543 shares of Wickes common stock
were pledged to secure various obligations of the Company. On the closing of the
Imagine short-term loan, Imagine released 81,970 shares of Wickes common stock,
thereby permitting the Company to sell such shares. Imagine has agreed to
release another 81,720 shares of Wickes common stock that the Company will sell
in the market and use the proceeds to cover payables and current operating
costs. The Company currently owns 9,230,000 shares of Greenleaf common stock and
has a five year option to purchase two million shares at $0.25 per share. All
9,230,000 shares owned are pledged to secure the Company's 11% Notes, and any
proceeds of sale are required to be applied as discussed above. The Company owns
an additional three million shares of Greenleaf common stock that are held in an
escrow account, pursuant to an escrow agreement between the Company and
Greenleaf (see Note 4. "Investment in Greenleaf").
The Company has been selling shares of Wickes and Greenleaf common
stock to meet the immediate cash requirements of interest due and operations.
Through September 30, 2000, the Company has sold 81,970 shares of Wickes common
stock and 770,000 shares of Greenleaf common stock for proceeds of approximately
$476,000 and $1,286,000, respectively. Proceeds from the sale of Wickes common
stock are used to pay the interest due to Wickes and to fund current operating
costs. All proceeds from the sale of Greenleaf common stock are used to pay the
11% Noteholders as discussed in Note 6."Long Term and Mortgage Debt".
The Company's $11.3 million of real estate indebtedness is secured by
the Company's real estate and 2,016,168 shares of Wickes common stock.
Additional collateral would be required in the event there is any collateral
deficit, at any quarterly valuation date, which would depend upon factors
including the market value of Wickes' common stock and the timing and amount of
real estate sales.
In June 2000, the Company sold 6.83 acres of its Florida real estate,
which generated proceeds of approximately $1.6 million. The entire proceeds were
used to pay the interest due on the Company's mortgage debt and a prepayment of
interest of approximately $88,000.
The Company sold 8.6 acres of its Atlanta real estate in September for
$861,000 and the Company currently has 45 acres of its Atlanta real estate under
contract to sell. All sales proceeds, estimated at $7.8 million (after closing
costs) will be used to pay interest, real estate taxes and pay down principal on
the current mortgage debt of $11.3 million. The Company previously had a
contract to sell all remaining acres scheduled for a May closing, however, the
buyer was unable to meet the terms of the sale and it was cancelled.
13
<PAGE>
The Company's assessment of the matters described in this note and
other Forward-Looking Information is inherently subject to uncertainty. The
outcome of certain matters described in this note may differ from the Company's
assessment of these matters as a result of a number of factors including but not
limited to: matters unknown to the Company at the present time, development of
losses materially different from the Company's experience, Wickes' ability to
prevail against its insurers with respect to coverage issues to date, the
financial ability of those insurers and other persons from whom Wickes may be
entitled to indemnity, and the unpredictability of matters in litigation.
In addition, the discussion above of the Company's future operations,
liquidity needs and sufficiency constitutes Forward-Looking Information and is
inherently subject to uncertainty as a result of a number of risk factors
including, among other things: (i) the success of, and level of cash flow
generated by Cybermax, (ii) the Company's ability to achieve the level of real
estate sales required to meet scheduled real estate debt principal and interest
payments and to avoid the requirement that the Company provide additional
collateral for this debt, (iii) the Company's ability to borrow, which may
depend upon, among other things, the trading price of Wickes common stock, the
value and liquidity of the Company's Greenleaf securities, and the success of
Cybermax and Buildscape, (iv) the ability of the Company to raise funds through
sales of Wickes and Greenleaf common stock and (v) uncertainty concerning the
possible existence of indemnification claims resulting from the Company's
discontinued operations. Future real estate sales depend upon a number of
factors, including re-zoning permits, interest rates, general economic
conditions, and conditions in the commercial real estate markets in Atlanta,
Georgia. In addition to the factors described above, the Company's ability to
sell Wickes and Greenleaf common stock would depend upon, among other things,
the trading prices for these securities, and, in light of the relatively low
trading volume for Wickes, the Company's ability to find a buyer or buyers for
these securities in a private transaction or otherwise.
6. LONG TERM AND MORTGAGE DEBT
---------------------------
Consolidated long-term and mortgage debt is comprised of the following
as of June 30, 2000 (in thousands):
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM DEBT
<S> <C>
Collateralized Notes $ 9,805
Other 2,269
Less: current maturities (11,806)
-----------
Total Company long-term debt less current maturities $ 268
MORTGAGE DEBT
Mortgage debt, non-recourse $ 11,345
-----------
Total long-term and mortgage debt
less current maturities $ 11,613
===========
</TABLE>
14
COLLATERALIZED NOTES ("THE 11% NOTES")
On August 25, 1999, the Company and the 13% Note holders executed an
agreement (the "11% Agreement"), whereby the Company's 13% Notes that were
scheduled to mature in September 1999, were replaced with new unsubordinated
promissory notes due September 30, 2000 bearing 11% interest. The 11% Notes are
secured by a junior lien on the collateral securing the Company's real estate
indebtedness and 10 million shares of Greenleaf common stock.
On March 24, 2000, the Company and the 11% Note holders executed a
modification to the 11% Agreement. This modification allows the Company to use
100% of the net sales proceeds from the sale of its Greenleaf shares to be
applied against the semi-annual interest payment due March 31, 2000 in lieu of
payment against the principal. In addition, the Company agreed to make a
principal reduction of $550,000 on the 11% Notes on or before April 30, 2000.
The Company was unable to sell a sufficient amount of the Greenleaf shares to
meet the April 30 deadline, and received a notice of default from the note
holders on May 8, 2000.
On May 8, 2000, the Company and the 11% Note holders executed a
Forbearance Agreement that precluded the 11% Note holders from taking any action
to accelerate the payment of the 11% Notes, as long as the Company performed
pursuant to the terms of the agreement. The terms included funding the balance
of the $550,000 principal payment that was due April 30, 2000 and selling
additional shares of Greenleaf common stock in subsequent months with the entire
proceeds applied to reduce the outstanding principal on the 11% Notes. The
Company reduced the principal balance of the notes by $195,000 in June, $145,000
in July and $160,000 in August, however, these payments fell below the
requirements of the forbearance agreement.
The Company has entered into an Amendment to the Forbearance Agreement
with the agent for the 11% Noteholders that will allow the interest and
principal due on September 30, 2000, to be paid on December 31, 2000. The terms
of this agreement provide (i) the Company continue to sell the Greenleaf common
stock in a reasonable manner, (ii) the Company will apply the proceeds from such
sales first to the unpaid interest and second to the unpaid principal, (iii) the
interest rate will remain at 17% and the Noteholders will receive a second lien
behind Imagine on the 3,119,067 shares of Buildscape common stock.
15
<PAGE>
OTHER
WICKES PROMISSORY NOTE
In March of 2000, the Company and Wickes renegotiated the terms of the
Wickes promissory note, deferring all principal payments, including the
delinquent principal payments due in November of 1999 and February of 2000, for
one year, after which the principal payments are due on a quarterly basis. The
interest on this note will be payable on a quarterly basis.
IMAGINE SHORT-TERM LOAN
As of May 9, 2000, the Company had made payments of $9,553 under the
Imagine short-term loan but was delinquent with respect to required payments of
approximately $174,675 of interest. In connection with the Greenleaf Settlement,
the Company granted Greenleaf a stock option to purchase 5% of the issued and
outstanding shares of Cybermax, all of which are pledged to Imagine. The Company
believes that if Greenleaf exercises this stock option, then the Imagine
short-term loan will be paid in full. The Company and Imagine have agreed to
extend the principal and interest payments due on August 15, 2000 until
December 15, 2000. The $1.8 million loan balance will be increased for unpaid
interest and refinancing costs of $221,000 with this extension.
7. INCOME TAXES
------------
The Company's effective tax rate was 0% for the six months ended June
30, 2000 and 1999. The Company has established a reserve for the full amount of
deferred tax assets. In management's opinion, it is unlikely the deferred tax
assets will be realized in the near future.
8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
-----------------------------------------
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," standardizes the accounting for derivative instruments by requiring
that all derivatives be recognized as assets and liabilities and measured at
fair value. In June 1999, SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of SFAS No. 133," was
issued amending SFAS No. 133 by deferring the effective date for one year, to
fiscal years beginning after June 15, 2000. The Company currently is evaluating
the effects of this pronouncement.
9. SUBSEQUENT EVENTS
-----------------
In the second quarter management proposed the transfer of additional
shares of Greenleaf's common stock and options to certain officers and
employees. These issuances are subject to the Company's Board of Directors
review and approval. On April 7, 2000, the Board engaged an outside consulting
firm to conduct a compensation analysis of incentive programs. The Board has not
taken any further action pending receipt of the report.
On August 14, 2000, the Company executed an Amendment to the Forbearance
Agreement with the agent for the 11% Noteholders, that provides for an extension
of the maturity date of the Notes from September 30, 2000 to December 31, 2000.
For further information regarding this extension see Note 5. "Commitments and
Contingencies".
On August 10, 2000, Imagine agreed to extend the maturity date of its
Note from August 31, 2000 to December 15, 2000 and to increase the principal due
for the unpaid interest and refinancing costs of $221,000. For further
information regarding this extension see Note 5. "Commitments and
Contingencies".
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
---------------------------------------------------------------- -------
The following discussion should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes thereto contained
elsewhere herein and in conjunction with the Consolidated Financial Statements
and Notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
RESULTS OF OPERATIONS
GENERAL
The Company reported results of operations for the three and six months
ended June 30, 2000 and 1999, as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings(loss) before income taxes,
and equity in related parties(1)(2) $ (658) $ (2,392) $ (972) $ (4,231)
Income tax (benefit) expense -- --
Equity in earnings (losses)
of Wickes Inc.(3) 417 1,178 (880) (147)
---------- ----------- ---------- ----------
Net loss $ (241) $ (1,214) $ (1,852) $ (4,378)
========== =========== ========== ==========
</TABLE>
(1) Includes realized investment gains of $587,000 and $0 for the three
months ended June 30, 2000 and 1999, and $1,163,000 and $0 for the six
months ended June 30, 2000 and 1999, respectively.
(2) The Company accounted for its investment in Buildscape under the equity
method for the six months of 2000. During the same period in 1999, the
Company consolidated Buildscape's operations with those of the Company
and its subsidiaries.
(3) Includes goodwill amortization of $130,200 and $130,200 for the three
months ended June 30, 2000 and 1999, and $260,400 and $260,400 for the
six months ended June 30, 2000 and 1999, respectively.
17
<PAGE>
LINES OF BUSINESS
The following tables sets forth certain financial data for the three and
six months ended June 30, 2000 and 1999, respectively, for the following
segments: Buildscape, Cybermax, Wickes and the Parent Group. Buildscape's
operations are consolidated with those of the Company and its subsidiaries
through October 21, 1999. The Company accounted for its investment in Buildscape
under the equity method for the first six months of 2000. The "Parent Group"
includes real estate, parent company, discontinued operations and all
eliminating entries for inter-company transactions.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
SALES:
Buildscape(1) $ -- $ 114 $ -- $ 179
Cybermax 344 143 748 543
Wickes(2) -- -- -- --
Parent Group -- 13 -- 29
------------ ---------- ------------ -----------
Total $ 344 $ 270 $ 748 $ 751
============ =========== ============ ==========
COST OF SALES:
Buildscape(1) $ -- $ 91 $ -- $ 123
Cybermax 164 48 288 91
Wickes(2) -- -- -- --
Parent Group -- 1 -- 4
------------ ----------- ---------- ------------
Total $ 164 $ 140 $ 288 $ 218
============ =========== =========== ============
OTHER OPERATING INCOME:
Buildscape(1) $ -- $ -- $ -- $ --
Cybermax 9 -- 12 1
Wickes(2) -- -- -- --
Parent Group 35 24 35 48
------------ ----------- ---------- ----------
Total $ 44 $ 24 $ 47 $ 49
============ =========== ========== =========
INVESTMENT INCOME AND REALIZED
GAINS/(LOSSES):
Buildscape(1) $ -- $ -- $ -- $ --
Cybermax -- -- -- --
Wickes(2) 36 -- 84 --
Parent Group 542 (7) 1,052 (36)
----------- ----------- ---------- -----------
Total $ 578 $ (7) $ 1,136 $ (36)
=========== =========== ========== ===========
18
<PAGE>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
(in thousands) (in thousands)
EXPENSES:
Buildscape(1) $ -- $ 1,301 $ -- $ 2,417
Cybermax 430 445 884 998
Wickes(2) -- -- -- --
Parent Group 307 143 397 59
----------- ------------ ---------- -----------
Total $ 737 $ 1,889 $ 1,281 $ 3,474
=========== ============ ========== ===========
INTEREST EXPENSE:
Buildscape(1) $ -- $ 46 $ -- $ 83
Cybermax -- 1 -- 2
Wickes (2) 374 382 648 763
Parent Group 349 221 686 455
----------- ------------ ---------- -----------
Total $ 723 $ 650 $ 1,334 $ 1,303
=========== ============ ========== ===========
EARNINGS(LOSS) BEFORE INCOME
TAXES, EQUITY IN RELATED PARTIES
AND MINORITY INTEREST:
Buildscape(1) $ -- $ (1,324) $ -- $ (2,444)
Cybermax (241) (351) (412) (547)
Wickes(2) (338) (382) (564) (763)
Parent Group (79) (335) 4 (477)
----------- ------------ ---------- ----------
Total $ (658) $ (2,392) $ (972) $ (4,231)
=========== ============ ========== ==========
IDENTIFIABLE ASSETS:
Buildscape(1) $ (947) 713 $ (947) $ 713
Cybermax 558 569 558 569
Wickes(2) 14,564 13,405 14,564 13,405
Parent Group 14,789 10,043 14,789 10,043
----------- ------------ ---------- -----------
Total $ 28,964 $ 24,730 $ 28,964 $ 24,730
=========== =========== ========== ===========
</TABLE>
(1) After October 21, 1999, the Company's balance sheet and statements of
operations reflect the Company's investment in Buildscape on the equity method.
(2) Includes an interest allocation from Riverside on its 11% secured notes and
13% subordinated notes of $374,000 and $382,000 for the three months ended June
30, 2000 and 1999, respectively, and $648,000 and $763,000 for the six months
ended June 30, 2000 and 1999, respectively.
19
<PAGE>
BUILDSCAPE, INC.
The following table sets forth unaudited information concerning the results
of Buildscape for the three and six months ended June 30, 2000 and 1999,
respectively: (in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 122 $ 114 $ 249 $ 179
Cost of sales 91 91 196 123
---------- ---------- ---------- ----------
Net profit 31 23 53 56
Selling, general and administrative 3,054 1,262 4,948 2,365
Depreciation and amortization 165 39 289 52
Interest expense 10 46 10 83
---------- ---------- ----------- ----------
Total expenses 3,229 1,347 5,247 2,500
Other income 54 -- 72 --
---------- ---------- ---------- ----------
Net loss $ (3,144) $ (1,324) $ (5,122) $ (2,444)
========== ========== ========== ==========
</TABLE>
On October 21, 1999, the Company sold to Imagine 38% of the common and
100% of the preferred stock of Buildscape. As a result, the Company accounted
for its investment in Buildscape under the equity method after October 21, 1999.
On May 12, 2000, Buildscape entered into a stock purchase agreement
with Imagine and the Dow Chemical Company ("Dow") pursuant to which Dow
purchased Series A Preferred Stock and common stock of Buildscape from Imagine
and also purchased newly issued Series B Preferred Stock directly from
Buildscape. Dow purchased one tranche of Series B Preferred Stock upon the
completion of certain milestones by Buildscape. Dow also acquired an option to
acquire additional shares in Buildscape that will increase its ownership to
50.1%. Upon the completion of the transactions, Riverside's ownership in
Buildscape will be reduced from 47% to 35%, on a fully converted basis.
In March 1999, Buildscapeauction.com was introduced. Although this
website is conducting sales, development costs continue as the site content is
expanded and the functionality of the site is enhanced and improved. Selling,
general and administrative expense includes personnel and technology costs
relevant to developing the technology for the website and the marketing sales
plan for the Buildscape.
Buildscape delivers products and services to construction professionals
through the Internet and other emerging technologies. BuildscapePro
(www.buildscapepro.com) provides access to real-time product and procurement
information, including pricing, availability and delivery. This allows
professional builders and contractors to better manage the flow of materials,
20
<PAGE>
locate subcontractors and enhance their customer service. Buildscape also
operates www.buildscape.com, giving consumers access to building products and
information for their home improvement needs.
Buildscape has experienced cumulative operating losses, and its
operations are subject to certain risks and uncertainties, including, among
others, risks associated with technology and regulatory trends, evolving
industry standards, growth and acquisitions, actual and prospective competition
by entities with greater financial and other resources, the development of the
Internet market and the need for additional capital. There can be no assurances
that Buildscape will be successful in becoming profitable or generating positive
cash flow in the future. Buildscape is considered to be a development stage
company.
CYBERMAX, INC.
The following table sets forth unaudited information concerning the
results of Cybermax for the three and six months ended June 30, 2000 and 1999,
respectively (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 344 $ 143 $ 748 $ 543
Cost of sales 164 48 288 91
------- -------- --------- --------
Net profit 180 95 460 452
Selling, general and administrative 384 414 792 943
Depreciation and amortization 46 31 92 53
Interest expense -- 1 -- 2
-------- -------- --------- --------
Total expenses 430 446 884 999
Other operating income 9 -- 12 1
-------- -------- -------- --------
Net loss $ (241) $ (351) $ (412) $ (547)
======== ======== ======= ========
</TABLE>
21
<PAGE>
Revenues for the second quarter of 2000 were $344,000 compared to
$143,000 for the comparable period in 1999. Revenues for the second quarter of
2000 include $250,000 of e-Commerce solution sales, $34,000 of software and
equipment sales, $7,000 of multi-media solution sales and $53,000 of network
services. Revenues for the second quarter of 1999 include $87,000 of e-Commerce
solution sales, $8,000 of software and equipment sales and $48,000 of network
services. The direct costs for the second quarter of 2000 include $83,000 for
e-Commerce solution sales, $28,000 of software and equipment sales, $40,000
network services and $13,000 of miscellaneous costs. The direct costs for the
second quarter of 1999 include $6,000 of costs for software and equipment sales,
$35,000 of costs for network services and $7,000 of miscellaneous costs. During
the second quarter of 1999, the direct costs for the e-Commerce solution sales
were employees salaries which were included in the selling, general and
administrative line item. In 2000, these costs were provided by an outside
consulting firm and were included as a direct cost of sales.
Revenues for the first six months of 2000 were $748,000 compared to
$543,000 for the first six months of 1999. Revenues for the first six months of
2000 include $553,000 of e-Commerce solution sales, $86,000 of software and
equipment sales, $7,000 of multimedia solutions sales and $102,000 of network
services. Revenues for the first six months of 1999 include $426,000 of
e-Commerce solution sales, $8,000 of software and equipment sales and $109,000
of network services. The direct costs for the first six months of 2000 include
$137,000 for e-Commerce solution sales, $57,000 of software and equipment sales,
$78,000 of network services and $16,000 of miscellaneous costs. During the first
six months of 1999, the direct costs for the e-Commerce solution sales were
employees salaries which were included in the selling, general and
administrative line item. In 2000, these costs were provided by an outside
consulting firm and were included as a direct cost of sales.
Selling, general and administrative expenses decreased for the second
quarter of 2000 to $384,000, compared to $414,000 during the first six months of
1999. The primary reason for this decrease was the reduction of personnel and
legal expense which was offset slightly by increases in contractual services,
software services and marketing and advertising expense.
Selling, general and administrative expenses decreased for the first
six months of 2000 to $792,000, compared to $943,000 during the first six months
of 1999. The primary reason for this decrease was the reduction of the personnel
in 2000 and legal expenses which was offset slightly by increases in contractual
services, software services and marketing and advertising expense.
WICKES INC.
The Company estimates that its results of operations for the second
quarter of 2000 include profits of $79,000 attributable to Wickes, compared to
profits of $796,000 for the same period in 1999. The Company estimates that its
results of operations include losses of $1,444,000 and $909,000 attributable to
Wickes, for the first six months ended June 30, 2000 and 1999, respectively.
The following discussion was obtained from the Wickes Quarterly Report
on Form 10-Q for the second quarter of 2000.
22
<PAGE>
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto contained elsewhere herein
and in conjunction with the Consolidated Financial Statements and Notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in Wickes' Annual Report on Form 10-K for the year ended
December 25, 1999.
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain expense and income items. This information
includes the results from all sales and distribution and component manufacturing
facilities operated by Wickes, including those closed or sold during the period.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(unaudited) (unaudited)
June 24, June 26 June 24, June 26,
2000 1999 2000 1999
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 24.8% 23.0% 24.8% 23.4%
Selling, general and
administrative expense 21.2% 19.0% 22.4% 20.7%
Depreciation, goodwill and
trademark amortization 0.7% 0.6% 0.7% 0.6%
Provision for doubtful accounts 0.0% 0.0% 0.1% 0.1%
Other operating income (0.3)% (0.8)% (0.3)% (0.6)%
Income from operations 3.2% 4.2% 2.0% 2.6%
</TABLE>
Wickes' results of operations are historically affected by, among other
factors, weather conditions, interest rates, lumber prices, housing starts and
other external economic factors. Weather conditions during the first six months
of 2000 were relatively comparable to the prior year. However, in Wickes'
largest region, the Midwest, experienced extremely wet conditions in May and
June which tends to adversely impact sales. The second quarter and first half of
2000 showed continuing trends of higher interest rates, which many builders took
as a sign to slow down production and test demand. As a result of these factors,
housing starts for the second quarter of 2000 were down from the second quarter
of 1999 a combined 5.4% in the Midwest and Northeast regions of the United
States (5.3% and 5.4%, respectively). The Midwest and Northeast represented
approximately 79.0% of Wickes' sales in the second quarter of 2000 versus 76.4%
of Wickes' sales in the comparable period of 1999. When combined with the South,
housing starts for the second quarter of this year were flat in all regions
served by Wickes over the same period last year. On a year-to-date basis, actual
housing starts are relatively comparable to last year. In addition to the
effects of the foregoing, escalating fuel prices and higher interest rates have
also adversely impacted Wickes' earnings.
Net income for the three months ended June 24, 2000 was $1.5 million
compared with a net income of $3.6 million for the three months ended June 26,
1999. The decrease in net income for the three-month period primarily is the
result of increased sales, general and administrative expenses, interest and
depreciation expenses, as well as a reduction in other operating income, all of
which offset higher gross margins.
23
<PAGE>
Net loss for the first six months of 2000 was $1.7 million compared
with net loss of $311,000 for the first six months of 1999. The decrease in net
income for the six-month period primarily is the result of increases in sales,
general and administrative, depreciation and interest expenses, as well as a
reduction in other operating income, all of which offset higher gross margins.
PARENT COMPANY AND OTHER SUBSIDIARIES
The following discussion relates to the operations of the Parent
Company and its subsidiaries, other than Buildscape, Cybermax and Wickes (the
"Parent Group").
The Parent Group's non-interest operating expenses for the second
quarter of 2000 increased to $307,000 compared to $143,000 for the same period
in 1999. On April 14, 2000, the Company's Board of Directors authorized the
Company to transfer certain options held by the Company to acquire common stock
of Greenleaf to certain employees of the Company. Accordingly, in the second
quarter of 2000, the Company recorded income of approximately $105,000 included
in net realized investment gains, which represents the value of the shares
transferred. Such approval effectively results in the awarding of options and
the recognition of compensation expense of approximately $105,000, accordingly.
In addition, travel, audit and legal expenses increased during the second
quarter of 2000 compared to the second quarter of 1999.
Revenues of the Parent Company (excluding investment income) for the
second quarter of 2000 and 1999 were $35,000 and $24,000, respectively.
Interest expense (excluding interest allocation to Wickes for the
Parent Company's 11% and 13% Notes of $374,000 in 2000 and $382,000 in 1999) for
the second quarter of 2000 and 1999, were $349,000 and $221,000 respectively. In
2000, interest consisted of $71,000 on the Parent Company's other debt and
$278,000 on the Parent Company's real estate mortgage debt. In 1999, interest
consisted of $2,000 on the Parent Company's other bank debt and $219,000 on the
Parent Company's real estate mortgage debt. The primary reason for the increase
in interest expense is due to additional debt of the Company and higher interest
rates on the Company's mortgage debt.
The Parent Group's non-interest operating expenses for the first six
months of 2000 increased to $307,000 compared to $59,000 during the same period
in 1999. The 1999 expenses include income of approximately $100,000, which
resulted from the release of a reserve established in prior years in connection
with the sale of the Company's former property and casualty operations.
In 2000, compensation expense of approximately $105,000 was included for options
transferred to employees, as discussed above. In addition travel, audit and
legal expenses were higher for the six months of 2000 compared to the six months
of 1999.
Revenues of the Parent Group (excluding investment income) for the
first six months of 2000 and 1999 were $35,000 and $48,000, respectively.
Interest expense (excluding interest allocation to Wickes for the
Parent Company's 11% and 13% notes of $648,000 in 2000 and $763,000 in 1999) for
the six months of 2000 and 1999, were $686,000 and $455,000 respectively. In
2000, interest consisted of $142,000 on the Parent Company's other debt and
$544,000 on the Parent Company's real estate mortgage debt. In 1999, interest
consisted of $3,000 on the Parent Company's other bank debt and $452,000 on the
Parent Company's real estate mortgage debt. The primary reason for the increase
in interest expense is due to additional debt of the Company and higher interest
rates on the Company's mortgage debt.
24
<PAGE>
REAL ESTATE INVESTMENTS
The Company's real estate investments consist of $7,306,000 in Georgia
properties, and $81,000 in other states.
During the second quarter of 2000, the Company sold 6.83 acres of its
Florida property for $1,636,000, and recorded a loss of $3,400 on the sale.
During the fourth quarter of 1999, the Company had established a reserve for
$278,000 on this property. The Company had no sales of its real estate
investments during the second quarter of 1999.
INCOME TAXES
The Company's effective tax rate was 0% for the three and six
months ended June 30, 2000 and 1999. The Company's equity in losses of Wickes
has reduced the Company's GAAP basis in its investment in Wickes creating
deferred tax benefits which will be realized upon sale or subsequent increase in
GAAP basis of this investment.
LIQUIDITY AND CAPITAL RESOURCES
The Parent Company's general liquidity requirements consist primarily
of funds for payment of debt and related interest and for operating expenses and
overhead.
Operations (exclusive of Wickes, which is prohibited from paying
dividends under its debt instruments) consist primarily of asset sales and
Cybermax's operations. Proceeds from real estate sales are required to be
applied to real estate debt reduction and are not available to the Parent
Company for other purposes.
The $9,500,000 principal amount of the Company's 11% Notes due
September 30, 2000, and the $1,800,000 principal amount of the Company's
short-term loan from Imagine due August 31, 2000, has been extended. For further
information regarding these loans see Note 5. "Commitments and Contingencies"
and Note 6. "Long Term and Mortgage Debt".
For a detailed discussion of the Parent Company's liquidity and
management's plans related thereto, see Note 5. "Commitments and Contingencies".
During the first six months of 2000, stockholders' equity increased by
a net of $3,642,000. The primary reason for the increase was the change in
unrealized gains on the Company's Greenleaf common stock which was approximately
$5,494,000. In addition, the Company recorded gains on the sale of its Greenleaf
25
<PAGE>
common stock of $977,000. This increase was offset by losses attributable to
Wickes of approximately $1,444,000. In addition, the Parent Company's and
Cybermax's operations incurred losses of approximately $1,385,000.
YEAR 2000
The Year 2000 issue is the result of certain computer programs that
were designed to use two digits rather than four to define the applicable year.
As a result, if the Company's computer programs with date-sensitive functions
are not Year 2000 compliant, they may recognize a date using "00" as the Year
1900 rather than the Year 2000. This could cause system failures,
miscalculations, the inability to process transactions, send invoices, or
process similar business activities.
The Company's total cost for the Year 2000 project was approximately
$350,000, of which approximately $306,000 was used to replace the Company's
accounting software system. The remaining $44,000 is for the replacement of
systems, equipment and software which was accelerated due to the Year 2000
problem, and has been capitalized over the systems and software estimated useful
life.
To date, the Company has not experienced any significant Year 2000
problems and will continue to monitor its systems over the next few months.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
26
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding the Company's legal
proceedings, see Note 5 of Notes to Condensed
Consolidated Financial Statements included elsewhere
herein.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
For information regarding the Company's default on
its 11% Notes, see Note 6 of Notes to Condensed
Consolidated Financial Statements included elsewhere
herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
4.1 (a) Forbearance Agreement dated May 8, 2000 among the
registrant and the Secured Noteholders.
(b) Amendment to the Forbearance Agreement dated August
14, 2000 among the registrants and the Secured Note
Holders.
(c) First Amendment to Loan Agreement and Stock Pledge
Agreements dated August 31, 2000 among the registrant
and Imagine Investments.
(d) First Amended and Restated Promissory Note dated
August 31, 2000 among the registrant and Imagine
Investments.
(e) Stock Pledge Agreement dated August 31, 2000 among
the registrant and Imagine Investments.
27.1 Financial Data Schedule (SEC Use Only)
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated
as of May 26, 2000 reporting under Item 4. Changes in
Registrant's Certifying Accountant.
27
<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.
RIVERSIDE GROUP, INC.
By /s/ J. Steven Wilson
----------------------------------------
J. Steven Wilson
Chairman of the Board,
President and
Chief Executive Officer
By /s/ Catherine J. Gray
----------------------------------------
Catherine J. Gray
Senior Vice President and
Chief Financial Officer
Date: October 6, 2000
28
<PAGE>
FORBEARANCE AGREEMENT
THIS AGREEMENT, made as of the 8th day of May, 2000, by and between
RIVERSIDE GROUP, INC., a Florida corporation (the "Debtor") and MITCHELL W.
LEGLER ("Agent") as agent for the Holders shown on Exhibit "A" hereto
("Holders").
RECITALS
A. The Debtor and the Holders are parties to a Credit Agreement dated
as of April 1, 1999 (as amended or modified from time to time, the "Credit
Agreement"), pursuant to which the Holders have made loans totaling in the
aggregate $10,000,000.00 evidenced by secured promissory notes dated April 1,
1999 (as amended, modified or extended, the "Notes"). All terms used in this
Agreement which are not defined in this Agreement shall have the same meaning as
is ascribed to them in the Credit Agreement.
B. An Event of Default has occurred and is continuing under the Notes
and the Credit Agreement, resulting from the Debtor's failure to make certain
payments as required.
C. The Debtor has requested that the Holders and the Agent forbear from
the exercise of its rights and remedies under the Credit Agreement and
Collateral Documents (as defined in the Credit Agreement), and enter into
certain additional agreements, all as hereafter set forth, and the Holders and
the Agent have agreed to forbear and to enter into such other agreements as
hereinafter set forth, on and subject to all of the terms and conditions set
forth in this Agreement and in consideration of the representations, warranties,
covenants and agreements of the Debtor hereinafter set forth.
NOW, THEREFORE, for and in consideration of the sum of Ten and 00/100
Dollars ($10.00) in hand paid, and to induce the Holders and the Agent to
continue to forbear from taking any collection action with respect to the Notes,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the recitals are
true and correct and do also hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE DEBTOR. The Debtor hereby agrees
and acknowledges, and represents and warrants to the Holders, as follows:
(a) RECITALS. The Recitals are true and correct.
(b) CREDIT AGREEMENT. The representations and warranties of the Debtor
contained in the Credit Agreement and the Collateral Documents or delivered in
connection with the Credit Agreement and the Collateral Documents continue to be
true and correct in all material respects as of the date hereof, except to the
extent that such representations and warranties relate solely to an earlier date
and except that the Debtor is in default in its existing credit facility with
Imagine, Inc.
(c) AUTHORITY.
(i) The execution, delivery and performance of this Agreement by
the Debtor has been duly and properly authorized and approved by the Debtor; and
(ii) The Debtor has the power and authority to execute this
Agreement and perform its obligations hereunder.
<PAGE>
(d) OUTSTANDING INDEBTEDNESS.
(i) As of the date of this Agreement, the outstanding principal
balance of the Notes is $10,000,000.00, plus accrued interest;
(ii) The Event of Default described in the Recitals hereto is
continuing;
(ii) The Agent has given the required notice under the Notes,
the Credit Agreement and the Collateral Documents of the occurrence of the Event
of Default. The Debtor acknowledges that the Notes are now due and payable on
demand by the Agent as a result of the Event of Default, that the Holders and
the Agent have the right, at any time and in their sole discretion, to demand
repayment in full of the Notes and that the Notes bear interest at the Default
Rate; and
(iv) Notwithstanding the execution and delivery of this Agree-
ment and any other settlement documents delivered in connection herewith, and
notwithstanding any subsequent cure of the Event of Default, the Debtor
acknowledges and agrees that, except as set forth in this Agreement, neither
this Agreement nor any other settlement document, nor any action taken or
omitted pursuant to this Agreement or any other settlement document, shall
constitute or be deemed to constitute a cure of the Event of Default or a
reinstatement of the Notes, and, except as set forth in this Agreement, the
Notes shall remain in default.
(e) CREDIT AGREEMENT AND COLLATERAL DOCUMENTS; WAIVERS BY DEBTOR.
(i) The Credit Agreement, this Agreement and the other Collat-
eral Documents constitute the valid and legally binding obligations of the
Debtor and are enforceable against the Debtor in accordance with their
respective terms;
(ii) Except for the Event of Default described in the Recitals
hereto, the Debtor is in full compliance with the covenants and agreements of
the Debtor set forth in the Credit Agreement and the other Collateral Documents.
(ii) Neither this Agreement nor any other settlement document
delivered in connection herewith shall be deemed or construed to be a
satisfaction, novation or release of the Credit Agreement or any other
Collateral Document, or any of them, or, except as expressly provided in this
Agreement, a waiver or forbearance by Holders of any of the rights of the
Holders under the Credit Agreement and the Collateral Documents, or any of them,
or at law or in equity;
(iv) The Debtor has no presently existing defenses, affirmative
defenses, set-offs, claims, counterclaims or causes of action of any kind or
nature whatsoever against the Agent or the Holders with respect to (a) the
Credit Agreement, the Collateral Documents, or the indebtedness evidenced or
secured thereby, (b) any other documents or instruments evidencing, securing or
in any way relating to the Notes, (c) the administration or funding of the Notes
by the Holders or the Agent or (d) any actions or courses of dealing by the
Agent or the Holders; and
(f) LEGAL PROCEEDINGS. Except as set forth in the Credit Agreement, the
Debtor is not a party to, or the subject of, any lawsuit, complaint,
counterclaim, cross-claim, adversary proceeding, arbitration proceeding,
bankruptcy or insolvency proceeding, administrative claim or other legal action
or proceeding.
<PAGE>
(g) NO FRAUDULENT INTENT. Neither the execution or delivery of
this Agreement or any other settlement documents, nor the performance of any
actions required hereunder or thereunder, is being consummated by the Debtor
with or as a result of any actual intent by the Debtor to hinder, delay or
defraud any person or entity to which the Debtor is now or will hereafter become
indebted.
(h) NO BANKRUPTCY INTENT. The Debtor has no present intent (i) to file
any petition under any chapter of the Federal Bankruptcy Code, or in any manner
to seek relief, protection, reorganization, liquidation, dissolution or similar
relief for Debtor under any other local, state, federal or other insolvency law
or laws providing for relief of Debtor or in equity, or (ii) directly or
indirectly to cause any involuntary petition under any chapter of the Federal
Bankruptcy Code to be filed against the Debtor, or directly or indirectly to
cause any Debtor to become the subject of any proceedings pursuant to any other
state, federal or other insolvency laws or laws providing for the relief of
Debtor, either at the present time, or at any time hereafter. The Debtor hereby
waives to the fullest extent permitted by law any benefit of an automatic stay
under the Federal Bankruptcy Code.
2. COVENANTS AND AGREEMENTS OF THE DEBTOR.
(a) RESTRICTIONS ON COLLATERAL. The Debtor agrees to cooperate in all
respects with the requests of the Agent for monitoring of all property of the
Debtor, whether real or personal, tangible or intangible or mixed, and wherever
located, which serves as collateral for the Notes or any other obligations of
the Debtor under the Credit Agreement or Collateral Documents, and in
furtherance thereof, the Debtor agrees that the Agent may be present at any or
all of the Debtor's business locations, at any reasonable time, and from time to
time for the purpose of examining and making copies of any and all books and
records of the Debtor and for the purpose of examining and monitoring, but not
controlling, the condition, location and status of all Collateral, and the
Debtor agrees to provide the Agent with full and complete access to all such
information and shall provide such assistance and perform such acts as such
agent or representative may reasonably require in connection therewith.
(b) NOTICE OF PROCEEDINGS. The Debtor shall notify the Agent in
writing, promptly upon learning thereof, of the institution of any suit,
administrative proceeding or other legal proceeding which if adversely
determined would materially affect the operations, financial condition or
business of any of the Debtor.
(c) COMPLIANCE WITH CREDIT AGREEMENT AND COLLATERAL DOCUMENTS. The
Debtor shall comply fully and promptly with the covenants and agreements of the
Debtor set forth in the Credit Agreement and the Collateral Documents, except to
the extent inconsistent with the terms of this Agreement.
(d) PRINCIPAL REDUCTION. The Debtor agrees that
(i) on or before May 31, 2000 the outstanding principal of the
Notes shall have been reduced by $200,000;
(ii) on or before July 15, 2000, the outstanding principal of
the Notes shall have been reduced by $550,000;
(iii) on or before August 15, 2000 the outstanding principal of
the Notes shall have been reduced by $550,000 plus the proceeds of the sale on
or after July 15, 2000, of 200,000 of the Greenleaf Shares (as defined in the
Credit Agreement), with such proceeds being delivered to the Agent immediately
upon receipt by the Debtor;
<PAGE>
(iv) on or before September 15, 2000 the outstanding principal
of the Notes shall have been reduced by $550,000 plus the proceeds of the sale
on or after July 15, 2000, of 400,000 of the Greenleaf Shares with such proceeds
being delivered to the Agent immediately upon receipt by the Debtor; and
(v) the Notes shall remain due and payable in full without
notice on September 30, 2000.
Provided, however, for purposes of subparagraphs (i) through (iv), in the event
that the proceeds of the sales of Greenleaf Shares are not received by the Agent
by the due dates shown above, no Forbearance Default shall be deemed to occur if
the proceeds from the Greenleaf shares are (x) held in a brokerage account in
which the Holders have a perfected first priority security interest and (y)
received by the Agent no later than August 21 and September 21 respectively.
(e) COMPENSATION FOR SELECTED EXECUTIVE OFFICERS.
(i) The Debtor shall not permit the aggregate amount of
"Compensation" (as defined below) either directly or indirectly paid by the
Debtor and/or its majority-owned subsidiaries to Steven J. Wilson and Catherine
J. Gray ("Selected Executive Officers") to exceed $35,000 per month, beginning
May 1, 2000; provided however, that this amount shall be reduced
dollar-for-dollar, but not below $2,500 per month for any "Excess Compensation"
(as defined below) paid to the Selected Executive Officers by any affiliates of
the Debtor which are not majority-owned subsidiaries (including, without
limitation, Wickes Inc. and Buildscape, Inc.). For purposes of this subsection
"Compensation" shall include base salary, all bonuses, personal expenses paid to
or for the benefit of the Selected Executive Officers and all other amounts
required to be included as compensation on an employee's Internal Revenue Form
W-2 for Federal Income Tax purposes. "Excess Compensation" shall mean monthly
Compensation to the Selected Executive Officers during any calendar year
beginning January 1, 2000 in which the total Compensation to both of the
Selected Executive Officers, calculated on a year to date, annualized basis, is
in excess of $400,000 per annum in the aggregate, provided, however, that this
calculation will exclude cash bonuses of $778,000 paid prior to June 2, 2000,
with respect to calendar year 1999.
(ii) Debtor shall not and shall not permit its majority-owned
subsidiaries to, grant to the Selected Executive Officers any property intended
as compensatory benefits, including without limitation, stock options, stock
purchase rights, stock appreciation rights, and insurance benefits, other than
those listed on Exhibit B which were approved prior to March 31, 2000 except to
the extent such property is subject to a valid, perfected security interest in
favor of the Holders and the Selected Executive Officers execute an
acknowledgement that their rights in such property are subordinate to that of
the Holders.
(f) PAYMENTS TO AFFILIATES. The Debtor shall not and shall not permit
its majority- owned subsidiaries to make any payments to affiliates of the
Company in excess of $5,000 per month including, without limitation any
affiliate owning or operating an airplane.
(g) INTEREST RATE. Notwithstanding any provision of the Credit
Agreement or the Notes to the contrary, effective as of May 1, 2000, until
September 30, 2000, Interest on the Notes shall accrue at 17% per annum, and
after September 30, 2000, if not sooner paid in full, the Notes will bear
interest at the highest rate permitted by applicable law not to exceed 25% per
annum.
<PAGE>
(h) FURTHER ASSURANCES. At any time, and from time to time, upon
request by the Agent, the Debtor will take such action as may, in the reasonable
opinion of the Agent, be necessary or desirable in order to effectuate, complete
or perfect, or to continue and preserve the Holders' security interest in and to
any Collateral, and including execution, delivery, filing and recordation of
such security agreements, financing statements, continuation statements,
instruments of further assurance, certificates, or other documents necessary to
correct any technical or inadvertent errors or omissions.
3. RELEASE OF HOLDERS AND AGENT.
(a) RELEASE AND COVENANT NOT TO SUE. The Debtor, for itself and its
successors and assigns, and subject to the limitations hereinafter set forth,
does hereby (i) remise, release, acquit, satisfy and forever discharge the
Holders and the Agent, and all of their past, present and future officers,
directors, employees, agents, attorneys, heirs, representatives, successors and
assigns of any of the above persons or entities (hereinafter referred to as the
"Released Parties"), from any and all manner of action and actions, cause or
causes of action, suits, debts, sums of money, accounts, covenants, contracts,
controversies, obligations, liabilities, agreements, promises, expenses,
variances, trespasses, damages, judgments, liens, claims of lien, claims,
counterclaims, or demand of every nature and kind whatsoever, if any, at law or
in equity, whether now accrued or hereafter maturing and whether known and
unknown, which the Debtor now has or hereafter can, shall or may have by reason
of any matter, cause of thing, from the beginning of the world to and including
the date of this Agreement, arising out of or in connection with the Notes,
Credit Agreement, any other Collateral Documents, or any transactions or other
matters in connection therewith, including without limitation, the
administration or funding of the Notes and the loans evidenced thereby; and (ii)
covenant and agree never to institute or cause to be instituted a suit or any
other form of action or proceeding of any kind or nature against the Released
Parties, or any of them, by reason of or in connection with any of the actions
or matters described in this Section (a); provided, however, that this release
and covenant not to sue shall not apply to any claims arising after the
"Termination Date" (as defined in Section 4 below) under or in connection with
this Agreement.
4. COVENANTS AND AGREEMENTS OF HOLDERS AND AGENT. The Holders and the Agent
hereby covenant and agree that, except as otherwise expressly provided in this
Agreement, unless and until a Forbearance Default (as hereinafter defined) shall
occur, the Holders shall not, prior to the Termination Date (as defined below),
except as otherwise specifically and expressly contemplated by this Agreement,
file any proceedings or otherwise take any action to enforce the Holders' rights
and remedies against the Debtor under or in connection with the Credit Agreement
or the Collateral Documents (the forbearance from such actions by Holders,
subject to the terms and conditions of this Agreement, being referred to herein
as the "Forbearance Covenant"). For purposes hereof, "Termination Date" shall
mean the earlier of (i) September 30, 2000, or (ii) the date the Debtor shall
file, or shall have filed against it, any petition in bankruptcy under any
Chapter of the Bankruptcy Code; or any receiver or trustee shall be appointed
for all or any portion of the assets of the Debtor which constitutes Collateral;
or the Debtor shall make a general assignment for the benefit of creditors, or
shall file any petition seeking reorganization, liquidation, dissolution or
similar relief under any present or future federal, state or local law or
regulation relating to bankruptcy, insolvency or other relief for Debtor; or
there shall be appointed, or any action or proceeding shall be initiated seeking
the appointment of, a receiver, liquidator, or custodian of all or any portion
of the assets of any Debtor. The Debtor expressly acknowledges and agrees,
however, that from and after the Termination Date or such earlier date as a
<PAGE>
Forbearance Default (as hereinafter defined) shall occur, and except as provided
in the first sentence of this Section 4, the Holders shall have the right, at
any time and from time to time, without notice of any kind, to exercise any and
all rights and remedies available against the Debtor under the Credit Agreement,
the Collateral Documents, this Agreement, or at law or in equity, to the same
extent as the Holders would be entitled if the foregoing Forbearance Covenant
had never been a part of this Agreement and the Debtor agrees following the
Termination Date to cooperate with the Holders in the liquidation or other
disposition of the remaining Collateral. It is specifically agreed and
understood that the Forbearance Covenant does not apply, relate or extend to any
actions that the Holders may take under the Credit Agreement or Collateral
Documents or at law or in equity to preserve and protect the Collateral and the
interests of the Holders in such Collateral, including without limitation (i)
filing actions against or defending or intervening in actions brought by third
parties or the Debtor relating to such Collateral or the interests of the Debtor
therein, or (ii) the sending of notices to any persons or entities concerning
the existence of security interests (including, without limitation, notices to
account debtors) or liens in favor of the Holders concerning any such
Collateral, but only to the extent believed prudent by the Holders to preserve
and protect the Holders' liens thereon or security interests therein or the
perfection of such liens and security interests, or (iii) filing actions against
or defending or intervening in actions brought by third parties relating to
Collateral acquired by such third parties from the Debtor subject to or in
violation of the Holders' security interest or lien. Nothing herein shall be
deemed to prohibit the Holders at any time from selling, assigning or otherwise
transferring the Notes, or any portion thereof, together with all Collateral
therefor and together with all rights and remedies of the Holders under this
Agreement, the Credit Agreement and Collateral Documents to any person
whatsoever, subject to the terms of this Agreement and the Debtor hereby
consents to and waives the right, if any, to object to any such sale, assignment
or transfer.
5. FORBEARANCE DEFAULTS.
(a) DEFINED. For purposes of this Agreement, each of the following
shall constitute a "Forbearance Default":
(i) Breach of Covenant; Misrepresentation. The Debtor shall
breach, default under or fail to perform in all material respects any of its
respective covenants, agreements and obligations under this Agreement, or any
representation or warranty of Debtor hereunder shall be materially untrue.
(ii) Suit by the Debtor. The Debtor shall file or institute
against the Holders, the Agent or any of their officers, directors, employees,
agents or attorneys a lawsuit, complaint, administrative claim, adversary
proceeding or other legal action.
(iii) Liens. Any third party shall obtain, after the date
hereof, a lien against any of the Collateral not otherwise permitted under the
Credit Agreement or the Collateral Documents, but only if the Agent determines
in good faith that such lien would have a material adverse effect on the ability
of the Holders to collect the indebtedness evidenced by the Notes.
(iv) Interference. The Debtor shall take any action of any kind
or nature whatsoever, either directly or indirectly, to oppose, impede,
obstruct, hinder, enjoin or otherwise interfere with the exercise by the Holders
(provided that any such exercise does not result in a breach of the Forbearance
Covenant) of their rights and remedies against or with respect to the
Collateral.
<PAGE>
(v) Tax Liens. Any federal tax lien, or any tax lien by any
other governmental authority, shall be filed against all or any portion of any
Collateral.
(vi) Other Documents. Any Event of Default shall occur under
the Credit Agreement or any Collateral Document other than the existing Event of
Default; provided, however, that the occurrence of a default under the Debtor's
credit arrangements with a creditor other than the Holders shall not constitute
a Forbearance Default unless the creditor in question accelerates the maturity
of such indebtedness or takes any other action or exercises any remedies to seek
to collect such indebtedness.
6. REMEDIES. Upon the occurrence of a Forbearance Default, the Agent and
the Holders shall have all the rights and remedies provided in the Credit
Agreement and the Collateral Documents or available under applicable law.
7. MISCELLANEOUS PROVISIONS.
(a) SURVIVAL OF PROVISIONS. The covenants, representations and
obligations of the Debtor contained in this Agreement, including, without
limitation, the releases and covenants not to sue set forth in Section 3
hereinabove, shall survive and continue in full force and effect,
notwithstanding the occurrence of a Forbearance Default, the Termination Date,
or the consummation of the transactions contemplated by this Agreement.
(b) NO LIMITATION OF REMEDIES, WAIVER. No right, power or remedy
conferred upon or reserved to or by the Holders and the Agent in this Agreement
is intended to be exclusive of any other right, power or remedy conferred upon
or reserved to or by the Holders and the Agent hereunder or under the Credit
Agreement, the Collateral Documents, or at law or in equity, but each and every
remedy shall be cumulative and concurrent, and shall be in addition to each and
every other right, power and remedy given hereunder or under the Credit
Agreement, the Collateral Documents, or now or hereafter existing at law or in
equity. Except as specifically and expressly set forth in this Agreement,
nothing contained in this Agreement shall constitute a waiver of any rights or
remedies of Holders under the Credit Agreement, the Collateral Documents, or at
law or in equity.
(c) NO ADMISSION. The Debtor expressly acknowledges and agrees that
the release of the Holders and the Agent, as set forth in Section 3 hereof, is
not and shall not be construed as an admission of wrongdoing, liability or
culpability on the part of the Holders and the Agent, or as an admission by the
Holders and the Agent of the existence of any claims of any of the Debtor
against the Holders and the Agent. The Debtor further acknowledges that, to the
extent that any such claims may exist, they are speculative and not liquidated.
In any event, the Debtor acknowledges and agrees that the value to the Debtor of
covenants and agreements of the Holders and the Agent under this Agreement is in
excess of and constitutes more than "reasonably equivalent value" for the claims
and liabilities released by the Debtor hereunder.
(d) NO PARTNERSHIP OR JOINT VENTURE. Neither this Agreement nor any
other settlement documents delivered in connection herewith, nor any prior
agreement, actions or omissions shall in any respect be interpreted, deemed or
construed as making the Holders and the Agent a partner or joint venturer with
the Debtor, and the Debtor agrees not to make any contrary assertion,
contention, claim or counterclaim in any action, suit or other legal proceeding
involving the Holders and the Agent. Nothing herein shall give the Holders and
the Agent any control over or right to control any aspect of the Debtor's
business except for Collateral.
<PAGE>
(e) SUCCESSORS OR ASSIGNS. All covenants and agreements contained in
this Agreement shall bind and inure to the benefit of the parties hereto and
their respective heirs, executors, legal representatives, successors,
successors-in-title and assigns, whether so expressed or not.
(f) CONSTRUCTION OF AGREEMENT. The Holders, the Agent and the Debtor
acknowledge and agree (i) that it has participated in the negotiation of this
Agreement, and no provision of this Agreement shall be construed against or
interpreted to the disadvantage of any party hereto by any court or other
governmental or judicial authority by reason of such party having or being
deemed to have structured, dictated or drafted such provision; (ii) that it at
all times has been represented by legal counsel in the negotiation of the terms
of and in the preparation and execution of this Agreement, and has had the
opportunity to review and analyze this Agreement for a sufficient period of time
prior to the execution and delivery thereof; (iii) that no representations,
warranties, covenants or agreements have been made by or on behalf of the
Holders, the Agent or the Debtor, or relied upon by the Holders, the Agent or
the Debtor, in connection with the execution and delivery of this Agreement and
pertaining to the subject matter of this Agreement, other than those that are
expressly set forth in this Agreement and all prior statements, representations,
warranties, covenants and agreements of Holders are totally superseded and
merged into this Agreement; (iv) that all of the terms of this Agreement were
negotiated at arm's-length, and that this Agreement was prepared and executed
without fraud, duress, undue influence or coercion of any kind exerted by any of
the parties upon the others; and that the execution and delivery of this
Agreement is the free and voluntary act of the Holders, the Agent and the
Debtor.
(g) INVALID PROVISION TO AFFECT NO OTHERS. If any clause or provision
herein operated or would prospectively operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held for naught,
as though not herein contained, and the remainder of this Agreement shall remain
operative and in full force and effect.
(h) NOTICES. All notices permitted or required to be made under this
Agreement shall be made in accordance with the Credit Agreement and Collateral
Documents.
(i) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
(j) HEADINGS. The headings of the articles, paragraphs and
subparagraphs of this Agreement are for the convenience of reference only, are
not to be considered a part hereof, and shall not limit or otherwise affect any
of the terms hereof.
(k) MODIFICATIONS. The terms of this Agreement may not be changed,
modified, waived, discharged or terminated orally, but only by an instrument or
instruments in writing, signed by the party against whom the enforcement of the
change, modification, waiver, discharge or termination is asserted. Moreover,
the Debtor expressly agrees that this Agreement and any failure by the Holders
or the Agent to exercise any and all remedies or rights available to them shall
not constitute a course of dealing requiring any subsequent forbearance in
exercise of any remedies and rights.
(l) TIME OF ESSENCE. Time is of the essence of this Agreement.
(m) NO THIRD PARTY BENEFICIARIES. All covenants and agreements of the
parties hereto are solely and exclusively for the benefit of the parties hereto
and no other person or entity shall have standing to require performance of any
such covenants and agreements, and no other person or entity shall, under any
circumstances, be deemed to be a beneficiary of such obligations.
<PAGE>
(n) SETTLEMENT DISCUSSIONS. The parties hereto agree that any and
all oral communications among or between any parties hereto whether prior to or
after the execution hereof are in the nature of settlement discussions and,
except to the extent embodied in writing and signed by the parties, no position
taken and no statement made during such discussions shall be admissible as
evidence in any court of law or in any hearing or legal proceeding pertaining in
any way to this Agreement or any Collateral Document or the transactions arising
therefrom. In that regard, the parties hereto agree to keep confidential any and
all such discussions, making information relating thereto available only to
those persons within their own organizations and such advisors as have a
reasonable basis for knowing. Thus, such discussions and conduct or statements
made in connection therewith or made hereafter prior to the date the provisions
of this Section (o) are formally terminated in writing by notice given by any
party to the others shall be treated as part of the compromise discussion
between the parties and fall within the Exclusionary Rule of Evidence contained
in Florida Statutes Section 90.408 (1991).
(o) DUE NOTICE. The Debtor agrees that it has at all times received
reasonable notice of actions and demands by the Holders and the Agent, been
given reasonable opportunity to correct any defaults before actions being taken
by the Holders and the Agent, the Holders and the Agent have acted in good faith
in their dealings, have not breached any of their obligations under the Credit
Agreement or other Collateral Documents and that the Holders and the Agent have
made no agreements and incurred no obligations in favor of the Debtor except as
is expressly set forth in the Credit Agreement or other Collateral Documents and
this Agreement or otherwise in a writing signed by the Holders and the Agent.
(p) NO USURY. In no event shall interest, including any charge or fee
deemed to be interest, accrue or be payable hereon or on account of the
indebtedness arising under this Agreement, the Credit Agreement, the Notes or
any Collateral Document, in excess of the highest contract rate allowed by law
for the time such indebtedness shall be outstanding and unpaid. If by reason of
the acceleration of maturity of such indebtedness, or for any other reason,
interest in excess of the highest rate allowed by law shall be charged or paid,
any such excess shall be refunded to the Debtor together with interest thereon
at the highest rate permitted by law at the time of such overcharge. The Debtor
agrees to accept such reimbursement or principal reduction in lieu of any other
remedies it may have under law.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement under seal, as of the day and year first above written.
Signed, sealed and delivered in the presence of:
Riverside Group, Inc.
By:________________________
Name: Mitchell W. Legler, as Agent for the Holders
Title shown on Exhibit "A" hereto.
<PAGE>
EXHIBIT "A"
LIST OF HOLDERS
Cecil Altmann
Creek Farms Corp.
Lovco, Inc.
East Adams Corporation
Fujita Investment Co., Ltd.
Gerlach & Company
Kirschner, Kenneth M.
Pitt & Co.
Southern Farm Bureau Casualty Company
Hare & Co. NY
American Centennial Insurance Company
Frederick H. Schultz 1994 Trust
<PAGE>
EXHIBIT "B"
COMPENSATION BENEFITS APPROVED PRIOR
TO MARCH 31, 2000
NONE
<PAGE>
AMENDMENT TO FORBEARANCE AGREEMENT
THIS AMENDMENT TO FORBEARANCE AGREEMENT, made as of the 14th day of
August, 2000, by and between RIVERSIDE GROUP, INC., a Florida corporation (the
"Debtor") and MITCHELL W. LEGLER ("Agent") as agent for the Holders shown on
Exhibit "A" hereto ("Holders").
RECITALS
A. The Debtor and the Holders are parties to a Credit Agreement dated
as of April 1, 1999 (as amended or modified from time to time, the "Credit
Agreement"), pursuant to which the Holders have made loans totaling in the
aggregate $10,000,000.00 evidenced by secured promissory notes dated April 1,
1999 (as amended, modified or extended, the "Notes").
B. An Event of Default has occurred and is continuing under the Notes
and the Credit Agreement, resulting from the Debtor's failure to make certain
payments as required.
C. As of May 8, 2000, the Agent and the Debtor entered into a
Forbearance Agreement ("Original Agreement") whereby for certain consideration,
including scheduled principal reduction payments, the Holders and the Agent
agreed to not take action to enforce their rights and remedies pursuant to the
Credit Agreement as a result of the Event of Default until the Termination Date
(as defined in the Original Agreement).
D. The Debtor has advised the Agent that it will be unable to make its
scheduled principal reduction payment on August 15, 2000, which will constitute
a Forbearance Default and is unlikely to make the additional required payments
due between the date of this Agreement and September 30, 2000, and has requested
that the Holders and the Agent agree to forbear from the exercise of its rights
and remedies under the Credit Agreement and Collateral Documents and the
Original Agreement until December 31, 2000.
NOW, THEREFORE, for and in consideration of the sum of Ten and 00/100
Dollars ($10.00) in hand paid, and to induce the Holders and the Agent to
continue to forbear from taking any collection action with respect to the Notes,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the recitals are
true and correct and do also hereby agree as follows:
1. DEFINITIONS. The Original Agreement as amended by this Amendment
shall be referred herein as the "Forbearance Agreement". All terms used in this
Amendment which are not otherwise defined herein shall have the same meaning as
is ascribed to them in the Original Agreement.
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF THE DEBTOR. The Debtor hereby
agrees and acknowledges, and represents and warrants to the Holders, as follows:
(a) Recitals. The Recitals are true and correct.
Credit Agreement. The representations and warranties of the Debtor
contained in the Credit Agreement and the Collateral Documents or delivered in
connection with the Credit Agreement and the Collateral Documents continue to be
true and correct in all material respects as of the date hereof.
Original Agreement. The representations and warranties of the Debtor
contained in the Original Agreement or delivered in connection with the Original
Agreement continue to be true and correct in all material respects as of the
date hereof.
Authority.
(i) The execution, delivery and performance of this Amendment
by the Debtor has been duly and properly authorized and approved by the Debtor;
and
(ii) The Debtor has the power and authority to execute this
Amendment and perform its obligations hereunder.
(e) Outstanding Indebtedness.
(i) As of the date of this Amendment the outstanding principal
balance of the Notes is $9,500,000.00, plus accrued interest;
(ii) The Event of Default and Forbearance Default described in
the Recitals hereto are continuing;
(iii) The Debtor acknowledges that the Notes are now due and
payable on demand by the Agent as a result of the Event of Default and the
Forbearance Default, that the Holders and the Agent have the right, at any time
and in their sole discretion, to demand repayment in full of the Notes and that
the Notes bear interest at the Default Rate; and
(iv) Notwithstanding the execution and delivery of this Amendment
and any other settlement documents delivered in connection herewith, and
notwithstanding any subsequent cure of the Event of Default or Forbearance
Default, the Debtor acknowledges and agrees that, except as set forth in the
Forbearance Agreement, neither this Amendment nor any other settlement document,
nor any action taken or omitted pursuant to the Forbearance Agreement or any
other settlement document, shall constitute or be deemed to constitute a waiver
or cure of the Event of Default or the Forbearance Default or a reinstatement of
the Notes, and the Notes shall remain in default.
<PAGE>
(f) Credit Agreement and Collateral Documents; Waivers by Debtor.
(i) The Credit Agreement, the Original Agreement, this Amendment
and the other Collateral Documents constitute the valid and legally binding
obligations of the Debtor and are enforceable against the Debtor in accordance
with their respective terms;
(ii) Except for the Event of Default and Forbearance Default
described in the Recitals hereto, the Debtor is in full compliance with the
covenants and agreements of the Debtor set forth in the Credit Agreement, the
Original Agreement, and the other Collateral Documents.
(iii) Neither this Amendment nor any other settlement document
delivered in connection herewith shall be deemed or construed to be a
satisfaction, novation or release of the Credit Agreement, the Original
Agreement, or any other Collateral Document, or any of them, a waiver by Holders
of any of the rights of the Holders under the Credit Agreement, the Forbearance
Agreement and the Collateral Documents, or any of them, or at law or in equity;
(iv) The Debtor has no defenses, affirmative defenses, set-offs,
claims, counterclaims or causes of action of any kind or nature whatsoever with
respect to (a) the Credit Agreement, the Original Agreement, the Collateral
Documents, or the indebtedness evidenced or secured thereby, (b) any other
documents or instruments evidencing, securing or in any way relating to the
Notes, (c) the administration or funding of the Notes by the Holders or the
Agent or (d) any actions or courses of dealing by the Agent or the Holders; and
(g) Legal Proceedings. Except as set forth in the Credit Agreement,
the Debtor is not a party to, or the subject of, any lawsuit, complaint,
counterclaim, cross-claim, adversary proceeding, arbitration proceeding,
bankruptcy or insolvency proceeding, administrative claim or other legal action
or proceeding.
(h) No Fraudulent Intent. Neither the execution or delivery of this
Amendment or any other settlement documents, nor the performance of any actions
required hereunder or thereunder, is being consummated by the Debtor with or as
a result of any actual intent by the Debtor to hinder, delay or defraud any
person or entity to which the Debtor is now or will hereafter become indebted.
(i) No Bankruptcy Intent. The Debtor has no intent (i) to file any
petition under any chapter of the Federal Bankruptcy Code, or in any manner to
seek relief, protection, reorganization, liquidation, dissolution or similar
relief for Debtor under any other local, state, federal or other insolvency law
or laws providing for relief of Debtor or in equity, or (ii) directly or
indirectly to cause any involuntary petition under any chapter of the Federal
Bankruptcy Code to be filed against the Debtor, or directly or indirectly to
cause any Debtor to become the subject of any proceedings pursuant to any other
<PAGE>
state, federal or other insolvency laws or laws providing for the relief of
Debtor, either at the present time, or at any time hereafter. The Debtor hereby
waives to the fullest extent permitted by law any benefit of an automatic stay
under the Federal Bankruptcy Code.
3. AMENDMENTS TO COVENANTS AND AGREEMENTS OF THE DEBTOR.
(a) Section 2(d) of the Original Agreement. Section 2(d) of the
Original Agreement is hereby amended in its entirety as follows:
(d) Intentionally Omitted.
(b) Section 2(g) of the Original Agreement. Section 2(g) of the
Original Agreement is hereby amended in its entirety as follows:
(g) Interest Rate. Notwithstanding any provision of the Credit
Agreement or the Notes to the contrary, effective as of May 1, 2000, until
December 31, 2000, Interest on the Notes shall accrue at 17% per annum, and
after December 31, 2000, if not sooner paid in full, the Notes shall bear
interest at the highest rate permitted by applicable law not to exceed 25% per
annum.
(c) Section 2(i) of the Original Agreement. A new Section 2(i) is
hereby added at the end of Section 2 of the Original Agreement which shall read
as follows:
(i) Interest Reduction. The Debtor agrees that from the date hereof
until such time as there is no outstanding interest accrued on the Notes, the
Debtor shall liquidate in an orderly fashion the Greenleaf Shares, seeking to
sell as many such shares as the market can absorb on a daily basis without
materially and adversely effecting the price of such shares. The proceeds of
such liquidation shall be delivered to the Agent immediately upon receipt by the
Debtor, to be applied to reduce the outstanding interest of the Notes and to pay
expenses which the Debtor is required to pay under the Credit Agreement and this
Agreement.
(d) Section 2(j) of the Original Agreement. A new Section 2(j) is
hereby added at the end of Section 2 of the Original Agreement, which shall read
as follows:
(j) Buildscape Lien. The Debtor shall grant to the Agent on behalf of
the Holders a perfected security interest second in priority only to that of
Imagine Investments, LLC (the "Buildscape Lien") in 100% of the shares of
Buildscape, Inc. and the proceeds thereof (the "Buildscape Shares") owned by the
Debtor, which the Debtor represents to the Agent constitute not less than 36% of
all outstanding shares of Buildscape as of the date hereof, and Debtor sand
Imagine Investments hall execute all documents necessary to evidence and to
perfect such security interest and limit the debt of Imagine Investments as set
forth below (the "Buildscape Collateral Documents"). For purposes of the Credit
Agreement and this Forbearance Agreement, the definition of Collateral shall be
<PAGE>
deemed to include the Buildscape Shares and the definition of Collateral
Documents shall include the Buildscape Collateral Documents. The Debtor shall
not permit the debt secured by the lien senior to the Buildscape Lien to exceed
$2.4 million. The Buildscape Collateral Documents shall contain an
acknowledgment from the Imagine Investments that the priority its existing lien
is senior to the Buildscape Lien is only to the extent of a principal balance
not to exceed $2.4 million.
(e) Amendment to Covenants and Agreements of Holders and Agent.
Section 4 of the Original Agreement is amended in its entirety as follows:
4. COVENANTS AND AGREEMENTS OF HOLDERS AND AGENT. The Holders and the
Agent hereby covenant and agree that, except as otherwise expressly provided in
this Agreement, unless and until a Forbearance Default (as hereinafter defined)
shall occur, the Holders shall not, prior to the Termination Date (as defined
below), except as otherwise specifically and expressly contemplated by this
Agreement, file any proceedings or otherwise take any action to enforce the
Holders' rights and remedies against the Debtor under or in connection with the
Credit Agreement or the Collateral Documents (the forbearance from such actions
by Holders, subject to the terms and conditions of this Agreement, being
referred to herein as the "Forbearance Covenant"). For purposes hereof,
"Termination Date" shall mean the earlier of (i) December 31, 2000, or (ii) the
date the Debtor shall file, or shall have filed against it, any petition in
bankruptcy under any Chapter of the Bankruptcy Code; or any receiver or trustee
shall be appointed for all or any portion of the assets of the Debtor which
constitutes Collateral; or the Debtor shall make a general assignment for the
benefit of creditors, or shall file any petition seeking reorganization,
liquidation, dissolution or similar relief under any present or future federal,
state or local law or regulation relating to bankruptcy, insolvency or other
relief for Debtor; or there shall be appointed, or any action or proceeding
shall be initiated seeking the appointment of, a receiver, liquidator, or
custodian of all or any portion of the assets of any Debtor. The Debtor
expressly acknowledges and agrees, however, that from and after the Termination
Date or such earlier date as a Forbearance Default (as hereinafter defined)
shall occur, and except as provided in the first sentence of this Section 4, the
Holders shall have the right, at any time and from time to time, without notice
of any kind, to exercise any and all rights and remedies available against the
Debtor under the Credit Agreement, the Collateral Documents, this Agreement, or
at law or in equity, to the same extent as the Holders would be entitled if the
foregoing Forbearance Covenant had never been a part of this Agreement and the
Debtor agrees following the Termination Date to cooperate with the Holders in
the liquidation or other disposition of the remaining Collateral. It is
specifically agreed and understood that the Forbearance Covenant does not apply,
relate or extend to any actions that the Holders may take under the Credit
Agreement or Collateral Documents or at law or in equity to preserve and protect
the Collateral and the interests of the Holders in such Collateral, including
without limitation (iii) filing actions against or defending or intervening in
actions brought by third parties or the Debtor relating to such Collateral or
<PAGE>
the interests of the Debtor therein, or (iv) the sending of notices to any
persons or entities concerning the existence of security interests (including,
without limitation, notices to account debtors) or liens in favor of the Holders
concerning any such Collateral, but only to the extent believed prudent by the
Holders to preserve and protect the Holders' liens thereon or security interests
therein or the perfection of such liens and security interests, or (v) filing
actions against or defending or intervening in actions brought by third parties
relating to Collateral acquired by such third parties from the Debtor subject to
or in violation of the Holders' security interest or lien. Nothing herein shall
be deemed to prohibit the Holders at any time from selling, assigning or
otherwise transferring the Notes, or any portion thereof, together with all
Collateral therefor and together with all rights and remedies of the Holders
under this Agreement, the Credit Agreement and Collateral Documents to any
person whatsoever, subject to the terms of this Agreement and the Debtor hereby
consents to and waives the right, if any, to object to any such sale, assignment
or transfer.
4. CONDITIONS. The effectiveness of this Amendment shall be subject
to the satisfaction of the following conditions, as evidenced by written
certification from the Agent:
(a) requisite consent of the Holders pursuant to the Credit Agreement
to the Agent's execution of this Amendment; and
(b) delivery of the Buildscape Collateral Documents in form
satisfactory to the Agent and satisfaction of counsel to the Agent that the
Buildscape Lien is perfected as provided herein.
5. EXPENSES. All expenses incurred in connection with this Amendment, the
Original Agreement or relating to either of them, including without limitation
all of the Agent's fees, Agent's attorneys' fees and costs, all documentary
stamp taxes and intangible taxes, and any penalties and or interest thereon,
shall be promptly paid by the Borrower and secured by all Collateral.
6. MISCELLANEOUS.
(a) Settlement Discussions. The parties hereto agree that any and all
oral communications among or between any parties hereto whether prior to or
after the execution hereof are in the nature of settlement discussions and,
except to the extent embodied in writing and signed by the parties, no position
taken and no statement made during such discussions shall be admissible as
evidence in any court of law or in any hearing or legal proceeding pertaining in
any way to this Amendment or the transactions arising therefrom. In that regard,
the parties hereto agree to keep confidential any and all such discussions,
making information relating thereto available only to those persons within their
own organizations and such advisors as have a reasonable basis for knowing.
Thus, such discussions and conduct or statements made in connection therewith or
made hereafter prior to the date the provisions of this Section are formally
terminated in writing by notice given by any party to the others shall be
<PAGE>
treated as part of the compromise discussion between the parties and fall within
the Exclusionary Rule of Evidence contained in Florida Statutes Section 90.408
(1991).
Due Notice. The Debtor agrees that it has at all times received
reasonable notice of actions and demands by the Holders and the Agent, been
given reasonable opportunity to correct any defaults before actions being taken
by the Holders and the Agent, the Holders and the Agent have acted in good faith
in their dealings, have not breached any of their obligations under the Credit
Agreement or other Collateral Documents and that the Holders and the Agent have
made no agreements and incurred no obligations in favor of the Debtor except as
is expressly set forth in the Credit Agreement or other Collateral Documents and
this Agreement or otherwise in a writing signed by the Holders and the Agent.
No Usury. In no event shall interest, including any charge or fee deemed
to be interest, accrue or be payable hereon or on account of the indebtedness
arising under the Forbearance Agreement, the Credit Agreement, the Notes or any
Collateral Document, in excess of the highest contract rate allowed by law for
the time such indebtedness shall be outstanding and unpaid. If by reason of the
acceleration of maturity of such indebtedness, or for any other reason, interest
in excess of the highest rate allowed by law shall be charged or paid, any such
excess shall be refunded to the Debtor together with interest thereon at the
highest rate permitted by law at the time of such overcharge. The Debtor agrees
to accept such reimbursement or principal reduction in lieu of any other
remedies it may have under law.
Ratification. Subject to the provisions in this Amendment, the Original
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment under seal, as of the day and year first above written.
Signed, sealed and delivered in the presence of:
RIVERSIDE GROUP, INC.
By:
Name: Mitchell W. Legler, as Agent for the Holders
Title shown on Exhibit "A" hereto.
<PAGE>
EXHIBIT "A"
List of Holders
Cecil Altmann
Creek Farms Corp.
Lovco, Inc.
East Adams Corporation
Fujita Investment Co., Ltd.
Gerlach & Company
Kirschner, Kenneth M.
Pitt & Co.
Southern Farm Bureau Casualty Insurance Company
Hare & Co. NY
American Centennial Insurance Company
Frederick H. Schultz 1994 Trust
FIRST AMENDMENT TO LOAN AGREEMENT AND STOCK PLEDGE AGREEMENTS
This FIRST AMENDMENT TO LOAN AGREEMENT AND STOCK PLEDGE AGREEMENT (this
"Amendment") is made as of the 31st day of August, 2000, by and between, IMAGINE
INVESTMENTS, INC., a Delaware corporation, with a principal place of business in
Dallas, Texas ("Lender") and RIVERSIDE GROUP, INC., a Florida corporation, with
a principal place of business in Jacksonville, Florida ("Borrower").
RECITALS
A. Borrower and Lender have entered into that certain Loan Agreement
dated as of August 31, 1999 (the "Loan Agreement").
B. Lender had made demand for payment in full as of August 31, 2000 for
any and all principal and accrued but unpaid interest evidenced by that certain
Demand Promissory Note dated August 31, 1999 executed by Borrower in favor of
Lender (the "Existing Note", and as amended and restated as of the date hereof,
the "Note"). Borrower has requested Lender to refinance the indebtedness
evidenced by the Existing Note and Lender has agreed to the same upon the terms
and conditions hereinafter set forth.
C. To induce Lender to refinance the Loan as of the date hereof, and in
connection with this Amendment, Borrower will execute a Stock Pledge Agreement
(the "Buildscape Pledge Agreement") in favor of Lender pursuant to which
Borrower shall pledge and grant to Lender a first lien security interest in
3,119,067 shares of common capital stock of Buildscape, Inc.
D. In connection with this Amendment, Borrower has requested and Lender
has agreed to an amendment of that certain Stock Pledge Agreement dated as of
August 31, 1999 (the "Wickes Pledge Agreement") executed by Borrower in favor of
Lender, whereby Borrower granted to Lender a first lien and security interest in
921,845 shares of common capital stock of Wickes, Inc. in order to allow
Borrower to sell certain shares of Wickes, Inc. in order to pay outstanding
payables and operating expenses and implement other amendments thereto as set
forth herein.
E. In connection with this Amendment, the parties have agreed to amend
that certain Stock Pledge Agreement dated as of August 31, 1999 (the "Cybermax
Pledge Agreement") executed by Borrower in favor of Lender, whereby Borrower
granted to Lender a first lien and security interest in 1,000 shares of common
capital stock of Cybermax, Inc.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
Page 1
<PAGE>
ARTICLE I
Definitions
Section 1.01 Definitions. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meaning as assigned
to them in the Loan Agreement, as amended hereby.
ARTICLE II
Amendments to Loan Agreement
Section 2.01 Amendment to Section 1.1 of Loan Agreement. Section 1.1 of
the Loan Agreement is hereby amended and restated in its entirety to hereafter
read as follows:
"1.1 Amount, Purpose and Interest. Borrower shall execute a
note (the "Note") dated August 31, 2000 in favor of Lender in the
amount of Two Million Twenty-One Thousand Six Hundred Twenty Eight and
01/100 Dollars ($2,021,628.01) (the "Loan") that evidences a refinance
of any and all advances by Lender to Borrower pursuant to the Demand
Promissory Note dated August 31, 1999 (the "Prior Note"). The Note is
in the principal amount of the amount advanced under the Prior Note
plus the accrued and unpaid interest on the Prior Note as of August 31,
2000 (such date being the effective date of demand on the Prior Note
and the refinancing of the Prior Note pursuant to the terms of the
First Amendment to Loan Agreement and Stock Pledge Agreement and the
Note plus attorneys fees and expenses incurred in connection with the
First Amendment to Loan Agreement and Stock Pledge Agreement). The Loan
is evidenced by and payable on the terms set forth in the Note and on
the terms established in this Loan Agreement. All payments on the Loan
shall be made in immediately available funds at the principal office of
Lender as specified in the Note or this Loan Agreement. The outstanding
principal balance of the Note shall bear interest from the date hereof
at the rate of twelve and three- quarters percent (12.75%) per annum."
Section 2.02 Amendment to Section 1.2 of Loan Agreement. Section 1.2 of
the Loan Agreement is hereby amended and restated in its entirety to hereafter
read as follows:
"1.2 Disbursements. Borrower acknowledges that all of the
Loan proceeds have been distributed to Borrower.
The Loan is not a revolving loan, and amounts borrower and
repaid under the Note may not be reborrowed in whole or in part."
Section 2.03 Amendment to Section 1.4 of Loan Agreement. Section 1.4 of
the Loan Agreement is hereby amended and restated in its entirety to hereafter
read as follows:
"1.4 Maturity Date. The maturity date of the Loan shall be the
maturity date set forth in the Note."
Section 2.04 Amendments to Section 2 of Loan Agreement. Section 2.2 of
the Loan Agreement shall be amended and restated in its entirety, Section 2.3 of
the Loan Agreement is hereby renumbered to become Section 2.4, and a new Section
2.3 shall be inserted, so that the sections read as follows:
"2.2 Stock Pledge Agreement Pertaining to Wickes, Inc. That
certain Stock Pledge Agreement between Borrower and Lender dated as of
August 31, 1999, amended by that certain First Amendment to Loan
Agreement and Stock Pledge Agreement dated
Page 2
<PAGE>
as of August 31, 2000, pursuant to which Borrower pledges 921,845
shares of common capital stock of Wickes, Inc. ("Wickes Stock") as
represented by those certificates listed on Exhibit B attached hereto
and incorporated herein by reference which Borrower owns and delivers
to Lender the original certificates of the Wickes Stock, together with
the appropriate blank stock powers (the "Wickes Sstock Pledge
Agreement").
2.3 Stock Pledge Agreement Pertaining to Buildscape, Inc. That
certain Stock Pledge Agreement between Borrower and Lender dated as of
August 31, 2000, pursuant to which Borrower pledges 3,119,067 shares of
the common capital stock of Buildscape, Inc. as represented by
certificate number 5, the original of which Borrower has delivered to
Lender together with the appropriate blank stock power (the "Buildscape
Stock Pledge Agreement").
2.4 Other Security. Other security and instruments, if any,
granted by Borrower to lender, whether of even date herewith or
hereafter or heretofore granted, to secure the Note and/ or any other
Indebtedness."
Section 2.05 Amendment to Section 4.9 of Loan Agreement. Section 4.9 of
the Loan Agreement is hereby amended and restated in its entirety to hereafter
read as follows:
"4.9 Payment of Note and Other Indebtedness. Borrower shall
pay the principal and accrued and unpaid interest on the Note
in accordance with the payment terms set forth in the Note."
Section 2.06 Amendment to Section 6 of Loan Agreement. Section 6 of the
Loan Agreement is hereby amended and restated in its entirety to hereafter read
as follows:
"6. ADDITIONAL AGREEMENTS REGARDING STOCK. As additional
security for the Loan, Borrower hereby assigns to Lender all
of the respective rights, titles and interests of Borrower
under any and all registration rights and similar agreements
with respect to the stock of Cybermax, Inc., Wickes, Inc., and
Buildscape, Inc., to the extent Lender has from time to time
foreclosed upon or otherwise acquired or thereafter does
foreclose or otherwise acquire any of the stock of Cybermax,
Inc., Wickes, Inc., or Buildscape, Inc. owned by Borrower."
Section 2.07 Amendment to Section 11.5 of Loan Agreement. Section 11.5
of the Loan Agreement is hereby amended and restated in its entirety to
hereafter read as follows:
"11.5 Governing Law. This Loan Agreement and all
other Loan Documents are executed and delivered in, and shall
be governed by the laws of, the State of Texas, without giving
effect to any conflict of law rule or principal that might
require the application of the laws of another jurisdiction."
Section 2.08 Amendment to Section 11.8 of the Loan Agreement. Section
11.8 of the Loan Agreement is hereby amended to replace the reference to
"Commonwealth of Kentucky" with "State of Texas" in the places where such phrase
appears.
ARTICLE III
Amendments to Wickes Pledge Agreement
Page 3
<PAGE>
Section 3.01 Amendment to Section 7 of Wickes Pledge Agreement. Section
7 of the Wickes Pledge Agreement is hereby amended to replace the reference to
"Commonwealth of Kentucky" with "State of Texas."
Section 3.02 Amendment to Section 7.2 of Wickes Pledge Agreement.
Section 7.2 of the Wickes Pledge Agreement is hereby amended to replace the
reference to "Commonwealth of Kentucky" with "State of Texas."
Section 3.03 Amendment to Section 8.2 of Wickes Pledge Agreement.
Section 8.2 of the Wickes Pledge Agreement is hereby amended and restated in its
entirety to hereafter read as follows:
"8.2 Reassignment of an additional 81,000 shares of Stock. At
the time of the signing of the First Amendment to Loan
Agreement and Stock Pledge Agreement effective as of August
31, 2000, Borrower has requested and Lender has consented to
the release of an additional 81,000 shares of Stock held by
Lender as collateral security for the payment of the Secured
Obligations, provided, and only if, the shares to be released
are sold promptly by the selling broker and the proceeds
therefrom are used to pay down outstanding payables and
current operating expenses of the Borrower."
Section 3.04 Amendment to Section 8.3(b) of Wickes Pledge Agreement.
Section 8.3 of the Stock Pledge Agreement is hereby amended by substitution
"Forty percent (40%)" for "Thirty percent (30%)".
Section 3.05 Amendment to Section 11.3 of Wickes Pledge Agreement.
Section 11.3 of the Wickes Pledge Agreement is hereby amended to replace the
reference to "Commonwealth of Kentucky" with "State of Texas."
Section 3.06 Amendment to Section 11.11 of Wickes Pledge Agreement.
Section 7.2 of the Wickes Pledge Agreement is hereby amended to replace the
reference to "Louisville or Jefferson County, Kentucky" with "Dallas County,
Texas."
ARTICLE IV
Amendments to Cybermax Pledge Agreement
Section 4.01 Amendment to Section 7 of Cybermax Pledge Agreement.
Section 7 of the Cybermax Pledge Agreement is hereby amended to replace the
reference to "Commonwealth of Kentucky" with "State of Texas."
Section 4.02 Amendment to Section 7.2 of Cybermax Pledge Agreement.
Section 7.2 of the Cybermax Pledge Agreement is hereby amended to replace the
reference to "Commonwealth of Kentucky" with "State of Texas."
Section 4.03 Amendment to Section 9.2 of Cybermax Pledge Agreement.
Section 9.2 of the Cybermax Pledge Agreement is hereby amended to replace the
reference to "Commonwealth of Kentucky" with "State of Texas."
Page 4
<PAGE>
Section 4.04 Amendment to Section 9.10 of Cybermax Pledge Agreement.
Section 9.10 of the Cybermax Pledge Agreement is hereby amended to replace the
reference to "Louisville or Jefferson County, Kentucky" with "Dallas County,
Texas."
ARTICLE V
Amended and Restated Note
The Existing Note or Note (as defined in the Loan Agreement) shall be
amended and restated in its entirety in the form attached hereto as Exhibit "A".
Any reference in the Loan Documents to the "Note" shall be a reference to the
Note as amended and restated hereby.
ARTICLE VI
Conditions Precedent
Section 6.01 Conditions. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent, unless
specifically waived by Lender:
(a) The following instruments shall have been duly and validly
executed and delivered by the parties thereto, all in form, scope and
content satisfactory to Lender:
(i) this Amendment;
(ii) the Note, as amended hereby, being that
certain promissory note dated of even date
herewith in the stated principal amount of
$2,021,628.01 together with an Affidavit of
Out-of-State Signing;
(iii) the Buildscape Pledge Agreement executed by
Borrower in favor of Lender granting a first
lien in all of its shares of stock of
Buildscape, Inc. together with the
certificate number 5 of Buildscape and blank
stock power;
(iv) a Corporate Certificate of the Secretary of
Borrower, containing the names and
signatures of the officers of Borrower
authorized to execute this Amendment and the
Note.
(b) The representations and warranties contained herein, in
the Loan Agreement, as amended hereby, and/or in each other Loan
Document shall be true and correct in all material respects as of the
date hereof, as if made on the date hereof, except to the extent such
representation and warranties relate to an earlier date.
(c) No Event of Default shall have occurred and be continuing
and no default shall exist, unless such Event of Default or default has
been specifically waived in writing by Lender.
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto, shall be
satisfactory to Lender.
(e) Borrower shall have paid the expenses of Lender incurred
in negotiating and effecting this Amendment and related Loan Documents,
including Lender's attorneys' fees and costs.
Page 5
<PAGE>
ARTICLE VII
Acknowledgements
Borrower ratifies and confirms that the Loan Agreement, as amended
hereby, the Note, as amended hereby, the Security Instruments, as amended
hereby, and the other Loan Documents are and remain in full force and effect in
accordance with their respective terms, that the Collateral is unimpaired by
this Amendment, and that the liens, security interests and other security or
collateral held by Lender are hereby renewed, extended and carried forward to
secure any and all indebtedness incurred by Borrower to Lender pursuant to the
Loan Agreement, as amended hereby. Borrower hereby agrees that all applicable
limitations periods with respect to the Note, the Loan Agreement, the Security
Instruments and the other Loan Documents are renewed and extended effective as
of the date of this Amendment. Borrower further acknowledges and agrees that the
term "Secured Obligations", as defined in the Security Instruments, shall
include any and all indebtedness incurred by Borrower to Lender pursuant to the
Loan Agreement, as amended hereby, including the Note in the stated principal
amount of $2,021,628.01. The undersigned officer of Borrower executing this
Amendment represents and warrants that he/she has full power and authority to
execute and deliver this Amendment on behalf of Borrower and that such execution
and delivery has been duly authorized by the Board of Directors of Borrower. Any
reference in the Note, the Security Instruments or any other Loan Document to
the "Loan Agreement" shall be deemed to be references to the Credit Agreement as
amended through the date hereof.
ARTICLE VIII
Miscellaneous
Section 8.01 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
Section 8.02 FINAL AGREEMENT. THE LOAN AGREEMENT, AS AMENDED HEREBY,
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
Page 6
<PAGE>
Executed on the date first written above, to be effective as of the
respective date indicated above.
BORROWER:
RIVERSIDE GROUP, INC.
By:
Name:
Title:
LENDER:
IMAGINE INVESTMENTS, INC.
By:
Name:
Title:
Page 7
<PAGE>
EXHIBIT A
FIRST AMENDED AND RESTATED PROMISSORY NOTE
(attached hereto)
FIRST AMENDMENT TO CREDIT AGREEMENT- EXHIBIT A
<PAGE>
FIRST AMENDED AND RESTATED PROMISSORY NOTE
$2,021,628.01 ____________, Georgia
August 31, 2000
FOR VALUE RECEIVED, the undersigned, RIVERSIDE GROUP, INC., a Florida
corporation with a principal office and place of business in Jacksonville,
Florida ("Maker"), hereby promises and agrees to pay to the order of IMAGINE
INVESTMENTS, INC., a Delaware corporation, or to any holder of this Note
("Payee"), the principal sum of TWO MILLION TWENTY- ONE THOUSAND SIX HUNDRED
TWENTY EIGHT AND 01/100 DOLLARS ($2,021,628.01), or the aggregate principal
amount advanced and which shall be outstanding under this Note, together with
interest upon such principal balance at the rate provided below, in legal tender
of the United States of America. The unpaid principal balance of, and all
accrued interest on, this Note shall be due and payable in full on December 15,
2000. All payments under this Note shall be paid to Payee at 8150 North Central
Expressway, Suite 1901, Dallas, Texas 75206, or to such other person or at such
other place as may be designated in writing by Payee or any subsequent holder of
this Note.
1. INTEREST RATE. The principal balance of this Note shall bear
interest at the rate of twelve and three-quarters percent (12.75%) per annum.
All interest on the principal balance of this Note shall be computed on the
basis of the actual number of days elapsed over an assumed year of 360 days. All
parties hereto hereby specifically agree that the laws of the Commonwealth of
Kentucky shall govern this Note.
2. REPAYMENT OF PRINCIPAL AND INTEREST. The entire outstanding
balance of principal and all accrued, but unpaid interest on this Note shall be
due and payable in full on December 15, 2000. This Note may be prepaid in whole
or in part at any time and from time to time without penalty.
3. APPLICATION OF PAYMENTS. Payments made under this Note shall be
applied, at the holder's sole option, first to any expenses or sums advanced by
Payee or other amounts (other than principal and interest) payable to Payee in
respect of and in accordance with the terms of this Note, the Loan Agreement or
under the terms of any document or instrument securing the repayment of this
Note; second, to accrued but unpaid interest upon the principal balance of this
Note and then to the principal balance of this Note.
4. OVERDUE PAYMENTS; DEFAULT RATE. All overdue payments of principal or
interest on this Note shall bear additional interest until paid in full at the
rate per annum (calculated on the basis of an assumed year of 360 days as
aforesaid) of five percent (5%) in excess of the rate otherwise payable under
the terms of this Note or the highest rate allowed by applicable law, whichever
is lower, and shall be due and payable on demand of the holder hereof. The
collection of default rate interest shall not be deemed a waiver of an Event of
Default.
5. SECURITY. This Note is secured by a pledge of the following: (i)
1,000 shares of the common capital stock of Cybermax, Inc., a Florida
corporation, pursuant to that certain Stock Pledge Agreement, dated August 31,
1999, between Maker, (ii) 758,155 shares of the capital stock of Wickes, Inc., a
Delaware corporation, pursuant to that certain Stock Pledge Agreement, dated as
of August 31, 1999 between Maker and Payee herewith (921,845 shares were
initially pledged but 81,970 were released pursuant to a letter dated August 30,
1999 and 81,720 are being released effective the date hereof) and (iii)
<PAGE>
3,119,067 shares of the common capital stock of Buildscape, Inc., a Florida
corporation, pursuant to that certain Stock Pledge Agreement dated of even date
herewith between Maker and Payee. This Note has been issued pursuant to the Loan
Agreement among Maker and Payee, dated as of August 31, 1999 as amended by the
First Amendment to Loan Agreement dated as of the date hereof (as so amended and
as the same may be amended, restated, supplemented and modified, the "Loan
Agreement") (such Loan Agreement and the foregoing Stock Pledge Agreements, as
amended, are hereinafter collectively referred to as the "Security Documents"),
and is subject to all terms and conditions of the Loan Agreement and is entitled
to all the benefits of the Security Documents.
6. ACKNOWLEDGEMENT. The Maker ratifies and confirms that the Security
Documents are and remain in full force and effect in accordance with their
respective terms and that all of the property encumbered by the Security
Documents (herein the "Collateral") is unimpaired by this Note. Maker represents
and warrants that all of the representations and warranties made in each of the
Security Documents and all instruments and documents executed pursuant thereto
and the Existing Note (hereinafter defined) remain true and correct in all
material respects on and as of this date, except such representations that
relate solely to an earlier date and that were true and correct on such earlier
date. The undersigned officer of the Maker executing this Note represents and
warrants that he has full power and authority to execute and deliver this Note
on behalf of the Maker, that such execution and delivery has been duly
authorized by the Board of Directors of the Maker and that the resolutions
previously delivered to the Payee in connection with the execution and delivery
of the Existing Note and the Security Documents, and the resolutions delivered
in connection with the execution and delivery of this Note, are and remain in
full force and effect and have not been altered, amended or repealed in anywise.
7. GRANT AND AFFIRMATION OF SECURITY INTEREST. The Maker hereby affirms
the prior grant of the security interest in, and hereby grants a security
interest in, the Collateral to secure payment and performance of all of the
Maker's indebtedness to the Payee, including the indebtedness renewed and
increased under this Note, and the obligations described in the Security
Documents and all documents and instruments executed in connection therewith,
and the Maker ratifies, confirms and agrees that any and all liens, security
interests and other security or collateral now or hereafter held by the Payee as
security for payment and performance of the Existing Note hereby is renewed and
carried forth to secure payment and performance of all of the Maker's
obligations to the Payee, including, without limitation, the payment of all
advances made under the Existing Note, as such advances are increased by this
Note. The Security Documents are and remain the legal, valid and binding
obligations of the parties thereto, enforceable in accordance with their
respective terms.
8. EVENTS OF DEFAULT. Each of the following events shall constitute an
event of default under this Note, the occurrence of any of which shall entitle
the holder hereof to declare the entire principal balance of this Note, together
with all accrued interest and all other liabilities, indebtedness and
obligations of Maker to Payee, whether now existing or hereafter created, to be
immediately due and payable, and to take any and all action allowed Payee, under
this Note, under the Security Documents, and under any other agreements between
Maker and Payee or as allowed by applicable law or equity:
(a) The failure of Maker to make any payment of principal or
interest provided for in this Note on the date upon which it
is due;
(b) The occurrence of an Event of Default under any Security
Document; or
<PAGE>
(c) The occurrence of an event of default under any loan document
between Maker or any of Maker's subsidiaries and Payee
pursuant to which Payee has loaned certain amounts to Maker or
any of Maker's subsidiaries.
9. CROSS DEFAULT; ACCELERATION. If Maker fails to make any payment of
principal or interest provided for in this Note on the date upon which it is due
or otherwise defaults under this Note or related loan documents, all sums and
amounts due under all other loan documents between Maker or any of Maker's
subsidiaries and Payee shall be immediately accelerated and shall be immediately
due and payable to Payee.
10. NO WAIVER, CUMULATIVE REMEDIES. The failure of Payee to
exercise any of its rights and remedies shall not constitute a waiver of the
right to exercise them at that or any other time. All rights and remedies of
Payee in the event of a default shall be cumulative to the greatest extent
permitted by law.
11. EXPENSES. If there is any default under this Note or any Security
Document and this Note is placed in the hands of any attorney for collection or
is collected through any court including any bankruptcy court, Maker promises
and agrees to pay to Payee its attorneys' fees, court costs, and all other
expenses incurred in collecting or attempting to collect or securing or
attempting to secure this Note as provided by the laws of the Commonwealth of
Kentucky, or any other state where the collateral or any part of it is situated.
This section shall be deemed supplemental to, and not to be in substitution for,
that section of any Security Document dealing with the reimbursement of
expenses. Further, Maker agrees to pay all of Payee's legal fees and expenses in
connection with the making and documentation of the loan evidenced by this Note.
12. WAIVERS. Maker and any sureties, guarantors, endorsers and all
other parties ever liable for payment of this Note jointly and severally (a)
waive demand, notice of intent to demand, presentment, notice of nonpayment,
notice of intent to accelerate, notice of acceleration, diligence in collecting,
grace, protest, notice of protest, notice of dishonor, notice of application for
or actual appointment of a receiver for the Collateral or any other asset of
Maker, bringing of suit, and diligence in taking any action to collect any sums
owing hereunder or in proceeding against any of the rights and properties
securing payment of the indebtedness evidenced by this Note, (b) consent to all
extensions without notice for any period or periods of time and partial
payments, before or after maturity, without prejudice to the Payee; (c) agree to
any substitution, subordination, exchange or release of any such security or the
release of any party primarily or secondarily liable hereon; (d) agree that
Payee shall not be required first to institute suit or exhaust its remedies
hereon against Maker or others liable or to become liable hereon or to enforce
its rights against them or any security here for; and (e) consent to any
extension or postponement of time of payment of this Note or to any other
indulgence with respect hereto without notice to any of them, and without in any
way affecting the personal liability of any party hereunder.
13. COLLECTION COSTS. If Payee retains an attorney in connection with
any default or at maturity or to collect, enforce or defend this Note or any of
the Security Documents, whether or not a lawsuit is filed, or in probate,
reorganization, bankruptcy or other proceeding, then Maker agrees to pay to
Payee, in addition to principal and interest, all reasonable costs and expenses
incurred by Payee in trying to collect this Note or in any such suit or
proceeding, including reasonable attorneys' fees.
14. TIME OF ESSENCE. Time is of the essence in the payment and
performance of all of Maker's obligations under this Note, the Security
Documents and all documents securing this Note or relating hereto.
<PAGE>
15. RELEASE. As additional consideration to the execution, delivery,
and performance of this Note by the Maker and to induce Payee to agree to the
refinancing evidenced by this Note, the Maker warrants and represents to Payee
that no facts, events, statuses or conditions exist or have existed which,
either now or with the passage of time or giving of notice, or both, constitute
or will constitute a basis for any claim or cause of action against Payee or any
defense to (a) the payment of any obligations and indebtedness under the
Existing Note or the Security Documents or both; (b) the performance of any of
Maker's obligations in respect to the Existing Note or this Note or any of the
Security Documents, or with respect to any other agreement between Maker and
Payee, and in the event any such facts, events, statuses or conditions exist or
have existed, whether known or unknown, the Maker unconditionally and
irrevocably waives any and all claims and causes of action against Payee and any
defenses to its payment and performance obligations in respect to the Existing
Note, the Security Documents, and any other agreements. Notwithstanding any
provision of this Note or any of the Security Documents or other documents
executed in connection therewith or herewith, this Section shall remain in full
force and effect and shall survive the delivery of the Existing Note and this
Note, the Security Documents and the making and renewal thereof and any and all
amendments, modifications, or restatements of the Existing Note, this Note or
the Security Documents.
16. VENUE AND JURISDICTION. Maker further agrees fthat in the event of
any litigation for collection of or relating to this Note, jurisdiction and
venue shall be proper and appropriate in any court sitting in Dallas County,
Texas and Maker hereby consents to such jurisdiction and venue.
17. WAIVER OF JURY TRIAL. MAKER VOLUNTARILY AND INTENTIONALLY WAlVES
AND SHALL NOT ASSERT ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING FROM OR CONNECTED WITH THIS NOTE, THE SECURITY DOCUMENTS
OR ANY AGREEMENT MADE OR CONTEMPLATED TO BE MADE IN CONNECTION THEREWITH, OR ANY
COURSE OF DEALING, COURSE OF CONDUCT, STATEMENT OR ACTIONS OF ANY PARTY IN
CONNECTION WITH THIS NOTE.
18. LIMITATION ON INTEREST. It is the intention of the parties hereto
to conform strictly to all applicable usury laws. Accordingly, all agreements
between Maker and Payee with respect to this Note and the Loan Documents, as
defined in the Loan Agreement, are hereby expressly limited so that in no event,
whether by reason of acceleration of maturity or otherwise, shall the amount
paid or agreed to be paid to Payee or charged by Payee for the use, forbearance
or detention of the money to be lent hereunder or otherwise, exceed the maximum
amount allowed by law. If this loan would be usurious under applicable law,
then, notwithstanding anything to the contrary in this Note or in the Loan
Documents: (a) the aggregate of all consideration which constitutes interest
under applicable law that is contracted for, taken, reserved, charged or
received under this Note or the Loan Documents shall under no circumstances
exceed the maximum amount of interest allowed by applicable law, and any excess
shall be credited on this Note by the holder thereof, or, at Payee's option,
refunded to Maker; and (b) if maturity is accelerated by reason of an election
by Payee, or in the event of an prepayment, then any consideration which
constitutes interest may never include more than the maximum amount allowed by
applicable law. In such case, interest in excess of the maximum allowed by
applicable law, if any provided for in this Note, the Loan Documents or
otherwise, to the extent permitted by applicable law, shall be amortized,
prorated, allocated and spread from the date of advance of principal hereunder
until payment in full so that the actual rate of interest is uniform through the
<PAGE>
terms hereof. If such amortization, proration, allocation and spreading is not
permitted under applicable law, then such interest in excess of the maximum
allowed by applicable law shall be canceled automatically as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited on this
Note, or, at Payee's option, refunded to Maker. The terms and provisions of this
Section shall control and supersede every other provision of this Note and the
Loan Documents. This Note shall be construed in accordance with and governed by
the laws of the State of Texas, except that if at any time the laws of the
United States America permit Payee to contract for, take, reserve, charge or
receive a higher rate of interest than is allowed by the laws of State of Texas
(whether such federal laws directly so provide or refer to the law of any
state), then such federal laws shall to such extent govern as to the rate of
interest which Payee may contract for, take, reserve, charge or receive under
this Note.
19. PARTIAL INVALIDITY. If any one or more of the provisions of this
Note, or the applicability of any such provision to a specific situation, shall
be held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and enforceable,
and the validity and enforceability of all other provisions of this Note and all
other applications of any such provision shall not be affected thereby. In the
event such provision(s) cannot be modified to make it or them enforceable, the
invalidity or unenforceability of any such provision(s) of this Note shall not
impair the validity or enforceability of any other provision of this Note.
20. BINDING EFFECT. This Note shall bind the successors and assigns
of Maker and shall inure to the benefit of Payee and its successors and assigns.
Maker shall not assign or allow the assumption of its rights and obligations
hereunder without Payee's prior written consent.
17. RENEWAL. This Note amends, restates, renews and increases but does
not extinguish that certain Demand Promissory Note dated August 31, 1999
executed by Maker payable to the order of payee in the principal amount of
$1,800,000.00 (the "Existing Note"). Under the Existing Note, all unpaid
principal and accrued but unpaid interest under the Existing Note is payable on
demand on or after August 31, 2000. Payee has demanded, as of August 31, 2000,
payment in full of all principal and accrued but unpaid interest under the
Existing Note in the total amount of $2,015,128.01. The parties have agreed to
refinance the amount owed as principal and interest plus attorneys fees and
costs incurred to amend the Loan Agreement, this Note and Security Documents in
an amount of $6500.00, and such amount will be payable in accordance with the
terms of this Note.
NO ORAL AGREEMENTS. THIS NOTE AND THE SECURITY DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
----------------------------------------------------------
[SIGNATURE ON FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the undersigned Maker has executed this Note as of
the date first above written.
RIVERSIDE GROUP, INC.
By:
Title:
("Maker")
FIRST AMENDMENT TO CREDIT AGREEMENT- EXHIBIT A
<PAGE>
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT is entered into and effective as of August
31st, 2000 (the "Effective Date"), by and between: (i) RIVERSIDE GROUP, INC., a
Florida corporation having its principal office in Jacksonville, Florida
("Borrower") and (ii) IMAGINE INVESTMENTS, INC., a Delaware corporation having
its principal office in Dallas, Texas ("Lender"). All capitalized terms defined
in that certain Loan Agreement dated as of August 31, 1999 between Borrower and
Lender as amended by that certain First Amendment to Loan Agreement dated as of
the Effective Date (as so amended and as the same may be amended, restated,
modified or supplemented from time to time, the "Loan Agreement") and not
otherwise defined herein shall have the same meaning herein as in the Loan
Agreement.
RECITALS:
A. Pursuant to the terms of the Loan Agreement and the Demand Promissory Note
dated August 31, 1999 executed by Borrower in favor of Lender in the face
principal amount of One Million Eight Hundred Thousand and 00/100 Dollars
($1,800,000), Lender has extended a loan to Borrower (the "Loan") which is being
refinanced as of the Effective Date in accordance with the payment terms of the
First Amended and Restated Promissory Note dated the Effective Date executed by
Borrower in favor of Lender in the face principal amount of Two Million
Twenty-One Thousand Six Hundred Twenty-Eight and 01/100 Dollars ($2,021,628.01)
(the "Note").
B. To induce Lender to refinance the Loan as of the date hereof, without which
inducement Lender would be unwilling to do so, Borrower has agreed to pledge and
grant a security interest in certain shares of the issued and outstanding common
capital stock of Buildscape, Inc. ("Buildscape"), a Florida corporation, to
Lender to secure the payment of the Loan and all other obligations of Borrower
in connection with the Loan, pursuant to the terms and conditions of this Stock
Pledge Agreement.
AGREEMENT:
NOW, THEREFORE, the parties hereby agree as follows:
1. PLEDGE AND DEPOSIT OF SHARES.
----------------------------
1.1 Pledge and Assignment. Borrower hereby pledges and assigns to
Lender and grants a security interest to Lender in 3,119,067 shares of the
common capital stock of Buildscape (the "Stock"), now standing in Borrower's
name, as represented by stock certificate number 5, the original of which has
been delivered herewith by Borrower to Lender, together with a duly executed
blank stock power attached thereto, all as collateral security for the full and
punctual payment and due performance by Borrower of all its obligations under
the Loan Documents (the "Secured Obligations").
1.2 Certificates. The certificates or other instruments evidencing all
new shares of capital stock and all other securities, rights, warrants, options
and the like hereafter created in respect of the Stock, whether by stock split,
stock dividend, merger, consolidation or otherwise, shall be delivered by
Borrower to, and shall be held by, Lender under the terms and conditions of this
Stock Pledge Agreement and subject to the lien and security interest herein
granted, and the term Stock as used herein shall be deemed to include all such
<PAGE>
new shares, securities, rights, warrants, options and the like. In addition, any
and all shares of stock of Buildscape which may be owned or acquired by Borrower
now or hereafter, whether created or acquired, shall be deemed pledged to Lender
as security pursuant to this Stock Pledge Agreement, and all certificates
representing said shares shall be immediately delivered, properly endorsed to
Lender, upon issuance to or receipt by Borrower. Furthermore, Borrower agrees
that it shall pledge to Lender, immediately upon creation or purchase, any
interest which it may create or acquire in any partnership, corporation or other
entity whose purpose includes the holding or operation of properties in
connection with or related to the business operations of Buildscape.
2. COVENANTS. During the period the Stock is being held as security hereunder,
Borrower shall not, without the prior written consent of Lender, vote in favor
of allowing Buildscape to (i) issue any additional capital stock or other equity
securities of any kind or options, subscription rights, warrants or other
instruments with respect thereto or any other instruments convertible into
shares of its capital stock, or sell or issue any treasury stock, (ii) merge
into or with or consolidate with any other corporation or business or otherwise
participate in any reorganization or sell or lease to others all or
substantially all of its assets, (iii) amend its Articles of Incorporation or
By-Laws in any manner that would have a material adverse effect on Lender's
rights with respect to the Stock, or liquidate or dissolve or take any steps to
effect same, or (iv) effect a recapitalization or alter its capital structure.
3. VOTING RIGHTS; DIVIDENDS, ETC.
------------------------------
3.1 Voting of Stock. So long as no Event of Default shall have
occurred, Borrower shall be entitled to exercise any and all voting and/or
consensual rights and powers relating or pertaining to the Stock or any part
thereof for any purpose not inconsistent with the terms of this Stock Pledge
Agreement.
3.2 Payment of Dividends and Distributions. All dividends and
distributions, regardless whether in cash, stock, rights, options or other
property. and all stock splits, stock dividends and the like and the proceeds of
all redemptions and liquidations that are made, paid or declared with respect to
the Stock shall be paid directly to Lender, and those dividends and
distributions that are paid in cash, shall, at Lender's sole election, either be
applied as a payment on the Secured Obligations or held by Lender as additional
security for the Secured Obligations, and those dividends and distributions that
are paid other than in cash shall be held by Lender as additional security for
the Secured Obligations (and Borrower shall execute all instruments in
connection therewith as are requested by Lender and hereby appoints Lender as
its attorney-in-fact to execute such instruments). Borrower represents and
warrants to Lender that it is the only duly authorized transfer agent authorized
to distribute all such dividends and distributions. If at any time a different
transfer agent is authorized to distribute any dividend or distribution,
Borrower shall (i) immediately notify Lender thereof and (ii) instruct such
transfer agent to send all dividends and distributions with respect to the Stock
to Lender, payable directly to Lender. Borrower agrees that any such transfer
agent may rely conclusively upon a copy of this Stock Pledge Agreement for
authorization to make and send such distributions and dividends directly to
Lender without the need for further authorization from, or notification to,
Borrower.
4. STATUS OF THE STOCK. Borrower hereby represents and warrants to Lender that
(a) the Stock is validly issued and outstanding, fully paid and non-assessable,
and constitutes 100% of the issued and outstanding capital stock of Buildscape
owned by Borrower; (b) Borrower is the registered and absolute beneficial owner
of the Stock; (c) as of the date hereof, all the Stock is free and clear of
liens, charges and encumbrances in favor of persons other than Lender and,
<PAGE>
except for the second lien to be granted to the persons listed on Schedule I
attached hereto and made a part hereof, all the Stock shall be free and clear of
liens, charges and encumbrances in favor of persons other than Lender, at all
times while any indebtedness under the Note is outstanding; (d) Borrower has the
full power and authority to pledge the Stock to Lender pursuant to this Stock
Pledge Agreement; (e) the Stock is freely pledgeable under this Stock Pledge
Agreement without the necessity of prior registrations or filings with any state
securities department of the Securities and Exchange Commission; and (f)
Buildscape is a corporation validly existing under the law of the State of
Florida. No part of the Stock shall be sold, transferred or further assigned by
Borrower without the prior written consent of Lender, which consent may be
arbitrarily withheld so long as this Stock Pledge Agreement is in effect.
5. MAINTENANCE OF PRIORITY OF PLEDGE. Borrower shall be liable for and shall
from time to time pay and discharge all taxes, assessments and governmental
charges imposed upon the Stock by any federal, state or local authority, the
liens of which would or might be held prior to the right of Lender in and to the
Stock or which are imposed on the holders and/or registered owners of the Stock.
Borrower shall not, at any time while this Stock Pledge Agreement is in effect,
do or suffer any act or thing whereby the rights of Lender in the Stock would or
might be materially impaired or diminished. Borrower shall execute and deliver
such further documents and take such further actions as may be required to
confirm the rights of Lender in and to the Stock or otherwise to effectuate the
intention of this Stock Pledge Agreement.
6. EVENTS OF DEFAULT. Each of the following shall be deemed an "Event of
Default" hereunder:
6.1 Cross Default. The occurrence of any Event of Default under the
Loan Agreement, the Note or any other Loan Document, or under any other
related instrument or agreement;
6.2 Default Hereunder. The occurrence of any default of any kind
whatsoever under the terms, covenants and conditions of this Stock Pledge
Agreement which is not fully corrected to the complete satisfaction of Lender
within 5 days after Lender has given Borrower notice thereof.
7. REMEDIES UPON DEFAULT. Upon the occurrence of any Event of Default
referred to in Section 6 above, Lender shall have all rights and remedies in and
against the Stock and otherwise of a secured party under the Uniform Commercial
Code as enacted in the State of Texas (the "UCC") and all other applicable laws,
and shall also have all of the rights provided herein, in the Note and in all
other Loan Documents, all of which rights and remedies shall be cumulative to
the fullest extent permitted by law. In connection with the foregoing, Lender
shall have the right:
7.1 Voting Rights. To exercise all voting rights and privileges
whatsoever with respect to the Stock, and to that end Borrower hereby
constitutes Lender as its proxy and attorney-in-fact for all purposes of voting
the Stock, and this appointment shall be deemed coupled with an interest and is
and shall be irrevocable until the Secured Obligations have been fully paid and
this Stock Pledge Agreement terminated, and all persons whatsoever shall be
conclusively entitled to rely upon Lender's verbal or written certification that
it is entitled to vote the Stock hereunder. Borrower shall execute and deliver
to Lender any and all additional proxies and powers of attorney that Lender may
desire in order to vote more effectively the Stock in its own name. Upon any
Event of Default hereunder, Lender may vote the Stock to remove the directors
and officers of Buildscape and to elect new such officers and directors who
shall thereafter manage the affairs of Buildscape, operate any of its
properties, carry on any business, and otherwise take any action with respect
thereto as they shall deem necessary and appropriate, and may also vote stock to
liquidate Buildscape and its business, and may authorize the borrowing of money
in the name of Buildscape and the pledge of its assets to secure such borrowing.
<PAGE>
7.2 Right of Sale. To declare the Note and the other Secured
Obligations immediately due and payable in full, and to sell the Stock in one or
more lots, and from time to time, upon 10 business days' prior written notice to
Borrower of the time and place of sale (which notice Borrower hereby
conclusively agrees is commercially reasonable), for cash or upon credit or for
future delivery, Borrower hereby waiving all rights, if any, of marshaling the
Stock and any other security for the payment of the Note and other Secured
Obligations, and at the option and in the sole discretion of Lender, to either:
(i) Sell the Stock at a public sale or sales, including a sale
at or on any broker's board or stock exchange; or
(ii) Sell the Stock at a private sale or sales.
Lender may bid for and acquire the Stock or any portion thereof at any
public sale, free from any redemption rights of Borrower, and in lieu of paying
cash therefor, may make settlement for the selling price of the Stock or any
part thereof by crediting the net selling price of the Stock against the Note
and other Secured Obligations, after deducting all of Lender's costs and
expenses of every kind and nature therefrom, including Lender's attorneys' fees
incurred in connection with realizing upon the Stock and enforcing the Loan
Documents and the Note, provided the same is not prohibited by the laws of the
State of Texas.
From time to time Lender may, but shall not be obligated to, postpone the
time of any proposed sale of any of the Stock which has been the subject of a
notice as provided above, and also, upon 10 days' prior written notice to
Borrower (which notice Borrower conclusively agrees is commercially reasonable),
may change the time and/or place of such sale.
In the case of any sale by Lender of the Stock or any portion thereof on
credit or for future delivery, which may be elected at the option and in the
sole discretion of Lender, the Stock so sold may, at the sole option of Lender,
either be delivered to the purchaser or retained by Lender until the selling
price is paid by the purchaser, but in either event Lender shall incur no
liability, to Borrower or otherwise, in case of failure of the purchaser to take
up and pay for the Stock so sold. In case of any such failure, such Stock may be
sold again by Lender in the manner provided in this Section 7.
Borrower covenants and agrees that, during any period of sale or
liquidation of the Stock by Lender under this Section 7.2, Borrower shall not
sell any other stock of the Buildscape if such sale would restrict or limit
Lender's sale of the Stock under Rule 144 or other Rule of the Securities and
Exchange Commission or if such sale by Borrower would cause or contribute to a
decline in the share price of the Stock. Borrower further agrees in the event of
any such sale or liquidation by Lender, to execute any and all forms, including,
but not limited to, Forms 144 and customary broker's and seller's representation
letters, to enable Lender to effect the sale of the Stock. Borrower shall
further take and shall cause Buildscape to take all necessary actions to remove
any restrictive legend affecting the Stock, and to assist in the effectuation of
the sale of the Stock including, at Borrower's expense, the supplying of
opinions of counsel customarily required to effect such sales.
7.3 Costs and Expenses. After deducting all of Lender's costs and
expenses of every kind, including, but not limited to, legal fees and
registration (Securities and Exchange Commission and other) fees and expenses,
<PAGE>
if any, incurred in connection with the sale of the Stock, Lender shall apply
the residue of the proceeds of any sale or sales of the Stock against the Note
and the other Secured Obligations, in the order of priority elected by Lender.
Lender shall not incur any liability to Borrower or otherwise as a result of the
sale of the Stock at any private sale or sales, and Borrower hereby waives any
claim arising by reason of (i) the fact that the price or prices for which the
Stock or any portion thereof is sold at such private sale or sales is less than
the price which would have been obtained at a public sale or sales or is less
than the amount due under the Note and other obligations secured hereby, even if
Lender accepts the first offer received and does not offer the Stock or any
portion thereof to more than one offeree, (ii) any delay by Lender in selling
the Stock following an Event of Default hereunder, even if the price of the
Stock thereafter declines, or (iii) the immediate sale of the Stock upon the
occurrence of an Event of Default hereunder, even if the price of the Stock
should thereafter increase. Borrower shall remain liable for any deficiency
remaining due under the Note, this Stock Pledge Agreement, any of the other Loan
Documents or any related documents or instruments.
8. NOTICES. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given (i) upon being delivered personally
(or by confirmed telefax or other electronic delivery method); or (ii) four days
after being mailed by certified mail, return receipt requested, postage prepaid,
or (iii) one day after being sent by Federal Express or other reputable
overnight delivery service providing delivery confirmation, for next day
delivery, in each case to the parties at the following address (or at such other
address for a party as shall be specified by like notice):
If to Borrower: Riverside Group, Inc.
7800 Belfort Parkway, Suite 100
Jacksonville, Florida 32256
Attention: Cathe Gray
If to Lender, to: Imagine Investments, Inc.
No. Central Expressway
Suite 1901
Dallas, Texas 75206
Attention: Gary Goltz, General Counsel
With a copy to: Munsch Hardt Kopf & Harr, P.C.
4000 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202
Attention: Carmen Yung
9. MISCELLANEOUS.
9.1 Future Advances. This Stock Pledge Agreement also secures all
additional loans and/or future advances that may be made hereafter at any time
by Lender to Borrower.
9.2 Governing Law. The laws of the State of Texas shall govern the
construction of this Stock Pledge Agreement and the rights, remedies and duties
of the parties hereunder.
<PAGE>
9.3 Severability. In the event that any one or more of the provisions
contained herein shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Stock Pledge Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
9.4 Successors and Assigns. This Stock Pledge Agreement shall bind
Borrower and its successors and assigns, and shall inure to the benefit of
Lender and its successors and assigns.
9.5 Time of Essence. Time shall be of the essence in the performance
of Borrower's obligations hereunder.
9.6 Captions. The several captions, headings, sections and subsections
of this Stock Pledge Agreement are inserted for convenience only and shall be
ignored in interpreting the provisions of this Stock Pledge Agreement.
9.7 Counterparts. This Stock Pledge Agreement may be executed in
several counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
9.8 Waiver. The failure of Lender to insist upon strict performance of
any of the terms, covenants, or conditions hereof shall not be deemed a waiver
of any of its rights or remedies and shall not be deemed a waiver of any
subsequent breach or default in any of such terms, covenants, or conditions.
9.9 Modifications. This Stock Pledge Agreement may be modified or
amended only by written agreement executed by all of the parties hereto.
9.10 Consent to Jurisdiction. Borrower agrees that in the event of any
litigation for collection of or relating to this Security Agreement,
jurisdiction and venue shall be proper and appropriate in any court sitting in
Dallas County, Texas, and Borrower hereby consents to such jurisdiction and
venue.
9.11 Waiver of Jury Trial. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT BORROWER MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN OR ANY RELATED LOAN OR LENDING TRANSACTION OR ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION THEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF ANY
PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER MAKING THE LOAN.
10. TERMINATION. This Pledge Agreement shall terminate when the Note and all the
other Secured Obligations have been paid in full, at which time Lender shall
reassign and redeliver, without recourse upon or warranty by Lender and at the
expense of Borrower (or cause to be so reassigned and redelivered to Borrower,
to such person or persons as Borrower shall designate, or to such person as may
be legally entitled), against receipt, such of the Stock (if any) as shall not
have been sold or otherwise applied by Lender pursuant to the terms hereof and
shall still be held by it hereunder, together with appropriate instruments of
reassignment and release.
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Stock Pledge
Agreement as of the date first written above.
RIVERSIDE GROUP, INC.
By:
Title:
("Borrower")
IMAGINE INVESTMENTS, INC.
By:
Title: Vice President
("Lender")
<PAGE>
SCHEDULE I
Persons Entitled to Second Lien on the Stock
Cecil Altmann
Creek Farms Corp.
Lovco, Inc.
East Adams Corporation
Fujita Investment Co., Ltd.
Gerlach & Company
Kirschner, Kenneth M.
Pitt & Co.
Southern Farm Bureau Casualty Insurance Company
Hare & Co. NY
American Centennial Insurance Company
Frederick H. Schultz 1994 Trust
<PAGE>
