<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
ATLANTIC GULF COMMUNITIES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
2601 South Bayshore Drive
Miami, Florida 33133-5461
(305) 859-4000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
59-0720444
(I.R.S. Employer Identification No.)
Thomas W. Jeffrey
Executive Vice President
2601 South Bayshore Drive
Miami, Florida 33133-5461
(305) 859-4000
(Name, address, including zip code and telephone number including area
code, of agent for service)
The Commission is requested to send copies of all communications to:
Carter Strong, Esq.
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
(202) 857-6252
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, as amended ("Securities Act"), other than
securities offered only in connection with dividend or interest
reinvestment plans, check the following
box. [ X ]
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
343, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Securities Amount to be Proposed Proposed Maximum Amount
to be Registered Registered Maximum Aggregate of Fee
Offering Price Offering
Per Unit (1) Price
<S> <C> <C> <C> <C>
Common Stock 1,776,199 $5.875 $10,435,169 $3,162.17
Series B
Preferred Stock 1,000,000 $9.88 $ 9,880,000 $2,993.94
Common Stock
issuable upon
conversion of
Series B Preferred
Stock and exercise
of Series B
Warrants (2)(3) 3,739,130 -- -- (2)
TOTAL $20,315,169 $6,157.00
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended, based
upon the average of the high and low price reported on August 6, 1997.
(2) The Common Stock being registered hereby is issuable upon conversion of
Series B Preferred Stock and exercise of Series B Warrants. Accordingly,
pursuant to Rule 457(i) under the Securities Act, no additional filing fee is
required.
(3) Includes such undetermined additional shares as may become issuable
pursuant to the antidilution provisions of the Series B Preferred Stock and
the Series B Warrants and to the dividend provisions of the Series B Preferred
Stock.
The registrant hereby amends the registration statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states
that this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act or until the
registration statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST __, 1997
ATLANTIC GULF COMMUNITIES CORPORATION
5,515,329 Shares of Common Stock
1,000,000, Shares of Series B Preferred Stock
This Prospectus relates to the offering and resale by the persons
listed under the heading "Selling Stockholders" (the "Selling
Stockholders") of up to 5,515,329 shares of Common Stock and 1,000,000
shares of Series B Preferred Stock (collectively, the " Securities"),
of Atlantic Gulf Communities Corporation, a Delaware corporation (the
"Company"). The Securities to which this Prospectus relates have been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), on behalf of the Selling Stockholders to permit
their public sale or other distribution. See "Selling Stockholders"
and "Plan of Distribution."
None of the net proceeds from the sale of the Securities will be
received by the Company.
The Series B Preferred Stock ranks senior to the Common Stock with
respect to dividends and distributions. Holders of Series B Preferred
Stock will be entitled to receive, when, as and if declared by the
Board, cash dividends on a quarterly basis at an annual rate equal to
20% of the liquidation preference, which is $10 per share, plus any
accrued and unpaid dividends. Upon certain events of default,
dividends will accumulate at an annual rate of 23%. The Series B
Preferred Stock will be redeemable by the Company in whole or in part
after three years from the issuance date at a redemption price in cash
equal to the liquidation preference. Holders of the Series B
Preferred Stock have certain "put rights" which will entitle them to
require the Company to repurchase the Series B Preferred Stock in
certain amounts and at certain times: up to an aggregate of one-third
of the shares of the Series B Preferred Stock after the end of the
fourth year following the issuance date and before the end of the
fifth year, up to an aggregate of two-thirds of the shares of the
Series B Preferred Stock after the end of the fifth year following the
issuance date and before the end of the sixth year, and up to the
entire amount after the sixth year following the issuance date, at a
repurchase price in cash equal to the liquidation preference. Certain
events of default, including a Default Change of Control (as defined
below) of the Company, would accelerate the put rights. The Series B
Preferred Stock will be convertible into such number of shares of
Common Stock as is obtained by dividing the liquidation preference by
the conversion price of $5.75 per share, subject to certain
adjustments. The Series B Preferred Stock put rights will not be
secured. Holders of Series B Preferred Stock will have no voting
rights except as may be required by applicable law. As long as Apollo
(as defined) holds at least 500,000 shares of Series A Preferred
Stock, it will have certain consent rights in respect of the Company
engaging in "Major Transactions" (as defined). For a description of the
rights and preferences of the Series B Preferred Stock, see
"Description of Capital Stock -- Series B Preferred Stock."
The Common Stock is traded on the NASDAQ National Market System under
the symbol "AGLF." On August 7, 1997, the last reported sale price of
the Common Stock on the National Market System was $6.00 per share.
See "Price Range of Common Stock and Dividends." Each share of Series
B Preferred Stock is immediately convertible at the holder's option
into 1.739 shares of Common Stock (subject to adjustment).
The Company has applied for listing of the Series B Preferred Stock on
the National Market System under the trading symbol "AGLFP." The
Company expects the Series B Preferred Stock to be accepted for
quotation on the National Market System if there are an adequate
number of publicly held shares of Series B Preferred Stock to meet the
requirements of NASDAQ. No assurance can be given that there will be
an adequate number of publicly held shares of Series B Preferred
Stock, or that a market will develop for the Series B Preferred Stock.
<PAGE>
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THE SECURITIES MAY BE SOLD FROM TIME TO TIME BY THE SELLING
STOCKHOLDERS THROUGH DEALERS, BROKERS OR OTHER AGENTS AT MARKET PRICES
PREVAILING AT THE TIME OF SALE. THE COMPANY WILL BEAR SUBSTANTIALLY
ALL OF THE EXPENSES INCIDENT TO THE REGISTRATION OF THE SECURITIES,
WHICH ARE ESTIMATED TO BE APPROXIMATELY $52,000. THE SELLING
STOCKHOLDERS AND ANY DEALERS, BROKERS OR AGENTS THAT PARTICIPATE WITH
THE SELLING STOCKHOLDERS IN THE DISTRIBUTION OF THE SECURITIES MAY BE
DEEMED TO BE "UNDERWRITERS" WITHIN THE MEANING OF THE SECURITIES ACT
AND ANY COMMISSIONS RECEIVED BY THEM AND ANY PROFIT ON THE RESALE OF
SECURITIES PURCHASED BY THEM MAY BE DEEMED TO BE UNDERWRITING
COMMISSIONS OR DISCOUNTS UNDER THE SECURITIES ACT. SEE "PLAN OF
DISTRIBUTION."
The date of this Prospectus is August ___, 1997.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OF ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO
WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE
SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY
TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
<PAGE>
TABLE OF CONTENTS
Page
Available Information 5
Documents Incorporated by Reference 5
Risk Factors 7
The Company 13
Recent Developments 14
Dilution 15
Ratio Earnings to Fixed Charges and Preferred Stock Dividends 16
Use of Proceeds 17
Selling Stockholders 18
Plan of Distribution and Determination of Offering Price 19
Price of Common Stock and Dividends 20
Description of Capital Stock 21
Legal Matters 29
Experts 29
<PAGE> AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information
filed by the Company with the Commission, including the Registration
Statement on Form S-3 of which this Prospectus is a part, may be
inspected and copied at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
Seven World Trade Center, New York, New York 10048 and 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Common Stock is traded in the over-the-counter market and
is traded on the NASDAQ National Market System. The Commission
maintains a Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding
registrants, such as the Company, that file electronically with the
Commission. Copies of the Company's reports, proxy statements and
other information filed with the Commission can also be inspected at
the offices of the National Association of Securities Dealers, Inc. at
1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain parts of which are omitted
as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. For
further information regarding the Company and the securities offered
hereby, reference is made to the Registration Statement and to the
exhibits thereto.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the
Commission are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, filed April 14, 1997, and Amendment No. 1 thereto
filed on Form 10-K/A on April 30, 1997 (collectively, the "Company's
1996 10-K").
(2) The Company's Current Report on Form 8-K filed February 18, 1997.
(3) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997, filed May 15, 1997.
(4) The Company's Proxy Statement dated May 21, 1997.
(5) The Company's Current Report on Form 8-K filed June 5, 1997.
(6) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, dated March 20, 1992.
(7) The Company's Registration Statement on Form S-3 (File No. 333-
31939), as amended (the "Rights Offering Registration Statement"),
including the financial statements under the heading "Unaudited Pro Forma
Financial Information" therein.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to termination of the offering hereunder shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof
from the date any such document is filed. All documents filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act after the date of the initial Registration Statement and prior to
the effectiveness of the Registration Statement shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof
from the date any such document is filed. Any statement contained in
a document incorporated or deemed to be incorporated by reference
herein shall be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any subsequently
filed document which is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon written or oral request, a copy
of any and all of the documents incorporated by reference herein,
other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents. Any such
request may be directed to Atlantic Gulf Communities Corporation,
Attention: Thomas W. Jeffrey, Chief Financial Officer, at the
Company's principal executive offices, which are located at 2601 South
Bayshore Drive, Miami, Florida 33133-5461, telephone number (305)
859-4000.
<PAGE> RISK FACTORS
Prior to making an investment decision, purchasers should consider
carefully the following factors relating to the Company's business and
the offering made hereby, together with the information and financial
data set forth elsewhere in this Prospectus or incorporated by
reference herein.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus 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) the advantages and benefits
and disadvantages and costs of the Apollo Transaction (as defined),
the Private Placement (as defined) and the Rights Offering (as
defined); (c) the opportunities for cash flow growth through the use
of the net proceeds from the Apollo Transaction, the Private Placement
and the Rights Offering; and (d) those other statements preceded by,
followed by or that include the words "believes," "expects," "intends,"
"anticipates," "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 Prospectus, 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) the inability to realize significant benefits as a
result of the Apollo Transaction, the Private Placement and the Rights
Offering or to realize increases in revenues, net income or cash flow
as a result of such transactions; (e) unanticipated costs,
difficulties or delays in completing or realizing the intended
benefits of development projects; (f) adverse changes in current
financial market and general economic conditions, including interest
rate increases; and (g) actions by competitors.
HIGH LEVEL OF DEBT; CAPITAL RESOURCES
The Company has a high level of debt. Approximately $21.67 million of
the Company's indebtedness to Foothill Capital Corporation ("Foothill
Debt") matures on December 31, 1997. The balance of approximately
$41.7 million of Foothill Debt and an additional $39.6 million in
certain unsecured cash flow notes mature in 1998. The Company
currently does not have sufficient liquidity and capital resources to
satisfy such indebtedness and to implement fully its business plan.
Management believes, however, that sufficient liquidity and capital
resources to satisfy such indebtedness and to implement fully the
Company's business plan will be provided by a combination of sources,
including the Apollo Transaction, the Private Placement and the Rights
Offering, the accelerated disposition of non-core tract and scattered
homesite assets, the monetizing of Predecessor Company assets,
refinancings, and revenues from operations.
LOSSES
During the year ended December 31, 1996, the Company had net income of
approximately $1.2 million, including an extraordinary gain of
approximately $13.7 million resulting from the extinguishment of debt
and an operating loss of $12.5 million. The Company had a net loss of
$20.6 million for the year ended December 31, 1995. 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 Company expects to achieve
operating profitability through some combination of growth in revenues
and reductions in debt, fixed expenses and overhead.
FLORIDA REAL ESTATE MARKET
The Company's success is affected by the risks generally incident to
the real estate business, including risks generally incident to the
Florida real estate market. The Florida real estate market
historically has been cyclical, and the Company's business may be
affected by changes in the Florida and national economy and changes in
the levels of interest rates. Any downturn in the Florida or national
economy or increase in interest rates can have adverse effects on
sales and profitability and on the Company's ability to make required
payments on debt.
REGULATORY AND ENVIRONMENTAL MATTERS
The Company's real estate operations are regulated by various local,
regional, state and federal agencies. The extent and nature of these
regulations include matters such as planning, zoning, design,
construction of improvements, environmental considerations and sales
activities. Local, regional, state and federal laws, regulations and
policies regarding the protection of the environment directly affect
the Company and its business. The Company has permits for certain of
its development projects, issued by a variety of governmental
entities. Ongoing permitting obligations may include a range of
environmental, maintenance and monitoring obligations, including water
quality monitoring, surface water management and wetlands mitigation.
A small portion of the Company's land holdings contain residues or
contaminants from current and past activities by the Company, its
lessees, prior owners and operators of the properties and/or
unaffiliated parties. Some of these areas have been the subject of
cleanup action by the Company voluntarily or following the involvement
of regulatory agencies. Additional cleanup in the future also may be
required. The Company's business is subject to additional obligations
under the environmental laws, relating to both ongoing operations as
well as past activities. Compliance with environmental restrictions
is likely to become more costly and time consuming for the Company in
the future. The Company believes, however, that its obligations under
the environmental laws will not have a material adverse affect on its
business, results of operations or financial position.
Certain of the Company's tract inventory is subject to permits and
regulatory approvals which enhance the marketability of the property.
In some cases, preserving the permits and approvals prior to sale
could require additional development in the future, subject to growth
thresholds such as traffic patterns. To the extent the Company
chooses not to undertake development work required by a permit or
approval for a specific tract within the indicated time period, the
Company's targeted gross margins for that tract could be adversely
affected based upon a revised development plan or land use.
COMPETITION
Real estate operations, particularly in Florida, are highly
competitive. Competition with respect to tract sales of Florida real
estate has been heightened by the general lack of available bank
financing for real estate acquisition and development which reduces
the number of buyers who have the financial resources and development
expertise to transform these tracts into finished homesites. For
tract sales, the Company competes with other real estate sellers for
developers/builders and other real estate investors on the basis of
location, permitted uses, financing and price.
In the development and sale of new homesite subdivisions, the Company
has focused on acquiring new properties in Florida's primary markets
and in selected primary markets in the Southeast. The supply of
finished lots in the primary markets has been significantly reduced
from its levels in recent years due to a combination of several
factors, including a reduction in the capital available for the
acquisition and development of new homesites and a reduction in the
number of real estate developers active in new subdivision acquisition
and development. Also, homebuilders are reluctant to acquire and
develop finished homesites due to a lack of expertise and the
substantial cost associated with carrying finished inventory.
Nevertheless, the Company continues to compete on the basis of price,
product and location with other developers and homebuilders in those
markets.
The secondary Florida markets, where the Company's scattered homesite
inventory is located, are also highly competitive. With respect to
the sale of scattered homesites in the secondary Florida markets,
there is a significant oversupply of buildable homesites developed by
the Company's predecessor company remaining on the market. Because
the primary buyers for the scattered buildable homesites are small
independent homebuilders, the Company competes for their business on
the basis of price and location.
POSSIBLE DILUTION OF OWNERSHIP INTEREST
Each share of the Series B Preferred Stock may be converted into 1.739
shares of Common Stock (subject to adjustment) and, if converted, will
be entitled to vote on all matters presented to holders of Common
Stock. Similarly, each Series B Warrant is exercisable for one share
of Common Stock (subject to adjustment) and, if exercised, will be
entitled to vote on all matters presented to Stockholders. Moreover,
the conversion of the Series A Preferred Stock and the exercise of the
Investor Warrants and the Bank Warrants (as defined below) would
increase the amount of Common Stock outstanding and thereby further
dilute the percentage ownership interests and voting rights of the
holders of Common Stock immediately prior to such conversion or
exercise.
ABSENCE OF DIVIDENDS
No dividends have been declared or paid by the Company on its Common
Stock. 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 to pay any cash dividends
on the Common Stock in the foreseeable future. Also, no cash
dividends can be paid on Common Stock while any dividend arrearages
exist on the Preferred Stock. Furthermore, the Company's current debt
obligations prohibit the payment of any dividend (other than dividends
payable solely in common stock or preferred stock of the Company,
including Common Stock and Preferred Stock). There can also be no
assurance that the Company will be able to pay accumulated dividends
on the Series B Preferred Stock. Also, under the Foothill Debt
agreements ("Foothill Debt Agreements"), the Company has agreed to
certain restrictions on payment of dividends.
EFFECT ON COMMON STOCK OF SHARES ELIGIBLE FOR FUTURE SALE
A total of approximately 19,166,586 shares of Common Stock are
issuable upon conversion of the Preferred Stock and upon exercise of
outstanding warrants (including the Series B Warrants) and options.
The conversion of such Preferred Stock and the exercise of such
warrants and options, along with the issuance of Common Stock under
other Company compensation plans, would result in the issuance of a
substantial amount of Common Stock, thereby diluting the proportionate
equity interests of the holders of the Common Stock. No prediction
can be made as to the effect, if any, that future sales of Common
Stock, or the availability of shares for future sales, will have on
the market price of the Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock (including shares issued
upon the conversion of Preferred Stock or exercise of warrants or
options), or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock.
ABSENCE OF TRADING MARKET FOR THE SERIES B PREFERRED STOCK AND THE
SERIES B WARRANTS
Heretofore, there has been no market for the Series B Preferred Stock
or the Series B Warrants and there can be no assurance that a market
will develop, or if developed, that it will be sustained. In
addition, although the Company has sought a NASDAQ listing for the
Series B Preferred Stock and the Series B Warrants, the Series B
Preferred Stock and the Series B Warrants may not be quoted for
trading on the NASDAQ National Market System or on any other market.
If any market does develop, the market price of these securities might
be volatile. Factors such as announcements by the Company or its
competitors concerning proposed plans, procedures and proposed
government regulations, losses and litigation may have a significant
effect on the market price of the Company's securities. Changes in
the market price of the Company's securities may have no connection
with the Company's actual financial results.
ABSENCE OF COLLATERAL FOR SERIES B PREFERRED STOCK PUT RIGHTS
Holders of each of the Series A Preferred Stock and the Series B
Preferred Stock have certain put rights which permit them to require
the Company under certain circumstances to purchase the Preferred
Stock then held by them at a price in cash equal to the Liquidation
Preference. See the information under the captions "Description of
Capital Stock -- Series B Preferred Stock," herein, and "The Apollo
Transaction -- The Series A Preferred Stock," in the Rights Offering
Registration Statement. The put rights of the holders of the Series A
Preferred Stock are secured by a junior lien on substantially all of
the assets of the Company and its subsidiaries, except for the
outstanding capital stock and assets of the SP Subsidiary, and by a
senior lien on the outstanding capital stock of the SP Subsidiary and
on its assets. The put rights of the holders of the Series B
Preferred Stock are not secured. Therefore, the holders of the Series
B Preferred Stock will be in a significantly weaker position vis-a-vis
the holders of the Series A Preferred with respect to the enforcement
of their put rights if the Company defaults in its repurchase
obligations. Also, under the Foothill Debt Agreements, the Company has agreed
not to purchase, redeem, retire or otherwise acquire any capital stock of the
Company (other than solely for common stock or preferred stock of the
Company).
CONTROL OF THE COMPANY BY APOLLO
As long as Apollo holds at least 500,000 shares of Series A Preferred
Stock, (a) the holder(s) of the Series A Preferred Stock will have the
right to elect three of the seven Board members and (b) without
Apollo's consent, the Company will not have the right to engage in or
enter into any agreement with respect to a Major Transaction. See the
information under the caption "The Apollo Transaction Consent Rights"
in the Rights Offering Registration Statement. In addition to
Apollo's right to elect three Board members, Apollo could obtain
sufficient ownership of Common Stock having the power to elect one or
more additional Board members, or otherwise significant voting power
on matters other than the election of directors. Based upon certain
assumptions, Apollo's percentage ownership of Common Stock could range
up to approximately 49%. See the information under the caption "The
Apollo Transaction Ownership By Apollo" in the Rights Offering
Registration Statement. There can be no assurance regarding the
effect that Apollo's influence on and participation in the Company's
management will have on the Company's financial condition and
performance. The foregoing, along with the issuance of the Series B
Preferred Stock, could also have certain anti-takeover effects. Such
effects could discourage and frustrate an attempt to acquire the
Company, thus depriving Stockholders of the benefits that could result
from such an attempt including a merger or tender offer in which
Stockholders might receive a premium over the market price of their
Common Stock.
AVAILABILITY OF NET OPERATING LOSS CARRYFORWARDS
Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"), limits a corporation's ability to carry forward its net
operating losses and other tax attributes following a transfer of
stock or changes in a corporation's equity structure which results in
a "change of ownership." The determination of whether a change of
ownership occurs is made by determining for each "five-percent
shareholder" of the corporation the excess, if any, of his percentage
ownership of the corporation's stock over his smallest percentage
ownership during the three prior years. If the total of such
increases exceeds 50 percentage points, there has been a change of
ownership for purposes of Section 382. A five-percent shareholder
generally refers to any person that directly or indirectly owns five
percent or more of the total value of the corporation's stock at any
time during the three years analysis period. As a result of certain
transactions, several less than five percent shareholders may be
aggregated and treated as a single five-percent shareholder whose
increase in ownership is taken into account. At December 31, 1996, the
Company had approximately $207 million of unused net operating loss
("NOL") carry forwards which expire in years 1999 through 2010.
Included in this amount is approximately $24.1 million of net
operating loss attributable to certain legal entities that may only be
used against future taxable income of these same entities.
The Company cannot determine at this time whether the Apollo
Transaction, the Private Placement and the Rights Offering will result
in a Section 382 change of ownership. That determination is dependent
on several factors that are not known at this time (e.g., the portion
of the stock issued in such transactions that will be acquired by
actual or deemed five-percent shareholders and the Common Stock prices
prevailing at the time the transactions are consummated). Once these
factors are known, the Company may determine that the consummation of
such transactions will result or have resulted in a change of
ownership. Further, even if a change of ownership does not result
immediately, such transactions will result in an increase in ownership
of five-percent shareholders of the Company, and , therefore, will
significantly increase the risk that a subsequent transaction within
three years (over which the Company may not have control) would cause
a change of ownership of the Company. If a change of ownership were
to occur, the Company's ability to carry forward its existing NOLs to
offset future income and gain would be subject to an annual
limitation. The impact of this limitation cannot be predicted with
any certainty because the amount of the limitation would depend on the
value of the Common Stock and on interest rates in effect at the time
the change of ownership occurred. However, based on recent Common
Stock trading prices of $5.50 to $6.00 per share and on current
interest rates, the Company's ability to utilize its existing NOLs
would be limited to approximately $2.9 million to $3.2 million per
year (reduced in the first five years following the change of
ownership to the extent necessary to permit the deduction of certain
realized tax operating losses that were built-in as of the change of
ownership). If the restriction on the utilization of the NOLs did
apply, a significant portion of the NOLs would expire before the
Company was able to utilize them. Any unused annual NOL limitations
as well as any tax operating losses generated after the change of
ownership, adjusted for tax attributes existing prior to the change of
ownership date, would carry forward for use in future years without
restriction by Section 382.
REVERSE AND FORWARD STOCK SPLITS
The Stockholders approved at their annual meeting on June 23, 1997
(the "Annual Meeting") an amendment to the Company's certificate of
incorporation which authorizes the Board in its discretion to effect,
prior to the annual meeting of Stockholders in 1998, either of two
different reverse stock splits of the Common Stock, followed by a
forward stock split. Pursuant to the reverse stock split, each 100 or
200 shares, as determined by the Board, of the then outstanding Common
Stock would be converted into one share. Stockholders who own fewer
than 100 or 200 shares would no longer be stockholders of the Company
but instead would be entitled to receive from the Company a cash
payment based on the closing price of the Common Stock in lieu of
receiving less than one whole share. Pursuant to the forward stock
split, on the day following the reverse stock split, Common Stock then
outstanding would be converted into the number of shares of Common
Stock that such shares represented prior to the reverse stock split.
Thus, if the stock split is effected, Stockholders who currently own
fewer than 100 or 200 shares of Common Stock, as applicable, would
cease to be Stockholders unless in the interim they acquire sufficient
additional Common Stock on the open market or through the purchase and
conversion of Series B Preferred Stock.<PAGE>
THE COMPANY
The Company 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: (a) enhance the
value of certain properties, (b) maintain a continuing inventory of
marketable tracts and (c) 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.
Atlantic Gulf and its predecessors have been operating as community
developers in Florida since 1955. Atlantic Gulf's immediate
predecessor, General Development Corporation (the "Predecessor
Company"), was among the largest community developers in Florida. In
1990, the Predecessor Company and certain of its subsidiaries
commenced proceedings under Chapter 11 of the Bankruptcy Code (the
"Reorganization Proceedings") to reorganize their business. Atlantic
Gulf emerged from the Reorganization Proceedings pursuant to a plan of
reorganization (the "POR" that became effective on March 31, 1992 (the
"POR Effective Date")).
The Company was incorporated in Delaware in 1928. Its executive
offices are located at 2601 South Bayshore Drive, Miami, Florida
33133-5461, and its telephone number is (305) 859-4000.
<PAGE>
RECENT DEVELOPMENTS
THE APOLLO TRANSACTION
The Company and AP-AGC, LLC, a Delaware limited liability company
("Apollo"), are parties to an Amended and Restated Investment Agreement
dated as of February 7, 1997, amended as of March 20, 1997, and
amended and restated as of May 15, 1997 (the "Investment Agreement").
Under the Investment Agreement, subject to certain conditions,
including Stockholders' approval, the Company agreed to issue and sell
to Apollo, and Apollo agreed to purchase from the Company, for an
aggregate purchase price of up to $25,000,000, up to 2,500,000 shares
of Series A Preferred Stock at a per share price of $9.88 and
5,000,000 Investor Warrants at a per warrant price of $0.06. On June
23, 1997, the Stockholders approved the Investment Agreement and the
transactions contemplated thereby (collectively, the "Apollo
Transaction"), and on June 24, 1997, Apollo purchased 553,475 shares of
Series A Preferred Stock (the "Initial Preferred Shares") and 1,106,950
Investor Warrants (the "Apollo Closing"). From time to time thereafter
and until Apollo has acquired all of the 2,500,000 shares of Series A
Preferred Stock and the 5,000,000 Investor Warrants, Apollo will
purchase, subject to the terms and conditions of the Investment
Agreement, additional Series A Preferred Stock and two Investor
Warrants for each share of Series A Preferred Stock purchased (the
"Proportionate Number of Investor Warrants") to enable the Company to
invest in real estate development projects approved by the Board and
Apollo. If the Company has not presented Apollo with real estate
development projects pursuant to which Apollo has invested the
aggregate purchase price of $25,000,000, under the Investment
Agreement, (a) Apollo will be entitled at any time to acquire all of
the Series A Preferred Stock and Investor Warrants not acquired by it
prior thereto and (b) from and after June 30, 1998, the Company will
be entitled at any time to require Apollo to purchase all of such
Series A Preferred Stock and Investor Warrants, provided that no Event
of Default (as defined in the Secured Agreement) shall have occurred
and, except for an Event of Default which is or results from a
Bankruptcy Event (as defined), shall then exist. The Investment
Agreement contemplates that the Company will make available for sale
to the Stockholders in a Rights Offering 1,000,000 shares of Series B
Preferred Stock with a liquidation preference of $10 per share, and
Warrants to purchase 2,000,000 shares of Common Stock, for an
aggregate purchase price of $10 million.
At the Apollo Closing on June 24, 1997, the following transactions
occurred:
1. Charter Amendments. The Company filed with the State of Delaware
an Amended and Restated Certificate of Incorporation (the "Charter
Amendments") which, among other things, increased the number of
authorized shares of Common Stock from 15,665,000 to 70,000,000 and
authorized the issuance of 4,500,000 shares of Preferred Stock,
2,500,000 of which are designated Series A Preferred Stock and
2,000,000 of which are designated Series B Preferred Stock. The
Charter Amendments also eliminated the restriction on the Company
issuing nonvoting stock and the provision requiring certain mandatory
dividends on the Common Stock, each of which would be inconsistent
with the rights of the holders of the Preferred Stock.
2. Sale of Series A Preferred Stock and Investor Warrants. For an
aggregate purchase price of $5,534,752, the Company issued to Apollo
553,475 shares of Series A Preferred Stock and Investor Warrants
(consisting of 368,983 Class A Warrants, 368,983 Class B Warrants and
368,984 Class C Warrants) to purchase 1,106,950 shares of Common Stock
at a per share purchase price of $5.75 (subject to adjustment).
3. The Board. The number of directors was reduced from 10 to seven
and three Apollo designees were appointed to the Board by the
incumbent directors.
4. Commitment Fee. Apollo refunded to the Company the $1,000,000
commitment fee the Company had paid to Apollo in connection with
entering into the Investment Agreement.
On June 30, 1997, the Company issued and sold to Apollo under the
Investment Agreement an additional 334,000 shares of Series A
Preferred Stock and Investor Warrants to purchase an additional
668,000 shares of Common Stock, for an aggregate purchase price of
$3,340,000.
On July 31, 1997, the Company issued and sold to Apollo under the
Investment Agreement an additional 850,000 shares of Series A
Preferred Stock and Investor Warrants to Purchase an additional
1,700,000 shares of Common Stock, for an aggregate purchase price of
$8,500,000.
On August 8, 1997, the Company issued and sold to Apollo under the
Investment Agreement an additional 259,000 shares of Series A
Preferred Stock and Investor Warrants to Purchase an additional
518,000 shares of Common Stock, for an aggregate purchase price of
$2,590,000.
THE PRIVATE PLACEMENT
Concurrently with the Apollo Closing, the Company sold to the Selling
Shareholders, in a private placement (the "Private Placement"), for an
aggregate purchase price of $20 million, (a) 1,776,199 shares of
Common Stock for $10 million, and (b) 1,000,000 shares of Series B
Preferred Stock and Series B Warrants (consisting of 666,667 Class A
Warrants, 666,667 Class B Warrants and 666,666 Class C Warrants) to
purchase 2,000,000 shares of Common Stock, for $10 million.
THE RIGHTS OFFERING
Pursuant to the Rights Offering Registration Statement, the Company
expects to make available for sale to the Stockholders of record on
June 20, 1997, in a rights offering, units composed of 1,000,000
shares of Series B Preferred Stock and Series B Warrants to purchase
2,000,000 shares of Common Stock, for an aggregate purchase price of
$10 million (the "Rights Offering").
FURTHER INFORMATION
The Company's Proxy Statement dated May 21, 1997 and the Rights
Offering Registration Statement include further information with
respect to the Apollo Transaction, the Private Placement, the Rights
Offering and related matters. See "Documents Incorporated by
Reference."
<PAGE>
DILUTION
The net tangible book value of the Common Stock as of March 31, 1997,
was $49.2 million or $5.02 per share. Net tangible book value per
share represents total tangible assets less total liabilities, divided
by the number of shares of Common Stock outstanding, on a fully
diluted basis excluding stock options. After giving effect to the
consummation of the Apollo Transaction, the Private Placement and the
Rights Offering (assuming all Rights are exercised) and the
application of the net proceeds therefrom, the Company's net tangible
book value as of March 31, 1997, would have been approximately $59.7
million, or $5.15 per share. This represents an immediate increase
in net tangible book value of $.13 per share with respect to shares
outstanding prior to the Rights Offering and an immediate dilution of
$.54 per share with respect to shares purchased upon the exercise of
Rights, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Subscription Price $5.67
Net tangible book value per share at March
31, 1997 $5.02
Increase per share attributable to Rights Offerings (a) .13
Pro forma net tangible book value per share
after the consummation of the Apollo
Transaction, the Private Placement and the
Rights Offering and application of net
proceeds therefrom 5.15
Dilution per share purchased upon the
exercise of Rights .52
- --------------------------
</TABLE>
(a) Represents Series A Preferred Stock purchase by Apollo, the Rights
Offering, and the Private Placement.
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Company's ratios of earnings to fixed charges and preferred stock
dividends for the year ended December 31, 1996 and for the three
months ended March 31, 1997 were 1.2 and 1.8, respectively, based,
respectively, upon the Company's audited Consolidated Financial
Statements and upon the Company's unaudited consolidated financial
statements, each incorporated by reference into this Prospectus. For
the purpose of computing the ratio of earnings to fixed charges,
earnings are defined as net income (loss) plus fixed charges. Fixed
charges include (i) net cash interest expense, (ii) property taxes,
(iii) rental expense, and (iv) preferred stock dividends.<PAGE>
USE OF PROCEEDS
The Securities will be sold by the Selling Stockholders, who will
receive all of the net proceeds from the sale of the Securities. None
of such proceeds will be received by the Company.
<PAGE> SELLING STOCKHOLDERS
The table below sets forth with respect to each Selling Stockholder,
such Selling Stockholder's name, the amount of each class of
Securities owned by such Selling Stockholder before the offering
hereunder, which is also the amount to be offered by such Selling
Stockholder hereunder. None of the Selling Stockholders held any
position, office, or other material relationship within the last three
years with the registrant or any of its predecessors or affiliates.
<TABLE>
<CAPTION>
SERIES B
SELLING STOCKHOLDER COMMON STOCK* PREFERRED STOCK
<S> <C> <C>
Morgan Stanley Institutional Fund
Etate Portfolio 512,407 107,021
MS SICAV Real Estate 147,961 54,017
Morgan Stanley U.S. Real Estate
Portfolio 47,369 8,207
Universal Funds - Real Estate
Portfolio 15,565 2,003
Principal Asset Allocation Fund -
Real Estate Account 7,593 2,772
The Eugenia II Investment Holdings
LTD. - REIT 30,562 11,158
Van Kampen American Capital LIT
Real Estate Portfolio 616,302 79,420
Van Kampen American Capital Real
Estate Securities Fund 276,840 35,402
Westgate International, L.P. 537,390 125,000
Elliott Associates, L.P. 2,220,273 375,000
The Robertson Stephens Contrarian
Fund 827,300 150,000
Robin C. Rodriguez 13,788 2,500
Charles F. Robinson 13,787 2,500
LKCM Equity Fund 55,154 10,000
E. A. Advisers, Inc. 27,576 5,000
LKCM Investment Partnership 137,884 25,000
Raymond Cahman 27,576 5,000
</TABLE>
__________
* Includes Common Stock issuable upon exercise of Series B Warrants or upon
conversion of Preferred Stock.<PAGE>
PLAN OF DISTRIBUTION AND DETERMINATION OF OFFERING PRICE
The Securities offered hereby are being sold by the Selling Stockholders
acting as principals for their own accounts. The Company will receive none of
the proceeds from such offering. The distribution of the Securities by the
Selling Stockholders is not subject to any underwriting agreement. While the
Selling Stockholders may use any means to sell their Securities that is
permitted under the Securities Act, The Company expects that the Selling
Stockholders will sell their Securitiesthrough customary brokerage channels,
either through broker-dealers acting as agents or brokers for the Selling
Stockholders, or through broker-dealers acting as principals, who may then
resell the Securities in the over-the-counter market, or at private sales or
otherwise, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling Securities through
broker-dealers, and such broker-dealers will receive compensation in the form
of underwriting discounts, concessions, or commissions from the Selling
Stockholders and/or the purchasers of the Securities for whom they may act as
agent (which compensation may be in excess of customary commissions). The
Selling Stockholders and any broker-dealers that participate with the Selling
Stockholders in the distribution of the Securities may be deemed to be
"underwriters" as that term is defined in the Securities Act and any
commissions received by such broker-dealers and any profit on resale of
Securities sold by them might be deemed to be underwriting discounts or
commissions under the Securities Act. All expenses of registration incurred
in connection with this offering are being borne by the Company, other than
brokerage commissions and other similar expenses incurred by the Selling
Stockholders will be borne by the Selling Stockholders.
At the time a particular offer of Securities is made, to the extent required,
a supplement to this Prospectus will be distributed which will identify and
set forth the aggregate amount of Securities being offered and the terms of
the offering, including the name or names of any underwriters, dealers or
agents, the purchase price paid by any underwriters for Securities purchased
from the Selling Stockholders, any discounts, commissions and other items
constituting compensation from the Selling Stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers, including
the proposed selling price to the public.
Elliott Associates, L.P. and Westgate International, L.P. (which mat be deemed
a group) may offer their Securities through the selling efforts of Manchester
Securities Corp., a registered broker-dealer that is wholly-owned by Elliott
Associates, L.P., however, there is presently no agreement, arrangement, or
understanding relating to any such services.<PAGE>
PRICE OF COMMON STOCK AND DIVIDENDS
The Common Stock is quoted on the NASDAQ National Market System under the
Symbol "AGLF." As of June 30, 1997 there were approximately 30,000 holders of
record of Common Stock, which excludes holders whose stock is held in nominee
or street name by brokers. The last reported sale price of the Common Stock
on the NASDAQ National Market System on August 7, 1997 was $6.00.
No dividends have been paid on the Common Stock during the last two fiscal
years. Under the Foothill Debt Agreements the Company has agreed not to
declare or pay any dividend (other than dividends payable solely in its common
stock or preferred stock) on, or make any payment on account of, or set apart
assets for a sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of, any capital stock of the
Company. Furthermore, no cash dividends can be paid on Common Stock while any
dividend arrearages exist on the Preferred Stock.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
As of July 21, 1997, the Company's authorized capital stock consists of
70,000,000 shares of Common Stock and 4,500,000 shares of Preferred Stock, par
value $.01 per share. Of such authorized Common Stock, (a) 11,509,077 shares
are outstanding (including 13,290 Reserved Shares and 1,776,199 shares issued
in the Private Placement) (excluding shares granted automatically to directors
in lieu of fees); (b) 10,000,000 shares are reserved for issuance upon
conversion of the Series A Preferred Stock; (c) 8,000,000 shares are reserved
for issuance upon conversion of the Series B Preferred Stock; (d) 1,500,000
shares are reserved for issuance pursuant to the Bank Warrants; (e) 5,000,000
shares are reserved for issuance upon the exercise of the Investor Warrants;
(f) 86,277 shares are held in the Company's treasury; (g) 1,241,000 shares are
reserved for issuance upon the exercise of employee and director stock
options; and (h) the remaining shares are authorized but unissued. Of the
authorized Preferred Stock, (a) 2,500,000 are designated Series A Preferred
Stock, with a liquidation preference of $10 per share, 553,475 of which were
issued to Apollo as part of the Apollo Closing, 334,000, 850,000 and 259,000
were issued, respectively, at three subsequent issuances and the remainder are
reserved for issuance, and (b) 2,000,000 shares are designated Series B
Preferred Stock, with a liquidation preference of $10 per share, 1,000,000 of
which were issued to the Private Purchasers in the Private Placement and
1,000,000 of which are to be issued at the Unit Closing (assuming all Rights
are exercised).
COMMON STOCK
Holders of Common Stock have no preemptive rights to purchase or subscribe for
securities of the Company, and the Common Stock is not convertible into any
other securities or subject to redemption by the Company.
Subject to the rights of the holders of the Series A Preferred Stock and the
Series B Preferred Stock, which have a preference and priority over the
Common Stock, the holders of the Common Stock are entitled to dividends in
such amounts as may be declared by the Board from time to time out of funds
legally available for such payments and, in the event of liquidation, to share
ratably in any assets of the Company remaining after payment in full of all
creditors and provision for any liquidation preferences on any outstanding
Preferred Stock ranking senior to the Common Stock. Prior to the amendment of
the Company's Restated Certificate of Incorporation on June 24, 1997, such
certificate provided for mandatory dividends on the Common Stock equal to 25
percent of Available Cash (as defined in the POR) after all indebtedness
issued under the POR was paid in full, although dividends did not accrue if
the Company was unable to pay them due either to a lack of Available Cash,
surplus capital or net profits, or applicable provisions of Delaware law.
This mandatory dividend feature was eliminated as of June 24, 1997.
American Stock Transfer & Company serves as the registrar and transfer agent
for the Common Stock.
SERIES A PREFERRED STOCK
The preferences, powers and rights of the Series A Preferred Stock are
described in the Proxy Statement incorporated by reference herein.
SERIES B PREFERRED STOCK
The preferences, powers, and rights of the Series B Preferred Stock are set
forth in a Statement of Preferences and Rights ("Series B Statement of
Designations") attached hereto as Appendix A. This summary is qualified in
its entirety by reference to the full text of the Series B Statement of
Designations.
Assuming all Rights in the Rights Offering are exercised, the Company will
issue pro rata to purchasers of Units an aggregate of 1,000,000 shares of
Series B Preferred Stock. There are currently outstanding 1,000,000 shares of
Series B Preferred Stock issued in the Private Placement.
NUMBER OF SHARES. The number of authorized shares of Series B Preferred
Stock is 2,000,000.
RANK. With respect to dividends and distributions upon the voluntary or
involuntary liquidation, winding-up or dissolution of the Company, the Series
B Preferred Stock will rank senior to the Common Stock and pari passu with any
Parity Stock (subject to any differing security interests between different
classes of Parity Stock). "Parity Stock" means any class or series of stock
the terms of which provide that it is entitled to participate pari passu with
the Series B Preferred Stock with respect to any dividend or distribution or
upon voluntary or involuntary liquidation, dissolution or winding-up of the
Company. Parity Stock includes the Series A Preferred Stock (except insofar as
the Series A Preferred Stock has certain security rights and interests that
are not applicable to the Series B Preferred Stock). See "Recent Developments
- -- The Apollo Transaction -- Series A Preferred Stock," in the Rights Offering
Registration Statement.
DIVIDENDS. The holders of record of the Series B Preferred Stock will be
entitled to receive, when, as and if declared by the Board, out of funds
legally available therefor, cash dividends on each share of Series B Preferred
Stock at an annual rate (the "Dividend Rate") equal to 20% of the Liquidation
Preference in effect from time to time. "Liquidation Preference" means, at any
time, $10 per share of Series B Preferred Stock, plus accumulated and unpaid
dividends thereon through the date of such determination, whether or not
declared and whether or not funds are legally available therefor. All
dividends will be cumulative, whether or not declared, on a daily basis from
the date on which the Series B Preferred Stock is originally issued by the
Company (the "Original Issue Date") and will be payable quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year (the "Dividend
Payment Date"), commencing on September 30, 1997.
Dividends will cease to accumulate in respect of Series B Preferred Stock on
the Redemption Date (see "Optional Redemption" below), the Conversion Date
(see "Conversion" below) or the Repurchase Date (see "Repurchase Obligations"
below) for such shares, as the case may be, unless, in the case of a
Redemption Date or Repurchase Date, the Company defaults in the payment of the
amounts necessary for such redemption, or in its obligation to deliver
certificates representing Common Stock issuable upon such conversion, as the
case may be, in which case, dividends will continue to accumulate at an annual
rate of 23% of the Liquidation Preference in effect from time to time (the
"Default Dividend Rate") until such payment or delivery is made. If the
Company defaults in the payment of amounts due upon a Repurchase Date,
interest will accrue on the amount of such obligation at the Default Dividend
Rate until such payment is made (with all interest due).
Following an Event of Default, the holders will be entitled to receive
dividends on each share of Series B Preferred Stock at an annual rate equal to
the Default Dividend Rate, payable in cash. Event of Default, as defined in
the Series B Statement of Designations, means (a) any event of default
(whatever the reason for such event of default and whether it is voluntary or
involuntary or effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
governmental authority) under any instrument creating, evidencing, or securing
any indebtedness for borrowed money of the Company or any Significant
Subsidiary (as defined below) in an amount in excess of $2,500,000 that would
enable the creditors or secured parties under such instrument to declare the
principal amount of such indebtedness due and payable prior to its scheduled
maturity, which event of default has not been waived, (b) the occurrence of a
Default Change of Control (as defined below), or (c) any Bankruptcy Event
giving rise to each holder of Series B Preferred Stock being deemed
automatically to have delivered a Repurchase Notice as described below under
"Repurchase Obligations." "Significant Subsidiary" means a subsidiary as
defined in Regulation S-X under the Exchange Act; provided that SP Subsidiary
will be a Significant Subsidiary. Regulation S-X under the Exchange Act
defines a Significant Subsidiary as a subsidiary which meets any of the
following conditions: (a) the Company's and its other Subsidiaries'
investments in and advances to the subsidiary exceed 10% of the total assets
of the Company and its Subsidiaries consolidated as of the end of the most
recently completed fiscal year; (b) the Company's and its other Subsidiaries'
proportionate share of the total assets of the subsidiary exceeds 10% of the
total assets of the Company and its Subsidiaries consolidated as of the end of
the most recently completed fiscal year; and (c) the Company's and its other
Subsidiaries' equity in the income from continuing operations before income
taxes, extraordinary items and cumulative effect of a change in accounting
principle of the subsidiary exceeds 10% of such income of the Company and its
Subsidiaries consolidated for the most recently completed fiscal year.
While any Series B Preferred Stock is outstanding, the Company will not
declare, pay or set apart for payment any dividend on any Junior Stock or make
any payment on account of, or set apart for payment money for a sinking or
other similar fund for, the purchase, redemption or other retirement of, any
Junior Stock, or any warrants, rights, calls or options exercisable for any
Junior Stock or make any distribution in respect thereof (other than, prior to
the occurrence of an Event of Default, dividends, payments, purchases,
acquisitions, redemptions, retirements or distributions in Junior Stock) and
will not permit any Subsidiary to do any of the same in respect of such Junior
Stock (other than, prior to the occurrence of an Event of Default, dividends,
payments, purchases, acquisitions, redemptions, retirements or distributions
in Junior Stock) unless and until all dividend arrearages, if any, on the
Series B Preferred Stock have been paid in full in cash and the Company is not
in default of any of its redemption obligations or Repurchase Obligations.
"Junior Stock" means Common Stock and all other classes of capital stock of
the Company and series of preferred stock of the Company after the Unit
Closing Date which is not Senior Stock or Parity Stock. "Senior Stock" means
any class or series of stock the terms of which provide that it is entitled to
a preference to the Series B Preferred Stock with respect to any dividend or
distribution or upon voluntary or involuntary liquidation, dissolution or
winding-up of the Company.
So long as more than 500,000 shares of the Series A Preferred Stock are held
by Apollo, and except as permitted by the Investment Agreement, the Company
may not engage in, or enter into any agreement with respect to, any Major
Transaction, without the Apollo's prior consent. "Major Transaction" means
any material transaction which is not described in an Approved Business Plan
(as defined below), including any (a) recapitalization, redemption or
reclassification of, or distribution or dividend on, the Company's capital
stock provided, however, that subject to the terms and conditions of the
Investment Agreement and Secured Agreement, neither (i) any action or
determination by the Company in respect of any Series A Preferred Stock that
is not otherwise prohibited by the Investment Agreement and is in accordance
with the Series A Statement of Designations, including dividends and
redemptions, nor (ii) any dividends on or redemptions of Series B Preferred
Stock in accordance with the Series B Statement of Designations, or any action
in respect of the Series B Preferred Stock required to be taken by the Company
under the Series B Statement of Designations or under the securities purchase
agreement pursuant to which the Private Placement was consummated shall be
deemed to be a Major Transaction, so long as, in the case of dividends and
optional redemptions, the ratio of the aggregate amount being paid on the
Series A Preferred Stock to the aggregate amount being paid on the Series B
Preferred Stock is both (A) greater than or equal to the ratio of the
aggregate outstanding liquidation preference of the Series A Preferred Stock
to the aggregate outstanding liquidation preference of the Series B Preferred
Stock issued in the Rights Offering and the Private Placement and (B) less
than or equal to the ratio of the aggregate outstanding liquidation preference
of the Series A Preferred Stock to the aggregate outstanding liquidation
preference of the Series B Preferred Stock issued in the Rights Offering, (b)
amendment of the Company's charter or bylaws, (c) liquidation, winding-up or
dissolution of the Company or any Significant Subsidiary of the Company, (d)
consolidation of the Company with, or merger of the Company with or into, any
other person, except a merger of a Subsidiary wholly owned by the Company into
the Company, with the Company surviving such merger, (e) sale, transfer, lease
or encumbrance by the Company or any of its subsidiaries of a significant
amount of assets of the Company, other than in respect of sales of certain
assets held by the Company's predecessor, General Development Corporation; (f)
special dividends or distributions with respect to, or repurchase or
redemption of, the Company's equity securities or any rights, warrants or
options in respect of such equity securities, (g) capital expenditure or
investment by the Company or any of its subsidiaries in excess of $500,000,
(h) entering into or materially amending any material contract, (i)
significant new financing or refinancing, (j) issuance of securities (other
than employee and director stock options to acquire up to 2,000,000 shares of
Common Stock and the issuance of Common Stock thereunder), (k) transactions
which would result in a Change of Control (as defined below), (l) material
transaction the nature of which prevents specificity in the Business Plan or
(m) commencement, undertaking or acquisition of a real estate development
project by SP Subsidiary (whether independently, by joint venture or
otherwise) and related financings or joint venture arrangements. "Approved
Business Plan" means a Business Plan of the Company that has been approved by
the Investor.
"Change of Control" means: (a) an acquisition by any person or group (as
defined for purposes of Section 13(d) under the Exchange Act) (excluding the
Company or an employee benefit plan of the Company or a corporation controlled
by the Stockholders) of beneficial ownership (as defined for purposes of
Section 13(d) under the Exchange Act) of Common Stock such that such person or
group thereafter beneficially owns 25% or more of the outstanding Common Stock
or other voting securities of the Company; (b) a change in a majority of the
Incumbent Board (excluding any individuals approved by a vote of at least five
members of the Incumbent Board other than in connection with an actual or
threatened proxy contest); (c) failure of the requisite number of Investor
designees to be members of the Board (other than as result of the Investor's
failure to nominate a successor to an Investor designee who has resigned or
been removed as a director); or (d) consummation of a Business Combination
(other than a Business Combination in which all or substantially all of the
Stockholders receive or own upon consummation thereof 50% or more of the
Company's outstanding stock resulting from the Business Combination, at least
a majority of the board of directors of the resulting corporation are members
of the Incumbent Board, and after which no Person owns 25% or more of the
outstanding stock of the resulting corporation who did not own such stock
immediately before the Business Combination), excluding, in each case (a)
through (d), the transactions contemplated by the Investment Agreement
(including for this purpose the Rights Offering and the Private Placement).
"Default Change of Control" means a Change in Control of the type referred to
in clauses (b) or (c) above or of the type referred to in clauses (a) and (d)
provided that the percentage thresholds referred to in clauses (a) and (d)
will be 40% instead of 25%.
"Incumbent Board" means, prior to the Apollo Closing, the Board as constituted
on the day after execution and delivery of the Investment Agreement and,
following the Apollo Closing, the Board as constituted immediately following
the Apollo Closing.
"Business Combination" means a complete liquidation or dissolution of the
Company or a merger, consolidation or sale of all or substantially all of the
Company's assets.
Under the Foothill Debt Agreements, the Company has agreed not to declare or
pay any dividend (other than dividends payable solely on its common stock or
preferred stock) on any capital stock of the Company.
LIQUIDATION PREFERENCE. In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the holders of the
Series B Preferred Stock will be entitled to be paid out of the Company's
assets available for distribution to its Stockholders an amount in cash equal
to the then Liquidation Preference, for each share outstanding, before any
payment will be made or any assets distributed to the holders of any Junior
Stock. If the Company's assets are not sufficient to pay in full the
liquidation payments payable to the holders of the Series B Preferred Stock
and the holders of any Parity Stock outstanding, then, subject to the rights
of the holders of Series B Preferred Stock to require the Company to purchase
their shares as described under ''Repurchase Obligations'' below, and subject
to any differing security interests between different classes of Parity Stock,
the holders of all such shares will share ratably in such distribution of
assets. Each holder agrees that it will respect the security rights and
priorities of any holder of shares of any Parity Stock or Senior Stock and
will not challenge the right of any holder of Parity Stock or Senior Stock to
be paid in respect of any obligations of the Company under any instruments
between such holder and the Company or any of its Subsidiaries, including the
right to be paid by any Subsidiary of the Company under any guarantee by such
Subsidiary of the obligations of the Company. For the purposes of the
foregoing, neither the sale, conveyance, exchange or transfer of all or
substantially all of the property or assets of the Company nor the
consolidation or merger of the Company with or into one or more corporations
will be deemed to be a voluntary or involuntary liquidation, dissolution or
winding-up of the Company.
OPTIONAL REDEMPTION. At the Board's option, the Company may redeem, upon
30 days notice, at any time on or after the third anniversary of the Original
Issue Date, from any source of funds legally available therefor, in whole or
in part, any or all of the Series B Preferred Stock, at a redemption price in
cash equal to the then Liquidation Preference. No optional redemption will be
made unless full dividends have been or contemporaneously are declared and
paid or declared and a sum set apart sufficient for such payment, on the
Series B Preferred Stock for all dividend periods terminating on or prior to
the redemption date. In addition, no partial redemption will be made for an
amount of shares less than such number of shares of Series B Preferred Stock
as have an aggregate Liquidation Preference equal to the lesser of $1,000,000
or the aggregate Liquidation Preference of all outstanding Series B Preferred
Stock. The Company has agreed in the Investment Agreement that, without
Apollo's consent, the Company will not redeem Series B Preferred Stock except
that Apollo's consent is not required so long as the ratio of the aggregate
amount being paid on the Series A Preferred Stock to the aggregate amount
being paid on the Series B Preferred Stock is both (A) greater than or equal
to the ratio of the aggregate outstanding liquidation preference of the Series
A Preferred Stock to the aggregate outstanding liquidation preference of the
Series B Preferred Stock issued in the Rights Offering and the Private
Placement and (B) less than or equal to the ratio of the aggregate outstanding
liquidation preference of the Series A Preferred Stock to the aggregate
outstanding liquidation preference of the Series B Preferred Stock in the
Rights Offering. See "The Apollo Transaction Consent Rights," in the Rights
Offering Registration Statement. Optional redemptions of Series B Preferred
Stock by the Company can be effected (subject to Apollo's above-discussed
consent rights) without proration in accordance to the number of shares of
Series B Preferred Stock held by each holder.
VOTING RIGHTS. The holders of Series B Preferred Stock will not vote on
the election of Company directors or on any other matters submitted for a vote
of the holders of the Common Stock, except as may be required by applicable
law. In any case in which the holders of Series B Preferred Stock will be
entitled to vote as a separate class, each holder will be entitled to one vote
for each share of Series B Preferred Stock then held.
REPURCHASE OBLIGATIONS. Beginning on the fourth anniversary of the
Original Issue Date, each holder of Series B Preferred Stock will have the
right, at such holder's option, exercisable by notice (a "Repurchase Notice")
to require the Company to purchase Series B Preferred Stock then held by such
holder, at a repurchase price in cash equal to the Liquidation Preference in
effect at such time (the "Repurchase Price"). Prior to the fifth anniversary
of the Original Issue Date, however, the number of shares required to be
repurchased by the Company from any holder pursuant to the foregoing provision
(the "Put Shares"), will not exceed one-third of the total number of shares of
Series B Preferred Stock issued by the Company and, prior to the sixth
anniversary of the Original Issue Date, the number of Put Shares will not
exceed two-thirds of the total number of shares of Series B Preferred Stock
issued by the Company. The Repurchase Date will be the 30th day following the
date of the Repurchase Notice relating thereto. If the Company defaults in its
obligation to pay the Repurchase Price, interest will accrue on the amount of
such obligation at the Default Dividend Rate until such payment is made (with
all interest due).
Notwithstanding the foregoing, if an Event of Default (as defined in the
Series B Statement of Designations) occurs at any time on or after the
Original Issue Date, each holder of Series B Preferred Stock will have the
right, at such holder's option exercisable by notice at any time within 60
days after the happening of each such Event of Default or, if later, receipt
of notice from the Company of such Event of Default, to require the Company to
purchase all or any part of the Series B Preferred Stock then held by such
holder as such holder may elect, at the Repurchase Price.
Notwithstanding any of the foregoing, if any of the following events shall
occur and be continuing, then automatically each holder of Series B Preferred
Stock will be deemed to have delivered on the date immediately preceding such
event, a Repurchase Notice with respect to all Series B Preferred Stock held
by such holder, all such shares will be Put Shares and the aggregate
Repurchase Price in respect of each such share will immediately become due and
payable in full. Such events ("Bankruptcy Events") are: (a) the Company or any
of its Significant Subsidiaries shall commence any case, proceeding or other
action under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or
any substantial part of its assets, or the Company or any of its Subsidiaries
shall make a general assignment for the benefit of its creditors; (b) there
shall be commenced against the Company or any Significant Subsidiary any case,
proceeding or other action of a nature referred to in clause (a) above which
results in the entry of an order for relief or any such adjudication or
appointment remains undismissed, undischarged or unbonded for a period of 60
days; (c) there shall be commenced against the Company or any Significant
Subsidiary any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; (d) the Company or any
Significant Subsidiary shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth in
clauses (a), (b) or (c) above; (e) the Company or any Significant Subsidiary
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; (f) the Company or any
Significant Subsidiary shall cause to be reinstated the Reorganization
Proceedings; or (g) the Confirmation Order shall be reversed, withdrawn,
modified (in any manner adverse to Company or any Significant Subsidiary), or
any rehearing shall be ordered with respect thereto by the Bankruptcy Court or
by any court having jurisdiction over the Company.
The right to require the Company to purchase the Series B Preferred Stock as
described above will not be secured by any lien on the assets of the Company
or any Subsidiary. The put rights of the Series A Preferred Stock are
secured. See "Recent Developments -- The Apollo Transaction -- The Series A
Preferred Stock," in the Rights Offering Registration Statement. Also, under
the Foothill Debt Agreements, the Company has agreed not to purchase, redeem,
retire or otherwise acquire any capital stock of the Company (other than
solely for common stock or preferred stock of the Company).
CONVERSION. The holder of each share of Series B Preferred Stock will have
the right at any time prior to the 30th day after receipt of a notice of
redemption by the Company, at such holder's option, to convert such share into
Common Stock. Subject to provisions for adjustment, each share of Series B
Preferred Stock will be convertible into such number of shares of Common
Stock, as is obtained by dividing the Liquidation Preference by the Conversion
Price, in each case as in effect at the date any Series B Preferred Stock is
surrendered for conversion. If any Series B Preferred Stock is called for
redemption, the right to convert such Series B Preferred Stock will terminate
on the 30th day following the date of the Redemption Notice. Conversion Price
means, initially, $5.75 and, thereafter, such price as adjusted.
The Conversion Price will be subject to adjustment from time to time upon the
following events: (a) if the Company declares a dividend or makes a
distribution on the outstanding Common Stock in capital stock of the Company,
subdivides or reclassifies the outstanding Common Stock into a greater number
of shares (or into other securities or property), or combines or reclassifies
the outstanding Common Stock into a smaller number of shares (or into other
securities or property); (b) if the Company fixes a record date for the
issuance of rights or warrants to all holders of Common Stock entitling them
to subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) (other than Series B Preferred Stock, Series B
Warrants or Investor Warrants) at a price per share less than the Current
Market Price of Common Stock on such record date; (c) if the Company fixes a
record date for the making of a distribution to all holders of Common Stock of
shares of any class other than Common Stock, of evidences of indebtedness of
the Company or any Subsidiary, of assets or other property or of rights or
warrants (excluding those rights or warrants resulting in an adjustment
pursuant to clause (b) above and the right to acquire Series B Preferred Stock
in the Rights Offering thereof); (d) if the Company issues Common Stock (other
than certain Common Stock issued (i) to the Company's employees or former
employees or their estates under certain employee benefit plans, (ii) pursuant
to the Bank Warrants (as defined below), (iii) to the Investor pursuant to the
Investor Warrants and (iv) upon conversion of the Series A Preferred Stock or
Series B Preferred Stock for a consideration per share less than the Current
Market Price per share on the date the Company fixes the offering price of
such additional shares; (e) if the Company issues any securities convertible
into or exchangeable for Common Stock (excluding securities issued in
transactions resulting in adjustments pursuant to clauses (b) and (c) above,
Series B Preferred Stock, Investor Warrants or Series B Warrants and upon
conversion of any such securities) for a consideration per share of Common
Stock deliverable upon conversion or exchange of such securities less than the
Current Market Price per share in effect immediately prior to the issuance of
such securities. Current Market Price per share at any date means the average
of the daily closing price for the Common Stock for the 10 consecutive trading
days commencing 14 trading days before such date. Bank Warrants means the
1,500,000 warrants for the purchase of Common Stock issued by the Company on
September 30, 1996 pursuant to the Prepayment Agreement dated as of September
30, 1996 among certain financial institutions and the Company. Each Bank
Warrant entitles the holder thereof to purchase one share of Common Stock for
$6.50, subject to certain antidilution adjustments.
In the event of any consolidation with or merger of the Company into another
corporation, or in the event of any sale, lease or conveyance of assets to
another corporation of the property of the Company as an entirety or
substantially as an entirety, then adequate provisions will be made whereby
each holder of Series B Preferred Stock will have the right to receive, from
such successor, leasing or purchasing corporation, as the case may be, in lieu
of the Common Stock immediately prior thereto receivable upon the conversion
of such Series B Preferred Stock, the kind and amount of shares of stock,
other securities, property or cash or any combination thereof receivable upon
such consolidation, merger, sale, lease or conveyance by a holder of the
number of shares of common stock into which such shares of Series B Preferred
Stock might have been converted immediately prior to such consolidation,
merger, sale, lease or conveyance.
In the event of any reclassification or change of the Common Stock issuable
upon conversion of Series B Preferred Stock, or in the event of any
consolidation or merger of another corporation into the Company in which the
Company is the continuing corporation and in which there is a reclassification
or change of the Common Stock, adequate provisions will be made whereby each
holder of Series B Preferred Stock will have the right to receive, in lieu of
the Common Stock immediately prior thereto receivable upon the conversion of
Series B Preferred Stock, the kind and amount of stock, other securities,
property or cash or any combination thereof receivable upon such
reclassification, change, consolidation or merger, by a holder of the number
of shares of Common Stock into which such Series B Preferred Stock might have
been converted immediately prior to such reclassification, change,
consolidation or merger.
The Conversion Price will be adjusted if the Company repurchases (by way of
tender offer, exchange offer or otherwise) any Common Stock for a per share
consideration which exceeds the Current Market Price of a share of Common
Stock on the date immediately prior to such repurchase.
The formulas for calculating the foregoing adjustments are set forth in the
Series B Statement of Designations, which is included in Exhibit 4(a) hereto.
In addition to the adjustments required in accordance with the foregoing, the
Company may make such reductions in the Conversion Price as it considers to be
advisable so that any event treated for federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the recipients.
If any event occurs as to which the foregoing provisions are not strictly
applicable or, if strictly applicable, would not, in the Board's good faith
judgment, fairly protect the conversion rights of the Series B Preferred Stock
in accordance with the essential intent and principles of such provisions,
then the Board will make adjustments in the application of such provisions, in
accordance with such essential intents and principles, as shall be reasonably
necessary, in the Board's good faith opinion, to protect such conversion
rights as aforesaid, but in no event will any adjustment have the effect of
increasing the Conversion Price, or otherwise adversely affect the holders of
the Series B Preferred Stock.
The Company will at all times reserve and keep available, free from preemptive
rights, out of its authorized but unissued stock, for the purpose of effecting
the conversion or redemption of Series B Preferred Stock, such number of its
authorized shares of Common Stock as will from time to time be sufficient for
the conversion of all outstanding Series B Preferred Stock into Common Stock.
The Company will, from time to time and in accordance with Delaware law, cause
the authorized number of shares of Common Stock to be increased if the
aggregate of the number of authorized shares of Common Stock remaining
unissued and the issued shares of such Common Stock reserved for issuance in
any other connection will not be sufficient for the conversion of all
outstanding Series B Preferred Stock into Common Stock at any time.
CONSENT AND OTHER RIGHTS. For a description of the consent rights of
holders of Series A Preferred Stock with respect to Major Transactions (as
defined below) and certain other rights of such holders, none of which apply
to holders of Series B Preferred Stock, see "Recent Developments -- The Apollo
Transaction -- The Series A Preferred Stock" and "Recent Developments -- The
Apollo Transaction -- Consent Rights," in the Rights Offering Registration
Statement.
LEGAL MATTERS
The validity of the Series B Preferred Stock, Series B Warrants and Common
Stock offered hereby will be passed upon for the Company by Arent Fox Kintner
Plotkin & Kahn, Washington, D.C.
EXPERTS
The consolidated financial statements of the Company incorporated by reference
in the Company's Annual Report (Form 10-K) for the year ended December 31,
1996 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing. <PAGE>
APPENDIX A
STATEMENT OF PREFERENCES AND RIGHTS, SERIES B PREFERRED STOCK
The 20% Cumulative Redeemable Convertible Preferred Stock, Series B, of
Atlantic Gulf Communities Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation")
shall have the following powers, preferences, and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, in addition to those set forth in the attached Amended
and Restated Certificate of Incorporation of the Corporation (all capitalized
terms used without definition are defined in Section 15 of this Statement of
Preferences and Rights (this "Certificate of Designation")):
1. Designation. The series of preferred stock established
hereby shall be designated the "20% Cumulative Redeemable Convertible
Preferred Stock, Series B" (and shall be referred to herein as the "Series B
Preferred Stock") and the authorized number of shares of Series B Preferred
Stock shall be 2,000,000.
2. Rank. The Series B Preferred Stock shall, with respect to
dividend distributions and distributions upon the voluntary or involuntary
liquidation, winding up and dissolution of the Corporation, rank (i) senior to
all classes of Common Stock and each other class of Capital Stock of the
Corporation or series of preferred stock of the Corporation hereafter created
which is not Senior Stock or Parity Stock ("Junior Stock"), (ii) pari
passuwith any Parity Stock (subject to any differing security interests
between different classes of Parity Stock) and (iii) junior to any Senior
Stock.
There is no Senior Stock outstanding on the date hereof, and there is no
Parity Stock outstanding on the date hereof other than the 20% Cumulative Re-
deemable Convertible Preferred Stock, Series A (the "Series A Preferred
Stock"), the holders of which have certain security interests and rights to
which the Holders of Series B Preferred Stock are not entitled. Senior Stock
or Parity Stock may be authorized or issued only in accordance with the
provisions of Section 7(b).
3. Dividends. (a) Subject to the provisions of Section 3(c),
beginning on the Original Issue Date, the Holders shall be entitled to
receive, when, as and if declared by the Board of Directors, but only out of
funds legally available therefor, distributions in the form of cash dividends
on each share of Series B Preferred Stock at an annual rate equal to 20% of
the Liquidation Preference in effect from time to time and no more. All
Dividends shall be cumulative, whether or not declared, on a daily basis from
the date of original issuance and shall be payable quarterly in arrears on
each Dividend Payment Date commencing on September 30, 1997. Each dividend
shall be payable with respect to Series B Preferred Stock held by Holders as
they appear on the stock books of the Corporation on each Dividend Record
Date. Dividends shall cease to accumulate in respect of Series B Preferred
Stock on the Redemption Date, the Conversion Date or the Repurchase Date for
such shares, as the case may be, unless, in the case of a Redemption Date or
Repurchase Date, the Corporation defaults in the payment of the amounts
necessary for such redemption or in its obligation to deliver certificates
representing Common Stock issuable upon such conversion, as the case may be,
in which case, dividends shall continue to accumulate at an annual rate of 23%
of the Liquidation Preference in effect from time to time (the "Default -
Dividend Rate") until such payment or delivery is made. If the Corporation
defaults in the payment of amounts due upon a Repurchase Date, interest shall
accrue on the amount of such obligation at the Default Dividend Rate until
such payment is made (with all interest due).
(b) Dividends on account of arrears for any past Dividend Period
and dividends in connection with any optional redemption pursuant to Section
5(a) may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to Holders on such date, not more than forty-five (45)
days prior to the payment thereof, as may be fixed by the Board of Directors.
(c) Notwithstanding anything to the contrary in the preceding
provisions of this Section 3, following an Event of Default, the Holders shall
be entitled to receive dividends on each share of Series B Preferred Stock at
an annual rate equal to the Default Dividend Rate, payable in cash.
(d) So long as any Series B Preferred Stock is outstanding, the
Corporation shall not declare, pay or set apart for payment any dividend on
any Junior Stock or make any payment on account of, or set apart for payment
money for a sinking or other similar fund for, the purchase, redemption or
other retirement of, any Junior Stock, or any warrants, rights, calls or
options exercisable for any Junior Stock (except such securities which are
debt securities or Senior Stock or Parity Stock) or make any distribution in
respect thereof, either directly or indirectly, and whether in cash,
obligations or shares of the Corporation or other property (other than, prior
to the occurrence of an Event of Default, dividends, payments, purchases,
acquisitions, redemptions, retirements or distributions in Junior Stock) and
shall not permit any Subsidiary of the Corporation directly or indirectly to
do any of the same in respect of such Junior Stock (other than, prior to the
occurrence of an Event of Default, dividends, payments, purchases,
acquisitions, redemptions, retirements or distributions in Junior Stock)
unless and until all dividend arrearages on the Series B Preferred Stock have
been paid in full in cash, and the Corporation is not in default of any of its
obligations under Section 5 or Section 8.
(e) Unless and until all dividend arrearages on the Series B
Preferred Stock have been paid in full, all dividends declared by the
Corporation upon Series B Preferred Stock or Parity Stock shall be declared
pro rata with respect to all Series B Preferred Stock and Parity Stock then
outstanding so that the amounts of any dividends declared per share on the
Series B Preferred Stock and such Parity Stock bear the same ratio to each
other at the time of declaration as all accrued and unpaid dividends on the
Series B Preferred Stock and the Parity Stock bear to each other.
(f) Dividends payable on the Series B Preferred Stock shall be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in the period for which payable.
4. Liquidation Preference. (a) In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the Holders shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders an amount in cash
equal to the then Liquidation Preference for each share outstanding, before
any payment shall be made or any assets distributed to the holders of any
Junior Stock. If the assets of the Corporation are not sufficient to pay in
full the liquidation payments payable to the Holders and the holders of any
outstanding Parity Stock, then, subject to the rights of the Holders pursuant
to Section 8 and subject to any differing security interests between different
classes of Parity Stock, the holders of all such shares shall share ratably
in such distribution of assets in accordance with the amounts which would be
payable on such distribution if the amount to which the Holders and the
holders of any outstanding Parity Stock are entitled were paid in full. By
acceptance hereof each Holder agrees that it shall respect the security rights
and priorities of any holder of shares of Parity Stock or Senior Stock and
shall not challenge the right of any holder of Parity Stock or Senior Stock to
be paid in respect of any obligations of the Company under any Instruments
between such holder and the Company or any of its Subsidiaries, including the
right to be paid by any Subsidiary of the Company under any guarantee by such
Subsidiary of the obligations of the Company.
(b) For the purposes of this Section 4, neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Corporation nor the consolidation or merger of the Corporation with or
into one or more corporations shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation.
5. Redemption. (a) Optional Redemption. The Corporation may,
at the option of the Board of Directors, redeem at any time on or after the
third anniversary of the Original Issue Date, from any source of funds legally
available therefor, in whole or in part, in the manner provided in Section
5(c), any or all of the Series B Preferred Stock, at a redemption price in
cash equal to the then Liquidation Preference (the "Optional Redemption
Price"); provided that no optional redemption shall be made unless full
dividends have been or contemporaneously are declared and paid or declared and
a sum set apart sufficient for such payment, on the Series B Preferred Stock
for all Dividend Periods terminating on or prior to the Redemption Date; and
provided, further, that no partial redemption shall be made for an amount of
shares of Series B Preferred Stock less than such number as have an aggregate
Liquidation Preference equal to the lesser of $1,000,000 or the aggregate
Liquidation Preference of all outstanding Series B Preferred Stock.
(b) Procedure for Redemption. (i) At least thirty (30) days and
not more than sixty (60) days prior to the date fixed for any redemption of
the Series B Preferred Stock, written notice (the "Redemption Notice") shall
be given by first class mail, postage prepaid, to each Holder on the record
date fixed for such redemption of the Series B Preferred Stock at such
Holder's address as the same appears on the stock books of the Corporation.
The Redemption Notice shall state:
(1) that such notice constitutes a Redemption Notice pursuant to
Section 5(a);
(2) the Optional Redemption Price;
(3) whether all or less than all the outstanding Series B
Preferred Stock redeemable thereunder is to be redeemed and the total
number of shares of such Series B Preferred Stock being redeemed;
(4) the number of shares of Series B Preferred Stock held, as of
the appropriate record date, by the specific Holder that the Corporation
intends to redeem;
(5) the Redemption Date;
(6) that the Holder is to surrender to the Corporation his cer-
tificate or certificates representing the Series B Preferred Stock to be
redeemed, specifying the place or places where, and the manner in which,
certificates for Series B Preferred Stock are to be surrendered for
redemption;
(7) the date on which the Series B Preferred Stock called for
redemption shall cease to be convertible; and
(8) that dividends on the Series B Preferred Stock to be
redeemed shall cease to accumulate on the Redemption Date, unless the
Corporation defaults in the payment of the amounts necessary for such
redemption, in which case, dividends shall continue to accumulate until
such payment is made.
(ii) Each Holder shall surrender the certificate or
certificates
representing such Series B Preferred Stock to the Corporation, duly endorsed,
in the manner and at the place designated in the Redemption Notice, and on the
Redemption Date the full Optional Redemption Price for such shares so surren-
dered shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be cancelled and retired. If less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(iii) If on or before the Redemption Date all funds
necessary for
such redemption shall have been set aside by the Corporation, separate and
apart from its other funds, in trust for the pro rata benefit of the Holders
of the shares so called for redemption, so as to be and continue to be
available therefor and not subject to claims of creditors of the Corporation,
then, notwithstanding that any certificate for shares so called for redemption
shall not have been surrendered for cancellation, all shares so called for
redemption shall no longer be deemed outstanding on and after such Redemption
Date, and all rights with respect to such shares shall forthwith on such Re-
demption Date cease and terminate, except only the right of the Holders
thereof to receive the amount payable on redemption thereof, without
interest.
Any interest accrued on such funds shall be paid to the Corporation from time
to time.
Any funds so set aside or deposited by the Corporation which shall
not be required for such redemption because of the exercise of any right of
conversion subsequent to the date of such deposit shall be released or repaid
to the Corporation forthwith. Any funds so set aside or deposited, as the
case may be, and unclaimed as of the first anniversary of such Redemption Date
shall be released or repaid to the Corporation, after which the Holders of the
shares so called for redemption shall look only to the Corporation for payment
thereof.
6. Conversion. (a) Conversion Right. The Holder of each share
of Series B Preferred Stock shall have the right at any time, or from time to
time (prior in each case to the thirtieth day following the date of the
Redemption Notice if such share shall be called for redemption pursuant to
Section 5), at the option of such Holder, to convert such share into Common
Stock, on and subject to the terms and conditions hereinafter set forth.
Subject to the provisions for adjustment hereinafter set forth, each share of
Series B Preferred Stock shall be convertible into such number (calculated as
to each conversion to the nearest 1/100th of a share) of fully paid and
nonassessable shares of Common Stock, as is obtained by dividing the
Liquidation Preference by the Conversion Price, in each case as in effect at
the date any Series B Preferred Stock is surrendered for conversion.
(b) Conversion Procedures. To exercise the conversion privilege,
the Holder of any Series B Preferred Stock to be converted in whole or in part
shall surrender the certificate representing such Series B Preferred Stock
(the "Series B Preferred Stock Certificate") at the office or agency then
maintained by the Corporation for the transfer of the Series B Preferred
Stock, and shall give written notice of conversion in the form provided on the
Series B Preferred Stock Certificate (or such other notice which is acceptable
to the Corporation) to the Corporation at such office or agency that the
Holder elects to convert such Series B Preferred Stock represented by the
Series B Preferred Stock Certificate so surrendered or the portion thereof
specified in said notice into Common Stock. Such notice shall also state the
name or names (with addresses) in which the certificate or certificates for
Common Stock which shall be issuable upon such conversion shall be issued, and
shall be accompanied by transfer taxes, if required. Each Series B Preferred
Stock Certificate surrendered for conversion shall, unless the shares issuable
on conversion are to be issued in the same name as the registration of such
Series B Preferred Stock Certificate, be duly endorsed by, or be accompanied
by instruments of transfer in form satisfactory to the Corporation duly
executed by, the Holder or such Holder's duly authorized attorney.
As promptly as practicable, but in no event later than five (5)
Business Days, after the surrender of such Series B Preferred Stock
Certificate and the receipt of such notice and funds, if any, as aforesaid,
the Corporation shall issue and shall simultaneously deliver at such office or
agency to such Holder, or on his written order, a certificate or certificates
for the number of shares of Common Stock, issuable upon the conversion of such
Series B Preferred Stock represented by the Series B Preferred Stock
Certificate so surrendered or portion thereof in accordance with the
provisions of this Section 6. In case less than all of the Series B Preferred
Stock represented by a Series B Preferred Stock Certificate surrendered for
conversion is to be converted, the Corporation shall simultaneously deliver to
or upon the written order of the Holder of such Series B Preferred Stock
Certificate a new Series B Preferred Stock Certificate representing the Series
B Preferred Stock not converted. If a Holder fails to notify the Corporation
of the number of shares of Series B Preferred Stock which such Holder wishes
to convert, such Holder shall be deemed to have elected to convert all shares
represented by the certificate or certificates surrendered for conversion.
Each conversion shall be deemed to have been effected on the date
on which such Series B Preferred Stock Certificate shall have been surrendered
and such notice shall have been received by the Corporation, as aforesaid (the
"Conversion Date"), and the Person in whose name any certificate or cer-
tificates for Common Stock shall be issuable upon such conversion shall be
deemed to have become on said date the holder of record of the shares repre-
sented thereby; provided, however, that any such surrender on any date when
the stock books of the Corporation shall be closed shall constitute the Person
in whose name the certificates are to be issued as the record holder thereof
for all purposes on the next succeeding day on which such stock books are
open, but such conversion shall be at the Conversion Price as in effect on the
date upon which such Series B Preferred Stock Certificate shall have been
surrendered.
All Series B Preferred Stock that shall have been surrendered for
conversion as herein provided shall no longer be deemed to be outstanding and
all rights with respect to such shares, including the rights, if any, to
receive notices and to vote, shall forthwith cease, except only the right of
the Holders thereof, subject to the provisions of this Section 6, to receive
Common Stock in exchange therefor; provided, however, that if the Corporation
defaults in its obligation to deliver certificates representing Common Stock
issuable upon such conversion, dividends shall continue to accumulate at the
Default Dividend Rate until such delivery is made.
If any Series B Preferred Stock shall be called for redemption,
the right to convert such Series B Preferred Stock shall terminate at the
close of business on the thirtieth day following the date of the Redemption
Notice.
(c) The Conversion Price at which Series B Preferred Stock is
convertible into Common Stock shall be subject to adjustment from time to time
as provided in this Section 6(c) (unless otherwise indicated, all calculations
under this Section 6(c) shall be made to the nearest $0.01):
(i) In case the Corporation shall (A) declare a dividend
or make
a distribution on the outstanding Common Stock in Capital Stock of the
Corporation, (B) subdivide or reclassify the outstanding Common Stock
into a greater number of shares (or into other securities or property),
or (C) combine or reclassify the outstanding Common Stock into a smaller
number of shares (or into other securities or property), the Conversion
Price in effect at the close of business on the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution, or to be affected by such subdivision, combination or -
other reclassification, shall be adjusted by multiplying such Conversion
Price by a fraction, the numerator of which shall be the total number of
outstanding shares of Common Stock immediately prior to such event, and
the denominator of which shall be the total number of outstanding shares
of Common Stock immediately after such event. An adjustment made
pursuant to this subparagraph (i) shall become effective immediately
after the record date for such event, or, if there is no record date,
upon the effective date for such event. Any Common Stock issuable in
payment of a dividend shall be deemed to have been issued immediately
prior to the time of the record date for such dividend for purposes of
calculating the number of outstanding shares of Common Stock under
subparagraphs (ii) and (iii) below. Adjustments pursuant to this sub-
paragraph shall be made successively whenever any event specified above
shall occur.
(ii) In case the Corporation shall fix a record date for
issuance of rights or warrants to all holders of Common Stock entitling
them to subscribe for or purchase Common Stock (or securities
convertible into or exchangeable for Common Stock) (other than Series B
Preferred Stock, Series B Warrants or Investor Warrants) at a price per
share (or having a conversion price or exchange price per share, subject
to normal antidilution adjustments) less than the Current Market Price
(as defined in subparagraph (vii) below) of Common Stock on such record
date, the Conversion Price in effect at the close of business on such
record date shall be reduced by multiplying such Conversion Price by a
fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights, options or
warrants plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered
would purchase at the Current Market Price as of such record date, and
the denominator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights, options or warrants
plus the number of additional shares of Common Stock offered for
subscription or purchase in connection with such rights, options or
warrants. Such adjustment shall be made whenever such rights, options
or warrants are issued, and shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such rights, options or warrants. In case any rights or warrants
referred to in this subparagraph (ii) in respect of which an adjustment
shall have been made shall expire unexercised within forty-five (45)
days after the same shall have been distributed or issued by the Cor-
poration, the Conversion Price shall be readjusted at the time of such
expiration to the Conversion Price that would have been in effect if no
adjustment had been made on account of the distribution or issuance of
such expired rights or warrants.
(iii) In case the Corporation shall fix a record date for
making of a distribution to all holders of Common Stock (A) of shares of
any class other than Common Stock, (B) of evidences of indebtedness of
the Corporation or any Subsidiary, (C) of assets or other property or
(D) of rights or warrants (excluding those rights or warrants resulting
in an adjustment pursuant to subparagraph (ii) above, and the right to
acquire Series B Preferred Stock in the rights offering thereof), then
in each such case the Conversion Price shall be reduced so that such
price shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of the Conversion
Price reduction contemplated by this subparagraph (iii) by a fraction,
the numerator of which shall be the then Current Market Price per share
of Common Stock, less the then fair market value (as determined by the
Board of Directors, whose reasonable determination shall be described in
a resolution certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification (a "Board
Resolution") of the portion of the securities, evidences of
indebtedness, assets, property or rights or warrants so distributed, the
case may be, which is applicable to one share of Common Stock, and the
denominator of which shall be the Current Market Price per share of
Common Stock as of the record date for such distribution. Such adjust-
ment shall be made successively whenever such a record date is fixed.
(iv) In case the Corporation shall issue Common Stock for a
consideration per share less than the Current Market Price per share on
the date the Corporation fixes the offering price of such additional
shares, the Conversion Price shall be adjusted immediately thereafter so
that it shall equal the price determined by multiplying the Conversion
Price in effect immediately prior thereto by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding im-
mediately after the issuance of such additional shares, and the
denominator shall be the total number of shares of Common Stock out-
standing immediately prior to the issuance of such additional shares
plus the number of shares of Common Stock which the aggregate con-
sideration received (determined as provided in subparagraph (vi) below)
for the issuance of such additional shares would purchase at the Current
Market Price per share. Such adjustment shall be made successively
whenever such an issuance is made; provided, however, that the
provisions of this subparagraph shall not apply (A) to Common Stock
issued to the Corporation's employees or former employees or their
estates under bona fide employee benefit plans adopted by the Board of
Directors and approved by the holders of Common Stock if required by
law, if such Common Stock would otherwise be covered by this subpara-
graph, but only to the extent that the aggregate number of shares
excluded hereby shall not exceed, on a cumulative basis since the date
hereof, 1,642,000 (including 842,000 shares as of the date hereof to be
issued pursuant to employee stock options outstanding as of the date
hereof to purchase Common Stock), (B) to the Common Stock to be issued
pursuant to the Bank Warrants, (C) to the Common Stock to be issued
pursuant to the Investor Warrants or the Series B Warrants and (D) to
Common Stock to be issued upon conversion of the Series A Preferred
Stock or the Series B Preferred Stock, adjusted as appropriate in each
case, in connection with any stock split, merger, recapitalization or
similar transaction.
(v) In case the Corporation shall issue any securities
convertible into or exchangeable for Common Stock (excluding (A)
securities issued in transactions resulting in adjustment pursuant to
subparagraphs (ii) and (iii) above, (B) Series A Preferred Stock, (C)
Series B Preferred Stock, (D) Investor Warrants or Series B Warrants,
and (E) upon conversion of any of such securities) for a consideration
per share of Common Stock deliverable upon conversion or exchange of
such securities (determined as provided in subparagraph (vi) below and
subject to normal antidilution adjustments) less than the Current Market
Price per share in effect immediately prior to the issuance of such
securities, the Conversion Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying
the Conversion Price in effect immediately prior thereto by a fraction,
of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the maximum number
of shares of Common Stock deliverable upon conversion of or in exchange
for such securities at the initial conversion or exchange price or rate,
and the denominator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities plus
the number of shares of Common Stock which the aggregate consideration
received (determined as provided in subparagraph (vi) below) for such
securities would purchase at the Current Market Price per share. Such
adjustment shall be made successively whenever such an issuance is made.
Upon the termination of the right to convert or exchange such
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustments made
upon the issuance of such convertible or exchangeable securities been
made upon the basis of the delivery of only the number of shares of
Common Stock actually delivered upon conversion or exchange of such
securities and upon the basis of the consideration actually received by
the Corporation (determined as provided in subparagraph (vi) below) for
such securities.
(vi) For purposes of any computation respecting
consideration received pursuant to subparagraphs (iv) and (v) above,
the following shall apply:
(A) in the case of the issuance of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deductions be made for any commissions,
discounts, placement fees or other expenses incurred by the
Corporation for any underwriting or placement of the issue or
otherwise in connection therewith;
(B) in the case of the issuance of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined by the Board of Directors,
whose reasonable determination shall be described in a Board
Resolution; and
(C) in the case of the issuance of securities
convertible into or exchangeable for Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Corporation for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Corporation upon the conversion or exchange
thereof (the consideration in each case to be determined in the
same manner as provided in clauses (A) and (B) of this
subparagraph (vi)).
(vii) For the purpose of any computation under this
Certificate of
Designation, (A) the "Current Market Price" per share at any date shall
be deemed to be the average of the daily Closing Price for the Common
Stock for the ten (10) consecutive Trading Days commencing fourteen (14)
Trading Days before such date, and (B) the "Closing Price" of the Common
Stock means the last reported sale price regular way reported on the
NASDAQ Stock Market or its successor, or, if not listed or admitted to
trading on the NASDAQ Stock Market or its successor, the last reported
sale price regular way reported on any other stock exchange or market on
which the Common Stock is then listed or eligible to be quoted for
trading, or as reported by the National Quotation Bureau Incorporated.
(viii) In any case in which this Section shall require that
adjustment shall become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of such event (A)
issuing to the Holder of any Series B Preferred Stock converted after
such record date and before the occurrence of such event the Common
Stock issuable upon such conversion by reason of the adjustment required
by such event over and above the Common Stock issuable upon such
conversion before giving effect to such adjustment and (B) paying to
such Holder an amount in cash in lieu of a fractional share of Common
Stock pursuant to Section 6(h); provided, however, that the Corporation
shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's rights to receive such additional Common Stock,
and such cash, upon the occurrence of the event requiring such
adjustment.
(ix) The Corporation may make such reductions in the
Conversion
Price, in addition to those required pursuant to other subparagraphs of
this Section, as it considers to be advisable so that any event treated
for federal income tax purposes as a dividend of stock or stock rights
shall not be taxable to the recipients.
(x) In case of any consolidation with or merger of the
Corporation into another corporation, or in case of any sale, lease or
conveyance of assets to another corporation of the property of the
Corporation as an entirety or substantially as an entirety, lawful and
adequate provisions shall be made whereby each Holder of Series B Pre-
ferred Stock shall have the right to receive, from such successor,
leasing or purchasing corporation, as the case may be, upon the basis
and upon the terms and conditions specified herein, in lieu of the Com-
mon Stock immediately theretofore receivable upon the conversion of such
Series B Preferred Stock, the kind and amount of shares of stock, other
securities, property or cash or any combination thereof receivable upon
such consolidation, merger, sale, lease or conveyance by a holder of the
number of shares of Common Stock into which such Series B Preferred
Stock might have been converted immediately prior to such consolidation,
merger, sale, lease or conveyance. In the case of any such con-
solidation, merger or sale of substantially all the assets, appropriate
provision shall be made with respect to the rights and interests of the
Holders to the end that the provisions hereof (including provisions for
adjustment of the Conversion Price) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or
assets thereafter deliverable upon the exercise of any conversion rights
hereunder.
(xi) In case of any reclassification or change of the
Common
Stock issuable upon conversion of Series B Preferred Stock (other than a
change in par value, or from par value to no par value, or as a result
of a subdivision or combination, but including any change in the Common
Stock into two or more classes or series of shares), or in case of any
consolidation or merger of another corporation into the Corporation in
which the Corporation is the continuing corporation and in which there
is a reclassification or change (including a change to the right to
receive cash or other property) of the Common Stock (other than a change
in par value, or from par value to no par value, or as a result of a
subdivision or combination, but including any change in the Common Stock
into two or more classes or series of shares), lawful and adequate
provisions shall be made whereby each Holder of Series B Preferred Stock
shall have the right to receive, upon the basis and upon the terms and
conditions specified herein, in lieu of the Common Stock immediately
theretofore receivable upon the conversion of such Series B Preferred
Stock, the kind and amount of shares of stock, other securities,
property or cash or any combination thereof receivable upon such re-
classification, change, consolidation or merger, by a holder of the
number of shares of Common Stock into which such Series B Preferred
Stock might have been converted immediately prior to such reclassifi-
cation, change, consolidation or merger.
(xii) The foregoing subparagraphs (x) and (xi), however,
shall not
in any way affect the rights a Holder may otherwise have, pursuant to
this Section, to receive securities, evidences of indebtedness, assets,
property rights or warrants upon conversion of any Series B Preferred
Stock.
(xiii) If the Corporation repurchases (by way of tender
offer,
exchange offer or otherwise) any Common Stock for a per share
consideration which exceeds the Current Market Price of a share of
Common Stock on the date immediately prior to such repurchase, the
Conversion Price shall be reduced so that such price shall equal the
price determined by multiplying the Conversion Price in effect imme-
diately prior to the effectiveness of the Conversion Price reduction
contemplated by this subparagraph (xiii) by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding
immediately prior to such acquisition multiplied by the Current Market
Price per share of the Common Stock on the immediately preceding
Trading Day, and the denominator shall be the sum of (A) the fair market
value (as determined in good faith by the Board of Directors) of the ag-
gregate consideration payable to stockholders as a result of such
acquisition, and (B) the product of the number of shares of Common Stock
outstanding immediately following such acquisition and the Current
Market Price per share of the Common Stock on such immediately preceding
Trading Day, such reduction to become effective immediately prior to the
opening of business on the day following such acquisition.
(xiv) If any event occurs as to which the foregoing
provisions of
this Section 6(c) are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board of
Directors, fairly protect the conversion rights of the Series B
Preferred Stock in accordance with the essential intent and principles
of such provisions, then the Board of Directors shall make such
adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary,
in the good faith opinion of the Board of Directors, to protect such
conversion rights as aforesaid, but in no event shall any such ad-
justment have the effect of increasing the Conversion Price, or
otherwise adversely affect the Holders.
(xv) For purposes of Section 6(c), Common Stock owned or
held at
any relevant time by, or for the account of, the Corporation in its
treasury or otherwise, shall not be deemed to be outstanding for
purposes of the calculation and adjustments described therein. Shares
held in the Disputed Claims Reserve, Division Class 14 Utility Fund
Trust Agreement dated April 6, 1993 and the Improvements Fund Trust
Agreement dated April 6, 1993 shall not be deemed to be held by, or for
the account of, the Corporation.
(d) Conversion Price Adjustment Deferred. Notwithstanding the
foregoing provisions of this Section 6, (i) no adjustment in the number of
shares of Common Stock into which any Series B Preferred Stock is convertible
shall be required unless such adjustment would require an increase or decrease
in such number of shares of at least 1% and (ii) no adjustment in the
Conversion Price shall be required unless such adjustment would require an
increase or decrease in the Conversion Price of at least $.01 per share;
provided, however, that any adjustments which by reason of this paragraph (d)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 6 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may
be.
(e) Adjustment Report. Whenever any adjustment is required in
the shares into which any Series B Preferred Stock is convertible, the
Corporation shall forthwith (i) file with each office or agency then
maintained by the Corporation for the transfer of the Series B Preferred Stock
a statement describing in reasonable detail the adjustment and the method of
calculation used and (ii) cause a notice of such adjustment, setting forth the
adjusted Conversion Price and the calculation thereof to be mailed to the
Holders at their respective addresses as shown on the stock books of the
Corporation. The certificate of any independent firm of public accountants of
recognized standing selected by the Board of Directors certifying to the Board
of Directors the correctness of any computation under this Section 6 shall be
evidence of the correctness of such computation.
(f) Notice of Certain Events. In the event that:
(i) the Corporation shall take action to make any
distribution
to the holders of its Common Stock;
(ii) the Corporation shall take action to offer for
subscription
pro rata to the holders of its Common Stock any securities of any kind;
(iii) the Corporation shall take action to accomplish any
capital
reorganization, or reclassification of the Capital Stock of the
Corporation, or a consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation is
required, or the sale or transfer of all or substantially all of the
assets of the Corporation; or
(iv) the Corporation shall take action looking to a
voluntary or
involuntary dissolution, liquidation or winding-up of the Corporation;
then the Corporation shall (A) in case of any such distribution or
subscription rights, at least twenty (20) days prior to the date or expected
date on which the stock books of the Corporation shall close or a record shall
be taken for the determination of Holders entitled to such distribution or
subscription rights, and (B) in the case of any such reorganization, reclas-
sification, consolidation, merger, sale, transfer, dissolution, liquidation or
winding-up, at least twenty (20) days prior to the date or expected date when
the same shall take place, cause written notice thereof to be mailed to each
Holder at his address as shown on the stock books of the Corporation. Such
notice in accordance with the foregoing clause (A) shall also specify, in the
case of any such distribution or subscription rights, the date or expected
date on which the holders of Common Stock shall be entitled thereto, and such
notice in accordance with the foregoing clause (B) shall also specify the date
or expected date on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up, as the case may be.
(g) Common Stock. For the purposes of this Section 6, the term
"Common Stock" shall mean (i) the Common Stock or (ii) any other class of
stock resulting from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value or from no par value to par
value, or from par value to no par value. If at any time as a result of an
adjustment made pursuant to the provisions of Section 6(c), the Holder of any
Series B Preferred Stock thereafter surrendered for conversion shall become
entitled to receive any shares of the Corporation, such other shares so re-
ceivable upon conversion of any Series B Preferred Stock shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Section 6(c), and the other provisions of this Section 6 with respect to the
Common Stock shall apply on like terms to any such other shares.
(h) Fractional Shares. The Corporation shall not be required to
issue fractional shares of Common Stock upon the conversion of any Series B
Preferred Stock. If more than one share of Series B Preferred Stock shall be
surrendered for conversion at one time by the same Holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares so surrendered. If any fractional
interest in a share of Common Stock would be deliverable upon the conversion
of any Series B Preferred Stock, the Corporation may pay, in lieu thereof, in
cash the Closing Price thereof as of the Business Day immediately preceding
the date of such conversion.
(i) Reservation of Shares. The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued stock, for the purpose of effecting the conversion or redemption
of the Series B Preferred Stock, such number of its duly authorized shares of
Common Stock (or treasury shares as provided below) as shall from time to
time be sufficient for the conversion of all outstanding Series B Preferred
Stock into Common Stock at any time. The Corporation shall, from time to time
and in accordance with the General Corporation Law of the State of Delaware,
cause the authorized number of shares of Common Stock to be increased if the
aggregate of the number of authorized shares of Common Stock remaining
unissued and the issued shares of such Common Stock reserved for issuance in
any other connection shall not be sufficient for the conversion of all out-
standing Series B Preferred Stock into Common Stock at any time.
7. Voting Rights. The Holders of Series B Preferred Stock shall
not vote on any matters submitted to the holders of the Common Stock for a
vote, except as may be required by law. In any case in which the Holders
shall be entitled to vote as a separate class pursuant to Delaware law, each
Holder shall be entitled to one vote for each share of Series B Preferred
Stock then held.
8. Repurchase Obligation. (a) Subject to the provisions of
Section 8(b), the Series B Preferred Stock shall not be redeemable at the
option of the Holder thereof prior to the fourth anniversary of the Original
Issue Date. Beginning on the fourth anniversary of the Original Issue Date,
each Holder shall have the right, at such Holder's option, exercisable by
notice (a "Repurchase Notice"), to require the Corporation to purchase Series
B Preferred Stock then held by such Holder, at a repurchase price in cash
equal to the Liquidation Preference in effect at such time (the "Repurchase
Price"); provided, however, that the number of shares required to be
repurchased by the Corporation pursuant to this Section 8(a) ("Put Shares")
prior to the fifth anniversary of the Original Issue Date shall not exceed
one-third of the total number of shares of Series B Preferred Stock issued by
the Corporation, and, prior to the sixth anniversary of the Original Issue
Date, the number of Put Shares shall not exceed two-thirds of the total number
of shares of Series B Preferred Stock issued by the Corporation.
(b) Notwithstanding the provisions of Section 8(a), if an Event
of Default shall occur at any time or from time to time on or after the
Original Issue Date, each Holder shall have the right, at such Holder's option
exercisable by Repurchase Notice at any time within sixty (60) days after the
happening of each such Event of Default or, if later, receipt of notice from
the Corporation of such Event of Default, to require the Corporation to
purchase all or any part of the Series B Preferred Stock then held by such
Holder as such Holder may elect, at the Repurchase Price.
(c) The Corporation shall, within thirty (30) days of the occur-
rence of an Event of Default, give written notice thereof by telecopy, if
possible, and by first class mail, postage prepaid, to each Holder, addressed
to such Holder at his last address and telecopy number as shown upon the stock
books of the Corporation. Each such notice shall specify the Event of Default
which has occurred and the date of such occurrence, the place or places of
payment, the then effective Conversion Price pursuant to Section 6, the then
effective Repurchase Price and the date the right of such Holder to require
such repurchase shall terminate. In addition, the Corporation shall, im-
mediately upon becoming aware of any facts or events that could reasonably be
expected to result in the occurrence of an Event of Default, give a written
notice thereof by telecopy, if possible, and by first class mail, postage pre-
paid, to the Holders, addressed to such Holders at their last addresses as
shown upon the stock books of the Corporation.
(d) The date fixed for each such repurchase (the "Repurchase
Date") shall be the 30th day following the date of the Repurchase Notice
relating thereto. The place of payment shall be at an office or agency in the
City of New York, New York fixed therefor by the Corporation or, if not fixed,
at the principal executive office of the Corporation.
On or before the Repurchase Date, each Holder who elects to have
Series B Preferred Stock held by it purchased shall surrender the certificate
representing such shares to the Corporation at the place designated in such -
notice together with an election to have such purchase made and shall
thereupon be entitled to receive payment therefor provided in this Section 8.
If less than all the shares represented by any such surrendered certificate
are repurchased, a new certificate shall be issued representing the
unpurchased shares. Payment of the Repurchase Price for the Put Shares shall
be made on the later of the Repurchase Date or the fifth Business Day after
the surrender of such certificate. Dividends with respect to the Series B
Preferred Stock so purchased shall cease to accrue after the Repurchase Date,
such shares shall no longer be deemed outstanding and the Holders thereof
shall cease to be stockholders of the Corporation and all rights whatsoever
with respect to the shares so purchased shall terminate; provided, however,
that if the Corporation defaults in its obligation to pay the Repurchase Price
for such Put Shares, interest shall accrue on the amount of such obligation at
the Default Dividend Rate until such payment is made (with all interest due).
(e) Notwithstanding any other provision hereof, if any of the
following events shall occur and be continuing: (i) the Company or any of its
Significant Subsidiaries shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or the Company or any of its Significant
Subsidiaries shall make a general assignment for the benefit of its creditors;
(ii) there shall be commenced against the Company or any of its Significant
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; (iii) there shall be commenced against the
Company or any of its Significant Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; (iv) the Company or any of its Significant Subsidiaries
shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clauses (i),
(ii), or (iii) above; (v) the Company or any of its Significant Subsidiaries
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; (vi) the Company or any of its
Significant Subsidiaries shall cause to be reinstated the Reorganization Pro-
ceedings (as defined in the Note Agreement (as defined in the Investment
Agreement)); or (vii) the Confirmation Order (as defined in the Note
Agreement) shall be reversed, withdrawn, modified (in any manner adverse to
the Company or any of its Significant Subsidiaries), or any rehearing shall be
ordered with respect thereto by the Bankruptcy Court or by any court having
jurisdiction over the Company; then, and in any such event, all Series B Pre-
ferred Stock held by such Holder shall be Put Shares and the aggregate Repur-
chase Price in respect of each such share shall immediately and automatically
become due and payable in full without any requirement or pre-condition of
delivery of a Repurchase Notice, any such requirement or pre-condition being
expressly waived hereby.
9. Reissuance of Series B Preferred Stock. Series B Preferred
Stock that has been issued and reacquired in any manner, including shares
surrendered to the Corporation upon conversion, and shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws of
Delaware) have the status of authorized and unissued preferred stock un-
designated as to series and may not be re-designated and reissued as part of
any series of preferred stock.
10. Business Day. If any payment or redemption shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment or redemption shall be made on the immediately succeeding Business
Day.
11. Headings of Sections. The headings of the various Sections
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
12. Severability of Provisions. If any right, preference or
limitation of the Series B Preferred Stock set forth in this Certificate of
Designation (as it may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule or law or public policy, all
other rights, preferences and limitations set forth in this Certificate of
Designation (as so amended) which can be given effect without the invalid,
unlawful or unenforceable right, preference or limitation shall, nevertheless,
remain in full force and effect, and no right, preference or limitation herein
set forth shall be deemed dependent upon any other such right, preference or
limitation unless so expressed herein.
13. Notice. All notices and other communications provided for or
permitted to be given to the Corporation hereunder shall be made by hand
delivery, next day air courier or certified first-class mail to the
Corporation at its principal executive offices at Atlantic Gulf Communities
Corporation, 2601 South Bayshore Drive, Miami, Florida 33133-5461, Telecopy
number (305) 859-4623, Attention: Chief Financial Officer.
14. Amendments. This Certificate of Designation may be amended
without notice to or the consent of any Holder to cure any ambiguity, defect
or inconsistency or to make any other amendment provided that any such
amendment does not adversely affect the rights of any Holder. Any provisions
of this Certificate of Designation may also be amended by the Corporation with
the vote or written consent of Holders representing a majority of the
outstanding Series B Preferred Stock.
The Corporation will, so long as any Series B Preferred Stock is
outstanding, maintain an office or agency where such shares may be presented
for registration or transfer and where such shares may be presented for
conversion and redemption.
15. Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Bank Warrants" means the 1,500,000 warrants for the purchase of
Common Stock issued on September 30, 1996 pursuant to the Prepayment Agreement
dated as of September 30, 1996 among the financial institutions listed on the
signature pages thereof, The Chase Manhattan Bank and the Corporation.
"Board of Directors" means the Board of Directors of the
Corporation.
"Board Resolution" has the meaning set forth in Section 6(c)(iii).
"Business Day" means a day that is not a Saturday, a Sunday or a
day on which banking institutions in the State of New York are not required to
be open. Unless specifically stated as a Business Day, all days referred to
herein shall mean calendar days.
"Capital Stock" means, with respect to any Person, any and all
shares, partnership interests, participations, rights in, or other equivalents
(however designated and whether voting or nonvoting) of, such Person's capital
stock.
"Closing Price" has the meaning set forth in Section 6(c)(vii).
"Common Stock" means shares of Common Stock, par value $.10 per
share, of the Corporation.
"Conversion Date" has the meaning set forth in Section 6(b).
"Conversion Price" means, initially, $5.75 and, thereafter, such
price as adjusted pursuant to Section 6.
"Corporation" means Atlantic Gulf Communities Corporation, a
Delaware corporation.
"Current Market Price" has the meaning set forth in Section
6(c)(vii).
"Default Dividend Rate" has the meaning set forth in Section 3(a).
"Dividend Payment Date" means March 31, June 30, September 30 and
December 31 of each year.
"Dividend Period" means the Initial Dividend Period and,
thereafter, each Quarterly Dividend Period.
"Dividend Record Date" means a day fifteen (15) days preceding the
Dividend Payment Date.
"Event of Default" means (i) any event of default (whatever the
reason for such event of default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
governmental authority) under any Instrument creating, evidencing or securing
any indebtedness for borrowed money of the Company or any Significant
Subsidiary in an amount in excess of $2,500,000 that would enable the credi-
tors or secured parties under such Instrument to declare the principal amount
of such indebtedness due and payable prior to its scheduled maturity, and has
not been waived by the relevant creditors or secured parties, (ii) the
occurrence of a Default Change of Control (as defined in the Investment
Agreement), or (iii) one of the events specified in clauses (i) through (vii)
of Section 8(e).
"Holder" means a record holder of one or more outstanding shares
of Series B Preferred Stock.
"Initial Dividend Period" means the dividend period commencing on
the Original Issue Date and ending on the second Dividend Payment Date to
occur thereafter.
"Instrument" means any contract, agreement, indenture, mortgage,
security, document or writing under which any obligation is evidenced, assumed
or undertaken, or any security interest is granted or perfected.
"Investor" has the meaning set forth in the Investment Agreement.
"Investor Warrants" means the 5,000,000 warrants to acquire Common
Stock to be issued to the Investor pursuant to the Investment Agreement.
"Investment Agreement" means the Amended and Restated Investment
Agreement dated as of February 7, 1997 by and between AP-AGC, LLC and the
Corporation, amended as of March 20, 1997 and amended and restated as of May
15, 1997.
"Junior Stock" has the meaning set forth in Section 2.
"Liquidation Preference" means, at any time, $10 per share of
Series B Preferred Stock, plus accumulated and unpaid Dividends thereon
through the date of such determination, whether or not declared and whether or
not funds are legally available therefor.
"Optional Redemption Price" has the meaning set forth in Section
5(a).
"Original Issue Date" means the date upon which the Series B
Preferred Stock is originally issued by the Corporation.
"Parity Stock" means the Series A Preferred Stock (except insofar
as the Series A Preferred Stock has certain security rights and interests
which are not applicable to the Series B Preferred Stock) and any class or
series of stock the terms of which provide that it is entitled to participate
pari passu with the Series B Preferred Stock with respect to any dividend or
distribution or upon liquidation, dissolution or winding-up of the
Corporation.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, business trust, joint-stock
company, trust, unincorporated organization or government or agency or
political subdivision thereof.
"Put Shares" has the meaning set forth in Section 8(a).
"Quarterly Dividend Period" shall mean the quarterly period
commencing on each March 31, June 30, September 30 and December 31 and ending
on each Dividend Payment Date, respectively.
"Redemption Date", with respect to any Series B Preferred Stock,
means the date on which such Series B Preferred Stock is redeemed by the
Corporation.
"Redemption Notice" has the meaning set forth in Section 5(c).
"Repurchase Date" has the meaning set forth in Section 8(d).
"Repurchase Notice" has the meaning set forth in Section 8(a).
"Repurchase Price" has the meaning set forth in Section 8(a).
"Senior Stock" means any class or series of stock the terms of
which provide that it is entitled to a preference to the Series B Preferred
Stock with respect to any dividend or distribution or upon voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation.
"Series A Preferred Stock" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series A, par value $.01 per share, of the
Corporation.
"Series B Preferred Stock Certificate" has the meaning set forth
in Section 6(b).
"Series B Preferred Stock" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series B, par value $.01 per share, of the
Corporation, which may be issued in accordance with the Investment Agreement.
"Series B Warrants" means up to 4,000,000 warrants to acquire
Common Stock which may be issued to acquirers of Series B Preferred Stock.
"Significant Subsidiary" has the meaning set forth in Regulation
S-X under the Securities Exchange Act of 1934, as amended.
"Subsidiary" means, (i) with respect to any Person, a corporation
a majority of whose Capital Stock with voting power under ordinary
circumstances to elect directors is at the time, directly or indirectly, owned
by such Person, by a Subsidiary of such Person or by such Person and a
Subsidiary of such Person, or (ii) any other Person (other than a corporation)
of which at least a majority of the voting interest is at the time, directly
or indirectly, owned by such Person, by a Subsidiary of such Person or by such
Person and a Subsidiary of such Person.
"Trading Day" shall mean a day on which securities are traded or
quoted on the national securities exchange or quotation system or in the over-
the-counter market used to determine the Closing Price.
<PAGE> PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Set forth below is an estimate of the approximate amount of the fees and
expenses payable by the Registrant.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee 6,157
*Blue sky fees and expenses (including legal fees) 7,500
*Accounting fees and expense 3,500
*Legal fees and expense 30,000
*Printing and engraving 500
*Miscellaneous 5,343
*Total 52,000
</TABLE>
- ---------------
* Estimated
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law, as amended, provides that
a corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at its request in such capacity in
another corporation or business association, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Section 102(b)(7) of the Delaware General Corporation Law, as amended, permits
a corporation to provide in its certificate of incorporation that a director
of the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (a) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (b) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the
law, (c) under Section 174 of the Delaware General Corporation Law, or (d) any
transaction from which the director derived an improper personal benefit.
Article Twelfth of the Registrant's charter provides for the elimination of
personal liability of a director for breach of fiduciary duty as permitted by
Section 102(b)(7) of the Delaware General Corporation Law, and Article Ninth
provides that the Registrant may indemnify its directors and officers to the
full extent permitted by the Delaware General Corporation Law.
The Registrant has in effect a directors and officers liability insurance
policy under which the directors and officers of the Registrant are insured
against loss arising from claims made against them due to wrongful acts while
acting in their individual and collective capacities as directors and
officers, subject to certain exclusions.
The Registrant has entered into indemnification and release agreements with
its directors who have resigned effective as of the Apollo Closing that
contractually provide for indemnification and expense advancement, including
related provisions meant to facilitate the indemnitees' receipt of such
benefits, and certain releases. Under such agreements, the Registrant for
itself, its Subsidiaries and any other entities that the Registrant controls,
will release each of the resigning directors from any and all claims that any
of the releasors may have against the resigning directors. The Investment
Agreement also provides for continuing indemnification following the Apollo
Closing for the Registrant's directors to the fullest extent provided by law,
as well as continuing coverage under the Company's directors' and officers'
liability insurance policies.
Item 16. Exhibits and Financial Statement Schedule.
Exhibits:
4 (a) Amended and Restated Certificate of Incorporation of the Registrant,
incorporated by reference to Exhibit 4(a) to the Registrant's Registration
Statement on Form S-3 filed on July 23, 1997 (File No. 333-31939).
(b) Restated Bylaws of the Registrant (incorporated herein by reference to
Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992).
(c) Statements of Preferences and Rights establishing Series A Preferred
Stock and Series B Preferred Stock (included in Exhibit 4(a)).
5 Opinion of Arent Fox Kintner Plotkin & Kahn concerning legality of
securities being registered.
10(a) Investment Agreement (Exhibit EX-1 to the Company's Current Report on
Form 8-K filed February 18, 1997), as amended and restated as of May 15, 1997
(Exhibit EX-1 to the Company's Current Report on Form 8-K filed June 5, 1997).
(b) Secured Agreement (Exhibit EX-6 to the Company's Current Report on Form
8-K filed February 18, 1997), as amended and restated as of May 15, 1997.
23 Consents of experts and counsel:
(a) Arent Fox Kintner Plotkin & Kahn (included in Exhibit 5).
(b) Ernst & Young LLP.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form or prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective Registration
Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
will not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 15 or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initialbona
fide offering thereof.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE> SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Miami, State of Florida, on this 8th day of August,
1997.
ATLANTIC GULF COMMUNITIES CORPORATION
By:/s/Thomas W. Jeffrey, Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Thomas W.
Jeffrey his or her true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution for him or her and in his or her name,
place and stead, in any and all capacities, to sign any or all Amendments
(including post-effective Amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing appropriate or necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on
the dates indicated:
Signatures Title Date
Chairman of the Board, August 8, 1997
/s/J. Larry Rutherford President and Chief
Executive Officer,
Director
Executive Vice August 8, 1997
/s/Thomas W. Jeffrey President and Chief
Financial Officer
<PAGE>
Vice President and August 8, 1997
/s/Callis N. Carleton Controller (Principal
Accounting Officer)
Lee Niebart Director _______________, 1997
Ricardo Koenigsberger Director _______________, 1997
/s/Gerald N. Agranoff Director August 8, 1997
James M. DeFrancia Director _______________, 1997
/s/Charles K. MacDonald Director August 8, 1997
/s/W. Edward Scheetz Director August 8, 1997
<PAGE> EXHIBIT INDEX
4 (a) Amended and Restated Certificate of Incorporation of the Registrant,
incorporated by reference to Exhibit 4(a) to the Registrant's Registration
Statement on Form S-3 filed on July 23, 1997 (File No. 333-31939).
(b) Restated Bylaws of the Registrant (incorporated herein by reference to
Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992).
(c) Statements of Preferences and Rights establishing Series A Preferred
Stock and Series B Preferred Stock (included in Exhibit 4(a)).
5 Opinion of Arent Fox Kintner Plotkin & Kahn concerning legality of
securities being registered.
10(a) Investment Agreement (Exhibit EX-1 to the Company's Current Report on
Form 8-K filed February 18, 1997), as amended and restated as of May 15, 1997
(Exhibit EX-1 to the Company's Current Report on Form 8-K filed June 5, 1997).
(b) Secured Agreement (Exhibit EX-6 to the Company's Current Report on Form
8-K filed February 18, 1997), as amended and restated as of May 15, 1997.
23 Consents of experts and counsel:
(a) Arent Fox Kintner Plotkin & Kahn (included in Exhibit 5).
(b) Ernst & Young LLP.
<PAGE>[ARENT FOX LETTERHEAD] EXHIBIT 5
August 8, 1997
The Board of Directors
Atlantic Gulf Communities Corporation
2601 S. Bayshore Drive
Miami, FL 33133-5461
Gentlemen:
We have acted as counsel to Atlantic Gulf Communities Corporation (the
"Company") with respect to the Company's Registration Statement on Form S-3,
filed by the Company with the Securities and Exchange Commission in connection
with the registration under the Securities Act of 1933, as amended, of
1,000,000 shares of Series B 20% Cumulative Redeemable Convertible Preferred
Stock, par value $.01 per share (the "Preferred Shares") and 5,515,329 shares
of Common Stock (the "Common Shares").
As counsel to the Company, we have examined the Company's Amended and
Restated Certificate of Incorporation and such records, certificates and other
documents of the Company, as well as relevant statutes, regulations, published
rulings and such questions of law, as we considered necessary or appropriate
for the purpose of this opinion.
We assume that, prior to the sale of any Preferred Shares and Common
Shares to which the Registration Statement relates, appropriate action will be
taken to register and qualify such Shares for sale, to the extent necessary,
under any applicable state securities laws.
Based on the foregoing, we are of the opinion that the 1,000,000
Preferred Shares and the 5,515,329 Common Shares will be, upon issuance,
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm in the Registration
Statement. In giving this consent, we do not hereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the General Rules and Regulations
thereunder.
Very truly yours,
ARENT FOX KINTNER PLOTKIN & KAHN
By: /s/Jeffrey Jordan
<PAGE> EXHIBIT 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Atlantic Gulf
Communities Corporation for the registration of 1,000,000 shares of 20%
Series B Cumulative Redeemable Preferred Stock, 1,776,199 shares of the
Company's common stock and 3,739,130 shares of the Company's common stock
issuable upon the conversion of Series B Cumulative Redeemable Preferred
Stock and exercise of Series B Warrants, and to the incorporation by
reference therein of our report dated February 27, 1997, with respect to
the consolidated financial statements and schedule of Atlantic Gulf
Communities Corporation included in its Annual Report (Form 10-K) for the
year ended December 31, 1996, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Miami Florida
August 6, 1997
