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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: February 7, 1997
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Atlantic Gulf Communities Corporation
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-8967 59-0720444
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Indentification No.)
2601 South Bayshore Drive, Miami, Florida 33133-5461
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 305-859-4000
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ITEM 5. OTHER EVENTS.
Atlantic Gulf Communities Corporation, (the "Company") has entered
into an Investment Agreement dated as of February 7, 1997 (the "Investment
Agreement"), and the Company and certain of its subsidiaries (the "Mortgagor
Subsidiaries") have entered into a Secured Note Agreement dated as of February
7, 1997 (the "Secured Note Agreement") (collectively, the Investment Agreement
and the Secured Note Agreement are referred to herein as the "Agreements"),
with AP-AGC, LLC ("Apollo"). Apollo, a Delaware limited liability company, is
an affiliate of Apollo Real Estate Investment Fund, L.P., a private real estate
investment fund, the general partner of which is Apollo Real Estate Advisors,
L.P., a New York-based investment fund.
Prior to entering into the Agreements, the Company's board of
directors (the "Board") received an opinion of its financial advisor, Tallwood
Associates, Inc., that the transactions contemplated by the Agreements are
fair, from a financial point of view, to the Company's stockholders (the
"Stockholders").
BECAUSE THE DISCUSSION BELOW IS ONLY A SUMMARY OF SELECTED MATERIAL
AND OTHER TERMS AND CONDITIONS OF THE AGREEMENTS, WHICH ARE INCLUDED HEREWITH
AS EXHIBITS (AS LISTED UNDER ITEM 7 BELOW), SUCH DISCUSSION IS QUALIFIED IN ITS
ENTIRETY BY THIS REFERENCE TO THE EXHIBITS HERETO AND BY SUCH REFERENCE, SUCH
EXHIBITS ARE INCORPORATED HEREIN. (CAPITALIZED TERMS WHICH ARE USED BUT NOT
DEFINED HEREIN SHALL HAVE THE MEANING ASCRIBED TO THEM IN THE AGREEMENTS.)
FURTHERMORE, THERE IS NO ASSURANCE THAT THE TRANSACTIONS SUMMARIZED BELOW WILL
BE CONSUMMATED OR CONSUMMATED AS DESCRIBED BELOW.
The Agreements provide, among other things, that on and subject to
certain terms and conditions Apollo will make a loan to the Company in a
principal amount up to $10,000,000 (the "Loan"). The Company is not obligated
to borrow any portion of the $10,000,000. If the Company wishes to borrow, the
Company will give Apollo a request for such loan, including the amount of funds
it wishes to borrow and a description of the Company's proposed use of such
funds. Apollo will notify the Company within 10 business days of such request
whether or not Apollo, in its discretion, approves such use of funds. If
Apollo approves the Company's proposed use of such funds, the funding will
occur on the 20th business day following the notice from Apollo, subject to all
the conditions to the Funding having been complied with or waived.
At the consummation of the loan (the "Funding"), Apollo will deliver
to the Company the amount of the loan to be made (the "Loan Amount") and the
Company and the Mortgagor Subsidiaries will execute and deliver to Apollo a
secured convertible promissory note (the "Note") in the principal amount equal
to the Loan Amount. The interest rate under the Note will be 20% per annum,
payable monthly. The interest rate will increase to 23% per annum if either
(a) the Stockholders do not approve the proposed amendment to the Company's
certificate of incorporation required to effect the transactions to be
consummated at the Series A Preferred Stock closing described below (the
"Closing") or (b) the Company is in default.
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If no default has occurred and the conditions to the Closing have been
met, the Note will be converted into Series A Preferred Stock to be issued, as
described below, upon consummation of the Closing. If no default has occurred
and the conditions to the Closing have not been met, the Note will mature on
December 31, 1998, subject to Apollo's right to require a mandatory redemption
of up to 50% of the outstanding principal on December 31, 1997. The Note will
be secured by a junior lien on substantially all of the Company's assets.
The Loan is not subject to or conditioned on the Stockholders'
approval.
Subject to the prior satisfaction of certain conditions, including the
approval of the Stockholders, at the Closing, Apollo will purchase from the
Company, and the Company will issue and sell to Apollo, 25,000 shares of Series
A Preferred Stock and certain warrants to purchase 5,000,000 shares of the
Company's common stock (the "Common Stock"), for a purchase price of
$25,000,000 payable as described below. If the Funding has not occurred,
Apollo will deliver to the Company $25,000,000. If the Funding has occurred,
Apollo will present the Note for conversion into Series A Preferred Stock and
will deliver to the Company an amount equal to $25,000,000 reduced by the
outstanding principal amount of the Note. Accrued unpaid interest will be
paid by the Company at the Closing.
The Series A Preferred Stock will rank senior to the Common Stock with
respect to dividends and distributions. Holders of the Series A Preferred
Stock will be entitled to cash dividends on a quarterly basis at an annual rate
equal to 20% of the Liquidation Preference, which is $1,000 per share plus any
accrued and unpaid dividends. If an event of default occurs, dividends will
accumulate at an annual rate of 25%. The Series A Preferred Stock will be
redeemable by the Company in whole or in part after three years from the
issuance date at a redemption price in cash equal to the Liquidation
Preference. Holders of the Series A Preferred Stock will have certain "put
rights," which will entitle them to require the Company to repurchase the
Series A Preferred Stock in certain amounts and at certain times: up to
one-third of the shares after the end of the fourth year following the issuance
date and before the end of the fifth year, up to two-thirds in the aggregate
after the end of the fifth year and before the end of the sixth year following
the issuance date, and up to the entire amount after the sixth year following
the issuance date at a repurchase price in cash equal to the Liquidation
Preference. Certain events of default, including a change of control (as
defined) of the Company, would accelerate the put rights. The put rights will
be secured by a junior lien on substantially all of the Company's assets.
Holders of Series A Preferred Stock will have certain voting rights
and consent rights. Holders of the Series A Preferred Stock will be entitled
to elect three directors to the Board out of a seven-member Board, but will
have no other rights to vote on matters submitted to a vote of the Company's
common stockholders except as may be required by applicable law. The Series A
Preferred Stock will be convertible into Common Stock at a Conversion Price of
$5.75 per share, subject to certain anti-dilution and other adjustments.
Holders of the Series A Preferred Stock will have certain demand and piggy-back
registration rights with respect to the Series A Preferred Stock and the Common
Stock issuable upon conversion of the Series A Preferred Stock.
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The Investment Agreement provides that at the Closing, the Company
will issue to Apollo warrants to purchase up to an aggregate of 5,000,000
shares of Common Stock as follows (the "Warrants"): 1,666,667 Class A Warrants,
1,666,667 Class B Warrants and 1,666,666 Class C Warrants. The Warrants will
have an exercise price of $5.75, subject to certain anti-dilution and other
adjustments. The Warrants will expire on the seventh anniversary of their
issuance date. Apollo and its transferees will have certain demand and
piggy-back registration rights with respect to the Common Stock issuable upon
the exercise of the Warrants.
After Closing, the Company, in a rights offering, intends to make
available for sale to its existing Stockholders, on a pro rata basis, Series B
Preferred Stock in the aggregate amount of $10,000,000. The Series B Preferred
Stock would be substantially the same as the Series A Preferred Stock, as to
economic terms and would be pari passu with the Series A Preferred Stock as to
dividends and other rights of payment. However, the put rights of the holders
of the Series B Preferred Stock would not be secured by any lien on the
Company's assets, and the holders of the Series B Preferred Stock (a) would not
be issued warrants to purchase Common Stock, (b) would not be entitled to vote
Series B Preferred Stock as a separate class in respect to the election of
directors of the Company, and (c) would not have any "consent" rights in
respect of Major Transactions (as defined below).
The Investment Agreement provides that, until the Closing the Board
will consist of ten directors, one of whom will be designated by Apollo (the
"Original Apollo Designee"). The Original Apollo Designee will be in the class
of directors whose term of office expires at the annual meeting in 1999. In
accordance with the foregoing, the Board on February 10, 1997, adopted a
resolution pursuant to the Company's By-Laws which increased the size of the
Board to ten members. Apollo designated W. Edward Scheetz as the Original
Apollo Designee, and the Board then appointed him as a Class 1 director, whose
term will continue until the annual meeting of Stockholders to be held in 1999
and until his successor is elected and qualified. If, however, no Funding has
occurred and the Investment Agreement is terminated in accordance with its
terms, Apollo will cause the Original Apollo Designee to promptly resign from
the Board. Apollo will be entitled to have at least one designee on the Board
so long as any amounts are owed under the Note.
At the annual Stockholders meeting expected to be held in May 1997,
the Stockholders will vote upon the election to the Board of the three Board
members whose terms expire in 1997. However, in accordance with the Investment
Agreement, as of and after the Closing, the Board will be reduced to seven
directors. Three of the seven directors will be designated by Apollo, one will
be the Company's president and chief executive officer and three will be
independent directors selected by the incumbent Board with Apollo's approval.
The Apollo three designees will be the Original Apollo Designee and two
additional designees.
Without Apollo's consent, the Company will not have the right to
engage in or enter into any agreement with respect to certain significant
actions and transactions ("Major Transaction"), including, but not limited to,
amendment of the Company's certificate of incorporation or by-
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laws, recapitalization or reclassification of the Common Stock, a merger or
consolidation, a sale of a significant amount of assets, a special dividend or
distribution, a significant new financing or refinancing, an issuance of
securities, a transaction which would result in a change of control, and
certain other transactions.
Under the Investment Agreement, Apollo, subject to certain conditions
and limitations, will have the opportunity to participate in new joint venture
community development projects that the Company proposes to enter into, until
Apollo has invested $60,000,000 or more in such projects. Except with respect
to certain preexisting projects, Apollo will have a right of first offer to
participate in such projects while it owns at least 5,000 shares of Series A
Preferred Stock.
The Investment Agreement contains certain exclusivity provisions that
preclude the Company from soliciting or initiating an alternative transaction
prior to the Closing. In addition, the Company has agreed that the Board will
not withdraw or modify its approval or recommendation of the Investment
Agreement or the transactions contemplated thereby, or approve or recommend or
enter into any agreement with respect to an alternative proposal. If, however,
the Board receives an unsolicited alternative proposal that, in the exercise of
its fiduciary obligations, it determines to be a superior proposal, the Board
may withdraw or modify its approval or recommendation of the Investment
Agreement and the transactions contemplated thereby, approve or recommend such
superior proposal and terminate the Investment Agreement.
In January 1997, the Company paid to Apollo a $1,000,000 commitment
fee, which will be refunded to the Company at the Closing. If, however, the
Investment Agreement is terminated or the Closing does not occur by May 22,
1997, the commitment fee will be forfeited and the Company will pay certain
out-of-pocket expenses of Apollo and its affiliates (the "transaction
expenses"). If the Closing does not occur by May 22, 1997 as a result of a
breach of the Investment Agreement or the Secured Note Agreement by the
Company, the Company is required to pay to Apollo a $1,000,000 break-up fee
plus Apollo's transaction expenses, in addition to forfeiting the commitment
fee. If the conditions for the payment of the break-up fee are fulfilled and
either the Company willfully breaches the Investment Agreement or the Company
enters into or consummates an Alternative Transaction (as defined) by certain
dates, the Company is required to pay to Apollo a $1,000,000 alternative
transaction fee, in addition to the payment of the break-up fee and Apollo's
transaction expenses and forfeiting the commitment fee.
If the Board withdraws its approval of the Investment Agreement,
approves or recommends a superior proposal, enters into an agreement with
respect to a superior proposal or terminates the Investment Agreement, the
Company is required to pay to Apollo a $2,000,000 termination fee and Apollo's
transaction expenses in addition to forfeiting the commitment fee. In that
case, the Company will not be required to pay the break-up fee and the
alternative transaction fee. The maximum amount of fees that Apollo will be
entitled to receive as a result of the termination of the Investment Agreement
will be $3,000,000 plus Apollo's transaction expenses.
The Company has agreed to reimburse Apollo for all of its transaction
expenses.
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The Closing is subject to a number of conditions including, but not
limited to, Stockholder approval of the proposed Amended and Restated
Certificate of Incorporation which will (a) authorize the issuance of the
Series A Preferred Stock, (b) authorize the issuance of the Series B Preferred
Stock, and (c) increase the amount of authorized Common Stock sufficient to
permit the conversion of Series A Preferred Stock and Series B Preferred Stock
and the exercise of the Warrants. In addition, the proposed amendment will
modify the dividend rights of the holders of Common Stock in certain respects.
Additional conditions precedent to the Closing include (a) the consent of the
Company's senior secured lender, Foothill Capital Corporation, to the
Agreements and the transactions contemplated thereby, all on terms and
conditions reasonably satisfactory to the Company and Apollo, and (b) the
absence of any material adverse effect occurring in respect of the Company's
business, operations, property, condition (financial or otherwise), or
prospects.
The Agreements can be terminated at any time prior to the Closing (a)
by mutual consent of the Company and Apollo; (b) by the Company or Apollo if
the Closing shall not have occurred on or before May 22, 1997; provided,
however, that such right to terminate shall not be available to any party whose
breach of the Investment Agreement has been the cause of the failure of the
Closing to occur on or before such date; (c) by Apollo if the Company's proxy
statement regarding the Agreements and the transactions contemplated thereby
has not been mailed to the Stockholders by May 1, 1997; (d) by the Company or
Apollo if any judgment, injunction, order, or decree enjoining Apollo or the
Company from consummating this Agreement is entered and such judgment,
injunction, order, or decree shall become final and nonappealable; provided,
however, that the party seeking to terminate the Investment Agreement shall
have used all reasonable efforts to remove such judgment, injunction, order, or
decree; (e) by Apollo or the Company if the other party is in material breach
of the Investment Agreement; (f) by the Company in connection with an
Alternative Transaction (as defined), provided that prior to or concurrently
with such termination Apollo shall have received the termination fee; or (g) by
either the Company or Apollo at any time from March 30, 1997 until April 5,
1997 if and until any necessary consent from Foothill Capital Corporation has
not been obtained on terms reasonable satisfactory to Apollo and the Company.
If the Investment Agreement is terminated by the Company as
contemplated by clause (g) in the preceding paragraph, and either (a) the
Company willfully breached or breaches the Investment Agreement or the Secured
Note Agreement or (b) the Company enters into an agreement for, or consummates,
an Alternative Transaction prior to the 180th day after the date of termination
of the Investment Agreement, the Company shall pay an additional $2,000,000
Alternative Transaction fee to Apollo, in addition to the forfeiture of the
commitment fee, plus Apollo's transaction expenses.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS.
DESCRIPTION
EX-1 Execution Copy - Investment Agreement between Atlantic Gulf
Communities Corporation and AP-AGC, LLC, dated as of February
7, 1997.
EX-2 Exhibit A to Investment Agreement - Form of Amended and
Restated Certificate of Incorporation of Atlantic Gulf
Communities Corporation.
EX-3 Annex A to Amended and Restated Certificate of Incorporation
of Atlantic Gulf Communities Corporation, Statement of
Preferences and Rights of 20% Cumulative Redeemable Convertible
Preferred Stock, Series A.
EX-4 Annex B to Amended and Restated Certificate of Incorporation
of Atlantic Gulf Communities Corporation, Statement of
Preferences and Rights of 20% Cumulative Redeemable Convertible
Preferred Stock, Series B.
EX-5 Exhibit C - Warrant for the Purchase of Common Stock of
Atlantic Gulf Communities Corporation.
EX-6 Execution Copy - Atlantic Gulf Communities Corporation and the
Subsidiaries Set Forth on the Signature Pages Hereof, Secured
Note Agreement, dated as of February 7, 1997.
EX-7 Form of Secured Convertible Promissory Note.
Exhibit 1 omits the Disclosure Schedules which are referred to therein
and the Schedules referred to in Exhibit C to the Investment Agreement, being
the Secured Notes Agreement. The Company agrees to furnish a copy of such
Disclosure Schedules and Schedules supplementally upon request from the
Commission's staff.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
ATLANTIC GULF COMMUNITIES CORPORATION
a Delaware corporation
Date: February 13, 1997 By: /s/ John H. Fischer
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John H. Fischer, Vice President and
Treasurer
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Exhibit 1
INVESTMENT AGREEMENT
Between
ATLANTIC GULF COMMUNITIES CORPORATION
and
AP-AGC, LLC
Dated as of February 7, 1997
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1. DEFINITIONS: CERTAIN REFERENCES . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Other Defined Terms . . . . . . . . . . . . . . . . . . . 6
SECTION 1.3 Terms Defined in Note Agreement . . . . . . . . . . . . . 7
SECTION 1.4 Terms Generally . . . . . . . . . . . . . . . . . . . . . 8
2. FUNDING AND CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.1 The Funding . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.2 Transactions at the Closing . . . . . . . . . . . . . . . 9
SECTION 2.3 Funding Time and Place . . . . . . . . . . . . . . . . . . 10
SECTION 2.4 Closing Time and Place . . . . . . . . . . . . . . . . . . 10
3. CONDITIONS TO THE FUNDING AND THE CLOSING . . . . . . . . . . . . . . . . 10
SECTION 3.1 Conditions Precedent to the
Obligations of the Investor
at the Funding . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.2 Conditions Precedent to the
Obligations of the Investor
at the Closing . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.3 Conditions Precedent to
Obligations of the Company
at the Closing . . . . . . . . . . . . . . . . . . . . . 13
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . 15
SECTION 4.1 Due Authorization; No Conflicts;
Validity . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.2 Capitalization of the Company . . . . . . . . . . . . . . 16
SECTION 4.3 SEC Documents . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 4.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.5 Approvals . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.6 Licenses, Etc. . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.7 Contracts . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.8 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.9 Employee Benefits . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.10 Securities Law Matters . . . . . . . . . . . . . . . . . . 20
SECTION 4.11 State Takeover Statutes . . . . . . . . . . . . . . . . . 20
SECTION 4.12 1996 Financial Statements . . . . . . . . . . . . . . . . 20
</TABLE>
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<TABLE>
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5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR . . . . . . . . . . . . . . 21
SECTION 5.1 Due Authorization; No Conflicts;
Validity . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.2 Approvals . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.3 Acquisition for Own Account . . . . . . . . . . . . . . . 22
SECTION 5.4 Finder's Fees . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.5 Financing . . . . . . . . . . . . . . . . . . . . . . . . 23
6. COVENANTS OF THE PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.1 Transfer Restrictions; Legends . . . . . . . . . . . . . . 23
SECTION 6.2 Stockholders Meeting . . . . . . . . . . . . . . . . . . . 24
SECTION 6.3 Pre-Closing Activities . . . . . . . . . . . . . . . . . . 25
SECTION 6.4 No Inconsistent Agreements . . . . . . . . . . . . . . . . 27
SECTION 6.5 Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.6 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.7 Affirmative Covenants . . . . . . . . . . . . . . . . . . 30
SECTION 6.8 Publicity . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.9 Reservation of Shares . . . . . . . . . . . . . . . . . . 34
SECTION 6.10 The Board . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.11 Indemnification of Board . . . . . . . . . . . . . . . . . 34
SECTION 6.12 Co-Investment Opportunity . . . . . . . . . . . . . . . . 35
SECTION 6.13 Approved Business Plan . . . . . . . . . . . . . . . . . . 36
7. SURVIVAL AND INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.1 Survival Periods . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.2 Indemnification by the Company . . . . . . . . . . . . . . 36
SECTION 7.3 Indemnification by the Investor . . . . . . . . . . . . . 37
SECTION 7.4 Notification . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.5 Registration Statements . . . . . . . . . . . . . . . . . 39
8. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.1 Demand Registrations . . . . . . . . . . . . . . . . . . . 39
SECTION 8.2 Piggyback Registrations . . . . . . . . . . . . . . . . . 40
SECTION 8.3 Indemnification by the Company . . . . . . . . . . . . . . 40
SECTION 8.4 Indemnification by the Investor . . . . . . . . . . . . . 41
SECTION 8.5 Notification . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.6 Other Indemnification . . . . . . . . . . . . . . . . . . 42
SECTION 8.7 Contribution . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.8 Registration Covenants of the
Company . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 8.10 Transfer of Registration Rights . . . . . . . . . . . . . 46
SECTION 8.11 Other Registration Rights . . . . . . . . . . . . . . . . 46
SECTION 8.12 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.13 Limitation on Requirement to File
or Amend Registration Statement . . . . . . . . . . . . . 47
</TABLE>
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<TABLE>
<S> <C> <C>
9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . 48
SECTION 9.3 Fees Due Upon Termination . . . . . . . . . . . . . . . . 49
10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 10.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 10.3 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . 51
SECTION 10.4 Severability . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 10.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.7 Maximum Interest Rate . . . . . . . . . . . . . . . . . . 52
SECTION 10.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 10.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.10 Third-Party Beneficiaries . . . . . . . . . . . . . . . . 53
SECTION 10.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 10.12 Submission to Jurisdiction;
Waiver of Jury Trial . . . . . . . . . . . . . . . . . . 53
SCHEDULE I Disclosure Schedule
EXHIBIT A Form of Amended and Restated Certificate of
Incorporation
EXHIBIT B Form of Class A, Class B and Class C Warrants
EXHIBIT C Form of Secured Note Agreement
</TABLE>
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INVESTMENT AGREEMENT dated as of February 7, 1997, by and
between Atlantic Gulf Communities Corporation, a corporation organized and
existing under the laws of the State of Delaware (the "Company"), and AP-AGC,
LLC, a limited liability company organized and existing under the laws of the
State of Delaware (the "Investor").
WHEREAS, the Company and the Investor desire to enter into
this Agreement pursuant to which, among other things, (a) at the Funding (all
capitalized terms used in these Recitals, as defined below), the Investor will
lend to the Company, and the Company will borrow from the Investor, the Loan
Amount, and (b) at the Closing, the Company will issue to the Investor, and
the Investor will acquire from the Company, the Preferred Shares and the
Warrants, all on the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, concurrently with the execution of this Agreement,
the Company and the Investor are entering into the Note Agreement;
WHEREAS, the Board of Directors of the Company has received
the opinion of Tallwood Associates, Inc., its financial advisor that the
transactions contemplated by this Agreement and the other Transaction Documents
are fair, from a financial point of view, to the stockholders of the Company;
WHEREAS, the Board of Directors of the Company (the "Board")
has determined that it is in the best interests of the Company to enter into
this Agreement and the other Transaction Documents, and the managing member of
the Investor has approved this Agreement and the other Transaction Documents;
and
NOW, THEREFORE, for and in consideration of the mutual
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS: CERTAIN REFERENCES
SECTION 1.1 Definitions. The terms defined in this
Article I, whenever used in this Agreement, shall have the following meanings
for all purposes of this Agreement:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, as the same may be amended from
time to time.
<PAGE> 6
"Agreement" means this Investment Agreement, including all
Exhibits and Schedules.
"Amended and Restated Certificate of Incorporation" means
the Amended and Restated Certificate of Incorporation of the Company in the
form of Exhibit A, to be filed with the Delaware Secretary of State, including
therein the Series A Preferred Stock Certificate of Designation and the Series
B Preferred Stock Certificate of Designation.
"Approval" means each authorization, approval, consent,
license, filing and registration by, with or from any Government Authority,
self-regulatory organization or stock exchange, necessary to authorize or
permit the execution, delivery or performance of this Agreement or any other
Transaction Document or for the validity or enforceability hereof or thereof.
"Approved Business Plan" means a Business Plan of the
Company that has been approved by the Investor.
"Bank Warrants" means the 1,500,000 warrants for the
purchase of Common Stock issued on September 30, 1996 pursuant to the
Prepayment Agreement dated as of September 30, 1996 among the financial
institutions listed on the signature pages thereof, The Chase Manhattan Bank
and the Company.
"Business Combination" means a complete liquidation or
dissolution of the Company or a merger or consolidation of the Company, or a
sale of all or substantially all of the Company's assets.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company as filed with the Delaware Secretary of State, as
amended through the date hereof.
"Change of Control" means: (i) an acquisition by any
Person or group (as defined for purposes of Section 13(d) under the Exchange
Act) (excluding the Company or an employee benefit plan of the Company or a
corporation controlled by the Company's stockholders) of 25% or more of the
Common Stock or other voting securities of the Company; (ii) a change in a
majority of the Incumbent Board (excluding any individuals approved by a vote
of at least a majority of the Incumbent Board other than in connection with an
actual or threatened proxy contest); (iii) failure of the requisite number of
Investor Designees to be members of the Board (other than as a result of the
Investor's failure to nominate a successor to an Investor Designee who has
resigned or been removed as a director); or
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<PAGE> 7
(iv) consummation of a Business Combination (other than a Business Combination
in which all or substantially all of the stockholders of the Company receive or
own upon consummation thereof 50% or more of the stock of the Company resulting
from the Business Combination, at least a majority of the board of directors of
the resulting corporation are members of the Incumbent Board, and after which
no Person owns 25% or more of the stock of the resulting corporation who did
not own such stock immediately before the Business Combination), excluding, in
each case, the transactions contemplated by this Agreement.
"Class A Warrants" means the 1,666,667 Warrants for the
Purchase of Common Stock of the Company to be issued by the Company pursuant to
this Agreement, in the form of Exhibit B.
"Class B Warrants" means the 1,666,667 Warrants for the
Purchase of Common Stock of the Company to be issued by the Company pursuant to
this Agreement, in the form of Exhibit B.
"Class C Warrants" means the 1,666,666 Warrants for the
Purchase of Common Stock of the Company to be issued by the Company pursuant to
this Agreement, in the form of Exhibit B.
"Conversion Shares" means the shares of Common Stock
issuable or issued upon conversion of the Preferred Shares.
"Default Change in Control" means a Change in Control (a)
of the type referred to in clauses (ii) or (iii) of the definition thereof or
(b) of the type referred to in clauses (i) and (ii) of the definition thereof,
provided that the percentage thresholds referred to in such clauses (i) and
(iv) shall be 40% instead of 25%.
"Disclosure Schedule" means the Disclosure Schedule of the
Company attached hereto as Schedule I, as it may be amended or supplemented
from time to time by the Company with the written consent of the Investor.
"Effective Date" means the date on which the Amended and
Restated Certificate of Incorporation is filed with the Delaware Secretary of
State and becomes effective.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder, as the same
may be amended from time to time.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules thereunder.
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<PAGE> 8
"Incumbent Board" means, prior to the Closing, the Board as
constituted on the day after execution and delivery of this Agreement and,
following the Closing, the Board as constituted immediately following the
Closing.
"Instrument" means any contract, agreement, indenture,
mortgage, security, document or writing under which any obligation is
evidenced, assumed or undertaken, or any Lien is granted or perfected.
"Letter Agreement" means that certain letter agreement,
dated November 19, 1996, between the Company and the Investor as amended by
that certain letter agreement dated January 14, 1997, between the Company and
the Investor.
"Loan Documents" means the Note Agreement and each
instrument or document required to be executed and delivered by the Company or
any Subsidiary pursuant thereto.
"Major Transaction" means any material transaction which is
not described in an Approved Business Plan, including any (i) recapitalization,
redemption or reclassification of, or distribution or dividend on, the
Company's capital stock (except in the case of the Series A Preferred Stock and
Series B Preferred Stock in accordance with their respective terms), (ii)
amendment of its certificate of incorporation or by-laws, (iii) liquidation,
winding-up or dissolution of the Company or any Significant Subsidiary (as
defined in SEC Regulation S-X) of the Company, (iv) consolidation of the
Company with, or merger of the Company with or into, any other Person, except a
merger of a wholly owned Subsidiary of the Company into the Company, with the
Company surviving such merger, (v) sale, transfer, lease or encumbrance of a
significant amount of assets of the Company other than in respect of sales of
Predecessor Assets (as referred to in the Company's annual report on Form 10-K
for the year ended December 31, 1995 and as set forth in Section 1.1 of the
Disclosure Schedule), (vi) special dividend or distribution with respect to, or
repurchase, redemption or other acquisition of, equity securities of the
Company or any rights, warrants or options in respect of such equity
securities, (vii) capital expenditure or investment by the Company in excess of
$500,000, (viii) entering into or materially amending (including by waiver) any
material contract, (ix) significant new financing or refinancing, (x) issuance
of securities (other than employee and director stock options to acquire up to
2,000,000 shares of Common Stock and the issuance of the Common Stock
thereunder), (xi) transactions which would result in a Change of Control, or
(xii) material transaction the nature of which prevents specificity in the
Approved Business Plan.
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<PAGE> 9
"Material Adverse Effect" means a material adverse effect
on (i) the business, operations, property, condition (financial or otherwise)
or prospects of the Company and its Subsidiaries taken as a whole, (ii) the
ability of the Company to perform its obligations under this Agreement or any
of the other Transaction Documents, or (iii) the validity or enforceability of
this Agreement or any of the other Transaction Documents or the material rights
or remedies of the Investor thereunder (in any capacity).
"Maximum Loan Amount" means $10,000,000.
"Note Agreement" means the Secured Note Agreement dated the
date hereof by and between the Company and the Investor in the form of Exhibit
C.
"Payment Default" means a Default referred to in any of
subsection (a), (e), (g) or (h) of Section 8.1 of the Note Agreement, whether
or not any requirement for the giving of notice, the lapse of time, or both, or
any other condition thereto, has been satisfied.
"Preferred Shares" means the 25,000 shares of Series A
Preferred Stock to be issued to the Investor pursuant to this Agreement at the
Closing.
"Promissory Note" means a Secured Convertible Promissory
Note of the Company issuable under the Note Agreement in the form attached as
an exhibit to the Note Agreement, in an aggregate principal amount not to
exceed the Maximum Loan Amount.
"SEC" means the United States Securities and Exchange
Commission.
"SEC Documents" means all documents filed by the Company
with the SEC since January 1, 1995.
"Series A Preferred Stock" means a new series of preferred
stock of the Company to be designated 20% Cumulative Redeemable Convertible
Preferred Stock, Series A, liquidation preference $1,000 per share, the terms
of which shall be as set forth in the Series A Preferred Stock Certificate of
Designations.
"Series A Preferred Stock Certificate of Designation" means
the Statement of Designations setting forth the terms of the Series A Preferred
Stock included within the Amended and Restated Certificate of Incorporation.
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<PAGE> 10
"Series B Preferred Stock" means a new series of preferred
stock of the Company to be designated 20% Cumulative Redeemable Convertible
Preferred Stock, Series B, liquidation preference $10 per share, the terms of
which, if issued, shall be as set forth in the Series B Preferred Stock
Certificate of Designations.
"Series B Preferred Stock Certificate of Designation" means
a Statement of Designations setting forth the terms of the Series B Preferred
Stock included within the Amended and Restated Certificate of Incorporation.
"Specified Investor Amount" means 5,000 shares of Series A
Preferred Stock.
"Transaction Documents" means this Agreement, the Warrants,
the Amended and Restated Certificate of Incorporation, the Loan Documents and
each exhibit, schedule, certificate and document to be executed or delivered
pursuant hereto or thereto.
"Transaction Expenses" means the out-of-pocket expenses of
the Investor and its Affiliates, including the reasonable fees and expenses of
lawyers, accountants, appraisers, consultants and other advisors relating to
the discussion, evaluation, negotiation and documentation of the Transaction
Documents and the Funding and Closing.
"Warrants" means the 5,000,000 in aggregate Class A
Warrants, Class B Warrants and Class C Warrants to be issued by the Company to
the Investor at the Closing.
"Warrant Shares" means the 5,000,000 shares of Common Stock
issuable upon exercise of the Warrants.
SECTION 1.2 Other Defined Terms. Each of the following
terms is defined in the Section of this Agreement set forth opposite such term
below:
<TABLE>
<CAPTION>
Defined Term Section
- ------------ -------
<S> <C>
Additional Investor Designee . . . . . . . . . . . . . . . . 3.2(h)
Alternative Proposal . . . . . . . . . . . . . . . . . . . . 6.6(b)
Alternative Transaction . . . . . . . . . . . . . . . . . . . 6.6(a)
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 4.9
Board . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Change of Position . . . . . . . . . . . . . . . . . . . . . 6.6(c)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . 2.4
Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . 2.2(c)
</TABLE>
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<PAGE> 11
<TABLE>
<S> <C>
Common Stock . . . . . . . . . . . . . . . . . . . . . . . 4.2
Company . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Demand Registration . . . . . . . . . . . . . . . . . . . . 8.1
Eligible Transferee . . . . . . . . . . . . . . . . . . . . 8.10
Funding . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Funding Date . . . . . . . . . . . . . . . . . . . . . . . 2.3
indemnified party . . . . . . . . . . . . . . . . . . . . . 7.2
Investor . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Investor Designees . . . . . . . . . . . . . . . . . . . . 3.2(h)
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 7.2
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . 4.6
Loan Amount . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Multiemployer Plan . . . . . . . . . . . . . . . . . . . . 4.9
Multiple Employer Plan . . . . . . . . . . . . . . . . . . 4.9
NASD . . . . . . . . . . . . . . . . . . . . . . . . . 8.8(p)
Notice of Superior Proposal . . . . . . . . . . . . . . . . 6.6(c)
Options . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Original Investor Designee . . . . . . . . . . . . . . . . 3.1(d)
Piggyback Registration . . . . . . . . . . . . . . . . . . 8.2(a)
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . 6.2(b)
Purchase Price . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
Registrable Securities . . . . . . . . . . . . . . . . . . 8.1
Registration Statement . . . . . . . . . . . . . . . . . . 8.8(a)
Representatives . . . . . . . . . . . . . . . . . . . . . . 6.7(b)
Stockholders Approval . . . . . . . . . . . . . . . . . . . 4.1
Stockholders Meeting . . . . . . . . . . . . . . . . . . . 6.2(a)
Superior Proposal . . . . . . . . . . . . . . . . . . . . . 6.6(c)
Termination Fee . . . . . . . . . . . . . . . . . . . . . . 6.6(c)
</TABLE>
SECTION 1.3 Terms Defined in Note Agreement. As used in this
Agreement, each of the following terms (and any defined terms included within
the definitions of the following terms) shall have the meaning ascribed to it
in the Note Agreement.
<TABLE>
<S> <C>
Affiliate Foothill Loan Documents
Business Day GAAP
Business Plan Government Authority
Code Hazardous Materials
Contractual Obligation Indebtedness
Deeds of Trust Issuance Date
Default Joint Venture
Dollars or $ Lien
Due Diligence Fee Mortgages
Agreement Obligations
Environmental Laws Person
ERISA Plan
Event of Default Reorganization Plan
Excluded Subsidiaries Requirement of Law
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C>
Responsible Officer Subsidiary
Revolving Loans
Security Documents
</TABLE>
SECTION 1.4 Terms Generally. The definitions in Sections
1.1, 1.2 and 1.3 shall apply equally to both the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation." All references herein to Articles, Sections, Exhibits
and Schedules shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP. The
terms and conditions of this Agreement shall be deemed to apply to any
Subsidiary of the Company as though such entity were the Company, except where
such application would be manifestly inappropriate.
ARTICLE II
FUNDING AND CLOSING
SECTION 2.1 The Funding. If the Company wishes to borrow
under the Note Agreement up to the Maximum Loan Amount, the Company will give
the Investor a written request for such loan, including in such request the
amount of funds it wishes to borrow and a reasonably detailed description of
the Company's proposed use of such funds. The Investor shall notify the
Company in writing within 10 business days of such request whether or not the
Investor, in its absolute discretion, approves such use of funds. If the
Investor does not approve such use of funds, then the Investor shall have no
obligation to make such loan and the rights and obligations of the parties
under this Agreement shall be unaffected by such request of the Company. If
the Investor does approve such use of funds, then the consummation of such loan
(the "Funding") shall take place on the twentieth business day following such
notice from the Investor, subject to all of the conditions to the Funding
having been complied with or waived by the Investor. On the terms and subject
to the conditions contained herein and in the Note Agreement, at the Funding,
the Company shall issue and deliver to the Investor a Promissory Note with a
face amount equal to the amount of the loan being made (the "Loan Amount"),
duly executed by the Company, dated the date of the Funding and registered in
the name of the Investor, against delivery by the Investor of the Loan Amount
in immediately available funds by
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<PAGE> 13
wire transfer to a bank account designated by the Company to the Investor in
writing not less than two Business Days prior to the Funding Date.
SECTION 2.2 Transactions at the Closing. On the terms and
subject to the conditions contained herein, at the Closing:
(a) Acquisition of Preferred Shares. The Investor will
purchase from the Company, and the Company will issue and sell to the Investor,
the Preferred Shares and the Warrants, for a purchase price of $25,000,000 (the
"Purchase Price"), payable as described in the immediately following sentence.
The Company shall issue and deliver to the Investor one or more stock
certificates representing the Preferred Shares, each duly executed by the
Company and registered in the name of the Investor, and if the Funding shall
have occurred, shall pay to the Investor in cash the amount of accrued and
unpaid interest due on the Promissory Note, against delivery to the Company of
the Purchase Price payable (i) if the Funding shall not have occurred, in
immediately available funds by wire transfer (to a bank account designated by
the Company to the Investor in writing not less than two Business Days prior to
the Closing Date) or (ii) if the Funding shall have occurred, in the form of
(x) presentation of the Promissory Note for renewal and conversion, together
with (y) immediately available funds (by wire transfer as aforesaid) of an
amount equal to $25,000,000 reduced by the outstanding principal amount of the
Promissory Note. If the Funding has occurred, the Investor shall present the
original Promissory Note to the Company at the Closing for renewal and
conversion, and a legend shall be placed thereon stating that the Promissory
Note has been converted into Preferred Shares and stating the number of
Preferred Shares into which it has been converted, which legend shall be
acknowledged on the Promissory Note by the Company and the Investor. From and
after the Closing, the Promissory Note shall not evidence an indebtedness for
borrowed money of the Company, but shall evidence the repurchase obligations
and other monetary obligations of the Company and the co-makers of the
Promissory Note to the holders of the Preferred Shares as set forth in Section
8 of the Series A Preferred Stock Certificate of Designations. From and after
the Closing Date, the Promissory Note (legended as set forth above, if
applicable) shall be held by the Investor together with the stock
certificate(s) evidencing the Preferred Shares, and rights in the Promissory
Note shall be transferable pro-rata only to holders of the Preferred Shares.
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<PAGE> 14
(b) Issuance of Warrants. The Company will issue and deliver
to the Investor certificates representing the Warrants, each duly executed by
the Company, dated the Closing Date, and registered in the name of the
Investor.
(c) Refund of Commitment Fee. The Investor will deliver to
the Company $1,000,000, representing the return of the commitment fee (the
"Commitment Fee") paid by the Company to the Investor pursuant to the Letter
Agreement, payable in immediately available funds by wire transfer (to a bank
account designated by the Company to the Investor in writing not less than two
Business Days prior to the Closing Date).
(d) Allocation of Purchase Price. The Purchase Price shall
be allocated $24,900,000 to the Preferred Shares and $100,000 to the Warrants.
SECTION 2.3 Funding Time and Place. If applicable, the
closing of the loan of the Loan Amount and delivery of the Promissory Note
shall take place at 10 a.m., New York City time, on the date determined
pursuant to Section 2.1, at the offices of Wachtell, Lipton, Rosen & Katz, 51
West 52nd Street, New York, New York, or at such other time and place as the
parties may mutually determine in writing. The actual date on which the
Funding shall occur is referred to herein as the "Funding Date."
SECTION 2.4 Closing Time and Place. The closing of the
acquisition of the Preferred Shares and the issuance of the Warrants shall take
place at 10 a.m., New York City time, on the Effective Date, which shall be no
later than the second Business Day following the satisfaction or waiver of the
conditions to the Closing described in Sections 3.2 and 3.3, at the offices of
Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, or on
such other day or at such other time and place as the parties may mutually
determine in writing (the "Closing"). The actual date on which the Closing
shall occur is referred to herein as the "Closing Date."
ARTICLE III
CONDITIONS TO THE FUNDING AND THE CLOSING
SECTION 3.1 Conditions Precedent to the Obligations of the
Investor at the Funding. The obligations of the Investor to be discharged
under this Agreement at the Funding are subject to (a) the Closing not having
occurred, (b) this Agreement remaining in full force and effect and (c)
satisfaction at or prior to the Funding (unless expressly waived in writing by
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<PAGE> 15
the Investor at or prior to the Funding) of the conditions to the Funding set
forth in the Note Agreement.
SECTION 3.2 Conditions Precedent to the Obligations of the
Investor at the Closing. The obligations of the Investor to be discharged
under this Agreement at the Closing are subject to satisfaction of the
following conditions at or prior to the Closing (unless expressly waived in
writing by the Investor at or prior to the Closing):
(a) Compliance by the Company. Each of the terms, covenants
and conditions of this Agreement and the other Transaction Documents to be
complied with and performed by the Company at or prior to the Closing shall
have been complied with and performed by the Company, and the representations
and warranties made by the Company in this Agreement shall be true and correct
in all material respects at and as of the Closing with the same force and
effect as though such representations and warranties had been made at and as of
the Closing, except for representations and warranties that are expressly made
as of a specific time, which shall be true and correct as of such time.
(b) No Legal Action. No action, suit, investigation or other
proceeding relating to the transactions contemplated hereby shall have been
instituted or threatened before any court or by any Government Authority or
body that restrains or prohibits or seeks to restrain or prohibit the
transactions contemplated hereby or to obtain material damages or other
material relief in connection therewith.
(c) Regulatory Matters. There shall have been received, and
shall be in full force and effect, all requisite Approvals with respect to the
transactions to be consummated at the Closing. The transactions to be
consummated at the Closing on the terms and conditions herein provided shall
not violate any applicable law or governmental regulation, and shall not
subject the Investor to any tax, penalty or liability, or require the Investor
to register or qualify, under or pursuant to any applicable law or governmental
regulation. There shall not have occurred, and there shall not be pending or
threatened, any change in law, regulation or regulatory practice that has or
would reasonably be expected to have a Material Adverse Effect.
(d) Legal Opinion. The Company shall have furnished to the
Investor on the Closing Date the opinions of Arent Fox Kintner Plotkin & Kahn,
counsel to the Company, and Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A., special Florida counsel to the Company, dated the Closing Date,
in the form and substance reasonably acceptable to the Investor.
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<PAGE> 16
(e) Transaction Documents. Each of the Transaction Documents
required to be delivered at or before the Closing shall have been executed and
delivered and shall be in full force and effect.
(f) Closing Documents. The Company shall have delivered to
the Investor the following:
(i) a certificate of the chief executive officer and the
chief financial officer of the Company, dated the Closing Date, to the
effect that the conditions specified in Sections 3.2(a) and 3.2(j)
have been satisfied;
(ii) incumbency certificates, dated the Closing Date, for
the officers of the Company executing any of the Transaction Documents
and any certificates or documents delivered in connection with any
Transaction Documents at the Closing;
(iii) a certificate of the Secretary of State of the State
of Delaware, dated a recent date, certifying that the Company is in
good standing in such State, and that all reports, if any, have been
filed as required and that all fees in connection therewith and all
franchise taxes have been paid; and
(iv) such other certificates or documents as the Investor
or its counsel may reasonably request relating to the transactions
contemplated hereby.
(g) Stockholders Approval; Charter Amendment. The
Stockholders Approval shall have been obtained at the Stockholders Meeting and
the Amended and Restated Certificate of Incorporation shall have been filed
with the Delaware Secretary of State and shall be effective.
(h) Board Constitution. The Company shall have taken all
actions necessary to provide that the Board shall consist of seven members, and
the Company shall have caused the Original Investor Designee, the two
additional individual designated by the Investor (the "Additional Investor
Designees" and, together with the Original Investor Designee, including their
successors nominated by the Investor, the "Investor Designees"), one director
who is then an incumbent member of management of the Company and the
independent directors appointed pursuant to Section 6.10, to be appointed to
the Board, effective as of the Closing.
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<PAGE> 17
(i) Expenses. The Company shall have paid or reimbursed all
theretofore unreimbursed Transaction Expenses incurred by the Investor (or made
provision satisfactory to the Investor for payment or reimbursement of such
expenses in the case of expenses incurred but not yet billed to Investor).
(j) No Default; No Change of Control; No Material Adverse
Effect. No Default shall have occurred (and, if the Funding shall have
occurred, the Company shall have paid all interest accrued and unpaid on the
Promissory Note and all other amounts, other than principal, due and owing
under the Note Agreement), no Change of Control shall have occurred, and there
shall have been no event or events causing a Material Adverse Effect, nor any
developments that would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(k) Amendments to Security Documents. Any amendments to the
Security Documents that may be required to increase the dollar amount of
indebtedness secured thereby to not less than the maximum possible aggregate
Repurchase Price (as defined in the Series A Preferred Stock Certificate of
Designations), increase the amount of title insurance in respect of the
Mortgages and Deeds of Trust and "bring down" the endorsements thereon to the
Closing Date shall have been effected and shall be in form and substance
satisfactory to the Investor.
(l) Note Agreement Obligations. The Company shall have
performed all of the obligations to be performed by it on or before the
Issuance Date under Sections 3.1, 3.2 and 5.1 of the Note Agreement, other than
pursuant to clauses (s), (y) and (z) of Section 5.1 thereof.
SECTION 3.3 Conditions Precedent to Obligations of the
Company at the Closing. The obligations of the Company to be discharged under
this Agreement at the Closing are subject to satisfaction of the following
conditions at or prior to the Closing (unless expressly waived in writing by
the Company at or prior to the Closing):
(a) Compliance by the Investor. Each of the terms, covenants
and conditions of this Agreement to be complied with and performed by the
Investor at or prior to the Closing shall have been complied with and performed
by the Investor, and the representations and warranties made by the Investor in
this Agreement shall be true and correct in all material respects at and as of
the Closing with the same force and effect as though such representations and
warranties had been made at and as of the Closing, except for representations
and warranties that are
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<PAGE> 18
expressly made as of a specific time, which shall be true and correct as of
such time.
(b) No Legal Action. No action, suit, investigation or other
proceeding relating to the transactions contemplated hereby shall have been
instituted or threatened before any court or by any Government Authority or
body that restrains or prohibits or seeks to restrain or prohibit the
transactions contemplated hereby or to obtain material damages or other
material relief in connection therewith.
(c) Regulatory Matters. There shall have been received, and
shall be in full force and effect, all requisite Approvals with respect to the
transactions to be consummated at the Closing. The transactions to be
consummated at the Closing on the terms and conditions herein provided shall
not violate any applicable law or governmental regulation.
(d) Investment Agreement. This Agreement shall be in full
force and effect.
(e) Closing Documents. The Investor shall have delivered to
the Company:
(i) a certificate of the managing member of the Investor,
dated the Closing Date and signed by an officer or other authorized
representative of the managing member, certifying attached copies of
the Limited Liability Company Agreement of the Investor, and the
resolutions adopted by the managing member of the Investor authorizing
the execution and delivery by the Investor of this Agreement and the
other Transaction Documents and the consummation by the Investor of
the transactions contemplated hereby and thereby; and
(ii) a certificate of the managing member of the Investor
signed by an officer or other authorized representative of the
managing member to the effect that the conditions specified in Section
3.3(a) have been satisfied.
(f) Stockholders Approval; Charter Amendment. The
Stockholders Approval shall have been obtained at the Stockholders Meeting and
the Amended and Restated Certificate of Incorporation shall have been filed
with the Delaware Secretary of State and shall be effective.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor
that each of the representations and warranties of the Company set forth in the
Note Agreement, which (together with the definitions of any defined terms used
therein) are incorporated by reference into this Agreement as though expressly
set forth herein (provided, however, that each reference in such representations
and warranties (x) to the "Effective Date" shall be deemed to refer herein to
the date that any such representation or warranty is made hereunder, (y) to
"Lender" shall be deemed to refer herein to the Investor and (z) to "this
Agreement" shall be deemed to refer herein to this Agreement), is true and
correct, and further that:
SECTION 4.1 Due Authorization; No Conflicts; Validity. The
Company has full power and authority to enter into and, subject to obtaining
the Stockholders Approval, perform its obligations under this Agreement and
each other Transaction Document executed or to be executed by it. The approval
of the Amended and Restated Certificate of Incorporation by a majority of the
votes entitled to be cast by all holders of Common Stock (the "Stockholders
Approval") is the only vote of the holders of any class or series of the
capital stock of the Company or any of its Subsidiaries required to approve
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby. The execution and delivery by the Company of
this Agreement, each other Transaction Document and each other certificate or
document executed or to be executed by it in connection with the transactions
contemplated hereby and thereby, and the performance by the Company of its
obligations hereunder and thereunder (including the issuance of the Promissory
Note, the Preferred Shares, the Warrants, the Warrant Shares and the Conversion
Shares) have been duly authorized by all necessary corporate proceedings on the
part of the Company (and no other corporate proceedings or actions on the part
of the Company or its Board or stockholders, are necessary therefor, other than
the Stockholders Approval), do not and will not conflict with, result in any
violation of, or constitute any default under, any Requirement of Law or
Contractual Obligation applicable to the Company or any Subsidiary, and will
not result in or require the creation or imposition of any Lien on any of the
properties of the Company or any Subsidiary of the Company pursuant to any
Instrument, other than pursuant to any Transaction Document, except as set
forth in Section 4.1 of the Disclosure Schedule. This Agreement has been duly
executed and
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<PAGE> 20
delivered by the Company and constitutes, and each other Transaction Document
executed by the Company will, on the due execution and delivery thereof,
constitute, the valid and binding obligations of the Company enforceable in
accordance with their respective terms.
SECTION 4.2 Capitalization of the Company. (a) On the date
of this Agreement, the authorized capital stock of the Company consists of
15,665,000 shares of common stock, par value $0.10 per share ("Common Stock"),
of which (i) 9,721,720 shares are issued and outstanding, (ii) 86,227 shares
are held in the Treasury of the Company, (iii) 1,241,000 shares are reserved
for issuance upon the exercise of outstanding options to acquire Common Stock
("Options") (and no more than 822,000 Options have been authorized, issued or
granted), (iv) 1,500,000 shares are reserved for issuance pursuant to the Bank
Warrants (and 1,500,000 Bank Warrants are outstanding), and (v) 13,543 shares
are reserved for distribution in connection with disputed claims pursuant to
the Reorganization Plan. All of the outstanding shares of Common Stock are,
and all of the shares of Common Stock reserved for issuance will be, when
issued, duly authorized, validly issued, fully paid and nonassessable.
(b) After giving effect to the Amended and Restated
Certificate of Incorporation, the authorized capital stock of the Company will
at the Closing (assuming no stock option or warrant exercises) consist of: (i)
50,000,000 shares of Common Stock, of which (A) 9,721,720 shares will be
outstanding (excluding shares granted automatically to directors in lieu of
fees), (B) 15,200,000 shares will be reserved for issuance upon conversion of
the Preferred Shares, (C) 1,500,000 shares will be reserved for issuance
pursuant to the Bank Warrants, (D) 5,000,000 shares will be reserved for
issuance upon exercise of the Warrants, (E) 86,227 shares will be held in the
Treasury of the Company, (F) 822,000 (excluding stock options granted
automatically to directors) shares will be reserved for issuance upon the
exercise of outstanding Options, and (G) 13,543 shares will be reserved for
distribution in connection with disputed claims pursuant to the Reorganization
Plan; and (ii) 1,025,000 shares of preferred stock, par value $.01 per share,
of which (A) 25,000 will be designated Series A Preferred Stock, all of which
shares will be issued to the Investor at the Closing and (B) 1,000,000 will be
designated Series B Preferred Stock, none of which shares will be issued or
outstanding. No other capital stock of the Company is, or at the Closing will
be, authorized and no other capital stock is, or at the Closing will be,
issued. At the Closing, all of the Preferred Shares will be duly authorized,
and, when issued in accordance with this Agreement, will be validly issued,
fully paid and nonassessable
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and entitled to the benefits of, and have the terms and conditions set forth
in, the Amended and Restated Certificate of Incorporation.
(c) The Preferred Shares, the Conversion Shares, the Warrants
and the Warrant Shares are duly authorized by the Board and, when issued in
accordance with the Certificate of Amendment, will be validly issued, and, in
the case of the Preferred Shares, Conversion Shares and Warrant Shares, fully
paid and nonassessable.
(d) Except as set forth above or in Item 4.2 of the
Disclosure Schedule and except as contemplated by this Agreement, there are not
authorized, issued, outstanding or reserved for issuance any (i) securities or
obligations of the Company convertible into or exchangeable for any capital
stock of the Company, (ii) warrants, rights or options to subscribe for or
purchase from the Company, or stock appreciation rights in respect of, any
capital stock or any such convertible or exchangeable securities or obligations
or (iii) obligations of the Company to issue such shares, any such convertible
or exchangeable securities or obligations, or any such warrants, rights or
options. No Person has preemptive or similar rights with respect to the
securities of the Company. There are no obligations of the Company or any of
its Subsidiaries to vote or to repurchase, redeem or otherwise acquire, or to
register under the Act, any shares of capital stock of the Company or any of
its Subsidiaries.
SECTION 4.3 SEC Documents. (a) The Company has filed all
documents required to be filed with the SEC under the Act and the Exchange Act
since January 1, 1995 and has delivered to the Investor true and complete
copies of all of the SEC Documents. As of its filing date, each SEC Document
(including all exhibits and schedules thereto and documents incorporated by
reference therein) (i) complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and (ii) did not and
does not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(b) The Company has (i) delivered to the Investor true and
complete copies of all correspondence between the SEC and the Company or its
legal counsel, accountants or other advisors since January 1, 1995 and (ii)
disclosed to the Investor in writing the content of all material discussions
between the SEC and the Company or its legal counsel, accountants or other
advisors concerning the adequacy or form of any SEC Document
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<PAGE> 22
filed with the SEC since January 1, 1995. The Company is not aware of any
issues raised by the SEC with respect to any of the SEC Documents, other than
those disclosed to the Investor pursuant to this Section 4.3(b).
SECTION 4.4 Subsidiaries. Except as set forth in Item 4.4
of the Disclosure Schedule, (a) the list of Subsidiaries of the Company filed by
the Company with its most recent Form 10-K is a true and accurate list of all of
the Subsidiaries of the Company and (b) all of the outstanding capital stock of
each Subsidiary and all of the outstanding ownership interests of each Joint
Venture have been duly authorized and validly issued, is fully paid and
nonassessable and is owned by the Company, directly or through other
Subsidiaries, free and clear of any Lien, restrictions upon voting or transfer,
claim or encumbrance of any kind, there are no rights granted to or in favor of
any third party, other than the Company or any Subsidiary of the Company, to
acquire any such capital stock, any additional capital stock or any other
securities of any such Subsidiary, and there exists no restriction on the
payment of cash dividends by any Subsidiary.
SECTION 4.5 Approvals. Except as set forth in Item 4.5 of
the Disclosure Schedule, no Approval is required to be obtained by the Company
or any Subsidiary of the Company for the consummation of the transactions
contemplated by this Agreement or by any of the Transaction Documents, except
for the expiration of the waiting period under the HSR Act, the Stockholders
Approval and except such as may be required under the Act and state securities
laws in connection with the performance by the Company of its obligations under
Article VIII.
SECTION 4.6 Licences, Etc. The Company and its Subsidiaries
hold, own and possess all such governmental, regulatory and other filings,
licenses, approvals, registrations, consents, franchises and concessions
(collectively, "Licenses") as are necessary for the ownership of the property
and conduct of the businesses of the Company and its Subsidiaries, as now
conducted and are in compliance in all material respects with their respective
obligations under such Licenses.
SECTION 4.7 Contracts. All of the material contracts of the
Company or any of its Subsidiaries that are required to be described in the SEC
Documents or to be filed as exhibits thereto are described in the SEC Documents
or filed as exhibits thereto and are in full force and effect. True and
complete copies of all such material contracts have been delivered by the
Company to the Investor. Neither the Company nor any of its Subsidiaries nor,
to the best knowledge of the Company, any other party is in breach of or in
default under any
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<PAGE> 23
such contract. Except as disclosed in Item 4.7 of the Disclosure Schedule, as
of the date hereof, the Company is not a party to, nor are any assets,
properties or operations of the Company bound by, any (i) employment or
severance agreement or any consulting agreement obligating the Company to make
payments in excess of $100,000 which cannot be terminated by the Company upon
30 days notice without further obligation thereunder, (ii) lease of real
property, or lease of personal property with an annual base rental obligation
of more than $100,000 or a total remaining rental obligation of more than
$1,000,000, (iii) agreement which is over one year in length of obligation and
not terminable without penalty or damages within one year, and involves an
unsatisfied obligation of the Company of more than $5,000,000, (iv) agreement
containing covenants limiting the ability of the Company or any of its
Affiliates to compete in any line of business with any Person or in any area or
territory, (v) commitment for or relating to any lending or borrowing or the
guaranty thereof, (vi) agreement relating to any acquisition or disposition of
securities or assets containing any indemnification obligations of the Company
or any of its Subsidiaries, (vii) agreement with any Affiliate of the Company
out of the ordinary course of the Company's business (other than employment,
compensation or benefit arrangements), or (viii) other material contract,
agreement or arrangement, entered into other than in the ordinary course of
business.
SECTION 4.8 Finder's Fees. Except for Bankers Trust
Securities Corporation and Tallwood Associates, Inc., whose fees and expenses
will be paid by the Company, no broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of the Company.
SECTION 4.9 Employee Benefits. Except for the plans set
forth in Item 4.9(a) of the Disclosure Schedule (the "Benefit Plans"), there
are no employee benefit plans or arrangements of any type (including, without
limitation, plans described in Section 3(3) of ERISA), under which the Company
or any of its Subsidiaries has or in the future could have directly, or
indirectly through a Commonly Controlled Entity (within the meaning of Sections
414(b), (c), (m) and (o) of the Code), any liability with respect to any
current or former employee of the Company, any of its Subsidiaries, or any
Commonly Controlled Entity. Except for the Benefit Plan set forth in Item
4.9(b) of the Disclosure Statement, no Benefit Plan is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code or any corresponding
provision of applicable law. No Benefit Plan is a "multiemployer plan" within
the
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<PAGE> 24
meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that
has two or more contributing sponsors at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA (a "Multiple Employer
Plan"), nor has the Company or any ERISA Affiliate of the Company, at any time
since September 2, 1974, contributed to or been obligated to contribute to any
Multiemployer Plan or Multiple Employer Plan. With respect to each Benefit
Plan the Company has delivered to the Investor complete and accurate copies of
(i) all plan texts and agreements, (ii) all material employee communications
(including summary plan descriptions), (iii) the most recent annual report,
(iv) the most recent annual and periodic accounting of plan assets, (v) the
most recent determination letter received from the Internal Revenue Service and
(vi) the most recent actuarial valuation. Except as may be set forth in Item
4.9(c) of the Disclosure Schedule, with respect to each Benefit Plan: (A) no
event has occurred and there exists no circumstance under which the Company or
any of its Subsidiaries could directly, or indirectly through a Commonly
Controlled Entity, incur any material liability under ERISA, the Code or
otherwise (other than routine claims for benefits and other liabilities arising
in the ordinary course pursuant to the normal operation of such Benefit Plan);
(B) all contributions and premiums due and owing have been made or paid on a
timely basis; and (C) all contributions made under any Benefit Plan have met
the requirements for deductibility under the Code, and all contributions that
have not been made have been properly recorded on the books of the Company or a
Commonly Controlled Entity thereof in accordance with GAAP. The Company has no
liability for life, health, medical or other welfare benefits to former
employees or beneficiaries or dependents thereof, except for health
continuation coverage as required by Section 4980B of the Code or Part 6 of
Title I of ERISA and at no expense to the Company.
SECTION 4.10 Securities Law Matters. Neither the Company nor
any Person acting on its behalf has, in connection with the sale of the
Preferred Shares and the issuance of the Warrants, engaged in (i) any form of
general solicitation or general advertising (as those terms are used within the
meaning of Rule 502(c) under the Act), (ii) any action involving a public
offering within the meaning of Section 4(2) of the Act, or (iii) any action
that would require the registration under the Act of the offering and sale of
the Preferred Shares or the issuance of the Warrants pursuant to this
Agreement, or that would violate applicable state securities or "blue sky"
laws. In reliance on the representation of the Investor set forth in Section
5.3, the offer, issuance, sale and delivery of the Preferred Shares, the
Conversion Shares, the Warrants, and the Warrant Shares, in each case as
provided in this Agreement, are
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<PAGE> 25
or will be exempt from registration under the Act and any applicable state
securities or "blue sky" laws. The Company has not made and will not make,
directly or indirectly, any offer or sale of Preferred Shares or Warrants or of
securities of the same or a similar class as the Preferred Shares or Warrants
if as a result the offer and sale of the Preferred Shares and issuance of the
Warrants contemplated hereby could fail to be entitled to exemption from the
registration requirements of the Act. As used herein, the terms "offer" and
"sale" have the meanings specified in Section 2(3) of the Act.
SECTION 4.11 State Takeover Statutes. The Board has duly and
validly approved this Agreement and the other Transaction Documents and the
transactions contemplated hereby and thereby, and such approval is sufficient
to render the provisions of Section 203 of the Delaware General Corporation Law
inapplicable to this Agreement and the other Transaction Documents and the
transactions contemplated hereby or thereby, and to any future "business
combination" (as defined in Section 203) between the Investor and the Company
or their respective Affiliates. To the Company's knowledge, no other state
takeover statute or similar statute or regulation (including Florida Statutes
Sections 607.901 through 607.903) applies or purports to apply to this
Agreement.
SECTION 4.12 1996 Financial Statements. The consolidated
balance sheets of the Company and its consolidated Subsidiaries as at December
31, 1996 and the related consolidated statements of income and of cash flows
for the fiscal year ending on such date, reported on by Ernst & Young, a copy
of which will be furnished to the Investor as soon as such documents are
available, will fairly and accurately present the consolidated financial
condition of Company and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows for
the fiscal year then ended. Such financial statements, including the related
schedules and notes thereto, will have been prepared in accordance with GAAP
applied consistently throughout the periods involved and consistently with the
financial statements of the Company and its consolidated Subsidiaries as at and
for the year ended December 31, 1995 (except for such inconsistencies as
approved by such accountants and as disclosed therein). Neither the Company nor
any of its consolidated Subsidiaries will have, at the date of the balance sheet
referred to above, any material guarantee obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including any interest rate or foreign currency swap or exchange
transaction, which is not reflected in the foregoing statements or in the notes
thereto.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to the Company
that:
SECTION 5.1 Due Authorization; No Conflicts; Validity. The
Investor has full power and authority to enter into and perform its obligations
under this Agreement and each other Transaction Document executed or to be
executed by it. The execution and delivery by the Investor of this Agreement,
each other Transaction Document and each other certificate or document executed
or to be executed by it in connection with the transactions contemplated hereby
and thereby, and the performance by the Investor of its obligations hereunder
and thereunder have been duly authorized by all necessary proceedings on the
part of the Investor, and do not and will not conflict with, result in any
violation of, or constitute any default under, any Requirement of Law or
Contractual Obligation applicable to the Investor. This Agreement constitutes,
and each other Transaction Document executed by the Investor will, on the due
execution and delivery thereof, constitute, the valid and binding obligations
of the Investor enforceable in accordance with their respective terms.
SECTION 5.2 Approvals. No Approval is required to be
obtained by the Investor for the consummation of the transactions contemplated
by this Agreement or by any of the Transaction Documents, except for the
expiration of the waiting period under the HSR Act and except such as may be
required under the Act and state securities or "blue sky" laws under Article
VIII.
SECTION 5.3 Acquisition for Own Account. The Preferred
Shares and the Warrants are being acquired by the Investor for its own account
and with no intention of distributing or reselling the Preferred Shares, the
Warrants, the Warrant Shares or the Conversion Shares, or any part thereof in
any transaction that would be in violation of the Act or the securities or
"blue sky" laws of any state, without prejudice, however, to the rights of the
Investor at all times to sell or otherwise dispose of all or any part of the
Preferred Shares, the Warrants, the Warrant Shares or the Conversion Shares
under an effective registration statement under the Act or under an exemption
from such registration available under the Act, or to pledge all or any part of
the Preferred Shares, the Warrants, the Warrant Shares or the Conversion Shares
to secure any obligation of the Investor. The Investor is capable of
evaluating the merits and risks of an investment in the Preferred Shares,
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the Warrants and the Warrant Shares, and can bear the economic risk of such
investment.
SECTION 5.4 Finder's Fees. No broker, investment banker,
financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Investor.
SECTION 5.5 Financing. The Investor has, or will have at
the time of the Funding and the Closing, the funds necessary to fulfill its
obligations under this Agreement.
ARTICLE VI
COVENANTS OF THE PARTIES
SECTION 6.1 Transfer Restrictions; Legends. (a) Subject to
the requirements of the Act and the Exchange Act, the Preferred Shares, the
Warrants, the Warrant Shares, the Conversion Shares and the Promissory Note
shall be freely transferable; provided, however, that, unless either a Payment
Default, an Event of Default or a Default Change of Control shall have occurred
or the Stockholders Approval shall not have been received at the Stockholders
Meeting, the Investor shall not assign or otherwise transfer any of such
securities or the Promissory Note or any beneficial interest in any of such
securities or the Promissory Note until the second anniversary of the date of
this Agreement; provided that the Investor may pledge any of such securities or
the Promissory Note as security for bona fide indebtedness owed to a Person
which is not an Affiliate of the Investor.
(b) So long as the Preferred Shares, the Conversion Shares,
the Warrant Shares and the Warrants are restricted securities under the Act and
unless they shall have been previously issued pursuant to an effective
registration statement under the Act, the certificates representing such
restricted Preferred Shares, Warrant Shares, Conversion Shares and Warrants
shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY
SECURITIES ISSUABLE UPON CONVERSION OR EXERCISE HEREOF MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN APPLICABLE
EXEMPTION FROM REGISTRATION THEREUNDER. PRIOR TO ____, 1999, SUCH
SECURITIES MAY ALSO BE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS SET
FORTH IN
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AN INVESTMENT AGREEMENT RATED AS OF FEBRUARY 5, 1997 BETWEEN THE
ISSUER AND AP-AGC, LLC, A COPY OF THE APPLICABLE PROVISIONS OF WHICH
IS AVAILABLE UPON REQUEST TO THE ISSUER.
(c) After termination of the requirement that a legend be
placed upon a certificate representing Preferred Shares, Warrant Shares,
Warrants or Conversion Shares, the Company shall, upon receipt by the Company
of evidence reasonably satisfactory to it that such requirement has terminated
and upon the written request of any holder of Preferred Shares, Warrant Shares,
Warrants or Conversion Shares, issue certificates for such Preferred Shares,
Warrant Shares, Warrants or Conversion Shares, as the case may be, that do not
bear such legend.
SECTION 6.2 Stockholders Meeting. (a) The Company shall
take all action necessary, in accordance with applicable law and its
Certificate of Incorporation and By-laws, to convene to a special or annual
meeting of its stockholders (the "Stockholders Meeting") as promptly as
reasonably practicable after the date of this Agreement for the purpose of,
among other things, considering and taking action upon a resolution to adopt
the Amended and Restated Certificate of Incorporation. The Board will
recommend that holders of Common Stock vote in favor of the adoption of the
Amended and Restated Certificate of Incorporation at the Stockholders Meeting.
(b) The Company will, as soon as practicable following the
date of this Agreement, prepare and file a proxy statement (the "Proxy
Statement") with the SEC relating to the Stockholders Meeting (including any
information required to satisfy the requirements of Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder). The Company will use its
reasonable good faith efforts to respond to any comments of the SEC or its
staff and to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments
to the satisfaction of the SEC or its staff. The Company will provide the
Investor with a copy of the preliminary Proxy Statement and all modifications
thereto prior to filing or delivery to the SEC and will consult with the
Investor in connection therewith. The Company will notify the Investor promptly
of the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Proxy Statement or
for additional information and will supply the Investor with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Stockholders Meeting. The Investor will cooperate and furnish
promptly all information required for inclusion in the Proxy
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Statement. If at any time prior to the Stockholders Meeting there shall occur
any event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company will promptly prepare and mail to its stockholders such
an amendment or supplement. The information provided by either party for use
in the Proxy Statement shall be true and correct in all material respects
without omission of any material fact which is required to make such information
not false or misleading. No representation, covenant or agreement is made by
either party with respect to information supplied by the other party for
inclusion in the Proxy Statement.
SECTION 6.3 Pre-Closing Activities. From and after the date
of this Agreement until the Closing, each of the Company and the Investor shall
act with good faith towards the other, and shall use all reasonable efforts to
consummate the transactions contemplated by this Agreement, and neither the
Company nor the Investor will take any action that would prohibit or impair its
ability to consummate the transactions contemplated by this Agreement. From
the date hereof until the Closing, the Company shall conduct the business of it
and its Subsidiaries in the ordinary course consistent with past practice and
shall use all reasonable efforts to preserve intact its business organizations
and relationships with third parties, and, except as otherwise provided herein,
to keep available the services of the present directors, officers and key
employees. Without limiting the generality of the foregoing, from the date
hereof until the Closing, except as contemplated by this Agreement, without the
Investor's prior written consent the Company shall not, and shall ensure that
each of its Subsidiaries does not:
(a) adopt or propose (or agree to commit to) any change in
its certificate of incorporation or By-Laws, except as contemplated
hereby or as required to effect the transactions hereunder;
(b) take any action that would make any representation or
warranty of the Company hereunder required to be true at and as of the
Closing as a condition to the Investor's obligations to consummate the
transactions contemplated hereby inaccurate at the Closing;
(c) issue, sell, pledge or encumber any capital stock or
other securities, except (i) pursuant to Options or Bank Warrants
outstanding on the date hereof, (ii) pursuant to options granted
automatically under the Company's 1994 Non-Employee Directors Stock
Option Plan or 1996 Non-Employee Directors Stock Plan, and Common
Stock issued to directors in lieu of cash fees, or (iii) for the
issuance
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of up to $10,000,000 aggregate liquidation preference of Series B
Preferred Stock to stockholders of the Company who subscribe for such
shares pursuant to a rights offering by the Company, the terms of
which shall be reasonably acceptable to the Investor; provided that
the net proceeds of the issuance and sale of such Series B Preferred
Stock shall be used for working capital purposes (which does not
include repurchasing securities of the Company) or for investment
projects of the Company in accordance with the provisions of this
Agreement;
(d) make any material change in its accounting methods,
principles or practices except as may be required by law or applicable
accounting standards;
(e) except as described in the Approved Business Plan for
1997, (i) grant to any employee any material increase in salary or
other remuneration or any increase in severance or termination pay not
consistent with past practice; (ii) grant or approve any general
increase in salaries of all or any class of, or a substantial portion
of, its employees not consistent with past practice; (iii) pay or
award any material bonus, incentive, compensation, service award or
other like benefit for or to the credit of any employee except in
accordance with written policy or consistent with past practice; (iv)
enter into any material employment contract or severance arrangement
with any employee or adopt or amend in any material respect any of its
employee benefit plans; or (v) change in any material respect the
compensation (whether in respect of terms or method) of its agents;
(f) (i) except as permitted by the Note Agreement, enter
into or assume any loan or other Instrument pursuant to which the
Company or such Subsidiary incurs Indebtedness for borrowed money
(other than any such Instrument among the Company and its wholly owned
Subsidiaries or among the Company's wholly owned Subsidiaries) or (ii)
request or agree to any material amendment or supplement to or waiver,
termination or modification of any material existing Instrument (other
than Instruments relating to Indebtedness);
(g) declare, pay, set aside or make any dividend or
distribution (payable in cash, stock, property or obligations) on, or
combine, subdivide or reclassify, any shares of any class of its
capital stock or of its Subsidiaries (now or hereafter outstanding),
or apply any of its funds, property or assets to the purchase,
redemption, sinking fund or other retirement of any shares of any
class of its
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capital stock or of its Subsidiaries (now or hereafter outstanding);
provided, however, that this provision shall not apply in respect of
the liquidation or dissolution of one or more Excluded Subsidiaries;
or
(h) agree, commit or resolve to do any of the foregoing.
SECTION 6.4 No Inconsistent Agreements. Neither the Company
nor any of its Subsidiaries shall enter into any Instrument, or enter into any
amendment or other modification to any currently existing Instrument, that by
its terms restricts or prohibits the ability of the Company to issue Conversion
Shares upon the conversion of the Preferred Shares or Warrant Shares upon the
exercise of the Warrants, or pursuant to which the Company's ability to make
any distributions with respect to, or to redeem or repurchase any of, the
Preferred Shares or Warrant Shares will be subject to any restriction that is
more restrictive than the provisions of the Amended and Restated Certificate of
Incorporation, or restricting the Company's ability to perform any of its
obligations under this Agreement or any of the Transaction Documents, including
its obligations relating to registration rights.
SECTION 6.5 Hart-Scott-Rodino. To the extent applicable,
each of the Company and the Investor shall make all filings and furnish all
information required with respect to the transactions contemplated by this
Agreement by the HSR Act and shall use reasonable efforts to obtain the early
termination of the waiting period thereunder.
SECTION 6.6 Exclusivity. (a) The Company hereby agrees
that it will not, nor will it permit any of its Subsidiaries to, nor will it
authorize or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative of it or any of its
Subsidiaries to, solicit or initiate, or encourage the submission of, any
proposal or transaction for a financing of the Company (other than draws under
the Foothill Facility or project financing in the ordinary course of business
consistent with past practice) or for the acquisition by a Person other than the
Investor or an Affiliate of the Investor of stock or a substantial part of the
assets of the Company through a merger or other business combination, stock or
assets acquisition or otherwise (in any such case, an "Alternative Transaction")
(or to furnish to any Person any nonpublic information concerning the business,
properties or assets of the Company (other than in connection with the sale by
the Company of properties designated for sale in an Approved Business Plan, as
required by the Foothill Loan Documents or in connection with project financing
(debt or equity)
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in the ordinary course of business consistent with past practice), or to
otherwise facilitate any inquiries or the making of any proposal) prior to the
Closing. In addition, the Company hereby agrees that it will, and will cause
its Subsidiaries, officers, directors, employees, investment bankers, attorneys
and other advisors or representatives to, terminate any other discussions or
negotiations with any third party regarding any Alternative Transaction, and
that the Company will not, nor will it permit any of its Subsidiaries to, nor
will it authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of the Company,
or any of its Subsidiaries to have any additional discussions or negotiations
with any third party regarding such an Alternative Transaction prior to the
Closing.
(b) Notwithstanding the provisions of Section 6.6(a), prior
to the Closing, to the extent required by the fiduciary obligations of the
Board, as determined in good faith by the Board after receipt of the written
advice of its outside counsel and financial advisor, the Company may (i) in
response to an unsolicited request therefor, furnish information with respect
to the Company to the requestor pursuant to a customary confidentiality
agreement and discuss such information and the terms of this Section 6.6 (but
not the terms of any possible Alternative Proposal) with such Person and (ii)
upon receipt by the Company of an unsolicited Alternative Proposal, following
delivery to the Investor of the notice required pursuant to the last two
sentences of this Section 6.6(b), participate in negotiations regarding such
Alternative Proposal. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the preceding sentence by any
director or executive officer of the Company or any of its Subsidiaries or any
investment banker, financial advisor, attorney or other advisor to or
representative of the Company or any of its Subsidiaries, whether or not such
person is purporting to act on behalf of the Company or any of its Subsidiaries
or otherwise, shall be deemed to be a breach of Section 6.6 by the Company. For
purposes of this Agreement, "Alternative Proposal" means any proposal (whether
or not in writing and whether or not delivered to the Company's stockholders
generally) for a Business Combination involving the Company or any proposal or
offer to conduct in any manner, directly or indirectly, an Alternative
Transaction. The Company shall promptly advise the Investor orally and in
writing of any request for information or of any Alternative Proposal, or any
inquiry with respect to or which could lead to any Alternative Proposal, the
material terms and conditions of such request, Alternative Proposal or inquiry,
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and the identity of the Person making any such Alternative Proposal or inquiry.
The Company shall keep the Investor reasonably informed of the status of any
such request, Alternative Proposal or inquiry.
(c) Prior to the Closing, neither the Board nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to the Investor, the approval or recommendation by the Board of
this Agreement or the transactions contemplated hereby, (ii) approve or
recommend, or propose to approve or recommend, any Alternative Proposal or
(iii) enter into any agreement with respect to any Alternative Proposal.
Notwithstanding the foregoing, if the Board receives an unsolicited Alternative
Proposal that, in the exercise of its fiduciary obligations (as determined in
good faith by the Board after receipt of the written advice of its outside
counsel and financial advisor), it determines to be a Superior Proposal, the
Board may (subject to the provisions of this Section 6.6) withdraw or modify
its approval or recommendation of this Agreement and the transactions
contemplated hereby, approve or recommend any such Superior Proposal, enter
into an agreement with respect to such Superior Proposal and terminate this
Agreement (any such action, a "Change of Position"), in each case at any time
after the second Business Day following the Investor's receipt of written
notice (a "Notice of Superior Proposal") advising the Investor that the Board
has received a Superior Proposal, specifying the material terms and conditions
of such Superior Proposal and identifying the person making such Superior
Proposal. In addition, if the Company proposes to approve or engage in any
Change of Position with respect to any Alternative Proposal, it shall prior to
or concurrently with approving or adopting such Change of Position pay to the
Investor $2,000,000 in immediately available funds (the "Termination Fee"). In
addition, the Commitment Fee shall be forfeited by the Company and the Company
shall pay to the Investor within two Business Days of request therefor, subject
to provision of documentation, an amount in cash equal to the Investor's
Transaction Expenses. For purposes of this Agreement, a "Superior Proposal"
means any bona fide Alternative Proposal which the Board determines in its good
faith reasonable judgment (after receipt of the written advice of its financial
advisor and outside counsel) to be more favorable from a financial point of
view to the Company's stockholders than the transactions contemplated by this
Agreement. Nothing contained herein shall prohibit the Company from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a) under
the Exchange Act prior to the third business day following the Investor's
receipt of a Notice of Superior Proposal provided that the Company does not at
that time withdraw
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or modify its position with respect to the Merger or approve or recommend an
Alternative Proposal.
SECTION 6.7 Affirmative Covenants. The Company hereby
agrees that from the date hereof and so long as the Promissory Note remains
outstanding and unpaid or the Investor holds at least the Specified Investor
Amount of Series A Preferred Stock:
(a) Financial Statements. The Company shall furnish to the
Investor:
(i) as soon as available, but in any event not later than
90 days after the end of each fiscal year of the Company, a copy of
the consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the and of such year and the related consolidated
statements of income and retained earnings and of cash flows for such
year, setting forth in each case in comparative form the figures for
the previous year, reported on by Ernst & Young or other independent
certified public accountants of nationally recognized standing
acceptable to the Investor;
(ii) as soon as available, but in any event not later than
90 days after the end of each fiscal year of the Company, a copy of
the consolidating balance sheet of the Company and its consolidated
Subsidiaries as at the end of such year and the related consolidating
statements of income and retained earnings and of cash flows for such
year, setting forth in each case in comparative form the figures for
the previous year, certified by a Responsible Officer as being fairly
stated in all material respects;
(iii) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of
each fiscal year of the Company, the unaudited consolidated and
consolidating balance sheet of the Company and its consolidated
Subsidiaries as at the end of such quarter and the related unaudited
consolidated and consolidating statements of income and retained
earnings and of cash flows of the Company and its consolidated
Subsidiaries for such quarter and the portion of the fiscal year
through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
when considered in relation to the consolidated and consolidating
financial statements of the Company and its consolidated Subsidiaries
(subject to normal year-end audit adjustments); all such financial
statements specified in (i), (ii) and (iii)
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above to be complete and correct in all material respects and to be
prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the
case may be, and disclosed therein);
(iv) as soon as available, but in any event not later than
45 days after the end of each quarterly period of the Company, a
report showing all sales by the Company of real property, including a
description of the property sold and the price received, certified by
a Responsible Officer as being fairly stated in all material respects;
(v) a copy of each report, certificate or other document
or information delivered to the lenders or agent under the Foothill
Loan Documents, concurrently with the delivery thereof to such lenders
or agent, including all annexes or attachments thereto; and
(vi) such other information as the Investor may reasonably
request from time to time.
(b) Access. The Company shall (and shall cause each of
its Subsidiaries to), upon reasonable notice, afford the officers, employees,
counsel, accountants, financing sources and other authorized representatives of
the Investor or any of its Affiliates ("Representatives") reasonable access
during normal business hours to its properties, books, contracts, commitments
and records (including environmental records) and personnel and advisors (who
will be instructed by the Company to cooperate) and the Company shall (and
shall cause each of its Subsidiaries to) furnish promptly to the Investor all
information concerning its business, properties and personnel as the Investor
or its Representatives may reasonably request; provided that any review will be
conducted in a way that will not interfere unreasonably with the conduct of the
Company's business, and provided, further, that no review pursuant to this
Section 6.7(b) shall affect or be deemed to modify any representation or
warranty made by the Company. The Investor will keep all information and
documents obtained pursuant to this Section 6.7(b) on a confidential basis in
accordance with Paragraph F of the Letter Agreement.
(c) Notices. The Company shall promptly give notice to
the Investor of:
(i) the occurrence of any Default or Event of Default;
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(ii) any (A) default or event of default under any
Contractual Obligation of the Company or, to the knowledge of the
Company, any of its Subsidiaries or (B) litigation, investigation or
administrative or other proceeding which may exist at any time between
the Company or, to the knowledge of the Company, any of its
Subsidiaries and any Government Authority, which in the case of either
clause (A) or clause (B), if not cured or if adversely determined, as
the case may be, would have a Material Adverse Effect;
(iii) any litigation or administrative or other proceeding
affecting the Company or, to the knowledge of the Company, any of its
Subsidiaries, in which the amount involved or sought is in excess of
$500,000 or in which injunctive or similar relief is sought;
(iv) any default under, or revocation of, or notice
threatening to revoke, any operating permit or license material to the
Company's business;
(v) its having become aware that any representation or
warranty contained herein is or has become untrue in any material
respect; and
(vi) any development or event which would reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and stating what action the Company proposes to take with
respect thereto.
(d) Environmental Laws. The Company shall:
(i) comply with, and use its reasonable efforts to insure
compliance by all tenants and subtenants, if any, with, all Environmental Laws
and obtain and comply with and maintain, and insure that all tenants and
subtenants obtain and comply with and maintain, any and all licenses,
approvals, registrations or permits required by Environmental Laws, except in
each case to the extent that failure to do so would not reasonably be expected
to have a Material Adverse Effect; and
(ii) conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions required
under Environmental Laws and promptly comply with all lawful orders and
directives of all Government Authorities respecting Environmental Laws, except
to the extent that the same are being contested in good faith by appropriate
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proceedings and the pendency of such proceedings or delay in such actions would
not reasonably be expected to have a Material Adverse Effect.
(e) Business Plan. The Company shall furnish to the Investor
on or before the tenth day following approval by the Board, but in no event
later than December 31 of each fiscal year and within 10 days (after approval
by the Board, if applicable) of any amendment, modification or update thereto,
a Business Plan of the Company for the next succeeding fiscal year in a form
and in substance satisfactory to the Investor setting forth in reasonable
detail a projected statement for such fiscal year's income and cash flow with a
projected balance sheet as of the close of the succeeding fiscal year end,
accompanied by a statement of a Responsible Officer that the Business Plan
projected statements of income, cash flow and balance sheet for the succeeding
fiscal year have been adopted by the Board. The Company shall at all times
conduct its business substantially in accordance with the Business Plan and
shall not materially modify such Business Plan without the prior written
approval of the Investor.
(f) Major Transactions. Except as permitted by this
Agreement, the Company shall not engage in, or enter into any agreement with
respect to, or (except subject to the prior written approval of the Investor)
resolve to engage in or to enter into any agreement with respect to, any Major
Transaction, without the prior written consent of the Investor (it being agreed
that (i) the approval (x) of a majority of the Investor Designees at a meeting
of the Board, (y) of one or more Investor Designees at a meeting of the
Executive Committee of the Board or (z) of all members of the Board, including
the Investor Designees, by a written directors consent shall be deemed to be
written consent of the Investor and (ii) any action by the Company in respect
of the Series A Preferred Stock and the Series B Preferred Stock, including
dividend payments thereon and redemption thereof, in accordance with their
terms shall not be deemed to be Major Transactions).
SECTION 6.8 Publicity. The parties will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any public announcement or
statement with respect hereto or thereto without prior notification to the other
party, and, until 30 days after the Closing Date, except as required by law, the
reasonable approval of the other party.
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SECTION 6.9 Reservation of Shares. From and after the
Closing, the Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized and unissued stock, (a) solely for the
purpose of effecting the conversion of the Preferred Shares, such number of
shares of Common Stock as shall be sufficient to effect the conversion of all
of the Preferred Shares and (b) solely for the purpose of issuing shares of
Common Stock upon the exercise of Warrants, such number of shares of Common
Stock which may then be deliverable upon exercise of all of the Warrants.
SECTION 6.10 The Board. The Company shall take all actions
necessary so that: (a) as of the date of this Agreement and until the Closing,
the full Board shall consist of ten directors, one of whom shall be the
Original Investor Designee (who shall be in the class of directors whose term
of office expires at the annual meeting in 1999; provided, however, that, if no
Funding has occurred and this Agreement is terminated in accordance with its
terms, the Investor shall cause the Original Investor Designee to promptly
resign from the Board), and (b) as of and after the Closing, the Board shall
consist of seven directors, who shall be the Original Investor Designee, the
Additional Investor Designees (one of each of whom shall be in each of the
other classes of directors), one member of the incumbent management of the
Company and three independent directors (satisfying the standard of
independence established in the rules of the New York Stock Exchange, Inc.) who
shall be selected by the Incumbent Board with the approval of the Investor
(which shall not be unreasonably withheld). Subject to applicable law, the
Company shall take all action necessary to effect any such election or
appointment, including timely mailing to its stockholders the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder (and the Investor shall provide to the Company on a timely basis all
information required to be included in the Proxy Statement with respect to the
Original Investor Designee and the Additional Investor Designees). From and
after the Effective Date, the voting rights of holders of the Preferred Shares
voting shall be as set forth in the Amended and Restated Certificate of
Incorporation. So long as any amounts are owed under the Promissory Note, at
least one member of the Board shall be designated by the Investor.
SECTION 6.11 Indemnification of Board. From and after the
Closing, the Amended and Restated Certificate of Incorporation and By-laws of
the Company, however amended, will at all times contain provisions exculpating
and indemnifying its directors to the fullest extent permitted under applicable
law. The By-laws of the Company shall always contain provisions consistent
with the provisions of this Section 6.11. The
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Company shall maintain valid policies of directors and officers indemnity
insurance with financially sound and reputable insurers in such amounts, with
such deductibles and against such risks and losses as are reasonable for the
business and assets of the Company.
SECTION 6.12 Co-Investment Opportunity. Except with respect
to projects, including joint ventures, of the Company or any Subsidiary
existing on the date of this Agreement as set forth in Section 6.12 of the
Disclosure Schedule, as long as the Investor owns at least the Specified
Investor Amount of Preferred Stock, the Investor will have a right of first
offer to participate in new joint venture community development projects
proposed to be entered into by the Company, until the Investor has invested at
least $60,000,000 in cash in such projects; provided, however, that the
provisions of this Section 6.12 shall not apply to any project in which the
Company's participation and commitment shall be in the form of (a) its expertise
and business efforts or (b) the contribution or real property (or equity
interests in real property), as opposed to capital contributions. Subject to
the foregoing, if the Company proposes to enter into any new community
development project (including any new joint venture, partnership or similar
arrangement with any third party), the Company will inform the Investor thereof
and will offer the Investor the opportunity to invest in such proposed project
for one week before offering such opportunity to any third party. To the extent
reasonably available to the Company, the Company shall give the Investor such
information regarding the proposal as the Investor may reasonably request to
enable it to make an investment decision. If the Investor fails to advise the
Company within 10 Business Days after receipt of any such offer in writing of
its intention to proceed with due diligence and negotiation with respect to such
proposed investment, the Investor shall be deemed to have rejected such offer.
If the Investor discloses to the Company its intention, within such 10 Business
Day period, to proceed with due diligence and negotiation with respect to such
proposed investment, then the Investor and the Company agree to negotiate with
each other in good faith with respect to such proposed investment for up to 20
Business Days following the Investor's receipt of such information. If, after
the Company and the Investor have discussed the proposed transaction for such
20-Business Day period, the Investor determines either not to invest in such
project, or not to invest the full amount that the Company requires for such
project, or has not committed to the Company to make such investment, on
substantially the terms and conditions offered to the Investor, then the Company
may enter into an agreement with or consummate a transaction with other
potential investors with regard to the proposed investment (or the amount
required in excess of the
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amount to be committed by the Investor), provided that the Company may not
offer terms to another potential investor materially more favorable in the
aggregate than the terms offered to the Investor unless the Company first
offers such terms to the Investor. Nothing herein shall be deemed to imply any
commitment on the part of the Investor to invest in the Company or any project
proposed by the Company, except as expressly provided in this Agreement. So
long as any principal amount is outstanding under the Promissory Note, in
connection with the Investor's rights described above, the Company will offer
the Investor the opportunity to conduct due diligence investigations with
respect to such projects and will comply with the terms of the Due Diligence
Fee Agreement.
SECTION 6.13 Approved Business Plan. Within 30 days after
the date hereof, the Company shall deliver to the Investor a draft of the
Business Plan for 1997-1998, and the Company and the Investor shall exercise
reasonable efforts to reach agreement on the Approved Business Plan.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
SECTION 7.1 Survival Periods. All representations and
warranties contained in this Agreement shall survive for thirty months from the
Closing Date, and shall thereupon terminate and cease to be of further force
and effect, except that any representation or warranty as to which notice of a
breach giving rise to a right of indemnification has been given prior to the
end of such thirty month period shall survive until any such right of
indemnification has been finally resolved. The covenants and agreements
contained in this Agreement, other than those which by their terms only apply
until the Closing Date, shall survive the Closing in accordance with their
terms. The representations and warranties and the survival periods set forth
above shall apply regardless of any investigation made by or on behalf of any
Person.
SECTION 7.2 Indemnification by the Company. Subject to the
provisions of Section 7.1, the Company agrees to indemnify and hold harmless
the Investor and its Affiliates and their respective officers, directors,
agents, employees, subsidiaries, partners and controlling persons (each, an
"indemnified party") to the fullest extent permitted by law from and against
any and all losses, claims, damages, expenses (including reasonable fees,
disbursements and other charges of counsel) or other liabilities
("Liabilities") resulting from any breach of any covenant, agreement,
representation or warranty
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of the Company in this Agreement or in any other Transaction Document;
provided, however, that the Company shall not be liable under this Section 7.2:
(i) for any amount paid in settlement of claims without its consent (which
consent shall not be unreasonably withheld) or (ii) to the extent that it is
finally judicially determined that such Liabilities resulted primarily from a
breach by the Investor of any representation, warranty, covenant or agreement
of the Investor contained in this Agreement or the willful misconduct of the
Investor; provided, further, that, if and to the extent that such
indemnification is unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of such indemnified
liability that shall be permissible under applicable laws. In connection with
the obligation of the Company to indemnify for Liabilities as set forth above,
the Company further agrees to reimburse each indemnified party for all such
expenses (including reasonable fees, disbursements and other charges of
counsel) as they are incurred by such indemnified party.
SECTION 7.3 Indemnification by the Investor. Subject to the
provisions of Section 7.1, the Investor agrees to indemnify and hold harmless
the Company and their respective Affiliates, officers, directors, agents,
employees, subsidiaries, partners and controlling persons (each, an
"indemnified party") to the fullest extent permitted by law from and against
any and all Liabilities resulting from any breach of any covenant, agreement,
representation or warranty of the Investor in this Agreement or in any other
Transaction Document; provided, however, that the Investor shall not be liable
under this Section 7.3: (i) for any amount paid in settlement of claims
without the Investor's consent (which consent shall not be unreasonably
withheld) or (ii) to the extent that it is finally judicially determined that
such Liabilities resulted primarily from a breach by the Company of any
representation, warranty, covenant or agreement of the Company contained in
this Agreement or the willful misconduct of the Company; provided, further,
that, if and to the extent that such indemnification is unenforceable for any
reason, the Investor shall make the maximum contribution to the payment and
satisfaction of such indemnified liability that shall be permissible under
applicable laws. In connection with the obligation of the Investor to
indemnify for Liabilities as set forth above, the Investor further agrees to
reimburse each indemnified party for all such expenses (including reasonable
fees, disbursements and other charges of counsel) as they are incurred by such
indemnified party.
SECTION 7.4 Notification. Each indemnified party under this
Article VII or Article VIII will, promptly after the
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receipt of notice of the commencement of any action or other proceeding against
such indemnified party in respect of which indemnity may be sought from any
indemnifying party under this Article VII or Article VIII, notify such
indemnifying party in writing of the commencement thereof. The omission of any
indemnified party so to notify any indemnifying party of any such action shall
not relieve such indemnifying party from any liability that it may have to such
indemnified party (a) other than pursuant to this Article VII or Article VIII or
(b) under this Article VII or Article VIII unless, and only to the extent that,
such omission results in forfeiture of substantive rights or defenses. In case
any such action or other proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
such indemnifying party shall be entitled to participate therein and, to the
extent that either may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided, however, that any
indemnified party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action or
proceeding in which any indemnifying party and an indemnified party are, or are
reasonably likely to become, a party, such indemnified party shall have the
right to employ separate counsel at the expense of such indemnifying party and
to control its own defense of such action or proceeding if, in the reasonable
opinion of counsel to such indemnified party, (i) there are or may be legal
defenses available to such indemnified party or to other indemnified parties
that are different from or additional to those available to such indemnifying
party or (ii) any conflict or potential conflict exists between such
indemnifying party and such indemnified party that would make such separate
representation advisable in the view of the indemnified party; provided,
however, that (A) any such separate counsel employed by the indemnified party at
the expense of such indemnifying party shall be reasonably satisfactory to such
indemnifying party, (B) the indemnified party will not, without the prior
written consent of such indemnifying party settle, compromise or consent to the
entry of any judgment in such action or proceeding unless such settlement,
compromise or consent includes an unconditional release of such indemnifying
party from all liability arising or that may arise out of such action or
proceeding relating to any matter subject to indemnification hereunder and (C)
in no event shall such indemnifying party be required to pay fees and expenses
under this Article VII or Article VIII for more than one firm of attorneys
representing the indemnified parties in any jurisdiction in any one legal action
or group of related legal actions. The rights accorded to indemnified parties
hereunder shall be in addition to any rights that any indemnified party may have
at common law, by separate agreement or otherwise.
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SECTION 7.5 Registration Statements. Notwithstanding
anything to the contrary in this Article VII, the indemnification and
contribution provisions of Article VIII shall govern any claim made with respect
to registration statements filed pursuant thereto or sales made thereunder.
ARTICLE VIII
REGISTRATION RIGHTS
SECTION 8.1 Demand Registrations. At any time and from time
to time after the Closing, the Company shall, upon the written demand of the
Investor, use its best efforts to effect the registration (a "Demand
Registration") under the Act (by means of a "shelf" registration statement
pursuant to Rule 415 under the Act, if so requested and if the Company is
eligible therefor at such time) of such number of Registrable Securities (as
defined below) then beneficially owned by the Investor as shall be indicated in
a written demand sent to the Company by the Investor; provided, however, that:
(a) the Company shall be obligated under this Agreement to effect no more than
(i) two Demand Registrations so long as the Company is not eligible to file
Form S-3 under the Act, and (ii) five Demand Registrations if the Company is
eligible to file Form S-3; and (b) a Demand Registration shall not count as
such until it has become effective, except that if, after it has become
effective, the offering of Registrable Securities pursuant to such registration
is interfered with by any stop order, injunction or other order or requirement
of the SEC or any other Government Authority, such registration shall be deemed
not to have been effected unless such stop order, injunction or other order or
requirement shall subsequently have been vacated or otherwise removed. If a
Demand Registration is initiated by the Investor, no other securities may be
offered in such offering by the Company without the Investor's consent. Upon
receipt of the written demand of the Investor, the Company shall expeditiously
effect the registration under the Act of the Registrable Securities covered by
such request and use its best efforts to have such registration become and
remain effective as provided in Section 8.8. The Investor shall have the right
to select the underwriters for a Demand Registration.
As used in this Agreement, "Registrable Securities" shall mean
(a) any Preferred Shares, (b) any Conversion Shares, (c) any Warrant Shares,
(d) any other shares of Common Stock acquired by the Investor and (e) any
securities issued or issuable with respect to any Preferred Shares, Conversion
Shares, Warrant Shares by way of stock dividend or stock split, or in
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connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.
SECTION 8.2 Piggyback Registrations. (a) If the Company
proposes to register any of its securities under the Act for sale for cash
(otherwise than in connection with the registration of securities issuable
pursuant to an employee stock option, stock purchase or similar plan or
pursuant to a merger, exchange offer or a transaction of the type specified in
Rule 145(a) under the Act), the Company shall give the Investor notice of such
proposed registration at least 20 days prior to the filing of a registration
statement. At the written request of the Investor delivered to the Company
within 10 Business Days after the receipt of the notice from the Company,
stating the number of Registrable Securities that the Investor wishes to sell
or distribute publicly under the registration statement proposed to be filed by
the Company, the Company shall use its best efforts to register under the Act
the sale of such Registrable Securities, and to cause such registration (a
"Piggyback Registration") to become and remain continuously effective as
provided in Section 8.8;
(b) If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the managing underwriters thereof
advise the Company in writing that in their opinion the number of securities
requested to be included in the registration exceeds the number which can be
sold in the offering without adversely affecting the offering, the Company
shall include in the registration (i) first, that portion of the Registrable
Securities that the Investor proposes to sell representing 10% of such
offering, (ii) second, the securities the Company proposes to sell, and (iii)
third, the remaining Registrable Securities the Investor proposes to sell.
SECTION 8.3 Indemnification by the Company. In the event of
any registration of any Registrable Securities under the Act, the Company
shall, and hereby does, indemnify and hold harmless the Investor, each of its
directors and officers, each other Person who participates as an underwriter in
the offering or sale of such Registrable Securities and each other Person, if
any, who controls the Investor or any such underwriter within the meaning of
Section 15 and Section 20 of the Act against any losses, claims, damages or
liabilities, joint or several, to which the Investor or any such director or
officer or underwriter or controlling Person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which
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the Registrable Securities were registered under the Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, and the Company shall reimburse the Investor and each such
director, officer, underwriter and controlling Person for any legal or any
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information about the Investor furnished to the Company through an
instrument duly executed by or on behalf of the Investor specifically stating
that it is for use in the preparation thereof. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Investor or any such director, officer or controlling Person and shall
survive the transfer of the Registrable Securities by the Investor.
SECTION 8.4 Indemnification by the Investor. The Company
may require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 8.1 or 8.2, that the Company
shall have received an undertaking satisfactory to it from the Investor to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 8.3) the Company, each director of the Company, each officer
of the Company signing such registration statement, each other Person who
participates as an underwriter in the offering or sale of such Registrable
Securities and each other Person, if any, who controls the Company within the
meaning of Section 15 and Section 20 of the Act with respect to any untrue
statement or alleged untrue statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein or any amendment or supplement thereto, if
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
about the Investor furnished to the Company through an instrument duly executed
by the Investor specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such
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indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
Person and shall survive the transfer by the seller of the securities of the
Company being registered.
SECTION 8.5 Notification. The procedures set forth in
Section 7.4 shall apply to any claim for indemnification pursuant to Section
8.3 or 8.4.
SECTION 8.6 Other Indemnification. Indemnification similar
to that specified in this Article VIII (with appropriate modifications) shall
be given by the Company and the Investor with respect to any required
registration or other qualification of Registrable Securities under any federal
or state law or regulation of any Government Authority other than the Act.
SECTION 8.7 Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in this Article VIII is for any reason held to be unenforceable by
the indemnified parties although applicable in accordance with its terms in
respect of any Liabilities suffered by an indemnified party referred to
therein, each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Liabilities, in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and of
the liable selling stockholders on the other in connection with the statements
or omissions which resulted in such Liabilities, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand
and of the liable selling stockholders (including, in each case, that of their
respective officers, directors, employees, agents and controlling Persons) on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company, on the one hand, or by or on behalf of the selling stockholders,
on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
SECTION 18.8 Registration Covenants of the Company. If any
Registrable Securities of the Investor are to be registered pursuant to Section
8.1 or 8.2, the Company covenants and agrees that it shall use its best efforts
to effect the registration and cooperate in the sale of the Registrable
Securities to be registered and shall as expeditiously as possible:
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(a) (i) prepare and file with the SEC a registration
statement with respect to the Registrable Securities (as well as any
necessary amendments or supplements thereto) (a "Registration
Statement") and (ii) use its best efforts to cause the Registration
Statement to become effective;
(b) prior to the filing described above in Section 8.8(a),
furnish to the Investor copies of the Registration Statement and any
amendments or supplements thereto and any prospectus forming a part
thereof, which documents shall be subject to the review and approval
of counsel for the Investor;
(c) notify the Investor, promptly after the Company shall
receive notice thereof, of the time when the Registration Statement
becomes effective or when any amendment or supplement or any
prospectus forming a part of the Registration Statement has been
filed;
(d) notify the Investor promptly of any request by the SEC
for the amending or supplementing of the Registration Statement or
prospectus or for additional information and promptly deliver to the
Investor copies of any comments received from the SEC;
(e) (i) advise the Investor after the Company shall receive
notice or otherwise obtain knowledge of the issuance of any order by
the SEC suspending the effectiveness of the Registration Statement or
any amendment thereto or of the initiation or threatening of any
proceeding for that purpose and (ii) promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal
promptly if a stop order should be issued;
(f) (i) prepare and file with the SEC such amendments and
supplements to the Registration Statement and each prospectus forming
a part thereof as may be necessary to keep the Registration Statement
continuously effective for the period of time necessary to permit the
Investor to dispose of all its Registrable Securities and (ii) comply
with the provisions of the Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during
such period in accordance with the intended methods of disposition by
the Investor set forth in the Registration Statement;
(g) furnish to the Investor such number of copies of the
Registration Statement, each amendment and supplement thereto, the
prospectus included in the Registration Statement (including each
preliminary prospectus) and such
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other documents as the Investor may request in order to facilitate the
disposition of the Registrable Securities owned by the Investor;
(h) use its best efforts to register or qualify such
Registrable Securities under such other securities or "blue sky" laws
of such jurisdictions as determined by the underwriters after
consultation with the Company and the Investor and do any and all other
acts and things which may be reasonably necessary or advisable to
enable the Investor to consummate the disposition in such jurisdictions
of the Registrable Securities (provided that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction in
which it would not otherwise be required to qualify but for this
Section 8.8(h), (ii) subject itself to taxation in any such
jurisdiction, or (iii) consent to general service of process in any
such jurisdiction);
(i) notify the Investor, at any time when a prospectus
relating thereto is required to be delivered under the Act, of the
happening of any event as a result of which the Registration Statement
would contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading, and, at the request of the
Investor, prepare a supplement or amendment to the Registration
Statement so that the Registration Statement shall not, to the
Company's knowledge, contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;
(j) if the Common Stock is not then listed on a securities
exchange, use its best efforts, consistent with the then-current
corporate structure of the Company, to facilitate the listing of the
Common Stock on a stock exchange or on the NASDAQ Stock Market;
(k) provide a transfer agent and registrar, which may be a
single entity, for all the Registrable Securities not later than the
effective date of the Registration Statement;
(l) enter into such customary agreements (including an
underwriting agreement in customary form, including customary
indemnification provisions and customary lock-up arrangements of the
issuer and its directors and executive officers) and take all such
other action, if any, as the Investor or the underwriters shall
reasonably request
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in order to expedite or facilitate the disposition of the Registrable
Securities pursuant to this Article VIII;
(m) (i) make available for inspection by the Investor, any
underwriter participating in any disposition pursuant to the
Registration Statement and any attorney, accountant or other agent
retained by the Investor or any such underwriter all relevant
financial and other records, pertinent corporate documents and
properties of the Company as any of them may request in connection
with their "due diligence" investigations of the Company and (ii)
cause the Company's officers, directors and employees to supply all
relevant information reasonably requested by the Investor or any such
underwriter, attorney, accountant or agent in connection with the
Registration Statement;
(n) use its best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or
approved by such other governmental authorities as may be necessary to
enable the Investor to consummate the disposition of such Registrable
Securities;
(o) cause the Company's independent public accountants to
provide to the underwriters, if any, and the selling holders, if
permissible, a comfort letter in customary form and covering such
matters of the type customarily covered by comfort letters;
(p) cooperate and assist in any filings required to be made
with the National Association of Securities Dealers, Inc. (the
"NASD"); and
(q) use all reasonable efforts to facilitate the distribution
and sale of any Registrable Securities to be offered pursuant to this
Agreement, including without limitation by making road show
presentations, holding meetings with potential investors and taking
such other actions as shall be appropriate or as shall be requested by
the lead managing underwriter of an underwritten offering.
SECTION 8.9 Expenses. In connection with any Demand
Registration pursuant to Section 8.1 or any Piggyback Registration pursuant to
Section 8.2, the Company shall pay all registration, filing and NASD fees, all
fees and expenses of complying with securities or "blue sky" laws (including
fees and disbursements of underwriters' counsel); provided, however, that the
Investor shall pay its pro rata share of any commissions, fees and
disbursements of underwriters customarily paid by
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sellers of securities (based upon offering proceeds to be received by it). In
any Demand Registration or Piggyback Registration, the Company shall be
responsible for the fees and disbursements of counsel for the Company and of
its independent public accountants, printing costs and premiums and other costs
of policies of insurance against Liabilities arising out of the public offering
of the Registrable Securities. The Investor shall be responsible for the fees
and disbursements of counsel for the Investor.
SECTION 8.10 Transfer of Registration Rights. The Investor
(or any Eligible Transferee) may transfer all or any portion of its rights
under this Article VIII to any transferee of an amount of Registrable
Securities equal to or exceeding 10% of the outstanding class of such
Registrable Securities at the time of transfer (each transferee that receives
such minimum number of such Registrable Securities, an "Eligible Transferee"),
and any Eligible Transferee shall be treated as the "Investor" for all purposes
under this Article VIII; provided, however, that the Company shall be obligated
under this Agreement to effect no more than that number of Demand Registrations
set forth in the proviso in Section 8.1 on behalf of all Eligible Transferees
in the aggregate. Any transfer of registration rights pursuant to this Section
8.10 shall be effective upon receipt by the Company of (i) written notice from
the Investor or the transferring Eligible Transferee, as the case may, stating
the name and address of the new Eligible Transferee and identifying the amount
of Registrable Securities with respect to which the rights under this Agreement
are being transferred and (ii) a writing from such new Eligible Transferee
agreeing to be bound by the terms of this Article VIII. The Eligible
Transferees may exercise their rights hereunder in such priority as they shall
agree upon among themselves.
SECTION 8.11 Other Registration Rights. Notwithstanding any
other provision of this Agreement, if the Company at any time grants
registration rights to any other Person on terms relating to the priority of
registration rights or periods when the Company shall be entitled to defer
filing any Registration Statement which the Investor considers preferential to
the comparable terms in this Article VIII, then the Investor shall be entitled
to registration rights with such preferential terms. The Company shall not
grant any right of registration under the Act relating to any of its securities
to any Person other than the Investor unless the Investor shall be entitled to
have included in any Piggyback Registration effected a number of Registrable
Securities requested by the Investor to be so included representing at least
10% of such offering prior to the inclusion of any securities requested to be
registered by the Persons entitled to any such other registration rights.
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SECTION 8.12 Rule 144. So long as the Company is subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall take all actions reasonably necessary to enable the Investor to
sell the Registrable Securities without registration under the Act within the
limitation of the exemptions provided by Rule 144 under the Act, as such Rules
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC, including filing on a timely basis all reports required to
be filed by the Exchange Act. Upon the request of the Investor, the Company
shall deliver to the Investor a written statement as to whether it has complied
with such requirements.
SECTION 8.13. Limitation on Requirement to File or Amend
Registration Statement. Anything in this Agreement to the contrary
notwithstanding, the Company shall not be required to file, and may defer
filing, any Registration Statement, amendment, supplement or post-effective
amendment thereto or prospectus supplement, if the Company is then involved in
discussions concerning, or otherwise engaged in, an acquisition, disposition,
financing or other material transaction and the Company determines in good
faith that the making of such a filing, supplement or amendment at such time
would materially adversely affect or interfere with such transaction; provided,
however, that the Company may not so defer making such filing for more than 90
days on any one occasion or within 30 days after the termination of any such
deferral period; and provided, further that the Company shall, as soon as
practicable thereafter, make such filing, supplement or amendment. The Company
shall promptly give the Investor written notice of any such deferral,
containing a general statement of the reasons for such deferral and an
approximation of the anticipated delay, provided, however, that nothing herein
shall require the Company to disclose any terms of any such transaction or the
identity of any party thereto.
ARTICLE IX
TERMINATION
SECTION 9.1 Termination. This Agreement (other than, if and
so long as the Promissory Note remains outstanding, Sections 6.1, 6.7(f), 6.10,
6.11, 10.7, 10.12 and 10.13 and Article VII) may be terminated at any time
prior to the Closing:
(a) by mutual written consent of the Company and the
Investor;
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(b) by the Company or the Investor, if the Closing
shall not have occurred on or before May 22, 1997; provided, however, that the
right to terminate this Agreement under this clause (b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Closing to occur on or
before such date;
(c) by the Investor, if the Proxy Statement has not
been mailed to stockholders of the Company by May 1, 1997;
(d) by the Company or the Investor, if any judgment,
injunction, order or decree enjoining the Investor or the Company from
consummating this Agreement is entered and such judgment, injunction, order or
decree shall become final and nonappealable; provided, however, that the party
seeking to terminate this Agreement shall have used all reasonable efforts to
remove such judgment, injunction, order or decree;
(e) by the Investor, if there has been a material
breach of any representation, warranty or material covenant or agreement of the
Company which is incurable, or, if curable, which is not cured within 30 days
of receipt of written notification from the Company identifying such breach and
demanding that it be cured;
(f) by the Company, if there has been a material
breach of any representation, warranty, or material covenant or agreement of
the Investor contained in this Agreement, which breach is incurable or, if
curable, which is not cured within 30 days of receipt of written notification
from the Investor identifying such breach and demanding that it be cured;
(g) by the Company, in accordance with the
provisions of Section 6.6(c), provided that prior to or concurrently with such
termination, the Investor shall have received the Termination Fee; or
(h) by either the Company or the Investor at any
time from March 30, 1997 until April 5, 1997 if and until any necessary consent
from Foothill Capital Corporation has not been obtained on terms reasonably
satisfactory to the Investor and the Company.
SECTION 9.2 Effect of Termination. If this Agreement is
terminated pursuant to Section 9.1, then this Agreement (except for Section
9.3, which shall remain in full force and effect, and the provisions specified
in Section 9.1, which shall remain in full force and effect if and so long as
the Promissory Note is outstanding) shall become void and of no
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effect with no liability on the part of any party hereto thereunder, except to
the extent such termination results from the breach by a party hereto of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.
SECTION 9.3 Fees Due Upon Termination. (a) If this
Agreement is terminated or the Closing does not occur by 5:00 p.m., New York
City time, on May 22, 1997 for any reason whatsoever other than as a result of
a breach of this Agreement by the Investor entitling the Company not to
consummate the Closing, the Commitment Fee shall be forfeited and the Company
shall pay to the Investor within two Business Days of request therefor,
together with documentation therefor, the Investor's Transaction Expenses.
(b) If the Closing has not been consummated by May 22, 1997
as a result of either a breach by the Company of this Agreement, or a breach by
the Company of the Note Agreement which is not cured by May 22, 1997, or a
failure by 5:00 p.m., New York City time, on May 22, 1997 to obtain the
Stockholders Approval, then, in addition to the forfeiture of the Commitment
Fee, the Company shall pay to Apollo in cash, on May 23, 1997, an additional
$1,000,000 break-up fee, plus the Investor's Transaction Expenses.
(c) If the conditions for the payment of the break-up fee
referred to in Section 9.3(b) are fulfilled, and either (i) the Company
wilfully breached or breaches this Agreement or the Note Agreement or (ii) the
Company (x) enters into an agreement for an Alternative Transaction prior to
the earlier of May 22, 1998 or the date that is nine months after the date of
termination of this Agreement or (y) consummates an Alternative Transaction
prior to the earlier of May 22, 1998 or the first anniversary of the date of
termination of this Agreement, the Company shall pay an additional $1,000,000
Alternative Transaction fee to the Investor, in addition to the $1,000,000
break-up fee provided for in Section 9.3(b) above and the forfeiture of the
Commitment Fee, plus the Investor's Transaction Expenses.
(d) If the Agreement is terminated by the Company pursuant to
Section 9.1(h), and either (i) the Company wilfully breached or breaches this
Agreement or the Note Agreement or (ii) the Company enters into an agreement
for, or consummates, an Alternative Transaction prior to the 180th day after
the date of termination of this Agreement, the Company shall pay an additional
$2,000,000 Alternative Transaction fee to the Investor, in addition to the
forfeiture of the Commitment Fee, plus the Investor's Transaction Expenses.
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(e) Notwithstanding the foregoing provisions of this Section
9.3, the Company shall not be required to pay fees pursuant to this Section 9.3
if the Company shall have terminated the Agreement pursuant to Section 6.6(b)
and paid the Investor the Termination Fee and Transaction Expenses therein
specified (and the Commitment Fee shall have been forfeited by the Company).
Notwithstanding any other provision of this Agreement, in no event shall the
Investor be entitled to receive fees in excess of $3,000,000 (plus Transaction
Expenses) from the Company as a result of the termination of this Agreement.
All fees and Transaction Expenses shall be payable in cash.
ARTICLE X
MISCELLANEOUS
SECTION 1.58 Notices. All notices or other communications
given or made hereunder shall be validly given or made if in writing and
delivered by facsimile transmission or in person at, mailed by registered or
certified mail, return receipt requested, postage prepaid, or sent by a
reputable overnight courier to, the following addresses (and shall be deemed
effective at the time of receipt thereof).
If to the Company: Atlantic Gulf Communities
Corporation
2601 South Bayshore Drive
Miami, Florida 33133-5461
Telecopy: (305) 859-4623
Attention: Thomas W. Jeffrey, Chief Financial
Officer
with copies to: Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Telecopy: (202) 857-6395
Attention: Carter Strong, Esq.
If to the Investor:
AP-ACG, LLC
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c/o Apollo Real Estate Advisors II, L.P.
Two Manhattanville Road
Purchase, NY 10577
Telecopy: (914) 694-8032
Attention: Ron Solotruck
with a copy to:
Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Telecopy: (212) 459-3301
Attention: Rick Koenigsberger
and a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy: (212) 403-2000
Attention: Philip Mindlin, Esq.
Trevor S. Norwitz, Esq.
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
SECTION 10.2 Expenses. The Company will pay all Transaction
Expenses.
SECTION 10.3 Amendment; Waiver. The provisions of this
Agreement may be modified or amended, and waivers and consents to the
performance and observance of the terms hereof may be given, only by written
instrument executed and delivered by the Company and the Investor. The
failure at any time to require performance of any provision hereof shall in no
way affect the full right to require such performance at any time thereafter.
The waiver by any party to this Agreement of a breach of any provision hereof
shall not be taken or held to be a waiver of any succeeding breach of such
provision of any other provision or as a waiver of the provision itself.
SECTION 10.4 Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, void or unenforceable, the validity, legality and enforceability
of the remaining provisions contained herein shall not in any way be affected
or impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which
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comes as close as possible to that of the provision held to be invalid, illegal
or unenforceable.
SECTION 10.5 Headings. The Index and Article and Section
headings herein are for convenience only and shall not affect the construction
hereof.
SECTION 10.6 Entire Agreement. This Agreement and the other
Transaction Documents and paragraph E of the Letter Agreement (the remainder of
the Letter Agreement being superceded hereby) embody the entire agreement
between the parties relating to the subject matter hereof and any and all prior
oral or written agreements, representations or warranties, contracts,
understandings, correspondence, conversations, and memoranda, whether written
or oral, between the Company and the Investor, or between or among any of their
agents, representatives, parents, Subsidiaries, Affiliates, predecessors in
interest or successors in interest, with respect to the subject matter hereof.
SECTION 10.7 Maximum Interest Rate. Nothing contained in
this Agreement, the Promissory Note or any other Transaction Document shall
require the Company to pay interest at a rate exceeding the maximum rate
permitted by applicable law. If the amount of interest payable on any interest
payment date, computed pursuant to applicable law and the Transaction Documents
would exceed the maximum amount permitted by applicable law to be charged, the
amount of interest payable for its account on such interest payment date shall
be automatically reduced to such maximum permissible amount. If the amount of
interest payable for the account of the Investor in respect of any interest
computation period is reduced pursuant to the preceding sentence of this
Section and the amount of interest payable for its account in respect of any
subsequent interest computation period, computed pursuant to applicable law and
the Transaction Documents, would be less than the maximum amount permitted by
applicable law to be charged, then the subsequent interest computation period
shall be automatically increased to such maximum permissible amount; provided
that at no time shall the aggregate amount by which interest paid had been
increased pursuant to this sentence exceed the aggregate amount by which
interest has theretofore been reduced pursuant to the preceding sentence of
this Section.
SECTION 10.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both of which
together shall be deemed to be one and the same instrument.
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SECTION 10.9 Assignment. All covenants and agreements
contained in this Agreement by or on behalf of the parties hereto shall bind,
and inure to the benefit of, the respective successors and assigns of the
parties hereto; provided, however, that, subject to Section 8.10, the rights
and obligations of either party hereto may not be assigned without the prior
written consent of the other parties; provided, further, however, that prior to
the Closing, the Investor may assign all of its rights and obligations
hereunder to an Affiliate of the Investor, which shall then be treated as the
Investor for all purposes under this Agreement.
SECTION 10.10 Third-Party Beneficiaries. Except for Article
VII and Sections 8.3, 8.4, 8.6 and 8.7, this Agreement is for the sole benefit
of the parties hereto and their permitted assigns and nothing herein expressed
or implied shall give or be construed to give to any Person, other than the
parties hereto and such assigns, any legal or equitable rights hereunder.
SECTION 10.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE.
SECTION 10.12 Submission to Jurisdiction; Waiver of Jury
Trial. Each of the Company and the Investor hereby submits to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State Court sitting in the City of New York for
purposes of all legal proceedings which may arise hereunder or under any other
Transaction Documents. The parties irrevocably waive, to the fullest extent
permitted by law, any objection which they may have or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such a court has been brought in an
inconvenient forum. The parties hereby consent to process being served in any
such proceeding by the mailing of a copy thereof by registered or certified
mail, postage prepaid, to its address specified in Section 10.1 or in any other
manner permitted by law. The Company and the Investor hereby knowingly,
voluntarily, and intentionally waive any rights they may have to a trial by
jury in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement or any other Transaction Document, or any
course of conduct, course of dealing, statements (whether oral or written), of
the Investor or the Company. This provision is a material inducement for the
Investor's entering into this Agreement. The Company hereby irrevocably
designates Arent Fox Kintner Plotkin & Kahn, 1675 Broadway, New York, NY 10019,
as
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<PAGE> 58
the designee, appointee and agent of the Company to receive, for and on behalf
of the Company, service of process in such jurisdiction in any legal action or
proceeding with respect to this Agreement or any other Transaction Document.
It is expected that a copy of such process served on such agent will be
promptly forwarded by mail to the Company at its address set forth in Section
10.1, but the failure of the Company to receive such copy shall not affect in
any way the service of such process. The Company further irrevocably consents
to the service of process of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered by
certified mail, postage prepaid, to the Company at such addresses. Nothing
herein shall affect the right of the Investor to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against the Company in any other jurisdiction.
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<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
ATLANTIC GULF
COMMUNITIES CORPORATION
By: /s/ Thomas W. Jeffrey
---------------------------------
Name: Thomas W. Jeffrey
Title: Executive Vice President
and Chief Financial
Officer
AP-AGC, LLC
By: KRONUS PROPERTY, INC.
Manager
By: /s/ Ricardo Koenigsberger
----------------------------------
Name: Ricardo Koenigsberger
Title: Vice President
<PAGE> 1
Exhibit 2
EXHIBIT A TO INVESTMENT AGREEMENT
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ATLANTIC GULF COMMUNITIES CORPORATION
Atlantic Gulf Communities Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
as follows:
1. The name of the corporation is Atlantic Gulf
Communities Corporation. Atlantic Gulf Communities Corporation was originally
incorporated under the name "Chemical Research Corporation". The original
Certificate of Incorporation of Chemical Research Corporation was filed with the
Secretary of State of the State of Delaware on January 13, 1928. Atlantic Gulf
Communities Corporation was subsequently named General Development Corporation.
General Development Corporation filed a voluntary petition for relief from
creditors under Chapter 11 of the Bankruptcy Code on April 6, 1990, in the
United States Bankruptcy Court for the Southern District of Florida (the
"Bankruptcy Court"). On ________, 1991, the Certificate of Incorporation of the
corporation was amended pursuant to Section 7.2(b) of the Second Amended Joint
Plan of Reorganization of General Development Corporation dated October 9, 1991,
and confirmed by Order of the Bankruptcy Court on [Confirmation Date] (the
"Reorganization Plan").
2. This Amended and Restated Certificate of
Incorporation was adopted by the stockholders of the corporation on _________,
1997 and restates and further amends the provisions of the Certificate of
Incorporation of this corporation as heretofore amended or supplemented.
3. The text of the Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further
amended to read in its entirety as follows:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is ATLANTIC GULF COMMUNITIES CORPORATION.
SECOND: The registered office of the Corporation is to
be located at 1209 Orange Street, in the City of Wilmington, in the County of
New Castle, in the State of Delaware. The name of its registered agent at that
address is The Corporation Trust Company.
<PAGE> 2
THIRD: The purpose of the Corporation is to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: (a) The total number of shares of stock that the
Corporation shall have authority to issue is fifty-one million and twenty-five
thousand (51,000,025), of which fifty million (50,000,000) shall be common stock
of one class, par value of ten cents ($0.10) per share ("Common Stock"),
amounting in the aggregate to par value five million dollars ($5,000,000), and
one million and twenty-five thousand (1,025,000) shall be preferred stock, par
value $.01 per share ("Preferred Stock"), amounting in the aggregate to par
value of ten thousand two hundred and fifty dollars ($10,250).
(b) Shares of Preferred Stock may be issued from time to time
in one or more series. The Board of Directors of the Corporation is hereby
authorized to fix the voting rights, if any, designations, powers, preferences
and the relative, participation, optional or other rights, if any, and the
qualifications, limitations or restrictions thereof, of any unissued series of
Preferred Stock; and to fix the number of shares constituting such series, and
to increase or decrease the number of shares of any such series (but not below
the number of shares thereof then outstanding). Except as otherwise provided by
law, the voting rights of the Corporation's capital stock shall be as set forth
in this Amended and Restated Certificate of Incorporation or in the resolution
or resolutions adopted by the Board of Directors designating the rights, powers
and preferences of any series of Preferred Stock. Each share of Common Stock
shall have one vote, and the Common Stock shall vote together as a single class.
(c) The Board of Directors of the Corporation is authorized to
effect the elimination of shares of its Common Stock purchased or otherwise
reacquired by the Corporation from the authorized capital stock of the number of
shares of the Corporation in the manner provided for in the General Corporation
Law of the State of Delaware.
(d) No holder of Common Stock shall have any preemptive right
to subscribe to stock, obligations, warrants, rights to subscribe to stock or
other securities of the Corporation of any class, whether now or hereafter
authorized.
(e) The powers, preferences and rights of the 20% Cumulative
Redeemable Convertible Preferred Stock, Series A of the Corporation shall be set
forth in Annex A to this Amended
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<PAGE> 3
and Restated Certificate of Incorporation (which is incorporated herein as
though set forth in full in this place).
(f) The powers, preferences and rights of 20% Cumulative
Redeemable Convertible Preferred Stock, Series B of the Corporation shall be set
forth in Annex B to this Amended and Restated Certificate of Incorporation
(which is incorporated herein as though set forth in full in this place).
FIFTH: The Corporation shall be managed by the Board of
Directors, which shall exercise all powers conferred under the laws of the State
of Delaware. The number of directors shall be determined as provided in the
By-laws of the Corporation. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is authorized to later amend or
repeal the By-laws of the Corporation.
SIXTH: No action shall be taken by the stockholders of the
Corporation except at an annual meeting or at a special meeting of stockholders
of the Corporation; provided, however, that at any time after the first meeting
of the stockholders held in accordance with the By-laws of the Corporation, any
action required or permitted to be taken at any annual or special meeting of the
stockholders may be taken without a meeting, without prior notice and without a
vote, if consents in writing, setting forth the action so taken, are signed by
the holders of shares of capital stock having not less than the minimum number
of votes that would be necessary to authorize or take the action at a meeting at
which the holders of all shares entitled to be voted thereon were present and
voted; prompt notice of the taking of action without a meeting by less than
unanimous consent shall be given to the stockholders who have not consented in
writing.
SEVENTH: At any time after the first annual meeting of
stockholders held in accordance with the By-laws of the Corporation, the holders
of 35 percent of the issued and outstanding shares of capital stock may request
that a special meeting be called in accordance with the procedures set forth in
the By-laws.
EIGHTH: No director may be removed from office except for
cause and only by the affirmative vote of the holders of a majority of the
outstanding stock entitled to vote.
NINTH: The Corporation may indemnify its directors, officers,
employees and agents to the fullest extent permitted by the General Corporation
Law of Delaware, as the same exists or may hereafter be amended.
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<PAGE> 4
TENTH: The provisions set forth in this Article Tenth and in
Articles Fifth, Sixth, Eighth, Ninth, Eleventh, and Twelfth of this Amended and
Restated Certificate of Incorporation may not be amended, altered, repealed or
rescinded in any respect, and no other provision or provisions may be adopted
which impair(s) in any respect the operation or effect of any such provision,
except by the affirmative vote of the holders of not less than three-fifths of
the outstanding stock.
ELEVENTH: The Board of Directors shall have the power to
adopt, amend, alter, or repeal the By-Laws of the Corporation as provided in
such By-Laws. The stockholders shall also have the power to adopt, amend, alter
or repeal the By-Laws of the Corporation; provided, however, that,
notwithstanding the foregoing and anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, unless amended, altered
or repealed by the Board of Directors as provided in the By-Laws, Sections 2.1,
2.2(a) and 2.2(c) of Article II, Sections 3.1, 3.2, 3.3, 3.4, 3.8 and 3.9 of
Article III, Section 4.1 of Article IV, Article VII, Article VIII, and Section
10.1 of Article X of the By-Laws may not be amended, altered, repealed or
rescinded in any respect, and no other provision or provisions may be adopted
which impair(s) in any respect the operation or effect of such provision, except
by the same vote that would be required to amend pursuant to Article Tenth of
this Amended and Restated Certificate of Incorporation.
TWELFTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by the General
Corporation Law of Delaware, as the same exists or may hereafter be amended. No
amendment to or repeal of this Article shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
4. This Amended and Restated Certificate of Incorporation was
approved by the shareholders of the Corporation at a meeting held on __________,
1997 and was duly adopted in accordance with the provisions of Sections 103 and
303 of Title 8 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed and attested by the undersigned, thereunto duly
authorized, this ____ day of , 1997.
Atlantic Gulf Communities Corporation
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<PAGE> 5
By:
------------------------
Its:
-----------------------
Attest:
- --------------------------
Name
Title
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<PAGE> 1
Exhibit 3
ANNEX A TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ATLANTIC GULF COMMUNITIES CORPORATION
STATEMENT OF
PREFERENCES AND RIGHTS OF
20% CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, SERIES A
-----------------------
The 20% Cumulative Redeemable Convertible Preferred Stock, Series A, of Atlantic
Gulf Communities Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") shall have
the following powers, preferences, and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, in addition to those set forth in the attached Amended and Restated
Certificate of Incorporation of the Corporation (all capitalized terms used
without definition are defined in Section 15 of this Statement):
1. Designation. The series of preferred stock established
hereby shall be designated the "20% Cumulative Redeemable Convertible Preferred
Stock, Series A" (and shall be referred to herein as the "Series A Preferred
Stock") and the authorized number of shares of Series A Preferred Stock shall be
25,000.
2. Rank. The Series A Preferred Stock shall, with respect to
dividend distributions and distributions upon the voluntary or involuntary
liquidation, winding up and dissolution of the Corporation, rank (i) senior to
all classes of Common Stock and each other class of Capital Stock of the
Corporation or series of preferred stock of the Corporation hereafter created
which is not Senior Stock or Parity Stock ("Junior Stock"), (ii) pari passu with
any Parity Stock and (iii) junior to any Senior Stock. There is no Senior Stock
or Parity Stock outstanding on the date hereof. Senior Stock or Parity Stock may
be authorized or issued only in accordance with the provisions of Section 7(b).
3. Dividends. (a) Subject to the provisions of Section 3(c),
beginning on the Original Issue Date, the Holders shall be entitled to receive,
when, as and if declared by the Board of Directors, but only out of
funds legally available
<PAGE> 2
therefor, distributions in the form of cash dividends on each share of Series A
Preferred Stock at an annual rate equal to 20% of the Liquidation Preference in
effect from time to time and no more. All Dividends shall be cumulative, whether
or not declared, on a daily basis from the Original Issue Date and shall be
payable quarterly in arrears on each Dividend Payment Date commencing on June
30, 1997. Each dividend shall be payable with respect to Series A Preferred
Stock held by Holders as they appear on the stock books of the Corporation on
each Dividend Record Date. Dividends shall cease to accumulate in respect of
Series A Preferred Stock on the Redemption Date, the Conversion Date or the
Repurchase Date for such shares, as the case may be, unless, in the case of a
Redemption Date or Repurchase Date, the Corporation defaults in the payment of
the amounts necessary for such redemption or in its obligation to deliver
certificates representing Common Stock issuable upon such conversion, as the
case may be, in which case, dividends shall continue to accumulate at an annual
rate of 25% 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 A Preferred Stock at an
annual rate equal to the Default Dividend Rate, payable in cash.
(d) So long as any Series A Preferred Stock is outstanding,
the Corporation shall not declare, pay or set apart for payment any dividend on
any Junior Stock or make any payment on account of, or set apart for payment
money for a sinking or other similar fund for, the purchase, redemption or other
retirement of, any Junior Stock, or any warrants, rights, calls or options
exercisable for any Junior Stock (except such securities which are debt
securities or Senior Stock or Parity Stock) or make any distribution in respect
thereof, either directly or indirectly, and whether in cash, obligations or
shares of the Corporation or other property (other than, prior
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<PAGE> 3
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, re tirements or distributions in Junior Stock) unless and until all
dividend arrearages on the Series A Preferred Stock have been paid in full in
cash, and the Corporation is not in default of any of its obligations under
Section 5 or Section 8.
(e) Unless and until all dividend arrearages on the Series A
Preferred Stock have been paid in full, all dividends declared by the
Corporation upon Series A Preferred Stock or Parity Stock shall be declared pro
rata with respect to all Series A Preferred Stock and Parity Stock then
outstanding so that the amounts of any dividends declared per share on the
Series A Preferred Stock and such Parity Stock bear the same ratio to each other
at the time of declaration as all accrued and unpaid dividends on the Series A
Preferred Stock and the Parity Stock bear to each other.
(f) Dividends payable on the Series A Preferred Stock shall be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in the period for which payable.
4. Liquidation Preference. (a) In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the Holders shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders an amount in cash
equal to the then Liquidation Preference for each share out standing, 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,
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.
(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
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<PAGE> 4
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 A Preferred Stock, at a redemp
tion price in cash equal to the then Liquidation Preference (the
"Optional Redemption Price"); provided that no optional redemption shall
be made unless full dividends have been or contemporaneously are declared
and paid or declared and a sum set apart sufficient for such payment, on
the Series A Preferred Stock for all Dividend Periods terminating on or
prior to the Redemption Date; and provided, further, that no partial
redemption shall be made (i) for an amount of shares of Series A Preferred
Stock less than such number as have an aggregate Liquidation Preference
equal to the lesser of $1,000,000 or the aggregate Liquidation Preference
of all outstanding Series A Preferred Stock, or (ii) if after con
summation of any such partial redemption there would remain outstanding
less than the Specified Investor Amount of shares of Series A Preferred
Stock.
(b) Proration. In the event of a redemption pursuant to
Section 5(a) of only a portion of the then outstanding Series A Preferred Stock,
unless a majority of the outstanding shares of Series A Preferred Stock shall
agree in writing to waive the requirement of proration, the Corporation shall
effect such redemption pro rata according to the number of shares held by each
Holder, except that the Corporation may redeem such shares held by Holders of
100 or fewer shares (or shares held by Holders who would hold 100 or fewer
shares as a result of such redemption), as may be determined by the Corporation.
(c) Procedure for Redemption. (i) At least thirty (30) days
and not more than sixty (60) days prior to the date fixed for any redemption of
the Series A Preferred Stock, written notice (the "Redemption Notice") shall be
given by first class mail, postage prepaid, to each Holder on the record date
fixed for such redemption of the Series A Preferred Stock at such Holder's
address as the same appears on the stock books of the Corporation. The
Redemption Notice shall state:
(1) that such notice constitutes a Redemption Notice
pursuant to Section 5(a);
(2) the Optional Redemption Price;
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<PAGE> 5
(3) whether all or less than all the outstanding Series A
Preferred Stock redeemable thereunder is to be redeemed and the total
number of shares of such Series A Preferred Stock being redeemed;
(4) the number of shares of Series A Preferred Stock held, as
of the appropriate record date, by the specific Holder that the
Corporation intends to redeem;
(5) the Redemption Date;
(6) that the Holder is to surrender to the Corporation his
certificate or certificates representing the Series A Preferred Stock
to be redeemed, specifying the place or places where, and the manner in
which, certificates for Series A Preferred Stock are to be surrendered
for redemption;
(7) the date on which the Series A Preferred Stock called for
redemption shall cease to be convertible; and
(8) that dividends on the Series A Preferred Stock to be
redeemed shall cease to accumulate on the Redemption Date, unless the
Corporation defaults in the payment of the amounts necessary for such
redemption, in which case, dividends shall continue to accumulate until
such payment is made.
(ii) Each Holder shall surrender the certificate or
certificates representing such Series A Preferred Stock to the Corporation, duly
endorsed, in the manner and at the place designated in the Redemption Notice,
and on the Redemption Date the full Optional Redemption Price for such shares so
surrendered shall be payable in cash to the Person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be cancelled and retired. If less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(iii) If on or before the Redemption Date all funds necessary
for such redemption shall have been set aside by the Corporation, separate and
apart from its other funds, in trust for the pro rata benefit of the Holders of
the shares so called for redemption, so as to be and continue to be available
therefor and 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
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<PAGE> 6
rights with respect to such shares shall forthwith on such Redemption Date cease
and terminate, except only the right of the Holders thereof to receive the
amount payable on redemption thereof, without interest. Any interest accrued on
such funds shall be paid to the Corporation from time to time.
Any funds so set aside or deposited by the Corporation which
shall not be required for such redemption because of the exercise of any right
of conversion subsequent to the date of such deposit shall be released or repaid
to the Corporation forthwith. Any funds so set aside or deposited, as the case
may be, and unclaimed as of the first anniversary of such Redemption Date shall
be released or repaid to the Corporation, after which the Holders of the shares
so called for redemption shall look only to the Corporation for payment thereof.
6. Conversion. (a) Conversion Right. The Holder of each share
of Series A Preferred Stock shall have the right at any time, or from time to
time (prior in each case to the thirtieth day following the date of the
Redemption Notice if such share shall be called for redemption pursuant to
Section 5), at the option of such Holder, to convert such share into Common
Stock, on and subject to the terms and conditions hereinafter set forth. Subject
to the provisions for adjustment hereinafter set forth, each share of Series A
Preferred Stock shall be convertible into such number (calculated as to each
conversion to the nearest 1/100th of a share) of fully paid and nonassessable
shares of Common Stock, as is ob tained by dividing the Liquidation Preference
by the Conversion Price, in each case as in effect at the date any Series A
Preferred Stock is surrendered for conversion.
(b) Conversion Procedures. To exercise the conversion
privilege, the Holder of any Series A Preferred Stock to be converted in whole
or in part shall surrender the certificate representing such Series A Preferred
Stock (the "Series A Preferred Stock Certificate") at the office or agency then
maintained by the Corporation for the transfer of the Series A Preferred Stock,
and shall give written notice of conversion in the form provided on the Series A
Preferred Stock Certificate (or such other notice which is acceptable to the
Corporation) to the Corporation at such office or agency that the Holder elects
to convert such Series A Preferred Stock represented by the Series A Preferred
Stock Certificate so surrendered or the portion thereof speci fied in said
notice into Common Stock. Such notice shall also state the name or names (with
addresses) in which the certificate or certificates for Common Stock which shall
be issuable upon such conversion shall be issued, and shall be accompanied by
transfer taxes, if required. Each Series A Preferred Stock Certificate
surrendered for conversion
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<PAGE> 7
shall, unless the shares issuable on conversion are to be issued in the same
name as the registration of such Series A Preferred Stock Certificate, be duly
endorsed by, or be accompanied by instruments of transfer in form satisfactory
to the Corporation duly executed by, the Holder or such Holder's duly authorized
attorney.
As promptly as practicable, but in no event later than five
(5) Business Days, after the surrender of such Series A Preferred Stock
Certificate and the receipt of such notice and funds, if any, as aforesaid, the
Corporation shall issue and shall simultaneously deliver at such office or
agency to such Holder, or on his written order, a certificate or certificates
for the number of shares of Common Stock, issuable upon the conversion of such
Series A Preferred Stock repre sented by the Series A Preferred Stock
Certificate so surrendered or por tion thereof in accordance with the provisions
of this Section 6. In case less than all of the Series A Preferred Stock
represented by a Series A Preferred Stock Certificate surrendered for conversion
is to be con verted, the Corporation shall simultaneously deliver to or upon the
written order of the Holder of such Series A Preferred Stock Certificate a new
Series A Preferred Stock Certificate representing the Series A Preferred Stock
not converted. If a Holder fails to notify the Corpora tion of the number of
shares of Series A Preferred Stock which such Holder wishes to convert, such
Holder shall be deemed to have elected to convert all shares represented by the
certificate or certificates sur rendered for conversion.
Each conversion shall be deemed to have been effected on the
date on which such Series A Preferred Stock Certificate shall have been
surrendered and such notice shall have been received by the Corporation, as
aforesaid (the "Conversion Date"), and the Person in whose name any certificate
or certificates for Common Stock shall be issuable upon such conversion shall be
deemed to have become on said date the holder of record of the shares
represented thereby; provided, however, that any such surrender on any date when
the stock books of the Corporation shall be closed shall constitute the Person
in whose name the certificates are to be issued as the record holder thereof for
all purposes on the next succeeding day on which such stock books are open, but
such conversion shall be at the Conversion Price as in effect on the date upon
which such Series A Preferred Stock Certificate shall have been surrendered.
All Series A Preferred Stock that shall have been surrendered
for conversion as herein provided shall no longer be deemed to be outstanding
and all rights with respect to such shares, including the rights, if any, to
receive notices and to
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<PAGE> 8
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 con
version, dividends shall continue to accumulate at the Default Dividend Rate
until such delivery is made.
If any Series A Preferred Stock shall be called for
redemption, the right to convert such Series A Preferred Stock shall terminate
at the close of business on the thirtieth day following the date of the
Redemption Notice.
(c) The Conversion Price at which Series A Preferred Stock is
convertible into Common Stock shall be subject to adjustment from time to time
as provided in this Section 6(c) (unless otherwise indicated, all calculations
under this Section 6(c) shall be made to the nearest $0.01):
(i) In case the Corporation shall (A) declare a dividend or
make a distribution on the outstanding Common Stock in Capital Stock of
the Corporation, (B) subdivide or reclassify the outstanding Common
Stock into a greater number of shares (or into other securities or
property), or (C) combine or reclassify the outstanding Common Stock
into a smaller number of 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 divi dend shall be deemed to have
been issued immediately prior to the time of the record date for such
dividend for purposes of calculating the number of outstanding shares
of Common Stock under subparagraphs (ii) and (iii) below. Adjustments
pursuant to this subparagraph shall be made successively whenever any
event specified above shall occur.
(ii) In case the Corporation shall fix a record date for the
issuance of rights or warrants to all holders of
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<PAGE> 9
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 or Investor Warrants) at a price
per share (or having a conversion price or exchange price per share,
subject to normal antidilution adjustments) less than the Current
Market Price (as defined in subparagraph (vii) below) of Common Stock
on such record date, the Conversion Price in effect at the close of
business on such record date shall be reduced by multiplying such
Conversion Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of
such rights, options or warrants plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares
of Common Stock so offered would purchase at the Current Market Price
as of such record date, and the denominator of which shall be the
number of shares of Common Stock outstanding on the date of issuance of
such rights, options or warrants plus the number of additional shares
of Common Stock offered for subscription or purchase in connection with
such rights, options or warrants. Such adjustment shall be made
whenever such rights, options or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants. In
case any rights or warrants referred to in this subparagraph (ii) in
respect of which an adjustment shall have been made shall expire
unexercised within forty-five (45) days after the same shall have been
distributed or issued by the Corporation, the Conversion Price shall be
readjusted at the time of such expiration to the Conversion Price that
would have been in effect if no ad justment had been made on account of
the distribution or issuance of such expired rights or warrants.
(iii) In case the Corporation shall fix a record date for the
making of a distribution to all holders of Common Stock (A) of shares
of any class other than Common Stock, (B) of evidences of indebtedness
of the Corporation or any Subsidiary, (C) of assets or other property
or (D) of rights or warrants (excluding those rights or warrants
resulting in an adjustment pursuant to subparagraph (ii) above, and the
right to acquire Series B Preferred Stock in the rights offering
thereof), then in each such case the Conversion Price shall be reduced
so that such price shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the effectiveness of
the Conversion Price reduction contemplated by this subparagraph (iii)
by a fraction, the numerator of
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<PAGE> 10
which shall be the then Current Market Price per share of Common Stock,
less the then fair market value (as deter mined by the Board of
Directors, whose reasonable determination shall be described in a
resolution certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be
in full force and effect on the date of such certification (a "Board
Resolution") of the portion of the securities, evidences of
indebtedness, assets, property or rights or warrants so distributed,
the case may be, which is applicable to one share of Common Stock, and
the denominator of which shall be the Current Market Price per share of
Common Stock as of the record date for such distribution. Such
adjustment shall be made succes sively whenever such a record date is
fixed.
(iv) In case the Corporation shall issue Common Stock for a
consideration per share less than the Current Market Price per share on
the date the Corporation fixes the offering price of such additional
shares, the Conversion Price shall be adjusted immediately thereafter
so that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior thereto by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding immediately after the issuance of such additional shares,
and the denominator shall be the total number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares
plus the number of shares of Common Stock which the aggregate
consideration received (determined as provided in subparagraph (vi)
below) for the issuance of such additional shares would purchase at the
Current Market Price per share. Such adjustment shall be made
successively whenever such an issuance is made; provided, however, that
the provisions of this subparagraph shall not apply (A) to Common Stock
issued to the Corporation's employees or former employees or their
estates under bona fide employee benefit plans adopted by the Board of
Direc tors and approved by the holders of Common Stock if required by
law, if such Common Stock would otherwise be covered by this
subparagraph, but only to the extent that the aggregate number of
shares excluded hereby shall not exceed, on a cumulative basis since
the date hereof, [NUMBER TO BE AGREED BEFORE CLOSING] (including
822,000 shares as of the date hereof to be issued pursuant to em ployee
stock options outstanding as of the date hereof to pur chase Common
Stock), (B) to the Common Stock to be issued pursuant to the Bank
Warrants, (y) to the Common Stock to be issued pursuant to the Investor
Warrants and (C) to Common Stock to be issued upon conversion of the
Series B
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<PAGE> 11
Preferred Stock, adjusted as ap propriate 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 B Preferred Stock, (C)
Investor Warrants, and (D) 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 issu
ance 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 ad justment shall be made
successively whenever such an issuance is made.
Upon the termination of the right to convert or exchange such
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustments made
upon the issuance of such convertible or exchangeable securities been
made upon the basis of the delivery of only the number of shares of
Common Stock actually delivered upon conversion or exchange of such
securities and upon the basis of the consideration actually received by
the Corporation (determined as provided in subparagraph (vi) below) for
such securities.
(vi) For purposes of any computation respecting
consideration received pursuant to subparagraphs (iv) and (v) above,
the following shall apply:
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<PAGE> 12
(A) in the case of the issuance of Common Stock
for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deductions be made for any
commissions, discounts, placement fees or other expenses
incurred by the Corporation for any underwriting or placement
of the issue or otherwise in connection therewith;
(B) in the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined by the Board of Directors,
whose reasonable determination shall be described in a Board
Resolution; and
(C) in the case of the issuance of securities
convertible into or exchangeable for Common Stock, the
aggregate consideration received therefor shall be deemed to
be the consideration received by the Corporation for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by the Corporation upon
the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in
clauses (A) and (B) of this subparagraph (vi)).
(vii) For the purpose of any computation under this Certificate
of Designation, (A) the "Current Market Price" per share at any date
shall be deemed to be the average of the daily Closing Price for the
Common Stock for the ten (10) consecutive Trading Days commencing
fourteen (14) Trading Days before such date, and (B) the "Closing
Price" of the Common Stock means the last reported sale price regular
way reported on the NASDAQ Stock Market or its successor, or, if not
listed or admitted to trading on the NASDAQ Stock Market or its
successor, the last reported sale price regular way reported on any
other stock exchange or market on which the Common Stock is then listed
or eligible to be quoted for trading, or as reported by the National
Quotation Bureau Incorporated.
(viii) In any case in which this Section shall require that an
adjustment shall become effective immediately after a record date for
an event, the Corporation may defer until the occurrence of such event
(A) issuing to the Holder of any Series A Preferred Stock converted
after such record date and before the occurrence of such event the
Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above
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<PAGE> 13
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 Con
version Price, in addition to those required pursuant to other
subparagraphs of this Section, as it considers to be advisable so that
any event treated for federal income tax purposes as a dividend of
stock or stock rights shall not be taxable to the recipients.
(x) In case of any consolidation with or merger of the
Corporation into another corporation, or in case of any sale, lease or
conveyance of assets to another corporation of the property of the
Corporation as an entirety or substantially as an entirety, lawful and
adequate provisions shall be made whereby each Holder of Series A
Preferred Stock shall have the right to receive, from such successor,
leasing or purchasing corporation, as the case may be, upon the basis
and upon the terms and conditions specified herein, in lieu of the
Common Stock immediately theretofore re ceivable upon the conversion of
such Series A Preferred Stock, the kind and amount of shares of stock,
other securities, property or cash or any combination thereof
receivable upon such consolida tion, merger, sale, lease or conveyance
by a holder of the number of shares of Common Stock into which such
Series A Preferred Stock might have been converted immediately prior to
such con solidation, merger, sale, lease or conveyance. In the case of
any such consolidation, merger or sale of substantially all the as
sets, appropriate provision shall be made with respect to the rights
and interests of the Holders to the end that the provisions hereof
(including provisions for 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 de liverable upon the
exercise of any conversion rights hereunder.
(xi) In case of any reclassification or change of the Common
Stock issuable upon conversion of Series A Preferred Stock (other than
a change in par value, or from par value to no par value, or as a
result of a subdivision or combination, but including any change in the
Common Stock into two or more classes or series of shares), or in
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<PAGE> 14
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 combina tion, but including any change in
the Common Stock into two or more classes or series of shares), lawful
and adequate provisions shall be made whereby each Holder of Series A
Preferred Stock shall have the right to receive, upon the basis and
upon the terms and conditions specified herein, in lieu of the Common
Stock im mediately theretofore receivable upon the conversion of such
Series A Preferred Stock, the kind and amount of shares of stock, other
securities, property or cash or any combination thereof receivable upon
such reclassification, change, consolidation or merger, by a holder of
the number of shares of Common Stock into which such Series A Preferred
Stock might have been converted immediately prior to such
reclassification, change, consolidation or merger.
(xii) The foregoing subparagraphs (x) and (xi), however, shall
not in any way affect the rights a Holder may otherwise have, pursuant
to this Section, to receive securities, evidences of indebtedness,
assets, property rights or warrants upon conversion of any Series A
Preferred Stock.
(xiii) If the Corporation repurchases (by way of tender offer,
exchange offer or otherwise) any Common Stock for a per share
consideration which exceeds the Current Market Price of a share of
Common Stock on the date immediately prior to such repurchase, the
Conversion Price shall be reduced so that such price shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subparagraph (xiii) by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such acquisition multiplied by the
Current Market Price per share of the Common Stock on the immediately
preceding Trading Day, and the denominator shall be the sum of (A) the
fair market value (as determined in good faith by the Board of
Directors) of the aggregate consideration payable to stockholders as a
result of such acquisition, and (B) the product of the number of shares
of Common Stock outstanding immediately following such acquisition and
the Current Market Price per share of the Common Stock on such
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<PAGE> 15
immediately preceding Trading Day, such reduction to become effective
immediately prior to the opening of business on the day following such
acquisition.
(xiv) If any event occurs as to which the foregoing provisions
of this Section 6(c) are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the Board of
Directors, fairly protect the conversion rights of the Series A
Preferred Stock in accordance with the essential intent and principles
of such provisions, then the Board of Directors shall make such
adjustments in the application of such provisions, in accordance with
such essential intent and principles, as shall be reasonably necessary,
in the good faith opinion of the Board of Directors, to protect such
conversion rights as aforesaid, but in no event shall any such
adjustment have the effect of increasing the Conversion Price, or
otherwise adversely affect the Holders.
(xv) For purposes of Section 6(c), Common Stock owned or held
at any relevant time by, or for the account of, the Corporation in its
treasury or otherwise, shall not be deemed to be outstanding for
purposes of the calculation and adjustments described therein. Shares
held in the Disputed Claims Reserve, Division Class 14 Utility Fund
Trust Agreement dated April 6, 1993 and the Improvements Fund Trust
Agreement dated April 6, 1993 shall not be deemed to be held by, or for
the account of, the Corporation.
(d) Conversion Price Adjustment Deferred. Notwithstanding the
foregoing provisions of this Section 6, (i) no adjustment in the number of
shares of Common Stock into which any Series A Preferred Stock is convertible
shall be required unless such adjustment would require an increase or decrease
in such number of shares of at least 1% and (ii) no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease in the Conversion Price of at least $.01 per share; provided, however,
that any adjustments which by reason of this paragraph (d) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 6 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be.
(e) Adjustment Report. Whenever any adjustment is required in
the shares into which any Series A Preferred Stock is convertible, the
Corporation shall forthwith (i) file with each office or agency then maintained
by the Corporation for
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<PAGE> 16
the transfer of the Series A Preferred Stock a statement describing in
reasonable detail the adjustment and the method of calculation used and (ii)
cause a notice of such adjustment, setting forth the adjusted Conversion Price
and the calculation thereof to be mailed to the Holders at their respective
addresses as shown on the stock books of the Corporation. The certificate of any
independent firm of public accountants of recognized standing selected by the
Board of Di rectors 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 sub stantially all of the
assets of the Corporation; or
(iv) the Corporation shall take action looking to a
voluntary or involuntary dissolution, liquidation or winding-up of the
Corporation;
then the Corporation shall (A) in case of any such distribution or subscription
rights, at least twenty (20) days prior to the date or expected date on which
the stock books of the Corporation shall close or a record shall be taken for
the determination of Holders entitled to such distribution or subscription
rights, and (B) in the case of any such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up,
at least twenty (20) days prior to the date or expected date when the same shall
take place, cause written notice thereof to be mailed to each Holder at his
address as shown on the stock books of the Corporation. Such notice in
accordance with the foregoing clause (A) shall also specify, in the case of any
such distribution or subscription rights, the date or expected date on which the
holders of Common Stock shall be entitled thereto, and such notice in accordance
with the foregoing clause (B) shall also specify the date or expected date on
which the holders of Common Stock
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<PAGE> 17
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up, as the case may
be.
(g) Common Stock. For the purposes of this Section 6, the term
"Common Stock" shall mean (i) the Common Stock or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value or from no par value to par value, or
from par value to no par value. If at any time as a result of an adjustment made
pursuant to the provisions of Section 6(c), the Holder of any Series A Preferred
Stock thereafter surrendered for conversion shall become entitled to receive any
the Corporation such other shares so receivable upon conversion of any Series A
Preferred Stock shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in Section 6(c), and the other provisions of this
Section 6 with respect to the Common Stock shall apply on like terms to any such
other shares.
(h) Fractional Shares. The Corporation shall not be required
to issue fractional shares of Common Stock upon the conversion of any Series A
Preferred Stock. If more than one share of Series A Preferred Stock shall be
surrendered for conversion at one time by the same Holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on the
basis of the aggregate number of shares so surrendered. If any fractional
interest in a share of Common Stock would be deliverable upon the conversion of
any Series A Preferred Stock, the Corporation may pay, in lieu thereof, in cash
the Closing Price thereof as of the Business Day immediately preceding the date
of such conversion.
(i) Reservation of Shares. The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued stock, for the purpose of effecting the conversion or redemption of
the Series A Preferred Stock, such number of its duly authorized shares of
Common Stock (or treasury shares as provided below) as shall from time to time
be sufficient for the conversion of all outstanding Series A Preferred Stock
into Common Stock at any time. The Corporation shall, from time to time and in
accordance with the General Corporation Law of the State of Delaware, cause the
authorized number of shares of Common Stock to be increased if the aggregate of
the number of authorized shares of Common Stock remaining unissued and the
issued shares
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<PAGE> 18
of such Common Stock reserved for issuance in any other connection shall not be
sufficient for the conversion of all outstanding Series A Preferred Stock into
Common Stock at any time.
7. Voting Rights. The Series A Preferred Stock shall have
the following voting rights:
(a) The Holders of Series A Preferred Stock voting together as
a single class shall be entitled to elect three directors to the Board of
Directors (who shall serve for terms of one year) and shall otherwise not vote
on any matters submitted to the holders of the Common Stock for a vote, except
as may be required by law; provided, however, that if the Investor does not hold
at least the Specified Investor Amount of Series A Preferred Stock, the number
of directors that the Holders of the Series A Preferred Stock shall be entitled
to elect shall be equal to three multiplied by a fraction, the numerator of
which is the number of shares of Series A Preferred Stock outstanding and the
denominator of which is 25,000, rounded up to the nearest whole director.
(b) So long as any Series A Preferred Stock is outstanding,
without the affirmative vote or consent of Holders of at least a majority of the
outstanding Series A Preferred Stock, voting or consenting, as the case may be,
as one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting, the Corporation shall not (i) issue, or
reclassify any authorized stock of the Corpo ration into, or issue any
obligation or security convertible into or evidencing a right to purchase, any
Senior Stock or Parity Stock or any preferred stock having voting rights senior
or equal to those of the Se ries A Preferred Stock (other than Series B
Preferred Stock), (ii) reclassify the Series A Preferred Stock, or (iii) amend
its Certificate of Incorporation or this Certificate of Designation or the
Certificate of Designation for the Series B Preferred Stock so as to affect
adversely the specified rights, preferences, privileges or voting rights of Hold
ers or to increase or decrease the authorized number of shares of Series A
Preferred Stock or Series B Preferred Stock.
(c) In any case in which the Holders shall be entitled to vote
as a separate class pursuant to this Section 7 or pursuant to Delaware law, each
Holder shall be entitled to one vote for each share of Series A Preferred Stock
then held.
8. Repurchase Obligation. (a) Subject to the provisions of
Section 8(b), the Series A Preferred Stock shall not be redeemable at the option
of the Holder thereof prior to the
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<PAGE> 19
fourth anniversary of the Original Issue Date. Beginning on the fourth
anniversary of the Original Issue Date, each Holder shall have the right, at
such Holder's option, exercisable by notice (a "Repurchase Notice"), to require
the Corporation to purchase Series A Preferred Stock then held by such Holder,
at a repurchase price in cash equal to the Liquidation Preference in effect at
such time (the "Repurchase Price"); provided, however, that the number of shares
required to be repurchased from any Holder by the Corporation pursuant to this
Section 8(a) ("Put Shares") prior to the fifth anni versary of the Original
Issue Date shall not exceed one-third of the total number of shares of Series A
Preferred Stock issued by the Corporation, and, prior to the sixth anniversary
of the Original Issue Date, the number of Put Shares shall not exceed two-thirds
of the total number of shares of Series A Preferred Stock issued by the
Corporation.
(b) Notwithstanding the provisions of Section 8(a), if an
Event of Default shall occur at any time or from time to time on or after the
Original Issue Date, each Holder shall have the right, at such Holder's option
exercisable by Repurchase Notice at any time within sixty (60) days after the
happening of each such Event of Default or, if later, receipt of notice from the
Corporation of such Event of Default, to re quire the Corporation to purchase
all or any part of the Series A Preferred Stock then held by such Holder as such
Holder may elect, at the Repurchase Price.
(c) The Corporation shall, within thirty (30) days of the
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, immediately upon
becoming aware of any facts or events that could reasonably be expected to
result in the oc currence of an Event of Default, give a written notice thereof
by tele copy, if possible, and by first class mail, postage prepaid, to the
Holders, addressed to such Holders at their last addresses as shown upon the
stock books of the Corporation.
(d) The date fixed for each such repurchase (the "Repurchase
Date") shall be the 30th day following the date of the Repurchase Notice
relating thereto. The place of payment shall be at an office or agency in the
City of New York, New
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<PAGE> 20
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 A Preferred Stock held by it purchased shall surrender the
certificate representing such shares to the Corporation at the place designated
in such notice together with an election to have such purchase made and shall
thereupon be entitled to receive payment therefor provided in this Section 8. If
less than all the shares represented by any such surrendered certificate are
repurchased, a new certificate shall be issued representing the unpurchased
shares. Payment of the Repurchase Price for the Put Shares shall be made on the
later of the Repurchase Date or the fifth Business Day after the surrender of
such certificate. Divi dends with respect to the Series A Preferred Stock so
purchased shall cease to accrue after the Repurchase Date, such shares shall no
longer be deemed outstanding and the Holders thereof shall cease to be
stockholders of the Corporation and all rights whatsoever with respect to the
shares so purchased shall terminate; provided, however, that if the Corporation
defaults in its obligation to pay the Repurchase Price for such Put Shares,
interest shall accrue on the amount of such obligation at the Default Dividend
Rate until such payment is made (with all interest due).
(e) Notwithstanding any other provision hereof, if any of the
following events shall occur and be continuing: (i) the Company or any of its
Significant Subsidiaries shall commence any case, proceeding or other action (A)
under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
assets, or the Company or any of its Significant Subsidiaries shall make a
general assignment for the benefit of its creditors; (ii) there shall be
commenced against the Company or any of its Significant Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
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, dis traint or similar process against all
or any substantial part of its assets which results in the
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<PAGE> 21
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; (iv) the Company or any of its Significant Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clauses (i), (ii), or (iii) above;
(v) the Company or any of its Significant Subsidiaries shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts as
they become due; (vi) the Company or any of its Significant Subsidiaries shall
cause to be reinstated the Reorganization Proceedings (as defined in the Note
Agreement (as defined in the Investment Agreement)); or (vii) the Confirmation
Order (as defined in the Note Agreement) shall be reversed, withdrawn, modified
(in any manner adverse to Company or any of its Significant Subsidiaries), or
any rehearing shall be ordered with respect thereto by the Bankruptcy Court or
by any court having jurisdiction over the Company; then, and in any such event,
all Series A Preferred Stock held by such Holder shall be Put Shares and the
aggregate 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 A Preferred Stock. Series A
Preferred Stock that has been issued and reacquired in any manner, including
shares surrendered to the Corporation upon conversion, and shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws of
Delaware) have the status of authorized and unissued preferred stock
undesignated as to series and may not be re-designated and reissued as part of
any series of preferred stock.
10. Business Day. If any payment or redemption shall be
required by the terms hereof to be made on a day that is not a Business
Day, such payment or redemption shall be made on the immediately
succeeding Business Day.
11. Headings of Sections. The headings of the various
Sections hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
12. Severability of Provisions. If any right, preference or
limitation of the Series A Preferred Stock set forth in this Certificate of
Designation (as it may be amended from time to time) is invalid, unlawful or
incapable of being enforced by reason of any rule or law or public policy, all
other
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<PAGE> 22
rights, preferences and limitations set forth in this Certificate of Designation
(as so amended) which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and no right, preference or limitation herein set forth
shall be deemed dependent upon any other such right, preference or limitation
unless so expressed herein.
13. Notice. All notices and other communications provided
for or permitted to be given to the Corporation hereunder shall be made by hand
delivery, next day air courier or certified first-class mail to the Corporation
at its principal executive offices at Atlantic Gulf Communities Corporation,
2601 South Bayshore Drive, Miami, Florida 33133-5461, Telecopy number (305)
859-4623, Attention: Chief Financial Officer.
14. Amendments. This Certificate of Designation may be amended
without notice to or the consent of any Holder to cure any ambiguity, defect or
inconsistency or to make any other amendment provided that any such amendment
does not adversely affect the rights of any Holder. Any provisions of this
Certificate of Designation may also be amended by the Corporation with the vote
or written consent of Holders represent ing a majority of the outstanding Series
A Preferred Stock.
The Corporation will, so long as any Series A Preferred Stock
is outstanding, maintain an office or agency where such shares may be presented
for registration or transfer and where such shares may be presented for
conversion and redemption.
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).
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<PAGE> 23
"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
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<PAGE> 24
would enable the creditors or secured parties under such Instrument to declare
the principal amount of such indebtedness due and payable prior to its sched
uled maturity, and has not been waived by the relevant creditors or secured
parties, (ii) the occurrence of a Default Change of Control (as defined in the
Investment Agreement), (iii) a material breach (following written notice by the
Investor that the Investor would consider such a breach as material) by the
Company of Section 6.7(f) of the Investment Agreement or (insofar as such breach
is willful and materially imperils the value of the collateral securing the
rights of the Holder or the rights of the Holder with respect thereto) of
Section 3 of the Note Agreement or any Security Document (as defined in the Note
Agreement) which, in any event, is not curable or if curable is not cured within
15 days, or (iv) one of the events specified in clauses (i) through (vii) of
Section 8(e).
"Holder" means a record holder of one or more outstanding
shares of Series A Preferred Stock.
"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 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 Investment Agreement dated as
of February 7, 1997 by and between AP-AGC, LLC and the Corporation.
"Junior Stock" has the meaning set forth in Sec
tion 2.
"Liquidation Preference" means, at any time, $1,000 per share
of Series A Preferred Stock, plus accumulated and unpaid Dividends thereon
through the date of such determination, whether or not declared and whether or
not funds are legally available therefor.
"Optional Redemption Price" has the meaning set forth in
Section 5(a).
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<PAGE> 25
"Original Issue Date" means the date upon which the Series A
Preferred Stock is originally issued by the Corporation.
"Parity Stock" means the Series B Preferred Stock and any
class or series of stock the terms of which provide that it is entitled to
participate pari passu with the Series A Preferred Stock with respect to any
dividend or distribution or upon liquidation, dissolution or winding-up of the
Corporation.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, business trust, joint-stock
company, trust, unincorporated organization or government or agency or political
subdivision thereof.
"Put Shares" has the meaning set forth in Section 8(a).
"Quarterly Dividend Period" shall mean the quarterly period
commencing on each March 31, June 30, September 30 and December 31 and ending on
each Dividend Payment Date, respectively.
"Redemption Date", with respect to any Series A Preferred
Stock, means the date on which such Series A Preferred Stock is redeemed by the
Corporation.
"Redemption Notice" has the meaning set forth in Section
5(c).
"Repurchase Date" has the meaning set forth in Section 8(d).
"Repurchase Notice" has the meaning set forth in Section
8(a).
"Repurchase Price" has the meaning set forth in Section 8(a).
"Senior Stock" means any class or series of stock the terms of
which provide that it is entitled to a preference to the Series A Preferred
Stock with respect to any dividend or distribution or upon voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation.
"Series A Preferred Stock" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series A, par value $.10 per share, of the
Corporation.
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<PAGE> 26
"Series A Preferred Stock Certificate" has the meaning set
forth in Section 6(b).
"Series B Preferred Stock" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series B, par value $.01 per share, of the
Corporation, which may be issued in accordance with the Investment Agreement.
"Significant Subsidiary" has the meaning set forth in
Regulation S-X under the Securities Exchange Act of 1934, as amended.
"Specified Investor Amount" means 5,000 shares of Series A
Preferred Stock.
"Subsidiary" means, (i) with respect to any Person, a cor
poration a majority of whose Capital Stock with voting power under ordinary
circumstances to elect directors is at the time, directly or indirectly, owned
by such Person, by a Subsidiary of such Person or by such Person and a
Subsidiary of such Person, or (ii) any other Person (other than a corporation)
of which at least a majority of the voting interest is at the time, directly or
indirectly, owned by such Person, by a Subsidiary of such Person or by such
Person and a Subsidiary of such Person.
"Trading Day" shall mean a day on which securities are traded
or quoted on the national securities exchange or quotation system or in the
over-the-counter market used to determine the Closing Price.
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<PAGE> 1
Exhibit 4
ANNEX B TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ATLANTIC GULF COMMUNITIES CORPORATION
STATEMENT OF
PREFERENCES AND RIGHTS OF
20% CUMULATIVE REDEEMABLE CONVERTIBLE
PREFERRED STOCK, SERIES B
_______________________
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):
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 1,000,000.
2. Rank. The Series B Preferred Stock shall, with respect to
dividend distributions and distributions upon the voluntary or involuntary
liquidation, winding up and dissolution of the Corporation, rank (i) senior to
all classes of Common Stock and each other class of Capital Stock of the
Corporation or series of preferred stock of the Corporation hereafter created
which is not Senior Stock or Parity Stock ("Junior Stock"), (ii) pari passu
with any Parity Stock and (iii) junior to any Senior Stock. There is no Senior
Stock outstanding on the date hereof, and there is no Parity Stock outstanding
on the date hereof other than the 20% Cumulative Redeemable Convertible
Preferred Stock, Series A (the "Series A Preferred Stock"). 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
<PAGE> 2
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 Original Issue Date and shall be payable quarterly in
arrears on each Dividend Payment Date commencing on ________, 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 25% 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
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<PAGE> 3
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, 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.
(b) For the purposes of this Section 4, neither the sale,
conveyance, exchange or transfer (for cash, shares of
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<PAGE> 4
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)
Proration. In the event of a redemption pursuant to Section
5(a) of only a portion of the then outstanding Series B Preferred Stock, unless
a majority of the outstanding shares of Series B Preferred Stock shall agree in
writing to waive the requirement of proration, the Corporation shall effect
such redemption pro rata according to the number of shares held by each Holder,
except that the Corporation may redeem such shares held by Holders of 100 or
fewer shares (or shares held by Holders who would hold 100 or fewer shares as a
result of such redemption), as may be determined by the Corporation.]
(c) Procedure for Redemption. (i) At least thirty (30) days
and not more than sixty (60) days prior to the date fixed for any redemption of
the Series 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;
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<PAGE> 5
(3) whether all or less than all the outstanding Series B
Preferred Stock redeemable thereunder is to be redeemed and the total
number of shares of such Series B Preferred Stock being redeemed;
(4) the number of shares of Series B Preferred Stock
held, as of the appropriate record date, by the specific Holder that
the Corporation intends to redeem;
(5) the Redemption Date;
(6) that the Holder is to surrender to the Corporation
his certificate or certificates representing the Series B Preferred
Stock to be redeemed, specifying the place or places where, and the
manner in which, certificates for Series B Preferred Stock are to be
surrendered for redemption;
(7) the date on which the Series B Preferred Stock called
for redemption shall cease to be convertible; and
(8) that dividends on the Series B Preferred Stock to be
redeemed shall cease to accumulate on the Redemption Date, unless the
Corporation defaults in the payment of the amounts necessary for such
redemption, in which case, dividends shall continue to accumulate
until such payment is made.
(ii) Each Holder shall surrender the certificate or
certificates representing such Series B Preferred Stock to the Corporation,
duly endorsed, in the manner and at the place designated in the Redemption
Notice, and on the Redemption Date the full Optional Redemption Price for such
shares so surrendered shall be payable in cash to the Person whose name appears
on such certificate or certificates as the owner thereof, and each surrendered
certificate shall be cancelled and retired. If less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(iii) If on or before the Redemption Date all funds
necessary for such redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the Holders of the shares so called for redemption, so as to be and continue to
be available therefor and not subject to claims of creditors of the
Corporation, then, notwithstanding that any certificate for shares so called
for redemption shall not have been surrendered for cancellation, all shares so
called for redemption shall no longer be deemed outstanding on and after such
Redemption Date, and all
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<PAGE> 6
rights with respect to such shares shall forthwith on such Redemption Date
cease and terminate, except only the right of the Holders thereof to receive
the amount payable on redemption thereof, without interest. Any interest
accrued on such funds shall be paid to the Corporation from time to time.
Any funds so set aside or deposited by the Corporation which
shall not be required for such redemption because of the exercise of any right
of conversion subsequent to the date of such deposit shall be released or
repaid to the Corporation forthwith. Any funds so set aside or deposited, as
the case may be, and unclaimed as of the first anniversary of such Redemption
Date shall be released or repaid to the Corporation, after which the Holders of
the shares so called for redemption shall look only to the Corporation for
payment thereof.
6. Conversion. (a) Conversion Right. The Holder of each
share of Series 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
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<PAGE> 7
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 certificates for Common Stock shall be issuable upon such conversion shall
be deemed to have become on said date the holder of record of the shares
represented thereby; provided, however, that any such surrender on any date
when the stock books of the Corporation shall be closed shall constitute the
Person in whose name the certificates are to be issued as the record holder
thereof for all purposes on the next succeeding day on which such stock books
are open, but such conversion shall be at the Conversion Price as in effect on
the date upon which such Series B Preferred Stock Certificate shall have been
surrendered.
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
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<PAGE> 8
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 subparagraph shall be made
successively whenever any event specified above shall occur.
(ii) In case the Corporation shall fix a record date for
the issuance of rights or warrants to all holders of
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<PAGE> 9
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 or Investor Warrants) at a price
per share (or having a conversion price or exchange price per share,
subject to normal antidilution adjustments) less than the Current
Market Price (as defined in subparagraph (vii) below) of Common Stock
on such record date, the Conversion Price in effect at the close of
business on such record date shall be reduced by multiplying such
Conversion Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding on the date of issuance
of such rights, options or warrants plus the number of shares of
Common Stock which the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at the Current Market
Price as of such record date, and the denominator of which shall be
the number of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase
in connection with such rights, options or warrants. Such adjustment
shall be made whenever such rights, options or warrants are issued,
and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options
or warrants. In case any rights or warrants referred to in this
subparagraph (ii) in respect of which an adjustment shall have been
made shall expire unexercised within forty- five (45) days after the
same shall have been distributed or issued by the Corporation, the
Conversion Price shall be readjusted at the time of such expiration to
the Conversion Price that would have been in effect if no adjustment
had been made on account of the distribution or issuance of such
expired rights or warrants.
(iii) In case the Corporation shall fix a record date for
the making of a distribution to all holders of Common Stock (A) of
shares of any class other than Common Stock, (B) of evidences of
indebtedness of the Corporation or any Subsidiary, (C) of assets or
other property or (D) of rights or warrants (excluding those rights or
warrants resulting in an adjustment pursuant to subparagraph (ii)
above, and the right to acquire Series B Preferred Stock in the rights
offering thereof), then in each such case the Conversion Price shall
be reduced so that such price shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this
subparagraph (iii) by a fraction, the numerator of
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<PAGE> 10
which shall be the then Current Market Price per share of Common
Stock, less the then fair market value (as determined by the Board of
Directors, whose reasonable determination shall be described in a
resolution certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and to be
in full force and effect on the date of such certification (a "Board
Resolution") of the portion of the securities, evidences of
indebtedness, assets, property or rights or warrants so distributed,
the case may be, which is applicable to one share of Common Stock, and
the denominator of which shall be the Current Market Price per share
of Common Stock as of the record date for such distribution. Such
adjustment shall be made successively whenever such a record date is
fixed.
(iv) In case the Corporation shall issue Common Stock for
a consideration per share less than the Current Market Price per share
on the date the Corporation fixes the offering price of such
additional shares, the Conversion Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying
the Conversion Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of
Common Stock outstanding immediately after the issuance of such
additional shares, and the denominator shall be the total number of
shares of Common Stock outstanding immediately prior to the issuance
of such additional shares plus the number of shares of Common Stock
which the aggregate consideration received (determined as provided in
subparagraph (vi) below) for the issuance of such additional shares
would purchase at the Current Market Price per share. Such adjustment
shall be made successively whenever such an issuance is made;
provided, however, that the provisions of this subparagraph shall not
apply (A) to Common Stock issued to the Corporation's employees or
former employees or their estates under bona fide employee benefit
plans adopted by the Board of Directors and approved by the holders of
Common Stock if required by law, if such Common Stock would otherwise
be covered by this subparagraph, but only to the extent that the
aggregate number of shares excluded hereby shall not exceed, on a
cumulative basis since the date hereof, [NUMBER TO BE AGREED BEFORE
CLOSING] (including 822,000 shares as of the date hereof to be issued
pursuant to employee stock options outstanding as of the date hereof
to purchase Common Stock), (B) to the Common Stock to be issued
pursuant to the Bank Warrants, (y) to the Common Stock to be issued
pursuant to the Investor Warrants and (C) to Common Stock to be issued
upon conversion of the Series B
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<PAGE> 11
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 B Preferred Stock, (C)
Investor Warrants, and (D) upon conversion of any of such securities)
for a consideration per share of Common Stock deliverable upon
conversion or exchange of such securities (determined as provided in
subparagraph (vi) below and subject to normal antidilution
adjustments) less than the Current Market Price per share in effect
immediately prior to the issuance of such securities, the Conversion
Price shall be adjusted immediately thereafter so that it shall equal
the price determined by multiplying the Conversion Price in effect
immediately prior thereto by a fraction, of which the numerator shall
be the number of shares of Common Stock outstanding immediately prior
to such issuance plus the maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for such securities at
the initial conversion or exchange price or rate, and the denominator
shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities plus the number of shares of
Common Stock which the aggregate consideration received (determined as
provided in subparagraph (vi) below) for such securities would
purchase at the Current Market Price per share. Such adjustment shall
be made successively whenever such an issuance is made.
Upon the termination of the right to convert or exchange such
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustments made
upon the issuance of such convertible or exchangeable securities been
made upon the basis of the delivery of only the number of shares of
Common Stock actually delivered upon conversion or exchange of such
securities and upon the basis of the consideration actually received
by the Corporation (determined as provided in subparagraph (vi) below)
for such securities.
(vi) For purposes of any computation respecting
consideration received pursuant to subparagraphs (iv) and (v) above,
the following shall apply:
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(A) in the case of the issuance of Common Stock
for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deductions be made for any
commissions, discounts, placement fees or other expenses
incurred by the Corporation for any underwriting or placement
of the issue or otherwise in connection therewith;
(B) in the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined by the Board of Directors,
whose reasonable determination shall be described in a Board
Resolution; and
(C) in the case of the issuance of securities
convertible into or exchangeable for Common Stock, the
aggregate consideration received therefor shall be deemed to
be the consideration received by the Corporation for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by the Corporation upon
the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in
clauses (A) and (B) of this subparagraph (vi)).
(vii) For the purpose of any computation under this
Certificate of Designation, (A) the "Current Market Price" per share
at any date shall be deemed to be the average of the daily Closing
Price for the Common Stock for the ten (10) consecutive Trading Days
commencing fourteen (14) Trading Days before such date, and (B) the
"Closing Price" of the Common Stock means the last reported sale price
regular way reported on the NASDAQ Stock Market or its successor, or,
if not listed or admitted to trading on the NASDAQ Stock Market or its
successor, the last reported sale price regular way reported on any
other stock exchange or market on which the Common Stock is then
listed or eligible to be quoted for trading, or as reported by the
National Quotation Bureau Incorporated.
(viii) In any case in which this Section shall require that
an adjustment shall become effective immediately after a record date
for an event, the Corporation may defer until the occurrence of such
event (A) 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
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<PAGE> 13
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
Preferred Stock shall have the right to receive, from such successor,
leasing or purchasing corporation, as the case may be, upon the basis
and upon the terms and conditions specified herein, in lieu of the
Common Stock immediately theretofore receivable upon the conversion of
such Series B Preferred Stock, the kind and amount of shares of stock,
other securities, property or cash or any combination thereof
receivable upon such consolidation, merger, sale, lease or conveyance
by a holder of the number of shares of Common Stock into which such
Series B Preferred Stock might have been converted immediately prior
to such consolidation, merger, sale, lease or conveyance. In the case
of any such consolidation, merger or sale of substantially all the
assets, appropriate provision shall be made with respect to the rights
and interests of the Holders to the end that the provisions hereof
(including provisions for adjustment of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
exercise of any conversion rights hereunder.
(xi) In case of any reclassification or change of the
Common Stock issuable upon conversion of Series B Preferred Stock
(other than a change in par value, or from par value to no par value,
or as a result of a subdivision or combination, but including any
change in the Common Stock into two or more classes or series of
shares), or in
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<PAGE> 14
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 reclassification, change, consolidation
or merger, by a holder of the number of shares of Common Stock into
which such Series B Preferred Stock might have been converted
immediately prior to such reclassification, change, consolidation or
merger.
(xii) The foregoing subparagraphs (x) and (xi), however,
shall not in any way affect the rights a Holder may otherwise have,
pursuant to this Section, to receive securities, evidences of
indebtedness, assets, property rights or warrants upon conversion of
any Series B Preferred Stock.
(xiii) If the Corporation repurchases (by way of tender
offer, exchange offer or otherwise) any Common Stock for a per share
consideration which exceeds the Current Market Price of a share of
Common Stock on the date immediately prior to such repurchase, the
Conversion Price shall be reduced so that such price shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price
reduction contemplated by this subparagraph (xiii) by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such acquisition multiplied by the
Current Market Price per share of the Common Stock on the immediately
preceding Trading Day, and the denominator shall be the sum of (A) the
fair market value (as determined in good faith by the Board of
Directors) of the aggregate consideration payable to stockholders as a
result of such acquisition, and (B) the product of the number of
shares of Common Stock outstanding immediately following such
acquisition and the Current Market Price per share of the Common Stock
on such
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<PAGE> 15
immediately preceding Trading Day, such reduction to become effective
immediately prior to the opening of business on the day following such
acquisition.
(xiv) If any event occurs as to which the foregoing
provisions of this Section 6(c) are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the
Board of Directors, fairly protect the conversion rights of the Series
B Preferred Stock in accordance with the essential intent and
principles of such provisions, then the Board of Directors shall make
such adjustments in the application of such provisions, in accordance
with such essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of the Board of Directors, to
protect such conversion rights as aforesaid, but in no event shall any
such adjustment have the effect of increasing the Conversion Price, or
otherwise adversely affect the Holders.
(xv) For purposes of Section 6(c), Common Stock owned or
held at any relevant time by, or for the account of, the Corporation
in its treasury or otherwise, shall not be deemed to be outstanding
for purposes of the calculation and adjustments described therein.
Shares held in the Disputed Claims Reserve, Division Class 14 Utility
Fund Trust Agreement dated April 6, 1993 and the Improvements Fund
Trust Agreement dated April 6, 1993 shall not be deemed to be held by,
or for the account of, the Corporation.
(d) Conversion Price Adjustment Deferred. Notwithstanding
the foregoing provisions of this Section 6, (i) no adjustment in the number of
shares of Common Stock into which any Series B Preferred Stock is convertible
shall be required unless such adjustment would require an increase or decrease
in such number of shares of at least 1% and (ii) no adjustment in the
Conversion Price shall be required unless such adjustment would require an
increase or decrease in the Conversion Price of at least $.01 per share;
provided, however, that any adjustments which by reason of this paragraph (d)
are not required to 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
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<PAGE> 16
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, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up,
at least twenty (20) days prior to the date or expected date when the same
shall take place, cause written notice thereof to be mailed to each Holder at
his address as shown on the stock books of the Corporation. Such notice in
accordance with the foregoing clause (A) shall also specify, in the case of any
such distribution or subscription rights, the date or expected date on which
the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (B) shall also specify the date or
expected date on which the holders of Common Stock
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<PAGE> 17
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up, as the case may
be.
(g) Common Stock. For the purposes of this Section 6, the
term "Common Stock" shall mean (i) the Common Stock or (ii) any other class of
stock resulting from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value or from no par value to par
value, or from par value to no par value. If at any time as a result of an
adjustment made pursuant to the provisions of Section 6(c), the Holder of any
Series B Preferred Stock thereafter surrendered for conversion shall become
entitled to receive any the Corporation such other shares so receivable upon
conversion of any Series B Preferred Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Common Stock contained in Section 6(c), and
the other provisions of this Section 6 with respect to the Common Stock shall
apply on like terms to any such other shares.
(h) Fractional Shares. The Corporation shall not be required
to issue fractional shares of Common Stock upon the conversion of any Series B
Preferred Stock. If more than one share of Series B Preferred Stock shall be
surrendered for conversion at one time by the same Holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of 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
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<PAGE> 18
of such Common Stock reserved for issuance in any other connection shall not be
sufficient for the conversion of all outstanding Series B Preferred Stock into
Common Stock at any time.
7. Voting Rights. The Holders of Series B Preferred Stock
shall not vote on any matters submitted to the holders of the Common Stock for
a vote, except as may be required by law. In any case in which the Holders
shall be entitled to vote as a separate class pursuant to Delaware law, each
Holder shall be entitled to one vote for each share of Series B Preferred Stock
then held.
8. Repurchase Obligation. (a) Subject to the provisions of
Section 8(b), the Series B Preferred Stock shall not be redeemable at the
option of the Holder thereof prior to the fourth anniversary of the Original
Issue Date. Beginning on the fourth anniversary of the Original Issue Date,
each Holder shall have the right, at such Holder's option, exercisable by
notice (a "Repurchase Notice"), to require the Corporation to purchase Series B
Preferred Stock then held by such Holder, at a repurchase price in cash equal
to the Liquidation Preference in effect at such time (the "Repurchase Price");
provided, however, that the number of shares required to be repurchased by the
Corporation pursuant to this Section 8(a) ("Put Shares") prior to the fifth
anniversary of the Original Issue Date shall not exceed one-third of the total
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
occurrence of an Event of Default, give written notice thereof by telecopy, if
possible, and by first class mail, postage prepaid, to each Holder, addressed
to such Holder at his last address and telecopy number as shown upon the stock
books of the Corporation. Each such notice shall specify the
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Event of Default which has occurred and the date of such occurrence, the place
or places of payment, the then effective Conversion Price pursuant to Section
6, the then effective Repurchase Price and the date the right of such Holder to
require such repurchase shall terminate. In addition, the Corporation shall,
immediately upon becoming aware of any facts or events that could reasonably be
expected to result in the occurrence of an Event of Default, give a written
notice thereof by telecopy, if possible, and by first class mail, postage
prepaid, to the Holders, addressed to such Holders at their last addresses as
shown upon the stock books of the Corporation.
(d) The date fixed for each such repurchase (the "Repurchase
Date") shall be the 30th day following the date of the Repurchase Notice
relating thereto. The place of payment shall be at an office or agency in the
City of New York, New York fixed therefor by the Corporation or, if not fixed,
at the principal executive office of the Corporation.
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,
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<PAGE> 20
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 Proceedings (as defined in the Note Agreement (as defined in the
Investment Agreement)); or (vii) the Confirmation Order (as defined in the Note
Agreement) shall be reversed, withdrawn, modified (in any manner adverse to
Company or any of its Significant Subsidiaries), or any rehearing shall be
ordered with respect thereto by the Bankruptcy Court or by any court having
jurisdiction over the Company; then, and in any such event, all Series B
Preferred Stock held by such Holder shall be Put Shares and the aggregate
Repurchase Price in respect of each such share shall immediately and
automatically become due and payable in full without any requirement or
pre-condition of delivery of a Repurchase Notice, any such requirement or
pre-condition being expressly waived hereby.
9. Reissuance of Series B Preferred Stock. Series B
Preferred Stock that has been issued and reacquired in any manner, including
shares surrendered to the Corporation upon conversion, and shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws of
Delaware) have the status of authorized and unissued preferred stock
undesignated as to series and may not be re-designated and reissued as part of
any series of preferred stock.
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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
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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.
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"Dividend Period" means the Initial Dividend Period and,
thereafter, each Quarterly Dividend Period.
"Dividend Record Date" means a day fifteen (15) days preceding
the Dividend Payment Date.
"Event of Default" means (i) any event of default (whatever the
reason for such event of default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
governmental authority) under any Instrument creating, evidencing or securing
any indebtedness for borrowed money of the Company or any Significant
Subsidiary in an amount in excess of $2,500,000 that would enable the creditors
or secured parties under such Instrument to declare the principal amount of
such indebtedness due and payable prior to its scheduled maturity, and has not
been waived by the relevant creditors or secured parties, (ii) the occurrence
of a Default Change of Control (as defined in the Investment Agreement), or
(iii) one of the events specified in clauses (i) through (vii) of Section 8(e).
"Holder" means a record holder of one or more outstanding
shares of Series B Preferred Stock.
"Initial Dividend Period" means the dividend period commencing
on the Original Issue Date and ending on the second Dividend Payment Date to
occur thereafter.
"Instrument" means any contract, agreement, indenture,
mortgage, security, document or writing under which any obligation is
evidenced, assumed or undertaken, or any security interest is granted or
perfected.
"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 Investment Agreement dated as
of February 7, 1997 by and between AP- AGC, LLC and the Corporation.
"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.
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"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 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.
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<PAGE> 25
"Series A Preferred Stock" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series A, par value $.10 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.
"Significant Subsidiary" has the meaning set forth in
Regulation S-X under the Securities Exchange Act of 1934, as amended.
"Subsidiary" means, (i) with respect to any Person, a
corporation a majority of whose Capital Stock with voting power under ordinary
circumstances to elect directors is at the time, directly or indirectly, owned
by such Person, by a Subsidiary of such Person or by such Person and a
Subsidiary of such Person, or (ii) any other Person (other than a corporation)
of which at least a majority of the voting interest is at the time, directly or
indirectly, owned by such Person, by a Subsidiary of such Person or by such
Person and a Subsidiary of such Person.
"Trading Day" shall mean a day on which securities are traded
or quoted on the national securities exchange or quotation system or in the
over-the-counter market used to determine the Closing Price.
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<PAGE> 1
Exhibit 5
EXHIBIT C
________ Warrants Certificate No. W-[A][B][C]-1
WARRANT FOR THE PURCHASE OF
COMMON STOCK OF
ATLANTIC GULF COMMUNITIES CORPORATION
(VOID AFTER ________, 2004)
THE WARRANTS (AND THE COMMON STOCK ISSUABLE UPON EXERCISE THEREOF)
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE
ABSENCE OF SUCH REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM
SUCH REGISTRATION. THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED EXCEPT UPON COMPLIANCE WITH THE REQUIREMENTS FOR TRANSFER SET
FORTH HEREIN AND IN AN INVESTMENT AGREEMENT DATED AS OF FEBRUARY 7,
1997 BETWEEN THE ISSUER AND AP-AGC, LLC. THE COMMON STOCK ISSUABLE UPON
EXERCISE HEREOF IS ENTITLED TO THE BENEFITS OF CERTAIN REGISTRATION
RIGHTS UNDER SUCH INVESTMENT AGREEMENT.
THIS IS TO CERTIFY THAT, for value received, AP-AGC, LLC
("AP-AGC"), or registered assigns (collectively, the "Holder"), is the
registered owner of the number of Warrants set forth above, each of which
entitles the Holder, subject to the terms and conditions set forth hereinafter,
to purchase one share of Common Stock, par value $.10 per share (the "Common
Stock"), of Atlantic Gulf Communities Corporation, a corporation organized under
the laws of the State of Delaware (the "Company") having a place of business at
2601 South Bayshore Drive, Miami, Florida 33133-5461, at a purchase price per
share referred to herein as the "Exercise Price." The number of shares of Common
Stock which may be received upon the exercise of this certificate (this "Warrant
Certificate") and the Exercise Price for each such share of Common Stock are
subject to adjustment from time to time as hereinafter set forth. Each share of
Common Stock issuable upon the exercise of each of the Warrants (collectively,
the "Warrant Shares") when issued and paid for pursuant to the provisions of
this Warrant shall be duly authorized, validly issued, fully paid and
nonassessable, shall be free from all taxes, liens and charges with respect to
the issuance thereof and shall be free of any preemptive or similar rights. The
Company shall cause the Warrant Shares to be listed or eligible to be quoted for
trading on the NASDAQ
<PAGE> 2
Stock Market or on any other stock exchange or market on which Common Stock is
then listed or eligible to be quoted for trading.
Each Warrant evidenced hereby is originally acquired pursuant
to an Investment Agreement dated as of February 7, 1997, between the Company and
AP-AGC (the "Investment Agreement"), pursuant to which AP-AGC and the Company
are also entering into a Secured Note Agreement dated as of February 7, 1997
(the "Note Agreement"), for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged.
Each Warrant is subject to the following terms and provisions:
Section 1. Exercise of Warrant.
(a) Subject to the provisions hereof, the Warrants evidenced
hereby may be exercised at the discretion of the Holder in whole or in part at
any time or from time to time on or after February 7, 1997 (the "Initial
Exercise Date") to and including February 7, 2004 (the "Expiration Date") or, if
either day is not a Trading Day, then on the next succeeding Trading Day, by
presentation and surrender hereof to the Company at the office or agency of the
Company maintained for that purpose pursuant to Section 11 (the "Warrant
Office"), with the Notice of Election to Exercise (the "Exercise Notice")
attached hereto duly executed and accompanied by payment to the Company of the
Exercise Price for the number of Warrant Shares specified in such Exercise
Notice.
(b) The Exercise Price for the Common Stock which each Warrant
entitles the Holder to purchase shall initially be equal to $5.75. The Exercise
Price set forth in the preceding sentence is subject to adjustment as set forth
in Sections 5 and 6.
(c) Upon receipt by the Company of this Warrant Certificate at
the Warrant Office, together with a properly completed Exercise Notice and
payment of the Exercise Price as provided above, the Holder shall be deemed to
be the holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares shall not then be actually
delivered to the Holder. The Company shall deliver such certificates to the
Holder as promptly as possible thereafter, but in any event within five business
days of receipt of the Exercise Notice. The Company shall pay all expenses, and
any and all United States federal, state and
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<PAGE> 3
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 1
except that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of the
Warrant Shares in a name other than that of the Holder of the Warrant evidenced
hereby who shall have surrendered the same in exercise of the subscription right
evidenced hereby. If Warrant Shares are issued prior to the time that an
appropriate registration statement with respect to the Warrant Shares has become
effective under the Securities Act of 1933, as amended (the "Securities Act"),
the Warrant Shares so issued shall have stamped or imprinted thereon a legend in
the form of Exhibit A. Any holder of Warrant Shares so legended shall be
entitled to have such legend removed, upon surrender of Warrant Shares to the
Company or the transfer agent for the Common Stock, upon effectiveness of such a
registration statement or upon receipt by the Company of an opinion of counsel
to the Holder to the effect that such legend is no longer required.
(d) Upon any partial exercise of the number of Warrants to
which this Warrant Certificate entitles the Holder, there shall be issued to the
Holder hereof a new Warrant Certificate in respect of the shares as to which
this Warrant Certificate shall not have been exercised, subject to the
provisions of Section 3. Such new Warrant Certificate shall be identical to this
Warrant Certificate, except as to the number of shares of Common Stock covered
thereby.
Section 2. Exchange, Transfer, Assignment or Loss of
Warrant Certificate; Temporary Warrant
Certificates.
(a) In case this Warrant Certificate shall be mutilated, lost,
stolen, or destroyed, the Company may, in its discretion, issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen, or destroyed, a new Warrant Certificate of like tenor and representing
an equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and
indemnification reasonably satisfactory to it.
(b) The Warrant Certificates shall be numbered and shall be
registered in a Warrant Register maintained by the Company as they are issued.
The registered owner on the Warrant Register may be treated by the Company and
all other persons dealing with the Warrants evidenced hereby as the absolute
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<PAGE> 4
owner hereof for any purpose and as the person entitled to exercise the right
represented hereby, or to the transfer hereof on the books of the Company, any
notice to the contrary notwithstanding and, until such transfer on such books,
the Company may treat the registered owner on the Warrant Register as the owner
for all purposes. The Company may require payment of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any
registration of transfer of Warrant Certificates.
(c) This Warrant Certificate may be subdivided or combined with
other Warrant Certificates evidencing the same rights as the rights evidenced
hereby and thereby upon presentation and surrender hereof at the Warrant Office
together with a written notice signed by the Holder hereof specifying the
denominations in which new Warrant Certificates are to be issued. Upon
presentation and surrender of any Warrant Certificates, together with such
written notice, for subdivision or combination, the Company will issue a new
Warrant Certificate or Certificates, in the denominations requested, entitling
the holders thereof to purchase the same aggregate number of shares of Common
Stock as the Warrant Certificate or Certificates so surrendered. Such new
Warrant Certificates will be registered in the name of the Holder submitting
such request and delivered to such Holder. Any Warrant Certificate surrendered
for subdivision or combination shall be cancelled promptly upon the issuance of
such new Warrant Certificate(s). The term "Warrant Certificate" as used herein
includes any Warrant Certificates into which this Warrant Certificate may be
subdivided, combined or exchanged.
Section 3. Fractional Interests.
(a) The Company shall not be required to issue fractions of
Warrants or to issue Warrant Certificates which evidence fractional Warrants.
(b) The Company shall not be required to issue fractions of
shares of Common Stock in the exercise of Warrants. If any fraction of a Warrant
Share would, but for the provisions of this Section, be issuable on the exercise
of any Warrant (or specified portion thereof), the Company shall purchase such
fraction for an amount in cash equal to the same fraction of the Current Market
Price (as defined in Section 5(g)) per share of Common Stock.
(c) The Holder, by acceptance of this Warrant Certificate,
expressly waives his right to receive any fractional Warrant or any fractional
share upon exercise of a Warrant.
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<PAGE> 5
Section 4. Reservation of Warrant Shares, etc.
The Company represents that, as of the date hereof, it has
sufficient Common Stock reserved for issuance upon exercise of all outstanding
Warrants, and agrees that, at all times during the period within which the
rights represented by this Warrant Certificate may be exercised, there shall be
reserved for issuance and/or delivery upon exercise of the Warrants evidenced by
this Warrant Certificate, free from preemptive rights, such number of shares of
authorized but unissued or treasury shares of Common Stock, or other stock or
securities deliverable pursuant to Section 5, as shall be required for issuance
or delivery upon exercise of the Warrants evidenced hereby. The Company further
agrees (i) that it will not, by amendment of its certificate of incorporation or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act, avoid or seek to avoid the observance or performance
of any of the covenants, stipulations or conditions to be observed or performed
hereunder by the Company and (ii) to promptly take all action as may from time
to time be required to permit the Holder to exercise the Warrants evidenced
hereby and the Company duly and effectively to issue the Warrant Shares as
provided herein upon the exercise hereof. Without limiting the generality of the
foregoing, the Company agrees that it will not take any action which would
result in Warrant Shares when issued not being validly and legally issued and
fully paid and nonassessable and that it will take all such action as may be
necessary to assure that the Warrant Shares may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
the NASDAQ Stock Market or any other stock exchange or market upon which the
Common Stock may be listed; provided, however, that the Company shall not be
required to effect a registration under federal or state securities laws with
respect to such exercise except as provided in the Investment Agreement. The
Company further agrees that it will not increase the par value of the Common
Stock while the Warrants evidenced hereby are outstanding, although such par
value may be reduced at any time.
Section 5. Anti-Dilution.
The Exercise Price and the number of shares of Common Stock
purchasable upon the exercise hereof shall be subject to adjustment from time to
time as provided in this Section. Unless otherwise indicated, all calculations
under this Section 5 shall be made to the nearest $0.01 or 1/100th of a share,
as the case may be.
(a) In case the Company shall (i) declare a dividend or make a
distribution on the outstanding Common Stock in
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<PAGE> 6
capital stock of the Company, (ii) subdivide or reclassify the
outstanding Common Stock into a greater number of shares (or into other
securities or property), or (iii) combine or reclassify the outstanding
Common Stock into a smaller number of shares (or into other securities
or property), the number of Warrant Shares issuable upon the exercise
of each Warrant shall be adjusted so that the Holder of each Warrant
shall be entitled to purchase the kind and number of shares of Common
Stock or other securities or property of the Company determined by
multiplying the number of Warrant Shares issuable upon exercise of each
Warrant immediately prior to such event by a fraction, the numerator of
which shall be the total number of outstanding shares of Common Stock
immediately after such event, and the denominator of which shall be the
total number of outstanding shares of Common Stock immediately prior to
such event. An adjustment made pursuant to this paragraph (a) shall
become effective immediately after the effective date of such event,
retroactive to the record date, if any, for such event. Any Common
Stock issuable in payment of a dividend shall be deemed to have been
issued immediately prior to the time of the record date for such
dividend for purposes of calculating the number of outstanding shares
of Common Stock under paragraphs (b) and (c) below. Adjustments
pursuant to this paragraph shall be made successively whenever any
event specified above shall occur. Whenever the number of Warrant
Shares issuable upon exercise of a Warrant is adjusted pursuant to this
paragraph, the Exercise Price payable upon exercise of each Warrant
shall be adjusted by multiplying the Exercise Price in effect
immediately prior to such adjustment by a fraction, the numerator of
which shall be the number of Warrant Shares issuable upon the exercise
of each Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares issuable
immediately thereafter.
(b) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of Common Stock entitling
them to subscribe for or purchase Common Stock (or securities
convertible into or exchangeable of Common Stock) (other than Series B
Preferred Stock) at a price per share (or having a conversion price or
exchange price per share, subject to normal antidilution adjustments)
less than the Current Market Price (as defined in paragraph (g) below)
of the Common Stock on such record date, the number of Warrant Shares
thereafter issuable upon exercise of each Warrant shall be determined
by
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<PAGE> 7
multiplying the number of Warrant Shares theretofore issuable upon
exercise of each Warrant by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the number of
additional shares of Common Stock offered for subscription or purchase
in connection with such rights, options or warrants, and the
denominator of which shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights, options or warrants
plus the number of shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered would
purchase at the Current Market Price as of such record date. Such
adjustment shall be made whenever such rights, options or warrants are
issued, and shall become effective immediately after the record date
for the determination of stockholders entitled to receive such rights,
options or warrants. Whenever the number of Warrant Shares issuable
upon exercise of a Warrant is adjusted pursuant to this paragraph, the
Exercise Price payable upon exercise of each Warrant shall be adjusted
by multiplying the Exercise Price in effect immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of
Warrant Shares issuable upon the exercise of each Warrant immediately
prior to such adjustment, and the denominator of which shall be the
number of Warrant Shares issuable immediately thereafter.
(c) In case the Company shall fix a record date for the making
of a distribution to all holders of Common Stock (i) of shares of any
class other than Common Stock, (ii) of evidences of indebtedness of the
Company or any Subsidiary, (iii) of assets or other property or (iv) of
rights or warrants (excluding rights or warrants resulting in an
adjustment pursuant to paragraph (b) above, and the right to acquire
Series B Preferred Stock in the rights offering thereof), then in each
such case the number of Warrant Shares thereafter issuable upon
exercise of each Warrant shall be determined by multiplying the number
of Warrants Shares theretofore issuable upon the exercise of each
Warrant by a fraction, the numerator of which shall be the Current
Market Price per share of Common Stock as of the record date for such
distribution, and the denominator of which shall be the then Current
Market Price per share of Common Stock, less the then fair market value
(as determined by the Board of Directors, whose reasonable
determination shall be described in a Board Resolution) of the portion
of the securities, evidences of indebtedness, assets, property or
rights or warrants so distributed, the case may be, which is applicable
to one share of Common
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<PAGE> 8
Stock. Such adjustment shall be made successively whenever such a
record date is fixed. Whenever the number of Warrant Shares issuable
upon exercise of a Warrant is adjusted pursuant to this paragraph, the
Exercise Price payable upon exercise of each Warrant shall be adjusted
by multiplying such Exercise Price immediately prior to such adjustment
by a fraction, the numerator of which shall be the number of Warrant
Shares issuable upon the exercise of each Warrant immediately prior to
such adjustment, and the denominator of which shall be the number of
Warrant Shares purchasable immediately thereafter.
(d) In case the Company shall issue its Common Stock for a
consideration per share less than the Current Market Price per share on
the date the Company fixes the offering price of such additional
shares, the Exercise Price shall be adjusted immediately thereafter so
that it shall equal the price determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, of which the
numerator shall be the total number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares
plus the number of shares of Common Stock which the aggregate
consideration received (determined as provided in paragraph (f) below)
for the issuance of such additional shares would purchase at the
Current Market Price per share, and the denominator shall be the number
of shares of Common Stock outstanding immediately after the issuance of
such additional shares. Such adjustment shall be made successively
whenever such an issuance is made; provided, however, that the
provisions of this paragraph shall not apply (i) to Common Stock issued
to the Company's employees or former employees or their estates under
bona fide employee benefit plans adopted by the Board of Directors and
approved by the holders of Common Stock if required by law, if such
Common Stock would otherwise be covered by this paragraph, but only to
the extent that the aggregate number of shares excluded hereby shall
not exceed, on a cumulative basis since the Initial Exercise Date,
[NUMBER TO BE AGREED BEFORE CLOSING] (including 822,000 shares as of
the Initial Exercise Date to be issued pursuant to employee and
director stock options outstanding as of the Initial Exercise Date to
purchase Common Stock), (ii) to Common Stock to be issued pursuant to
the Bank Warrants, (y) to Common Stock to be issued pursuant to the
Investor Warrants and (iii) to Common Stock to be issued upon
conversion of Series A Preferred Stock or Series B Preferred Stock,
adjusted, as appropriate, in each case, connection with any stock
split, merger, recapitalization or similar transaction.
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<PAGE> 9
(e) In case the Company shall issue any securities convertible
into or exchangeable for Common Stock (excluding (A) securities issued
in transactions resulting in an adjustment pursuant to paragraphs (b)
and (c) above, (B) Series A Preferred Stock, (C) Series B Preferred
Stock and (D) upon conversion of any of such securities) for a
consideration per share of Common Stock deliverable upon conversion or
exchange of such securities (determined as provided in paragraph (f)
below and subject to normal anti-dilution adjustments) less than the
Current Market Price per share in effect immediately prior to the
issuance of such securities, the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the price determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such
securities plus the number of shares of Common Stock which the
aggregate consideration received (determined as provided in paragraph
(f) below) for such securities would purchase at the Current Market
Price per share, and the denominator shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the
maximum number of shares of Common Stock deliverable upon conversion of
or in exchange for such securities at the initial conversion or
exchange price or rate. Such adjustment shall be made successively
whenever such an issuance is made.
Upon the termination of the right to convert or exchange such
securities, the Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been obtained had the adjustments made
upon the issuance of such convertible or exchangeable securities been
made upon the basis of the delivery of only the number of shares of
Common Stock actually delivered upon conversion or exchange of such
securities and upon the basis of the consideration actually received by
the Company (determined as provided in paragraph (f) below) for such
securities.
(f) For purposes of any computation respecting consideration
received pursuant to paragraphs (d) and (e) above, the following shall
apply:
(i) in the case of the issuance of Common Stock for
cash, the consideration shall be the amount of such cash,
provided that in no case shall any deductions be made for any
customary commissions, discounts, placement fees or other
expenses reasonably incurred by the Company for any
underwriting or
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<PAGE> 10
placement of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of Common Stock for
a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as reasonably determined by the Board of
Directors, whose determination shall be described in a Board
Resolution; and
(iii) in the case of the issuance of securities
convertible into or exchangeable for Common Stock, the
aggregate consideration received therefor shall be deemed to
be the consideration received by the Company for the issuance
of such securities plus the additional minimum consideration,
if any, to be received by the Company upon the conversion or
exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (i) and
(ii) of this paragraph (f)).
(g) For the purpose of any computation under this Warrant, the
"Current Market Price" per share at any date shall be deemed to be the
average of the daily Sale Price for the Common Stock for the 10
consecutive Trading Days commencing 14 Trading Days before such date.
(h) In any case in which this Section shall require that an
adjustment shall become effective immediately after a record date for
an event, the Company may defer until the occurrence of such event (i)
issuing to the Holder of any Warrant exercised after such record date
and before the occurrence of such event the additional Common Stock
issuable upon such exercise by reason of the adjustment required by
such event over and above the Common Stock issuable upon such exercise
before giving effect to such adjustment and (ii) paying to such Holder
an amount in cash in lieu of a fractional share of Common Stock
pursuant to Section 3; provided, however , that the Company shall
deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's rights to receive such additional Common
Stock, and such cash, upon the occurrence of the event requiring such
adjustment.
(i) No adjustment in the Exercise Price shall be required with
respect to Common Stock issued upon exercise of the Warrants unless
such adjustment would require a decrease of at least $.01; provided,
however, that any such adjustment which is not required to be made
shall be
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<PAGE> 11
carried forward and taken into account in any subsequent adjustment.
(j) The Company may make such reductions in the Exercise Price,
in addition to those required pursuant to other paragraphs of this
Section, as it considers to be advisable so that any event treated for
federal income tax purposes as a dividend of stock or stock rights
shall not be taxable to the recipients.
(k) In case of any consolidation with or merger of the Company
into another corporation, or in case of any sale, lease or conveyance
of assets to another corporation of the property of the Company as an
entirety or substantially as an entirety, such successor, leasing or
purchasing corporation, as the case may be, shall be bound by this
Warrant Certificate and shall execute and deliver to the Holder hereof
simultaneously therewith a new Warrant Certificate, reasonably
satisfactory in form and substance to such Holder, providing that the
Holder of each Warrant then outstanding shall have the right
thereafter to exercise such Warrant solely for the kind and amount of
shares of stock, other securities, property or cash or any combination
thereof receivable upon such consolidation, merger, sale, lease or
conveyance by a holder of the number of shares of Common Stock for
which such Warrant might have been exercised immediately prior to such
consolidation, merger, sale, lease or conveyance.
(l) In case of any reclassification or change of the Common
Stock issuable upon exercise of the Warrants (other than a change in
par value, or from par value to no par value, or as a result of a
subdivision or combination, but including any change in the Common
Stock into two or more classes or series of shares), or in case of any
consolidation or merger of another corporation into the Company in
which the Company is the continuing corporation and in which there is a
reclassification or change (including a change to the right to receive
cash or other property) of the Common Stock (other than a change in par
value, or from par value to no par value, or as a result of a
subdivision or combination, but including any change in the Common
Stock into two or more classes or series of shares), the Company shall
execute and deliver to the Holder hereof simultaneously therewith a new
Warrant Certificate, satisfactory in form and substance to such Holder,
providing that the Holder of each Warrant then outstanding shall have
the right thereafter to exercise such Warrant solely for the kind and
amount of shares of
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<PAGE> 12
stock, other securities, property or cash or any combination thereof
receivable upon such reclassification, change, consolidation or merger
by a holder of the number of shares of Common Stock for which such
Warrant might have been exercised immediately prior to such
reclassification, change, consolidation or merger.
(m) The foregoing paragraphs (k) and (1), however, shall not
in any way affect the rights a Holder may otherwise have, pursuant to
this Section, to receive securities, evidences of indebtedness, assets,
property rights or warrants upon exercise of a Warrant.
(n) Whenever there shall be any change in the Exercise Price
under any paragraph of this Section, and no specific means of adjusting
the number of Warrant Shares issuable upon exercise of each Warrant is
provided in such paragraph, then there shall be an adjustment (to the
nearest hundredth of a share) in the number of shares of Common Stock
purchasable upon exercise of this Warrant Certificate, which adjustment
shall become effective at the time such change in the Exercise Price
becomes effective and shall be made by multiplying the number of shares
of Common Stock purchasable upon exercise of this Warrant Certificate
immediately before such change in the Exercise Price by a fraction, the
numerator of which is the Exercise Price immediately before such
change, and the denominator of which is the Exercise Price immediately
after such change. If, following the declaration of a record date for
the distribution of any rights, warrants or other securities or
property to be distributed to holders of Common Stock, such rights,
warrants or other securities or property are not so issued, the
Exercise Price then in effect shall be readjusted, effective as of the
date when the Board of Directors determines not to issue such rights or
warrants, to the Exercise Price which would then be in effect if a
record date for such issuance had not been fixed.
(o) If the Company repurchases any Common Stock for a per
share consideration which exceeds the Current Market Price of a share
of Common Stock on the date immediately prior to such repurchase, then
the Company shall issue additional Warrants to the holder having the
Exercise Price in effect on the Trading Day immediately prior to such
repurchase. The additional Warrants issued pursuant to the preceding
sentence shall entitle the Holder to purchase the number of shares of
Common Stock equal to the result obtained by dividing (A) the product
of (w) the number of shares of Common Stock repurchased at a price in
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excess of the Current Market Price and (x) the amount by which the
per-share repurchase price exceeds such Current Market Price, by (B)
the amount by which (y) such Current Market Price exceeds (z) the
Exercise Price in effect as of the date immediately preceding such
repurchase.
(p) If any event occurs as to which the foregoing provisions
of this Section are not strictly applicable or, if strictly applicable,
would not, in the good faith judgment of the Board of Directors, fairly
protect the purchase rights of the Warrants in accordance with the
essential intent and principles of such provisions, then such Board of
Directors shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, as
shall be reasonably necessary, in the good faith opinion of such Board,
to protect such purchase rights as aforesaid, but in no event shall any
such adjustment have the effect of increasing the Exercise Price or
decreasing the number of shares of Common Stock subject to purchase
upon exercise of this Warrant, or otherwise adversely affect the
Holders. Under no circumstances (other than (A)(x) a reverse stock
split, (y) a recapitalization in which all holders of Common Stock (and
securities exercisable for or convertible into Common Stock, with
respect to such exercise or conversion provisions) are treated equally
and (z) a merger, in each case in which each outstanding share of
Common Stock is converted into less than one share of Common Stock
(including, in the case of a merger, of the entity surviving such
merger), or (B) as provided in Section 6) shall any adjustment pursuant
to this Section have the effect of raising the Exercise Price or
lowering the number of Warrant Shares issuable upon exercise of a
Warrant.
(q) If, after one or more adjustments to the Exercise Price
pursuant to this Section 5, the Exercise Price cannot be reduced
further without falling below the lowest positive exercise price
legally permissible for warrants to acquire Common Stock, the Company
shall make further adjustment to compensate the holder, consistent with
the foregoing principles, as the Board of Directors, acting in good
faith, deems necessary, including an increase in the number of Warrant
Shares issuable upon exercise of outstanding Warrants and/or a cash
payment to the Holder.
(r) For purposes of any adjustment to be made pursuant to this
Section 5, Common Stock owned or held at any relevant time by, or for
the account of, the Company in its treasury or otherwise, shall not be
deemed to be outstanding for purposes of the calculation and
adjustments
-13-
<PAGE> 14
described therein, but shares held in the Disputed Claims Reserve,
Division Class 14 Utility Fund Trust Agreement dated April 6, 1993 and
the Improvements Fund Trust Agreement dated April 6, 1993 shall not be
deemed to be held by, or for the account of, the Company.
Section 6. Additional Adjustment of Exercise
Price.
(a) The Company will cause the financial statements for the
Company and its consolidated Subsidiaries for the fiscal year ending on December
31, 1998 to be audited by Ernst & Young, LLP, or another national independent
accounting firm, and a manually signed copy of such financial statements to be
delivered by the Company to the Holders as soon as practicable following
December 31, 1998, but in no event later than March 31, 1999 (the date such
financial statements are so delivered, the "Adjustment Date").
(b) The Exercise Price shall be reduced, effective as of the
Adjustment Date, by subtracting the Adjustment Amount from the Exercise Price;
provided, however, that (i) the Exercise Price shall only be adjusted pursuant
to this Section 6 if the Adjustment Amount is a positive number; (ii) in no
event shall the adjustment required by this Section 6 result in an Exercise
Price lower than [$2.00 FOR CLASS A] [$3.00 FOR CLASS B] [$4.00 FOR CLASS C] (as
adjusted pursuant to Section 5, the "Base Exercise Price"), and if the
adjustment required pursuant to this Section 6 would result in an Exercise Price
lower than the Base Exercise Price, then the Exercise Price shall be reduced to
the Base Exercise Price; and (iii) if the closing price for the Common Stock
(adjusted pursuant to Section 5) is greater than $9.75 both (A) on the last
trading day of 1998 and (B) on an average basis over the three months ending on
December 31, 1998, then no adjustment shall be made pursuant to this Section 6.
The "Adjustment Amount" equals the product of (i) $.0175 and
(ii) the quotient obtained by dividing (A) the difference between (x) the Actual
Cumulative Operating Cash Flow and (y) the Target Cumulative Operating Cash Flow
by (B) $100,000, where:
"Target Cumulative Operating Cash Flow" equals $62,443,000;
"Actual Cumulative Operating Cash Flow" equals the sum of the
Actual Operating Cash Flow for the year ending December 31, 1997 and the Actual
Operating Cash Flow for the year
-14-
<PAGE> 15
ending December 31, 1998, minus 0.15 times the Excess 1998 Operating Cash Flow;
"Actual Operating Cash Flow" for any year means the net cash
proceeds derived by the Company from the operation in the ordinary course of its
business and from the bulk asset sales contemplated by the Business Plan,
calculated in all respects the same as, and using the same accounting principles
and practices and classification systems and techniques as were used in, the
calculation of the Target Cumulative Operating Cash Flow, as described in
summary format in Exhibit B to this Warrant. By way of clarification, all
revenue and cost items shall be associated for purposes of calculating the
Actual Operating Cash Flow with the same activities/categories (such as "Net
Subdivision Homesites") as they were in calculating the Target Cumulative
Operating Cash Flow.
"Excess 1998 Operating Cash Flow" means the Actual Operating
Cash Flow for the year ending December 31, 1998 minus $3,028,000.
(c) No adjustment shall be made to the number of Warrant
Shares issuable upon exercise of a Warrant as a result of an adjustment to the
Exercise Price pursuant to this Section 6; provided, however, that this
paragraph shall not prevent adjustments otherwise required pursuant to another
Section of this Warrant from being made.
(d) If Company is involved in a merger, consolidation or
similar transaction, or to the extent that all or substantially all of the
assets of the Company are sold, in either case prior to the Adjustment Date,
then an adjustment to the Exercise Price shall be made pursuant to this Section
6 on a pro rata basis by dividing both the Target Cumulative Operating Cash Flow
and the Actual Cumulative Operating Cash Flow derived by the Company's business
through the close of business on the date immediately prior to the effective
date of such transaction by a fraction, the numerator of which shall be the
number of days elapsed from the Initial Exercise Date through the business day
immediately prior to the effective date of such transaction and the denominator
of which shall be the number of days from the Initial Exercise Date through
February 28, 1999.
Section 7. Notice of Adjustments.
(a) Prior to the earlier to occur of (i) the declaration of a
record date for, or (ii) the announcement and/or consummation of, any event or
action that would result in an adjustment pursuant to Section 5 or Section 6,
the Company
-15-
<PAGE> 16
shall notify the Holder of such intended record date, announcement, event or
action. Such notice must be reasonably calculated to be delivered not less than
20 nor more than 90 days prior to the applicable event.
(b) Whenever the Exercise Price is adjusted as provided in
Section 5 or Section 6:
(i) the Company shall compute the adjusted Exercise
Price in accordance with Section 5 or Section 6 and shall
prepare a certificate signed by the chief financial officer of
the Company setting forth the adjusted Exercise Price and
showing in reasonable detail the facts upon which such
adjustment is based, including, if appropriate, a statement of
the consideration received or to be received by the Company
for, and setting forth the amount of, any additional Common
Stock issued since the last such adjustment and the number of
shares of Common Stock for which the Warrants evidenced hereby
are exercisable at the then Exercise Price, and such
certificate shall forthwith be filed at the Warrant Office;
(ii) a notice stating that the Exercise Price and
number of shares for which each Warrant may be exercised have
been adjusted and setting forth the adjusted Exercise Price
and number of shares for which each Warrant may be exercised
shall be communicated by telegram, telex, telecopier or any
other means of electronic communication capable of producing a
written record, or shall be delivered by hand or mailed as
soon as practicable by the Company to the Holder at its last
address as it shall appear upon the Warrant Register provided
for in Section 2; and
(iii) the Company shall provide to the Holder such
additional information, including worksheets used in the
calculation of any adjustment made pursuant to Section 5 or
Section 6, as the Holder may reasonably request for the
purpose of confirming the accuracy of such adjustment.
Section 8. No Rights as Shareholders; Notice to
Holder.
Nothing contained herein shall be construed as conferring upon
the Holder the right to vote or to receive dividends or to receive notice as
shareholders in respect of the meetings of shareholders for the election of
directors of the
-16-
<PAGE> 17
Company or any other matter, or any rights whatsoever as shareholders of the
Company. If, however, at any time prior to the expiration of the Warrants and
prior to their exercise, any of the following shall occur:
(a) The Company shall authorize the issuance to all
holders of Common Stock of rights, options or warrants to
subscribe for or purchase Common Stock, or of any other
subscription rights or warrants (other than the rights
offering of Series B Preferred Stock contemplated by the
Investment Agreement); or
(b) The Company shall authorize the distribution to
all holders of Common Stock of evidences of its indebtedness
or assets (other than cash dividends or cash distributions
payable out of consolidated earnings or earned surplus or
dividends payable in Common Stock); or
(c) The Company shall propose any consolidation or
merger to which the Company is a party and for which approval
of any stock of the Company is required, or the conveyance or
transfer of all or substantially all the properties and assets
of the Company, whether in one transaction or in a series of
transactions (whether by sale, lease or other disposition), or
any reclassification or change of outstanding Common Stock
issuable upon exercise of the Warrants (other than a change in
par value or from par value to no par value); or
(d) The Company shall propose the voluntary or
involuntary dissolution, liquidation or winding up of the
Company;
then the Company shall cause to be given to the Holder at its address appearing
on the Warrant Register, at least 15 days prior to the applicable record date
hereinafter specified, by first class mail, postage prepaid, and, if possible,
by telecopy transmission, a written notice stating (i) the date as of which the
holders of record of Common Stock entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the date on which any
such consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as of
which it is expected that the holders of record of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the notice
required by this Section or any defect therein shall not affect the legality or
validity of any distribution, right,
-17-
<PAGE> 18
option, warrant, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any action.
Section 9. Restrictions on Transfer of the
Warrants and Warrant Shares.
Until such time as an appropriate registration statement
covering the Warrants or the Warrant Shares has become effective under the
Securities Act, the Holder will not dispose of either the Warrants evidenced
hereby or the Warrant Shares, as the case may be, unless (i) the transferee has
agreed to be bound by the restrictions contained herein on such Warrants or
Warrant Shares, as the case may be, and (ii) except in the case of a transfer by
the Holder to an Affiliate, the Company shall have received an opinion of
counsel (which shall be reasonably satisfactory to the Company) to the effect
that the sale or other proposed disposition of the Warrants or Warrant Shares
may be accomplished without such registration under the Securities Act, which
opinion may be conditioned upon (x) acceptance by the transferee of a Warrant
Certificate or Certificates or Warrant Shares bearing a legend similar to that
set forth in Exhibit A and (y) a certificate of the transferee stating that the
Warrant(s) or Warrant Share(s) being acquired by such transferee are being
acquired by such transferee for its own account and not with a view to, or for
resale in connection with, the distribution thereof in violation of the
Securities Act.
Section 10. Execution of Warrant Certificates.
Each Warrant Certificate shall be executed on behalf of the
Company by the manual or facsimile signature of the present or any future
Chairman of the Board of Directors, President or Vice President of the Company.
Section 11. Maintenance of Office or Agency.
The Company will maintain a Warrant Office in [New York, New
York], where this Warrant Certificate may be presented or surrendered for
subdivision, combination, registration of transfer, or exchange and where
notices and demands to or upon the Company in respect of the Warrants evidenced
hereby may be served. The Company hereby initially designates [TO BE DESIGNATED]
as the agency of the Company for such purpose.
Section 12. Severability.
If any one or more of the provisions contained herein, or the
application thereof in any circumstances, is held
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<PAGE> 19
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality, and enforceability of any such provision in every other respect and
the other remaining provisions hereof shall not be in any way impaired or
affected, it being intended that all of the Holder's rights and privileges shall
be enforceable to the fullest extent permitted by law.
Section 13. Governing Law.
The Warrants shall be governed by and construed in accordance
with the laws of the State of Delaware.
Section 14. Definitions.
For all purposes of this Warrant Certificate, in addition to
the other terms defined elsewhere herein, unless the context otherwise requires:
"Affiliate" of any specified person means any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person. For the purposes of
this definition, "control" when used with respect to any specified
person means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Appraisal Procedure" means a procedure whereby two
independent appraisers or other experts qualified to conduct the
evaluation or calculation required ("Appraisers"), one chosen by the
Company and one by the Holder entitled to use the Appraisal Procedure
(or, to the extent more than one Holder is so entitled, by a majority
in interest of the Holders so entitled), shall mutually agree upon the
determinations then the subject of appraisal, evaluation or
calculation. Each party shall deliver a notice to the other appointing
its Appraiser within 15 days after the Appraisal Procedure is invoked.
If within 30 days after appointment of the two Appraisers they are
unable to agree upon the amount in question, a third independent
Appraiser shall be chosen within 10 days thereafter by the mutual
consent of such first two Appraisers or, if such first two Appraisers
fail to agree upon the appointment of a third Appraiser, such
appointment shall be made by the American Arbitration Association, or
any organization successor thereto, from a panel of arbitrators having
experience in the appraisal, evaluation or calculation of the subject
matter to be determined. The decision of the third Appraiser so
appointed and chosen shall be given within 30 days after the selection
of such third
-19-
<PAGE> 20
Appraiser. If three Appraisers shall be appointed and the determination
of one Appraiser is disparate from the middle determination by more
than twice the amount by which the other determination is disparate
from the middle determination, then the determination of such Appraiser
shall be excluded, the remaining two determinations shall be averaged
and such average shall be binding and conclusive on the Company and the
Holders; otherwise the average of all three determinations shall be
binding and conclusive on the Company and the Holders. The costs of
conducting any Appraisal Procedure shall be borne by the Holders
requesting such Appraisal Procedure, except (a) the fees and expenses
of the Appraiser appointed by the Company and any costs incurred by the
Company shall be borne by the Company and (b) if such Appraisal
Procedure shall result in a determination that is disparate by 5% or
more from the Company's initial determination, all costs of conducting
such Appraisal Procedure shall be borne by the Company.
"Bank Warrants" means the 1,500,000 warrants for the purchase
of Common Stock issued on September 30, 1996 pursuant to the Prepayment
Agreement dated as of September 30, 1996 among the financial
institutions listed on the signature pages thereof, The Chase Manhattan
Bank and the Company.
"Board of Directors" means either the Board of Directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been
duly adopted by the Board of Directors and to be in full force and
effect on the date of such certification and delivered to each of the
Holders of the Warrants.
"Business Plan" means the 1997-1998 Business Plan of the
Company previously delivered to the Investor and certified to the
Investor by the Company on the date of issuance of this Warrant.
"Common Stock" means any stock of any class of the Company
which has no preference in respect of dividends or of amounts payable
in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, and which is not subject to redemption by
the Company. However, subject to Section 5, shares issuable on exercise
of the Warrants evidenced hereby, as contemplated
-20-
<PAGE> 21
by the first paragraph of this Warrant Certificate, shall include only
shares of the class designated as Common Stock of the Company as of the
date of this Warrant or shares of any class or classes resulting from
any reclassification or reclassifications thereof and which have no
preference in respect of dividends or of amounts payable in the event
of any voluntary or involuntary liquidation, dissolution or winding up
of the Company and which are not subject to redemption by the Company;
provided that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall
be substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total
number of shares of all such classes resulting from all such
reclassifications. As used in this Warrant Certificate, "shares" shall
include fractions thereof to the extent that fractional shares of the
Company are outstanding.
"Investment Agreement" means the Investment Agreement dated as
of February 7, 1997 by and between AP-AGC and the Company.
"Investor Warrants" means the 5,000,000 warrants to acquire
Common Stock to be issued to AP-AGC pursuant to the Investment
Agreement.
"Person" shall mean any individual, firm, partnership,
association, group (as such term is used in Rule 13d-5 under the
Securities Exchange Act of 1934, as amended, as in effect on the date
of this Warrant), corporation or other entity.
"Sale Price" of the Common Stock means the last reported sale
price regular way reported on the NASDAQ Stock Market or its successor,
or, if not listed or admitted to trading on the NASDAQ Stock Market or
its successor, the last reported sale price regular way reported on any
other stock exchange or market on which the Common Stock is then listed
or eligible to be quoted for trading, or as reported by the National
Quotation Bureau Incorporated.
"Series B Preferred Stock" means the 20% Cumulative Redeemable
Convertible Preferred Stock, Series B, par value $.01 per share, of the
Company, which may be issued in accordance with the Investment
Agreement.
"Subsidiary" means any subsidiary of the Company, a majority
of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time,
-21-
<PAGE> 22
directly or indirectly owned by the Company, by one or more
subsidiaries of the Company or by the Company and one or more
subsidiaries of the Company.
"Trading Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday, other than any day on which securities are not
traded on the exchange or market where the Warrants are listed or sold.
Section 15. Fees and Expenses.
All fees and expenses incurred by the Holder in connection
with the Holder's ownership of Warrants and securities or other property
received upon exercise thereof which relate to (i) any required regulatory
filings, (ii) registration fees, (iii) stock exchange or NASDAQ listing fees,
and (iv) reasonable fees and expenses of counsel to the Company in connection
with the foregoing, shall be paid by the Company.
Section 16. Contest and Appraisal Rights.
Upon each determination of fair market value or other
evaluation or calculation required hereunder (including calculation of the
Adjustment Amount), the Company shall promptly give notice thereof to all
Holders, setting forth in reasonable detail the calculation of such fair market
value or valuation (or Adjustment Amount) and the method and basis of
determination thereof, as the case may be. If any Holders of Warrants to
purchase at least 100,000 shares of Common Stock (including, for purposes of
determining such level of ownership, all Warrants owned by affiliates of such
Holders) shall disagree with such determination and shall, by notice to the
Company given within 15 days after the Company's notice of such determination,
elect to dispute such determination, such dispute shall be resolved in
accordance with the Appraisal Procedure.
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<PAGE> 23
Section 17. Additional Warrants to be Issued at
Current Exercise Price.
Notwithstanding any other provision of this Warrant, to the
extent the Holder is entitled to receive additional Warrants in accordance with
the terms hereof, the Warrants so issued shall have terms identical to this
Warrant, except that (i) the initial Exercise Price for such additional Warrants
shall be deemed to be the Exercise Price in effect on the date such additional
Warrants are issued and (ii) the amount and kind of securities and/or other
property issuable upon exercise of such Warrants shall be deemed to be the
amount and kind of securities and/or other property issuable upon exercise of
the Warrants outstanding immediately prior to issuance of such additional
Warrants.
Dated: , 1997 ATLANTIC GULF COMMUNITIES
----------- CORPORATION
By:
--------------------------------
Name:
Title:
ATTEST:
- -------------------------------
Secretary
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<PAGE> 24
NOTICE OF ELECTION TO EXERCISE
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing ______ shares of Common Stock and
hereby makes payment of the Exercise Price in cash in the amount of $_________.
NAME OF HOLDER:
-----------------------------
(Please Print)
By
---------------------------
Date: , 199 .
----------------- -
Instructions for Registration of Stock
Name
------------------------------------------------
(please type or print in block letters)
Address
---------------------------------------------
-24-
<PAGE> 25
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF SUCH REGISTRATION OR THE
AVAILABILITY OF AN EXEMPTION FROM SUCH REGISTRATION. SUCH SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON COMPLIANCE WITH THE REQUIREMENTS FOR
TRANSFER SET FORTH HEREIN.
<PAGE> 26
EXHIBIT A
EXHIBIT B TO WARRANT CERTIFICATE
ATLANTIC GULF COMMUNITIES CORPORATION
CALCULATION PRINCIPLES AND POLICIES FOR
WARRANT ADJUSTMENT FORMULA AND OPERATING CASH FLOW TARGETS (1)
Target Cumulative Operating Cash Flow was calculated as follows (capitalized
terms having the meanings set forth in the attached Warrant):
<TABLE>
<CAPTION>
Target for Year ended 12/31, 1997 1998
- ---------------------------- ---- ----
<S> <C> <C>
Net GDC Bulk Asset Sales (2) $ 54,743,000.00 $ 0.00
Utility Trust 10,000,000.00 0.00
Net Subdivision Homesites (3) 9,000,000.00 11,128,000.00
Overhead (4) (14,328,000.00) (8,100,000.00)
----------------- -----------------
Total Operating Target 59,415,000.00 3,028,000.00
Cumulative Total Target $ 59,415,000.00 $ 62,443,000.00
</TABLE>
Target Cumulative Operating Cash Flow = $62,443,000.00
(1) Operating Cash Flow excludes capital transactions such as financings,
refinancings, any equity issuances, sale in bulk of assets or subdivisions and
any other transactions not in the ordinary course of business, except for GDC
Bulk Asset Sales and Utility Trust proceeds as set forth above.
(2) Includes the net cash proceeds from the sale or non-recourse financing of
any mortgages (Seller Paper) generated from GDC bulk asset sales, but excludes
any sales of assets or financings classified as "Scattered Homesites" (bulk or
otherwise) in the Business Plan. For the purpose of this calculation, mortgages
will be treated as follows: Cash Flow payments will be discounted at 15% per
year, as long as the aggregate principal outstanding of mortgages at any time is
less than $10,000,000.00, otherwise the incremental amount of mortgages will be
treated in the same manner but using a 20% discount rate.
(3) "Net Subdivision Homesites" as described in the Business Plan, subject to
any further Business Plan changes approved by the Board of Directors and AP-AGC.
(4) "Overhead" as described in the Business Plan.
<PAGE> 1
Exhibit 6
-------------------------------------
ATLANTIC GULF COMMUNITIES CORPORATION
-AND-
THE SUBSIDIARIES SET FORTH
ON THE SIGNATURE PAGES HEREOF
------------------------------------
SECURED NOTE AGREEMENT
DATED AS OF FEBRUARY 7, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS
1.1 Defined Terms..................................................
1.2 Other Definitional Provisions..................................
SECTION 2. ISSUANCE AND TERMS OF SECURED
NOTES................................................................
2.1 Notes...........................................................
2.2 Payment of Notes................................................
2.3 Satisfaction Upon Issuance of...................................
Preferred Stock...............................................
2.4 Interest Rates and Interest.....................................
Payment Dates.................................................
2.5 Computation of Interest and Fees................................
2.6 Pro Rata Treatment and Payments.................................
2.7 Taxes...........................................................
2.8 Use of Proceeds.................................................
2.9 Fees............................................................
2.10 Maximum Interest Rate...........................................
SECTION 3. COLLATERAL...........................................................
3.1 Liens in Subsidiary Stock,......................................
Contract Receivables, Real Property...........................
and Personal Property.........................................
3.2 Security Documents .............................................
3.3 Section 365(j) Property.........................................
3.4 [intentionally omitted].........................................
3.5 Subordinations and Releases of..................................
Mortgage and Related Personal.................................
Property Liens...................................................
3.6 Subsidiary Guaranties...........................................
SECTION 4. REPRESENTATIONS AND WARRANTIES.......................................
4.1 Financial Condition.............................................
4.2 No Material Adverse Change......................................
4.3 Corporate Existence; Compliance.................................
with Law......................................................
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.4 Corporate Power; Authorization;.................................
Enforceable Obligations ......................................
4.5 No Legal Bar....................................................
4.6 No Material Litigation..........................................
4.7 No Default......................................................
4.8 Ownership of Property; Liens....................................
4.9 Intellectual Property...........................................
4.10 Taxes...........................................................
4.11 Federal Regulations ............................................
4.12 ERISA ..........................................................
4.13 Investment Company Act; Other...................................
Regulations...................................................
4.14 Subsidiaries and Joint Ventures.................................
4.15 Environmental Matters...........................................
4.16 Indebtedness....................................................
4.17 Contingent Obligations..........................................
4.18 Restitution Program and Final...................................
Judgment......................................................
4.19 Certain Fees....................................................
4.20 Disclosure......................................................
4.21 Insurance......................... .............................
4.22 Total Real Property Matters.....................................
4.23 Reorganization Proceedings......................................
4.24 Excluded Subsidiaries; Unrestricted.............................
Subsidiaries..................................................
4.25 [intentionally omitted].........................................
4.26 Bank Accounts...................................................
4.27 Utility Fund Trusts.............................................
4.28 [intentionally omitted].........................................
4.29 SPUD Subsidiaries...............................................
4.30 DRI and Zoning..................................................
SECTION 5. CONDITIONS PRECEDENT.................................................
5.1 Conditions to Issuance...........................................
5.2 [intentionally omitted]..........................................
SECTION 6. AFFIRMATIVE COVENANTS................................................
6.1 Financial Statements............................................
6.2 Certificates; Other Information.................................
6.3 Payment of Obligations..........................................
6.4 Conduct of Business and Maintenance.............................
of Existence....................................................
6.5 Maintenance of Property; Insurance .............................
6.6 Inspection of Collateral; Books and.............................
Records; Appraisals...........................................
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.7 Notice..........................................................
6.8 Environmental Laws..............................................
6.9 Business Plan...................................................
6.10 Compliance with Other Transaction .............................
Documents.....................................................
6.11 Dividends from Subsidiaries.....................................
6.12 Supplemental Reports Regarding..................................
Real Property...................................................
6.13 Compliance with Laws............................................
6.14 Other Notices...................................................
Agreement.....................................................
6.16 Foothill Reports................................................
SECTION 7. NEGATIVE COVENANTS
7.1 Maintenance of Consolidated.....................................
Net Worth; Interest Charges...................................
Coverage Ratio................................................
7.2 Limitation of Indebtedness......................................
7.3 Limitation on Liens.............................................
7.4 Limitation on Guarantee Obligations.............................
7.5 Limitations on Fundamental Changes .............................
7.6 Limitation on Sale of Assets....................................
7.7 Limitation on Dividends.........................................
7.8 Limitation on Capital Expenditures .............................
7.9 Limitation on Investments, Loans,...............................
and Advances....................................................
7.10 Limitation on Optional Payments and.............................
Modifications of Debt Instruments.............................
7.11 Transactions with Affiliates....................................
7.12 Sale and Leaseback .............................................
7.13 Fiscal Year.....................................................
7.14 Limitation on Negative Pledge...................................
Clauses......................................................
7.15 Deviation from Business Plan....................................
7.16 Unsold Housing Inventory........................................
7.17 Limitation of Bank Accounts.....................................
7.18 Venture Subsidiaries and Joint..................................
Ventures........................................................
7.19 Excluded Subsidiaries;..........................................
Unrestricted Subsidiaries .............................
SECTION 8. EVENTS OF DEFAULT; REMEDIES..........................................
8.1 Events of Default; Remedies......................................
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 9 THE COLLATERAL AGENT................................................
9.1 [intentionally omitted].........................................
9.2 Appointment of Collateral Agent.................................
9.3 [intentionally omitted].........................................
9.4 Delegation of Duties............................................
9.5 Exculpatory Provisions..........................................
9.6 Reliance by the Lender..........................................
9.7 Notice of Default...............................................
9.8 Non-Reliance on Collateral Agent................................
9.9 Indemnification.................................................
9.10 [intentionally omitted].........................................
9.11 [intentionally omitted].........................................
9.12 Successor Collateral Agent......................................
SECTION 10 MISCELLANEOUS
10.1 Amendments and Waivers.........................................
10.2 Notices........................................................
10.3 No Waiver; Cumulative Remedies.................................
10.4 Survival of Certain Provisions.................................
10.5 Payment of Expenses and Taxes .................................
10.6 Successors and Assigns;........................................
Participations; Purchasing Lender............................
10.7 Adjustments; Setoff............................................
10.8 Appointment of Secured Creditor................................
as the Company's Lawful Attorney.............................
10.9 Counterparts...................................................
10.10 Severability...................................................
10.11 Integration....................................................
10.12 GOVERNING LAW..................................................
10.13 SUBMISSION TO JURISDICTION;....................................
WAIVERS......................................................
10.14 Acknowledgments................................................
10.15 WAIVERS OF JURY TRIAL..........................................
10.16 Confidentiality................................................
10.17 Controlling Agreement..........................................
10.18 Counsel to Collateral Agent....................................
</TABLE>
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<PAGE> 6
SCHEDULES
Schedule E-1 Excluded Subsidiaries
Schedule N-1 Net Cash Flow
Schedule N-2 Net Operating Cash Flow
Schedule P-1 Principal Raw Land
Schedule U-1 Unrestricted Subsidiaries
Schedule 4.1 Additional Liabilities of the Company; Pur-
chases and Dispositions by the Company
Schedule 4.2 Material Adverse Effect
Schedule 4.4 Consents and Authorizations
Schedule 4.5 Certain Contractual Obligations
Schedule 4.6 Litigation
Schedule 4.7 Defaults
Schedule 4.10 Tax
Schedule 4.12 ERISA
Schedule 4.14(A) Subsidiaries
Schedule 4.14(B) Joint Ventures
Schedule 4.15 Hazardous Materials
Schedule 4.16 Indebtedness
Schedule 4.17 Guaranties
Schedule 4.21 Insurance
Schedule 4.24 Unrestricted Subsidiaries' Assets and Busi-
nesses
Schedule 4.26 Bank Accounts
Schedule 4.29 SPUD Subsidiaries
Schedule 4.30 Representations and Warranties regarding DRI
and Zoning Matters
Schedule 5.1(k) Real Property Matters
Schedule 7.3 Liens
Schedule 7.17 Restricted Bank Accounts
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<PAGE> 7
EXHIBITS
Exhibit A-1 Form of Deed of Trust
Exhibit B-1 Form of Mortgage and Security Agreement
Exhibit C-1 Form of Secured Promissory Note
Exhibit D-1 Form of Deposit Account Security Agreement
Exhibit E-1 Form of Due Diligence Fee Agreement
Exhibit F-1 Form of Monthly Management Business Plan
Update
Exhibit G-1 Form of Land Sales Report
Exhibit H-1 Form of Junior Assignment of Notes and Deeds
of Trust
Exhibit H-2 Form of Junior Assignment of Notes and
Mortgages
Exhibit I-1 Form of Intercreditor Agreement
Exhibit J-1 Form of Joint Venture Pledge Agreement
Exhibit P-1 Form of Personal Property Security Agreement
Exhibit R-1 Copy of Reorganization Plan
Exhibit S-1 Form of Stock Pledge Agreement
Exhibit S-2 Form of Subsidiary Guaranty
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<PAGE> 8
THIS SECURED NOTE AGREEMENT, dated as of February __, 1997,
among ATLANTIC GULF COMMUNITIES CORPORATION, a Delaware corporation (the
"Company"), the Subsidiaries of the Company named on the signature pages hereof
(the "Mortgagor Subsidiaries," and together with the Company, the "Co-Makers"),
AP-AGC, LLC, a Delaware limited liability company (the "Lender") and the entity
named as collateral agent on the signature pages hereof as collateral agent for
the Lender (hereinafter, in such capacity, together with any successors thereto
in such capacity, referred to as "Collateral Agent").
RECITALS
WHEREAS, in accordance with an Investment Agreement between
the Company and the Lender dated as of the date hereof, the Co-Makers desire to
be able to borrow up to $10,000,000 from the Lender on the terms hereinafter set
forth and the Lender is willing, on the terms and subject to the conditions set
forth in this Agreement, to commit to lend up to $10,000,000 to the Co-Makers.
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"Administrative Claims": as defined in Article I of the
Reorganization Plan.
"Affiliate": with respect to any Person, (a) any other Person
which is a Subsidiary of such Person, (b) any other Person (and each
Subsidiary thereof) of which such Person is a Subsidiary, and (c) any
other Person which is under common control with such Person.
"AG Asia": Atlantic Gulf Asia Holdings N.V., a Netherlands
Antilles corporation.
"Agreement": this Secured Note Agreement, as amended,
supplemented or otherwise modified from time to time.
<PAGE> 9
"Annual Net Income": income as shown on the consolidated
statements of income provided by the Company under Section 6.1, but
in no event less than 0.
"Bank Accounts": any and all deposit accounts, money market
accounts and any other deposits and investments of the Company or any
Subsidiary held in any bank or other financial institution, any
brokerage firm or any other Person and all money, instruments,
securities, documents and other investments held pursuant thereto,
whether now existing or owned or hereafter created or acquired
(exclusive of all but the residual, remainder or beneficial interest
of the Company and its Subsidiaries in the Reserve Accounts, the Claims
Disbursement Account and all other escrow, restricted, custodial and
fiduciary accounts the pledge of which by the Company or any Subsidiary
is prohibited by agreements existing on the date hereof or by law as
set forth in Schedule 7.17, which may be amended from time to time by
written notice to the Lender to include other restricted accounts).
"Bankruptcy Code": Title 11 of the United States Code
entitled "Bankruptcy" from time to time in effect, or any successor
statute.
"Bankruptcy Court": the United States Bankruptcy Court for the
Southern District of Florida or if such court ceases to exercise
jurisdiction over the Reorganization Proceedings, the court that
exercises jurisdiction over the Reorganization Proceedings in lieu of
the United States Bankruptcy Court for the Southern District of
Florida.
"Beige Book": the book prepared by the Company dated December
1994, setting forth the estimated fair market value of the Real
Property of the Company and its Subsidiaries.
"Book Value": with respect to a specified asset of a
specified Person, the carrying value of the specified asset on the
balance sheet of such Person prepared in accordance with GAAP and
delivered to the Lender from time to time pursuant to the Transaction
Documents.
"Borrowing Base": as defined in the Revolving Loan Agreement.
"Business Day": any day excluding Saturday, Sunday and any day
which either is a legal holiday under the laws of the States of
California or New York or is a day on
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<PAGE> 10
which banking institutions located in the States of California or New
York are authorized or required by law or other governmental action to
close.
"Business Plan": as of the Issuance Date and until a new
Business Plan is delivered to the Lender in accordance with Section
6.9, the business plan of the Company and its Subsidiaries dated
October 23, 1996, and thereafter the business plan of the Company and
its Subsidiaries delivered to and approved by the Lender in December of
each year in accordance with Section 6.9.
"Capital Stock": with respect to any Person, any and all
shares, interests, or other equivalents (however designated) of
capital stock of a corporation, any and all equivalent ownership
interests in a Person (other than a corporation) and any and all
warrants or options to purchase any of the foregoing.
"Cash Collateral Accounts": any and all accounts that
Collateral Agent, for the benefit of the Lender, may from time to time
require to be established and maintained with financial institutions
reasonably satisfactory to Collateral Agent and pledged to Collateral
Agent pursuant to cash collateral account agreements in form and
substance reasonably satisfactory to Collateral Agent.
"Cash Equivalents": (a) securities issued or directly and
fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof having maturities of not more than 90
days from the date of acquisition, (b) time deposits and certificates
of deposit having maturities of not more than 90 days from the date of
acquisition issued by any domestic commercial bank, or non-domestic
commercial bank provided that such non-domestic commercial bank shall
have offices in the United States, having capital and surplus in excess
of $500,000,000, (c) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in
clauses (a) and (b) entered into with any bank meeting the
qualifications specified in clause (b) above, and (d) commercial paper
rated at least A-1 or the equivalent thereof by Standard & Poor's
Corporation or P-1 or the equivalent thereof by Moody's Investors
Service, Inc. or which is issued by any domestic commercial bank having
capital and surplus in excess of $500,000,000 (or any holding company
thereof) and, in any such case, maturing within 90 days after the date
of acquisition.
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<PAGE> 11
"Certificate of Designation": means the "Series A Preferred
Stock Certificate of Designation," as defined in the Investment
Agreement.
"Claims Disbursement Account": the segregated account
established for purposes of holding funds borrowed to pay
Administrative Claims, Priority Claims and Convenience Class Claims
pursuant to Sections 3.2.4 and 8.1.1 of the Reorganization Plan.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral": as defined in Section 3.1.
"Collateral Agent": the entity named as collateral agent on
the signature page hereof, and any successor thereto, solely in its
capacity as collateral agent for the Lender, and, after the issuance of
the Preferred Stock, as collateral agent for the holders of Preferred
Stock, under the Security Documents, pursuant to the terms of this
Agreement and the Security Documents.
"Commercial Real Estate": all Real Property of the Company
and its Subsidiaries (including condominium and cooperative units),
other than Real Property reserved for sale as single residential
homes or lots.
"Commercial Receivables": all promissory notes and mortgages
and deeds of trust payable to, or held by, the Company or any
Subsidiary, and all other documents, instruments and agreements
executed in connection therewith, whether currently existing or
hereafter created or acquired, arising from the sale of single family
homesites or arising from the sale of other Real Property and all cash
and non-cash proceeds thereof.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes
the Company and which is treated as a single employer under Section 414
of the Code.
"Company Operating Account" means that certain deposit account
number 6189189013641 maintained by the Company with Sun Trust Bank,
Miami, N.A. or such other deposit account maintained by the Company at
a financial institution reasonably satisfactory to Collateral Agent.
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<PAGE> 12
"Company Operating Account Control Agreement" means a written
agreement among the Company, the Collateral Agent, the "Collateral
Agent" under the Foothill Loan Documents), and Operating Account Bank,
with respect to the Company Operating Account, in form and substance
reasonably satisfactory to the Lender, pursuant to which Operating
Account Bank acknowledges the security interests granted by the Company
to the Collateral Agent for the benefit of Secured Creditor in the
Company Operating Account, waives rights of setoff with respect to the
Company Operating Account, and agrees to act upon the instructions of
the Collateral Agent with respect to the disposition of funds in the
Company Operating Account should Operating Account Bank receive such
instructions from the Collateral Agent.
"Condemnation Awards": any and all proceeds (including
proceeds in the form of promissory notes or other agreements for the
payment of proceeds) from (i) the taking by eminent domain,
condemnation or otherwise, or acquisition pursuant to contract, of any
property of the Company or any Subsidiary by the United States of
America, the State of Florida or any political subdivision thereof, or
any agency, department, bureau, board, commission or instrumentality of
any of them, including any award and/or other compensation awarded to
or for the benefit of, or received by or on behalf of, the Company or
GDU, whether as a result of litigation, arbitration, settlement or
otherwise, or (ii) any sale by the Company or any Subsidiary of a
water and utility system to a Person, whether now owned or hereafter
created or acquired.
"Confirmation Order": the order entered on March 27, 1992, by
the Bankruptcy Court, confirming the Reorganization Plan.
"Consolidated Net Worth": at any particular date, all amounts
which, in accordance with GAAP, would be included as Shareholders'
Equity on a consolidated balance sheet of the Company and its
consolidated Subsidiaries at such date.
"Contractual Obligation": with respect to any Person, any
provision of any security issued by such Person or of any agreement,
instrument or other undertaking to which that Person is a party or by
which it or any of its property is bound.
"Convenience Class Claims": as described in Subsection 2.13
of the Reorganization Plan.
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<PAGE> 13
"Deed of Trust": the Junior Deed of Trust and Security
Agreement to be executed on or before the Issuance Date and from time
to time thereafter between the Company or a Subsidiary and Collateral
Agent, in the form of Exhibit A-1, as the same be amended, supplemented
or otherwise modified from time to time, pursuant to which the Company
and Subsidiaries grant a security interest in the Real Property located
in Tennessee (and such other jurisdictions where "deeds of trust" are
used to encumber real property) and related Personal Property of the
Company or Subsidiaries to Collateral Agent, for the benefit of Secured
Creditor as required by this Agreement.
"Default": any of the events specified in Section 8.1,
whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Default Rate": has the meaning assigned that term in
Section 2.4(b).
"Deposit Account Security Agreement": the Deposit Account
Security Agreement, in the form of Exhibit D-1, to be executed by the
Company and each of its Subsidiaries in favor of Collateral Agent on or
before the Issuance Date, for the benefit of Secured Creditor, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Due Diligence Fee Agreement": the Due Diligence Fee
Agreement, in the form of Exhibit E-1, to be executed by the Company
and the Lender, providing among other things for payment of a fixed due
diligence and investment analysis fee on each Interest Payment Date as
compensation for the due diligence and investment analysis services
described therein.
"Environmental Laws": any and all applicable Federal,
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or requirements of any Governmental
Authority regulating, relating to or imposing liability or standards of
conduct concerning environmental protection matters, including, without
limitation, Hazardous Materials, as now or may at any time hereafter be
in effect.
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<PAGE> 14
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Event of Default": any of the events specified in Section
8.1, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.
"Excluded Property": (a) the Capital Stock of General
Development Acceptance Corporation and GDV Financial Corporation, (b)
34% of the Capital Stock of AG Asia, (c) all money or property now or
hereafter deposited into a Reserve Account pursuant to the
Reorganization Plan (exclusive of the residual, remainder or
beneficial interests of the Company and its Subsidiaries therein), (d)
any portions of payments made on Homesite Contracts Receivable which
are, as a matter of law or pursuant to such Homesite Contracts
Receivable, required to be placed in a restricted account for the
payment of utility charges or paid toward real estate taxes on the lots
subject to the respective Homesite Contracts Receivable giving rise to
such payments, and (e) the Trust Property.
"Excluded Subsidiaries": the direct or indirect subsidiaries
of the Company listed on Schedule E-1.
"Financing Lease": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a consolidated balance
sheet of the Company and Subsidiaries.
"Foothill Debt": Indebtedness outstanding under the Foothill
Loan Documents.
"Foothill Loan Documents": means, collectively, (i) the
Revolving Loan Agreement, (ii) the "Loan Documents," as defined in the
Revolving Loan Agreement, (iii) the Secured Floating Rate Note
Agreement, and (iv) the "Secured Floating Rate Note Documents," as
defined in the Secured Floating Rate Note Agreement, each of the
foregoing as in effect on the date hereof.
"GAAP": generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a
significant segment of the accounting profession, that are
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<PAGE> 15
applicable to the circumstances as of the date of determination;
provided that calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to
prepare the financial statements referred to in Section 4.1.
"GDC": General Development Corporation, a Delaware
corporation, under which name the Company was formerly known.
"GDU": the Company's Subsidiary, General Development
Utilities, Inc., a Florida corporation.
"Governmental Authority": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to,government.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including any bank under any letter of credit) as to which the
guaranteeing person has issued a reimbursement, counter indemnity or
similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other
obligations (the "primary obligations") of any other third Person (the
"primary obligor") in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to
advance or supply funds (x) for the purchase or payment of any such
primary obligation or (y) to maintain working capital or equity
capital of the primary obligor or other wise to maintain the net worth
or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the owner of any such primary obligation against loss
in respect thereof; provided, however, that, as used herein, the term
"Guarantee Obligation" shall neither include endorsements of
instruments for deposit or collection in the ordinary course
of business, nor constitute Indebtedness. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the
primary obligation in
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<PAGE> 16
respect of which such Guarantee Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable
pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for
which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as reasonably determined by the Company in
good faith.
"Hazardous Materials": any hazardous materials, hazardous
wastes, hazardous constituents, hazardous or toxic substances,
petroleum products (including crude oil or any fraction thereof),
defined or regulated as such in or under any Environmental Law.
"Homesite Contracts Receivable": all contracts for deed,
promissory notes, mortgages, deeds of trust and other agreements,
currently existing or hereafter created or acquired, pursuant to which
the Company or any Subsidiary has the right to receive payment in any
form whatsoever for the sale of single-family homesites (excluding
Commercial Receivables), including any and all accounts, contract
rights, chattel paper, general intangibles and unpaid seller's rights,
relating to the foregoing or arising therefrom, reserves and credit
balances arising thereunder and cash and non-cash proceeds of any and
all of the foregoing.
"Homesite Program": as defined in Article I of the
Reorganization Plan.
"Housing Inventory": as at any date, the amount that would be
set forth under "housing units completed or under construction" or
other similar entry in the notes to a consolidated balance sheet of
the Company and its Subsidiaries prepared at such date in accordance
with GAAP.
"Indebtedness": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than incurred in the
ordinary course of business and payable in accordance with customary
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations (contingent or otherwise) of such
Person arising out of letters of credit issued for the account or upon
the application of such Person, (c) all obligations of such Person
under Financing Leases, (d) all obligations of such Person in respect
of acceptances
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<PAGE> 17
issued or created for the account of such Person, (e) all liabilities
secured by any Lien on any property owned by such Person even though
such Person may have not assumed or otherwise become liable for the
payment thereof, and (f) the Unsecured Cash Flow Notes. As used
herein, the term "Indebtedness" shall not include Guarantee
Obligations.
"Insolvency": with respect to any Multi-employer Plan, the
condition that such plan is insolvent within the meaning of Section
4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": as defined in Section 4.9.
"Intercreditor Agreement": that certain Intercreditor
Agreement of even date herewith by and between the Lender, Collateral
Agent, the lenders party to the Foothill Loan Documents, and the agent
and collateral agent for such lenders, in the form of Exhibit I-1, as
such agreement may be supplemented, amended or otherwise modified from
time to time.
"Interest Charges": means, with respect to any period, the
sum (without duplication) of the following (eliminating all
intercompany items required to be eliminated in the course of
preparing consolidated financial statements for the Company and its
Subsidiaries in accordance with GAAP) (a) all interest in respect of
the Indebtedness of the Company and its Subsidiaries (including imputed
interest on Financing Leases) deducted in de termining consolidated net
income for such period and (b) all debt discount and expense amortized
or required to be amortized in the determination of consolidated net
income for such period.
"Interest Charges Coverage Ratio": at any time, the ratio of
(a) Net Operating Cash Flow for the period of four fiscal quarters
ending on, or most recently ended prior to, such time, taken as a
whole, to (b) Interest Charges for such period.
"Interest Payment Date": the last day of each calendar month
to occur while any obligation evidenced by the Note is outstanding.
"Investment Agreement": that certain Investment Agreement of
even date herewith by and between the Company
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<PAGE> 18
and the Lender, providing among other things for the execution and
delivery of this Agreement and the issuance of the Preferred Stock.
"Investments": any and all promissory notes, Capital Stock
(other than Subsidiary Stock), bonds, debentures and securities, held
by the Company or any Subsidiary, whether now owned or hereafter
acquired.
"Issuance Date": the date on or before May 22, 1997 upon
which all of the conditions set forth in Section 5 have been met or
waived by the Lender in its sole discretion and the Note is issued.
"Joint Ventures": collectively, (a) the joint ventures
identified on Schedule 4.14(B), and (b) any other partnership, joint
venture, limited liability company, or other entity in which a
Subsidiary acquires, after the date hereof and as permitted under
Section 7.9(g) and 7.18, equity interests therein representing 50% or
less of such entity's contributed capital; and "Joint Venture" means
any one of them.
"Joint Venture Pledge Agreement": the Junior Joint Venture
Pledge Agreement in the form of Exhibit J-1, to be executed by each of
the Venture Subsidiaries and Collateral Agent on or before the Issuance
Date, as the same may be amended, supplemented or otherwise modified
from time to time, pursuant to which the Venture Subsidiaries pledge
all of their right, title, and interest in and to the Joint Ventures to
Collateral Agent for the benefit of Secured Creditor.
"Junior Assignments": the Junior Assignment of Notes and
Deeds of Trust and the Junior Assignment of Notes and Mortgages, in
the form of Exhibits H-1 and H-2 respectively, to be executed on or
before the Issuance Date, as the same may be amended, supplemented or
otherwise modified from time to time,
"JV Real Property": any and all real property and fixtures
and interests in real property and fixtures now owned or hereafter
acquired by any Joint Venture.
"JV Receivables": all contracts for deed, promissory notes,
mortgages, deeds of trust and other agreements, currently existing or
hereafter created or acquired, pursuant to which any Joint Venture has
the right to receive payment in any form whatsoever for the sale of JV
Real
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<PAGE> 19
Property, and cash and non-cash proceeds of any and all of the
foregoing.
"Lender": the Lender, as defined in the Preamble to this
Agreement, together with its permitted successors and assigns.
"Lien": any mortgage, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement, any
Financing Lease having substantially the same economic effect as any of
the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction in
respect of any of the foregoing).
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise)
or prospects of the Company and its Subsidiaries taken as a whole, (b)
the ability of the Company to perform its obligations under this
Agreement, the Notes, the Security Documents, or the other Transaction
Documents or (c) the validity or enforceability of this Agreement, the
Notes, the Security Documents or other Transaction Documents or the
other Transaction Documents or the rights or remedies of Collateral
Agent or the Secured Creditor hereunder or thereunder.
"Maturity Date": December 31, 1998.
"Mortgages": the Junior Mortgage and Security Agreements to
be executed on or before the Issuance Date and from time to time
thereafter by the Company or a Subsidiary in favor of Collateral
Agent, substantially in the form of Exhibit B-1, as the same may be
amended, supplemented or otherwise modified from time to time,
pursuant to which the Company and Subsidiaries grant a security
interest in the Real Property located in Florida (and in such other
jurisdictions where "mortgages" are used to encumber real property) and
related Personal Property of the Company or Subsidiaries to Collateral
Agent, for the benefit of Secured Creditor, as required by this
Agreement.
"Mortgagor Subsidiaries": the Subsidiaries party to this
Agreement that shall grant to Collateral Agent
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<PAGE> 20
Mortgages on Real Property owned by them in Florida on or before the Issuance
Date as required herein.
"Multi-employer Plan": a Plan which is a multi-employer plan as defined
in Section 4001(a)(3) of ERISA.
"Negative Shareholder Vote": the "Stockholders Approval" (as defined in
the Investment Agreement) not having been obtained by May 22, 1997.
"Net Cash Proceeds": with respect to any sale of assets, all cash
payments (including any cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such sale net of bona fide direct costs of sale.
"Net Cash Flow": with respect to any fiscal period of a Person, on a
consolidated basis, the actual consolidated pre-tax net cash flow as determined
on the basis set forth in Schedule N-1.
"Net Operating Cash Flow": with respect to any Person for any applicable
fiscal period, the actual consolidated pre-tax net operating cash flow as
determined on the basis set forth in Schedule N-2.
"Note": the Secured Convertible Promissory Note to be issued by the
Company and the Mortgagor Subsidiaries under this Agreement in the form of
Exhibit C-1, and any further or additional notes issued by the Company and/or
the Mortgagor Subsidiaries to the Lender under this Agreement, as any of them
may from time to time be amended, supplemented, modified, renewed, extended,
restated, or replaced.
"Obligations": all obligations of every nature of the Company from time
to time owed to the Secured Creditor or Collateral Agent or either of them
under the Transaction Documents, whether for principal, interest (including
interest accruing after the commencement of a bankruptcy case, whether or not
enforceable in such case), fees, costs, expenses, indemnification or otherwise,
of whatsoever nature and whether now or hereafter made, incurred or created,
whether absolute or contingent, liquidated or unliquidated, regardless of
class, whether due or not due, and however arising.
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<PAGE> 21
"Official Unsecured Creditors Committee": the official committee of
creditors appointed by the United States Trustee in the Reorganization
Proceedings.
"Operating Account Bank": Sun Trust Bank, Miami, N.A. or such other
domestic commercial bank having capital and surplus in excess of $500,000,000
reasonably satisfactory to holders of the Foothill Debt.
"PBGC": the Pension Benefit Guarantee Corporation established pursuant
to Subtitle A of Title IV of ERISA or any successor thereto.
"Permitted Sale Asset" has the meaning assigned that term in Section
7.6.
"Person": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Personal Property": the following personal property of the Company or
any Subsidiary (exclusive of Homesite Contracts Receivable and Commercial
Receivables of the Company or any Subsidiary):
(a) the Bank Accounts;
(b) the Investments;
(c) any and all accounts, contract rights, chattel paper, instruments
and documents, including any right to payment for goods sold or leased or
services rendered, whether now owned or hereafter acquired;
(d) any and all machinery, apparatus, equipment, fittings, furniture,
fixtures, motor vehicles and other tangible personal property of every kind and
description, whether now owned or hereafter acquired, and wherever lo cated, and
all parts, accessories and special tools and replacements therefor;
(e) any and all general intangibles, whether now owned or hereafter
created or acquired, including all cho ses in action, causes of action, rights
in and to any and all Condemnation Awards, corporate or other business records,
deposit accounts, inventions, designs, patents, patent applications, trademarks,
trade names, trade se crets, goodwill, copyrights, registrations, licenses,
franchises, customer lists, tax refund claims, computer
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programs, any other Intellectual Property, all claims under guarantees,
security interests or other security to secure payment of any accounts by an
account debtor, all rights to indemnification and all other intangible property
of every kind and nature, including (i) the interests, if any, of the Company or
any Subsidiary in payments, proceeds, residuals and remainders from, or as a
beneficiary of, the Reserve Accounts, Claims Disbursement Account, or other such
accounts, (ii) any and all beneficial interests in the trusts pursuant to which
title to the Trust Property is held and (iii) any and all other proceeds or
choses in action with respect to, or rights to receive proceeds from, any
condemnation of any Real Property or Personal Property of the Company or any
Subsidiary, whether now in existence or hereafter created or acquired;
(f) any and all goods which are, or may at any time be, goods held for
sale or lease or furnished under con tracts of service or raw materials,
work-in-process or materials used or consumed in business, wheresoever located
and whether now owned or hereafter created or acquired, including all such
property the sale or other disposition of which has given rise to accounts and
which has been returned to or repossessed or stopped in transit;
(g) all monies, cash, residues and property of any kind, now or at any
time hereafter in the possession or under the control of Secured Creditor or
Collateral Agent or any agent or bailee of Secured Creditor or Collateral Agent,
any holder of Foothill Debt or any agent therefor, or any other person;
(h) all accessions to, all substitutions for, and all replacements,
products and proceeds of, the foregoing, including proceeds of insurance
policies insuring the aforesaid property and documents covering the aforesaid
property, all property received wholly or partly in trade or exchange for such
property, and all rents, revenues, issues, profits and proceeds arising from the
sale, lease, license, encumbrance, correction or any other temporary or
permanent disposition of such items or any interest therein whether or not they
constitute "proceeds" as defined in the Uniform Commercial Code; and
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(i) all books, records, documents and ledger receipts pertaining to any
of the foregoing, including customer lists, credit files, computer records,
computer programs, storage media and computer software used or acquired in
connection with generating, processing and storing such books and records or
otherwise used or acquired in connection with documenting information pertaining
to the aforesaid property.
"Personal Property Security Agreement": the Junior Personal Property
Security Agreement in the form of Exhibit P-1, to be executed on or before the
Issuance Date by the Company and the Subsidiaries now or hereafter party thereto
in favor of Collateral Agent, for the benefit of Secured Creditor, as the same
may be amended, supplemented or oth erwise modified from time to time.
"Plan": at a particular time, any employee benefit plan which is covered
by ERISA and in respect of which the Company or a Commonly Controlled Entity is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Preferred Stock": the Cumulative Redeemable Convertible Preferred
Stock, Series A, liquidation preference $1,000 per share, of the Company to be
issued pursuant to the Investment Agreement.
"Principal Raw Land": the parcels of Real Property of the Company and
its Subsidiaries identified on Schedule P-1.
"Priority Claims": as defined in Article I of the Reorganization Plan.
"Real Property": any and all real property and fix tures and interests
in real property and fixtures, now owned or hereafter acquired by the Company or
any Subsidiary.
"Reorganization": with respect to any Multi-employer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reorganization Plan": the Restated Second Amended Joint Plan of
Reorganization of General Development Corporation jointly proposed in the
Reorganization Proceedings by the Company and the Official Unsecured Creditors'
Committee, filed on October 9, 1991, with the Clerk of the
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Bankruptcy Court, as modified by Modification filed March 9, 1992, a copy of
which is attached hereto as Exhibit R-1.
"Reorganization Proceedings": the cases commenced on April 6 and April
12, 1990 under Chapter 11 of Title 11 of the United States Code in the
Bankruptcy Court by GDC (Case No. 90-12231-BKC-AJC), General Development
Financial Services, Inc. (Case No. 90-12232-BKC-AJC), General Development
Resorts, Inc. (Case No. 90-12233 BKC-AJC), Town & Country II, Inc. (formerly
Florida Residential Communities, Inc.) (Case No. 90-12234-BKC-AJC), Five Star
Homes Group, Inc. (Case No. 90-12235-BKC-AJC), Five Star Homes, Inc. (Case No.
90-12338-BKC-AJC), GDV Financial Corporation (Case No. 90-12236-BKC-AJC) and
Environmental Quality Laboratory, Incorporated (Case No. 90-12237-BKC-AJC).
"Reportable Event": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty-day notice period is
waived under Subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section
2615.
"Requirement of Law": as to any Person, the charter, the certificate
of incorporation and bylaws or other orga nizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.
"Reserve Accounts": the Disbursement Account (as defined in
Section 8.4 of the Reorganization Plan); the Disputed Claims Reserve
Account (as defined in Section 8.7 of the Reorganization Plan); any reserve of
securities, utility-satisfied lots, cash or other assets that is es tablished
pursuant to the Reorganization Plan, the Homesite Program, or any agreement
resolving a claim of the State of Florida in the Reorganization Proceedings, to
satisfy requests for utility service; and any reserve of securities or cash
established to fund road or other improvements pursuant to any agreement
resolving a claim of the State of Florida in the Reorganization Proceedings,
including, without limitation: the Division Class 14 Utility Fund Trust
Agreement and the Improvement Fund Trust Agreement, executed by and among the
State of Florida, Department of Business Regulation, Division of Florida Land
Sales, Condominiums and Mobile Homes, the Company and the Trustee, the Class 14
Utility Fund Trust Agreement and the Homesite Program Utility Fund Trust
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Agreement executed by and between the Company and the Trustee, the Class 14
Utility Lot Trust Agreement executed by and between the Company and the
Trustee, as described in Section 7.6 of the Reorganization Plan, if any.
"Responsible Officer": the chief executive officer
and the president of the Company, or with respect to corporate
proceedings, the secretary or any assistant secretary of the Company, or, with
respect to financial matters, the chief financial officer or treasurer of the
Company.
"Reverse Stock Split": the proposal to amend the Company's
restated certificate of incorporation to effect, if subsequently
determined by the Company's board of directors, a reverse stock split of the
Company's outstanding common stock as of 5:00 p.m. (Florida time) on the
effective date of the amendment (the "Reverse Split Effec tive Date"), pursuant
to which each 100 shares or 200 shares (as determined by the Company's board of
directors in its discretion) then outstanding will be converted into one share
(the "Reverse Stock Split"), and to effect a forward split of the Company's
common stock as of 6:00 a.m. (Florida time) on the day following the Reverse
Split Effective Date, pursuant to which each share of common stock then
outstanding as of such date will be converted into the number of shares of the
Company's common stock that each share represented immediately prior to the
Reverse Split Effective Date, all as set forth in the Company's proxy
statement dated April 22, 1996, provided that the Lender consents
thereto in writing in its sole and absolute discretion prior to the
commencement thereof.
"Revolving Loan Agreement": the Second Amended and Restated Revolving
Loan Agreement dated as of September 30, 1996 by and among the Company, the
Revolving Loan Bank, and Foothill Capital Corporation, a California
corporation, as collateral agent for the Revolving Loan Bank, pursuant to which
the Revolving Loan Bank has agreed to make certain loans to the Company,
together with all amendments, modifications, extensions, substitutions and
renewals thereof.
"Revolving Loan Bank": Foothill Capital Corporation, a California
corporation, and its successors and assigns.
"Revolving Loans": the Revolving Loans outstanding from time to time
under the Revolving Loan Agreement.
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"Sale and Leaseback": any arrangement with any Person providing for the
leasing by the Company or any Subsidiary of real or personal property which has
been or is to be sold or transferred by the Company or such Subsidiary to such
Person or to any other Person to whom funds have been or are to be advanced by
such Person on the security of such property or rental obligations of the
Company or Subsidiary.
"Section 365(j) Property": the property now or here after made subject
to substitute Liens in favor of Homesite Purchasers (as defined in the
Reorganization Plan) pursuant to Section 5.2.2 of the Reorganization Plan.
"Secured Creditor": collectively, the holder or holders from time to
time of the Secured Obligations.
"Secured Floating Rate Note Agreement": the Second Amended and
Restated Secured Floating Rate Note Agreement dated as of September 30, 1996
among the parties to the Revolving Loan Agreement, together with all
amendments, modifications, extensions, substitutions and renewals thereof.
"Secured Floating Rate Notes": the notes issued pursuant to the
Secured Floating Rate Note Agreement.
"Secured Note Documents": this Agreement, the Note, the Subsidiary
Guaranty and the Security Documents.
"Secured Obligations": collectively, all Obligations now or hereafter
owed under this Agreement, the Due Diligence Fee Agreement or any Secured Note
Document together with, after the issuance of the Preferred Stock, all
Obligations owed to the holders of such Preferred Stock pursuant to Section 8
of the Certificate of Designation or, after the occurrence of an Event of
Default, as defined in the Certificate of Designation, pursuant to Section 7.2
of the Investment Agreement.
"Security Agreements": the Personal Property Security Agreement, the
Deposit Account Security Agreement, and any other security agreements, between
the Company and/or a Subsidiary and Secured Creditor or Collateral Agent, as
the same may be amended supplemented or otherwise modified from time to time,
pursuant to which the Company and Subsidiaries assign and grant a security
interest in Homesite Contracts Receivables and Commercial Receivables and
Personal Property of the Company or Subsidiaries to Secured Creditor or
Collateral Agent, for the
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benefit of Secured Creditor, as required by this Agreement.
"Security Documents": the Stock Pledge Agreement, the Joint Venture
Pledge Agreement, the Security Agreements, the Mortgages, the Deed of Trust,
the Junior Assignments, the Company Operating Account Control Agreement, any
cash collateral account agreements, and any and all other agreements,
instruments, documents, financing statements, assignments, notices, mortgages
and other written matter necessary or reasonably required by Secured Creditor
or Collateral Agent at any time to create, perfect, maintain or continue
Secured Creditor's and Collateral Agent's Lien in the Collateral, together with
all amendments, modifications, extensions, substitutions and renewals thereof.
"Shareholders' Equity": as to any corporation, an amount equal to the
excess of the assets of such corporation over its liabilities (including
minority interests), determined in accordance with GAAP, and as shown on the
most recently prepared applicable balance sheet of such corporation.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multi-employer Plan.
"SPUD Subsidiary": as defined in Section 7.2(h).
"Stock Pledge Agreement": the Junior Stock Pledge Agreement, in the
form of Exhibit S-1, to be executed on or before the Issuance Date among the
Company, each of its Subsidiaries and Collateral Agent, as the same may be
amended, supplemented or otherwise modified from time to time, pursuant to
which the Company and Subsidiaries pledge Subsidiary Stock to Collateral Agent
for the benefit of Secured Creditor.
"Subsidiary": as to any Person, a corporation, partnership, trust
(exclusive of any trust created in connec tion with a Reserve Account) or other
entity of which shares of stock, partnership interests, beneficial interests
or other ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors
or other managers of such corporation, partnership, trust (exclusive of
any trust created in connection with a Re serve Account) or other entity are at
the time owned, or the management of which is otherwise controlled, directly
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or indirectly, through one or more intermediaries, or both, by such
Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company. Unless otherwise indicated, all references to a Subsidiary or
Subsidiaries of the Company shall not mean, include, or refer to the
Unrestricted Subsidiaries or the Joint Ventures.
"Subsidiary Guaranty": the Subsidiary Guaranty, in the form of Exhibit
S-2, to be executed on or before the Issuance Date by the Company and each of
its Subsidiaries in favor of Collateral Agent, for the benefit of Secured
Creditor, as the same may be amended, supplemented or otherwise modified from
time to time.
"Subsidiary Property Under Development": collectively, the Real
Property of any Subsidiary which is acquired for the purpose of being
developed, or which is in the process of being improved or developed, either by
the construction of roads, curb cuts, sewer and water facilities or other
improvements, or by the construction of residential units and appurtenances
thereto.
"Subsidiary Stock": the Capital Stock of any and all Subsidiaries
(including the Unrestricted Subsidiaries).
"Tax Servicing Contracts": collectively, the tax servicing contracts
required to be delivered under the Foothill Loan Documents, and all amendments,
modifications, extensions, substitutions and renewals thereof.
"Total Real Property": collectively, the Real Property and the JV
Real Property.
"Total Unsecured Claims": as defined in Article I of the
Reorganization Plan.
"Transaction Documents": the Secured Note Documents, the Intercreditor
Agreement, the Investment Agreement, the Due Diligence Fee Agreement, the
Preferred Stock, the Warrants, the Certificate of Designation relating to the
Preferred Stock, and each exhibit, schedule, certificate and document to be
executed or delivered pursuant hereto or thereto, each as from time to time
amended, supplemented or otherwise modified.
"Trust Property": the real property held in trust pursuant to (a)
Trust Agreement No. 06-01-009-6082101, dated as of January 17, 1991, by and
between NCNB National
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Bank of Florida, as Trustee for the benefit of the Company, the
Beneficiary, (b) Trust Agreement No. 06-01-009-6081954, dated as of
January 17, 1991, by and between NCNB National Bank of Florida, as
Trustee for the benefit of the Company, the Beneficiary, (c) Trust
Agreement No. 06-01-009-6082655, dated as of January 17, 1991, by and
between NCNB National Bank of Florida, as Trustee for the benefit of
the Company and General Development Financial Services, Inc., the
Beneficiaries, and (d) Trust Agreement No. 2, dated as of May 31, 1991,
by and between Jake Gamble, Esquire, as successor Trustee for the
benefit of the Company and Cumberland Cove, Inc., the Beneficiaries.
"Unrestricted Subsidiaries": collectively, (a) the direct or
indirect subsidiaries of the Company listed on Schedule U-1, and (b)
any other direct or indirect subsidiary of the Company that is formed
or acquired after the date hereof, that does not have or make any
investment in any Joint Venture (nor was formed or acquired for the
purpose of having or making any such investment), and that the Lender
agrees in writing shall constitute an Unrestricted Subsidiary under and
for all purposes of this Agreement and the other Loan Documents, upon
which Schedule U-1 automatically shall be deemed to be amended to
reflect the inclusion on such schedule of such new Unrestricted
Subsidiary; and "Unrestricted Subsidiary" means any one of them.
"Unsecured Cash Flow Notes": the "New Unsecured Cash Flow Notes," as
defined in Article I of the Reorganization Plan.
"Unsold Housing Inventory": as at any date, all Housing Inventory
applicable to Unsold Residential Dwelling Units.
"Unsold Residential Dwelling Units": single-family dwelling
units (whether detached or included within a townhouse, villa or
cluster containing more than one such unit) or condominium units
(excluding timeshare units) completed or under construction by the
Company or any Sub sidiary that are not subject to a contract for sale
to any third-party purchaser.
"Warrants": as defined in the Investment Agreement.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in
this Agreement shall have such defined meanings when
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used in the Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Company and its Subsidiaries not defined in Section 1.1 and accounting terms
partly defined in Section 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) References to "Sections", "subsections", Exhibits and Schedules are
to Sections, Sections, Exhibits and Schedules, respectively, of this Agreement
unless otherwise specifically provided.
(f) Unless the context of this Agreement clearly requires
otherwise, the term "including" is not limiting.
(g) Except as may be expressly specified otherwise herein, each
reference to an agreement or instrument amended, supplemented or otherwise
modified from time to time means such agreement or instrument as amended,
supplemented or modified in accordance with the terms hereof and thereof and
the Intercreditor Agreement, if applicable.
SECTION 2. ISSUANCE AND TERMS OF SECURED NOTE
2.1 Note. The Lender hereby agrees that on the Issuance Date, subject
to the terms and conditions set forth herein, (a) the Lender shall make a loan
to the Company and the Mortgagor Subsidiaries in a principal amount to be
specified by the Company, up to $10,000,000, and (b) the Company and the
Mortgagor Subsidiaries shall execute and deliver to the Lender the Note. There
shall be only one borrowing hereunder. If the initial loan to be made hereunder
is less than $10,000,000 the Lender's commitment shall terminate with respect to
any remaining portion of such $10,000,000.
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2.2 Payment of Note. The then outstanding principal amount of the Note
shall be due and payable, and shall be paid in full by the Company and the
Mortgagor Subsidiaries, on the Maturity Date. In addition: (a) a principal
installment in an amount designated in writing by the Lender in its sole
discretion to the Company on or before December 2, 1997, not to exceed the
lesser of (x) the outstanding amount due under the Note and (y) $5,000,000,
shall be due with respect to the Note on December 31, 1997, provided that if the
Lender shall fail to designate any amount by such date, the amount of such
installment shall be the lesser of (x) the outstanding amount due under the Note
and (y) $5,000,000, and (b) in the event of any acceleration of the maturity of
any of the principal of the Note pursuant to the provisions of Section 8 hereof
or pursuant to the terms of the Note, such accelerated principal shall be
immediately due and payable. The principal of the Note may be prepaid in whole
or in part, from time to time, without premium or penalty. On any date that any
principal is due and payable hereunder, anything herein to the contrary
notwithstanding, all accrued and unpaid interest with respect to such principal
likewise shall be due and payable on such date.
2.3 Conversion of Note into Preferred Stock. The outstanding principal
amount of the Note shall be convertible into Preferred Stock on the terms and
subject to the conditions set forth in the Investment Agreement. All interest
and other amounts (other than principal) theretofore accrued and owing hereunder
or under the Due Diligence Fee Agreement shall be paid in full prior to or
concurrent with such conversion. If the Note is converted into Preferred Stock
and the Lender purchases an additional $15,000,000 of Preferred Stock as set
forth in the Investment Agreement, the Company will be obligated to repurchase
all such Preferred Stock on the happening of certain conditions set forth in the
Certificate of Designation. From and after such conversion of the Note into
Preferred Stock, the Note shall no longer evidence an indebtedness for borrowed
money, and notwithstanding anything herein to the contrary the term Secured
Obligations as used in this Agreement and each other Transaction Document shall
not mean or include any indebtedness for principal or interest, but the Note
shall remain in full force and effect to evidence the obligation of the Company
to repurchase all such Preferred Stock under Section 8 of the Certificate of
Designation and pay all other Secured Obligations then outstanding and the joint
and several obligation of each and every Mortgagor Subsidiary to pay the Secured
Obligations then outstanding shall continue to be secured by the Secured Note
Documents.
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2.4 Interest Rates and Interest Payment Dates.
(a) From and after the Issuance Date, subject to Sections
2.4(b) and 2.10, as well before as after judgment, the Note at all times shall
bear interest at a rate per annum equal to twenty percent (20%).
(b) Section 2.4(a) notwithstanding, but subject to Section
2.10, from and after the occurrence and during the continuance of an Event of
Default and in any event at all times after a Negative Shareholder Vote, the
Note and all amounts due hereunder and not paid at all such times shall bear
interest at a per annum rate, as well before as after judgment, equal to
twenty-three percent (23%) (the "Default Rate").
(c) Interest shall be payable in arrears on each Interest
Payment Date, provided that from and after the occur rence and during the
continuance of an Event of Default interest accruing pursuant to paragraph (b)
of this Section 2.4 also shall be payable on demand.
2.5 Computation of Interest and Fees.
(a) Interest on the Notes and fees shall be calculated
on the basis of a 360-day year for the actual days elapsed.
(b) Each determination of an interest rate by the
Lender pursuant to any provision of this Agreement shall be conclusive and
binding in the absence of manifest error.
2.6 Pro Rata Treatment and Payments. If the Note is replaced with
multiple Notes pursuant to Section 10.6, each payment (including each
prepayment) by the Company on account of principal of and interest on such Notes
shall be made pro rata according to the respective outstanding principal amounts
of the Notes. All payments (including prepayments) to be made by the Company
hereunder and under the Notes, whether on account of principal, interest, fees
or otherwise, shall be made without setoff or counterclaim and shall be made
prior to noon, New York City time, on the due date thereof, in Dollars and in
immediately available funds to the following account: FBO: Apollo Real Estate
Investment Fund II, L.P.-Operating Money Market Account, Chase Manhattan Bank,
380 Madison Avenue, ABA #: 021-000-021, Account #: 230-211755. If any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day, and, with respect
to payments of principal, interest thereon shall be payable at then-applicable
rate during such extension.
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2.7 Taxes. Any Lender that is not organized under the laws of the
United States of America or a state thereof agrees that it will deliver to the
Company and the Lender (a) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor applicable form, as the case may
be, and (b) an Internal Revenue Service Form W-8 or W-9 or successor applicable
form. Each such Lender also agrees to deliver to the Company two further copies
of the said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms
or other manner of certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Company, and such extensions or renewals thereof as may reasonably be requested
by the Company, unless in any such case any change in treaty, law or regulation
has occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such the Lender so advises the Company and any other Lenders. Such Lender shall
certify (a) in the case of a Form 1001 or 4224, that it is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, and (b) in the case of a Form W-8 or W-9, that it
is entitled to an exemption from United States backup withholding tax.
2.8 Use of Proceeds. The proceeds of the issuance of the Note hereunder
shall be used only for the lawful and permitted corporate purposes relating to
the Company's domestic business specified pursuant to Section 5.1(z).
2.9 Fees. The Company shall pay (a) to the Collateral Agent such fees
as may be required under any agreement between the Company and the Collateral
Agent with respect to compensation of the Collateral Agent in respect of its
services, and (b) to each other person or entity to whom the Company has agreed
to pay a fee in connection with this Agreement or the other Transaction
Documents and the transactions contemplated hereby or thereby, such fees as may
be required under such agreement; provided in each case that such agreement has
been approved by the Lender.
2.10 Maximum Interest Rate. Nothing contained in this Agreement, the
Note or any other Transaction Document shall require the Company or the
Mortgagor Subsidiaries to pay interest at a rate exceeding the maximum rate
permitted by applicable law. If the amount of interest paid or payable on any
Interest Payment Date, computed pursuant to applicable law and the Transaction
Documents, would exceed the maximum amount
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<PAGE> 34
permitted by applicable law to be charged, the amount of interest paid
or payable on such Interest Payment Date shall be automatically reduced to such
maximum permissible amount and the excess applied to principal or, if no
principal shall be outstanding and such amount has been paid, returned to the
payor. If the amount of interest payable to the Lender in respect of any
interest computation period is reduced pursuant to the preceding sentence of
this Section and the amount of interest payable for its account in respect of
any subsequent interest computation period, computed pursuant to applicable law
and the Transaction Documents, would be less than the maximum amount permitted
by applicable law to be charged, then the amount of interest payable to the
Lender in respect of such subsequent interest computation period shall be
automatically increased to such maximum permissible amount; provided that at no
time shall the aggregate amount by which interest paid had been increased
pursuant to this sentence exceed the aggregate amount by which interest has
theretofore been reduced pursuant to the preceding sentence of this Section.
SECTION 3. COLLATERAL
3.1 Liens in Subsidiary Stock, Contract Receivables, Real Property and
Personal Property. To secure the prompt payment of the Secured Obligations,
together with all costs, expenses, fees and other obligations payable by the
Company or the Mortgagor Subsidiaries hereunder or under the Investment
Agreement with respect to the Secured Obligations, on or before the Issuance
Date the Company shall grant, and shall cause each Subsidiary to grant, to
Collateral Agent a continuing Lien, junior to the Lien created by, and securing
the obligations of the Company and Subsidiaries under, the Foothill Loan
Documents, in and to all of the following property and interests in property of
the Company and the Subsidiaries, except the Excluded Property, whether now
owned or existing or hereafter acquired or arising, or in which the Company and
the Subsidiaries now or hereafter have any rights, and wheresoever located, and
all proceeds thereof ("Collateral"):
(a) the Subsidiary Stock;
(b) the Homesite Contracts Receivable;
(c) the Commercial Receivables;
(d) the Real Property; and
(e) the Personal Property.
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At such times as any Excluded Property is freed of contractual or legal
restrictions against becoming subject to a Lien to secure the Secured
Obligations or upon the distribution of any Trust Property to the Company or a
Subsidiary (including an Unrestricted Subsidiary or Joint Venture), such
property shall, automatically, become subject to the Liens created by the
Security Documents, and the Company shall notify the Secured Creditor
in writing of such event and take such further actions as may be required by
the Secured Creditor and/or Collateral Agent to evidence and perfect such
Liens; provided that, in no event, shall a Lien be granted on any assets
required to be placed in a Reserve Account pursuant to the Reorganization Plan
or the Homesite Program.
3.2 Security Documents. To evidence and perfect the Liens of the
Secured Creditor and Collateral Agent in the Collateral in accordance with
applicable law, on or before the Issuance Date the Company shall execute and
deliver and will cause the Subsidiaries to execute and deliver, to Collateral
Agent the Security Documents, which Security Documents will be delivered to the
Lender and filed and recorded, and the Company will deliver, and shall cause the
Subsidiaries to deliver (or, if such Collateral shall be in the possession of
the collateral agent for the holders of the Foothill Debt, shall cause such
agent to acknowledge that it is holding such Collateral for the benefit of the
Lender as well as the holders of the Foothill Debt) to Collateral Agent any
Collateral if the perfection of a Lien against such Collateral requires
possession thereof for purposes of perfecting such Liens, all at the cost and
expense of the Company. Specifically, but without limiting the generality of
the foregoing, on or before the Issuance Date the Company will do, and will
cause the Subsidiaries to do, the following, subject in each case to the senior
and prior Liens created by, and securing the obligations of the Company and
Subsidiaries under, the Foothill Loan Documents:
(a) Stock Pledge. To evidence and perfect the Liens of
Collateral Agent in the Subsidiary Stock, the Company and the Subsidiaries
owning other Subsidiaries or Unrestricted Sub sidiaries shall execute and
deliver the Stock Pledge Agreement and will execute and deliver related undated
stock powers executed in blank by the Company and shall deliver all original
certificates representing the Subsidiary Stock to Collateral Agent and will
cause all issuers of Subsidiary Stock to execute and deliver pledge
acknowledgments pursuant to the Stock Pledge Agreement.
(b) Homesite Contracts Receivables and Commercial Receivables.
To evidence and perfect the Liens of Collateral
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Agent in the Homesite Contracts Receivable and Commercial Receivables,
the Company and the Subsidiaries will execute and deliver to Collateral Agent
the Security Agreements, together with related financing statements, which will
be filed and recorded in accordance with applicable law, and the Company and
Subsidiaries shall duly endorse any and all promissory notes included in the
Homesite Contracts Receivable and Commercial Receivables to the order of
Collateral Agent and shall deliver such promissory notes and the related
mortgages or deeds of trust to Collateral Agent or its designee, and shall
execute and deliver assignments of promissory notes and mortgages or deeds of
trust, filed and recorded in accordance with applicable law, and, as to
Commercial Receivables acquired following March 31, 1992, accompanied by ALTA
title insurance policies naming Collateral Agent as the insured mortgagee
thereunder.
(c) Real Property. To evidence and perfect the Liens of
Collateral Agent in the Real Property, the Company shall execute and deliver to
Collateral Agent the Mortgages, and the Mortgagor Subsidiaries shall execute and
deliver to Collateral Agent the Mortgages and Deed of Trust, as applicable, and
related financing statements encumbering such Real Property, which will be filed
and recorded in accordance with applicable law, accompanied by ALTA title
insurance policies insuring Secured Creditor's Lien represented thereby, and, if
requested by Secured Creditor, surveys of such Real Property.
(d) Joint Venture Pledge. To evidence and perfect the Liens of
Collateral Agent in the interests of the Venture Subsidiaries in the Joint
Ventures, the Company will cause the Venture Subsidiaries to execute and deliver
the Joint Venture Pledge Agreement and all requisite consents in respect of such
Liens.
(e) Personal Property. To evidence and perfect the Liens of
Collateral Agent in the Personal Property, the Company and Subsidiaries shall
execute and deliver to Collateral Agent the Security Agreements, together with
related financing statements, which have been or will be filed and recorded in
accordance with applicable law, and, to the extent that the Personal Property
comprises Investments or Bank Accounts, the Com pany and Subsidiaries shall take
the following actions:
(i) with respect to any Investment or Bank
Account which is or becomes evidenced by an agreement, instrument,
certificate or document, including promissory notes, stock
certificates, bonds, debentures, securities and certificates of
deposit, the Company shall from time
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to time deliver, or shall from time to time cause such
Subsidiary to deliver, the original thereof to the Collateral Agent,
together with appropriate assignments and endorsements or other
specific evidence of assignment thereof to the Collateral Agent, in
form and substance acceptable to the Collateral Agent;
(ii) with respect to any Investment or Bank
Account which is not certificated or otherwise evidenced as described
in clause (i) above, including uncertificated securities and
depository and other accounts maintained with financial institutions
and any other Persons, the Company shall notify the Secured Creditor
thereof and take, or cause such Subsidiary to take, any and all steps
which are required by the Secured Creditor for purposes of perfecting
the Collateral Agent's Lien therein;
(iii) the Company shall keep the Secured
Creditor informed of any and all Bank Accounts maintained by the
Company or any such Subsidiary with any financial institution or other
Person and, if requested by the Secured Creditor, the Company or any
such Subsidiary shall execute a cash collateral account agreement in
form and substance satisfactory to the Secured Creditor, pursuant to
which the Lien of Collateral Agent in such Bank Accounts is perfected
and preserved; and
(iv) if deemed by the Secured Creditor, in
its sole discretion, to be necessary for purposes of perfecting the
Lien of the Collateral Agent in any Bank Account, the Company shall
transfer to and maintain in a cash collateral account, and shall cause
the Subsidiaries to transfer to and maintain in a cash collateral
account, the funds in each such Bank Account and, if deemed necessary
by the Secured Creditor, shall execute and cause any such Subsidiary to
execute a cash collateral account agreement in form and substance
reasonably satisfactory to Collateral Agent, pursuant to which the Lien
of Collateral Agent in such Bank Account shall be perfected and pre
served; provided, however, the Company shall not be required to
deposit the residual, remainder or beneficial interest of the Company
and any such Subsidiary in the Reserve Accounts, the Claims
Disbursement Accounts and other escrow, restricted, custodial and
fiduciary accounts until such time as all amounts required to be
disbursed to the intended beneficiaries thereof have been disbursed and
the residual or remainder is available to the Company and its
Subsidiaries for deposit in an unrestricted account.
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(f) Additional Acts. The Company shall, and shall cause the
Subsidiaries to, take all actions and execute all documents deemed necessary by
the Secured Creditor or Collateral Agent to ensure that, upon the issuance of
the Note, the Secured Creditor or Collateral Agent, for the benefit of the
Secured Creditor, shall have a security interest in the Collateral granted by
the Security Documents junior only to the Liens thereon established under the
Foothill Loan Documents. If the perfection or recordation of Collateral Agent's
Lien or the Lien of the Secured Creditor pursuant hereto upon any Collateral
acquired hereafter by the Company or any Subsidiary requires any additional act
of possession or filing or recordation of any Security Document, the Company
shall notify the Secured Creditor of the acquisition of such Collateral and, at
the Secured Creditor's request, the Company shall execute and deliver and shall
cause the Subsidiaries to execute and deliver such Security Documents for
filing or recordation and deliver such items of Collateral as Collateral Agent
or the Secured Creditor may reasonably request for purposes thereof and the
Company shall pay the cost of preparing any such Security Documents and the
filing and recordation thereof. Without limiting the generality of the
foregoing, the Company agrees to, and to cause each Subsidiary (other than with
respect to property required to be released pursuant to Section 3.6) to notify
the Secured Creditor upon the acquisition of any Real Property acquired after
the date hereof, except as provided by Section 3.6, and upon request of the
Secured Creditor, to provide to the Secured Creditor an appraisal and an
environmental report (each in form and substance satisfactory to the Secured
Creditor) covering such property, and to cause such Real Property to be
subjected to a Mortgage or Deed of Trust in favor of Collateral Agent for the
benefit of Secured Creditor. With respect to any such Mortgages or Deed of
Trust, the Company or such Subsidiary shall deliver to the Secured Creditor the
following, all in form and substance satisfactory to the Secured Creditor: (i)
executed Mortgages or Deed of Trust and financing statements encumbering such
property and (ii) ALTA lenders' extended coverage policies of title insurance
on such property, in liability, amount and form and issued by a title company
satisfactory to the Secured Creditor showing the Mortgage or Deed of Trust as a
perfected lien upon the property, subject only to Liens permitted pursuant to
Section 7.3 and such other exceptions as may be approved by the Secured
Creditor in writing, together with endorsements reasonably required by the
Secured Creditor and affirmative assurances that the improvements are wholly
located within the boundaries of the insured land.
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3.3 Section 365(j) Property. Pursuant to the Reorganization Plan and
the Confirmation Order, the Company has designated the property which comprises
the Section 365(j) Property, which property, at the time of execution of the
mortgage encumbering the Section 365(j) Property in favor of the trustee for the
holders of Section 365(j) Liens, had a value, as appraised pursuant to the
Company's land plan book dated May, 1991, no greater than 120% of the value of
the Section 365(j) Liens established pursuant to the Reorganization Plan. The
Liens granted to Collateral Agent pursuant hereto in the Section 365(j) Property
are subordinate to the Liens of the Section 365(j) Liens and Collateral Agent
shall not be permitted to exercise its rights or remedies of foreclosure against
such property or exercise any other rights with respect to such property until
such time as the Section 365(j) Liens have been satisfied or have been
transferred to other property acceptable to the Bankruptcy Court.
3.4 [intentionally omitted]
3.5 Subordinations and Releases of Mortgage and Related
Personal Property Liens.
(a) [intentionally omitted]
(b) At such times as Liens are granted by the Company or any
Subsidiary, as permitted pursuant to Section 7.3(n), so long as no Default or
Event of Default has occurred and is continuing or would result therefrom, and
provided the Secured Creditor has received a certificate of a Responsible
Officer certifying and demonstrating that all of the conditions set forth in
Section 7.3(n) have been satisfied, the Secured Creditor shall instruct
Collateral Agent to and Collateral Agent shall execute documentation
subordinating the Lien of the Mortgages to such Liens, in form and substance
satisfactory to the Secured Creditor and Collateral Agent, unless such Real
Property qualifies for the release provisions in Section 3.5(c), in which event
the provisions of Section 3.5(c) shall apply.
(c) At such time as Liens are granted by any Subsidiary, as
permitted by Section 7.3(n), so long as no Default or Event of Default has
occurred and is continuing or would result therefrom, and provided the Secured
Creditor has received a certificate of a Responsible Officer certifying and
demonstrating that all of the conditions set forth in Section 7.3(n) have been
satisfied, the Secured Creditor shall instruct Collateral Agent to and
Collateral Agent shall release the Lien of the Mortgages on any Subsidiary
Property Under Development if (i)(x) such Real Property is financed under the
acquisition and
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project financing provisions of Sections 7.2(f) or 7.2(j), and (y) the
terms of such financing prohibit subordinate Liens upon such Real Property, or
(ii) such Real Property is contributed by the Company to a Subsidiary pursuant
to Section 7.8(g). The Company shall use reasonable efforts to cause any
lender/seller providing the acquisition and/or project financing on Subsidiary
Property Under Development to permit the subordination of Collateral Agent's
Liens on such Subsidiary Property Under Development, and thereby to eliminate
the need for Collateral Agent to release its Liens on such Subsidiary Property
Under Development. In connection with the release of any Liens on Subsidiary
Property Under Development pursuant to this Section 3.5(c), upon the request of
the Company, Secured Creditor shall instruct Collateral Agent to, and
Collateral Agent shall, release any Liens upon any Personal Property related
to, and integral to the use of, the Real Property being released; provided
that the Company provides a detailed list of such Personal Property to be
released in form and substance satisfactory to Secured Creditor. If such
lender/seller will permit such subordination, then, notwithstanding the
foregoing provisions of this Section 3.5(c), Collateral Agents's Liens on such
Subsidiary Property Under Development will not be released and will become
subordinate Liens pursuant to documentation in form and substance satisfactory
to Secured Creditor.
(d) [intentionally omitted]
3.6 Subsidiary Guaranties. The payment and performance by the Company
of its obligations under this Agreement and the other Transaction Documents,
and any and all other liabilities of the Company to the Secured Creditor or
Collateral Agent, whether now existing or hereafter created or acquired, are
and shall continue to be guaranteed by any and all Subsidiaries, which are and
shall continue to be evidenced by guarantees in the form of the Subsidiary
Guaranties. The Company shall cause any entity becoming a Subsidiary after the
date hereof to execute and deliver counterparts of the Transaction Documents to
which Subsidiaries of the Company are parties (other than the Note, the Note
Agreement and the initial Mortgages recorded in Florida), including the
Subsidiary Guaranties and the Security Documents, and to take all such steps as
shall be necessary to create in favor of the Collateral Agent duly perfected
and recorded Liens securing the Secured Obligations. In the case of any
subsequent Florida Mortgages executed by such subsequent Subsidiaries to secure
their obligations under the Subsidiary Guaranties, the amount of recovery under
such subsequent Mortgages shall be limited to an amount not greater than the
value of the respective additional mortgaged property.
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SECTION 4. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to Secured Creditor that:
4.1 Financial Condition.
(a) The consolidated balance sheets of the Company and
its consolidated Subsidiaries as at December 31, 1995 and the related
consolidated statements of income and of cash flows for the fiscal year ended
on such date, reported on by Ernst & Young, a copy of which has been furnished
to the Lender, fairly and accurately present the consolidated financial
condition of the Company and its consolidated Subsidiaries as at such date, and
the consolidated results of their operations and their consolidated cash flows
for the fiscal year then ended.
(b) The unaudited consolidated balance sheets of the
Company and its consolidated Subsidiaries as at September 30, 1996, and the
related consolidated statements of income and cash flows for the three months
and fiscal year then ended, a copy of which has been delivered to the Lender,
fairly and accurately presents the consolidated financial condition of the
Company and its consolidated Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for the three
months, and fiscal year, then ended (subject to normal year-end adjustments)
and a Responsible Officer has so certified to the Lender.
(c) All such financial statements described in clauses
(a) and (b) above, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except for such inconsistencies as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein). Neither
the Company nor any of its consolidated Subsidiaries had, at the date of the
most recent balance sheet referred to above, any material Guarantee Obligation,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including any interest rate or foreign
currency swap or exchange transaction, which is not reflected in the foregoing
statements or in the notes thereto or in Schedule 4.1. Since September 30,
1996 there has been no sale, transfer or other disposition or agreement
therefor by the Company or any of its consolidated Subsidiaries of any material
part of its business or property and no purchase or other acquisition of any
business or property (including any capital stock of any other Person) which is
material in relation to the consolidated financial condition of the Company and
its consolidated Subsidiaries at September 30, 1996, except as
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described in Schedule 4.1 or consented to in writing by the Lender in its sole
discretion.
(d) The three-year Management Business Plan update for
the period 1996-1998 delivered to the Lender prior to the date hereof (i) was
prepared in good faith upon assumptions believed by the Company to be
reasonable, it being understood that the projections therein contained as to
future events are subject to certain uncertainties and contingencies which are
beyond the control of the Company and may be significant, and thus no assurance
can be given that such projections will be realized, and (ii) presents fairly,
in all material respects, the actual results of operations of the Company and
Subsidiaries for the period from January 1, 1996 through the date thereof, in
accordance with GAAP, subject to recurring year-end audit adjustments and the
absence of footnotes.
4.2 No Material Adverse Change. Since September 30, 1996, (a)
there has been no development or event nor any prospective development or
event, which has had or could reasonably be expected to have a Material Adverse
Effect, except such developments or events or prospective developments or
events as have been disclosed by the Company in filings with the Securities and
Exchange Commission made prior to the date hereof and true and correct copies
of which have been delivered to the Lender or as set forth on Schedule 4.2, and
(b) no dividends or other distributions have been declared, paid or made upon
the Capital Stock of the Company nor has any of the Capital Stock of the
Company been redeemed, retired, purchased or otherwise acquired for value by
the Company or any of its Subsidiaries. As of the date hereof and the Issuance
Date, no motion for the conversion of the case, appointment of a trustee, or
dismissal is pending or has been denied, the reversal of which on appeal would
affect the validity of this Agreement and no appeal has been taken from the
entry of the Confirmation Order in the Reorganization Proceedings, the
reversal, modification, or affirmance of which will affect the validity or
enforceability, or change the provisions, of this Agreement or any other
Transaction Document.
4.3 Corporate Existence; Compliance with Law. Each of the Company
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, except, in the
case of any such Subsidiary, where all such failures to be in good standing are
not reasonably likely, in the aggregate, to have a Material Adverse Effect, (b)
has the corporate power and authority, and the legal right, to own and operate
its property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
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corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except to the extent that all such failures to be
so qualified and in good standing are not reasonably likely, in the aggregate,
to have a Material Adverse Effect, and (d) is in compliance with all
Requirements of Law except to the extent that any failures to comply therewith
is not reasonably likely, in the aggregate, to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations.
(a) The Company. The Company has the corporate power and
authority, and the legal right, to make, deliver and perform this Agreement,
the Note and other Transaction Documents, and to borrow hereunder and perform
the terms thereof and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and the Notes and to
authorize the execution, delivery and performance of this Agreement, the Notes
and the other Transaction Documents including the issuance of the Preferred
Stock and the Initial Warrants, except for shareholder action necessary to
authorize (i) the Preferred Stock, (ii) the Common Stock of the Company
issuable upon conversion of the Preferred Stock and exercise of the Warrants
and (iii) issuance of the Warrants. Except as set forth on Schedule 4.4, no
consent or authorization of, filing with or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement, the Note or the other Transaction Documents,
except such consents, authorizations, filings or other acts as have been
obtained, made or performed, as the case may be, and as remain in full force
and effect. This Agreement and the other Transaction Documents to which the
Company is party have been or will be, duly executed and delivered on behalf of
the Company. This Agreement, and each other Transaction Document executed and
delivered constitutes, or when executed and delivered will constitute, a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting the enforcement of creditors rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
(b) Subsidiaries. Each of the Subsidiaries (including
Unrestricted Subsidiaries) party to the Transaction Documents has the corporate
power and authority, and the legal
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right, to make, deliver and perform the Transaction Documents to which it is a
party and has taken all necessary corporate action to authorize the execution,
delivery and performance of the Transaction Documents to which it is a party.
Except as set forth on Schedule 4.4, no consent or authorization of, filing
with or other act by or in respect of, any Governmental Authority or any other
Person is required in connection with the execution, delivery, performance,
validity or enforceability of the Transaction Documents to which it is a party,
except such consents, authorizations, filings or other acts as have been
obtained, made or performed, as the case may be, and as remain in full force
and effect. Each Transaction Document to which any Subsidiary (including
Unrestricted Subsidiaries) is a party has been or will be duly executed and
delivered on behalf of each such Subsidiary. Each Transaction Document to
which any Subsidiary (including Unrestricted Subsidiaries) is a party, executed
and delivered constitutes, or when executed and delivered will constitute, a
legal, valid and binding obligation of each such Subsidiary, enforceable
against each such Subsidiary in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of this
Agreement, the Note, the Subsidiary Guaranty and the other Transaction
Documents, and the use of the proceeds of the Notes will not violate (i) any
Requirement of Law or (ii) except as disclosed on Schedule 4.5 hereto, any
material Contractual Obligation of the Company or of any of its Subsidiaries or
Unrestricted Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation.
4.6 No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Company, threatened by or against the Company or any of
its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to this Agreement, the Note or other Transaction
Documents or any of the transactions contemplated hereby or thereby or (b)
which is reasonably likely to have a Material Adverse Effect, which has not
been disclosed (including, estimates of the Dollar amounts involved) in the
Company's filings with the Securities and Exchange Commission made prior to the
date hereof, true and correct copies of which have been delivered to the Lender
or on Schedule 4.6 hereto.
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4.7 No Default. Neither the Company nor any of its Subsidiaries
is in default under or with respect to any of its Contractual Obligations in
any respect which is reasonably likely to have a Material Adverse Effect,
except as disclosed, including estimates of the Dollar amounts involved, in the
Company's filings with the Securities and Exchange Commission made prior to the
date hereof, true and correct copies of which have been delivered to the Lender
or on Schedule 4.7. No Default or Event of Default has occurred and is
continuing. No default has occurred and is continuing under any of the
Foothill Loan Documents or the indenture governing the Unsecured Cash Flow
Notes.
4.8 Ownership of Property; Liens. Each of the Company and its
Subsidiaries, as the case may be, has good record and marketable title in fee
simple to, or a valid leasehold interest in, all of the Collateral and all its
other real property, and good title to all its other property necessary for the
operation of its business, and none of such property of the Company or such
Subsidiaries is subject to any Lien except as permitted by Section 7.3. To the
best knowledge of the Company, after diligent inquiry, the Collateral includes
all property of the Company and its Subsidiaries that is not Excluded Property.
4.9 Intellectual Property. The Company and each of its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which is not reasonably likely to have a Material Adverse Effect (the
"Intellectual Property"). No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does the
Company know of any valid basis for any such claim. The use of such
Intellectual Property by the Company and its Subsidiaries does not infringe on
the rights of any Person, except for such claims and infringements that, in the
aggregate, do not have a Material Adverse Effect. To the knowledge of the
Company, there exists no infringement upon the Intellectual Property rights of
the Company and Subsidiaries by any other Person.
4.10 Taxes. Each of the Company and its Subsidiaries (including
Unrestricted Subsidiaries and Joint Ventures) has filed or caused to be filed
all tax returns which, to the knowledge of the Company, are required to be
filed and has paid all taxes shown to be due and payable on said returns or on
any assessments made against it or any of its property and all other taxes,
fees or other charges imposed on it or any of its property by any Governmental
Authority (other than any taxes,
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fees or other charges the amount or validity of which are currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the Company
or its Subsidiaries (including Unrestricted Subsidiaries and Joint Ventures),
as the case may be) except tax claims which are to be paid on a deferred basis
pursuant to the Reorganization Plan; no tax Lien has been filed, and, to the
knowledge of the Company, no claim is being asserted, with respect to any such
tax, fee or other charge, except as disclosed on Schedule 4.10.
4.11 Federal Regulations. No part of the proceeds of the Note
will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation G, T, U or X
of the Board of Governors of the Federal Reserve System as now and from time to
time hereafter in effect or for any purpose which violates the provisions of
the Regulations of such Board of Governors.
4.12 ERISA. Except as disclosed on Schedule 4.12 or by letter to
the Lender referring to this Section 4.12 delivered on or prior to the date
hereof in accordance with Section 6.7(d), no Reportable Event has occurred
during the five-year period prior to the date on which this representation is
made or deemed made with respect to any Plan. The Company and each Commonly
Controlled Entity are in substantial compliance with the applicable provisions
of ERISA with respect to each Plan. The present value of all accrued benefits
under each Single Employer Plan (based on the reasonable assumptions used by
the independent actuary for such Plan for purposes of establishing the minimum
funding requirements under Section 412 of the Code) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits, individually or in the aggregate for all Single Employer
Plans (excluding for purposes of such computation any Single Employer Plans
with respect to which the value of the assets exceed the present value of the
accrued benefits), by more than $4,600,000. Neither the Company nor any
Commonly Controlled Entity is liable under Title IV of ERISA by reason of the
termination of a Single Employer Plan or the withdrawal from a Single Employer
Plan in which it was a "substantial employer" within the meaning of Section
4001(a)(2) of ERISA. Each Plan intended to be qualified under Section 401(a)
of the Code, including each Single Employer Plan, is qualified in operation
under Section 401(a) of the Code and is qualified in form under Section 401(a)
of the Code, except with respect to any required amendments with respect to
which the remedial amendment period under Section 401(b) of the Code has not
expired. Neither the Company nor any Commonly Controlled Entity has had a
complete
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or partial withdrawal from any Multiemployer Plan and neither the Company nor
any Commonly Controlled Entity would become subject to any liability under
ERISA if the Company or any such Commonly Controlled Entity were to withdraw
from all Multiemployer Plans in complete withdrawals within the meaning of
Section 4203 of ERISA as of the valuation dates for such plans most closely
preceding the date on which this representation is made or deemed made. No
Multiemployer Plan is in Reorganization or Insolvent. Neither the Company nor
any Commonly Controlled Entity is liable for fines, penalties, taxes or related
charges under Chapter 43 of the Code or under Sections 409, 502(c), 502(i),
502(1) or 4071 of ERISA in an amount exceeding $50,000 in the aggregate at any
time. There are no material claims (other than routine claims for benefits)
against any Plan (other than a Multiemployer Plan) or against the Company or
any Commonly Controlled Entity in connection with any such Plan. Neither the
Company nor any Commonly Controlled Entity is liable for post retirement
benefits to be provided to their current and former employees under Plans which
are welfare benefit plans (as defined in Section 3(1) of ERISA) except as
required by Section 4980B of the Code and Section 601 of ERISA.
4.13 Investment Company Act; Other Regulations. The Company is
not an "investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
The Company is not subject to regulation under any Federal or state statute or
regulation which limits its ability to incur Indebtedness.
4.14 Subsidiaries and Joint Ventures. The Subsidiaries listed on
Schedule 4.14(A) constitute all of the Subsidiaries and such schedule
identifies the shareholders of such Subsidiary, the Joint Ventures listed on
Schedule 4.14(B) constitute all of the Joint Ventures and such schedule
identifies all owners of the Joint Venture interests thereof and the percentage
equity ownership of such owners, and neither the Company nor any Subsidiary
other than a Venture Subsidiary owns any Joint Venture interest.
4.15 Environmental Matters. Each of the representations and
warranties set forth in paragraphs (a) through (g) of this Section is true and
correct, except as disclosed on Schedule 4.15 or described in the certificate
regarding environmental matters required pursuant to Section 5.1(i) or except
to the extent that the facts and circumstances giving rise to any such failure
to be so true and correct is not reasonably likely to have a Material Adverse
Effect:
(a) The Total Real Property does not contain, and has
not previously contained, therein, thereon, or thereunder,
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including the soil and groundwater thereunder, any Hazardous Materials in
violation of any Environmental Law.
(b) The Company, its Subsidiaries, the Joint Ventures,
the Total Real Property, and all operations and facilities at the Total Real
Property, are in compliance with all Environmental Laws, and there are no
Hazardous Materials or violations of any Environmental Law which could
interfere with the continued operation of any of the Total Real Property or
impair the fair saleable value of any thereof.
(c) Neither the Company nor any of its Subsidiaries nor
any of the Joint Ventures has received any complaint or any notice of
violation, alleged violation or investigation or of potential liability or
designating any of such Persons as a potentially responsible party under any
Environmental Law regarding environmental protection matters or environmental
permit compliance with regard to the Total Real Property, nor is the Company
aware that any Governmental Authority is contemplating delivering to the
Company or any of its Subsidiaries or any of the Joint Ventures any such
notice. Neither the Company nor any of its Subsidiaries nor any of the Joint
Ventures has reported any releases of Hazardous Materials to any Governmental
Authority.
(d) Hazardous Materials have not been generated,
treated, stored or disposed of, at, on or under any of the Total Real Property
in violation of any Environmental Law, nor have any Hazardous Materials been
transferred from the Total Real Property to any other location in violation of
any Environmental Law nor have there been any treatment, storage or disposal
operations on any of the Total Real Property requiring any approval or permit
from any Governmental Authority. Neither the Company nor any of its
Subsidiaries nor any of the Joint Ventures has ever owned or operated or
currently owns or operates any waste disposal or storage facilities,
underground storage tanks or surface impoundments except as disclosed on
Schedule 4.15.
(e) There are no governmental or administrative actions
or judicial proceedings pending or, to the knowledge of the Company,
contemplated under any Environmental Laws to which the Company or any of its
Subsidiaries or any of the Joint Ventures is or, to the knowledge of the
Company, will be named as a party with respect to the Total Real Property, nor
are there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Company or any of
its Subsidiaries or any of the Joint Ventures or to any of the Total Real
Property.
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(f) There is no environmental condition associated with
any of the Total Real Property which would impede the development thereof,
including the presence of endangered or threatened species, or ecologically
sensitive habitat or water rights or quality issues.
(g) Copies of all permits, authorizations and
environmental reports for or with respect to the Total Real Property have been
made available to the Lender.
4.16 Indebtedness. Schedule 4.16 lists all Indebtedness
(including available commitments) of the Company and its Subsidiaries as
existing on the date hereof.
4.17 Contingent Obligations. Schedule 4.17 lists all Guarantee
Obligations of the Company and all Guarantee Obligations of any of its
Subsidiaries.
4.18 Restitution Program and Final Judgment. The Company and its
Subsidiaries are in compliance with the "Restitution Program" and the "Final
Judgment," as defined in the Reorganization Plan.
4.19 Certain Fees. No broker's or finder's fee or commission
will be payable with respect to this Agreement or any other Transaction
Document or any of the transactions contemplated hereby or thereby except for
the fee payable by the Company to Banker's Trust pursuant to an engagement
letter dated August 3, 1995, as amended by a letter agreement dated February
29, 1996, which the Company agrees to pay, and the Company hereby indemnifies
Secured Creditor against, and agrees that it will hold Secured Creditor
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
4.20 Disclosure. No representation or warranty of the Company or
any of its Subsidiaries contained in any Transaction Document or in any other
document, certificate or written statement furnished to Secured Creditor by or
on behalf of the Company or any of its Subsidiaries for use in connection with
the transactions contemplated by this Agreement or any other Transaction
Document contains any untrue statement of a material fact or omits to state a
material fact (known to the Company in the case of any document not furnished
by it) necessary in order to make the statements contained herein or therein
not misleading in light of the circumstances in which the same were
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made. Any projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by the
Company to be reasonable at the time made, it being recognized by the Lender
that such projections as to future events are not to be viewed as facts and
that actual results during the period or periods covered by any such
projections may differ from the projected results. There are no facts known
(or which should upon the reasonable exercise of diligence be known) to the
Company (other than matters of an economic nature affecting business
enterprises generally) that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect and have not been disclosed
herein or in such other written documents, certificates and statements
furnished to Secured Creditor for use in connection with the transactions
contemplated hereby.
4.21 Insurance. The Company and each of its Subsidiaries
maintain, with financially sound and reputable insurers, insurance with respect
to its properties and business and the properties and business of its
Subsidiaries, against loss and damage of the kinds customarily insured against
by corporations of established reputation engaged in the same or similar
business of such types and in such amounts as are customarily carried under
similar circumstances by such other corporations. Attached as Schedule 4.21 is
a complete and accurate description of all policies of insurance that will be
in effect as of the Issuance Date for the Company and each of its Subsidiaries.
4.22 Total Real Property Matters. The Company and each of its
Subsidiaries (including the Joint Ventures) is in compliance with all
development orders obtained by the Company and its Subsidiaries (including the
Joint Ventures) with respect to any Total Real Property, except to the extent
noncompliance could not reasonably be expected to have a Material Adverse
Effect.
4.23 Reorganization Proceedings. The Company has delivered to
the Lender true, correct and complete copies of the Reorganization Plan and
Confirmation Order, together with copies of any modifications thereto or
subsequent proceedings with the Bankruptcy Court. The Company and its
Subsidiaries are in all material respects in compliance with the Reorganization
Plan and Confirmation Order.
4.24 Excluded Subsidiaries; Unrestricted Subsidiaries.
(a) The Excluded Subsidiaries do not have, nor are they
anticipated to have, any assets or revenues. The Excluded Subsidiaries do not
currently conduct, nor are they anticipated to begin to conduct, any business.
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(b) The Unrestricted Subsidiaries do not have, nor are
they anticipated to have, any assets or revenues other than the assets
disclosed on Schedule 4.24 as being owned by them and the revenues arising
therefrom. The Unrestricted Subsidiaries do not currently conduct, nor are
they anticipated to begin to conduct, any business other than the businesses
disclosed on Schedule 4.24 as being conducted by them.
4.25 [intentionally omitted]
4.26 Bank Accounts. Schedule 4.26 (as amended from time to time
by written notice to the Lender) is a true and correct list of all Bank
Accounts of the Company and its Subsidiaries.
4.27 Utility Fund Trusts. All of the Company's obligations under
each of the Class 14 Utility Fund Trust Agreement and the Homesite Program
Utility Fund Trust Agreement, each dated December 8, 1992, and entered into by
and between the Company and First Union National Bank of Florida as Trustee
have been fully funded in the amount of $10,000,000.
4.28 [intentionally omitted]
4.29 SPUD Subsidiaries. Except as disclosed on Schedule 4.29, no
Subsidiary is a SPUD Subsidiary.
4.30 DRI and Zoning. The representations and warranties set
forth in Schedule 4.30 are by this reference incorporated herein as though
fully set forth and made in this Section 4.30.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Issuance. The obligation of the Lender to
accept the Note and make the loan contemplated hereby is subject to the
satisfaction, or waiver by the Lender, on or before May 22, 1997, of the
following conditions precedent:
(a) Secured Note Documents. The Lender shall have
received (i) this Agreement, executed and delivered by a duly authorized
officer of the Company and the Mortgagor Subsidiaries, (ii) a Note conforming
to the requirements hereof and executed and delivered by a duly authorized
officer of the Company and the Mortgagor Subsidiaries, (iii) each other Secured
Note Document conforming to the requirements hereof and executed and delivered
by a duly authorized officer of the Company or each of its Subsidiaries
(including each of the Unrestricted Subsidiaries as to its Acknowledgment under
the Stock Pledge Agreement), as the case may be, which are parties to such
Secured Exchangeable Note Document, (iv) each other Transaction Document,
executed and delivered by a duly authorized
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officer of each party thereto, (v) copies, certified as true and correct copies
by a Responsible Officer, of the Security Documents and (vi) in form and
substance satisfactory to the Lender and Collateral Agent, a duly executed
agreement with local counsel or representatives with respect to certain
collateral-related services to be provided thereby to the Lender and Collateral
Agent, respectively.
(b) Corporate Proceedings of the Company. The Lender
shall have received a copy of the resolutions, in form and substance
satisfactory to the Lender and dated on or prior to the date hereof, of the
Board of Directors of the Company authorizing the execution, delivery and
performance of this Agreement, the Note, and the other Transaction Documents to
which it is a party, certified by the secretary or an assistant secretary of
the Company as of the Issuance Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded and are in full force and effect and shall be in form and substance
satisfactory to the Lender.
(c) Corporate Proceedings of the Subsidiaries. The
Lender shall have received a copy of the resolutions, in form and substance
satisfactory to the Lender and dated on or prior to the date hereof, of the
Board of Directors of each Subsidiary which is a party to any Transaction
Document authorizing the execution, delivery and performance of the Transaction
Documents to which it is a party, certified by its secretary or an assistant
secretary as of the Issuance Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded and are in full force and effect and shall be in form and substance
satisfactory to the Lender.
(d) Corporate Documents. The Lender shall have received
true and complete copies of (i) the certificate or articles of incorporation of
the Company and each of its Subsidiaries which is a party to any Transaction
Document certified by the Secretary of State of their respective jurisdictions
of incorporation as of a recent date prior to the Issuance Date, (ii) the
Bylaws of the Company and each of its Subsidiaries which is a party to any
Transaction Document certified as of the Issuance Date by its secretary or an
assistant secretary, (iii) good standing certificates, including, in states
which provide such certificates, certification of tax status, of the Company
and each of its Subsidiaries which is a party to any Transaction Document
certified by the Secretary of State of their respective jurisdictions of
incorporation and of each jurisdiction in which they are qualified to do
business as a
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foreign corporation dated as of a recent date prior to the Issuance Date and
(iv) incumbency and signature certificates for the Company and each Subsidiary
executing any Transaction Document as of the Issuance Date.
(e) Other Documents. The Lender shall have received
copies, certified as true and correct by a Responsible Officer, of (i) the
indenture relating to the Unsecured Cash Flow Notes and the Foothill Loan
Documents, each as amended through the Issuance Date, and (ii) the Business
Plan and the Beige Book.
(f) No Violation. The consummation of the transactions
contemplated hereby and by the other Transaction Documents shall not
contravene, violate or conflict with, nor involve Secured Creditor in any
violation of, any Requirement of Law.
(g) Consents, Authorizations, and Filings. The Lender
shall have received a certificate of a Responsible Officer (i) attaching copies
of all consents, authorizations, and filings referred to in Section 4.4 and in
any similar provision of any of the other Transaction Documents, and (ii)
stating that such consents, authorizations, and filings are in full force and
effect and each such consent, authorization, and filing shall be in form and
substance satisfactory to the Lender.
(h) Legal Opinions. The Collateral Agent and the Lender
shall have received executed legal opinions dated as of the Issuance Date in
form and substance satisfactory to the Lender:
(i) Arent Fox Kintner Plotkin & Kahn, counsel to
the Company and its Subsidiaries;
(ii) corporate counsel to the Company and its
Subsidiaries;
(iii) Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A., special Florida counsel to the Company and its
Subsidiaries;
(iv) Chambliss & Bahner, special Tennessee counsel
to the Company and its Subsidiaries; and
(v) Carlton Fields Ward Emmanuel Smith & Cutler,
P.A., special Florida counsel to the Lender and Collateral Agent.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement and the
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other Transaction Documents as the Lender may reasonably require.
(i) Certification as to Environmental Matters. The
Lender shall have received a certificate of a Responsible Officer (i) stating
that the Company is not aware of any environmental matters in connection with
any of the Total Real Property which could reasonably be expected to result in
a liability to the Company or any Subsidiary or any Joint Venture in excess of
$200,000 except as listed on a schedule attached to such certificate and (ii)
certifying that the Company has made, and agreeing that the Company will
continue to make, available to the Lender copies all notices, citations,
requests for information and reports from the Environmental Protection Agency,
Florida Department of Environmental Regulation or other Federal, state or local
environmental regulatory agency having jurisdiction over any of the Total Real
Property, and any report or audit prepared by a private company with respect
thereto.
(j) Continued Perfection of Security Interests. The
Company and its Subsidiaries party to any of the Security Documents shall have
taken or cause to be taken all such actions deemed necessary or desirable by
Collateral Agent to ensure that Collateral Agent or Secured Creditor has and
continues to have a valid and perfected security interest in the Collateral
granted by the Security Documents subject to the Liens permitted pursuant to
this Agreement and the Security Documents (and the Lender and Collateral Agent
shall have received satisfactory evidence thereof). Such action shall include:
(i) the delivery by the Company pursuant to the Stock Pledge Agreement of
certificates (which certificates shall be registered in the name of Collateral
Agent or properly endorsed in blank for transfer or accompanied by irrevocable
undated stock powers duly endorsed in blank, all in form and substance
satisfactory to Collateral Agent and the Lender) representing all Subsidiary
Stock; (ii) the delivery to Collateral Agent of Uniform Commercial Code
financing statements, executed by each of the Company and each of its
Subsidiaries as to the Collateral granted by each such party for all
jurisdictions as may be necessary or desirable to perfect or continue the
perfection of Collateral Agent's security interest in such Collateral; and
(iii) evidence reasonably satisfactory to Collateral Agent and the Lender that
all other filings, recordings and other actions Collateral Agent and the Lender
deems necessary or advisable to establish, preserve and perfect the Liens and
the priority thereof granted to Collateral Agent and the Lender hereunder shall
have been made.
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(k) Real Property Matters. The Lender shall have
received: (i) such Mortgages and Deeds of Trust as may be requested by the
Lender, in each case in form and substance satisfactory to the Lender and its
local counsel, to protect and preserve the Lien and priority of the Mortgages
and Deeds of Trust as they secure the Secured Obligations and other amounts due
hereunder and under the other Transaction Documents, together with new ALTA
lender's extended coverage policies of title insurance or amendments of the
existing ALTA lender's extended coverage policies of title insurance on the
Real Property encumbered by the Mortgages and Deeds of Trust in liability,
amount and form issued by a title company satisfactory to the Lender showing
the Mortgages and Deeds of Trust as first Liens upon the respective Real
Property, subject only to Liens permitted hereunder and thereunder and such
other exceptions or exclusions as may be approved by the Lender in its sole
discretion, together with any endorsements reasonably required by the Lender,
and affirmative assurance that the improvements are fully located within the
boundaries of the insured land; and (ii) in respect of the Total Real Property
listed on Schedule 5.1(k) and subject to Section 5.3(a), copies of such
appraisals, surveys, environmental audit reports, satisfactory evidence of
entitlements (including so-called "zoning letters"), and other documents as the
Lender may request, each as specified or contemplated on Schedule 5.1(k). The
legal descriptions of real property Collateral shall be satisfactory to Lender
and its local counsel.
(l) [intentionally omitted]
(m) [intentionally omitted]
(n) [intentionally omitted]
(o) Evidence of Insurance. The Company shall have
delivered to the Lender certificates of insurance naming Collateral Agent on
behalf of Secured Creditor as loss payee under the casualty and surety policies
required pursuant to Section 6.5.
(p) No Material Adverse Effect. On the Issuance Date,
the Lender shall have received an officer's certificate executed by a
Responsible Officer stating that no Material Adverse Effect has occurred since
September 30, 1996.
(q) Intercreditor Agreement. The Intercreditor Agreement
shall have been executed and delivered by each of the parties thereto, and the
Lender shall have received a fully executed copy thereof in form and substance
satisfactory to the Lender.
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(r) Fees, Costs, and Expenses. The Company shall have
paid, when and as invoiced: (i) to the Lender all fees, costs, and expenses of
the Lender and its counsel incurred in connection with the preparation,
negotiation, and execution of this Agreement, the other Transaction Documents,
and any other documents executed in connection herewith or therewith; and (ii)
to the Collateral Agent all fees, costs, and expenses of Collateral Agent and
its counsel incurred in connection with the preparation, negotiation, and
execution of this Agreement, any other Transaction Documents to which it is a
party and any other documents executed in connection herewith or therewith.
(s) Borrowing Request. The Company shall have delivered
a Borrowing Request, signed by a Responsible Officer, specifying the amount of
the borrowing requested and the date such borrowing is to be made and
certifying, as of the date of such certificate and the date of such borrowing,
to the fact that no Default or Event of Default has occurred and that each
representation and warranty of the Company or any Subsidiary contained in this
Agreement and each other Transaction Document was true and correct in all
material respects when made and on as of the date of such certificate and the
date of such borrowing.
(t) [intentionally omitted]
(u) Consents under Certain Loan Documents. Any consents
necessary under the terms of the Security Documents and other Foothill Loan
Documents in connection with the transactions contemplated by the Transaction
Documents shall have been obtained and shall be in form and substance
satisfactory to the Lender.
(v) Other Matters. The Company shall have made available
to the Lender such other documents and information, or taken such other
actions, as the Lender may reasonably request.
(w) Addressee. Each certificate delivered to the Lender
under this Section 5 shall be addressed to Secured Creditor.
(x) Tax Servicing Contracts. Provision reasonably
satisfactory to the Lender and Collateral Agent shall have been made for
delivery to each of them of all reports and information delivered to the
holders of the Foothill Debt pursuant to any Tax Servicing Contracts existing
in favor of such holders in respect of Real Property located in Florida and
Tennessee.
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(y) Due Diligence Fee Agreement. The Company and the
Lender shall have executed and delivered the Due Diligence Fee Agreement.
(z) Use of Proceeds. The Lender shall have received an
officer's certificate executed by a Responsible Officer specifically describing
the use to be made of the proceeds of the issuance of the Note and the Lender
shall approve such use, in its sole and absolute discretion.
(aa) Collateral Agent. A Person reasonably satisfactory
to the Lender shall have agreed to serve as Collateral Agent under the
Transaction Documents and shall have executed and delivered each Transaction
Document to which the Collateral Agent is a party.
5.2 [intentionally omitted]
SECTION 6. AFFIRMATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof and
until the "Closing Date" (as defined in the Investment Agreement) and
thereafter at any time while there shall be due and owing and unpaid any
Repurchase Obligation under Section [8] of the Certificate of Designation, the
Company shall, and shall cause each of its Subsidiaries to:
6.1 Financial Statements. Furnish to the Lender:
(a) as soon as available, but in any event not later than
90 days after the end of each fiscal year of the Company, a copy of the
consolidated balance sheet of the Company and its consolidated Subsidiaries
(including Unrestricted Subsidiaries) as at the and of such year and the
related consolidated statements of income and retained earnings and of cash
flows for such year, setting forth in each case in comparative form the figures
for the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of the
audit, by Ernst & Young or other independent certified public accountants of
nationally recognized standing acceptable to the Lender;
(b) as soon as available, but in any event not later than
90 days after the end of each fiscal year of the Company, a copy of the
consolidating balance sheet of the Company and its consolidated Subsidiaries
(including Unrestricted Subsidiaries) as at the end of such year and the
related consolidating statements of income and retained earnings and of cash
flows for such year, setting forth in each case in comparative
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form the figures for the previous year, certified by a Responsible Officer as
being fairly stated in all material respects;
(c) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of each
fiscal year of the Company, the unaudited consolidated and consolidating
balance sheet of the Company and its consolidated Subsidiaries (including
Unrestricted Subsidiaries) as at the end of such quarter and the related
unaudited consolidated and consolidating statements of income and retained
earnings and of cash flows of the Company and its consolidated Subsidiaries
(including Unrestricted Subsidiaries) for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a Responsible
Officer as being fairly stated in all material respects when considered in
relation to the consolidated and consolidating financial statements of the
Company and its consolidated Subsidiaries (subject to normal year-end audit
adjustments);
(d) as soon as available, but in any event not later than
30 days after the end of each calendar month, the unaudited consolidated
balance sheet of the Company and its consolidated Subsidiaries (including
Unrestricted Subsidiaries) as at the end of such month and the related
unaudited consolidated statements of income and retained earnings and of cash
flows of the Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) for such month, setting forth in each case in comparative form
the figures for such month as set forth on the Business Plan and, beginning in
fiscal year 1996, with a comparison to the same calendar month of the preceding
fiscal year, certified by a Responsible Officer as being fairly stated in all
material respects when considered in relation to the consolidated financial
statements of the Company and its consolidated Subsidiaries (including
Unrestricted Subsidiaries) (subject to normal year-end audit adjustments); and
(e) as soon as available, but in any event not later than
45 days after the end of each fiscal quarter, projections by the Company of the
operating cash flow budget of the Company and its Subsidiaries for (i) the
following two fiscal quarters, prepared on a monthly basis and (ii) the two
fiscal quarters thereafter, prepared on a quarterly basis, certified by a
Responsible Officer as being prepared in good faith on the basis of the
assumptions stated therein, which assumptions were reasonable in light of
conditions existing at the time of delivery thereof and represented, at the
time of delivery, the Company's best estimate of its future financial
performance;
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all such financial statements to be complete and correct in
all material respects and to be prepared in reasonable detail and in accordance
with GAAP applied consistently throughout the periods reflected therein and
with prior periods (except as approved by such accountants or officer, as the
case may be, and disclosed therein).
Furnish, or cause each Subsidiary with an investment in a
Borrowing Base Joint Venture to furnish, to the Lender:
(f) as soon as available, but in any event not later than
90 days after the end of each fiscal year of the relevant Borrowing Base Joint
Venture, a copy of the balance sheet of such Joint Venture as at the end of
such year and the related consolidated statements of income and retained
earnings and of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year; if such financial
statements are required under the relevant Borrowing Base Joint Venture's
governing or charter documents or other material agreement (including financing
agreements) to be audited, then such financial statements shall be reported on
without a "going concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by independent certified public
accountants acceptable to the Lender;
(g) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of the
relevant Borrowing Base Joint Venture, the unaudited balance sheet of such
Borrowing Base Joint Venture as at the end of such quarter and the related
unaudited statements of income and retained earnings and of cash flows of such
Borrowing Base Joint Venture for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth in each case in comparative
form the figures for the previous year, certified by the chief accounting
officer or treasurer of the relevant Venture Subsidiary as being fairly stated
in all material respects when considered in relation to the financial
statements of such Borrowing Base Joint Venture (subject to normal year-end
audit adjustments); and
(h) as soon as available, but in any event not later than
30 days after the end of each calendar month, the unaudited balance sheet of
the relevant Borrowing Base Joint Venture as at the end of such month and the
related unaudited consolidated statements of income and retained earnings and
of cash flows of such Borrowing Base Joint Venture for such month, certified by
the chief accounting officer or treasurer of the relevant Venture Subsidiary as
being fairly stated in all material respects when considered in relation to the
financial
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statements of such Borrowing Base Joint Venture (subject to normal year-end
audit adjustments);
all such financial statements to be complete and correct in
all material respects and to be prepared in reasonable detail and in accordance
with GAAP applied consistently throughout the periods reflected therein and
with prior periods (except as approved by such accountants or officer, as the
case may be, and disclosed therein).
6.2 Certificates; Other Information. Furnish to the Lender:
(i) concurrently with the delivery of the
financial statements referred to in Section 6.1(a), a certificate of
the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary
therefor such accounting firm has obtained no knowledge that a Default
or Event of Default has occurred and is continuing, except as
specified in such certificate;
(ii) concurrently with the delivery of the
financial statements referred to in Sections 6.1(a), (b) and (c), a
certificate of a Responsible Officer stating that, to the best of such
Responsible Officer's knowledge, the Company and each Subsidiary
during such period has observed or performed the covenants of Section
7 and all other of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and in the Note and in
the other Transaction Documents to which it is a party to be observed,
performed or satisfied by it, and that such Officer has obtained no
knowledge that a Default or Event of Default has occurred and is
continuing except as specified in such certificate, and, if a Default
or Event of Default exists, stating the details thereof and what
actions the Company proposes to take with respect thereto;
(iii) within five Business Days after the
same are sent, copies of all financial statements and reports which
the Company sends to its stockholders and all financial statements and
reports which the Company or any of its Subsidiaries sends to the
holders or trustee of any Unsecured Cash Flow Notes, and within five
Business Days after the same are filed, copies of all financial
statements and reports which the Company may make to, or file with,
the Securities and Exchange Commission or any successor or analogous
Governmental Authority;
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(iv) within 10 Business Days after the same are
delivered, copies of all financial statements and all material
reports, management letters or other financial information prepared
for its Board of Directors;
(v) on a monthly basis and, in any event, by no
later than the 30th day of each month: (w) a detailed calculation of
the Borrowing Base; (x) a summary listing, by Borrowing Base category,
of the Total Real Property included directly or indirectly in the
Borrowing Base and, by Joint Venture, of the investments of the
Venture Subsidiaries in Joint Ventures, with, in each case, a summary
reconciliation to such listing provided in respect of the prior month;
(y) a detailed aging, by total, of the Homesite Commercial Receivables
and of the Commercial Receivables and of the JV Receivables; and (z) a
summary aging, by vendor, of the Company's accounts payable and any
book overdraft; in each case, in form satisfactory to the Lender;
(vi) not later than the tenth Business Day of
every month, the monthly Management Business Plan update for the
previous month, in form substantially equivalent to that attached
hereto as Schedule F-1;
(vii) not later than the tenth Business
Day of every month, the "Land Sales Report" for the previous month, in
form substantially equivalent to that attached hereto as Schedule G-1;
and
(viii) promptly, such additional financial
and other information as the Lender may from time to time reasonably
request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy
at or before maturity or before they become delinquent, as the case may be, all
its obligations of whatever nature, except where the amount or validity thereof
is currently being contested in good faith by appropriate proceedings, and
reserves in conformity with GAAP with respect thereto have been provided on the
books of the Company or its Subsidiaries, as the case may be or where the terms
of this Agreement or the Reorganization Plan would prohibit such payment,
discharge, or satisfaction.
6.4 Conduct of Business and Maintenance of Existence. Subject to
Sections 7.5, 7.6, 7.7 and 7.9: continue (a) to engage in business of the same
general type as now conducted by it and preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
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all rights, privileges and franchises necessary or desirable in the normal
conduct of its business; and (b) to comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith is
not reasonably likely to, in the aggregate, have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. Keep all property useful
and necessary in its business in good working order and condition; maintain
with financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as are
usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to the Lender, upon written request,
full information as to the insurance carried. Each such policy of insurance
shall name Collateral Agent as a loss payee thereunder and shall provide for at
least thirty days prior written notice to Secured Creditor of any material
modification or cancellation of such policies. On the Issuance Date and on
each anniversary thereafter, the Company and its Subsidiaries shall submit to
Secured Creditor certificates of insurance evidencing compliance with this
Section 6.5.
6.6 Inspection of Collateral; Books and Records; Appraisals. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of the Lender with respect to the Company and its Subsidiaries,
to inspect the Collateral and related properties and examine and make abstracts
from any of its books and records at any reasonable time and as often as may
reasonably be desired and to discuss the business, operations, properties and
financial and other condition of the Company and its Subsidiaries with officers
and employees of the Company and such Subsidiaries and with its independent
certified public accountants. From time to time, if the Lender determines that
obtaining appraisals is necessary or appropriate, the Lender will obtain
appraisal reports from appraisers satisfactory to the Lender, stating then
current fair market values of all or any portion of the Total Real Property.
Anything herein to the contrary notwithstanding, the Company shall not be
obligated to reimburse the Lender with respect to appraisals of the same
particular item of Total Real Property that occur more frequently than once in
any year, unless an Event of Default has occurred and is continuing or there
has occurred a material adverse change in the value of the Collateral, in which
case the Company shall be obligated to reimburse the Lender with respect to as
many appraisals as the Lender deems necessary to conduct.
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6.7 Notices. Promptly give notice to the Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
Contractual Obligation of the Company or, to the knowledge of the Company, any
of its Subsidiaries or (ii) litigation, investigation or proceeding which may
exist at any time between the Company or, to the knowledge of the Company, any
of its Subsidiaries and any Governmental Authority, which in either case, if
not cured or if adversely determined, as the case may be, would have a Material
Adverse Effect;
(c) any litigation or proceeding affecting the Company
or, to the knowledge of the Company, any of its Subsidiaries in which the
amount involved is $250,000 or more and, not covered by insurance or in which
injunctive or similar relief is sought;
(d) as soon as possible and in any event within 30 days
after the Company knows or has reason to know thereof, the occurrence or
expected occurrence of any event or condition described in Section 4.12 which
could reasonably be expected to result in liability of the Company or any
Commonly Controlled Entity in excess of $100,000 and which is not reflected in
the financial statements most recently delivered to the Lender pursuant to
Section 6.1; and
(e) any development or event which could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and stating what action the Company proposes to take with
respect thereto.
6.8 Environmental Laws.
(a) Comply with, and use its best efforts to insure
compliance by all tenants and subtenants, if any, with, all Environmental Laws
and obtain and comply with and maintain, and insure that all tenants and
subtenants obtain and comply with and maintain, any and all licenses,
approvals, registrations or permits required by Environmental Laws, except in
each case to the extent that failure to do so could not reasonably be expected
to have a Material Adverse Effect;
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other
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actions required under Environmental Laws and promptly comply with all lawful
orders and directives of all Governmental Authorities respecting Environmental
Laws, except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings could not
reasonably be expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless Secured Creditor,
and its employees, agents, officers and directors, from and against any and all
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to, the violation of or noncompliance
with any Environmental Laws applicable to the real property owned or operated
by the Company or any of its Subsidiaries, or any orders, requirements or
demands of Governmental Authorities related thereto, including attorney's and
consultant's fees, investigation and laboratory fees, court costs and
litigation expenses, except to the extent that any of the foregoing arise out
of the gross negligence or willful misconduct of the party seeking
indemnification therefor. The agreements in this Section shall survive the
payment of the Note and all other amounts payable hereunder.
6.9 Business Plan. Furnish to the Lender on or before the tenth
day following approval by the Company's Board of Directors, but in no event
later than December 31 of each fiscal year and within 10 days (after approval
by the Company's Board of Directors, if applicable) of any amendment,
modification or update thereto, a Business Plan of the Company and its
Subsidiaries for the next succeeding fiscal year in a form and in substance
satisfactory to the Lender setting forth in reasonable detail a projected
statement for such fiscal year's income and cash flow with a projected balance
sheet as of the close of the succeeding fiscal year end, accompanied by a
statement of a Responsible Officer that the Business Plan projected statements
of income, cash flow and balance sheet for the succeeding fiscal year have been
adopted by the Board of Directors of the Company. The Company and its
Subsidiary shall at all times conduct their business substantially in
accordance with the Business Plan and shall not materially modify or deviate
from such Business Plan without the prior written approval of the Lender.
6.10 Compliance with Other Transaction Documents. Comply with,
and cause the Subsidiaries to comply with, all of the Transaction Documents.
6.11 Dividends from Subsidiaries. Cause the Subsidiaries to pay
dividends to the Company from the Net Cash Proceeds of
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any sales of assets (including Real Property Sales) to the extent not
prohibited by law, including the proceeds of any utility condemnations;
provided that proceeds from the sale of residential units, lots or tracts by
Subsidiaries (a) from developed phases of a multi-phase project comprising
Subsidiary Property Under Development may be used to pay all costs associated
with development of the same phase or additional phases of the same project,
including reasonable reserves for such anticipated costs during the period
commencing on the date of sale to the date 180 days after the date of sale
(excluding any costs which are an allocated share of corporate general and
administrative expenses of the Company or any Subsidiary), and (b) from single
phase projects comprising Subsidiary Property Under Development to the extent
units, lots or tracts may be sold in accordance with applicable laws and
regulations prior to completion of the projects may be used to pay all costs
associated with development of such project (excluding any costs which are an
allocated share of corporate general and administrative expenses of the Company
or any other Subsidiary), in either case until the conclusion of the project,
at and following which time all such proceeds shall be distributed to the
Company. For purposes hereof, "conclusion of the project" shall mean the
completion of structure or infrastructure development of the project (or, with
multi-phase projects: (a) (i) the final phase of the project, or (ii) the sale
of substantially all units thereon; and (b) the payment of the Indebtedness in
respect of Subsidiary Property Under Development that prohibits such
distributions) in accordance with the requirements of applicable laws and
regulations.
6.12 Supplemental Reports Regarding Real Property.
(a) Furnish to the Lender such supplemental title reports
on the Real Property subject to the Deed of Trust and Mortgages as the Lender
may reasonably request from time to time; provided the Company shall not be
required to provide such supplemental reports more than once per quarter.
(b) No later than 60 days after the Issuance Date, the
Company shall deliver to the Lender such third party appraisals, environmental
reports, surveys, and ALTA title policies, as would have complied with the
provisions of Section 5.1(l) if delivered on the Issuance Date with respect to
all Real Property to the extent such reports were not required by the Lender to
be delivered on or prior to the Issuance Date.
6.13 Compliance with Laws. The Company shall, and shall cause
each of its Subsidiaries to, comply with the requirements of all applicable
laws, rules, regulations and orders of any
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Governmental Authority, noncompliance with which would or could be reasonably
expected to cause a Material Adverse Effect.
6.14 Other Notices. Promptly give notice to the Lender of:
(a) the creation of any new Deposit Account; and
(b) the organization or formation of any new Venture
Subsidiary, any other Subsidiary, any Unrestricted Subsidiary, or any Joint
Venture; or the disposition or dissolution of any Excluded Subsidiary;
in each case, together with such information related thereto
as the Lender may request.
6.15 The Company Operating Account Control Agreement. Maintain
in full force and effect the Company Operating Account Control Agreement. At
all times from and after the date hereof, the Company shall continue to
maintain the Company's cash management system substantially as such system
exists on the date hereof, and shall continue to concentrate the funds of the
Company into the Company Operating Account except to the extent that such funds
reasonably are required to be held in other accounts for permitted uses by the
Company, and except to the extent that such funds are invested in investments
permitted by Section 7.9.
6.16 Foothill Reports. Deliver to the Lender a copy of each
report, certificate or other document or information delivered to the lenders
or agent pursuant to the Foothill Loan Documents, concurrently with the
delivery thereof to such lenders or agent, including all annexes or attachments
thereto.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof and
until the "Closing Date" (as defined in the Investment Agreement) and
thereafter at any time while there shall be due and owing and unpaid any
Repurchase Obligation under Section 8 of the Certificate of Designation, the
Company shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly:
7.1 Maintenance of Consolidated Net Worth; Interest Charge
Coverage Ratio. Permit (i) Consolidated Net Worth at any time to be less than
the amounts set forth below (hereinafter referred to as the "Minimum
Consolidated Net Worth") the sum of: (a) $23,500,000; and (b) 50% of the
Annual Net Income for the prior fiscal year; provided, however, that the amount
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determined under this clause (b) shall never be less than zero, or (ii) permit
the Interest Charges Coverage Ratio at any time to be less than 1.5.
To demonstrate compliance with the Minimum Consolidated Net
Worth and the Interest Charges Coverage Ratio covenants set forth in this
Section, the Company shall furnish to the Lender (i) within 45 days of the
close of each calendar quarter a certificate of a Responsible Officer setting
forth Minimum Consolidated Net Worth and the Interest Charges Coverage Ratio
for such date calculated in accordance with this Section 7.1, and the
calculation upon which it is based; and (ii) within 90 days of the close of
each fiscal year, a certificate of a Responsible Officer setting forth Minimum
Consolidated Net Worth and the Interest Charges Coverage Ratio as of such date
calculated in accordance with this Section 7.1 and the calculation upon which
it is based, reflecting in such annual certificate any addition to the Minimum
Consolidated Net Worth that the Company is required to maintain resulting from
the Annual Net Income for the fiscal year then ended, but only as calculated
under clause (b) of this Section 7.1.
7.2 Limitation of Indebtedness. Create, incur, assume or suffer
to exist any Indebtedness, except:
(a) Indebtedness of the Company under or in respect of
the Transaction Documents;
(b) Indebtedness under or in respect of (i) the
Revolving Loan Agreement (including Indebtedness in respect of Letters of
Credit issued under the Revolving Loan Agreement), and any replacement of the
Revolving Loans, not to exceed $45,000,000 in the aggregate principal amount
outstanding at any time (unless increased to an amount up to $50,000,000
pursuant to an increase in the Working Capital Loan Commitments (as defined in
the Revolving Loan Agreement) from $20,000,000 to an amount up to $25,000,000
in accordance with the terms of the "Intercreditor Agreement" included in the
Foothill Loan Documents) or (ii) the Secured Floating Rate Note Agreement, and
any replacement Indebtedness, not to exceed the amount then outstanding under
such Note Agreement, provided that any such replacement loans shall be on terms
and conditions collectively no less favorable to the Company than those set
forth in the Revolving Loan Agreement or the Secured Floating Rate Note
Agreement, as applicable;
(c) [intentionally omitted];
(d) Indebtedness of the Company in respect of the
Unsecured Cash Flow Notes;
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(e) Indebtedness of the Company and its Subsidiaries at
any time outstanding, whether recourse or nonrecourse and whether incurred in
connection with Subsidiary Property Under Development or otherwise, not
exceeding $55,000,000 (less the face amount of all outstanding Guarantee
Obligations permitted under Section 7.4(c) in respect of Indebtedness of any
Unrestricted Subsidiary or Joint Venture) in the aggregate; provided, however,
that the proceeds of such Indebtedness used to acquire, finance, or refinance
Real Property shall not exceed 80% of the lesser of the purchase price or fair
market value of such Real Property at the time of application of such proceeds;
(f) Indebtedness of the Company to any Subsidiary or of
any Subsidiary to the Company; provided that (i) such intercompany Indebtedness
shall not be evidenced by promissory notes or any other instruments, and (ii)
all Indebtedness of Subsidiaries to the Company shall not exceed an aggregate
principal amount of $20,000,000 at any time;
(g) Indebtedness of the Company and its Subsidiaries
outstanding on the date hereof and listed on Schedule 4.16;
(h) The limitations otherwise imposed by Section 7.2(e)
notwithstanding, Indebtedness of any Subsidiary to Persons extending
acquisition or project development financing in connection with Subsidiary
Property Under Development of the Subsidiary (any Subsidiary incurring such
Indebtedness shall be referred to in this Section 7.2(h) as a "SPUD
Subsidiary"); provided that (i) neither the Company nor any Subsidiary other
than that SPUD Subsidiary is liable for such Indebtedness in respect of that
Subsidiary Property Under Development, directly or pursuant to a Guarantee
Obligation or otherwise, (ii) such outstanding Indebtedness permitted pursuant
to this Section 7.2(h) shall not exceed in the aggregate $75,000,000 minus
other outstanding Indebtedness of the Company and Subsidiaries permitted
pursuant to Section 7.2(e), and (iii) the proceeds of any such Indebtedness
used to acquire, finance or refinance Real Property shall not exceed 80% of the
purchase price or fair market value of such property, whichever is less, at the
time of the application of such proceeds;
(i) [intentionally omitted]
(j) [intentionally omitted]; and
(k) Indebtedness of Subsidiaries for the development of
infrastructure, common areas, or recreational facilities owing to
quasi-governmental entities such as community development and special districts
to the extent financed
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through the issuance of industrial revenue bonds or other similar public
financing; provided that (except for Liens permitted pursuant to Section
7.3(q)) there is no direct or indirect recourse to the Company with respect to
such Indebtedness (other than inchoate Liens arising by operation of law in
respect of such Indebtedness) and such Indebtedness shall not exceed
$15,000,000 in the aggregate at any one time outstanding; provided further that
the Company shall give the Lender prior written notice of the incurrence of any
such Indebtedness under this Section 7.2(k).
Anything to the contrary notwithstanding, in no event shall
the Company or any Subsidiary co-make, endorse, guarantee (except to the extent
permitted under Section 7.4(c)), or otherwise become liable or have any
recourse with respect to any Indebtedness of any of the Unrestricted
Subsidiaries.
7.3 Limitation on Liens. Create, incur, assume or suffer to
exist any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except for:
(a) Liens securing Indebtedness permitted by Section
7.2(a);
(b) Liens securing Indebtedness permitted by Section
7.2(b);
(c) [intentionally omitted]
(d) Liens against the Section 365(j) Property securing
the Section 365(j) Claims pursuant to the Reorganization Plan;
(e) Liens for taxes (i) which are not yet delinquent, or
(ii) which are not in an aggregate amount, as to the Company and all
Subsidiaries, of greater than $1,000,000, or (iii) which are being contested in
good faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Company or its Subsidiaries,
as the case may be, in conformity with GAAP;
(f) carriers', warehousemen's, mechanics', construction,
materialmen's, repairmen's or other like Liens arising in the ordinary course
of business which do not remain unsatisfied or undischarged for a period of
more than 60 days or which are being contested in good faith by appropriate
proceedings;
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(g) pledges or deposits in connection with workers
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(h) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(i) easements, rights-of-way, restrictions, development
orders, plats, and other similar encumbrances incurred in the ordinary course
of business which, in the aggregate, are not substantial in amount and which do
not in any case materially detract from the value of the property subject
thereto or materially interfere with the ordinary conduct of the business of
the Company or such Subsidiary;
(j) Liens granted by the Company or any Subsidiary, as
lessee, in the ordinary course of business on leased equipment, leasehold
improvements and furnishings;
(k) Liens created, incurred or assumed in connection
with the acquisition of, or the refinancing or any subsequent refinancing of
Indebtedness incurred in connection with property, plant and equipment acquired
after the date hereof and attaching only to the property, plant and equipment
being acquired or refinanced, if the Indebtedness secured thereby does not
exceed (i) in any acquisition, 80% of the purchase price or fair market value
of any Real Property, whichever is less, at the time of such acquisition and
(ii) in any refinancing, the outstanding Indebtedness being refinanced;
(l) other Liens in existence on the date hereof listed
on Schedule 7.3, provided that no such Lien is spread to cover any additional
property after the date hereof and that the amount of any Indebtedness or other
obligations secured thereby is not increased;
(m) Liens granted pursuant to Section 7.7 of the
Reorganization Plan;
(n) Liens granted by the Company or Subsidiaries upon
Real Property and related Personal Property which is Subsidiary Property Under
Development and which is either financed by Indebtedness incurred by
Subsidiaries pursuant to Section 7.2(e) or 7.2(h), or contributed by the
Company to a Subsidiary pursuant to Section 7.9(g);
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(o) [intentionally omitted]
(p) [intentionally omitted]; and
(q) inchoate Liens solely arising by operation of law in
respect of Indebtedness incurred pursuant to Section 7.2(k).
7.4 Limitation on Guarantee Obligations. Create, incur, assume
or suffer to exist any Guarantee Obligation, except: (a) the Guarantee
Obligations listed on Schedule 4.17; (b) Guarantee Obligations made in the
ordinary course of its business by the Company of obligations (other than
Indebtedness) of any of its Subsidiaries, which obligations are otherwise
permitted under this Agreement; (c) Guarantee Obligations by the Company of
Indebtedness of any Subsidiary, Unrestricted Subsidiary, or Joint Venture;
provided, however, that any outstanding Guarantee Obligations permitted under
this Section 7.4(c) in respect of Indebtedness of any Unrestricted Subsidiary
or Joint Venture shall reduce on a dollar-for-dollar basis the $55,000,000
limitation otherwise available for Indebtedness permitted under Section 7.2(e)
and that the sum of all Indebtedness permitted under Section 7.2(e) and all
Guarantee Obligations permitted pursuant to this Section 7.4(c) shall not
exceed $55,000,000 in the aggregate; provided further, that the Company may not
incur any Guarantee Obligation with respect to Indebtedness of any Subsidiary
permitted pursuant to Section 7.2(h).
7.5 Limitations on Fundamental Changes. Except to the extent
such merger, consolidation, or amalgamation is of a Subsidiary with and into
the Company, or between or among wholly owned Subsidiaries, enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets; provided that the Company or any Subsidiary may convey,
sell, assign, transfer or have condemned or otherwise disposed of assets to the
extent permitted by Section 7.6 so long as the proceeds of any such sale are
applied in accordance with this Agreement.
7.6 Limitation on Sale of Assets. So long as no Default or
Event of Default has occurred and is continuing or would result therefrom
(unless the Permitted Sale Asset is the subject of a binding written contract
of sale with an unaffiliated third party entered into prior to the first date
on which the applicable Default or Event of Default occurred)), convey, sell,
lease, assign, transfer or otherwise dispose of any of its property, business
or assets (including receivables and
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leasehold interests), whether now owned or hereafter acquired, except the
following ("Permitted Sale Assets"):
(a) raw land;
(b) homes or homesites in the ordinary course of its
business;
(c) obsolete or worn out property disposed of in the
ordinary course of business;
(d) Commercial Real Estate;
(e) (i) the sale or discount without recourse of
Commercial Receivables or Homesite Contract Receivables in the ordinary course
of business; and (ii) during the period commencing on October 1, 1996 and
ending on December 31, 1997, the sale or discount with recourse of Commercial
Receivables relating solely to homesites located in Tennessee in an aggregate
amount not to exceed $8,000,000;
(f) dispositions on or after October 1, 1996 not
otherwise permitted hereunder the proceeds of which, in the aggregate, do not
exceed $2,000,000 in any 12-month period;
(g) sales or other transfers of any partnership
interests or joint venture interests in entities that are not wholly owned,
collectively, by the Company and its Subsidiaries; and
(h) transactions permitted under Section 7.5.
Upon any permitted sale as aforesaid, Collateral Agent shall execute releases
of Collateral Agent's Lien upon the Collateral included in any such sale;
provided that there exists no Default or Event of Default hereunder and no
Default or Event of Default would result therefrom; and provided further, that
Collateral Agent's Lien shall continue against the proceeds of such sale, as
evidenced by any and all documents and filings as may be required by the
Lender.
7.7 Limitation on Dividends. Declare or pay any dividend (other
than dividends payable solely in common stock or preferred stock of the
Company) 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, whether
now or hereafter outstanding, or make any other distributions in respect
thereof, either directly or indirectly, whether in cash or property (other than
distributions or dividends in the
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form of common stock or preferred stock of the Company) or in obligations of
the Company or any Subsidiary, except for dividends declared and paid by any
Subsidiary to the Company or any Subsidiary.
7.8 Limitation on Capital Expenditures. Make, or enter into any
agreement the performance of the terms of which would require the Company or
any Subsidiary to make (by way of the acquisition of securities of a Person or
otherwise), any expenditures in respect of the purchase or other acquisition of
fixed or capital assets (excluding any such asset acquired in connection with
nominal replacement and maintenance programs properly charged to current
operations), exceeding in the aggregate $25,000,000 for the Company and its
Subsidiaries during any 12-month period from and after October 1, 1996.
7.9 Limitation on Investments, Loans, and Advances. Except to
the extent of assets in the Reserve Accounts, make any advance, loan, extension
of credit or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting a business unit
of, or make any other Investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees of the Company or
its Subsidiaries for travel, entertainment and relocation expenses and for
advances on salary prior to, and otherwise payable during, an employee's
vacation, in the ordinary course of business in an aggregate amount for the
Company and its Subsidiaries not to exceed $500,000 in any one time
outstanding;
(d) investments by the Company in any Subsidiary or by
any Subsidiary in the Company or any other Subsidiary in connection with cash
management procedures in the ordinary course of business;
(e) (i) loans by the Company to its Subsidiaries or by
any Subsidiary of the Company to the Company to the extent such Indebtedness is
permitted pursuant to Section 7.2(f); and (ii) capital contributions to
Subsidiaries other than Venture Subsidiaries so long as the Company or its
Subsidiary making the capital contribution receives stock equal to the value of
the capital contributed as determined in accordance with GAAP; provided, that
Collateral Agent's Lien shall continue against such stock received by the
Company or its Subsidiary as
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aforesaid, which Lien shall be evidenced by any and all documents and filings
as may be required by Collateral Agent and the Lender;
(f) extensions of credit for sale of assets;
(g) capital contributions to Venture Subsidiaries for
the purpose of making investments in Joint Ventures and to Unrestricted
Subsidiaries so long as the Company or its Subsidiary making the capital
contribution receives stock, partnership interests, joint venture interests, or
beneficial interests, respectively, equal to the value of the capital
contributed as determined in accordance with GAAP (and upon any permitted
capital contribution as aforesaid, Collateral Agent shall execute releases of
Collateral Agent's Lien upon any Collateral contributed); provided, (i) that no
Default or Event of Default exists hereunder or would result therefrom, (ii)
that Collateral Agent's Lien shall continue against such stock or other
interests received by the Company or its Subsidiary as aforesaid, which Lien
shall be evidenced by any and all documents and filings as may be required by
Collateral Agent and the Lender, (iii) such capital contributions shall be
limited to assets (including cash) having fair market values for any single
enterprise or project no greater than $15,000,000 and fair market values in the
aggregate amount not greater than $35,000,000 plus an amount equal to 75% of
all dividends (without duplication) paid to the Company by all Subsidiaries
having investments in Joint Ventures after October 1, 1996.
7.10 Limitation on Optional Payments and Modifications of Debt
Instruments.
(a) Make any optional payment or optional prepayment on, or
optional redemption of, or purchase or otherwise acquire any interest in, any
Indebtedness (including payments on Indebtedness under the Unsecured Cash Flow
Notes) other than the Note, except payments on the Foothill Debt.
(b) Amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms of any Unsecured Cash
Flow Notes or any Indebtedness outstanding under the Foothill Loan Documents or
any other agreement executed in connection with either thereof or otherwise in
connection with any Indebtedness (other than: (1) terms other than payment
terms of Indebtedness permitted to be incurred pursuant to subsections 7.2(e),
(f), (g) (but exclusive of Indebtedness permitted pursuant thereto consisting
of intercompany Indebtedness among the Company and its Subsidiaries, the
Unsecured Cash Flow Notes, and Financing Leases), (h), and (k); and (2) other
than any such amendment,
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modification, or change to any such other Indebtedness which would extend the
maturity or reduce the amount of any payment of principal thereof or which
would reduce the rate or the amount of interest payable or extend the date for
payment of interest thereon; but in the case of either (1) or (2), solely to
the extent the amendment, modification, or change to any such Indebtedness is
not prohibited by any other provision in this Agreement or the other
Transaction Documents; and
(c) Amend any subordination provisions of any instrument
governing any Indebtedness (except for amendments pursuant to this Agreement
and the Security Documents or the Revolving Loan Agreement and the security
documents in respect thereof).
7.11 Transactions with Affiliates. Enter into any transaction,
including any purchase, sale, lease or exchange of property or the rendering of
any service, with any Affiliate (other than any Subsidiary), unless such
transaction is otherwise permitted under this Agreement, is in the ordinary
course of the Company's or such Affiliate's business and is upon fair and
reasonable terms no less favorable to the Company or such Affiliate, as the
case may be, than it would obtain in a comparable arms length transaction with
a Person not an Affiliate.
7.12 Sale and Leaseback. Enter into any Sale and Leaseback to
the extent the aggregate Book Value of all assets sold and leased under all
such transactions exceeds $2,000,000 during the period from October 1, 1996
through the termination of this Agreement.
7.13 Fiscal Year. Permit the fiscal year of the Company to end
on a day other than December 31.
7.14 Limitation on Negative Pledge Clauses. Enter into any
agreement, other than the Foothill Loan Documents, any industrial revenue
bonds, community development district financing, purchase money mortgages,
Financing Leases, or agreements executed in connection with Indebtedness
incurred in connection with Subsidiary Property Under Development permitted by
this Agreement (in which cases, any prohibition or limitation shall only be
effective against the assets financed thereby), with any Person other than the
Lender pursuant hereto which prohibits or limits the ability of the Company or
any of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired.
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7.15 Deviation from Business Plan. Allow either:
(a) the actual Net Operating Cash Flow during any fiscal
year, to deviate from the Net Operating Cash Flow projected under the Business
Plan by a negative margin equal to or greater than 30 percent, as of the end of
each fiscal quarter on a cumulative basis; or
(b) the total actual Net Cash Flow for any fiscal year,
including major asset dispositions, to deviate from the annual Net Cash Flow
projected under the Business Plan for such year by a negative margin equal to
or greater than 40 percent.
7.16 Unsold Housing Inventory. Permit Unsold Housing Inventory
to exceed, in the aggregate, $10,000,000 at any one time.
7.17 Limitation of Bank Accounts. So long as the Note is
outstanding, allow cash and Cash Equivalents maintained in Bank Accounts of the
Company and Subsidiaries other than in the Cash Collateral Account and the
restricted accounts set forth in Schedule 7.17 (including any beneficial
interest therein), less the amount of checks outstanding to pay current
expenses in the ordinary course of business or to prepay expenses to be
incurred in the immediately subsequent three-month period consistent with past
practices, to exceed $5,000,000 in the aggregate at any time. The Company and
its Subsidiaries (a) shall deposit in a Cash Collateral Account amounts
required to cash collateralize Letters of Credit under the Revolving Loan
Agreement pursuant to Section 8 of the Revolving Loan Agreement, and (b) shall
deposit in the Company Operating Account, after application to the Loans (as
defined in the Revolving Loan Agreement) pursuant to Section 2.11(a)(iii) of
the Revolving Loan Agreement, all remaining cash of the Company and its
Subsidiaries in excess of amounts permitted to be maintained in accounts other
than a Cash Collateral Account under this Section 7.17.
7.18 Venture Subsidiaries and Joint Ventures.
(a) Cause, suffer, or permit any Venture Subsidiary to
have any asset or revenues other than the Joint Venture interests owned by such
Venture Subsidiary as disclosed on Schedule 4.14(B) and the revenues arising
from such interests.
(b) Cause, suffer, or permit any Venture Subsidiary to
create, incur, assume, or suffer to exist any Lien (other than Liens in favor
of Collateral Agent for the benefit of Secured Creditor and the holders of the
Foothill Debt) upon any of such Venture Subsidiary's property, assets, or
revenues, whether now owned or hereafter acquired (including the Joint
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Venture interests owned by such Venture Subsidiary as disclosed on Schedule
4.14(B) and the revenues arising from such interests).
7.19 Excluded Subsidiaries; Unrestricted Subsidiaries. Except as
disclosed on Schedule 7.19, permit any Excluded Subsidiary to own any assets,
have any revenues or liabilities, or conduct any business or except as
specifically agreed in writing by the Lender permit any Unrestricted Subsidiary
to own any assets, have any revenues or liabilities or conduct any business.
SECTION 8. EVENTS OF DEFAULT; REMEDIES
8.1 Events of Default; Remedies. If any of the following events
shall occur and be continuing:
(a) (i) The Company and the Mortgagor Subsidiaries
shall fail to pay any principal when due of the Note in accordance with the
terms thereof or hereof; or (ii) the Company and the Mortgagor Subsidiaries
shall fail to pay any interest due on the Note or any other amount payable
hereunder or under any other Transaction Document, thereby giving rise to a
Default, and fail to cure such Default within five (5) days after any such
interest or other amount becomes due in accordance with the terms thereof or
hereof; provided, however, if any event described in this Section 8.1(a)(ii)
shall occur and be continuing, it shall not constitute an Event of Default
until and unless the Lender provides the Company with a written declaration
that such event constitutes an Event of Default; or
(b) Any representation or warranty made or deemed made
by the Company or any of its Subsidiaries herein or in any other Transaction
Document or which is contained in any certificate, document or financial or
other statement furnished at any time under or in connection with this
Agreement shall prove to have been incorrect in any material respect on or as
of the date made or deemed made; or
(c) The Company shall default in the observance or
performance of any agreement contained in Section 7; or
(d) The Company or any Subsidiary shall default in the
observance or performance of any other agreement contained in this Agreement
(other than as provided in paragraphs (a) through (c) of this Section) or in
any other Transaction Document, and such default shall continue unremedied for
a period of thirty (30) days; or
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(e) The Company shall fail to pay any obligations under
the Foothill Loan Documents or any principal of or interest on any Unsecured
Cash Flow Notes (whether at scheduled maturity or by required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such obligation under the Foothill Loan Documents or any Unsecured
Cash Flow Notes; or
(f) Any Foothill Debt or any Unsecured Cash Flow Notes
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof; or
(g) Any Subsidiary of the Company shall fail to pay any
principal of, or interest on, any Indebtedness or any Guarantee Obligation
(other than any Guarantee Obligation created pursuant to any Transaction
Document) in excess of $1,000,000, when due and payable (whether at scheduled
maturity or by required prepayment, acceleration, demand or otherwise) and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument under which such Indebtedness or Guarantee
Obligation was created and, if such agreement or instrument permits the
acceleration of the maturity of such Indebtedness or Guarantee Obligation as a
result of such failure, such Indebtedness or Guarantee Obligation shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or any such Indebtedness or Guarantee Obligation shall be declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity; or
(h) The Company shall (i) default in any payment of
principal of or interest on any Indebtedness (other than the Notes the Foothill
Debt, or any Unsecured Cash Flow Notes) or in the payment of any Guarantee
Obligation in excess of $1,000,000, beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or permit the holder or holders of such Indebtedness or
beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if
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required, such Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable; or
(i) (i) The Company or any of its 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 Subsidiaries shall make a general assignment for the
benefit of its creditors, or (ii) there shall be commenced against the Company
or any of its 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, or (iii) there shall be
commenced against the Company or any of its 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, or (iv) the Company or any of its 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, or (v) the Company or any of its Subsidiaries shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts
as they become due, provided that the Company or any of its Subsidiaries may
admit in writing that it is "insolvent" as such term is defined in, and for
purposes of, Section 108(a)(1)(8) of the Code, or (vi) the Company or any of
its Subsidiaries shall cause to be reinstated the Reorganization Proceedings;
or
(j) The Confirmation Order shall be reversed, withdrawn,
modified (in any manner adverse to the Company or any of its Subsidiaries), or
any rehearing shall be ordered with respect thereto by the Bankruptcy Court or
by any court having jurisdiction over the Company; or
(k) (i) There occurs one or more events or conditions
described in Section 4.12 which individually or in the aggregate result in
liability of the Company or any Commonly Controlled Entity in excess of
$4,600,000; or the present value
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of all accrued benefits under each Single Employer Plan (based on the
reasonable assumptions used by the independent actuary for such Plan for
purposes of establishing the minimum funding requirements under Section 412 of
the Code), as of the last annual valuation date, exceed the value of the assets
of such plan allocable to such accrued benefits, individually or in the
aggregate for all Single Employer Plans with respect to which the value of the
assets exceed the present value of the accrued benefits, by more than
$4,600,000; or
(l) One or more judgments or decrees shall be entered
against the Company or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance) of $500,000 or more in the
case of the Company or any of its Subsidiaries and all such judgments or
decrees shall not have been vacated, discharged, stayed or bonded pending
appeal within 60 days from the entry thereof; or
(m) (i) The Subsidiary Guaranty or any Security
Document shall cease, for any reason, to be in full force and effect or the
Company or any of its Subsidiaries, as the case may be, party thereto shall so
assert in writing, or (ii) any Security Document shall cease to be effective to
grant a perfected Lien on the collateral described therein with the priority
purported to be created thereby (other than as a result of any action or
inaction on the part of the Lender or their agents or bailees or other than
with respect to Collateral having an aggregate value of $100,000 or less); or
(n) Other than Secured Creditor or any Affiliate of
Secured Creditor and any Person acting in concert with Secured Creditor or any
Affiliate of Secured Creditor, any Person that is not a transferee of Secured
Creditor or of any Affiliate of Secured Creditor or two or more such Persons
acting in concert shall have acquired beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended) of 30% or more of the outstanding Capital
Stock of the Company, or fewer than [ONE] member of the Board of Directors of
the Company shall be a designee of the Lender, other than as a result of the
Lender's failure to nominate a successor to a designee who has resigned or been
removed for cause; or
(o) Any event or change shall occur that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect;
or
(p) The Total Unsecured Claims shall exceed $1.5
Billion;
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then, and in any such event: (A) if such event is an Event of Default
specified in clause (i), (ii), (iv), (v) or (vi) of Section 8.1(i) above,
automatically the principal amount of the Note (with accrued interest thereon)
and all other amounts owing under this Agreement and the Note shall immediately
become due and payable in full, which amount shall accrue interest at the
Default Rate as well before as after judgment, and the Lender and Collateral
Agent shall have all rights and remedies given to the Lender and Collateral
Agent pursuant to the Security Documents and all rights of a secured party,
mortgagee and pledgee under applicable law, all of which rights and remedies
shall be cumulative and non-exclusive, to the extent permitted by law; and (B)
if such event is any other Event of Default, the Lender may, by notice of
default to the Company, declare the principal amount of the Note (with accrued
interest thereon) and all other amounts owing under this Agreement and the Note
to be due and payable in full, which amount shall accrue interest at the
Default Rate as well before as after judgment, and the Lender and Collateral
Agent shall have all rights and remedies given to the Lender and Collateral
Agent pursuant to the Security Documents and all rights of a secured party,
mortgagee and pledgee under applicable law, all of which rights and remedies
shall be cumulative and non-exclusive, to the extent permitted by law.
SECTION 9. THE COLLATERAL AGENT
9.1 [intentionally omitted]
9.2 Appointment of Collateral Agent. The Lender hereby
irrevocably designates and appoints as Collateral Agent under this Agreement
and the Security Documents to which the Collateral Agent is a party, and the
Collateral Agent hereby accepts such appointment, subject to the terms and
provisions of this Agreement and the Security Documents to which it is a party.
The Lender hereby further authorizes Collateral Agent to enter into the
Security Documents to be executed and delivered by Collateral Agent on the
Issuance Date and agrees to be bound by the terms thereof. The Lender
irrevocably authorizes the Collateral Agent, as Collateral Agent for the
Lender, to take such action on its behalf under the provisions of this
Agreement and the Security Documents to which Collateral Agent is a party, and
to exercise such powers and perform such duties as are expressly delegated to
Collateral Agent by the terms of this Agreement and the Security Documents to
which it is a party, together with such other powers as are reasonably
incidental thereto; provided that Collateral Agent shall not enter into any
consent to any amendment, modification, termination or waiver of any provision
contained in any Security Document to which it is party without the prior
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written consent of the Lender. The Lender hereby authorizes Collateral Agent
to release Collateral only as expressly permitted or required under this
Agreement or the Security Documents and agrees that a certificate executed by
Collateral Agent evidencing such release of Collateral shall be conclusive
evidence of such release to any third party. Collateral Agent shall not
subordinate or release any Liens under any of the Security Documents except as
provided in this Agreement or upon the written direction of the Lender. All
notices and directions to Collateral Agent shall be given by the Lender on
behalf of and at the direction of the Lender.
9.3 [intentionally omitted]
9.4 Delegation of Duties. Collateral Agent may execute any of
its duties under this Agreement and the other Secured Note Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Collateral Agent shall not
be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care. Notwithstanding any
provision to the contrary elsewhere in this Agreement, Collateral Agent shall
not have any duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with the Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Secured Exchangeable Note
Document or otherwise exist against Collateral Agent; and Collateral Agent is
acting hereunder and under the other Secured Note Documents solely as the
collateral agent of the Lender pursuant hereto and thereto, and Collateral
Agent is not acting as trustee for the Lender.
9.5 Exculpatory Provisions. Neither the Lender, Collateral
Agent nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or any other Transaction Document (except for its or such
Persons own gross negligence or willful misconduct) or (b) responsible in any
manner for any recitals, statements, representations or warranties made by the
Company or any officer thereof contained in this Agreement or any other
Transaction Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Lender under or in
connection with, this Agreement or any other Secured Floating Rate Note
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or the Note or any other Transaction Document
or for any failure of the Company to perform its obligations hereunder or
thereunder.
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Neither the Lender nor Collateral Agent shall be under any obligation to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions to, this Agreement or any other
Transaction Document or as to the use of proceeds of the Note or the Investment
Agreement or of the existence or possible existence of a Default or Event of
Default, or to inspect the properties, books or records of the Company.
9.6 Reliance by the Lender.
(a) Each of the Lender and Collateral Agent shall be
entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including counsel to the Company), independent
accountants and other experts selected by the Lender or Collateral Agent, as
the case may be.
(b) Collateral Agent shall be fully justified in failing
or refusing to take any action under this Agreement or any other Transaction
Document unless (i) it shall first receive such advice or concurrence as it
deems appropriate from the Lender, or (ii) it shall first be indemnified to its
satisfaction by the Lender against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action,
except in the case of Collateral Agent's gross negligence or willful
misconduct. Collateral Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement, the Note and the other
Transaction Documents in accordance with a request of the Lender and such
request and any action taken or failure to act pursuant thereto shall be
binding upon the Lender and all future holders of the Note.
9.7 Notice of Default. Neither the Lender nor Collateral Agent
shall be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default unless the Lender or Collateral Agent, as the case may be, has
received notice from the Lender (in the case of Collateral Agent) or the
Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." If the Lender
receives such a notice, the Lender shall promptly give notice thereof to
Collateral Agent. If Collateral Agent receives such a notice, Collateral Agent
shall promptly give notice thereof to the Lender. Collateral Agent shall take
such action with respect to such Default or Event of
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Default as shall be directed by the Lender (subject to the provisions of
Section 9.4(b)); provided that unless and until Collateral Agent shall have
received such directions, Collateral Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Lender.
9.8 Non-Reliance on Collateral Agent. The Lender expressly
acknowledges that neither Collateral Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by Collateral Agent hereinafter taken,
including any review of the affairs of the Company or any of its Subsidiaries,
shall be deemed to constitute any representation or warranty by Collateral
Agent to the Lender. The Lender represents to Collateral Agent that it has,
independently and without reliance upon Collateral Agent, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Company and its Subsidiaries and
made its own decision to enter into this Agreement. The Lender also represents
that it will, independently and without reliance upon Collateral Agent, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Transaction
Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Company and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the Lender
hereunder, Collateral Agent shall not have any duty or responsibility to
provide the Lender with any credit or other information concerning the
business, operations, property, condition (financial or otherwise), prospects
or creditworthiness of the Company or any of its Subsidiaries which may come
into the possession of Collateral Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
9.9 Indemnification. The Lender agrees to indemnify Collateral
Agent in its capacity as such (to the extent not reimbursed by the Company and
without limiting the obligation of the Company to do so) from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including at any time following the payment of the Note) be
imposed on, incurred by or asserted against Collateral Agent in any way
relating to or
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arising out of this Agreement, any of the other Transaction Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by Collateral
Agent under or in connection with any of the foregoing; provided that the
Lender shall not be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from Collateral Agent's gross
negligence or willful misconduct. The agreements in this Section shall survive
the payment of the Note and all other amounts payable hereunder.
9.10 [intentionally omitted]
9.11 [intentionally omitted]
9.12 Successor Collateral Agent. Collateral Agent may resign as
Collateral Agent, upon 30 days' notice to the Lender. If Collateral Agent
shall resign as Collateral Agent under this Agreement and the other Transaction
Documents, then the Lender shall appoint a successor collateral agent for the
Lender, which successor collateral agent, except if an Event of Default shall
have occurred and be continuing, shall be approved by the Company (which
approval shall not be unreasonably withheld), whereupon, effective upon
acceptance of its appointment as successor collateral agent, such successor
collateral agent shall succeed to the rights, powers and duties of Collateral
Agent and the term "Collateral Agent" shall mean such successor collateral
agent, and the former Collateral Agent's rights, powers and duties as
Collateral Agent shall be terminated, without any other or further act or deed
on the part of such former Collateral Agent or any of the parties to this
Agreement or any holder of the Note. If the Lender fails to appoint a
successor collateral agent for the Lender as provided above within 30 days
after the resignation of Collateral Agent, then Collateral Agent may appoint a
successor collateral agent for the Lender, which successor collateral agent,
except if an Event of Default shall have occurred and be continuing, shall be
approved by the Company (which approval shall not be unreasonably withheld),
whereupon, effective upon acceptance of its appointment as successor collateral
agent, such successor collateral agent shall succeed to the rights, powers and
duties of Collateral Agent and the term "Collateral Agent" shall mean such
successor collateral agent and the former Collateral Agent's rights, powers and
duties as Collateral Agent, as the case may be, shall be terminated, without
any other or further act or deed on the part of such former Collateral Agent or
any of the parties to this Agreement or any holder of the Note. After any
retiring
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Collateral Agent's resignation as Collateral Agent, the provisions of this
Section 9 shall inure and survive to its benefit as to any actions taken or
omitted to be taken (or any matter related thereto) by it while it was
Collateral Agent under this Agreement and the other Transaction Documents.
Notwithstanding anything herein to the contrary, the resignation of Collateral
Agent shall not be effective unless and until a successor collateral agent has
been appointed and has accepted such appointment.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, the Note,
any other Transaction Document, nor any terms hereof or thereof may be amended,
supplemented or modified except with the prior written consent of the Lender.
No such amendment, supplement or modification shall amend, modify or waive any
provision of Section 9 without the written consent of then Collateral Agent
affected thereby. Any such waiver of a Default or Event of Default in
accordance with the terms hereof and any such amendment, supplement or
modification shall be binding upon the Company, the Lender, Collateral Agent
and all future holders of the Note. In the case of any waiver, the Company,
the Lender, and Collateral Agent shall be restored to their former position and
rights hereunder and under the outstanding Note and any other Transaction
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent thereon.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or five Business Days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when the recipient has confirmed receipt, addressed as follows in the
case of the Company, the Lender, and Collateral Agent:
The Company: Atlantic Gulf Communities Corporation
2601 South Bayshore Drive
Miami, Florida 33133-5461
Attention: John H. Fischer,
Vice President and Treasurer
Telecopy: (305) 859-4623
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Copy to: Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Attention: Carter Strong, Esquire
Telecopy: (202) 857-6395
The Lender: AP-AGC, LLC
Two Manhattanville Road
Purchase, New York 10577
Attention: W. Edward Scheetz
Telecopy: (212) 261-4060
Copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Philip Mindlin, Esquire
Trevor Norwitz, Esquire
Telecopy: (212) 403-2000
The Collateral
Agent: As specified by Collateral Agent
Copy to: As specified by Collateral Agent
and, in the case of the other parties hereto, as set forth under that party's
name on the signature pages hereof, or, in each case, to such other address as
may be hereafter notified by the respective parties hereto and any future
holders of the Notes; provided, however, that any notice, request or demand to
or upon Collateral Agent or the Lender shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of Collateral Agent or the Lender, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
10.4 Survival of Certain Provisions. All representations and
warranties made hereunder or under any other Transaction Document and in any
document, certificate or statement delivered pursuant hereto or thereto or in
connection herewith or therewith, all indemnities made hereunder or under any
thereof
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in favor of the Lender, Secured Creditor or Collateral Agent, all agreements or
undertakings herein or in any thereof in favor of the Lender, Secured Creditor
or Collateral Agent and all agreements or undertakings in Section 3 hereof or
otherwise contained herein or in any thereof relating to the Collateral shall
survive the execution and delivery of this Agreement and the Note and the
payment in full of the Note and all Obligations hereunder. Without limiting
the generality of the foregoing, the following agreements and undertakings
shall continue in full force and effect so long as the Note, any Preferred
Stock or any unpaid Repurchase Price or Optional Redemption Price (each as
defined in the Certificate of Designation) remains outstanding, whether or not
any principal shall be outstanding hereunder: (i) each term and provision of
the Note, the Subsidiary Guaranties, and the Security Documents, (ii) Section
3, (iii) Sections 6 and 7, but only during the period specified in the
introductory paragraph to each such Section, except that the last paragraph of
Section 7.6 shall remain in effect whether or not the balance of Section 7
shall at the time be in effect and (iv) Sections 9, 10 and 11 and (in each
case) the relevant definitions.
10.5 Payment of Expenses and Taxes. The Company agrees (a) to
pay or reimburse Secured Creditor and Collateral Agent for all its
out-of-pocket costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Agreement, the Note, the Intercreditor Agreement, and the other
Transaction Documents and any other documents prepared in connection herewith
or therewith, and the consummation of the transactions contemplated hereby and
thereby, including the reasonable fees and disbursements of counsel to Secured
Creditor and counsel to Collateral Agent, and the reasonable allocated costs of
in-house counsel to Secured Creditor and in-house counsel to Collateral Agent,
(b) to pay or reimburse Secured Creditor and Collateral Agent for all its costs
and expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the Note, the Intercreditor Agreement, the other
Transaction Documents and any such other documents, including fees and
disbursements of counsel to Secured Creditor and counsel to Collateral Agent,
and the reasonable allocated costs of in-house counsel to Secured Creditor and
in-house counsel to Collateral Agent, (c) to pay, indemnify, and hold Secured
Creditor and Collateral Agent harmless from, any and all recording and filing
fees, any and all Florida documentary stamp taxes and Florida intangible
personal property taxes and any and all other stamp, excise and other taxes
(other than any taxes which are determined based solely upon the income or
revenues of Secured Creditor or Collateral Agent), if any, which may be payable
or determined to be payable in connection with
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the execution and delivery of, or consummation of any of the transactions
contemplated by this Agreement, the Note, the other Transaction Documents, and
any such other documents, and any and all liabilities with respect to, or
resulting from any delay in paying any of such fees and taxes, (d) to pay the
costs of furnishing all opinions of counsel for the Company, or obtaining
technical assistance advisories, required hereunder, (e) to pay the costs of
obtaining any required consents, amendments, waivers or other modifications to
the Foothill Loan Documents and the agreements governing the Unsecured Cash
Flow Notes, and any other agreements, (f) to pay the costs and expenses
incurred to continue the perfection of any Liens in favor of Secured Creditor
and Collateral Agent pursuant to any of the Security Documents, including the
costs of title searches, title insurance premiums, UCC searches and UCC filing
charges, (g) to pay, indemnify, and hold each Secured Creditor and Collateral
Agent harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement, the
Note, the Intercreditor Agreement, the other Transaction Documents, and any
such other documents (all the foregoing, collectively, the "indemnified
liabilities"), provided, that the Company shall have no obligation hereunder to
Collateral Agent or Secured Creditor, with respect to indemnified liabilities
arising from (i) the gross negligence or willful misconduct of Collateral Agent
or Secured Creditor, or (ii) legal proceedings commenced against Secured
Creditor by any Transferee (as defined in Section 10.6), and (h) to pay or
reimburse Secured Creditor and Collateral Agent for all out-of-pocket costs and
expenses incurred in connection with any change of counsel to Collateral Agent
pursuant to Section 10.18, including the reasonable fees and disbursements of
counsel to Secured Creditor, the replaced counsel to Collateral Agent, and the
new counsel to Collateral Agent, and the reasonable allocated costs of in-house
counsel to Secured Creditor and in-house counsel to Collateral Agent. The
agreements in this Section shall survive repayment of the Note and all other
amounts payable hereunder.
10.6 Successors and Assigns; Participations; Purchasing Lender.
(a) This Agreement shall be binding upon and inure to
the benefit of the Company, the Lender, Collateral Agent, all future holders of
the Note and their respective successors and assigns, except that the Company
may not assign or transfer any of its rights or obligations under this
Agreement and the other Transaction Documents without the prior written consent
of the Lender.
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(b) Subject to Sections 10.6(h) and (k), the Lender may
at any time sell to one or more banks or other entities ("Participants")
participating interests in the Note or any other interest of the Lender
hereunder and under the other Transaction Documents. In the event of any such
sale by the Lender of participating interests to a Participant, the Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, the Lender shall remain solely responsible for the
performance thereof, the Lender shall remain the holder of its Note for all
purposes under this Agreement and the other Transaction Documents, and the
Company and Collateral Agent shall continue to deal solely, and directly, with
the Lender in connection with the Lender's rights and obligations under this
Agreement and the other Transaction Documents. The Company agrees that if
amounts outstanding under this Agreement and the Note are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement and the Note to the same extent as if the amount of its
participating interest were owing directly to it as the Lender under this
Agreement or the Note, provided that such Participant shall only be entitled to
such right of setoff if it shall have agreed in the agreement pursuant to which
it shall have acquired its participating interest to share with the Lender the
proceeds thereof as provided in Section 10.7. The Company also agrees that
each Participant shall be entitled to the benefits of Sections 2.7, 2.9 and
10.5 with respect to its participation in the Note outstanding from time to
time; provided, that no Participant shall be entitled to receive any greater
amount pursuant to such Sections than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred
by such transferor the Lender to such Participant had no such transfer
occurred. Notwithstanding anything herein to the contrary, participants shall
not be entitled to require the Lender to take or omit to take any action
hereunder except with respect to amendments or waivers resulting in (i) the
extension of the regularly-scheduled maturity dates of any portion of the
principal of, or interest on, a Note in which such Participant is participating
(it being understood that any waiver of an installment on, or the application
of, any prepayment or the method of application of any prepayment to the
amortization of the Notes shall not constitute an extension of the regularly
scheduled maturity dates), (ii) a reduction of the principal amount of, or the
rate of interest (except in connection with a waiver of the applicability of
any post-default increase in interest rates or margins) or fees payable on the
Note in which such participant is participating, or (iii) the release of all or
substantially all of
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the Collateral or the Subsidiary Guaranty (except as otherwise expressly
provided in the Transaction Documents).
(c) Subject to Sections 10.6(h) and (k), the Lender may
at any time sell to any bank or other entity ("Purchasing Lender") all or any
part of its rights and obligations under this Agreement and the Note and other
Transaction Documents, whereupon (i) the Purchasing Lender shall be a party
hereto and have the rights and obligations of a Lender hereunder and under the
other Transaction Documents, and (ii) the transferor Lender shall, to the
extent of such transfer, be released from its obligations under this Agreement
and under the other Transaction Documents (and, in the case of a transfer
covering all or the remaining portion of a transferor Lender's rights and
obligations under this Agreement and under the other Secured Note Documents,
such transferor Lender shall cease to be a party hereto and thereto). Such
transfer shall be deemed to amend this Agreement to the extent, and only to the
extent, necessary to reflect the addition of such Purchasing Lender under this
Agreement and the Note and other Secured Note Documents. On or prior to the
transfer effective date, the Company, at its own expense, shall execute and
deliver to the Lender new Note(s) to the order of such Purchasing Bank in an
amount equal to the Note or Note portion acquired by it and, if the transferor
Lender has retained a portion of the Note hereunder, new Note(s) to the order
of the transferor Lender in an amount equal to the portion retained by it.
Such new Note(s) shall be dated the same date as, and shall otherwise be in the
form of, the Note(s) replaced thereby. The Note(s) replaced by the new
Note(s), marked "renewed and replaced," shall be attached to the new Note(s);
and a copy thereof shall be sent to the Company.
(d) [intentionally omitted]
(e) [intentionally omitted]
(f) Subject to Section 10.16, the Company authorizes the
Lender to disclose to any Participant or Purchasing Lender (each, a
"Transferee") and any prospective Transferee any and all information in the
Lender's possession concerning the Company and its Affiliates; provided,
however, that such Transferee agrees in writing to be bound by the terms of
Section 10.16.
(g) If, pursuant to this Section 10.6, any interest in
this Agreement or any Note is transferred to any Purchasing Lender which is
organized under the laws of any jurisdiction other than the United States or
any state thereof, the Company will not be required to pay any increased
withholding taxes of
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the United States or any political subdivision thereof unless, prior to the
date of transfer, the transferor Lender shall cause such Purchasing Lender to
comply with the requirements of Section 2.7.
(h) [intentionally omitted]
(i) Nothing herein shall prohibit any Lender which is a
bank from pledging or assigning any Note to any Federal Reserve Bank in
accordance with applicable law.
(j) Notwithstanding the foregoing provisions of this
Section 10.6, no holder of a Note shall transfer such Note in a manner which
would violate any Requirement of Law.
(k) Notwithstanding the foregoing provisions of this
Section 10.6, the initial Lender hereunder agrees not to sell or assign the
Note prior to the earliest of (a) the second anniversary of the Issuance Date,
(b) the occurrence of an Event of Default and (c) a Negative Shareholder Vote.
10.7 Adjustments; Setoff.
(a) If at any time when there is more than one Lender
any Lender (a "Benefitted Lender") shall at any time receive any payment of all
or part of its Note(s), or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by setoff, pursuant to
events or proceedings of the nature referred to in Section 8.1(i), or
otherwise), in a greater proportion than any such payment to or collateral
received by, any other Lender, if any, in respect of such other Lender's
Note(s), or interest thereon, or fees due to it hereunder, such Benefitted
Lender shall purchase for cash from the other Lender such portion of each such
other Lender's Note(s), or make such payment on account of such fees, or shall
provide such other Lender with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender,
such purchase shall be rescinded, and the purchase price and benefits returned,
to the extent of such recovery, but without interest. The Company agrees, that
each Lender purchasing a portion of another Lender's Note(s) owing to it may
exercise all rights of payment (including, without limitation, rights of
setoff) with respect to such portion as fully as if such Lender were the direct
holder of such portion.
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(b) In addition to any rights and remedies of the Lender
provided by law, each Lender shall have the right, without prior notice to the
Company, any such notice being expressly waived by the Company to the extent
permitted by applicable law, upon any Secured Obligations becoming due (whether
at the stated maturity, by acceleration or otherwise) to set off and
appropriate and apply against such amount any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender to or for the credit or the account of the Company. Each
Lender agrees promptly to notify the Company and each other Lender after any
such setoff and application made by such the Lender, provided that the failure
to give such notice shall not affect the validity of such setoff and
application.
10.8 Appointment of Secured Creditor as the Company's Lawful
Attorney. The Company irrevocably designates, makes, constitutes and appoints
Secured Creditor (and all Persons designated by Secured Creditor) as the
Company's true and lawful attorney (and agent-in-fact) coupled with an
interest, with the power to sign the name of the Company on any instruments,
documents and agreements, including, without limitation, security agreements,
pledge agreements, mortgages, and financing statements, as deemed by Secured
Creditor as necessary or reasonably required by Secured Creditor to grant,
perfect, maintain and continue the Liens in the Collateral or to monitor or
administer the Note, together with any and all amendments, modifications,
extensions, substitutions and renewals thereof and deliver any of such
instruments, documents and agreements to such persons as Secured Creditor, in
its sole discretion, may elect, and in such event copies thereof shall be
delivered to the Company.
10.9 Counterparts. This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Company and the Lender.
10.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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10.11 Integration. This Agreement, together with the other
Transaction Documents represents the entire agreement of the Company,
Collateral Agent and the Lender and supersedes all prior agreements with
respect to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by Collateral Agent or the Lender relative to
subject matter hereof not expressly set forth or referred to herein or in the
other Transaction Documents.
10.12 GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE RIGHTS AND OF
THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.13 SUBMISSION TO JURISDICTION; WAIVERS. THE COMPANY HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE
COURTS OF THE STATES OF CALIFORNIA AND NEW YORK, THE COURTS OF THE UNITED
STATES OF AMERICA FOR THE CENTRAL DISTRICT OF CALIFORNIA AND THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT
SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT
TO PLEAD OR CLAIM THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS SET FORTH IN SECTION 10.2 OR AT SUCH OTHER ADDRESS OF
WHICH THE Lender SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS MANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT TO SUE IN ANY OTHER JURISDICTION;
(e) WAIVES (i) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF THE NOTES AND ALL OTHER SECURED
NOTE DOCUMENTS AND HEREBY RATIFIES
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AND CONFIRMS WHATEVER SECURED CREDITOR OR COLLATERAL AGENT MAY DO IN THIS
REGARD, (ii) ALL RIGHTS TO NOTICE OF A HEARING PRIOR TO SECURED CREDITOR'S OR
COLLATERAL AGENT'S ATTACHMENT OR LEVY UPON THE COLLATERAL, AND ANY BOND OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING SECURED
CREDITOR OR COLLATERAL AGENT TO EXERCISE ANY OF SECURED CREDITOR'S OR
COLLATERAL AGENT'S REMEDIES, AND (iii) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; AND
(f) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING
REFERRED TO IN THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES.
10.14 Acknowledgments. The Company hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement, the Note and the other Transaction
Documents;
(b) neither Collateral Agent nor the Lender has any
fiduciary relationship to the Company, and the relationship between the Lender,
on one hand, and the Company, on the other hand, is solely that of debtor and
creditor; and
(c) no joint venture exists between the Company and the
Lender.
10.15 WAIVERS OF JURY TRIAL. THE COMPANY AND THE SECURED CREDITOR
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTE OR ANY OTHER TRANSACTION
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.16 Confidentiality. Secured Creditor agrees to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all non-public information provided to it by the Company or any of its
Subsidiaries, or by Collateral Agent on the Company's behalf, in connection
with this Agreement or any other Transaction Document and agrees and undertakes
that neither it nor any of its Affiliates shall use any such information for
any purpose or in any manner other than pursuant to the terms contemplated by
this Agreement and the other Transaction Documents. Secured Creditor may
disclose such information (a) at the request of any regulatory authority or in
connection with an examination of Secured Creditor by any such authority; (b)
pursuant to subpoena or other court process; (c) when required to do so in
accordance with the provisions of any applicable law; (d) at the express
direction of
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any other agency of any State of the United States of America or of any other
jurisdiction, in which Secured Creditor conducts its business; (e) to Secured
Creditor's independent auditors and other professional advisors; (f) following
an Event of Default, in connection with the sale or other realization on the
Collateral under the Security Documents; (g) in connection with any litigation
or dispute between (i) Secured Creditor and (ii) the Company and/or any
Subsidiary; and (h) in connection with any litigation or dispute involving
Secured Creditor if the disclosure is determined by Secured Creditor to be
necessary for the defense or protection of Secured Creditor's rights and/or
interests. Secured Creditor further agrees, upon receipt by Secured Creditor
of a request to disclose any information to a Governmental Authority or courts
(other than governmental bank examiners and independent auditors of Secured
Creditor, to notify the Company of such request and to permit, to the extent
practicable, the Company to seek a protective order with respect thereto;
provided, however, that no Secured Creditor shall be requested to notify the
Company of any such request if (i) it is not permitted to do so by applicable
law and regulations, (ii) it is requested not to notify the Company by any
Person acting or purporting to act on behalf of a Governmental Authority, or
(iii) it otherwise reasonably believes that it is not permitted to so notify
the Company.
10.17 Controlling Agreement. In the event of any conflict between the
terms and conditions of this Agreement and the terms and conditions of any
other Secured Exchangeable Note Document, the terms and conditions of this
Agreement shall control.
10.18 Counsel to Collateral Agent. If the Company reasonably and in
good faith requests in writing to Collateral Agent and the Lender that
Collateral Agent replace, at the Company's sole expense, then existing counsel
to Collateral Agent, the Lender and Collateral Agent shall consider such
request and, so long as no Default or Event of Default has occurred and is
continuing, the Lender and Collateral Agent shall not unreasonably withhold its
consent to such request.
SECTION 11. THE CO-MAKERS
11.1 Certain Defined Terms. As used in this Section, the following
terms shall have the following meanings unless the context otherwise requires:
"payment in full," "paid in full" or any similar term means
payment in full in cash of the Secured Obligations including all principal,
interest, costs, fees and expenses
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(including, without limitation, reasonable legal fees and expenses) of Lender
and Collateral Agent as required under the Transaction Documents.
11.2 All Co-Makers Liable. Subject to the provisions of subsection
11.3, all Co-Makers are jointly and severally irrevocably and unconditionally
liable, as primary obligors and not merely as sureties, for the due and
punctual payment in full of the Secured Obligations when the same shall become
due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. Section 362(a)).
11.3 Limitation on Obligations of Mortgagor Subsidiaries; Contribution
among Mortgagor Subsidiaries.
(a) Anything contained in this Agreement to the contrary
notwithstanding, the obligations of each Mortgagor Subsidiary hereunder shall
be limited to a maximum aggregate amount equal to the largest amount that would
not render its obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any applicable provisions of comparable state law (collectively, the
"Fraudulent Transfer Laws"), in each case after giving effect to all other
liabilities of such Mortgagor Subsidiary, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Mortgagor Subsidiary (i) in respect of intercompany
indebtedness to Company or other affiliates of Company to the extent that such
indebtedness would be discharged in an amount equal to the amount paid by such
Mortgagor Subsidiary hereunder and (ii) under any guaranty of subordinated
indebtedness which guaranty contains a limitation as to maximum amount similar
to that set forth in this subsection 11.3(a), pursuant to which the liability
of such Mortgagor Subsidiary hereunder is included in the liabilities taken
into account in determining such maximum amount) and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation, reimbursement,
indemnification or contribution of such Mortgagor Subsidiary pursuant to
applicable law or pursuant to any agreement.
(b) The Mortgagor Subsidiaries under this Agreement are
also parties to a Subsidiary Guaranty among Subsidiaries of the Company and
pursuant thereto have allocated as among themselves liability for the Secured
Obligations and provided contribution from one another in amounts designed to
assure
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that each bears only its "fair share" (as defined in the Subsidiary Guaranty)
of the obligations in respect of the Secured Obligations. The allocation among
Subsidiaries of their obligations as set forth in the Subsidiary Guaranty shall
not be construed in any way to limit the liability of any Co-Maker hereunder or
under the Subsidiary Guaranty. The obligations of the Mortgagor Subsidiaries
under the Subsidiary Guaranty are not secured by the initial Mortgages recorded
in Florida, which Mortgages secure the direct obligations of the Co-Makers
rather than guaranties of the obligations of others.
11.4 Liability of Co-Makers Absolute. Each Co-Maker agrees that its
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a co-maker other than indefeasible payment in full of
the Secured Obligations. In furtherance of the foregoing and without limiting
the generality thereof, each Co-Maker agrees as follows:
(a) The obligation of each Co-Maker is independent,
primary and original, and not dependent upon failure of Lender to collect from
any other Co-Maker.
(b) Lender may enforce this Agreement against the
Mortgagor Subsidiaries notwithstanding the existence of any dispute between
Lender and Company or any Mortgagor Subsidiary with respect to the existence of
an Event of Default.
(c) The obligations of each Mortgagor Subsidiary
hereunder are independent of the obligations of Company under the Transaction
Documents and the obligations of any other Co-Maker or any guarantor, and a
separate action or actions may be brought and prosecuted against such Mortgagor
Subsidiary whether or not any action is brought against Company or any of such
other Co-Makers or guarantor and whether or not Company is joined in any such
action or actions.
(d) Payment by any Co-Maker of a portion, but not all,
of the Secured Obligations shall in no way limit, affect, modify or abridge any
other Co-Maker's liability for any portion of the Secured Obligations which has
not been paid. Without limiting the generality of the foregoing, if Lender is
awarded a judgment in any suit brought to enforce any Co-Maker's covenant to
pay a portion of the Secured Obligations, such judgment shall not be deemed to
release such Co-Maker from its covenant to pay the portion of the Secured
Obligations that is not the subject of such suit, and such judgment shall not,
except to the extent satisfied by such Co-Maker, limit, affect,
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modify or abridge any other Co-Maker's liability hereunder in respect of the
Secured Obligations.
(e) Lender, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or enforceability
of this Agreement or giving rise to any reduction, limitation, impairment,
discharge or termination of any Co-Maker's liability hereunder, from time to
time may (i) renew, extend, accelerate, increase the rate of interest on, or
otherwise change the time, place, manner or terms of payment of the Secured
Obligations, (ii) settle, compromise, release or discharge, or accept or refuse
any offer of performance with respect to, or substitutions for, the Secured
Obligations or any agreement relating thereto and/or subordinate the payment of
the same to the payment of any other obligations; (iii) request and accept
guaranties of the Secured Obligations and take and hold security for the
payment of this Agreement or the Secured Obligations; (iv) release, surrender,
exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or
modify, with or without consideration, any security for payment of the Secured
Obligations, any guaranties of the Secured Obligations, or any other obligation
of any Person (including any other Co-Maker) with respect to the Secured
Obligations; (v) enforce and apply any security now or hereafter held by or for
the benefit of Lender in respect of this Agreement or the Secured Obligations
and direct the order or manner of sale thereof, or exercise any other right or
remedy that Lender may have against any such security, as Lender in its
discretion may determine consistent with this Agreement and any applicable
security agreement or mortgage, including foreclosure on any such security
pursuant to one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable, and even though such action
operates to impair or extinguish any right of reimbursement or subrogation or
other right or remedy of any Co-Maker against any other Co-Maker or any
security for the Secured Obligations; and (vi) exercise any other rights
available to it under the Transaction Documents.
(f) This Agreement and the obligations of the Co-Makers
hereunder shall be valid and enforceable and shall not be subject to any
reduction, limitation, impairment, discharge or termination for any reason
(other than indefeasible payment in full of the Secured Obligations), including
the occurrence of any of the following, whether or not any Co-Maker shall have
had notice or knowledge of any of them: (i) any failure or omission to assert
or enforce, or agreement or election not to assert or enforce, or the stay or
enjoining, by order of court, by operation of law or otherwise, of the exercise
or enforcement of, any claim or demand or any right, power or
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remedy (whether arising under the Transaction Documents, at law, in equity or
otherwise) with respect to the Secured Obligations or any agreement relating
thereto, or with respect to any guaranty of or security for the payment of the
Secured Obligations; (ii) any rescission, waiver, amendment or modification of,
or any consent to departure from, any of the terms or provisions (including
provisions relating to events of default) of this Agreement, any of the other
Transaction Documents or any agreement or instrument executed pursuant thereto,
or of any guaranty or security for the Secured Obligations, in each case
whether or not in accordance with the terms of the Agreement or such
Transaction Document or any agreement relating to such guaranty or security;
(iii) the Secured Obligations, or any agreement relating thereto, at any time
being found to be illegal, invalid or unenforceable in any respect; (iv) the
application of payments received from any source (other than payments received
pursuant to the other Transaction Documents or from the proceeds of any
security for the Secured Obligations, except to the extent such security also
serves as collateral for indebtedness other than the Secured Obligations) to
the payment of indebtedness other than the Secured Obligations, even though
Lender might have elected to apply such payment to any part or all of the
Secured Obligations; (v) Lender's consent to the change, reorganization or
termination of the corporate structure or existence of Company or any of its
Subsidiaries and to any corresponding restructuring of the Secured Obligations;
(vi) any failure to perfect or continue perfection of a security interest in
any collateral which secures any of the Secured Obligations; (vii) any
defenses, setoffs or counterclaims which any Co-Maker may allege or assert
against Lender in respect of the Secured Obligations, including failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury; and (viii) any other act or
thing or omission, or delay to do any other act or thing, which may or might in
any manner or to any extent vary the risk of any Co-Maker as an obligor in
respect of the Secured Obligations.
11.5 Waivers by Co-Maker. Each Co-Maker hereby waives, for the
benefit of Lender:
(a) any right to require Lender, as a condition of
payment or performance by such Co-Maker, to (i) proceed against Company, any
Mortgagor Subsidiary or any guarantor of the Secured Obligations or any other
Person, (ii) proceed against or exhaust any security held from Company, any
other Mortgagor Subsidiary or any guarantor of the Secured Obligations or any
other Person, (iii) proceed against or have resort to any balance of any
deposit account or credit on the books of Lender
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<PAGE> 101
in favor of Company or any other Person, or (iv) pursue any other remedy in the
power of Lender whatsoever;
(b) any defense arising by reason of the incapacity,
lack of authority or any disability or other defense of any Co-Maker including
any defense based on or arising out of the lack of validity or the
unenforceability of the Secured Obligations or any agreement or instrument
relating thereto or by reason of the cessation of the liability of any Co-Maker
from any cause other than indefeasible payment in full of the Secured
Obligations;
(c) any defense based upon any statute or rule of law
which provides that the obligation of a co-maker must be neither larger in
amount nor in other respects more burdensome than that of any other obligor;
(d) any defense based upon Lender's errors or omissions
in the administration of the Secured Obligations, except behavior which amounts
to bad faith;
(e) (i) any principles or provisions of law, statutory
or otherwise, which are or might be in conflict with the terms of this
Agreement or which result or might result in any legal or equitable discharge
of such Co-Maker's obligations hereunder, (ii) the benefit of any statute of
limitations affecting such Co-Maker's liability hereunder or the enforcement
hereof, (iii) any rights to setoffs, recoupments and counterclaims, and (iv)
promptness, diligence and any requirement that Lender protect, secure, perfect
or insure any security interest or lien or any property subject thereto;
(f) notices, demands, presentments, protests, notices of
protest, notices of dishonor and notices of any action or inaction, including
acceptance of this Agreement, notices of default under this Agreement or any
agreement or instrument related thereto, notices of any renewal, extension or
modification of the Secured Obligations or any agreement related thereto,
notices of any extension of credit to any other Co-Maker and notices of any of
the matters referred to in subsection 11.4 and any right to consent to any
thereof; and
(g) any defenses or benefits that may be derived from or
afforded by law which limit the liability of or exonerate co-makers, guarantors
or sureties, or which may conflict with the terms of this Agreement.
11.6 Payment by Mortgagor Subsidiaries; Application of Payments.
Subject to the provisions of subsection 11.3(a), Mortgagor Subsidiaries hereby
jointly and severally agree, in
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furtherance of the foregoing and not in limitation of any other right which
Lender or any other Person may have at law or in equity against any Mortgagor
Subsidiary by virtue hereof, that upon the failure of Company to pay any of the
Secured Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section
362(a)), Mortgagor Subsidiaries will upon demand pay, or cause to be paid, in
cash, to Lender, an amount equal to all Secured Obligations then due as
aforesaid, including accrued and unpaid interest on such Secured Obligations
(including interest which, but for the filing of a petition in bankruptcy with
respect to Company, would have accrued on such Secured Obligations, whether or
not a claim is allowed against Company for such interest in any such bankruptcy
proceeding) and all other Secured Obligations then owed to Lender as aforesaid.
All such payments shall be applied promptly from time to time by Lender in
accordance with this Agreement.
11.7 Co-Makers' Rights of Subrogation, Contribution, Etc. Each
Co-Maker hereby waives any claim, right or remedy, direct or indirect, that
such Co-Maker now has or may hereafter have against any other Co-Maker or any
of its assets in connection with this Agreement or the performance by such
Co-Maker of its obligations hereunder, in each case whether such claim, right
or remedy arises in equity, under contract, by statute, under common law or
otherwise and including without limitation (a) any right of subrogation,
reimbursement or indemnification that such Co-Maker now has or may hereafter
have against Company, (b) any right to enforce, or to participate in, any
claim, right or remedy that Lender now has or may hereafter have against any
other Co-Maker, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by Lender. In addition, until the
Secured Obligations shall have been indefeasibly paid in full, each Co-Maker
shall withhold exercise of any right of contribution such Co-Maker may have
against any guarantor of the Secured Obligations (including any such right of
contribution under any guaranty). Each Co-Maker further agrees that, to the
extent the waiver or agreement to withhold the exercise of its rights of
subrogation, reimbursement, indemnification and contribution as set forth
herein is found by a court of competent jurisdiction to be void or voidable for
any reason, any rights of subrogation, reimbursement or indemnification such
Co-Maker may have against any other Co-Maker or against any collateral or
security, and any rights of contribution such Co-Maker may have against any
such guarantor, shall be junior and subordinate to any rights Lender may have
against Company and
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<PAGE> 103
the other Co-Makers, to all right, title and interest Lender may have in any
such collateral or security, and to any right Lender may have against such
guarantor. If any amount shall be paid to any Co-Maker on account of any such
subrogation, reimbursement, indemnification or contribution rights at any time
when all Secured Obligations shall not have been paid in full, such amount
shall be held in trust for Lender and shall forthwith be paid over to Lender to
be credited and applied against the Secured Obligations, whether matured or
unmatured, in accordance with the terms hereof.
11.8 Subordination of Other Obligations. Any indebtedness of any
Co-Maker now or hereafter held by any other Co-Maker is hereby subordinated in
right of payment to the obligations of such indebted Co-Maker in respect of the
Secured Obligations, and any such indebtedness of a Co-Maker to another
Co-Maker collected or received by such other Co-Maker after an Event of Default
has occurred and is continuing shall be held in trust for Lender and shall
forthwith be paid over to Lender to be credited and applied against the Secured
Obligations but without affecting, impairing or limiting in any manner the
liability of any Co-Maker under any other provision of this Agreement.
11.9 Expenses. Co-Makers jointly and severally agree to pay, or cause
to be paid, on demand, and to save Lender harmless against liability for, any
and all costs and expenses (including reasonable fees and disbursements of
counsel and allocated costs of internal counsel) incurred or expended by Lender
in connection with the enforcement of, or preservation of any rights under,
this Agreement.
11.10 Continuing Agreement. This Agreement shall remain in effect as
against each Co-Maker until all of the Secured Obligations shall have been
indefeasibly paid in full. Each Co-Maker hereby irrevocably waives any right
to revoke this Agreement as to future transactions giving rise to any Secured
Obligations.
11.11 Authority of the Co-Makers. It is not necessary for Lender to
inquire into the capacity or powers of any Co-Maker or the officers, directors
or any agents acting or purporting to act on behalf of any of them.
11.12 Financial Condition of the Company. Any Secured Obligations may
be incurred by Company or continued from time to time without notice to or
authorization from any Mortgagor Subsidiary regardless of the financial or
other condition of Company at the time of any such grant or continuation. The
Lender shall have no obligation to disclose or discuss with any
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<PAGE> 104
Mortgagor Subsidiary its assessment, or any Mortgagor Subsidiary's assessment,
of the financial condition of Company. Each Mortgagor Subsidiary has adequate
means to obtain information from Company on a continuing basis concerning the
financial condition of Company and its ability to perform its obligations under
the Transaction Documents, and each Mortgagor Subsidiary assumes the
responsibility for being and keeping informed of the financial condition of
Company and of all circumstances bearing upon the risk of nonpayment of the
Secured Obligations. Each Mortgagor Subsidiary hereby waives and relinquishes
any duty on the part of Lender to disclose any matter, fact or thing relating
to the business, operations or conditions of Company now known or hereafter
known by lender.
11.13 Rights Cumulative. The rights, powers and remedies given to
Lender by this Agreement are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Lender by virtue of any
statute or rule of law or in any of the other Transaction Documents or any
agreement between any Mortgagor Subsidiary and Lender or between Company and
Lender. Any forbearance or failure to exercise, and any delay by Lender in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.
11.14 Bankruptcy; Post-Petition Interest; Reinstatement of Agreement.
(a) So long as any Secured Obligations remain
outstanding, no Co-Maker shall, without the prior written consent of Lender in
accordance with the Agreement, commence or join with any other Person in
commencing any bankruptcy, reorganization or insolvency proceedings of or
against any other Co-Maker. The obligations of the Co-Makers under this
Agreement shall not be reduced, limited, impaired, discharged, deferred,
suspended or terminated by any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of any other or by any defense which any other Co-Maker may have by
reason of the order, decree or decision of any court or administrative body
resulting from any such proceeding.
(b) Each Co-Maker acknowledges and agrees that any
interest on any portion of the Secured Obligations which accrues after the
commencement of any proceeding referred to in clause (a) above (or, if interest
on any portion of the Secured Obligations ceases to accrue by operation of law
by reason of the commencement of said proceeding, such interest as would
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<PAGE> 105
have accrued on such portion of the Secured Obligations if said proceedings had
not been commenced) shall be included in the Secured Obligations because it is
the intention of Co-Makers and Lender that the Secured Obligations of each Co-
Maker pursuant to this Agreement should be determined without regard to any
rule of law or order which may relieve any other Co-Maker of any portion of
such Secured Obligations. The Co-Makers will permit any trustee in bankruptcy,
receiver, debtor in possession, assignee for the benefit of creditors or
similar person to pay Lender, or allow the claim of Lender in respect of, any
such interest accruing after the date on which such proceeding is commenced.
(c) If all or any portion of the Secured
Obligations is paid by any Co-Maker, the obligations of the other Co-Makers
hereunder shall continue and remain in full force and effect or be reinstated,
as the case may be, in the event that all or any part of such payment(s) are
rescinded or recovered directly or indirectly from Lender as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Secured Obligations for all purposes under this
Agreement.
11.15 Setoff. In addition to any other rights Lender may
have under law or in equity, if any amount shall at any time be due and owing
by any Co-Maker to Lender under this Agreement, Lender is authorized at any
time or from time to time, without notice (any such notice being hereby
expressly waived), to set off and to appropriate and to apply any and all
deposits (general or special, including but not limited to indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other indebtedness of Lender owing to such Co-Maker and any other property of
such Co-Maker held by Lender to or for the credit or the account of such
Co-Maker against and on account of the Secured Obligations and liabilities of
such Co-Maker to Lender under this Agreement; provided, however, that the
foregoing shall not apply to Excluded Property and the restricted Bank Accounts
identified in Schedule 7.17 of this Agreement.
SECTION 12. MISCELLANEOUS
12.1 Acknowledgment Regarding Certain Environmental
Obligations. Each Mortgagor Subsidiary hereby acknowledges and agrees that the
Secured Obligations includes Company's obligation under this Agreement to
comply with the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 and all other Environmental Laws and to indemnify and
hold harmless Lender from and against any and all liability arising out of, or
in connection with the presence of
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<PAGE> 106
Hazardous Materials at any property of Company or any Mortgagor Subsidiary
given as security for the Secured Obligations, and each Mortgagor Subsidiary
hereby expressly undertakes as Co-Maker the payment, performance and discharge
of such obligations and liabilities of Company.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
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<PAGE> 107
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
ATLANTIC GULF COMMUNITIES CORPO-
RATION, a Delaware corporation
By: /s/ Thomas W. Jeffrey
--------------------------------
Name: Thomas W. Jeffrey
Title: Executive Vice President
and Chief Financial Officer
CUMBERLAND COVE, INC.
By: /s/ Thomas W. Jeffrey
--------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
ENVIRONMENTAL QUALITY LABORATORY INC.
By: /s/ Thomas W. Jeffrey
--------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
GENERAL DEVELOPMENT UTILITIES, INC.
By: /s/ Thomas W. Jeffrey
--------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
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<PAGE> 108
FIVE STAR HOMES, INC.
By: /s/ Thomas W. Jeffrey
--------------------------------
Name: Thomas W. Jeffrey
Title: President
ATLANTIC GULF OF TAMPA, INC.
By: /s/ Thomas W. Jeffrey
--------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
ESTERO POINTE DEVELOPMENT
CORPORATION
By: /s/ Thomas W. Jeffrey
--------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
AP-AGC, LLC, as Lender
By: /s/ Ricardo Koenigsberger
--------------------------------
Name: Ricardo Koenigsberger
Title: Vice President of Kronus
Property, Inc., its
Manager
_____________, as Collateral Agent
By:
--------------------------------
Name:
Title:
-101-
<PAGE> 1
Exhibit 7
[FORM OF]
SECURED CONVERTIBLE PROMISSORY NOTE
[ ] __, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned, ATLANTIC GULF COMMUNITIES
CORPORATION, a Delaware corporation (the "Company"), and the other undersigned
corporations (the "Subsidiaries"; the Company and the Subsidiaries are referred
to herein collectively as the "Obligors"), do hereby jointly and severally
promise to pay to the order of AP-AGC, LLC, a Delaware limited liability company
("Holder"), in lawful money of the United States of America, in immediately
available funds, to such account as Holder may designate from time to time, the
principal sum of [WORDS] Dollars ($[NUMERALS]), together with interest thereon,
as described below.
This Secured Convertible Promissory Note (this "Note") is
issued pursuant to that certain Secured Note Agreement (the "Note Agreement")
dated as of February 7, 1997 among the Obligors, Holder, and [NAME OF COLLATERAL
AGENT] ("Collateral Agent"), as collateral agent for Holder (as amended,
supplemented or otherwise modified from time to time, the "Note Agreement"), the
terms of which are incorporated herein by reference. Capitalized terms used in
this Note, unless otherwise defined herein, shall have the meaning given such
terms in the Note Agreement.
Interest shall accrue from the date hereof on the outstanding
principal balance of the indebtedness evidenced hereby at a rate per annum
(based on a year of 360 days and actual days elapsed), as well before as after
judgment, of (i) 20% so long as no Event of Default has occurred and is
continuing and no Negative Shareholder Vote has occurred and (ii) 23% from and
after the occurrence and during the continuance of an Event of Default and in
any event at all times after a Negative Shareholder Vote has occurred, in each
case as set forth in Section 2.4 of the Note Agreement.
Principal and interest hereunder shall be due and payable as
follows:
(a) Interest shall be payable in arrears in accordance with
Section 2.4 of the Note Agreement.
EXHIBIT C-1
<PAGE> 2
(b) The aggregate principal amount of this Note then
outstanding shall be paid (together with all accrued and unpaid interest and
fees then accrued thereon and all other amounts due under the Note Agreement) on
December 31, 1998.
The Obligors shall make mandatory prepayments of this Note if
and as required by Section 2.2 of the Note Agreement. The outstanding principal
amount of this Note may be prepaid in whole or in part at any time and from time
to time without penalty or premium.
The proceeds of any prepayment shall be applied first to
accrued and unpaid interest, fees and other amounts due on or in connection
herewith and second to repayment of the principal hereunder, as provided in the
Note Agreement.
The outstanding principal amount of this Note shall be
convertible into Preferred Stock on the terms and subject to the conditions set
forth in the Investment Agreement. All interest and other amounts (other than
principal) theretofore accrued and owing hereunder or under the Due Diligence
Fee Agreement shall be paid in full prior to or concurrent with such conversion.
If this Note is converted into Preferred Stock and the Lender purchases an
additional $15,000,000 of Preferred Stock as set forth in the Investment
Agreement, the Company will be obligated to repurchase all such Preferred Stock
on the happening of certain conditions set forth in the Certificate of
Designation. From and after such conversion of the Note into Preferred Stock,
this Note shall no longer evidence an indebtedness for borrowed money, and
notwithstanding anything herein to the contrary the term Secured Obligations as
used in this Note and each other Transaction Document shall not mean or include
any indebtedness for principal or interest, but this Note shall remain in full
force and effect to evidence the obligation of the Company to repurchase all
such Preferred Stock under Section 8 of the Certificate of Designation and pay
all other Secured Obligations then outstanding and the joint and several
obligation of each and every Mortgagor Subsidiary shall continue to be secured
by the Secured Note Documents.
If the Obligors shall fail to pay any principal hereunder when
due; or if the Obligors shall fail to pay any interest hereunder or other
amounts payable hereunder within five (5) days after the due date therefor, or
if any other Event of Default shall have occurred, the entire outstanding
principal amount hereof, together with accrued interest and charges thereon may
become due and payable in full in accordance with the terms and provisions of
the Note Agreement.
EXHIBIT C-2
<PAGE> 3
If any payment of principal or interest of this Note shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day.
In no contingency or event whatsoever shall the interest rate
charged pursuant to the terms of this Note exceed the highest rate permissible
under applicable law. If the amount of interest paid or payable under the
Transaction Documents would exceed the maximum amount permitted by applicable
law to be charged, the amount of interest paid or payable shall be automatically
reduced to such maximum permissible amount and the excess applied to principal
or if no principal shall be outstanding and such amount has been paid, refunded
to the payor. If the amount of interest payable for the account of Holder in
respect of any interest computation period is reduced pursuant to the preceding
sentence and the amount of interest payable for its account in respect of any
subsequent interest computation period, computed pursuant to applicable law and
the Transaction Documents, would be less than the maximum amount permitted by
applicable law to be charged, then the amount of interest payable in respect of
the subsequent inter est computation period shall be automatically increased to
such maximum permissible amount; provided that at no time shall the aggregate
amount by which interest paid had been increased pursuant to this sentence
exceed the aggregate amount by which interest has theretofore been reduced
pursuant to the preceding sentence.
All payments and prepayments on account of principal and
interest due in connection with this Note made by the Obligors to Holder
pursuant to the Note Agreement shall be recorded by the Holder on Schedule 1
annexed hereto, and constituting a part hereof, which recordations shall
constitute prima facie evidence of the accuracy of the information so recorded;
provided, however, that the failure of the Holder to make any such recordation
shall not limit or otherwise affect the obligations of the Obligors hereunder or
under the Note Agreement.
The Obligors hereby waive presentment, demand, protest and
notice of any kind in connection with this Note. The Obligors and any endorsers
of this Note hereby consent to renewals and extensions of time at or after the
maturity hereof, without notice, and hereby waive presentment, demand, protest
and notice of any kind in connection with this Note and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder. This Note is entitled to the benefits of the Transaction
Documents. This Note is secured by certain assets pursuant to the Security
Documents.
EXHIBIT C-3
<PAGE> 4
The terms of this Note are subject to amendment, waiver or
modification only in the manner provided in the Note Agreement.
This Note shall bind the Obligors and their respective
successors and assigns, and the benefits hereof shall inure to the benefit of
the Holder and its successors and assigns. All references herein to the
"Obligors" and the "Holder" shall be deemed to apply to the Obligors and the
Holder, respectively, and their respective successors and assigns.
Subject to the provisions of Section 11.3(a) of the Note
Agreement, all Obligors are jointly and severally irrevocably and
unconditionally liable, as primary obligors and not merely as sureties, for the
due and punctual payment in full of all Secured Obligations when the same shall
become due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. ss. 362(a)). The obligation of each Obligor is independent,
primary and original, and not dependent upon failure of Holder to collect from
any other Obligor. Holder may enforce this Note against the Subsidiaries party
hereto notwithstanding the existence of any dispute between Holder and the
Company with respect to the existence of an Event of Default. The obligations of
each such Subsidiary hereunder are independent of the obligations of the Company
under the Transaction Documents and the obligations of any other Obligor or any
guarantor, and a separate action or actions may be brought and prosecuted
against such Subsidiary whether or not any action is brought against the Company
or any of such other Obligor or any guarantor and whether or not the Company is
joined in any such action or actions.
This Note, for all purposes, shall be governed by, and
construed in accordance with, the laws of the State of New York (including
without limitation Section 5-1401 of the General Obligations Law of the State of
New York). In the event any provision of this Note shall be prohibited or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity and the remainder of such provision or the
remaining provisions of this Note shall not in any way be affected or impaired
thereby.
WAIVER OF JURY TRIAL. NO PARTY TO THIS NOTE OR ANY ASSIGNEE,
SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF A PARTY SHALL SEEK A JURY TRIAL IN
ANY LAW SUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION PROCEDURE BASED
UPON, OR ARISING
EXHIBIT C-4
<PAGE> 5
OUT OF, THIS NOTE, ANY RELATED AGREEMENT OR INSTRUMENT, ANY SECURITY FOR THE
INDEBTEDNESS EVIDENCED HEREBY, OR THE DEALINGS OR THE RELATION SHIP BETWEEN OR
AMONG THE PARTIES, OR ANY OF THEM. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH
ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE
BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN ANY WAY AGREED WITH, OR REPRESENTED
TO, ANY OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
WITNESS the due execution hereof as of the date first above
written.
ATLANTIC GULF COMMUNITIES
CORPORATION, a Delaware corporation
By:
-----------------------------
John H. Fischer, its
Vice President
CUMBERLAND COVE, INC.
By:
-------------------------------
Name:
Title:
ENVIRONMENTAL QUALITY LABORATORY
INC.
By:
-------------------------------
Name:
Title:
EXHIBIT C-5
<PAGE> 6
SCHEDULE 1 TO NOTE
NOTE RECORD
DATE AMOUNT DATE OF AMOUNT OF
PAYMENT OF PAYMENT PREPAYMENT PREPAYMENT
- ------- ---------- ---------- ----------
EXHIBIT C-7
