SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: JUNE 4, 1997
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ATLANTIC GULF COMMUNITIES CORPORATION
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(Exact Name of Registrant as Specified in Charter)
DELAWARE 1-8967 59-0720444
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2601 SOUTH BAYSHORE DRIVE, MIAMI, FLORIDA 33133-5461
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 305-859-4000
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ITEM 5. OTHER EVENTS.
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As reported in a current report on Form 8-K filed with the Commission
on February 18, 1997, Atlantic Gulf Communities Corporation (the "Company")
entered into an Investment Agreement dated as of February 7, 1997, and the
Company and certain of its subsidiaries entered into a Secured Note Agreement
dated as of February 7, 1997 with AP-AGC, LLC ("Apollo"). Apollo, a Delaware
limited liability company, is an affiliate of Apollo Real Estate Investment
Fund, L.P., a private real estate investment fund, the general partner of which
is Apollo Real Estate Advisors, L.P., a New York-based investment fund.
The Company and Apollo have entered into an Amended and Restated
Investment Agreement dated as of February 7, 1997, amended as of March 20, 1997,
and amended and restated as of May 15, 1997 (the "Investment Agreement"). In
connection with entering into the Investment Agreement, the Company, certain of
its subsidiaries (the "Subsidiaries") and Apollo expect to enter into a Secured
Note Agreement dated as of February 7, 1997, and amended and restated as of May
15, 1997 (the "Note Agreement"). Collectively, the Investment Agreement and the
Note Agreement are referred to herein as the Agreements.
BECAUSE THE DISCUSSION BELOW IS ONLY A SUMMARY OF SELECTED MATERIAL AND
OTHER TERMS AND CONDITIONS OF THE INVESTMENT AGREEMENT, WHICH IS INCLUDED
HEREWITH AS EXHIBITS (AS LISTED UNDER ITEM 7 BELOW), SUCH DISCUSSION IS
QUALIFIED IN ITS ENTIRETY BY THIS REFERENCE TO THE EXHIBITS HERETO AND BY SUCH
REFERENCE, SUCH EXHIBITS ARE INCORPORATED HEREIN. (CAPITALIZED TERMS WHICH ARE
USED BUT NOT DEFINED HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN THE
AGREEMENTS.) FURTHERMORE, THERE IS NO ASSURANCE THAT THE TRANSACTIONS SUMMARIZED
BELOW WILL BE CONSUMMATED OR CONSUMMATED AS DESCRIBED BELOW.
Subject to the prior satisfaction of certain conditions, including the
approval of the Stockholders, Apollo will purchase from the Company, and the
Company will issue and sell to Apollo, up to 2,500,000 shares of Series A
Preferred Stock (20% cumulative redeemable convertible preferred stock, Series A
of the Company) and the Investor Warrants (to purchase up to 5,000,000 shares of
Common Stock). Initially, Apollo will purchase at a closing expected to occur
promptly after Stockholders Approval (the "Closing") (a) a number of shares of
Series A Preferred Stock to be agreed upon between the Company and Apollo which
number will be not fewer than 500,000 (the "Initial Preferred Shares") and (b)
two Investor Warrants for each share of Series A Preferred Stock purchased (the
"Proportionate Number of Investor Warrants). The number of Investor Warrants
purchased at the Closing (the "Initial Warrants"), therefore, will be not fewer
than 1,000,000. The purchase price of the Initial Preferred Shares and the
Investor Warrants (the "Initial Purchase Price") will be an amount equal to (a)
the number of Initial Preferred Shares multiplied by $9.88, plus (b) the number
of Initial Warrants multiplied by $0.06 (the "Per Warrant Price").
From time to time after the Closing and until Apollo has acquired all
of the 2,500,000 shares of Series A Preferred Stock and paid the aggregate
purchase price of $25,000,000, the
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Company will issue and sell to Apollo, and Apollo will purchase from the
Company, additional Series A Preferred Stock and on each such occasion, a
Proportionate Number of Investor Warrants (each such transaction, a "Subsequent
Issuance") on the terms and conditions set forth in the Investment Agreement, to
enable the Company to invest in real estate development projects approved by the
Board and Apollo. Promptly after delivery to Apollo of a certified Board
resolution to invest in a real estate development project, the Company and
Apollo will set a date for the Subsequent Issuance and the number of shares of
Series A Preferred Stock to be issued and sold (the "Subsequent Issuance
Preferred Shares") and the Proportionate Number of Warrants to be issued and
sold (the "Subsequent Issuance Warrants").
At each Subsequent Issuance, Apollo will purchase from the Company, and
the Company will issue and sell to Apollo, the agreed number of Subsequent
Issuance Preferred Shares and Subsequent Issuance Warrants for a purchase price
equal to the number of Subsequent Issuance Preferred Shares multiplied by $9.88
plus the number of Subsequent Issuance Warrants multiplied by the Per Warrant
Price of $0.06 (the "Subsequent Issuance Purchase Price"), payable as described
below.
Apollo's obligations at each Subsequent Issuance are subject to the
conditions (unless waived by Apollo) that no Event of Default (as defined in the
Note Agreement) shall have occurred and, except for an Event of Default which is
or results from a Bankruptcy Event, shall then exist.
If the Company has not presented Apollo with real estate development
projects pursuant to which Apollo has invested the aggregate purchase price of
$25,000,000, on the terms and conditions set forth in the Investment Agreement,
(a) Apollo will be entitled at any time to require that a Subsequent Issuance be
effected at which Apollo will acquire all of the Series A Preferred Stock not
acquired by it prior thereto and (b) from and after June 30, 1998, the Company
will be entitled at any time to require that a Subsequent Issuance be effected
at which Apollo will acquire all of the Series A Preferred Stock not acquired by
it prior thereto. The Company's right to require Apollo on and after June 30,
1998 to purchase all of the Series A Preferred Stock not acquired by it prior
thereto is subject to the condition that no Event of Default (as defined in the
Note Agreement) shall have occurred and, except for an Event of Default which is
or results from a Bankruptcy Event, shall then exist.
The Series A Preferred Stock will rank senior to the Common Stock with
respect to dividends and distributions. Holders of the Series A Preferred Stock
will be entitled to cash dividends on a quarterly basis at an annual rate equal
to 20% of the Liquidation Preference, which is $10 per share plus any accrued
and unpaid dividends. If the Board does not declare and pay cash dividends on a
quarterly basis, such dividends will be accrued. If an event of default occurs,
dividends will accumulate at an annual rate of 23%. The Series A Preferred Stock
will be redeemable by the Company, in whole or in part, after three years from
the issuance date at a redemption price in cash equal to the Liquidation
Preference. Holders of the Series A Preferred Stock will have certain "put
rights," which will entitle them to require the Company to repurchase
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the Series A Preferred Stock as follows: up to one-third of the shares after the
end of the fourth year following the issuance date and before the end of the
fifth year, up to two-thirds in the aggregate after the end of the fifth year
and before the end of the sixth year following the issuance date, and up to the
entire amount after the sixth year following the issuance date at a repurchase
price in cash equal to the Liquidation Preference. Certain events of default,
including certain change of control events in respect of the Company, would
accelerate the exercisability of the put rights. The put rights will be secured
by (a) a junior lien on substantially all of the Company's assets, except for
the capital stock of the SP Subsidiary (defined below) and the assets of the SP
Subsidiary and (b) a senior lien on the outstanding capital stock of the SP
Subsidiary and on its assets.
Holders of Series A Preferred Stock will have certain voting rights and
consent rights. Holders of the Series A Preferred Stock will be entitled to
elect three directors to the Board out of a seven-member Board, but will have no
other rights to vote on matters submitted to a vote of the Stockholders except
as may be required by applicable law. The Series A Preferred Stock will be
convertible into Common Stock at a Conversion Price of $5.75 per share, subject
to certain anti-dilution adjustments. Holders of the Series A Preferred Stock
will have certain demand and piggy-back registration rights with respect to the
Series A Preferred Stock and the Common Stock issuable upon conversion of the
Series A Preferred Stock. As long as Apollo holds at least 500,000 shares of
Series A Preferred Stock, Apollo will have certain consent rights in respect of
the Company engaging in Major Transactions (described below).
Without Apollo's prior consent, so long as Apollo holds any Series A
Preferred Stock (or the Note, if issued, remains outstanding and unpaid), the
proceeds from the issuance and sale of the Series A Preferred Stock and the
Investor Warrants (and the Note, if issued) and all funds generated thereby or
assets acquired therewith will be held from and after the Closing by a newly
formed special purpose corporation which will be a direct wholly owned
subsidiary of the Company ("SP Subsidiary"). The only business transactions in
which SP Subsidiary will engage are the development and sale of Board-approved
real estate development projects and certain activities incidental thereto. SP
Subsidiary will be under certain restrictions, including with respect to the
incurrence of debt and liens and the payment of dividends and payments for
certain other purposes. Apollo will have a first priority security interest in
all outstanding capital stock and assets of SP Subsidiary.
The Investment Agreement contemplates the issuance by the Company of
5,000,000 Investor Warrants and up to 4,000,000 Series B Warrants (collectively,
the "Warrants"). At the Closing, and at the Subsequent Issuances, the Company
will issue to Apollo the Investor Warrants to purchase up to an aggregate of
5,000,000 shares of Common Stock as follows: 1,666,667 Class A Warrants,
1,666,667 Class B Warrants and 1,666,666 Class C Warrants. As the Investor
Warrants are issued, they will be allocated as evenly as possible among Class A
Warrants, Class B Warrants and Class C Warrants. In the rights offering
(described below), the Company will issue pro rata to purchasers of Series B
Preferred Stock up to 2,000,000 Series B Warrants in three classes: 666,667
Class A Warrants, 666,667 Class B Warrants and 666,666 Class C
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Warrants. In the private placement described below, the Company expects to issue
pro rata to purchasers of Common Stock and Series B Preferred Stock up to
2,000,000 Series B Warrants in the three classes: 666,667 Class A Warrants,
666,667 Class B Warrants and 666,666 Class C Warrants. The Warrants will have an
exercise price of $5.75, subject to certain antidilution and other adjustments.
The Class A, Class B and Class C Warrants are identical except that they have
different minimum exercise prices. Unexercised Warrants will expire on the
seventh anniversary of their issuance date. Apollo and its transferees will have
certain demand and piggy-back registration rights with respect to the Common
Stock issuable upon the exercise of the Warrants.
The Company intends to conduct a rights offering, expected to commence
promptly after Closing, whereby it will distribute to the holders of Common
Stock transferrable rights to purchase, on a pro rata basis, an aggregate of
1,000,000 shares of Series B Preferred Stock (20% cumulative redeemable
convertible preferred stock, Series B of the Company, with a liquidation
preference of $10 per share) and Series B Warrants to purchase an aggregate of
2,000,000 shares of Common Stock, for an aggregate purchase price of
$10,000,000, all subject to compliance with applicable securities registration
and other laws and regulations (the "Rights Offering"). The Series B Preferred
Stock would be PARI PASSU with the Series A Preferred Stock as to dividends and
other rights of payment; except, however, (a) the put rights of the holders of
the Series B Preferred Stock would not be secured by any lien on the assets of
the Company or any Subsidiaries, (b) optional redemptions of Series B Preferred
Stock by the Company can be effected (subject to certain consent rights of
Apollo) without proration in accordance to the number of shares held by each
holder, and (c) the holders of the Series B Preferred Stock (i) would not be
entitled to vote Series B Preferred Stock with respect to election of Company
directors, and (ii) would not have any "consent" rights in respect of Major
Transactions.
At the annual Stockholders meeting scheduled to be held on June 23,
1997, the Stockholders will vote upon the election to the Board of the three
Board members whose terms expire in 1997. However, in accordance with the
Investment Agreement, as of and after the Closing, the Board will be reduced to
seven directors. Seven current directors, including three Class 2 directors
nominated to be reelected at the Meeting, will resign effective as of the
Closing. As of the Closing, the seven directors of the Company will be: the
three designees of Apollo; Mr. J. Larry Rutherford, the Company's current
president and chief executive officer; and three independent directors selected
by the incumbent Board with Apollo's approval. Apollo's three designees will be
Messrs. W. Edward Scheetz (the original designee of Apollo appointed on February
10, 1997), Lee Neibart and Ricardo Koenigsberger. The Board, with Apollo's
approval, has selected three independent directors as follows: Mr. Gerald N.
Agranoff, who is a current director, and two new directors: James M. DeFrancia
and Charles K. MacDonald.
As long as Apollo holds at least 500,000 shares of Series A Preferred
Stock, without Apollo's consent, the Company will not have the right to engage
in or enter into any agreement with respect to certain significant actions and
transactions ("Major Transactions"), including (subject to certain exceptions):
recapitalizations, redemptions or reclassifications of the Company's capital
stock; distributions or dividends on the Company's capital stock; liquidation,
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winding-up or dissolution of the Company or any Subsidiary; amendments of the
Company's certificate of incorporation or by-laws; mergers or consolidations;
sales of a significant amount of assets not contemplated by an Approved Business
Plan; special dividends or distributions; entering into or amending material
contracts; significant new financings or refinancings, issuances of securities;
unplanned major investments or capital expenditures; transactions which would
result in a change of control of the Company; or the commencement, undertaking
or acquisition of real estate development projects by SP Subsidiary and related
financing or joint venture arrangements.
Under the Investment Agreement, Apollo, subject to certain conditions
and limitations, will have the opportunity to participate in new joint venture
community development projects that the Company proposes to enter into, until
Apollo has invested at least $60,000,000 in such projects. Except with respect
to certain preexisting projects, Apollo will have a right of first offer to
participate in such projects so long as it holds at least 500,000 shares of
Series A Preferred Stock.
The Company and certain prospective purchasers are in the process of
negotiating a securities purchase agreement providing for the Company's issuance
and sale, in a private placement, of Common Stock, Series B Preferred Stock and
Warrants. It is contemplated that the Company will issue and sell to the
prospective purchasers, for an aggregate purchase price of up to $20,000,000, on
a pro rata basis, up to: (a) that number of shares of Common Stock equal to
$10,000,000 divided by the average closing price per share of Common Stock for a
period to be agreed upon; (b) 1,000,000 shares of Series B Preferred Stock; and
(c) Series B Warrants to purchase 2,000,000 shares of Common Stock (the "Private
Placement"). No agreement has been executed with respect to the foregoing
potential transactions and there can be no assurance that such agreement will be
executed, or if executed, on the terms and conditions discussed above. Further,
if such agreement were executed, there can be no assurance that such agreement
would be closed and the transactions effected, in whole or in part. The
Stockholders Approval of the Transactions and Charter Amendments is required for
the Company to consummate the potential Private Placement. The Company's
issuance and sale in the Private Placement of Common Stock, Series B Preferred
Stock and Warrants to purchase Common Stock for an aggregate purchase price of
at least $15,000,000 is a condition to Foothill Capital Corporation
("Foothill"), the Company's senior secured lender, granting its consent to the
transactions.
The Investment Agreement contains certain exclusivity provisions that
preclude the Company from soliciting or initiating an alternative transaction
prior to the Closing. In addition, the Company has agreed that the Board will
not withdraw or modify its approval or recommendation of the Investment
Agreement or the transactions contemplated thereby, or approve or recommend or
enter into any agreement with respect to an alternative proposal. If, however,
the Board receives an unsolicited alternative proposal that, in the exercise of
its fiduciary obligations, it determines to be a superior proposal, the Board
may withdraw or modify its approval or recommendation of the Investment
Agreement and the transactions contemplated thereby, approve or recommend such
superior proposal and terminate the Investment Agreement, subject to the
Company's obligation to pay certain fees to Apollo.
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In January 1997, the Company paid to Apollo a $1,000,000 commitment
fee, which will be refunded to the Company at the Closing. If, however, the
Investment Agreement is terminated or the Closing does not occur on or before
June 24, 1997, for any reason other than a breach of the Investment Agreement by
Apollo, the commitment fee will be forfeited and the Company will pay certain
out-of-pocket expenses of Apollo and its affiliates (the "transaction
expenses"). If the Closing does not occur on or before June 24, 1997, as a
result of a breach of the Investment Agreement or the Note Agreement by the
Company, Stockholders Approval not having been obtained, or failure by June 24,
1997 to obtain the consent required from Foothill in respect of the transactions
contemplated by the Investment Agreement, the Company is required to pay to
Apollo a $1,000,000 break-up fee plus Apollo's transaction expenses, in addition
to forfeiting the commitment fee. If the conditions for the payment of the
break-up fee are fulfilled and either the Company willfully breaches the
Investment Agreement or the Company enters into or consummates an Alternative
Transaction (as defined) by certain dates, the Company is required to pay to
Apollo a $1,000,000 alternative transaction fee, in addition to the payment of
the breakup fee and Apollo's transaction expenses and forfeiting the commitment
fee. If the Board withdraws its approval of the Investment Agreement, approves
or recommends a superior proposal, enters into an agreement with respect to a
superior proposal or terminates the Investment Agreement, the Company is
required to pay to Apollo a $2,000,000 termination fee and Apollo's transaction
expenses in addition to forfeiting the commitment fee. In that case, the Company
will not be required to pay the break-up fee and the alternative transaction
fee. The maximum amount of fees that Apollo will be entitled to receive as a
result of the termination of the Investment Agreement will be $3,000,000
(inclusive of the $1 million commitment fee) plus Apollo's transaction expenses.
The Company has agreed to reimburse Apollo for all of its transaction expenses
whether or not the Closing under the Investment Agreement occurs.
The Closing is subject to a number of conditions, including the vote by
the holders of a majority of the outstanding Common Stock in favor of the
Transactions and the Charter Amendments which will upon effectiveness, among
other things, (a) authorize the Company's issuance of the Series A Preferred
Stock, (b) authorize the Company's issuance of the Series B Preferred Stock, and
(c) increase the amount of authorized Common Stock sufficient to permit the
conversion of Series A Preferred stock and Series B Preferred Stock, the
exercise of the Warrants and the issuance of new Common Stock in the Private
Placement. In addition, the Charter Amendments will modify the dividend rights
of the holders of Common Stock in certain respects including the elimination of
mandatory dividends on the Common Stock equal to 25% of Available Cash (as
defined). Additional conditions precedent to the Closing include (a) Foothill's
consent to the Agreements and the transactions contemplated thereby, all on
terms and conditions reasonably satisfactory to the Company and Apollo, and (b)
the absence of any material adverse effect occurring in respect of the Company's
business, operations, property, condition (financial or otherwise) or prospects.
The Investment Agreement (other than certain provisions thereof, if and
so long as the Note remains outstanding) can be terminated at any time prior to
the Closing (a) by mutual consent of the Company and Apollo; (b) by the Company
or Apollo if the Closing shall not have
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occurred on or before June 24, 1997; provided, however, that such right to
terminate shall not be available to any party whose breach of the Investment
Agreement has been the cause of the failure of the Closing to occur on or before
such date; (c) by the Company or Apollo if any judgment, injunction, order, or
decree enjoining Apollo or the Company from consummating the Transactions is
entered and such judgment, injunction, order, or decree shall become final and
nonappealable; provided, however, that the party seeking to terminate the
Investment Agreement shall have used all reasonable efforts to remove such
judgment, injunction, order, or decree; (d) by Apollo or the Company if the
other party is in material breach of the Investment Agreement and such breach is
not cured within 30 days notice thereof; or (e) by the Company in connection
with its approval of a Superior Proposal provided that prior to or concurrently
with such termination Apollo shall have received the termination fee discussed
below.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
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(C) EXHIBITS.
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DESCRIPTION
EX-1 Execution Copy - Amended and Restated Investment Agreement
between Atlantic Gulf Communities Corporation and AP-AGC, LLC,
dated as of February 7, 1997, amended as of March 20, 1997 and
amended and restated as of May 15, 1997.
EX-2 Exhibit A to Investment Agreement - Form of Amended and
Restated Certificate of Incorporation of Atlantic Gulf
Communities Corporation.
EX-3 Annex A to Amended and Restated Certificate of Incorporation
of Atlantic Gulf Communities Corporation, Statement of
Preferences and Rights of 20% Cumulative Redeemable
Convertible Preferred Stock, Series A.
EX-4 Annex B to Amended and Restated Certificate of Incorporation
of Atlantic Gulf Communities Corporation, Statement of
Preferences and Rights of 20% Cumulative Redeemable
Convertible Preferred Stock, Series B.
EX-5 Exhibit C - Warrant for the Purchase of Common Stock of
Atlantic Gulf Communities Corporation.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereto duly authorized.
ATLANTIC GULF COMMUNITIES CORPORATION,
a Delaware corporation
Date: June 5, 1997 By: /s/ JOHN H. FISCHER
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John H. Fischer, Vice President
and Treasurer
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EXECUTION COPY
AMENDED AND RESTATED INVESTMENT AGREEMENT
Between
ATLANTIC GULF COMMUNITIES CORPORATION
and
AP-AGC, LLC
Dated as of February 7, 1997,
Amended as of March 20, 1997
and
Amended and Restated as of May 15, 1997
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TABLE OF CONTENTS
PAGE
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1. DEFINITIONS: CERTAIN REFERENCES .................... 2
SECTION 1.1 Definitions ........................... 2
SECTION 1.2 Other Defined Terms ................... 10
SECTION 1.3 Terms Defined in Note Agreement ....... 11
SECTION 1.4 Terms Generally ....................... 13
2. FUNDING, CLOSING AND SUBSEQUENT ISSUANCES ........... 13
SECTION 2.1 The Funding ........................... 13
SECTION 2.2 Transactions at the Closing ........... 14
SECTION 2.3 Funding Time and Place ................ 16
SECTION 2.4 Closing Time and Place ................ 16
SECTION 2.5 Subsequent Issuances .................. 17
3. CONDITIONS TO THE FUNDING, THE CLOSING AND
THE SUBSEQUENT ISSUANCES .......................... 20
SECTION 3.1 Conditions Precedent to the
Obligations of the Investor
at the Funding ...................... 20
SECTION 3.2 Conditions Precedent to the
Obligations of the Investor
at the Closing ...................... 20
SECTION 3.3 Conditions Precedent to
Obligations of the Company
at the Closing ...................... 23
SECTION 3.4 Condition Precedent to the
Obligations of the Investor at
each Subsequent Issuance ............ 25
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ....... 25
SECTION 4.1 Due Authorization; No Conflicts;
Validity ............................ 26
SECTION 4.2 Capitalization of the Company ......... 27
SECTION 4.3 SEC Documents ......................... 29
SECTION 4.4 Subsidiaries .......................... 30
SECTION 4.5 Approvals ............................. 30
SECTION 4.6 Licenses, Etc. ........................ 30
SECTION 4.7 Contracts ............................. 31
SECTION 4.8 Finder's Fees ......................... 32
SECTION 4.9 Employee Benefits ..................... 32
SECTION 4.10 Securities Law Matters ................ 33
SECTION 4.11 State Takeover Statutes ............... 34
SECTION 4.12 1996 Financial Statements ............. 34
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5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR ...... 35
SECTION 5.1 Due Authorization; No Conflicts;
Validity ............................ 35
SECTION 5.2 Approvals ............................. 36
SECTION 5.3 Acquisition for Own Account ........... 36
SECTION 5.4 Finder's Fees ......................... 36
SECTION 5.5 Financing ............................. 37
6. COVENANTS OF THE PARTIES ............................ 37
SECTION 6.1 Transfer Restrictions; Legends ........ 37
SECTION 6.2 Stockholders Meeting .................. 38
SECTION 6.3 Pre-Closing Activities ................ 39
SECTION 6.4 No Inconsistent Agreements ............ 42
SECTION 6.5 Hart-Scott-Rodino ..................... 43
SECTION 6.6 Exclusivity ........................... 43
SECTION 6.7 Affirmative Covenants ................. 46
SECTION 6.8 Publicity ............................. 51
SECTION 6.9 Reservation of Shares ................. 51
SECTION 6.10 The Board ............................. 52
SECTION 6.11 Indemnification of Board .............. 53
SECTION 6.12 Co-Investment Opportunity ............. 53
SECTION 6.13 Approved Business Plan ................ 55
SECTION 6.14 Special Purpose Subsidiary ............ 55
7. SURVIVAL AND INDEMNIFICATION ........................ 58
SECTION 7.1 Survival Periods ...................... 58
SECTION 7.2 Indemnification by the Company ........ 58
SECTION 7.3 Indemnification by the Investor ....... 59
SECTION 7.4 Notification .......................... 60
SECTION 7.5 Registration Statements ............... 61
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8. REGISTRATION RIGHTS ................................. 62
SECTION 8.1 Demand Registrations .................. 62
SECTION 8.2 Piggyback Registrations ............... 63
SECTION 8.3 Indemnification by the Company ........ 64
SECTION 8.4 Indemnification by the Investor ....... 65
SECTION 8.5 Notification .......................... 66
SECTION 8.6 Other Indemnification ................. 66
SECTION 8.7 Contribution .......................... 66
SECTION 8.8 Registration Covenants of the
Company ............................. 67
SECTION 8.9 Expenses .............................. 71
SECTION 8.10 Transfer of Registration Rights ....... 71
SECTION 8.11 Other Registration Rights ............. 72
SECTION 8.12 Rule 144 .............................. 72
SECTION 8.13 Limitation on Requirement to File
or Amend Registration Statement ..... 73
9. TERMINATION.......................................... 73
SECTION 9.1 Termination ........................... 73
SECTION 9.2 Effect of Termination ................. 75
SECTION 9.3 Fees Due Upon Termination ............. 75
10. MISCELLANEOUS ....................................... 77
SECTION 10.1 Notices ............................... 77
SECTION 10.2 Expenses .............................. 78
SECTION 10.3 Amendment; Waiver ..................... 78
SECTION 10.4 Severability .......................... 79
SECTION 10.5 Headings .............................. 79
SECTION 10.6 Entire Agreement ...................... 79
SECTION 10.7 Maximum Interest Rate ................. 80
SECTION 10.8 Counterparts .......................... 80
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SECTION 10.9 Assignment ............................ 80
SECTION 10.10 Third-Party Beneficiaries ............. 81
SECTION 10.11 Governing Law ......................... 81
SECTION 10.12 Submission to Jurisdiction;
Waiver of Jury Trial ................ 81
SCHEDULE I Disclosure Schedule
EXHIBIT A Form of Amended and Restated Certificate of
Incorporation
EXHIBIT B Form of Class A, Class B and Class C Warrants
EXHIBIT C Form of Secured Note Agreement, as amended and restated
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AMENDED AND RESTATED INVESTMENT AGREEMENT dated as of February 7,
1997, amended as of March 20, 1997 and amended and restated as of May 15, 1997
by and between Atlantic Gulf Communities Corporation, a corporation organized
and existing under the laws of the State of Delaware (the "COMPANY"), and
AP-AGC, LLC, a limited liability company organized and existing under the laws
of the State of Delaware (the "INVESTOR").
WHEREAS, the Company and the Investor desire to enter into this
Agreement pursuant to which, among other things, (a) at the Funding (all
capitalized terms used in these Recitals, as defined below), the Investor will
lend to the Company, and the Company will borrow from the Investor, the Loan
Amount, and (b) at the Closing and the Subsequent Issuances, the Company will
issue to the Investor, and the Investor will acquire from the Company, the
Preferred Shares and the Warrants, all on the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, concurrently with the execution of the Original Agreement,
the Company and the Investor have entered into the Note Agreement;
WHEREAS, the Board of Directors of the Company has received the
opinion of Tallwood Associates, Inc., its financial advisor that the
transactions contemplated by this Agreement and the other Transaction Documents
are fair, from a financial point of view, to the stockholders of the Company;
WHEREAS, the Board of Directors of the Company (the "BOARD") has
determined that it is in the best interests of the Company to enter into this
Agreement and the other Transaction Documents, and the managing member of the
Investor has approved this Agreement and the other Transaction Documents; and
NOW, THEREFORE, for and in consideration of the mutual
representations, warranties, covenants and agreements contained herein, and
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intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS: CERTAIN REFERENCES
SECTION 1.1 DEFINITIONS. The terms defined in this Article I, whenever
used in this Agreement, shall have the following meanings for all purposes of
this Agreement:
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder, as the same may be amended from time to
time.
"AGGREGATE PURCHASE PRICE" means the aggregate purchase price for all
of the Preferred Shares and the Warrants, which is $25,000,000.
"AGREEMENT" means this Amended and Restated Investment Agreement,
including all Exhibits and Schedules.
"AMENDED AND RESTATED CERTIFICATE OF INCORPORATION" means the Amended
and Restated Certificate of Incorporation of the Company in the form of Exhibit
A, to be filed with the Delaware Secretary of State, including therein the
Series A Preferred Stock Certificate of Designation and the Series B Preferred
Stock Certificate of Designation.
"APPROVAL" means each authorization, approval, consent, license,
filing and registration by, with or from any Government Authority,
self-regulatory organization or stock exchange, necessary to authorize or permit
the execution, delivery or performance of this Agreement or any other
Transaction Document or for the validity or enforceability hereof or thereof.
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"APPROVED BUSINESS PLAN" means a Business Plan of the Company that has
been approved by the Investor.
"BANKRUPTCY EVENT" means any event described in Section 8(e)(i)
through (vii) of the Series A Preferred Stock Certificate of Designations.
"BANK WARRANTS" means the 1,500,000 warrants for the purchase of
Common Stock issued on September 30, 1996 pursuant to the Prepayment Agreement
dated as of September 30, 1996 among the financial institutions listed on the
signature pages thereof, The Chase Manhattan Bank and the Company.
"BUSINESS COMBINATION" means a complete liquidation or dissolution of
the Company or a merger or consolidation of the Company, or a sale of all or
substantially all of the Company's assets.
"CERTIFICATE OF INCORPORATION" means the Certificate of Incorporation
of the Company as filed with the Delaware Secretary of State, as amended through
the date hereof.
"CHANGE OF CONTROL" means: (i) an acquisition by any Person or group
(as defined for purposes of Section 13(d) under the Exchange Act) (excluding the
Company or an employee benefit plan of the Company or a corporation controlled
by the Company's stockholders) of beneficial ownership (as defined for purposes
of Section 13(d) under the Exchange Act) of Common Stock or other voting
securities of the Company such that such person or group thereafter beneficially
owns 25% or more of the Common Stock or other voting securities of the Company;
(ii) a change in a majority of the Incumbent Board other than the Investor
Designees (excluding any individuals approved by a vote of at least five members
of the Incumbent Board other than in connection with an actual or threatened
proxy contest); (iii) failure of the requisite number of Investor Designees to
be members of the Board (other than as a result of the Investor's failure to
nominate a successor to an Investor Designee who has resigned or been removed as
a director); or (iv) consummation of a Business Combination (other than a Busi-
ness Combination in which all or substantially all of the stock holders of the
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Company receive or own upon consummation thereof 50% or more of the stock of the
Company resulting from the Business Combination, at least a majority of the
board of directors of the resulting corporation are members of the Incumbent
Board, and after which no Person owns 25% or more of the stock of the resulting
corporation who did not own such stock immediately before the Business
Combination); excluding, in each case (i) through (iv), the transactions
contemplated by this Agreement (including for this purpose the Rights Offering
and the Private Placement.
"CLASS A WARRANTS" means the 1,666,667 Warrants for the Purchase of
Common Stock of the Company to be issued by the Company pursuant to this
Agreement, in the form of Exhibit B.
"CLASS B WARRANTS" means the 1,666,667 Warrants for the Purchase of
Common Stock of the Company to be issued by the Company pursuant to this
Agreement, in the form of Exhibit B.
"CLASS C WARRANTS" means the 1,666,666 Warrants for the Purchase of
Common Stock of the Company to be issued by the Company pursuant to this
Agreement, in the form of Exhibit B.
"CONVERSION SHARES" means the shares of Common Stock issuable or
issued upon conversion of the Preferred Shares.
"DEFAULT CHANGE IN CONTROL" means a Change in Control (a) of the type
referred to in clauses (ii) or (iii) of the definition thereof or (b) of the
type referred to in clauses (i) and (iv) of the definition thereof, provided
that the percentage thresholds referred to in such clauses (i) and (iv) shall be
40% instead of 25%.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule of the Company
attached as Schedule I to the Original Agreement, as it may be amended or
supplemented from time to time by the Company with the written consent of the
Investor.
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"EFFECTIVE DATE" means the date on which the Amended and Restated
Certificate of Incorporation is filed with the Delaware Secretary of State and
becomes effective.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, as the same may be amended
from time to time.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules thereunder.
"INCUMBENT BOARD" means, prior to the Closing, the Board as
constituted on the day after execution and delivery of this Agreement and,
following the Closing, the Board as constituted immediately following the
Closing.
"INITIAL PREFERRED SHARES" shall be the shares of Series A Preferred
Stock to be issued and sold at the Closing, the number of which shall be as
agreed between the Company and the Investor, provided that such number shall not
be less than the Specified Investor Amount.
"INSTRUMENT" means any contract, agreement, indenture, mortgage,
security, document or writing under which any obligation is evidenced, assumed
or undertaken, or any Lien is granted or perfected.
"LETTER AGREEMENT" means that certain letter agreement, dated November
19, 1996, between the Company and the Investor as amended by that certain letter
agreement dated January 14, 1997, between the Company and the Investor.
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"LOAN DOCUMENTS" means the Note Agreement and each instrument or
document required to be executed and delivered by the Company or any Subsidiary
pursuant thereto.
"MAJOR TRANSACTION" means any material transaction which is not
described in an Approved Business Plan, including any (i) recapitalization,
redemption or reclassification of, or distribution or dividend on, the Company's
capital stock, (ii) amendment of its certificate of incorporation or by-laws,
(iii) liquidation, winding-up or dissolution of the Company or any Significant
Subsidiary (as defined in SEC Regulation S-X) of the Company, (iv) consolidation
of the Company with, or merger of the Company with or into, any other Person,
except a merger of a wholly owned Subsidiary of the Company into the Company,
with the Company surviving such merger, (v) sale, transfer, lease or encumbrance
by the Company or any Subsidiary of a significant amount of assets of the
Company other than in respect of sales of Predecessor Assets (as referred to in
the Company's annual report on Form 10-K for the year ended December 31, 1995
and as set forth in Section 1.1 of the Disclosure Schedule), (vi) special
dividend or distribution with respect to, or repurchase, redemption or other
acquisition of, equity securities of the Company or any rights, warrants or
options in respect of such equity securities, (vii) capital expenditure or
investment by the Company or any Subsidiary in excess of $500,000, (viii)
entering into or materially amending (including by waiver) any material
contract, (ix) significant new financing or refinancing, (x) issuance of
securities (other than employee and director stock options to acquire up to
2,000,000 shares of Common Stock and the issuance of the Common Stock
thereunder), (xi) transactions which would result in a Change of Control, (xii)
material transaction the nature of which prevents specificity in the Approved
Business Plan or (xiii) commencement, undertaking or acquisition of a real
estate development project by SP Subsidiary (whether independently, by joint
venture or other wise) and related financing or joint venture arrangements;
PROVIDED, HOWEVER, that, subject to the terms and conditions of the Transaction
Documents, neither (a) any action or determination by the Company in respect of
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any Series A Preferred Stock that is not otherwise prohibited by the Investment
Agreement and is in accordance with the Series A Preferred Stock Certificate of
Designations, including dividends and redemptions, nor (b) any dividends on or
redemptions of Series B Preferred Stock in accordance with the Series B
Preferred Stock Certificate of Designations, or any action in respect of the
Series B Preferred Stock required to be taken by the Company under the Series B
Preferred Stock Certificate of Designations or under the securities purchase
agreement pursuant to which the Private Placement is consummated (which
agreement shall be a material agreement for purposes of this definition) shall
be deemed to be a Major Transaction, so long as, in the case of dividends and
optional redemptions, the ratio of the aggregate amount being paid on the Series
A Preferred Stock to the aggregate amount being paid on the Series B Preferred
Stock is both (A) greater than or equal to the ratio of the aggregate
outstanding liquidation preference of the Series A Preferred Stock to the
aggregate outstanding liquidation preference of the Series B Preferred Stock
issued in the Rights Offering and the Private Placement and (B) less than or
equal to the ratio of the aggregate outstanding liquidation preference of the
Series A Preferred Stock to the aggregate outstanding liquidation preference of
the Series B Preferred Stock issued in the Rights Offering.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, operations, property, condition (financial or otherwise) or prospects
of the Company and its Subsidiaries taken as a whole, (ii) the ability of the
Company to
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perform its obligations under this Agreement or any of the other Transaction
Documents, or (iii) the validity or enforceability of this Agreement or any of
the other Transaction Documents or the material rights or remedies of the
Investor thereunder (in any capacity).
"MAXIMUM LOAN AMOUNT" means $10,000,000.
"NOTE AGREEMENT" means the Secured Note Agreement dated the date
hereof by and between the Company and the Investor in the form of Exhibit C.
"ORIGINAL AGREEMENT" means the Investment Agreement dated as of
February 7, 1997 between the Company and the Investor.
"PAYMENT DEFAULT" means a Default referred to in any of subsection
(a), (e), (g) or (h) of Section 8.1 of the Note Agreement, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition thereto, has been satisfied.
"PER SHARE PURCHASE PRICE" means $9.88.
"PER WARRANT PRICE" means $.06.
"PREFERRED SHARES" means the 2,500,000 shares of Series A Preferred
Stock to be issued to the Investor pursuant to this Agreement at the Closing and
the Subsequent Issuances. "PROMISSORY NOTE" means a Secured Convertible Prom-
issory Note of the Company issuable under the Note Agreement in the form
attached as an exhibit to the Note Agreement, in an aggregate principal amount
not to exceed the Maximum Loan Amount.
"PROPORTIONATE NUMBER OF WARRANTS" means two Warrants for every
Preferred Share issued and sold on such occasion.
"SEC" means the United States Securities and Exchange Commission.
"SEC DOCUMENTS" means all documents filed by the Company with the SEC
since January 1, 1995.
"SERIES A PREFERRED STOCK" means a new series of preferred stock of
the Company to be designated 20% Cumulative Redeemable Convertible Preferred
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Stock, Series A, liquidation preference $10 per share, the terms of which shall
be as set forth in the Series A Preferred Stock Certificate of Designations.
"SERIES A PREFERRED STOCK CERTIFICATE OF DESIGNATION" means the
Statement of Preferences and Rights setting forth the terms of the Series A
Preferred Stock included within the Amended and Restated Certificate of
Incorporation.
"SERIES B PREFERRED STOCK" means a new series of Preferred stock of
the Company to be designated 20% Cumulative Redeemable Convertible Preferred
Stock, Series B, liquidation preference $10 per share, the terms of which, if
issued, shall be as set forth in the Series B Preferred Stock Certificate of
Designations.
"SERIES B PREFERRED STOCK CERTIFICATE OF DESIGNATION" means the
Statement of Preferences and Rights setting forth the terms of the Series B
Preferred Stock included within the Amended and Restated Certificate of
Incorporation.
"SPECIFIED INVESTOR AMOUNT" means 500,000 shares of Series A Preferred
Stock.
"TRANSACTION DOCUMENTS" means this Agreement, the Warrants, the
Amended and Restated Certificate of Incorporation, the Loan Documents and each
exhibit, schedule, certificate and document to be executed or delivered pursuant
hereto or thereto.
"TRANSACTION EXPENSES" means the out-of-pocket expenses of the
Investor and its Affiliates, including the reasonable fees and expenses of
lawyers, accountants, appraisers, consultants and other advisors relating to the
discussion, evaluation, negotiation and documentation of the Transaction
Documents and the Funding and Closing.
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"WARRANTS" means the 5,000,000 in aggregate Class A Warrants, Class B
Warrants and Class C Warrants to be issued by the Company to the Investor at the
Closing.
"WARRANT SHARES" means the 5,000,000 shares of Common Stock issuable
upon exercise of the Warrants.
SECTION 1.2 OTHER DEFINED TERMS. Each of the following terms is
defined in the Section of this Agreement set forth opposite such term below:
DEFINED TERM SECTION
------------ -------
Additional Investor Designee ............................... 3.2(h)
Alternative Proposal ....................................... 6.6(b)
Alternative Transaction .................................... 6.6(a)
Benefit Plans .............................................. 4.9
Board ...................................................... Recitals
Change of Position ......................................... 6.6(c)
Closing .................................................... 2.4
Closing Date ............................................... 2.4
Commitment Fee ............................................. 2.2(c)
Common Stock ............................................... 4.2
Company .................................................... Preamble
Demand Registration ........................................ 8.1
Eligible Transferee ........................................ 8.10
Funding .................................................... 2.1
Funding Date ............................................... 2.3
indemnified party .......................................... 7.2
Initial Purchase Price ..................................... 2.2(a)
Initial Warrants ........................................... 2.2(a)
Investor ................................................... Preamble
Investor Designees ......................................... 3.2(h)
Liabilities ................................................ 7.2
Licenses ................................................... 4.6
Loan Amount ................................................ 2.1
Multiemployer Plan ......................................... 4.9
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DEFINED TERM (CONTINUED) SECTION
------------ -------
Multiple Employer Plan ..................................... 4.9
NASD ....................................................... 8.8(p)
New Promissory Note ........................................ 2.2(a)
Notice of Superior Proposal ................................ 6.6(c)
Options .................................................... 4.2
Original Investor Designee ................................. 3.1(d)
Piggyback Registration ..................................... 8.2(a)
Private Placement .......................................... 6.3(c)
Proxy Statement ............................................ 6.2(b)
Registrable Securities ..................................... 8.1
Registration Statement ..................................... 8.8(a)
Representatives ............................................ 6.7(b)
Rights Offering ............................................ 6.3(c)
SP Subsidiary .............................................. 6.14
Stockholders Approval ...................................... 4.1
Stockholders Meeting ....................................... 6.2(a)
Subsequent Issuances ....................................... 2.5
Subsequent Issuance Preferred Shares ....................... 2.5
Subsequent Issuance Warrants ............................... 2.5
Superior Proposal .......................................... 6.6(c)
Termination Fee ............................................ 6.6(c)
SECTION 1.3 TERMS DEFINED IN NOTE AGREEMENT. As used in this
Agreement, each of the following terms (and any defined terms included within
the definitions of the following terms) shall have the meaning ascribed to it in
the Note Agreement.
Affiliate Environmental Laws
Business Day ERISA
Business Plan Event of Default
Code Excluded Subsidiaries
Contractual Obligation Foothill Loan Documents
Deeds of Trust GAAP
Default Government Authority
Dollars or $ Hazardous Materials
Due Diligence Fee Indebtedness
Agreement
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Issuance Date Reorganization Plan
Joint Venture Requirement of Law
Lien Responsible Officer
Mortgages Revolving Loans
Obligations Security Documents
Person Subsidiary
Plan
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SECTION 1.4 TERMS GENERALLY. The definitions in Sections 1.1, 1.2 and
1.3 shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation." All references herein to Articles, Sections, Exhibits and Schedules
shall be deemed references to Articles and Sections of, and Exhibits and
Schedules to, this Agreement unless the context shall otherwise require. Except
as otherwise expressly provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP. The terms and conditions of
this Agreement shall be deemed to apply to any Subsidiary of the Company as
though such entity were the Company, except where such application would be
manifestly inappropriate.
ARTICLE II
FUNDING, CLOSING, AND SUBSEQUENT ISSUANCES
SECTION 2.1 THE FUNDING. If the Company wishes to borrow under the
Note Agreement up to the Maximum Loan Amount, the Company will give the Investor
a written request for such loan, including in such request the amount of funds
it wishes to borrow and a reasonably detailed description of the Company's
proposed use of such funds. The Investor shall notify the Company in writing
within 10 business days of such request whether or not the Investor, in its
absolute discretion, approves such use of funds. If the Investor does not
approve such use of funds, then the Investor shall have no obligation to make
such loan and the rights and obligations of the parties under this Agreement
shall be unaffected by such request of the Company. If the Investor does approve
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such use of funds, then the consummation of such loan (the "FUNDING") shall take
place on the twentieth business day following such notice from the Investor,
subject to all of the conditions to the Funding having been complied with or
waived by the Investor. On the terms and subject to the conditions contained
herein and in the Note Agreement, at the Funding, the Company shall issue and
deliver to the Investor a Promissory Note with a face amount equal to the amount
of the loan being made (the "LOAN AMOUNT"), duly executed by the Company, dated
the date of the Funding and registered in the name of the Investor, against
delivery by the Investor of the Loan Amount in immediately available funds by
wire transfer to a bank account designated by the Company to the Investor in
writing not less than two Business Days prior to the Funding Date.
SECTION 2.2 TRANSACTIONS AT THE CLOSING. On the terms and subject to
the conditions contained herein, at the Closing:
(a) ACQUISITION OF INITIAL PREFERRED SHARES. The Investor will
purchase from the Company, and the Company will issue and sell to the Investor,
the Initial Preferred Shares and a Proportionate Number of Warrants (allocated
as evenly as possible among Class A Warrants, Class B Warrants and Class C
Warrants) (the "INITIAL WARRANTS"), for a purchase price equal to (x) the number
of Initial Preferred Shares multiplied by the Per Share Purchase Price PLUS (y)
the number of Initial Warrants multiplied by the Per Warrant Price (the "INITIAL
PURCHASE PRICE"), payable as described in the immediately following sentence.
The Company shall issue and deliver to the Investor one or more certificates
representing the Initial Warrants and one or more stock certificates
representing the Initial Preferred Shares, each duly executed by the Company and
registered in the name of the Investor, and if the Funding shall have occurred,
shall pay to the Investor in cash the amount of accrued and unpaid interest due
on the Promissory Note, against delivery to the Company of the Initial Purchase
Price payable as follows: (i) if the Funding shall not have occurred, the
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Initial Purchase Price shall be paid in immediately available funds by wire
transfer (to a bank account designated by the Company to the Investor in writing
not less than two Business Days prior to the Closing Date); or (ii) if the
Funding shall have occurred, the Initial Purchase Price shall be paid (A) if the
Initial Purchase Price exceeds the outstanding principal amount of the
Promissory Note, in the form of (x) presentation of the Promissory Note for
renewal and conversion, together with (y) immediately available funds (by wire
transfer as aforesaid) of an amount equal to the Initial Purchase Price reduced
by the outstanding principal amount of the Promissory Note or (B) if the
principal amount of the Promissory Note exceeds the Initial Purchase Price, in
the form of presentation of the Promissory Note for partial renewal and
conversion, and, in such event, the Company shall execute and deliver to the
Investor a new Promissory Note (the "NEW PROMISSORY NOTE") in an amount equal to
the amount of the original Promissory Note reduced by the Initial Purchase
Price. If the Funding has occurred, the Investor shall present the Promissory
Note to the Company at the Closing for renewal and conversion in whole or in
part, and a legend shall be placed thereon stating that the Promissory Note has
been converted into Preferred Shares (and, if applicable, the New Promissory
Note) and stating the number of Preferred Shares (and, if applicable, the amount
of the New Promissory Note) into which it has been converted, which legend shall
be acknowledged on the original Promissory Note by the Company and the Investor.
From and after the Closing, the original Promissory Note shall not evidence an
indebtedness for borrowed money of the Company, but shall evidence the
repurchase obligations and other monetary obligations of the Company and the
co-makers of the original Promissory Note to the holders of the Preferred Shares
into which it has been converted, as set forth in Section 8 of the Series A
Preferred Stock Certificate of Designations. From and after the Closing Date,
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the original Promissory Note (legended as set forth above, if applicable) shall
be held by the Investor together with the stock certificate(s) evidencing such
Preferred Shares, and rights in the original Promissory Note shall be
transferable pro-rata only to holders of such Preferred Shares.
(b) REFUND OF COMMITMENT FEE. The Investor will deliver to the Company
$1,000,000, representing the return of the commitment fee (the "COMMITMENT FEE")
paid by the Company to the Investor pursuant to the Letter Agreement, payable in
immediately available funds by wire transfer (to a bank account designated by
the Company to the Investor in writing not less than two Business Days prior to
the Closing Date).
(c) ALLOCATION OF AGGREGATE PURCHASE PRICE. The Aggregate Purchase
Price shall be allocated $24,700,000 to the Preferred Shares and $300,000 to the
Warrants. The parties agree that the valuation set forth in the immediately
preceding sentence shall be utilized by each of them for all financial and tax
reporting purposes.
SECTION 2.3 FUNDING TIME AND PLACE. If applicable, the closing of the
loan of the Loan Amount and delivery of the Promissory Note shall take place at
10 a.m., New York City time, on the date determined pursuant to Section 2.1, at
the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York,
New York, or at such other time and place as the parties may mutually determine
in writing. The actual date on which the Funding shall occur is referred to
herein as the "FUNDING DATE."
SECTION 2.4 CLOSING TIME AND PLACE. The closing of the acquisition of
the Initial Preferred Shares and the issuance of the Initial Warrants shall take
place at 10 a.m., New York City time, on the Effective Date, which shall be no
later than the second Business Day following the satisfaction or waiver of the
conditions to the Closing described in Sections 3.2 and 3.3, at the offices of
Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, or on
such other day or at such other time and place as the parties may mutually
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determine in writing (the "CLOSING"). The actual date on which the Closing shall
occur is referred to herein as the "CLOSING DATE."
SECTION 2.5 SUBSEQUENT ISSUANCES. (a) TIMING OF SUBSEQUENT ISSUANCES.
From time to time following the Closing and until the Investor has acquired
hereunder all of the Preferred Shares and paid the Aggregate Purchase Price in
full, the Company shall issue and sell to the Investor, and the Investor shall
acquire from the Company, additional shares of Series A Preferred Stock and, on
each such occasion, a Proportionate Number of Warrants (each such transaction
referred to herein as a "SUBSEQUENT ISSUANCE"), on the terms and subject to the
conditions herein set forth, for the purpose of enabling the Company to invest
through SP Subsidiary in real estate development projects approved by the Board.
Promptly after delivery to the Investor of a certified Board resolution to
invest in a real estate development project, the Company and the Investor shall
set a date for such Subsequent Issuance (which shall be not less than twenty
business days following such notification) and the number of Preferred Shares to
be issued and sold thereat (the "SUBSEQUENT ISSUANCE PREFERRED SHARES") and the
Proportionate Number of Warrants to be issued thereat (the "SUBSEQUENT ISSUANCE
WARRANTS").
(b) ACQUISITION OF SUBSEQUENT ISSUANCE PREFERRED SHARES AND SUBSEQUENT
ISSUANCE WARRANTS. On the terms and subject to the conditions contained herein,
at each Subsequent Issuance, the Investor will purchase from the Company, and
the Company will issue and sell to the Investor, the agreed number of Subsequent
Issuance Preferred Shares and Subsequent Issuance Warrants (allocated as evenly
as possible among Class A Warrants, Class B Warrants and Class C Warrants) for a
purchase price equal to (x) the number of Subsequent Issuance Preferred Shares
multiplied by the Per Share Purchase Price PLUS (y) the number of Subsequent
Issuance Warrants multiplied by the Per Warrant Price (the "SUBSEQUENT ISSUANCE
PURCHASE PRICE"), payable as described in the immediately following sentence.
The Company shall issue and deliver to the Investor one or more certificates
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representing the Subsequent Issuance Warrants and one or more stock certificates
representing the Subsequent Issuance Preferred Shares, each duly executed by the
Company and registered in the name of the Investor and, if any amount shall be
outstanding under a New Promissory Note, shall pay to the Investor in cash the
amount of accrued and unpaid interest due on such New Promissory Note, against
delivery to the Company of the Subsequent Issuance Purchase Price payable as
follows: (i) if no amount shall be outstanding under a New Promissory Note, the
Subsequent Issuance Purchase Price shall be paid in immediately available funds
by wire transfer (to a bank account designated by the Company to the Investor in
writing not less than two Business Days prior to the date of such Subsequent
Issuance); or (ii) if any amount shall be outstanding under a New Promissory
Note, the Subsequent Issuance Purchase Price shall be paid (A) if the Subsequent
Issuance Purchase Price exceeds the outstanding principal amount of the New
Promissory Note, in the form of (x) presentation of the New Promissory Note for
renewal and conversion, together with (y) immediately available funds (by wire
transfer as aforesaid) of an amount equal to the Subsequent Issuance Purchase
Price reduced by the outstanding principal amount of the New Promissory Note or
(B) if the outstanding principal amount of the New Promissory Note exceeds the
Subsequent Issuance Purchase Price, in the form of presentation of the New
Promissory Note for partial renewal and conversion, and, in such event, the
Company shall execute and deliver to the Investor a New Promissory Note in an
amount equal to the amount of the New Promissory Note so surrendered reduced by
the Subsequent Issuance Purchase Price. Each time a Promissory Note is
presented for renewal and conversion, a legend shall be placed thereon stating
that such Promissory Note has been converted into Preferred Shares (and, if
applicable, a New Promissory Note) and stating the number of Preferred Shares
(and, if applicable, the amount of the New Promissory Note) into which it has
been converted, which legend shall be acknowledged on such Promissory Note by
the Company and the Investor. From and after each Subsequent Issuance, any
Promissory Note surrendered thereat shall not evidence an indebtedness for
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borrowed money of the Company, but shall evidence the repurchase obligations and
other monetary obligations of the Company and the co-makers of the Promissory
Note so surrendered to the holders of the Preferred Shares into which it has
been converted as set forth in Section 8 of the Series A Preferred Stock
Certificate of Designations. From and after each Subsequent Issuance, any
Promissory Note surrendered thereat (legended as set forth above, if applicable)
shall be held by the Investor together with the stock certificate(s) evidencing
such Subsequent Issuance Preferred Shares, and rights in such Promissory Note
shall be transferable pro-rata only to holders of such Subsequent Issuance
Preferred Shares.
(c) Notwithstanding the foregoing provisions of this Section 2.5, in
the event the Company has not presented the Investor with real estate
development projects pursuant to which the Investor has invested the Aggregate
Purchase Price in full, on the terms and subject to the conditions herein set
forth, (i) the Investor shall be entitled at any time to require that a
Subsequent Issuance be effected at which the Investor shall acquire all of the
Preferred Shares not theretofore acquired by it and (ii) from and after June 30,
1998, the Company shall be entitled at any time to require that a Subsequent
Issuance be effected at which the Investor shall acquire all of the Preferred
Shares not theretofore acquired by it. The aggregate proceeds from any such
Subsequent Issuance shall be invested by the Company in debt securities issued
by the U.S. federal government until they can be invested in Board-approved real
estate development projects. All such U.S. government debt securities and all
projects funded directly or indirectly by the Investor's acquisition of
Preferred Shares and Warrants shall be held by SP Subsidiary in accordance with
the provisions of Section 6.14.
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ARTICLE III
CONDITIONS TO THE FUNDING, THE CLOSING
AND THE SUBSEQUENT ISSUANCES
SECTION 3.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE INVESTOR AT
THE FUNDING. The obligations of the Investor to be discharged under this
Agreement at the Funding are subject to (a) the Closing not having occurred, (b)
this Agreement remaining in full force and effect and (c) satisfaction at or
prior to the Funding (unless expressly waived in writing by the Investor at or
prior to the Funding) of the conditions to the Funding set forth in the Note
Agreement.
SECTION 3.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE INVESTOR AT
THE CLOSING. The obligations of the Investor to be discharged under this
Agreement at the Closing are subject to satisfaction of the following conditions
at or prior to the Closing (unless expressly waived in writing by the Investor
at or prior to the Closing):
(a) COMPLIANCE BY THE COMPANY. Each of the terms, covenants and conditions of
this Agreement and the other Transaction Documents to be complied with and
performed by the Company at or prior to the Closing shall have been complied
with and performed by the Company, and the representations and warranties made
by the Company in this Agreement shall be true and correct in all material
respects at and as of the Closing with the same force and effect as though such
representations and warranties had been made at and as of the Closing, except
for representations and warranties that are expressly made as of a specific
time, which shall be true and correct as of such time.
(b) NO LEGAL ACTION. No action, suit, investigation or other proceeding relating
to the transactions contemplated hereby shall have been instituted or threatened
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before any court or by any Government Authority or body that restrains or
prohibits or seeks to restrain or prohibit the transactions contemplated hereby
or to obtain material damages or other material relief in connection therewith.
(c) REGULATORY MATTERS. There shall have been received, and shall be in full
force and effect, all requisite Approvals with respect to the transactions to be
consummated at the Closing. The transactions to be consummated at the Closing on
the terms and conditions herein provided shall not violate any applicable law or
governmental regulation, and shall not subject the Investor to any tax, penalty
or liability, or require the Investor to register or qualify, under or pursuant
to any applicable law or governmental regulation. There shall not have occurred,
and there shall not be pending or threatened, any change in law, regulation or
regulatory practice that has or would reasonably be expected to have a Material
Adverse Effect.
(d) LEGAL OPINION. The Company shall have furnished to the Investor on the
Closing Date the opinions of Arent Fox Kintner Plotkin & Kahn, counsel to the
Company, and Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., special
Florida counsel to the Company, dated the Closing Date, in the form and
substance reasonably acceptable to the Investor.
(e) TRANSACTION DOCUMENTS. Each of the Transaction Documents required to be
delivered at or before the Closing shall have been executed and delivered and
shall be in full force and effect.
(f) CLOSING DOCUMENTS. The Company shall have delivered to the Investor the
following:
(i) a certificate of the chief executive officer and the
chief financial officer of the Company, dated the Closing Date, to the
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effect that the conditions specified in Sections 3.2(a) and 3.2(j) have
been satisfied;
(ii) incumbency certificates, dated the Closing Date, for the
officers of the Company executing any of the Transaction Documents and
any certificates or documents delivered in connection with any
Transaction Documents at the Closing;
(iii) a certificate of the Secretary of State of the State of
Delaware, dated a recent date, certifying that the Company is in good
standing in such State, and that all reports, if any, have been filed
as required and that all fees in connection therewith and all franchise
taxes have been paid; and
(iv) such other certificates or documents as the Investor
or its counsel may reasonably request relating to the transactions
contemplated hereby.
(g) STOCKHOLDERS APPROVAL; CHARTER AMENDMENT. The Stockholders
Approval shall have been obtained at the Stockholders Meeting and the Amended
and Restated Certificate of Incorporation shall have been filed with the
Delaware Secretary of State and shall be effective.
(h) BOARD CONSTITUTION. The Company shall have taken all actions
necessary to provide that the Board shall consist of seven members, and the
Company shall have caused the Original Investor Designee, the two additional
individual designated by the Investor (the "ADDITIONAL INVESTOR DESIGNEES" and,
together with the Original Investor Designee, including their successors
nominated by the Investor, the "INVESTOR DESIGNEES"), one director who is then
an incumbent member of management of the Company and the independent directors
appointed pursuant to Section 6.10, to be appointed to the Board, effective as
of the Closing.
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(i) EXPENSES. The Company shall have paid or reimbursed all
theretofore unreimbursed Transaction Expenses incurred by the Investor (or made
provision satisfactory to the Investor for payment or reimbursement of such
expenses in the case of expenses incurred but not yet billed to Investor).
(j) NO DEFAULT; NO CHANGE OF CONTROL; NO MATERIAL ADVERSE EFFECT. No
Default shall have occurred (and, if the Funding shall have occurred, the
Company shall have paid all interest accrued and unpaid on the Promissory Note
and all other amounts, other than principal, due and owing under the Note
Agreement), no Change of Control shall have occurred, and there shall have been
no event or events causing a Material Adverse Effect, nor any developments that
would, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
(k) AMENDMENTS TO SECURITY DOCUMENTS. Any amendments to the Security
Documents that may be required to increase the dollar amount of indebtedness
secured thereby to not less than the maximum possible aggregate Repurchase Price
(as defined in the Series A Preferred Stock Certificate of Designations),
increase the amount of title insurance in respect of the Mortgages and Deeds of
Trust and "bring down" the endorsements thereon to the Closing Date shall have
been effected and shall be in form and substance satisfactory to the Investor.
(l) NOTE AGREEMENT OBLIGATIONS. The Company shall have performed all
of the obligations to be performed by it on or before the Issuance Date under
Sections 3.1, 3.2 and 5.1 of the Note Agreement, other than pursuant to clauses
(s), (y) and (z) of Section 5.1 thereof.
SECTION 3.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AT THE
CLOSING. The obligations of the Company to be discharged under this Agreement at
the Closing are subject to satisfaction of the following conditions at or prior
to the Closing (unless expressly waived in writing by the Company at or prior to
the Closing):
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(a) COMPLIANCE BY THE INVESTOR. Each of the terms, covenants and
conditions of this Agreement to be complied with and performed by the Investor
at or prior to the Closing shall have been complied with and performed by the
Investor, and the representations and warranties made by the Investor in this
Agreement shall be true and correct in all material respects at and as of the
Closing with the same force and effect as though such representations and
warranties had been made at and as of the Closing, except for representations
and warranties that are expressly made as of a specific time, which shall be
true and correct as of such time.
(b) NO LEGAL ACTION. No action, suit, investigation or other
proceeding relating to the transactions contemplated hereby shall have been
instituted or threatened before any court or by any Government Authority or body
that restrains or prohibits or seeks to restrain or prohibit the transactions
contemplated hereby or to obtain material damages or other material relief in
connection therewith.
(c) REGULATORY MATTERS. There shall have been received, and shall be
in full force and effect, all requisite Approvals with respect to the
transactions to be consummated at the Closing. The transactions to be
consummated at the Closing on the terms and conditions herein provided shall not
violate any applicable law or governmental regulation.
(d) INVESTMENT AGREEMENT. This Agreement shall be in full force and
effect.
(e) CLOSING DOCUMENTS. The Investor shall have delivered to the
Company:
(i) a certificate of the managing member of the Investor,
dated the Closing Date and signed by an officer or other authorized
representative of the managing member, certifying attached copies of
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the Limited Liability Company Agreement of the Investor, and the
resolutions adopted by the managing member of the Investor authorizing
the execution and delivery by the Investor of this Agreement and the
other Transaction Documents and the consummation by the Investor of the
transactions contemplated hereby and thereby; and
(ii) a certificate of the managing member of the Investor
signed by an officer or other authorized representative of the
managing member to the effect that the conditions specified in Section
3.3(a) have been satisfied.
(f) STOCKHOLDERS APPROVAL; CHARTER AMENDMENT. The Stockholders
Approval shall have been obtained at the Stockholders Meeting and the Amended
and Restated Certificate of Incorporation shall have been filed with the
Delaware Secretary of State and shall be effective.
SECTION 3.4. CONDITION PRECEDENT TO THE OBLIGATIONS OF THE INVESTOR AT
EACH SUBSEQUENT ISSUANCE. The obligations of the Investor to be discharged under
this Agreement at each Subsequent Issuance are subject to the conditions (unless
expressly waived in writing by the Investor at or prior to such Subsequent
Issuance) that no Event of Default shall have occurred and, except for an Event
of Default which is or results from a Bankruptcy Event, shall then exist.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor that each
of the representations and warranties of the Company set forth in the Note
Agreement, which (together with the definitions of any defined terms used
therein) are incorporated by reference into this Agreement as though expressly
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set forth herein (PROVIDED, HOWEVER, that each reference in such representations
and warranties (x) to the "Effective Date" shall be deemed to refer herein to
the date that any such representation or warranty is made hereunder, (y) to
"Lender" shall be deemed to refer herein to the Investor and (z) to "this
Agreement" shall be deemed to refer herein to this Agreement), is true and
correct, and further that:
SECTION 4.1 DUE AUTHORIZATION; NO CONFLICTS; VALIDITY. The Company has
full power and authority to enter into and, subject to obtaining the
Stockholders Approval, perform its obligations under this Agreement and each
other Transaction Document executed or to be executed by it. The approval of the
Amended and Restated Certificate of Incorporation by a majority of the votes
entitled to be cast by all holders of Common Stock (the "STOCKHOLDERS APPROVAL")
is the only vote of the holders of any class or series of the capital stock of
the Company or any of its Subsidiaries required to approve this Agreement, the
other Transaction Documents and the transactions contemplated hereby and
thereby. The execution and delivery by the Company of this Agreement, each other
Transaction Document and each other certificate or document executed or to be
executed by it in connection with the transactions contemplated hereby and
thereby, and the performance by the Company of its obligations hereunder and
thereunder (including the issuance of the Promissory Note, the Preferred Shares,
the Warrants, the Warrant Shares and the Conversion Shares) have been duly
authorized by all necessary corporate proceedings on the part of the Company
(and no other corporate proceedings or actions on the part of the Company or its
Board or stockholders, are necessary therefor, other than the Stockholders
Approval), do not and will not conflict with, result in any violation of, or
constitute any default under, any Requirement of Law or Contractual Obligation
applicable to the Company or any Subsidiary, and will not result in or require
the creation or imposition of any Lien on any of the properties of the Company
or any Subsidiary of the Company pursuant to any Instrument, other than pursuant
to any Transaction Document, except as set forth in Section 4.1 of the
Disclosure Schedule. This Agreement has been duly executed and delivered by the
Company and constitutes, and each other Transaction
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Document executed by the Company will, on the due execution and delivery
thereof, constitute, the valid and binding obligations of the Company
enforceable in accordance with their respective terms.
SECTION 4.2 CAPITALIZATION OF THE COMPANY. (a) On the date of this
Agreement, the authorized capital stock of the Company consists of 15,665,000
shares of common stock, par value $0.10 per share ("COMMON STOCK"), of which (i)
9,721,720 shares are issued and outstanding, (ii) 86,277 shares are held in the
Treasury of the Company, (iii) 1,241,000 shares are reserved for issuance upon
the exercise of outstanding options to acquire Common Stock ("Options") (and no
more than 842,000 Options have been authorized, issued or granted), (iv)
1,500,000 shares are reserved for issuance pursuant to the Bank Warrants (and
1,500,000 Bank Warrants are outstanding), and (v) 13,290 shares (which are
outstanding but ineligible to vote) are held for distribution in connection with
disputed claims pursuant to the Reorganization Plan. All of the outstanding
shares of Common Stock are, and all of the shares of Common Stock reserved for
issuance will be, when issued, duly authorized, validly issued, fully paid and
nonassessable.
(b) After giving effect to the Amended and Restated Certificate of
Incorporation, the authorized capital stock of the Company will at the Closing
(assuming no stock option or warrant exercises and assuming that the Private
Placement and the Rights Offering have been consummated) consist of: (i)
70,000,000 shares of Common Stock, of which (A) 9,721,720 shares will be
outstanding (excluding shares granted automatically to directors in lieu of
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fees), (B) 10,000,000 shares will be reserved for issuance upon conversion of
the Preferred Shares, (C) 8,000,000 shares will be reserved for issuance upon
conversion of the Series B Preferred Stock, (D) 1,500,000 shares will be
reserved for issuance pursuant to the Bank Warrants, (E) 5,000,000 shares will
be reserved for issuance upon exercise of the Warrants, (F) 4,000,000 shares
will be reserved for issuance upon exercise of warrants to be issued in
connection with the Private Placement and the Rights Offering (G) 86,277 shares
will be held in the Treasury of the Company, and (H) 1,241,000 shares will be
reserved for issuance upon the exercise of outstanding Options; and (ii)
4,500,000 shares of preferred stock, par value $.01 per share, of which (A)
2,500,000 will be designated Series A Preferred Stock, of which the Initial
Preferred Shares will be issued to the Investor at the Closing (and the
remainder will be reserved for issuance to the Investor at Subsequent Issuances)
and (B) 2,000,000 will be designated Series B Preferred Stock, of which
1,000,000 will have been issued pursuant to the Private Placement and 1,000,000
will have been issued pursuant to the Rights Offering. No other capital stock of
the Company is, or at the Closing will be, authorized and no other capital stock
is, or at the Closing will be, issued. At the Closing, all of the Preferred
Shares will be duly authorized, and, when issued in accordance with this
Agreement, will be validly issued, fully paid and nonassessable and entitled to
the benefits of, and have the terms and conditions set forth in, the Amended and
Restated Certificate of Incorporation.
(c) The Preferred Shares, the Conversion Shares, the Warrants and the
Warrant Shares are duly authorized by the Board and, when issued in accordance
with the Certificate of Amendment, will be validly issued, and, in the case of
the Preferred Shares, Conversion Shares and Warrant Shares, fully paid and
nonassessable.
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(d) Except as set forth above or in Item 4.2 of the Disclosure
Schedule and except as contemplated by this Agreement, there are not authorized,
issued, outstanding or reserved for issuance any (i) securities or obligations
of the Company convertible into or exchangeable for any capital stock of the
Company, (ii) warrants, rights or options to subscribe for or purchase from the
Company, or stock appreciation rights in respect of, any capital stock or any
such convertible or ex changeable securities or obligations or (iii) obligations
of the Company to issue such shares, any such convertible or ex changeable
securities or obligations, or any such warrants, rights or options. No Person
has preemptive or similar rights with respect to the securities of the Company.
There are no obligations of the Company or any of its Subsidiaries to vote or to
repurchase, redeem or otherwise acquire, or to register under the Act, any
shares of capital stock of the Company or any of its Subsidiaries.
SECTION 4.3 SEC DOCUMENTS. (a) The Company has filed all documents
required to be filed with the SEC under the Act and the Exchange Act since
January 1, 1995 and has delivered to the Investor true and complete copies of
all of the SEC Documents. As of its filing date, each SEC Document (including
all exhibits and schedules thereto and documents incorporated by reference
therein) (i) complied in all material respects with the applicable requirements
of the Securities Act and the Exchange Act and (ii) did not and does not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) The Company has (i) delivered to the Investor true and complete
copies of all correspondence between the SEC and the Company or its legal
counsel, accountants or other advisors since January 1, 1995 and (ii) disclosed
to the Investor in writing the content of all material discussions between the
SEC and the Company or its legal counsel, accountants or other advisors
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concerning the adequacy or form of any SEC Document filed with the SEC since
January 1, 1995. The Company is not aware of any issues raised by the SEC with
respect to any of the SEC Documents, other than those disclosed to the Investor
pursuant to this Section 4.3(b).
SECTION 4.4 SUBSIDIARIES. Except as set forth in Item 4.4 of the
Disclosure Schedule, (a) the list of Subsidiaries of the Company filed by the
Company with its most recent Form 10-K is a true and accurate list of all of the
Subsidiaries of the Company and (b) all of the outstanding capital stock of each
Subsidiary and all of the outstanding ownership interests of each Joint Venture
have been duly authorized and validly issued, is fully paid and nonassessable
and is owned by the Company, directly or through other Subsidiaries, free and
clear of any Lien, restrictions upon voting or transfer, claim or encumbrance of
any kind, there are no rights granted to or in favor of any third party, other
than the Company or any Subsidiary of the Company, to acquire any such capital
stock, any additional capital stock or any other securities of any such
Subsidiary, and there exists no restriction on the payment of cash dividends by
any Subsidiary.
SECTION 4.5 APPROVALS. Except as set forth in Item 4.5 of the
Disclosure Schedule, no Approval is required to be obtained by the Company or
any Subsidiary of the Company for the consummation of the transactions
contemplated by this Agreement or by any of the Transaction Documents, except
for the expiration of the waiting period under the HSR Act, the Stockholders
Approval and except such as may be required under the Act and state securities
laws in connection with the performance by the Company of its obligations under
Article VIII.
SECTION 4.6 LICENCES, ETC. The Company and its Subsidiaries hold, own
and possess all such governmental, regulatory and other filings, licenses,
approvals, registrations, consents, franchises and concessions
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(collectively, "LICENSES") as are necessary for the ownership of the property
and conduct of the businesses of the Company and its Subsidiaries, as now
conducted and are in compliance in all material respects with their respective
obligations under such Licenses.
SECTION 4.7 CONTRACTS. All of the material contracts of the Company or
any of its Subsidiaries that are required to be described in the SEC Documents
or to be filed as exhibits thereto are described in the SEC Documents or filed
as exhibits thereto and are in full force and effect. True and complete copies
of all such material contracts have been delivered by the Company to the
Investor. Neither the Company nor any of its Subsidiaries nor, to the best
knowledge of the Company, any other party is in breach of or in default under
any such contract. Except as disclosed in Item 4.7 of the Disclosure Schedule,
as of the date hereof, the Company is not a party to, nor are any assets,
properties or operations of the Company bound by, any (i) employment or
severance agreement or any consulting agreement obligating the Company to make
payments in excess of $100,000 which cannot be terminated by the Company upon 30
days notice without further obligation thereunder, (ii) lease of real property,
or lease of personal property with an annual base rental obligation of more than
$100,000 or a total remaining rental obligation of more than $1,000,000, (iii)
agreement which is over one year in length of obligation and not terminable
without penalty or damages within one year, and involves an unsatisfied
obligation of the Company of more than $5,000,000, (iv) agreement containing
covenants limiting the ability of the Company or any of its Affiliates to
compete in any line of business with any Person or in any area or territory, (v)
commitment for or relating to any lending or borrowing or the guaranty thereof,
(vi) agreement relating to any acquisition or disposition of securities or
assets containing any indemnification obligations of the Company or any of its
Subsidiaries, (vii) agreement with any Affiliate of the Company out of the
ordinary course of the Company's business (other than employment, compensation
or benefit arrangements), or (viii) other material contract, agreement or
arrangement, entered into other than in the ordinary course of business.
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SECTION 4.8 FINDER'S FEES. Except for Bankers Trust Securities
Corporation and Tallwood Associates, Inc., whose fees and expenses will be paid
by the Company, no broker, investment banker, financial advisor or other person
is entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
SECTION 4.9 EMPLOYEE BENEFITS. Except for the plans set forth in Item
4.9(a) of the Disclosure Schedule (the "BENEFIT PLANS"), there are no employee
benefit plans or arrangements of any type (including, without limitation, plans
described in Section 3(3) of ERISA), under which the Company or any of its
Subsidiaries has or in the future could have directly, or indirectly through a
Commonly Controlled Entity (within the meaning of Sections 414(b), (c), (m) and
(o) of the Code), any liability with respect to any current or former employee
of the Company, any of its Subsidiaries, or any Commonly Controlled Entity.
Except for the Benefit Plan set forth in Item 4.9(b) of the Disclosure
Statement, no Benefit Plan is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code or any corresponding provision of applicable
law. No Benefit Plan is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA (a "MULTIEMPLOYER PLAN") or a plan that has two or more
contributing sponsors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA (a "MULTIPLE EMPLOYER PLAN"), nor has the
Company or any ERISA Affiliate of the Company, at any time since September 2,
1974, contributed to or been obligated to contribute to any Multiemployer Plan
or Multiple Employer Plan. With respect to each Benefit Plan the Company has
delivered to the Investor complete and accurate copies of (i) all plan texts and
agreements, (ii) all material employee communications (including summary plan
descriptions), (iii) the most recent annual report, (iv) the most recent annual
and periodic accounting of plan assets, (v) the most recent determination letter
received from the Internal Revenue Service and (vi) the most recent actuarial
valuation. Except as may be set forth in Item 4.9(c) of the Disclosure Schedule,
with respect to each Benefit Plan: (A) no event has occurred and there exists no
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circumstance under which the Company or any of its Subsidiaries could directly,
or indirectly through a Commonly Controlled Entity, incur any material liability
under ERISA, the Code or otherwise (other than routine claims for benefits and
other liabilities arising in the ordinary course pursuant to the normal
operation of such Benefit Plan); (B) all contributions and premiums due and
owing have been made or paid on a timely basis; and (C) all contributions made
under any Benefit Plan have met the requirements for deductibility under the
Code, and all contributions that have not been made have been properly recorded
on the books of the Company or a Commonly Controlled Entity thereof in
accordance with GAAP. The Company has no liability for life, health, medical or
other welfare benefits to former employees or beneficiaries or dependents
thereof, except for health continuation coverage as required by Section 4980B
of the Code or Part 6 of Title I of ERISA and at no expense to the Company.
SECTION 4.10 SECURITIES LAW MATTERS. Neither the Company nor any
Person acting on its behalf has, in connection with the sale of the Preferred
Shares and the issuance of the Warrants, engaged in (i) any form of general
solicitation or general advertising (as those terms are used within the meaning
of Rule 502(c) under the Act), (ii) any action involving a public offering
within the meaning of Section 4(2) of the Act, or (iii) any action that would
require the registration under the Act of the offering and sale of the Preferred
Shares or the issuance of the Warrants pursuant to this Agreement, or that would
violate applicable state securities or "blue sky" laws. In reliance on the
representation of the Investor set forth in Section 5.3, the offer, issuance,
sale and delivery of the Preferred Shares, the Conversion Shares, the Warrants,
and the Warrant Shares, in each case as provided in this Agreement, are or will
be exempt from registration under the Act and any applicable state securities
or "blue sky" laws. The Company has not made and will not make, directly or
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indirectly, any offer or sale of Preferred Shares or Warrants or of securities
of the same or a similar class as the Preferred Shares or Warrants if as a
result the offer and sale of the Preferred Shares and issuance of the Warrants
contemplated hereby could fail to be entitled to exemption from the registration
requirements of the Act. As used herein, the terms "OFFER" and "SALE" have the
meanings specified in Section 2(3) of the Act.
SECTION 4.11 STATE TAKEOVER STATUTES. The Board has duly and validly
approved this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby, and such approval is sufficient to render the
provisions of Section 203 of the Delaware General Corporation Law inapplicable
to this Agreement and the other Transaction Documents and the transactions
contemplated hereby or thereby, and to any future "business combination" (as
defined in Section 203) between the Investor and the Company or their respective
Affiliates. To the Company's knowledge, no other state takeover statute or
similar statute or regulation (including Florida Statutes ss.ss.607.901 through
607.903) applies or purports to apply to this Agreement.
SECTION 4.12 1996 FINANCIAL STATEMENTS. The consolidated balance
sheets of the Company and its consolidated Subsidiaries as at December 31, 1996
and the related consolidated statements of income and of cash flows for the
fiscal year ending on such date, reported on by Ernst & Young, a copy of which
has been furnished to the Investor, fairly and accurately present the
consolidated financial condition of Company and its consolidated Subsidiaries as
at such date, and the consolidated results of their operations and their
consolidated cash flows for the fiscal year then ended. Such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved and consistently with the financial statements of the Company and its
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consolidated Subsidiaries as at and for the year ended December 31, 1995 (except
for such inconsistencies as approved by such accountants and as disclosed
therein). Neither the Company nor any of its consolidated Subsidiaries had, at
the date of the balance sheet referred to above, any material guarantee
obligation, contingent liability or liability for taxes, or any long-term lease
or unusual forward or long-term commitment, including any interest rate or
foreign currency swap or exchange transaction, which is not reflected in the
foregoing statements or in the notes thereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to the Company that:
SECTION 5.1 DUE AUTHORIZATION; NO CONFLICTS; VALIDITY. The Investor
has full power and authority to enter into and perform its obligations under
this Agreement and each other Transaction Document executed or to be executed by
it. The execution and delivery by the Investor of this Agreement, each other
Transaction Document and each other certificate or document executed or to be
executed by it in connection with the transactions contemplated hereby and
thereby, and the performance by the Investor of its obligations hereunder and
thereunder have been duly authorized by all necessary proceedings on the part of
the Investor, and do not and will not conflict with, result in any violation of,
or constitute any default under, any Requirement of Law or Contractual
Obligation applicable to the Investor. This Agreement constitutes, and each
other Transaction Document executed by the Investor will, on the due execution
and delivery thereof, constitute, the valid and binding obligations of the
Investor enforceable in accordance with their respective terms.
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SECTION 5.2 APPROVALS. No Approval is required to be obtained by the
Investor for the consummation of the transactions contemplated by this Agreement
or by any of the Transaction Documents, except for the expiration of the
waiting period under the HSR Act and except such as may be required under the
Act and state securities or "blue sky" laws under Article VIII.
SECTION 5.3 ACQUISITION FOR OWN ACCOUNT. The Preferred Shares and the
Warrants are being acquired by the Investor for its own account and with no
intention of distributing or reselling the Preferred Shares, the Warrants, the
Warrant Shares or the Conversion Shares, or any part thereof in any transaction
that would be in violation of the Act or the securities or "blue sky" laws of
any state, without prejudice, however, to the rights of the Investor at all
times to sell or otherwise dispose of all or any part of the Preferred Shares,
the Warrants, the Warrant Shares or the Conversion Shares under an effective
registration statement under the Act or under an exemption from such
registration available under the Act, or to pledge all or any part of the
Preferred Shares, the Warrants, the Warrant Shares or the Conversion Shares to
secure any obligation of the Investor. The Investor is capable of evaluating the
merits and risks of an investment in the Preferred Shares, the Warrants and the
Warrant Shares, and can bear the economic risk of such investment.
SECTION 5.4 FINDER'S FEES. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Investor.
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SECTION 5.5 FINANCING. The Investor has, or will have at the time of
the Funding and the Closing, and at any Subsequent Issuance, the funds necessary
to fulfill its obligations under this Agreement.
ARTICLE VI
COVENANTS OF THE PARTIES
SECTION 6.1 TRANSFER RESTRICTIONS; LEGENDS. (a) Subject to the
requirements of the Act and the Exchange Act, the Preferred Shares, the
Warrants, the Warrant Shares, the Conversion Shares and the Promissory Note
shall be freely transferable; PROVIDED, HOWEVER, that, unless either a Payment
Default, an Event of Default or a Default Change of Control shall have occurred
or the Stockholders Approval shall not have been received at the Stockholders
Meeting, the Investor shall not assign or otherwise transfer any of such
securities or the Promissory Note or any beneficial interest in any of such
securities or the Promissory Note until the second anniversary of the date of
this Agreement; provided that the Investor may pledge any of such securities or
the Promissory Note as security for bona fide indebtedness owed to a Person
which is not an Affiliate of the Investor.
(b) So long as the Preferred Shares, the Conversion Shares, the
Warrant Shares and the Warrants are restricted securities under the Act and
unless they shall have been previously issued pursuant to an effective
registration statement under the Act, the certificates representing such
restricted Preferred Shares, Warrant Shares, Conversion Shares and Warrants
shall bear the following legend:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY
SECURITIES ISSUABLE UPON CONVERSION OR EXERCISE HEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN APPLICABLE
EXEMPTION FROM REGISTRATION THEREUNDER. PRIOR TO MAY 15, 1999, SUCH
SECURITIES MAY ALSO BE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS SET
FORTH IN AN AMENDED AND RESTATED INVESTMENT AGREEMENT DATED AS OF
FEBRUARY 7, 1997, AMENDED AS OF MARCH 20, 1997 AND AMENDED AND RESTATED
AS OF MAY 15, 1997 BETWEEN THE ISSUER AND AP- AGC, LLC, A COPY OF THE
APPLICABLE PROVISIONS OF WHICH IS AVAILABLE UPON REQUEST TO THE ISSUER.
(c) After termination of the requirement that a legend be placed upon
a certificate representing Preferred Shares, Warrant Shares, Warrants or
Conversion Shares, the Company shall, upon receipt by the Company of evidence
reasonably satisfactory to it that such requirement has terminated and upon the
written request of any holder of Preferred Shares, Warrant Shares, Warrants or
Conversion Shares, issue certificates for such Preferred Shares, Warrant Shares,
Warrants or Conversion Shares, as the case may be, that do not bear such legend.
SECTION 6.2 STOCKHOLDERS MEETING. (a) The Company shall take all
action necessary, in accordance with applicable law and its Certificate of
Incorporation and By-laws, to convene to a special or annual meeting of its
stockholders (the "STOCKHOLDERS MEETING") as promptly as reasonably practicable
after the date of this Agreement for the purpose of, among other things,
considering and taking action upon a resolution to adopt the Amended and
Restated Certificate of Incorporation. The Board will recommend that holders of
Common Stock vote in favor of the adoption of the Amended and Restated
Certificate of Incorporation at the Stockholders Meeting.
(b) The Company will, as soon as practicable following the date of
this Agreement, prepare and file a proxy statement (the "PROXY STATEMENT") with
the SEC relating to the Stockholders Meeting (including any information required
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to satisfy the requirements of Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder). The Company will use its reasonable good faith efforts
to respond to any comments of the SEC or its staff and to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as practicable
after responding to all such comments to the satisfaction of the SEC or its
staff. The Company will provide the Investor with a copy of the preliminary
Proxy Statement and all modifications thereto prior to filing or delivery to the
SEC and will consult with the Investor in connection therewith. The Company will
notify the Investor promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or supplements
to the Proxy Statement or for additional information and will supply the
Investor with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement or the Stockholders Meeting. The Investor
will cooperate and furnish promptly all information required for inclusion in
the Proxy Statement. If at any time prior to the Stockholders Meeting there
shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company will promptly prepare and mail to its
stockholders such an amendment or supplement. The information provided by either
party for use in the Proxy Statement shall be true and correct in all material
respects without omission of any material fact which is required to make such
information not false or misleading. No representation, covenant or agreement is
made by either party with respect to information supplied by the other party for
inclusion in the Proxy Statement.
SECTION 6.3 PRE-CLOSING ACTIVITIES. From and after the date of this
Agreement until the Closing, each of the Company and the Investor shall act with
good faith towards the other, and shall use all reasonable efforts to consummate
the transactions contemplated by this Agreement, and neither the
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Company nor the Investor will take any action that would prohibit or impair its
ability to consummate the transactions contemplated by this Agreement. From the
date hereof until the Closing, the Company shall conduct the business of it and
its Subsidiaries in the ordinary course consistent with past practice and shall
use all reasonable efforts to preserve intact its business organizations and
relationships with third parties, and, except as otherwise provided herein, to
keep available the services of the present directors, officers and key
employees. Without limiting the generality of the foregoing, from the date
hereof until the Closing, except as contemplated by this Agreement, without the
Investor's prior written consent the Company shall not, and shall ensure that
each of its Subsidiaries does not:
(a) adopt or propose (or agree to commit to) any change in its
certificate of incorporation or By-Laws, except as contemplated hereby
or as required to effect the transactions hereunder;
(b) take any action that would make any representation or
warranty of the Company hereunder required to be true at and as of the
Closing as a condition to the Investor's obligations to consummate the
transactions contemplated hereby inaccurate at the Closing;
(c) issue, sell, pledge or encumber any capital stock or other
securities, except (i) pursuant to Options or Bank Warrants outstanding
on the date hereof, (ii) pursuant to options granted automatically
under the Company's 1994 Non-Employee Directors Stock Option Plan or
1996 Non-Employee Directors Stock Plan, and Common Stock issued to
directors in lieu of cash fees, (iii) for the issuance of up to
$10,000,000 aggregate liquidation preference of Series B Preferred
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Stock (and up to 2,000,000 warrants to purchase Common Stock in
connection therewith) to all of the stockholders of the Company who
subscribe for such shares pursuant to a rights offering by the Company
registered under the Act, the terms of which shall be reasonably
acceptable to the Investor (the "Rights Offering") or (iv) for the
issuance of up to $10,000,000 aggregate liquidation preference of
Series B Preferred Stock (and up to 2,000,000 warrants to purchase
Common Stock in connection therewith) in connection with the issuance
of up to $10,000,000 in fair market value of Common Stock to certain
purchasers pursuant to a private placement under Section 4(2) of the
Act, the terms of which shall be acceptable to the Investor (the
"Private Placement"); PROVIDED that the net proceeds of the issuance
and sale of such Series B Preferred Stock, such warrants and Common
Stock shall be used for working capital purposes, including the payment
of existing indebtedness of the Company (which does not include
repurchasing securities of the Company) or for investment projects of
the Company in accordance with the provisions of this Agreement;
(d) make any material change in its accounting methods,
principles or practices except as may be required by law or applicable
accounting standards;
(e) except as described in the Approved Business Plan for
1997, (i) grant to any employee any material increase in salary or
other remuneration or any increase in severance or termination pay not
consistent with past practice; (ii) grant or approve any general
increase in salaries of all or any class of, or a substantial portion
of, its employees not consistent with past practice; (iii) pay or
award any material bonus, incentive, compensation, service award or
other like benefit for or to the credit of any employee except in
accordance with written policy or consistent with past practice; (iv)
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enter into any material employment contract or severance arrangement
with any employee or adopt or amend in any material respect any of its
employee benefit plans; or (v) change in any material respect the
compensation (whether in respect of terms or method) of its agents;
(f) (i) except as permitted by the Note Agreement, enter into
or assume any loan or other Instrument pursuant to which the Company or
such Subsidiary incurs Indebtedness for borrowed money (other than any
such Instrument among the Company and its wholly owned Subsidiaries or
among the Company's wholly owned Subsidiaries) or (ii) request or agree
to any material amendment or supplement to or waiver, termination or
modification of any material existing Instrument (other than
Instruments relating to Indebtedness);
(g) declare, pay, set aside or make any dividend or
distribution (payable in cash, stock, property or obligations) on, or
combine, subdivide or reclassify, any shares of any class of its
capital stock or of its Subsidiaries (now or hereafter outstanding), or
apply any of its funds, property or assets to the purchase, redemption,
sinking fund or other retirement of any shares of any class of its
capital stock or of its Subsidiaries (now or hereafter out standing);
PROVIDED, HOWEVER, that this provision shall not apply in respect of
the liquidation or dissolution of one or more Excluded Subsidiaries; or
(h) agree, commit or resolve to do any of the foregoing.
SECTION 6.4 NO INCONSISTENT AGREEMENTS. Neither the Company nor any of
its Subsidiaries shall enter into any Instrument, or enter into any amendment
or other modification to any currently existing Instrument, that by its terms
restricts or prohibits the ability of the Company to issue Conversion Shares
upon the conversion of the Preferred Shares or Warrant Shares upon the exercise
of the Warrants, or pursuant to which the Company's ability to make any
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distributions with respect to, or to redeem or repurchase any of, the Preferred
Shares or Warrant Shares will be subject to any restriction that is more
restrictive than the provisions of the Amended and Restated Certificate of
Incorporation, or restricting the Company's ability to perform any of its
obligations under this Agreement or any of the Transaction Documents, including
its obligations relating to registration rights.
SECTION 6.5 HART-SCOTT-RODINO. To the extent applicable, each of the
Company and the Investor shall make all filings and furnish all information
required with respect to the transactions contemplated by this Agreement by the
HSR Act and shall use reasonable efforts to obtain the early termination of the
waiting period thereunder.
SECTION 6.6 EXCLUSIVITY. (a) The Company hereby agrees that it will
not, nor will it permit any of its Subsidiaries to, nor will it authorize or
permit any officer, director or employee of, or any investment banker, attorney
or other advisor or representative of it or any of its Subsidiaries to, solicit
or initiate, or encourage the submission of, any proposal or transaction for a
financing of the Company (other than draws under the Foothill Facility or
project financing in the ordinary course of business consistent with past
practice) or for the acquisition by a Person other than the Investor or an
Affiliate of the Investor of stock or a substantial part of the assets of the
Company through a merger or other business combination, stock or assets
acquisition or otherwise (in any such case, an "ALTERNATIVE TRANSACTION") (or to
furnish to any Person any nonpublic information concerning the business,
properties or assets of the Company (other than in connection with the sale by
the Company of properties designated for sale in an Approved Business Plan, as
required by the Foothill Loan Documents or in connection with project financing
(debt or equity) in the ordinary course of business consistent with past
practice), or to otherwise facilitate any inquiries or the making of any pro-
posal) prior to the Closing. In addition, the Company hereby agrees that it
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will, and will cause its Subsidiaries, officers, directors, employees,
investment bankers, attorneys and other advisors or representatives to,
terminate any other discussions or negotiations with any third party regarding
any Alternative Transaction, and that the Company will not, nor will it permit
any of its Subsidiaries to, nor will it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of the Company, or any of its Subsidiaries to have any additional
discussions or negotiations with any third party regarding such an Alternative
Transaction prior to the Closing.
(b) Notwithstanding the provisions of Section 6.6(a), prior to the
Closing, to the extent required by the fiduciary obligations of the Board, as
determined in good faith by the Board after receipt of the written advice of its
outside counsel and financial advisor, the Company may (i) in response to an
unsolicited request therefor, furnish information with respect to the Company to
the requestor pursuant to a customary confidentiality agreement and discuss such
information and the terms of this Section 6.6 (but not the terms of any possible
Alternative Proposal) with such Person and (ii) upon receipt by the Company of
an unsolicited Alternative Proposal, following delivery to the Investor of the
notice required pursuant to the last two sentences of this Section 6.6(b),
participate in negotiations regarding such Alternative Proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the preceding sentence by any director or executive officer of the
Company or any of its Subsidiaries or any investment banker, financial advisor,
attorney or other advisor to or representative of the Company or any of its Sub-
sidiaries, whether or not such person is purporting to act on behalf of the
Company or any of its Subsidiaries or otherwise, shall be deemed to be a breach
of Section 6.6 by the Company. For purposes of this Agreement, "ALTERNATIVE
PROPOSAL" means any proposal (whether or not in writing and whether or not
delivered to the Company's stockholders generally) for a Business Combination
involving the Company or any proposal or offer to conduct in any manner,
directly or indirectly, an Alternative Transaction. The Company shall promptly
advise the Investor orally and in writing of any request for information or of
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any Alternative Proposal, or any inquiry with respect to or which could lead to
any Alternative Proposal, the material terms and conditions of such request,
Alternative Proposal or inquiry, and the identity of the Person making any such
Alternative Proposal or inquiry. The Company shall keep the Investor reasonably
informed of the status of any such request, Alternative Proposal or inquiry.
(c) Prior to the Closing, neither the Board nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to the Investor, the approval or recommendation by the Board of this
Agreement or the transactions contemplated hereby, (ii) approve or recommend, or
propose to approve or recommend, any Alternative Proposal or (iii) enter into
any agreement with respect to any Alternative Proposal. Notwithstanding the
foregoing, if the Board receives an unsolicited Alternative Proposal that, in
the exercise of its fiduciary obligations (as determined in good faith by the
Board after receipt of the written advice of its outside counsel and financial
advisor), it determines to be a Superior Proposal, the Board may (subject to the
provisions of this Section 6.6) withdraw or modify its approval or
recommendation of this Agreement and the transactions contemplated hereby,
approve or recommend any such Superior Proposal, enter into an agreement with
respect to such Superior Proposal and terminate this Agreement (any such action,
a "CHANGE OF POSITION"), in each case at any time after the second Business Day
following the Investor's receipt of written notice (a "NOTICE OF SUPERIOR
PROPOSAL") advising the Investor that the Board has received a Superior
Proposal, specifying the material terms and conditions of such Superior Proposal
and identifying the person making such Superior Proposal. In addition, if the
Company proposes to approve or engage in any Change of Position with respect to
any Alternative Proposal, it shall prior to or concurrently with approving or
adopting such Change of Position pay to the Investor $2,000,000 in immediately
available funds (the "TERMINATION FEE"). In addition, the Commitment Fee shall
be forfeited by the Company and the Company shall pay to the Investor within two
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Business Days of request therefor, subject to provision of documentation, an
amount in cash equal to the Investor's Transaction Expenses. For purposes of
this Agreement, a "SUPERIOR PROPOSAL" means any bona fide Alternative Proposal
which the Board determines in its good faith reasonable judgment (after receipt
of the written advice of its financial advisor and outside counsel) to be more
favorable from a financial point of view to the Company's stockholders than the
transactions contemplated by this Agreement. Nothing contained herein shall
prohibit the Company from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) under the Exchange Act prior to the third business
day following the Investor's receipt of a Notice of Superior Proposal provided
that the Company does not at that time withdraw or modify its position with
respect to the Merger or approve or recommend an Alternative Proposal.
SECTION 6.7 AFFIRMATIVE COVENANTS. The Company hereby agrees that from
the date hereof and so long as the Promissory Note remains outstanding and
unpaid or the Investor holds at least the Specified Investor Amount of Series A
Preferred Stock:
(a) FINANCIAL STATEMENTS. The Company shall furnish to the Investor:
(i) as soon as available, but in any event not later than 90 days
after the end of each fiscal year of the Company, a copy of the
consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the and of such year and the related consolidated
statements of income and retained earnings and of cash flows for such year,
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setting forth in each case in comparative form the figures for the previous
year, reported on by Ernst & Young or other independent certified public
accountants of nationally recognized standing acceptable to the Investor;
(ii) as soon as available, but in any event not later than 90
days after the end of each fiscal year of the Company, a copy of the
consolidating balance sheet of the Company and its consolidated
Subsidiaries as at the end of such year and the related consolidating
statements of in come and retained earnings and of cash flows for such
year, setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly stated in
all material respects;
(iii) as soon as available, but in any event not later than 45
days after the end of each of the first three quarterly periods of each
fiscal year of the Company, the unaudited consolidated and consolidating
balance sheet of the Company and its consolidated Subsidiaries as at the
end of such quarter and the related unaudited consolidated and
consolidating statements of income and retained earnings and of cash flows
of the Company and its consolidated Subsidiaries for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth
in each case in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects when considered in relation to the consolidated and consolidating
financial statements of the Company and its consolidated Subsidiaries
(subject to normal year-end audit adjustments); all such financial
statements specified in (i), (ii) and (iii) above to be complete and
correct in all material respects and to be prepared in reasonable detail
and in accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such
accountants or officer, as the case may be, and disclosed therein);
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(iv) as soon as available, but in any event not later than 45
days after the end of each quarterly period of the Company, a report
showing all sales by the Company of real property, including a description
of the property sold and the price received, certified by a Responsible
Officer as being fairly stated in all material respects;
(v) a copy of each report, certificate or other document or
information delivered to the lenders or agent under the Foothill Loan
Documents, concurrently with the delivery thereof to such lenders or agent,
including all annexes or attachments thereto; and
(vi such other information as the Investor may reasonably
request from time to time.
(b) ACCESS. The Company shall (and shall cause each of its
Subsidiaries to), upon reasonable notice, afford the officers, employees,
counsel, accountants, financing sources and other authorized representatives of
the Investor or any of its Affiliates ("REPRESENTATIVES") reasonable access
during normal business hours to its properties, books, contracts, commitments
and records (including environmental records) and personnel and advisors (who
will be instructed by the Company to cooperate) and the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to the Investor all
information concerning its business, properties and personnel as the Investor or
its Representatives may reasonably request; PROVIDED that any review will be
conducted in a way that will not interfere unreasonably with the conduct of the
Company's business, and PROVIDED, FURTHER, that no review pursuant to this
Section 6.7(b) shall affect or be deemed to modify any representation or
warranty made by the Company. The Investor will keep all information and
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documents obtained pursuant to this Section 6.7(b) on a confidential basis in
accordance with Paragraph F of the Letter Agreement.
(c) NOTICES. The Company shall promptly give notice to the Investor
of:
(i) the occurrence of any Default or Event of Default;
(ii) any (A) default or event of default under any Contractual
Obligation of the Company or, to the knowledge of the Company, any of its
Subsidiaries or (B) litigation, investigation or administrative or other
proceeding which may exist at any time between the Company or, to the
knowledge of the Company, any of its Subsidiaries and any Government
Authority, which in the case of either clause (A) or clause (B), if not
cured or if adversely determined, as the case may be, would have a Material
Adverse Effect;
(iii) any litigation or administrative or other proceeding affecting
the Company or, to the knowledge of the Company, any of its Subsidiaries,
in which the amount involved or sought is in excess of $500,000 or in
which injunctive or similar relief is sought;
(iv) any default under, or revocation of, or notice threatening to
revoke, any operating permit or license material to the Company's business;
(v) its having become aware that any representation or warranty
contained herein is or has become untrue in any material respect; and
(vi) any development or event which would reasonably be expected to
have a Material Adverse Effect.
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Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and stating what action the Company proposes to take with
respect thereto.
(d) ENVIRONMENTAL LAWS. The Company shall:
(i) comply with, and use its reasonable efforts to insure compliance
by all tenants and subtenants, if any, with, all Environmental Laws and obtain
and comply with and maintain, and insure that all tenants and subtenants obtain
and comply with and maintain, any and all licenses, approvals, registrations or
permits required by Environmental Laws, except in each case to the extent that
failure to do so would not reasonably be expected to have a Material Adverse
Effect; and
(ii) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Government Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings or delay in such actions would not reasonably
be expected to have a Material Adverse Effect.
(e) BUSINESS PLAN. The Company shall furnish to the Investor on or
before the tenth day following approval by the Board, but in no event later than
December 31 of each fiscal year and within 10 days (after approval by the Board,
if applicable) of any amendment, modification or update thereto, a Business
Plan of the Company for the next succeeding fiscal year in a form and in
substance satisfactory to the Investor setting forth in reasonable detail a
projected statement for such fiscal year's income and cash flow with a projected
balance sheet as of the close of the succeeding fiscal year end, accompanied by
a statement of a Responsible Officer that the Business Plan projected statements
of income, cash flow and balance sheet for the succeeding fiscal year have been
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adopted by the Board. The Company shall at all times conduct its business
substantially in accordance with the Business Plan and shall not materially
modify such Business Plan without the prior written approval of the Investor.
(f) MAJOR TRANSACTIONS. Except as permitted by this Agreement, the
Company shall not engage in, or enter into any agreement with respect to, or
(except subject to the prior written approval of the Investor) resolve to engage
in or to enter into any agreement with respect to, any Major Transaction,
without the prior written consent of the Investor (it being agreed that the
approval (x) of a majority of the Investor Designees at a meeting of the Board,
(y) of one or more Investor Designees at a meeting of the Executive Committee of
the Board or (z) of all members of the Board, including the Investor Designees,
by a written directors consent shall be deemed to be written consent of the
Investor.
SECTION 6.8 PUBLICITY. The parties will cooperate with each other in
the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any public announcement or
statement with respect hereto or thereto without prior notification to the other
party, and, until 30 days after the Closing Date, except as required by law, the
reasonable approval of the other party.
SECTION 6.9 RESERVATION OF SHARES. From and after the Closing, the
Company shall at all times reserve and keep available, free from preemptive
rights, out of its authorized and unissued stock, (a) solely for the purpose of
effecting the conversion of the Preferred Shares, such number of shares of
Common Stock as shall be sufficient to effect the conversion of all of the
Preferred Shares and (b) solely for the purpose of issuing shares of Common
Stock upon the exercise of Warrants, such number of shares of Common Stock which
may then be deliverable upon exercise of all of the Warrants.
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SECTION 6.10 THE BOARD. The Company shall take all actions necessary
so that: (a) as of the date of this Agreement and until the Closing, the full
Board shall consist of ten directors, one of whom shall be the Original Investor
Designee (who shall be in the class of directors whose term of office expires at
the annual meeting in 1999; PROVIDED, HOWEVER, that, if no Funding has occurred
and this Agreement is terminated in accordance with its terms, the Investor
shall cause the Original Investor Designee to promptly resign from the Board),
and (b) as of and after the Closing, the Board shall consist of seven directors,
who shall be the Original Investor Designee (who shall resign from the
aforementioned class and be renominated for a one-year term), the Additional
Investor Designees (who shall each serve for one-year terms), one member of the
incumbent management of the Company and three independent directors (satisfying
the standard of independence established in the rules of the New York Stock
Exchange, Inc.) who shall be selected by the Incumbent Board with the approval
of the Investor (which shall not be unreasonably withheld). Subject to
applicable law, the Company shall take all action necessary to effect any such
election or appointment, including timely mailing to its stockholders the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder (and the Investor shall provide to the Company on a
timely basis all information required to be included in the Proxy Statement with
respect to the Original Investor Designee and the Additional Investor
Designees). From and after the Effective Date, the voting rights of holders of
the Preferred Shares shall be as set forth in the Amended and Restated
Certificate of In corporation, and directors nominated by the holders of the
Preferred Shares shall be represented on any committee of the Board and shall
constitute one half of the Executive Committee of the Board, if the Board
decides to have an Executive Committee. So long as any amounts are owed under
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the Promissory Note, at least one member of the Board shall be designated by the
Investor.
SECTION 6.11 INDEMNIFICATION OF BOARD. From and after the Closing, the
Amended and Restated Certificate of In corporation and By-laws of the Company,
however amended, will at all times contain provisions exculpating and
indemnifying its directors to the fullest extent permitted under applicable law.
The By-laws of the Company shall always contain provisions consistent with the
provisions of this Section 6.11. The Company shall maintain valid policies of
directors and officers indemnity insurance with financially sound and reputable
insurers in such amounts, with such deductibles and against such risks and
losses as are reasonable for the business and assets of the Company.
SECTION 6.12 CO-INVESTMENT OPPORTUNITY. Except with respect to
projects, including joint ventures, of the Company or any Subsidiary existing on
the date of this Agreement as set forth in Section 6.12 of the Disclosure
Schedule, as long as the Investor owns at least the Specified Investor Amount of
Preferred Stock, the Investor will have a right of first offer to participate in
new joint venture community development projects proposed to be entered into by
the Company, until the Investor has invested at least $60,000,000 in cash in
such projects; PROVIDED, HOWEVER, that the provisions of this Section 6.12 shall
not apply to any project in which the Company's participation and commitment
shall be in the form of (a) its expertise and business efforts or (b) the
contribution or real property (or equity interests in real property), as opposed
to capital contributions. Subject to the foregoing, if the Company proposes to
enter into any new community development project (including any new joint
venture, partnership or similar arrangement with any third party), the Company
will inform the Investor thereof and will offer the Investor the opportunity to
invest in such proposed project for one week before offering such opportunity to
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any third party. To the extent reasonably available to the Company, the Company
shall give the Investor such information regarding the proposal as the Investor
may reasonably request to enable it to make an investment decision. If the
Investor fails to advise the Company within 10 Business Days after receipt of
any such offer in writing of its intention to proceed with due diligence and
negotiation with respect to such proposed investment, the Investor shall be
deemed to have rejected such offer. If the Investor discloses to the Company its
intention, within such 10 Business Day period, to proceed with due diligence and
negotiation with respect to such proposed investment, then the Investor and the
Company agree to negotiate with each other in good faith with respect to such
proposed investment for up to 20 Business Days following the Investor's receipt
of such information. If, after the Company and the Investor have discussed the
proposed transaction for such 20- Business Day period, the Investor determines
either not to invest in such project, or not to invest the full amount that the
Company requires for such project, or has not committed to the Company to make
such investment, on substantially the terms and conditions offered to the
Investor, then the Company may enter into an agreement with or consummate a
transaction with other potential investors with regard to the proposed
investment (or the amount required in excess of the amount to be committed by
the Investor), PROVIDED that the Company may not offer terms to another
potential investor materially more favorable in the aggregate than the terms
offered to the Investor unless the Company first offers such terms to the
Investor. Nothing herein shall be deemed to imply any commitment on the part of
the Investor to invest in the Company or any project proposed by the Company,
except as expressly provided in this Agreement. So long as any principal amount
is outstanding under the Promissory Note, in connection with the Investor's
rights described above, the Company will offer the Investor the opportunity to
conduct due diligence investigations with respect to such projects and will
comply with the terms of the Due Diligence Fee Agreement.
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SECTION 6.13 APPROVED BUSINESS PLAN. Within 30 days after the date of
this Agreement, the Company shall deliver to the Investor a draft of the
Business Plan for 1997-1998, and the Company and the Investor shall exercise
reasonable efforts to reach agreement on the Approved Business Plan.
SECTION 6.14 SPECIAL PURPOSE SUBSIDIARY. The Company hereby agrees
that, without the Investor's prior written consent, which may be withheld in its
sole discretion, from the date hereof and so long as the Promissory Note remains
out standing and unpaid or the Investor holds any Series A Preferred Stock:
(a) The proceeds from the issuance and sale of the Promissory
Note, the Preferred Shares and the Warrants to the Investor
hereunder and, except as otherwise provided below, all funds
generated thereby or assets acquired therewith, shall be held
from and after the Closing Date (or, if earlier, the Funding
Date) by a newly formed special purpose Delaware corporation
which shall be a direct wholly owned subsidiary of the Company
("SP SUBSIDIARY") which shall not have conducted any other
activities or have any other as sets or liabilities.
(b) Except as otherwise provided below, all funds received by the
Company from the Investor (including pursuant to Section 6.12)
and all direct and indirect proceeds thereof shall also be
contributed to and, subject to use as contemplated by Section
6.14(c), at all times held by SP Subsidiary or a wholly owned
Subsidiary of SP Subsidiary or, with the prior written consent
of the Investor, a joint venture in which SP Subsidiary (or a
wholly owned Subsidiary thereof) is a joint venturer or
partner, so long as, except for the Company's ownership of all
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of SP Subsidiary's outstanding capital stock, neither the
Company nor any other Subsidiary thereof has an interest
therein.
(c) The only business transactions in which SP Subsidiary shall
engage are the development and sale of Board- approved real
estate development projects, including financing and other
activities incidental thereto.
(d) Until the fourth anniversary of the Closing Date, SP
Subsidiary shall not declare or pay any dividend on, or make
any payment on account of, the purchase, redemption,
defeasance or retirement of any capital stock of SP
Subsidiary, or make any advance, loan, extension of credit or
capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities or assets of, or make any other
investment in, or engage in any other transactions with, the
Company or any entity in which the Company has an interest,
except that (i) the foregoing restrictions shall not apply to
transactions with or investments in a wholly owned Subsidiary
of SP Subsidiary; (ii) at any time after the Closing Date, SP
Subsidiary can transfer funds to the Company, whether in the
form of a dividend or otherwise, solely for the purpose of, or
otherwise directly pay on the Company's behalf, any dividend
or other cash payment on or in respect of Preferred Shares,
(iii) upon the third anniversary of the Closing Date or, if
earlier, any Repurchase Date (as defined in the Series A
Preferred Stock Certificate of Designations), SP Subsidiary
can transfer funds to the Company, whether in the form of a
dividend or otherwise, solely for the purpose of, or otherwise
directly pay on the Company's behalf in respect of, the
purchase or redemption of Preferred Shares and (iv) to the
extent the Company provides administrative and other services
to SP Subsidiary, an appropriate portion of the general and
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administrative expenses of the Company (which shall be
reasonably agreed by the Company and the Investor and, to the
extent possible, set forth in the pro forma financial
statements for each Board-approved real estate development
project) may be allocated to and reimbursed by SP Subsidiary.
(e) At any time after the fourth anniversary of the Closing Date,
SP Subsidiary may declare and pay dividends in respect of its
capital stock in an amount not to exceed, during any fiscal
year, the lesser of 5% of SP Subsidiary's Excess Value (as
defined below) or 10% of SP Subsidiary's cash-on-hand,
provided that no Event of Default (as defined in the Series A
Preferred Stock Certificate of Designations) exists with
respect to the Preferred Shares. "EXCESS VALUE" shall mean SP
Subsidiary's net worth, after taking into account all of its
liabilities, on a GAAP basis, and all amounts necessary to
redeem all outstanding Preferred Shares in full.
(f) The Investor shall at all times have a first priority security
interest in all outstanding capital stock of SP Subsidiary and
(subject to prior liens for customary project financing with
the consent of the Investor) its assets, perfected under
security documents satisfactory to the Investor.
(g) The board of directors of SP Subsidiary shall consist of one
director designated by the Company and one director designated
by the Investor, but the Investor's designee shall not vote
against or other wise impede any resolution or other action
authorizing or directing SP Subsidiary to take any action
permitted by this Section 6.14.
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(h) Any agreement to which SP Subsidiary will be a party that will
govern (i) a borrowing of funds which will be secured by its
interest in one or more real estate development projects or
(ii) a joint venture, partnership or similar agreement
between SP Subsidiary and the third party in respect of one or
more real estate development projects shall include provisions
reasonably satisfactory to the Investor in respect of (a)
rights to cure any default or event of default by SP
Subsidiary or (b) rights of a third party triggered or
otherwise exercisable upon the occurrence of a change in the
control of the Company or SP Subsidiary.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
SECTION 7.1 SURVIVAL PERIODS. All representations and warranties
contained in this Agreement shall survive for thirty months from the Closing
Date, and shall thereupon terminate and cease to be of further force and
effect, except that any representation or warranty as to which notice of a
breach giving rise to a right of indemnification has been given prior to the end
of such thirty month period shall survive until any such right of
indemnification has been finally resolved. The covenants and agreements
contained in this Agreement, other than those which by their terms only apply
until the Closing Date, shall survive the Closing in accordance with their
terms. The representations and warranties and the survival periods set forth
above shall apply regardless of any investigation made by or on behalf of any
Person.
SECTION 7.2 INDEMNIFICATION BY THE COMPANY. Subject to the provisions
of Section 7.1, the Company agrees to indemnify and hold harmless the Investor
and its Affiliates and their respective officers, directors, agents, employees,
subsidiaries, partners and controlling persons (each, an "INDEMNIFIED PARTY") to
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the fullest extent permitted by law from and against any and all losses, claims,
damages, expenses (including reasonable fees, disbursements and other charges of
counsel) or other liabilities ("LIABILITIES") resulting from any breach of any
covenant, agreement, representation or warranty of the Company in this Agreement
or in any other Transaction Document; PROVIDED, HOWEVER, that the Company shall
not be liable under this Section 7.2: (i) for any amount paid in settlement of
claims without its consent (which consent shall not be unreasonably withheld) or
(ii) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from a breach by the Investor of any
representation, warranty, covenant or agreement of the Investor contained in
this Agreement or the willful misconduct of the Investor; PROVIDED, FURTHER,
that, if and to the extent that such indemnification is unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of such indemnified liability that shall be permissible under
applicable laws. In connection with the obligation of the Company to indemnify
for Liabilities as set forth above, the Company further agrees to reimburse each
indemnified party for all such expenses (including reasonable fees,
disbursements and other charges of counsel) as they are incurred by such
indemnified party.
SECTION 7.3 INDEMNIFICATION BY THE INVESTOR. Subject to the provisions
of Section 7.1, the Investor agrees to indemnify and hold harmless the Company
and their respective Affiliates, officers, directors, agents, employees,
subsidiaries, partners and controlling persons (each, an "INDEMNIFIED PARTY")
to the fullest extent permitted by law from and against any and all Liabilities
resulting from any breach of any covenant, agreement, representation or
warranty of the Investor in this Agreement or in any other Transaction Document;
PROVIDED, HOWEVER, that the Investor shall not be liable under this Section 7.3:
(i) for any amount paid in settlement of claims without the Investor's consent
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(which consent shall not be unreasonably withheld) or (ii) to the extent that
it is finally judicially determined that such Liabilities resulted primarily
from a breach by the Company of any representation, warranty, covenant or
agreement of the Company contained in this Agreement or the willful misconduct
of the Company; PROVIDED, FURTHER, that, if and to the extent that such
indemnification is unenforceable for any reason, the Investor shall make the
maximum contribution to the payment and satisfaction of such indemnified
liability that shall be permissible under applicable laws. In connection with
the obligation of the Investor to indemnify for Liabilities as set forth above,
the Investor further agrees to reimburse each indemnified party for all such
expenses (including reasonable fees, disbursements and other charges of counsel)
as they are incurred by such indemnified party.
SECTION 7.4 NOTIFICATION. Each indemnified party under this Article
VII or Article VIII will, promptly after the receipt of notice of the
commencement of any action or other proceeding against such indemnified party in
respect of which indemnity may be sought from any indemnifying party under this
Article VII or Article VIII, notify such indemnifying party in writing of the
commencement thereof. The omission of any indemnified party so to notify any
indemnifying party of any such action shall not relieve such indemnifying party
from any liability that it may have to such indemnified party (a) other than
pursuant to this Article VII or Article VIII or (b) under this Article VII or
Article VIII unless, and only to the extent that, such omission results in
forfeiture of substantive rights or defenses. In case any such action or other
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, such indemnifying party
shall be entitled to participate therein and, to the extent that either may
wish, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; PROVIDED, HOWEVER, that any indemnified party may, at
its own expense, retain separate counsel to participate in such defense.
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Notwithstanding the foregoing, in any action or proceeding in which any
indemnifying party and an indemnified party are, or are reasonably likely to
become, a party, such indemnified party shall have the right to employ separate
counsel at the expense of such indemnifying party and to control its own defense
of such action or proceeding if, in the reasonable opinion of counsel to such
indemnified party, (i) there are or may be legal defenses available to such
indemnified party or to other indemnified parties that are different from or
additional to those available to such indemnifying party or (ii) any conflict or
potential conflict exists between such indemnifying party and such indemnified
party that would make such separate representation advisable in the view of the
indemnified party; PROVIDED, HOWEVER, that (A) any such separate counsel
employed by the indemnified party at the expense of such indemnifying party
shall be reasonably satisfactory to such indemnifying party, (B) the indemnified
party will not, without the prior written consent of such indemnifying party
settle, compromise or consent to the entry of any judgment in such action or
proceeding unless such settlement, compromise or consent includes an
unconditional release of such indemnifying party from all liability arising or
that may arise out of such action or proceeding relating to any matter subject
to indemnification here under and (C) in no event shall such indemnifying party
be required to pay fees and expenses under this Article VII or Article VIII for
more than one firm of attorneys representing the indemnified parties in any
jurisdiction in any one legal action or group of related legal actions. The
rights accorded to indemnified parties hereunder shall be in addition to any
rights that any indemnified party may have at common law, by separate agreement
or otherwise.
SECTION 7.5 REGISTRATION STATEMENTS. Notwithstanding anything to the
contrary in this Article VII, the indemnification and contribution provisions
of Article VIII shall govern any claim made with respect to registration
statements filed pursuant thereto or sales made thereunder.
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ARTICLE VIII
REGISTRATION RIGHTS
SECTION 8.1 DEMAND REGISTRATIONS. At any time and from time to time
after the Closing, the Company shall, upon the written demand of the Investor,
use its best efforts to effect the registration (a "DEMAND REGISTRATION") under
the Act (by means of a "shelf" registration statement pursuant to Rule 415 under
the Act, if so requested and if the Company is eligible therefor at such time)
of such number of Registrable Securities (as defined below) then beneficially
owned by the Investor as shall be indicated in a written demand sent to the
Company by the Investor; PROVIDED, HOWEVER, that: (a) the Company shall be
obligated under this Agreement to effect no more than (i) two Demand
Registrations so long as the Company is not eligible to file Form S-3 under the
Act, and (ii) five Demand Registrations if the Company is eligible to file Form
S-3; and (b) a Demand Registration shall not count as such until it has become
effective, except that if, after it has become effective, the offering of
Registrable Securities pursuant to such registration is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
Government Authority, such registration shall be deemed not to have been
effected unless such stop order, injunction or other order or requirement shall
subsequently have been vacated or otherwise removed. If a Demand Registration is
initiated by the Investor, no other securities may be offered in such offering
by the Company without the Investor's consent. Upon receipt of the written
demand of the Investor, the Company shall expeditiously effect the registration
under the Act of the Registrable Securities covered by such request and use its
best efforts to have such registration become and remain effective as provided
in Section 8.8. The Investor shall have the right to select the underwriters for
a Demand Registration.
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As used in this Agreement, "REGISTRABLE SECURITIES" shall mean (a) any
Preferred Shares, (b) any Conversion Shares, (c) any Warrant Shares, (d) any
other shares of Common Stock acquired by the Investor and (e) any securities
issued or issuable with respect to any Preferred Shares, Conversion Shares,
Warrant Shares by way of stock dividend or stock split, or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
SECTION 8.2 PIGGYBACK REGISTRATIONS. (a) If the Company proposes to
register any of its securities under the Act for sale for cash (otherwise than
in connection with the registration of securities issuable pursuant to an
employee stock option, stock purchase or similar plan or pursuant to a merger,
exchange offer or a transaction of the type specified in Rule 145(a) under the
Act), the Company shall give the Investor notice of such proposed registration
at least 20 days prior to the filing of a registration statement. At the written
request of the Investor delivered to the Company within 10 Business Days after
the receipt of the notice from the Company, stating the number of Registrable
Securities that the Investor wishes to sell or distribute publicly under the
registration statement proposed to be filed by the Company, the Company shall
use its best efforts to register under the Act the sale of such Registrable
Securities, and to cause such registration (a "PIGGYBACK REGISTRATION") to
become and remain continuously effective as provided in Section 8.8;
(b) If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the managing underwriters thereof
advise the Company in writing that in their opinion the number of securities
requested to be included in the registration exceeds the number which can be
sold in the offering without adversely affecting the offering, the Company shall
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include in the registration (i) first, that portion of the Registrable
Securities that the Investor proposes to sell representing 10% of such offering,
(ii) second, the securities the Company proposes to sell, and (iii) third, the
remaining Registrable Securities the Investor proposes to sell.
SECTION 8.3 INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any Registrable Securities under the Act, the Company shall, and
hereby does, indemnify and hold harmless the Investor, each of its directors and
officers, each other Person who participates as an underwriter in the offering
or sale of such Registrable Securities and each other Person, if any, who
controls the Investor or any such underwriter within the meaning of Section 15
and Section 20 of the Act against any losses, claims, damages or liabilities,
joint or several, to which the Investor or any such director or officer or under
writer or controlling Person may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which the
Registrable Securities were registered under the Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and the Company shall reimburse the Investor and each such director,
officer, underwriter and controlling Person for any legal or any other expenses
reasonably incurred by it in connection with investigating or defending any such
loss, claim, liability, action or proceeding; PROVIDED, HOWEVER, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, preliminary
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prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information about the Investor
furnished to the Company through an instrument duly executed by or on behalf of
the Investor specifically stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Investor or any such director, officer
or controlling Person and shall survive the transfer of the Registrable
Securities by the Investor.
SECTION 8.4 INDEMNIFICATION BY THE INVESTOR. The Company may require,
as a condition to including any Registrable Securities in any registration
statement filed pursuant to Section 8.1 or 8.2, that the Company shall have
received an undertaking satisfactory to it from the Investor to indemnify and
hold harmless (in the same manner and to the same extent as set forth in Section
8.3) the Company, each director of the Company, each officer of the Company
signing such registration statement, each other Person who participates as an
underwriter in the offering or sale of such Registrable Securities and each
other Person, if any, who controls the Company within the meaning of Section 15
and Section 20 of the Act with respect to any untrue statement or alleged untrue
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein or any amendment or supplement thereto, if such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information about the Investor furnished to
the Company through an instrument duly executed by the Investor specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer by the seller of
the securities of the Company being registered.
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SECTION 8.5 NOTIFICATION. The procedures set forth in Section 7.4
shall apply to any claim for indemnification pursuant to Section 8.3 or 8.4.
SECTION 8.6 OTHER INDEMNIFICATION. Indemnification similar to that
specified in this Article VIII (with appropriate modifications) shall be given
by the Company and the Investor with respect to any required registration or
other qualification of Registrable Securities under any federal or state law or
regulation of any Government Authority other than the Act.
SECTION 8.7 CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Article VIII is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms in respect of any
Liabilities suffered by an indemnified party referred to therein, each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such Liabilities, in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and of the liable selling
stockholders on the other in connection with the statements or omissions which
resulted in such Liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
liable selling stockholders (including, in each case, that of their respective
officers, directors, employees, agents and control ling Persons) on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company, on the
one hand, or by or on behalf of the selling stockholders, on the other, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
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SECTION 8.8 REGISTRATION COVENANTS OF THE COMPANY. If any Registrable
Securities of the Investor are to be registered pursuant to Section 8.1 or 8.2,
the Company covenants and agrees that it shall use its best efforts to effect
the registration and cooperate in the sale of the Registrable Securities to be
registered and shall as expeditiously as possible:
(a) (i) prepare and file with the SEC a registration statement
with respect to the Registrable Securities (as well as any necessary
amendments or supplements thereto) (a "REGISTRATION STATEMENT") and
(ii) use its best efforts to cause the Registration Statement to become
effective;
(b) prior to the filing described above in Section 8.8(a),
furnish to the Investor copies of the Registration Statement and any
amendments or supplements thereto and any prospectus forming a part
thereof, which documents shall be subject to the review and approval of
counsel for the Investor;
(c) notify the Investor, promptly after the Company shall
receive notice thereof, of the time when the Registration Statement
becomes effective or when any amendment or supplement or any prospectus
forming a part of the Registration Statement has been filed;
(d) notify the Investor promptly of any request by the SEC for
the amending or supplementing of the Registration Statement or
prospectus or for additional information and promptly deliver to the
Investor copies of any comments received from the SEC;
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(e) (i) advise the Investor after the Company shall receive
notice or otherwise obtain knowledge of the issuance of any order by
the SEC suspending the effectiveness of the Registration Statement or
any amendment thereto or of the initiation or threatening of any
proceeding for that purpose and (ii) promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal
promptly if a stop order should be issued;
(f) (i) prepare and file with the SEC such amendments and
supplements to the Registration Statement and each prospectus forming a
part thereof as may be necessary to keep the Registration Statement
continuously effective for the period of time necessary to permit the
Investor to dispose of all its Registrable Securities and (ii) comply
with the provisions of the Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during
such period in accordance with the intended methods of disposition by
the Investor set forth in the Registration Statement;
(g) furnish to the Investor such number of copies of the
Registration Statement, each amendment and supplement thereto, the
prospectus included in the Registration Statement (including each
preliminary prospectus) and such other documents as the Investor may
request in order to facilitate the disposition of the Registrable
Securities owned by the Investor;
(h) use its best efforts to register or qualify such
Registrable Securities under such other securities or "blue sky" laws
of such jurisdictions as determined by the under writers after
consultation with the Company and the Investor and do any and all
other acts and things which may be reasonably necessary or advisable to
enable the Investor to consummate the disposition in such jurisdictions
of the Registrable Securities (PROVIDED that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction in
which it would not otherwise be required to qualify but for this
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Section 8.8(h), (ii) subject itself to taxation in any such
jurisdiction, or (iii) consent to general service of process in any
such jurisdiction);
(i) notify the Investor, at any time when a prospectus
relating thereto is required to be delivered under the Act, of the
happening of any event as a result of which the Registration Statement
would contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading, and, at the request of the
Investor, prepare a supplement or amendment to the Registration
Statement so that the Registration Statement shall not, to the
Company's knowledge, contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(j) if the Common Stock is not then listed on a securities
exchange, use its best efforts, consistent with the then-current
corporate structure of the Company, to facilitate the listing of the
Common Stock on a stock ex change or on the NASDAQ Stock Market;
(k) provide a transfer agent and registrar, which may be a
single entity, for all the Registrable Securities not later than the
effective date of the Registration Statement;
(l) enter into such customary agreements (including an
underwriting agreement in customary form, including customary
indemnification provisions and customary lock-up arrangements of the
issuer and its directors and executive officers) and take all such
other action, if any, as the Investor or the underwriters shall
reasonably request in order to expedite or facilitate the disposition
of the Registrable Securities pursuant to this Article VIII;
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(m) (i) make available for inspection by the Investor, any
underwriter participating in any disposition pursuant to the
Registration Statement and any attorney, accountant or other agent
retained by the Investor or any such underwriter all relevant financial
and other records, pertinent corporate documents and properties of the
Company as any of them may request in connection with their "due
diligence" investigations of the Company and (ii) cause the Company's
officers, directors and employees to supply all relevant information
reasonably requested by the Investor or any such underwriter, attorney,
accountant or agent in connection with the Registration Statement;
(n) use its best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved
by such other governmental authorities as may be necessary to enable
the Investor to consummate the disposition of such Registrable
Securities;
(o) cause the Company's independent public accountants to
provide to the underwriters, if any, and the selling holders, if
permissible, a comfort letter in customary form and covering such
matters of the type customarily covered by comfort letters;
(p) cooperate and assist in any filings required to be made
with the National Association of Securities Dealers, Inc. (the
"NASD"); and
(q) use all reasonable efforts to facilitate the distribution
and sale of any Registrable Securities to be offered pursuant to this
Agreement, including without limitation by making road show
presentations, holding meetings with potential investors and taking
such other actions as shall be appropriate or as shall be requested by
the lead managing underwriter of an underwritten offering.
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SECTION 8.9 EXPENSES. In connection with any Demand Registration
pursuant to Section 8.1 or any Piggyback Registration pursuant to Section 8.2,
the Company shall pay all registration, filing and NASD fees, all fees and
expenses of complying with securities or "blue sky" laws (including fees and
disbursements of underwriters' counsel); PROVIDED, HOWEVER, that the Investor
shall pay its PRO RATA share of any commissions, fees and disbursements of
underwriters customarily paid by sellers of securities (based upon offering
proceeds to be received by it). In any Demand Registration or Piggyback Regi-
tration, the Company shall be responsible for the fees and disbursements of
counsel for the Company and of its independent public accountants, printing
costs and premiums and other costs of policies of insurance against Liabilities
arising out of the public offering of the Registrable Securities. The Investor
shall be responsible for the fees and disbursements of counsel for the Investor.
SECTION 8.10 TRANSFER OF REGISTRATION RIGHTS. The Investor (or any
Eligible Transferee) may transfer all or any portion of its rights under this
Article VIII to any transferee of an amount of Registrable Securities equal to
or exceeding 10% of the outstanding class of such Registrable Securities at the
time of transfer (each transferee that receives such minimum number of such
Registrable Securities, an "ELIGIBLE TRANSFEREE"), and any Eligible Transferee
shall be treated as the "Investor" for all purposes under this Article VIII;
PROVIDED, HOWEVER, that the Company shall be obligated under this Agreement to
effect no more than that number of Demand Registrations set forth in the proviso
in Section 8.1 on behalf of all Eligible Transferees in the aggregate. Any
transfer of registration rights pursuant to this Section 8.10 shall be
effective upon receipt by the Company of (i) written notice from the Investor
or the transferring Eligible Transferee, as the case may, stating the name and
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address of the new Eligible Transferee and identifying the amount of Registrable
Securities with respect to which the rights under this Agreement are being
transferred and (ii) a writing from such new Eligible Transferee agreeing to be
bound by the terms of this Article VIII. The Eligible Transferees may exercise
their rights hereunder in such priority as they shall agree upon among
themselves.
SECTION 8.11 OTHER REGISTRATION RIGHTS. Notwithstanding any other
provision of this Agreement, if the Company at any time grants registration
rights to any other Person on terms relating to the priority of registration
rights or periods when the Company shall be entitled to defer filing any Reg-
istration Statement which the Investor considers preferential to the comparable
terms in this Article VIII, then the Investor shall be entitled to registration
rights with such preferential terms. The Company shall not grant any right of
registration under the Act relating to any of its securities to any Person other
than the Investor unless the Investor shall be entitled to have included in any
Piggyback Registration effected a number of Registrable Securities requested by
the Investor to be so included representing at least 10% of such offering prior
to the inclusion of any securities requested to be registered by the Persons
entitled to any such other registration rights.
SECTION 8.12 RULE 144. So long as the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall take all actions reasonably necessary to enable the Investor to sell the
Registrable Securities without registration under the Act within the limitation
of the exemptions provided by Rule 144 under the Act, as such Rules may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC, including filing on a timely basis all reports required to be filed
by the Exchange Act. Upon the request of the Investor, the Company shall de-
liver to the Investor a written statement as to whether it has complied with
such requirements.
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SECTION 8.13. LIMITATION ON REQUIREMENT TO FILE OR AMEND REGISTRATION
STATEMENT. Anything in this Agreement to the contrary notwithstanding, the
Company shall not be required to file, and may defer filing, any Registration
Statement, amendment, supplement or post-effective amendment thereto or
prospectus supplement, if the Company is then involved in discussions
concerning, or otherwise engaged in, an acquisition, disposition, financing or
other material transaction and the Company determines in good faith that the
making of such a filing, supplement or amendment at such time would materially
adversely affect or interfere with such transaction; PROVIDED, HOWEVER, that
the Company may not so defer making such filing for more than 90 days on any one
occasion or within 30 days after the termination of any such deferral period;
and PROVIDED, FURTHER that the Company shall, as soon as practicable thereafter,
make such filing, supplement or amendment. The Company shall promptly give the
Investor written notice of any such deferral, containing a general statement of
the reasons for such deferral and an approximation of the anticipated delay,
PROVIDED, HOWEVER, that nothing herein shall require the Company to disclose any
terms of any such transaction or the identity of any party thereto.
ARTICLE IX
TERMINATION
SECTION 9.1 TERMINATION. This Agreement (other than, if and so long as
the Promissory Note remains outstanding, Sections 6.1, 6.7(f), 6.10, 6.11, 10.7,
10.12 and 10.13 and Article VII) may be terminated at any time prior to the
Closing:
(a) by mutual written consent of the Company and the Investor;
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(b) by the Company or the Investor, if the Closing shall not have
occurred on or before June 24, 1997; PROVIDED, HOWEVER, that the right to
terminate this Agreement under this clause (b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date;
(c) by the Investor, if the Proxy Statement has not been mailed
to stockholders of the Company by May 22, 1997;
(d) by the Company or the Investor, if any judgment, injunction,
order or decree enjoining the Investor or the Company from consummating this
Agreement is entered and such judgment, injunction, order or decree shall become
final and nonappealable; PROVIDED, HOWEVER, that the party seeking to terminate
this Agreement shall have used all reasonable efforts to remove such judgment,
injunction, order or decree;
(e) by the Investor, if there has been a material breach of any
representation, warranty or material covenant or agreement of the Company which
is incurable, or, if curable, which is not cured within 30 days of receipt of
written notification from the Company identifying such breach and demanding that
it be cured;
(f) by the Company, if there has been a material breach of any
representation, warranty, or material covenant or agreement of the Investor
contained in this Agreement, which breach is incurable or, if curable, which is
not cured within 30 days of receipt of written notification from the Investor
identifying such breach and demanding that it be cured;
(g) by the Company, in accordance with the pro visions of Section
6.6(c), provided that prior to or concurrently with such termination, the
Investor shall have received the Termination Fee; or
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(h) by either the Company or the Investor at any time from March
30, 1997 until April 5, 1997 if and until any necessary consent from Foothill
Capital Corporation has not been obtained on terms reasonably satisfactory to
the Investor and the Company.
SECTION 9.2 EFFECT OF TERMINATION. If this Agreement is
terminated pursuant to Section 9.1, then this Agreement (except for Section 9.3,
which shall remain in full force and effect, and the provisions specified in
Section 9.1, which shall remain in full force and effect if and so long as the
Promissory Note is outstanding) shall become void and of no effect with no
liability on the part of any party hereto thereunder, except to the extent such
termination results from the breach by a party hereto of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 9.3 FEES DUE UPON TERMINATION. (a) If this Agreement is
terminated or the Closing does not occur by 5:00 p.m., New York City time, on
June 24, 1997 for any reason whatsoever other than as a result of a breach of
this Agreement by the Investor entitling the Company not to consummate the Clos-
ing, the Commitment Fee shall be forfeited and the Company shall pay to the
Investor within two Business Days of request therefor, together with
documentation therefor, the Investor's Transaction Expenses.
(b) If the Closing has not been consummated by June 24, 1997 as a
result of (i) a breach by the Company of this Agreement, or a breach by the
Company of the Note Agreement which is not cured by June 24, 1997, or (ii) a
failure by 5:00 p.m., New York City time, on June 24, 1997 to obtain the Stock
holders Approval, or (iii) a failure by 5:00 p.m., New York City time, on June
24, 1997 to obtain the consent required in respect of the transactions
contemplated by this Agreement under the Foothill Loan Documents because of the
failure of the Company to sell Common Stock, Series B Preferred Stock and
warrants to acquire Common Stock in the Private Placement for an aggregate
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purchase price of at least $15,000,000, then, in the case of any of (i), (ii) or
(iii), in addition to the forfeiture of the Commitment Fee, the Company shall
pay to Apollo in cash, on June 25, 1997, an additional $1,000,000 break-up fee,
plus the Investor's Transaction Expenses.
(c) If the conditions for the payment of the break-up fee
referred to in Section 9.3(b) are fulfilled, and either (i) the Company wilfully
breached or breaches this Agreement or the Note Agreement or (ii) the Company
(x) enters into an agreement for an Alternative Transaction prior to the earlier
of June 24, 1998 or the date that is nine months after the date of termination
of this Agreement or (y) consummates an Alternative Transaction prior to the
earlier of June 24, 1998 or the first anniversary of the date of termination of
this Agreement, the Company shall pay an additional $1,000,000 Alternative
Transaction fee to the Investor, in addition to the $1,000,000 break-up fee
provided for in Section 9.3(b) above and the forfeiture of the Commitment Fee,
plus the Investor's Transaction Expenses.
(d) If the Agreement is terminated by the Company pursuant to
Section 9.1(h), and either (i) the Company wilfully breached or breaches this
Agreement or the Note Agreement or (ii) the Company enters into an agreement
for, or consummates, an Alternative Transaction prior to the 180th day after the
date of termination of this Agreement, the Company shall pay an additional
$2,000,000 Alternative Transaction fee to the Investor, in addition to the
forfeiture of the Commitment Fee, plus the Investor's Transaction Expenses.
(e) Notwithstanding the foregoing provisions of this Section 9.3,
the Company shall not be required to pay fees pursuant to this Section 9.3 if
the Company shall have terminated the Agreement pursuant to Section 6.6(b) and
paid the Investor the Termination Fee and Transaction Expenses therein specified
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(and the Commitment Fee shall have been forfeited by the Company).
Notwithstanding any other provision of this Agreement, in no event shall the
Investor be entitled to receive fees in excess of $3,000,000 (plus Transaction
Expenses) from the Company as a result of the termination of this Agreement.
All fees and Transaction Expenses shall be payable in cash.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 NOTICES. All notices or other communications given
or made hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in person at, mailed by registered or certified mail,
return receipt requested, postage prepaid, or sent by a reputable overnight
courier to, the following addresses (and shall be deemed effective at the time
of receipt thereof).
If to the Company: Atlantic Gulf Communities
Corporation
2601 South Bayshore Drive
Miami, Florida 33133-5461
Telecopy: (305) 859-4623
Attention: Thomas W. Jeffrey, Chief Financial Officer
with copies to: Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Telecopy: (202) 857-6395
Attention: Carter Strong, Esq.
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If to the Investor:
AP-ACG, LLC
c/o Apollo Real Estate Advisors II, L.P.
Two Manhattanville Road
Purchase, NY 10577
Telecopy: (914) 694-8032
Attention: Ron Solotruck
with a copy to:
Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Telecopy: (212) 459-3301
Attention: Rick Koenigsberger
and a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: (212) 403-2000
Attention: Philip Mindlin, Esq.
Trevor S. Norwitz, Esq.
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
SECTION 10.2 EXPENSES. The Company will pay all Transaction Expenses.
SECTION 10.3 AMENDMENT; WAIVER. The provisions of this Agreement may
be modified or amended, and waivers and consents to the performance and
observance of the terms hereof may be given, only by written instrument executed
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and delivered by the Company and the Investor. The failure at any time to re-
quire performance of any provision hereof shall in no way affect the full right
to require such performance at any time thereafter. The waiver by any party to
this Agreement of a breach of any provision hereof shall not be taken or held to
be a waiver of any succeeding breach of such provision of any other provision or
as a waiver of the provision itself.
SECTION 10.4 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the validity, legality and enforceability of the
remaining pro visions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the provision
held to be invalid, illegal or unenforceable.
SECTION 10.5 HEADINGS. The Index and Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
SECTION 10.6 ENTIRE AGREEMENT. This Agreement and the other
Transaction Documents and paragraph E of the Letter Agreement (the remainder of
the Letter Agreement being super ceded hereby) embody the entire agreement
between the parties relating to the subject matter hereof and any and all prior
oral or written agreements, representations or warranties, contracts,
understandings, correspondence, conversations, and memoranda, whether written or
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oral, between the Company and the Investor, or between or among any of their
agents, representatives, parents, Subsidiaries, Affiliates, predecessors in
interest or successors in interest, with respect to the subject matter hereof.
SECTION 10.7 MAXIMUM INTEREST RATE. Nothing contained in this
Agreement, the Promissory Note or any other Transaction Document shall require
the Company to pay interest at a rate exceeding the maximum rate permitted by
applicable law. If the amount of interest payable on any interest payment date,
computed pursuant to applicable law and the Transaction Documents would exceed
the maximum amount permitted by applicable law to be charged, the amount of
interest payable for its account on such interest payment date shall be
automatically reduced to such maximum permissible amount. If the amount of
interest payable for the account of the Investor in respect of any interest
computation period is reduced pursuant to the preceding sentence of this
Section and the amount of interest pay able for its account in respect of any
subsequent interest computation period, computed pursuant to applicable law and
the Transaction Documents, would be less than the maximum amount permitted by
applicable law to be charged, then the subsequent interest computation period
shall be automatically increased to such maximum permissible amount; PROVIDED
that at no time shall the aggregate amount by which interest paid had been
increased pursuant to this sentence exceed the aggregate amount by which
interest has theretofore been reduced pursuant to the preceding sentence of this
Section.
SECTION 10.8 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both of which
together shall be deemed to be one and the same instrument.
SECTION 10.9 ASSIGNMENT. All covenants and agreements contained in
this Agreement by or on behalf of the parties hereto shall bind, and inure to
the benefit of, the respective successors and assigns of the parties hereto;
PROVIDED, HOWEVER, that, subject to Section 8.10, the rights and obligations of
either party hereto may not be assigned without the prior written consent of the
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other parties; PROVIDED, FURTHER, HOWEVER, that prior to the Closing, the
Investor may assign all of its rights and obligations hereunder to an Affiliate
of the Investor, which shall then be treated as the Investor for all purposes
under this Agreement.
SECTION 10.10 THIRD-PARTY BENEFICIARIES. Except for Article VII and
Sections 8.3, 8.4, 8.6 and 8.7, this Agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be construed to give to any Person, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
SECTION 10.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE.
SECTION 10.12 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. Each
of the Company and the Investor hereby submits to the exclusive jurisdiction of
the United States District Court for the Southern District of New York and of
any New York State Court sitting in the City of New York for purposes of all
legal proceedings which may arise hereunder or under any other Transaction
Documents. The parties irrevocably waive, to the fullest extent permitted by
law, any objection which they may have or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
The parties hereby consent to process being served in any such proceeding by the
mailing of a copy thereof by registered or certified mail, postage prepaid, to
its address specified in Section 10.1 or in any other manner permitted by law.
The Company and the Investor hereby knowingly, voluntarily, and intentionally
waive any rights they may have to a trial by jury in respect of any litigation
based hereon, or arising out of, under, or in connection with, this agreement or
any other Transaction Document, or any course of conduct, course of dealing,
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statements (whether oral or written), of the Investor or the Company. This
provision is a material inducement for the Investor's entering into this
Agreement. The Company hereby irrevocably designates Arent Fox Kintner Plotkin &
Kahn, 1675 Broadway, New York, NY 10019, as the designee, appointee and agent of
the Company to receive, for and on behalf of the Company, service of process in
such jurisdiction in any legal action or proceeding with respect to this
Agreement or any other Transaction Document. It is expected that a copy of such
process served on such agent will be promptly forwarded by mail to the Company
at its address set forth in Section 10.1, but the failure of the Company to
receive such copy shall not affect in any way the service of such process. The
Company further irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered by certified mail, postage prepaid, to the Company at such
addresses. Nothing herein shall affect the right of the Investor to serve
process in any other manner permitted by law or to commence legal proceedings
or otherwise proceed against the Company in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
ATLANTIC GULF
COMMUNITIES CORPORATION
By: /s/ THOMAS W. JEFFREY
----------------------------------
Name: Thomas W. Jeffrey
Title: Executive Vice President
and Chief Financial
Officer
AP-AGC, LLC
By: KRONUS PROPERTY, INC.
Manager
By: /s/ RICARDO KOENIGSBERGER
----------------------------------
Name: Ricardo Koenigsberger
Title: Vice President
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EXHIBIT 2
EXHIBIT A TO INVESTMENT AGREEMENT
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ATLANTIC GULF COMMUNITIES CORPORATION
Atlantic Gulf Communities Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
1. The name of the corporation is Atlantic Gulf Communities
Corporation. Atlantic Gulf Communities Corporation was originally incorporated
under the name "Chemical Research Corporation". The original Certificate of
Incorporation of Chemical Research Corporation was filed with the Secretary of
State of the State of Delaware on January 13, 1928. Atlantic Gulf Communities
Corporation was subsequently named General Development Corporation. General
Development Corporation filed a voluntary petition for relief from creditors
under Chapter 11 of the Bankruptcy Code on April 6, 1990, in the United States
Bankruptcy Court for the Southern District of Florida (the "Bankruptcy Court").
On [AGCC TO PROVIDE], 1991, the Certificate of Incorporation of the corporation
was amended pursuant to Section 7.2(b) of the Second Amended Joint Plan of
Reorganization of General Development Corporation dated October 9, 1991, and
confirmed by Order of the Bankruptcy Court on [Confirmation Date] [AGCC TO
PROVIDE] (the "Reorganization Plan").
2. This Amended and Restated Certificate of Incorporation was adopted
by the stockholders of the corporation on [June 12], 1997 and restates and
further amends the provisions of the Certificate of Incorporation of this
corporation as heretofore amended or supplemented.
<PAGE>
3. The text of the Certificate of Incorporation as heretofore amended
or supplemented is hereby restated and further amended to read in its entirety
as follows:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is ATLANTIC GULF COMMUNITIES CORPORATION.
SECOND: The registered office of the Corporation is to be located at
1209 Orange Street, in the City of Wilmington, in the County of New Castle, in
the State of Delaware. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: (a) The total number of shares of stock that the Corporation
shall have authority to issue is seventy-four million and five hundred thousand
(74,500,000), of which seventy million (70,000,000) shall be common stock of one
class, par value of ten cents ($0.10) per share ("Common Stock"), amounting in
the aggregate to par value seven million dollars ($7,000,000), and four million
and five hundred thousand (4,500,000) shall be preferred stock, par value $.01
per share ("Preferred Stock"), amounting in the aggregate to par value of
forty-five thousand dollars ($45,000).
(b) Shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of the Corporation is hereby authorized to
fix the voting rights, if any, designations, powers, preferences and the
relative, participation, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, of any unissued series of
Preferred Stock; and to fix the number of shares constituting such series, and
to increase or decrease the number of shares of any such series (but not below
the number of shares thereof then outstanding). Except as otherwise provided by
law, the voting rights of the Corporation's capital stock shall be as set forth
in this Amended and Restated Certificate of Incorporation or in the resolution
or resolutions adopted by the Board of Directors designating the rights, powers
and preferences of any series of Preferred Stock. Each share of Common Stock
shall have one vote, and the Common Stock shall vote together as a single class.
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(c) The Board of Directors of the Corporation is authorized to effect
the elimination of shares of its Common Stock purchased or otherwise reacquired
by the Corporation from the authorized capital stock of the number of shares of
the Corporation in the manner provided for in the General Corporation Law of the
State of Delaware.
(d) No holder of Common Stock shall have any preemptive right to
subscribe to stock, obligations, warrants, rights to subscribe to stock or other
securities of the Corporation of any class, whether now or hereafter authorized.
(e) The powers, preferences and rights of the 20% Cumulative Redeemable
Convertible Preferred Stock, Series A of the Corporation shall be set forth in
Annex A to this Amended and Restated Certificate of Incorporation (which is
incorporated herein as though set forth in full in this place).
(f) The powers, preferences and rights of 20% Cumulative Redeemable
Convertible Preferred Stock, Series B of the Corporation shall be set forth in
Annex B to this Amended and Restated Certificate of Incorporation (which is
incorporated herein as though set forth in full in this place).
FIFTH: The Corporation shall be managed by the Board of Directors,
which shall exercise all powers conferred under the laws of the State of
Delaware. The number of directors shall be determined as provided in the By-laws
of the Corporation. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is authorized to later amend or repeal the
By-laws of the Corporation.
SIXTH: No action shall be taken by the stockholders of the Corporation
except at an annual meeting or at a special meeting of stockholders of the
Corporation; PROVIDED, HOWEVER, that at any time after the first meeting of the
stockholders held in accordance with the By-laws of the Corporation, any action
required or permitted to be taken at any annual or special meeting of the
stockholders may be taken without a meeting, without prior notice and without a
vote, if consents in writing, setting forth the action so taken, are signed by
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the holders of shares of capital stock having not less than the minimum number
of votes that would be necessary to authorize or take the action at a meeting at
which the holders of all shares entitled to be voted thereon were present and
voted; prompt notice of the taking of action without a meeting by less than
unanimous consent shall be given to the stockholders who have not consented in
writing.
SEVENTH: At any time after the first annual meeting of stockholders
held in accordance with the By-laws of the Corporation, the holders of 35
percent of the issued and outstanding shares of capital stock may request that a
special meeting be called in accordance with the procedures set forth in the
By-laws.
EIGHTH: No director may be removed from office except for cause and
only by the affirmative vote of the holders of a majority of the outstanding
stock entitled to vote.
NINTH: The Corporation may indemnify its directors, officers, employees
and agents to the fullest extent permitted by the General Corporation Law of
Delaware, as the same exists or may hereafter be amended.
TENTH: The provisions set forth in this Article Tenth and in Articles
Fifth, Sixth, Eighth, Ninth, Eleventh, and Twelfth of this Amended and Restated
Certificate of Incorporation may not be amended, altered, repealed or rescinded
in any respect, and no other provision or provisions may be adopted which
impair(s) in any respect the operation or effect of any such provision, except
by the affirmative vote of the holders of not less than three-fifths of the
outstanding stock.
ELEVENTH: The Board of Directors shall have the power to adopt, amend,
alter, or repeal the By-Laws of the Corporation as provided in such By-Laws. The
stockholders shall also have the power to adopt, amend, alter or repeal the
By-Laws of the Corporation; PROVIDED, HOWEVER, that, notwithstanding the
foregoing and anything contained in this Amended and Restated Certificate of
Incorporation to the contrary, unless amended, altered or repealed by the Board
of Directors as provided in the By-Laws, Sections 2.1, 2.2(a) and 2.2(c) of
Article II, Sections 3.1, 3.2, 3.3, 3.4, 3.8 and 3.9 of Article III, Section 4.1
of Article IV, Article VII, Article VIII, and Section 10.1 of Article X of the
By-Laws may not be amended, altered, repealed or rescinded in any respect, and
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<PAGE>
no other provision or provisions may be adopted which impair(s) in any respect
the operation or effect of such provision, except by the same vote that would be
required to amend pursuant to Article Tenth of this Amended and Restated
Certificate of Incorporation.
TWELFTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the General Corporation Law
of Delaware, as the same exists or may hereafter be amended. No amendment to or
repeal of this Article shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
4. This Amended and Restated Certificate of Incorporation was approved
by the shareholders of the Corporation at a meeting held on [June 12], 1997 and
was duly adopted in accordance with the provisions of Sections 103 and 303 of
Title 8 of the General Corporation Law of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed and attested by the undersigned, thereunto duly
authorized, this __ day of June, 1997.
Atlantic Gulf Communities Corporation
By: --------------------------------
Its: --------------------------------
Attest:
- ------------------------
Name
Title
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EXHIBIT 3
ANNEX A TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ATLANTIC GULF COMMUNITIES CORPORATION
STATEMENT OF
PREFERENCES AND RIGHTS OF
20% CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, SERIES A
-----------------------
The 20% Cumulative Redeemable Convertible Preferred Stock, Series A, of Atlantic
Gulf Communities Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") shall have
the following powers, preferences, and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, in addition to those set forth in the attached Amended and Restated
Certificate of Incorporation of the Corporation (all capitalized terms used
without definition are defined in Section 15 of this Statement of Preferences
and Rights (this "Certificate of Designation")):
1. DESIGNATION. The series of preferred stock established hereby shall
be designated the "20% Cumulative Redeemable Convertible Preferred Stock, Series
A" (and shall be referred to herein as the "Series A Preferred Stock") and the
authorized number of shares of Series A Preferred Stock shall be 2,500,000.
2. RANK. The Series A Preferred Stock shall, with respect to dividend
distributions and distributions upon the voluntary or involuntary liquidation,
winding up and dissolution of the Corporation, rank (i) senior to all classes of
Common Stock and each other class of Capital Stock of the Corporation or series
of preferred stock of the Corporation hereafter created which is not Senior
Stock or Parity Stock ("Junior Stock"), (ii) PARI PASSU with any Parity Stock
(subject to any differing security interests between different classes of Parity
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Stock) and (iii) junior to any Senior Stock. There is no Senior Stock or Parity
Stock [(other than ______ shares of Series B Preferred Stock issued on the date
hereof in accordance with the Investment Agreement)1] outstanding on the date
hereof. Senior Stock or Parity Stock may be authorized or issued only in
accordance with the provisions of Section 7(b).
3. DIVIDENDS. (a) Subject to the provisions of Section 3(c), beginning
on the Original Issue Date, the Holders shall be entitled to receive, when, as
and if declared by the Board of Directors, but only out of funds legally
available therefor, distributions in the form of cash dividends on each share of
Series A Preferred Stock at an annual rate equal to 20% of the Liquidation
Preference in effect from time to time and no more. All Dividends shall be
cumulative, whether or not declared, on a daily basis from the date of original
issuance and shall be payable quarterly in arrears on each Dividend Payment
Date commencing on September 30, 1997. Each dividend shall be payable with
respect to Series A Preferred Stock held by Holders as they appear on the stock
books of the Corporation on each Dividend Record Date. Dividends shall cease to
accumulate in respect of Series A Preferred Stock on the Redemption Date, the
Conversion Date or the Repurchase Date for such shares, as the case may be,
unless, in the case of a Redemption Date or Repurchase Date, the Corporation
defaults in the payment of the amounts necessary for such redemption or in its
obligation to deliver certificates representing Common Stock issuable upon such
conversion, as the case may be, in which case, dividends shall continue to
accumulate at an annual rate of 23% of the Liquidation Preference in effect from
time to time (the "Default Dividend Rate") until such payment or delivery is
made. If the Corporation defaults in the payment of amounts due upon a
Repurchase Date, interest shall accrue on the amount of such obligation at the
Default Dividend Rate until such payment is made (with all interest due).
(b) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption pursuant to Section 5(a)
may be declared and paid at any time, without reference to any regular Dividend
Payment Date, to Holders on such date, not more than forty-five (45) days prior
to the payment thereof, as may be fixed by the Board of Directors.
- ----------
1 To be included if the private placement is closing concurrently with the
Closing.
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(c) Notwithstanding anything to the contrary in the preceding
provisions of this Section 3, following an Event of Default, the Holders shall
be entitled to receive dividends on each share of Series A Preferred Stock at an
annual rate equal to the Default Dividend Rate, payable in cash.
(d) So long as any Series A Preferred Stock is outstanding, the
Corporation shall not declare, pay or set apart for payment any dividend on any
Junior Stock or make any payment on account of, or set apart for payment money
for a sinking or other similar fund for, the purchase, redemption or other
retirement of, any Junior Stock, or any warrants, rights, calls or options
exercisable for any Junior Stock (except such securities which are debt
securities or Senior Stock or Parity Stock) or make any distribution in respect
thereof, either directly or indirectly, and whether in cash, obligations or
shares of the Corporation or other property (other than, prior to the occurrence
of an Event of Default, dividends, payments, purchases, acquisitions,
redemptions, retirements or distributions in Junior Stock) and shall not permit
any Subsidiary of the Corporation directly or indirectly to do any of the same
in respect of such Junior Stock (other than, prior to the occurrence of an Event
of Default, dividends, payments, purchases, acquisitions, redemptions,
retirements or distributions in Junior Stock) unless and until all dividend
arrearages on the Series A Preferred Stock have been paid in full in cash, and
the Corporation is not in default of any of its obligations under Section 5 or
Section 8.
(e) Unless and until all dividend arrearages on the Series A Preferred
Stock have been paid in full, all dividends declared by the Corporation upon
Series A Preferred Stock or Parity Stock shall be declared PRO RATA with respect
to all Series A Preferred Stock and Parity Stock then outstanding so that the
amounts of any dividends declared per share on the Series A Preferred Stock and
such Parity Stock bear the same ratio to each other at the time of declaration
as all accrued and unpaid dividends on the Series A Preferred Stock and the
Parity Stock bear to each other.
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(f) Dividends payable on the Series A Preferred Stock shall be computed
on the basis of a 360-day year of twelve 30-day months and the actual number of
days elapsed in the period for which payable.
4. LIQUIDATION PREFERENCE. (a) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the Holders shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders an amount in cash
equal to the then Liquidation Preference for each share outstanding, before any
payment shall be made or any assets distributed to the holders of any Junior
Stock. If the assets of the Corporation are not sufficient to pay in full the
liquidation payments payable to the Holders and the holders of any outstanding
Parity Stock, then, subject to the rights of the Holders pursuant to Section 8
and subject to any differing security interests between different classes of
Parity Stock, the holders of all such shares shall share ratably in such
distribution of assets in accordance with the amounts which would be payable on
such distribution if the amount to which the Holders and the holders of any
outstanding Parity Stock are entitled were paid in full. By acceptance hereof
each Holder agrees that it shall respect the security rights and priorities of
any holder of shares of Parity Stock or Senior Stock and shall not challenge the
right of any holder of Parity Stock or Senior Stock to be paid in respect of any
obligations of the Company under any Instruments between such holder and the
Company or any of its Subsidiaries, including the right to be paid by any
Subsidiary of the Company under any guarantee by such Subsidiary of the
obligations of the Company.
(b) For the purposes of this Section 4, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into one
or more corporations shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation.
5. REDEMPTION. (a) OPTIONAL REDEMPTION. The Corporation may, at the
option of the Board of Directors, redeem at any time on or after the third
anniversary of the Original Issue Date, from any source of funds legally
available therefor, in whole or in part, in the manner provided in Section 5(c),
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any or all of the Series A Preferred Stock, at a redemption price in cash equal
to the then Liquidation Preference (the "Optional Redemption Price"); PROVIDED
that no optional redemption shall be made unless full dividends have been or
contemporaneously are declared and paid or declared and a sum set apart
sufficient for such payment, on the Series A Preferred Stock for all Dividend
Periods terminating on or prior to the Redemption Date; and PROVIDED, FURTHER,
that no partial redemption shall be made (i) for an amount of shares of Series A
Preferred Stock less than such number as have an aggregate Liquidation
Preference equal to the lesser of $1,000,000 or the aggregate Liquidation
Preference of all outstanding Series A Preferred Stock, or (ii) if after
consummation of any such partial redemption there would remain outstanding less
than the Specified Investor Amount of shares of Series A Preferred Stock.
(b) PRORATION. In the event of a redemption pursuant to Section 5(a) of
only a portion of the then outstanding Series A Preferred Stock, unless a
majority of the outstanding shares of Series A Preferred Stock shall agree in
writing to waive the requirement of proration, the Corporation shall effect such
redemption PRO RATA according to the number of shares held by each Holder,
except that the Corporation may redeem such shares held by Holders of 100 or
fewer shares (or shares held by Holders who would hold 100 or fewer shares as a
result of such redemption), as may be determined by the Corporation.
(c) PROCEDURE FOR REDEMPTION. (i) At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for any redemption of the
Series A Preferred Stock, written notice (the "Redemption Notice") shall be
given by first class mail, postage prepaid, to each Holder on the record date
fixed for such redemption of the Series A Preferred Stock at such Holder's
address as the same appears on the stock books of the Corporation. The
Redemption Notice shall state:
(1) that such notice constitutes a Redemption Notice pursuant
to Section 5(a);
(2) the Optional Redemption Price;
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(3) whether all or less than all the outstanding Series A
Preferred Stock redeemable thereunder is to be redeemed and the total
number of shares of such Series A Preferred Stock being redeemed;
(4) the number of shares of Series A Preferred Stock held, as
of the appropriate record date, by the specific Holder that the
Corporation intends to redeem;
(5) the Redemption Date;
(6) that the Holder is to surrender to the Corporation his
certificate or certificates representing the Series A Preferred Stock
to be redeemed, specifying the place or places where, and the manner in
which, certificates for Series A Preferred Stock are to be surrendered
for redemption;
(7) the date on which the Series A Preferred Stock called for
redemption shall cease to be convertible; and
(8) that dividends on the Series A Preferred Stock to be
redeemed shall cease to accumulate on the Redemption Date, unless the
Corporation defaults in the payment of the amounts necessary for such
redemption, in which case, dividends shall continue to accumulate until
such payment is made.
(ii) Each Holder shall surrender the certificate or certificates
representing such Series A Preferred Stock to the Corporation, duly endorsed, in
the manner and at the place designated in the Redemption Notice, and on the
Redemption Date the full Optional Redemption Price for such shares so
surrendered shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be cancelled and retired. If less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(iii) If on or before the Redemption Date all funds necessary for such
redemption shall have been set aside by the Corporation, separate and apart from
its other funds, in trust for the PRO RATA benefit of the Holders of the shares
so called for redemption, so as to be and continue to be available therefor and
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not subject to claims of creditors of the Corporation, then, notwithstanding
that any certificate for shares so called for redemption shall not have been
surrendered for cancellation, all shares so called for redemption shall no
longer be deemed outstanding on and after such Redemption Date, and all rights
with respect to such shares shall forthwith on such Redemption Date cease and
terminate, except only the right of the Holders thereof to receive the amount
payable on redemption thereof, without interest. Any interest accrued on such
funds shall be paid to the Corporation from time to time.
Any funds so set aside or deposited by the Corporation which shall not
be required for such redemption because of the exercise of any right of
conversion subsequent to the date of such deposit shall be released or repaid to
the Corporation forthwith. Any funds so set aside or deposited, as the case may
be, and unclaimed as of the first anniversary of such Redemption Date shall be
released or repaid to the Corporation, after which the Holders of the shares so
called for redemption shall look only to the Corporation for payment thereof.
6. CONVERSION. (a) CONVERSION RIGHT. The Holder of each share of Series
A Preferred Stock shall have the right at any time, or from time to time (prior
in each case to the thirtieth day following the date of the Redemption Notice if
such share shall be called for redemption pursuant to Section 5), at the option
of such Holder, to convert such share into Common Stock, on and subject to the
terms and conditions hereinafter set forth. Subject to the provisions for
adjustment hereinafter set forth, each share of Series A Preferred Stock shall
be convertible into such number (calculated as to each conversion to the nearest
1/100th of a share) of fully paid and nonassessable shares of Common Stock, as
is obtained by dividing the Liquidation Preference by the Conversion Price, in
each case as in effect at the date any Series A Preferred Stock is surrendered
for conversion.
(b) CONVERSION PROCEDURES. To exercise the conversion privilege, the
Holder of any Series A Preferred Stock to be converted in whole or in part shall
surrender the certificate representing such Series A Preferred Stock (the
"Series A Preferred Stock Certificate") at the office or agency then maintained
by the Corporation for the transfer of the Series A Preferred Stock, and shall
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<PAGE>
give written notice of conversion in the form provided on the Series A Preferred
Stock Certificate (or such other notice which is acceptable to the Corporation)
to the Corporation at such office or agency that the Holder elects to convert
such Series A Preferred Stock represented by the Series A Preferred Stock
Certificate so surrendered or the portion thereof specified in said notice into
Common Stock. Such notice shall also state the name or names (with addresses) in
which the certificate or certificates for Common Stock which shall be issuable
upon such conversion shall be issued, and shall be accompanied by transfer
taxes, if required. Each Series A Preferred Stock Certificate surrendered for
conversion shall, unless the shares issuable on conversion are to be issued in
the same name as the registration of such Series A Preferred Stock Certificate,
be duly endorsed by, or be accompanied by instruments of transfer in form
satisfactory to the Corporation duly executed by, the Holder or such Holder's
duly authorized attorney.
As promptly as practicable, but in no event later than five (5)
Business Days, after the surrender of such Series A Preferred Stock Certificate
and the receipt of such notice and funds, if any, as aforesaid, the Corporation
shall issue and shall simultaneously deliver at such office or agency to such
Holder, or on his written order, a certificate or certificates for the number of
shares of Common Stock, issuable upon the conversion of such Series A Preferred
Stock represented by the Series A Preferred Stock Certificate so surrendered or
portion thereof in accordance with the provisions of this Section 6. In case
less than all of the Series A Preferred Stock represented by a Series A
Preferred Stock Certificate surrendered for conversion is to be converted, the
Corporation shall simultaneously deliver to or upon the written order of the
Holder of such Series A Preferred Stock Certificate a new Series A Preferred
Stock Certificate representing the Series A Preferred Stock not converted. If a
Holder fails to notify the Corporation of the number of shares of Series A
Preferred Stock which such Holder wishes to convert, such Holder shall be deemed
to have elected to convert all shares represented by the certificate or
certificates surrendered for conversion.
Each conversion shall be deemed to have been effected on the date on
which such Series A Preferred Stock Certificate shall have been surrendered and
such notice shall have been received by the Corporation, as aforesaid (the
"Conversion Date"), and the Person in whose name any certificate or certificates
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for Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
PROVIDED, HOWEVER, that any such surrender on any date when the stock books of
the Corporation shall be closed shall constitute the Person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock books are open, but such conversion
shall be at the Conversion Price as in effect on the date upon which such Series
A Preferred Stock Certificate shall have been surrendered.
All Series A Preferred Stock that shall have been surrendered for
conversion as herein provided shall no longer be deemed to be outstanding and
all rights with respect to such shares, including the rights, if any, to receive
notices and to vote, shall forthwith cease, except only the right of the Holders
thereof, subject to the provisions of this Section 6, to receive Common Stock in
exchange therefor; PROVIDED, HOWEVER, that if the Corporation defaults in its
obligation to deliver certificates representing Common Stock issuable upon such
conversion, dividends shall continue to accumulate at the Default Dividend Rate
until such delivery is made.
If any Series A Preferred Stock shall be called for redemption, the
right to convert such Series A Preferred Stock shall terminate at the close of
business on the thirtieth day following the date of the Redemption Notice.
(c) The Conversion Price at which Series A Preferred Stock is
convertible into Common Stock shall be subject to adjustment from time to time
as provided in this Section 6(c) (unless otherwise indicated, all calculations
under this Section 6(c) shall be made to the nearest $0.01):
(i) In case the Corporation shall (A) declare a dividend or make a
distribution on the outstanding Common Stock in Capital Stock of the
Corporation, (B) subdivide or reclassify the outstanding Common Stock into a
greater number of shares (or into other securities or property), or (C)
combine or reclassify the outstanding Common Stock into a smaller number of
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<PAGE>
shares (or into other securities or property), the Conversion Price in
effect at the close of business on the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution, or to
be affected by such subdivision, combination or other reclassification,
shall be adjusted by multiplying such Conversion Price by a fraction, the
numerator of which shall be the total number of outstanding shares of Common
Stock immediately prior to such event, and the denominator of which shall be
the total number of outstanding shares of Common Stock immediately after
such event. An adjustment made pursuant to this subparagraph (i) shall
become effective immediately after the record date for such event, or, if
there is no record date, upon the effective date for such event. Any Common
Stock issuable in payment of a dividend shall be deemed to have been issued
immediately prior to the time of the record date for such dividend for
purposes of calculating the number of outstanding shares of Common Stock
under subparagraphs (ii) and (iii) below. Adjustments pursuant to this
subparagraph shall be made successively whenever any event specified above
shall occur.
(ii) In case the Corporation shall fix a record date for the issuance of
rights or warrants to all holders of Common Stock entitling them to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) (other than Series B Preferred Stock, Series
B Warrants or Investor Warrants) at a price per share (or having a
conversion price or exchange price per share, subject to normal antidilution
adjustments) less than the Current Market Price (as defined in subparagraph
(vii) below) of Common Stock on such record date, the Conversion Price in
effect at the close of business on such record date shall be reduced by
multiplying such Conversion Price by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the number of shares of
Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at the Current Market Price
as of such record date, and the denominator of which shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights,
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options or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase in connection with such rights, options
or warrants. Such adjustment shall be made whenever such rights, options or
warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights,
options or warrants. In case any rights or warrants referred to in this
subparagraph (ii) in respect of which an adjustment shall have been made
shall expire unexercised within forty-five (45) days after the same shall
have been distributed or issued by the Corporation, the Conversion Price
shall be readjusted at the time of such expiration to the Conversion Price
that would have been in effect if no adjustment had been made on account of
the distribution or issuance of such expired rights or warrants.
(iii) In case the Corporation shall fix a record date for the making of
a distribution to all holders of Common Stock (A) of shares of any class
other than Common Stock, (B) of evidences of indebtedness of the Corporation
or any Subsidiary, (C) of assets or other property or (D) of rights or
warrants (excluding those rights or warrants resulting in an adjustment
pursuant to subparagraph (ii) above, and the right to acquire Series B
Preferred Stock in the rights offering thereof), then in each such case the
Conversion Price shall be reduced so that such price shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction contemplated by this
subparagraph (iii) by a fraction, the numerator of which shall be the then
Current Market Price per share of Common Stock, less the then fair market
value (as determined by the Board of Directors, whose reasonable
determination shall be described in a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the
Board of Directors and to be in full force and effect on the date of such
certification (a "Board Resolution") of the portion of the securities,
evidences of indebtedness, assets, property or rights or warrants so
distributed, the case may be, which is applicable to one share of Common
Stock, and the denominator of which shall be the Current Market Price per
share of Common Stock as of the record date for such distribution. Such
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adjustment shall be made successively whenever such a record date is fixed.
(iv) In case the Corporation shall issue Common Stock for a
consideration per share less than the Current Market Price per share on the
date the Corporation fixes the offering price of such additional shares, the
Conversion Price shall be adjusted immediately thereafter so that it shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately after the issuance
of such additional shares, and the denominator shall be the total number of
shares of Common Stock outstanding immediately prior to the issuance of such
additional shares plus the number of shares of Common Stock which the
aggregate consideration received (determined as provided in subparagraph
(vi) below) for the issuance of such additional shares would purchase at the
Current Market Price per share. Such adjustment shall be made successively
whenever such an issuance is made; PROVIDED, HOWEVER, that the provisions of
this subparagraph shall not apply (A) to Common Stock issued to the
Corporation's employees or former employees or their estates under BONA FIDE
employee benefit plans adopted by the Board of Directors and approved by
the holders of Common Stock if required by law, if such Common Stock would
otherwise be covered by this subparagraph, but only to the extent that the
aggregate number of shares excluded hereby shall not exceed, on a cumulative
basis since the date hereof, [NUMBER TO BE AGREED BEFORE CLOSING] (including
842,000 shares as of the date hereof to be issued pursuant to employee
stock options outstanding as of the date hereof to purchase Common Stock),
(B) to the Common Stock to be issued pursuant to the Bank Warrants, (y) to
the Common Stock to be issued pursuant to the Investor Warrants or the
Series B Warrants and (C) to Common Stock to be issued upon conversion of
the Series A Preferred Stock or the Series B Preferred Stock, adjusted as
appropriate in each case, in connection with any stock split, merger,
recapitalization or similar transaction.
(v) In case the Corporation shall issue any securities convertible into
or exchangeable for Common Stock (excluding (A) securities issued in
transactions resulting in adjustment pursuant to subparagraphs (ii) and
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(iii) above, (B) Series A Preferred Stock, (C) Series B Preferred Stock, (D)
Investor Warrants or Series B Warrants, and (E) upon conversion of any of
such securities) for a consideration per share of Common Stock deliverable
upon conversion or exchange of such securities (determined as provided in
subparagraph (vi) below and subject to normal antidilution adjustments) less
than the Current Market Price per share in effect immediately prior to the
issuance of such securities, the Conversion Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying the Conversion Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of Common
Stock outstanding immediately prior to such issuance plus the maximum
number of shares of Common Stock deliverable upon conversion of or in
exchange for such securities at the initial conversion or exchange price or
rate, and the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities plus the
number of shares of Common Stock which the aggregate consideration received
(determined as provided in subparagraph (vi) below) for such securities
would purchase at the Current Market Price per share. Such adjustment shall
be made successively whenever such an issuance is made.
Upon the termination of the right to convert or exchange such
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustments made upon
the issuance of such convertible or exchangeable securities been made upon
the basis of the delivery of only the number of shares of Common Stock
actually delivered upon conversion or exchange of such securities and upon
the basis of the consideration actually received by the Corporation
(determined as provided in subparagraph (vi) below) for such securities.
(vi) For purposes of any computation respecting consideration received
pursuant to subparagraphs (iv) and (v) above, the following shall apply:
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(A) in the case of the issuance of Common Stock for cash, the
consideration shall be the amount of such cash, PROVIDED that in no case
shall any deductions be made for any commissions, discounts, placement
fees or other expenses incurred by the Corporation for any underwriting
or placement of the issue or otherwise in connection therewith;
(B) in the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined by the Board of Directors, whose reasonable determination
shall be described in a Board Resolution; and
(C) in the case of the issuance of securities convertible into
or exchangeable for Common Stock, the aggregate consideration received
therefor shall be deemed to be the consideration received by the
Corporation for the issuance of such securities plus the additional
minimum consideration, if any, to be received by the Corporation upon
the conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (A) and (B) of this
subparagraph (vi)).
(vii) For the purpose of any computation under this Certificate of
Designation, (A) the "Current Market Price" per share at any date shall be
deemed to be the average of the daily Closing Price for the Common Stock for
the ten (10) consecutive Trading Days commencing fourteen (14) Trading Days
before such date, and (B) the "Closing Price" of the Common Stock means the
last reported sale price regular way reported on the NASDAQ Stock Market or
its successor, or, if not listed or admitted to trading on the NASDAQ Stock
Market or its successor, the last reported sale price regular way reported on
any other stock exchange or market on which the Common Stock is then listed
or eligible to be quoted for trading, or as reported by the National
Quotation Bureau Incorporated.
(viii) In any case in which this Section shall require that an
adjustment shall become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of such event (A)
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issuing to the Holder of any Series A Preferred Stock converted after such
record date and before the occurrence of such event the Common Stock issuable
upon such conversion by reason of the adjustment required by such event over
and above the Common Stock issuable upon such conversion before giving effect
to such adjustment and (B) paying to such Holder an amount in cash in lieu of
a fractional share of Common Stock pursuant to Section 6(h); PROVIDED,
HOWEVER, that the Corporation shall deliver to such Holder a due bill or
other appropriate instrument evidencing such Holder's rights to receive such
additional Common Stock, and such cash, upon the occurrence of the event
requiring such adjustment.
(ix) The Corporation may make such reductions in the Conversion Price,
in addition to those required pursuant to other subparagraphs of this
Section, as it considers to be advisable so that any event treated for
federal income tax purposes as a dividend of stock or stock rights shall not
be taxable to the recipients.
(x) In case of any consolidation with or merger of the Corporation into
another corporation, or in case of any sale, lease or conveyance of assets to
another corporation of the property of the Corporation as an entirety or
substantially as an entirety, lawful and adequate provisions shall be made
whereby each Holder of Series A Preferred Stock shall have the right to
receive, from such successor, leasing or purchasing corporation, as the case
may be, upon the basis and upon the terms and conditions specified herein, in
lieu of the Common Stock immediately theretofore receivable upon the
conversion of such Series A Preferred Stock, the kind and amount of shares of
stock, other securities, property or cash or any combination thereof
receivable upon such consolidation, merger, sale, lease or conveyance by a
holder of the number of shares of Common Stock into which such Series A
Preferred Stock might have been converted immediately prior to such con-
solidation, merger, sale, lease or conveyance. In the case of any such
consolidation, merger or sale of substantially all the as sets, appropriate
provision shall be made with respect to the rights and interests of the
Holders to the end that the provisions hereof (including provisions for
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adjustment of the Conversion Price) shall thereafter be applicable, as nearly
as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of any conversion rights hereunder.
(xi) In case of any reclassification or change of the Common Stock
issuable upon conversion of Series A Preferred Stock (other than a change in
par value, or from par value to no par value, or as a result of a subdivision
or combination, but including any change in the Common Stock into two or more
classes or series of shares), or in case of any consolidation or merger of
another corporation into the Corporation in which the Corporation is the
continuing corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of the
Common Stock (other than a change in par value, or from par value to no par
value, or as a result of a subdivision or combination, but including any
change in the Common Stock into two or more classes or series of shares),
lawful and adequate provisions shall be made whereby each Holder of Series A
Preferred Stock shall have the right to receive, upon the basis and upon the
terms and conditions specified herein, in lieu of the Common Stock im-
mediately theretofore receivable upon the conversion of such Series A
Preferred Stock, the kind and amount of shares of stock, other securities,
property or cash or any combination thereof receivable upon such
reclassification, change, consolidation or merger, by a holder of the number
of shares of Common Stock into which such Series A Preferred Stock might have
been converted immediately prior to such reclassification, change,
consolidation or merger.
(xii) The foregoing subparagraphs (x) and (xi), however, shall not in
any way affect the rights a Holder may otherwise have, pursuant to this
Section, to receive securities, evidences of indebtedness, assets, property
rights or warrants upon conversion of any Series A Preferred Stock.
(xiii) If the Corporation repurchases (by way of tender offer, exchange
offer or otherwise) any Common Stock for a per share consideration which
exceeds the Current Market Price of a share of Common Stock on the date
immediately prior to such repurchase, the Conversion Price shall be reduced
so that such price shall equal the price determined by multiplying the
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Conversion Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this subparagraph (xiii) by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such acquisition multiplied by the
Current Market Price per share of the Common Stock on the immediately
preceding Trading Day, and the denominator shall be the sum of (A) the fair
market value (as determined in good faith by the Board of Directors) of the
aggregate consideration payable to stockholders as a result of such
acquisition, and (B) the product of the number of shares of Common Stock
outstanding immediately following such acquisition and the Current Market
Price per share of the Common Stock on such immediately preceding Trading
Day, such reduction to become effective immediately prior to the opening of
business on the day following such acquisition.
(xiv) If any event occurs as to which the foregoing provisions of this
Section 6(c) are not strictly applicable or, if strictly applicable, would
not, in the good faith judgment of the Board of Directors, fairly protect the
conversion rights of the Series A Preferred Stock in accordance with the
essential intent and principles of such provisions, then the Board of
Directors shall make such adjustments in the application of such provisions,
in accordance with such essential intent and principles, as shall be
reasonably necessary, in the good faith opinion of the Board of Directors, to
protect such conversion rights as aforesaid, but in no event shall any such
adjustment have the effect of increasing the Conversion Price, or otherwise
adversely affect the Holders.
(xv) For purposes of Section 6(c), Common Stock owned or held at any
relevant time by, or for the account of, the Corporation in its treasury or
otherwise, shall not be deemed to be outstanding for purposes of the
calculation and adjustments described therein. Shares held in the Disputed
Claims Reserve, Division Class 14 Utility Fund Trust Agreement dated April 6,
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1993 and the Improvements Fund Trust Agreement dated April 6, 1993 shall not
be deemed to be held by, or for the account of, the Corporation.
(d) CONVERSION PRICE ADJUSTMENT DEFERRED. Notwithstanding the
foregoing provisions of this Section 6, (i) no adjustment in the number
of shares of Common Stock into which any Series A Preferred Stock is
convertible shall be required unless such adjustment would require an
increase or decrease in such number of shares of at least 1% and (ii) no
adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease in the Conversion Price
of at least $.01 per share; PROVIDED, HOWEVER, that any adjustments
which by reason of this paragraph (d) are not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 6 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be.
(e) ADJUSTMENT REPORT. Whenever any adjustment is required in
the shares into which any Series A Preferred Stock is convertible, the
Corporation shall forthwith (i) file with each office or agency then
maintained by the Corporation for the transfer of the Series A Preferred
Stock a statement describing in reasonable detail the adjustment and the
method of calculation used and (ii) cause a notice of such adjustment,
setting forth the adjusted Conversion Price and the calculation thereof
to be mailed to the Holders at their respective addresses as shown on
the stock books of the Corporation. The certificate of any independent
firm of public accountants of recognized standing selected by the Board
of Directors certifying to the Board of Directors the correctness of
any computation under this Section 6 shall be evidence of the
correctness of such computation.
(f) NOTICE OF CERTAIN EVENTS. In the event that:
(i) the Corporation shall take action to make any distribution to the
holders of its Common Stock;
(ii) the Corporation shall take action to offer for subscription PRO
RATA to the holders of its Common Stock any securities of any kind;
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(iii) the Corporation shall take action to accomplish any capital
reorganization, or reclassification of the Capital Stock of the Corporation,
or a consolidation or merger to which the Corporation is a party and for
which approval of any stockholders of the Corporation is required, or the
sale or transfer of all or substantially all of the assets of the
Corporation; or
(iv) the Corporation shall take action looking to a voluntary or
involuntary dissolution, liquidation or winding-up of the Corporation;
then the Corporation shall (A) in case of any such distribution or subscription
rights, at least twenty (20) days prior to the date or expected date on which
the stock books of the Corporation shall close or a record shall be taken for
the determination of Holders entitled to such distribution or subscription
rights, and (B) in the case of any such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up,
at least twenty (20) days prior to the date or expected date when the same shall
take place, cause written notice thereof to be mailed to each Holder at his
address as shown on the stock books of the Corporation. Such notice in
accordance with the foregoing clause (A) shall also specify, in the case of any
such distribution or subscription rights, the date or expected date on which the
holders of Common Stock shall be entitled thereto, and such notice in accordance
with the foregoing clause (B) shall also specify the date or expected date on
which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up, as the case may be.
(g) COMMON STOCK. For the purposes of this Section 6, the term "Common
Stock" shall mean (i) the Common Stock or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value or from no par value to par value, or
from par value to no par value. If at any time as a result of an adjustment made
pursuant to the provisions of Section 6(c), the Holder of any Series A Preferred
Stock thereafter surrendered for conversion shall become entitled to receive any
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the Corporation such other shares so receivable upon conversion of any Series A
Preferred Stock shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in Section 6(c), and the other provisions of this
Section 6 with respect to the Common Stock shall apply on like terms to any such
other shares.
(h) FRACTIONAL SHARES. The Corporation shall not be required to issue
fractional shares of Common Stock upon the conversion of any Series A Preferred
Stock. If more than one share of Series A Preferred Stock shall be surrendered
for conversion at one time by the same Holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares so surrendered. If any fractional interest in a
share of Common Stock would be deliverable upon the conversion of any Series A
Preferred Stock, the Corporation may pay, in lieu thereof, in cash the Closing
Price thereof as of the Business Day immediately preceding the date of such
conversion.
(i) RESERVATION OF SHARES. The Corporation shall at all times reserve
and keep available, free from preemptive rights, out of its authorized but
unissued stock, for the purpose of effecting the conversion or redemption of the
Series A Preferred Stock, such number of its duly authorized shares of Common
Stock (or treasury shares as provided below) as shall from time to time be
sufficient for the conversion of all outstanding Series A Preferred Stock into
Common Stock at any time. The Corporation shall, from time to time and in
accordance with the General Corporation Law of the State of Delaware, cause the
authorized number of shares of Common Stock to be increased if the aggregate of
the number of authorized shares of Common Stock remaining unissued and the
issued shares of such Common Stock reserved for issuance in any other connection
shall not be sufficient for the conversion of all outstanding Series A Preferred
Stock into Common Stock at any time.
7. VOTING RIGHTS. The Series A Preferred Stock shall have the following
voting rights:
(a) The Holders of Series A Preferred Stock voting together as a single
class shall be entitled to elect three directors to the Board of Directors (who
shall serve for terms of one year) and shall otherwise not vote on any matters
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submitted to the holders of the Common Stock for a vote, except as may be
required by law; PROVIDED, HOWEVER, that if the Investor does not hold at least
the Specified Investor Amount of Series A Preferred Stock, the number of
directors that the Holders of the Series A Preferred Stock shall be entitled to
elect shall be equal to three multiplied by a fraction, the numerator of which
is the number of shares of Series A Preferred Stock outstanding and the
denominator of which is 2,500,000, rounded up to the nearest whole director.
(b) So long as any Series A Preferred Stock is outstanding, without the
affirmative vote or consent of Holders of at least a majority of the outstanding
Series A Preferred Stock, voting or consenting, as the case may be, as one
class, given in person or by proxy, either in writing or by resolution adopted
at an annual or special meeting, the Corporation shall not (i) issue, or
reclassify any authorized stock of the Corporation into, or issue any obligation
or security convertible into or evidencing a right to purchase, any Senior Stock
or Parity Stock or any preferred stock having voting rights senior or equal to
those of the Series A Preferred Stock (other than Series B Preferred Stock),
(ii) reclassify the Series A Preferred Stock, or (iii) amend its Certificate of
Incorporation or this Certificate of Designation or the Certificate of
Designation for the Series B Preferred Stock so as to affect adversely the
specified rights, preferences, privileges or voting rights of Holders or to
increase or decrease the authorized number of shares of Series A Preferred Stock
or Series B Preferred Stock.
(c) In any case in which the Holders shall be entitled to vote as a
separate class pursuant to this Section 7 or pursuant to Delaware law, each
Holder shall be entitled to one vote for each share of Series A Preferred Stock
then held.
8. REPURCHASE OBLIGATION. (a) Subject to the provisions of Section
8(b), the Series A Preferred Stock shall not be redeemable at the option of the
Holder thereof prior to the fourth anniversary of the Original Issue Date.
Beginning on the fourth anniversary of the Original Issue Date, each Holder
shall have the right, at such Holder's option, exercisable by notice (a
"Repurchase Notice"), to require the Corporation to purchase Series A Preferred
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Stock then held by such Holder, at a repurchase price in cash equal to the
Liquidation Preference in effect at such time (the "Repurchase Price");
PROVIDED, HOWEVER, that the number of shares required to be repurchased from any
Holder by the Corporation pursuant to this Section 8(a) ("Put Shares") prior to
the fifth anniversary of the Original Issue Date shall not exceed one-third of
the total number of shares of Series A Preferred Stock issued by the
Corporation, and, prior to the sixth anniversary of the Original Issue Date, the
number of Put Shares shall not exceed two-thirds of the total number of shares
of Series A Preferred Stock issued by the Corporation.
(b) Notwithstanding the provisions of Section 8(a), if an Event of
Default shall occur at any time or from time to time on or after the Original
Issue Date, each Holder shall have the right, at such Holder's option
exercisable by Repurchase Notice at any time within sixty (60) days after the
happening of each such Event of Default or, if later, receipt of notice from the
Corporation of such Event of Default, to re quire the Corporation to purchase
all or any part of the Series A Preferred Stock then held by such Holder as such
Holder may elect, at the Repurchase Price.
(c) The Corporation shall, within thirty (30) days of the occurrence
of an Event of Default, give written notice thereof by telecopy, if possible,
and by first class mail, postage prepaid, to each Holder, addressed to such
Holder at his last address and telecopy number as shown upon the stock books of
the Corporation. Each such notice shall specify the Event of Default which has
occurred and the date of such occurrence, the place or places of payment, the
then effective Conversion Price pursuant to Section 6, the then effective
Repurchase Price and the date the right of such Holder to require such
repurchase shall terminate. In addition, the Corporation shall, immediately upon
becoming aware of any facts or events that could reasonably be expected to
result in the occurrence of an Event of Default, give a written notice thereof
by telecopy, if possible, and by first class mail, postage prepaid, to the
Holders, addressed to such Holders at their last addresses as shown upon the
stock books of the Corporation.
(d) The date fixed for each such repurchase (the "Repurchase Date")
shall be the 30th day following the date of the Repurchase Notice relating
thereto. The place of payment shall be at an office or agency in the City of New
York, New York fixed therefor by the Corporation or, if not fixed, at the
principal executive office of the Corporation.
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On or before the Repurchase Date, each Holder who elects to have Series
A Preferred Stock held by it purchased shall surrender the certificate
representing such shares to the Corporation at the place designated in such
notice together with an election to have such purchase made and shall thereupon
be entitled to receive payment therefor provided in this Section 8. If less than
all the shares represented by any such surrendered certificate are repurchased,
a new certificate shall be issued representing the unpurchased shares. Payment
of the Repurchase Price for the Put Shares shall be made on the later of the
Repurchase Date or the fifth Business Day after the surrender of such
certificate. Dividends with respect to the Series A Preferred Stock so
purchased shall cease to accrue after the Repurchase Date, such shares shall no
longer be deemed outstanding and the Holders thereof shall cease to be
stockholders of the Corporation and all rights whatsoever with respect to the
shares so purchased shall terminate; PROVIDED, HOWEVER, that if the Corporation
defaults in its obligation to pay the Repurchase Price for such Put Shares,
interest shall accrue on the amount of such obligation at the Default Dividend
Rate until such payment is made (with all interest due).
(e) Notwithstanding any other provision hereof, if any of the following
events shall occur and be continuing: (i) the Company or any of its Significant
Subsidiaries shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
assets, or the Company or any of its Significant Subsidiaries shall make a
general assignment for the benefit of its creditors; (ii) there shall be
commenced against the Company or any of its Significant Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
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results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days; (iii) there shall be commenced against the Company or any of its
Significant Subsidiaries any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; (iv) the Company or
any of its Significant Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clauses (i), (ii), or (iii) above; (v) the Company or any of its
Significant Subsidiaries shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; (vi) the
Company or any of its Significant Subsidiaries shall cause to be reinstated the
Reorganization Proceedings (as defined in the Note Agreement (as defined in the
Investment Agreement)); or (vii) the Confirmation Order (as defined in the Note
Agreement) shall be reversed, withdrawn, modified (in any manner adverse to
Company or any of its Significant Subsidiaries), or any rehearing shall be
ordered with respect thereto by the Bankruptcy Court or by any court having
jurisdiction over the Company; then, and in any such event, all Series A
Preferred Stock held by such Holder shall be Put Shares and the aggregate
Repurchase Price in respect of each such share shall immediately and
automatically become due and payable in full without any requirement or
pre-condition of delivery of a Repurchase Notice, any such requirement or
pre-condition being expressly waived hereby.
9. REISSUANCE OF SERIES A PREFERRED STOCK. Series A Preferred Stock
that has been issued and reacquired in any manner, including shares surrendered
to the Corporation upon conversion, and shares purchased or redeemed, shall
(upon compliance with any applicable provisions of the laws of Delaware) have
the status of authorized and unissued preferred stock undesignated as to series
and may not be re-designated and reissued as part of any series of preferred
stock.
10. BUSINESS DAY. If any payment or redemption shall be required by the
terms hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day.
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11. HEADINGS OF SECTIONS. The headings of the various Sections hereof
are for convenience of reference only and shall not affect the interpretation of
any of the provisions hereof.
12. SEVERABILITY OF PROVISIONS. If any right, preference or limitation
of the Series A Preferred Stock set forth in this Certificate of Designation (as
it may be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule or law or public policy, all other rights,
preferences and limitations set forth in this Certificate of Designation (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set forth
shall be deemed dependent upon any other such right, preference or limitation
unless so expressed herein.
13. NOTICE. All notices and other communications provided for or
permitted to be given to the Corporation hereunder shall be made by hand
delivery, next day air courier or certified first-class mail to the Corporation
at its principal executive offices at Atlantic Gulf Communities Corporation,
2601 South Bayshore Drive, Miami, Florida 33133-5461, Telecopy number (305)
859-4623, Attention: Chief Financial Officer.
14. AMENDMENTS. This Certificate of Designation may be amended without
notice to or the consent of any Holder to cure any ambiguity, defect or
inconsistency or to make any other amendment PROVIDED that any such amendment
does not adversely affect the rights of any Holder. Any provisions of this
Certificate of Designation may also be amended by the Corporation with the vote
or written consent of Holders represent ing a majority of the outstanding Series
A Preferred Stock.
The Corporation will, so long as any Series A Preferred Stock is
outstanding, maintain an office or agency where such shares may be presented for
registration or transfer and where such shares may be presented for conversion
and redemption.
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<PAGE>
15. DEFINITIONS. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"BANK WARRANTS" means the 1,500,000 warrants for the purchase of Common
Stock issued on September 30, 1996 pursuant to the Prepayment Agreement dated as
of September 30, 1996 among the financial institutions listed on the signature
pages thereof, The Chase Manhattan Bank and the Corporation.
"BOARD OF DIRECTORS" means the Board of Directors of the Corporation.
"BOARD RESOLUTION" has the meaning set forth in Section 6(c)(iii).
"BUSINESS DAY" means a day that is not a Saturday, a Sunday or a day on
which banking institutions in the State of New York are not required to be open.
Unless specifically stated as a Business Day, all days referred to herein shall
mean calendar days.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
partnership interests, participations, rights in, or other equivalents (however
designated and whether voting or nonvoting) of, such Person's capital stock.
"CLOSING PRICE" has the meaning set forth in Section 6(c)(vii).
"COMMON STOCK" means shares of Common Stock, par value $.10 per share,
of the Corporation.
"CONVERSION DATE" has the meaning set forth in Section 6(b).
"CONVERSION PRICE" means, initially, $5.75 and, thereafter, such price
as adjusted pursuant to Section 6.
"CORPORATION" means Atlantic Gulf Communities Corporation, a Delaware
corporation.
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"CURRENT MARKET PRICE" has the meaning set forth in Section 6(c)(vii).
"DEFAULT DIVIDEND RATE" has the meaning set forth in Section 3(a).
"DIVIDEND PAYMENT DATE" means March 31, June 30, September 30 and
December 31 of each year.
"DIVIDEND PERIOD" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"DIVIDEND RECORD DATE" means a day fifteen (15) days preceding the
Dividend Payment Date.
"EVENT OF DEFAULT" means (i) any event of default (whatever the reason
for such event of default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any governmental authority) under any
Instrument creating, evidencing or securing any indebtedness for borrowed money
of the Company or any Significant Subsidiary in an amount in excess of
$2,500,000 that would enable the creditors or secured parties under such
Instrument to declare the principal amount of such indebtedness due and payable
prior to its scheduled maturity, and has not been waived by the relevant
creditors or secured parties, (ii) the occurrence of a Default Change of Control
(as defined in the Investment Agreement), (iii) a material breach (following
written notice by the Investor that the Investor would consider such a breach as
material) by the Company of Section 6.7(f) of the Investment Agreement or
(insofar as such breach is willful and materially imperils the value of the
collateral securing the rights of the Holder or the rights of the Holder with
respect thereto) of Section 3 of the Note Agreement or any Security Document (as
defined in the Note Agreement) which, in any event, is not curable or if curable
is not cured within 15 days, or (iv) one of the events specified in clauses (i)
through (vii) of Section 8(e).
"HOLDER" means a record holder of one or more outstanding shares of
Series A Preferred Stock.
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"INITIAL DIVIDEND PERIOD" means the dividend period commencing on the
Original Issue Date and ending on the second Dividend Payment Date to occur
thereafter.
"INSTRUMENT" means any contract, agreement, indenture, mortgage,
security, document or writing under which any obligation is evidenced, assumed
or undertaken, or any security interest is granted or perfected.
"INVESTOR" has the meaning set forth in the Investment Agreement.
"INVESTOR WARRANTS" means the 5,000,000 warrants to acquire Common
Stock to be issued to the Investor pursuant to the Investment Agreement.
"INVESTMENT AGREEMENT" means the Amended and Restated Investment
Agreement dated as of February 7, 1997 by and between AP-AGC, LLC and the
Corporation, amended as of March 20, 1997 and amended and restated as of May 15,
1997.
"JUNIOR STOCK" has the meaning set forth in Section 2.
"LIQUIDATION PREFERENCE" means, at any time, $10 per share of Series A
Preferred Stock, PLUS accumulated and unpaid Dividends thereon through the date
of such determination, whether or not declared and whether or not funds are
legally available therefor.
"OPTIONAL REDEMPTION PRICE" has the meaning set forth in Section 5(a).
"ORIGINAL ISSUE DATE" means the date upon which the Series A Preferred
Stock is originally issued by the Corporation, which shall be the Closing Date
(as defined in the Investment Agreement).
"PARITY STOCK" means the Series B Preferred Stock (except insofar as
the Series A Preferred Stock has certain security rights and interests which are
not applicable to the Series B Preferred Stock) and any class or series of stock
the terms of which provide that it is entitled to participate PARI PASSU with
the Series A Preferred Stock with respect to any dividend or distribution or
upon liquidation, dissolution or winding-up of the Corporation.
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"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, business trust, joint-stock company,
trust, unincorporated organization or government or agency or political
subdivision thereof.
"PUT SHARES" has the meaning set forth in Section 8(a).
"QUARTERLY DIVIDEND PERIOD" shall mean the quarterly period commencing
on each March 31, June 30, September 30 and December 31 and ending on each
Dividend Payment Date, respectively.
"REDEMPTION DATE", with respect to any Series A Preferred Stock, means
the date on which such Series A Preferred Stock is redeemed by the Corporation.
"REDEMPTION NOTICE" has the meaning set forth in Section 5(c).
"REPURCHASE DATE" has the meaning set forth in Section 8(d).
"REPURCHASE NOTICE" has the meaning set forth in Section 8(a).
"REPURCHASE PRICE" has the meaning set forth in Section 8(a).
"SENIOR STOCK" means any class or series of stock the terms of which
provide that it is entitled to a preference to the Series A Preferred Stock with
respect to any dividend or distribution or upon voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation.
"SERIES A PREFERRED STOCK" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series A, par value $.01 per share, of the
Corporation.
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"SERIES A PREFERRED STOCK CERTIFICATE" has the meaning set forth in
Section 6(b).
"SERIES B PREFERRED STOCK" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series B, par value $.01 per share, of the
Corporation, which may be issued in accordance with the Investment Agreement.
"SERIES B WARRANTS" means up to 4,000,000 warrants to acquire Common
Stock which may be issued to acquirers of Series B Preferred Stock.
"SIGNIFICANT SUBSIDIARY" has the meaning set forth in Regulation S-X
under the Securities Exchange Act of 1934, as amended; PROVIDED that SP
Subsidiary (as defined in the Investment Agreement) shall be a Significant
Subsidiary.
"SPECIFIED INVESTOR AMOUNT" means 500,000 shares of Series A Preferred
Stock.
"SUBSIDIARY" means, (i) with respect to any Person, a corporation a
majority of whose Capital Stock with voting power under ordinary circumstances
to elect directors is at the time, directly or indirectly, owned by such Person,
by a Subsidiary of such Person or by such Person and a Subsidiary of such
Person, or (ii) any other Person (other than a corporation) of which at least a
majority of the voting interest is at the time, directly or indirectly, owned by
such Person, by a Subsidiary of such Person or by such Person and a Subsidiary
of such Person.
"TRADING DAY" shall mean a day on which securities are traded or quoted
on the national securities exchange or quotation system or in the
over-the-counter market used to determine the Closing Price.
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ANNEX B TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ATLANTIC GULF COMMUNITIES CORPORATION
STATEMENT OF
PREFERENCES AND RIGHTS OF
20% CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, SERIES B
-----------------------
The 20% Cumulative Redeemable Convertible Preferred Stock, Series B, of Atlantic
Gulf Communities Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") shall have
the following powers, preferences, and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, in addition to those set forth in the attached Amended and Restated
Certificate of Incorporation of the Corporation (all capitalized terms used
without definition are defined in Section 15 of this Statement of Preferences
and Rights (this "Certificate of Designation")):
1. DESIGNATION. The series of preferred stock established hereby shall
be designated the "20% Cumulative Redeemable Convertible Preferred Stock, Series
B" (and shall be referred to herein as the "Series B Preferred Stock") and the
authorized number of shares of Series B Preferred Stock shall be 2,000,000.
2. RANK. The Series B Preferred Stock shall, with respect to dividend
distributions and distributions upon the voluntary or involuntary liquidation,
winding up and dissolution of the Corporation, rank (i) senior to all classes of
Common Stock and each other class of Capital Stock of the Corporation or series
of preferred stock of the Corporation hereafter created which is not Senior
Stock or Parity Stock ("Junior Stock"), (ii) PARI PASSU with any Parity Stock
(subject to any differing security interests between different classes of Parity
Stock) and (iii) junior to any Senior Stock. There is no Senior Stock
outstanding on the date hereof, and there is no Parity Stock outstanding on the
date hereof other than the 20% Cumulative Redeemable Convertible Preferred
Stock, Series A (the "Series A Preferred Stock"), the holders of which have
certain security interests and rights to which the
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Holders of Series B Preferred Stock are not entitled. Senior Stock or Parity
Stock may be authorized or issued only in accordance with the provisions of
Section 7(b).
3. DIVIDENDS. (a) Subject to the provisions of Section 3(c), beginning
on the Original Issue Date, the Holders shall be entitled to receive, when, as
and if declared by the Board of Directors, but only out of funds legally
available therefor, distributions in the form of cash dividends on each share of
Series B Preferred Stock at an annual rate equal to 20% of the Liquidation
Preference in effect from time to time and no more. All Dividends shall be
cumulative, whether or not declared, on a daily basis from the date of original
issuance and shall be payable quarterly in arrears on each Dividend Payment Date
commencing on September 30, 1997. Each dividend shall be payable with respect to
Series B Preferred Stock held by Holders as they appear on the stock books of
the Corporation on each Dividend Record Date. Dividends shall cease to
accumulate in respect of Series B Preferred Stock on the Redemption Date, the
Conversion Date or the Repurchase Date for such shares, as the case may be,
unless, in the case of a Redemption Date or Repurchase Date, the Corporation
defaults in the payment of the amounts necessary for such redemption or in its
obligation to deliver certificates representing Common Stock issuable upon such
conversion, as the case may be, in which case, dividends shall continue to
accumulate at an annual rate of 23% of the Liquidation Preference in effect from
time to time (the "Default Dividend Rate") until such payment or delivery is
made. If the Corporation defaults in the payment of amounts due upon a
Repurchase Date, interest shall accrue on the amount of such obligation at the
Default Dividend Rate until such payment is made (with all interest due).
(b) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption pursuant to Section 5(a)
may be declared and paid at any time, without reference to any regular Dividend
Payment Date, to Holders on such date, not more than forty-five (45) days prior
to the payment thereof, as may be fixed by the Board of Directors.
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(c) Notwithstanding anything to the contrary in the preceding
provisions of this Section 3, following an Event of Default, the Holders shall
be entitled to receive dividends on each share of Series B Preferred Stock at an
annual rate equal to the Default Dividend Rate, payable in cash.
(d) So long as any Series B Preferred Stock is outstanding, the
Corporation shall not declare, pay or set apart for payment any dividend on any
Junior Stock or make any payment on account of, or set apart for payment money
for a sinking or other similar fund for, the purchase, redemption or other
retirement of, any Junior Stock, or any warrants, rights, calls or options
exercisable for any Junior Stock (except such securities which are debt
securities or Senior Stock or Parity Stock) or make any distribution in respect
thereof, either directly or indirectly, and whether in cash, obligations or
shares of the Corporation or other property (other than, prior to the occurrence
of an Event of Default, dividends, payments, purchases, acquisitions,
redemptions, retirements or distributions in Junior Stock) and shall not permit
any Subsidiary of the Corporation directly or indirectly to do any of the same
in respect of such Junior Stock (other than, prior to the occurrence of an Event
of Default, dividends, payments, purchases, acquisitions, redemptions,
retirements or distributions in Junior Stock) unless and until all dividend
arrearages on the Series B Preferred Stock have been paid in full in cash, and
the Corporation is not in default of any of its obligations under Section 5 or
Section 8.
(e) Unless and until all dividend arrearages on the Series B Preferred
Stock have been paid in full, all dividends declared by the Corporation upon
Series B Preferred Stock or Parity Stock shall be declared PRO RATA with respect
to all Series B Preferred Stock and Parity Stock then outstanding so that the
amounts of any dividends declared per share on the Series B Preferred Stock and
such Parity Stock bear the same ratio to each other at the time of declaration
as all accrued and unpaid dividends on the Series B Preferred Stock and the
Parity Stock bear to each other.
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(f) Dividends payable on the Series B Preferred Stock shall be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in the period for which payable.
4. LIQUIDATION PREFERENCE. (a) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the Holders shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders an amount in cash
equal to the then Liquidation Preference for each share outstanding, before any
payment shall be made or any assets distributed to the holders of any Junior
Stock. If the assets of the Corporation are not sufficient to pay in full the
liquidation payments payable to the Holders and the holders of any outstanding
Parity Stock, then, subject to the rights of the Holders pursuant to Section 8
and subject to any differing security interests between different classes of
Parity Stock, the holders of all such shares shall share ratably in such
distribution of assets in accordance with the amounts which would be payable on
such distribution if the amount to which the Holders and the holders of any
outstanding Parity Stock are entitled were paid in full. By acceptance hereof
each Holder agrees that it shall respect the security rights and priorities of
any holder of shares of Parity Stock or Senior Stock and shall not challenge the
right of any holder of Parity Stock or Senior Stock to be paid in respect of any
obligations of the Company under any Instruments between such holder and the
Company or any of its Subsidiaries, including the right to be paid by any
Subsidiary of the Company under any guarantee by such Subsidiary of the
obligations of the Company.
(b) For the purposes of this Section 4, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Corporation nor the consolidation or merger of the Corporation with or into one
or more corporations shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation.
5. REDEMPTION. (a) OPTIONAL REDEMPTION. The Corporation may, at the
option of the Board of Directors, redeem at any time on or after the third
anniversary of the Original Issue Date, from any source of funds legally
available therefor, in whole or in part, in the manner provided in Section 5(c),
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any or all of the Series B Preferred Stock, at a redemption price in cash equal
to the then Liquidation Preference (the "Optional Redemption Price"); PROVIDED
that no optional redemption shall be made unless full dividends have been or
contemporaneously are declared and paid or declared and a sum set apart
sufficient for such payment, on the Series B Preferred Stock for all Dividend
Periods terminating on or prior to the Redemption Date; and PROVIDED, FURTHER,
that no partial redemption shall be made for an amount of shares of Series B
Preferred Stock less than such number as have an aggregate Liquidation
Preference equal to the lesser of $1,000,000 or the aggregate Liquidation
Preference of all outstanding Series B Preferred Stock.
(b) PROCEDURE FOR REDEMPTION. (i) At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for any redemption of the
Series B Preferred Stock, written notice (the "Redemption Notice") shall be
given by first class mail, postage prepaid, to each Holder on the record date
fixed for such redemption of the Series B Preferred Stock at such Holder's
address as the same appears on the stock books of the Corporation. The
Redemption Notice shall state:
(1) that such notice constitutes a Redemption Notice
pursuant to Section 5(a);
(2) the Optional Redemption Price;
(3) whether all or less than all the outstanding Series B
Preferred Stock redeemable thereunder is to be redeemed and the total
number of shares of such Series B Preferred Stock being redeemed;
(4) the number of shares of Series B Preferred Stock held,
as of the appropriate record date, by the specific Holder that the
Corporation intends to redeem;
(5) the Redemption Date;
(6) that the Holder is to surrender to the Corporation his
certificate or certificates representing the Series B Preferred Stock
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to be redeemed, specifying the place or places where, and the manner
in which, certificates for Series B Preferred Stock are to be
surrendered for redemption;
(7) the date on which the Series B Preferred Stock called
for redemption shall cease to be convertible; and
(8) that dividends on the Series B Preferred Stock to be
redeemed shall cease to accumulate on the Redemption Date, unless the
Corporation defaults in the payment of the amounts necessary for such
redemption, in which case, dividends shall continue to accumulate
until such payment is made.
(ii) Each Holder shall surrender the certificate or certificates
representing such Series B Preferred Stock to the Corporation, duly endorsed, in
the manner and at the place designated in the Redemption Notice, and on the
Redemption Date the full Optional Redemption Price for such shares so
surrendered shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be cancelled and retired. If less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(iii) If on or before the Redemption Date all funds necessary for such
redemption shall have been set aside by the Corporation, separate and apart from
its other funds, in trust for the PRO RATA benefit of the Holders of the shares
so called for redemption, so as to be and continue to be available therefor and
not subject to claims of creditors of the Corporation, then, notwithstanding
that any certificate for shares so called for redemption shall not have been
surrendered for cancellation, all shares so called for redemption shall no
longer be deemed outstanding on and after such Redemption Date, and all rights
with respect to such shares shall forthwith on such Redemption Date cease and
terminate, except only the right of the Holders thereof to receive the amount
payable on redemption thereof, without interest. Any interest accrued on such
funds shall be paid to the Corporation from time to time.
Any funds so set aside or deposited by the Corporation which shall not
be required for such redemption because of the exercise of any right of
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conversion subsequent to the date of such deposit shall be released or repaid to
the Corporation forthwith. Any funds so set aside or deposited, as the case may
be, and unclaimed as of the first anniversary of such Redemption Date shall be
released or repaid to the Corporation, after which the Holders of the shares so
called for redemption shall look only to the Corporation for payment thereof.
6. CONVERSION. (a) CONVERSION RIGHT. The Holder of each share of
Series B Preferred Stock shall have the right at any time, or from time to time
(prior in each case to the thirtieth day following the date of the Redemption
Notice if such share shall be called for redemption pursuant to Section 5), at
the option of such Holder, to convert such share into Common Stock, on and
subject to the terms and conditions hereinafter set forth. Subject to the
provisions for adjustment hereinafter set forth, each share of Series B
Preferred Stock shall be convertible into such number (calculated as to each
conversion to the nearest 1/100th of a share) of fully paid and nonassessable
shares of Common Stock, as is obtained by dividing the Liquidation Preference by
the Conversion Price, in each case as in effect at the date any Series B
Preferred Stock is surrendered for conversion.
(b) CONVERSION PROCEDURES. To exercise the conversion privilege, the
Holder of any Series B Preferred Stock to be converted in whole or in part shall
surrender the certificate representing such Series B Preferred Stock (the
"Series B Preferred Stock Certificate") at the office or agency then maintained
by the Corporation for the transfer of the Series B Preferred Stock, and shall
give written notice of conversion in the form provided on the Series B Preferred
Stock Certificate (or such other notice which is acceptable to the Corporation)
to the Corporation at such office or agency that the Holder elects to convert
such Series B Preferred Stock represented by the Series B Preferred Stock
Certificate so surrendered or the portion thereof specified in said notice into
Common Stock. Such notice shall also state the name or names (with addresses) in
which the certificate or certificates for Common Stock which shall be issuable
upon such conversion shall be issued, and shall be accompanied by transfer
taxes, if required. Each Series B Preferred Stock Certificate surrendered for
conversion shall, unless the shares issuable on conversion are to be issued in
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the same name as the registration of such Series B Preferred Stock Certificate,
be duly endorsed by, or be accompanied by instruments of transfer in form
satisfactory to the Corporation duly executed by, the Holder or such Holder's
duly authorized attorney.
As promptly as practicable, but in no event later than five (5)
Business Days, after the surrender of such Series B Preferred Stock Certificate
and the receipt of such notice and funds, if any, as aforesaid, the Corporation
shall issue and shall simultaneously deliver at such office or agency to such
Holder, or on his written order, a certificate or certificates for the number of
shares of Common Stock, issuable upon the conversion of such Series B Preferred
Stock represented by the Series B Preferred Stock Certificate so surrendered or
portion thereof in accordance with the provisions of this Section 6. In case
less than all of the Series B Preferred Stock represented by a Series B
Preferred Stock Certificate surrendered for conversion is to be converted, the
Corporation shall simultaneously deliver to or upon the written order of the
Holder of such Series B Preferred Stock Certificate a new Series B Preferred
Stock Certificate representing the Series B Preferred Stock not converted. If a
Holder fails to notify the Corporation of the number of shares of Series B
Preferred Stock which such Holder wishes to convert, such Holder shall be deemed
to have elected to convert all shares represented by the certificate or
certificates surrendered for conversion.
Each conversion shall be deemed to have been effected on the date on
which such Series B Preferred Stock Certificate shall have been surrendered and
such notice shall have been received by the Corporation, as aforesaid (the
"Conversion Date"), and the Person in whose name any certificate or certificates
for Common Stock shall be issuable upon such conversion shall be deemed to have
become on said date the holder of record of the shares represented thereby;
PROVIDED, HOWEVER, that any such surrender on any date when the stock books of
the Corporation shall be closed shall constitute the Person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock books are open, but such conversion
shall be at the Conversion Price as in effect on the date upon which such Series
B Preferred Stock Certificate shall have been surrendered.
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All Series B Preferred Stock that shall have been surrendered for
conversion as herein provided shall no longer be deemed to be outstanding and
all rights with respect to such shares, including the rights, if any, to receive
notices and to vote, shall forthwith cease, except only the right of the Holders
thereof, subject to the provisions of this Section 6, to receive Common Stock in
exchange therefor; PROVIDED, HOWEVER, that if the Corporation defaults in its
obligation to deliver certificates representing Common Stock issuable upon such
conversion, dividends shall continue to accumulate at the Default Dividend Rate
until such delivery is made.
If any Series B Preferred Stock shall be called for redemption, the
right to convert such Series B Preferred Stock shall terminate at the close of
business on the thirtieth day following the date of the Redemption Notice.
(c) The Conversion Price at which Series B Preferred Stock is
convertible into Common Stock shall be subject to adjustment from time to time
as provided in this Section 6(c) (unless otherwise indicated, all calculations
under this Section 6(c) shall be made to the nearest $0.01):
(i) In case the Corporation shall (A) declare a dividend or
make a distribution on the outstanding Common Stock in Capital Stock of
the Corporation, (B) subdivide or reclassify the outstanding Common
Stock into a greater number of shares (or into other securities or
property), or (C) combine or reclassify the outstanding Common Stock
into a smaller number of shares (or into other securities or property),
the Conversion Price in effect at the close of business on the date
fixed for the determination of stockholders entitled to receive such
dividend or other distribution, or to be affected by such subdivision,
combination or other reclassification, shall be adjusted by multiplying
such Conversion Price by a fraction, the numerator of which shall be
the total number of outstanding shares of Common Stock immediately
prior to such event, and the denominator of which shall be the total
number of outstanding shares of Common Stock immediately after such
event. An adjustment made pursuant to this subparagraph (i) shall
become effective immediately after the record date for such event, or,
if there is no record date, upon the effective date for such event. Any
Common Stock issuable in payment of a dividend shall be deemed to have
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been issued immediately prior to the time of the record date for such
dividend for purposes of calculating the number of outstanding shares
of Common Stock under subparagraphs (ii) and (iii) below. Adjustments
pursuant to this subparagraph shall be made successively whenever any
event specified above shall occur.
(ii) In case the Corporation shall fix a record date for the
issuance of rights or warrants to all holders of Common Stock entitling
them to subscribe for or purchase Common Stock (or securities
convertible into or exchangeable for Common Stock) (other than Series B
Preferred Stock, Series B Warrants or Investor Warrants) at a price per
share (or having a conversion price or exchange price per share,
subject to normal antidilution adjustments) less than the Current
Market Price (as defined in subparagraph (vii) below) of Common Stock
on such record date, the Conversion Price in effect at the close of
business on such record date shall be reduced by multiplying such
Conversion Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of
such rights, options or warrants plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares
of Common Stock so offered would purchase at the Current Market Price
as of such record date, and the denominator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of
such rights, options or warrants plus the number of additional shares
of Common Stock offered for subscription or purchase in connection with
such rights, options or warrants. Such adjustment shall be made
whenever such rights, options or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants. In
case any rights or warrants referred to in this subparagraph (ii) in
respect of which an adjustment shall have been made shall expire
unexercised within forty-five (45) days after the same shall have been
distributed or issued by the Corporation, the Conversion Price shall be
readjusted at the time of such expiration to the Conversion Price that
would have been in effect if no adjustment had been made on account of
the distribution or issuance of such expired rights or warrants.
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(iii) In case the Corporation shall fix a record date for the
making of a distribution to all holders of Common Stock (A) of shares
of any class other than Common Stock, (B) of evidences of indebtedness
of the Corporation or any Subsidiary, (C) of assets or other property
or (D) of rights or warrants (excluding those rights or warrants
resulting in an adjustment pursuant to subparagraph (ii) above, and the
right to acquire Series B Preferred Stock in the rights offering
thereof), then in each such case the Conversion Price shall be reduced
so that such price shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the effectiveness of
the Conversion Price reduction contemplated by this subparagraph (iii)
by a fraction, the numerator of which shall be the then Current Market
Price per share of Common Stock, less the then fair market value (as
determined by the Board of Directors, whose reasonable determination
shall be described in a resolution certified by the Secretary or an
Assistant Secretary of the Company to have been duly adopted by the
Board of Directors and to be in full force and effect on the date of
such certification (a "Board Resolution") of the portion of the
securities, evidences of indebtedness, assets, property or rights or
warrants so distributed, the case may be, which is applicable to one
share of Common Stock, and the denominator of which shall be the
Current Market Price per share of Common Stock as of the record date
for such distribution. Such adjustment shall be made successively
whenever such a record date is fixed.
(iv) In case the Corporation shall issue Common Stock for a
consideration per share less than the Current Market Price per share on
the date the Corporation fixes the offering price of such additional
shares, the Conversion Price shall be adjusted immediately thereafter
so that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior thereto by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding immediately after the issuance of such additional
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shares, and the denominator shall be the total number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares plus the number of shares of Common Stock which the
aggregate consideration received (determined as provided in
subparagraph (vi) below) for the issuance of such additional shares
would purchase at the Current Market Price per share. Such adjustment
shall be made successively whenever such an issuance is made; PROVIDED,
HOWEVER, that the provisions of this subparagraph shall not apply (A)
to Common Stock issued to the Corporation's employees or former
employees or their estates under BONA FIDE employee benefit plans
adopted by the Board of Directors and approved by the holders of Common
Stock if required by law, if such Common Stock would otherwise be
covered by this subparagraph, but only to the extent that the aggregate
number of shares excluded hereby shall not exceed, on a cumulative
basis since the date hereof, [NUMBER TO BE AGREED BEFORE CLOSING]
(including 842,000 shares as of the date hereof to be issued pursuant
to employee stock options outstanding as of the date hereof to purchase
Common Stock), (B) to the Common Stock to be issued pursuant to the
Bank Warrants, (y) to the Common Stock to be issued pursuant to the
Investor Warrants or the Series B Warrants and (C) to Common Stock to
be issued upon conversion of the Series A Preferred Stock or the Series
B Preferred Stock, adjusted as appropriate in each case, in connection
with any stock split, merger, recapitalization or similar transaction.
(v) In case the Corporation shall issue any securities
convertible into or exchangeable for Common Stock (excluding (A)
securities issued in transactions resulting in adjustment pursuant to
subparagraphs (ii) and (iii) above, (B) Series A Preferred Stock, (C)
Series B Preferred Stock, (D) Investor Warrants or Series B Warrants,
and (E) upon conversion of any of such securities) for a consideration
per share of Common Stock deliverable upon conversion or exchange of
such securities (determined as provided in subparagraph (vi) below and
subject to normal antidilution adjustments) less than the Current
Market Price per share in effect immediately prior to the issuance of
such securities, the Conversion Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying
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the Conversion Price in effect immediately prior thereto by a fraction,
of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the maximum number
of shares of Common Stock deliverable upon conversion of or in exchange
for such securities at the initial conversion or exchange price or
rate, and the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities plus
the number of shares of Common Stock which the aggregate consideration
received (determined as provided in subparagraph (vi) below) for such
securities would purchase at the Current Market Price per share. Such
adjustment shall be made successively whenever such an issuance is
made.
Upon the termination of the right to convert or exchange such
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustments made
upon the issuance of such convertible or exchangeable securities been
made upon the basis of the delivery of only the number of shares of
Common Stock actually delivered upon conversion or exchange of such
securities and upon the basis of the consideration actually received by
the Corporation (determined as provided in subparagraph (vi) below) for
such securities.
(vi) For purposes of any computation respecting con-
sideration received pursuant to subparagraphs (iv) and (v) above, the
following shall apply:
(A) in the case of the issuance of Common Stock
for cash, the consideration shall be the amount of such cash,
PROVIDED that in no case shall any deductions be made for any
commissions, discounts, placement fees or other expenses
incurred by the Corporation for any underwriting or placement
of the issue or otherwise in connection therewith;
(B) in the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined by the Board of Directors,
whose reasonable determination shall be described in a Board
Resolution; and
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(C) in the case of the issuance of securities
convertible into or exchangeable for Common Stock, the
aggregate consideration received therefor shall be deemed to
be the consideration received by the Corporation for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by the Corporation upon
the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in
clauses (A) and (B) of this subparagraph (vi)).
(vii) For the purpose of any computation under this Certificate
of Designation, (A) the "Current Market Price" per share at any date
shall be deemed to be the average of the daily Closing Price for the
Common Stock for the ten (10) consecutive Trading Days commencing
fourteen (14) Trading Days before such date, and (B) the "Closing
Price" of the Common Stock means the last reported sale price regular
way reported on the NASDAQ Stock Market or its successor, or, if not
listed or admitted to trading on the NASDAQ Stock Market or its suc-
cessor, the last reported sale price regular way reported on any other
stock exchange or market on which the Common Stock is then listed or
eligible to be quoted for trading, or as reported by the National
Quotation Bureau Incorporated.
(viii) In any case in which this Section shall require that an
adjustment shall become effective immediately after a record date for
an event, the Corporation may defer until the occurrence of such event
(A) issuing to the Holder of any Series B Preferred Stock converted
after such record date and before the occurrence of such event the
Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment and (B) paying
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to such Holder an amount in cash in lieu of a fractional share of
Common Stock pursuant to Section 6(h); PROVIDED, HOWEVER, that the
Corporation shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's rights to receive such
additional Common Stock, and such cash, upon the occurrence of the
event requiring such adjustment.
(ix) The Corporation may make such reductions in the Conversion
Price, in addition to those required pursuant to other subparagraphs of
this Section, as it considers to be advisable so that any event treated
for federal income tax purposes as a dividend of stock or stock rights
shall not be taxable to the recipients.
(x) In case of any consolidation with or merger of the
Corporation into another corporation, or in case of any sale, lease or
conveyance of assets to another corporation of the property of the
Corporation as an entirety or substantially as an entirety, lawful and
adequate provisions shall be made whereby each Holder of Series B
Preferred Stock shall have the right to receive, from such successor,
leasing or purchasing corporation, as the case may be, upon the basis
and upon the terms and conditions specified herein, in lieu of the
Common Stock immediately theretofore receivable upon the conversion of
such Series B Preferred Stock, the kind and amount of shares of stock,
other securities, property or cash or any combination thereof
receivable upon such consolidation, merger, sale, lease or conveyance
by a holder of the number of shares of Common Stock into which such
Series B Preferred Stock might have been converted immediately prior to
such con solidation, merger, sale, lease or conveyance. In the case of
any such consolidation, merger or sale of substantially all the assets,
appropriate provision shall be made with respect to the rights and
interests of the Holders to the end that the provisions hereof
(including provisions for adjustment of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise of any conversion rights hereunder.
(xi) In case of any reclassification or change of the Common
Stock issuable upon conversion of Series B Preferred Stock (other than
a change in par value, or from par value to no par value, or as a
result of a subdivision or combination, but including any change in the
Common Stock into two or more classes or series of shares), or in case
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of any consolidation or merger of another corporation into the
Corporation in which the Corporation is the continuing corporation and
in which there is a reclassification or change (including a change to
the right to receive cash or other property) of the Common Stock (other
than a change in par value, or from par value to no par value, or as a
result of a subdivision or combination, but including any change in the
Common Stock into two or more classes or series of shares), lawful and
adequate provisions shall be made whereby each Holder of Series B
Preferred Stock shall have the right to receive, upon the basis and
upon the terms and conditions specified herein, in lieu of the Common
Stock immediately theretofore receivable upon the conversion of such
Series B Preferred Stock, the kind and amount of shares of stock, other
securities, property or cash or any combination thereof receivable upon
such reclassification, change, consolidation or merger, by a holder of
the number of shares of Common Stock into which such Series B Preferred
Stock might have been converted immediately prior to such
reclassification, change, consolidation or merger.
(xii) The foregoing subparagraphs (x) and (xi), however, shall
not in any way affect the rights a Holder may otherwise have, pursuant
to this Section, to receive securities, evidences of indebtedness,
assets, property rights or warrants upon conversion of any Series B
Preferred Stock.
(xiii) If the Corporation repurchases (by way of tender offer,
exchange offer or otherwise) any Common Stock for a per share
consideration which exceeds the Current Market Price of a share of
Common Stock on the date immediately prior to such repurchase, the
Conversion Price shall be reduced so that such price shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subparagraph (xiii) by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such acquisition multiplied by the
Current Market Price per share of the Common Stock on the immediately
preceding Trading Day, and the denominator shall be the sum of (A) the
fair market value (as determined in good faith by the Board of
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Directors) of the aggregate consideration payable to stockholders as a
result of such acquisition, and (B) the product of the number of shares
of Common Stock outstanding immediately following such acquisition and
the Current Market Price per share of the Common Stock on such
immediately preceding Trading Day, such reduction to become effective
immediately prior to the opening of business on the day following such
acquisition.
(xiv) If any event occurs as to which the foregoing provisions of
this Section 6(c) are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board of
Directors, fairly protect the conversion rights of the Series B
Preferred Stock in accordance with the essential intent and principles
of such provisions, then the Board of Directors shall make such
adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary,
in the good faith opinion of the Board of Directors, to protect such
conversion rights as aforesaid, but in no event shall any such
adjustment have the effect of increasing the Conversion Price, or
otherwise adversely affect the Holders.
(xv) For purposes of Section 6(c), Common Stock owned or held at
any relevant time by, or for the account of, the Corporation in its
treasury or otherwise, shall not be deemed to be outstanding for
purposes of the calculation and adjustments described therein. Shares
held in the Disputed Claims Reserve, Division Class 14 Utility Fund
Trust Agreement dated April 6, 1993 and the Improvements Fund Trust
Agreement dated April 6, 1993 shall not be deemed to be held by, or for
the account of, the Corporation.
(d) CONVERSION PRICE ADJUSTMENT DEFERRED. Notwithstanding the
foregoing provisions of this Section 6, (i) no adjustment in the number of
shares of Common Stock into which any Series B Preferred Stock is convertible
shall be required unless such adjustment would require an increase or decrease
in such number of shares of at least 1% and (ii) no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease in the Conversion Price of at least $.01 per share; PROVIDED, HOWEVER,
that any adjustments which by reason of this paragraph (d) are not required to
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be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 6 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(e) ADJUSTMENT REPORT. Whenever any adjustment is required in the
shares into which any Series B Preferred Stock is convertible, the Corporation
shall forthwith (i) file with each office or agency then maintained by the
Corporation for the transfer of the Series B Preferred Stock a statement
describing in reasonable detail the adjustment and the method of calculation
used and (ii) cause a notice of such adjustment, setting forth the adjusted
Conversion Price and the calculation thereof to be mailed to the Holders at
their respective addresses as shown on the stock books of the Corporation. The
certificate of any independent firm of public accountants of recognized standing
selected by the Board of Directors certifying to the Board of Directors the
correctness of any computation under this Section 6 shall be evidence of the
correctness of such computation.
(f) NOTICE OF CERTAIN EVENTS. In the event that:
(i) the Corporation shall take action to make any distribution
to the holders of its Common Stock;
(ii) the Corporation shall take action to offer for subscription
PRO RATA to the holders of its Common Stock any securities of any kind;
(iii) the Corporation shall take action to accomplish any
capital reorganization, or reclassification of the Capital Stock of the
Corporation, or a consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation is
required, or the sale or transfer of all or substantially all of the
assets of the Corporation; or
(iv) the Corporation shall take action looking to a voluntary or
involuntary dissolution, liquidation or winding-up of the Corporation;
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then the Corporation shall (A) in case of any such distribution or
subscription rights, at least twenty (20) days prior to the date or
expected date on which the stock books of the Corporation shall close
or a record shall be taken for the determination of Holders entitled to
such distribution or subscription rights, and (B) in the case of any
such reorganization, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up, at least twenty (20)
days prior to the date or expected date when the same shall take place,
cause written notice thereof to be mailed to each Holder at his address
as shown on the stock books of the Corporation. Such notice in
accordance with the foregoing clause (A) shall also specify, in the
case of any such distribution or subscription rights, the date or
expected date on which the holders of Common Stock shall be entitled
thereto, and such notice in accordance with the foregoing clause (B)
shall also specify the date or expected date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up, as the case may be.
(g) COMMON STOCK. For the purposes of this Section 6, the term "Common
Stock" shall mean (i) the Common Stock or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value or from no par value to par value, or
from par value to no par value. If at any time as a result of an adjustment made
pursuant to the provisions of Section 6(c), the Holder of any Series B Preferred
Stock thereafter surrendered for conversion shall become entitled to receive any
the Corporation such other shares so receivable upon conversion of any Series B
Preferred Stock shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in Section 6(c), and the other provisions of this
Section 6 with respect to the Common Stock shall apply on like terms to any such
other shares.
(h) FRACTIONAL SHARES. The Corporation shall not be required to issue
fractional shares of Common Stock upon the conversion of any Series B Preferred
Stock. If more than one share of Series B Preferred Stock shall be surrendered
for conversion at one time by the same Holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
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the aggregate number of shares so surrendered. If any fractional interest in a
share of Common Stock would be deliverable upon the conversion of any Series B
Preferred Stock, the Corporation may pay, in lieu thereof, in cash the Closing
Price thereof as of the Business Day immediately preceding the date of such
conversion.
(i) RESERVATION OF SHARES. The Corporation shall at all times reserve
and keep available, free from preemptive rights, out of its authorized but
unissued stock, for the purpose of effecting the conversion or redemption of the
Series B Preferred Stock, such number of its duly authorized shares of Common
Stock (or treasury shares as provided below) as shall from time to time be
sufficient for the conversion of all outstanding Series B Preferred Stock into
Common Stock at any time. The Corporation shall, from time to time and in
accordance with the General Corporation Law of the State of Delaware, cause the
authorized number of shares of Common Stock to be increased if the aggregate of
the number of authorized shares of Common Stock remaining unissued and the
issued shares of such Common Stock reserved for issuance in any other connection
shall not be sufficient for the conversion of all outstanding Series B Preferred
Stock into Common Stock at any time.
7. VOTING RIGHTS. The Holders of Series B Preferred Stock shall not
vote on any matters submitted to the holders of the Common Stock for a vote,
except as may be required by law. In any case in which the Holders shall be
entitled to vote as a separate class pursuant to Delaware law, each Holder shall
be entitled to one vote for each share of Series B Preferred Stock then held.
8. REPURCHASE OBLIGATION. (a) Subject to the provisions of Section
8(b), the Series B Preferred Stock shall not be redeemable at the option of the
Holder thereof prior to the fourth anniversary of the Original Issue Date.
Beginning on the fourth anniversary of the Original Issue Date, each Holder
shall have the right, at such Holder's option, exercisable by notice (a
"Repurchase Notice"), to require the Corporation to purchase Series B Preferred
Stock then held by such Holder, at a repurchase price in cash equal to the
Liquidation Preference in effect at such time (the "Repurchase Price");
PROVIDED, HOWEVER, that the number of shares required to be repurchased by the
Corporation pursuant to this Section 8(a) ("Put Shares") prior to the fifth
anniversary of the Original Issue Date shall not exceed one-third of the total
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number of shares of Series B Preferred Stock issued by the Corporation, and,
prior to the sixth anniversary of the Original Issue Date, the number of Put
Shares shall not exceed two-thirds of the total number of shares of Series B
Preferred Stock issued by the Corporation.
(b) Notwithstanding the provisions of Section 8(a), if an Event of
Default shall occur at any time or from time to time on or after the Original
Issue Date, each Holder shall have the right, at such Holder's option
exercisable by Repurchase Notice at any time within sixty (60) days after the
happening of each such Event of Default or, if later, receipt of notice from the
Corporation of such Event of Default, to re quire the Corporation to purchase
all or any part of the Series B Preferred Stock then held by such Holder as such
Holder may elect, at the Repurchase Price.
(c) The Corporation shall, within thirty (30) days of the occurrence
of an Event of Default, give written notice thereof by telecopy, if possible,
and by first class mail, postage prepaid, to each Holder, addressed to such
Holder at his last address and telecopy number as shown upon the stock books of
the Corporation. Each such notice shall specify the Event of Default which has
occurred and the date of such occurrence, the place or places of payment, the
then effective Conversion Price pursuant to Section 6, the then effective
Repurchase Price and the date the right of such Holder to require such
repurchase shall terminate. In addition, the Corporation shall, immediately upon
becoming aware of any facts or events that could reasonably be expected to
result in the occurrence of an Event of Default, give a written notice thereof
by telecopy, if possible, and by first class mail, postage prepaid, to the
Holders, addressed to such Holders at their last addresses as shown upon the
stock books of the Corporation.
(d) The date fixed for each such repurchase (the "Repurchase Date")
shall be the 30th day following the date of the Repurchase Notice relating
thereto. The place of payment shall be at an office or agency in the City of New
York, New York fixed therefor by the Corporation or, if not fixed, at the
principal executive office of the Corporation.
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On or before the Repurchase Date, each Holder who elects to have Series
B Preferred Stock held by it purchased shall surrender the certificate
representing such shares to the Corporation at the place designated in such
notice together with an election to have such purchase made and shall thereupon
be entitled to receive payment therefor provided in this Section 8. If less than
all the shares represented by any such surrendered certificate are repurchased,
a new certificate shall be issued representing the unpurchased shares. Payment
of the Repurchase Price for the Put Shares shall be made on the later of the
Repurchase Date or the fifth Business Day after the surrender of such
certificate. Dividends with respect to the Series B Preferred Stock so
purchased shall cease to accrue after the Repurchase Date, such shares shall no
longer be deemed outstanding and the Holders thereof shall cease to be
stockholders of the Corporation and all rights whatsoever with respect to the
shares so purchased shall terminate; PROVIDED, HOWEVER, that if the Corporation
defaults in its obligation to pay the Repurchase Price for such Put Shares,
interest shall accrue on the amount of such obligation at the Default Dividend
Rate until such payment is made (with all interest due).
(e) Notwithstanding any other provision hereof, if any of the following
events shall occur and be continuing: (i) the Company or any of its Significant
Subsidiaries shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
assets, or the Company or any of its Significant Subsidiaries shall make a
general assignment for the benefit of its creditors; (ii) there shall be
commenced against the Company or any of its Significant Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days; (iii) there shall be commenced against the Company or any of its
Significant Subsidiaries any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an order for
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any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; (iv) the Company or
any of its Significant Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clauses (i), (ii), or (iii) above; (v) the Company or any of its
Significant Subsidiaries shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; (vi) the
Company or any of its Significant Subsidiaries shall cause to be reinstated the
Reorganization Proceedings (as defined in the Note Agreement (as defined in the
Investment Agreement)); or (vii) the Confirmation Order (as defined in the Note
Agreement) shall be reversed, withdrawn, modified (in any manner adverse to
Company or any of its Significant Subsidiaries), or any rehearing shall be
ordered with respect thereto by the Bankruptcy Court or by any court having
jurisdiction over the Company; then, and in any such event, all Series B
Preferred Stock held by such Holder shall be Put Shares and the aggregate
Repurchase Price in respect of each such share shall immediately and
automatically become due and payable in full without any requirement or
pre-condition of delivery of a Repurchase Notice, any such requirement or
pre-condition being expressly waived hereby.
9. REISSUANCE OF SERIES B PREFERRED STOCK. Series B Preferred Stock
that has been issued and reacquired in any manner, including shares surrendered
to the Corporation upon conversion, and shares purchased or redeemed, shall
(upon compliance with any applicable provisions of the laws of Delaware) have
the status of authorized and unissued preferred stock undesignated as to series
and may not be re-designated and reissued as part of any series of preferred
stock.
10. BUSINESS DAY. If any payment or redemption shall be required by the
terms hereof to be made on a day that is not a Business Day, such payment or
redemption shall be made on the immediately succeeding Business Day.
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11. HEADINGS OF SECTIONS. The headings of the various Sections hereof
are for convenience of reference only and shall not affect the interpretation of
any of the provisions hereof.
12. SEVERABILITY OF PROVISIONS. If any right, preference or limitation
of the Series B Preferred Stock set forth in this Certificate of Designation (as
it may be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule or law or public policy, all other rights,
preferences and limitations set forth in this Certificate of Designation (as so
amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set forth
shall be deemed dependent upon any other such right, preference or limitation
unless so expressed herein.
13. NOTICE. All notices and other communications provided for or
permitted to be given to the Corporation hereunder shall be made by hand
delivery, next day air courier or certified first-class mail to the Corporation
at its principal executive offices at Atlantic Gulf Communities Corporation,
2601 South Bayshore Drive, Miami, Florida 33133-5461, Telecopy number (305)
859-4623, Attention: Chief Financial Officer.
14. AMENDMENTS. This Certificate of Designation may be amended without
notice to or the consent of any Holder to cure any ambiguity, defect or
inconsistency or to make any other amendment PROVIDED that any such amendment
does not adversely affect the rights of any Holder. Any provisions of this
Certificate of Designation may also be amended by the Corporation with the vote
or written consent of Holders represent ing a majority of the outstanding Series
B Preferred Stock.
The Corporation will, so long as any Series B Preferred Stock is
outstanding, maintain an office or agency where such shares may be presented for
registration or transfer and where such shares may be presented for conversion
and redemption.
15. DEFINITIONS. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
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"BANK WARRANTS" means the 1,500,000 warrants for the purchase of Common
Stock issued on September 30, 1996 pursuant to the Prepayment Agreement dated as
of September 30, 1996 among the financial institutions listed on the signature
pages thereof, The Chase Manhattan Bank and the Corporation.
"BOARD OF DIRECTORS" means the Board of Directors of the Corporation.
"BOARD RESOLUTION" has the meaning set forth in Section 6(c)(iii).
"BUSINESS DAY" means a day that is not a Saturday, a Sunday or a day on
which banking institutions in the State of New York are not required to be open.
Unless specifically stated as a Business Day, all days referred to herein shall
mean calendar days.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
partnership interests, participations, rights in, or other equivalents (however
designated and whether voting or nonvoting) of, such Person's capital stock.
"CLOSING PRICE" has the meaning set forth in Section 6(c)(vii).
"COMMON STOCK" means shares of Common Stock, par value $.10 per share,
of the Corporation.
"CONVERSION DATE" has the meaning set forth in Section 6(b).
"CONVERSION PRICE" means, initially, $5.75 and, thereafter, such price
as adjusted pursuant to Section 6.
"CORPORATION" means Atlantic Gulf Communities Corporation, a Delaware
corporation.
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"CURRENT MARKET PRICE" has the meaning set forth in Section 6(c)(vii).
"DEFAULT DIVIDEND RATE" has the meaning set forth in Section 3(a).
"DIVIDEND PAYMENT DATE" means March 31, June 30, September 30 and
December 31 of each year.
"DIVIDEND PERIOD" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"DIVIDEND RECORD DATE" means a day fifteen (15) days preceding the
Dividend Payment Date.
"EVENT OF DEFAULT" means (i) any event of default (whatever the reason
for such event of default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any governmental authority) under any
Instrument creating, evidencing or securing any indebtedness for borrowed money
of the Company or any Significant Subsidiary in an amount in excess of
$2,500,000 that would enable the creditors or secured parties under such
Instrument to declare the principal amount of such indebtedness due and payable
prior to its scheduled maturity, and has not been waived by the relevant
creditors or secured parties, (ii) the occurrence of a Default Change of Control
(as defined in the Investment Agreement), or (iii) one of the events specified
in clauses (i) through (vii) of Section 8(e).
"HOLDER" means a record holder of one or more outstanding shares of
Series B Preferred Stock.
"INITIAL DIVIDEND PERIOD" means the dividend period commencing on the
Original Issue Date and ending on the second Dividend Payment Date to occur
thereafter.
"INSTRUMENT" means any contract, agreement, indenture, mortgage,
security, document or writing under which any obligation is evidenced, assumed
or undertaken, or any security interest is granted or perfected.
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"INVESTOR" has the meaning set forth in the Investment Agreement.
"INVESTOR WARRANTS" means the 5,000,000 warrants to acquire Common
Stock to be issued to the Investor pursuant to the Investment Agreement.
"INVESTMENT AGREEMENT" means the Amended and Restated Investment
Agreement dated as of February 7, 1997 by and between AP-AGC, LLC and the
Corporation, amended as of March 20, 1997 and amended and restated as of May 15,
1997.
"JUNIOR STOCK" has the meaning set forth in Section 2.
"LIQUIDATION PREFERENCE" means, at any time, $10 per share of Series B
Preferred Stock, PLUS accumulated and unpaid Dividends thereon through the date
of such determination, whether or not declared and whether or not funds are
legally available therefor.
"OPTIONAL REDEMPTION PRICE" has the meaning set forth in Section 5(a).
"ORIGINAL ISSUE DATE" means the date upon which the Series B Preferred
Stock is originally issued by the Corporation.
"PARITY STOCK" means the Series A Preferred Stock (except insofar as
the Series A Preferred Stock has certain security rights and interests which are
not applicable to the Series B Preferred Stock) and any class or series of stock
the terms of which provide that it is entitled to participate PARI PASSU with
the Series B Preferred Stock with respect to any dividend or distribution or
upon liquidation, dissolution or winding-up of the Corporation.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, business trust, joint-stock company,
trust, unincorporated organization or government or agency or political
subdivision thereof.
"PUT SHARES" has the meaning set forth in Section 8(a).
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"QUARTERLY DIVIDEND PERIOD" shall mean the quarterly period commencing
on each March 31, June 30, September 30 and December 31 and ending on each
Dividend Payment Date, respectively.
"REDEMPTION DATE", with respect to any Series B Preferred Stock, means
the date on which such Series B Preferred Stock is redeemed by the Corporation.
"REDEMPTION NOTICE" has the meaning set forth in Section 5(c).
"REPURCHASE DATE" has the meaning set forth in Section 8(d).
"REPURCHASE NOTICE" has the meaning set forth in Section 8(a).
"REPURCHASE PRICE" has the meaning set forth in Section 8(a).
"SENIOR STOCK" means any class or series of stock the terms of which
provide that it is entitled to a preference to the Series B Preferred Stock with
respect to any dividend or distribution or upon voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation.
"SERIES A PREFERRED STOCK" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series A, par value $.01 per share, of the
Corporation.
"SERIES B PREFERRED STOCK CERTIFICATE" has the meaning set forth in
Section 6(b).
"SERIES B PREFERRED STOCK" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series B, par value $.01 per share, of the
Corporation, which may be issued in accordance with the Investment Agreement.
"SERIES B WARRANTS" means up to 4,000,000 warrants to acquire Common
Stock which may be issued to acquirers of Series B Preferred Stock.
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"SIGNIFICANT SUBSIDIARY" has the meaning set forth in Regulation S-X
under the Securities Exchange Act of 1934, as amended.
"SUBSIDIARY" means, (i) with respect to any Person, a corporation a
majority of whose Capital Stock with voting power under ordinary circumstances
to elect directors is at the time, directly or indirectly, owned by such Person,
by a Subsidiary of such Person or by such Person and a Subsidiary of such
Person, or (ii) any other Person (other than a corporation) of which at least a
majority of the voting interest is at the time, directly or indirectly, owned by
such Person, by a Subsidiary of such Person or by such Person and a Subsidiary
of such Person.
"TRADING DAY" shall mean a day on which securities are traded or quoted
on the national securities exchange or quotation system or in the
over-the-counter market used to determine the Closing Price.
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Exhibit 5
EXHIBIT C
________ Warrants Certificate No. W-[A][B][C]-1
WARRANT FOR THE PURCHASE OF
COMMON STOCK OF
ATLANTIC GULF COMMUNITIES CORPORATION
(VOID AFTER ________, 2004)
THE WARRANTS (AND THE COMMON STOCK ISSUABLE UPON EXERCISE
THEREOF) REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF SUCH
REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM SUCH
REGISTRATION. THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED EXCEPT UPON COMPLIANCE WITH THE REQUIREMENTS FOR
TRANSFER SET FORTH HEREIN [AND IN AN AMENDED AND RESTATED
INVESTMENT AGREEMENT DATED AS OF FEBRUARY 7, 1997, AMENDED
AS OF MARCH 20, 1997 AND AMENDED AND RESTATED AS OF MAY 15,
1997, BETWEEN THE ISSUER AND AP-AGC, LLC]. THE COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF IS ENTITLED TO THE BENEFITS
OF CERTAIN REGISTRATION RIGHTS UNDER [SUCH INVESTMENT
AGREEMENT].1
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THIS IS TO CERTIFY THAT, for value received, [AP-AGC, LLC]* _________,
or registered assigns (collectively, the "Holder"), is the registered owner of
the number of Warrants set forth above, each of which entitles the Holder,
subject to the terms and conditions set forth hereinafter, to purchase one share
of Common Stock, par value $.10 per share (the "Common Stock"), of Atlantic Gulf
- ----------
1 Bracketed language not to be included in Series B Warrants.
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<PAGE>
Communities Corporation, a corporation organized under the laws of the State of
Delaware (the "Company") having a place of business at 2601 South Bayshore
Drive, Miami, Florida 33133-5461, at a purchase price per share referred to
herein as the "Exercise Price." The number of shares of Common Stock which may
be received upon the exercise of this certificate (this "Warrant Certificate")
and the Exercise Price for each such share of Common Stock are subject to
adjustment from time to time as hereinafter set forth. Each share of Common
Stock issuable upon the exercise of each of the Warrants (collectively, the
"Warrant Shares") when issued and paid for pursuant to the provisions of this
Warrant shall be duly authorized, validly issued, fully paid and nonassessable,
shall be free from all taxes, liens and charges with respect to the issuance
thereof and shall be free of any preemptive or similar rights. The Company shall
cause the Warrant Shares to be listed or eligible to be quoted for trading on
the NASDAQ Stock Market or on any other stock exchange or market on which Common
Stock is then listed or eligible to be quoted for trading.
Each Warrant evidenced hereby is originally acquired pursuant to [the
Investment Agreement between the Company and the Investor] [a Securities
Purchase Agreement between the Company and ___________] [a rights offering by
the Company to all of its shareholders by means of a registration statement on
Form S-3], for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged.
Each Warrant is subject to the following terms and provisions:
Section 1. EXERCISE OF WARRANT.
(a) Subject to the provisions hereof, the Warrants evidenced hereby may
be exercised at the discretion of the Holder in whole or in part at any time or
from time to time on or after June 24, 1997 [DATE OF ISSUANCE OF SERIES B
WARRANT] (the "Initial Exercise Date") to and including June 24 [_____], 2004
(the "Expiration Date") or, if either day is not a Trading Day, then on the next
succeeding Trading Day, by presentation and surrender hereof to the Company at
the office or agency of the Company maintained for that purpose pursuant to
Section 11 (the "Warrant Office"), with the Notice of Election to Exercise (the
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"Exercise Notice") attached hereto duly executed and accompanied by payment to
the Company of the Exercise Price for the number of Warrant Shares specified in
such Exercise Notice.
(b) The Exercise Price for the Common Stock which each Warrant entitles
the Holder to purchase shall initially be equal to $5.75. The Exercise Price set
forth in the preceding sentence is subject to adjustment as set forth in
Sections 5 and 6.
(c) Upon receipt by the Company of this Warrant Certificate at the
Warrant Office, together with a properly completed Exercise Notice and payment
of the Exercise Price as provided above, the Holder shall be deemed to be the
holder of record of the Warrant Shares issuable upon such exercise, not-
withstanding that the stock transfer books of the Company shall then be closed
or that certificates representing such shares shall not then be actually
delivered to the Holder. The Company shall deliver such certificates to the
Holder as promptly as possible thereafter, but in any event within five business
days of receipt of the Exercise Notice. The Company shall pay all expenses, and
any and all United States federal, state and local taxes and other charges that
may be payable in connection with the preparation, issue and delivery of stock
certificates under this Section 1 except that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of the Warrant Shares in a name other than that of the Holder
of the Warrant evidenced hereby who shall have surrendered the same in exercise
of the subscription right evidenced hereby. If Warrant Shares are issued prior
to the time that an appropriate registration statement with respect to the
Warrant Shares has become effective under the Securities Act of 1933, as amended
(the "Securities Act"), the Warrant Shares so issued shall have stamped or
imprinted thereon a legend in the form of Exhibit A. Any holder of Warrant
Shares so legended shall be entitled to have such legend removed, upon surrender
of Warrant Shares to the Company or the transfer agent for the Common Stock,
upon effectiveness of such a registration statement or upon receipt by the
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Company of an opinion of counsel to the Holder to the effect that such legend is
no longer required.
(d) Upon any partial exercise of the number of Warrants to which this
Warrant Certificate entitles the Holder, there shall be issued to the Holder
hereof a new Warrant Certificate in respect of the shares as to which this
Warrant Certificate shall not have been exercised, subject to the provisions
of Section 3. Such new Warrant Certificate shall be identical to this Warrant
Certificate, except as to the number of shares of Common Stock covered thereby.
Section 2. Exchange, Transfer, Assignment or Loss of Warrant
Certificate; Temporary Warrant CERTIFICATES.
(a) In case this Warrant Certificate shall be mutilated, lost, stolen,
or destroyed, the Company may, in its discretion, issue and deliver in exchange
and substitution for and upon cancellation of the mutilated Warrant Certificate,
or in lieu of and substitution for the Warrant Certificate lost, stolen, or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and
indemnification reasonably satisfactory to it.
(b) The Warrant Certificates shall be numbered and shall be registered
in a Warrant Register maintained by the Company as they are issued. The
registered owner on the Warrant Register may be treated by the Company and all
other persons dealing with the Warrants evidenced hereby as the absolute owner
hereof for any purpose and as the person entitled to exercise the right
represented hereby, or to the transfer hereof on the books of the Company, any
notice to the contrary notwithstanding and, until such transfer on such books,
the Company may treat the registered owner on the Warrant Register as the owner
for all purposes. The Company may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
registration of transfer of Warrant Certificates.
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<PAGE>
(c) This Warrant Certificate may be subdivided or combined with other
Warrant Certificates evidencing the same rights as the rights evidenced hereby
and thereby upon presentation and surrender hereof at the Warrant Office
together with a written notice signed by the Holder hereof specifying the
denominations in which new Warrant Certificates are to be issued. Upon
presentation and surrender of any Warrant Certificates, together with such
written notice, for subdivision or combination, the Company will issue a new
Warrant Certificate or Certificates, in the denominations requested, entitling
the holders thereof to purchase the same aggregate number of shares of Common
Stock as the Warrant Certificate or Certificates so surrendered. Such new
Warrant Certificates will be registered in the name of the Holder submitting
such request and delivered to such Holder. Any Warrant Certificate surrendered
for subdivision or combination shall be cancelled promptly upon the issuance
of such new Warrant Certificate(s). The term "Warrant Certificate" as used
herein includes any Warrant Certificates into which this Warrant Certificate may
be subdivided, combined or exchanged.
Section 3. FRACTIONAL INTERESTS.
(a) The Company shall not be required to issue fractions of Warrants
or to issue Warrant Certificates which evidence fractional Warrants.
(b) The Company shall not be required to issue fractions of shares of
Common Stock in the exercise of Warrants. If any fraction of a Warrant Share
would, but for the provisions of this Section, be issuable on the exercise of
any Warrant (or specified portion thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the Current Market
Price (as defined in Section 5(g)) per share of Common Stock.
(c) The Holder, by acceptance of this Warrant Certificate, expressly
waives his right to receive any fractional Warrant or any fractional share upon
exercise of a Warrant.
Section 4. RESERVATION OF WARRANT SHARES, ETC.
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The Company represents that, as of the date hereof, it has sufficient
Common Stock reserved for issuance upon exercise of all outstanding Warrants,
and agrees that, at all times during the period within which the rights
represented by this Warrant Certificate may be exercised, there shall be
reserved for issuance and/or delivery upon exercise of the Warrants evidenced
by this Warrant Certificate, free from preemptive rights, such number of shares
of authorized but unissued or treasury shares of Common Stock, or other stock or
securities deliverable pursuant to Section 5, as shall be required for issuance
or delivery upon exercise of the Warrants evidenced hereby. The Company further
agrees (i) that it will not, by amendment of its certificate of incorporation or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or performed
hereunder by the Company and (ii) to promptly take all action as may from time
to time be required to permit the Holder to exercise the Warrants evidenced
hereby and the Company duly and effectively to issue the Warrant Shares as
provided herein upon the exercise hereof. Without limiting the generality of the
foregoing, the Company agrees that it will not take any action which would
result in Warrant Shares when issued not being validly and legally issued and
fully paid and nonassessable and that it will take all such action as may be
necessary to assure that the Warrant Shares may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
the NASDAQ Stock Market or any other stock exchange or market upon which the
Common Stock may be listed; PROVIDED, HOWEVER, that the Company shall not be
required to effect a registration under federal or state securities laws with
respect to such exercise except as provided in the Investment Agreement. The
Company further agrees that it will not increase the par value of the Common
Stock while the Warrants evidenced hereby are outstanding, although such par
value may be reduced at any time.
Section 5. ANTI-DILUTION.
The Exercise Price and the number of shares of Common Stock purchasable
upon the exercise hereof shall be subject to adjustment from time to time as
provided in this Section. Unless otherwise indicated, all calculations under
this Section 5 shall be made to the nearest $0.01 or 1/100th of a share, as the
case may be.
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(a) In case the Company shall (i) declare a dividend or make a
distribution on the outstanding Common Stock in capital stock of the
Company, (ii) subdivide or reclassify the outstanding Common Stock into a
greater number of shares (or into other securities or property), or (iii)
combine or reclassify the outstanding Common Stock into a smaller number of
shares (or into other securities or property), the number of Warrant Shares
issuable upon the exercise of each Warrant shall be adjusted so that the
Holder of each Warrant shall be entitled to purchase the kind and number of
shares of Common Stock or other securities or property of the Company
determined by multiplying the number of Warrant Shares issuable upon
exercise of each Warrant immediately prior to such event by a fraction, the
numerator of which shall be the total number of outstanding shares of Common
Stock immediately after such event, and the denominator of which shall be
the total number of outstanding shares of Common Stock immediately prior to
such event. An adjustment made pursuant to this paragraph (a) shall become
effective immediately after the effective date of such event, retroactive to
the record date, if any, for such event. Any Common Stock issuable in
payment of a dividend shall be deemed to have been issued immediately prior
to the time of the record date for such dividend for purposes of calculating
the number of outstanding shares of Common Stock under paragraphs (b) and
(c) below. Adjustments pursuant to this paragraph shall be made successively
whenever any event specified above shall occur. Whenever the number of
Warrant Shares issuable upon exercise of a Warrant is adjusted pursuant to
this paragraph, the Exercise Price payable upon exercise of each Warrant
shall be adjusted by multiplying the Exercise Price in effect immediately
prior to such adjustment by a fraction, the numerator of which shall be the
number of Warrant Shares issuable upon the exercise of each Warrant
immediately prior to such adjustment, and the denominator of which shall be
the number of Warrant Shares issuable immediately thereafter.
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(b) In case the Company shall fix a record date for the issuance of
rights or warrants to all holders of Common Stock entitling them to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable of Common Stock) (other than Series B Preferred Stock or Series
B Warrants) at a price per share (or having a conversion price or exchange
price per share, subject to normal antidilution adjustments) less than the
Current Market Price (as defined in paragraph (g) below) of the Common Stock
on such record date, the number of Warrant Shares thereafter issuable upon
exercise of each Warrant shall be determined by multiplying the number of
Warrant Shares theretofore issuable upon exercise of each Warrant by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights, options or
warrants plus the number of additional shares of Common Stock offered for
subscription or purchase in connection with such rights, options or
warrants, and the denominator of which shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights, options or
warrants plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered
would purchase at the Current Market Price as of such record date. Such
adjustment shall be made whenever such rights, options or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants. Whenever the number of Warrant Shares issuable upon exercise of a
Warrant is adjusted pursuant to this paragraph, the Exercise Price payable
upon exercise of each Warrant shall be adjusted by multiplying the Exercise
Price in effect immediately prior to such adjustment by a fraction, the
numerator of which shall be the number of Warrant Shares issuable upon the
exercise of each Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares issuable
immediately thereafter.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (i) of shares of any class other
than Common Stock, (ii) of evidences of indebtedness of the Company or any
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Subsidiary, (iii) of assets or other property or (iv) of rights or warrants
(excluding rights or warrants resulting in an adjustment pursuant to
paragraph (b) above, and the right to acquire Series B Preferred Stock and
Series B Warrants in the rights offering thereof), then in each such case
the number of Warrant Shares thereafter issuable upon exercise of each
Warrant shall be determined by multiplying the number of Warrants Shares
theretofore issuable upon the exercise of each Warrant by a fraction, the
numerator of which shall be the Current Market Price per share of Common
Stock as of the record date for such distribution, and the denominator of
which shall be the then Current Market Price per share of Common Stock, less
the then fair market value (as determined by the Board of Directors, whose
reasonable determination shall be described in a Board Resolution) of the
portion of the securities, evidences of indebtedness, assets, property or
rights or warrants so distributed, the case may be, which is applicable to
one share of Common Stock. Such adjustment shall be made successively
whenever such a record date is fixed. Whenever the number of Warrant Shares
issuable upon exercise of a Warrant is adjusted pursuant to this paragraph,
the Exercise Price payable upon exercise of each Warrant shall be adjusted
by multiplying such Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of Warrant Shares
issuable upon the exercise of each Warrant immediately prior to such
adjustment, and the denominator of which shall be the number of Warrant
Shares purchasable immediately thereafter.
(d) In case the Company shall issue its Common Stock for a
consideration per share less than the Current Market Price per share on the
date the Company fixes the offering price of such additional shares, the
Exercise Price shall be adjusted immediately thereafter so that it shall
equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
total number of shares of Common Stock outstanding immediately prior to the
issuance of such additional shares plus the number of shares of Common Stock
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which the aggregate consideration received (determined as provided in
paragraph (f) below) for the issuance of such additional shares would
purchase at the Current Market Price per share, and the denominator shall be
the number of shares of Common Stock outstanding immediately after the
issuance of such additional shares. Such adjustment shall be made
successively whenever such an issuance is made; PROVIDED, HOWEVER, that the
provisions of this paragraph shall not apply (i) to Common Stock issued to
the Company's employees or former employees or their estates under BONA FIDE
employee benefit plans adopted by the Board of Directors and approved by the
holders of Common Stock if required by law, if such Common Stock would
otherwise be covered by this paragraph, but only to the extent that the
aggregate number of shares excluded hereby shall not exceed, on a cumulative
basis since the Initial Exercise Date, [NUMBER TO BE AGREED BEFORE CLOSING]
(including 842,000 shares as of the Initial Exercise Date to be issued
pursuant to employee and director stock options outstanding as of the
Initial Exercise Date to purchase Common Stock), (ii) to Common Stock to be
issued pursuant to the Bank Warrants, (y) to Common Stock to be issued
pursuant to the Investor Warrants or the Series B Warrants and (iii) to
Common Stock to be issued upon conversion of Series A Preferred Stock or
Series B Preferred Stock, adjusted, as appropriate, in each case,
connection with any stock split, merger, recapitalization or similar
transaction.
(e) In case the Company shall issue any securities convertible into or
exchangeable for Common Stock (excluding (A) securities issued in
transactions resulting in an adjustment pursuant to paragraphs (b) and (c)
above, (B) Series A Preferred Stock, (C) Series B Preferred Stock, (D)
Series B Warrants and (E) upon conversion of any of such securities) for a
consideration per share of Common Stock deliverable upon conversion or
exchange of such securities (determined as provided in paragraph (f) below
and subject to normal anti-dilution adjustments) less than the Current
Market Price per share in effect immediately prior to the issuance of such
securities, the Exercise Price shall be adjusted immediately thereafter so
that it shall equal the price determined by multiplying the Exercise Price
in effect immediately prior thereto by a fraction, of which the numerator
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shall be the number of shares of Common Stock outstanding immediately prior
to the issuance of such securities plus the number of shares of Common
Stock which the aggregate consideration received (determined as provided in
paragraph (f) below) for such securities would purchase at the Current
Market Price per share, and the denominator shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the maximum
number of shares of Common Stock deliverable upon conversion of or in
exchange for such securities at the initial conversion or exchange price or
rate. Such adjustment shall be made successively whenever such an issuance
is made.
Upon the termination of the right to convert or exchange such
securities, the Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been obtained had the adjustments made upon the
issuance of such convertible or exchangeable securities been made upon the
basis of the delivery of only the number of shares of Common Stock actually
delivered upon conversion or exchange of such securities and upon the basis
of the consideration actually received by the Company (determined as
provided in paragraph (f) below) for such securities.
(f) For purposes of any computation respecting consideration received
pursuant to paragraphs (d) and (e) above, the following shall apply:
(i) in the case of the issuance of Common Stock for cash,
the consideration shall be the amount of such cash, PROVIDED
that in no case shall any deductions be made for any customary
commissions, discounts, placement fees or other expenses
reasonably incurred by the Company for any underwriting or
placement of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
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consideration other than cash shall be deemed to be the fair
market value thereof as reasonably determined by the Board of
Directors, whose determination shall be described in a Board
Resolution; and
(iii) in the case of the issuance of securities convertible
into or exchangeable for Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Company upon the conversion or exchange
thereof (the consideration in each case to be determined in the
same manner as provided in clauses (i) and (ii) of this
paragraph (f)).
(g) For the purpose of any computation under this Warrant, the "Current
Market Price" per share at any date shall be deemed to be the average of the
daily Sale Price for the Common Stock for the 10 consecutive Trading Days
commencing 14 Trading Days before such date.
(h) In any case in which this Section shall require that an adjustment
shall become effective immediately after a record date for an event, the
Company may defer until the occurrence of such event (i) issuing to the
Holder of any Warrant exercised after such record date and before the
occurrence of such event the additional Common Stock issuable upon such
exercise by reason of the adjustment required by such event over and above
the Common Stock issuable upon such exercise before giving effect to such
adjustment and (ii) paying to such Holder an amount in cash in lieu of a
fractional share of Common Stock pursuant to Section 3; PROVIDED, HOWEVER,
that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's rights to receive such
additional Common Stock, and such cash, upon the occurrence of the event
requiring such adjustment.
(i) No adjustment in the Exercise Price shall be required with respect
to Common Stock issued upon exercise of the Warrants unless such adjustment
would require a decrease of at least $.01; PROVIDED, HOWEVER, that any such
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adjustment which is not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
(j) The Company may make such reductions in the Exercise Price, in
addition to those required pursuant to other paragraphs of this Section, as
it considers to be advisable so that any event treated for federal income
tax purposes as a dividend of stock or stock rights shall not be taxable to
the recipients.
(k) In case of any consolidation with or merger of the Company into
another corporation, or in case of any sale, lease or conveyance of assets
to another corporation of the property of the Company as an entirety or
substantially as an entirety, such successor, leasing or purchasing
corporation, as the case may be, shall be bound by this Warrant Certificate
and shall execute and deliver to the Holder hereof simultaneously therewith
a new Warrant Certificate, reasonably satisfactory in form and substance to
such Holder, providing that the Holder of each Warrant then outstanding
shall have the right thereafter to exercise such Warrant solely for the
kind and amount of shares of stock, other securities, property or cash or
any combination thereof receivable upon such consolidation, merger, sale,
lease or conveyance by a holder of the number of shares of Common Stock for
which such Warrant might have been exercised immediately prior to such
consolidation, merger, sale, lease or conveyance.
(l) In case of any reclassification or change of the Common Stock
issuable upon exercise of the Warrants (other than a change in par value, or
from par value to no par value, or as a result of a subdivision or
combination, but including any change in the Common Stock into two or more
classes or series of shares), or in case of any consolidation or merger of
another corporation into the Company in which the Company is the continuing
corporation and in which there is a reclassification or change (including a
change to the right to receive cash or other property) of the Common Stock
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(other than a change in par value, or from par value to no par value, or as
a result of a subdivision or combination, but including any change in the
Common Stock into two or more classes or series of shares), the Company
shall execute and deliver to the Holder hereof simultaneously therewith a
new Warrant Certificate, satisfactory in form and substance to such Holder,
providing that the Holder of each Warrant then outstanding shall have the
right thereafter to exercise such Warrant solely for the kind and amount of
shares of stock, other securities, property or cash or any combination
thereof receivable upon such reclassification, change, consolidation or
merger by a holder of the number of shares of Common Stock for which such
Warrant might have been exercised immediately prior to such
reclassification, change, consolidation or merger.
(m) The foregoing paragraphs (k) and (1), however, shall not in any way
affect the rights a Holder may otherwise have, pursuant to this Section, to
receive securities, evidences of indebtedness, assets, property rights or
warrants upon exercise of a Warrant.
(n) Whenever there shall be any change in the Exercise Price under any
paragraph of this Section, and no specific means of adjusting the number of
Warrant Shares issuable upon exercise of each Warrant is provided in such
paragraph, then there shall be an adjustment (to the nearest hundredth of a
share) in the number of shares of Common Stock purchasable upon exercise of
this Warrant Certificate, which adjustment shall become effective at the
time such change in the Exercise Price becomes effective and shall be made
by multiplying the number of shares of Common Stock purchasable upon
exercise of this Warrant Certificate immediately before such change in the
Exercise Price by a fraction, the numerator of which is the Exercise Price
immediately before such change, and the denominator of which is the Exercise
Price immediately after such change. If, following the declaration of a
record date for the distribution of any rights, warrants or other securities
or property to be distributed to holders of Common Stock, such rights,
warrants or other securities or property are not so issued, the Exercise
Price then in effect shall be readjusted, effective as of the date when the
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Board of Directors determines not to issue such rights or warrants, to the
Exercise Price which would then be in effect if a record date for such
issuance had not been fixed.
(o) If the Company repurchases any Common Stock for a per share
consideration which exceeds the Current Market Price of a share of Common
Stock on the date immediately prior to such repurchase, then the Company
shall issue additional Warrants to the holder having the Exercise Price in
effect on the Trading Day immediately prior to such repurchase. The
additional Warrants issued pursuant to the preceding sentence shall entitle
the Holder to purchase the number of shares of Common Stock equal to the
result obtained by dividing (A) the product of (w) the number of shares of
Common Stock repurchased at a price in excess of the Current Market Price
and (x) the amount by which the per-share repurchase price exceeds such
Current Market Price, by (B) the amount by which (y) such Current Market
Price exceeds (z) the Exercise Price in effect as of the date immediately
preceding such repurchase.
(p) If any event occurs as to which the foregoing provisions of this
Section are not strictly applicable or, if strictly applicable, would not,
in the good faith judgment of the Board of Directors, fairly protect the
purchase rights of the Warrants in accordance with the essential intent and
principles of such provisions, then such Board of Directors shall make such
adjustments in the application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably necessary, in the
good faith opinion of such Board, to protect such purchase rights as
aforesaid, but in no event shall any such adjustment have the effect of
increasing the Exercise Price or decreasing the number of shares of Common
Stock subject to purchase upon exercise of this Warrant, or otherwise
adversely affect the Holders. Under no circumstances (other than (A)(x) a
reverse stock split, (y) a recapitalization in which all holders of Common
Stock (and securities exercisable for or convertible into Common Stock, with
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respect to such exercise or conversion provisions) are treated equally and
(z) a merger, in each case in which each outstanding share of Common Stock
is converted into less than one share of Common Stock (including, in the
case of a merger, of the entity surviving such merger), or (B) as provided
in Section 6) shall any adjustment pursuant to this Section have the effect
of raising the Exercise Price or lowering the number of Warrant Shares
issuable upon exercise of a Warrant.
(q) If, after one or more adjustments to the Exercise Price pursuant to
this Section 5, the Exercise Price cannot be reduced further without falling
below the lowest positive exercise price legally permissible for warrants to
acquire Common Stock, the Company shall make further adjustment to
compensate the holder, consistent with the foregoing principles, as the
Board of Directors, acting in good faith, deems necessary, including an
increase in the number of Warrant Shares issuable upon exercise of out-
standing Warrants and/or a cash payment to the Holder.
(r) For purposes of any adjustment to be made pursuant to this Section
5, Common Stock owned or held at any relevant time by, or for the account
of, the Company in its treasury or otherwise, shall not be deemed to be out-
standing for purposes of the calculation and adjustments described therein,
but shares held in the Disputed Claims Reserve, Division Class 14 Utility
Fund Trust Agreement dated April 6, 1993 and the Improvements Fund Trust
Agreement dated April 6, 1993 shall not be deemed to be held by, or for the
account of, the Company.
SECTION 6. ADDITIONAL ADJUSTMENT OF EXERCISE PRICE.
(a) The Company will cause the financial statements for the Company and
its consolidated Subsidiaries for the fiscal year ending on December 31, 1998 to
be audited by Ernst & Young, LLP, or another national independent accounting
firm, and a manually signed copy of such financial statements to be delivered
by the Company to the Holders as soon as practicable following December 31,
1998, but in no event later than March 31, 1999 (the date such financial
statements are so delivered, the "Adjustment Date").
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(b) The Exercise Price shall be reduced, effective as of the Adjustment
Date, by subtracting the Adjustment Amount from the Exercise Price; PROVIDED,
HOWEVER, that (i) the Exercise Price shall only be adjusted pursuant to this
Section 6 if the Adjustment Amount is a positive number; (ii) in no event shall
the adjustment required by this Section 6 result in an Exercise Price lower than
[$2.00 FOR CLASS A] [$3.00 FOR CLASS B] [$4.00 FOR CLASS C] (as adjusted
pursuant to Section 5, the "Base Exercise Price"), and if the adjustment
required pursuant to this Section 6 would result in an Exercise Price lower than
the Base Exercise Price, then the Exercise Price shall be reduced to the Base
Exercise Price; and (iii) if the closing price for the Common Stock (adjusted
pursuant to Section 5) is greater than $9.75 both (A) on the last trading day of
1998 and (B) on an average basis over the three months ending on December 31,
1998, then no adjustment shall be made pursuant to this Section 6.
The "Adjustment Amount" equals the product of (i) $.015 and (ii) the
quotient obtained by dividing (A) the difference between (x) the Actual
Cumulative Operating Cash Flow and (y) the Target Cumulative Operating Cash Flow
by (B) $100,000, where:
"Target Cumulative Operating Cash Flow" equals $62,443,000;
"Actual Cumulative Operating Cash Flow" equals the sum of the Actual
Operating Cash Flow for the year ending December 31, 1997 and the Actual
Operating Cash Flow for the year ending December 31, 1998, minus 0.15 times the
Excess 1998 Operating Cash Flow;
"Actual Operating Cash Flow" for any year means the net cash proceeds
derived by the Company from the operation in the ordinary course of its business
and from the bulk asset sales contemplated by the Business Plan, calculated in
all respects the same as, and using the same accounting principles and
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practices and classification systems and techniques as were used in, the
calculation of the Target Cumulative Operating Cash Flow, as described in
summary format in Exhibit B to this Warrant. By way of clarification, all
revenue and cost items shall be associated for purposes of calculating the
Actual Operating Cash Flow with the same activities/categories (such as "Net
Subdivision Homesites") as they were in calculating the Target Cumulative
Operating Cash Flow.
"Excess 1998 Operating Cash Flow" means the Actual Operating Cash Flow
for the year ending December 31, 1998 minus $3,028,000.
(c) No adjustment shall be made to the number of Warrant Shares
issuable upon exercise of a Warrant as a result of an adjustment to the Exercise
Price pursuant to this Section 6; PROVIDED, HOWEVER, that this paragraph shall
not prevent adjustments otherwise required pursuant to another Section of this
Warrant from being made.
(d) If Company is involved in a merger, consolidation or similar
transaction, or to the extent that all or substantially all of the assets of
the Company are sold, in either case prior to the Adjustment Date, then an
adjustment to the Exercise Price shall be made pursuant to this Section 6 on a
PRO RATA basis by dividing both the Target Cumulative Operating Cash Flow and
the Actual Cumulative Operating Cash Flow derived by the Company's business
through the close of business on the date immediately prior to the effective
date of such transaction by a fraction, the numerator of which shall be the
number of days elapsed from the Initial Exercise Date through the business day
immediately prior to the effective date of such transaction and the denominator
of which shall be the number of days from the Initial Exercise Date through
February 28, 1999.
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SECTION 7. NOTICE OF ADJUSTMENTS.
(a) Prior to the earlier to occur of (i) the declaration of a record
date for, or (ii) the announcement and/or consummation of, any event or action
that would result in an adjustment pursuant to Section 5 or Section 6, the
Company shall notify the Holder of such intended record date, announcement,
event or action. Such notice must be reasonably calculated to be delivered not
less than 20 nor more than 90 days prior to the applicable event.
(b) Whenever the Exercise Price is adjusted as provided in Section 5
or Section 6:
(i) the Company shall compute the adjusted Exercise Price in
accordance with Section 5 or Section 6 and shall prepare a certificate
signed by the chief financial officer of the Company setting forth the
adjusted Exercise Price and showing in reasonable detail the facts upon
which such adjustment is based, including, if appropriate, a statement
of the consideration received or to be received by the Company for,
and setting forth the amount of, any additional Common Stock issued
since the last such adjustment and the number of shares of Common Stock
for which the Warrants evidenced hereby are exercisable at the then
Exercise Price, and such certificate shall forthwith be filed at the
Warrant Office;
(ii) a notice stating that the Exercise Price and number of
shares for which each Warrant may be exercised have been adjusted and
setting forth the adjusted Exercise Price and number of shares for
which each Warrant may be exercised shall be communicated by telegram,
telex, telecopier or any other means of electronic communication
capable of producing a written record, or shall be delivered by hand or
mailed as soon as practicable by the Company to the Holder at its last
address as it shall appear upon the Warrant Register provided for in
Section 2; and
(iii) the Company shall provide to the Holder such additional
information, including worksheets used in the calculation of any
adjustment made pursuant to Section 5 or Section 6, as the Holder may
reasonably request for the purpose of confirming the accuracy of such
adjustment.
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SECTION 8. NO RIGHTS AS SHAREHOLDERS; NOTICE TO HOLDER.
Nothing contained herein shall be construed as conferring upon the
Holder the right to vote or to receive dividends or to receive notice as
shareholders in respect of the meetings of shareholders for the election of
directors of the Company or any other matter, or any rights whatsoever as share
holders of the Company. If, however, at any time prior to the expiration of the
Warrants and prior to their exercise, any of the following shall occur:
(a) The Company shall authorize the issuance to all holders of
Common Stock of rights, options or warrants to subscribe for or
purchase Common Stock, or of any other subscription rights or warrants
(other than the rights offering of Series B Preferred Stock
contemplated by the Investment Agreement); or
(b) The Company shall authorize the distribution to all
holders of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in Common
Stock); or
(c) The Company shall propose any consolidation or merger to
which the Company is a party and for which approval of any stock of
the Company is required, or the conveyance or transfer of all or
substantially all the properties and assets of the Company, whether in
one transaction or in a series of transactions (whether by sale, lease
or other disposition), or any reclassification or change of outstanding
Common Stock issuable upon exercise of the Warrants (other than a
change in par value or from par value to no par value); or
(d) The Company shall propose the voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then the Company shall cause to be given to the Holder at its address appearing
on the Warrant Register, at least 15 days prior to the applicable record date
hereinafter specified, by first class mail, postage prepaid, and, if possible,
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by telecopy transmission, a written notice stating (i) the date as of which the
holders of record of Common Stock entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the date on which any
such consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as of
which it is expected that the holders of record of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the notice
required by this Section or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
SECTION 9. RESTRICTIONS ON TRANSFER OF THE WARRANTS AND WARRANT SHARES.
Until such time as an appropriate registration statement covering the
Warrants or the Warrant Shares has become effective under the Securities Act,
the Holder will not dispose of either the Warrants evidenced hereby or the
Warrant Shares, as the case may be, unless (i) the transferee has agreed to be
bound by the restrictions contained herein on such Warrants or Warrant Shares,
as the case may be, and (ii) except in the case of a transfer by the Holder to
an Affiliate, the Company shall have received an opinion of counsel (which shall
be reasonably satisfactory to the Company) to the effect that the sale or other
proposed disposition of the Warrants or Warrant Shares may be accomplished
without such registration under the Securities Act, which opinion may be
conditioned upon (x) acceptance by the transferee of a Warrant Certificate or
Certificates or Warrant Shares bearing a legend similar to that set forth in
Exhibit A and (y) a certificate of the transferee stating that the Warrant(s) or
Warrant Share(s) being acquired by such transferee are being acquired by such
transferee for its own account and not with a view to, or for resale in
connection with, the distribution thereof in violation of the Securities Act.
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SECTION 10. EXECUTION OF WARRANT CERTIFICATES.
Each Warrant Certificate shall be executed on behalf of the Company by
the manual or facsimile signature of the present or any future Chairman of the
Board of Directors, President or Vice President of the Company.
SECTION 11. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain a Warrant Office in [New York, New York],
where this Warrant Certificate may be presented or surrendered for subdivision,
combination, registration of transfer, or exchange and where notices and demands
to or upon the Company in respect of the Warrants evidenced hereby may be
served. The Company hereby initially designates [TO BE DESIGNATED] as the
agency of the Company for such purpose.
SECTION 12. SEVERABILITY.
If any one or more of the provisions contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality, and
enforceability of any such provision in every other respect and the other
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the Holder's rights and privileges shall be
enforceable to the fullest extent permitted by law.
SECTION 13. GOVERNING LAW.
The Warrants shall be governed by and construed in accordance with the
laws of the State of Delaware.
SECTION 14. DEFINITIONS.
For all purposes of this Warrant Certificate, in addition to the other
terms defined elsewhere herein, unless the context otherwise requires:
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any specified person means the power to
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direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise.
"Appraisal Procedure" means a procedure whereby two independent
appraisers or other experts qualified to conduct the evaluation or
calculation required ("Appraisers"), one chosen by the Company and one by
the Holder entitled to use the Appraisal Procedure (or, to the extent more
than one Holder is so entitled, by a majority in interest of the Holders so
entitled), shall mutually agree upon the determinations then the subject of
appraisal, evaluation or calculation. Each party shall deliver a notice to
the other appointing its Appraiser within 15 days after the Appraisal
Procedure is invoked. If within 30 days after appointment of the two
Appraisers they are unable to agree upon the amount in question, a third
independent Appraiser shall be chosen within 10 days thereafter by the
mutual consent of such first two Appraisers or, if such first two Appraisers
fail to agree upon the appointment of a third Appraiser, such appointment
shall be made by the American Arbitration Association, or any organization
successor thereto, from a panel of arbitrators having experience in the
appraisal, evaluation or calculation of the subject matter to be determined.
The decision of the third Appraiser so appointed and chosen shall be given
within 30 days after the selection of such third Appraiser. If three
Appraisers shall be appointed and the determination of one Appraiser is
disparate from the middle determination by more than twice the amount by
which the other determination is disparate from the middle determination,
then the determination of such Appraiser shall be excluded, the remaining
two determinations shall be averaged and such average shall be binding and
conclusive on the Company and the Holders; otherwise the average of all
three determinations shall be binding and conclusive on the Company and the
Holders. The costs of conducting any Appraisal Procedure shall be borne by
the Holders requesting such Appraisal Procedure, except (a) the fees and
expenses of the Appraiser appointed by the Company and any costs incurred by
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the Company shall be borne by the Company and (b) if such Appraisal
Procedure shall result in a determination that is disparate by 5% or more
from the Company's initial determination, all costs of conducting such
Appraisal Procedure shall be borne by the Company.
"Bank Warrants" means the 1,500,000 warrants for the purchase of Common
Stock issued on September 30, 1996 pursuant to the Prepayment Agreement
dated as of September 30, 1996 among the financial institutions listed on
the signature pages thereof, The Chase Manhattan Bank and the Company.
"Board of Directors" means either the Board of Directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification and delivered to each of the Holders of the Warrants.
"Business Plan" means the 1997-1998 Business Plan of the Company
previously delivered to the Investor and certified to the Investor by the
Company on the date of issuance of this Warrant.
"Common Stock" means any stock of any class of the Company which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Com-
pany, and which is not subject to redemption by the Company. However,
subject to Section 5, shares issuable on exercise of the Warrants evidenced
hereby, as contemplated by the first paragraph of this Warrant Certificate,
shall include only shares of the class designated as Common Stock of the
Company as of the date of this Warrant or shares of any class or classes
resulting from any reclassification or reclassifications thereof and which
have no preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or winding up
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of the Company and which are not subject to redemption by the Company;
PROVIDED that if at any time there shall be more than one such resulting
class, the shares of each such class then so issuable shall be substantially
in the proportion which the total number of shares of such class resulting
from all such reclassifications bears to the total number of shares of all
such classes resulting from all such reclassifications. As used in this
Warrant Certificate, "shares" shall include fractions thereof to the extent
that fractional shares of the Company are outstanding.
"Investment Agreement" means the Amended and Restated Investment
Agreement dated as of February 7, 1997 by and between the Investor and the
Company, amended as of March 20, 1997 and amended and restated as of May 15,
1997.
"Investor" means AP-AGC, LLC.
"Investor Warrants" means the 5,000,000 warrants to acquire Common
Stock to be issued to the Investor pursuant to the Investment Agreement.
"Person" shall mean any individual, firm, partnership, association,
group (as such term is used in Rule 13d-5 under the Securities Exchange Act
of 1934, as amended, as in effect on the date of this Warrant), corporation
or other entity.
"Sale Price" of the Common Stock means the last reported sale price
regular way reported on the NASDAQ Stock Market or its successor, or, if not
listed or admitted to trading on the NASDAQ Stock Market or its successor,
the last reported sale price regular way reported on any other stock
exchange or market on which the Common Stock is then listed or eligible to
be quoted for trading, or as reported by the National Quotation Bureau
Incorporated.
"Series B Preferred Stock" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series B, par value $.01 per share, of the
Company, which may be issued in accordance with the Investment Agreement.
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"Series B Warrants" means up to 4,000,000 warrants to acquire Common
Stock which may be issued to acquirers of Series B Preferred Stock.
"Subsidiary" means any subsidiary of the Company, a majority of whose
capital stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly owned by the Company, by
one or more subsidiaries of the Company or by the Company and one or more
subsidiaries of the Company.
"Trading Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are not traded on the
exchange or market where the Warrants are listed or sold.
SECTION 15. FEES AND EXPENSES.
All fees and expenses incurred by the Holder in connection with the
Holder's ownership of Warrants and securities or other property received upon
exercise thereof which relate to (i) any required regulatory filings, (ii)
registration fees, (iii) stock exchange or NASDAQ listing fees, and (iv)
reasonable fees and expenses of counsel to the Company in connection with the
foregoing, shall be paid by the Company.
SECTION 16. CONTEST AND APPRAISAL RIGHTS.
Upon each determination of fair market value or other evaluation or
calculation required hereunder (including calculation of the Adjustment
Amount), the Company shall promptly give notice thereof to all Holders, setting
forth in reasonable detail the calculation of such fair market value or
valuation (or Adjustment Amount) and the method and basis of determination
thereof, as the case may be. If any Holders of Warrants to purchase at least
100,000 shares of Common Stock (including, for purposes of determining such
level of ownership, all Warrants owned by affiliates of such Holders) shall
disagree with such determination and shall, by notice to the Company given
within 15 days after the Company's notice of such determination, elect to
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dispute such determination, such dispute shall be resolved in accordance with
the Appraisal Procedure.
SECTION 17. ADDITIONAL WARRANTS TO BE ISSUED AT CURRENT EXERCISE PRICE.
Notwithstanding any other provision of this Warrant, to the extent the
Holder is entitled to receive additional Warrants in accordance with the terms
hereof, the Warrants so issued shall have terms identical to this Warrant,
except that (i) the initial Exercise Price for such additional Warrants shall be
deemed to be the Exercise Price in effect on the date such additional Warrants
are issued and (ii) the amount and kind of securities and/or other property
issuable upon exercise of such Warrants shall be deemed to be the amount and
kind of securities and/or other property issuable upon exercise of the Warrants
outstanding immediately prior to issuance of such additional Warrants.
Dated: ________ __, 1997 ATLANTIC GULF COMMUNITIES
CORPORATION
By:--------------------
Name:
Title:
ATTEST:
- ----------------------------
Secretary
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NOTICE OF ELECTION TO EXERCISE
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ______ shares of Common Stock and hereby
makes payment of the Exercise Price in cash in the amount of $_________.
NAME OF HOLDER:
---------------------------
(Please Print)
By_________________________
Date:_________________, 199_.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name________________________________________
(please type or print in block letters)
Address_____________________________________
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EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF SUCH REGISTRATION OR THE
AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION. SUCH SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON COMPLIANCE WITH THE REQUIREMENTS FOR
TRANSFER SET FORTH HEREIN.
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EXHIBIT A
EXHIBIT B TO WARRANT CERTIFICATE
ATLANTIC GULF COMMUNITIES CORPORATION
CALCULATION PRINCIPLES AND POLICIES FOR
WARRANT ADJUSTMENT FORMULA AND OPERATING CASH FLOW TARGETS (1)
Target Cumulative Operating Cash Flow was calculated as follows (capitalized
terms having the meanings set forth in the attached Warrant):
TARGET FOR YEAR ENDED 12/31, 1997 1998
- --------------------------- ---- ----
Net GDC Bulk Asset Sales (2) $54,743,000.00 $0.00
Utility Trust 10,000,000.00 0.00
Net Subdivision Homesites (3) 9,000,000.00 11,128,000.00
Overhead (4) (14,328,000.00) (8,100,000.00)
--------------- --------------
Total Operating Target 59,415,000.00 3,028,000.00
Cumulative Total Target $59,415,000.00 $62,443,000.00
TARGET CUMULATIVE OPERATING CASH FLOW = $62,443,000.00
- ------------------------------------------------------
(1) Operating Cash Flow excludes capital transactions such as financings,
refinancings, any equity issuances, sale in bulk of assets or subdivisions and
any other transactions not in the ordinary course of business, except for GDC
Bulk Asset Sales and Utility Trust proceeds as set forth above.
(2) Includes the net cash proceeds from the sale or non-recourse financing of
any mortgages (Seller Paper) generated from GDC bulk asset sales, but excludes
any sales of assets or financings classified as "Scattered Homesites" (bulk or
otherwise) in the Business Plan. For the purpose of this calculation,
mortgages will be treated as follows: Cash Flow payments will be discounted at
15% per year, as long as the aggregate principal outstanding of mortgages at any
time is less than $10,000,000.00, otherwise the incremental amount of mortgages
will be treated in the same manner but using a 20% discount rate.
(3) "Net Subdivision Homesites" as described in the Business Plan, subject to
any further Business Plan changes approved by the Board of Directors and the
Investor.
(4) "Overhead" as described in the Business Plan.
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