SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File Number: 1-8967
ATLANTIC GULF COMMUNITIES CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 59-0720444
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2601 South Bayshore Drive
MIAMI, FLORIDA 33133-5461
- -------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (305) 859-4000
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
There are 9,721,720 shares of the Registrant's Common Stock outstanding as of
May 12, 1997.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
No.
----
PART I. - FINANCIAL INFORMATION
<S> <C> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997 and December 31,
1996 1
Consolidated Statements of Operations for the Three Months Ended
March 31, 1997 and 1996 2
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1997 and 1996 3
Notes to Consolidated Financial Statements 4
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
</TABLE>
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
ASSETS (UNAUDITED)
------
<S> <C> <C>
Cash and cash equivalents $ 2,458 $ 7,050
Restricted cash and cash equivalents 6,004 6,034
Contracts receivable, net 8,773 9,649
Mortgages, notes and other receivables, net 48,209 63,800
Land and residential inventory 146,485 153,417
Property, plant and equipment, net 2,802 2,911
Other assets, net 25,153 20,532
--------- ---------
Total assets $ 239,884 $ 263,393
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Accounts payable and accrued liabilities $ 9,322 $ 16,914
Customers' and other deposits 5,945 5,483
Other liabilities 13,267 15,393
Notes, mortgages and capital leases 162,184 169,215
--------- ---------
190,718 207,005
--------- ---------
Stockholders' equity
Common stock, $.10 par value; 15,665,000
shares authorized; 9,807,997 and
9,795,642 shares issued 981 980
Contributed capital 122,176 122,123
Accumulated deficit (67,982) (60,706)
Minimum pension liability adjustment (6,000) (6,000)
Treasury stock, 86,277 shares, at cost (9) (9)
--------- ---------
Total stockholders' equity 49,166 56,388
--------- ---------
Total liabilities and stockholders' equity $ 239,884 $ 263,393
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
<S> <C> <C>
Revenues: 1997 1996
-------- --------
Real estate sales:
Homesite $ 2,550 $ 14,598
Tract 6,664 5,745
Residential 7,070 2,870
-------- --------
Total real estate sales 16,284 23,213
Other operating revenue 593 1,133
Interest income 1,372 1,341
Other income:
Reorganization reserves 429 1,267
Other income -- 4,820
-------- --------
Total revenues 18,678 31,774
-------- --------
Costs and expenses:
Cost of real estate sales:
Homesite 1,988 10,919
Tract 6,155 4,703
Residential 5,316 2,175
-------- --------
Total cost of real estate sales 13,459 17,797
Selling expense 2,129 2,552
Other operating expense 330 699
Other real estate costs 2,906 4,257
General and administrative expense 2,200 3,130
Depreciation 184 249
Cost of borrowing, net of amounts capitalized 4,035 3,288
Other expense 711 207
-------- --------
Total costs and expenses 25,954 32,179
-------- --------
Loss before extraordinary item (7,276) (405)
Extraordinary gain on extinguishment of debt -- 3,770
-------- --------
Net income (loss) $ (7,276) $ 3,365
======== ========
Loss before extraordinary item per common share $ (.75) $ (.04)
======== ========
Net income (loss) per common share $ (.75) $ .35
======== ========
Weighted average common shares outstanding 9,722 9,733
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (7,276) $ 3,365
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,072 1,212
Gain from utility condemnations or sales -- (4,846)
Extraordinary gain from extinguishment of debt -- (3,770)
Other (income) expense 81 (231)
Reorganization items (175) (597)
Other net changes in assets and liabilities:
Restricted cash 30 1,787
Receivables 4,010 13,483
Land and residential inventory 6,956 8,029
Other assets (4,999) (4,242)
Accounts payable and accrued liabilities (7,404) (4,571)
Customer deposits 462 (1,320)
Other liabilities (215) (526)
Other, net -- (11)
-------- --------
Net cash provided by (used in) operating activities (7,458) 7,762
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment, net (75) (48)
Proceeds from utility system sale -- 1,244
Funds withdrawn from utility trust accounts 12,109 --
-------- --------
Net cash provided by investing activities 12,034 1,196
-------- --------
Cash flows from financing activities:
Borrowings under credit agreements 45,896 15,935
Repayments under credit agreements (53,461) (23,935)
Principal payments on other liabilities (1,603) (2,232)
-------- --------
Net cash used in financing activities (9,168) (10,232)
-------- --------
Decrease in cash and cash equivalents (4,592) (1,274)
Cash and cash equivalents at beginning of period 7,050 3,560
-------- --------
Cash and cash equivalents at end of period $ 2,458 $ 2,286
======== ========
Supplemental cash flow information:
Interest payments, net of amounts capitalized $ 2,483 $ 4,625
======== ========
Reorganization item payments $ 1,644 $ 2,428
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1997
(unaudited)
(1) The March 31, 1997 financial statements are unaudited and subject to
year-end adjustments. In management's opinion, the interim financial
statements reflect all adjustments, principally consisting of normal
recurring accruals, necessary for a fair presentation of the financial
position and results of operations. Results for interim periods are not
necessarily indicative of results for the full year. For a complete
description of the Company's accounting policies, see "Notes to
Consolidated Financial Statements" included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. Certain prior
year amounts have been reclassified to conform with the 1997
presentation.
(2) The net income (loss) per common share is based on the weighted average
number of shares of common stock outstanding during the periods. The
effect of any outstanding warrants and options to purchase common stock
on the per share computation was anti-dilutive or not material during
the periods.
(3) The Company capitalizes interest primarily on land inventory being
developed for sale which is subsequently charged to income when the
related asset is sold. Capitalized interest was $1,275,000 and
$1,892,000, for the three months ended March 31, 1997 and 1996,
respectively.
(4) Revenue from the sale of residential units other than Regency Island
Dunes ("Regency") condominium units is recognized when the earnings
process is complete. Revenue from the sale of Regency condominium units
is recognized using the percentage-of-completion method. Earned revenue
is based on the percentage of costs incurred to date to total estimated
costs to be incurred. This percentage is then applied to the expected
revenue associated with units that have been sold to date. Revenue from
the sale of land is recognized when the cash received, as a percentage
of the sales price, is at least 20% for land sales other than retail
land sales and 10% for retail land sales, the earnings process is
complete and the collection of any remaining receivable is reasonably
assured.
(5) The Company has made an estimate of Available Cash, as defined in the
Company's loan agreements, at June 30, 1997, and has determined, based
on this estimate, that the Company will not have any Available Cash
requiring it to make any portion of the interest payments on the Cash
Flow Notes for the six-month period commencing January 1, 1997 and
ending June 30, 1997. In addition, the Company did not have any
Available Cash requiring it to make any interest payments for the
twelve month period ended December 31, 1996. Interest on the Cash Flow
Notes is noncumulative. Therefore, the Company has not recorded
interest expense associated with the Cash Flow Notes during the three
months ended March 31, 1997 and 1996. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations Liquidity and
Capital Resources."
4
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1997
(unaudited)
(6) In January 1997, pursuant to the Company's 1996 Non-Employee Directors'
Stock Plan, the Company issued 12,355 shares of Atlantic Gulf's common
stock to the Non-Employee Directors at a price of $4.3125 per share for
the first quarter of 1997.
(7) The Company and AP-AGC, LLC ("Apollo") 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 12, 1997. The
Company, certain of its subsidiaries, and Apollo entered into a Secured
Note Agreement dated as of February 7, 1997, and amended and restated
as of May 12, 1997. Apollo, a Delaware limited liability company, is an
affiliate of Apollo Real Estate Investment Fund II, L.P. ("Apollo Fund
II"), a private real estate investment fund, the general partner of
which is Apollo Real Estate Advisors II, L.P., a New York-based
investment fund.
5
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
---------------------
CURRENT BUSINESS
- ----------------
Atlantic Gulf Communities Corporation is a Florida-based real estate
development and asset management company. The Company's primary lines of
business are acquisition, development and sale of new subdivision and scattered
developed homesites, sale of land tracts and residential construction and sales.
Additional lines of business which contribute to the Company's overall
operations include portfolio management of mortgages and contracts receivable
and environmental services.
The Company acquires and develops real estate to: (i) enhance the value
of certain properties, (ii) maintain a continuing inventory of marketable tracts
and (iii) supply finished homesites to builders in Florida's fastest growing
markets. The Company's acquisition and development activities are comprised of
four primary functions: business development, planning, community development
and residential construction. See Item 1. BUSINESS in the Company's 1996 Annual
Report on Form 10-K for a more detailed description of the Company's current
business.
BUSINESS PLAN
- -------------
The Company's goal is to produce superior returns for stockholders by
liquidating predecessor assets, paying off debt, matching overhead to
development and construction activities, and becoming the leading supplier of
finished homesites to independent homebuilders in Florida's fastest growing
markets and in selected primary markets in the southeastern United States,
without the exposure entailed in carrying a substantial inventory of land.
Predecessor assets are those real estate assets inherited by the Company from
its predecessor company and consist of tracts and scattered homesites located in
secondary markets throughout Florida and in one community in Tennessee.
The Company's business plan is centered on its three principal lines of
business: (i) sales of finished homesites to independent homebuilders, (ii)
sales of tract land to end users as well as to investors and (iii) residential
construction and sales. The intent of the plan is to monetize the Company's
predecessor assets as rapidly as market conditions permit while entering into
new markets with a higher risk-adjusted return potential. The business plan also
contemplates modifying the Company's capital structure by reducing debt,
improving financial flexibility, and reducing overhead by focusing on the
Company's core assets and businesses.
The Company is also actively marketing predecessor assets on a bulk
sale basis as well as on an individual tract/lot basis through the Company's
Atlantic Gulf Land Company. The Company currently has approximately $26.4
million in pending contracts and letters of intent on predecessor assets. There
are no assurances that the above-mentioned negotiations, pending contracts and
letters of intent will result in material sales or in material sales at prices
which, in the aggregate, equal the Company's book value in the properties sold.
See Item 1. BUSINESS in the Company's 1996 Annual Report on Form 10-K for
additional information on the Company's business plan.
6
<PAGE>
This Quarterly Report includes "forward looking" statements that are
subject to risks and uncertainties. Such forward-looking statements include (a)
expectations and estimates as to the Company's future financial performance,
including growth and opportunities for growth in revenues, net income and cash
flow; (b) estimated and targeted annual unit sales, sales prices, and margins
and (c) those other statements preceded by, followed by or that include the
words "believes," "expects," "intends," "anticipate," "potential" or similar
expressions. For these statements, the Company claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The following important factors, in addition to
those discussed elsewhere in this Quarterly Report, could affect the Company's
future results and could cause those results to differ materially from those
expressed in the forward-looking statements: (a) the inability to generate
growth in revenues and net income; (b) the inability to generate sufficient cash
flows from operations to fund capital expenditures and debt service; (c)
unanticipated capital expenditures, including costs associated with real estate
development projects; (d) unanticipated costs, difficulties or delays in
completing or realizing the intended benefits of development projects; (e)
adverse changes in current financial markets and general economic conditions,
including interest rate increases; (f) adverse changes in current real estate
markets and the real estate industry; and (g) actions by competitors.
7
<PAGE>
RESULTS OF OPERATIONS
---------------------
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
------------------------------------------------------------
The Company's results of operations for the three months ended March
31, 1997 and 1996 are summarized by line of business, as follows:
COMBINING RESULTS OF OPERATIONS BY LINE OF BUSINESS
---------------------------------------------------
Three Months Ended March 31, 1997
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
HOMESITE TRACT RESIDENTIAL OTHER BUSINESS ADMINISTRATIVE
SALES SALES SALES OPERATIONS DEVELOPMENT & OTHER TOTAL
----- ----- ----- ---------- ----------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Real estate sales $2,550 $6,664 $7,070 $ $ $ $16,284
Other operating revenues 10 583 593
Interest income 1,118 254 1,372
Other income:
Reorganization reserves 267 162 429
Other income -
- ------------------------------------------------------------------------------------------------------------------------
Total revenues 2,560 6,664 7,070 1,968 416 18,678
- ------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of real estate sales 1,988 6,155 5,316 13,459
Selling expense 911 803 407 8 2,129
Other operating expense 330 330
Other real estate costs:
Property tax, net 911 911
Other real estate overhead 363 344 23 188 657 420 1,995
General and administrative expense 2,200 2,200
Depreciation 4 15 2 29 134 184
Cost of borrowing, net 4,035 4,035
Other expense 96 175 440 711
- ------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 3,266 7,317 5,748 643 840 8,140 25,954
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (706) $ (653) $1,322 $1,325 $ (840) $(7,724) $(7,276)
========================================================================================================================
</TABLE>
8
<PAGE>
COMBINING RESULTS OF OPERATIONS BY LINE OF BUSINESS
---------------------------------------------------
Three Months Ended March 31, 1996
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
HOMESITE TRACT RESIDENTIAL OTHER BUSINESS ADMINISTRATIVE
SALES SALES SALES OPERATIONS DEVELOPMENT & OTHER TOTAL
----- ----- ----- ---------- ----------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Real estate sales $14,598 $5,745 $2,870 $ $ $ $23,213
Other operating revenue 1,133 1,133
Interest income 814 527 1,341
Other income:
Reorganization reserves 1,267 1,267
Other income 4,820 4,820
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues 14,598 5,745 2,870 6,767 1,794 31,774
- ------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of real estate sales 10,919 4,703 2,175 17,797
Selling expense 1,385 643 524 2,552
Other operating expense 699 699
Other real estate costs:
Property tax, net 10 1,429 1,439
Other real estate overhead 550 495 422 251 584 516 2,818
General and administrative 3,130 3,130
Depreciation 9 18 12 107 103 249
Cost of borrowing, net 3,288 3,288
Other expense 12 195 207
- ------------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 12,875 5,859 3,133 1,067 779 8,466 32,179
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) before
extraordinary item 1,723 (114) (263) 5,700 (779) (6,672) (405)
Extraordinary gain on
extinguishment of debt 3,770 3,770
- ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1,723 $ (114) $ (263) $5,700 $ (779) $(2,902) $ 3,365
==============================================================================================================================
</TABLE>
During the first quarter of 1997, the Company incurred a net loss of
$7.3 million compared to net income of $3.4 million during the first quarter of
1996 primarily due to a $5.7 million decrease in other income and a $3.8 million
extraordinary gain in the first quarter of 1996 resulting from the cancellation
of debt. The decrease in other income was principally attributable to a gain of
approximately $4.1 million in the first quarter of 1996 from an $18.75 million
settlement of the Port St. Lucie condemnation litigation.
9
<PAGE>
HOMESITE SALES
--------------
The net operating results from homesite sales decreased $2.4 million
during the first quarter of 1997 compared to the first quarter of 1996 primarily
due to a decrease in the number of homesites sold.
Revenues from homesite sales decreased $12.0 million in the first
quarter of 1997 from the first quarter of 1996. The decrease resulted from a 64%
decrease in the number of homesites sold and a 52% decrease in the average sales
price per homesite. The decrease in the average sales price was primarily due to
a change in the sales mix. The following table summarizes homesite activity for
the three months ended March 31 (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
---------------------------------------- ------------------------------------
NUMBER OF AVERAGE NUMBER OF AVERAGE
LOTS REVENUE SALES PRICE LOTS REVENUE SALES PRICE
---------- ------- ----------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Subdivision homesite sales 67 $1,469 $21.9 384 $12,082 $31.5
Scattered homesite sales 177 1,081 6.1 285 2,516 8.8
--- ------ ----- --- ------- -----
244 $2,550 $10.5 669 $14,598 $21.8
=== ====== ===== === ======= =====
</TABLE>
The decrease in subdivision homesite sales is primarily due to two
sales in the first quarter of 1996 consisting of 193 homesites for $8.1 million
in Windsor Palms, a project located in southwest Broward County, Florida. There
were no sales in Windsor Palms in the first quarter of 1997, however, the
Company anticipates it will sell the remaining 102 lots in this project for
approximately $5.0 million during the remainder of 1997. In addition, there were
approximately $2.0 million of sales in the first quarter of 1996 in Julington
Creek Plantation, a project in Jacksonville, Florida, which was sold in its
entirety in June 1996. The decrease in the average sales price of subdivision
homesite sales is primarily due to the homesite sales in the first quarter of
1996 in Windsor Palms and Julington Creek Plantation which yielded average sales
prices of approximately $42,000 and $39,000, respectively.
Scattered homesite sales decreased in the first quarter of 1997
compared to the first quarter of 1996 due to decreases in volume and the average
sales price per homesite. These decreases are principally due to a $1.2 million
decrease in sales and a 30% decrease in the average sales price in the Company's
Cumberland Cove community in Tennessee. The decrease in sales in Cumberland Cove
is primarily due to timing as sales in this project are anticipated to increase
during the remainder of 1997. The decrease in the average sales price in
Cumberland Cove is primarily due to the mix of homesites sold. Scattered
homesite sales includes bulk homesite sales in secondary markets in Florida
which increased slightly in the first quarter of 1997 compared to the same prior
year period. The Company anticipates it will continue to supplement scattered
homesite sales volume in secondary markets through bulk homesite sales and
through the marketing activities of the Atlantic Gulf Land Company as part of
its plan to accelerate the disposition of assets in secondary real estate
markets in Florida.
As of March 31, 1997, the Company had approximately 569 total homesites
for approximately $12.6 million under contract and which are anticipated to
close in 1997. Of the 569 homesites under contract, 450 homesites totaling $12.2
million are in the Company's subdivision homesite projects of Lakeside Estates,
West Meadows and Sanctuary. Substantially, all of the Company's subdivision
10
<PAGE>
homesites currently under development are under "contract" for sale. As of March
31, 1996, the Company had approximately 1,827 total homesites under contract
totaling approximately $29.2 million.
The homesite sales gross margin percentages were 22.0% in 1997 compared
to 25.2% in 1996, which generally reflect targeted gross margins of 20% to 30%
for this line of business. Gross margin represents the difference between the
Company's real estate revenue and related cost of sales.
Homesite selling expense decreased primarily due to a decrease in
revenues. Homesite selling expense as a percentage of revenues increased from
9.5% in 1996 to 35.7% in 1997, primarily due to the decreased revenues over
which to spread fixed selling costs.
Homesite sales other real estate overhead decreased in the first
quarter of 1997 compared to the first quarter of 1996 primarily due to lower
overhead costs associated with managing the Company's subdivision homesite
projects in Florida's primary real estate markets.
TRACT SALES
-----------
The net operating results from tract sales decreased in the first
quarter of 1997 compared to the first quarter of 1996 despite an increase in
revenues, primarily due to lower tract sales gross margins in 1997.
Revenues from tract sales of $6.7 million in the first quarter of 1997
represented an increase of $919,000 or 16% compared to the first quarter of
1996. Tract sales acreages often vary significantly in size and revenues from
such sales vary from quarter to quarter depending on the timing and size of
individual sales. Due to the Company's plan to monetize the Company's
predecessor assets located in secondary markets, tract sales are expected to
continue to be a significant source of revenue for the Company in 1997. As of
March 31, 1997, there were pending tract sales contracts totaling approximately
$18.0 million which, subject to certain contingencies, are anticipated to close
in 1997. As of March 31, 1996, there were pending tract sales contracts totaling
approximately $29.7 million.
Tract sales gross margins are summarized as follows for the three
months ended March, 31:
<TABLE>
<CAPTION>
1997 1996
------------------------ -------------------------
TARGETED ACTUAL TARGETED ACTUAL
MARGINS MARGINS MARGINS MARGINS
------- ------- ------- -------
<S> <C> <C> <C> <C>
Port LaBelle agricultural acreage 0% (2.7)% 5% -
Other tract acreage 5-10% 14.3% 20% 18.1%
</TABLE>
The targeted gross margin is lower for Port LaBelle agricultural
acreage as management has determined that approximately 20,000 acres of the Port
LaBelle agricultural property is not an integral part of the Company's long-term
business strategy. In order to accelerate the disposal of this property, the
sales value for this property was adjusted from a "retail" to a "wholesale"
basis, which reduced the targeted gross margin for this property. During the
first quarter of 1997 the Company sold 2,156 acres of this property for
approximately $2.5 million.
The actual gross margin in 1997 for other tract acreage was higher than
the targeted gross margin principally due to the mix of properties sold during
11
<PAGE>
the period. The targeted gross margins have been reduced primarily due to the
Company's plan to accelerate land sales in secondary real estate market
locations.
Tract sales selling expenses increased and other real estate costs
decreased in the first quarter of 1997 compared to the first quarter of 1996
primarily due to advertising and other marketing costs which were included in
other real estate costs in 1996 and are included in selling expenses in 1997.
RESIDENTIAL SALES
-----------------
The net operating results from residential sales, which includes single
family homes and condominiums, improved $1.6 million during the three months
ended March 31, 1997 compared to the corresponding prior year period principally
due to an increase in condominium revenues and profits from the Company's
Regency Island Dunes condominium project and a decrease in other real estate
overhead costs.
Residential sales are summarized as follows for the three months ended
March 31 (in thousand of dollars):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Condominium sales - Regency Island Dunes:
First Building $1,310 $ 910
Second Building 5,684 -
------ ------
Total condominium sales 6,994 910
Single family home sales 76 1,960
------ ------
$7,070 $2,870
====== ======
</TABLE>
The revenues and profits associated with Regency Island Dunes
condominium sales are recorded using the percentage of completion method. The
Regency Island Dunes condominium project consists of two 72-unit buildings. As
of December 31, 1995, the Company recorded 97% of the expected revenues and
profits on 61 units that were under contract in the first building as of
December 31, 1995 based on a construction completion percentage of 97%.
Condominium revenues of $910,000 in the first quarter of 1996 represent the
incremental revenue earned upon the completion of 49 of the 61 units in the
first quarter of 1996. The condominium revenues of $1.3 million in the first
building in 1997 represent revenue earned upon the closing of an additional four
units in 1997. As of March 31, 1997, 70 of the 72 units in the first building
have been sold and closed. As of December 31, 1996, the Company recorded 79% of
the expected revenues and profits on 56 units that were under contract in the
second building as of December 31, 1996 based on a construction completion
percentage of 79%. The revenues of approximately $5.7 million in the second
building in the first quarter of 1997 were derived from an increase in the
completion percentage from 79% as of December 31 1996 to 96% as of March 31,
1997 and to an additional eight units sold during the first quarter of 1997 for
a total of 64 units sold in the second building. Additional revenues and profits
will be recorded as the construction progresses and more units are sold. The
Company anticipates that construction of the second building will be completed
during the second quarter of 1997 and that all 72 units in the second building
will be sold and closed in 1997.
Single family home sales revenues decreased during the first quarter of
1997 compared to the first quarter of 1996 due a decrease in closings from 22 in
1996 to one in 1997. Closings decreased because the Company decided in mid-1995
to begin phasing out its single family home business in predecessor communities
and substantially completed the withdrawal in 1996. The Company may seek to
re-enter the single family home business in primary markets where this business
12
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would complement current or potential land development activities. As of March
31, 1997, the Company had two single family home residential units in inventory,
neither of which were under contract. As of March 31, 1996, the Company had six
single family home residential units under contract totalling $498,000.
Residential sales gross margins are summarized as follows for the three
months ended March 31:
1997 1996
---- ----
Condominiums 25.3% 46.4%
Single family homes (15.8)% 13.9%
The gross margin for condominiums in the first quarter of 1997 was
within the targeted gross margin of approximately 20% to 25%for this line of
business. The gross margin for condominiums in the first quarter of 1996 was
higher than the targeted gross margin primarily due to adjustments resulting
from the recording of the actual profits associated with 49 closings in the
first quarter of 1996 as compared to the estimated profits previously recorded.
The single family home gross margin in the first quarter of 1997 was
generated from one unit which was priced to sell as the Company has withdrawn
from this line of business.
Residential selling expense as a percentage of revenues decreased from
18.3% in 1996 to 5.8% in 1997 primarily due to closing costs incurred in the
first quarter of 1996 associated with the closing of 49 condominium units, the
revenues for which, had previously been recorded using the percentage of
completion method. The residential selling expenses percentage also decreased
due to increased revenues over which to spread fixed selling costs.
Other real estate overhead decreased in the first quarter of 1997
compared to the first quarter of 1996 primarily due to a $329,000 reduction in
overhead costs associated with the Regency Island Dunes condominium project,
most notably due to a reduction condominium association costs. In addition,
single family overhead costs decreased due to the phasing-out of this operation.
OTHER OPERATIONS
----------------
Net income from other operations decreased $4.4 million in the first
quarter of 1997 compared to the first quarter of 1996 primarily due to a
decrease in other income.
Other operating revenues and expenses decreased in the first quarter of
1997 from the same prior year period primarily due to the absence of revenues
and expenses from the Port LaBelle utility system sold in February 1996 and the
Julington Creek utility system sold in June 1996.
Interest income increased in the first quarter of 1997 from the
corresponding prior year period primarily due to a higher average balance of
land mortgages receivable in 1997 and to adjustments in the first quarter of
1996 associated with the land mortgages receivable portfolio, partially offset
by a lower average balance of contracts receivable during the periods under
review.
Other income of $267,000 in the first quarter of 1997 represents the
amortization of the Company's utility connections reserve. Other income in the
first quarter of 1996 included a gain of approximately $4.1 million on an $18.75
million settlement in March 1996 with the City of Port St. Lucie regarding
litigation pursuant to condemnation proceedings associated with the taking of
the Company's Port St. Lucie system. Also included in other income in the first
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<PAGE>
quarter of 1996 was a gain of $695,000 on the sale of the Company's Port LaBelle
utility system which was sold in February 1996 for $4.5 million.
BUSINESS DEVELOPMENT
--------------------
Total business development expenditures were similar in the first
quarter of 1997 compared to the first quarter of 1996. Business development
expenditures consist primarily of costs associated with the pursuit of business
opportunities in primary market locations within Florida and other southeastern
United States locations.
Business development other expenses included $112,000 in the first
quarter of 1997 and $195,000 in the first quarter of 1996 representing the
Company's 50% share of the net loss of the Ocean Grove joint venture. The loss
resulted from pre-sales advertising and other selling and overhead costs.
ADMINISTRATIVE & OTHER
----------------------
The net loss from administrative & other activities increased $4.8
million in the first quarter of 1997 from the first quarter of 1996 principally
due to an extraordinary gain of $3.8 million in 1996 resulting from the
cancellation of debt and to a $1.1 million reduction in other income.
Interest income decreased in the first quarter of 1997 from the
corresponding prior year period primarily due to a decrease in short term
investment interest income.
Other income of $162,000 in the first quarter of 1997 and $1.3 million
in the first quarter of 1996 represented gains resulting from the resolution of
certain reorganization items. This process is expected to continue during the
remainder of the year with adjustments to be recorded as the final disposition
of various claims and other liabilities is concluded.
Property tax, net of capitalized property taxes decreased in the first
quarter of 1997 compared to the first quarter of 1996 primarily due to a
reduction of land inventory not under development. The decrease in inventory
under development corresponds to sales activity and to the completion of various
projects during the intervening period.
General and administrative expenses decreased approximately $1.0
million in the first quarter of 1997 compared to the first quarter of 1996
principally due to financial advisory and due diligence costs incurred in the
first quarter of 1996 associated with the Company's recapitalization efforts.
Cost of borrowing, net increased in the first quarter of 1997 compared
to the same period in 1996 primarily due to a $617,000 decrease in interest
capitalized to land inventory corresponding to the decrease in land under
development. During the three months ended March 31, 1997 and 1996, the Company
did not accrue interest on its Cash Flow Notes because of the absence of
Available Cash during the periods. See "LIQUIDITY AND CAPITAL RESOURCES."
Other expense of $440,000 in the first quarter of 1997 represented a
loss on the sale of $9.3 million of land mortgage receivables to the First Bank
of Boston in March 1997 for an initial cash distribution of $7.0 million plus a
residual interest in the portfolio. The proceeds were used to reduce corporate
debt and to fund ongoing operations.
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<PAGE>
In February 1996, the Company recorded an extraordinary gain of
approximately $3.8 million due to the cancellation of approximately $1.9 million
of Unsecured 12% Notes and $1.9 million of Unsecured Cash Flow Notes. These
notes, held in the disputed claims reserve account, were in excess of the
requirements necessary to satisfy the Company's obligations in accordance with
the Company's plan of reorganization.
LIQUIDITY & CAPITAL RESOURCES
- -----------------------------
As of March 31, 1997, the Company's cash and cash equivalents totaled
approximately $2.5 million. The Company also had restricted cash and cash
equivalents of $6.0 million, which consisted primarily of escrows for the sale
and development of real estate properties, funds held in trust to pay certain
bankruptcy claims and various other escrow accounts. Of the $4.6 million
decrease in cash and cash equivalents during the first quarter of 1997, $7.5
million was used in operating activities and $9.2 million was used in financing
activities, partially offset by $12.1 million provided by investing activities.
Cash used in operating activities includes approximately (i) $3.8
million for interest payments, (ii) $5.4 million for property tax payments,
(iii) $6.6 million for construction and development expenditures and (iv) $1.8
million of fees associated with the Company's refinancing and recapitalization
efforts. These uses were offset in part by net cash generated through real
estate sales and other operations.
Cash provided by investing activities consisted of $12.1 million of
funds released on January 2, 1997 from various utility trust accounts which were
funded by the Company during the reorganization proceedings. The terms of these
trusts require the Company to periodically assess the adequacy of the property
in these trusts. Pursuant to a review of these trusts in December 1996, it was
determined that approximately $12.1 million in cash and $6.2 million of notes
could be released from these trust accounts.
Cash used in financing activities includes $37.5 million of principal
payments on January 3, 1997 to repay in full the Company's Unsecured 12% Notes
and $1.6 million in principal payments related to the Company's deferred
property tax and Section 365(j) lien obligations arising out of the
reorganization proceedings. These payments were partially offset by net
borrowings of $18.1 million under the Reducing Revolving Loan with Foothill,
which were used along with the $12.1 million of excess funds from the various
utility trust accounts to repay the Unsecured 12% Notes. In addition, the
Company had net borrowings of $6.2 million associated with the financing of the
Company's mortgage receivables and net borrowings of $5.6 million on new project
financings.
The Company has, pursuant to a Revolving Loan Agreement dated as of
September 30, 1996 with Foothill Capital Corporation ("Foothill"), (i) a $20
million working capital facility maturing December 1, 1998 ("Working Capital
Facility"), and a $25 million reducing revolving loan maturing June 30, 1998
("Reducing Revolving Loan "), with principal reductions as set forth below.
Amounts under the Reducing Revolving Loan are available only when (i) the
Working Capital Facility is fully utilized, and (ii) the Company is in
compliance with, among other conditions, a "borrowing base" formula based on the
value of certain of the Company's assets. Amounts outstanding under the Working
Capital Facility bear variable interest at a rate equal to the variable interest
rate, per annum, announced by Northwest Bank of Minnesota, N.A., as its "base
rate" plus two percentage points. The Reducing Revolving Loan bears variable
interest at the "base rate" plus four percentage points. As of March 31, 1997,
the Working Capital Facility was fully drawn and there was $19.8 million
outstanding on the Reducing Revolving Loan. The Company and Foothill have
amended the Revolving Loan Agreement, effective as of March 31, 1997, pursuant
to which, among other things, the Company can borrow thereunder until June 30,
1997 up to $10 million in excess of the amount otherwise available under the
borrowing base formula, subject in any event to the maximum availability of $25
million under the Reducing Revolving Loan. Upon execution of the Revolving Loan
Agreement amendment, the Company paid a $1 million fee to Foothill. The
above-mentioned amendment also provides that as long as the Company's
indebtedness under the Foothill loan
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<PAGE>
agreements is in excess of the aggregate amount the Company could otherwise
borrow under the borrowing base formula, the interest rates payable under the
Working Capital Loan, Reducing Revolving Loan and the Term Loan (as defined
below) will be increased by two percentage points.
The Company's remaining material obligations for 1997 include (i)
principal repayments on the Foothill debt up to $43.3 million as more fully
described below, and (ii) the final principal and interest payments on the
Company's Section 365(j) lien and deferred property tax liabilities totaling
$1.5 million which are due in the third quarter of 1997. The Company's 1997
business plan also contemplates full year expenditures for development,
construction and other capital improvements estimated at approximately $50
million, of which a substantial portion will require funding through individual
project development loans or joint venture arrangements, many of which are
already in place. If the Company is unable to obtain the capital resources to
fund these expenditures, the implementation of the Company's business plan will
be adversely affected, thus slowing the Company's expected revenue growth and
increasing the expected time necessary for the Company to achieve profitability.
On September 30, 1996, the Company closed on three credit facilities
totalling $85.0 million with Foothill (the "Foothill Refinancing"). Pursuant to
the Foothill Refinancing, Foothill has provided the Company with (I) an
extension to December 1, 1998 of the $20 million Working Capital Facility as
discussed above; (ii) a $40 million Term Loan at an interest rate of 15% per
annum, maturing June 30, 1998; and (iii) a Reducing Revolving Loan of up to $25
million maturing on June 30, 1998, as discussed above. At March 31, 1997, the
Company had outstanding the full $20 million under the Working Capital Facility
and approximately $19.8 million under the Reducing Revolving Loan. The Term Loan
requires principal repayments of one-third on each of June 30, 1997, December
31, 1997, and June 30, 1998. The commitment under the Reducing Revolving Loan
will also be reduced by one-third on each of June 30, 1997, December 31, 1997,
and June 30, 1998, and the Company will be required to repay on those dates any
amounts outstanding under the Reducing Revolving Loan in excess of the new
commitment amount.
The Company does not currently have sufficient liquid capital resources
to satisfy the up to $43.3 million of Foothill debt of which approximately $21.7
million is due on each of June 30, 1997, and December 31, 1997. However,
management believes that the Company, through a combination of sources as more
fully described below, will be able to obtain sufficient liquidity and capital
resources necessary to continue implementing its business plan and to satisfy
its debt obligations as they become due.
The Company's ongoing business plan is to continue to monetize its
non-core tract and scattered homesite assets ("Predecessor assets") to reduce
corporate debt. The Company made substantial progress in this regard as it sold
$55.6 million of tract and scattered homesite assets in 1996 and $7.7 million in
the first quarter of 1997. In addition, the Company currently has pending under
contract or letter of intent a combination of Predecessor asset sale
transactions which would generate, if consummated, approximately $26.4 million
of cash and notes. The transactions under contract are subject to a variety of
customary conditions, in some cases including a financing condition.
Transactions subject to a letter of intent are also subject to further
negotiation and documentation and there are no assurances that any particular
transaction under contract or letter of intent will be consummated.
As part of the effort to monetize the Predecessor assets pursuant to
its business plan, the Company is actively monetizing mortgage and note
receivables generated from the sale of Predecessor tracts and scattered
homesites. The Company raised approximately $17.8 million of cash proceeds in
1996 and an additional $14.6 million in the first quarter of 1997, and received
certain residual interests, from the sale or refinancing of mortgages or other
receivables generated from the sale of Predecessor real estate assets. These
cash proceeds, along with the net cash proceeds from Predecessor real estate
sales, were applied to
16
<PAGE>
the reduction of corporate debt and to fund ongoing operations. The Company
plans to continue to sell or finance mortgages and other receivables generated
from the future sale of Predecessor real estate assets going forward.
As previously disclosed by the Company in a current report on Form 8-K
dated February 13, 1997 and in an annual report on Form 10-K for the fiscal year
ended December 31, 1996, the Company executed an Investment Agreement and Note
Agreement with AP-AGC, LLC, a Delaware limited liability company and an
affiliate of Apollo Real Estate Advisors II, L.P., a New York-based investment
fund ("Apollo"). Subject to the terms of the Investment Agreement and the
approval of certain charter amendments by the Company's stockholders, Apollo
would invest an aggregate of $25 million in new Series A 20% cumulative
redeemable convertible preferred stock of the Company (the "Series A Preferred
Stock"). The Investment Agreement also contemplates that the Company would seek
the approval of its stockholders of a charter amendment authorizing an
additional $10 million of new Series B 20% cumulative redeemable convertible
preferred stock of the Company (the "Series B Preferred Stock") to be made
available to the Company's stockholders in a rights offering (the "Series B
Rights Offering"). The 20% cumulative dividend rate on the Series A and Series B
Preferred Stock would accumulate unless declared and paid by the Company.
The Company expects that the Investment Agreement will be amended to
provide, among other things, that the amounts invested by Apollo (which will be
staged over a period of time, as appropriate investment projects are identified)
will be held by a new wholly owned special purpose subsidiary of the Company,
and invested in new real estate development projects. Apollo would have a first
lien over the assets and stock of such subsidiary securing the Company's
repurchase and redemption obligations in respect of the Series A Preferred
Stock.
The Company anticipates submitting the proposed charter amendments for
the authorization of the Series A and Series B Preferred Stock at the 1997
annual meeting of stockholders. If the stockholders approve the charter
amendments, the initial closing on the Series A Preferred Stock transaction
could occur in June 1997, and the $10 million Series B Rights Offering could
close in the third quarter of 1997. Pursuant to the Investment Agreement, as
Apollo purchases up to $25 million of Series A Preferred Stock, Apollo would
also receive, on a pro rata basis, warrants to acquire up to 5 million shares of
Company common stock. In addition to stockholder approval, the closings under
the Investment Agreement are also subject to the satisfaction of other
conditions, including the consent of Foothill. The Company anticipates that the
proceeds from the Series A Preferred Stock closings would be available for new
project acquisition and development (through the special purpose subsidiary
described above) while the net proceeds from the Series B Rights Offering would
be available to the Company for general corporate purposes, including the
repayment of debt owed to Foothill.
The Company expects that the above discussed amendments to the
Investment Agreement will among other things, also provide for warrants to
purchase 2 million shares of the Company's common stock to be part of the Series
B Rights Offering, and a possible private placement by the Company, with
financial purchasers unaffiliated with Apollo, of newly issued common stock,
additional Series B Preferred Stock, and warrants to purchase additional common
stock. The gross proceeds to the Company from the private placement could be up
to $20 million.
The closing under the Investment Agreement with Apollo and the private
placement and Series B Rights Offering are contingent upon a number of factors
which are not within the control of the Company, including shareholder approval
and receipt of the final approval of Foothill. There can be no assurance that
all of these conditions will be fulfilled or, to the extent that they may be
waived, waived by Apollo,
17
<PAGE>
Foothill or the private placement purchasers. For more detailed information
relating to the transactions described above, please refer to the Company's
proxy statement for its 1997 annual meeting, which will be mailed to
shareholders in the near future.
If the stockholders' approval is not obtained or the Series A Preferred
Stock transaction is not otherwise consummated, the Company will pursue other
alternatives to address its liquidity issues, and improve its financial
condition and liquidity, including the possibility of soliciting other
transactions similar to the transaction. If, however, the stockholders' approval
is not obtained or the Series A Preferred Stock transaction is not otherwise
consummated, under certain circumstances the Company will be required to pay a
$1 million fee to Apollo and the Company's $1 million commitment fee will be
forfeited; and if an alternative transaction is consummated within specified
time periods, the Company will be required to pay an additional $1 million fee
to Apollo.
Available Cash is defined in the Company's POR with respect to any
payment period (generally, any six-month period ending June 30 or December 31),
as the sum of all cash receipts (exclusive of borrowed money and certain
delineated cash items) less the sum of payments for operating expenses, all debt
payments (including repurchases of indebtedness), capital expenditures, tax
payments, payments to creditors under the plan of reorganization and creation of
reserves for working capital and other expenses for the next two payment
periods.
Pursuant to the Company's debt agreements, the Company must apply any
Available Cash (I) to the payment of interest due on the Company's unsecured
cash flow notes due December 31, 1998 ("Cash Flow Notes"); (ii) to payments of
outstanding amounts under the Working Capital Facility; and (iii) to repayments
of principal on the Cash Flow Notes. Under the Company's certificate of
incorporation, after all reorganization debt has been repaid, the Company must
pay mandatory dividends on its common stock in an amount equal to 25% of
Available Cash. (If, however, the Series Preferred Stock closing occurs, the
charter provision requiring mandatory dividends equal to 25% of available cash
will be eliminated.)
If there is no Available Cash on a payment date, the then current
interest on the Cash Flow Notes is not due or payable on that payment date or at
any time thereafter. Due to the necessity to establish reserves against future
mandatory debt, capital and operating expenditures, the Company did not have any
Available Cash to enable it to make payments on the Cash Flow Notes through
March 31, 1997. Accordingly, the Company did not accrue any interest on the Cash
Flow Notes during the three months ended March 31, 1997 and 1996. Also, based
upon the Company's existing debt obligations, its anticipated net cash flows and
its business plan, management does not anticipate the Company having Available
Cash in the foreseeable future.
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<PAGE>
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
FLORIDA HOME FINDERS, INC. In March, 1995, the Company sold Florida
Home Finders, Inc. ("Florida Home Finders") to the FHF Trust, owned by Ian R.
Law and Benjamin Schiff, for $3.5 million. It has been alleged in litigation
filed against Florida Home Finders that FHF Trust withdrew escrow deposits held
by Florida Home Finders for the benefit of tenant and owner clients and utilized
those funds to purchase a certificate of deposit. It is further alleged that the
certificate of deposit was pledged as security to County National Bank for a
personal loan to Messrs. Law and Schiff, and that a portion of the proceeds of
that loan were utilized to pay the Company approximately $2.0 million of the
amount due under the purchase money note given by FHF Trust in favor of the
Company at the time of the sale of Florida Home Finders. The Company had no
knowledge of the source of the payment.
Subsequent to the foregoing alleged events, the Florida Real Estate
Commission discovered that escrow deposits were missing from Florida Home
Finder's accounts and brought an action in St. Lucie County circuit court
seeking the appointment of a receiver for the property and business of Florida
Home Finders. STATE OF FLORIDA, DEPARTMENT OF BUSINESS AND PROFESSIONAL
REGULATION V. FLORIDA HOME FINDERS, INC. ET AL., Case No. 95-1092-CA 17 (St.
Lucie Cty. Cir. Ct.) A receiver was appointed for Florida Home Finders in
October 1995. In November 1995, the Company intervened in the receivership
proceeding. The receivers have sold the Florida Home Finders' assets (other than
litigation claims against third parties, which have been retained by the
receiver) to ALL FLORIDA PROPERTY MANAGEMENT, INC., a Florida corporation;
however the sales proceeds are being held by the receiver pending the court's
order directing disbursement.
In November 1995, the receiver filed a lawsuit against several parties,
including the Company, seeking a return and recovery of the missing escrow
deposits. SPIRE V. IAN R. LAW ET AL., Case No. 95-1300-CA 17 (St. Lucie Cty.
Cir. Ct.). The Company filed a motion to dismiss the complaint, contending that
the complaint failed to identify any knowledge, notice or wrongdoing on the part
of the Company. This case was voluntarily dismissed without prejudice on
February 6, 1997.
The Company agreed with the receiver on May 5, 1997 to a tentative
settlement of all matters pending final documentation, the satisfaction of
certain conditions and court approval. The terms of the settlement, if
finalized, will not have a material, adverse financial affect on the Company.
REGENCY ISLAND DUNES. In connection with the construction of the
Regency Island Dunes Condominium Project in Jensen Beach, Florida, various
disputes have arisen between the Company's subsidiary, Regency Island Dunes,
Inc. ("Regency"), and the general contractor, Foley and Associates Construction
Company, Inc. ("Foley"), regarding completion of the first phase of the project
containing 72 units. As a result, Foley filed suit in the Circuit Court of St.
Lucie County under the caption of FOLEY AND ASSOCIATES CONSTRUCTION, INC. V.
REGENCY ISLAND DUNES, INC. AND ATLANTIC GULF COMMUNITIES CORPORATION, Case No.
96-1569-CA-03 (St. Lucie Cty. Cir. Ct.) alleging breach of the construction
contract, claims for lost profits and delay damages as well as various counts
claiming fraudulent transfers of funds from Regency to the Company. This case
was filed by Foley in addition to Foley's demand for arbitration before the
American Arbitration Association as required pursuant to the terms of the
construction contract between Regency and Foley. Regency has asserted
counterclaims for Foley's failure to properly staff the job and refusal to
perform corrective work which was performed at Regency's expense, all such sums
incurred by Regency would offset Foley's contract claim. The costs of corrective
work already incurred together with Regency's claims for delay damages and
penalties exceed Foley's claims for the unpaid contract balance. In addition, in
the case styled REGENCY ISLAND DUNES INC. V. FOLEY AND ASSOCIATES CONSTRUCTION
COMPANY, INC., Case No. 96-1532 CA-17 (St. Lucie Cty. Cir. Ct.), Regency filed
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<PAGE>
its action to discharge the construction lien filed by Foley on the basis that
the lien claim was inflated and was recorded against units which had previously
been conveyed to third party purchasers as well as additional lands not included
within the construction contract between the parties. The preceding two cases
have been consolidated and partially stayed pending resolution of the contract
disputes in arbitration. In REGENCY ISLAND DUNES, INC. V. NATIONAL FIRE
INSURANCE COMPANY OF HARTFORD AND FOLEY AND ASSOCIATES CONSTRUCTION COMPANY,
INC., now refiled under Case No. 97-14075, U.S.D.C., Southern District of
Florida, Regency filed suit to recover damages against Foley's surety for
corrective work performed by Regency as well as various other claims for damages
asserted by Regency in the arbitration described above. In addition, based upon
a separate construction contract between Regency and Foley for the construction
of the second phase of the Regency Island Dunes Condominium Project, Foley filed
a demand for arbitration in March 1997 asserting breach of contract relating to
change orders, release of retainage and Foley's requests for extensions of time.
The dispute with Foley in connection with the second phase has escalated and
Foley has filed a claim of lien, which includes retainage, overhead and
unauthorized change orders. The Company continues discussions with Foley to
resolve these matters. In the event the settlement discussions are unsuccessful,
the Company and Regency will vigorously defend the claims asserted by Foley and
aggressively pursue their claims against Foley and the surety.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits required by Item 601 of Regulation S-K
(10.1) Utility Lot Trust Agreement, dated as of December 26,
1996, between Atlantic Gulf Communities Corporation and
the Division of Florida Land Sales, Condominiums, and
Mobile Homes, and Peninsula State Title, as Trustee.
(10.2) Restated, Amended and Consolidated Trust Agreement,
dated as of December 26, 1996, amended as of December
30, 1996, between the State of Florida, Department of
Business Regulation, Division of Florida Land Sales,
Condominiums, and Mobile Homes, Atlantic Gulf
Communities Corporation and First Union National Bank of
Florida, as Trustee.
(10.3) First Amendment to the Restated, Amended and
Consolidated Trust Agreement dated as of December 26,
1996, amended as of December 30, 1996.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on February 13, 1997, pursuant
to Item 5, Other Events, reporting that the Company entered into an Investment
Agreement dated as of February 7, 1997 with Apollo.
20
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATLANTIC GULF COMMUNITIES CORPORATION
Date: May 12, 1997 /s/ THOMAS W. JEFFREY
-------------------------------
Thomas W. Jeffrey
Executive Vice President
and Chief Financial Officer
Date: May 12, 1997 /s/ CALLIS N. CARLETON
-------------------------------
Callis N. Carleton
Vice President and Controller
(Principal Accounting Officer)
21
ATLANTIC GULF COMMUNITIES CORPORATION EXHIBIT TO THE MARCH 31, 1997 FORM 10-Q
EXHIBIT 10.1 UTILITY LOT TRUST AGREEMENT DATED AS OF DECEMBER 26, 1996.
- -----------------------------------------------------------------------
UTILITY LOT TRUST AGREEMENT
UTILITY LOT TRUST AGREEMENT, (this "Agreement) made and entered into as
of this 26th day of December, 1996, by and between ATLANTIC GULF COMMUNITIES
CORPORATION ("Atlantic Gulf" or the "Company") and the DIVISION OF FLORIDA LAND
SALES, CONDOMINIUMS, AND MOBILE HOMES (the "Division"), collectively the
"Parties", and shall be joined into by Peninsula State Title, a Florida Joint
Venture, as Trustee.
WITNESSETH:
WHEREAS, General Development Corporation ("GDC") was debtor and
debtor-in-possession in the proceeding for reorganization under Chapter 11 of
the United States Bankruptcy Code, 11 U.S.C. ss. 101, ET SEQ., filed in the
United States Bankruptcy Court for the Southern District of Florida (the
"Bankruptcy Court"), captioned IN RE GENERAL DEVELOPMENT CORPORATION, ET AL.,
Case No. 90-12231-BKC- AJC;
WHEREAS, the Restated Second Amended Joint Plan of Reorganization of
GDC, dated as of October 9, 1991, as modified on March 9, 1992 (the "Plan"), was
confirmed by the U.S. Bankruptcy Court for the Southern District of Florida on
March 27, 1992, and became effective on March 31, 1992;
WHEREAS, pursuant to the Plan, GDC has been renamed Atlantic Gulf
Communities Corporation;
WHEREAS, pursuant to the Homesite Purchaser Assurance Program and the
Class 14 Utility Service Program, Atlantic Gulf established, and the Division
approved the establishment of, the Homesite Program Utility Fund Trust, the
Class 14 Utility Fund Trust and the Division Class 14 Utility Fund Trust, all as
described in the Plan (the "Original Trusts"), all of which have been
consolidated into that certain Restated, Amended and Consolidated Trust
Agreement of even date herewith (the "Trust Agreement"). The funds and stock
held thereunder are collectively referred to herein as the "Utility Funds";
1
<PAGE>
WHEREAS, based upon the December 1996 "Review of Utility Reserve Pool
and Utility Reserve Funds" conducted by Milian, Swain & Associates ("MSA"), the
assurance provided by the Utility Funds and the Lot Reserve provided in the
Original Trusts is no longer optimally structured;
WHEREAS, this Agreement is being entered into by the Company in
accordance with and to implement the utility service provisions of the Trust
Agreement;
WHEREAS, The Original Trusts have been consolidated and restated, and
thereby superseded and canceled into the Restated, Consolidated and Amended
Trust;
WHEREAS, the Company desires to establish this Agreement, as referenced
by the Trust Agreement as hereinbelow described, for the purposes set forth
below.
NOW, THEREFORE, in consideration of the mutual promises herein
contained the Parties agree as follows:
ARTICLE I
UTILITY LOT TRUST
-----------------
Section 1.1. THE TRUST. For all purposes of this Agreement the "Lot
Trust Assets" shall consist of the following assets, which assets shall be held
in trust by the Trustee (as hereafter defined) for the benefit of eligible
homesite purchasers as defined in the Trust Agreement, the Division and the
Company and all such assets shall be subject to the terms and conditions hereof
(the "Lot Trust"):
(a) the entire balance of utility satisfied lots from the existing Lot
Reserve Pool (1700 lots) as described in the Trust Agreement; and
(b) 4,300 additional utility satisfied lots transferred to the Lot
Trust by the Company.
2
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(c) said lots are referred to herein as the "Lots" or the "Lot Trust
Assets" and are more particularly described on Exhibit "A" attached.
Section 1.2. RELEASES, SUBSTITUTIONS AND WITHDRAWALS. The Trustee shall
deliver appropriate instruments to release or substitute Lots from this
Agreement and the lien created hereby and may withdraw lots from the Lot Trust,
within five (5) business days of the following:
(a) a lot owner, eligible to participate in the lot exchange program,
initiates an exchange request in accordance with, and satisfies all applicable
requirements of, the Class 14 Utility Service Program; or
(b) Upon delivery of the Company's certificate that the Lot to be
released is then under contract to be sold together with the Company's
designation of a substitute utility satisfied lot in the same community as the
Lot to be released which shall then be added to and encumbered by this
Agreement; or
(c) Upon delivery of the Company's certification to the Trustee
together with a copy of the Annual Evaluation or Quarterly Reports described in
Paragraph 3.1 or 3.2 hereof, confirming that there are excess Lots in the Lot
Trust, in which event the Company may withdraw such excess Lots so long as the
Lot Trust contains one lot for each remaining non-utility satisfied lot which is
eligible for exchange, provided the Company shall not make such request more
than quarterly; or
(d) Upon receipt of documentation from the Division consenting to the
withdrawal of additional Lots pursuant to the requirements of the Trust
Agreement.
ARTICLE II
TRUSTEE
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Section 2.1. DESIGNATION. Peninsula State Title, a Florida Joint
Venture, shall serve as Trustee for this Agreement.
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Section 2.2. COMPENSATION TO TRUSTEE. Trustee shall receive such
compensation as the Company may elect to pay by separate agreement for its
services in accepting this Trust Agreement.
Section 2.3. LIMITATION ON DUTIES. The Trustee undertakes to perform
only such duties as are expressly set forth herein, and no implied duties or
obligations shall be read into this Agreement against the Trustee.
Section 2.4. RELIANCE. The Trustee may act in reliance upon any writing
or instrument or signature which it, in good faith, believes to be genuine, may
assume the validity and accuracy of any statement or assertion contained in such
a writing or instrument and may assume that any person purporting to give any
writing, notice, advice, or instruction in connection with the provisions hereof
has been duly authorized to do so. The Trustee shall not be liable in any manner
for the sufficiency or correctness as to form, manner and execution, or validity
of any instrument deposited in this Trust, nor as to the identity, authority, or
right of any person executing the same; and its duties herein shall be limited
to the safekeeping of the Trust corpus and for the disposition of the same in
accordance with the terms of this Agreement.
Section 2.5. TRUSTEE'S RESPONSIBILITY TO MAKE ADVANCES OR INCUR OR PAY
EXPENSES. The Company shall be responsible for the payment of ad valorem taxes
or assessments for each Lot in the Lot Trust.
Section 2.6. TRUSTEE'S ADDITIONAL RESPONSIBILITY. The Company shall be
responsible for maintaining all lots in the Lot Trust free and clear from all
liens, mortgages, or other instruments or interests that would affect the
marketability of Lots in accordance with the terms of the lot exchange program
approved pursuant to the Plan.
Section 2.7. RESIGNATION OF TRUSTEE; SUCCESSOR TRUSTEE. Trustee may at
any time resign as Trustee and from its duties under this Trust Agreement by
giving at least thirty days's prior written notice to both Atlantic Gulf and the
Division, such resignation to be effective on the acceptance of appointment by a
successor Trustee selected by Atlantic Gulf. In addition, Atlantic Gulf may at
any time remove Trustee with or without cause by giving written notice to
Trustee, such removal to be effective upon the acceptance of appointment by a
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successor Trustee selected by Atlantic Gulf. If a successor Trustee shall not
have been appointed within thirty days of written notice of resignation or
removal, Trustee may apply to any court of competent jurisdiction to appoint a
successor Trustee to act until such time, in any, as a successor shall have been
selected and appointed by Atlantic Gulf. Any successor Trustee shall execute and
deliver to the predecessor Trustee an instrument accepting such appointment, a
copy of which shall also be delivered to Atlantic Gulf and the Division, and
thereupon such successor Trustee, without further act, shall become bound by the
terms of the Trust Agreement and be vested with all the estates, properties,
rights, powers, duties, and trusts of the predecessor Trustee; and such
predecessor Trustee shall duly assign, transfer, deliver, and pay over to such
successor Trustee all moneys and other property then held by such predecessor
Trustee under this Trust Agreement. Prior to the proposed successor Trustee's
execution and delivery of an instrument accepting appointment as successor
Trustee, Atlantic Gulf shall consult with the Division in respect of its
selection of a successor Trustee. Upon appointment, a memorandum of appointment
of successor trustee shall be recorded in the public record of every county in
which the trust assents are located.
Section 2.8. TRUSTEE'S RESPONSIBILITY WITH RESPECT TO LEGAL
PROCEEDINGS. Trustee shall be under no duty to take any action, to pay any money
or to incur any expenses in regard to any legal proceeding involving this Trust
Agreement or the Trust Assets unless it shall elect, in its absolute discretion,
to do so and be furnished with sufficient funds or be indemnified to its
satisfaction by Atlantic Gulf. If the Trustee is served with process or notice
of legal proceedings or of any other matters concerning this Trust Agreement or
the Trust Assets, the sole duty of the Trustee shall be to forward the process
or notice to Atlantic Gulf. In such case, Atlantic Gulf may defend said action
in the name of the Trustee with counsel reasonably acceptable to the Trustee;
provided, however, that the Trustee may at any time resign as such under this
Trust Agreement (but only in accordance with the provision of Section 2.7
hereof) or personally appear in said proceeding.
Section 2.9. TAXES AND TAX RETURNS. Atlantic Gulf shall prepare and
file returns and reports and pay all real estate and all other taxes or charges
payable with respect to the Trust Assets and to the earnings, avails and
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proceeds of the Trust Assets or based on its interest under this Trust
Agreement. If Atlantic Gulf fails to prepare and file returns and reports and/or
fails to pay taxes or charges with regard to the Trust Assets as required by
law, the Trustee shall have the right but not the obligation to file any tax
return or pay taxes relating to the Trust Assets which it, in its absolute
discretion, deems should be filed an/or paid by it. If the Trustee does file a
tax return, Atlantic Gulf will cooperate with the Trustee in providing such
information as is necessary for the proper and correct preparation of such
return and Atlantic Gulf will promptly pay to the Trustee the amount of said
taxes.
Section 2.10. TRUSTEE NOT REQUIRED TO GIVE WARRANTY. The Trustee shall
not be required to execute any instrument containing any covenants of warranty
that would result in liability to the Trustee in regard to the execution of any
such instrument.
Section 2.11. TRUSTEE NOT INDIVIDUALLY LIABLE. The Trustee shall have
no individual liability or obligation whatsoever with respect to any act done or
contract entered into or indebtedness incurred by it in dealing with the Trust
Assets or in otherwise acting under this Trust Agreement except to the extent of
the Trust Assets and any trust funds in the actual possession of the Trustee
which shall be applicable to the payment and discharge of such liability or
obligation. By way of illustration and not by way of limitation, the Trustee
shall be under no duty whatsoever to execute or enter into any instrument or
agreement which does not contain language acceptable to the Trustee providing
the Trustee shall have no personal liability whatsoever and that the liability
of the Trustee shall be limited solely to any Trust Assets that the Trustee
holds under this Trust Agreement.
ARTICLE III
DIVISION REVIEW
---------------
Section 3.1. QUARTERLY REPORTS. The Company shall provide the Division
a quarterly report on or before 30 days following the end of each calendar
quarter detailing Sales Activity of all lots.
Section 3.2. ANNUAL EVALUATIONS. The Company shall on or before March 1
of each year provide the Division an annual report as of December 31, 1997, and
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each December 31 thereafter, of the prior year's activity in the lot exchange
program and the Lot Trust. At a minimum, this report shall identify:
(a) the beginning and ending balances of the Lot Trust;
(b) the beginning and ending number of non-utility satisfied lots which
remain eligible for the lot exchange program;
(c) the mechanisms by which utility satisfied lots not within the Lot
Trust were created and the number of utility satisfied lots created by each such
mechanism identified; and
(d) the above information shall be provided by specific lot number in
the form set forth in Exhibit "B."
Section 3.3. ANNUAL REVIEW. Based upon the information contained in the
Annual Evaluation, the Company and the Division shall annually review the
adequacy of the Lot Trust Assets. This review shall also consider any of the
Utility Funds and the extent of any remaining obligation to eligible lot owners.
As a result of this review, the Company and the Division may agree to:
(a) the free withdrawal of additional Lots from the Lot Trust;
(b) the free withdrawal of cash, securities or other assets from the
Trust Agreement.
(c) a reevaluation of the terms of this Agreement or the Trust
Agreement.
ARTICLE IV
MISCELLANEOUS
-------------
Section 4.1. LAW GOVERNING. This Trust Agreement shall be construed in
accordance with, and governed by, the laws of the State of Florida.
Section 4.2. NOTICES. All notices or other writings required or
permitted to be given by either party to this Trust Agreement shall be in
writing, and shall be (a) hand delivered, (b) sent by certified or registered
mail, return receipt requested, or (c) sent by overnight courier service to the
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address set forth on the signature page hereof, and if delivered to Atlantic
Gulf, deliver a copy to Atlantic Gulf's legal department at the same address.
Such notice shall be deemed to be given in the case of hand delivery or
overnight courier, when received, and in the case of mailing by certified or
registered mail, return receipt requested, five days after said notice has been
deposited in the United States Mail, postage prepaid. Either party may change
its address to which said notices are to be sent by giving notice of same to the
other party in accordance with the provisions hereof.
Section 4.3 NO OTHER BENEFICIARIES. This Trust Agreement is solely for
the benefit of the Division, eligible homesite purchasers, and Atlantic Gulf. No
other person or persons shall have any rights or privileges under this Agreement
either as a third-party beneficiary or otherwise.
Section 4.4 TERM. This Agreement shall terminate upon the earlier of:
(a) full disbursement of the Lot Trust Assets;
(b) execution of a joint letter of direction to the Trustee executed by
the Division and the Atlantic Gulf declaring that the Lot Trust Assets are no
longer required to satisfy the Company's obligation under the Trust Agreement,
revoking the Lot Trust and terminating this Agreement and directing the return
of any remaining Lot Trust Assets to the Company;
Otherwise, this "Utility Lot Trust Agreement" shall be irrevocable during its
term.
Section 4.5 AMENDMENT.
(a) This Agreement may only be amended by an instrument signed by the
Company and Division. Notwithstanding the foregoing, the Trustee shall not be
obligated to execute any amendment hereof that it believes may result in it
incurring liability or that would delete any protection provided to it
hereunder.
(b) In the event the Division or the Company withholds approval of a
proposed amendment, the Amendment shall not become effective until the
requesting party obtains an order from a court of competent jurisdiction
approving the amendment.
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Section 4.6. OTHER TERMS. The captions for the paragraphs contained
herein are solely for the convenience of the Parties and do not, in themselves,
have any legal significance. Time is of the essence in this Agreement. In this
Agreement, the plural includes the singular and vice versa. This Agreement
constitutes the complete agreement between the Parties and there are no
representation, agreements, or understandings other than as set forth herein.
This Agreement may not be amended, changed, or modified except by a writing
signed by both Parties to this Agreement and in accordance with the procedures
set forth in section 4.5 hereof.
Section 4.7 INTERPRETATION. If either of the Parties hereto shall be in
disagreement about the interpretation of this Trust Agreement, or about the
rights and obligation of or the propriety of any action contemplated by Trustee
hereunder, such Party may (but need not), at its sole discretion, file a motion
in the Bankruptcy Court to resolve said disagreement. The Division and the
Company shall each bear its own expenses under this Agreement; provided,
however, that if either seeks Bankruptcy Court intervention as a result of
egregious conduct on the part of the other, the movant may seek to have the
Bankruptcy Court assess attorney's fees and costs against the party whose action
necessitated such proceeding.
Section 4.8. BANKRUPTCY COURT JURISDICTION. The Lot Trust Agreement,
and all assets of the trust created thereby, shall remain subject to the
continuing jurisdiciton of the Bnakruptcy Court pursuant to paragraph 3(f) of
The Final Decree of GDC, IN RE GENERAL DEVELOPMENT CORPORATION, ET AL., Case No.
90-12231-BKC-AJC (Bankr. S.D. Fla. Mar. 15, 1995), and Trustee shall comply with
the orders of the Bankruptcy Court. In the absence of an order of the Bankruptcy
Court to the contrary, Trustee shall have no affirmative duty to seek further
authority from the Bankruptcy Court to take any actions necessary under and
pursuant to this Agreement.
Section 4.9. LIEN OF DIVISION ON "LOT TRUST ASSETS". The Company
covenants that the Lot Trust Assets are not subject to any interest, direct or
subordinated, of either the Reducing Revolving Loan Agreement (dated as of
October 1, 1996) lender or the Secured Floating Rate Note Agreement (dated as of
October 1, 1996) note holders, and will not be subjected to any loan agreement
or mortgage, liens and the Lot Trust Assets as described on Exhibit "A" shall
remain free and clear from all liens other than real estate taxes and
assessments for the current year and other plats, easements, restrictions,
reservations or matters of record, and the Company hereby grants to the Division
security interest in the Lot Trust Assets described on Exhibit "A" which shall
be evidenced by the recordation of a Memorandum of this Agreement in form and
content acceptable to the Parties to be recorded in every county where the Lot
Trust Assets are located.
Section 4.10. ENTIRE AGREEMENT. This Agreement, together with the Trust
Agreement constitutes the entire agreement between the Parties.
Section 4.11. DISCLOSURE. The Division freely acknowledges that
Atlantic Gulf has advised that Peninsula State Title is a Florida joint venture,
the sole partners of which are (a) AG Title, Inc., a wholly owned subsidiary of
Atlantic Gulf, and (b) PST, Inc., a Florida corporation which is totally owned
by several attorneys licensed to practice law in Florida, none of whom are
Atlantic Gulf employees.
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IN WITNESS WHEREOF, the Parties hereto have executed this Trust
Agreement as of the day and year first above written.
ATLANTIC GULF COMMUNITIES CORPORATION
By: /s/ THOMAS W. JEFFREY
-----------------------------
Thomas W. Jeffrey
Vice President - CFO
2601 South Bayshore Drive
Miami, Florida 33133
STATE OF FLORIDA, DEPARTMENT OF BUSINESS
AND PROFESSIONAL REGULATION, DIVISION OF
FLORIDA LAND SALES, CONDOMINIUMS AND
MOBILE HOMES
By: /s/ ROBERT ELLZEY
-----------------------------
Robert Ellzey
Director, Division of Florida Land
Sales, Condominiums and Mobile
Homes
1940 North Monroe Street
Tallahassee, Florida 32399-1030
PENINSULA STATE TITLE, AS TRUSTEE
By: /s/ C. GUY BATSEL
-----------------------------
C. Guy Batsel
18401 Murdock Circle, Suite B
Port Charlotte, FL 33948
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ATLANTIC GULF COMMUNITIES CORPORATION EXHIBIT TO THE MARCH 31, 1997 FORM 10-Q
EXHIBIT 10.2 RESTATED, AMENDED AND CONSOLIDATED TRUST AGREEMENT DATED AS OF
DECEMBER 26, 1996, AMENDED AS OF DECEMBER 30, 1996.
- ---------------------------------------------------
RESTATED, AMENDED AND CONSOLIDATED TRUST AGREEMENT
RESTATED, AMENDED AND CONSOLIDATED TRUST AGREEMENT, made and entered
into as of this 26th day of December, 1996, by and between the STATE OF FLORIDA,
DEPARTMENT OF BUSINESS REGULATION, DIVISION OF FLORIDA LAND SALES, CONDOMINIUMS,
AND MOBILE HOMES (the "Division"), ATLANTIC GULF COMMUNITIES CORPORATION
("Atlantic Gulf" or the "Company"), and FIRST UNION NATIONAL BANK OF FLORIDA, as
Trustee ("Trustee") (collectively with the Division and the Company, the
"Parties").
WHEREAS, the Restated Second Amended Joint Plan of Reorganization of
GDC, dated as of October 9, 1991, as modified on March 9, 1992 (the "Plan"), was
confirmed by the U.S. Bankruptcy Court for the Southern District of Florida on
March 27, 1992, and became effective on March 31, 1992;
WHEREAS, pursuant to the Plan, GDC has been renamed Atlantic Gulf
Communities Corporation;
WHEREAS, the Parties previously entered into the Homesite Program
Utility Fund Trust Agreement, dated December 8, 1992, the Class 14 Utility Fund
Trust Agreement, dated December 8, 1992, the Division Class 14 Utility Fund
Trust Agreement, dated April 6, 1993, and the Improvement Fund Trust Agreement,
dated April 6, 1993 (collectively, the "Original Trusts") all of which
Agreements were entered into pursuant to the Plan;
WHEREAS, pursuant to the letter agreement by and between Atlantic Gulf
and the Division, dated December 24, 1996, Atlantic Gulf and the Division agreed
to collapse the Original Trusts into a single, Restated, Amended and
Consolidated Trust which consolidates the assets, provisions, and obligations of
the Original Trust agreements, except that $120,000 shall be retained in the
Improvement Fund Trust, cash account #4072850907, for satisfaction of the
obligation set forth within the twelfth preamble of the Improvement Fund Trust
Agreement (the "Hendry County Obligation");
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WHEREAS, by execution of this Restated, Amended and Consolidated Trust
Agreement, Atlantic Gulf and the Division deem the Original Trusts to be merged
and superseded;
WHEREAS, Atlantic Gulf and the Division entered into the Utility Lot
Trust Agreement on December 20, 1996, for the purpose of providing utility
satisfied lots to be utilized in the Lot Exchange Program;
WHEREAS, the Division and Atlantic Gulf desire to appoint and authorize
a trustee to establish and administer the Restated, Amended and Consolidated
Trust for the purposes set forth below.
NOW, THEREFORE, in consideration of the mutual promises herein
contained the Parties agree as follows:
ARTICLE I.
DEFINITIONS
-----------
Unless the context requires otherwise, all capitalized terms used
herein and not otherwise defined shall have the meanings assigned to them in the
Plan.
ARTICLE II.
RESTATED, AMENDED AND CONSOLIDATED TRUST FUND
---------------------------------------------
Section 2.1. THE FUND. For all purposes of this Trust Agreement, the
Restated, Amended and Consolidated Trust Fund shall consist of the following
assets, and Trustee shall accept such assets subject to the terms and conditions
hereof:
(a) all stock and cash transferred from the Division Class 14 Utility
Fund Trust;
(b) all proceeds generated from the sale of stock pursuant to Section
2.3;
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(c) all moneys earned on the investment and reinvestment of the
foregoing.
(d) all stock and cash transferred from the Improvement Fund Trust,
excluding the $120,000 retained to meet the Hendry County Obligation.
Section 2.2. SECURITIES. Trustee shall hold in trust the Stock and all
non-cash proceeds received in connection with the Stock (the "Stock Rights" and
the "Securities"), including without limitation all stock certificates, options
and warrants and similar rights, until such time as the Stock and the Stock
Rights are withdrawn from the Restated, Amended and Consolidated Trust pursuant
to Section 2.6 or sold pursuant to Section 2.3.
Section 2.3. SALE OF SECURITIES.
------------------
(a) Beginning January 1, 1994, and continuing on each three-month
anniversary of such date until December 31, 1998 (the "Terminal Date"), the
Trustee shall determine how many shares of Stock are in Trust (the "Remaining
Stock"); PROVIDED, HOWEVER, that any Stock tendered in accordance with Section
2.3(b) shall not be deemed part of Remaining Stock for so long as such Stock
remains subject to tender. Subject to the provisions set forth in subsections
(b) to (e) below, the Trustee shall sell on the fifth (5th) business day in each
calendar quarter of such year, or as promptly thereafter as market conditions
reasonably permit, an amount of Stock (the "Quarterly Sale Amount") equal to (I)
the Remaining Stock, divided by (ii) the number of calendar quarters remaining
until the Terminal Date (E.G., in the quarter beginning on January 1, 1994, the
Trustee shall sell one-twentieth of the Remaining Stock; in the next quarter,
one-nineteenth; etc.). Subject to the provisions set forth in subparagraphs (b)
to (e) below, in the event there is any Remaining Stock as of January 1, 1999,
the Trustee shall sell all such Remaining Stock during such calendar year. The
Trustee shall deposit the proceeds from any such sales in the Division Cash
Account.
(b) The Trustee shall sell more than the Quarterly Sale Amount of Stock
for a particular quarter if there is a tender offer for such Stock and the
Division has instructed the Trustee in writing to so tender.
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(c) The Trustee shall delay or refrain from selling any Stock scheduled
to be sold in a particular quarter as provided in subsection (a) or (b) if (I)
the Division has instructed the Trustee to delay or refrain from such sale in
writing based upon a determination by the Division that such sale of Stock is
not in the interest of maximizing the Division Class 14 Utility Fund as a result
of extraordinary market conditions, or (ii) if the Trustee has determined that
such sale would violate applicable securities or other laws.
(d) The Trustee shall sell the Quarterly Sale Amount of Stock as
provided in this Section 2.3 in ordinary trading transactions, and shall be
entitled to pay a reasonable and customary brokerage commission in connection
therewith to the third-party securities broker effecting such transactions.
(e) Prior to selling any Quarterly Sale Amount and for so long as the
Stock is not registered pursuant to Section 5 of the Securities Act of 1933, the
Trustee may request an opinion from the Company that such Stock is exempt from
registration pursuant to Section 1145 of the Bankruptcy Code.
(f) If there is a tender offer for the Stock or the Notes and the
Division has not instructed Trustee to tender the Trust's Stock or Notes, as the
case may be, at least twenty (20) days prior to the deadline for holders to
tender, the Company may apply to the Bankruptcy Court for an order requiring the
Division to instruct the Trustee to so tender.
Section 2.4. [reserved]
Section 2.5. THE DIVISION CASH ACCOUNT. Trustee shall establish a
separate trust account (the "Division Cash Account"), and receive and keep in
the Division Cash Account (a) all cash deposited with the Trustee pursuant to
section 2.1, (b) all net sale proceeds from the sale of Securities deposited
with Trustee pursuant to Section 2.3, and (c) all moneys earned on the
investment and reinvestment of such amounts (collectively, the "Funds").
Section 2.6. AUTOMATIC AND ROUTINE CASH AND STOCK WITHDRAWAL.
(a) At such time as the number of non-utility satisfied lots owned by
parties eligible for the Lot Exchange Program (the "Eligible Lots") is less than
or equal to the number of utility satisfied lots held in the Utility Lot Trust,
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all assets of the Restated, Amended and Consolidated Trust shall be disbursed to
Atlantic Gulf and this trust shall terminate. As a condition precedent to said
disbursement and termination, Atlantic Gulf shall provide a certification to the
Division, based upon an independent analysis conducted by Milian, Swain &
Associates, Inc., that the number of lots in the Utility Lot Trust equals or
exceeds the number of Eligible Lots.
(b) At any time, but only with the consent of the Division, Atlantic
Gulf may direct the Trustee to disburse cash or stock to Atlantic Gulf.
(c) Atlantic Gulf may withdraw funds from the Division Cash Account
from time to time upon certification of the responsible officer of the Company
to the Trustee that the Company will use the funds to purchase lots to replenish
the Utiltity Lot Trust.
Section 2.7. ACCOUNTING.
----------
(a) Trustee shall account separately for the Stock in the Trust and
shall provide the Division and the Company with a quarterly statement detailing
all trust activity in connection with the Stock, including all deposits,
withdrawals, and/or sales of the Stock and the Stock Rights and all trust
expenses attributable to the Stock and the Stock Rights.
(b) Trustee shall account separately for the Division Cash Account and
shall provide the Division and the Company with a quarterly cash statement
detailing the activity in the Division Cash Account, including all deposits and
withdrawals, principal balance, income earned on, and expenses charged to the
Division Cash Account.
ARTICLE III.
FUNDS AND INVESTMENTS
---------------------
Section 3.1. SEPARATE FUNDS. In no event shall Trustee commingle the
Funds with other assets of, or maintained by, Trustee.
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Section 3.2. INVESTMENT OF MONEYS. Subject to section 3.3, Trustee
shall have the authority to invest and reinvest the moneys in this Trust (the
"Cash Proceeds") in the following instruments: (a) bonds, notes, treasury bills,
or other securities constituting direct obligations of, or fully guaranteed by,
the United States of America (provided that such direct obligations or
guarantees, as the case may be, are entitled to the full faith and credit of the
United States of America); (b) bonds, notes, or other securities of the Federal
National Mortgage Association, Federal Home Loan Mortgage Association, Federal
Home Loan Bank Board, or other similar agencies of the United State which are of
similar financial quality; (c) certificates of deposit of or money market
accounts at any bank (I) organized under the laws of the United States of
America and having offices in the State of Florida, or (ii) organized under the
laws of the State of Florida (in either case having a combined capital and
surplus of not less than $500,000,000 whose deposits are insured by the Federal
Deposit Insurance Corporation (including the Trustee if otherwise qualified
under this Section)); (d) if the interest rates available on certificates of
deposit of or money market accounts at banks described in clause (b) of this
section are lower than could be obtained if the Trustee invested such moneys
with other financial institutions of comparable quality, certificates of deposit
of or money market accounts at any domestic commercial bank, or non-domestic
bank provided that such non-domestic commercial bank shall have offices in New
York or Florida, having a combined capital and surplus of not less than
$500,000,000; (e) commercial paper currently rated "Prime-1" or higher by
Moody's Investors Service, Inc. or "A-l" or higher by Standard & Poor's
Corporation or an equivalent investment grade rating by another nationally
recognized securities rating agency; and (f) repurchase obligations with a term
of not more than 60 days for underlying securities of the types described in
clauses (a), (b), (c) and (d). The Company will only instruct the Trustee to
invest moneys held in the Funds in the foregoing investments. Trustee shall not
be liable to the Division or the company for any losses suffered on the
investment of the Cash Proceeds as a result of the Trustee's investment of such
moneys as long as such investment has been in accordance with the provisions of
this section.
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Section 3.3. DIRECTION BY COMPANY. Subject to section 3.2, the Company
shall direct in writing the Trustee's investment and reinvestment of Cash
Proceeds. In the event that the Trustee reasonably believes that a direction by
the Company is inconsistent with section 3.2, the Trustee shall not follow such
direction, and may invest such moneys in accordance with its standard practices
using the investments specified in Section 3.2 hereof.
ARTICLE IV.
TRUSTEE
Section 4.1. COMPENSATION TO TRUSTEE. Trustee shall receive
compensation for its services in accepting this Trust Agreement. Such
compensation shall be calculated in accordance with a separate agreement among
Trustee, the Division, and the Company.
Section 4.2. LIMITATION ON DUTIES. The Trustee undertakes to perform
only such duties as are expressly set forth herein, and no implied duties or
obligations shall be read into this Agreement against the Trustee.
Section 4.3. RELIANCE. The Trustee may act in reliance upon any writing
or instrument or signature which it, in good faith, believes to be genuine, may
assume the validity and accuracy of any statement or assertion contained in such
a writing or instrument and may assume that any person purporting to give any
writing, notice, advice, or instruction in connection with the provisions hereof
has been duly authorized to do so. The Trustee shall not be liable in any manner
for the sufficiency or correctness as to form, manner and execution, or validity
of any instrument deposited in this Trust, nor as to the identity, authority, or
right of any person executing the same; and its duties hereunder shall be
limited to the safekeeping of such certificates, moneys, instruments,
securities, or other documents received by it as Trustee, and for the
disposition of the same in accordance with the terms of this Agreement.
Section 4.4. TRUSTEE'S RESPONSIBILITY TO MAKE ADVANCES OR INCUR PAY
EXPENSES. Trustee shall have the right, but not the duty, to make any advances
or incur or pay any reasonable and necessary expenses on account of this Trust
Agreement or the Funds. If Trustee shall make any such advances or incur or pay
any such expenses on account of this Trust Agreement or the Funds, or shall
incur any expenses by reason of being a party to any litigation in connection
with this Trust Agreement or the Funds, or if Trustee shall be compelled by an
order of a court of competent jurisdiction
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to pay money on account of this Trust Agreement or the Funds, whether for breach
of contract, injury under any law, or otherwise (PROVIDED, HOWEVER, Trustee
shall not be individually liable in any manner under this Trust Agreement as set
forth in Section 4.3 hereof), the Company, on demand by Trustee, shall pay to
Trustee, with interest from the date Trustee made such advance or paid such
money through the date of payment by the Company to Trustee at the rate of the
weekly average yield on United States Treasury securities adjusted to a constant
maturity of one year, as made available by the Federal Reserve Board, the amount
of all such expenses, including reasonable attorneys' fees, incurred by Trustee
in said matters. Trustee shall have the right, but not the duty, to employ and
consult with counsel of its own choice regarding this Trust Agreement and the
Funds, and shall have full and complete authorization and protection for any
action taken by it hereunder in good faith and in accordance with the opinion of
such counsel; any and all reasonable costs and expenses incurred by Trustee by
virtue of said employment and consultation shall be deemed to be an advance or
expense made or incurred by Trustee under this Section 4.4 to be paid by the
Company on demand. The Company further agrees to indemnify and hold Trustee
harmless of and from any and all expenses, including, but not limited to, all
reasonable costs and attorneys' fees, advances, payments, or liabilities
incurred by it for any reason whatsoever as a result of this Trust Agreement,
except those resulting from Trustee's gross negligence or willful misconduct. To
the extent that the Company has failed to pay amounts due to the Trustee under
this Trust Agreement, the Trustee may retain sufficient funds to pay itself for
those amounts owed. Trustee shall not be obliged to convey, transfer, or
otherwise deal with the Funds or any part of them or to follow any instructions
of the Company unless and until all of the payments, advances, and expenses made
or incurred or paid by Trustee on account of this Trust Agreement or the Funds
shall have been paid, with interest, at the rate set forth herein.
Section 4.5. RESIGNATION OF TRUSTEE; SUCCESSOR TRUSTEE.
Trustee may at any time resign as Trustee and from its duties under this Trust
Agreement by giving at least thirty (30) days' prior written notice to both the
Company and the Division, such resignation to be effective on the acceptance of
appointment by a successor Trustee selected by the Company in consultation with
8
<PAGE>
the Division. In addition, the Company and the Division jointly may at any time
remove Trustee with or without cause (and the Company may at any time remove
Trustee as provided in Section 4.7(f)) by giving written notice to Trustee, such
removal to be effective upon the acceptance of appointment by a successor
Trustee selected by the Company in consultation with the Division. If a
successor Trustee shall not have been appointed with-in thirty (30) days of
written notice of resignation or removal, Trustee may apply to any court of
competent jurisdiction to appoint a successor Trustee to act until such time, if
any, as a successor shall have been selected and appointed by the Company in
consultation with the Division. Any successor Trustee shall be a trust company
or bank (I) organized under the laws of the State of Florida or (ii) organized
under the laws of the United States and having offices in the State of Florida
(in either case having trust powers). Any successor Trustee shall execute and
deliver to the predecessor Trustee an instrument accepting such appointment, a
copy of which shall also be delivered to the Company and the Division, and
thereupon such successor Trustee, without further act, shall become bound by the
terms of this Trust Agreement and be vested with all the estates, properties,
rights, powers, duties, and trusts of the predecessor Trustee; and such
predecessor Trustee shall duly assign, transfer, deliver, and pay over to such
successor Trustee all moneys and other property then held by such predecessor
Trustee. under this Trust Agreement, except that the Trustee may retain
sufficient funds to pay itself for amounts owed to it hereunder. Prior to
selecting any successor trustee, the Company shall inform the Division of its
selection.
Section 4.6. TRUSTEE'S RESPONSIBILITY WITH RESPECT TO LEGAL
PROCEEDINGS. Subject to the provisions of Section 6.9 of this Trust Agreement,
Trustee shall be under no duty to take any action, to pay any money, or to incur
any expenses in regard to any legal proceeding involving this Trust Agreement or
the Funds. If Trustee is served with process or notice of legal proceedings or
of any other matters concerning this Trust Agreement or the Funds, the sole duty
of Trustee shall be to forward the process or notice to the Company and the
Division as provided herein. In such case, the Company may defend said action in
the name of Trustee with counsel reasonably acceptable to Trustee; PROVIDED,
HOWEVER, that if the Trustee determines that such counsel selected by the
9
<PAGE>
Company has a conflict in representing the interests of the Company and the
Trustee, the Trustee may represent its own interests; and PROVIDED FURTHER, that
Trustee may at any time resign as such under this Trust Agreement (but only in
accordance with the provisions of Section 4.5 hereof) or personally appear in
said proceeding.
Section 4.7. TAXES AND TAX RETURNS.
---------------------
(a) The Trustee shall obtain an employer identification number for the
Restated, Amended and Consolidated Trust.
(b) The Trustee, or an agent of the Trustee that is acceptable to the
Company, shall be responsible for filing all appropriate federal, state, and
local tax returns, including U.S. Form 1041, with respect to the Restated,
Amended and Consolidated 14 Trust.
(c) The Company, the Division and the Trustee shall cooperate, when
necessary, with regard to the filing of tax returns and payment of taxes, if
any.
(d) To the extent that the Restated, Amended and Consolidated Trust is
determined to have taxable income and any taxes thereon shall be due, Trustee
shall pay out of the Division Cash Account any federal, state, and local taxes
required to be paid, and any estimated tax liabilities, with respect to such
taxable income.
(e) In furtherance and not in limitation of Section 4.4, the Company
further agrees to indemnify and hold Trustee harmless of and from any and all
income taxes and associated costs, including, but not limited to, all reasonable
attorneys' fees, advances, payments, or liabilities incurred by it as a result
of any dispute with the Internal Revenue Service related to the Trustee's
payment of the Trust's income taxes, except those resulting from Trustee's gross
negligence or willful misconduct.
(f) If the Company objects to the amount of the Tax Reserve, and if
Trustee and the Company cannot thereafter mutually agree on the amount of such
Reserve, the Company shall have the right to seek the removal of the Trustee
pursuant to Section 4.5.
10
<PAGE>
Section 4.8. VOTING. In the event that a vote of the holders of the
Stock is scheduled which requires approval of 50 percent or more of the
outstanding Stock entitled to vote thereon under applicable law, Trustee shall
vote or cause to be voted (by executing a proxy or otherwise) one-hundred
percent (100%) of the Stock held in this Trust (the "Trust Stock") with the
majority of the Stock voting that is not held in this Trust (the "Non-Trust
Stock"); PROVIDED, HOWEVER, that if the scheduled vote does not so require
approval of 50 percent or more of the outstanding Stock entitled to vote
thereon, Trustee shall vote or cause to be voted (by executing a proxy or
otherwise) the Trust Stock in the same proportions as the Non-Trust Stock is
voted.
ARTICLE V.
DIVISION REVIEW
---------------
Section 5.1. ANNUAL AUDIT. The company shall cause to be prepared, and
shall provide to the Division and the Trustee, one audit per calendar year (the
"Annual Audit") of the records related to this Agreement. Such Annual Audit
shall be performed in accordance with a separate agreement between the Company
and the Division for purposes of ensuring the Company's compliance with the
terms and provisions of this Agreement.
Section 5.2. AUDIT ADJUSTMENTS.
-----------------
(a) If, as a result of any Annual Audit, the Division determines that
the records reflect any inaccuracies requiring entry of an Audit Adjustment,
including, without limitation, the disbursement of any amount that is
inconsistent with any provision of the Agreement ("Ineligible Disbursement"),
the Division shall give written notice thereof to the Company and the Trustee (a
"Notice of Audit Adjustment").
(b) If the Company disputes an asserted Audit Adjustment, it may submit
the dispute to the Bankruptcy Court as provided in Section 6.8 and shall notify
the Trustee of its doing so.
(c) If the Company does not dispute an asserted Audit Adjustment, or if
the Bankruptcy Court confirms a proposed Audit Adjustment over the Company's
objection, (I) the Company will pay to the account in question the amount
required to restore such account to where it would have been absent the
Ineligible Disbursement
11
<PAGE>
Section 5.3. AGREEMENT BETWEEN TRUSTEE AND THE COMPANY. The Company
shall provide a copy of the separate agreement between Trustee and the Company,
and any amendments thereto, to the Division.
ARTICLE VI.
MISCELLANEOUS
-------------
Section 6.1. INQUIRIES. Written inquiries, legal and other notices, tax
statements, and all other documents and writings received by Trustee and
relating to this Trust Agreement or the Funds shall be sent and forwarded within
a reasonable time after receipt by Trustee to the Division and the Company at
the address set forth on the signature page hereto or as changed from time to
time in writing.
Section 6.2. LAW GOVERNING. This Trust Agreement shall be construed in
accordance with, and governed by, the laws of the State of Florida.
Section 6.3. NOTICES. All notices or other writings required or
permitted to be given by either party to this Trust Agreement shall be in
writing, and shall be (a) hand delivered, (b) sent by certified or registered
mail, return receipt requested, or (c) sent by overnight courier service to the
address set forth on the signature page hereof. Such notice shall be deemed to
be given in the case of hand delivery or overnight courier, when received, and
in the case of mailing by certified or registered mail, return receipt
requested, five (5) days after said notice has been deposited in the United
States Mail, postage prepaid. Any Party may change its address to which said
notices are to be sent by giving notice of same to the other Parties in
accordance with the provisions hereof.
Section 6.4. NO OTHER BENEFICIARIES. This Trust Agreement is solely for
the benefit of the Company, the Trustee, the Division, lot owners eligible for
the lot exchange program, and their successors. No other person or persons shall
have any rights or privileges under this Trust Agreement either as a third-party
beneficiary or otherwise.
12
<PAGE>
Section 6.5. TERM.
----
(a) This Trust Agreement shall terminate upon the earlier of (I) full
disbursement of the cash and other assets in this Trust; or (ii) receipt by the
Trustee of a notice of revocation executed Jointly by the Company and the
Division (or executed by (1) either the Company or the Division and (2)
accompanied by order of the Court as described in subsection (b) of this Section
6.5), which notice shall direct the Trustee as to the disposition of the
remaining assets. The Trust Agreement shall otherwise be irrevocable during its
term.
(b) In the event that either the Company or the Division shall desire
to terminate this Agreement but is unable to secure the consent of the other to
termination, pursuant to subsection (a) of this Section 6.5, the party desiring
to terminate this Agreement shall submit a written request for consent to
termination to the other Party (with a copy to the Trustee) by certified mail,
return receipt requested (the "Termination Request"). Such request shall state
conspicuously, and in bold-face type, that such request contains
"Time-Sensitive" matters. The Party receiving the Termination Request shall
notify the Party making such request of its response to the Termination Request
within 30 days of the former's receipt of the Termination Request, which notice,
in the event of disapproval of the Termination Request, shall specify the basis
of such disapproval. In the event that the Party receiving the Termination
Request does not consent thereto or fails to respond within the time period
specified, the Party making such request may petition the Bankruptcy Court for
an order finding that, notwithstanding the other party's lack of consent (or
objection) to termination, the Trust should be terminated.
Section 6.6. AMENDMENT.
---------
(a) With the prior written approval of the Division, which approval
shall not be unreasonably withheld, the Company may at any time by written
instrument delivered to Trustee amend this Trust Agreement; PROVIDED, HOWEVER,
that any amendment which would increase the responsibilities of the Trustee
shall require the consent of the Trustee. The Company shall furnish to Trustee
the
13
<PAGE>
written form of said amendment as executed by the Company along with proper
verification of the Division's prior written approval. Upon the execution of
said amendment by Trustee, said amendment shall be considered to be an amendment
to this Trust Agreement and shall be binding upon all parties hereto and upon
any beneficiaries hereof. The Trustee shall not be obligated to execute any
amendment hereof that it believes may result in it incurring liability or that
would delete any protection or benefit to it provided hereunder.
(b) In the event that the Division withholds approval of a proposed
amendment, the Amendment shall not become effective until (1) the Company, the
Division, and the Trustee agree in writing to such amendment, or (2) the Company
obtains an order from a court of competent jurisdiction approving the amendment.
Section 6.7. OTHER TERMS. The captions for the paragraphs contained
herein are solely for the convenience of the Parties and do not, in themselves,
have any legal significance. Time is of the essence in this Trust Agreement. In
this Trust Agreement, the plural includes the singular and vice versa. This
Trust Agreement constitutes the complete agreement between the Parties hereto
and there are no representations, agreements, or understandings other than as
set forth herein. This Trust Agreement may not be amended, changed, or modified
except by a writing signed by the Division and the Company and in accordance
with the procedures set forth in Section 6.6 hereof.
Section 6.8. INTERPRETATION. If any of the Parties hereto shall be in
disagreement about the interpretation of this Trust Agreement, or about the
rights and obligations of or the propriety of any action contemplated by Trustee
hereunder, any Party may (but need not), at its sole discretion, file a motion
in the Bankruptcy Court to resolve said disagreement. Trustee shall be
indemnified for all costs, including reasonable attorney's fees, in connection
with the aforesaid motion, and shall be fully protected in suspending all or a
part of its activities under this Trust Agreement until the Bankruptcy court
resolves such disagreement. The Division and the Company shall each bear its own
14
<PAGE>
costs and expenses under this Agreement; provided, however, that if either seeks
Bankruptcy Court intervention as a result of egregious conduct on the part of
the other, the movant may seek to have the Bankruptcy Court assess attorneys'
fees and costs against the party whose action necessitated such proceeding.
Section 6.9. BANKRUPTCY COURT JURISDICTION. The Restated, Amended and
Consolidated Trust Agreement and all assets of the trust created thereby, shall
remain subject to subject to the continuing jurisdiction of the Bankruptcy Court
pursuant to paragraph 3(f) of The Final Decree of GDC, IN RE GENERAL DEVELOPMENT
CORPORATION, ET AL., Case No. 90-12231-BKC-AJC (Bankr. S.D. Fla. Mar. 15, 1995),
and Trustee shall comply with the orders of the Bankruptcy Court. In the absence
of an order of the Bankruptcy Court to the contrary, Trustee shall have no
affirmative duty to seek further authority from the Bankruptcy Court to take any
actions necessary under and pursuant to this Agreement.
Section 6.10. INTEREST OF CERTAIN LENDERS. The Company and the Division
acknowledge that the lenders (the "Lenders") under the Working Capital and Term
Loan Agreement dated as of March 31, 1992 (the "Term Loan Agreement"), have an
interest, and the note holders (the "Note Holders") under the Secured Floating
Rate Note Agreement dated as of March 31, 1992 (the "Note Agreement"), have a
subordinated interest in any distributions made to the Company pursuant to
Section 2.6 hereof, and the Company has informed the Trustee of the existence of
such interests. If a default has occurred and is continuing under either the
Term Loan Agreement or the Note Agreement (a "Default"), the Lenders' agent
under the Term Loan Agreement (the "Lenders' Agent") or the Note Holders' agent
under the Note Agreement (the "Note Holders' Agent"), as the case may be, may
give the Trustee notice of such fact. From the Trustee's receipt of such notice
until (a) informed otherwise by the Lenders' Agent or the Note Holders' Agent,
as the case may be, or (b) ordered to do otherwise by a final order of a court
of competent jurisdiction, any distributions pursuant to Section 2.6 hereof
shall be made: (i) so long as any obligations are outstanding under the Term
Loan Agreement, to the Lenders' Agent, and (ii) thereafter and so long as any
obligations are outstanding under the Note Agreement, to the Note Holder's
Agent. Providing notice to the Trustee of a Default shall be the sole
responsibility of the Lenders' Agent and/or the Note Holders' Agent, and the
Trustee shall have no obligation to determine whether there has been a Default
prior to making any distributions under this Agreement.
15
<PAGE>
Section 6.11. ENTIRE AGREEMENT. This Trust Agreement, together with the
Utility Lot Trust Agreement, constitutes the entire agreement between the
Parties. This Trust Agreement, and the Utility Lot Trust Agreement, supersede
any prior agreements or understandings, oral or written, with respect to the
subject matter of this Trust Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Restated,
Amended and Consolidated Trust Agreement as of the day and year first above
written.
ATLANTIC GULF COMMUNITIES CORPORATION
By: /s/ THOMAS W. JEFFREY
----------------------------
Thomas W. Jeffrey, Esq.
Vice-President - CFO
2601 South Bayshore Drive
Miami, Florida 33133
STATE OF FLORIDA, DEPARTMENT OF BUSINESS
REGULATION, DIVISION OF FLORIDA LAND SALES,
CONDOMINIUMS, AND MOBILE HOMES
By: /s/ ROBERT H. ELLZEY, JR.
----------------------------
Robert H. Ellzey, Jr.
Director, Division of
Florida Land Sales, Condominiums,
and Mobile Homes
725 South Bronough Street
Tallahassee, Florida 32399
FIRST UNION NATIONAL BANK OF FLORIDA,
AS TRUSTEE
By:
----------------------------
Corporate Trust Department
Fourteenth Floor
200 South Biscayne Boulevard
Miami, Florida 33131
ATLANTIC GULF COMMUNITIES CORPORATION EXHIBIT TO THE MARCH 31, 1997 FORM 10-Q
EXHIBIT 10.3 FIRST AMENDMENT TO THE RESTATED, AMENDED AND CONSOLIDATED TRUST
AGREEMENT DATED AS OF DECEMBER 26, 1996, AMENDED AS OF DECEMBER 30, 1996.
FIRST AMENDMENT TO THE
RESTATED, AMENDED AND CONSOLIDATED TRUST AGREEMENT
--------------------------------------------------
RESTATED, AMENDED AND CONSOLIDATED TRUST AGREEMENT AMENDMENT, made and
entered into as of this 30th day of December, 1996, by and between the STATE OF
FLORIDA, DEPARTMENT OF BUSINESS REGULATION, DIVISION OF FLORIDA LAND SALES,
CONDOMINIUMS, AND MOBILE HOMES (the "Division"), ATLANTIC GULF COMMUNITIES
CORPORATION ("Atlantic Gulf" or the "Company"), and FIRST UNION NATIONAL BANK OF
FLORIDA, as Trustee ("Trustee") (collectively with the Division and the Company,
the "Parties").
WHEREAS, the Parties entered into the Restated, Amended and
Consolidated Trust Agreement (the "Agreement") dated as of December 24, 1996;
WHEREAS, the Parties desire to amend the Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
contained the Parties agree as follows:
1. Section 4.7 of the Agreement is hereby amended by deleting the text
of subsection (f), and adding sub-subsections (f)(i) and (f)(ii) which state:
(f)(i) The Trustee shall not be obligated to make any cash
disbursement pursuant to Section 2.6 to the extent that the
Trustee reasonably believes that such disbursement would
leave the Trust with insufficient Funds to meet its
potential tax liability as of such date. Any Funds so
withheld by the Trustee shall be called the "Tax Reserve"
and shall be accounted for separately by the Trustee from
other Funds in the Trust.
(f)(ii) If the Company objects to the amount of the Tax
1
<PAGE>
Reserve, and if Trustee and the Company cannot thereafter
mutually agree on the amount of such Reserve, the Company
shall have the right to seek the removal of the Trustee
pursuant to Section 4.5.
IN WITNESS WHEREOF, the Parties hereto have executed this Restated,
Amended and Consolidated Trust Agreement Amendment as of the day and year first
above written.
ATLANTIC GULF COMMUNITIES CORPORATION
By: /s/ THOMAS W. JEFFREY
----------------------------
Thomas W. Jeffrey, Esq.
Vice-President - CFO
2601 South Bayshore Drive
Miami, Florida 33133
STATE OF FLORIDA, DEPARTMENT OF BUSINESS
REGULATION, DIVISION OF FLORIDA LAND SALES,
CONDOMINIUMS, AND MOBILE HOMES
By: /s/ ROBERT H. ELLSEY, JR.
----------------------------
Robert H. Ellzey, Jr.
Director, Division of
Florida Land Sales, Condominiums,
and Mobile Homes
725 South Bronough Street
Tallahassee, Florida 32399
2
<PAGE>
FIRST UNION NATIONAL BANK OF FLORIDA,
AS TRUSTEE
By: /s/ PETER H. FOWLER
----------------------------
Corporate Trust Department
Fourteenth Floor
200 South Biscayne Boulevard
Miami, Florida 33131
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT MARCH 31,
1997 (UNAUDITED) AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000771934
<NAME> Gulf Atlantic Communities Corporation
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,462
<SECURITIES> 0
<RECEIVABLES> 56,982 <F1>
<ALLOWANCES> 0
<INVENTORY> 146,485
<CURRENT-ASSETS> 0 <F2>
<PP&E> 2,802 <F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 239,884
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 162,184
0
0
<COMMON> 981
<OTHER-SE> 48,185
<TOTAL-LIABILITY-AND-EQUITY> 239,884
<SALES> 16,284
<TOTAL-REVENUES> 18,678
<CGS> 13,459
<TOTAL-COSTS> 15,918
<OTHER-EXPENSES> 6,001
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,035
<INCOME-PRETAX> (7,276)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,276)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,276)
<EPS-PRIMARY> (.75)
<EPS-DILUTED> (.75)
<FN>
<F1> The values for Receivables and PP&E Represent Net Amounts.
<F2> The Company does not prepare a Classified Balance Sheet. Therefore, Current
Assets and Current Liabilities are not applicable.
</FN>
</TABLE>
