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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 1-8967
ATLANTIC GULF COMMUNITIES CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 59-0720444
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(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2601 South Bayshore Drive
Miami, Florida 33133-5461
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(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code (305) 859-4000
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
X Yes No
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Page 1 of ___ Pages
The exhibit index for this Form 10-K is located at page 54.
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
As of March 20, 1997, the aggregate market value of the registrant's Common
Stock held by non-affiliates of the registrant was approximately $55.9 million.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
X Yes No
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As of March 20, 1997, there were 9,721,720 shares of the registrant's
Common Stock outstanding, including 13,290 outstanding shares held in a disputed
claims reserve.
Documents incorporated by reference
Part III, Items 10, 11, 12 and 13 are incorporated by reference from the
Company's Proxy Statement related to the Annual Meeting of the Stockholders
scheduled to be held on May 28, 1997.
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Unless the context otherwise requires, references to the "Company" include
Atlantic Gulf Communities Corporation and its wholly owned subsidiaries and
references to "Atlantic Gulf" refer solely to Atlantic Gulf Communities
Corporation. References to "Predecessor Company" or "Predecessor" refers to
General Development Corporation, Atlantic Gulf's immediate predecessor.
PART I
Item 1. Business
CURRENT BUSINESS
Atlantic Gulf Communities Corporation is a Florida-based real estate
development and asset management company. The Company's primary lines of
business are acquisition, development and sale of new subdivision and scattered
developed homesites, sale of land tracts and residential construction and sales
(see "Primary Lines of Business"). Additional lines of business which contribute
to the Company's overall operations include portfolio management of mortgages
and contracts receivable and environmental services.
The Company acquires and develops real estate to: (i) enhance the value of
certain properties, (ii) maintain a continuing inventory of marketable tracts
and (iii) supply finished homesites to builders in Florida's fastest growing
markets. The Company's acquisition and development activities are comprised of
four primary functions: business development, planning, community development
and residential construction.
Business Development. The Company's business development activities focus
on formulating strategies to invest Company resources in real estate in primary
markets and the corresponding business opportunities to produce superior returns
for our shareholders. The business development department identifies specific
primary markets and evaluates specific business opportunities within these
markets which meet the Company's investment criteria. The business development
department initiates and evaluates the financial and market feasibility studies
of these business opportunities and conducts appropriate due diligence
activities with respect to planning, zoning, and permitting requirements. The
department also identifies financing and investment sources and potential joint
venture partners.
Planning. The Company's planning activities include master land use
planning, zoning, mitigation, project permitting and obtaining all other
regulatory approvals necessary to develop a specified property. These activities
are coordinated by a staff at the Company's Miami corporate headquarters
consisting of 11 employees, supplemented, as needed, by subcontracted engineers
and other professionals.
The planning department evaluates, designs (or re-designs) and obtains
approvals to develop the Company's new acquisitions as residential subdivisions.
This department also obtains certain approvals and permits to enhance the value
of the Company's land tracts prior to sale.
Atlantic Gulf also has a wholly-owned subsidiary, Environmental Quality
Laboratory, Inc., staffed with 15 professionals who conduct environmental
assessments, testing and planning activities for the Company as well as for
unaffiliated parties. This company combines 20 years' experience in
environmental science with an in-depth knowledge of complex state and federal
regulations and state-of-the-art facilities to assist the Company and other
clients in achieving projects that are environmentally sound. See "Other
Businesses - Environmental Services" below.
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Community Development. The Company's community development staff focusses
on land development activities including the construction of roads, amenities,
utilities, and other infrastructure needed to obtain building permits. These
activities are directed by Company personnel in the field using subcontractors
with fixed price contracts to perform the actual land development work. The
final product is finished homesites that are sought by leading homebuilders.
Residential Construction. The Company owns and develops condominiums in
coastal locations where the Company believes there is existing demand for such
product. The Company acts as an owner/general contractor and subcontracts
substantially all residential construction activities. The Company was also
involved in the construction of single family homes, however, during 1995 the
Company decided to phase out its single family home construction and sales
operation in Predecessor communities. See " Primary Lines of Business -
Residential Sales" below.
BUSINESS PLAN
The Company's goal is to produce superior returns for shareholders by
liquidating Predecessor assets, paying off debt, matching overhead to
development and construction activities, and becoming the leading supplier of
finished homesites to independent homebuilders in Florida's fastest growing
markets and in selected primary markets in the southeastern United States (the
"Southeast"), without the exposure entailed in carrying a substantial inventory
of land.
The Company's business plan is centered on its three principal lines of
business: (i) sales of finished homesites to independent homebuilders, (ii)
sales of tract land to end users as well as to investors and (iii) residential
construction and sales. The intent of the plan is to monetize the Company's
Predecessor assets as rapidly as market conditions permit while entering into
new markets with a higher risk-adjusted return potential. The business plan also
contemplates modifying the Company's capital structure by reducing debt,
improving financial flexibility, and reducing overhead by focusing on the
Company's core assets and businesses.
Florida continues to be one of the fastest growing states in the nation. It
currently ranks as the fourth most populous state behind California, Texas and
New York. Since 1992, the population of the United States has grown by 4.0%. In
the past three years, Florida grew by approximately 686,500 persons to an
estimated population of 14,400,000, a 5.0% growth rate. Florida currently
accounts for 5.4% of the nation's total population, but it accounted for 8.2% of
the nation's population growth during the four years ended December 31, 1996.
Florida achieved this pace of growth by attracting new residents both from other
areas of the United States and other countries. While this growth has
historically been lead by retirees, in the 1980's Florida's rapid job growth
attracted residents in search of job opportunities.
Within Florida, a number of submarkets exist which vary based on
demographics and economic growth, among other factors. There are five markets
within Florida that represent densely populated, high growth areas referred to
as primary markets. All other areas in Florida are referred to as secondary
markets. Over the past few years, the Company has increasingly directed its
efforts to Florida's primary markets in an attempt to achieve solid growth in
the future. In 1995, the Company withdrew from single family home construction
activities and aggressively marketed assets located in secondary markets,
consistent with its business plan. In 1996, the Company continued to shift its
asset base and development activities from secondary to primary markets. See
"Florida Real Estate Market Summary" below for a discussion of these markets.
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Homesite sales. The supply of homesites suitable for residential
construction in Florida's primary markets has decreased, significantly in some
cases, over the last three years. The Company has identified other primary
market areas in the Southeast that have experienced similar decreases in
available homesites. This decrease resulted from several factors, including: (i)
a reduction in the number of major land developers, (ii) reduced availability of
acquisition and development financing and (iii) increased environmental and
regulatory restrictions.
As a result of financial difficulties caused by the last real estate down
cycle in the late 1980's and early 1990's, many residential real estate
developers terminated their businesses or stopped acquiring new properties for
development. The absence of these developers has made it difficult in the 1990's
for homebuilders to maintain an adequate supply of developed lots in more
desirable areas in Florida and selected markets in the Southeast.
Traditional development financing is no longer readily available to
homebuilders or developers as a result of the collapse of the savings and loan
industry. The surviving lenders are generally more risk averse, which has
reduced developers' access to capital.
Environmental and other regulatory restrictions have become increasingly
burdensome. As a result, the Company believes that the more knowledgeable and
technically capable developers will be more successful. These regulatory
challenges will continue as Florida and other Southeastern states seek to
achieve responsible growth.
Increased demand for developed homesites, together with a reduction in new
homesite supply, provides the Company with an opportunity to capitalize on its
acquisition, planning, and community development expertise. For these reasons,
the Company has focused during the past three years on property acquisitions in
Florida's primary markets. Management believes that property acquisitions in
these markets should increase the Company's sales volume and overall
profitability in future years. The Company will also seek to identify other
primary market areas in the Southeast and Texas with similar characteristics for
potential property acquisitions.
To provide appropriate management focus, the Company divides its homesite
sales operation between "subdivision" homesite sales, which generally
corresponds to traditional land development activities in Florida's primary
markets, and "scattered" homesite sales, which generally encompasses Predecessor
non-contiguous homesites located in secondary markets.
As of December 31, 1996, the Company had pending subdivision homesite sales
contracts totalling approximately $15.2 million corresponding to 616 homesite or
86% of the total homesite inventory.
The Company typically develops new subdivision homesites in multiple phases
and does not incur hard development costs until all or substantially all of the
homesites in a phase are under contract with third party homebuilders.
Developing homesites in phases allows the Company to more closely match the
supply of finished homesites to the homebuilders' demand, thereby reducing the
overhead and carrying costs associated with carrying a substantial inventory of
finished lots.
The Company owns approximately 20,000 scattered homesites located in
secondary markets. The Company has implemented an aggressive sales program to
increase the sales rate of its scattered homesites.
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As of December 31, 1996, the Company had pending scattered homesite sales
contracts totalling $1.2 million.
During 1996, 1995 and 1994, homesite sales represented approximately 35%,
29% and 29% of the Company's total real estate revenues, respectively. In 1997,
homesite sales are expected to account for approximately 35% of the Company's
total real estate revenues. (See "Primary Lines of Business - Homesite Sales").
Tract sales. This line of business includes sales of commercial,
industrial, institutional, residential and agricultural acreage from the
Company's existing inventory located in secondary markets. The Company has
substantially completed, at significant cost since 1992, an effort to replan
many of these tracts to their highest and best use, enhancing their value and
marketability. Tract sales, while more variable from quarter to quarter than
homesites sales, have represented approximately 49%, 38% and 49% of the
Company's total real estate revenues during 1996, 1995 and 1994, respectively.
As part of the Company's comprehensive plan approved by the Board of Directors
in July 1995, the Company formed a new division, Atlantic Gulf Land Company, to
focus on the liquidation of Predecessor assets. This focus is consistent with
the Company's goal of producing superior returns for shareholders by liquidating
Predecessor assets, paying corporate debt, and reducing overhead. Brian A.
McLaughlin was hired as the president of Atlantic Gulf Land Company, (See
Executive Officers of Atlantic Gulf). Mr. McLaughlin has extensive experience in
real estate turn-arounds and asset dispositions. As of December 31, 1996, the
Company had pending tract sales contracts totalling approximately $18.1 million.
Due to the Company's plan to monetize the Company's Predecessor assets
located in secondary markets, tract sales will continue to be a significant
source of revenue for the Company in 1997. However, subsequent to the Company's
full implementation of the business plan anticipated in 1998, tract sales are
expected to decline from approximately 55% of total revenues in 1997 to
approximately 25% of total real estate revenues thereafter. See "Primary Lines
of Business - Tract Sales."
Residential construction and sales. The Company undertakes condominium
construction projects where the Company believes the risks can be reasonably
estimated and the prospective returns are attractive. The Company recorded
revenues of approximately $17.8 million and $18.0 million from sales in Regency
Island Dunes in 1996 and 1995, respectively. There were no significant
condominium revenues in 1994.
The Company has historically constructed single family homes. However, in
mid-1995, the Company decided to withdraw from the single family home business
in Predecessor communities. The Company has substantially completed its
withdrawal from this business. The Company is no longer accepting new sales
contracts in Predecessor communities to construct single family homes but is
fulfilling the contracts in place. The Company may seek to re-enter the single
family home business in primary market areas where this business would
complement current or potential land development activities. The Company may
seek to acquire demonstrated homebuilding expertise in order to re-enter this
single family home construction business.
Residential sales, including single family and condominium units, have
comprised 16%, 33% and 22% of total real estate sales for 1996, 1995 and 1994,
respectively. As the residential business shifts from primarily single family to
condominiums, and the Company's business plan is fully implemented, anticipated
in 1998, residential revenues are expected to increase to approximately 25% of
the Company's revenues. Residential sales revenues are expected to be
approximately 10% of total revenues in 1997. See "Primary Lines of Business -
Residential Sales."
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Overall, the Company believes that these three complementary business lines
represent the most appropriate utilization of the Company's resources to take
advantage of the opportunities in its markets and to pursue the highest return
on the Company's assets. However, the Company's business is affected by general
risks associated with the real estate business, including specific risks
incident to the Florida and other primary real estate markets. The Florida real
estate market, as well as other primary markets in the Southeast, historically
have been cyclical, and the Company's business may be affected by changes in
interest rates. Any downturn in the Florida or national economy or increase in
interest rates can have adverse effects on the Company's sales and profitability
and its ability to make required debt payments. Other factors that could effect
the Company's business include the availability and cost of financing for
acquisition and development, the availability and cost of materials and labor,
weather conditions, changes in government regulations and changes in consumer
preferences. The real estate business, particularly in Florida, is highly
competitive. See "Regulation" and "Competition."
The Company's historical operating performance has been adversely affected
by: (i) investments undertaken to produce future profits; (ii) high debt costs;
(iii) sales pressure attributable to near term debt maturities; (iv) significant
carrying costs attributable to its substantial but slower moving inventory in
secondary real estate markets; and (v) the time interval between asset
acquisition, development and sale. The results of several of the Company's
recent investments began to be realized in 1996. The results of certain other
investments will begin to be realized in 1997 when additional new projects come
on line. The Company anticipates its business plan will be fully implemented in
1998, assuming availability of appropriate capital resources during 1998, which
cannot be assured. See "Management's Discussion and Analysis - Liquidity and
Capital Resources."
FLORIDA REAL ESTATE MARKET SUMMARY
The information set forth in this section was provided primarily by
American Metro Study Corporation, an independent real estate consulting and
research firm.
Florida has one of the strongest economies in the nation. Since 1992, the
total non-agricultural employment in the nation has grown by 7.6% while
Florida's employment grew by 10.5% during the same period. Florida currently
accounts for 5.5% of the nation's non-agricultural employment, but it accounted
for 7.6% of the nation's job growth since 1992. The strong job growth in the
state is transforming Florida from a retirement destination to an employment
destination, particularly in the larger metropolitan areas of the state.
Due to the rapid population and employment growth, Florida has become the
leading state in the nation for single family home construction starts. In the
last four years the state has accounted for 365,900 single family home
construction starts, an average of 91,500 starts per year. During that period,
there were approximately 4,560,000 starts nationwide, an average of 1,140,000
starts per year, and Florida accounted for 8.0% of all single family home
construction starts in the nation.
The Company believes that, over the next five years, Florida should
continue to rank high nationally in terms of population growth, employment and
single family home construction starts and that its economic growth will be led
by tourism and international trade. It also believes that rapid expansion of the
Florida economy and the continued attraction of retirees will cause population
growth, which, in turn, will create increased demand for new housing units.
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The Federal Reserve recently raised interest rates one-quarter of one
percent. Higher interest rates may impact single family starts in 1997 and 1998.
Currently, housing demand is strong in the primary markets and there is a
reduced supply of finished homesites in Florida. The Company believes Florida's
favorable economic attributes will maintain a strong demand for finished
homesites over the next five years.
The Company has real estate interests in the following geographic markets:
PRIMARY MARKET AREAS
Jacksonville Area
Jacksonville is in the northeast corner of Florida. This four-county
metropolitan statistical area has 1 million residents and 502,000
non-agricultural jobs. This is a diverse local economy, with key employers
including the military, banking, insurance and service businesses.
Non-agricultural jobs increased 3.3% or 16,000 jobs during 1996. In 1996, the
local housing market had 5,750 single family home construction starts or 6.3% of
Florida's total single family home construction starts for the year. In 1996,
the Company sold its only Jacksonville-market project, Julington Creek
Plantation, for $24 million as part of the Company's plan to monetize certain
assets to retire debt. Under a management agreement between the Company and the
purchaser, the Company continues to manage Julington Creek Plantation in return
for 1% of gross revenues and a reimbursement of the Company's real estate and
overhead expenses. This management agreement expires in June 1997 and the
Company and the new owner are currently negotiating to extend its term on an
increased level of compensation to the Company. The Company is actively looking
for new projects in the Jacksonville market.
Orlando Area
The Orlando metropolitan statistical area is located in the east central
part of Florida, and is the only major market in the state not on either coast.
Orlando, with more than 13 million visitors per year, is Florida's largest
tourist center and is the most vibrant housing market. This four-county
metropolitan area has approximately 1,495,000 residents and 771,100
non-agricultural jobs. After tourism, the local market depends on defense,
manufacturing, banking and business services. During 1996, non-agricultural jobs
in the Orlando area increased 3.3% or 25,000 new jobs. This market has the most
active single family market in the state, with more than 13,000 single family
home construction starts in 1996, a 14.2% share of the entire state.
During 1996, approximately 25% of all the single family home construction
starts in the Orlando market occurred in the southeast area of the city. This
market area currently has the greatest shortage of developed homesites in the
entire Orlando market. The Company owns two residential projects, Lakeside
Estates in the southeast and the Sanctuary in the central Orlando area, and has
joint venture interests in one other residential project known as Falcon Trace
in southeast Orlando. In 1996, the Company's Lakeside Estates project was fourth
in the Orlando market in terms of single family housing permits issued.
Substantially all of the Lakeside and Sanctuary homesites under development are
under contract to homebuilders.
Tampa Bay Area
The four-county Tampa Bay area is on the central Gulf Coast of Florida.
This market is a more traditional housing market than the rest of Florida, with
many of the home buyers moving to the area for
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employment opportunities. It is the largest metropolitan statistical area in
Florida with approximately 2,250,000 residents and 1,050,000 non-agricultural
jobs. This market has significant employment in business services, health
services, trade, banking and manufacturing. During 1996, the Tampa Bay area's
non-agricultural jobs increased 2.3% or 24,200 jobs. After experiencing a
significant drop in housing market activity from 1987 through 1991, the Tampa
Bay market has recovered to 7,800 single family home construction starts in
1996, which represented 8.5% of such starts for the entire state. The Company
believes there is currently significant demand for developed homesites in Tampa
Bay's northeast market area. In this growing area, where the Company's West
Meadows project is located, there is less than a 23-month supply of developed
homesites. West Meadows will be developed in four phases. Development of the
first phase, consisting of 212 homesites was completed in 1996 and all of these
homesites have closed or are under contract. The Company is currently developing
the second phase of 99 homesites. Substantially all of the homesites under
development in West Meadows are subject to sales contracts with third party
builders.
Broward County
During the last two years, the Broward County (Fort Lauderdale)
metropolitan statistical area has been one of the fastest growing housing
markets in the nation. Housing demand in this market has almost doubled from
4,737 single family home construction starts in 1992, to 9,500 single family
home construction starts in 1996, representing a 10.4% share of the entire
state. This increase in housing demand began as a result of Hurricane Andrew,
which, in 1992, destroyed tens of thousands of homes in Dade County (Miami),
located directly south of Broward County. Since the initial relocation boom,
however, growth in southwestern Broward County has remained very strong.
Considered alone, Broward County has approximately 1,450,000 residents and
approximately 625,000 non-agricultural jobs. Broward County and Dade County
(Dade County - approximately 2,190,000 residents, 965,500 non-agricultural jobs
and 5,400 single family home construction starts in 1996) combined constitutes
the largest market in Florida. Non-agricultural jobs increased 3.4% or 52,500
jobs during 1996 for the combined Dade County/Broward County area.
Southwest Broward County was one of the best housing markets in the nation
in 1996, with more than 5,700 single family home construction starts and less
than a one-year supply of developed homesites. This market area, however, does
not have substantial developable land. This market area abuts the Everglades
which limits the number of new homesites that can be developed. The Company owns
one project and has joint venture interests in two other projects that account
for a significant portion of the total remaining developable homesites in this
market area.
Naples/Fort Myers Area
The Naples/Fort Myers area is on the southern Gulf Coast of Florida. This
area has a population of approximately 580,000 residents and approximately
160,000 jobs. During 1996, the Naples/Fort Myers had approximately 6,000
construction starts of which 3,000 or 50% were for multi-family homes which
represents the highest ratio of multi-family homes starts to total starts in the
state of Florida. During 1995 and 1996, the Company purchased approximately 326
acres of property in Naples, Florida in a project known as Estero Pointe and is
planning to assemble a total of 879 acres in this project. The Estero Pointe
project is anticipated to yield approximately 744 multi-family homes and 313
family single family homes.
Raleigh/Durham, North Carolina
Raleigh/Durham, North Carolina has a population of approximately 995,300
residents. The growth rate of the population in the state of North Carolina is
expected to grow at an 8.1% rate over the next five
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years which is the fifth highest growth rate in the United States. In December
1996, the Company became a limited partner in a limited partnership formed to
acquire and develop an $8.0 million residential real estate tract consisting of
approximately 660 acres located adjacent to the Research Triangle Park in the
town of Cary, North Carolina which is near Raleigh/Durham North Carolina. This
project, known as Panther Creek, is planned for 822 single family homes and up
to 310 multi-family homes. Panther Creek represents the Company's first new
residential project outside the Florida market.
SECONDARY MARKET AREAS
Treasure Coast Area
The Treasure Coast area, consisting of Martin and St. Lucie counties, is
north of Palm Beach County on Florida's east coast. This market has a
combination of job growth driven demand coming out of Palm Beach County, as well
as, retirement/second home demand. This market area has approximately 355,000
residents and 88,200 non-agricultural jobs. In 1996 there were 3,000 single
family home construction starts, a 3.2% share of the entire state. As the Palm
Beach and Broward markets exhaust the developable land, job growth and housing
demand is expected to increase in the Treasure Coast area.
Melbourne Area
The Melbourne area is the home of the Kennedy Space Center on Florida's
Central Atlantic Coast. This market has approximately 450,000 residents and
approximately 181,000 non-agricultural jobs. This market had 2,950 single family
home construction starts in 1996, a 3.2% share of the entire state. While the
demand for retirement homes in the Melbourne area is expected to remain strong
over the next few years, reductions in federal spending for space exploration
may limit job growth in the near future.
Other Areas
The Company has land holdings in several other secondary market areas, some
of which may currently have relatively high growth rates, but could be adversely
affected by changes in the economy. Furthermore, the existing supply of homesite
inventory in these other market areas should satisfy current annual demand for
many years. These factors render these markets shallow, with limited annual
absorption expected in the near term. A brief description of these other
secondary market areas is set forth below.
Sarasota/Bradenton/Punta Gorda Area
Located on Florida's west coast, north from Naples/Ft. Myers, the
Sarasota/Bradenton/Punta Gorda area is a diverse local market in which a
majority of new home sales are to retirees and second home buyers. This market
has approximately 698,000 residents and approximately 209,000 non-agricultural
jobs. During 1996, the area had 3,800 single family home construction starts, a
4.2% share of the entire state. Included in this area are the Company's land
holdings in the Port Charlotte and North Port communities.
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Ocala Area
Ocala, located 100 miles north of Tampa on Interstate 75, has emerged as an
attractive alternative location for affordable retirement communities. The Ocala
area has approximately 226,700 residents and 71,200 non-agricultural jobs. This
market is very dependent on out-of-state retirees. The Company's land holdings
in Silver Springs Shores are included in this market area.
PRIMARY LINES OF BUSINESS
The Company's primary lines of business are summarized below. See
"Management's Discussion and Analysis" for a summary of results of operations by
line of business.
This Annual Report includes "forward looking" statements that are subject
to risks and uncertainties. Such forward-looking statements include (a)
expectations and estimates as to the Company's future financial performance,
including growth and opportunities for growth in revenues, net income and cash
flow; (b) estimated and targeted annual unit sales, sales prices, and margins
and (c) those other statements preceded by, followed by or that include the
words "believes," "expects," "intends," "anticipate," "potential" or similar
expressions. For these statements, the Company claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The following important factors, in addition to
those discussed elsewhere in this Annual Report, could affect the Company's
future results and could cause those results to differ materially from those
expressed in the forward-looking statements: (a) the inability to generate
growth in revenues and net income; (b) the inability to generate sufficient cash
flows from operations to fund capital expenditures and debt service; (c)
unanticipated capital expenditures, including costs associated with real estate
development prices; (d) unanticipated costs, difficulties or delays in
completing or realizing the intended benefits of development projects; (e)
adverse changes in current financial market and general economic conditions,
including interest rate increases; and (f) actions by competitors.
HOMESITE SALES.
Finished homesites are typically sold to independent homebuilders, although
some scattered homesites are sold to individuals, most notably in the Company's
Cumberland Cove community in Tennessee, or are sold in bulk to investors and
other end users. Most homesite sales are on a cash basis except for Cumberland
Cove sales which are typically sold for a down payment of 10% to 20% with an
interest bearing note and deed of trust securing the balance of the purchase
price with a term of ten years. The Company divides its homesite sales into two
categories - subdivision and scattered. Subdivision homesites are generally
located in Florida's primary real estate markets and represent contiguous
homesites in subdivisions with entrance features and other amenities which could
include lakes, parks, or other recreational facilities. Scattered homesites are
generally located in secondary real estate markets, representing land assets
inherited from the Predecessor Company (see "History" below). Scattered
homesites typically do not have associated amenities.
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The table below sets forth certain information regarding homesite sales for
the three years ended December 31, 1996.
<TABLE>
<CAPTION>
Homesite Sales Summary
(dollars in thousands)
1996 1995 1994
----------------------- --------------------- ----------------------
Homesites Amount Homesites Amount Homesites Amount
<S> <C> <C> <C> <C> <C> <C>
Subdivision
Julington Creek 176 $ 7,574 209 $ 7,549 169 $ 5,505
Lakeside Estates 258 4,191 160 2,605 25 400
Sanctuary 151 2,561 -- -- -- --
Windsor Palms 306 12,467 -- -- -- --
West Meadows 64 1,698 -- -- -- --
Sabal Trace 15 599 -- -- -- --
------- ------- ------- ------- ------- -------
Total-Subdivision 970 29,090 369 10,154 194 5,905
Scattered 2,903 14,820 1,936 13,952 1,278 9,135
------- ------- ------- ------- ------- -------
Total 3,873 $43,910 2,305 $24,106 1,472 $15,040
======= ======= ======= ======= ======= =======
</TABLE>
SUBDIVISION HOMESITE SALES
During 1993, the Company began acquiring interests in or ownership of
property in Florida's primary real estate markets as part of its overall
business plan to become the leading supplier of finished homesites to builders
in Florida's fastest growing markets. During 1996, the Company began evaluating
the potential acquisitions of properties in other primary markets outside of
Florida, including Cary, North Carolina, located near Raleigh/Durham, North
Carolina. The Company is currently evaluating opportunities in other primary
market areas in the Southeast, including Atlanta, Charlotte, and Dallas. The
Company reduces the exposure corresponding to carrying a substantial inventory
of land by developing new subdivisions in multiple phases and by incurring hard
development costs only when all or substantially all of the homesites in a phase
are under contract with third party homebuilders.
Gross margin represents the difference between the Company's real estate
revenue and related cost of sales. Targeted gross margin percentages for the
Company's subdivision homesite sales generally range between 20% and 30%. As
discussed in Management's Discussion and Analysis of Results of Operations, the
Company's actual gross margins have suffered due to the Company's high weighted
average cost of capital and delays in obtaining development financing, both of
which are attributable to the historically high debt to equity ratios. Due to
the significant demand in most of the subdivision homesite market areas, the
Company does not anticipate a substantial marketing effort to achieve its
anticipated annual sales levels and estimates its selling costs as a percentage
of revenues to range from 5% to 10%.
10
<PAGE> 13
The table below summarizes the Company's subdivision homesite inventory by
market area as of December 31, 1996.
<TABLE>
<CAPTION>
Subdivision Homesite Inventory
------------------------------
(in number of homesites) (in acres)
---------------------------------------------------- ----------------
Homesites
Buildable Under Total Additional
Market Area Homesites Development Homesites Acreage*
- ----------- --------- ----------- --------- --------
<S> <C> <C> <C> <C>
Orlando Area
Lakeside Estates 89 169 258 122
Sanctuary 19 - 19 -
Broward County
Windsor Palms 102 - 102 -
Tampa Bay Area
West Meadows 148 99 247 950
North Port Area
Sabal Trace 92 - 92 107
Naples Area
Estero Pointe - - - 326
--- --- ---- -----
Total 450 268 718 1,505
=== === ==== =====
</TABLE>
- --------------
* Represents tract acreage which the Company currently intends to develop
as subdivision homesites.
As of December 31, 1996 and 1995, the Company had pending subdivision
homesite sales contracts totalling approximately $15.2 million (616 homesites)
and $29.3 million (950 homesites), respectively.
11
<PAGE> 14
Orlando Area
Lakeside Estates. In February 1994, the Company acquired approximately 245
acres in a community known as Lakeside Estates, situated approximately seven
miles south of Orlando International Airport, near the Florida Turnpike. The
total acquisition price for the property was approximately $7 million (including
$1 million of prepaid impact fees), of which $3.5 million was paid in cash and
$3.5 million was financed through a $7.8 million acquisition and development
loan.
In February 1995, the Company acquired an additional 50 acres in this
community for approximately $3.2 million (including approximately $500,000 of
prepaid impact fees). Approximately $1 million of the acquisition price was paid
in cash and the $2.2 million balance was financed through a $2.2 million
increase to the existing $7.8 million acquisition and development loan. The
combined acreage is approved for 1,389 residential homesites which are fully
permitted for development.
The first homesites in this project were sold in late 1994. The Company
anticipates this project will produce annual sales of approximately 200 - 250
homesites with sales prices ranging from $16,500 to $23,000. As of December 31,
1996 and 1995, the Company had pending sales contracts for $5.3 million (306
homesites) and $7.4 million (370 homesites), respectively. Substantially all of
the homesites under development are under contract with third party
homebuilders.
Sanctuary. In October 1994, the Company purchased a 50% joint venture
interest in a mortgage receivable for $1.6 million. The mortgage receivable
encumbered approximately 409 homesites in a subdivision known as the Sanctuary
located approximately 10 miles east of Orlando. The joint venture completed a
foreclosure proceeding on the property in mid-1995. The Company accounted for
the Sanctuary joint venture under the equity method until August 1996, at which
time the Company purchased its partner's interest in the joint venture for
approximately $1.0 million.
In December 1996, the joint venture sold 151 of the remaining 170 homesites
in this project for $2.6 million. The remaining 19 homesites were under contract
for $323,000 as of December 31, 1996. The Company has recovered all costs
associated with the purchase of this property.
Falcon Trace. In April 1996, the Company acquired approximately 390 acres
in southeast Orlando for approximately $5.3 million, of which $2.4 million was
paid in cash and the balance of $2.9 million was financed by Cypress Realty
Limited Partnership ("Cypress") through an acquisition loan secured by a
mortgage on the property. This project, known as Falcon Trace, is currently
being permitted for approximately 900 homesites. In December 1996, and as
amended in March 1997, the Company and Cypress agreed to a restructuring in
which title was transferred into Falcon Trace Partners Limited Partnership
("Falcon Trace Partnership") of which the Company is a limited partner. The
Company contributed its net investment in the project and its partner, Falcon
Trace-Cypress Limited Partnership, contributed all of its right, title and
interest to the mortgage on the property. The Company has a 65% interest in the
Falcon Trace Partnership after expenses and fixed returns to the partners.
Broward County
Windsor Palms. In October 1994, the Company purchased approximately 200
acres of residential property in southwest Broward County, just east of the
Interstate 75/Miramar Parkway interchange. The purchase price was $4.5 million,
of which $1.3 million was paid in cash and the remaining balance was financed
through the seller. This project, known as Windsor Palms, is a 408-unit gaited
community, featuring
12
<PAGE> 15
26 acres of lakes, a 48-acre conservation area and a 1.5-acre recreation area.
Windsor Palms' phased development is consistent with the Company's plan to incur
hard development costs only when all or substantially all of the subdivision
homesites are under contract with third party homebuilders. The property is
fully permitted. In 1996, the Company sold 306 homesites for $12.5 million in
Windsor Palms. As of December 31, 1996, there were no homesites under contract
with third party homebuilders, however, the remaining 102 homesites are
anticipated to be sold and closed in 1997.
Sunset Lakes. The Company is a party to a joint venture arrangement formed
to plan, finance, develop and sell approximately 1,950 acres located in
southwest Broward County, approximately three miles west of the Interstate
75/Pines Boulevard interchange. The Company has designed a plan for this parcel
which will allow construction of approximately 1,800 single family and
multi-family units. The Company is close to obtaining all required permits and
approvals to implement this plan. The Company will develop this property in
phases and will expend development costs when substantially all of the homesites
in a phase are under contract with third party homebuilders. As of December 31,
1996, the Company had pending sales contracts for approximately 786 homesites,
inclusive of options, for $39.2 million which are subject to a variety of
customary conditions, including the Company successfully obtaining all required
permits and approvals. The anticipated overall gross profit margin is
approximately 30%. The Company's percentage interest in the profits and losses
of the partnership is 65%. In addition, the Company is entitled to a fee equal
to 4% of the development costs, as defined in the Sunset Lakes joint venture
agreement.
Country Lakes. In September 1995, the Company became a limited partner of
Country Lakes, Ltd., a Virginia limited partnership (the"partnership") formed to
acquire, plan, develop and market approximately 1,750 acres located in Dade and
Broward counties, Florida, formerly known as Viacom/Blockbuster Park. This
unique joint venture arrangement does not require the Company to make any
substantial cash investment but capitalizes on the Company's planning and
community development expertise. This venture and the premier location of the
property are consistent with the Company's goal to produce superior returns for
shareholders by becoming the leading supplier of finished homesites to
homebuilders in Florida's fastest growing markets while avoiding the exposure
associated with carrying a substantial inventory of land. The Company accounts
for the partnership under the equity method. The anticipated overall gross
profit margin is approximately 45%. During 1996, this partnership sold 312 acres
for $7.5 million and generated a net profit to the Company of $251,000. Subject
to the partner's minimum return, the Company's percentage interest in the
profits of the partnership is 20 to 25%. In addition, the Company entered into a
development management agreement with the Partnership to provide day-to-day
management, development, marketing and sales coordination. The Company is
entitled to receive compensation of 3.5% of all gross revenues as defined in the
partnership agreement.
Tampa Bay Area
West Meadows. In February 1995, the Company acquired approximately 900
acres located in the northeastern part of the Tampa Bay area for $5 million, of
which $1.5 million was paid in cash and the balance of $3.5 million was financed
through a mortgage securing the property. In April 1996, the Company acquired an
additional 240 acres of this project for approximately $2.1 million, of which
$1.8 million was financed by the seller through a note secured by a mortgage on
the property. The combined acreage in the West Meadows project of approximately
1,140 acres is permitted for approximately 1,300 homesites. The property is
being developed in phases and hard development dollars are expended only when
substantially all of the homesites in a phase are under contract with third
party homebuilders. As of December 31, 1996, the Company had 291 homesites under
contract for approximately $9.6 million. Beginning in 1997, this project is
projected to
13
<PAGE> 16
generate approximately 150 - 200 homesites sales annually, with sales prices
ranging from $23,000 to $33,000. Substantially all of the homesites under
development are under contract with third party homebuilders.
North Port Area
Sabal Trace. The Company has obtained required permits for this 164-acre
tract which was selected from the Company's existing inventory, located adjacent
to the Sabal Trace golf course in the community of North Port. The Company plans
to develop 107 homesites and sell the remaining 107 acres in bulk. The homesites
in this project, known as Sabal Trace, are designed and priced to meet demand
for mid-range priced residences for the "move-up" and retirement markets.
Development of the 107 homesites, began in the fourth quarter of 1995. In 1997,
annual sales levels for the first phase are projected at approximately 50
homesites, with sales prices ranging from $37,000 to $44,000.
Naples Area
Estero Pointe. During 1995 and 1996, the Company purchased approximately
326 acres of residential property in Naples, Florida, which is in southwest
Florida, from various sellers for approximately $6.0 million of which $2.4
million was financed by the sellers through notes secured by mortgages on the
properties. The Company is planning to assemble a total of approximately 879
acres in this project, known as Estero Pointe, which is anticipated to yield
approximately 313 single family homes and 744 multi-family homes. The Company
anticipates converting its ownership of this project to a joint venture with a
third party capital partner.
North Carolina
Panther Creek. In December 1996, the Company became a limited partner of
Panther Creek-Raleigh, Limited Partnership (the "Panther Creek Partnership"), a
North Carolina limited partnership formed to acquire and develop an $8.0 million
residential real estate tract consisting of approximately 660 acres located near
Raleigh/Durham North Carolina. The property, planned for 822 single family homes
and up to 310 multi-family homes, is located adjacent to the Research Triangle
Park in the town of Cary, North Carolina. Panther Creek represents the Company's
first new residential project outside the Florida market. This joint venture
arrangement does not require the Company to make any substantial cash investment
but capitalizes on the Company's planning and community development expertise.
The Company's interest in the net cash flows of this partnership is 40%. In
addition, the Company entered into a development management agreement with the
Panther Creek Partnership to provide development and marketing services to the
partnership pursuant to which the Company is entitled to receive compensation of
2% percent of all project revenues as defined in the partnership agreement.
14
<PAGE> 17
SCATTERED HOMESITE SALES
The Company has a substantial inventory of developed lots which have all
required road and drainage improvements ("Homesites"). Homesites are considered
buildable if they are in areas where well and septic systems can be utilized or
have central utility service improvements required for a purchaser to obtain a
building permit ("Buildable Homesites").
The table below summarizes the Company's scattered Homesite sales by market
area for the three years ended December 31, 1996.
Scattered Homesite Sales Summary
(dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- --------------------- -------------------
Market Area Homesites Amount Homesites Amount Homesites Amount
- ----------- --------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Treasure Coast Area
Port St. Lucie 297 $ 1,716 65 $ 1,099 63 $ 663
Melbourne Area
Port Malabar 1,305 3,425 1,114 5,362 245 2,023
Other Communities 60 579 163 1,244 303 2,203
Other Areas
Port Charlotte 846 3,600 167 926 211 1,114
North Port 97 566 123 371 285 1,873
Port LaBelle 9 52 5 41 42 324
Silver Springs Shores 76 558 105 727 123 831
Cumberland Cove 213 4,324 194 4,182 6 104
----- ------- ----- ------- ----- ------
Total 2,903 $14,820 1,936 $13,952 1,278 $9,135
===== ======= ===== ======= ===== ======
</TABLE>
As of December 31, 1996 and 1995, the Company had pending scattered
Homesite sales contracts totalling approximately $1.2 million (475 homesites)
and $4.4 million (869 homesites), respectively.
Scattered homesite sales increased in 1996 due to a 50% increase in the
number of homesites sold, partially offset by a 29% decrease in the average
sales price principally due to an increase in bulk sales of scattered homesites.
Scattered homesite sales in 1997 are expected to be in the $10 million to $12
million range, with a targeted gross margin of approximately 40% in Cumberland
Cove and 20% in all other areas, except for bulk homesites sales which generally
have lower gross margins. The Company will continue to attempt to supplement
scattered homesite sales with bulk sales in accordance with its plan to
accelerate the sale of assets in secondary real estate markets. The Company's
marketing and other selling costs for homesites sold to homebuilders, using
in-house sales staff or brokers, generally range from 15% to 25% of the related
revenues. Marketing and other selling costs for Cumberland Cove are expected to
range from 50% to 60% due to recently implemented marketing programs which have
generated an increase in sales activity in this community.
15
<PAGE> 18
The table below summarizes the Company's scattered Homesite inventory by
market area as of December 31, 1996.
Scattered Homesite Inventory Summary
(in homesites)
<TABLE>
<CAPTION>
Standard Other Buildable Other
Buildable Developed Reserved Restricted Total
Market Area Homesites Lots(1) Homesites(2) Homesites(3) Homesites
- ----------- --------- -------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Treasure Coast Area
Port St. Lucie 373 57 346 102 878
Melbourne Area
Port Malabar 907 71 1,807 2,104 4,889
Other Communities 229 -- 54 21 304
Other Areas
Port Charlotte 509 107 2,185 356 3,157
North Port 3,131 47 1,761 155 5,094
Port LaBelle 81 -- 86 1,774 1,941
Silver Springs Shores 2,645 97 237 323 3,302
Cumberland Cove 323 -- 1 11 335
------ ------ ------ ------ ------
Total 8,198 379 6,477 4,846 19,900
====== ====== ====== ====== ======
</TABLE>
------------
(1) Includes commercial/industrial and other premium lots.
(2) Includes 6,000 lots held for Utility Reserves (see "Receivable Portfolio
Management" below) and other portfolio management use.
(3) Represents Homesites which may not be Buildable Homesites due to lack of
utility availability or engineering or title issues, and may only be sold
under certain conditions.
Summarized below is information regarding the Company's significant
communities in each market area.
Treasure Coast Area
Port St. Lucie. Port St. Lucie is located in southern St. Lucie County
between the cities of Fort Pierce and Stuart in Florida's Treasure Coast area.
The community is served by three major highways -- U.S. 1, Interstate 95 and the
Florida Turnpike. The original Port St. Lucie development forms most of what is
now the city of Port St. Lucie which was incorporated in 1961. The city has
approximately 48,700 acres containing an estimated 70,000 platted lots and
24,500 homes. Commercial development, including a number of hotels, strip
shopping centers, and a regional mall, is concentrated along U.S. 1 and at the
Interstate 95 and Florida Turnpike interchanges.
16
<PAGE> 19
Melbourne Area
Port Malabar. Port Malabar is located on the east coast of Florida,
primarily within the City of Palm Bay, in a rapidly growing portion of southern
Brevard County. The community is served primarily by U.S. 1 and by three
east/west arterials, Palm Bay Road, Port Malabar Boulevard and Malabar Road.
Each arterial has a full interchange at Interstate 95, providing direct linkage
to south Florida and the northeastern United States. The City of Palm Bay has a
current population of approximately 75,000 permanent residents.
Other Communities. The Company owns additional inventory in the following
smaller Florida communities: (i) Port St. John, located in Brevard County,
approximately six miles north of Cocoa, Florida; (ii) Sebastian Highlands,
located within the City of Sebastian, approximately 12 miles north of Vero
Beach, Florida and (iii) Vero Beach Highlands/Vero Shores, located approximately
five miles south of Vero Beach.
Other Areas
Port Charlotte. Port Charlotte is located in northern Charlotte County,
halfway between Fort Myers and Sarasota. This community is served by U.S. 41 and
Interstate 75. Development began in the mid 1950's and is comprised of
approximately 47,000 acres. Port Charlotte has a current population of
approximately 90,000 permanent residents.
North Port. North Port is located north of Port Charlotte in Sarasota
County, also by U.S. 41 and Interstate 75. This community was incorporated in
1959 and consists of approximately 76 square miles. Geographically, North Port
is the third largest city in size in the state, but only has a population of
approximately 15,000 residents.
Port LaBelle. Port LaBelle, originally planned as a 31,500-acre residential
community, is located in Hendry and Glades counties in southwest Florida,
approximately 35 miles east of the City of Ft. Myers and Interstate 75. It has a
current population of approximately 2,400 residents. The Company converted
approximately 22,000 acres of its inventory in this community from residential
to agricultural use (see "Tract Sales" below).
Silver Springs Shores. Silver Springs Shores, a 17,300-acre community, is
located in the southeastern Ocala area. This community has a current population
of approximately 11,000 residents.
Cumberland Cove. Cumberland Cove, a 21,700-acre community, is located in
the plateau of the Cumberland Mountains midway between Nashville and Knoxville,
Tennessee near Interstate 40. The wooded area features a variety of large lake
and bluff view lots suitable for building vacation and retirement homes. The
community includes 135 homes, a nine hole golf course and a small commercial
area.
TRACT SALES.
The Company's most significant recurring revenue source during the past
three years has been from the sale of commercial/industrial, undeveloped
residential, institutional and agricultural tracts ("Tracts") to both
governmental and private users and third party investors. The Company sells
Tracts either for cash or with seller financing typically structured with a
minimum 20% cash down payment with an interest-bearing note and mortgage
securing the balance of the purchase price which note typically matures within
three to five years. During 1996 and 1995, approximately 75% and 80%,
respectively, of the Company's aggregate Tract sales were for cash.
17
<PAGE> 20
As part of the Company's comprehensive plan approved by the Board of
Directors in July 1995, the Company formed a new division, Atlantic Gulf Land
Company, to focus on the liquidation of Predecessor assets. This focus is
consistent with the Company's goal of liquidating Predecessor assets, paying off
debt, and reducing overhead. Brian A. McLaughlin was hired as the president of
Atlantic Gulf Land Company. Mr. McLaughlin has extensive experience in real
estate dispositions.
Tracts are marketed both by the Company's employees and by independent
brokers. Due to variations in the timing and size of the Tracts being sold,
revenue from Tract sales may vary significantly from quarter to quarter. As of
December 31, 1996 and 1995, the Company had pending Tract sales contracts
totalling approximately $18.1 million (6,686 acres) and $25.8 million (4,105
acres), respectively.
The reduction in pending tract sales is consistent with the Company's
liquidation of Predecessor assets and shift to subdivision homesite sales in
primary markets.
18
<PAGE> 21
The table below summarizes the Company's Tract sales by market area for the
three years ended December 31, 1996.
TRACT SALES SUMMARY
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Commercial/ Undeveloped
Industrial Residential Institutional Agricultural Total
--------------- ---------------- ---------------- ------------ -----------------
Market Area Acres Amount Acres Amount Acres Amount Acres Amount Acres Amount
- ----------- ----- ------ ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jacksonville Area
Julington Creek 42 $ 164 2,923 $11,438 -- $ -- - $ -- 2,965 $11,602
Broward County
Summerchase -- -- 320 9,000 -- -- - -- 320 9,000
Tampa Bay Area
West Meadows -- -- 34 1,333 -- -- - -- 34 1,333
Treasure Coast Area
Port St. Lucie 206 1,796 2,309 8,777 254 1,344 - -- 2,769 11,917
Melbourne Area
Port Malabar 150 1,140 174 1,893 5 43 - -- 329 3,076
Other Communities 70 775 274 1,280 3 8 - -- 347 2,063
Other Areas
Port Charlotte 498 8,109 426 5,068 186 580 - -- 1,110 13,757
North Port 194 2,384 485 1,653 94 678 - -- 773 4,715
Port LaBelle 10 159 4 36 -- -- - -- 14 195
Silver Springs Shores 345 630 1,393 2,080 335 493 - -- 2,073 3,203
Cumberland Cove -- -- 4,083 1,832 -- -- - -- 4,083 1,832
------- ------- ------- ------- ------- ------- - --------- ------- -------
Total 1,515 $15,157 12,425 $44,390 877 $ 3,146 - $ -- 14,817 $62,693
======= ======= ======= ======= ======= ======= = ========= ======= =======
</TABLE>
19
<PAGE> 22
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Commercial/ Undeveloped
Industrial Residential Institutional Agricultural Total
---------------- ---------------- ---------------- ---------------- ---------------
Market Area Acres Amount Acres Amount Acres Amount Acres Amount Acres Amount
- ----------- ----- ------ ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Treasure Coast Area
Port St. Lucie 65 $ 817 392 $ 2,874 81 $ 691 -- $ -- 538 $ 4,382
Melbourne Area
Port Malabar 47 1,931 761 950 4 26 -- -- 812 2,907
Other Communities 16 210 161 776 3 36 -- -- 180 1,022
Other Areas
Port Charlotte 69 1,856 1,763 5,768 634 1,515 -- -- 2,466 9,139
North Port 198 1,589 2,566 3,906 98 389 5,980 6,324 8,842 12,208
Port LaBelle -- -- -- -- -- -- 1,116 1,381 1,116 1,381
Silver Springs Shores 4 16 -- -- -- -- -- -- 4 16
------- ------- ------- ------- ------- ------- ----- ----- ------- -------
Total 399 $ 6,419 5,643 $14,274 820 $ 2,657 7,096 $7,705 13,958 $31,055
======= ======= ======= ======= ======= ======= ===== ====== ======= =======
</TABLE>
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Commercial/ Undeveloped
Industrial Residential Institutional Agricultural Total
------------------ ---------------- ---------------- ---------------- ----------------
Market Area Acres Amount Acres Amount Acres Amount Acres Amount Acres Amount
- ----------- ----- ------ ----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Treasure Coast Area
Port St. Lucie 55 $ 1,897 442 $ 3,335 34 $ 381 -- $ -- 531 $ 5,613
Melbourne Area
Port Malabar 10 397 1,183 2,502 116 4,024 -- -- 1,309 6,923
Other Communities 9 788 123 739 -- -- -- -- 132 1,527
Other Areas
Port Charlotte 107 7,274 45 531 9 54 -- -- 161 7,859
North Port 161 961 450 1,405 14 83 -- -- 625 2,449
Port LaBelle -- -- -- -- 4 18 872 1,003 876 1,021
Silver Springs Shores 8 380 6 37 2 24 -- -- 16 441
Cumberland Cove -- -- 97 60 -- -- 287 113 384 173
------- ------- ------- ------- ------- ------- ----- ------- ------- -------
Total 350 $11,697 2,346 $ 8,609 179 $ 4,584 1,159 $ 1,116 4,034 $26,006*
======= ======= ======= ======= ======= ======= ===== ======= ======= =======
</TABLE>
* Amount excludes a $213,000 reduction in real estate sales which resulted
from discounting the purchase money mortgage notes received in 1994 to yield
prime plus 3% at the time of closing of the transactions. See Note 4 of the
Notes to Consolidated Financial Statements.
20
<PAGE> 23
The table below summarizes the Company's Tract acreage by market area and
current approved land use as of December 31, 1996.
Tract Inventory Summary
(in acres)
<TABLE>
<CAPTION>
Commercial/ Undeveloped
Market Area Industrial Residential Istitutional Agricultural Total
- ----------- ---------- ----------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
Treasure Coast Area
Port St. Lucie 182 1,495 509 -- 2,186
Melbourne Area
Port Malabar 321 1,670 851 -- 2,842
Other Communities -- 410 30 -- 440
Other
Port Charlotte 143 784 1,107 -- 2,034
North Port 1,012 923 597 -- 2,532
Port LaBelle 235 759 430 20,035 21,459
Silver Springs Shores 31 70 70 -- 171
Cumberland Cove -- 685 1,840 -- 2,525
------ ------ ------ ------ ------
Total 1,924 6,796 5,434 20,035 34,189
====== ====== ====== ====== ======
</TABLE>
The acreage owned by the Company will either be sold as is, sold in bulk
after approval of new land uses or development designs or developed and used in
the Company's homesite operations. See "Homesite Sales" for a description of
each location.
Some of the more significant development activities affecting Tract
inventory for 1997 are as follows:
Port LaBelle Agricultural Acreage. In recent years, southwest Florida has
become the center for production of new citrus groves in Florida because of its
climatically desirable location. During the mid-to-late 1980's, Hendry, Glades,
Collier, Lee and Charlotte Counties experienced substantial growth in citrus
grove development, with aggregate planting of approximately 10,000 to 12,000
acres of groves annually.
The Company determined that the highest and best use for substantially all
of its remaining undeveloped residential Port LaBelle acreage was to convert it
to agricultural use. In 1992, the Company began efforts to replan and obtain
permits to convert approximately 22,000 acres to citrus grove and other
agricultural uses. During 1993, the Company completed the water use permitting
process and created 23 separate agricultural basins ranging from approximately
300 to 2,300 acres per basin. In late 1994, the Company received final approval
for the sale of this property. The Company sold 872 acres in 1994 and 1,116
acres in 1995, with the remaining balance of approximately 20,000 acres
anticipated to be sold in the near term. The Company's targeted gross margin for
this property is approximately break even.
21
<PAGE> 24
River Trace. The Company expects to sell the remaining 1,210 acres of a
parcel known as River Trace in 1997 for approximately $5.0 million. This parcel
is located in Port St. Lucie immediately north of the Martin County line and
east of the Florida Turnpike and is zoned as golf course residential property.
Historical averages of the per acre tract sales price within a particular
zoning category are not necessarily indicative of expected sales values to be
achieved in the future. The average sales prices per acre for tracts can vary
significantly based on numerous factors which include general real estate market
conditions, location within the market area, stage of development, environmental
conditions and the number of net usable acres. Tract sales are expected to
increase in the near term due to the Company's plan to aggressively market
assets located in secondary real estate markets. A targeted gross margin of
5-10% is estimated for all acreage other than the Port LaBelle agricultural
tracts.
RESIDENTIAL SALES
Residential sales include construction and sale of single family homes and
condominium units. The Company has historically constructed single family homes.
However, in mid-1995, the Company decided to begin phasing out its single family
home business in Predecessor communities and substantially completed the
withdrawal from this business in 1996. During 1993, the Company entered the
luxury condominium market through the acquisition of a parcel on Hutchinson
Island, Florida. Consistent with the Company's business plan, the Company
entered the luxury condominium market to increase revenues and improve the
profitability of its residential sales operation.
All of the Company's residential sales are for cash. All purchasers
requiring financing obtain loans from independent financial institutions. Most
of the Company's residential sales are generated through local marketing
programs using an in-house sales staff and local brokers.
CONDOMINIUM SALES
During 1993, the Company was presented with an opportunity to enter the
luxury condominium market through the purchase of Regency Island Dunes (see
below). The Company strengthened its position in this market, with the addition
of the Ocean Grove condominium project in January 1995. This segment of the
residential construction market appears to have the potential to become a
profitable business line for the Company, with targeted gross margins of 20% to
25%. The Company markets this product locally, augmented by some regional and
national advertising. Generally, the Company will begin construction of a
condominium phase on a fixed price contract with independent general contractors
only after approximately 50% of the units in that phase have been pre-sold with
non-refundable earnest money deposits.
22
<PAGE> 25
Regency Island Dunes. In 1993, the Company acquired this parcel located on
Hutchinson Island, Florida for approximately $4.1 million in cash. Hutchinson
Island is located in St. Lucie County, 40 miles north of Palm Beach and five
miles east of Port St. Lucie. The property, known as Regency Island Dunes, is
part of Island Dunes, a golf course and condominium community with 2,700 feet of
frontage on both the Atlantic Ocean and the Intracoastal Waterway. This parcel
is permitted for construction of two 72-unit high rise condominium buildings.
The revenues associated with Regency Island Dunes condominium sales are recorded
using the percentage of completion method and are summarized as follows for the
years ended December 31 (in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Condominium sales - Regency Island Dunes:
First building $ 3,008 $17,989
Second building 14,801 -
------- -------
Total condominium sales $17,809 $17,989
======= =======
</TABLE>
The revenues of approximately $18 million in 1995 were derived from 61 units
under contract in the first building as of December 31, 1995 and construction on
the first building 97% complete. The condominium revenues of $3.0 million in the
first building in 1996 represent the incremental revenue earned upon the
completion of 59 of these 61 units in 1996 and the sale and closing of an
additional eight units in 1996. The revenues of approximately $14.8 million in
the second building in 1996 were derived from 56 units under contract in the
second building as of December 31, 1996 and construction on the second building
79% complete. Additional revenues and profits will be recorded as the
construction progresses and more units are sold. The Company anticipates that
construction of the second building will be completed during the first half of
1997 and that all 72 units in the second building will close in 1997. See Item
3. - "Legal Proceedings".
Ocean Grove. In January 1995, the Company acquired a two-acre parcel in a
six-acre project known as Ocean Grove. In June 1995, an unaffiliated third party
acquired a 50% joint venture interest in this project for $3.8 million, $1.8
million of which was paid in June 1995 and $2 million of which was paid in
January 1996, when the joint venture acquired the remaining four acres for $2.2
million in cash. The project was planned to encompass 162 luxury oceanfront
condominiums consisting of three, six-story towers, located in the City of
Jupiter in Palm Beach County, Florida. Presales of the first proposed building
in the 1995 - 1996 season were disappointing and the joint venture is currently
in the process of replanning and repermitting the site.
SINGLE FAMILY HOME SALES
As mentioned above, the Company in 1995 decided to begin phasing out its
single family home sales operation in Predecessor communities and substantially
completed the withdrawal during 1996. The Company may seek to re-enter the
single family home business in primary market areas where this business would
complement current or potential land development activities. The Company may
seek to acquire demonstrated homebuilding expertise in order to re-enter the
single family home construction business.
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<PAGE> 26
The table below summarizes the Company's single family home sales by market
area for the three years ended December 31, 1996.
Single Family Home Sales
(dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Market Area Units Amount Units Amount Units Amount
- ----------- ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Treasure Coast Area
Port St. Lucie 12 $1,213 28 $3,402 25 $ 3,097
Melbourne Area
Port Malabar 11 833 24 2,289 28 2,588
Hidden Glen at Suntree - - 9 833 22 2,015
Other Areas 13 1,107 48 3,229 37 3,767
--- ------ --- ------ --- --------
Total 36 $3,153 109 $9,753 112 $11,467
=== ====== === ====== === =======
</TABLE>
The Company's single family home inventory as of December 31, 1996
consisted of three completed units, none of which were under contract as of
December 31, 1996. As of December 31, 1995, the Company had pending sales
contracts of approximately $2.7 million representing 30 units. The decline in
pending sales contracts in 1996 corresponds to the Company's exit from its
single family home sales operations.
OTHER BUSINESSES
The Company has entered into several contracts to provide development
and/or administrative management services. These services are to be provided to
certain joint ventures in which the Company has a joint venture interest. The
Company will receive a fee equal to 4% of the development costs as defined in
the Sunset Lakes joint venture agreement. The Company is entitled to receive
compensation of 2% of all project revenues, as defined in the Panther Creek
development agreement, for development and marketing services provided to this
venture. The Company entered into a development management agreement with the
purchaser of its Julington Creek Plantation project and is entitled to receive
1% of all gross revenues as defined in the agreement. Country Lakes, Ltd. will
pay the Company 3.5% of all gross revenues for services to the venture including
day-to-day management, development, marketing, and sales coordination. The
Company's income from services will be deferred to the extent of the Company's
ownership percentage. Any income deferred will be recognized as the venture
recognizes sales revenue from third parties.
Special Opportunities. The Company will, under certain circumstances,
undertake special opportunities outside its normal operations. For example, in
1993, the Company entered into a Sino-Foreign equity joint venture with a
quasi-governmental entity in the City of Nanjing, China (the "Ya Dong JV"),
giving the Company a 50% joint venture interest. The Ya Dong JV provides for the
phased development of approximately 4,000 agricultural acres located within the
city limits of Nanjing into a new, mixed-use city center. The Chinese partner's
capital contribution is the land use rights for the property and the Company's
capital contribution is up to $10 million. As of March 29, 1997, the Company had
contributed approximately
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<PAGE> 27
$6.0 million to the Ya Dong JV. The Company is actively pursuing financing for
the project. Such financing is anticipated to include a development loan for the
first phase of residential and industrial development, and may also include a
sale of a portion of the equity held by either or both of the JV partners. The
Company does not anticipate making any material capital contributions in 1997.
The Company has made a proposal to its joint venture partner to transfer 35% of
its 50% interest in the joint venture to its partners in return for a note
receivable in the amount of $2.25 million. The Company would retain a 15%
interest in the joint venture. Due to the uncertainty associated with the
collection of this proposed receivable, the Company established an inventory
valuation reserve in the amount of $1.9 million. Consequently, the Company's net
investment in the joint venture is carried at $0.
Receivable Portfolio Management. The Company is actively engaged in the
management and collection of a portfolio of homesite contracts receivable
originated by the Predecessor Company's homesite installment sales program (the
"Homesite Contracts Receivable"). The Company collected for its own account a
total of approximately $7.0 million in principal and interest payments on the
Homesite Contracts Receivable during 1996. As of December 31, 1996, the
portfolio of Homesite Contracts Receivable had a remaining face value of $11.8
million. In January 1997, the Company closed on a $7.5 million financing of a
portion of its contracts receivable portfolio. See Notes 3 and 9 of the Notes to
Consolidated Financial Statements. The Company also services a land mortgage
receivable portfolio with a face value of $34.2 million as of December 31, 1996,
which was generated in connection with the Company's Tract sales line of
business. In addition, the Company also services approximately $533,000 of
Homesite Contracts Receivable for others.
Pursuant to certain reorganization-related agreements between the
Predecessor Company and the State of Florida, Department of Business Regulation,
Division of Florida Land Sales, Condominiums and Mobile Homes (the "Division of
Florida Land Sales") concerning homesite purchasers who have received or will
receive deeds in connection with the Predecessor Company's homesite sales
program, the Company established a series of trust accounts (collectively, the
"Utility Trusts") and a "Utility Reserve" to provide additional Buildable
Homesites to satisfy the Company's obligations to provide a Buildable Homesite
to such purchasers when they are ready to construct a house. The Utility Trusts
were funded with cash, shares of Atlantic Gulf's common stock and notes based on
estimates of the costs of future improvement obligations. Beginning in 1994, the
amount of cash, securities and Buildable Homesites set aside for such purposes
was subject to review and adjustment. In December 1996, pursuant to a review of
the Utility Trusts, it was determined that approximately $12.1 million in cash,
$4.2 million of Unsecured 12% Notes and $2.0 million of Unsecured 13% Cash Flow
Notes could be recovered from these trust accounts. See Notes 4 and 10 of the
Notes to Consolidated Financial Statements. Approximately $2.7 million in cash,
204,600 shares of stock and a lot reserve of 6,000 lots remain in the trusts.
The Company believes the remaining property currently held in trusts and
reserves is more than sufficient to meet all future improvement obligations
required under the terms of the settlements.
Environmental Services. Environmental Quality Laboratory, Inc. ("EQ Lab"),
a wholly owned subsidiary based in Charlotte County, Florida, is a full service
ecological consulting firm and laboratory. It performs water and soil testing
and environmental assessments for the Company and third parties, including both
governmental and private entities. Characteristic services performed by EQ Lab
for clients include acting as the primary surface water laboratory for three
regional Water Management Districts (government) and performing environmental
chemistry analyses for the Florida Concrete Products Association (industry), the
Florida Sugar Cane Growers Co-op (agriculture) and numerous marina projects
(development). EQ Lab also provides services to the Company and clients in the
areas of hazardous substance testing and site remediation, endangered species
management plans and wetlands identification and mitigation. EQ Lab's
capabilities permit the Company to quickly and cost-effectively assess and
address environmental concerns involving its existing real property assets and
other properties it may seek to acquire.
25
<PAGE> 28
Utility Operations. During the Reorganization Proceedings (see "History"
below) and the formulation of its new business plan, the Company determined that
utility operations were not part of its core business and that its systems
should be sold in due course to provide working capital to the Company. Over the
past six years, the Company's seven largest utility systems were acquired by
governmental entities, one of which was the subject of condemnation proceedings
until a settlement was reached in March 1996. See Notes 7 and 12 of the Notes to
Consolidated Financial Statements. During 1996, the Company disposed of its two
remaining systems. In February 1996, the Company sold its Port LaBelle utility
system to Hendry County for $4.5 million resulting in a gain of $686,000 and in
June 1996, the Company sold its Julington Creek utility system for $6.0 million
resulting in a gain of $696,000. As of December 31, 1996, the Company had no
remaining interest in any utility assets.
The table below summarizes significant utility financial and operating
information for the three years ended December 31, 1996.
<TABLE>
<CAPTION>
Year Ended December 31,
(dollars in thousands)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating revenues $1,004 $2,328 $2,886
Operating income (1) $ 289 $ 205 $ 619
Plant and equipment
(at year end)(2) $ -- $9,953 $9,659
Total connections
(at year end) -- 3,184 4,272
</TABLE>
(1) Operating income represents income before taxes and interest expense,
and excludes other income and expense items.
(2) Net of contributions in aid of construction and accumulated
depreciation.
Other Operations. Other operations consist primarily of the leasing of
non-residential acreage for pasture and farm use and the sale of excess fill
dirt from Company-owned property.
REGULATION
The Company's real estate operations are regulated by various local,
regional, state and federal agencies. The extent and nature of these regulations
include matters such as planning, zoning, design, construction of improvements,
environmental considerations and sales activities. For certain of its projects
in Florida and Tennessee, state laws and regulations may require the filing of
registration statements and copies of promotional materials and numerous
supporting documents and the delivery of an approved disclosure report to
purchasers prior to the execution of a land sales contract. In addition to
Florida and Tennessee, certain states impose requirements relating to the
inspection of properties, approval of sales literature, disclosures to
purchasers of specified information, assurances of future improvements, approval
of terms of sale and delivery to purchasers of a report describing the property.
Federal regulations, under the Interstate Land Sales Full Disclosure Act,
provide for the filing or certification of a registration statement with the
Office
26
<PAGE> 29
of Interstate Land Sales Regulation of the Department of Housing and Urban
Development ("HUD"). The Company's Homesite sales activities are also subject to
the requirements of the Federal Consumer Credit Protection ("Truth-in-Lending")
Act.
Local, regional, state and federal laws, regulations and policies regarding
the protection of the environment directly affect the Company and its business.
The Company has permits for certain of its development projects, issued by a
variety of governmental entities including local governments, regional water
management districts within the State of Florida, the State of Florida
Department of Environmental Protection, the U.S. Army Corps of Engineers and the
U.S. Environmental Protection Agency. Ongoing permitting obligations may include
a range of environmental, maintenance and monitoring obligations, including
water quality monitoring, surface water management and wetlands mitigation.
There is no assurance that all permits necessary to develop the Company's
inventory in accordance with its plan can be obtained in the future.
A small portion of the Company's land holdings contain residues or
contaminants from current and past activities by the Company, its lessees, prior
owners and operators of the properties and/or unaffiliated parties. Some of
these areas have been the subject of cleanup action by the Company voluntarily
or following the involvement of regulatory agencies. Additional cleanup in the
future also may be required. The Company's business is subject to additional
obligations under the environmental laws, relating to both ongoing operations as
well as past activities. The Company believes, however, that its obligations
under the environmental laws will not have a material adverse affect on its
business, results of operations or financial position.
Certain of the Company's Tract inventory is subject to permits and
regulatory approvals which enhance the marketability of the property. In some
cases, preserving the permits and approvals prior to sale could require
additional development in the future, subject to growth thresholds such as
traffic patterns. To the extent that the Company chooses not to undertake
development work required by a permit or approval for a specific Tract within
the indicated time period, the Company's targeted gross margins for that Tract
could be adversely affected based upon a revised development plan or land use.
The Company's current plan is to complete all required development obligations
on a timely basis with available working capital, project financing or funds
raised in connection with the formation of governmental taxing or assessment
districts.
COMPETITION
Real estate operations, particularly in Florida, are highly competitive.
Competition with respect to tract sales of Florida real estate has been
heightened by the general lack of available bank financing for real estate
acquisition and development which reduces the number of buyers who have the
financial resources and development expertise to transform these tracts into
finished homesites. For Tract sales, the Company competes with other real estate
sellers for developers/builders and other real estate investors on the basis of
location, permitted uses, financing and price.
The secondary Florida markets, where the Company's scattered homesite
inventory is located, are also highly competitive. With respect to the sale of
scattered homesites in the secondary Florida markets, there is a significant
oversupply of buildable homesites developed by the Predecessor Company remaining
on the market. Because the primary buyers for the scattered buildable homesites
are small independent homebuilders, the Company competes for their business on
the basis of price and location.
27
<PAGE> 30
In the development and sale of new homesite subdivisions, the Company has
focused on acquiring new properties in Florida's primary markets and in selected
primary markets in the Southeast. As discussed above in "Homesite Sales", the
supply of finished lots in the targeted primary markets has been significantly
reduced from its levels in recent years due to a combination of several factors,
including a reduction in the capital available for the acquisition and
development of new homesites and a reduction in the number of real estate
developers active in new subdivision acquisition and development. Also,
homebuilders are reluctant to acquire and develop finished homesites due to a
lack of expertise and the substantial costs associated with carrying finished
inventory. Nevertheless, the Company continues to compete on the basis of price,
product and location with other developers and homebuilders in those markets.
EMPLOYEES
As of February 28, 1997, the Company had approximately 141 full-time and 15
part-time employees. In addition, the Company employs on a daily basis such
additional personnel as may be required to perform various other activities. The
Company's relations with its employees are satisfactory and there have been no
work stoppages.
HISTORY
Atlantic Gulf and its predecessors have been operating as community
developers in Florida since 1955. Atlantic Gulf's immediate predecessor, General
Development Corporation (the "Predecessor Company" or "GDC"), was among the
largest community developers in Florida. In 1990, the Predecessor Company and
certain of its subsidiaries commenced proceedings under Chapter 11 of the
Bankruptcy Code (the "Reorganization Proceedings") to reorganize their
businesses. Atlantic Gulf, as the successor company, emerged from the
Reorganization Proceedings pursuant to a Plan of Reorganization (the "POR") that
became effective on March 31, 1992 (the "POR Effective Date"). For further
historical discussion of the Reorganization Proceedings, see Item 1. F. in the
Company's 1992 Annual Report on Form 10-K. As of the POR Effective Date,
Atlantic Gulf adopted a new charter and began developing a business plan for
implementation by its new board of directors and management.
EXECUTIVE OFFICERS OF ATLANTIC GULF
As of March 20, 1997, Atlantic Gulf's executive officers were as follows:
J. Larry Rutherford, age 50, has been a director of the Company since
January 1991, when he was also named the Company's President and Acting Chief
Executive Officer. Mr. Rutherford was named Chief Executive Officer of the
Company in March 1991. Mr. Rutherford joined the Company in September 1990 as
its Executive Vice President-Operations. Before his employment with the Company,
from May 1989 to August 1990, Mr. Rutherford served as President and Chief
Executive Officer of Gulfstream Land & Development Corp. ("Gulfstream"), a
Florida-based community development and homebuilding company. In this capacity,
Mr. Rutherford was charged with restructuring $300 million in Gulfstream debt.
Gulfstream actively developed seven large-scale mixed-use communities totalling
27,000 acres in Fort Lauderdale, Tampa, Jacksonville, Sarasota and Orlando,
Florida; Atlanta, Georgia; and Richmond, Virginia. In addition, Gulfstream
managed a homebuilding subsidiary which sold approximately 500 units per year.
Prior to being named Gulfstream's Chief Executive Officer, Mr. Rutherford served
Gulfstream as President and Chief
28
<PAGE> 31
Operating Officer from 1986 until May 1989, and as Senior Vice President from
1982 until 1986. From 1974 to 1982, Mr. Rutherford worked in various real
estate-related financial and operational capacities for Wintergreen Development,
Inc. and the Cabot, Cabot & Forbes Company. In 1992, Mr. Rutherford was named as
a defendant in a three-count Information filed by the State Attorney for Broward
County, Florida. The charges in the Information, which include a charge of
vehicular homicide, relate to an April 1991 traffic accident in which a
passenger was killed. As of March 1997, no trial date has been scheduled.
Following review of the circumstances surrounding this accident and the charges,
Atlantic Gulf's Board of Directors has expressed its continuing confidence in
Mr. Rutherford's ability to perform his duties as President and Chief Executive
Officer.
Thomas W. Jeffrey, age 37, has been the Company's Executive Vice President
and Chief Financial Officer since October 1994. Mr. Jeffrey joined the Company
in June 1991 as Senior Vice President - Law and Secretary and was named its
General Counsel in September 1991. From August 1987 until joining the Company,
Mr. Jeffrey practiced bankruptcy and securities law at the law firm of Wilmer,
Cutler & Pickering, in Washington, D.C., and developed expertise in financial
restructurings. From 1986 until 1987, Mr. Jeffrey was a law clerk to the Hon.
Nathanial R. Jones, Judge on the United States Court of Appeals for the Sixth
Circuit. From 1985 until 1986, Mr. Jeffrey was a law clerk to the Hon. Richard
A. Enslen, Judge on the United States District Court for the Western District of
Michigan.
Brian A. McLaughlin, age 54, joined the Company in July 1995 as president
of Atlantic Gulf Land Company, a new division responsible for liquidating
Predecessor assets. Prior to joining the Company, Mr. McLaughlin managed the
design, development, operations and disposition of numerous resort, recreational
and residential projects throughout the country for over 20 years. He has held
management positions with FPA Corporation, The Hilton Head Company, Kapalua Land
Company, Palm Beach Polo and Country Club, and most recently, with Palmas Del
Mar in Puerto Rico.
Jay C. Fertig, age 37, was promoted to Senior Vice President - National
Land Sales in September 1994, prior to which he was the Company's Vice President
- - National Land Sales since January 1990, having originally joined the Company
in 1985. Mr. Fertig is responsible for the national marketing and sale of the
Company's Tract and Scattered Homesite inventory. Mr. Fertig is a Florida
licensed real estate broker.
J. Thomas Gillette, III, age 52, was promoted to Senior Vice President -
Community Development for North Florida in February 1996. Prior to that time, he
served as Vice President and General Manager for the Company's Julington Creek
and West Meadows projects since 1991. Prior to joining Atlantic Gulf, Mr.
Gillette held the position of Vice President and General Manager for
Westinghouse Treasure Coast Communities in Vero Beach, Florida for approximately
two years where he directed all activities associated with a luxury residential
project. During most of the 1980's, Mr. Gillette was President of the Northeast
Florida Division for Gulfstream Land and Development Corporation. Previously,
Mr. Gillette owned and operated a home building and brokerage company in
Richmond, Virginia for seven years.
Kimball D. Woodbury, age 45, will become Senior Vice President -
Acquisitions effective April 1997 and will be responsible for evaluating
potential land acquisitions. From July 1995 until March 1997, Mr. Woodbury was
Senior Vice President - Community Development and was responsible for the
Company's South Florida subdivision homesite projects. Mr. Woodbury served as
Senior Vice President - Business Development from September 1994 until July
1995. Prior to that time, he served as the Company's Vice President - Planning
and Business Development since December 1991 and has been with the Company in
various land planning capacities since 1981. From 1976 until joining the
Company, Mr. Woodbury worked
29
<PAGE> 32
in a variety of government planning positions and as a private development
consultant. Mr. Woodbury is a member of the American Institute of Certified
Planners.
Callis N. Carleton, age 44, joined the Company in August 1995 as Vice
President and Controller. Prior to joining Atlantic Gulf, Mr. Carleton held the
position of Vice President and Chief Financial Officer for The Babcock Company.
Mr. Carleton was associated with Centex Homes of Florida and Touche, Ross &
Company, as well as being the principal of his own CPA firm. Mr. Carleton is a
Certified Public Accountant and a Member of the American Institute of Certified
Public Accountants and the Florida Institute of Certified Public Accountants.
John H. Fischer, age 39, has been a Vice President of the Company since
March 1992 and was appointed Treasurer in February 1994. Mr. Fischer has worked
for the Company in various capacities since August 1988. Prior to joining the
Company, from 1981 to 1987, Mr. Fischer was employed by the Florida Power &
Light Company in its financial resources department. Mr. Fischer is a Chartered
Financial Analyst.
Marcia H. Langley, age 36, was promoted to Vice President - General Counsel
& Secretary in January 1996. From February 1995 until January 1996, Ms. Langley
served as the Company's Vice President - Assistant General Counsel and Assistant
Secretary. From September 1991 until February 1995, Ms. Langley served as the
Company's Corporate Counsel. Prior to joining the Company, Ms. Langley was
Corporate Counsel for Gulfstream Housing Corporation and Lennar Corporation.
From 1985 until 1986 she was an attorney for the firm of Goldberg, Young &
Borkson.
Kevin M. O'Grady, age 42, joined the Company in 1995 as Vice President -
Business Development. Prior to joining the Company, Mr. O'Grady spent nearly 20
years in the real estate industry, and was involved both in commercial and
residential investment and development. Mr. O'Grady was president of Robert
Trent Jones International Development Company in Washington, D.C.
Item 2. Properties
The Company's real estate inventory is described in Item 1. above.
The Company's corporate headquarters are located at 2601 South Bayshore
Drive, Miami, Florida, in approximately 48,000 square feet of leased office
space. The Company is subleasing approximately 17,000 square feet of this office
space to a single tenant as part of its plan to reduce overhead and consolidate
its organization. The lease expires in 1999.
Item 3. Legal Proceedings
A. Condemnation Proceedings Involving General Development Utilities, Inc.
and Related Proceedings
Atlantic Gulf Communities Corporation, et al. v. Loftus, et al., Case No.
94-1931 CA (Charlotte Cty. Cir. Ct.). In December 1994, Atlantic Gulf and GDU
filed a declaratory judgement action in the Circuit Court for the Twentieth
Judicial Circuit in and for Charlotte County against a defendant class based
upon a demand made upon the Company by Richard D. Loftus and others for a
portion of the proceeds from the Charlotte County eminent domain case entitled
Charlotte County, et al. v. GDU, et al., Case No. 90-936 (Charlotte Cty. Cir.
Ct.) in which the Charlotte County Circuit Court entered a stipulated Final
Judgment
30
<PAGE> 33
setting full and complete compensation to Atlantic Gulf and GDU for certain
water and wastewater systems taken by Charlotte County in June 1991 totalling
$110 million, $65 million of which was paid as a good faith deposit at the time
of the taking and the balance of which was paid in December of 1994. The demand
made upon the Company was based upon the theory that there exists a class of
property owners in Charlotte County, Florida who have an interest in the
proceeds from the condemnation proceeding because of "contributions in aid of
construction." The case has been dormant as no rulings have been made by the
Court and discovery has not begun in any meaningful way. The Company believes,
based on the advice of counsel, that the defendants' claim has no merit under
Florida law. The Company intends to vigorously pursue the class action suit for
declaratory judgement, seeking an order of the Court that the class members have
no interest in the proceeds from the Charlotte County condemnation case.
B. Retention of Jurisdiction
On March 15, 1995, the Bankruptcy Court entered a final decree in the GDC
bankruptcy case. The Bankruptcy Court does, however, retain jurisdiction over
the Company with respect to various matters, including, among other things,
matters pertaining to (1) the allowance and disallowance of claims and
interests, (2) distributions under the POR, (3) the reduction and maintenance of
claim reserves, (4) appeals from orders entered by the Bankruptcy Court, (5) the
receipt, use or application of condemnation proceeds, (6) utility trusts created
or implemented pursuant to the POR, (7) Section 365(j) liens, (8) the Homesite
Purchaser Assurance Program, (9) Oxford Finance Company's and its affiliates'
chapter 11 bankruptcy and their business practices as they may affect the
Company, (10) the enforcement of all orders entered by the Court, and (11) tax
issues arising under the POR.
C. Other Litigation
Final Judgement of Permanent Injunction. The Company continues to be bound
by a Final Judgment of Permanent Injunction (the "Final Judgment") entered
November 30, 1990, by the United States District Court for the Southern District
of Florida in the civil action United States of America v. General Development
Corporation, No. 90-87-Civ-NESBITT. The Final Judgment provides that it will
remain in effect until November 30, 2000. Its material continuing requirements
govern the Company's conduct with regard to housing and retail homesite sales.
It also imposes periodic reporting obligations and requires that a responsible
officer of the Company (the "Compliance Officer") oversee compliance with the
Final Judgment, and that the Compliance Officer report to a committee of outside
directors of the Company's board of directors and to a Court-appointed Special
Master. Thomas W. Jeffrey, Executive Vice President and Chief Financial Officer,
has served as the Company's Compliance Officer since September 1991. In July of
1996, upon the Company's Motion to Modify or Grant Early Relief From the
Conditions of the Final Judgment, the U.S. District Court issued an Order
vacating certain portions of the Final Judgment thereby eliminating the
obligation to provide third-party appraisals in connection with housing sales
and certain duplicative prohibitions upon representations which may be made in
connection with retail homesite and housing sales.
Florida Home Finders, Inc. In March, 1995, the Company sold Florida Home
Finders, Inc. ("Florida Home Finders") to the FHF Trust, owned by Ian R. Law and
Benjamin Schiff, for $3.5 million. It has been alleged in litigation filed
against Florida Home Finders that FHF Trust withdrew escrow deposits held by
Florida Home Finders for the benefit of tenant and owner clients and utilized
those funds to purchase a certificate of deposit. It is further alleged that the
certificate of deposit was pledged as security to County National Bank for a
personal loan to Messrs. Law and Schiff, and that a portion of the proceeds of
that loan were utilized to pay the Company approximately $2.0 million of the
amount due under the purchase money
31
<PAGE> 34
note given by FHF Trust in favor of the Company at the time of the sale of
Florida Home Finders. The Company had no knowledge of the source of the payment.
Subsequent to the foregoing alleged events, the Florida Real Estate
Commission discovered that escrow deposits were missing from Florida Home
Finder's accounts and brought an action in St. Lucie County circuit court
seeking the appointment of a receiver for the property and business of Florida
Home Finders. State of Florida, Department of Business and Professional
Regulation v. Florida Home Finders, Inc. et al., Case No. 95-1092-CA 17 (St.
Lucie Cty. Cir. Ct.) A receiver was appointed for Florida Home Finders in
October 1995. In November 1995, the Company intervened in the receivership
proceeding. The receivers are currently negotiating with a third party for the
sale and purchase of Florida Home Finders assets.
In November 1995, the receiver filed a lawsuit against several parties,
including the Company, seeking a return and recovery of the missing escrow
deposits. Spire v. Ian R. Law et al., Case No. 95-1300-CA 17 (St. Lucie Cty.
Cir. Ct.). The Company filed a motion to dismiss the complaint, contending that
the complaint failed to identify any knowledge, notice or wrongdoing on the part
of the Company. This case was voluntarily dismissed without prejudice on
February 6, 1997.
Regency Island Dunes. In connection with the construction of the Regency
Island Dunes Condominium Project in Jensen Beach, Florida, various disputes have
arisen between the Company's subsidiary, Regency Island Dunes, Inc. ("Regency"),
and the general contractor, Foley and Associates Construction Company, Inc.
("Foley"), regarding completion of the first phase of the project containing 72
units. As a result, Foley filed suit in the Circuit Court of St. Lucie County
under the caption of Foley and Associates Construction, Inc. v. Regency Island
Dunes, Inc. and Atlantic Gulf Communities Corporation, Case No. 96-1569-CA-03
(St. Lucie Cty. Cir. Ct.) alleging breach of the construction contract, claims
for lost profits and delay damages as well as various counts claiming fraudulent
transfers of funds from Regency to the Company. This case was filed by Foley in
addition to Foley's demand for arbitration before the American Arbitration
Association as required pursuant to the terms of the construction contract
between Regency and Foley. Regency has asserted counterclaims for Foley's
failure to properly staff the job and refusal to perform corrective work which
was performed at Regency's expense, all such sums incurred by Regency would
offset Foley's contract claim. The costs of corrective work already incurred
together with Regency's claims for delay damages and penalties exceed Foley's
claims for the unpaid contract balance. The Company anticipates that the Circuit
Court case will be stayed pending resolution of the contract disputes in
arbitration. In addition, in the case styled Regency Island Dunes Inc. v. Foley
and Associates Construction Company, Inc., Case No. 96-1532 CA-17 (St. Lucie
Cty. Cir. Ct.), Regency filed its action to discharge the construction lien
filed by Foley on the basis that the lien claim was inflated and was recorded
against units which had previously been conveyed to third party purchasers as
well as additional lands not included within the construction contract between
the parties. In Regency Island Dunes, Inc. v. National Fire Insurance Company of
Hartford and Foley and Associates Construction Company, Inc., Case No. 97-102-CA
17 (St. Lucie Cty. Cir. Ct.), Regency filed suit to recover damages against
Foley's surety for corrective work performed by Regency as well as various other
claims for damages asserted by Regency in the arbitration described above. In
addition, based upon a separate construction contract between Regency and Foley
for the construction of the second phase of the Regency Island Dunes Condominium
Project, Foley filed a demand for arbitration in March 1997 asserting breach of
contract relating to change orders, release of retainage and Foley's requests
for extensions of time. The Company continues discussions with Foley to resolve
these matters. In the event the settlement discussions are unsuccessful, the
Company and Regency will vigorously defend the claims asserted by Foley and
aggressively pursue their claims against Foley and the surety.
32
<PAGE> 35
In addition to those legal proceedings specifically discussed in this Item
3., the Company is, from time to time, involved in various litigation matters
primarily arising in the normal course of its business. It is the opinion of
management that the resolution of these matters will not have a material adverse
affect on the Company's business or financial position.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is quoted on the NASDAQ National Market System
under the symbol "AGLF". The following table sets forth the high and low closing
sales prices of the Common Stock for the periods indicated.
<TABLE>
<CAPTION>
1996 1995
Sales Price Sales Price
----------- -----------
Quarter Ended High Low High Low
- ------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
March 31 6 3/4 5 3/8 10 1/4 8 3/8
June 30 6 3/8 5 1/2 9 5 3/4
September 30 6 4 7/8 8 1/2 6 3/8
December 31 5 3/8 3 15/16 7 5/8 6 1/4
</TABLE>
Holders. As of March 20, 1997, there were approximately 30,000 record
holders of the Common Stock.
Dividends. No dividends have been paid on the Common Stock of Atlantic Gulf
during the last two fiscal years.
Atlantic Gulf's Restated Certificate of Incorporation provides for
mandatory dividends on the Common Stock equal to 25% of "Available Cash" as
defined in the POR after all indebtedness issued under the POR is paid in full.
Atlantic Gulf's indebtedness issued under the POR is discussed in Note 10 of the
Notes to Consolidated Financial Statements included herein. Dividends will not
accrue if Atlantic Gulf is unable to pay them due either to a lack of Available
Cash, surplus capital or net profits, or applicable provisions of Delaware law.
Under the Foothill Refinancing loan agreements (discussed below under Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"), Atlantic Gulf has agreed not to declare or pay any dividend (other
than dividends payable solely in its common stock or preferred stock) on, or
make any payment of 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 Atlantic Gulf.
33
<PAGE> 36
Item 6. Selected Financial Data
As a result of the operation by the Predecessor Company as
debtor-in-possession under Chapter 11 during 1991 and the POR becoming effective
on March 31, 1992, the comparability of the information reflected in the
Selected Financial Data during the 1992 to 1996 periods is materially affected.
In addition, because of the implementation of the POR, the Selected Financial
Data reflected below for previous years is not necessarily indicative of the
Company's future financial condition or results of operations. For further
discussion, see the Notes to Consolidated Financial Statements.
(in millions except for per share data)
<TABLE>
<CAPTION>
Three
Years Nine Months Months
Ended Ended Ended
December 31, December 31, March 31,
1996 1995 1994 1993 1992 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data
Total revenues $165.3 $113.4 $ 106.0 $ 70.6 $ 65.9 $ 14.5
Income (loss) before reorganization items (12.6) (20.6) 1.1 (18.5) (23.9) (9.1)
Income (loss) from continuing operations
before extraordinary items (12.6) (20.6) 1.1 (18.5) (23.9) 3.8
Net income (loss) 1.2 (20.6) 1.1 (18.5) (23.9) 954.4
Net income (loss) per common share .12 (2.12) .11 (1.91) (2.45) 114.11
Weighted average common
shares outstanding 9.71 9.71 9.64 9.68 9.75 8.4
- ----------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (at period end)
Cash (including restricted amounts) $ 13.1 $ 12.0 $ 25.0 $ 26.4 $ 70.4 $ 48.7
Homesite contracts and other receivables 73.4 59.8 55.2 69.3 82.3 95.6
Inventory of land and residential
construction 153.4 218.3 228.5 228.3 223.0 220.8
Total assets 263.4 332.8 348.6 367.2 439.2 476.5
Notes, mortgages, capital leases and
other debt 169.2 221.0 190.3 203.3 228.2 235.9
Stockholders' equity (deficit) 56.4 54.4 74.7 73.1 94.5 119.9
</TABLE>
34
<PAGE> 37
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The Company's results of operations for the years ended December 31, 1996,
1995 and 1994 are summarized by line of business, as follows:
Combining Results of Operations by Line of Business
Year Ended December 31, 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
Homesite Tract Residential Other Business Administrative
Sales Sales Sales Operations Development & Other Total
----- ----- ----- ---------- ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Real estate sales $43,910 $62,693 $20,962 $ $ $ $ 127,565
Other operating revenue 324 4,595 4,919
Interest income 4,321 1,974 6,295
Other income:
Reorganization reserves 4,097 14,500 18,597
Other income 5,504 2,407 7,911
-------------------------------------------------------------------------------------------------
Total revenues 44,234 62,693 20,962 18,517 18,881 165,287
-------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of real estate sales 35,235 51,354 16,725 103,314
Inventory valuation reserves 10,400 1,883 12,283
Selling expense 6,008 5,691 1,826 13,525
Other operating expense 1,986 1,986
Other real estate costs:
Property tax, net 6,144 6,144
Other real estate overhead 1,719 3,426 838 1,051 3,912 2,294 13,240
General and administrative 11,510 11,510
Depreciation 16 92 22 262 508 900
Cost of borrowing, net 13,430 13,430
Other expense (6) 11 518 983 1,506
-------------------------------------------------------------------------------------------------
Total costs and expenses 42,972 70,963 19,411 3,310 6,313 34,869 177,838
-------------------------------------------------------------------------------------------------
Income (loss) before
extraordinary items 1,262 (8,270) 1,551 15,207 (6,313) (15,988) (12,551)
Extraordinary gains on
extinguishment of debt 13,732 13,732
-------------------------------------------------------------------------------------------------
Net income (loss) $1,262 $(8,270) $ 1,551 $15,207 $(6,313) $(2,256) $ 1,181
=================================================================================================
</TABLE>
35
<PAGE> 38
Combining Results of Operations by Line of Business
Year Ended December 31, 1995
(in thousands of dollars)
<TABLE>
<CAPTION>
Homesite Tract Residential Other Business Administrative
Sales Sales Sales Operations Development & Other Total
----- ----- ----- ---------- ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Real estate sales $24,106 $ 31,055 $27,742 $ $ $ $ 82,903
Other operating revenue 6,748 6,748
Interest income 6,158 1,607 7,765
Other income:
Reorganization reserves 10,676 10,676
Other income 603 2,613 2,044 5,260
--------------------------------------------------------------------------------------------------
Total revenues 24,709 31,055 27,742 15,519 14,327 113,352
--------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of real estate sales 17,151 26,108 23,150 66,409
Inventory valuation reserves 3,563 1,288 4,851
Selling expense 5,178 2,399 2,243 9,820
Other operating expense 4,037 4,037
Other real estate costs:
Property tax, net 80 5,764 5,844
Other real estate overhead 2,049 1,429 1,143 1,073 6,767 2,240 14,701
General and administrative 10,405 10,405
Depreciation 27 76 191 481 440 1,215
Cost of borrowing, net 14,274 14,274
Other expense 517 1,875 2,392
--------------------------------------------------------------------------------------------------
Total costs and expenses 24,405 33,575 26,727 5,671 7,284 36,286 133,948
--------------------------------------------------------------------------------------------------
Net income (loss) $ 304 $ (2,520) $ 1,015 $ 9,848 $ (7,284) $ (21,959) $ (20,596)
==================================================================================================
</TABLE>
36
<PAGE> 39
Combining Results of Operations by Line of Business
Year Ended December 31, 1994
(in thousands of dollars)
<TABLE>
<CAPTION>
Homesite Tract Residential Other Business Administrative
Sales Sales Sales Operations Development & Other Total
----- ----- ----- ---------- ----------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Real estate sales $15,040 $25,793 $ 11,467 $ $ $ $ 52,300
Other operating revenue 9,784 9,784
Interest income 6,570 1,693 8,263
Other income:
Reorganization reserves 700 700
Other income 721 34,200 (6) 34,915
-----------------------------------------------------------------------------------------
Total revenues 15,040 26,514 11,467 50,554 2,387 105,962
-----------------------------------------------------------------------------------------
Costs and expenses:
Cost of real estate sales 10,472 17,892 10,144 38,508
Selling expense 2,337 1,944 2,595 656 7,532
Other operating expense 7,085 7,085
Other real estate costs:
Property tax, net 130 8,062 8,192
Other real estate overhead 956 1,350 1,008 1,525 7,163 2,450 14,452
General and administrative 10,551 10,551
Depreciation 45 3 89 480 488 1,105
Cost of borrowing, net 14,818 14,818
Other expense 2,638 2,638
-----------------------------------------------------------------------------------------
Total costs and expenses 13,810 21,189 13,836 9,220 7,819 39,007 104,881
-----------------------------------------------------------------------------------------
Net income (loss) $ 1,230 $ 5,325 $ (2,369) $ 41,334 $ (7,819) $(36,620) $ 1,081
=========================================================================================
</TABLE>
37
<PAGE> 40
1996 Compared with 1995
During 1996, the Company generated net income of $1.2 million which
represented a $21.8 million improvement from a net loss of $20.6 million in
1995. The improvement in 1996 was primarily due to an increase in other income
of $10.6 million and to extraordinary gains of $13.7 million resulting from the
extinguishment of debt.
The Company's goal is to produce superior returns for shareholders by
liquidating Predecessor assets and paying off debt thereby reducing carrying
costs and associated overhead. The Company made substantial progress towards
this goal during 1996 as the Company sold $55.6 million of Predecessor assets,
which consist of tract and scattered homesite assets located in secondary
markets, reduced corporate debt by $55.1 million and reduced cost of borrowing
and other real estate costs. The Company continues to incur costs associated
with business development investments which corresponds to its goal of becoming
the leading supplier of finished homesites to builders in Florida's fastest
growing markets and in selected primary markets in the southeastern United
States, without the carrying costs of a substantial inventory. The results of
several of the Company's recent investments began to be realized in 1996 and
results associated with other investments are expected to begin to be realized
in 1997 when additional new projects come on line. There are no assurances that
any goals stated herein will be achieved.
Homesite Sales
Net income from homesite sales improved approximately $1.0 million in 1996
compared to 1995 primarily due to an increase in the number of homesites sold,
partially offset by lower gross margins in 1996.
Revenues from homesite sales increased $19.8 million in 1996, an 82%
increase from 1995. The increase resulted from a 68% increase in the number of
homesites sold and an 8% increase in the average sales price per homesite. The
following table summarizes homesite activity for the years ended December 31 (in
thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
----------------------------------------- -------------------------------------------
Number Average Number Average
of lots Revenue sales price of lots Revenue sales price
------- ------- ----------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Subdivision homesite sales 970 $29,090 $30.0 369 $10,154 $27.5
Scattered homesite sales 2,903 14,820 5.1 1,936 13,952 7.2
----- ------- ----- ----- ------- -----
3,873 $43,910 $11.3 2,305 $24,106 $10.5
===== ======= ===== ===== ======= =====
</TABLE>
The increase in subdivision homesite sales is primarily due to closings in
new projects in 1996 including 306 homesites for $12.5 million in Windsor Palms,
a project located in southwest Broward County, Florida, 151 homesites for $2.6
million in Sanctuary, a project located in Orlando, Florida and 64 homesites for
$1.7 million in West Meadows, located in Tampa, Florida. In addition, there was
a $1.6 million increase in closings in the Company's Lakeside Estates project in
Orlando, Florida. The increase in the average sales price of subdivision
homesite sales are primarily due to the homesite sales in Windsor Palms which
yielded an average sales price of approximately $40,600 and in Julington Creek
Plantation which yielded an average sales price of approximately $43,000 in 1996
compared to $36,100 in 1995.
Scattered homesite sales increased in 1996 compared to 1995 due to a 50%
increase in the number of homesites sold, partially offset by a 29% decrease in
the average sales price. The increase in volume and the decrease in the average
sales price is principally attributable to an increase in bulk homesite sales in
the secondary markets in Florida. The Company anticipates it will continue to
supplement scattered homesite sales volume in the secondary markets through bulk
homesite sales and through the marketing activities of the
38
<PAGE> 41
Atlantic Gulf Land Company as part of its plan to accelerate the disposition of
assets in secondary real estate markets in Florida.
Other operating revenues in 1996 included a management fee of $261,000 from
Country Lakes Ltd., a Virginia limited partnership which develops and sells
subdivision homesites located in Dade and Broward Counties, Florida. The Company
is a limited partner of this partnership and earns a management fee of 3.5% of
all gross revenues as defined in the partnership agreement. During 1996, the
Country Lakes partnership sold 312 acres for approximately $7.5 million.
Other income of $603,000 in 1995 represented the Company's 50% share of net
profits from the Sanctuary Joint Venture which the Company accounted for under
the equity method until August 1996, at which time the Company purchased its
partner's interest in the joint venture. The Sanctuary Joint Venture derives its
profits from the sale of subdivision homesites located near Orlando, Florida.
During 1995 the Sanctuary Joint Venture sold 239 homesites for $3.5 million.
There were no sales in this project during the first eight months of 1996 while
this project was accounted for under the equity method, however, 151 of the
remaining 170 homesites were sold in the fourth quarter of 1996.
As of December 31, 1996, the Company had approximately 1,091 total
homesites under contract for approximately $16.4 million of which 616 homesites
for $15.2 million are in the Company's subdivision projects of Lakeside Estates,
West Meadows and Sanctuary.
The homesite sales gross margin percentages were 19.8% in 1996 compared to
28.9% in 1995. The gross margin percentage decreased in 1996 compared to 1995
and was lower than the targeted gross margins of 20% to 30% in 1996 for this
line of business primarily due to the Company's high weighted average cost of
capital and delays in obtaining development financing. In addition, gross
margins decreased in Julington Creek from 31.7% in 1995 to 24.4% in 1996 due to
the bulk sale of this project in June 1996 and gross margins on bulk homesite
sales have been reduced as part of the Company's plan to accelerate land sales
in secondary real estate market locations. Julington Creek was sold in bulk as
part of the Company's business plan to monetize certain assets to generate cash
to retire debt. Gross margin represents the difference between the Company's
real estate revenue and related cost of sales. There are no assurances that the
targeted margins set forth herein will be achieved. The achievement of such
targets is subject to a number of factors over which the Company has no control,
including the continuation of current market conditions and interest rates, the
timely receipt of required regulatory approvals and the absence of other adverse
developments.
Homesite selling expense increased primarily due to an increase in
revenues. Homesite selling expense as a percentage of revenues decreased from
21.5% in 1995 to 13.7% in 1996, due to the increased revenues over which to
spread fixed costs and to a reduction in fixed selling costs.
Homesite sales other real estate overhead decreased in 1996 primarily due
to a $180,000 severance charge in the third quarter of 1995.
Tract Sales
Net operating results from tract sales decreased $5.8 million in 1996
compared to 1995, despite an increase in revenues, primarily due to an increase
in inventory valuation reserve charges and an increase in advertising expenses.
Revenues from tract sales of $62.7 million in 1996 represented an increase
of $31.6 million or 102% compared to 1995. The increase is primarily due to
several large sales during 1996 including the sale of the Company's Julington
Creek Plantation project which included $11.6 million of tract acreage and a
$9.0 million bulk sale of Summerchase, a project consisting of 320 acres in
southwest Broward County. In addition, there were increases in tract sales in
most of the Company's secondary real estate markets. Due to the Company's
39
<PAGE> 42
plan to monetize the Company's Predecessor assets located in secondary markets,
tract sales are expected to continue to be a significant source of revenue for
the Company in 1997. As of December 31, 1996, there were pending tract sales
contracts totaling approximately $18.1 million which, subject to certain
contingencies, are anticipated to close in 1997.
Tract sales gross margins are summarized as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1996 1995
---------------------------- ---------------------------
Targeted Actual Targeted Actual
Margins Margins Margins Margins
<S> <C> <C> <C> <C>
Port LaBelle agricultural acreage 5% -- 5% 2.8%
Julington Creek bulk sale -- 6.3% -- --
Other tract acreage 20% 20.8% 20-25% 16.5%
</TABLE>
The targeted gross margin is lower for Port LaBelle agricultural acreage
because management has determined that approximately 20,000 acres of the Port
LaBelle agricultural property is not an integral part of the Company's long-term
business strategy. In order to accelerate the disposal of this property, the
sales value for this property was adjusted from a "retail" to a "wholesale"
basis, which reduced the targeted gross margin for this property. The Company
anticipates it will sell approximately 10,000 acres of Port LaBelle agricultural
property in 1997.
The low gross margin in Julington Creek resulted from the bulk sale of this
project in June 1996 as part of the Company's business plan to monetize certain
assets to generate cash to retire debt.
The actual gross margin in 1996 for other tract acreage reflects the
targeted gross margin. The actual gross margin in 1995 for other tract acreage
was lower than the targeted gross margin primarily due to low gross margins on
several large sales. The targeted gross margins were reduced in 1996 primarily
due to the Company's plan to accelerate land sales in secondary real estate
market locations.
The tract sales inventory valuation reserve charges of $10.4 million in
1996 and $3.6 million in 1995 represent reductions in the carrying value of the
Company's inventories and land holdings based upon reviews of the net realizable
values associated with its inventories and land holdings. See Note 5 of the
Notes to Consolidated Financial Statements.
Tract sales selling expense increased in 1996 compared to 1995 primarily
due to an increase in revenues. Tract sales selling expense as a percentage of
revenues increased from 7.7% in 1995 to 9.1% in 1996 primarily due to direct
selling costs associated with the efforts to accelerate the disposition of
Predecessor assets in secondary real estate markets.
Tract sales other real estate overhead increased in 1996 compared to 1995
primarily due to management and advertising costs associated with the efforts to
accelerate the disposition of Predecessor assets in secondary real estate
markets.
40
<PAGE> 43
Residential Sales
Net income from residential sales, which includes single family homes and
condominiums, improved $536,000 in 1996 compared to 1995. Net income from
residential sales increased, despite a decrease in revenues, principally due to
a higher gross margin percentage on the condominium revenues from the Company's
Regency Island Dunes condominium project and a decrease in fixed selling and
overhead costs associated with single family homes as the Company has phased out
its single family homes sales operations.
Residential sales are summarized as follows for the years ended December 31
(in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Condominium sales - Regency Island Dunes:
First building $ 3,008 $17,989
Second building 14,801 -
------- -------
Total condominium sales 17,809 17,989
Single family home sales 3,153 9,753
------- -------
$20,962 $27,742
======= =======
</TABLE>
The revenues and profits associated with Regency Island Dunes condominium
sales are recorded using the percentage of completion method. The Regency Island
Dunes condominium project consists of two 72-unit buildings. The revenues of
approximately $18 million in 1995 were derived from 61 units under contract in
the first building as of December 31, 1995 with construction on the first
building 97% complete. The condominium revenues of $3.0 million in the first
building in 1996 represent the incremental revenue earned upon the completion of
59 of these 61 units in 1996 and the sale and closing of an additional eight
units in 1996. The revenues of approximately $14.8 million in the second
building in 1996 were derived from 56 units under contract in the second
building as of December 31, 1996 with construction on the second building 79%
complete. Additional revenues and profits will be recorded as the construction
progresses and more units are sold. The Company anticipates that construction of
the second building will be completed during the first half of 1997 and that all
72 units in the second building will close in 1997.
Single family home sales revenues decreased in 1996 compared to 1995 due to
a decrease in closings from 109 in 1995 to 36 in 1996. Closings decreased
because the Company decided in mid-1995 to begin phasing out its single family
home business in Predecessor communities and substantially completed the
withdrawal during 1996. The Company may seek to re-enter the single family home
business in primary market areas where this business would complement current or
potential land development activities. As of December 31, 1996, the Company had
three single family home residential units in inventory, none of which were
under contract as of December 31, 1996.
Residential sales gross margins are summarized as follows for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Condominiums 21.9% 17.9%
Single family homes 10.6% 14.0%
</TABLE>
The gross margin for condominiums in 1996 was within the targeted gross
margin of approximately 20% to 25% for this line of business.
The single family home gross margins decreased in 1996 due to the mix of
product sold and as a result of the Company winding down this line of business.
41
<PAGE> 44
Residential selling expense decreased in 1996 from 1995 due to a decrease
in revenues and a decrease in fixed selling costs associated with the single
family homes operation resulting from the phasing out of this operation.
Residential sales other real estate overhead decreased in 1996 compared to
1995 primarily due to reduced single family home overhead resulting from the
phasing out of this operation.
Other Operations
Net income from other operations increased $5.4 million in 1996 compared to
1995 due to an increase in other income, partially offset by a decrease in
interest income.
Other operating revenues and expenses decreased in 1996 compared to 1995
primarily due to the absence of revenues and expenses from Florida Home Finders
Inc. (FHF), a wholly-owned subsidiary providing property management and real
estate brokerage services, sold on March 31, 1995 and Longwood Utilities, Inc.
("Longwood"), a wholly-owned subsidiary sold in July 1995 and to a reduction in
revenues and expenses from the Port LaBelle utility system sold in February 1996
and the Julington Creek utility system sold in June 1996.
Interest income decreased in 1996 compared to 1995 primarily due to
adjustments associated with the Company's land mortgage receivable portfolio,
including an adjustment of the unamortized interest rate valuation discount in
December 1995, and to a lower average balance of contracts receivable during the
periods under review.
Other income in 1996 included a $4.1 million gain due to a reduction in the
Company's utility connections reserve in conjunction with the Company's annual
review of certain reorganization items. See Note 9 of the Notes to Consolidated
Financial Statements. Other income in 1996 also included a gain of approximately
$4.1 million on the $18.75 million settlement in March 1996 with the City of
Port St. Lucie regarding litigation pursuant to condemnation proceedings
associated with the taking of the Company's Port St. Lucie system. Additionally,
other income in 1996 consisted of a gain of $686,000 on the sale of the
Company's Port LaBelle utility system which was sold in February 1996 for $4.5
million and a gain of $696,000 on the sale of the Company's Julington Creek
utility system sold in June 1996 for $6.0 million. Other income of $2.6 million
in 1995 included a $2.4 million gain on the sale of FHF (see Item 3. - Legal
Proceedings and Note 12 of the Notes to Consolidated Financial Statements) and a
$219,000 gain on the sale of Longwood which was sold in July 1995 for $850,000.
Business Development
Total business development expenditures decreased $1.0 million in 1996
compared to 1995 primarily due to a $2.8 million decrease in overhead costs
related to the Company's Ya Dong joint venture in China, partially offset by a
$1.9 million valuation reserve in 1996 for this joint venture.
In January 1997, the Company made a proposal to its Ya Dong joint venture
partner to transfer 35% of its 50% interest in the joint venture to its partners
in return for a note receivable in the amount of $2.25 million. The Company
would retain a 15% interest in the joint venture. Due to the uncertainty
associated with the collection of this proposed receivable, the Company
established an inventory valuation reserve in the amount of $1.9 million.
Consequently, the Company's net investment in the joint venture is carried at
$0.
Business development overhead decreased in 1996 compared to 1995 primarily
due to the $2.8 million decrease in overhead costs related to the Ya Dong joint
venture. The Company incurred overhead costs associated with the Ya Dong joint
venture of $1.2 million in 1996 compared to $4.0 million in 1995. The
42
<PAGE> 45
remaining business development expenditures consist primarily of costs
associated with the pursuit of business opportunities in primary market
locations within Florida and other southeastern United States locations.
Other expenses included $437,000 in 1996 and $517,000 in 1995 representing
the Company's 50% share of the net loss of the Ocean Grove joint venture which
is a condominium project in Palm Beach County, Florida. The loss resulted from
pre-sales advertising and other selling and overhead costs.
Administrative & Other
The net loss from administrative & other activities decreased $19.7 million
in 1996 compared to 1995 principally due to extraordinary gains totalling $13.7
million in 1996 resulting from the extinguishment of debt and a $4.2 million
increase in other income.
Interest income increased in 1996 compared to 1995 primarily due to an
increase in the average balance of short term investments in 1996.
Other income included gains of $14.5 million in 1996 and $10.7 million in
1995 resulting from the resolution of certain reorganization items. The gain of
$14.5 million in 1996 included a net gain of $11.9 million due to an accrual in
December 1996 for the recovery of funds in January 1997 from various utility
trust accounts which were funded by the Company during the reorganization and a
gain of $703,000 due to a reduction in the Company's contracts receivable future
servicing reserve. See Notes 4 and 9 of the Notes to Consolidated Financial
Statements. The gain of $10.7 million in 1995 included gains of $2.8 million due
to a reduction of the Company's contracts receivable termination refunds
reserve, $2.2 million resulting from a reduction of the Company's deferred
property tax liability and $1.5 million due to a reduction of the Company's
income tax liability. See Notes 9 and 12 of the Notes to Consolidated Financial
Statements. The process of resolving reorganization items is expected to
continue during 1997 with adjustments to be recorded when the final disposition
of various claims and other liabilities is concluded. Other income in 1996 also
included a gain of approximately $1.3 million due to a reduction of the
Company's environmental reserve and a gain of approximately $1.2 million due to
a reduction in the Company's land mortgages receivable valuation reserve. See
Notes 4 and 5 of the Notes to Consolidated Financial Statements. Other income in
1995 also included a $2.0 million gain on proceeds of $4.0 million associated
with the assignment of rights of one of the Company's mortgage receivables.
A valuation reserve of approximately $1.3 million was provided in 1995
associated with one of the Company's land mortgage receivables. See Note 4 of
the Notes to Consolidated Financial Statements.
Property tax, net of capitalized property taxes increased in 1996 compared
to 1995, despite a decrease in land inventory principally due to a $1.1 million
reduction in capitalized property taxes resulting from a decrease in land under
development. The decrease in land under development corresponds to sales
activity and to the completion of various projects during the intervening
period.
General and administrative expenses increased in 1996 compared to 1995,
despite a severance charge of approximately $310,000 in 1995, principally due to
financial advisory and due diligence costs associated with the Company's
recapitalization efforts.
Cost of borrowing, net of capitalized interest decreased during 1996
compared to 1995 primarily due to lower average balances of the Company's
corporate debt, most notably the Mandatory Interest Notes, a decrease in
interest rates and to borrowing costs of $1.1 million in 1995 associated with
the September 1994 amendment of the Secured Floating Rate Notes. These interest
savings were partially offset by a $1.5 million decrease in interest capitalized
to land inventory corresponding to the decrease in land under development.
During the years ended December 31, 1996 and 1995, the Company did not accrue
interest on its Cash Flow Notes because of the absence of Available Cash during
the periods. See "Liquidity and Capital Resources."
43
<PAGE> 46
Other expenses in 1996 included a $395,000 increase in the reserve for
future contracts receivable cancellations and a $341,000 reserve associated with
the sale of Cumberland Cove land mortgages receivables in 1996. See Notes 3 and
4 of the Notes to Consolidated Financial Statements. Other expenses in 1995
included a $1.2 million valuation reserve associated with the Company's land
mortgages receivable portfolio due to an anticipated sale of this portfolio. See
Note 4 of the Notes to Consolidated Financial Statements. Other expenses in 1995
also included a $694,000 net loss resulting from the sale of the Company's
residential mortgages receivable portfolio in October 1995.
In February 1996, the Company recorded an extraordinary gain of
approximately $3.8 million due to the extinguishment of approximately $1.9
million of Unsecured 12% Notes and $1.9 million of Unsecured 13% Cash Flow
Notes. These notes, held in the disputed claims reserve account, were in excess
of the requirements necessary to satisfy the Company's obligations in accordance
with the Company's plan of reorganization.
In September 1996, the Company fully prepaid at a discount its Secured
Cash Flow Notes for $40 million in cash plus warrants to purchase up to
1,500,000 of the Company's common stock at $6.50 per share. As a result of the
extinguishment of the Secured Cash Flow Notes, the Company recorded an
extraordinary gain of approximately $3.9 million representing the difference
between the book value of these notes of $49.1 million, consisting of a par
value of $54.9 million less an unamortized discount of $5.8 million, and the
consideration given of $41.9 million, consisting of cash of $40 million and the
estimated fair market value of the warrants of $1.9 million, less $3.3 million
of expenses.
In December 1996, the Company recorded an extraordinary gain of
approximately $6.0 million due to the extinguishment of approximately $4.2
million of Unsecured 12% Notes and $1.8 million of Unsecured 13% Cash Flow
Notes, net of a $210,000 unamortized discount, which were held in various
utility trust accounts established during the reorganization. See Notes 10 and
13 of the Notes to Consolidated Financial Statements.
1995 Compared with 1994
During 1995, the Company incurred a net loss of $20.6 million compared to
net income of $1.1 million in 1994 primarily due to a decrease in other income.
The decrease in other income was primarily attributable to the $34.2 million
gain in 1994 on the settlement of the Charlotte County utility condemnation
litigation.
Homesite Sales
Net income from homesite sales decreased in 1995 compared to 1994 despite
an increase in revenues, primarily due to marketing costs incurred to produce
future profits.
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<PAGE> 47
Revenue from homesite sales increased $9.1 million in 1995, a 60.3%
increase from 1994. The increase resulted primarily from a 56.6% increase in the
number of homesites sold. The following table summarizes homesite activity for
the years ended December 31 (in thousands of dollars):
<TABLE>
<CAPTION>
1995 1994
-------------------------------------- ----------------------------------------
Number Average Number Average
of lots Revenue sales price of lots Revenue sales price
------- ------- ----------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Subdivision homesite sales 369 $10,154 $27.5 194 $ 5,905 $30.4
Scattered homesite sales 1,936 13,952 7.2 1,278 9,135 7.1
----- ------- ----- ----- -------- -----
2,305 $24,106 $10.5 1,472 $ 15,040 $10.2
===== ======= ===== ===== ======== =====
</TABLE>
The increase in subdivision homesite sales was primarily related to an
increase in demand for product in the Company's Julington Creek community and to
a significant increase in closings in the Lakeside Estates project in Orlando
acquired in 1994. The decrease in the average selling price of subdivision
homesite sales is primarily due to the increase in homesite sales in Lakeside
Estates which yield a lower average sales price, partially offset by an 11%
increase in the average sales price in Julington Creek.
Scattered homesite sales increased in 1995 compared to 1994 due to a 51.5%
increase in the number of homesites sold. The increase in volume in 1995 is
primarily attributed to bulk homesite sales in the secondary markets in Florida
and to a significant increase in sales in the Company's Cumberland Cove
community in Tennessee resulting from a retail sales program implemented in
1995.
As of December 31, 1995, the Company had approximately 1,819 total
homesites under contract totaling approximately $33.7 million of which 950
homesites for $29.3 million are in the Company's subdivision homesite projects
of Windsor Palms, Julington Creek and Lakeside Estates.
Other income of $603,000 in 1995 represents the Company's 50% share of net
profits from the Sanctuary Joint Venture which the Company accounted for under
the equity method during 1995. The Sanctuary Joint Venture derives its profits
from the sale of subdivision homesites located near Orlando, Florida. During
1995 the Sanctuary Joint Venture sold 239 homesites for $3.5 million.
The homesite sales gross margin percentages were 28.9% in 1995 compared to
30.4% in 1994, which generally reflect targeted gross margins of 30% in 1995 and
1994 for this line of business.
Homesite selling expense increased $2.8 million in 1995 compared to 1994
and also increased as a percentage of revenues from 15.5% in 1994 to 21.5% in
1995 primarily due to costs associated with scattered homesite retail sales
programs implemented in 1995, most particularly in the Cumberland Cove community
in Tennessee, designed to supplement homesite sales activity.
Homesite sales other real estate overhead increased in 1995 primarily due
to costs incurred to manage recently acquired subdivision homesite projects in
Florida's primary real estate markets. Homesite real estate overhead in 1995
also included a $180,000 severance charge. This charge represented a portion of
a non-recurring charge of approximately $1.0 million the Company recorded in the
third quarter of 1995 primarily for severance pay resulting from the
comprehensive plan approved by the Board of Directors in July 1995 to begin
consolidating and restructuring the Company's organization to reduce overhead.
This non-recurring charge affected all of the Company's lines of business,
particularly Administrative & Other.
45
<PAGE> 48
Tract Sales
Net operating results from tract sales decreased in 1995 from 1994 despite
an increase in revenues, primarily due to lower gross margins and the recording
of an inventory valuation reserve of approximately $3.6 million in 1995.
Revenue from tract sales increased $5.3 million in 1995 to $31.1 million
which was within the expected range for tract sales in 1995. As of December 31,
1995, there were pending tract sales contracts totaling approximately $25.8
million. Other income of $721,000 in 1994 consisted of a net gain on the sale of
the Company's two remaining nine-hole golf courses and certain other buildings
in various communities.
Tract sales gross margins are summarized as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1994
------------------------- -------------------------
Targeted Actual Targeted Actual
Margins Margins Margins Margins
<S> <C> <C> <C> <C>
Port LaBelle agricultural acreage 5% 2.8% 10% 14.3%
Other tract acreage 20-25% 16.5% 35% 31.3%
</TABLE>
The targeted gross margin is lower for Port LaBelle agricultural acreage
because management has determined that the Port LaBelle agricultural property is
not an integral part of the Company's long-term business strategy. In order to
accelerate the disposal of this property, the sales value for this property was
adjusted from a "retail" to a "wholesale" basis, which reduced the targeted
gross margin for this property.
The actual gross margin in 1995 for other tract acreage was lower than the
targeted gross margin primarily due to low gross margins on several large sales.
The gross margin in 1994 was lower than expected principally due to sales mix.
The targeted gross margins for other tract acreage was reduced in 1995 to a
range of 20% to 25% primarily due to the plan approved in 1995 to accelerate
land sales in secondary real estate market locations.
The inventory valuation reserve of $3.6 million in 1995 represented a
reduction in the carrying value of the Company's inventories and land holdings
based upon a review of the net realizable values associated with its inventories
and land holdings. See Note 5 of the Notes to Consolidated Financial Statements.
Residential Sales
The operating results from residential sales, which includes condominiums
and single family homes, improved in 1995 from 1994 primarily due to a profit of
$2.1 million on revenues of $18 million recorded on the Company's Regency Island
Dunes condominium project in 1995.
Residential sales are summarized as follows for the years ended December 31
(in thousands of dollars):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Condominium sales $17,989 $ -
Single family home sales 9,753 11,467
------- -------
$27,742 $11,467
======= =======
</TABLE>
46
<PAGE> 49
The revenues and profit associated with Regency Island Dunes condominium
sales were recorded using the percentage of completion method. As of December
31, 1995, the construction on the first of two 72-unit buildings of this project
was approximately 97% complete. Accordingly, the revenue and profit recorded in
1995 represents 97% of the expected revenue and profit on the 61 units which
were under contract in the first building as of December 31, 1995. In addition
to the 61 units under contract in the first building, there were 18 units under
contract in the second building with a sales volume of $6.6 million as of
December 31, 1995.
Single family home sales revenues decreased in 1995 compared to 1994
primarily due to a decrease in the average selling price from $102,000 on 112
closings in 1994 to $89,000 on 109 closings in 1995. The decrease in the average
selling price was due to the mix of product sold. As of December 31, 1995, the
Company had 30 single family home residential units under contract totaling $2.7
million.
Residential sales gross margins are summarized as follows for the years
ended December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Condominiums 17.9% -
Single family homes 14.0% 11.5%
</TABLE>
The gross margin for condominiums approximated the expected gross margin
for the Regency Island Dunes project.
The single family home gross margin improved in 1995 primarily due to the
implementation of improved operating procedures.
Residential selling expense as a percentage of revenues decreased from
22.6% in 1994 to 8.1% in 1995 due to a decrease in fixed selling costs
associated with the phasing-out of the single family home sales operations in
Predecessor communities and to the increase in revenues generated by the Regency
Island Dunes condominium project. Selling expense as a percentage of revenue
excluding the effect of the Regency condominium project was 11.6%.
Residential other real estate overhead increased in 1995 compared to 1994
primarily due to costs associated with the Regency Island Dunes condominium
project, partially offset by reduced single family housing overhead resulting
from the phasing out of this operation.
Other Operations
Net income from other operations decreased $31.5 million in 1995 compared
to 1994 primarily due to the $34.2 million gain in 1994 on the settlement of the
Charlotte County utility litigation.
Other operating revenues and expenses decreased in 1995 from 1994 primarily
due to a reduction in revenues and expenses from FHF, which was sold in the
first quarter of 1995 and Longwood Utilities, Inc. ("Longwood"), a wholly owned
subsidiary sold in July 1995, and to an absence of revenues and expenses from
two golf courses sold in the third quarter of 1994.
Interest income decreased in 1995 from 1994 primarily due to a lower
average balance of contracts receivable, partially offset by a higher average
balance of mortgages receivable generated primarily from tract sales.
Other income of $2.6 million in 1995 included a $2.4 million gain on the
sale of FHF and a $219,000 gain on the sale of Longwood. Other income in 1994 of
$34.2 million represented a gain on proceeds of $45
47
<PAGE> 50
million from Charlotte County pursuant to a stipulated final judgement by the
Charlotte County Circuit Court in settlement of the Company's utilities
condemnation litigation with Charlotte County.
Other operations real estate overhead decreased in 1995 from 1994
principally due to the reduction in costs incurred associated with servicing the
Company's contracts receivable portfolio which were not covered by servicing
reserves established in Fresh Start Reporting. Substantially all of the expected
future servicing costs have been fully reserved in Fresh Start Reporting.
Business Development
Total business development expenditures decreased in 1995 compared to 1994
primarily due to a decrease in expenditures associated with the Company's Ya
Dong joint venture in China.
Business development selling expenses in 1994 consisted primarily of
initial advertising costs associated with the Regency Island Dunes condominium
project. Regency Island Dunes costs were classified under residential sales in
1995.
Business development overhead decreased in 1995 compared to 1994 primarily
due to a decrease in costs related to the Ya Dong joint venture, partially
offset by increased overhead costs related to the pursuit of various business
opportunities in primary market locations within Florida and other southeastern
United States locations. In addition, overhead costs associated with Regency
Island Dunes were classified under residential sales in 1995 as opposed to
business development as they were in 1994. The Company incurred costs associated
with the Ya Dong JV of approximately $4.0 million in 1995 compared to $4.9
million in 1994.
The $517,000 of other expenses in 1995 represents the Company's 50% share
of the net loss of the Ocean Grove joint venture. The loss resulted from
pre-sales advertising and other selling and overhead costs for this condominium
project located in Palm Beach County, Florida.
Administrative & Other
The net loss from administrative & other activities decreased $14.7 million
in 1995 from 1994 principally due to an increase in other income of
approximately $12.0 million and reductions in property tax and other expense.
Other income included a $10.7 million gain in 1995 and a $700,000 gain in
1994 associated with the resolution of certain reorganization items. The gain of
$10.7 million in 1995 included gains of $2.8 million due to a reduction of the
Company's contracts receivable termination refunds reserve, $2.2 million
resulting from a reduction of the Company's deferred property tax liability and
$1.5 million due to a reduction of the Company's income tax liability. See Notes
9 and 12 of the Notes to Consolidated Financial Statements. Other income in 1995
also included a $2.0 million gain on proceeds of $4.0 million associated with
the assignment of rights of one of the Company's mortgage receivables.
A valuation reserve of approximately $1.3 million was provided in 1995
associated with one of the Company's land mortgage receivables. See Note 4 of
the Notes to Consolidated Financial Statements.
Property tax, net decreased approximately $2.3 million in 1995 compared to
1994 primarily due to sales of land inventory not under development.
Administrative & other real estate overhead decreased in 1995 compared to
1994 despite a non-recurring severance charge of approximately $265,000 in 1995,
primarily due to an increase in the utilization of existing personnel,
previously involved in evaluating existing assets, to evaluate new business
opportunities in 1995 and therefore the associated costs were included primarily
under business development in 1995.
48
<PAGE> 51
General and administrative expenses decreased in 1995 compared to 1994
despite a non-recurring severance charge of approximately $225,000 in 1995,
primarily due to cost reductions associated with the consolidation and
restructuring of the Company's organization.
Cost of borrowing, net decreased in 1995 compared to 1994 primarily due to
a $1.6 million increase in corporate interest capitalized to land inventory due
to an increase in land under development, partially offset by borrowing costs of
$1.1 million associated with the September 1994 amendment of the Secured
Floating Rate Notes. See Note 10 of the Notes to Consolidated Financial
Statements. During the years ended December 31, 1995 and 1994, the Company did
not accrue interest on its Cash Flow Notes because of the absence of Available
Cash during the periods. See "Liquidity and Capital Resources."
Other expenses in 1995 included a $1.2 million valuation reserve associated
with the Company's land mortgages receivable portfolio due to an anticipated
sale of this portfolio. See Note 4 of the Notes to Consolidated Financial
Statements. Other expenses in 1995 also included a $694,000 net loss resulting
from the sale of the Company's residential mortgages receivable portfolio in
October 1995. Other expenses of $2.6 million in 1994 represented fees incurred
to refinance the Company's term loan which was repaid in December 1994.
LIQUIDITY & CAPITAL RESOURCES
As of December 31, 1996, the Company's cash and cash equivalents totaled
approximately $7.1 million. The Company also had restricted cash and cash
equivalents of $6.0 million, which consisted primarily of escrows for the sale
and development of real estate properties, funds held in trust to pay certain
bankruptcy claims and various other escrow accounts. Of the $3.5 million
increase in cash and cash equivalents during 1996, $15.0 million was provided by
operating activities and $30.4 million was provided by investing activities,
partially offset by $41.9 million used in financing activities.
Cash provided by operating activities includes net cash generated through
real estate sales and other operations, partially offset by approximately (i)
$18.2 million for interest payments, (ii) $6.9 million for property tax
payments, (iii) $32.8 million for construction and development expenditures,
(iv) $9.3 million related to property acquisitions and (v) $8.0 million of fees
associated with the Company's refinancing and recapitalization efforts.
Cash provided by investing activities consisted primarily of the proceeds
from the Port St. Lucie utility condemnation settlement and from the sales of
the Port LaBelle and Julington Creek utilities systems.
Cash used in financing activities includes $51.2 million of principal
payments to repay in full the Company's Secured Floating Rate Notes, $40.0
million of principal payments to repay in full the Company's Secured Cash Flow
Notes at a discount, net repayments of $10.5 million on new project financings
and $4.3 million in principal payments related to the Company's deferred
property tax and Section 365(j) lien obligations arising out of the
reorganization proceedings. These payments were partially offset by net
borrowings of $10.3 million on the Working Capital Facility and $41.7 million of
net borrowings from the new credit facilities with Foothill, which were used to
finance in part the repayments of the Secured Floating Rate Notes and Secured
Cash Flow Notes (the "Foothill Refinancing" - see discussion below). In
addition, the Company had net borrowings of $12.1 million associated with the
financing of the Company's mortgage receivables.
The Company has, pursuant to a Revolving Loan Agreement dated as of
September 30, 1996 with Foothill Capital Corporation ("Foothill"), (i) a $20
million working capital facility maturing December 1, 1998 ("Working Capital
Facility"), and a $25 million reducing revolving loan maturing June 30, 1998
("Reducing Revolving Loan"), with principal reductions as set forth
below. Amounts under the Reducing
49
<PAGE> 52
Revolving Loan are available only when (i) the Working Capital Facility is fully
utilized, and (ii) the Company is in compliance with, among other conditions, a
"borrowing base" formula based on the value of certain of the Company's assets.
Amounts outstanding under the Working Capital Facility bear variable interest at
a rate equal to the variable interest rate, per annum, announced by Northwest
Bank of Minnesota, N.A., as its "base rate" plus two percentage points. The
Reducing Revolving Loan bears variable interest at the "base rate" plus four
percentage points. As of December 31, 1996, the Working Capital Facility was
fully drawn and there was $1.7 million outstanding on the Reducing Revolving
Loan. The Company and Foothill have amended the Revolving Loan Agreement,
effective as of March 31, 1997, pursuant to which, among other things, the
Company can borrow thereunder until June 30, 1997 up to $10 million in excess of
the amount otherwise available under the borrowing base formula, subject in any
event to the maximum availability of $25 million under the Reducing Revolving
Loan. Upon execution of the Revolving Loan Agreement amendment, the Company paid
a $1 million fee to Foothill. The above-mentioned amendment also provides that
as long as the Company's indebtedness under the Foothill loan agreements is in
excess of the aggregate amount the Company could otherwise borrow under the
borrowing base formula, the interest rates payable under the Working Capital
Loan, Reducing Revolving Loan and the Term Loan (as defined below) will be
increased by two percentage points.
On January 3, 1997, the Company paid the entire principal amount of $37.5
million on its Unsecured 12% Notes, which matured on December 31, 1996. The
repayment was made utilizing (i) the $12.1 million of excess funds released on
January 2, 1997 from various utility trust accounts and (ii) borrowings under
the Reducing Revolving Loan.
The Company's material obligations for 1997 include (i) principal
repayments on the Foothill debt up to $43.3 million as more fully described
below, (ii) 1996 property tax payments totaling $5.3 million due on March 31,
1997 (which have been paid), and (iii) the final principal and interest payments
on the Company's Section 365(j) lien and deferred property tax liabilities
totaling $3.3 million. The Company's 1997 business plan also contemplates full
year expenditures for development, construction and other capital improvements
estimated at approximately $50 million, of which a substantial portion will
require funding through individual project development loans or joint venture
arrangements, many of which are already in place. If the Company is unable to
obtain the capital resources to fund these expenditures, the implementation of
the Company's business plan will be adversely affected, thus slowing the
Company's expected revenue growth and increasing the expected time necessary for
the Company to achieve profitability.
The Company does not currently have sufficient liquid capital resources to
satisfy the up to $43.3 million of Foothill debt of which approximately $21.7
million is due on each of June 30, 1997, and December 31, 1997. However,
management believes that the Company, through a combination of sources as more
fully described below, will be able to obtain sufficient liquidity and capital
resources necessary to continue implementing its business plan and to satisfy
its debt obligations as they become due.
The Company's ongoing business plan is to continue to monetize its non-core
tract and scattered homesite assets ("Predecessor assets") to reduce corporate
debt. The Company made substantial progress in this regard in 1996 as it sold
$55.6 million of tract and scattered homesite assets. In addition, as of
December 31, 1996, the Company had pending under contract or letter of intent a
combination of Predecessor asset sale transactions which would generate, if
consummated, approximately $19.3 million of cash and notes. This amount has
increased to approximately $22.3 million as of March 31, 1997. The transactions
under contract are subject to a variety of customary conditions, in some cases
including a financing condition. Transactions subject to a letter of intent are
also subject to further negotiation and documentation and there are no
assurances that any particular transaction under contract or letter of intent
will be consummated.
As part of the effort to monetize the Predecessor assets pursuant to its
business plan, the Company is actively monetizing mortgage and note receivables
generated from the sale of Predecessor tracts and scattered homesites. In 1996,
the Company raised approximately $17.8 million of cash proceeds, and received
50
<PAGE> 53
certain residual interests, from the sale or refinancing of mortgages or other
receivables generated from the sale of Predecessor real estate assets. These
cash proceeds, along with the net cash proceeds from Predecessor real estate
sales, were applied to the reduction of corporate debt and to fund ongoing
operations. The Company plans to continue to sell or finance mortgages and other
receivables generated from the future sale of Predecessor real estate assets
going forward.
On September 30, 1996, the Company closed on three credit facilities
totalling $85.0 million with Foothill (the "Foothill Refinancing"). Pursuant to
the Foothill Refinancing, Foothill has provided the Company with (i) an
extension to December 1, 1998 of the $20 million Working Capital Facility as
discussed above; (ii) a $40 million Term Loan at an interest rate of 15% per
annum, maturing June 30, 1998; and (iii) a Reducing Revolving Loan of up to $25
million maturing on June 30, 1998, as discussed above. At December 31, 1996, the
Company had outstanding the full $20 million under the Working Capital Facility
and approximately $1.7 million under the Reducing Revolving Loan. The Term Loan
requires principal repayments of one-third on each of June 30, 1997, December
31, 1997, and June 30, 1998. The commitment under the Reducing Revolving Loan
will also be reduced by one-third on each of June 30, 1997, December 31, 1997,
and June 30, 1998, and the Company will be required to repay on those dates any
amounts outstanding under the Reducing Revolving Loan in excess of the new
commitment amount.
Concurrently with the Foothill Refinancing closing on September 30, 1996,
the proceeds from the Working Capital Facility, the Term Loan, approximately
$16.3 million of cash held in cash collateral accounts, $6 million from the
Reducing Revolving Loan, and 1.5 million warrants (which were issued to the
holders of the Secured Cash Flow Notes) were used to repay in full the Secured
Floating Rate Notes and prepay the Secured Cash Flow Notes at a discount. The
remaining portion of the Reducing Revolving Loan was used primarily to repay a
portion of the remaining $37.5 million of Unsecured 12% Notes on January 3,
1997.
In February 1997, the Company executed an Investment Agreement and Note
Agreement with AP- AGC, LLC, a Delaware limited liability company and an
affiliate of Apollo Real Estate Advisors II, L.P., a New York-based investment
fund ("Apollo"). Subject to the terms of the Investment Agreement and the
approval of certain charter amendments by the Company's stockholders, Apollo
would invest $25 million in new Series A 20% cumulative redeemable convertible
preferred stock of the Company (the "Series A Preferred Stock"). The Investment
Agreement also contemplates that the Company would seek the approval of its
stockholders of a charter amendment authorizing an additional $10 million of new
Series B 20% cumulative redeemable convertible preferred stock of the Company
(the "Series B Preferred Stock") to be made available to the Company's
stockholders in a rights offering (the "Series B Rights Offering"). The 20%
cumulative dividend rate on the Series A and Series B Preferred Stock would
accumulate unless declared and paid by the Company.
The Company anticipates submitting the proposed charter amendments for the
authorization of the Series A and Series B Preferred Stock at the 1997 annual
meeting of stockholders. If the stockholders approve the charter amendments, the
$25 million Series A Preferred Stock transaction could close in the second
quarter of 1997, and the $10 million Series B Rights Offering could close late
in the second quarter or in the third quarter of 1997. Pursuant to the
Investment Agreement, at the closing of the Series A Preferred Stock transaction
Apollo would also receive warrants to acquire 5 million shares of Company common
stock. In addition to stockholder approval, the closing under the Investment
Agreement is also subject to the satisfaction of other conditions, including the
consent of Foothill. The Company anticipates that the net proceeds from the $25
million Series A Preferred Stock closing would be available for new project
acquisition and development, while the net proceeds from the Series B Rights
Offering would be available to the Company for general corporate purposes,
including the repayment of debt owed to Foothill.
Pursuant to the Note Agreement, the Company would have the right, subject
to the consent of Foothill and the approval of Apollo of the use of proceeds, to
borrow from Apollo up to $10 million prior to the stockholder vote on the Series
A Preferred Stock charter amendments. Any amount borrowed under the Note
51
<PAGE> 54
Agreement would bear current interest at 20% per annum. If stockholders approve
the Series A Preferred Stock charter amendments and the Series A Preferred Stock
closing occurs, any borrowed amount outstanding would be converted into Series A
Preferred Stock. If the stockholders do not approve the charter amendments or if
the Company is in default under the Note Agreement, the applicable interest rate
on any outstanding loan would be automatically increased to 23% per annum and
the principal amount of the loan would be due 50% on December 31, 1997 and 50%
on December 31, 1998. The Company is not obligated to borrow any portion of the
$10 million available under the Note Agreement and, although circumstances may
change, as of the date hereof the Company does not anticipate borrowing any
money under the Note Agreement. If either a borrowing under the Note Agreement
or the Series A Preferred Stock transaction occurs, Apollo will have (a) a
junior lien securing the Company's obligations under the Note Agreement or, as
the case may be, the Company's obligations to repurchase the Series A Preferred
Stock on substantially all of the assets of the Company and its subsidiaries,
except for the capital stock of a special purpose subsidiary ("SP Subsidiary")
and (b) a senior lien on all of the capital stock of the SP Subsidiary and on
all of its assets. The net proceeds from either the borrowing or the Series A
Preferred Stock transaction will be held and used by the SP Subsidiary.
A more complete discussion of the terms and conditions of the Investment
Agreement, the Note Agreement, the proposed Series A Preferred Stock and the
proposed Series B Rights Offering will be found in the Company's Proxy Statement
to be mailed to stockholders in connection with the 1997 annual meeting of
stockholders. There is no assurance that the transactions contemplated by the
Investment Agreement, including the sale of the Series A Preferred Stock and
Series B Rights Offering will be consummated.
If the stockholders approval is not obtained or the Series A Preferred
Stock transaction is not otherwise consummated, the Company will pursue other
alternatives to address its liquidity issues, improve its financial condition
and liquidity, including the possibility of soliciting other transactions
similar to the transaction. If, however, the stockholders approval is not
obtained or the Series A Preferred Stock transaction is not otherwise
consummated, the Company will be required to pay a $1 million fee to Apollo and
the Company's $1 million commitment fee will be forfeited; and if an alternative
transaction is consummated within specified time periods, the Company will be
required to pay an additional $1 million fee to Apollo.
In April 1996, the Company acquired approximately 390 acres in southeast
Orlando for approximately $5.3 million, of which $2.4 million was paid in cash
and the balance of $2.9 million was financed by Cypress Realty Limited
Partnership ("Cypress") through an acquisition loan secured by a mortgage on
the property. In December 1996, and as amended in March 1997, the Company and
Cypress agreed to a restructuring in which title was transferred into Falcon
Trace Partners Limited Partnership ("Falcon Trace Partnership") of which the
Company is a limited partner. The Company contributed its net investment in the
project and its partner, Falcon Trace-Cypress Limited Partnership, contributed
all of its right, title and interest to the mortgage on the property. The
Company has a 65% interest in the Falcon Trace Partnership after expenses and
fixed returns to the partners. This project is currently being permitted for
approximately 900 homesites.
Available Cash is defined in the Company's POR with respect to any payment
period (generally, any six-month period ending June 30 or December 31), as the
sum of all cash receipts (exclusive of borrowed money and certain delineated
cash items) less the sum of payments for operating expenses, all debt payments
(including repurchases of indebtedness), capital expenditures, tax payments,
payments to creditors under the plan of reorganization and creation of reserves
for working capital and other expenses for the next two payment periods.
Pursuant to the Company's debt agreements, the Company must apply any
Available Cash (i) to the payment of interest due on the Company's unsecured
cash flow notes due December 31, 1998 ("Cash Flow Notes"); (ii) to payments of
outstanding amounts under the Working Capital Facility; and (iii) to repayments
of principal on the Cash Flow Notes. Under the Company's certificate of
incorporation, after all reorganization debt has been repaid, the Company must
pay mandatory dividends on its common stock in an
52
<PAGE> 55
amount equal to 25% of Available Cash. (If, however, the Series Preferred Stock
closing occurs, the charter provision requiring mandatory dividends equal to 25%
of available cash will be eliminated.)
If there is no Available Cash on a payment date, the then current interest
on the Cash Flow Notes is not due or payable on that payment date or at any time
thereafter. Due to the necessity to establish reserves against future mandatory
debt, capital and operating expenditures, the Company did not have any Available
Cash to enable it to make payments on the Cash Flow Notes through December 31,
1996. Accordingly, the Company did not accrue any interest on the Cash Flow
Notes during 1996, 1995 and 1994. Also, based upon the Company's existing debt
obligations, its anticipated net cash flows and its business plan, management
does not anticipate the Company having Available Cash in the foreseeable future.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data required under Item 8
are provided as exhibits under Item 14 and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Except for the information with respect to the Company's executive
officers, which is set forth in Part I under the caption "Executive Officers of
Atlantic Gulf", the information called for by this Item is incorporated by
reference from the Company's Definitive Proxy Statement for the 1997 Annual
Stockholders' Meeting to be filed with the Securities and Exchange Commission on
or before April 30, 1997.
Item 11. Executive Compensation
The information called for by this Item is incorporated by reference
from the Company's Definitive Proxy Statement for the 1997 Annual Stockholders'
Meeting to be filed with the Securities and Exchange Commission on or before
April 30, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by this Item is incorporated by reference
from the Company's Definitive Proxy Statement for the 1997 Annual Stockholders'
Meeting to be filed with the Securities and Exchange Commission on or before
April 30, 1997.
53
<PAGE> 56
Item 13. Certain Relationships and Related Transactions
The information called for by this Item is incorporated by reference
from the Company's Definitive Proxy Statement for the 1997 Annual Stockholders'
Meeting to be filed with the Securities and Exchange Commission on or before
April 30, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
a. Consolidated Balance Sheets as of December 31, 1996 and
1995
b. Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1995 and 1994
c. Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994
d. Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994
2. Financial Statement Schedules required to be filed by Item 8
and by Item 14(d).
a. Schedule II - Valuation and Qualifying Accounts
3. Exhibits required by Item 601 of Regulation S-K. See (c) below.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on October 4, 1996, pursuant to
Item 5, Other Events, reporting the closing of the Foothill
Refinancing.
(c) Exhibits Required for Form 10-K by Item 601 of Regulation S-K, as
indicated in the Exhibit Table in Item 601.
3. Articles of Incorporation and By-laws
a. Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 2(a) to GDC's
Form 8-A dated March 20, 1992).
b. Restated By-laws of the Company.**
c. Certificate of Amendment to the Restated Certificate of
Incorporation of Atlantic Gulf Communities Corporation,
dated June 22, 1993.***
4. Instruments defining the rights of security holders, including
indentures
54
<PAGE> 57
a. Second Amended and Restated Revolving Loan Agreement dated
as of September 30, 1996, as amended as of March 31, 1997.
b. Second Amended and Restated Secured Floating Rate Note
Agreement dated as of September 30, 1996.
c. Form of warrant granted on September 30, 1996.
d. Indemnification Agreement between Atlantic Gulf Communities
Corporation, General Development Utilities, Inc.,
NationsBank of North Carolina, N.A., Barclays Bank, PLC,
New York Branch, and The Bank of New York dated as of
December 28, 1993.***
e. The Company is a party to a number of other instruments
defining the rights of holders of long-term debt. No such
instrument authorizes an amount of securities in excess of
10 percent of the total assets of the Company and its
subsidiaries on a consolidated basis. On request, the
Company agrees to furnish a copy of each such instrument to
the Commission.
10(i).Certain material contracts not in the ordinary course of business
8. Final Judgment of Permanent Injunction and Other Relief as
to Defendant General Development Corporation dated November
30, 1990, entered in United States of America v. General
Development Corporation, Case No. 90-879-CIV-Nesbitt (S.D.
Fla) (with Restitution Program attached as exhibit to Final
Judgment).*
9. Trust Agreement among GDC and NCNB National Bank of Florida
as Trustee, dated as of January 17, 1991 (for GDC-owned
developed lots in Florida).*
12. Tennessee Trust Agreement between GDC and Joe M. Looney,
Esq. as Trustee, dated as of December 29, 1989 (for
GDC-owned lots in Tennessee).*
13. Trust Agreement No. 2 between GDC and Joe M. Looney, Esq.
as Trustee, dated as of May 31, 1991 (for GDFS-owned lots
in Tennessee).*
20. Class 14 Utility Trust Agreement between Atlantic Gulf
Communities Corporation and First Union National Bank of
Florida as Trustee, dated as of December 8, 1992.**
21. Homesite Program Utility Fund Trust Agreement between
Atlantic Gulf Communities Corporation and First Union
National Bank of Florida as Trustee, dated as of December
8, 1992.**
22. Agreement of Nanjing Ya Dong International Corporation
Limited, dated September 1993, between Nanjing Huan Dong
Enterprise/Nanjing Xianlin Agricultural and Grazing Farm
and Atlantic Gulf Asia Holdings N.V.***
23. Joint Venture Contract of Nanjing Ya Dong International
Corporation Limited, dated September 1993, between Nanjing
Huan Dong Enterprise/Nanjing Xianlin Agricultural and
Grazing Farm and Atlantic Gulf Asia Holdings N.V.***
55
<PAGE> 58
24. Articles of Association of Nanjing Ya Dong International
Corporation Limited, dated September 1993, between Nanjing
Huan Dong Enterprise/Nanjing Xianlin Agricultural and
Grazing Farm and Atlantic Gulf Asia Holdings N.V.***
25. Division Class 14 Utility Fund Trust Agreement between the
State of Florida, Department of Business Regulation,
Division of Florida Land Sales, Condominiums, and Mobile
Homes, Atlantic Gulf Communities Corporation and First
Union National Bank of Florida dated as of April 10,
1993.***
26. Improvements Fund Trust Agreement between the State of
Florida, Department of Business Regulation, Division of
Florida Land Sales, Condominiums, and Mobile Homes,
Atlantic Gulf Communities Corporation and First Union
National Bank of Florida dated as of April 10, 1993.***
27. Section 365(J) Lien Trust Agreement dated as of June 25,
1993 between NationsBank of Florida, N.A., as Trustee, and
Atlantic Gulf Communities Corporation.***
28. Registration Rights Agreement dated as of September 30,
1996 between Atlantic Gulf Communities Corporation and the
lenders set forth in Exhibit A of the agreement.
10(ii). Certain contracts that ordinarily accompany the Registrant's
business
1. Service Agreement dated July 28, 1975, between GDC and GDU
relating to certain terms and conditions under which GDU
may conduct its utilities operations (incorporated hereby
by reference to Exhibit 10.4 to the Predecessor Company's
Registration Statement on Form S-1 filed June 28, 1985
(Registration No. 2-98706)).
10(iii). Certain management contracts, compensatory plans, contracts or
arrangements
9. Debtor's Motion for Authority to Establish and Implement
Key Executive Retention Plan and Separation Pay Plan and to
Revise Vacation Plan dated November 5, 1990, entered in In
re General Development Corporation, et al, Case No.
90-12231-BKC- AJC (S.D. Fla).*
10. Order Authorizing Debtors to Establish and Implement Key
Executive Retention Plan and Separation Pay Plan and to
Revise Vacation Plan dated January 15, 1991, entered in In
re General Development Corporation, et al, Case No.
90-12231-BKC- AJC (S.D. Fla).*
11. Atlantic Gulf Communities Corporation 401(k) Plan.**
12. Employment Agreement between GDC and J. Larry Rutherford
dated July 1, 1991.*
13. Modification of Employment Agreement between the Company
and J. Larry Rutherford dated July 1, 1992.**
19. Employment Agreement between the Company and Thomas W.
Jeffrey dated June 1, 1994.****
22. Atlantic Gulf Communities Corporation Employee Stock Option
Plan as amended, as adopted by Atlantic Gulf's Board on
April 6, 1993, and as approved by Atlantic Gulf's common
stockholders at the 1993 Annual Meeting of Shareholders.***
56
<PAGE> 59
26. Non-Employee Directors' Stock Option Plan as approved by
Atlantic Gulf's common stockholders at the 1995 Annual
Meeting of Shareholders.*****
27. Employment and Non-Competition Agreement between the
Company and J. Larry Rutherford dated January 1, 1995
(incorporated herein by reference to Exhibit 10.1 of
Atlantic Gulf's Quarterly Report on Form 10-Q for the
quarterly period ending June 30, 1995).*****
28. Employment Agreement between the Company and Brian A.
McLaughlin dated July 1, 1995 (incorporated herein by
reference to Exhibit 10.2 of Atlantic Gulf's Quarterly
Report on Form 10-Q for the quarterly period ending June
30, 1995).*****
29. Atlantic Gulf Communities Corporation 1996 Non-Employee
Directors' Stock Plan (incorporated herein by reference to
Exhibit A to the Proxy Statement dated April 22, 1996).
21. Subsidiaries of the Company
23. Accountants' Consent - Ernst & Young LLP
27. Financial Data Schedule
- --------------------------------------
* These exhibits are incorporated herein by reference to the
exhibits of the same designation to the Predecessor Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
** These exhibits are incorporated herein by reference to the
exhibits of the same designation to Atlantic Gulf's Annual
Report on Form 10-K for the year ended December 31, 1992.
*** These exhibits are incorporated herein by reference to the
exhibits of the same designation to Atlantic Gulf's Annual
Report on Form 10-K for the year ended December 31, 1993.
**** These exhibits are incorporated herein by reference to the
exhibits of the same designation to Atlantic Gulf's Annual
Report on Form 10-K for the year ended December 31, 1994.
*****These exhibits are incorporated herein by reference to the
exhibits of the same designation to Atlantic Gulf's Annual
Report on Form 10-K for the year ended December 31, 1995.
(d) Financial Statement Schedules required by Regulation S-X that are
excluded from the Annual Report to Shareholders by Rule 14a-3(b)
promulgated pursuant to Section 14 of the Securities Exchange Act of
1934, including (1) separate financial statements of subsidiaries and
50 percent of less owned persons; (2) separate financial statements
of affiliates whose securities are pledged as collateral; and (3)
schedules.
57
<PAGE> 60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ATLANTIC GULF COMMUNITIES CORPORATION
By: /s/ Thomas W. Jeffrey
-----------------------------
Thomas W. Jeffrey
Executive Vice President
and Chief Financial Officer
Date: April 11, 1997
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ J. Larry Rutherford Date: April 11, 1997
- --------------------------------
J. Larry Rutherford
Director, President and
Chief Executive Officer
/s/ Callis N. Carleton Date: April 11, 1997
- --------------------------------
Callis N. Carleton
Vice President and Controller
(Principal Accounting Officer)
/s/ James W. Apthorp Date: April 11, 1997
- --------------------------------
James W. Apthorp
Chairman of the Board
/s/ Gerald N. Agranoff
- -------------------------------- Date: April 11, 1997
Gerald N. Agranoff
Director
58
<PAGE> 61
/s/ Allen A. Blase Date: April 11, 1997
- -----------------------
Allen Blase
Director
/s/ Jerome J. Cohen Date: April 11, 1997
- ----------------------
Jerome J. Cohen
Director
/s/ Raymond Ehrlich Date: April 11, 1997
- ----------------------
Raymond Ehrlich
Director
/s/ W.D. Frederick, Jr. Date: April 11, 1997
- -----------------------
W.D. Frederick, Jr.
Director
Date: April 11, 1997
- ---------------------
W. Edward Scheetz
Director
/s/ Lawrence B. Seidman Date: April 11, 1997
- -----------------------
Lawrence B. Seidman
Director
/s/ John W. Temple Date: April 11, 1997
- ------------------------
John W. Temple
Director
59
<PAGE> 62
INDEX TO FINANCIAL STATEMENTS
Atlantic Gulf Communities Corporation and Subsidiaries
Consolidated Financial Statements
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-3
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995
and 1994 F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995
and 1994 F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996,
1995 and 1994 F-6
Notes to Consolidated Financial Statements F-7
Consolidated Financial Statement Schedules for each of the periods in the three
years ended December 31, 1996:
Schedule II - Valuation and Qualifying Accounts S-1
All schedules other than those indicated in the index have been
omitted as the required information is inapplicable or not material,
or the information is presented in the Consolidated Financial
Statements and Notes thereto.
</TABLE>
<PAGE> 63
Report of Ernst & Young LLP
Independent Certified Public Accountants
Board of Directors
Atlantic Gulf Communities Corporation
We have audited the accompanying consolidated balance sheets of Atlantic
Gulf Communities Corporation and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1996. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Atlantic Gulf Communities Corporation and subsidiaries at
December 31, 1996 and 1995, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information
set forth therein.
ERNST & YOUNG LLP
Miami, Florida
February 27, 1997
F-2
<PAGE> 64
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
(in thousands of dollars)
<TABLE>
<CAPTION>
1996 1995
---- ----
Assets
<S> <C> <C>
Cash and cash equivalents $ 7,050 $ 3,560
Restricted cash and cash equivalents 6,034 8,461
Contracts receivable, net 9,649 14,350
Mortgages, notes and other receivables, net 63,800 45,479
Land and residential inventory 153,417 218,270
Property, plant and equipment, net 2,911 17,657
Other assets, net 20,532 25,048
--------- ---------
Total assets $ 263,393 $ 332,825
========= =========
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $ 16,914 $ 21,078
Customers' and other deposits 5,483 6,091
Contributions in aid of construction -- 4,530
Other liabilities 15,393 25,747
Notes, mortgages and capital leases 169,215 220,999
--------- ---------
207,005 278,445
--------- ---------
Commitments and contingencies
Stockholders' equity
Common stock, $.10 par value, 15,665,000
shares authorized; 9,795,642 and 9,771,521 shares issued 980 977
Contributed capital 122,123 120,115
Accumulated deficit (60,706) (61,887)
Minimum pension liability adjustments (6,000) (4,825)
Treasury stock, 86,277 shares in 1996, at cost (9) --
--------- ---------
Total stockholders' equity 56,388 54,380
--------- ---------
Total liabilities and stockholders' equity $ 263,393 $ 332,825
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 65
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31, 1996, 1995 and 1994,
(in thousands, except per share data)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Real estate sales:
Homesite $ 43,910 $ 24,106 $ 15,040
Tract 62,693 31,055 25,793
Residential 20,962 27,742 11,467
--------- --------- --------
Total real estate sales 127,565 82,903 52,300
Other operating revenue 4,919 6,748 9,784
Interest income 6,295 7,765 8,263
Other income:
Reorganization reserves 18,597 10,676 700
Other income 7,911 5,260 34,915
--------- --------- --------
Total revenues 165,287 113,352 105,962
--------- --------- --------
Costs and expenses:
Direct cost of real estate sales:
Homesite 35,235 17,151 10,472
Tract 51,354 26,108 17,892
Residential 16,725 23,150 10,144
--------- --------- --------
Total direct cost of real estate sales 103,314 66,409 38,508
Inventory valuation reserves 12,283 4,851 --
Selling expense 13,525 9,820 7,532
Other operating expense 1,986 4,037 7,085
Other real estate costs 19,384 20,545 22,644
General and administrative expense 11,510 10,405 10,551
Depreciation 900 1,215 1,105
Cost of borrowing, net of amounts capitalized 13,430 14,274 14,818
Other expense 1,506 2,392 2,638
--------- --------- --------
Total costs and expenses 177,838 133,948 104,881
--------- --------- --------
Income (loss) before extraordinary items (12,551) (20,596) 1,081
Extraordinary gains on extinguishment of debt 13,732 -- --
--------- --------- --------
Net income (loss) $ 1,181 $ (20,596) $ 1,081
========= ========= ========
Income (loss) before extraordinary items
per common share $ (1.29) $ (2 .12) $ .11
========= ========= ========
Net income (loss) per common share $ .12 $ (2 .12) $ .11
========= ========= ========
Weighted average common shares outstanding 9,709 9,708 9,643
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 66
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1996, 1995 and 1994
(in thousands of dollars)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,181 $ (20,596) $ 1,081
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 5,244 6,879 6,088
Other income (19,337) (8,922) (700)
(Gain) loss from sale of property, plant and equipment 94 (44) (715)
Gains from utility condemnations or sales (5,504) (219) (34,200)
Gain from sale of stock of wholly-owned subsidiaries -- (2,353) --
Extraordinary gains from extinguishment of debt (13,732) -- --
Reorganization items (1,477) (2,589) (3,536)
Inventory valuation reserves 12,283 4,851 --
Land acquisitions (9,338) (7,607) (8,549)
Other net changes in assets and liabilities:
Restricted cash 2,427 1,248 3
Receivables (403) (5,238) (1,008)
Land and residential inventory 61,694 21,463 10,790
Other assets (12,367) (5,311) (7,344)
Accounts payable and accrued liabilities (2,753) (3,641) 5,342
Customer deposits (414) 1,578 2,672
Other liabilities (2,317) (4,244) (2,703)
Other, net (273) (125) (455)
--------- --------- --------
Net cash provided by (used in) operating activities 15,008 (24,870) (33,234)
--------- --------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (228) (1,555) (3,576)
Proceeds from sale of property, plant & equipment 1,885 204 2,466
Proceeds from utility condemnations or sales 28,699 850 45,030
Proceeds from sale of stock of wholly-owned subsidiaries -- 2,701 --
--------- --------- --------
Net cash provided by investing activities 30,356 2,200 43,920
--------- --------- --------
Cash flows from financing activities:
Borrowings under credit agreements 123,848 44,538 61,851
Repayments under credit agreements (161,477) (24,662) (80,922)
Principal payments on other liabilities (4,250) (5,987) (8,211)
Proceeds from sale of note receivable -- -- 15,137
Proceeds from exercise of stock options 5 44 --
--------- --------- --------
Net cash provided by (used in) financing activities (41,874) 13,933 (12,145)
--------- --------- --------
Increase (decrease) in cash and cash equivalents 3,490 (8,737) (1,459)
Cash and cash equivalents at beginning of period 3,560 12,297 13,756
--------- --------- --------
Cash and cash equivalents at end of period $ 7,050 $ 3,560 $ 12,297
========= ========= ========
Supplemental cash flow information:
Income tax payments (refunds) $ -- $ -- $ (917)
========= ========= ========
Interest payments, net of amounts capitalized $ 12,268 $ 7,269 $ 9,470
========= ========= ========
Reorganization item payments $ 5,099 $ 7,298 $ 10,079
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 67
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
Minimum
Contri- Pension
Common Stock buted Accumulated Liability Treasury
Shares Amount Capital Deficit Adjustments Stock
------ ------ ------- ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 1994 9,603 $975 $119,015 $ (42,372) $ (4,265) $(202)
- ---------------------------------------------------------------------------------------------------------------------------
Net income - - - 1,081 - -
Stock returned (3) - - - - -
Shares issued under director
stock plan 19 - (20) - - 20
Shares issued as minimum
pension contribution 56 - 533 - - 80
Minimum pension liability
adjustment - - - - (115) -
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 9,675 975 119,528 (41,291) (4,380) (102)
- ---------------------------------------------------------------------------------------------------------------------------
Net loss - - - (20,596) - -
Stock returned (3) - - - -
Shares issued as minimum
pension contribution 31 - 206 - - 42
Minimum pension liability
adjustment - - - - (445) -
Exercise of stock options 8 1 43 - - -
Shares issued as Secured Floating
Rate Note fees 61 1 338 - - 60
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 9,772 977 120,115 (61,887) (4,825) -
- ---------------------------------------------------------------------------------------------------------------------------
Net income - - - 1,181 - -
Stock returned (86) - - - - (9)
Shares issued under director
stock plan 18 2 98 - - -
Warrants issued to pay down
Secured Cash Flow Notes - - 1,875 - - -
Exercise of stock options 1 - 5 - - -
Minimum pension liability
adjustment - - - - (1,175) -
Shares issued to director as
recapitalization committee fee 4 1 30 - - -
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 9,709 $980 $122,123 $ (60,706) $(6,000) $ (9)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 68
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) GENERAL
Atlantic Gulf Communities Corporation ("Atlantic Gulf" or the
"Company") is principally engaged in the business of
acquisition, development and sale of new subdivision and
scattered developed homesites and land tracts, residential
construction and sales and providing other related real
estate asset management services.
(b) CONSOLIDATION
The consolidated financial statements include the accounts of
the Company and all significant subsidiaries. All significant
intercompany accounts and transactions have been eliminated
in consolidation.
(c) USE OF ESTIMATES
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that effect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
(d) REORGANIZATION AND FRESH START REPORTING
In April 1990 (the "Petition Date"), Atlantic Gulf's
predecessor corporation ("Predecessor Company") and certain
of its subsidiaries filed for reorganization under Chapter 11
of the United States Bankruptcy Code. The Predecessor
Company's Plan of Reorganization ("POR") was confirmed on
March 27, 1992 by the Bankruptcy Court and became effective
on March 31, 1992 ("Effective Date"). Atlantic Gulf, as the
successor Company, adopted a new charter and business plan to
be implemented by its new board of directors and management.
The Company adopted "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("Fresh Start
Reporting") as of the Effective Date in accordance with
American Institute of Certified Public Accountants' Statement
of Position No. 90-7. Accordingly, the Company's consolidated
financial statements have been prepared as if the Company
were a new reporting entity as of, and for the periods
subsequent to, the Effective Date (see Note 18).
(e) NET INCOME (LOSS) PER COMMON SHARE
The net income (loss) per common share is based on the
weighted average number of shares of common stock outstanding
during the periods. The effect of outstanding warrants and
options to
F-7
<PAGE> 69
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
purchase common stock on the per share computations was
anti-dilutive or not material during the periods.
(f) REAL ESTATE SALES
Revenue from the sale of residential units other than Regency
Island Dunes ("Regency") condominium units is recognized when
the earnings process is complete. Revenue from the sale of
Regency condominium units is recognized using the
percentage-of-completion method. Earned revenue is based on
the percentage of costs incurred to date to total estimated
costs to be incurred. This percentage is then applied to the
expected revenue associated with units that have been sold to
date. Revenue from the sale of land is recognized when the
cash received is at least 20% for land sales other than
retail land sales and 10% for retail land sales, the earnings
process is complete and the collection of any remaining
receivable is reasonably assured.
Cost of residential sales other than Regency condominium
sales is determined on a specific identification basis. Cost
of sales associated with Regency condominium sales is
determined using the percentage-of-completion method. Cost of
land sales is determined on a project basis using the
relative sales value method.
(g) LAND AND RESIDENTIAL INVENTORY
The Company's cost of land was determined in connection with
its application of Fresh Start Reporting. Costs capitalized
are allocated on a specific project identification basis.
Residential unit costs are accounted for on a specific
identification basis and all land and residential inventory
is carried at the lower of cost or net realizable value.
(h) DEPRECIATION
Depreciation and amortization is provided on a straight-line
basis on the following assets:
<TABLE>
<CAPTION>
Estimated useful
lives in years
----------------
<S> <C>
Land improvements 5 to 33
Buildings 10 to 40
Fixtures and equipment 3 to 10
Utility equipment and facilities 3 to 50
</TABLE>
Maintenance and repairs are charged to income as incurred.
Renewals and betterments to owned properties are capitalized.
Betterments to leased properties are capitalized and
amortized over the shorter of the terms of the leases or the
lives of the betterments.
F-8
<PAGE> 70
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(i) INCOME TAXES
Income taxes have been provided using the liability method
in accordance with FASB Statement No. 109, Accounting for
Income Taxes.
(j) CAPITALIZED INTEREST
The Company capitalizes interest on land and residential
inventory under development on a specific project
identification basis. Capitalized interest approximated
$5,693,000, $7,418,000 and $5,101,000 during the years ended
December 31, 1996, 1995 and 1994, respectively.
(k) CASH AND CASH EQUIVALENTS
The Company includes in cash and cash equivalents all highly
liquid debt instruments purchased with a maturity of three
months or less. The credit risk associated with cash and cash
equivalents is considered low due to the high quality of the
financial instruments in which these assets are invested.
Restricted cash and cash equivalents include amounts pursuant
to escrows for the sale of real estate properties,
development cash collateral accounts, funds in a trust to pay
certain bankruptcy claims and various other escrow accounts.
(l) CONTRIBUTIONS IN AID OF CONSTRUCTION
Advances from real estate developers and other direct
contributions to utility subsidiaries for plant construction
are recorded as "contributions in aid of construction." To
the extent required by regulatory agencies, the balance is
amortized over the depreciable life of utility equipment and
facilities as an offset to depreciation expense amounting to
$65,000, $131,000 and $130,000 for the years ended December
31, 1996, 1995 and 1994, respectively. During 1996, the
Company sold its two remaining utility facilities, therefore,
there are no contributions in aid of construction on the
accompanying consolidated balance sheets as of December 31,
1996.
(m) DEFERRED DEBT ISSUANCE COSTS
Costs associated with the issuance of the Company's various
debt instruments or closing of other financing transactions
have been deferred and are being amortized over the term of
the related debt. Amortization of deferred debt issuance
costs, included in cost of borrowing, net in the accompanying
consolidated statements of operations, was $1,187,000,
$2,458,000 and $2,260,000 for the years ended December 31,
1996, 1995 and 1994, respectively.
F-9
<PAGE> 71
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(n) REPORTING ON ADVERTISING COSTS
Effective January 1, 1995, the Company adopted Statement of
Position (SOP) 93-7, "Reporting on Advertising Costs," issued
by the American Institute of Certified Public Accountants.
Adoption of SOP 93-7 had no effect on the consolidated
financial statements.
The Company expenses advertising costs as incurred. The
Company recognized advertising expenses of $3,577,000,
$2,126,000 and $2,318,000 for the years ended December 31,
1996, 1995 and 1994, respectively and these expenses are
included in selling and other real estate costs in the
accompanying consolidated statements of operations. The
Company did not incur any direct response advertising cost,
as defined by SOP 93-7, during the period.
(o) ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company will continue to account for stock-based
compensation plans under the provisions of APB 25 -
Accounting for Stock Issued to Employees. The Company
discloses the pro forma information required for stock-based
compensation plans in accordance with FAS 123 (see Note 20).
(p) RECLASSIFICATION
Certain amounts in the consolidated financial statements have
been reclassified to conform with the 1996 presentation.
(2) MANAGEMENT'S PLANS
The Company's near-term plan is to consummate the transactions
contemplated by the Investment Agreement dated as of February 7, 1997
with Apollo. The Company's high degree of leverage, combined with the
illiquid nature of its assets have resulted in the Company having
insufficient liquidity and capital resources to fully implement its
business plan and generate net income and increase stockholder value.
The Company plans to utilize the funds that result from the Apollo
transaction as follows:
(a) Increase investment in new real estate development projects,
on a wholly owned instead of joint venture basis, thereby
increasing the Company's potential rate of return.
(b) Seek more favorable terms and conditions from the Company's
lenders and other holders of company debt, thereby reducing
the cost of borrowing.
The Company's near-term plan anticipates the Company generating
approximately $115 million of cash available for debt service in 1997
from several sources, including (i) the increased cash generated from
ongoing core operations, including subdivision homesite and
condominium sales; (ii) the accelerated disposition of non-core tract
and scattered homesite assets through the efforts of the Company's
in-house
F-10
<PAGE> 72
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
sales staff in cooperation with outside brokers; (iii) the sale or
financing of any mortgage or other receivables acquired through real
estate sales; (iv) approximately $12.1 million in cash proceeds from
the various trusts established; and (v) the potential sale of the
Company's interest in one or more of its primary market projects.
Management believes the backlog of subdivision homesite sales ($15.2
million) and non-core real estate sales ($19.3 million) under contract
carried into 1997 plus the sources noted above will supply sufficient
cash to satisfy the 1997 debt service payments. Management believes
the near-term plan referred to above will strengthen its ability to
obtain sufficient liquidity and capital resources necessary to satisfy
its future debt obligations and to obtain financing to continue to
implement its business plan.
The Company will continue to explore alternative sources of funds
including refinancing or recapitalization of certain of its 1997
and/or 1998 debt obligations.
The Company's goal is to produce superior returns for shareholders by
liquidating Predecessor assets, paying off debt, reducing overhead,
and becoming the leading supplier of finished homesites to builders in
Florida's fastest growing markets and selected primary markets in the
Southeast without the exposure associated with carrying a substantial
inventory of land. The Company's historical operating performance has
been adversely affected by (i) investments undertaken to produce
future profits, (ii) high debt costs, (iii) significant carrying costs
attributable to its substantial but slower moving Predecessor
inventory in secondary real estate markets and (iv) the time interval
between asset acquisition, development and sale. Management
anticipates that revenues from many of the Company's investments
during the past three years will begin to be recognized in 1997. The
Company anticipates its business plan will be fully implemented in
1998, assuming availability of appropriate capital resources, which
cannot be assured.
The Company's business plan for 1997 contemplates that expenditures
for development, construction and other capital improvements could
range up to $50 million, of which a substantial portion would need to
be funded through individual project development loans or joint
venture arrangements, some of which are not yet in place. Management
believes that it can obtain the funds corresponding to the planned
1997 expenditures for development, construction, and other capital
improvements. However, if the Company is unable to obtain the capital
resources to fund these expenditures, the implementation of the
Company's business plan would be adversely affected, thus slowing the
Company's revenue growth and increasing the expected time necessary
for the Company to achieve profitability.
F-11
<PAGE> 73
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) CONTRACTS RECEIVABLE
The Company owns and manages a portfolio of retail land sales
contracts receivable generated by the Predecessor Company. At December
31, contracts receivable from retail land sales, net consisted of the
following (in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Contracts receivable, gross $11,779 $ 18,703
Reserve for estimated future cancellations,
net of estimated land recoveries (584) (1,112)
Valuation discounts to yield 15% (1,546) (3,241)
------- --------
$ 9,649 $ 14,350
======= ========
</TABLE>
Stated interest rates on homesite contracts receivable outstanding at
December 31, 1996 and 1995 range from 4% to 12.5% (averaging
approximately 7.0%). The original terms of these contracts were 10 to
12 years, and at December 31, 1996 and 1995, approximately 26% and
27%, respectively, of such homesite contracts receivable were
delinquent. Contracts are classified as delinquent if their monthly
payment is more than 30 days past due.
When a contract cancels, the Company recovers/restores the lot to
inventory at its estimated historical cost. Total future recoveries
are estimated at $1,243,000 and $1,517,000 as of December 31, 1996 and
1995, respectively, based on estimated future cancellations. The
Company's reserve for estimated future cancellations and its reserve
for contracts receivable termination refunds (see Note 9) are based on
1996 collection and cancellation experience, which is not necessarily
indicative of future trends. Due to higher than anticipated
cancellation activity in 1996, an adjustment was made in 1996 to
increase the reserve for future cancellations by $499,000 and the
reserve for estimated land recoveries by $104,000 resulting in a net
loss of $395,000 recorded in other expense in the accompanying
consolidated statements of operations. Due to better than anticipated
collection and cancellation activity in 1995, an adjustment was made
in 1995 to reduce the reserve for future cancellations by $1,856,000
and the reserve for estimated land recoveries by $1,812,000 resulting
in a net gain of $44,000 recorded in other income in the accompanying
consolidated statements of operations. The Company believes that a
downturn in the economy is the most significant factor which could
materially impact the future collectibility of the contracts
receivable portfolio. As of December 31, 1996, the Company believes
its contracts receivable reserves are adequate based on current and
foreseeable economic trends. There are no significant concentrations
of credit risk associated with this portfolio.
Pursuant to the Company's business plan to monetize receivables
generated as a result of the sale of Predecessor assets, the Company
closed on a $7.5 million financing in January 1997 of a portion of its
F-12
<PAGE> 74
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
contracts receivable portfolio with Litchfield Financial Corporation
("Litchfield"). The proceeds were used to reduce corporate debt and to
fund ongoing operations.
The Company amortizes the valuation discounts over the expected life
of the receivable portfolio. This amortization, included in results of
operations in the accompanying consolidated statements of operations,
amounted to $1,153,000, $1,472,000 and $2,000,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. The valuation
discounts were reduced by $542,000 in 1996 due to higher than
anticipated collection and cancellation activity since the Effective
Date resulting in a gain of $542,000 recorded in other income in the
accompanying consolidated statements of operations.
As of December 31, 1996, scheduled principal collections on the
contracts receivable portfolio for the five years ending December 31,
2001 are as follows: 1997 - $3,702,000, 1998 - $2,916,000, 1999 -
$2,210,000, 2000 - $1,563,000 and 2001 - $950,000.
The contracts receivable portfolio serves as collateral for a portion
of the Company's indebtedness (see Note 10).
(4) MORTGAGES, NOTES AND OTHER RECEIVABLES
At December 31, mortgages, notes and other receivables, net consisted
of (in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land mortgages receivable,
net of valuation discounts and reserves of
$2,605 and $3,499 $ 32,028 $ 21,959
Regency percentage-of-completion receivable 14,801 17,989
Utility trust fund withdrawal receivable 12,109 --
Cumberland Cove land mortgages receivable, net 1,120 3,142
Other receivables 3,742 2,389
-------- --------
$ 63,800 $ 45,479
======== ========
</TABLE>
The portfolio of land mortgages receivable relates primarily to seller
financing associated with sales of the Company's Predecessor tract
inventory. Mortgages in the portfolio as of the Effective Date were
discounted to yield 18%. Mortgages issued during 1994 were discounted
to yield prime plus 3% at the date of closing respectively, resulting
in a reduction in the valuation of real estate sales of $213,000 for
the year ended December 31, 1994 in the accompanying consolidated
statements of operations. Subsequent to December 31, 1994, mortgages
have been issued with a stated rate of approximately prime plus 2%;
therefore, no mortgage valuation discounts were incurred for mortgages
issued in 1995 and
F-13
<PAGE> 75
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1996. However, the valuation discount associated with the land
mortgages receivable was increased by approximately $1.2 million to
$2.1 million in 1995 and charged to other expense in the accompanying
consolidated statements of operations based on an anticipated sale of
the land sales mortgages in 1996. During 1996, the mortgages which
were anticipated to be sold were financed instead and, due to the
non-recourse provisions associated with the financing transaction
which reduced the foreclosure exposure to the Company, the valuation
discount was reduced by $1.2 million to $900,000 in 1996 and recorded
in other income in the accompanying consolidated statements of
operations. The land mortgages portfolio is also net of a valuation
reserve of $1.7 million as of December 31, 1995 of which $1.3 million
was reserved for in 1995 and charged to inventory valuation reserves
in the accompanying consolidated statements of operations.
Substantially all land sale mortgages receivable are due within five
years. Approximately 26% of the land mortgages receivable resulted
from sales made to a single trustee with multiple investors. The value
of the Florida land securing these mortgages is estimated to equal or
exceed the net book value of the related receivables.
In July 1996, pursuant to the Company's business plan to monetize
receivables generated as a result of the sale of Predecessor assets,
the Company sold to a limited partnership financed by Harbourton
Residential Capital Company, Ltd. ("Harbourton") approximately $19.8
million of mortgage receivables. The Company received an initial cash
distribution of approximately $13.3 million at closing, plus a
residual interest in the limited partnership. This sale was recorded
as a financing transaction, therefore, the underlying mortgage
receivables remained on the Company's accompanying consolidated
balance sheets and a mortgage loan payable was recorded for the amount
of the proceeds. The proceeds were used to reduce corporate debt and
to fund ongoing operations (see Note 10).
In March 1997, the Company sold approximately $9.3 million of mortgage
receivables to the First Bank of Boston for approximately $7 million.
The sale includes a repurchase option by the Company, subject to
certain conditions. The proceeds were used to reduce corporate debt
and to fund ongoing operations.
The Regency percentage-of-completion receivable represents earned
revenue recorded using the percentage-of-completion method for Regency
Island Dunes condominium units which were under contract but had not
closed as of December 31, 1996 and 1995, respectively. The Regency
Island Dunes condominium project consists of two 72-unit buildings.
The construction on the first building was approximately 97% complete
and 59 units were under contract as of December 31, 1995 generating a
receivable of $18 million which was collected during 1996 upon the
closing of these units. An additional eight units in the first
building were sold and closed during 1996. As of December 31, 1996,
construction of the second building was approximately 79% complete and
56 units were sold generating a receivable of $14.8 million. The
revenue and profit recorded in 1996 on the second building represents
79% of the expected revenue and profit on the 56 units which were
under contract as of December 31, 1996. Additional revenue and profit
will be recognized as the construction progresses and more units are
sold. The receivable balance of $14.8 million as of December 31, 1996
is anticipated to be collected in full by the third quarter of 1997
upon the closing of these units.
F-14
<PAGE> 76
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following is a summary of costs and estimated earnings associated
with the Company's Regency condominium project as of December 31 (in
thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Costs incurred on uncompleted contracts
and estimated earnings $14,801 $ 17,989
Less: Deposits to date (3,981) (4,820)
------- --------
$10,820 $ 13,169
======= ========
</TABLE>
As part of a settlement of the Company's improvement obligations to
the Predecessor Company's retail homesite customers, various trusts
were established. The Company funded these trusts with cash, stock and
notes based on estimates of the costs of the future improvement
obligations. The terms of these trusts and reserves require the
Company to periodically assess the adequacy of the property in the
trusts and reserves and any excess or deficiency will accrue to the
benefit or become an obligation of the Company (see Note 13). In
December 1996, upon review of these trusts, it was determined that
approximately $12.1 million in cash plus $6.2 million of notes could
be recovered from various utility trusts. A receivable for the $12.1
million, which was received in January 1997, was recorded as of
December 31, 1996 in the accompanying consolidated balance sheets and
a gain of $11.9 million, net of expenses, was recorded in other income
in the accompanying consolidated statements of operations.
The portfolio of Cumberland Cove land mortgages receivable relates to
seller financing associated with sales of the Company's scattered
homesite inventory in Cumberland Cove, Tennessee. These receivables
generally bear interest at rates ranging from 9.4% to 10.9%, depending
on the down payment, and a term of 10 years. Valuation discounts of
$242,000 and $236,000 associated with these mortgages were recorded
and are included as a reduction to real estate revenues in the
accompanying consolidated statements of operations for the years ended
December 31, 1996 and 1995, respectively. In 1996, the Company
obtained a commitment from Litchfield to buy up to $7 million of deeds
of trusts associated with the Cumberland Cove mortgages by December
31, 1997. During 1996, the Company closed on approximately $4.5
million under this commitment. A reserve of $341,000 was recorded
associated with these sales and was recorded in other expense in the
accompanying statements of operations.
In October 1995, the Company sold its residential mortgages receivable
portfolio for $2.4 million resulting in a loss of $694,000 which is
included in other expense in the accompanying consolidated statements
of operations.
The valuation discounts in 1995 and 1994 included unamortized interest
rate valuation discounts which were amortized based on the terms of
the related mortgages receivable and $610,000 and $741,000 was
included in interest income in the accompanying consolidated
statements of operations for the years ended December 31, 1995 and
1994, respectively. The valuation discount balance in 1996 did not
contain an
F-15
<PAGE> 77
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
unamortized interest rate valuation discount component, therefore, no
amortization income was recorded in 1996.
Scheduled collections of principal on the land mortgages receivable
for the five years ending December 31, 2001 are as follows: 1997 -
$8,989,000, 1998 - $5,365,000, 1999 - $4,563,000, 2000 - $7,236,000
and 2001 - $7,937,000. Substantially all other receivables are
non-interest bearing and are due within one year.
Substantially all mortgages, notes and other receivables secure a
portion of the Company's debt (see Note 10).
(5) LAND AND RESIDENTIAL INVENTORY
At December 31, land and residential inventory consisted of the
following (in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Homesite inventory
Subdivision homesites $ 40,684 $ 50,272
Scattered homesites 43,871 56,534
Tract inventory 63,637 103,180
Residential inventory
Single family homes 253 2,452
Condominiums 4,972 5,832
-------- --------
$153,417 $218,270
======== ========
</TABLE>
Land inventory is net of net valuation reserves of $7.4 million and
$3.6 million as of December 31,1996 and 1995, respectively. In
conjunction with the Company's reviews in 1995 and 1996 of the net
realizable values associated with its inventories and land holdings,
the Company provided additional net valuation reserves to reduce the
carrying value of its inventories and land holdings in the amounts of
$10.4 million and $3.6 million for the years ended December 31, 1996
and 1995, respectively, which were charged to inventory valuation
reserves in the accompanying consolidated statements of operations.
Land inventory is also net of environmental reserves of $1.2 million
and $2.6 million as of December 31, 1996 and 1995, respectively (see
Note 13). Based on a review of the environmental reserve and recent
changes in Florida state laws, this reserve was reduced by $1.3
million in 1996 and recorded in other income in the accompanying
consolidated statements of operations.
During 1996, the Company purchased approximately 300 acres of property
in a project known as Estero Pointe, located in southwest Florida,
from various sellers for approximately $5.6 million of which $2.1
million was financed by the sellers through notes secured by mortgages
on the properties. The financed
F-16
<PAGE> 78
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
amounts totaling $2.1 million are non-cash financing activities and
therefore are not reflected in the accompanying consolidated
statements of cash flows.
In December 1995, the Company purchased a project known as Summerchase
consisting of approximately 320 acres of residential property in
Broward County, Florida for $6.5 million of which $2.6 million was
paid in cash with the remaining balance of $3.9 million financed by
the seller through a note secured by a mortgage on the property. The
financed amount of $3.9 million is a non-cash financing activity and
therefore is not reflected in the accompanying consolidated statements
of cash flows. The company sold this project in bulk in April 1996 for
$9.0 million.
In February 1995, the Company acquired a project known as West Meadows
consisting of approximately 900 acres located in the northeastern part
of the Tampa Bay area for $5.0 million, of which $1.5 million was paid
in cash and the balance of $3.5 million was financed by the seller
through a note secured by a mortgage on the property. The financed
amount of $3.5 million is a non-cash financing activity and therefore
is not reflected in the accompanying consolidated statements of cash
flows. In April 1996, the Company acquired an additional 240 acres of
this project for approximately $2.1 million, of which $1.8 million was
financed by the seller through a note secured by a mortgage on the
property. The financed amount of $1.8 million is a non-cash financing
activity and therefore is not reflected in the accompanying
consolidated statements of cash flows. The combined acreage in the
West Meadows project of approximately 1,140 acres is currently being
permitted for approximately 1,300 homesites.
The single family home inventory has decreased to $253,000 as of
December 31, 1996 as the Company has phased out its single family home
sales operations.
Substantially all of the Company's inventory serves as collateral for
the Company's debt (see Note 10) and certain of its other liabilities
and commitments (see Notes 9 and 13).
F-17
<PAGE> 79
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) PROPERTY, PLANT AND EQUIPMENT
At December 31, property, plant and equipment, net, at cost, consisted
of (in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land and improvements $ 992 $ 1,318
Buildings 1,392 1,998
Fixtures and equipment 3,992 3,259
Utility equipment and facilities -- 13,111
Construction in progress -- 1,724
------- --------
6,376 21,410
Accumulated depreciation (3,465) (3,753)
------- --------
$ 2,911 $ 17,657
======= ========
</TABLE>
During 1996, the Company sold its two remaining utility systems in
accordance with the Company's business plan to dispose of its non-core
operations and provide working capital to the Company. In February,
1996, the Company sold its Port LaBelle utility system to Hendry
County for $4.5 million resulting in a gain of $686,000 which is
included in other income in the accompanying statements of operations.
The proceeds were used to repay the Company's Secured Floating Rate
Notes. In June 1996, the Company sold its Julington Creek utility
system for $6.0 million resulting in a gain of $696,000 which is
included in other income in the accompanying consolidated statements
of operations. Of the net proceeds of approximately $5.7 million from
this sale, approximately $2.0 million was used to repay fully the
Company's Utilities loan and $3.0 million was used to repay the
Company's Secured Floating Rate Notes. Construction in progress as of
December 31, 1995 consisted primarily of costs associated with the
expansion of the Julington Creek utility mains and outfall facilities
which were substantially completed as of December 31, 1995 and were
placed into service in 1996 for a total cost of approximately $1.8
million.
In 1995, the Company sold Longwood Utilities, Inc. ("Longwood"), a
wholly-owned subsidiary, which operated a wastewater treatment plant
in the City of Longwood, Florida. Longwood was sold for $850,000
resulting in a gain of $219,000 which is included in other income in
the accompanying consolidated statements of operations.
During 1994, the Company sold its two remaining nine-hole golf courses
and certain other buildings in various communities with a net book
value of $1.8 million for total cash proceeds of $2.4 million,
resulting in a net gain of $715,000 which is included in other income
in the accompanying consolidated statements of operations.
Substantially all property, plant and equipment serve as collateral
for the Company's debt (see Note 10).
F-18
<PAGE> 80
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) OTHER ASSETS
Other assets consisted of the following as of December 31 (in
thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net utility condemnation asset $ -- $ 12,398
Ocean Grove joint venture 3,046 2,016
Sunset Lakes joint venture 5,854 1,950
Falcon Trace joint venture 3,638 --
Investment in China joint venture -- 1,883
Sanctuary joint venture -- 882
Other real estate related assets 4,038 3,002
Other assets 3,956 2,917
-------- --------
$ 20,532 $ 25,048
======== ========
</TABLE>
The utility condemnation asset represented the excess of net book
value over proceeds received from the taking of the Company's Port St.
Lucie utility system pursuant to condemnation proceedings. On March
15, 1996, the Company and the City of Port St. Lucie settled
litigation pursuant to these condemnation proceedings. Under the terms
of the settlement, the City of Port St. Lucie paid Atlantic Gulf
$18.75 million in April 1996 resulting in a gain of approximately $4.1
million for the year ended December 31, 1996 which is included in
other income in the accompanying statements of operations. In October
1994, the Company settled litigation pursuant to condemnation
proceedings associated with its Charlotte County utility system for an
additional $45 million in cash which was paid to the Company in
December 1994. This $110 million settlement resulted in a net gain of
$34.2 million for the year ended December 31, 1994 which is included
in other income in the accompanying consolidated statements of
operations.
In January 1995, the Company acquired a two-acre parcel in a six-acre
project known as Ocean Grove for approximately $2 million in cash. In
January 1996, the Company purchased the remaining four acres for
approximately $2.2 million in cash. The project is planned for
construction of 162 luxury oceanfront condominiums consisting of three
six-story towers located in the City of Jupiter in Palm Beach County,
Florida. In June 1995, an unaffiliated third party acquired a 50%
joint venture interest in this project for $3.8 million, $1.8 million
of which was paid in June 1995 and $2 million of which was paid in
January 1996. The joint venture is currently in the process of
replanning and permitting the site to encompass certain design
concepts utilized in the Regency Island Dunes project. The Company
accounts for this joint venture under the equity method.
In February 1994, the Company entered into a formation agreement and
subsequently in December 1995 entered into a joint venture agreement
with an unaffiliated third party (the "Sunset Lakes Joint Venture") to
finance, develop and sell approximately 1,950 acres located in
southwest Broward County in Florida. This project is expected to yield
approximately 1,800 residential homesites. The Company's percentage
F-19
<PAGE> 81
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
interest in the profits and losses of the Sunset Lakes Joint Venture
is 65%. In addition, the Company is entitled to a fee equal to 4% of
development costs, as defined in the joint venture agreement. The
Company accounts for this joint venture under the equity method.
In April 1996, the Company acquired approximately 390 acres in
southeast Orlando for approximately $5.3 million, of which $2.4
million was paid in cash and the balance of $2.9 million was financed
by Cypress Realty Limited Partnership ("Cypress") through an
acquisition loan secured by a mortgage on the property. This project,
known as Falcon Trace, is currently being permitted for approximately
900 homesites. In December 1996, and as amended in March 1997, the
Company and Cypress agreed to a restructuring in which title was
transferred into Falcon Trace Partners Limited Partnership ("Falcon
Trace Partnership") of which the Company is a limited partner. The
Company contributed its net investment in the project and its partner,
Falcon Trace-Cypress Limited Partnership, contributed all of its
right, title and interest to the mortgage on the property. The Company
has a 65% interest in the Falcon Trace Partnership after expenses and
fixed returns to the partners.
In September 1993, the Company entered into a Sino-Foreign equity
joint venture with a quasi-governmental entity in the city of Nanjing,
China (the "Ya Dong JV"), giving the Company a 50% joint venture
interest. The Ya Dong JV provides for the phased development of
approximately 4,000 agricultural acres located within the city limits
of Nanjing into a new, mixed-use city center. The Chinese partner's
capital contribution is the land use rights for the property and the
Company's capital contribution is in cash not to exceed $10 million.
The Company has contributed $6.0 million as of February 28, 1997. The
political, diplomatic and economic environment in China poses
significant uncertainty and risk to the project. Accordingly, in 1995,
the Company wrote down its investment in the joint venture by $642,000
to $1.9 million and charged other real estate costs in the
accompanying consolidated statements of operations. The Company has
made a proposal to its joint venture partner to transfer 35% of its
50% interest in the joint venture to its partners in return for a note
receivable in the amount of $2.25 million. The Company would retain a
15% interest in the joint venture. Due to the uncertainty associated
with the collection of this proposed receivable, the Company
established an inventory valuation reserve in the amount of $1.9
million in the accompanying consolidated statements of operations.
Consequently, the Company's net investment in this joint venture is
carried at $0.
Effective in October 1994, the Company entered into a joint venture
agreement as the general partner with an unaffiliated party (the
"Sanctuary Joint Venture") giving the Company a 50% interest in a $7.8
million mortgage acquired by the Sanctuary Joint Venture for $3.2
million (the "Sanctuary Mortgage"). The Sanctuary Mortgage encumbered
467 partially developed lots near Orlando, Florida. The Company
accounted for the Sanctuary Joint Venture under the equity method
until August 1996, at which time the Company purchased its partner's
interest in the joint venture. The Sanctuary Joint Venture generated a
net profit to the Company of $603,000 in 1995 which is included in
other income in the accompanying consolidated statements of
operations. There were no closings in this project during the first
eight months of 1996 prior to the Company acquiring its partner's
share, however, in the fourth quarter of 1996, the Company closed on
151 of the remaining 170 homesites.
F-20
<PAGE> 82
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Other real estate related assets include refundable deposits to
acquire additional property, costs incurred to obtain regulatory
permits and approvals to develop property under contract and prepaid
impact fees which will reduce the acquisition price or be recovered as
the Company sells the related property.
Other assets include other deposits and prepaid expenses.
(8) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At December 31, accounts payable and accrued liabilities consisted of
(in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Accounts payable, principally trade $ 5,647 $ 4,433
Accrued interest 932 5,707
Taxes, other than income taxes 5,604 4,906
Employee earnings and benefits 1,485 1,534
Other accrued liabilities 3,246 4,498
------- --------
$16,914 $ 21,078
======= ========
</TABLE>
Accrued interest decreased in 1996 due to an interest payment on the
Company's Mandatory Interest Notes on December 31, 1996.
Substantially all accounts payable and accrued liabilities are payable
within one year.
(9) OTHER LIABILITIES
Other liabilities consisted of the following as of December 31 (in
thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Section 365(j) lien liability $ 2,512 $ 4,901
Deferred property tax liability 550 2,642
Reserve for contracts receivable
termination refunds and other costs 3,654 5,325
Accrued pension liability 3,131 2,621
Bankruptcy and other reserves 5,546 10,258
------- --------
$15,393 $ 25,747
======= ========
</TABLE>
The Section 365(j) lien liability consists of the portion of the
claims of homesite purchasers whose homesite contracts were rejected
by the Company in the reorganization proceedings that is secured
pursuant to Section 365(j) of the Bankruptcy Code. The outstanding
balance of the liability bears interest at 1% over the Chemical Bank
reference rate adjusted annually as of March 31, not to exceed 11%.
This liability is payable semiannually on February 1 and August 1 in a
principal amount approximating $1.2
F-21
<PAGE> 83
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
million through August 1997. It is secured by approximately 9,800
acres of the Company's tract inventory (see Note 5).
The deferred property tax liability relates to claims asserted with
respect to property or ad valorem tax obligations of the Company that
are secured by liens on property of the Company that attached prior to
the Petition Date. The outstanding balance of the claim bears simple
interest at 9.25% as determined by the Bankruptcy Court. This
liability is payable semiannually on February 1 and August 1 with the
last installment due in August 1997. Outstanding amounts that are
secured by property being sold by the Company are also due at the time
of sale and reduce the amounts payable in future installments. During
the fourth quarter of 1995, the Company received a favorable court
ruling which declared that approximately $2.2 million of the deferred
property tax liability was an unsecured claim thereby reducing the
Company's liability. As a result, the Company recorded a $2.2 million
gain in 1995 in other income in the accompanying consolidated
statements of operations.
The reserve for contracts receivable termination refunds and other
costs relates to the Company's obligations to retail land sales
customers whose contracts were not terminated or rejected as a result
of the bankruptcy proceedings. Under the terms of the retail land
sales contract, if a customer defaults and the contract is canceled,
the customer is entitled to a refund of principal payments in excess
of the Company's damages, which generally has been stipulated at 20%
of the sales price. This obligation extends to the Company's owned
contracts receivable, as well as receivables transferred to lenders
under the terms of the POR with a face value of approximately $9
million as of December 31, 1996. The remaining amount represents the
Company's estimate of the refund liability which would arise from the
amount of future cancellations based on the Company's most recent
actual collection and cancellation experience (see Note 3). Due to
better than anticipated collection and cancellation results in 1995,
an adjustment was made to reduce the termination refund reserve by
approximately $2.8 million resulting in a gain of $2.8 million in 1995
included in other income in the accompanying consolidated statements
of operations. Due to slightly higher than anticipated cancellation
activity in 1996, the termination refund reserve was increased in 1996
resulting in a loss of $112,000 in 1996 included in other expense in
the accompanying statements of operations. This reserve also provides
for the estimated future costs to maximize receivable collections and
minimize cancellations and termination refunds during the remaining
life of this portfolio. Due to lower costs than anticipated to service
this portfolio, the future servicing reserve was reduced in 1996
resulting in a gain of $703,000 included in other income in the
accompanying statements of operations.
The accrued pension liability is related to a frozen plan more fully
described in Note 15. The Company's estimated funding obligation for
the next three years is as follows: 1997 -$1.1 million, 1998 - $1.1
million and 1999 - $1.2 million. The Company does not anticipate any
significant additional funding requirements.
Bankruptcy and other reserves primarily include obligations associated
with the disposition of the Company's utility operations. Based on
minimal fundings to date and minimal fundings anticipated in the
future the utility reserves were reduced by $4.1 million in 1996 and
the reduction was included in other income in the accompanying
statements of operations. The bankruptcy and other reserves also
include an
F-22
<PAGE> 84
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
estimate of remaining claims related to the Predecessor Company, as
well as the estimated costs to be incurred associated with the
remaining outstanding claims which is planned to be substantially
resolved during 1997. The Company's income tax provision, included in
other reserves, was reduced by $1.5 million during 1995 to $117,000;
the reduction was included in other income in the accompanying
consolidated statements of operations. As of December 31, 1996,
approximately $284,000 is included in restricted cash and cash
equivalents to fund a portion of these remaining claims (see Note 1).
(10) NOTES, MORTGAGES AND CAPITAL LEASES
At December 31, notes, mortgages and capital leases consisted of the
following (in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Mandatory Interest Notes, due December 31, 1996,
weighted average interest rate of 12.0% and 10.7% $ 37,457 $ 94,965
Cash Flow Notes, due December 31, 1998, net of
unamortized discount of $4,015 and $13,444 35,603 85,212
Working Capital Facility 20,000 9,681
Term Loan 40,000 --
Reducing Revolving Loan 1,725 --
Mortgage receivables loan 12,147 --
Construction Loans 9,338 12,667
Utilities Loan -- 1,984
Other mortgages payable 12,609 16,377
Capital leases 336 113
-------- --------
$169,215 $220,999
======== ========
</TABLE>
As discussed in Note 1, in connection with the POR, the Company issued
$100 million in Mandatory Interest Notes, consisting of Secured
Floating Rate Notes and Unsecured 12% Notes, $100 million in Cash Flow
Notes, consisting of Secured Cash Flow Notes and Unsecured 13% Cash
Flow Notes, discounted to a value of $76.5 million, refinanced the
debt incurred during the reorganization through a $50 million Term
Loan and obtained a $20 million Working Capital Facility. On or about
May 29, 1992, the Company distributed a majority of the Notes in
settlement of Predecessor Company bankruptcy claims. The balance of
the $50 million Term Loan was fully repaid in December 1994 from the
Port Charlotte litigation settlement proceeds (see Note 7). In
February 1996, the Company recorded an extraordinary gain of
approximately $3.8 million due to the cancellation of approximately
$1.9 million of Unsecured 12% Notes and $1.9 million of Unsecured 13%
Cash Flow Notes in accordance with the POR. As of February 28, 1997,
$91,800 of the Unsecured 12% Notes and $101,400 of the Unsecured 13%
Cash Flow Notes are remaining to be distributed in accordance with the
POR.
F-23
<PAGE> 85
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In December 1996, the Company recorded an extraordinary gain of
approximately $6.0 million due to the extinguishment of approximately
$4.2 million of Unsecured 12% Notes and $1.8 million of Unsecured 13%
Cash Flow Notes, net of a $210,000 unamortized discount, which were
held in various utility trust accounts established during the
reorganization (see Note 13).
On September 30, 1996, the Company closed on three credit facilities
totalling $85.0 million with Foothill (the "Foothill Refinancing").
Pursuant to the Foothill Refinancing, Foothill provided the Company
with (i) an extension to December 1, 1998 of the $20 million Working
Capital Facility; (ii) a $40 million Term Loan maturing on June 30,
1998 and a (iii) $25 million Reducing Revolving Loan maturing on June
30, 1998.
The following is a summary of each debt instrument:
(a) The Mandatory Interest Notes, as of December 31, 1996,
consisted of $37.5 million of Unsecured 12% Notes which
matured on December 31, 1996 and were repaid in full on
January 3, 1997. Under the terms of the Secured Floating Rate
Note agreement, as amended in September 1994, the Company
paid a fee of approximately $1.1 million on January 2, 1996
as the Secured Floating Rate Notes were not paid by December
31, 1995 and paid fees of $429,000 and $375,000 for the first
and second quarters of 1996, respectively, while such notes
remained outstanding. On September 30, 1996, Foothill
purchased the $37.8 million outstanding balance of the
Secured Floating Rate Notes, advanced an additional $2.2
million and amended some of the terms in the form of a $40
million Term Loan discussed in (d) below.
(b) The Cash Flow Notes, as of December 31, 1996, consisted of
$39.6 million of Unsecured 13% Cash Flow Notes. On September
30, 1996, the Company utilized proceeds from the Working
Capital Facility, the Reducing Revolving Loan and cash on
hand for a total of $40 million plus warrants to purchase up
to 1,500,000 shares of the Company's stock at $6.50 per
share, to fully repay at a discount the Secured Cash Flow
Notes. As a result of the extinguishment of the Secured Cash
Flow Notes, the Company recorded an extraordinary gain of
approximately $3.9 million representing the difference
between the book value of these notes of $49.1 million,
consisting of a par value of $54.9 million less an
unamortized discount of $5.8 million, and the consideration
given of $41.9 million, consisting of cash of $40.0 million
and the estimated fair market value of the warrants of $1.9
million, less $3.3 million of expenses. Interest on the Cash
Flow Notes is payable semiannually, only if and to the extent
that the Company has generated Available Cash during the
preceding period. Interest on the Cash Flow Notes is not
payable if the Company has not generated Available Cash and
is not cumulative. The Cash Flow Notes are subject to
mandatory prepayment from Available Cash. The amortization of
the Cash Flow Notes discount is included in cost of
borrowing, net, in the accompanying consolidated statements
of operations and approximated $3,157,000, $3,205,000 and
$2,723,000 for the years ended December 31, 1996, 1995 and
1994, respectively.
F-24
<PAGE> 86
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(c) The $20 million Working Capital Facility currently bears
interest at the variable interest rate, per annum, announced
by Norwest Bank of Minnesota, N.A., or any successor thereto,
as its "base rate" plus two percentage points and matures on
December 1, 1998. The Working Capital Facility is secured by
a first lien on substantially all Company assets with certain
exceptions as to which the lenders generally will receive
junior liens, including (a) assets with mechanics' liens,
site liens and tax liens (see Note 9); (b) property subject
to Section 365(j) liens of homesite purchasers (see Note 9);
(c) the Construction Loans and certain other mortgages
payable; and (d) certain other assets. As of December 31,
1996, there was no additional credit available under the
Working Capital Facility. Under the terms of the Working
Capital Facility, the Company is required to pay an unused
line fee equal to 1/2 of 1% per annum of the average unused
portion of the Working Capital Facility.
(d) The $40 million Term Loan bears interest at 15% and matures
on June 30, 1998. Under the terms of the Term Loan, the
Company is required to pay an unused line fee equal to 1/2 of
1% per annum of the average unused portion of the Term Loan.
The Term Loan requires principal repayments of one-third on
June 30, 1997, December 31, 1997 and June 30, 1998.
(e) The Reducing Revolving Loan bears interest at prime plus four
percent and matures on June 30, 1998. Under the Reducing
Revolving Loan the Company can borrow up to $25 million.
Amounts under the Reducing Revolving Loan are available only
when the Working Capital Facility is fully utilized. In
January 1997, borrowings under the Reducing Revolving Loan
along with the $12.1 million of excess proceeds released from
various utility trust accounts in January 1997 were utilized
to repay fully the $37.5 million outstanding balance of the
Unsecured 12% Notes. The Reducing Revolving Loan requires
principal repayments of one-third on June 30, 1997, December
31, 1997 and June 30, 1998. The unused portion of the
commitment on the Reducing Revolving Loan will be required to
be reduced by one third on each respective principal
repayment date.
(f) The Mortgage receivables loan was used to finance the
Company's mortgage receivables portfolio in July 1996 (see
Note 4). This loan was provided by Harbourton and is secured
by the underlying mortgage receivables without recourse to
the Company. The mortgage receivables loan is repaid with
collections from the underlying mortgage receivables, bears
interest at prime plus 3% and matures in September 1998.
(g) The Construction Loans consist of two loans which have been
utilized to fund construction of the two 72-unit condominium
buildings at Regency. The first loan, which had an
outstanding balance of $12.7 million at December 31, 1995,
was used to construct the first building and was repaid fully
during the first quarter of 1996 with proceeds from the
closings of condominium units in the first building. The
second loan, which bears interest at prime plus 1.5%, has a
commitment of $14.25 million to fund construction of the
second building. The outstanding balance as of December 31,
1996 was $9.3 million. The second loan is payable as the
condominium units in
F-25
<PAGE> 87
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
the second building are closed and it matures on October 22,
1997. The second loan is secured by, among other things, the
property under construction .
(h) The Utilities loan was used to fund wastewater expansion
costs at the Company's water and wastewater utility system
located in its Julington Creek development and was repaid in
June 1996 from the proceeds of the sale of the Julington
Creek utilities system.
(i) Other mortgages payable consist primarily of notes and
mortgages used to fund the acquisition and development of
various land development projects. The notes are secured by
mortgages on the newly acquired properties and bear interest
at rates ranging from Libor plus 300 to Prime plus 1.75%.
Due in part to the necessity of establishing reserves for future
mandatory debt and other POR payments, the Company did not have any
Available Cash at December 31, 1996, 1995 and 1994 to enable it to
make any portion of the interest payment on the Cash Flow Notes for
the payment periods through December 31, 1996. Interest on the Cash
Flow Notes is noncumulative. Therefore, the Company has not recorded
any interest expense related to the Cash Flow Notes during the years
ended December 31, 1996, 1995 and 1994.
Based on the outstanding balances as of December 31, 1996, principal
payments required on the notes, mortgages and capital leases for each
of the five years following December 31, 1996, are as follows: 1997 -
$83,875,000, 1998 - $83,333,000, 1999 - $3,477,000, 2000 - $339,000
and 2001 - $1,693,000.
(11) STOCKHOLDERS' EQUITY
The Company is currently authorized to issue 15,665,000 shares of
Common Stock, $.10 par value. Under the terms of the POR, 9,750,000
shares were issued for distribution to creditors, of which 13,290
shares are being held in a Disputed Claims Reserve Account as of
February 28, 1997. The remaining shares are subject to distribution in
accordance with the POR during 1997 as remaining disputed claims are
resolved.
In connection with the reorganization, Atlantic Gulf issued Common
Stock Purchase Warrants to purchase 665,000 shares of common stock at
an exercise price of $19.50 per share, which warrants expired March
31, 1996. All warrants were outstanding as of December 31, 1995 and
1994.
Atlantic Gulf's Restated Certificate of Incorporation provides for
mandatory dividends on the Common Stock equal to 25 percent of
Available Cash, as defined (see Note 10), after all indebtedness
issued under the POR is paid in full. Dividends will not accrue if the
Company is unable to pay them, due either to a lack of Available Cash,
surplus capital or net profits, or applicable provisions of Delaware
law. No dividends were paid or payable as of December 31, 1996, 1995
or 1994.
In connection with the Company's prepayment, at a discount, of its
Secured Cash Flow Notes on September 30, 1996, the Company issued
10-year warrants to purchase up to 1,500,000 shares of the
F-26
<PAGE> 88
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Company's common stock at an exercise price of $6.50 per share (see
Note 10). The estimated fair market value of the warrants given to the
holders of the Secured Cash Flow Notes was $1,875,000.
Atlantic Gulf has an Employee Stock Option Plan ("Employee Option
Plan") which was implemented during 1993. Atlantic Gulf had a 1993
Non-Employee Directors' Stock Option Plan (the "1993 Plan") which was
adopted by the board of directors on March 7, 1994 and approved by the
Company's shareholders on June 14, 1994. Under the terms of the 1993
Plan, each non-employee director was to be annually granted options to
purchase 2,500 shares of Atlantic Gulf's common stock at a price equal
to the fair market value of the common stock at the date of grant. The
options were immediately vested and exercisable and remained
exercisable for ten years from the grant date. The total number of
shares to be issued under the 1993 Plan were not to exceed 150,000.
The 1993 plan was terminated and all options granted were surrendered
in connection with the shareholders approval of a 1994 Non-Employee
Stock Option Plan (the "1994 Plan"). See Note 20 for information on
the Company's stock option plans.
At its regular meeting on November 8, 1993, Atlantic Gulf's board of
directors adopted the Atlantic Gulf Communities Corporation
Non-Employee Directors' Stock-For-Retainer Plan (the "Directors' Stock
Plan"). Pursuant to the Directors' Stock Plan, each non-employee
Director was eligible to make a one-time, unconditional and
irrevocable election to purchase a certain number of shares of Common
Stock at fair market value and to receive such common stock through
1994 in lieu of all or a portion of his director compensation.
Effective November 18, 1993, four Directors elected to participate in
the Directors' Stock Plan and purchased, at fair market value ($6.50
per share), an aggregate total of 21,000 shares of common stock. In
1993, a total of 1,543 shares were issued under the Director's Stock
Plan and the remaining 19,457 were issued during 1994.
In 1996, the Company's shareholders approved the adoption of the 1996
Non-Employee Directors' Stock Plan (the "1996 Directors' Stock Plan).
Under such plan, which took effect July 1, 1996, the Non-Employee
Directors receive an annual retainer of $25,000 paid in Common Stock
quarterly based on the share price at the end of the previous quarter.
Pursuant to the 1996 Directors' Stock Plan, 8,328 shares were issued
to the Non-Employee Directors at a price of $6.00 per share for the
third quarter of 1996 and 10,256 shares were issued at a price of
$4.875 for the fourth quarter of 1996.
Shares of Atlantic Gulf's common stock are reserved at December 31,
1996 for possible future issuance as follows:
<TABLE>
<S> <C>
Warrants 1,500,000
Employee Option Plan 750,000
1994 Directors' Stock Option Plan 350,000
1996 Directors' Stock Plan 150,000
---------
2,750,000
=========
</TABLE>
F-27
<PAGE> 89
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During 1994, the Company issued 56,000 shares of its treasury stock
representing a $613,000 contribution to its Retirement Plan to satisfy
the minimum contribution requirement.
During the third quarter of 1995, the Company issued 31,068 shares of
its treasury stock representing a $249,000 contribution to its pension
plan to satisfy a portion of the minimum contribution requirement. The
remaining $56,000 of the required contribution was paid in cash.
During 1995, the Company issued 46,934 shares of its treasury stock
and 13,521 shares of its common stock representing $400,000 of fee
payments in connection with the September 1994 amendment of the
Company's Secured Floating Rate Notes and Secured Cash Flow Notes.
Also during 1995, the Company received 2,676 shares of its common
stock as a distribution from the disputed claims reserve in accordance
with the Company's plan of reorganization.
In March 1996, upon approval from the Company's board of directors,
the Company issued 4,537 shares of its common stock to Gerald
Agranoff, one of its non-employee directors, representing a $30,000
partial payment to assist management in the negotiation of proposed
financing. In June 1996, the Company issued 1,000 shares of its common
stock pursuant to the Company's Employee Stock Option Plan. In
February 1996, the Company received 75,730 shares of its common stock
and in August 1996, it received 505 shares as distributions from the
disputed claims reserve in accordance with the Company's plan of
reorganization. In June 1996, the Company received 8,728 shares of its
common stock, $96,400 principal amount of Mandatory Interest Notes and
$103,800 principal amount of Cash Flow Notes from the disputed claims
reserve account in settlement of a claim. The Company recorded the
shares at par value because the shares were never issued to a third
party. The debt corresponding to the notes was reduced and
concurrently other bankruptcy reserves were increased for the
principal amount of the notes. In December 1996, Atlantic Gulf
received 1,314 shares of its common stock, $7,100 principal amount of
Mandatory Interest Notes and $8,900 principal amount of Cash Flow
Notes in accordance with the terms of the POR.
(12) NONRECURRING AND OTHER ITEMS
The Company recorded various gains and provisions during the years
ended December 31, 1996, 1995 and 1994 for several items included in
other income or other expense in the accompanying consolidated
statements of operations, as more fully described below.
In the first quarter of 1996, the Company recorded a net gain of $4.1
million on proceeds of $18.75 million resulting from the settlement of
the utilities condemnation litigation with the City of Port St. Lucie
(see Note 7).
During 1996, the Company recorded gains of $18.6 million in other
income - reorganization items in the accompanying consolidated
statements of operations resulting from its annual review of certain
reorganization items. These gains included a net gain of $11.9 million
due to the recovery of funds from certain utility trust accounts
funded by the Company during the reorganization (see Note 4), a gain
of $4.1 million due to the reduction of the utility reserves and a
$703,000 gain due to the reduction in the contracts receivable future
servicing reserve (see Note 9). This process is expected to continue
during 1997 with adjustments to be recorded as the final disposition
of various claims and other liabilities is concluded.
F-28
<PAGE> 90
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In February, 1996, the Company sold its Port LaBelle utility system to
Hendry County for $4.5 million resulting in a gain of $686,000. In
June 1996, the Company sold its Julington Creek utility system for
$6.0 million resulting in a gain of $696,000 (see Note 6).
During 1996, the Company recorded extraordinary gains of approximately
$13.7 million due to the extinguishment of debt. In February 1996, the
Company recorded an extraordinary gain of approximately $3.8 million
due to the cancellation of approximately $1.9 million of Unsecured 12%
Notes and $1.9 million of Unsecured 13% Cash Flow Notes in accordance
with the POR. On September 30, 1996, the Company prepaid, at a
discount, its Secured Cash Flow Notes and recorded and extraordinary
gain of $3.9 million. In December 1996, the Company recorded an
extraordinary gain of approximately $6.0 million due to the
extinguishment of approximately $4.2 million of Unsecured 12% Notes
and $1.8 million of Unsecured 13% Cash Flow Notes, net of a $210,000
unamortized discount, which were held in various utility trust
accounts established during the reorganization (see Notes 10 and 13).
In March 1995, the Company sold its property management and real
estate brokerage company, Florida Home Finders, Inc. ("FHF"), a
wholly-owned subsidiary, for $3.5 million resulting in a gain of $3.3
million which also included a $200,000 forbearance fee receivable
recorded in the third quarter of 1995. The proceeds included a $3.0
million promissory note of which $2.3 million was received in June
1995. In October 1995, in connection with an allegedly illegal
transfer by the new owners of FHF of certain escrowed funds, a
receiver was appointed to manage FHF. Due to the uncertain
collectibility of the remaining note receivable and the forbearance
fee receivable, the company wrote-off these receivables in December
1995 thereby reducing the gain on the sale to $2.4 million.
During 1995, the Company recorded gains totalling $10.7 million
resulting from its annual review of certain reorganization items.
These gains included $2.8 million due to the reduction of the
contracts receivable termination refunds reserve, $2.2 million due to
the reduction of the deferred property tax liability and $1.5 million
due to the reduction in the income tax liability (see Note 9). Other
income in 1995 also included a $2.0 million gain in the third quarter
of 1995 on proceeds of $4.0 million associated with the assignment of
rights of one of the Company's mortgage receivables to a third party.
In the third quarter of 1995, the Company sold its Longwood utility
system for $850,000 resulting in a gain of $219,000. In October 1995,
the Company sold its residential mortgages receivable portfolio for
$2.4 million resulting in a net loss of $694,000 which was provided
for in the third quarter of 1995.
In the fourth quarter of 1994, the Company recorded a net gain of
$34.2 million on proceeds of $45 million resulting from the settlement
of the utilities condemnation litigation with Charlotte County (see
Note 7). In addition, the Company reduced its bankruptcy reserve based
on lower than previously estimated potential administrative claims as
of December 31, 1994 resulting in a gain of $700,000 in 1994.
As a result of the repayment of the Term loan in December 1994, the
Company wrote off $2.6 million of capitalized fees incurred in
connection with the refinancing of this loan.
F-29
<PAGE> 91
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) COMMITMENTS AND CONTINGENCIES
Atlantic Gulf is involved in various litigation matters primarily
arising in the normal course of its business or with respect to the
bankruptcy. It is the opinion of management that the resolution of
these matters will not have a material adverse affect on the Company's
financial position.
As part of a settlement of the Company's improvement obligations to
the Predecessor Company's retail homesite customers, various trusts
were established. The Company funded these trusts with cash, stock and
notes based on estimates of the costs of the future improvement
obligations. Certain other reserves were established to make a minimum
of 1,700 utility satisfied homesites available for trade to customers
whose homesites may not be utility satisfied, and therefore not
buildable, at the time they wish to construct a home. The terms of
these trusts and reserves require the Company to periodically assess
the adequacy of the property in the trusts and reserves and any excess
or deficiency will accrue to the benefit or become an obligation of
the Company. In December 1996, pursuant to a review of the trusts and
reserves it was determined that approximately $12.1 million in cash,
$4.2 million of Unsecured 12% Notes and $2.0 million of Unsecured 13%
Cash Flow Notes could be released from these trust accounts (see Notes
4 and 10). Approximately $2.7 million in cash, 204,600 shares of stock
and a lot reserve of 6,000 lots remain in the trusts. The Company
believes the remaining property currently held in trusts and reserves
is sufficient to meet all future improvement obligations required
under the terms of the settlements.
A small portion of the Company's land holdings contain residues or
contaminants from current and past activities by the Company, its
lessees, prior owners and operators of the properties and/or other
third parties. Some of these areas have been the subject of cleanup
action by the Company voluntarily or following the involvement of
regulatory agencies. Additional cleanup in the future also may be
required. The business of the Company is subject to a variety of
additional obligations under the environmental laws, relating to both
the ongoing operations and past activities. The Company does not
believe, however, that its obligations under the environmental laws
will have a material adverse effect on its business, results of
operations or financial position (see Note 5).
Rental expense related to operating leases was $1,835,000, $1,934,000
and $1,830,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company leases its corporate office space under an operating lease
which expires in 1999. Minimum future rental commitments under
non-cancelable operating leases as of December 31,1996 are as follows:
1997 - $1,246,000, 1998 - $1,081,000, 1999 - $545,000, 2000 - $15,000,
2001 - $1,000 and none thereafter.
As of December 31, 1996, the Company had no material development
obligations related to sold property. The Company's business plan
contemplates that 1997 expenditures for development, construction, and
other capital improvements could range up to $50 million, of which a
substantial portion would need to be funded through individual project
development loans or joint venture arrangements, some of which are not
yet in place.
See Notes 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 15 for a description of
other commitments and contingencies.
F-30
<PAGE> 92
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) INCOME TAXES
The difference between income taxes computed at the statutory federal
rate and the provision for income taxes consists of (in thousands of
dollars):
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
December 31, December 31, December 31,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Amount at statutory federal rate $ 402 $(6,749) $ 368
Unrecognized (recognized) benefit
of change in valuation allowance (402) 6,749 (368)
------- ------- -----
$ -- -- $ --
======= ======= =====
</TABLE>
The Company's deferred taxes reflect the impact of temporary
differences between the amount of assets and liabilities for financial
reporting purposes and such amounts for tax purposes. The most
significant types of temporary differences that give rise to deferred
taxes are installment accounting practices, depreciation, certain
financial statement reserves and cost capitalization methods.
F-31
<PAGE> 93
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effect of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1996
are presented below (in thousands of dollars):
<TABLE>
<S> <C>
Deferred tax assets:
Excess of tax basis in land over
financial statement basis $ 15,781
Excess of tax basis in other
receivables over financial
statement basis 2,378
Excess of financial statement basis
in debt obligations and reserves
over tax basis 6,358
Other 3,744
Net operating loss carryover 77,990
Capital loss carryover 9,961
Alternative minimum tax and
general business credit carryover 3,620
---------
Total gross deferred tax assets 119,832
Less - valuation allowance (117,443)
---------
Net deferred tax assets 2,389
---------
Deferred tax liabilities:
Excess of financial statement basis
in contracts receivable over tax basis 2,389
---------
Net deferred tax amount $ -0-
=========
</TABLE>
The net change in the valuation allowance for deferred tax assets for
the year ended December 31, 1996 was an increase of $2 million.
Subsequently recognized tax benefits relating to the valuation
allowance for deferred tax assets as of December 31, 1996 will be
allocated as follows (in thousands of dollars):
<TABLE>
<S> <C>
Income tax benefit that would be reported
in the consolidated statement of operations $ 64,343
Income tax benefit that would be reflected as an
adjustment to contributed capital 53,100
---------
Total $ 117,443
=========
</TABLE>
F-32
<PAGE> 94
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 31, 1996, the Company had a net operating loss carryover
for tax purposes of approximately $207 million which expires in years
1999 through 2011. Included in this amount is approximately $24.1
million of net operating loss attributable to certain legal entities
that may only be used against future taxable income of these same
entities. The Company has a capital loss carryover for tax purposes of
approximately $26.8 million, of which $25.2 million and $1.6 million
expire in 1996 and 1997, respectively, and may only be offset against
capital gains. Additionally, the Company has an unused general
business credit of approximately $2.7 million expiring in the years
1996 through 2004.
Upon the confirmation date of the POR as discussed in Note 1, the
Company underwent an ownership change as defined in Section 382 of the
Internal Revenue Code of 1986, as amended. Consequently, the
aforementioned tax attributes, existing at the Effective Date, will be
subject to an annual limitation. The net operating loss limitation is
determined pursuant to the Internal Revenue Code and is approximately
$7.6 million annually. Certain unrecognized tax losses at the Fresh
Start Reporting date may be subject to this limitation if recognized
by March 31, 1997.
The Company has an alternative minimum tax credit of approximately $1
million. The alternative minimum tax credit does not have an
expiration date.
(15) RETIREMENT PLANS
The Company has a Defined Benefit Retirement Plan ("Retirement Plan")
for substantially all of the Predecessor Company employees under which
future benefit accruals were frozen in 1990. The Company's policy
generally has been to fund an amount at least equal to the minimum
required contribution but no greater than the maximum tax deductible
amount.
F-33
<PAGE> 95
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 31, the funded status of the Company's Retirement Plan was
as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $(10,388) $(10,098)
Non-vested benefit obligation (43) (291)
-------- --------
Accumulated benefit obligation $(10,431) $(10,389)
======== ========
Projected benefit obligation $(10,431) $(10,389)
Plan assets at fair value 7,300 7,768
-------- --------
Unfunded projected benefit obligation $ (3,131) $ (2,621)
======== ========
Unrecognized net transition asset $ (406) $ (457)
Unrecognized net loss 6,475 5,282
Unrecognized prior service costs (69) --
Additional minimum liability (6,000) (4,825)
Accrued pension liability (3,131) (2,621)
-------- --------
Total $ (3,131) $ (2,621)
======== ========
</TABLE>
Statement of Financial Accounting Standards No. 87 - "Employers'
Accounting for Pensions" requires recognition of a minimum pension
liability for underfunded plans in the consolidated balance sheets.
The minimum liability that must be recognized is equal to the excess
of the accumulated benefit obligation over plan assets. A
corresponding amount is recognized as either an intangible asset or a
reduction of equity. Pursuant to this requirement, the Company has
recorded an additional minimum pension liability resulting in an
equity reduction of $6,000,000 and $4,825,000 as of December 31, 1996
and 1995, respectively.
The weighted average expected long-term rate of return on plan assets
is 9% for 1996 and 1995. The projected benefit obligation was
determined using a weighted average assumed discount rate of 7.5% for
1996, 7.25% for 1995 and 8.75% for 1994.
Assets of the Retirement Plan are invested in common stocks, U.S.
government agency issues, U.S. treasury bonds and notes, corporate
bonds, foreign bonds and money market funds, and included
approximately 87,068 shares of Atlantic Gulf common stock with an
aggregate fair value at December 31, 1996 of $375,500.
Atlantic Gulf also has a defined contribution savings plan which is
available to substantially all employees. The Company matches 25% of
each employee's contributions, up to a maximum of 4% of base salary
through December 31, 1995 and up to a maximum of 6% of base salary
beginning on January 1, 1996. In addition, upon approval from the
board of directors, an annual supplemental contribution may be made in
an amount up to the Company's matching contribution made during the
year. The Company's matching contribution was approximately $138,000
in 1996, $118,000 in 1995 and $55,000 in 1994.
F-34
<PAGE> 96
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(16) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is
practicable to estimate that value.
Cash and Cash Equivalents and Restricted Cash and Cash Equivalents
The carrying value of these instruments approximates fair value
because of the short maturity.
Contracts Receivable
The net book value of contracts receivable represents the net expected
future cash flow of the Company discounted to a rate approximating
15%, which management believes approximates fair value.
Mortgages, Notes and Other Receivables
Substantially all receivables which have a maturity in excess of one
year have been discounted to a market interest rate. Consequently,
management believes that the carrying value of these receivables
approximates fair value.
Other Interest Bearing Liabilities
Other interest bearing liabilities are at rates which approximate
current incremental borrowing rates.
Notes and Mortgages
As discussed in Note 10, long term debt includes Mandatory Interest
Notes and Cash Flow Notes issued in connection with the reorganization
of the Company. The fair value of these financial instruments is
estimated based on quoted market prices for the unsecured Notes. The
secured Mandatory Interest Notes and Cash Flow Notes are not listed on
any securities exchange and are subject to trading restrictions;
however, the Company has assumed that the fair value of these notes
approximates the fair value of the unsecured notes considering that
the security feature of the notes is offset by lower stated interest
rates on the secured notes. As of December 31, 1996, the Company
estimated the carrying value of the Mandatory Interest Notes to
approximate fair value since these notes were paid in full on January
3, 1997. Long term debt also includes other indebtedness including a
Working Capital Facility, a Term Loan and a Reducing Revolving Facility
as well as various acquisition, development and construction loans
(see Note 10) for which the Company estimates the carrying value to
approximate fair value.
F-35
<PAGE> 97
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The estimated fair values of the Company's financial instruments at
December 31 were as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1996 1995
----------------------- ----------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value (*) Value Value (*)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 7,050 $ 7,050 $ 3,560 $ 3,560
Restricted cash and cash equivalents 6,034 6,034 8,461 8,461
Contracts receivable 9,649 9,649 14,350 14,350
Mortgages, notes and other receivables 63,800 63,800 45,479 45,479
Other interest bearing liabilities 3,062 3,062 7,543 7,543
Mandatory Interest Notes 37,457 37,457 94,965 92,775
Cash Flow Notes 35,603 22,252 85,212 62,060
Other Indebtedness 96,155 96,155 40,822 40,822
</TABLE>
- --------------
(*) These values represent an approximation of fair value and may never
actually be realized.
F-36
<PAGE> 98
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) UNAUDITED QUARTERLY FINANCIAL DATA
Quarterly financial data for the years ended December 31, 1996 and
1995 are summarized below (in thousands of dollars except per share
amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1996:
- ----
<S> <C> <C> <C> <C>
Real estate sales $ 23,213 $ 46,282 $ 16,464 $ 41,606
Other revenues 8,561 5,447 2,195 21,519
-------- ----------- -------- --------
Total revenues $ 31,774 $ 51,729 $ 18,659 $ 63,125
======== =========== ======== ========
Gross margins on real estate sales (*) $ 5,416 $ 8,986 $ 3,775 $ 6,074
======== =========== ======== ========
Income (loss) before
extraordinary items $ (405) $ 496 $ (9,208) $ (3,434)
======== =========== ======== ========
Extraordinary items $ 3,770 $ -- $ 7,255 $ 2,707
======== =========== ======== ========
Net income (loss) $ 3,365 $ 496 $ (1,953) $ (727)
======== =========== ======== ========
Income (loss) before extraordinary
items per common share $ (.04) $ .05 $ (.95) $ (.35)
======== =========== ======== ========
Net income (loss) per common share $ .35 $ .05 $ (.20) $ (.07)
======== =========== ======== ========
</TABLE>
In conjunction with the Company's ongoing business plan to continue to
monetize its non-core tract and scattered homesites to reduce corporate
debt, certain tracts were targeted for bulk disposal in the fourth
quarter of 1996 and during 1997. The Company has priced its planned
bulk disposals attractively and as a result provided an inventory
valuation reserve in the fourth quarter of approximately $10.4 million
(see Note 5). The Company also reviewed its claims experience with
respect to the utility connection credit reserve and the number of
customers eligible to make a claim against this reserve. Based on the
factors noted above, this reserve was decreased by approximately $4.1
million (see Note 9).
Excluding these adjustments, the net income for the fourth quarter of
1996 was $5.6 million.
F-37
<PAGE> 99
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1995:
- ----
<S> <C> <C> <C> <C>
Real estate sales $ 7,903 $ 11,989 $ 22,605 $ 40,406
Other revenues 8,181 6,580 5,957 9,731
-------- ----------- -------- --------
Total revenues $ 16,084 $ 18,569 $ 28,562 $ 50,137
======== =========== ======== ========
Gross margin on real estate sales (*) $ 1,739 $ 3,670 $ 5,443 $ 5,642
======== =========== ======== ========
Net loss $ (4,791) $ (4,953) $ (4,669) $ (6,183)
======== =========== ======== ========
Net loss per common share $ (.50) $ (.51) $ (.48) $ (.63)
======== =========== ======== ========
</TABLE>
- ---------------
(*) Gross margin on real estate sales represents real estate sales revenue
less real estate cost of sales.
(18) FRESH START REPORTING
The Company's consolidated financial statements subsequent to March
31, 1992 have been prepared as if the Company were a new reporting
entity and reflect the recording of the Company's assets and
liabilities at their fair values as of March 31, 1992 and the
discharge of pre-petition liabilities relating to creditors' claims
against the Company. The reorganization value of the Company was
determined after consideration of several factors and by reliance on
various valuation methods, including discounted cash flows and other
applicable ratios. The factors considered by the Company and its
independent advisors included forecasted operating and cash flows
results which gave effect to the estimated impact of corporate
restructuring and other operating program changes, limitations on the
use of the available net operating loss carryovers and other tax
attributes resulting from the plan of reorganization and other events,
the discounted residual value at the end of the forecast period based
on the capitalized cash flows for the last year of that period, market
share and position, competition and general economic considerations,
projected sales growth, potential profitability and working capital
requirements.
(19) NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be disposed of," which requires
impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows are not sufficient to recover the assets'
carrying amount. The
F-38
<PAGE> 100
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Company adopted Statement No. 121 in 1996. The new impairment rules
have not resulted in any significant change in asset values from
December 31, 1995.
In October 1995, the Financial Accounting Standards Board issued
Statement 123, "Accounting for Stock-Based Compensation". This
statement permits a company to choose either a new fair value based
method or the current APB Opinion 25 intrinsic value based method of
accounting for its stock-based compensation arrangements. The
statement requires pro forma disclosures of net income and earnings
per share computed as if the fair value method had been applied in
financial statements of companies that continue to follow current
practice in accounting for such arrangements under Opinion 25. The
Company has elected to follow Opinion 25 and make the required
disclosures as outlined in Statement 123 (see Note 20).
In October 1996, the American Institute of Certified Public
Accountants (the "AICPA") issued Statement of Position 96-1 (the "SOP
96-1"). This Statement of Position (the "SOP") provides guidance on
the recognition, measurement, display, and disclosure of environmental
remediation liabilities. The Company will adopt SOP 96-1 in 1997.
Based on estimates presently available, the adoption of this SOP is
not expected to result in any significant change in asset
values/expenses from December 31, 1996.
(20) STOCK OPTIONS
At December 31, 1996, the Company has three stock based compensation
plans (See Note 11 -Stockholders' Equity). The Company applies APB
Opinion No. 25 and related Interpretations in accounting for its stock
based compensation plans. Accordingly, no compensation cost has been
recognized for its fixed stock option plans. Compensation cost was
recognized for compensation paid to Non-Employee Directors in
conjunction with annual retainer fees. The compensation cost that has
been charged against income for Non-Employee Directors' annual
retainer fees paid in Common Stock was $102,500 for 1996. Annual
Non-Employee Directors' retainer fees were paid in cash in 1994, 1995,
and the first six months of 1996 and were charged to income in the
respective periods.
F-39
<PAGE> 101
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Had compensation cost for the Company's two stock option plans been
determined consistent with FASB 123, the Company's net income and
earnings per share results would have been reduced to the proforma
amounts indicated below :
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net Income As reported $1,181,000 $(20,596,000) $1,081,000
Pro forma 649,380 (21,746,322) 810,768
Primary earnings
per share As reported $ .12 $ (2.12) $ .11
Pro forma 0.07 (2.24) .08
Fully diluted
earnings per share As reported $ .12 $ (2.12) $ .11
Pro forma 0.07 (2.24) .08
</TABLE>
Fixed Stock Option Plans
The Company has two fixed stock option plans.
The Employee Stock Option Plan (the "Employee Option Plan"),
implemented in 1993, provides for the issuance of up to 750,000
options to purchase Atlantic Gulf's common stock at a price equal to
the fair market value of the common stock at the date of grant. The
options vest to the employees over a five-year period or if there is a
change in control as defined in the Employee Option Plan. The options
vest 40% two years after the date of grant and 20% on each of the
three subsequent anniversaries of the date of grant. The options are
exercisable for a period of ten years from the date of the grant.
The 1994 Non-Employee Directors' Stock Option Plan (the "1994 Plan"),
approved by the Company's shareholders in 1995, provides for the
automatic grant of (i) options for 20,000 shares of common stock to
each non-employee director on December 5, 1994, (ii) options for
20,000 shares of common stock to each new non-employee director upon
his/her first election or appointment to the board of directors (the
"Board"), and (iii) options for 5,000 shares of common stock to each
non-employee director at the first meeting of directors following such
director's subsequent election or appointment to the Board. The option
F-40
<PAGE> 102
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
price for any grant under the 1994 Plan is equal to the fair market
value of Atlantic Gulf's common stock at the date of grant. Each
option is immediately vested, exercisable, and remains exercisable for
a period of 10 years from the grant date. A maximum of 350,000 shares
of common stock may be issued pursuant to the 1994 Plan.
In order to calculate the proforma amounts shown above, the fair value
of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1994, 1995, and 1996.
<TABLE>
<S> <C>
Dividend yield : None.
Expected volatility : Based on historical month-end close stock prices from June, 1992
through the month prior to the grant date as reported by
NASDAQ.
Expected life of grants : Five years.
Risk free interest rate : Yield on five-year U.S. Treasury
Notes maturing five years
from date of grant.
Contractual term of grant : Ten years.
</TABLE>
A summary of the status of the Company's two fixed stock option plans
as of December 31, 1996, 1995, and 1994, respectively and the changes
during the years ended on those dates is presented below.
F-41
<PAGE> 103
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Employee Stock Options
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
Employee Weighted Avg. Weighted Avg. Weighted Avg.
Options Shares Exercise Price Shares Exercise Price Shares Exercise Price
------- ------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at 327,500 $ 6.387 503,250 $ 8.731 582,400 $ 8.853
the beginning of
year
Options granted 221,000 $ 11.892 166,500 $ 8.867 102,500 $ 5.848
Options 0 n/a (8,000) $ 5.500 (1,000) $ 5.500
exercised
Options (45,250) $ 7.207 (79,350) $ 8.450 (46,900) $ 7.069
forfeited ------- -------- --------
Outstanding at 503,250 $ 8.731 582,400 $ 8.853 637,000 $ 8.506
end of year ======= ======== ========
Options 45,000 -- 126,760 -- 229,000 --
exercisable at
year-end
Weighted-avg $ 6.292 -- $ 4.573 -- $ 2.707 --
fair value of
options granted
during the year.
</TABLE>
F-42
<PAGE> 104
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table summarizes information about employee stock
options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Weighted-
Number of Average Weighted- Number of Weighted-
Range of Options Remaining Average Options Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Price at 12/31/96 Life Price at 12/31/96 Price
----- ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$4.00 - $4.99 2,500 9.9 $ 4.25 0 -
$5.00 - $5.99 155,000 8.3 $ 5.736 34,500 $ 5.500
$6.00 - $6.99 125,000 5.5 $ 6.738 103,500 $ 6.790
$7.00 - $7.99 27,000 6.9 $ 7.00 16,200 $ 7.00
$8.00 - $8.99 140,500 8.1 $ 8.866 0 -
$10.00 - $10.99 1,250 7.1 $10.750 500 $10.750
$11.00 - $11.99 1,250 7.5 $ 11.25 500 $11.250
$12.00 - $12.99 184,500 7.7 $ 12.00 73,800 $ 12.00
------- --------
637,000 229,000
======= ========
</TABLE>
F-43
<PAGE> 105
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Non-Employee Director Stock Options
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
Non-Employee
Director Weighted Avg. Weighted Avg. Weighted Avg.
Stock Options Shares Exercise Price Shares Exercise Price Shares Exercise Price
------------- ------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at 0 n/a 0 0 150,000 $ 8.825
the beginning of
year
Options granted 0 n/a 150,000 $ 8.825 35,000 $ 6.107
Options 0 n/a 0 0 0 $ 8.825
exercised
Options 0 n/a 0 0 0 0
forfeited --- ------- -------
Outstanding at 0 n/a 150,000 $ 8.825 185,000 $ 8.311
end of year === ======= =======
Options 0 -- 150,000 -- 185,000 --
exercisable at
year-end
Weighted-avg
fair value of
options granted
during the year 0 -- $ 4.509 -- $ 2.881 --
</TABLE>
Note: This schedule does not include the stock options issued in 1995
pursuant to the 1993 Plan and subsequently surrendered in accordance
with the adoption of the 1994 Plan.
F-44
<PAGE> 106
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table summarizes information about non-employee director
stock options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Weighted-
Number of Average Weighted- Number of Weighted-
Range of Options Remaining Average Options Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Price at 12/31/96 Life Price at 12/31/96 Price
----- ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$6.00 - $6.99 35,000 9.3 $ 6.107 35,000 $ 6.107
$7.00 - $7.99 10,000 8.3 $ 7.875 10,000 $ 7.875
$8.00 - $8.99 120,000 8.1 $ 8.875 120,000 $ 8.875
$9.00 - $9.99 20,000 8.2 $ 9.00 20,000 $ 9.00
-------- ---------
185,000 185,000
======== =========
</TABLE>
(21) SUBSEQUENT EVENTS
On January 3, 1997, the Company repaid in full the $37.5 million
outstanding balance of Unsecured 12% Notes which matured on December
31, 1996. The repayment was made utilizing the $12.1 million of excess
proceeds released in January 1997 from various utility trust accounts
and borrowings under the Company's Reducing Revolving Loan.
Pursuant to the Company's business plan to monetize receivables
generated as a result of the sale of Predecessor assets, the Company
closed on a $7.5 million financing in January 1997 of a portion of its
contracts receivable portfolio with Litchfield Financial Corporation
("Litchfield"). In addition, in March 1997, the Company sold
approximately $9.3 million of mortgage receivables to the First Bank
of Boston for approximately $7 million. The proceeds from these two
transactions were used to reduce corporate debt and to fund ongoing
operations.
The Company has entered into an investment agreement, dated as of
February 7, 1997, with an affiliate of Apollo Real Estate Advisors,
L.P. ("Apollo"). Subject to the terms of the agreement, Apollo will
invest $25 million in new 20% Redeemable Cumulative Convertible
Preferred Stock of Atlantic Gulf. The agreement also provides Apollo
the opportunity to co-invest up to an additional $60 million in new
joint venture acquisitions with the Company. The preferred stock
closing remains subject to certain conditions, including the approval
of the transaction by the Company's stockholders, which is expected to
be acted on at their annual meeting in 1997, and the consent of the
Company's senior secured lender, Foothill. The preferred stock would
be convertible by Apollo into Atlantic Gulf common stock at a
conversion price of $5.75 per share. At closing, Apollo would also
receive warrants to acquire 5 million shares of Atlantic Gulf common
stock at an exercise price of $5.75, subject to a one-time potential
downward adjustment in early 1999 based upon certain factors,
including the pace at which Atlantic Gulf liquidates certain
predecessor assets and the trading of its common stock.
F-45
<PAGE> 107
ATLANTIC GULF COMMUNITIES CORPORATION
Years Ended December 31, 1996, 1995 and 1994
Schedule II -
Valuation and Qualifying Accounts
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Amounts
Balance at Charged (Credited) Balance at
Beginning to Results of End of
of Period Operations Deductions(2) Period
--------- ---------- ------------- ------
<S> <C> <C> <C> <C>
Description
YEAR ENDED DECEMBER 31, 1994:
Contracts receivable reserves $10,490 $(2,000) $1,545 $6,945
Other receivable reserves (1) 5,369 (378) 2,626 2,365
------- ------- ------ ------
Total $15,859 $(2,378) $4,171 $9,310
======= ======= ====== ======
YEAR ENDED DECEMBER 31, 1995:
Contracts receivable reserves $ 6,945 $(1,516) $1,076 $4,353
Other receivable reserves (1) 2,365 2,173 732 3,806
------- ------- ------ ------
Total $ 9,310 $ 657 $1,808 $8,159
======= ======= ====== ======
YEAR ENDED DECEMBER 31, 1996:
Contracts receivable reserves $ 4,353 $(1,300) $ 923 $2,130
Other receivable reserves (1) 3,806 (784) 290 2,732
------- ------- ------ ------
Total $ 8,159 $(2,084) $1,213 $4,862
======= ======= ====== ======
</TABLE>
- ---------------
(1) Reserves are a deduction from mortgages, notes and other receivables.
(2) Deductions represents amounts charged to reserves resulting from the
cancellation, write-off, sale or other disposition of the related
receivables.
S-1
<PAGE> 1
================================================================================
Atlantic Gulf Communities Corporation Exhibit to the 1996 Form 10-K
Exhibit (c) 4. a. Second Amended and Restated Revolving Loan Agreement
dated as of September 30, 1996, as amended as of March 31, 1997
SECOND AMENDED AND RESTATED
REVOLVING LOAN AGREEMENT
DATED AS OF SEPTEMBER 30, 1996
BY AND AMONG
ATLANTIC GULF COMMUNITIES CORPORATION,
THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF,
FOOTHILL CAPITAL CORPORATION,
AS AGENT
AND
FOOTHILL CAPITAL CORPORATION,
AS COLLATERAL AGENT
================================================================================
<PAGE> 2
SECOND AMENDED AND RESTATED
REVOLVING LOAN AGREEMENT
ATLANTIC GULF COMMUNITIES CORPORATION
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
SECTION 1 DEFINITIONS.....................................................................................2
1.1 Certain Deferred Terms. ........................................................................2
1.2 Other Definitional Provisions..................................................................28
SECTION 2 AMOUNT AND TERMS OF COMMITMENTS................................................................28
2.1 Working Capital Loans..........................................................................28
2.2 Working Capital Notes..........................................................................29
2.3 Procedure for Working Capital Loan Borrowing...................................................30
2.4 Repayment of Working Capital Loans.............................................................30
2.5 Use of Proceeds of Working Capital Loans.......................................................31
2.6 Reducing Revolving Loans.......................................................................31
2.7 Reducing Revolving Notes.......................................................................31
2.8 Procedure for Reducing Revolving Loan Borrowing................................................32
2.9 Repayment of Reducing Revolving Loans..........................................................33
2.10 Use of Proceeds of Reducing Revolving Loans....................................................33
2.11 Mandatory Prepayments of Loans and Reduction of Reducing
Revolving Loan Commitments.....................................................................33
(a) Mandatory Prepayments of Loans........................................................33
(b) Mandatory Reductions of Reducing Revolving Loan
Commitments...........................................................................34
(c) Application of Mandatory Prepayment...................................................34
2.12 Optional Prepayments of Working Capital Loans; No Optional
Reductions of Working Capital Loan Commitments.................................................34
(a) Optional Prepayments of Working Capital Loan..........................................34
(b) No Optional Reduction of Working Capital Loan Commitments.............................34
2.13 Optional Prepayments of Reducing Revolving Loans and Optional
Termination or Reductions of Reducing Revolving Loan
Commitments....................................................................................34
(a) Optional Prepayments of Reducing Revolving Loans......................................34
(b) Optional Termination or Reduction of Reducing Revolving Loan
Commitment's..........................................................................35
2.14 Interest Rates and Payment Dates...............................................................35
(a) Rate of Interest......................................................................35
(b) Default Rate..........................................................................35
(c) Interest Payment Date.................................................................35
(d) Minimum Interest Rate.................................................................35
</TABLE>
i.
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
2.15 Fees...........................................................................................36
(a) Unused Line Fees......................................................................36
(b) Activation Fees.......................................................................36
(c) [intentionally omitted]...............................................................36
(d) Financial Examination Fees............................................................36
(e) Servicing Fee.........................................................................36
2.16 Computation of Interest and Fees...............................................................37
2.17 Pro Rata Treatment and Payments................................................................37
(a) Apportionment of Payments.............................................................37
(b) Payments by Banks.....................................................................37
2.18 Requirements of Law............................................................................38
2.19 Taxes..........................................................................................38
(a) Payments to be Free and Clear; Gross-Up...............................................38
(b) Tax Certificates......................................................................39
2.20 [intentionally omitted]........................................................................39
2.21 Issuance of Letters of Credit and Banks' Purchase of Participations
Therein. ......................................................................................39
(a) Letters of Credit.....................................................................39
(b) Mechanics of Issuance.................................................................40
(c) Banks' Purchase of Participations in Letters of Credit................................41
(d) Letter of Credit Fees.................................................................41
(e) Drawings and Reimbursement of Amounts Drawn
Under Letters of Credit...............................................................42
(f) Payment by Banks of Unreimbursed Drawings Under
Letters of Credit 43
(g) Interest on Amounts Drawn Under Letters of Credit.....................................43
(h) Obligations Absolute..................................................................44
(i) Indemnification; Nature of Issuing Banks' Duties......................................45
(j) Nature of Issuing Banks' Duties.......................................................46
(k) Increased Costs and Taxes Relating to Letters of Credit...............................46
(l) L/C Guarantees........................................................................47
2.22 Early Termination by Company...................................................................48
SECTION 3 COLLATERAL ....................................................................................48
3.1 Liens in Subsidiary Stock, Contract Receivables, Real Property and Personal
Property.
3.2 Security Documents.............................................................................49
(a) Stock Pledge..........................................................................49
(b) Homesite Contracts Receivables and Commercial Receivables.............................49
(c) Real Property.........................................................................50
(d) Joint Venture Pledge..................................................................50
(e) Personal Property.....................................................................50
(f) Additional Acts.......................................................................51
</TABLE>
ii.
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
3.3 Section 365(j) Property........................................................................52
3.4 [intentionally omitted] .......................................................................52
3.5 Subordinations and Releases of Mortgage Liens..................................................52
3.6 Guarantees.....................................................................................53
3.7 [intentionally omitted]........................................................................53
SECTION 4 REPRESENTATIONS AND WARRANTIES.................................................................53
4.1 Financial Condition............................................................................53
4.2 No Material Adverse Change.....................................................................54
4.3 Corporate Existence; Compliance with Law.......................................................54
4.4 Corporate Power; Authorization; Enforceable Obligations........................................55
(a) Company...............................................................................55
(b) Subsidiaries..........................................................................55
4.5 No Legal Bar...................................................................................56
4.6 No Material Litigation.........................................................................56
4.7 No Default.....................................................................................56
4.8 Ownership of Property; Liens...................................................................56
4.9 Intellectual Property..........................................................................57
4.10 Taxes..........................................................................................57
4.11 Federal Regulations............................................................................57
4.12 ERISA..........................................................................................58
4.13 Investment Company Act; Other Regulations......................................................58
4.14 Subsidiaries and Joint Ventures................................................................59
4.15 Environmental Matters..........................................................................59
4.16 Indebtedness...................................................................................60
4.17 Contingent Obligations.........................................................................60
4.18 Restitution Program and Final Judgment.........................................................60
4.19 Certain Fees...................................................................................60
4.20 Disclosure.....................................................................................61
4.21 Insurance......................................................................................61
4.22 Total Real Property Matters....................................................................61
4.23 Reorganization Proceedings.....................................................................61
4.24 Excluded Subsidiaries; Unrestricted Subsidiaries...............................................62
4.26 Bank Accounts..................................................................................62
4.27 Utility Fund Trusts............................................................................63
4.28 Eligible Receivables and Eligible JV Receivables...............................................63
4.29 SPUD Subsidiaries..............................................................................63
4.30 DRI and Zoning Matters.........................................................................63
SECTION 5 CONDITIONS PRECEDENT...........................................................................63
5.1 Conditions to Effectiveness of this Agreement..................................................63
(a) Loan Documents........................................................................63
(b) Corporate Proceedings of Company......................................................64
</TABLE>
iii.
<PAGE> 5
<TABLE>
<S> <C> <C> <C> <C>
(c) Corporate Proceedings of the Subsidiaries.............................................64
(d) Corporate Documents...................................................................64
(e) Other Documents.......................................................................65
(f) No Violation..........................................................................65
(g) Consents, Authorizations, and Filings.................................................65
(h) Legal Opinions........................................................................65
(i) Certification as to Environmental Matters.............................................66
(j) Continued Perfection of Security Interests............................................66
(k) Real Property Matters.................................................................66
(l) Purchase Agreement....................................................................67
(m) Secured Floating Rate Note Agreement and Secured
Cash Flow Note Agreement..............................................................67
(n) Acknowledgment Agreement..............................................................67
(o) Evidence of Insurance.................................................................67
(p) No Material Adverse Effect............................................................67
(q) Intercreditor Agreement...............................................................67
(r) Fees..................................................................................68
(s) Recapitalization Transactions.........................................................68
(t) Change of Collateral Agent............................................................68
(u) Amendment of Certain Loan Documents...................................................68
(v) Other Matters.........................................................................68
5.2 Conditions to Each Loan and Issuance of Each Letter of Credit..................................68
(a) Representations and Warranties........................................................68
(b) No Default............................................................................69
(c) Additional Security Documents: Other Documents.......................................69
(d) Officer's Certificate.................................................................69
(e) Additional Matters....................................................................69
(f) Reducing Revolving Loans..............................................................69
5.3 Conditions Subsequent..........................................................................69
(a) Real Property Matters Regarding Unsold Designated Raw Land............................69
(b) Tax Servicing Contracts...............................................................70
(c) Company Operating Account Control Agreement...........................................70
SECTION 6 AFFIRMATIVE COVENANTS..........................................................................70
6.1 Financial Statements...........................................................................70
6.2 Certificates; Other Information................................................................72
6.3 Payment of Obligations.........................................................................74
6.4 Conduct of Business and Maintenance of Existence...............................................74
6.5 Maintenance of Property; Insurance.............................................................74
6.6 Inspection of Property; Books and Records; Appraisals..........................................74
6.7 Notices........................................................................................75
6.8 Environmental Laws.............................................................................75
6.9 Business Plan..................................................................................76
</TABLE>
iv.
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
6.10 [intentionally omitted]........................................................................76
6.11 Dividends from Subsidiaries....................................................................76
6.12 Supplemental Reports Regarding Real Property...................................................77
6.13 Compliance with Laws...........................................................................77
6.14 Other Notices..................................................................................77
6.15 Company Operating Account Control Agreement....................................................78
SECTION 7 NEGATIVE COVENANTS.............................................................................78
7.1 Maintenance of Consolidated Net Worth..........................................................78
7.2 Limitation of Indebtedness.....................................................................79
7.3 Limitation on Liens............................................................................80
7.4 Limitation on Guarantee Obligations............................................................82
7.5 Limitations on Fundamental Changes.............................................................82
7.6 Limitation on Sale of Assets...................................................................82
7.7 Limitation on Dividends........................................................................83
7.8 Limitation on Capital Expenditures.............................................................83
7.9 Limitation on Investments, Loans, and Advances.................................................84
7.10 Limitation on Optional Payments and Modifications of Debt Instruments..........................85
7.11 Transactions with Affiliates...................................................................85
7.12 Sale and Leaseback.............................................................................86
7.13 Fiscal Year....................................................................................86
7.14 Limitation on Negative Pledge Clauses..........................................................86
7.15 Deviation from Business Plan...................................................................86
7.16 Unsold Housing Inventory.......................................................................86
7.17 Limitation of Bank Accounts....................................................................86
7.18 Venture Subsidiaries and Joint Ventures........................................................87
7.19 [intentionally omitted]........................................................................87
7.20 [intentionally omitted]........................................................................87
7.21 [intentionally omitted]........................................................................87
SECTION 8 EVENTS OF DEFAULT; REMEDIES....................................................................87
8.1 Events of Default; Remedies....................................................................87
SECTION 9 AGENTS.........................................................................................91
9.1 Appointment of Agent...........................................................................91
9.2 Appointment of Collateral Agent................................................................92
9.3 [intentionally omitted]........................................................................92
9.4 Delegation of Duties...........................................................................92
9.5 Exculpatory Provisions.........................................................................93
9.6 Reliance by Agents.............................................................................93
9.7 Notice of Default..............................................................................94
</TABLE>
v.
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
9.8 Non-Reliance on Agents and Other Banks.........................................................94
9.9 Indemnification................................................................................95
9.10 [intentionally omitted]........................................................................95
9.11 Agent in its Individual Capacity...............................................................95
9.12 Successor Agents...............................................................................95
SECTION 10 MISCELLANEOUS..................................................................................96
10.1 Amendments and Waivers.........................................................................96
10.2 Notices........................................................................................97
10.3 No Waiver: Cumulative Remedies................................................................98
10.4 Survival of Representations and Warranties.....................................................98
10.5 Payment of Expenses and Taxes..................................................................98
10.6 Successors and Assigns: Participations; Purchasing Banks......................................99
10.7 Adjustments; Set-Off..........................................................................101
10.8 Appointment of Agent as Company's Lawful Attorney.............................................102
10.9 Counterparts..................................................................................102
10.10 Severability..................................................................................103
10.11 Integration...................................................................................103
10.12 Governing Law.................................................................................103
10.13 Submission to Jurisdiction; Waivers...........................................................103
10.14 Acknowledgments...............................................................................104
10.15 Waivers of Any Jury Trial.....................................................................105
10.16 Confidentiality...............................................................................105
10.17 Controlling Agreement.........................................................................106
10.18 Counsel to Collateral Agent...................................................................106
</TABLE>
vi.
<PAGE> 8
SCHEDULES
Schedule E-1 Excluded Subsidiaries
Schedule L-1 Letters of Credit Outstanding on the Effective Date
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 2.1 Working Capital Loan Commitments of Banks
Schedule 2.6 Reducing Revolving Loan Commitments of Banks
Schedule 4.1 Additional Liabilities of Company; Purchases and
Dispositions by Company
Schedule 4.2 Material Adverse Effect
Schedule 4.4 Consents and Authorizations
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 Guarantees
Schedule 4.21 Insurance
Schedule 4.24 Unrestricted Subsidiaries' Assets and Businesses
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 to be Delivered by the
Effective Date
Schedule 7.3 Liens
Schedule 7.17 Restricted Bank Accounts
vii.
<PAGE> 9
EXHIBITS
Exhibit A-1 Form of Acknowledgment Agreement
Exhibit A-2 Form of Activation Notice
Exhibit D-1 Form of Deposit Account Security Agreement
Exhibit I-1 Form of Intercreditor Agreement
Exhibit J-1 Form of Joint Venture Pledge Agreement
Exhibit N-1 Form of Notice of Issuance of Letter of Credit
Exhibit P-1 Form of Personal Property Security Agreement
Exhibit S-1 Form of Stock Pledge Agreement
Exhibit S-2 Form of Subsidiary Guarantee
Exhibit 2.1 Form of Working Capital Note
Exhibit 2.7 Form of Reducing Revolving Note
Exhibit 5.1(h)-1 Form of Legal Opinion of Arent Fox Kintner Plotkin &
Kahn, Counsel to Company
Exhibit 5.1(h)-2 Form of Legal Opinion of Corporate Counsel to Company
Exhibit 5.1(h)-3 Form of Legal Opinion of Greenberg, Traurig,
Hoffman, Lipoff, Rosen & Quentel, P.A., special
Florida Counsel to Company
Exhibit 5.1(h)-4 Form of Legal Opinion of Chambliss & Bahner, Special
Tennessee Counsel to Company
Exhibit 5.1(h)-5 Form of Legal Opinion of Annis, Mitchell, Cockey,
Edwards & Roehn, P.A., Special Florida Counsel to
Agent and Collateral Agent
Exhibit 10.6 Form of Commitment Transfer Supplement
viii.
<PAGE> 10
SECOND AMENDED AND RESTATED
REVOLVING LOAN AGREEMENT
ATLANTIC GULF COMMUNITIES CORPORATION
THIS SECOND AMENDED AND RESTATED REVOLVING LOAN
AGREEMENT (this "AGREEMENT") is dated as of September 30, 1996 and entered into
by and among ATLANTIC GULF COMMUNITIES CORPORATION, a Delaware corporation,
formerly known as General Development Corporation ("COMPANY"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (together with each financial
institution that may become a party to this Agreement as herein provided,
referred to herein individually as a "BANK" and collectively as "BANKS"),
FOOTHILL CAPITAL CORPORATION, a California corporation, as successor to Chemical
Bank as agent for Banks (hereinafter, in such capacity, together with any
successors thereto in such capacity, referred to as "Agent"), and FOOTHILL
CAPITAL CORPORATION, a California corporation, as collateral agent for Banks
(hereinafter, in such capacity, together with any successors thereto in such
capacity, referred to as "COLLATERAL AGENT"). All capitalized terms not
otherwise defined herein have the meanings given such terms in Section 1.
R E C I T A L S
WHEREAS, Company, the Original Banks and Chase, as agent for
the Original Banks (the "ORIGINAL AGENT"), are parties to that certain Working
Capital and Term Loan Agreement, dated as of March 31, 1992 (as amended and
modified to the Old Effective Date, the "ORIGINAL LOAN AGREEMENT");
WHEREAS, pursuant to that certain Purchase Agreement, dated as
of September 21, 1994 (the "OLD PURCHASE AGREEMENT"), by and among Banks and the
Original Banks, the Original Banks assigned all right, title and interest in and
to the Original Loan Agreement and all other related loan documents to Banks;
WHEREAS, it was a condition to Banks entering into the Old
Purchase Agreement with the Original Banks that the Original Loan Agreement be
amended and restated as provided in the Existing Loan Agreement;
WHEREAS, pursuant to that certain Purchase Agreement, dated as
of even date herewith (the "PURCHASE AGREEMENT"), by and among Foothill, and the
holders of the Existing Secured Floating Rate Notes, such holders have assigned
all right, title and interest in and to the Existing Secured Floating Rate Note
Agreement, the Existing Secured Floating Rate Notes, and all other related
documents to Foothill, it being understood that no repayment of the Existing
Secured Floating Rate Notes is being effected thereby;
WHEREAS, concurrently herewith, Company is entering into the
Recapitalization Transactions;
<PAGE> 11
WHEREAS, it is a condition to Foothill entering into the
Purchase Agreement with the holders of the Existing Secured Floating Rate Notes
that the Existing Loan Agreement be amended and restated as provided in this
Agreement and that the Existing Secured Floating Rate Note Agreement be amended
and restated as provided in the Secured Floating Rate Note Agreement;
WHEREAS, Banks desire to appoint Foothill Capital Corporation
as Agent hereunder and under the Guarantees and to serve as Collateral Agent for
Banks under the Security Documents; and
WHEREAS, the parties hereto desire to amend and restate the
Existing Loan Agreement in its entirety as provided in this Agreement, it being
understood that no repayment of the obligations under the Existing Loan
Agreement is being effected hereby, but merely an amendment and restatement in
accordance with the terms hereof.
NOW THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Company, Banks, Agent and
Collateral Agent agree as follows:
SECTION 1
DEFINITIONS
1.1 CERTAIN DEFERRED TERMS.
The following terms used in this Agreement shall have the following
meanings:
"ACKNOWLEDGMENT AGREEMENT" means that certain Acknowledgment Agreement
regarding certain Security Documents, dated the Effective Date, executed by
Company and its Subsidiaries listed on the signature pages thereof,
substantially in the form of Exhibit A-1.
"ACTIVATED AMOUNT" means: (a) as of any date of determination on or
before December 31, 1996, the amount, not to exceed $25,000,000, designated by
Company as the "Activated Amount" (and representing the maximum aggregate amount
of Reducing Revolving Loans that Company desires the Banks to be obligated to
make, subject to the terms and conditions hereof, during the Reducing Revolving
Loan Commitment Period) pursuant to the then most recent Activation Notice
received by Agent prior to 5:00 p.m. (Boston time) on December 31, 1996; and (b)
as of any date of determination thereafter, the Activated Amount designated
pursuant to the last Activation Notice received by Agent prior to 5:00 p.m.
(Boston time) on December 31, 1996 or, if higher, the aggregate amount of all
Reducing Revolving Loans (together with all accrued but unpaid interest and fees
then accrued thereon) outstanding as of December 31, 1996 as determined by Agent
and such determination shall be conclusive absent manifest error.
2.
<PAGE> 12
"ACTIVATION NOTICE" means a written notice from Company to Agent, in
the form of Exhibit A-2, pursuant to which Company designates an amount known as
the "Activated Amount" representing the maximum aggregate amount of Reducing
Revolving Loans that Company then desires the Banks to be obligated to make,
subject to the terms and conditions hereof, during the Reducing Revolving Loan
Commitment Period.
"ADJUSTED BORROWING BASE AMOUNT" means, as of any date of
determination, the sum of (a) the Borrowing Base, plus (b) an amount up to
$5,000,000 equal to the amount of unrestricted cash subject to a first-priority
Lien in favor of Collateral Agent for the benefit of Banks and the holders of
the Secured Floating Rate Notes.
"ADMINISTRATIVE CLAIMS" has the meaning assigned that term in Article I
of the Reorganization Plan.
"AFFILIATE" with respect to any Person, means (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 Percent.
"AG ASIA" means Atlantic Gulf Asia Holdings N.V. a Netherlands Antilles
corporation.
"AGENT" has the meaning assigned that term in the introductory
paragraph to this Agreement.
"AGREEMENT" means this Second Amended and Restated Revolving Loan
Agreement, as it may be amended and restated, supplemented or otherwise modified
from time to time
"ANNUAL NET INCOME" means income as shown on the consolidated
statements of income provided by Company under Section 6.1, but in no event less
than 0.
"APPLICABLE MARGIN" means 2% in respect of Working Capital Loans and 4%
in respect of Reducing Revolving Loans.
"AVAILABLE CASH" has the meaning assigned that term in Article I of the
Reorganization Plan.
"AVERAGE UNUSED PORTION OF THE REDUCING REVOLVING LOAN COMMITMENTS"
means, for any month for which a determination is to be made, (a) the average
amount of the Reducing Revolving Loan Commitments during such month, less (b)
the average Reducing Revolving Facility Usage during such month.
"AVERAGE UNUSED PORTION OF THE WORKING CAPITAL LOAN COMMITMENTS" means,
for any month for which a determination is to be made, (a) the average amount of
the Working
3.
<PAGE> 13
Capital Loan Commitments during such month, less (b) the average Working Capital
Facility Usage during such month.
"BANK ACCOUNTS" means any and all deposit accounts, money market
accounts and any other deposits and investments of 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
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 Company or any Subsidiary is prohibited by agreements
existing on the Effective Date or by law, as set forth in Schedule 7.17, which
may be amended from time to time by written notice to Agent to include other
restricted accounts).
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy" from time to time in effect, or any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the
Southern District of Florida, or in the event that 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.
"BANKS" has the meaning assigned that term in the introductory
paragraph to this Agreement.
"BEIGE BOOK" means the book prepared by Company dated December 1994,
setting forth the estimated fair market value of the Real Property of Company
and its Subsidiaries
"BOOK VALUE", with respect to a specified asset of a specified Person,
means the carrying value of the specified asset on the balance sheet of such
Person prepared in accordance with GAAP and delivered to Agent from time to time
pursuant to the Loan Documents.
"BORROWING BASE" means the result of:
(i) an amount up to 75% of the principal amount of Eligible
Homesite Contract Receivables and Eligible Commercial Receivables;
plus
(ii) the lesser of:
(A) $27,500,000; and
4.
<PAGE> 14
(B) the sum of (without duplication):
(1) an amount up to 40% of the Company's or
a Subsidiary's Book Value of Real Property consisting of
subdivision homesites;
plus
(2) an amount up to 26% (i.e., 40% of the
relevant Venture Subsidiary's 65% Joint Venture interest in
Sunset Lakes; such interest to be proportionately reduced if
such Subsidiary's Joint Venture interest in Sunset Lakes is
reduced) of Sunset Lakes' Book Value of JV Real Property of
Sunset Lakes; plus an amount up to 26% (i.e., 40% of the
relevant Venture Subsidiary's 65 % Joint Venture interest in
Sunset Lakes; such interest to be proportionately reduced if
such Subsidiary's Joint Venture interest in Sunset Lakes is
reduced) of the principal amount of Eligible JV Receivables of
Sunset Lakes;
plus
(3) an amount up to 8% (i.e., 40% of the
relevant Venture Subsidiary's 20% Joint Venture interest in
Country Lakes; such interest to be proportionately reduced if
such Subsidiary's Joint Venture interest in Country Lakes is
reduced) of Country Lakes' Book Value of JV Real Property of
Country Lakes; S an amount up to 8% (i.e., 40% of the relevant
Venture Subsidiary's 20% Joint Venture interest in Country
Lakes; such interest to be proportionately reduced if such
Subsidiary's Joint Venture interest in Country Lakes is
reduced) of the principal amount of Eligible JV Receivables of
Country Lakes;
(4) an amount up to 40% of the Company's
Book-Value of Real Property consisting of the Regency
Development;
plus
(5) an amount up to 40% of the Company's
Book Value of the aggregate Joint Venture interests of all
Venture Subsidiaries in the Borrowing Base Joint Ventures
(other than Sunset Lakes and Country Lakes); S an amount up to
40% of the principal amount of eligible JV Receivables of such
Borrowing Base Joint Ventures;
plus
5.
<PAGE> 15
(iii) an amount up to 40% of the Company's or any Subsidiary's
Book Value of Real Property consisting of scattered homesites;
(iv) an amount up to 50% of the Company's or any Subsidiary's
Book Value of Real Property consisting of raw tract land;
less
(v) the aggregate amount of reserves, if any, established by
Agent in Agent's reasonable credit judgment in respect of Homesite
Contract Receivables, Commercial Receivables, JV Receivables, Real
Property, and JV Real Property. Without limiting the generality of the
foregoing, Agent may create reserves against Homesite Contract
Receivables and JV Receivables for cancellations, reserves against JV
Receivables, Homesite Contract Receivables, and Commercial Receivables
for valuation discounts, and reserves against Real Property and JV Real
Property in respect of the contents or status of items disclosed in
surveys and environmental reports or in respect of the failure of
Company to deliver (or cause the relevant Venture Subsidiary or Joint
Venture to deliver) such surveys and environmental reports required
hereunder.
Anything to the contrary notwithstanding, the Borrowing Base shall not include,
directly or indirectly, either any asset of any Unrestricted Subsidiary, or any
of the following: (a) any Homesite Contract Receivable, Commercial Receivable,
or JV Receivable to the extent the same is sold or discounted; or (b) any Real
Property or JV Real Property to the extent the same is sold or otherwise
disposed of; or (c) any Borrowing Base Joint Venture interest to the extent the
same (or any underlying JV Real Property of the relevant Borrowing Base Joint
Venture) is sold or otherwise disposed of; in each case, whether pursuant to
Section 7.6 or otherwise.
"BORROWING BASE JOINT VENTURES" means, collectively, Sunset Lakes,
Country Lakes, and any other Joint Venture owning JV Real Property that Agent
agrees in writing that such Joint Venture shall constitute a Borrowing Base
Joint Venture under and for all purposes of this Agreement and the other Loan
Documents, and "Borrowing Base Joint Venture" means any one of them.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day
which either is a legal holiday under the laws of the State of California or is
a day on which banking institutions located in the State of California are
authorized or required by law or other governmental action to close.
"BUSINESS PLAN" means as of the Effective Date and until a new Business
Plan is delivered to Banks in accordance with Section 6.9, the business plan of
Company and its Subsidiaries dated September, 1996, and thereafter the business
plan of Company and its Subsidiaries delivered to and approved by Required Banks
in December of each year in accordance with Section 6.9.
6.
<PAGE> 16
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations 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" means any and all accounts that Collateral
Agent, for the benefit of Banks and the holders of the Secured Floating Rate
Notes, 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" means (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.
"CASH FLOW AGENT" means Chase, as agent for the banks who are parties
to, and as defined in, the Secured Cash Flow Note Agreement.
"CHASE" means The Chase Manhattan Bank, formerly known as Chemical
Bank, as successor by merger to Manufacturers Hanover Trust Company.
"CLAIMS DISBURSEMENT ACCOUNT" means the segregated account established
for purposes of holding funds borrowed pursuant to the DIP Loan 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" means the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL" has the meaning assigned that term in Section 3.1.
"COLLATERAL AGENT" means Foothill Capital Corporation solely in its
capacity as collateral agent for Banks under the Security Documents pursuant to
the terms of this Agreement and the Security Documents.
7.
<PAGE> 17
"COLLECTIONS" means all cash, checks, notes, instruments, and other
items of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"COMMERCIAL REAL ESTATE" means all Real Property of Company and its
Subsidiaries (including condominium and cooperative units), other than Real
Property reserved for sale as single residential homes or lots.
"COMMERCIAL RECEIVABLES" means all promissory notes and mortgages and
deeds of trust payable to, or held by, 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.
"COMMITMENT TRANSFER SUPPLEMENT" has the meaning assigned that term in
Section 10.6.
"COMMITMENTS" means, collectively, the Working Capital Loan Commitments
and the Reducing Revolving Loan Commitments.
"COMMONLY CONTROLLED ENTITY" means an entity, whether or not
incorporated, which is under common control with Company within the meaning of
Section 4001 of ERISA or is part of a group which includes 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 Company with Sun Trust Bank, Miami, N.A. or such
other deposit account maintained by Company at a financial institution
reasonably satisfactory to Collateral Agent.
"COMPANY OPERATING ACCOUNT CONTROL AGREEMENT" means a written agreement
among Company, Foothill (in its capacity as Collateral Agent hereunder and in
its capacity as the "Collateral Agent" under the Secured Floating Rate Note
Agreement), and Operating Account Bank, with respect to the Company Operating
Account, in form and substance reasonably satisfactory to Foothill, pursuant to
which Operating Account Bank acknowledges the security interests granted by
Company to Foothill in the Company Operating Account, waives rights of setoff
with respect to the Company Operating Account, and agrees to act upon the
instructions of Foothill with respect to the disposition of funds in the Company
Operating Account should Operating Account Bank receive such instructions from
Foothill.
"CONDEMNATION AWARDS" means any and all proceeds (including proceeds in
the form of promissory notes or other agreements for the payment of proceeds)
from (a) the taking by eminent domain, condemnation or otherwise, or acquisition
pursuant to contract, of any property of 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,
8.
<PAGE> 18
including any awards and/or other compensation awarded to, or received by, the
Company or GDU, whether as a result of litigation, arbitration, settlement or
otherwise, arising from the Utility Condemnation Proceedings or (b) any sale by
Company or any Subsidiary of a water and utility system to a Person, whether now
owned or hereafter created or acquired.
"CONFIRMATION ORDER" means the order issued on March 27, 1992 by the
Bankruptcy Court, confirming the Reorganization Plan.
"CONSOLIDATED NET WORTH" means, at any particular date, all amounts
which, in accordance with GAAP, would be included as Shareholders' Equity on a
consolidated balance sheet of Company and its consolidated Subsidiaries at such
date.
"CONTRACTUAL OBLIGATION" means, with respect to any Person, any
provision of any security issued by that 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" has the meaning assigned that term in
Section 2.13 of the Reorganization Plan.
"COUNTRY LAKES" means Country Lakes, LP, a Virginia limited partnership
in which the Subsidiary, AGC CL-Limited Partner, Inc., a Florida corporation, is
a limited partner.
"CREDITORS COMMITTEE" has the meaning assigned that term in Article 1
of the Reorganization Plan.
"DEEDS OF TRUST" means the Deeds of Trust executed from time to time
between Company or a Subsidiary and Collateral Agent substantially in the form
of the Deeds of Trust in existence as of the Effective Date, as the same be
amended, supplemented or otherwise modified from time to time (including any
amendments or modifications made in connection with this Agreement), pursuant to
which Company and Subsidiaries grant a security interest in the Real Property
located in Tennessee (and in such other jurisdictions where "deeds of trust" are
used to encumber real property) and related Personal Property of Company or
Subsidiaries to Collateral Agent, for the benefit of Banks, as required by this
Agreement.
"DEFAULT" means any of the events specified in Section 8, 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 to that term in Section 2.14.
"DEPOSIT ACCOUNT SECURITY AGREEMENT" means the Deposit Account Security
Agreement, dated of even date herewith, substantially in the form of Exhibit
D-1, executed by
9.
<PAGE> 19
Company and each of its Subsidiaries in favor of Collateral Agent, for the
benefit of Banks, as the same may be amended, supplemented or otherwise modified
from time to time.
"DESIGNATED RAW LAND" means Real Property of the Company and its
Subsidiaries consisting of raw land that Company or any Subsidiary has committed
(in writing) to be sold on or before December 31, 1996.
"DOLLARS" and the sign "$" means the lawful money of the United States
of America.
"EFFECTIVE DATE" means the date, on or before October 11, 1996, upon
which all of the conditions set forth in Section 5 of this Agreement have been
met or waived by the Banks in their sole discretion and this Agreement becomes
effective.
"ELIGIBLE COMMERCIAL RECEIVABLES" means those Commercial Receivables
that comply with each and all of the representations and warranties respecting
Commercial Receivables made by Company or any Subsidiary to Agent in the Loan
Documents, and that are and at all times continue to be acceptable to Agent in
all respects; provided, however, that standards of eligibility may be fixed and
revised from time to time by Agent in Agent's reasonable credit judgment.
Eligible Commercial Receivables shall not include any of the following: (i)
Commercial Receivables that are in material default; (ii) Commercial Receivables
with respect to which the obligor is an employee, Affiliate, or agent of Company
or of any Subsidiary; (iii) Commercial Receivables with respect to which the
obligor is a creditor of Company or any Subsidiary, has or has asserted a right
of setoff, or has disputed its liability or made any claim with respect to the
Commercial Receivable; provided, however, that such Commercial Receivables only
shall be deemed ineligible under this clause to the extent of the actual or
likely offsetting amount as determined by Agent, in its reasonable credit
judgment, unless Agent believes that the dispute or claim will jeopardize the
repayment of all or substantially all of the Commercial Receivable in a timely
manner; (iv) Commercial Receivables that the obligor has failed to pay within 90
days of due date; (v) Commercial Receivables with respect to which the obligor
is the subject of any Insolvency Proceeding, or becomes insolvent; and (vi)
Commercial Receivables the collection of which Agent, in its reasonable credit
judgment, believes to be doubtful by reason of the obligor's financial
condition.
"ELIGIBLE HOMESITE CONTRACT RECEIVABLES" means those Homesite Contract
Receivables that comply with each and all of the representations and warranties
respecting Homesite Contract Receivables made by Company or any Subsidiary to
Agent in the Loan Documents, and that are and at all times continue to be
acceptable to Agent in all respects; provided, however, that standards of
eligibility may be fixed and revised from time to time by Agent in Agent's
reasonable credit judgment. Eligible Homesite Contract Receivables shall not
include any of the following: (i) Homesite Contract Receivables that are in
material default; (ii) Homesite Contract Receivables with respect to which the
obligor is an employee, Affiliate, or agent of Company or of any Subsidiary;
(iii) Homesite Contract Receivables with respect to which the obligor is a
creditor of Company or any Subsidiary, has or has asserted a right of setoff, or
has disputed its liability or made any claim with respect to the Homesite
Contract Receivable; provided, however, that such Homesite Contract
10.
<PAGE> 20
Receivables only shall be deemed ineligible under this clause to the extent of
the actual or likely offsetting amount as determined by Agent, in its reasonable
credit judgment, unless Agent believes that the dispute or claim will jeopardize
the repayment of all or substantially all of the Homesite Contract Receivable in
a timely manner; (iv) Homesite Contract Receivables that the obligor has failed
to pay within 90 days of due date; (v) Homesite Contract Receivables with
respect to which the obligor is the subject of any Insolvency Proceeding, or
becomes insolvent; and (vi) Homesite Contract Receivables the collection of
which Agent, in its reasonable credit judgment, believes to be doubtful by
reason of the obligor's financial condition.
"ELIGIBLE JV RECEIVABLES" means those JV Receivables that comply with
each and all of the representations and warranties respecting JV Receivables
made by Company or the relevant Venture Subsidiary to Agent in the Loan
Documents, and that are and at all times continue to be acceptable to Agent in
all respects; provided, however, that standards of eligibility may be fixed and
revised from time to time by Agent in Agent's reasonable credit judgment.
Eligible JV Receivables shall not include any of the following: (i) JV
Receivables that are in material default; (ii) JV Receivables with respect to
which the obligor is an employee, Affiliate, or agent of Company or of any
Subsidiary or of the relevant Borrowing Base Joint Venture (or any other
investor therein); (iii) JV Receivables with respect to which the obligor is a
creditor of Company or any Subsidiary or of the relevant Borrowing Base Joint
Venture (or any other investor therein), has or has asserted a right of setoff,
or has disputed its liability or made any claim with respect to the JV
Receivable; provided, however, that such JV Receivables only shall be deemed
ineligible under this clause to the extent of the actual or likely offsetting
amount as determined by Agent, in its reasonable credit judgment, unless Agent
believes that the dispute or claim will jeopardize the repayment of all or
substantially all of the JV Receivable in a timely manner; (iv) JV Receivables
that the obligor has failed to pay within 90 days of due date; (v) JV
Receivables with respect to which the obligor is the subject of any Insolvency
Proceeding, or becomes insolvent; and (vi) JV Receivables the collection of
which Agent, in its reasonable credit judgment, believes to be doubtful by
reason of the obligor's financial condition.
"ELIGIBLE RECEIVABLES" shall mean, collectively, Eligible Commercial
Receivables and Eligible Homesite Contract Receivables.
"ENVIRONMENTAL LAWS" means 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 Hazardous Materials, as now or may at any time
hereafter be in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
11.
<PAGE> 21
"ESCROW AGENT" means Chase, in its individual trust capacity, and not
in its capacity as one of the holders of the Existing Secured Floating Rate
Notes (or the agent for such holders), nor in its capacity as one of the holders
of the Secured Cash Flow Notes (or the agent for such holders).
"ESCROW AGREEMENT" means an escrow agreement, in form and substance
satisfactory to each of Foothill, Escrow Agent, the holders of the Existing
Secured Floating Rate Notes, Chase, as agent for the holders of the Existing
Secured Floating Rate Notes, the holders of the Secured Cash Flow Notes, and
Cash Flow Agent, relative to the receipt and application of all funds required
to effectuate the Recapitalization Transactions.
"EVENT OF DEFAULT" means any of the events specified in Section 8;
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"EXCLUDED PROPERTY" means (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 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
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" means General Development Corporation, a Delaware corporation,
under which name Company was formerly known.
"GDU" means the Company's Subsidiary, General Development Utilities,
Inc., a Florida corporation.
"GOVERNMENT ACTS" has the meaning assigned that term in Section
2.21(i).
"GOVERNMENTAL AUTHORITY" means any nation or government, state, local
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, government.
"GUARANTEE OBLIGATION" means, 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) to induce the creation of which
obligation 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
12.
<PAGE> 22
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 otherwise 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 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 Company in good faith.
"GUARANTEES" means, collectively, the guarantees of the Obligations,
made by the Subsidiaries pursuant to the Subsidiary Guarantees.
"HAZARDOUS MATERIALS" means any hazardous materials, hazardous waste,
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 RECEIVABLES" means all contracts for deed,
promissory notes, mortgages, deeds of trust and other agreements, currently
existing or hereafter created or acquired, pursuant to which 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" has the meaning assigned that term in Article I of
the Reorganization Plan.
"HOUSING INVENTORY" means, 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 Company and its
Subsidiaries prepared at such date in accordance with GAAP
"INDEBTEDNESS" means, 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
13.
<PAGE> 23
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 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 Public Debt Securities. As used herein, the term
"Indebtedness" shall not include Guarantee Obligations.
"INSOLVENCY", means, with respect to any Multiemployer Plan, the
condition that such plan is insolvent within the meaning of Section 4245 of
ERISA.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"INSOLVENT" means pertaining to a condition of Insolvency.
"INTELLECTUAL PROPERTY" has the meaning assigned that term in Section
4.9.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement of
even date herewith by and between Agent, Banks, Collateral Agent, and the
holders of the Secured Floating Rate Notes, substantially in the form of Exhibit
I-1, as such agreement may be supplemented, amended or otherwise modified from
time to time.
"INTEREST PAYMENT DATE" means, as to any Loan, the last day of each
calendar month to occur while such Loan is outstanding.
"INVESTMENTS" means any and all promissory notes, Capital Stock (other
than Subsidiary Stock), bonds, debentures and securities, held by Company or any
Subsidiary, whether now owned or hereafter acquired.
"ISSUING BANK" means, with respect to any Letter of Credit, Foothill or
its designee.
"JOINT VENTURES" means, 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
Effective Date 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" means the Consolidated, Amended and
Restated Assignment of Partnership Interests, dated of even date herewith,
substantially in the form of Exhibit J-1, among each of the Venture Subsidiaries
and Collateral Agent, as the same may be amended,
14.
<PAGE> 24
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 Banks.
"JV REAL PROPERTY" means 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" means all contracts for deed, promissory notes,
mortgages, deeds of trust and other agreements, currently existing or hereafter
created or acquired, pursuant to which any Borrowing Base Joint Venture has the
right to receive payment in any form whatsoever for the sale of JV Real
Property, and cash and non-cash proceeds of any and all of the foregoing.
"L/C GUARANTEE" means a guarantee of payment with respect to a letter
of credit issued by an issuing bank for the account of Company.
"LETTER OF CREDIT" or "Letters of Credit" means Standby Letters of
Credit or L/C Guarantees issued or to be issued by Issuing Bank for the account
of Company pursuant to Section 2.21.
"LETTER OF CREDIT USAGE" means, as at any date of determination, the
sum of (a) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding X (b)
the aggregate amount of all drawings under Letters of Credit honored by Issuing
Bank and not theretofore reimbursed by Company (whether by means of the proceeds
of Working Capital Loans pursuant to Section 2.21(e)(ii) or otherwise).
"LIEN" means 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).
"LOAN BORROWING DATE" means a Working Capital Loan Borrowing Date or a
Reducing Revolving Loan Borrowing Date, as the case may be.
"LOANS" means the collective reference to the Working Capital Loans and
the Reducing Revolving Loans.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Letters of Credit
(and any applications for or other documents or certificates executed by Company
in favor of Issuing Bank), the Subsidiary Guarantees, the Security Documents and
the Acknowledgment Agreement, and the Tax Servicing Contracts.
15.
<PAGE> 25
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the
business, operations, property or condition (financial or otherwise) or
prospects of Company and its Subsidiaries taken as a whole, (b) the ability of
Company to perform its obligations under this Agreement, the Notes, the Security
Documents or other Loan Documents, or (c) the validity or enforceability of this
Agreement, the Notes, the Security Documents or other Loan Documents or the
rights or remedies of Agent, Collateral Agent or Banks hereunder or thereunder.
"MORTGAGES" means the Mortgage and Security Agreements executed from
time to time by Company or a Subsidiary in favor of Collateral Agent,
substantially in the form of the Mortgages in existence as of the Effective
Date, as the same may be amended, supplemented, consolidated or otherwise
modified from time to time (including any amendments or modifications made in
connection with this Agreement), pursuant to which Company and Subsidiaries
grant a security interest in the Real Property located in Florida (or in such
other jurisdictions where "mortgages" are used to encumber real property) and
related Personal Property of Company or Subsidiaries to Collateral Agent, for
the benefit of Banks.
"MULTIEMPLOYER PLAN" means a Plan which is a multiemployer plan as
defined in Section 4001(a) (3) of ERISA.
"NET CASH PROCEEDS" means 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 and so
received) received from such sale net of bona fide direct costs of sale.
"NET CASH FLOW" means, with respect to any fiscal period of a Person,
on a consolidated basis, the actual consolidated pre-mc net cash flow as
determined on the basis set forth in Schedule N-1.
"NET OPERATING CASH FLOW" means, 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.
"NOTES" means, collectively, the Working Capital Notes and the Reducing
Revolving Notes.
"NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice substantially
in the form of Exhibit N-1 delivered by Company to Agent pursuant to Section
2.21(b)(i) with respect to the proposed issuance of a Letter of Credit.
"NOTIFICATION DATE" has the meaning assigned that term in Section
2.21(a) (iii).
16.
<PAGE> 26
"OBLIGATIONS" means all obligations of every nature of Company from
time to time owed to Agent, Banks, Issuing Bank or Collateral Agent or any of
them under the Loan Documents, whether for principal, interest, reimbursement of
amounts drawn under Letters of Credit, fees, costs, expenses, indemnification or
otherwise.
"OFFICIAL UNSECURED CREDITORS COMMITTEE" means the official committee
of creditors appointed by the United States Trustee in the Reorganization
Proceedings.
"OLD EFFECTIVE DATE" means September 21, 1994.
"OLD PURCHASE AGREEMENT" has the meaning assigned to that term in the
Recitals to this Agreement.
"OPERATING ACCOUNT BANK" means Sun Trust Bank, Miami, N.A. or such
other financial institution reasonably satisfactory to Foothill.
"ORIGINAL AGENT" has the meaning assigned that term in the Recitals to
this Agreement.
"ORIGINAL BANKS" means the banks or other financial institutions party
to the Original Loan Agreement immediately prior to the Old Effective Date.
"ORIGINAL EFFECTIVE DATE" means March 31, 1992.
"ORIGINAL LOAN AGREEMENT" has the meaning assigned that term in the
Recitals to this Agreement.
"PBGC" means the Pension Benefit Guaranty 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" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PERSONAL PROPERTY" means the following personal property of Company or
any Subsidiary (exclusive of Homesite Contracts Receivable and Commercial
Receivables of Company or any Subsidiary):
(a) the Bank Accounts;
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<PAGE> 27
(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 located, 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 choses 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
secrets, goodwill, copyrights, registrations, licenses, franchises,
customer lists, tax refund claims, computer programs, any other
Intellectual Property, all claims under guaranties, 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
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 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 contracts 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 Agent, Collateral Agent or any Bank or any agent or bailee
of Agent, Collateral Agent or any Bank;
(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
18.
<PAGE> 28
or permanent disposition of such items or any interest therein whether
or not they constitute "proceeds" as defined in the Uniform Commercial
Code; and
(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" means the Consolidated, Amended,
and Restated Personal Property Security Agreement, dated of even date herewith,
substantially in the form of Exhibit P-1, executed by Company and the
Subsidiaries now or hereafter party thereto in favor of Collateral Agent, for
the benefit of Banks, as the same may be amended, supplemented or otherwise
modified from time to time.
"PLAN" means, at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which 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.
"PRINCIPAL RAW LAND" means the parcels of Real Property of Company and
its Subsidiaries identified on Schedule P-1. Parcels of Designated Raw Land
constituting Principal Raw Land shall be marked on such schedule with an
asterisk (*).
"PRIORITY CLAIMS" has the meaning assigned that term in Article I of
the Reorganization Plan.
"PRO RATA SHARE" means, with respect to each Bank the percentage
obtained by dividing (a) the aggregate Commitments of such Bank by (b) the
aggregate Commitments of all Banks, as such percentage may be adjusted by
assignments permitted pursuant to Section 10.6.
"PUBLIC DEBT SECURITIES" means, collectively, the Unsecured 12% Notes
and Unsecured Cash Flow Notes.
"PURCHASE AGREEMENT" has the meaning assigned to that term in the
Recitals to this Agreement.
"REAL PROPERTY" means any and all real property and fixtures and
interests in real property and fixtures now owned or hereafter acquired by
Company or any Subsidiary.
"REAL PROPERTY SALE" means the sale, assignment or other transfer for
value of any Real Property by Company or any Subsidiary.
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<PAGE> 29
"RECAPITALIZATION TRANSACTIONS" means: (a)(i) the transfer by Chase to
Escrow Agent for the benefit of Company of (y) all Net Cash Proceeds from the
Julington Creek transaction held as cash collateral under that certain Cash
Collateral Account Agreement, dated as of June 7, 1996, between Company and
Chase (as Cash Flow Agent and as agent for the holders of the Existing Secured
Floating Rate Notes), and (z) all Net Cash Proceeds from the Harbourton Capital
transaction held as cash collateral under that certain Cash Collateral Account
Agreement, dated as of June 21, 1996, between Company and Chase (as Cash Flow
Agent and as agent for the holders of the Existing Secured Floating Rate Notes);
(ii) the use by Company of all of the Net Cash Proceeds in respect of clause
(a)(i) of this definition together with unrestricted and unencumbered cash of
Company, in each case, in accordance with the Funds Flow Memo, to finance, in
part, clause (c) of this definition; (b)(i) the purchase by Foothill and/or its
designees of all of the Existing Secured Floating Rate Notes from the holders
thereof pursuant to the Purchase Agreement for a purchase price (the "Purchase
Price") equal to 100% of the principal amount thereof outstanding, plus all
accrued and unpaid interest thereon, plus all fees and costs payable with
respect thereto; (ii) the purchase by Foothill and/or its designees from Company
of additional Existing Secured Floating Rate Notes in the aggregate principal
amount equal to (y) $40,000,000, less (z) the Purchase Price; (iii) the
amendment and restatement in full of the Existing Secured Floating Rate Note
Agreement and all Existing Secured Floating Rate Notes pursuant to the Secured
Floating Rate Note Agreement and the Secured Floating Rate Notes, respectively;
and (iv) the use by Company of all of the Net Cash Proceeds in respect of clause
(b)(ii) of this definition and of the proceeds of a Working Capital Loan on the
Effective Date, in an aggregate amount not greater than $20,000,000 and of the
proceeds of a Reducing Revolving Loan on the Effective Date, in each case, in
accordance with the Funds Flow Memo, to finance the balance of clause (c) of
this definition; and (c) (i) the retirement (by prepayment) by Company of all of
the outstanding Secured Cash Flow Notes for an aggregate amount not greater than
$40,000,000 in cash and 1,500,000 warrants to purchase the common stock of
Company and (ii) the termination of all Liens securing the Secured Cash Flow
Notes.
"REDUCING REVOLVING FACILITY AVAILABILITY" means, at any time, the
result of: (a) the lesser of (i) the Borrowing Base, less the Working Capital
Facility. Usage, u the aggregate outstanding balance of all Secured Floating
Rate Notes, and (ii) the Reducing Revolving Loan Commitments; minus (b) the
Reducing Revolving Facility Usage.
"REDUCING REVOLVING FACILITY USAGE" means, as of any date of
determination, the aggregate outstanding balance of all Reducing Revolving
Loans.
"REDUCING REVOLVING LOAN BORROWING DATE" means any Business Day
specified in a notice pursuant to Section 2.8 as a date on which Company
requests Banks to make Reducing Revolving Loans hereunder.
"REDUCING REVOLVING LOAN COMMITMENT" means, as to any Bank, the
obligation of such Bank, if any, to make Reducing Revolving Loans to Company
hereunder in an aggregate principal amount at any one time outstanding not to
exceed the amount set forth opposite such Bank's name on Schedule 2.6, as such
amount may be reduced from time to time in accordance with
20.
<PAGE> 30
Section 2.11(b) or 2.13(b); the Reducing Revolving Loan Commitments of all
Banks, are collectively referred to herein as the "Reducing Revolving Loan
Commitments." Anything herein to the contrary notwithstanding, the extensions of
credit under the Reducing Revolving Loan Commitments shall be subject to the
limitation that in no event shall Reducing Revolving Facility Usage exceed the
Reducing Revolving Loan Commitments then in effect.
"REDUCING REVOLVING LOAN COMMITMENT PERIOD" means the period from and
including the Effective Date to but not including the Reducing Revolving Loan
Maturity Date or such earlier date on which the Reducing Revolving Loan
Commitments shall terminate as provided herein. Anything herein to the contrary
notwithstanding, the Reducing Revolving Loan Commitments automatically shall
terminate on December 31, 1996 if Agent fails to receive any Activation Notice
on or before such date.
"REDUCING REVOLVING LOAN DESIGNATED PURPOSES" has the meaning assigned
that term in Section 2.10.
"REDUCING REVOLVING LOAN MATURITY DATE" means June 30, 1998.
"REDUCING REVOLVING LOANS" has the meaning assigned that term in
Section 2.6.
"REDUCING REVOLVING NOTE" has the meaning assigned that term in Section
2.7.
"REFERENCE RATE" means the variable rate of interest, per annum, most
recently announced by Norwest Bank Minnesota, N.A., or any successor to such
institution (or such successor), as its "base rate" irrespective of whether such
announced rate is the best rate available from such financial institution.
"REGENCY DEVELOPMENT" means all Real Property and Personal Property now
owned or hereafter acquired by Company, relating to its condominium project
located in St. Lucie County, Florida, commonly known as the Regency Condominium
at Island Dunes.
"REIMBURSEMENT DATE" has the meaning assigned such term in Section
2.21(e)(ii).
"REORGANIZATION" means, with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA
"REORGANIZATION DEBT" means, collectively, the Secured Floating Rate
Notes and the Public Debt Securities.
"REORGANIZATION PLAN" means the Restated Second Amended Joint Plan of
Reorganization of General Development Corporation jointly proposed in the
Reorganization Proceedings by Company and the Official Unsecured Creditors
Committee, filed on October 9, 1991 with the Clerk of the Bankruptcy Court, as
modified by Modification filed March 9, 1992.
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<PAGE> 31
"REORGANIZATION PROCEEDINGS" means 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. 9012234-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-MC) and
Environmental Quality Laboratory, Incorporated (Case No. 90-12237-BKC-AJC).
"REPORTABLE EVENT" means 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. ss.2615.
"REQUIRED BANKS" means Banks holding at least 51% of the aggregate
amount of the Commitments.
"REQUIREMENT OF LAW" means, as to any Person, the certificate or
articles of incorporation and bylaws or other organizational 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" means 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 established 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 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, Company and the trustee
thereunder, the Class 14 Utility Fund Trust Agreement and the Homesite Program
and Utility Fund Trust Agreement, executed by and between Company and the
trustee thereunder, the Class 14 Utility Lot Trust Agreement, executed by and
between Company and the trustee thereunder, as described in Section 7.6 of the
Reorganization Plan, if any.
"RESPONSIBLE OFFICER" means the chief executive officer and the
president of Company, or with respect to corporate proceedings, the secretary or
any assistant secretary of Company, or, with respect to financial matters, the
chief financial officer or treasurer of Company.
"REVERSE STOCK SPLIT" means the proposal to amend Company's restated
certificate of incorporation to effect, if subsequently determined by Company's
board of directors, a reverse
22.
<PAGE> 32
stock split of Company's outstanding common stock as of 5:00 p.m. (Florida time)
on the effective date of the amendment (the "Reverse Split Effective 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 only funds the Company uses to pay for
the less than whole shares of its common stock resulting from consummation of
the Reverse Stock Split are the net proceeds from the sale by the Company of its
common stock.
"SALE AND LEASEBACK" means any arrangement with any Person providing
for the leasing by Company or any Subsidiary of real or personal property which
has been or is to be sold or transferred by 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 Company or
Subsidiary
"SECTION 365(J) PROPERTY" means the property now or hereafter 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 CASH FLOW NOTE AGREEMENT" means that certain Amended and
Restated Secured Cash Flow Note Agreement, dated as of September 21, 1994,
executed by and among Company, Chase, NationsBank of Florida, N.A., NationsBank
of Georgia, N.A., Midland Bank PLC, New York Branch, Lehman Government
Securities, Inc., and Berliner Handels-Und Frankfurter Bank and Cash Flow Agent,
as modified from time to time.
"SECURED CASH FLOW NOTES" means the Secured Cash Flow Notes issued by
Company pursuant to the Secured Cash Flow Note Agreement.
"SECURED DEBT" means all Obligations.
"SECURED FLOATING RATE NOTE AGREEMENT" means that certain Second
Amended and Restated Secured Floating Rate Note Agreement, dated as of even date
herewith, executed by and among Company, the purchasers identified therein and
other Persons from time to time party thereto, and Foothill, as agent, as
modified from time to time.
"SECURED FLOATING RATE NOTES" means the secured floating rate notes
issued by Company pursuant to the Secured Floating Rate Note Agreement.
"SECURITY AGREEMENTS" means the Personal Property Security Agreement,
the Deposit Account Security Agreement, and any other security agreements,
between Company and/or
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<PAGE> 33
a Subsidiary and Agent or Collateral Agent, as the same may be amended
supplemented or otherwise modified from time to time (including as amended by
the Acknowledgment Agreement), pursuant to which Company and Subsidiaries assign
and grant a security interest in Homesite Contracts Receivables and Commercial
Receivables and Personal Property of Company or Subsidiaries to Agent or
Collateral Agent, for the benefit of Banks, as required by this Agreement.
"SECURITY DOCUMENTS" means the Stock Pledge Agreement, the Joint
Venture Pledge Agreement, the Security Agreements, the Mortgages, the Deeds of
Trust, 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 Agent or Collateral Agent at any time to
create, perfect, maintain or continue Agent's and Collateral Agent's Lien in the
Collateral, together with all amendments, modifications, extensions,
substitutions and renewals thereof.
"SHAREHOLDERS' EQUITY" means, 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" means any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"SPUD SUBSIDIARY" has the meaning assigned that term in Section 7.2(h).
"STANDBY LETTER OF CREDIT" means any standby letter of credit or
similar instrument issued for the purpose of supporting (a) workers'
compensation liabilities of Company or any of its Subsidiaries, (b) the
obligations of third party insurers of Company or any of its Subsidiaries
arising by virtue of the laws of any jurisdiction requiring third party
insurers, (c) obligations with respect to capital leases or operating leases of
Company or any of its Subsidiaries, (d) performance, payment, deposit or surety
obligations of Company or any of its Subsidiaries, in any case if required by
law or governmental rule or regulation or in accordance with custom and practice
in the industry, and (e) obligations of Company and its Subsidiaries otherwise
permitted to be incurred hereunder; provided that Standby Letters of Credit may
not be issued for the purpose of supporting (i) trade payables or (ii)
Indebtedness constituting "antecedent debt" (as that term is used in Section 547
of the Bankruptcy Code).
"STOCK PLEDGE AGREEMENT" means the Second Amended and Restated Stock
Pledge Agreement, dated of even date herewith, substantially in the form of
Exhibit S-1, among 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 Company and Subsidiaries pledge Subsidiary Stock to Collateral
Agent for the benefit of Banks.
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"SUBSIDIARY" means, as to any Person, a corporation, partnership, trust
(exclusive of any trust created in connection 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 Reserve Account) or other entity are at the time owned, or the
management of which is otherwise controlled, directly 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 Company. Unless otherwise indicated, all
references to a Subsidiary or Subsidiaries of Company shall not mean, include,
or refer to the Unrestricted Subsidiaries, the Excluded Subsidiaries, or the
Joint Ventures.
"SUBSIDIARY GUARANTEE" means the Consolidated Second Amended and
Restated Subsidiary Guarantee, dated of even date herewith, substantially in the
form of Exhibit S-2, executed by Company and each of its Subsidiaries in favor
of Agent, for the benefit of Banks, as the same may be amended, supplemented or
otherwise modified from time to time.
"SUBSIDIARY PROPERTY UNDER DEVELOPMENT" means, 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" means the Capital Stock of any and all Subsidiaries
(including the Excluded Subsidiaries and the Unrestricted Subsidiaries).
"SUNSET LAKES" means Sunset Lakes Associates, a Florida general
partnership in which the Subsidiary, Sunset Lakes Development Corporation, a
Florida corporation, is a partner.
"TAX SERVICING CONTRACTS" means, collectively, the tax servicing
contracts required to be delivered under Section 5.3, and all amendments,
modifications, extensions, substitutions and renewals thereof.
"TOTAL REAL PROPERTY" means, collectively, the Real Property and the JV
Real Property.
"TOTAL USAGE" means, as of any date of determination, the sum of (i)
the Working Capital Facility Usage, plus (ii) the Reducing Revolving Facility
Usage, plus (iii) the aggregate outstanding balance of all Secured Floating Rate
Notes.
"TRUST PROPERTY" means 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 Bank of Florida, as Trustee for the benefit of Company,
the Beneficiary; (b) Trust Agreement No.
25.
<PAGE> 35
06-01-009-6081954, dated as of January 17,1991, by and between NCNB National
Bank of Florida, as Trustee for the benefit of 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 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, Esq., as
successor Trustee for the benefit of Company and Cumberland Cove, Inc., the
Beneficiaries.
"UNRESTRICTED SUBSIDIARIES" means, collectively, (a) the direct or
indirect subsidiaries of Company listed on Schedule U-1, and (b) any other
direct or indirect Subsidiary of Company that is formed or acquired after the
Effective Date, 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 Agent agrees in writing that such entity 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" means the "New Unsecured Cash Flow Notes"
as defined in Article I of the Reorganization Plan.
"UNSECURED 12% NOTES" means the "New Unsecured 12% Notes" as defined in
Article I of the Reorganization Plan.
"UNSOLD HOUSING INVENTORY" means, as at any date, all Housing Inventory
applicable to Unsold Residential Dwelling Units.
"UNSOLD RESIDENTIAL DWELLING UNITS" means 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 Company or any Subsidiary that are not
subject to a contract for sale to any third-party purchaser.
"VENTURE SUBSIDIARY" means any Subsidiary whose sole asset is its
equity interest in a Joint Venture and whose sole revenues are derived from such
sole asset.
"WORKING CAPITAL EXIT FEE" means, in connection with the termination by
Company of this Agreement, a fee in an amount equal to (i) if such termination
occurs before the date that is one year prior to the Working Capital Loan
Maturity Date, $400,000, and (ii) if such termination occurs during the period
commencing on the date that is one year prior to the Working Capital Loan
Maturity Date and ending on the date immediately preceding the Working Capital
Loan Maturity Date, $200,000.
"WORKING CAPITAL FACILITY AVAILABILITY" means, at any time, the result
of: (a) the lesser of (i) the Borrowing Base, less the Reducing Revolving
Facility Usage, less the aggregate
26.
<PAGE> 36
outstanding balance of all Secured Floating Rate Notes, and (ii) the Working
Capital Loan Commitments; minus (b) the Working Capital Facility Usage.
"WORKING CAPITAL FACILITY USAGE" means, as at any date of
determination, the sum of (a) the aggregate principal amount of all outstanding
Working Capital Loans (other than Working Capital Loans made for the purpose of
reimbursing the Issuing Bank for any amount drawn under any Letter of Credit but
not yet so applied) plus (b) the Letter of Credit Usage.
"WORKING CAPITAL LOAN BORROWING DATE" means any Business Day specified
in a notice pursuant to Section 2.3 as a date on which Company requests Banks to
make Working Capital Loans hereunder.
"WORKING CAPITAL LOAN COMMITMENT" means, as to any Bank, the obligation
of such Bank, if any, to make Working Capital Loans to Company hereunder in an
aggregate principal amount at any one time outstanding not to exceed the amount
set forth opposite such Bank's name on Schedule 2.1; the Working Capital Loan
Commitments of all Banks, are collectively referred to herein as the "Working
Capital Loan Commitments." Anything herein to the contrary notwithstanding, the
extensions of credit under the Working Capital Loan Commitments shall be subject
to the limitation that in no event shall Working Capital Facility Usage exceed
the Working Capital Loan Commitments then in effect.
"WORKING CAPITAL LOAN COMMITMENT PERIOD" means the period from and
including the Original Effective Date to but not including the Working Capital
Loan Maturity Date or such earlier date on which the Working Capital Loan
Commitments shall terminate as provided herein.
"WORKING CAPITAL LOAN MATURITY DATE" means December 1, 1998 or, if the
Working Capital Maturity Extension is effected timely by Banks, December 1,
2000.
"WORKING CAPITAL LOANS" has the meaning assigned that term in Section
2.1.
"WORKING CAPITAL MATURITY EXTENSION" means the extension by Banks, in
their sole discretion, of the Working Capital Loan Maturity Date to December 1,
2000 pursuant to a written notice delivered by Agent on behalf of Banks to
Company on or before July 15, 1998. "Working Capital Note" has the meaning
assigned that term in Section 2.2.
"WORKING CAPITAL RESERVES" has the meaning assigned that term in
Article I of the Reorganization Plan.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have such defined meanings when used in the Notes or any
certificate or other document made or delivered pursuant hereto.
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(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to 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.
(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.
SECTION 2
AMOUNT AND TERMS OF COMMITMENTS
2.1 WORKING CAPITAL LOANS.
Subject to the terms and conditions hereof, each Bank having a Working
Capital Loan Commitment severally agrees to make working capital loans ("WORKING
CAPITAL LOANS") to Company from time to time during the Working Capital Loan
Commitment Period; provided that the aggregate outstanding principal balances of
the Working Capital Loans made by each such Bank shall not exceed an amount
which is equal to the Working Capital Loan Commitment of such Bank set forth on
Schedule 2.1. On the Effective Date, all Working Capital Loans outstanding under
the Existing Loan Agreement (the "EXISTING WORKING CAPITAL LOANS") shall be
converted into Working Capital Loans hereunder, it being understood that no
repayment of the Existing Working Capital Loans is being effected hereby, but
merely an amendment and restatement in accordance with the terms hereof. Subject
to the terms and conditions hereof, amounts prepaid or repaid on account of the
Working Capital Loans may be reborrowed during the Working Capital Loan
Commitment Period. All Working Capital Loans shall be made by Banks
simultaneously, it being understood that no Bank shall be responsible for any
default by any other Bank in the other Bank's obligations to make Working
Capital Loans hereunder nor shall the Working Capital Loan Commitment of any
Bank be increased as a result of the default by any other Bank in that Bank's
obligation to make Working Capital Loans hereunder. The default by any Bank in
its obligations to make Working Capital Loans shall not excuse any other Bank
from its obligations to make Working Capital Loans.
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Anything herein to the contrary notwithstanding, the extensions of
credit under the Working Capital Loan Commitments shall be subject to the
following limitations:
(a) in no event shall Working Capital Facility Usage at any time
exceed the Working Capital Loan Commitments then in effect; and
(b) in no event shall Total Usage at any time exceed the Borrowing
Base then in effect
2.2 WORKING CAPITAL NOTES.
The Working Capital Loans made by each Bank shall be evidenced by a
second amended and restated renewal promissory note of Company, substantially in
the form of Exhibit 2.2 with appropriate insertions as to payee, date and
principal amount (a "Working Capital Note"), payable to the order of such Bank,
in each case in the face amount of the Working Capital Loan Commitment of each
Bank. Each Bank is hereby authorized to record the date and amount of each
Working Capital Loan made by such Bank and the date and amount of each payment
or prepayment of principal thereof or of an advance of a Working Capital Loan on
the schedule annexed to and constituting a part of its Working Capital Note, and
any such recordation shall constitute prima facie evidence of the accuracy of
the information so recorded. Each Working Capital Note shall (a) be dated the
Effective Date, (b) be stated to mature as provided in Section 2.4 and (c)
provide for the computation and payment of interest in accordance with Sections
2.14 and 2.16.
2.3 PROCEDURE FOR WORKING CAPITAL LOAN BORROWING.
Company may borrow under the Working Capital Loan Commitments during
the Working Capital Loan Commitment Period on any Business Day in amounts not
less than $1,000,000 and subject to the conditions set forth in this Agreement;
provided that Company shall give Agent irrevocable notice (which notice must be
received by Agent prior to 11:00 a.m., California time two Business Days prior
to the requested Working Capital Loan Borrowing Date), specifying (a) the amount
to be borrowed and (b) the requested Working Capital Loan Borrowing Date. Upon
receipt of any such notice from Company, Agent shall promptly (and in any event
on the same Business Day) notify each Bank having a Working Capital Loan
Commitment thereof. Each notice of a request for borrowing by Company shall be
accompanied by a certificate of a Responsible Officer of Company (a) indicating
that the amount of cash or Cash Equivalents available to Company (including cash
available to Company from any Subsidiary but not including any cash in the
Claims Disbursement Account or Reserve Accounts or any account set forth on
Schedule 7.17) will be less than or equal to $5,000,000 after giving effect to
the requested borrowing and the payments to be made by Company (whether by check
or otherwise) on the Working Capital Loan Borrowing Date, (b) representing and
warranting that the purpose for which the requested borrowing is to be used is
permitted by, and is in accordance with, the terms and conditions of this
Agreement, and (c) representing and warranting as to compliance with the
limitations set forth in clauses (a) and (b) of Section 2.1. Each Bank having a
Working Capital Loan Commitment shall make the amount of its
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Pro Rata Share of each borrowing available to Agent for the account of Company
at the office of Agent specified on the signature pages hereof prior to 10:00
a.m., California time, on the Working Capital Loan Borrowing Date requested by
Company in funds immediately available to Agent. Such borrowing will then be
made available to Company by Agent crediting the Company Operating Account (or
such other deposit account as Company may designate in writing to Agent from
time to time) with the aggregate of the amounts made available to Agent by Banks
and in like funds as received by Agent; provided, however, if, following Agent's
receipt of funds for such borrowing from Banks, but prior to 11:00 a.m.,
California time, on such Working Capital Loan Borrowing Date, Agent shall have
received written notice from Banks having 50% or greater of the total Working
Capital Loan Commitments that any condition precedent to such borrowing has not
been met and that such Banks, therefore, have elected to stop such funding,
Agent shall not make such borrowing available to Company.
2.4 REPAYMENT OF WORKING CAPITAL LOANS.
On the Working Capital Loan Maturity Date, the aggregate principal
amount of the Working Capital Loans then outstanding shall be repaid (together
with all accrued and unpaid interest and fees then accrued thereon) without
demand. Anything herein to the contrary notwithstanding, any and all repayments
or prepayments of the Loans (irrespective of whether made by or on behalf of
Company, from Collections received, or from the proceeds of the sale or other
disposition of Collateral, or otherwise) shall be applied, first, to outstanding
Reducing Revolving Loans until the Reducing Revolving Facility Usage equals zero
and, then, to outstanding Working Capital Loans.
2.5 USE OF PROCEEDS OF WORKING CAPITAL LOANS.
The proceeds of the Working Capital Loans shall be used by Company or
its Subsidiaries, consistent with the terms and conditions. hereof, only for
lawful and permitted corporate purposes relating to Company's domestic
businesses as described in the Business Plan.
2.6 REDUCING REVOLVING LOANS.
Subject to the terms and conditions hereof, each Bank having a Reducing
Revolving Loan Commitment severally agrees to make reducing revolving loans
("Reducing Revolving Loans") to Company from time to time during the Reducing
Revolving Loan Commitment Period; provided that the aggregate outstanding
principal balances of the Reducing Revolving Loans made by each such Bank shall
not exceed an amount which is equal to the Reducing Revolving Loan Commitment of
such Bank set forth on Schedule 2.6, as reduced by any ratable reductions of the
Reducing Revolving Loan Commitment of such Bank pursuant to Sections 2.11 and
2.13. Subject to the terms and conditions hereof, amounts prepaid or repaid on
account of the Reducing Revolving Loans may be reborrowed during the Reducing
Revolving Loan Commitment Period. All Reducing Revolving Loans shall be made by
Banks simultaneously, it being understood that no Bank shall be responsible for
any default by any other Bank in the other Bank's obligations to make Reducing
Revolving Loans
30.
<PAGE> 40
hereunder nor shall the Reducing Revolving Loan Commitment of any Bank be
increased as a result of the default by any other Bank in that Bank's obligation
to make Reducing Revolving Loans hereunder. The default by any Bank in its
obligations to make Reducing Revolving Loans shall not excuse any other Bank
from its obligations to make Reducing Revolving Loans.
Anything herein to the contrary notwithstanding, the extensions of
credit under the Reducing Revolving Loan Commitments shall be subject to the
following limitations:
(a) in no event shall the outstanding balance of all Reducing
Revolving Loans at any time exceed the Reducing Revolving Loan Commitments
then in effect;
(b) in no event shall Total Usage at any time exceed the
Borrowing Base; and
(c) in no event shall any Reducing Revolving Loan be made at any
time, and to the extent, that Working Capital Facility Availability exists.
2.7 REDUCING REVOLVING NOTES.
The Reducing Revolving Loans made by each Bank shall be evidenced by a
promissory note of Company, substantially in the form of Exhibit 2.7 with
appropriate insertions as to payee, date and principal amount (a "Reducing
Revolving Note"), payable to the order of such Bank, in each case in the face
amount of the Reducing Revolving Loan Commitment of each Bank. Each Bank is
hereby authorized to record the date and amount of each Reducing Revolving Loan
made by such Bank and the date and amount of each payment or prepayment of
principal thereof or of an advance of a Reducing Revolving Loan on the schedule
annexed to and constituting a part of its Reducing Revolving Note, and any such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. Each Reducing Revolving Note shall (a) be dated the
Effective Date, (b) be stated to mature as provided in Section 2.4 and (c)
provide for the computation and payment of interest in accordance with Sections
2.14 and 2.16.
2.8 PROCEDURE FOR REDUCING REVOLVING LOAN BORROWING.
Company may borrow under the Reducing Revolving Loan Commitments during
the Reducing Revolving Loan Commitment Period on any Business Day in amounts not
less than $1,000,000 subject to the conditions set forth in this Agreement;
provided that Company shall give Agent irrevocable notice (which notice must be
received by Agent prior to 11:00 a.m., California time 5 Business Days prior to
the requested Reducing Revolving Loan Borrowing Date), specifying (a) the amount
to be borrowed and (b) the requested Reducing Revolving Loan Borrowing Date.
Upon receipt of any such notice from Company, Agent shall promptly (and in any
event on the same Business Day) notify each Bank having a Reducing Revolving
Loan Commitment thereof. Each notice of a request for borrowing by Company shall
be accompanied by a certificate of a Responsible Officer of Company (a)
indicating that the amount of cash or Cash Equivalents available to Company
(including cash available to Company from any Subsidiary but not including any
cash in the Claims
31.
<PAGE> 41
Disbursement Account or Reserve Accounts or any account set forth on Schedule
7.17) will be less than or equal to $5,000,000 after giving effect to the
requested borrowing and the payments to be made by Company (whether by check or
otherwise) on the Reducing Revolving Loan Borrowing Date, (b) representing and
warranting that the purpose for which the requested borrowing is to be used is
permitted by, and is in accordance with, the terms and conditions of this
Agreement, and (c) representing and warranting as to compliance with the
limitations set forth in clauses (a), (b), and (c) of Section 2.6. Each Bank
having a Reducing Revolving Loan Commitment shall make the amount of its Pro
Rata Share of each borrowing available to Agent for the account of Company at
the office of Agent specified on the signature pages hereof prior to 10:00 a.m.,
California time, on the Reducing Revolving Loan Borrowing Date requested by
Company in funds immediately available to Agent. Such borrowing will then be
made available to Company by Agent crediting the Company Operating Account (or
such other deposit account as Company may designate from time to time) with the
aggregate of the amounts made available to Agent by Banks and in like funds as
received by Agent; provided, however, if, following Agent's receipt of funds for
such borrowing from Banks, but prior to 11:00 a.m., California time, on such
Reducing Revolving Loan Borrowing Date, Agent shall have received written notice
from Banks having 50% or greater of the total Reducing Revolving Loan
Commitments that any condition precedent to such borrowing has not been met and
that such Banks, therefore, have elected to stop such funding, Agent shall not
make such borrowing available to Company.
2.9 REPAYMENT OF REDUCING REVOLVING LOANS.
To the extent that the Reducing Revolving Facility Usage at the time of
any reduction of the Reducing Revolving Loan Commitments hereunder exceeds the
Reducing Revolving Loan Commitments as so reduced, the Reducing Revolving Loans
shall be repaid in the amount of any such excess in accordance with Section 2.
11. On the Reducing Revolving Loan Maturity Date, the aggregate principal amount
of the Reducing Revolving Loans then outstanding shall be repaid (together with
all accrued and unpaid interest and fees then accrued thereon) without demand.
2.10 USE OF PROCEEDS OF REDUCING REVOLVING LOANS.
The proceeds of the Reducing Revolving Loans shall be used by Company
or its Subsidiaries for the following purposes only: (a) on the Effective Date,
to finance a portion of the Recapitalization Transactions (as described in, and
only to the extent set forth in, such definition); and (b) thereafter, to
complete the repayment in full of Company's outstanding Public Debt Securities
that are due and payable in 1996, to the extent that Net Cash Proceeds from
sales of assets permitted hereunder are not sufficient to pay the same
(collectively, the "Reducing Revolving Loan Designated Purposes"); provided,
however, that Reducing Revolving Loans may be used also for lawful and permitted
corporate purposes relating to Company's domestic businesses as described in the
Business Plan solely to the extent that all Working Capital Loans and all
Reducing Revolving Loans outstanding that are used for such corporate purposes
(but not for the Reducing Revolving Loan Designated Purposes) do not exceed the
Working Capital Loan Commitments.
32.
<PAGE> 42
2.11 MANDATORY PREPAYMENTS OF LOANS AND REDUCTION OF REDUCING
REVOLVING LOAN COMMITMENTS.
(A) MANDATORY PREPAYMENTS OF LOANS. Company shall make the
following mandatory prepayments of the Loans:
(i) If, at any time, the Working Capital Facility
Usage exceeds the lower of (y) the Adjusted Borrowing Base Amount, u
the Reducing Revolving Facility Usage, u the aggregate outstanding
balance of all Secured Floating Rate Notes, and (z) the Working Capital
Loan Commitments then in effect, Company shall immediately repay the
Working Capital Loans in an amount equal to such excess.
(ii) If at any time, the Reducing Revolving Facility
Usage exceeds the lower of (y) the Adjusted Borrowing Base Amount, less
the Working Capital Facility Usage, less the aggregate outstanding
balance of all Secured Floating Rate Notes, and (z) the Reducing
Revolving Loan Commitments then in effect, Company shall immediately
repay the Reducing Revolving Loans in an amount equal to such excess.
(iii) If at any time, the amount of cash or Cash
Equivalents held by Company and its Subsidiaries exceeds $5,000,000
(less any checks outstanding to the extent such checks have been
written to pay current expenses and not to prepay expenses except for
expenses to be incurred in the immediately subsequent three-month
period and consistent with past practices), Company shall repay
outstanding Loans in an amount equal to the excess.
(B) MANDATORY REDUCTIONS OF REDUCING REVOLVING LOAN
COMMITMENTS. The Reducing Revolving Loan Commitments automatically and ratably
shall be permanently reduced: (i) on June 30, 1997, to an amount equal to
two-thirds (2/3) of the Activated Amount; (ii) on December 31, 1997, to an
amount equal to one-third (1/3) of the Activated Amount; and (iii) on the
Reducing Revolving Loan Maturity Date, to zero.
(C) APPLICATION OF MANDATORY PREPAYMENTS. All prepayments
shall include payment of accrued interest on the principal amount prepaid and
shall be applied to the payment of interest and fees then due with respect to
the Loans prepaid before application to principal.
2.12 OPTIONAL PREPAYMENTS OF WORKING CAPITAL LOANS; NO OPTIONAL
REDUCTIONS OF WORKING CAPITAL LOAN COMMITMENTS.
A) OPTIONAL PREPAYMENTS OF WORKING CAPITAL LOANS. Company
may at any time and from time to time, so long as no Reducing Revolving Loan are
then outstanding, prepay the Working Capital Loans, in whole or in part, without
premium or penalty, upon at least one Business Day irrevocable notice to Agent,
specifying the date and amount of prepayment. Upon receipt of any such notice
Agent shall promptly (and in any event on the same Business Day) notify each
Bank having Working Capital Loan Commitments thereof. If any such notice is
given, the amount specified
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in such notice shall be due and payable on the date specified therein, together
with accrued interest and fees to such date on the amount prepaid. Partial
optional prepayments shall be in an aggregate principal amount of at least
$500,000. Optional prepayments made pursuant to this Section shall be applied
first to accrued and unpaid interest and fees due on or in connection with the
Working Capital Loans and second to repayment of the principal of the Working
Capital Loans.
(B) NO OPTIONAL REDUCTION OF WORKING CAPITAL LOAN COMMITMENTS.
Company shall not have the right to reduce the amount of the Working Capital
Loan Commitments.
2.13 OPTIONAL PREPAYMENTS OF REDUCING REVOLVING LOANS AND OPTIONAL
TERMINATION OR REDUCTIONS OF REDUCING REVOLVING LOAN COMMITMENTS.
(A) OPTIONAL PREPAYMENTS OF REDUCING REVOLVING LOANS. Company
may at any time and from time to time prepay the Reducing Revolving Loans, in
whole or in part, without premium or penalty, upon at least one Business Day
irrevocable notice to Agent, specifying the date and amount of prepayment. Upon
receipt of any such notice Agent shall promptly (and in any event on the same
Business Day) notify each Bank having Reducing Revolving Loan Commitments
thereof. If any such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein, together with accrued interest
and fees to such date on the amount prepaid. Partial optional prepayments shall
be in an aggregate principal amount of at least $500,000. Optional prepayments
made pursuant to this Section shall be applied first to accrued and unpaid
interest and fees due on or in connection with the Reducing Revolving Loans and
second to repayment of the principal of the Reducing Revolving Loans.
(B) OPTIONAL TERMINATION OR REDUCTION OF REDUCING REVOLVING
LOAN COMMITMENT'S. Company shall have the right, upon not less than five
Business Days notice to Agent and Banks having Reducing Revolving Loan
Commitments, to terminate the Reducing Revolving Loan Commitments or, from time
to time, to reduce the amount of the Reducing Revolving Loan Commitments;
provided that upon such termination or reduction of the Reducing Revolving Loan
Commitments, Company shall prepay the amount of the Reducing Revolving Loans in
an amount equal to the excess, if any, of the Reducing Revolving Facility Usage
over the reduced Reducing Revolving Loan Commitments. Any such reduction shall
be in an amount of $500,000, or a whole multiple thereof, and shall reduce
permanently the amount of the Reducing Revolving Loan Commitments then in
effect.
2.14 INTEREST RATES AND PAYMENT DATES.
(A) RATE OF INTEREST. Each Loan shall bear interest at a rate
per annum equal to the Reference Rate plus the Applicable Margin.
(B) DEFAULT RATE. All Obligations (other than Letters of
Credit) shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a per annum rate equal to the rate that
would otherwise be applicable to such Obligations pursuant to paragraph (a)
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or (d), as applicable, of this Section plus four (4.0) percentage points (the
"Default Rate"), in each case from the date of such Event of Default until such
Event of Default is cured or waived in writing. From and after the occurrence
and during the continuance of an Event of Default, the fee provided in Section
2.21(d)(i)(y) in respect of Letters of Credit shall be increased by four (4.0)
percentage points until such Event of Default is cured or waived in writing.
(C) INTEREST PAYMENT DATES. Interest shall be payable in arrears on
each Interest Payment Date; provided that interest accruing pursuant to
paragraph (b) of this Section also shall be payable on demand.
(D) MINIMUM INTEREST RATE. (i) In no event shall the rate of interest
chargeable hereunder in respect of Working Capital Loans be less than eight
percent (8.0%) per annum. To the extent that interest accrued hereunder in
respect of Working Capital Loans at the rate set forth in paragraph (a) above is
less than the foregoing minimum rate, the interest rate chargeable hereunder in
respect of Working Capital Loans for the month in question automatically shall
be deemed increased to such minimum rate of interest.
(ii) In no event shall the rate of interest chargeable hereunder
in respect of Reducing Revolving Loans be less than ten percent (10.0%) per
annum. To the extent that interest accrued hereunder in respect of Reducing
Revolving Loans at the rate set forth in paragraph (a) above is less than the
foregoing minimum rate, the interest rate chargeable hereunder in respect of
Reducing Revolving Loans for the month in question automatically shall he deemed
increased to such minimum rate of interest.
2.15 FEES.
(A) UNUSED LINE FEES. Company shall pay to Agent for the ratable
benefit of the Banks unused line fees on the last day of each month and during
the term of this Agreement, in arrears, in an amount equal to: (i) with respect
to the Working Capital Loan Commitments, one-half of one percent per annum times
the Average Unused Portion of the Working Capital Loan Commitments; and (ii)
with respect to the Reducing Revolving Loan Commitments, commencing with the
making of the initial Reducing Revolving Loan, one-half of one percent per annum
times the Average Unused Portion of the Reducing Revolving Loan Commitments.
(B) ACTIVATION FEES. Up to December 31, 1996, Company shall pay to
Agent for the ratable benefit of the Banks, concurrently with the delivery of
the initial Activation Notice on the Effective Date and the delivery of each
subsequent Activation Notice designating a new Activated Amount greater than the
previous Activated Amount, a fee (an "Activation Fee") in an amount equal to one
and one-half percent times the Activated Amount (or, if less, the increase in
the Activated Amount from the previous Activated Amount); provided, however,
that the total of all Activation Fees shall not exceed $375,000.
(c) [intentionally omitted]
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(D) FINANCIAL EXAMINATION FEES. Company shall pay to Agent: (i) a fee
of Six Hundred Fifty Dollars ($650) per day per examiner, plus reasonable
out-of-pocket expenses for each financial analysis and examination of Company or
its Subsidiaries performed by Agent or Banks or their agents: (ii) a fee of
Seven Hundred Fifty Dollars ($750) per day per appraiser, plus out-of-pocket
expenses for each appraisal of the Collateral performed by Agent or Banks or
their agents; (iii) the actual charges paid or incurred by Agent if it elects to
employ the services of one or more non-Affiliates to perform such financial
analyses and examinations (i.e., audits) of Company or to appraise the
Collateral; and (iv) for the sole and separate account of Agent, on each
anniversary of the Effective Date, a fee of One Thousand Dollars ($1,000) per
year for Agent's loan documentation review.
(E) SERVICING FEE. Company shall pay to Agent for the sole and
separate account of Agent, on the first day of each month and during the term of
this Agreement, and thereafter so long as any Obligations are outstanding, a
servicing fee, in arrears, in an amount equal to Five Thousand Dollars ($5,000)
per month; provided, however, that so long as any Indebtedness of Company is
outstanding under the Secured Floating Rate Notes, the servicing fee payable by
Company to Agent shall equal Fifteen Thousand Dollars ($15,000) per month.
2.16 COMPUTATION OF INTEREST AND FEES.
(a) Interest on Loans and fees shall be calculated on the basis of a
360-day year and the actual days elapsed. Any change in the interest rate on a
Loan resulting from a change in the Reference Rate shall become effective as of
the opening of business on the day on which such change in the Reference Rate is
announced. Each determination of an interest rate by Agent pursuant to any
provision of this Agreement shall be conclusive and binding on Company and Banks
in the absence of manifest error.
(b) Company hereby authorizes Agent, at its option, without prior
notice to Company, to charge all interest, fees, costs, expenses (as and when
incurred), and all other payments due under this Agreement or any other Loan
Document to Company's loan account, which amounts thereafter shall accrue
interest at the rate then applicable hereunder.
2.17 PRO RATA TREATMENT AND PAYMENTS.
(A) APPORTIONMENT OF PAYMENTS. Each borrowing by Company from Banks
hereunder, each payment by Company on account of any fee hereunder and each
reduction of the Working Capital Loan Commitments or the Reducing Revolving Loan
Commitments, as the case may be, shall be made pro rata according to the
respective Working Capital Loan Commitments or the respective Reducing Revolving
Loan Commitments, as the case may be, of Banks. Each payment (including each
prepayment) by Company on account of principal of and interest on the Loans
shall be made pro rata according to the effective outstanding principal amounts
of the Loans then held by Banks. All payments (including prepayments) to be made
by Company hereunder and under the Notes, whether on account of principal,
interest, fees or otherwise, shall be made without set off or
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counterclaim and shall be made prior to 9:00 a.m., California time, on the due
date thereof, to Agent, for the account of Banks in accordance with their
interests, at Agent's office specified on the appropriate signature page hereof,
in Dollars and in immediately available funds. Agent shall distribute such
payments to Banks in accordance with their pro rata interests promptly upon
receipt in like funds as received. 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 the then applicable rate during such
extension.
(B) PAYMENTS BY BANKS. Unless Agent shall have been notified in
writing by any Bank having a Commitment prior to a Loan Borrowing Date that such
Bank will not make the amount that would constitute its Pro Rata Share of the
Working Capital Loan borrowing or Reducing Revolving Loan borrowing, as the case
may be, on such date available to Agent, Agent may assume that such Bank has
made such amount available to Agent on such Loan Borrowing Date, and Agent may,
it its sole discretion, but shall not be obligated to, in reliance upon such
assumption, to make available to Company a corresponding amount. If such
corresponding amount is not made available to Agent on the Loan Borrowing Date,
Agent shall be entitled to recover such corresponding amount from such Bank,
together with interest thereon, for each day from such Loan Borrowing Date until
the date such amount is paid to Agent, at the customary rate set by Agent for
correction of errors among banks for three Business Days and thereafter at the
Reference Rate. A certificate of Agent submitted to any Bank with respect to any
amounts owing under this Section shall be conclusive in the absence of manifest
error. If such Bank does not pay such corresponding amount to Agent forthwith
upon demand, Agent shall promptly notify Company and Company shall immediately
pay such corresponding amount to Agent with interest thereon, for each day from
the Loan Borrowing Date until the date such amount is paid to Agent, at the rate
payable under this Agreement for Working Capital Loans or Reducing Revolving
Loans, as the case may be.
2.18 REQUIREMENTS OF LAW.
If any Bank shall have determined that any change in any Requirement of
Law regarding capital adequacy or in the interpretation or application thereof
or compliance by such Bank or any corporation controlling such Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any Governmental Authority made subsequent to the date hereof does
or shall have the effect of reducing the rate of return on such Bank's or such
corporation's capital as a consequence of its obligations hereunder to a level
below that which such Bank or such corporation could have achieved but for such
change or compliance (taking into consideration such Bank's or such
corporation's policies with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time, after submission by such Bank
to Company (with a copy to Agent) of a written request therefor, Company shall
pay to such Bank such additional amount or amounts as will compensate such Bank
for such reduction. The agreements in this Section shall survive the payment of
the Notes and all other amounts due hereunder.
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2.19 TAXES.
(A) PAYMENTS TO BE FREE AND CLEAR; GROSS-UP. All payments made by
Company under this Agreement and the Notes shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding, (i) in the case of Agent and each Bank, net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on Agent or such Bank, as the case may be, as a result of a present or former
connection between the jurisdiction of the government or taxing authority
imposing such tax and Agent or such Bank (excluding a connection arising solely
from Agent or such Bank having executed, delivered or performed its obligations
or received a payment under, or enforced, this Agreement, the Notes or any other
Loan Document) or any political subdivision or taxing authority thereof or
therein and (ii) in the case of each Bank organized under the laws of a
jurisdiction outside the United States, United States federal withholding tax
payable with respect to payments by Company that would not have been imposed had
such Bank, to the extent then required thereunder, delivered to Company and
Agent the forms prescribed by Section 2.19(b) (all such non-excluded taxes,
levies, imposts, duties, charges, fees, deductions and withholdings being
hereinafter called "Taxes"). If any Taxes are required by law to be withheld
from any amounts payable to Agent or any Bank hereunder or under the Notes, the
amounts so payable to Agent or such Bank shall be increased to the extent
necessary to yield to Agent or such Bank (after payment of all Taxes) interest
or any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the Notes. If Company fails to pay any Taxes
when due to the appropriate taxing authority, Company shall indemnify Agent and
Banks for any incremental taxes, interest or penalties that may become payable
by Agent or any Bank as a result of any such failure. The agreements in this
Section shall survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder.
(B) TAX CERTIFICATES. Each Bank that is not organized under the laws
of the United States of America or a state thereof agrees that it will deliver
to Company and Agent (i) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor applicable form, as the case may
be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable
form. Each such Bank also agrees to deliver to Company and Agent 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 Company, and such extensions or renewals thereof as may
reasonably be requested by Company or Agent, 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 Bank from duly completing and delivering any such
form with respect to it and such Bank so advises Company and Agent. Such Bank
shall certify (i) 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 (ii) in
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the case of a Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax.
2.20 [INTENTIONALLY OMITTED].
2.21 ISSUANCE OF LETTERS OF CREDIT AND BANKS' PURCHASE OF PARTICIPATIONS
THEREIN.
(A) LETTERS OF CREDIT. In addition to Company requesting that
Banks make Working Capital Loans pursuant to Section 2.1, Company may request,
in accordance with the provisions of this Section 2.21, from time to time during
the period from the Effective Date to but excluding the Working Capital Loan
Maturity Date, that Issuing Bank issue Letters of Credit for the account of
Company for the purposes specified in the definition of Standby Letters of
Credit. On the Effective Date, any and all Letters of Credit set forth on
Schedule L-1 shall be deemed issued under this Section 2.21(a). Subject to the
terms and conditions of this Agreement and in reliance upon the representations
and warranties of Company herein set forth, Issuing Bank shall issue Letters of
Credit in accordance with the provisions of this Section 2.21; provided that
Company shall not request that Issuing Bank to issue (and Issuing Bank shall not
issue):
(i) any Letter of Credit if, after giving effect to such
issuance, the Working Capital Facility Usage would exceed the Working
Capital Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $5,000,000;
(iii) any Letter of Credit having an expiration date later
than the earlier of (a) the Working Capital Loan Maturity Date and (b)
the date which is one year from the date of issuance of such Letter of
Credit; provided that the immediately preceding clause (b) shall not
prevent Issuing Bank from agreeing that a Letter of Credit will
automatically be extended for one or more successive periods not to
exceed one year each unless Issuing Bank elects not to extend for any
such additional period; provided further that Issuing Bank shall
deliver a written notice to Agent setting forth the last day on which
Issuing Bank may give notice that it will not extend such Letter of
Credit (the "Notification Date" with respect to such Letter of Credit)
at least ten Business Days prior to such Notification Date; and
provided, further that, unless Required Banks otherwise consent,
Issuing Bank shall give notice that it will not extend such Letter of
Credit if it has knowledge that an Event of Default has occurred and is
continuing on such Notification Date; or
(iv) any Letter of Credit denominated in a currency other than
Dollars.
(B) MECHANICS OF ISSUANCE.
(i) Notice of Issuance. Whenever Company desires the issuance
of a Letter of Credit, it shall deliver to Issuing Bank (with a copy to
Agent if Agent is not Issuing Bank)
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a Notice of Issuance of Letter of Credit no later than 10:00 a.m.
(California time) at least four Business Days or in such shorter period
as may be agreed to by the Issuing Bank in any particular instance, in
advance of the proposed date of issuance. The Notice of Issuance of
Letter of Credit shall specify (i) the proposed date of issuance (which
shall be a Business Day), (ii) the face amount of the Letter of Credit,
(iii) the expiration date of the Letter of Credit, (iv) the name and
address of the beneficiary, and (v) the verbatim text of the proposed
Letter of Credit or the proposed terms and conditions thereof,
including a precise description of any documents and the verbatim text
of any certificates to be presented by the beneficiary which, if
presented by the beneficiary prior to the expiration date of the Letter
of Credit would require the Issuing Bank to make payment under the
Letter of Credit; provided that Issuing Bank in its reasonable
discretion, may require changes in the text of the proposed Letter of
Credit or any such documents or certificates, including that such
Letter of Credit be governed by the Uniform Customs and Practices
publication number 500; and provided further that no Letter of Credit
shall require payment against a conforming draft to be made earlier
than the third Business Day after such draft is presented.
Company shall notify Issuing Bank (and Agent, if
Agent is not such Issuing Bank) prior to the issuance of any Letter of
Credit if any of the matters to which Company is required to certify in
the applicable Notice of Issuance of Letter of Credit is no longer true
and correct as of the proposed date of issuance of such Letter of
Credit, and upon the issuance of any Letter of Credit Company shall be
deemed to have recertified, as of the date of such issuance, as to the
matters to which Company is required to certify in the applicable
Notice of Issuance of Letter of Credit.
(ii) Notification to Banks. Promptly after receipt of
a Notice of Issuance of Letter of Credit (i) Agent shall notify each
Bank of the proposed issuance of such Letter of Credit and the amount
of such Bank's respective participation therein, determined in
accordance with Section 2.21(c) and (ii) Agent shall deliver to each
other Bank a copy of such Notice of Issuance of Letter of Credit.
(iii)Issuance of Letter of Credit. Upon satisfaction
or waiver (in accordance with Section 10.1) of the conditions set forth
in Section 5.2, Issuing Bank shall issue the requested Letter of Credit
in accordance with the Issuing Bank's standard operating procedures,
and upon its issuance of such Letter of Credit Issuing Bank shall
promptly notify Agent and each Bank of such issuance, which notice
shall be accompanied by a copy of such Letter of Credit.
(iv) Reports to Banks. Within 15 days after the end
of each calendar quarter ending after the Effective Date, so long as
any Letter of Credit shall have been outstanding during such calendar
quarter, Issuing Bank shall deliver to each other Bank a report setting
forth the average for such calendar quarter of the daily maximum amount
available to be drawn under the Letters of Credit issued by Issuing
Bank that were outstanding during such calendar quarter.
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(C) BANKS' PURCHASE OF PARTICIPATIONS IN LETTERS OF
CREDIT. Immediately upon the issuance of each Letter of Credit, each Bank shall
be deemed to, and hereby agrees to, have irrevocably purchased from Issuing Bank
a participation in such Letter of Credit and drawings thereunder in an amount
equal to such Bank's Pro Rata Share of the maximum amount which is or at any
time may become available to be drawn thereunder.
(D) LETTER OF CREDIT FEES. Company agrees to pay the
following amounts to Issuing Bank or Agent, as the case may be, with respect to
Letters of Credit issued by it:
(i) with respect to each Letter of Credit, (y) a
letter of credit fee to Agent equal to 1.25% per annum of the average
daily maximum amount available to be drawn under such Letter of Credit,
in each case payable in arrears on and through the last day of each
month and (z) to the extent Agent causes a third party to become
Issuing Bank, any and all service charges, commissions, fees and costs
to Agent in connection with the issuance by such Issuing Bank of such
Letter of Credit;
(ii) with respect to the issuance, amendment or
transfer of each Letter of Credit and each drawing made thereunder
(without duplication of the fees payable under clause (i) above),
documentary and processing charges in accordance with Issuing Bank's
standard schedule for such charges in effect at the time of such
issuance, amendment, transfer or drawing, as the case may be.
Promptly upon receipt by Issuing Bank of any amount described in clause
(i)(y) of this Section 2.21(d), Issuing Bank shall distribute to each
other Bank its Pro Rata Share of such amount.
(E) DRAWINGS AND REIMBURSEMENT OF AMOUNTS DRAWN UNDER
LETTERS OF CREDIT.
(i) Responsibility of Issuing Bank With Respect to
Requests For Drawings. In determining whether to honor any request for
drawing under any Letter of Credit by the beneficiary thereof, Issuing
Bank shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have
been delivered and that they comply on their face with the requirements
of such Letter of Credit.
(ii) Reimbursement by Company of Amounts Drawn Under
Letters of Credit. If Issuing Bank has determined to honor a request
for drawing under a Letter of Credit issued by it, Issuing Bank shall
immediately notify Company and Agent, and Company shall reimburse
Issuing Bank on or before the Business Day immediately following the
date on which such drawing is honored (the "Reimbursement Date") in an
amount in same day funds equal to the amount of such drawing; provided
that, anything contained in this Agreement to the contrary
notwithstanding, (y) unless Company shall have notified Agent and
Issuing Bank (if Agent is not Issuing Bank) prior to 10:00 a.m.
(California time) on the date of such
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drawing that Company intends to reimburse Issuing Bank for the amount
of such drawing with funds other than the proceeds of Working Capital
Loans, Company shall be deemed to have given a timely notice of
borrowing to Agent requesting Banks to make Working Capital Loans on
the Reimbursement Date in an amount equal to the amount of such
drawing, and (z) subject to satisfaction or waiver of the conditions
specified in Section 5.2, Banks shall, on the Reimbursement Date, make
Working Capital Loans in the amount of such drawing, the proceeds of
which shall be applied directly by Agent to reimburse Issuing Bank for
the amount of such drawing; and provided, further that if for any
reason proceeds of Working Capital Loans are not received by Issuing
Bank on the Reimbursement Date in an amount equal to the amount of such
drawing, Company shall reimburse Issuing Bank, on demand, in an amount
in same day funds equal to the excess of the amount of such drawing
over the aggregate amount of such Working Capital Loans, if any, which
are so received. Nothing in this Section 2.21(e) shall be deemed to
relieve any Bank from its obligation to make Working Capital Loans on
the terms and conditions set forth in this Agreement.
(F) PAYMENT BY BANKS OF UNREIMBURSED DRAWINGS UNDER
LETTERS OF CREDIT.
(i) Payment by Banks. If Company shall fail for any
reason to reimburse Issuing Bank as provided in Section 2.21(e) in an
amount equal to the amount of any drawing honored by Issuing Bank under
a Letter of Credit, Issuing Bank shall promptly notify each other Bank
of the unreimbursed amount of such drawing and of such other Bank's
respective participation therein based on such Bank's Pro Rata Share.
Each Bank shall make available to Issuing Bank an amount equal to its
respective participation, in same day funds, at the office of Issuing
Bank specified in such notice, not later than 11:00 a.m. (California
time) on the first Business Day after the date notified by Issuing Bank
or Agent. If any Bank fails to make available to Issuing Bank on such
Business Day the amount of such Bank's participation in such Letter of
Credit as provided in this Section 2.21(f), Issuing Bank shall be
entitled to recover such amount on demand from such Bank together with
interest thereon at the rate customarily used by Issuing Bank for the
correction of errors among banks for three Business Days and thereafter
at the Reference Rate. Nothing in this Section 2.21(f) shall be deemed
to prejudice the right of any Bank to recover from Issuing Bank any
amounts made available by such Bank to Issuing Bank pursuant to this
Section 2.21(f) if it is determined by the final judgment of a court of
competent jurisdiction that the payment with respect to a Letter of
Credit by Issuing Bank in respect of which payment was made by such
Bank constituted gross negligence or willful misconduct on the part of
Issuing Bank.
(ii) Distribution to Banks of Reimbursements Received
From Company. If Issuing Bank shall have been reimbursed by other Banks
pursuant to Section 2.21(f) for all or any portion of any drawing
honored by Issuing Bank under a Letter of Credit issued by it, Issuing
Bank shall distribute to each other Bank which has paid all amounts
payable by it under Section 2.21(f) with respect to such drawing such
other Bank's Pro Rata Share of all payments subsequently received by
Issuing Bank from Company in reimbursement of such drawing when such
payments are received. Any such distribution shall be made to a Bank at
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its primary address set forth below its name on the appropriate
signature page hereof or at such other address as such Bank may
request.
(G) INTEREST ON AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
(i) Payment of Interest by Company. Company agrees to
pay to Issuing Bank, with respect to drawings made under any Letters of
Credit issued by it, interest on the amount paid by Issuing Bank in
respect of each such drawing from the date of such drawing to but
excluding the date such amount is reimbursed by Company (including any
such reimbursement out of the proceeds of Working Capital Loans
pursuant to Section 2.21(e)(ii)) at a rate equal to (a) for the period
from the date of such drawing to but excluding the Reimbursement Date,
the rate then in effect under this Agreement with respect to Working
Capital Loans and (b) thereafter, a rate which is 2% per annum in
excess of the rate of interest otherwise payable under this Agreement
with respect to Working Capital Loans. Interest payable pursuant to
this Section 2.21(g) shall be computed on the basis of a 360-day year
for the actual number of days elapsed in the period during which it
accrues and shall be payable on demand or, if no demand is made, on the
date on which the related drawing under a Letter of Credit is
reimbursed in full.
(ii) Distribution of Interest Payments by Issuing
Bank. Promptly upon receipt by Issuing Bank of any payment of interest
pursuant to Section 2.21(g)(i), (y) Issuing Bank shall distribute to
each other Bank, out of the interest received by Issuing Bank in
respect of the period from the date of the applicable drawing under a
Letter of Credit issued by Issuing Bank to but excluding the date on
which Issuing Bank is reimbursed for the amount of such drawing
(including any such reimbursement out of the proceeds of Working
Capital Loans pursuant to Section 2.21(e)(ii), the amount that such
other Bank would have been entitled to receive in respect of the letter
of credit fee that would have been payable in respect of such Letter of
Credit for such period pursuant to Section 2.21(d)(i)(z) if no drawing
had been made under such Letter of Credit, and (z) if Issuing Bank
shall have been reimbursed by other Banks pursuant to Section 2.21(f)
for all or any portion of such drawing, Issuing Bank shall distribute
to each other Bank which has paid all amounts payable by it under
Section 2.21(f) with respect to such drawing such other Bank's Pro Rata
Share of any interest received by Issuing Bank in respect of that
portion of such drawing so reimbursed by other Banks for the period
from the date on which Issuing Bank was so reimbursed by other Banks to
and including the date on which such portion of such drawing is
reimbursed by Company. Any such distribution shall be made to a Bank at
its primary address set forth below its name on the appropriate
signature page hereof or at such other address as such Bank may
request.
(H) OBLIGATIONS ABSOLUTE. The obligation of Company to
reimburse Issuing Bank for drawings made under the Letters of Credit issued by
it and to repay any Working Capital Loans made by Banks pursuant to Section
2.21(e) and the obligations of Banks under Section 2.21(f) shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances including the following
circumstances:
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(i) any lack of validity or enforceability of any
Letter of Credit;
(ii) the existence of any claim, set-off, defense or
other right which Company or any Bank may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons
for whom any such transferee may be acting), Issuing Bank or other Bank
or any other Person or, in the case of a Bank, against Company, whether
in connection with this Agreement, the transactions contemplated herein
or any unrelated transaction (including any underlying transaction
between Company or one of its Subsidiaries and the beneficiary for
which any Letter of Credit was procured);
(iii) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(iv) payment by Issuing Bank under any Letter of
Credit against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of Credit:
(v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of
Company or any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan
Document by any party thereto;
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Default
shall have occurred and be continuing;
provided, in each case, that payment by Issuing Bank under the applicable Letter
of Credit shall not have constituted gross negligence or willful misconduct of
Issuing Bank under the circumstances in question (as determined by a final
judgment of a court of competent jurisdiction).
(I) INDEMNIFICATION; NATURE OF ISSUING BANKS' DUTIES. In
addition to other amounts payable as provided in this Section 2.21, Company
hereby agrees to protect, indemnify, pay and save harmless Issuing Bank from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable fees, expenses and disbursements of
counsel and allocated costs of internal counsel) which Issuing Bank may incur or
be subject to as a consequence, direct or indirect, of (i) the issuance of any
Letter of Credit by Issuing Bank, other than as a result of (x) the gross
negligence or willful misconduct of Issuing Bank as determined by a final
judgment of a court of competent jurisdiction or (y) subject to the following
clause (ii), the wrongful dishonor by Issuing Bank of a proper demand for
payment made under any Letter of Credit issued
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by it or (ii) the failure of Issuing Bank to honor a drawing under any such
Letter of Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority (all such acts or omissions herein called "Governmental
Acts").
(J) NATURE OF ISSUING BANKS' DUTIES. As between Company and
Issuing Bank, Company assumes all risks of the acts and omissions of, or misuse
of the Letters of Credit issued by Issuing Bank by, the respective beneficiaries
of such Letters of Credit. In furtherance and not in limitation of the
foregoing, Issuing Bank shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for and issuance of any such Letter
of Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any such Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; (iii) failure of the beneficiary of any such Letter of Credit to
comply fully with any conditions required in order to draw upon such Letter of
Credit; (iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (v) errors in interpretation of technical terms; (vi)
any loss or delay in the transmission or otherwise of any document required in
order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (vii) the misapplication by the beneficiary of any such Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any
consequences arising from causes beyond the control of Issuing Bank, including
any Governmental Acts, and none of the above shall affect or impair, or prevent
the vesting of, any of Issuing Bank's rights or powers hereunder.
In furtherance and extension and not in limitation of the
specific provisions set forth in the first paragraph of this Section 2.21(j),
any action taken or omitted by Issuing Bank under or in connection with the
Letters of Credit issued by it or any documents and certificates delivered
thereunder, if taken or omitted in good faith, shall not put Issuing Bank under
any resulting liability to Company.
Anything to the contrary contained in this Section 2.21(j)
notwithstanding, Company shall retain any and all rights it may have against
Issuing Bank for any liability arising solely out of the gross negligence or
willful misconduct of Issuing Bank, as determined by a final judgment of a court
of competent jurisdiction.
(K) INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT.
If Issuing Bank or any Bank shall determine (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto)
that any law, treaty or governmental rule, regulation or order, or any change
therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by
Issuing Bank or any Bank with any guideline, request or directive issued or made
after
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the date hereof by any central bank or other governmental or quasi-governmental
authority (whether or not having the force of law):
(i) subjects Issuing Bank or any Bank (or its
applicable lending or letter of credit office) to any additional tax
(other than any tax on the overall net income of Issuing Bank or Bank)
with respect to the issuing or maintaining of any Letters of Credit or
the purchasing or maintaining of any participations therein or any
other obligations under this Section 2.21, whether directly or by such
being imposed on or suffered by Issuing Bank;
(ii) imposes, modifies or holds applicable any
reserve (including any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or
similar requirement in respect of any Letters of Credit issued by
Issuing Bank or participations therein purchased by any Bank; or
(iii)imposes any other condition on or affecting
Issuing Bank or any Bank (or its applicable lending or letter of credit
office) regarding this Section 2.21 or any Letter of Credit or any
participation therein;
and the result of any of the foregoing is to increase the cost to Issuing Bank
or any Bank of agreeing to issue, issuing or maintaining any Letter of Credit or
agreeing to purchase, purchasing or maintaining any participation therein or to
reduce any amount received or receivable by Issuing Bank or Bank (or its
applicable lending or letter of credit office) with respect thereto; then, in
any case, Company shall promptly pay to Issuing Bank or any such Bank, upon
receipt of the statement referred to in the next sentence, such additional
amount or amounts as may be necessary to compensate Issuing Bank or such Bank
for any such increased cost or reduction in amounts received or receivable
hereunder. Issuing Bank or any such Bank shall deliver to Company a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to Issuing Bank or such Bank under this Section 2.21(k),
which statement shall be conclusive and binding upon all parties hereto absent
manifest error.
(L) L/C GUARANTEES.
(i) Company expressly understands and agrees that
Issuing Bank shall have no obligation to arrange for the issuance by
other issuing banks of the letters of credit that are to be the subject
of L/C Guarantees.
(ii) Company agrees to be bound by the other issuing
bank' s regulations and interpretations of any letters of credit
guarantied by Issuing Bank pursuant to an LIC Guarantee and opened to
or for Company's account or by Issuing Bank's interpretations of any
letter of credit issued by Issuing Bank to or for Company's account,
even though this interpretation may be different from Company's own,
and Company understands and agrees that Issuing Bank shall not be
liable for any error, negligence, or mistake, whether of omission or
commission, in following Company's instructions or those contained in
the Letter of Credit
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or any modifications, amendments, or supplements thereto. Company
understands that the L/C Guarantees may require Issuing Bank to
indemnify the other issuing bank for certain costs or liabilities
arising out of claims by Company against such other issuing bank.
Company hereby agrees to indemnify, save, defend, and hold Issuing Bank
harmless with respect to any loss, cost, expense (including reasonable
attorneys fees), or liability incurred by Issuing Bank under any L/C
Guaranty as a result of Issuing Bank's indemnification of any such
other issuing bank.
(iii) Company hereby authorizes and directs any other
bank that issues a letter of credit guaranteed by Issuing Bank to
deliver to Issuing Bank all instruments, documents, and other writings
and property received by the other issuing bank pursuant to such letter
of credit, and to accept and rely upon Issuing Bank's instructions and
agreements with respect to all matters arising in connection with such
letter of credit and the related application. Company may or may not be
the "applicant" or "account party" with respect to such letter of
credit.
(iv) Any and all charges, commissions, fees, and
costs incurred by Issuing Bank relating to the letters of credit
guaranteed by Issuing Bank shall be considered Obligations for purposes
of this Agreement and immediately shall be reimbursable by Company to
Issuing Bank.
2.22 EARLY TERMINATION BY COMPANY. Anything herein to the contrary
notwithstanding, Company has the option, at any time upon 30 days prior written
notice to Agent, to terminate this Agreement and all, but not less than all, of
the Commitments by paying to Agent, in cash, the Obligations (including an
amount equal to the full amount of the Letter of Credit Usage); provided,
however, that as a condition to the effectiveness of Company's exercise of such
option, all Indebtedness of the Company outstanding under the Secured Floating
Rate Notes shall have been previously or concurrently paid in full in cash.
SECTION 3
COLLATERAL
3.1 LIENS IN SUBSIDIARY STOCK, CONTRACT RECEIVABLES, REAL
PROPERTY AND PERSONAL PROPERTY.
To secure the prompt payment to Banks of the Secured Debt,
including the Loans, together with all costs, expenses and fees payable by
Company hereunder, Company has granted, and caused each Subsidiary to grant, to
Collateral Agent, for the benefit of Banks, a continuing Lien in and to all of
the following property and interests in property of Company and the
Subsidiaries, except the Excluded Property, whether now owned or existing or
hereafter acquired or arising, or in which Company and Subsidiaries now or
hereafter have any rights, and wherever located, and all proceeds thereof
("Collateral"):
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(a) the Subsidiary Stock;
(b) the Homesite Contracts Receivable;
(c) the Commercial Receivables;
(d) the Real Property; and
(e) the Personal Property.
At such times as any Excluded Property is freed of contractual or legal
restrictions against becoming subject to a Lien to secure the Secured Debt and
upon the distribution of any Trust Property to Company or a Subsidiary, such
property shall, automatically, become subject to the Liens created by the
Security Documents, and Company shall notify Agent in writing of such event and
take such further actions as may be required by Agent 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 Collateral Agent and
Agent in the Collateral in accordance with applicable law, Company has executed
and delivered and will execute and deliver and has caused the Subsidiaries to
execute and deliver and will cause the Subsidiaries to execute and deliver to
Collateral Agent the Security Documents, which Security Documents have been or
will be filed and recorded, and Company has delivered and will deliver and has
caused the Subsidiaries to deliver and will cause the Subsidiaries to deliver 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 Company. Specifically, but without limiting the
generality of the foregoing, Company has or will, and has caused or will cause
the Subsidiaries to. do the following:
(A) STOCK PLEDGE. To evidence and perfect the Liens of
Collateral Agent in the Subsidiary Stock, Company and the Subsidiaries owning
other Subsidiaries, Excluded Subsidiaries, or Unrestricted Subsidiaries have
executed and delivered the Stock Pledge Agreement and have executed and
delivered and will execute and deliver related undated stock powers executed in
blank and have delivered and will deliver the original certificates representing
the Subsidiary Stock to Collateral Agent and have caused 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 Agent in the Homesite Contracts
Receivable and Commercial Receivables, Company and Subsidiaries have executed
and delivered, and will 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 Company and
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Subsidiaries have duly endorsed, and will duly endorse, any and all promissory
notes included in the Homesite Contracts Receivable and Commercial Receivables
to the order of Collateral Agent and have delivered, and will deliver, such
promissory notes and the related mortgages or deeds of trust to Collateral Agent
or its designee, and have executed and delivered, and will 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 the Original Effective Date, 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, Company and Subsidiaries have executed
and delivered, and will execute and deliver, to Collateral Agent the Mortgages
and Deeds of Trust and related financing statements encumbering such Real
Property, which have been or will be filed and recorded in accordance with
applicable law, accompanied by ALTA title insurance policies (if required)
insuring Collateral Agent's Lien represented thereby, and, if requested by
Agent, 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, Company has caused, and 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 or Agent in the Personal Property, Company and Subsidiaries
have executed and delivered, and will 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. To the
extent that the Personal Property comprised Investments or Bank Accounts,
Company 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, Company shall
deliver, or shall cause such Subsidiary to deliver, the original
thereof to Collateral Agent, together with appropriate assignments and
endorsements or other specific evidence of assignment thereof to
Collateral Agent, in form and substance acceptable to Collateral Agent;
(ii) with respect to any Investment or Bank Account
which is not certificated or otherwise evidence as described in clause
(i) above, including uncertificated securities and depository and other
accounts maintained with financial institutions and any other Persons,
Company shall notify Agent thereof and take, or cause such Subsidiary
to take, any and all steps which are required by Agent for purposes of
perfecting Collateral Agent's Lien therein;
(iii) Company shall keep Agent and Banks informed of
any and all Bank Accounts maintained by Company or any Subsidiary with
any financial institution or other Person and, if requested by Agent or
Required Banks, Company or such Subsidiary shall
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execute a cash collateral account agreement in form and substance
satisfactory to Agent, pursuant to which the Lien of Collateral Agent
in such Bank Accounts is perfected and preserved; and
iv) if deemed by Agent or Required Banks, in its or
their sole discretion, to be necessary for purposes of perfecting the
Lien of Collateral Agent in any Bank Account, 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 Agent
shall cause such Subsidiary to become party to 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 preserved; provided, however,
Company shall not be required to deposit the residual, remainder or
beneficial interest of Company and its Subsidiaries 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 and remainder is available to
Company or any of its Subsidiaries for deposit in an unrestricted
account.
(F) ADDITIONAL ACTS. Company shall, and shall cause the
Subsidiaries to take all actions and execute all documents deemed necessary by
Agent or Collateral Agent to ensure that upon the consummation of the
transactions contemplated by the Purchase Agreement, Agent or Collateral Agent,
for the benefits of Banks, shall have a first priority security interest in the
Collateral granted by the Security Documents. In the event that the perfection
or recordation of Collateral Agent's or Agent's Lien pursuant hereto upon any
Collateral acquired hereafter by Company or any Subsidiary requires any
additional act of possession or filing or recordation of any Security Document,
Company shall notify Agent of the acquisition of such Collateral and at Agent's
request 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 Agent and Collateral Agent may reasonably
request for purposes thereof and Company shall pay the cost of any such Security
Documents and the filing and recordation thereof. Without limiting the
generality of the foregoing, Company agrees to, and to cause each Subsidiary
(other than with respect to property required to be released pursuant to Section
3.5) to notify Agent upon the acquisition of any Real Property acquired after
the date hereof, except as provided by Section 3.5, and upon request of Agent,
to provide to Agent an appraisal and an environmental report (each in form and
substance satisfactory to Agent) covering such property, and to cause such Real
Property to be subjected to a first priority Mortgage or Deed of Trust in favor
of Collateral Agent for the benefit of Banks. With respect to any such Mortgages
or Deeds of Trust, Company or such Subsidiary shall deliver to Agent the
following, all in form and substance satisfactory to Agent: (i) executed
Mortgages or Deeds 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 Agent showing the Mortgage or Deed of Trust as a first lien upon
the property, subject only to Liens permitted pursuant to Section 7.3 and such
other exceptions as may be approved by
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Agent in writing, together with endorsements reasonably required by Agent and
affirmative assurances that the improvements are wholly located within the
boundaries of the insured land.
3.3 SECTION 365(J) PROPERTY.
Pursuant to the Reorganization Plan and the Confirmation
Order, Company has designated certain property which comprises the Section
365(1) Property, which property had a value, as appraised pursuant to Company's
land plan book dated May, 1991, no greater than 120% of the value of the Section
365(j) liens established pursuant to, and as defined in, the Reorganization
Plan. The Liens granted to Collateral Agent pursuant hereto in the Section
365(j) Property shall be subordinate to such 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 such 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 LIENS.
(a) [intentionally omitted]
(b) At such times as Liens are granted by 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 Agent 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, Agent 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 Collateral Agent, unless such Real
Property qualifies for the release provisions set forth 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 Agent 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,
Agent 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 project financing
provisions of Section 7.2(e) or (h) and (y) the terms of such financing prohibit
subordinate Liens upon such Real Property or (ii) such Real Property is
contributed by Company to a Subsidiary pursuant to Section 7.9(g). 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
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Subsidiary Property Under Development pursuant to this Section 3.5(c), upon the
request of Company, Agent shall instruct Collateral Agent to, and Collateral
Agent shall, release any Liens upon any Personal Property related to and used or
held for the use on the Real Property being released; provided that Company
provides a detailed list of such Personal Property to be released in form and
substance satisfactory to Agent. If such lender/seller will permit such
subordination, then, notwithstanding the foregoing provisions of this Section
3.5(c), Collateral Agent'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 Agent.
(d) [intentionally omitted]
3.6 GUARANTEES.
The payment and performance by Company of its obligations
under this Agreement, including the repayment of all Obligations by Company, and
any and all other liabilities of Company to Banks, Issuing Bank, Agent, and
Collateral Agent whether now existing or hereafter created or acquired, shall be
guaranteed by any and all Subsidiaries, which shall be evidenced by guarantees
in the form of the Subsidiary Guarantees.
3.7 [INTENTIONALLY OMITTED].
SECTION 4
REPRESENTATIONS AND WARRANTIES
To induce Banks to enter into this Agreement and to make the
Loans and Issuing Bank to issue Letters of Credit, Company hereby represents and
warrants to Agent and each Rank that
4.1 FINANCIAL CONDITION.
(a) The consolidated balance sheets of 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, copies of which have been or will be furnished to
each Bank, 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 she fiscal
year then ended.
(b) [intentionally omitted]
(c) All such financial statements described in clause (a)
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
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accountants or Responsible Officer, as the case may be, and as disclosed
therein). Neither 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. During the
period from June 30, 1996 to and including the date hereof there has been no
sale, transfer or other disposition or agreement therefor by 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 Company and its consolidated Subsidiaries at
June 30, 1996, except as described in Schedule 4 1.
4.2 NO MATERIAL ADVERSE CHANGE.
Since June 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 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 Banks 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
Company nor has any of the Capital Stock of Company been redeemed, retired,
purchased or otherwise acquired for value by Company or any of its Subsidiaries.
As of the date hereof and the Effective 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.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW.
Each of 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 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.
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(A) COMPANY. Company has the corporate power and authority,
and the legal right, to make, deliver and perform this Agreement, the Notes and
other Loan Documents, and to borrow hereunder 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 other Loan Documents. 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 Notes or the
other Loan Documents, except such consents, authorizations, filings or other
acts as have been obtained, made or performed, as the case may be, prior to the
Original Effective Date and as remain in full force and effect or which the
failure to obtain, make or perform, as the case may be, could not reasonably be
expected to have a Material Adverse Effect. This Agreement and the other Loan
Documents to which Company is party have been or will be, duly executed and
delivered on behalf of Company. This Agreement, and each other Loan Document
executed and delivered constitutes, or when executed and delivered will
constitute, a legal, valid and binding obligation of Company enforceable against
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 Loan Documents has the corporate power
and authority, and the legal right, to make, deliver and perform the Loan
Documents to which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance of the Loan 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 Loan 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, prior to the Original Effective
Date and as remain in full force and effect or which the failure to obtain, make
or perform, as the case may be, could not reasonably be expected to have a
Material Adverse Effect. Each Loan 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 Loan 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.
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The execution, delivery and performance of this Agreement, the
Notes, the Guarantees and the other Loan Documents, the borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of Company or of any of its Subsidiaries, the violation
of which could reasonably be expected to have a Material Adverse Effect 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.
As of the Effective Date, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of Company, threatened by or against Company or any of its
Subsidiaries or against any of its or their respective properties or revenues
(a) with respect to this Agreement, the Notes or other Loan 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 Company' s filings with
the Securities and Exchange Commission made prior to the Effective Date, true
and correct copies of which have been delivered to Banks or on Schedule 4.6
hereto.
4.7 NO DEFAULT.
As of the Effective Date, neither 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 Company's filings with the Securities and Exchange Commission, true and
correct copies of which have been delivered to Banks or on Schedule 4 7. As of
the Effective Date, no Default or Event of Default has occurred and is
continuing. As of the Effective Date, no default has occurred and is continuing
under the Secured Cash Flow Note Agreement, the Secured Floating Rate Note
Agreement, or the indentures governing the Public Debt Securities.
4.8 OWNERSHIP OF PROPERTY; LIENS.
As of the Effective Date, each of 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 Company or such
Subsidiaries is subject to any Lien except as permitted by Section 7.3.
4.9 INTELLECTUAL PROPERTY.
As of the Effective Date, 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
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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 Company know of any
valid basis for any such claim. The use of such Intellectual Property by 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 Company, there exists no infringement upon
the Intellectual Property rights of Company and Subsidiaries by any other
Person.
4.10 TAXES.
As of the Effective Date, each of 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 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, 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 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 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 any Loans 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 Agent
with copies to each Bank 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. 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,
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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 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 Company nor any Commonly
Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan and neither Company nor any Commonly Controlled Entity would
become subject to any liability under ERISA if 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 Company or any Commonly Controlled Entity in
connection with any such Plan. Neither 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.
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. 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.
As of the Effective Date, (a) the Subsidiaries listed on
Schedule 4.14(A) constitute all of the Subsidiaries and such schedule identifies
the shareholders of such Subsidiary, (b) 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 (c) neither Company nor any Subsidiary other than
a Venture Subsidiary owns any Joint Venture interest.
4.15 ENVIRONMENTAL MATTERS.
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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 in the certificate regarding environmental matters
required pursuant to Section 5.1 (i) or 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, including the soil and
groundwater thereunder, any Hazardous Materials in violation of any
Environmental Law.
(b) Company, its Subsidiaries, the Borrowing Base 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 Company nor any of its Subsidiaries nor any of the
Borrowing Base 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 Company aware
that any Governmental Authority is contemplating delivering to Company or any of
its Subsidiaries or any of the Borrowing Base Joint Ventures any such notice.
Neither Company nor any of its Subsidiaries nor any of the Borrowing Base 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 Company nor any of its Subsidiaries nor
any of the Borrowing Base Joint Ventures has ever owned or operated or currently
owns or operates any waste disposal or storage facilities, underground storage
tanks or surface impoundments.
(e) There are no governmental or administrative actions or
judicial proceedings pending or, to the knowledge of Company, contemplated under
any Environmental Laws to which Company or any of its Subsidiaries or any of the
Borrowing Base Joint Ventures is or, to the knowledge of 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 Company or any of its Subsidiaries or any of
the Borrowing Base 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 Agent.
4.16 INDEBTEDNESS.
Schedule 4.16 lists all Indebtedness (including available
commitments) of Company and its Subsidiaries as existing on the Effective Date.
4.17 CONTINGENT OBLIGATIONS.
Schedule 4.17 lists all guarantees by Company and all
guarantees by any of its Subsidiaries.
4.18 RESTITUTION PROGRAM AND FINAL JUDGMENT.
As of the Effective Date, 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 of the transactions contemplated hereby, and
Company hereby indemnifies Banks against, and agrees that it will hold Banks
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 Company or any of its
Subsidiaries contained in any Loan Document or in any other document,
certificate or written statement furnished to Banks by or on behalf of Company
or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact (known to 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
made. Any projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by
Company to be reasonable at the time made, it being recognized by Banks 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
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may differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Company (other than
matters of an economic nature) 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 Banks for use in connection with the transactions contemplated
hereby.
4.21 INSURANCE.
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
Effective Date for Company and each of its Subsidiaries.
4.22 TOTAL REAL PROPERTY MATTERS.
Company and each of its Subsidiaries (including the Joint
Ventures) is in compliance with all development orders obtained by 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.
Company has delivered to Agent and Banks 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.
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.
(b) The Unrestricted Subsidiaries do not have, nor are they
anticipated to have, any asset 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 ORIGINAL BANKS COMPLIANCE WITH LOAN AGREEMENTS; BANKS
COMPLIANCE WITH EXISTING LOAN AGREEMENT.
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At all times prior to the Old Effective Date, the Original
Banks and the Original Agent have (a) performed and complied in all material
respects with all obligations required to be performed or complied with by them
under the Loan Agreements (as defined in the Original Loan Agreement), (b) have
acted in a commercially reasonable manner, in good faith and consistent with
obligations of fair dealing with Company and Subsidiaries with respect to the
Loan Documents (as defined in the Original Loan Agreement), and (c) have not
engaged in any acts, conduct or omissions that could give rise to a defense of
Company or the Subsidiaries to any of their respective obligations under the
Loan Documents (as defined in the Original Loan Agreement) or result in any such
obligations being avoided reduced, impaired, subordinated or disallowed.
At all times prior to the Effective Date, the Banks and the
Agent have (a) performed and complied in all material respects with all
obligations required to be performed or complied with by them under the Existing
Loan Agreements, (b) have acted in a commercially reasonable manner, in good
faith and consistent with obligations of fair dealing with Company and
Subsidiaries with respect to the Loan Documents (as defined in the Existing Loan
Agreement), and (c) have not engaged in any acts, conduct or omissions that
could give rise to a defense of Company or the Subsidiaries to any of their
respective obligations under the Loan Documents (as defined in the Existing Loan
Agreement) or result in any such obligations being avoided reduced, impaired,
subordinated or disallowed.
4.26 BANK ACCOUNTS.
Schedule 4 26 (as amended from time to time by written notice
to Agent) is a true and correct list of all Bank Accounts of Company and its
Subsidiaries.
4.27 UTILITY FUND TRUSTS.
All of 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 Company
and First Union National Bank of Florida as Trustee have been fully funded in
the amount of $10,000,000.
4.28 ELIGIBLE RECEIVABLES AND ELIGIBLE JV RECEIVABLES.
(a) The Eligible Receivables are bona fide existing
obligations created by the sale and delivery of Real Property in the ordinary
course of Company's or any of its Subsidiary's business, unconditionally owed to
Company or such Subsidiary without defenses, disputes, offsets, counterclaims,
or rights of cancellation. Neither Company nor any such Subsidiary has received
notice of any actual or imminent Insolvency Proceeding or material impairment of
the financial condition of any obligor regarding any Eligible Receivable.
(b) The Eligible JV Receivables are bona fide existing
obligations created by the sale and delivery of JV Real Property in the ordinary
course of the relevant Borrowing Base Joint
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Venture's business, unconditionally owed to such Borrowing Base Joint Venture
without defenses, disputes, offsets, counterclaims, or rights of cancellation.
Neither Company nor the relevant Venture Subsidiary nor the relevant Borrowing
Base Joint Venture has received notice of any actual or imminent Insolvency
Proceeding or material impairment of the financial condition of any obligor
regarding any Eligible JV Receivable.
4.29 SPUD SUBSIDIARIES. Except as disclosed on Schedule 4.29, no
Subsidiary is a SPUD Subsidiary.
4.30 DRI AND ZONING MATTERS. 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
The effectiveness of this Agreement and the obligations of Banks to
make Loans and Issuing Bank to issue Letters of Credit hereunder are subject to
the prior or concurrent satisfaction of all the following conditions:
5.1 CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT.
(A) LOAN DOCUMENTS. Agent shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of Company, with
a counterpart for each Bank, (ii) for the account of each Bank, a Working
Capital Note and a Reducing Revolving Note, (iii) each other Loan Document,
required to be delivered hereunder, conforming to the requirements hereof and
executed and delivered by a duly authorized officer of Company or each of its
Subsidiaries (including, the Unrestricted Subsidiaries and the Excluded
Subsidiaries, in each case as to their respective acknowledgments under the
Stock Pledge Agreement), as the case may be, which are parties to such Loan
Document, with a counterpart for each Bank, (iv) the Escrow Agreement, executed
and delivered by a duly authorized officer of each party thereto, and (v)
copies, certified as true and correct copies by a Responsible Officer, of the
Security Documents, as amended through the Effective Date listed in Schedule I
to the Acknowledgment Agreement.
Agent and Collateral Agent shall have received (vi) in form
and substance satisfactory to Agent and Collateral Agent, a duly executed
agreement with Annis, Mitchell, Cockey, Edwards & Roehn, P.A. of Tampa, Florida
with respect to certain services to be provided thereby to Agent and Collateral
Agent, respectively, and (vii) the Funds Flow Memo.
(B) CORPORATE PROCEEDINGS OF COMPANY. Agent shall have
received, with a counterpart for each Bank, a copy of the resolutions, in form
and substance satisfactory to Agent, of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the Notes
and the other Loan Documents to which it is a party, certified by the Secretary
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or an Assistant Secretary of the Company as of the Effective 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 Agent.
(C) CORPORATE PROCEEDINGS OF THE SUBSIDIARIES. Agent shall
have received, with a counterpart for each Bank, a copy of the resolutions, in
form and substance satisfactory to Agent, of the Board of Directors of each
Subsidiary of Company which is a party to any Loan Document authorizing the
execution, delivery and performance of the Loan Documents to which it is a
party, certified by the secretary or an assistant secretary of each Subsidiary
as of the Effective 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.
(D) CORPORATE DOCUMENTS. Agent shall have received, with a
counterpart for each Bank, 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 Loan Document certified by the Secretary of State of their
respective jurisdictions of incorporation as of a recent date prior to the
Effective Date, (ii) the Bylaws of the Company and each of its Subsidiaries
which is a party to any Loan Document certified as of the Effective 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 Loan
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 foreign corporation dated as of a recent date prior to the
Effective Date and (iv) incumbency and signature certificates for Company and
each Subsidiary executing any Loan Documents as of the Effective Date
(E) OTHER DOCUMENTS. Agent shall have received, with a
counterpart for each Bank, copies, certified as true and correct by a
Responsible Officer, of (i) the indentures relating to the Public Debt
Securities as amended through the Effective Date, and (ii) the Business Plan and
the Beige Book.
(F) NO VIOLATION. The consummation of the transactions
contemplated hereby and by the other Loan Documents shall not contravene,
violate or conflict with, nor involve Agent or any Bank in any violation of, any
Requirement of Law.
(G) CONSENTS, AUTHORIZATIONS, AND FILINGS. Agent shall have
received, with a counterpart for each Bank, 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 Loan
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 Agent.
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(H) LEGAL OPINIONS. Agent shall have received, with a
counterpart for each Bank, the following executed legal opinions dated as of the
Effective Date in form and substance satisfactory to Agent and addressed to
Agent and Banks:
(i) the executed legal opinion of Arent Fox Kintner
Plotkin & Kahn, counsel to Company, substantially in the form of
Exhibit 5.1(h)-1;
(ii) the executed legal opinion of corporate counsel
to Company, substantially in the form of Exhibit 5.1(h)-2;
(iii) the executed legal opinion of Greenberg,
Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., special Florida
counsel to Company, substantially in the form of Exhibit 5.1(h)-3; and
(iv) the executed legal opinion of Chambliss &
Bahner, special Tennessee counsel to Company, substantially in the form
of Exhibit 5.1(h)-4.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as Agent may reasonably require.
Collateral Agent and Agent shall have received, with a
counterpart for each Bank, the following executed legal opinion dated as of the
Effective Date in form and substance satisfactory to Collateral Agent and Agent
and addressed to Collateral Agent, Agent, Banks:
(v) the executed legal opinion of Annis, Mitchell,
Cockey, Edwards & Roehn, P.A., special Florida counsel to Agent and
Collateral Agent, substantially in the form of Exhibit 5-1(h)-5.
Such legal opinion shall cover such other matters incident to the transactions
contemplated by this Agreement as Collateral Agent and Agent may reasonably
require.
(I) CERTIFICATION AS TO ENVIRONMENTAL MATTERS. Agent
shall have received, with a counterpart for each Bank, a certificate of a
Responsible Officer (i) stating that 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 Company or any Subsidiary or any
Borrowing Base Joint Venture in excess of $200,000 except as listed on a
schedule attached to such certificate and (ii) certifying that Company has made,
and agreeing that Company will continue to make, available to Agent 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.
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(J) CONTINUED PERFECTION OF SECURITY INTERESTS. 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 Agent has and continues to have a valid
and perfected first priority security interest in the Collateral granted by the
Security Documents subject to the Liens permitted pursuant to this Agreement and
the Security Documents (and Agent and Collateral Agent shall have received
satisfactory evidence thereof). Such action shall include: (i) the delivery by
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 Agent) representing all Subsidiary Stock; (ii) the delivery
to Collateral Agent of Uniform Commercial Code financing statements, executed by
each of 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 Agent that all other filings, recordings and other actions Collateral Agent
and Agent deems necessary or advisable to establish, preserve and perfect the
Liens and the priority thereof granted to Collateral Agent and Agent hereunder
shall have been made.
(K) REAL PROPERTY MATTERS. Agent shall have received: (i) such
new Mortgages and Deeds of Trust or such amendments to the existing Mortgages
and Deeds of Trust as may be requested by Agent, in each case in form and
substance satisfactory to Agent and its local counsel, to protect and preserve
the Lien and priority of the Mortgages and Deeds of Trust as they secure the
Loans and other amounts due hereunder, 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 Trusts in liability, amount and form issued by a
title company satisfactory to Agent 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 Agent in its sole discretion, together with any endorsements
reasonably required by Agent, 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 Agent may request, each as specified or contemplated on
Schedule 5.1(k).
(L) PURCHASE AGREEMENT. All conditions precedent to the
closing of the purchase transaction contemplated by the Purchase Agreement shall
have been satisfied and the transactions contemplated by the Purchase Agreement
shall have been consummated.
(M) SECURED FLOATING RATE NOTE AGREEMENT AND SECURED CASH
FLOW NOTE AGREEMENT. (i) The Secured Floating Rate Note Agreement shall have
been entered into and such agreements and any other documentation entered into
connection therewith shall be in form and
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substance satisfactory to Agent and Banks and true and correct copies thereof
shall have been delivered to Agent and each Bank.
(ii) The Secured Cash Flow Notes shall have been
prepaid in their entirety by Company for an aggregate amount not to exceed
$40,000,000 in cash and 1,500,000 warrants to purchase the common stock of
Company, such Secured Cash Flow Notes shall have been canceled by Company, and
the Secured Cash Flow Note Agreement and any other documentation entered into,
or Liens securing the Secured Cash Flow Notes granted, in connection therewith
shall have been terminated pursuant to termination documents in form and
substance satisfactory to Agent and Banks, and true and correct copies thereof
shall have been delivered to Agent and each Bank.
(N) ACKNOWLEDGMENT AGREEMENT. Agent shall have received,
with an executed counterpart for each Bank, duly executed copies of the
Acknowledgment Agreement.
(O) EVIDENCE OF INSURANCE. Company shall have delivered
to Agent certificates of insurance naming Collateral Agent on behalf of Banks as
loss payee under the casualty and surety policies required pursuant to Section
6.5.
(P) NO MATERIAL ADVERSE EFFECT. On the Effective Date,
Agent shall have received an officer's certificate executed by a Responsible
Officer stating that no Material Adverse Effect has occurred since June 30,
1996, except as disclosed in Company's Form 10-Q for the quarter ended as of
June 30, 1996.
(Q) INTERCREDITOR AGREEMENT. The Intercreditor Agreement
shall have been executed and delivered by each of the parties thereto, and Agent
shall have received a fully executed copy thereof in form and substance
satisfactory to Agent.
(R) FEES, COSTS, AND EXPENSES. As of the Effective Date,
Company shall have paid: (i) to the Agent all interest and fees accrued under
the Existing Loan Agreement on or before the Effective Date and shall have paid
to Agent and Banks all fees and expenses due and payable under the Existing Loan
Agreement as of the Effective Date; (ii) to the Agent all fees, costs, and
expenses of Agent and its counsel incurred in connection with the preparation,
negotiation, and execution of this Agreement, the Secured Floating Rate Note
Agreement, the Intercreditor Agreement, and any other documents executed in
connection herewith and therewith; and (iii) 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, the Secured
Floating Rate Note Agreement, the Intercreditor Agreement, and any other
documents executed in connection herewith and therewith.
(S) RECAPITALIZATION TRANSACTIONS. Each of the
Recapitalization Transactions shall have been consummated in accordance with all
applicable law, the underlying transaction documents, and the Escrow Agreement,
and Agent shall have received evidence of such consummation satisfactory to
Agent.
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(T) CHANGE OF COLLATERAL AGENT. Agent and the agent for
the holders of the Secured Floating Rate Notes shall have received the written
resignation of Chase as collateral agent under the Existing Agreement and the
Existing Secured Floating Rate Note Agreement, in form and substance
satisfactory to Agent and the agent for the holders of the Secured Floating Rate
Notes.
(U) AMENDMENT OF CERTAIN LOAN DOCUMENTS. The Security
Documents and other Loan Documents shall have been amended in form and substance
satisfactory to Agent.
(V) OTHER MATTERS. Company shall have made available to
Agent and Banks such other documents and information, or taken such other
actions, as Agent and Banks may reasonably request.
5.2 CONDITIONS TO EACH LOAN AND ISSUANCE OF EACH LETTER OF CREDIT.
The effectiveness of this Agreement and the agreement of each
Bank to make any Loan requested to be made by it on any Loan Borrowing Date, and
of Issuing Bank to issue Letters of Credit is subject to the satisfaction of the
further conditions precedent:
(A) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by Company and its Subsidiaries in or
pursuant to each of the Loan Documents shall be true, correct and complete in
all material respects on and as of the date of such extension of credit, with
such exceptions, amendments or modifications as may be approved in writing by
Agent. For the purposes hereof with respect to any request for a Loan or
issuance of Letter of Credit, any and all representations and warranties made by
Company or any of its Subsidiaries which are made "as of the Effective Date"
shall be required to be true and correct "as of the Loan Borrowing Date," or
date of issuance of the Letter of Credit rather than "as of the Effective Date."
(B) NO DEFAULT. No Default or Event of Default shall
have occurred and be continuing as of the date of such extension of credit, as
the case may be, after giving effect to the Loans requested to be made on such
date.
(C) ADDITIONAL SECURITY DOCUMENTS: OTHER DOCUMENTS.
Agent shall have received each additional Security Document as may be required
pursuant to Section 3.2 and each additional Guarantee required by Section 3.6,
in each case with a counterpart for each Bank, and each additional document,
instrument, legal opinion or item of information reasonably requested by it or
the Required Banks, with a counterpart for each Bank, including a copy of any
debt instrument, security agreement or other material contract to which Company
may be a party.
(D) OFFICER'S CERTIFICATE. In the case of any Loan
requested by Company, Agent shall have received the certificate required by
Section 2.3 or 2.8, as the case may be, with a counterpart for each Bank having
an applicable Commitment.
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(E) ADDITIONAL MATTERS. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be satisfactory in form and substance to Agent, and Agent shall have received
such other documents and legal opinions in respect of any aspect or consequence
of the transactions contemplated hereby or thereby as it or the Required Banks
shall reasonably request, with a counterpart for each Bank.
(F) REDUCING REVOLVING LOANS. The agreement of each Bank to
make any Reducing Revolving Loan requested to be made by it on any Reducing
Revolving Loan Borrowing Date is subject to the satisfaction of the further
condition precedent that there shall not be any Working Capital Facility
Availability as of the date of the making of such Reducing Revolving Loan.
Each borrowing by Company or issuance of Letter of Credit hereunder shall
constitute a representation and warranty by Company, as of the date of such
borrowing or issuance of Letter of Credit. that the conditions contained in this
Section 5.2 have been satisfied.
5.3 CONDITIONS SUBSEQUENT.
As a condition subsequent to the making of the Loans and
Letters of Credit, Company shall perform or cause to be performed the following
(and the failure by Company to so perform or so cause to be performed shall
constitute an Event of Default):
(A) REAL PROPERTY MATTERS REGARDING UNSOLD DESIGNATED RAW
LAND. No later than March 3, 1997, Agent shall have received such title
insurance, surveys, environmental audit reports, satisfactory evidence of
entitlements, and other documents as Agent reasonably may request, in respect of
all Designated Raw Land constituting Principal Raw Land not sold on or before
December 31, 1996, in each case that, but for Agent's agreement that the same
may be delivered on or before March 3, 1997, were required to be delivered under
Section 5.1(k).
(B) TAX SERVICING CONTRACTS. (i) No later than 60 days after
the Effective Date, Agent and Collateral Agent shall have received a tax
servicing contract in respect of such portion of the Total Real Property located
in Florida as shall be satisfactory to Agent and Collateral Agent, in form and
substance satisfactory to Agent and Collateral Agent, among Company, Agent,
Collateral Agent, and a tax servicing firm satisfactory to Agent and Collateral
Agent.
(ii) No later than 90 days after the Effective Date,
Agent and Collateral Agent shall have received a tax servicing contract in
respect of the Real Property located in Tennessee, in form and substance
satisfactory to Agent and Collateral Agent, among Company, Agent, Collateral
Agent, and a tax servicing firm satisfactory to Agent and Collateral Agent,
unless all or substantially all of such Total Real Property shall have been sold
prior to such date.
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(C) COMPANY OPERATING ACCOUNT CONTROL AGREEMENT. Within
30 days following the Effective Date, Company, Collateral Agent, and Operating
Account Bank shall have executed and delivered the Company Operating Account
Control Agreement.
SECTION 6
AFFIRMATIVE COVENANTS
Company hereby agrees that, so long as the Commitments remain
in effect or any Note remains outstanding and unpaid or any other amount is
owing to any Bank or Agent hereunder, Company shall, and shall cause each of its
Subsidiaries to:
6.1 FINANCIAL STATEMENTS.
Furnish to each Bank:
(a) as soon as available, but in any event not later than 90
days after the end of each fiscal year of Company, a copy of the consolidated
balance sheet of 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 Required Banks;
(b) as soon as available, but in any event not later than 90
days after the end of each fiscal year of Company, a copy of the consolidating
balance sheet of 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 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 Company, the unaudited consolidated and consolidating balance sheet of
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
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 Company and its consolidated Subsidiaries
(subject to normal year-end audit adjustments);
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(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 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 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 Company and
its consolidated Subsidiaries (including Unrestricted Subsidiaries) (subject to
nominal 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 Company of the
operating cash flow budget of 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, Company's
best estimate of its future financial performance;
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 each Bank:
(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 Borrowing Base 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 Required Banks;
(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
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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 statements of such Borrowing Base Joint Venture (subject to nominal
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.
(a) Furnish to each Bank:
(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, Company and each Subsidiary during such period has observed or
performed the covenants of Sections 7.1, 7.2, 7.3, 7.6, 7.8, 7.9, 7.15, 7.16,
and 7.17 and all other of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and in the Notes and in the other
Loan 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 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 Company sends to its
stockholders and all financial statements and reports which Company or any of
its Subsidiaries sends to the holders or trustee of any Public Debt Securities,
and within five Business Days after the same are filed, copies of all financial
statements
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and reports which Company may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority;
(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; and
(v) promptly, such additional financial and other
information as any Bank may from time to time reasonably request.
(b) Furnish to Agent:
(i) 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
Borrowing Base Joint Venture, of the investments of the Venture Subsidiaries in
Borrowing Base 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 Company's
accounts payable and any book overdraft: in each case, in form satisfactory to
Agent;
(ii) copies of all JV Receivables promptly upon the
sale of the underlying JV Real Property; and
(iii) promptly, such additional financial and other
information as any Bank 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 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: (a) continue 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
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.
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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 each
Bank, 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 Agent of any
material modification or cancellation of such policies. On the Effective Date
and on each anniversary thereafter, Company and its Subsidiaries shall submit to
Agent certificates of insurance evidencing compliance with this Section 6.5.
6.6 INSPECTION OF PROPERTY; 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 Agent, and each Bank, with respect to
Company and its Subsidiaries, to visit and inspect any of 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 Company and its Subsidiaries with officers and employees of Company and such
Subsidiaries and with its independent certified public accountants. From time to
time, if Agent determines that obtaining appraisals is necessary or appropriate,
Agent will either cause its personnel to appraise, or obtain appraisal reports
from appraisers satisfactory to Agent, stating the then current fair market
values of all or any portion of the Total Real Property. Anything herein to the
contrary notwithstanding, Company shall not be obligated to reimburse Agent 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 Company shall be obligated to
reimburse Agent with respect to as many appraisals as Agent deems necessary to
conduct.
6.7 NOTICES.
Promptly give notice to Agent and each Bank of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of Company or, to the knowledge of Company, any of its Subsidiaries
or (ii) litigation, investigation or proceeding which may exist at any time
between Company or, to the knowledge of 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;
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(c) any litigation or proceeding affecting Company or, to the
knowledge of 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
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 Company or any Commonly
Controlled Entity in excess of $100,000 and which is not reflected in the
financial statements most recently delivered to Banks 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 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 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 Agent and Banks, and
their respective 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 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 Notes and all
other amounts payable hereunder.
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6.9 BUSINESS PLAN.
Furnish to each Bank on or before the tenth day following
approval by Company's Board of Directors, but in no event later than December 31
of each fiscal year and within 10 days (after approval by Company's Board of
Directors, if applicable) of any amendment, modification or update thereto, a
Business Plan of Company and its Subsidiaries for the next succeeding fiscal
year in a form and in substance satisfactory to the Required Banks 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
Company. 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
Agent and the Required Banks.
6.10 [INTENTIONALLY OMITTED]
6.11 DIVIDENDS FROM SUBSIDIARIES.
Cause the Subsidiaries to pay dividends to Company from the
Net Cash Proceeds of 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 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 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 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 Agent such supplemental title reports on the
Real Property subject to the Deeds of Trust and Mortgages as Agent and Required
Banks may reasonably request from time
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to time; provided Company shall not be required to provide such supplemental
reports more than once per quarter.
(b) No later than 60 days after the Effective Date, Company
shall deliver to Agent such third party appraisals, environmental reports,
surveys, and ALTA title policies, as would have complied with the provisions of
Section 5.1(1) if delivered on the Effective Date with respect to all Real
Property to the extent such reports were not required by Banks to be delivered
on or prior to the Effective Date.
6.13 COMPLIANCE WITH LAWS.
Company shall, and shall cause each of its Subsidiaries to
comply with the requirements of all applicable laws, rules, regulations and
orders of any 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 Agent 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 Agent may
request.
6.15 COMPANY OPERATING ACCOUNT CONTROL AGREEMENT. At all times
from and after the date of its execution and delivery, maintain in full force
and effect the Company Operating Account Control Agreement. At all times from
and after the Effective Date, Company shall continue to maintain Company's cash
management system substantially as such system exists on the Effective Date
after giving effect to the consummation of the transactions contemplated to
occur on such date, and shall continue to concentrate the funds of 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 Company, and
except to the extent that such funds are invested in investments permitted by
Section 7.9.
SECTION 7
NEGATIVE COVENANTS
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Company hereby agrees that, so long as the Commitments remain
in effect or any Note remains outstanding and unpaid or any other amount is
owing to any Bank or Agent hereunder, Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly:
7.1 MAINTENANCE OF CONSOLIDATED NET WORTH.
Permit 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) (i) from the Effective Date through December 31,
1996, $26,500,000; and (ii) at any time thereafter, $23,500,000; and (b) 50% of
the Annual Net Income for the prior fiscal year; provided, however, that the
amount determined under this clause (b) shall never be less than zero.
To demonstrate compliance with the Minimum Consolidated Net Worth covenant set
forth in this Section, Company shall furnish to Banks (i) within 45 days of the
close of each calendar quarter a certificate of a Responsible Officer setting
forth Minimum Consolidated Net Worth 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 as of the 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 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 in respect of the Loans and Letters of
Credit;
(b) Indebtedness of Company in respect of the Secured
Floating Rate Notes;
(c) [intentionally omitted];
(d) Indebtedness of Company in respect of the Public
Debt Securities;
(e) Indebtedness of 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;
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(f) Indebtedness of Company to any Subsidiary or of any
Subsidiary to 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 Company shall not exceed an aggregate principal
amount of $20,000,000 at any time;
(g) Indebtedness of Company and its Subsidiaries
outstanding on the Effective Date 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 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
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 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 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 Company
shall give Agent 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 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:
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(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(1) Property securing the Section
365(j) Claims pursuant to, and as defined in, the Reorganization Plan;
(e) Liens for taxes (i) which are not yet delinquent or (ii) which are,
not in an aggregate amount, as to 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 Company or its Subsidiaries, as the case may be, in conformity
with GAAP;
(f) carriers, warehousemen's, mechanics's, 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;
(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 Company or
such Subsidiary;
(j) Liens granted by 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
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less, at the time of such acquisition and (ii) in any refinancing, the
outstanding Indebtedness being refinanced;
(l) other Liens in existence on the Effective Date, listed on Schedule
7.3: provided that no such Lien is spread to cover any additional property after
the Effective Dale 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 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 Company to a Subsidiary pursuant to
Section 7.9(g);
(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 Company of
obligations (other than Indebtedness) of any of its Subsidiaries, which
obligations are otherwise permitted under this Agreement; (c) Guarantee
Obligations by 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
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 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
Company or any Subsidiary may convey, sell, assign,
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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 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 the Effective Date 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 after the Effective Date 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
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 Agent.
7.7 LIMITATION ON DIVIDENDS.
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Declare or pay any dividend (other than dividends payable solely in
common stock or preferred stock of Company) on, or, except for the Reverse Stock
Split, 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 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 form of common stock or preferred stock of Company) or in
obligations of Company or any Subsidiary, except for dividends declared and paid
by any Subsidiary to 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 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 Company and its Subsidiaries during any 12-month period from and after the
Effective Date.
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 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 Company and its Subsidiaries not to
exceed $500,000 at any one time outstanding;
(d) investments by Company in any Subsidiary or by any Subsidiary in
Company or any other Subsidiary in connection with cash management procedures in
the ordinary course of business;
(e) (i) loans by Company to its Subsidiaries or by any Subsidiary of
Company to 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 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
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such stock received by 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 Agent;
(f) extensions of credit for sale of assets; and
(g) capital contributions to Venture Subsidiaries for the purpose of
making investments in Joint Ventures and to Unrestricted Subsidiaries so long as
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 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 Agent, (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 Company by
all Subsidiaries having investments in Joint Ventures after the Effective Date.
7.10 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT INSTRUMENTS.
(a) Make any optional payment or optional prepayment on, or optional
redemption of, any Indebtedness (including any payments on the Secured Floating
Rate Notes and Public Debt Securities) except (i) payments on the Loans, (ii)
payments on Secured Floating Rate Notes or Public Debt Securities but only if
made out of Available Cash on a Payment Date pursuant to Section 8.6(c) of the
Reorganization Plan, or (iii) so long as no Event of Default has occurred and is
continuing or would result therefrom, payments made pursuant to Indebtedness
permitted pursuant to Section 7.2(e), (f), (g) (but exclusive of Indebtedness
permitted pursuant thereto consisting of intercompany Indebtedness among Company
and its Subsidiaries, the Public Debt Securities, and Financing Leases), (h), or
(k):
(b) Amend, modify, or change, or consent or agree to any amendment,
modification or change to any of the terms of any Secured Floating Rate Notes,
any Public Debt Securities, or any other agreement executed in connection with
the foregoing or otherwise in connection with any Indebtedness (other than: (1)
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 Company and its Subsidiaries, the Public Debt
Securities, and Financing Leases), (h), and (k); and (2) other than any such
amendment, 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
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amendment, modification, or change to any such Indebtedness is not prohibited by
any other provision in this Agreement or the other Loan 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 Secured Floating Rate Note 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 of Company), unless such transaction is otherwise permitted
under this Agreement, is in the ordinary course of Company's or such Affiliate's
business and is upon fair and reasonable terms no less favorable to 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 term of this Agreement.
7.13 FISCAL YEAR.
Permit the fiscal year of Company to end on a day other than December
31.
7.14 LIMITATION ON NEGATIVE PLEDGE CLAUSES.
Enter into any agreement, other than the Secured Floating Rate Note
Agreement, 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 Banks pursuant hereto which prohibits or limits the
ability of 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.
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; and
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(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 Loans or Commitments are outstanding, allow cash and Cash
Equivalents maintained in Bank Accounts of 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. Company and its Subsidiaries (a) shall deposit in a Cash Collateral
Account amounts required to cash collateralize Letters of Credit pursuant to
Section 8, and (b) shall deposit in the Company Operating Account, after
application pursuant to Section 2.11(a)(iii), all remaining cash of 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
revenue.
(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 Banks and the holders of the Secured Floating Rate
Notes) upon any of such Venture Subsidiary's property, assets, or revenues,
whether now owned or hereafter acquired (including the Joint Venture interests
owned by such Venture Subsidiary as disclosed on Schedule 4.14(B) and the
revenues arising from such revenue).
7.19 [INTENTIONALLY OMITTED].
7.20 [INTENTIONALLY OMITTED].
7.21 [INTENTIONALLY OMITTED].
SECTION 8
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EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT; REMEDIES.
If any of the following events ("EVENTS OF DEFAULT") shall occur and be
continuing:
(a) Company shall fail to pay any principal when due of any Note, or
any amount payable to Issuing Bank in reimbursement of any drawing under a
Letter of Credit in accordance with the terms thereof or hereof; or Company
shall fail to pay any interest due on any Note or any other amount payable
hereunder within five days after any such interest or other amount becomes due
in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by Company or
any of its Subsidiaries herein or in any other Loan 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) Company shall default in the observance or performance of any
agreement contained in Section 7; or
(d) 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 Loan
Document, and such default shall continue unremedied for a period of 30 days; or
(e) Company shall fail to pay any principal of or interest on any
Secured Floating Rate Notes or any Public Debt Securities (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 Secured Floating Rate Note or any
Public Debt Securities; or
(f) Any Secured Floating Rate Notes or any Public Debt Securities 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 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 Loan 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
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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) Company shall (i) default in any payment of principal of or
interest on any Indebtedness (other than the Notes, the Secured Floating Rate
Notes, or any Public Debt Securities) 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
required, such Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable; or
(i) (i) Company or any of its Subsidiaries shall commence any case,
proceeding or other action (x) 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 (y)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or Company or any of
its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Company or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (x) results in the entry of an order for relief or any
such adjudication or appointment or (y) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
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)
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 clause (i), (ii), or (iii) above; or (v) 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
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) Company or any of its Subsidiaries shall cause to be reinstated
the Reorganization Proceedings; or
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(j) The Confirmation Order shall be reversed, withdrawn, or modified
(in any manner adverse to 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 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
Company or any Commonly Controlled Entity in excess of $4,600,000; or 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), 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 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 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) Any of the Guarantees or any Security Document hereunder shall
cease, for any reason, to be in full force and effect or 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 Agent
or Banks or their agents or bailees or other than with respect to Collateral
having an aggregate value of $100,000 or less); or
(n) Any Person or two or more 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 Company;
(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) [intentionally omitted];
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 paragraph (i) above, (i) the
Commitments and the obligation of Issuing Bank to issue Letters of Credit shall
automatically immediately terminate, and (ii) the Loans hereunder (with accrued
interest thereon), an amount equal to the maximum amount that may at any time be
drawn under all Letters of Credit then outstanding (whether or not any
beneficiary under any such Letter of Credit shall have presented, or shall be
entitled at such time, to present, the drafts or other documents or certificates
required to draw such Letter of Credit), and all other Obligations shall
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immediately become due and payable in full, and Agent and Collateral Agent shall
have all rights and remedies given to Agent 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, either or both of the following actions may be taken:
(i) with the consent of the Required Banks, Agent may, or upon the request of
the Required Banks, Agent shall, by notice to Company declare the Commitments to
be terminated forthwith, whereupon the Commitments and the obligation of Issuing
Bank to issue Letters of Credit shall immediately terminate; and (ii) with the
consent of the Required Banks, Agent may, or upon the request of the Required
Banks, Agent shall, by notice of default to Company, declare the Loans hereunder
(with accrued interest thereon), an amount equal to the maximum amount that may
at any time be drawn under all Letters of Credit then outstanding (whether or
not any beneficiary under any such Letter of Credit shall have presented, or
shall be entitled at such time, to present, the drafts or other documents or
certificates required to draw such Letter of Credit), and all other Obligations
to be due and payable in full, and Agent shall have all rights and remedies
given to Agent 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; provided, however, with regard to clause (b) hereof, that
unless and until Agent shall have received such directions, 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 Banks. Any amounts received by Agent on account of amounts
that may be drawn (but which have not yet been drawn) under the Letters of
Credit shall be held by Agent in one or more Cash Collateral Accounts and
applied in a manner consistent with the applicable cash collateral account
agreement in respect thereof.
SECTION 9
AGENTS
9.1 APPOINTMENT OF AGENT.
Each Bank hereby irrevocably designates and appoints Foothill as Agent
of such Bank under this Agreement and the other Loan Documents, and Foothill
hereby accepts such appointment, subject to the terms and provisions of this
Agreement and the other Loan Documents. Each Bank irrevocably authorizes
Foothill, as Agent for such Bank, to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to exercise such
powers and perform such duties as are expressly delegated to Agent by the terms
of this Agreement and the other Loan Documents together with such other powers
as are reasonably incidental thereto.
Each Bank hereby further authorizes Agent to enter into the Security
Documents to be executed and delivered by Agent, on behalf of and for the
benefit of Banks, on the Effective Date and agrees to be bound by the terms
thereof. Each Bank irrevocably authorizes Agent to take such action on its
behalf under the provisions of the Security Documents, and to exercise such
powers and
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perform such duties as are expressly delegated to Agent by the terms of the
Security Documents, together with such other powers as are reasonably incidental
thereto; provided that 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 written consent of Required
Banks. Each Bank agrees that no Bank shall have any right individually to
realize upon the collateral granted by the Security Documents (including through
the exercise of a right of set-off against call deposits, if any, of such Bank
in which any funds on deposit in the Cash Collateral Accounts may from time to
time be invested), it being understood and agreed that such rights and remedies
may be exercised only by Agent at the direction of Required Banks, for the
benefit of Banks, in accordance with the terms of such agreements. Each Bank
hereby authorizes Agent to release Collateral only as expressly permitted or
required under this Agreement or the Security Documents, and agrees that a
certificate executed by Agent evidencing such release of Collateral shall be
conclusive evidence of such release to any third party.
9.2 APPOINTMENT OF COLLATERAL AGENT.
Each Bank hereby irrevocably designates and appoints Foothill as
Collateral Agent of such Bank under this Agreement and the Security Documents to
which Foothill is a party, and Foothill hereby accepts such appointment, subject
to the terms and provisions of this Agreement and the Security Documents to
which it is a party. Each Bank hereby further authorizes Collateral Agent to
enter into the Security Documents to be executed and delivered by Collateral
Agent on the Effective Date and agrees to be bound by the terms thereof. Each
Bank irrevocably authorizes Foothill, as Collateral Agent for such Bank, 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 written consent of Required
Banks. Each Bank agrees that no Bank shall have any right individually to
realize upon the security granted by the Security Documents to which Collateral
Agent is party, it being understood and agreed that such rights and remedies may
be exercised only by Collateral Agent at the direction of Agent on behalf of
Required Banks, for the benefit of Banks, in accordance with the terms of such
agreements. Each Bank 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 Agent on behalf of the Required Banks. All notices and
directions to Collateral Agent shall be given by Agent on behalf of and at the
direction of Required Banks.
9.3 [INTENTIONALLY OMITTED].
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9.4 DELEGATION OF DUTIES.
Agent and Collateral Agent may execute any of their respective duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Neither Agent nor Collateral Agent shall 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, neither Agent nor Collateral Agent shall
have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent or
Collateral Agent; and Agent and Collateral Agent are acting hereunder and under
the other Loan Documents solely as the agent and collateral agent, respectively,
of Banks pursuant hereto and thereto, and neither Agent nor Collateral Agent is
acting as trustee for Banks.
9.5 EXCULPATORY PROVISIONS.
Neither Agent, 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 Loan Document (except
for its or such Persons own gross negligence or willful misconduct) or (b)
responsible in any manner to any of Banks for any recitals, statements,
representations or warranties made by Company or any officer thereof contained
in this Agreement or any other Loan Document or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or the Notes or any other Loan Document or for any failure of
Company to perform its obligations hereunder or thereunder. Neither Agent nor
Collateral Agent shall be under any obligation to any Bank 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 Loan Document or as to the use
of proceeds of the Loans or of the existence or possible existence of a Default
or Event of Default, or to inspect the properties, books or records of Company.
Notwithstanding anything herein to the contrary, neither Agent nor Collateral
Agent shall have any liability arising from confirmations of the amount of
outstanding Loans.
9.6 RELIANCE BY AGENTS.
(a) Each of Agent 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 Company), independent accountants and other experts selected by Agent
or Collateral Agent, as the
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case may be. Agent and Collateral Agent may deem and treat the payee of any Note
as the owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with Agent.
(b) Each of Agent and Collateral Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless (i) it shall first receive such advice or concurrence as it
deems appropriate from Agent, in the case of Collateral Agent or from any Bank,
Banks or Required Banks in the case of Agent, as may be required pursuant to
this Agreement for such action, or (ii) it shall first be indemnified to its
satisfaction by such Banks 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 Agent's or Collateral Agent's, as the case may be, gross
negligence or willful misconduct. Each of Agent and Collateral Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement, the Notes and the other Loan Documents in accordance with a request
of any Bank, Banks or Required Banks in the case of Agent, or Agent in the case
of Collateral Agent, as required pursuant hereto and such request and any action
taken or failure to act pursuant thereto shall be binding upon all Banks and all
future holders of the Notes.
9.7 NOTICE OF DEFAULT.
Neither Agent nor Collateral Agent shall be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default unless Agent or
Collateral Agent, as the case may be, has received notice from a Bank or Company
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." If Agent receives such a
notice, Agent shall promptly give notice thereof to Banks and Collateral Agent.
If Collateral Agent receives such a notice, Collateral Agent shall give notice
thereof to Agent. Agent and Collateral Agent shall take such action with respect
to such Default or Event of Default as shall be directed by Agent in the case of
Collateral Agent and by any Bank Banks or Required Banks in the case of Agent,
as required pursuant hereto (subject to the provisions of Section 9.4(b));
provided that unless and until Agent or Collateral Agent, as the case may be,
shall have received such directions, Agent or Collateral Agent, as the case may
be, 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 Banks.
9.8 NON-RELIANCE ON AGENTS AND OTHER BANKS.
Each Bank expressly acknowledge that neither Agent, Collateral Agent
nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties to it
and that no act by Agent or Collateral Agent hereinafter taken, including any
review of the affairs of Company or any of its Subsidiaries, shall be deemed to
constitute any representation or warranty by Agent or Collateral Agent to any
Bank. Each Bank represents to Agent and Collateral Agent that it has,
independently and without reliance upon Agent or Collateral Agent or any other
Bank, and based on such documents and information as it has
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deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of Company and its Subsidiaries and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Bank also
represents that it will, independently and without reliance upon Agent,
Collateral Agent or any other Bank, 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 Loan 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 Company and its
Subsidiaries. Except for notices, reports and other documents expressly required
to be furnished to Banks by Agent hereunder, neither Agent nor Collateral Agent
shall have any duty or responsibility to provide any Bank with any credit or
other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of Company or any of its
Subsidiaries which may come into the possession of Agent or Collateral Agent or
any of their respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
9.9 INDEMNIFICATION.
Banks agree to indemnify Agent and Collateral Agent in their respective
capacities as such (to the extent not reimbursed by Company and without limiting
the obligation of Company to do so), ratably according to the respective
outstanding principal amounts of their Commitments, 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 Notes) be imposed on,
incurred by or asserted against Agent or Collateral Agent in any way relating to
or arising out of this Agreement, any of the other Loan 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 Agent or
Collateral Agent under or in connection with any of the foregoing; provided that
no Bank shall 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 Agent's or Collateral Agent's
gross negligence or willful misconduct. The agreements in this Section 9.9 shall
survive the payment of the Notes and all other amounts payable hereunder.
9.10 [INTENTIONALLY OMITTED].
9.11 AGENT IN ITS INDIVIDUAL CAPACITY.
Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with Company as though Agent were not
Agent hereunder and under the other Loan Documents. With respect to its Loans
made or renewed by it and any Note issued to it, Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any Bank
and may exercise the same as though it were not Agent, and the terms "Bank" and
"Banks" shall include Agent in its individual capacity.
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9.12 SUCCESSOR AGENTS.
Each of Agent and Collateral Agent may resign as Agent or Collateral
Agent, as the case may be, upon 30 days notice to Agent in the case of
Collateral Agent and to Banks in the case of Agent. If Agent or Collateral Agent
shall resign as Agent or Collateral Agent, as the case may be, under this
Agreement and the other Loan Documents, then the Required Banks shall appoint
from among Banks a successor agent or collateral agent for Banks, which
successor agent or collateral agent, except if an Event of Default shall have
occurred and be continuing, shall be approved by Company (which approval shall
not be unreasonably withheld), whereupon, effective upon acceptance of its
appointment as successor agent or collateral agent, such successor agent or
collateral agent shall succeed to the rights, powers and duties of Agent or
Collateral Agent, as the case may be, and the terms "Agent" and "Collateral
Agent" shall mean such successor agent or collateral agent, as the case may be,
and the former Agent's or Collateral Agent's rights, powers and duties as Agent
or Collateral Agent, as the case may be, shall be terminated, without any other
or further act or deed on the part of such former Agent or Collateral Agent or
any of the parties to this Agreement or any holders of the Notes. If the
Required Banks fail to appoint a successor or collateral agent for Banks as
provided above within 30 days after the resignation of Agent or Collateral
Agent, then Agent or Collateral Agent, as the case may be, may appoint a
successor agent or collateral agent for Banks, which successor agent or
collateral agent, except if an Event of Default shall have occurred and be
continuing, shall be approved by Company (which approval shall not be
unreasonably withheld), whereupon, effective upon acceptance of its appointment
as successor agent or collateral agent, such successor agent or collateral agent
shall succeed to the rights, powers and duties of Agent or Collateral Agent, as
the case may be, and the terms "Agent" and "Collateral Agent" shall mean such
successor agent or collateral agent and the former Agent's or Collateral Agent's
rights, powers and duties as Agent or Collateral Agent, as the case may be,
shall be terminated, without any other or further act or deed on the part of
such former Agent or Collateral Agent or any of the parties to this Agreement or
any holders of the Notes. After any retiring Agent's or Collateral Agent's
resignation as Agent or Collateral Agent, as the case may be, 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 Agent or
Collateral Agent under this Agreement and the other Loan Documents.
Notwithstanding anything herein to the contrary, the resignation of Agent or
Collateral Agent shall not be effective unless and until a successor agent or
collateral agent has been appointed and has accepted such appointment.
SECTION 10
MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS.
Neither this Agreement, any Note, any other Loan Document, nor any
terms hereof or thereof may be amended, supplemented or modified except in
accordance with the provisions of this Section. With the prior written consent
of the Required Banks, Agent and Company may, from
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time to time, enter into written amendments, supplements or modifications hereto
and to the Notes and the other Loan Documents for the purpose of adding any
provisions to this Agreement or the Notes, or the other Loan Documents or
changing in any manner the rights of Banks or of Company hereunder or thereunder
or waiving, on such terms and conditions as Agent may specify in such
instrument, any of the requirements of this Agreement or the Notes or the other
Loan Documents or any Default or Event of Default and its consequences;
provided, however, that no such waiver and no such amendment, supplement or
modification shall (a) reduce the amount of the Obligations or extend the
maturity of the
Obligations, or reduce the rate or extend the time of payment of
interest thereon, or reduce the amount or extend the time of payment of any fee
payable to any Bank hereunder or change the amount of any Bank's Commitments,
reduces the amount or postpones the due date of any amount payable in respect
of, or extends the required expiration date of any Letter of Credit, or changes
in any manner the obligations of Banks relating to the purchase of
participations in Letters of Credit, in each case without the consent of Bank
affected thereby, or (b) amend, modify or waive any provision of this Section or
reduce the percentage specified in the definition of Required Banks, or consent
to the assignment or transfer by Company of any of its rights and obligations
under this Agreement and the other Loan Documents, or release and/or subordinate
the Liens with respect to any Collateral in excess of 5 % of the aggregate value
of the Collateral on a Book Value basis during the term of this Agreement
(except as expressly required or provided for hereunder, including as provided
in Section 7.3(n), or in the Security Documents or as otherwise required by
law), or release any Subsidiary from its Guarantee, or amend, modify or waive
the provisions of Sections 2.1, 2.4, 2.6, 2.9, 2.11, 2.17, 2.18, 2.19, 3.2, 3.5,
5.2, or 10.5 (or any of the defined terms used in such Sections) or any
provision hereof or of any other Loan Document which, by its terms, shall be
taken or permitted only with the consent of all Banks, or extend the Working
Capital Loan Commitment Period or the Reducing Revolving Loan Commitment Period,
in each case without the written consent of all Banks, or (c) amend, modify or
waive any provision of Section 9, without the written consent of the then Agent
or Collateral Agent affected thereby, or (d) amend, modify or waive any
provision of Section 2.21 without the written consent of Issuing Bank. Any such
waiver and any such amendment, supplement or modification shall apply equally to
each of Banks and shall be binding upon Company, Banks, Agent, Collateral Agent
and all future holders of the Notes. In the case of any waiver, Company, Banks,
Agent and Collateral Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes and any other Loan 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
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confirmed receipt; provided that any notice, request or demand to or upon Agent,
Collateral Agent or Banks shall not be effective until received. For the
purposes hereof, the addresses of the parties hereto (until a notice of change
thereof is delivered as provided in this Section 10.2) shall be as set forth
under each party's name on the signature pages hereof.
10.3 NO WAIVER: CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising, on the part of
Agent, Collateral Agent or any Bank, 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 REPRESENTATIONS AND WARRANTIES.
All representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the Notes.
10.5 PAYMENT OF EXPENSES AND TAXES.
Company agrees (a) to pay or reimburse Agent, Collateral Agent, and
each Bank 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 Notes, the Intercreditor
Agreement, and the other Loan 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 Agent, counsel to Collateral Agent, and the several counsel to
Banks and the reasonable allocated costs of in-house counsel to Agent, in-house
counsel to Collateral Agent, and the several in-house counsel to Banks, (b) to
pay or reimburse each Bank, Agent, and Collateral Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the Notes, the Intercreditor Agreement, the other
Loan Documents and any such other documents, including fees and disbursements of
counsel to Agent, counsel to Collateral Agent, and to the several counsel to
Banks, and the reasonable allocated costs of in-house counsel to Agent and
in-house counsel to Collateral Agent, (c) to pay, indemnify, and hold each Bank,
Agent, 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 any such Bank, Agent or Collateral Agent), if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by this
Agreement, including any and all advances of the Loans pursuant hereto, the
Notes, the other Loan Documents, and any such other documents, and any and all
liabilities with respect to, or resulting
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from any delay in paying any of such fees and taxes, (d) to pay the costs of
furnishing all opinions of counsel for 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 Secured
Floating Rate Note Agreement, the agreements governing the Public Debt
Securities, and any other agreements, (f) to pay the costs and expenses incurred
to continue the perfection of any Liens in favor of Agent 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 Bank, Agent 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 Notes, the Intercreditor
Agreement, the other Loan Documents and any such other documents (all the
foregoing, collectively, the "indemnified liabilities"); provided, that Company
shall have no obligation hereunder to Agent, Collateral Agent or any Bank with
respect to indemnified liabilities arising from the gross negligence or willful
misconduct of Agent, Collateral Agent or any such Bank, and (h) to pay or
reimburse Agent 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
Agent, the replaced counsel to Collateral Agent, and the new counsel to
Collateral Agent, and the reasonable allocated costs of in-house counsel to
Agent and in-house counsel to Collateral Agent. The agreements in this Section
shall survive repayment to the Notes and all other amounts payable hereunder.
10.6 SUCCESSORS AND ASSIGNS: PARTICIPATIONS; PURCHASING BANKS.
(a) This Agreement shall be binding upon and inure to the benefit of
Company, Banks, Agent, Collateral Agent, all future holders of the Notes and
their respective successors and assigns, except that Company may not assign or
transfer any of its rights or obligations under this Agreement and the other
Loan Documents without the prior written consent of each Bank.
(b) Any Bank may, in accordance with applicable law, at any time sell
to one or more banks or other entities ("Participants") participating interests
in any Loan owing to such Bank, any Note held by such Bank, any Commitment of
such Bank or any other interest of such Bank hereunder and under the other Loan
Documents. In the event of any such sale by a Bank of participating interest to
a Participant, such Bank's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, such Bank shall remain the holder of
any such Note for all purposes under this Agreement and the other Loan
Documents, and Company and Agent shall continue to deal solely, and directly
with such Bank in connection with such Bank's rights and obligations under this
Agreement and the other Loan Documents. Company agrees that if amounts
outstanding under this Agreement and the Notes 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 any Note to the same extent as if the amount of its participating interest
were owing directly to it as
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a Bank under this Agreement or any 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 Banks the proceeds thereof as provided in Section 10.7. Company also
agrees that each Participant shall be entitled to the benefits of Sections 2.18,
2.19 and 10.5 with respect to its participation in the Commitments and the Loans
outstanding from time to time; provided, that no Participant shall be entitled
to receive any greater amount pursuant to such Sections than the transferor Bank
would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Bank to such Participant had no
such transfer occurred. Participants shall not be entitled to require the
applicable Bank 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
Loan in which such Participant is participating, (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 Loans in which such participant is participating, (iii)
the release of a substantial portion of the Collateral or any of the Guarantees
(except as otherwise expressly provided in the Loan Documents) or (iv) an
increase in the Commitments in which such Participant is participating.
(c) Any Bank may, in accordance with applicable law, at any time sell
to any Bank or any Affiliate thereof or to one or more banks or financial
institutions ("PURCHASING BANKS") all or any part of its rights and obligations
under this Agreement, the Notes and other Loan Documents pursuant to a
Commitment Transfer Supplement, substantially in the form of Exhibit 10.6,
executed by such Purchasing Bank and such transferor Bank, and delivered to
Agent for its acceptance and recording in the Register. Upon such execution,
delivery, acceptance and recording, from and after the Transfer Effective Date
determined pursuant to such Commitment Transfer Supplement, (i) the Purchasing
Bank thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Bank
hereunder and under the other Loan Documents, and (ii) the transferor Bank
thereunder shall, to the extent provided in such Commitment Transfer Supplement,
be released from its obligations under this Agreement and under the other Loan
Documents (and, in the case of a Commitment Transfer Supplement covering all or
the remaining portion of a transferor Bank's rights and obligations under this
Agreement and under the other Loan Documents, such transferor Bank shall cease
to be a party hereto and thereto). Such Commitment Transfer Supplement shall be
deemed to amend this Agreement to the extent, and only to the extent, necessary
to reflect the addition of such Purchasing Bank and the resulting adjustment of
Commitment and Loan percentages arising from the purchase by such Purchasing
Bank of all or a portion of the rights and obligations of such transferor Bank
under this Agreement, the Notes and other Loan Documents. At the request of
Purchasing Bank, Company and Agent shall negotiate in good faith with Purchasing
Bank to accommodate Purchasing Bank's reasonable requests with respect to the
timing of the obligations of Company, Agent and Banks set forth in Section 2.3.
On or prior to the Transfer Effective Date determined pursuant to such
Commitment Transfer Supplement, Company, at its own expense, shall execute and
deliver to Agent in exchange for the surrendered Note(s), new renewal Note(s) to
the order of such Purchasing Bank in an amount equal to the Commitment assumed
by it pursuant to such Commitment Transfer Supplement and, if the
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transferor Bank has retained a Commitment hereunder, new Note(s) to the order of
the transferor Bank in an amount equal to the Commitment retained by it. Such
new Note(s) shall be dated the Transfer Effective Date and shall otherwise be in
the form of the Note(s) replaced thereby. The Note(s) replaced by such new
Note(s), marked "renewed," shall be attached to such new Note(s); and a copy
thereof shall be sent to Company.
(d) Agent shall maintain at its address referred to in Section 10.2 a
copy of each Commitment Transfer Supplement delivered to it and a register (the
"Register") for the recordation of the names and addresses of Banks and the
Commitments of, and principal amount of the Loans owing to, each Bank from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Company, Agent, Collateral Agent and Banks may treat each
Person whose name is recorded in the Register as the owner of the Loans recorded
therein for all purposes of this Agreement. The Register shall be available for
inspection by Company or any Bank at any reasonable time and from time to time
upon reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement executed by a
transferor Bank and Purchasing Bank, Agent shall (i) promptly accept such
Commitment Transfer Supplement, (ii) forward a copy of such Commitment Transfer
Supplement to Company and (iii) on the Transfer Effective Date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to Banks and Company.
(f) Subject to Section 10.16, Company authorizes each Bank to disclose
to any Participant or Purchasing Bank (each, a "Transferee") and any prospective
Transferee any and all financial information in such Bank's possession
concerning Company and its Affiliates which has been delivered to such Bank by
or on behalf of Company pursuant to this Agreement or which has been delivered
to such Bank by or on behalf of Company in connection with such Bank's credit
evaluation of Company and its Affiliates prior to becoming a party to this
Agreement; 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 Bank which is organized under the
laws of any jurisdiction other than the United States or any state thereof,
Company will not be required to pay any increased withholding taxes of the
United States or any political subdivision thereof unless, prior to the date of
transfer, the transferor Bank shall cause such Purchasing Bank to comply with
the requirements of Section 2.19(b).
(h) Nothing herein shall prohibit any Bank from pledging or assigning
any Note to any Federal Reserve Bank in accordance with applicable law.
(i) Notwithstanding the foregoing provisions of this Section 10.6, no
holder of any Note shall transfer such Note in a manner which would violate any
Requirement of Law.
10.7 ADJUSTMENTS; SET-OFF.
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(a) If any Bank (a "BENEFITTED BANK") shall at any time receive any
payment of all or part of its Loans owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in the last
paragraph of Section 8.1, or otherwise), in a greater proportion than any such
payment to or collateral received by, any other Bank, if any, in respect of such
other Bank's Loans owing to it, or interest thereon, or fees due to it
hereunder, such benefitted Bank shall purchase for cash from the other Banks
such portion of each such other Banks' Loans, or make such payment on account of
such fees, or shall provide such other Banks with the benefits of any such
collateral, or the proceeds thereof as shall be necessary to cause such
benefitted Bank to share the excess payment or benefits of such collateral or
proceeds ratably with each of Banks; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefitted Bank, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. Company
agrees, that each Bank so purchasing a portion of another Bank's Loan owing to
it may exercise all rights of payment (including rights of set-off) with respect
to such portion as fully as if such Bank were the direct holder of such portion.
(b) In addition to any rights and remedies of Banks provided by law,
each Bank shall have the right, without prior notice to Company, any such notice
being expressly waived by Company to the extent permitted by applicable law,
upon any Secured Debt (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 Bank to or for the credit or the
account of Company. Each Bank agrees promptly to notify Company and Agent after
any such set-off and application made by such Bank; provided that the failure to
give such notice shall not affect the validity of such set-off and application.
10.8 APPOINTMENT OF AGENT AS COMPANY'S LAWFUL ATTORNEY.
Company irrevocably designates, makes, constitutes and appoints Agent
(and all Persons designated by Agent) as Company's true and lawful attorney (and
agent-in-fact) coupled with an interest, with the power to sign the name of
Company on any instruments, documents and agreements, including security
agreements, pledge agreements, mortgages, and financing statements, as deemed by
Agent as necessary or reasonably required by Agent to grant, perfect, maintain
and continue the Liens in the Collateral or to monitor or administer the Loans,
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 Agent, in its sole discretion, may elect, and in
such event copies thereof shall be delivered to 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
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constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with Company and Agent.
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.
10.11 INTEGRATION.
This Agreement, together with the other Loan Documents, represents the
entire agreement of Company, Agent, Collateral Agent and Banks and supersedes
all prior agreements with respect to the subject matter hereof or thereof, and
there are no promises, undertakings, representations or warranties by Agent,
Collateral Agent or any Bank relative to subject matter hereof or thereof not
expressly set forth or referred to herein or in the other Loan Documents.
10.12 GOVERNING LAW.
THIS AGREEMENT, THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
10.13 SUBMISSION TO JURISDICTION; WAIVERS.
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 LOAN DOCUMENTS TO WHICH IT
IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NONEXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
CALIFORNIA, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE CENTRAL DISTRICT
OF CALIFORNIA 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
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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 COMPANY AT ITS ADDRESS
SET FORTH ON THE SIGNATURE PAGES HEREOF OR AT SUCH OTHER ADDRESS OF WHICH AGENT
SHALL HAVE BEEN NOTIFIED PURSUANT THERETO:
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY 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 LOAN DOCUMENTS AND
HEREBY RATIFIES AND CONFIRMS WHATEVER BANKS, AGENT OR COLLATERAL AGENT MAY DO IN
THIS REGARD; (II) ALL RIGHTS TO NOTICE OF A HEARING PRIOR TO BANKS' OR AGENT'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 BANKS, AGENT OR
COLLATERAL AGENT TO EXERCISE ANY OF BANKS' OR AGENT'S OR COLLATERAL AGENT'S
REMEDIES; AND (X 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.
Company hereby acknowledges that;
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the Notes. and the other Loan Documents:
(b) none of Agent, Collateral Agent or any Bank has any fiduciary
relationship to Company, and the relationship between Agent and Banks, on one
hand, and Company, on the other hand, is solely that of creditor and debtor, and
(c) no joint venture exists among Banks or among Company and Banks.
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10.15 WAIVERS OF ANY JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. The scope
of this waiver is intended to be all encompassing of any and all disputes that
may be filed in any court and that relate to the subject matter of this
Agreement, including contract claims, tort claims, breach of duty claims, and
all other common law and statutory claims. Each party hereto acknowledges that
this waiver is a material inducement to enter into a business relationship, that
each has already belied on this waiver in entering into this Agreement, and that
each will continue to rely on this waiver in entering into any further
documentation related to the transactions contemplated hereby and otherwise in
their related future dealings. Each party hereto further warrants and represents
that it has reviewed this waiver with its legal counsel and that it knowingly
and voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER DOCUMENTS
OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. In
the event of litigation, this Agreement may be filed as a written consent to a
trial by the court.
10.16 CONFIDENTIALITY.
Each Bank agrees to take normal and reasonable precautions and exercise
due care to maintain the confidentiality of all non-public information provided
to it by Company or any of its Subsidiaries, or by Agent or Collateral Agent on
Company's behalf, in connection with this Agreement or any other Loan 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. Any Bank may disclose such information
(a) at the request of any regulatory authority or in connection with an
examination of such Bank 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 any other
agency of any State of the United States of America or of any other
jurisdiction, in which such Bank conducts its business; (e) to such Bank'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) such Bank and (ii) Company and/or any Subsidiary; and (h) in
connection with any litigation or dispute involving such Bank if the disclosure
is determined by such Bank to be necessary for the defense or protection of such
Bank's rights and/or interests. Each Bank further agrees, upon receipt by such
Bank of a request to disclose any information to a Governmental Authority or
courts (other than governmental bank examiners and independent auditors of such
Bank), to notify Company of such request and to permit, to the extent
practicable, Company to seek a protective order with respect
103.
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thereto; provided however that no Bank shall be requested to notify 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 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 Company.
10.17 CONTROLLING AGREEMENT.
In the event of any conflict between the terms and provisions of this
Agreement and the terms and provisions of any other Loan Document, the terms and
provisions of this Agreement shall control.
10.18 COUNSEL TO COLLATERAL AGENT.
If Company reasonably and in good faith requests in writing to
Collateral Agent and Agent that Collateral Agent replace, at Company's sole
expense, the then existing counsel to Collateral Agent, Collateral Agent shall
consider such request and, so long as no Default or Event of Default has
occurred and is continuing, Collateral Agent shall not unreasonably withhold its
consent to such request.
104.
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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
CORPORATION
By:
---------------------------------------
Name:
Title:
Notice Address:
2601 South Bayshore Drive, 9th Floor
Miami, Florida 33133-5461
Telecopy: (305) 859-4623
Attention: Chief Financial Officer
FOOTHILL CAPITAL CORPORATION
as Agent and as a Bank
By:
---------------------------------------
Name:
Title:
Notice Address:
60 State Street
Suite 1150
Boston, Massachusetts 02109
Telecopy: (617) 523-1675
Attention: Business Finance Division
Manager
105.
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FOOTHILL CAPITAL CORPORATION
as Collateral Agent
By:
---------------------------------------
Name:
Title:
Notice Address:
60 State Street
Suite 1150
Boston, Massachusetts 02109
Telecopy: (617) 523-1675
Attention: Business Finance Division
Manager
106.
<PAGE> 116
Atlantic Gulf Communities Corporation Exhibit to the 1996 Form 10-K
EXHIBIT (C) 4. A. SECOND AMENDED AND RESTATED REVOLVING LOAN AGREEMENT
DATED AS OF SEPTEMBER 30, 1996, AS AMENDED AS OF MARCH 31, 1997
AMENDMENT
As of March 31, 1997
Atlantic Gulf Communities Corporation
2601 South Bayshore Drive, 9th Floor
Miami, Florida 33133-5461
Ladies and Gentlemen:
Reference is made to: (a) that certain Second Amended and Restated
Revolving Loan Agreement, dated as of September 30, 1996 (as amended,
supplemented, or otherwise modified from time to time, the "Loan Agreement"), by
and among Atlantic Gulf Communities Corporation, a Delaware corporation
("Company"), the financial institutions listed therein (the "Loan Banks"),
Foothill Capital Corporation, as Agent for the Loan Banks ("Loan Agent"), and
Foothill Capital Corporation, as Collateral Agent; and (b) that certain Second
Amended and Restated Secured Floating Rate Note Agreement, dated as of September
30, 1996 (as amended, supplemented, or otherwise modified from time to time, the
"Note Agreement"), by and among Company, the financial institutions listed
therein (the "Note Banks"), Foothill Capital Corporation, as Agent for the Note
Banks ("Note Agent"), and Foothill Capital Corporation, as Collateral Agent.
Capitalized terms used in this Amendment without definition shall have the
meanings ascribed to them in the Loan Agreement.
You have advised Loan Agent, the Loan Banks, Note Agent, and the Note
Banks (collectively, the "Bank Group") that the sum of the Working Capital
Facility Usage, the Reducing Revolving Usage, and the aggregate outstanding
balance of all Secured Floating Rate Notes exceeds the Adjusted Borrowing Base
Amount (the amount of such excess in existence from time to time, the
"Overadvance"). The amount of the Overadvance in existence as of March 31, 1997
is approximately $5,200,000. You also have advised the Bank Group that Company
anticipates that, during the period commencing on March 31, 1997 and ending on
the earlier to occur of June 30, 1997 and the date that the Overadvance is
reduced to zero (the "Designated Period"), such Overadvance is likely to
continue and may need to increase from approximately $5,200,000 to up to a
maximum of $10,000,000.
Anything in the Loan Agreement, the Loan Documents, the Note
Agreement, or the "Secured Floating Rate Note Documents" (as that term is
defined in the Note Agreement) to the contrary notwithstanding, the Bank Group
hereby agrees that, effective solely during the Designated Period and so long as
the Overadvance does not exceed the
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"Permitted Overadvance Amount" (as that term is defined below) at any time,
Company need not repay the Loans in an amount equal to the Overadvance pursuant
to Section 2.11 of the Loan Agreement. The agreement contained in this paragraph
(the "Limited Amendment") only shall be effective through the end of the
Designated Period and only so long as the Overadvance does not exceed the
Permitted Overadvance Amount; otherwise, Company's obligation to repay the Loans
in an amount equal to the Overadvance in accordance with Section 2.11 of the
Loan Agreement shall not be deemed to have been waived or amended by the Bank
Group. As used herein, "Permitted Overadvance Amount" shall mean the result of
(A) $10,000,000, less (B) the aggregate amount of repayments (if any) made in
respect of the Overadvance pursuant to Section 1.d hereof.
As a condition precedent to the effectiveness of the Limited
Amendment, the Loan Banks shall have received a fee, which fee Company and the
Bank Group mutually have agreed shall be in the amount of One Million Dollars
($1,000,000) and shall be charged to Company as a further Reducing Revolving
Loan.
In order to induce the Bank Group to provide the Limited Amendment,
Company and the Bank Group hereby agree that, anything in the Loan Agreement,
the Loan Documents, the Note Agreement, or the Secured Floating Rate Note
Documents to the contrary notwithstanding:
1. the Loan Agreement hereby is amended as follows:
a. solely during the Designated Period and so long as
no Event of Default has occurred and is
continuing, all Obligations (other than Letters of
Credit) shall bear interest at a rate equal to the
rate that would otherwise be applicable to such
Obligations pursuant to Section 2.14(a) of the
Loan Agreement plus 200 basis points, and the fee
provided in Section 2.21(d)(i)(y) of the Loan
Agreement in respect of Letters of Credit shall be
increased by 200 basis points.
b. solely during the Designated Period and so long as
no Overadvance greater than the Permitted
Overadvance Amount exists or would result
therefrom, the Loan Banks agree, subject to the
provisions hereof and otherwise subject to the
terms and conditions of the Loan Agreement, (i) to
make additional Reducing Revolving Loans
("Permitted Overadvance Reducing Revolving Loans")
upon the written request therefor by Company, and
(ii) that amounts repaid on account of Permitted
Overadvance Reducing Revolving Loans may be
reborrowed during the Designated Period. The
foregoing notwithstanding, the Loan Banks shall
have no obligation to make Permitted
2
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Overadvance Reducing Revolving Loans: (y) to the
extent that the sum of the Working Capital
Facility Usage and the Reducing Revolving Usage
exceeds the sum of the Working Capital Loan
Commitments and the Reducing Revolving Loan
Commitments; and (z) other than (1) for payment to
the Bank Group of fees and interest due and
payable during the Designated Period (including
all interest due and payable on each Interest
Payment Date in respect of the Loans and all
interest due and payable on each "Interest Payment
Date" (as that term is defined in the Note
Agreement) in respect of the "Notes" (as that term
is defined in the Note Agreement)) and charged to
Company pursuant hereto or pursuant to the Loan
Documents or the Secured Floating Rate Note
Documents, and (2) consistent with the terms and
conditions of the Loan Agreement and the Note
Agreement, for any other purpose or use to the
extent that the portion of the Overadvance not
payable pursuant to the foregoing clause (z)(1)
exceeds $1,000,000 plus the amount, if any, by
which Company, after the date hereof, has made
repayments of principal of the Reducing Revolving
Loans outstanding pursuant to Section 2.13(a) of
the Loan Agreement (other than such repayments
that are applied to repay and permanently reduce
the Overadvance pursuant to Section 1.d below).
c. except for the transactions described (in detail
satisfactory to the Bank Group) on Schedule A
attached hereto, solely during the Designated
Period and without the Bank Group's prior written
consent, Company shall not, and shall not permit
any of its Subsidiaries to, directly or
indirectly, convey, sell, lease, assign, transfer,
or otherwise dispose of (whether in a single
transaction or a series of related transactions)
any of its property, business, or assets
(including Permitted Sale Assets, receivables and
leasehold interests) having either a book value or
a fair market value in excess of $500,000.
d. solely during the Designated Period, Company
shall, and shall cause each of its Subsidiaries
and Excluded Subsidiaries to, pay over to the Bank
Group the following amounts, which amounts shall
be applied to repay, and reduce permanently the
amount of, the then existing Overadvance (and the
excess, if any, to be subject to the other terms
and conditions of the Loan Agreement and the Note
Agreement): (i) 100% of the Net Cash Proceeds of
any equity securities offering or sale (other than
the offering and sale of 25,000 shares of Series A
Preferred Stock of Company
3
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and 5,000,000 Warrants for the Purchase of Common
Stock of Company, in each case, as contemplated by
that certain Investment Agreement, dated as of
February 7, 1997, between Company and AP-AGC, LLC,
a limited liability company organized and existing
under the laws of Delaware); and (ii) in respect
of any asset of such entity that is listed on
Schedule B attached hereto and constitutes an
element or component of the Borrowing Base (a
"Borrowing Base Asset"), first, 100% of the Net
Cash Proceeds of any sale or other disposition
(except in the ordinary course of business) of
such Borrowing Base Asset up to the amount of
borrowing availability that such Borrowing Base
Asset contributed to the Borrowing Base (the
"Allocated Borrowing Base Amount"), and, then, 75%
of the Net Cash Proceeds of such Borrowing Base
Asset in excess of the Allocated Borrowing Base
Amount shall be used to repay and permanently
reduce the then existing Overadvance.
e. on the first Business Day of each week, Company
shall deliver to Loan Agent the following (each in
form and substance satisfactory to Loan Agent):
(1) a detailed calculation of the Borrowing
Base;
(2) a summary listing, by Borrowing Base
category, of the Total Real Property
included directly or indirectly in the
Borrowing Base and, by Borrowing Base
Joint Venture, of the investments of the
Venture Subsidiaries in Borrowing Base
Joint Ventures, with, in each case, a
summary reconciliation to such listing
provided in respect of the prior week;
(3) a detailed report of all sales of assets
by Company and its Subsidiaries during
the prior week; and
(4) a consolidated Company cash flow
projection for the 8- week period
commencing on the first day of such
week.
2. the Note Agreement hereby is amended as follows:
a. solely during the Designated Period and so long as
no "Event of Default" (as that term is defined in
the Note Agreement) has occurred and is
continuing, each Note shall bear interest at a
rate equal to the rate that would otherwise be
applicable to such Note
4
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pursuant to Section 2.4(a) of the Note Agreement
plus 200 basis points.
The Limited Amendment shall be limited precisely as written, and
nothing in this Amendment shall be deemed to (a) constitute a waiver of
compliance by Company with respect to (i) Section 2.11 of the Loan Agreement in
any other instance or (ii) any other term, provision, or condition of the Loan
Agreement, the Note Agreement, or any other instrument or agreement referred to
therein (whether in connection with the Overadvance or otherwise) or (b)
prejudice any right or remedy that the Bank Group may now have or may have in
the future under or in connection with the Loan Agreement, the Note Agreement,
or any other instrument or agreement referred to therein. Except as expressly
set forth herein, the terms, provisions, and conditions of the Loan Agreement,
the other Loan Documents, the Note Agreement, and the other Secured Floating
Rate Note Documents shall remain in full force and effect and in all other
respects hereby are ratified and confirmed.
[remainder of page intentionally left blank]
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This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
when taken together shall constitute but one and the same instrument. Delivery
of an executed counterpart of this Amendment by telefacsimile shall be equally
as effective as delivery of an original executed counterpart of this Amendment.
Any party delivering an executed counterpart of this Amendment by telefacsimile
also shall deliver an original executed counterpart of this Amendment but the
failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Amendment. This Amendment
is a Loan Document and a Secured Floating Rate Note Document.
FOOTHILL CAPITAL CORPORATION,
individually as a Loan Bank
and as the Loan Agent
By:_________________________
Title:______________________
FOOTHILL CAPITAL CORPORATION,
individually as a Note Bank
and as the Note Agent
By:_________________________
Title:______________________
Acknowledged and Agreed:
ATLANTIC GULF COMMUNITIES CORPORATION
By:______________________________
Title:___________________________
6
<PAGE> 1
Atlantic Gulf Communities Corporation Exhibit to the 1996 Form 10-K
Exhibit (c) 4. b. Second Amended and Restated Secured Floating Rate Note
Agreement dated as of September 30, 1996
-------------------------------------
ATLANTIC GULF COMMUNITIES CORPORATION
-------------------------------------
SECOND AMENDED AND RESTATED SECURED FLOATING RATE NOTE
AGREEMENT
dated as of September 30, 1996
FOOTHILL CAPITAL CORPORATION
FOOTHILL CAPITAL CORPORATION,
as Agent
FOOTHILL CAPITAL CORPORATION,
as Collateral Agent
<PAGE> 2
TABLE OF CONTENTS
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SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2. ISSUANCE AND TERMS OF SECURED FLOATING RATE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.1 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.2 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.3 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.4 Interest Rates and Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.5 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.6 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.8 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.9 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 3. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.1 Liens in Subsidiary Stock, Contract Receivables, Real Property and
Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.3 Section 365(j) Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.4 [intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.5 [intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.6 Subordinations and Releases of Mortgage and Related
Personal Property Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.7 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.1 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.2 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.4 Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . 31
4.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.8 Ownership of Property: Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.9 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.11 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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4.13 Investment Company Act: Other Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.14 Subsidiaries and Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.16 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.17 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.18 Restitution Program and Final Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.19 Certain Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.20 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.22 Total Real Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.23 Reorganization Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.24 Excluded Subsidiaries: Unrestricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.25 Existing Banks Compliance with Existing Note Agreement etc . . . . . . . . . . . . . . . . . . . . . 38
4.26 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.27 Utility Fund Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.28 [intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.29 SPUD Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.30 DRI and Zoning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.1 Conditions to Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
5.2 [intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.3 Conditions Subsequent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.l Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.2 Certificates: Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.6 Inspection of Collateral; Books and Records; Appraisals . . . . . . . . . . . . . . . . . . . . . . 49
6.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.8 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.9 Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.10 [intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.11 Dividends from Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.12 Supplemental Reports Regarding Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.14 Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.15 Company Operating Account Control Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.l Maintenance of Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.2 Limitation of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
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7.3 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.4 Limitation on Guarantee Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.5 Limitations on Fundamental Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.6 Limitation on Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.7 Limitation on Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.8 Limitation on Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.9 Limitation on Investments, Loans. and Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.10 Limitation on Optional Payments and Modifications of Debt Instruments . . . . . . . . . . . . . . . 59
7.11 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.12 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.13 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.14 Limitation on Negative Pledge Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.15 Deviation from Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.16 Unsold Housing Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.17 Limitation of Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.18 Venture Subsidiaries and Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8. EVENTS OF DEFAULT; REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.1 Events of Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.1 Appointment of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.2 Appointment of Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.3 [intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.4 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.5 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.6 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.7 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.8 Non-Reliance on Agents and Other Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
9.9 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.10 [intentionally omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.11 Agent in Its Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.12 Successor Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.6 Successors and Assigns; Participations; Purchasing Banks . . . . . . . . . . . . . . . . . . . . . . 74
10.7 Adjustments; Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.8 Appointment of Agent as Company's Lawful Attorney . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.11 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.12 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.13 SUBMISSION TO JURISDICTION; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.14 Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.15 WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.16 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.17 Controlling Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.18 Counsel to Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
</TABLE>
iv
<PAGE> 6
SCHEDULES
<TABLE>
<S> <C>
Schedule E-1 Excluded Subsidiaries
Schedule N-1 Net Cash Flow
Schedule N-2 Net Operating Cash Flow
Schedule U-1 Unrestricted Subsidiaries
Schedule 4.1 Additional Liabilities of Company; Purchases and Dispositions by Company
Schedule 4.2 Material Adverse Effect
Schedule 4.4 Consents and Authorizations
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 Guarantees
Schedule 4.21 Insurance
Schedule 4.24 Unrestricted Subsidiaries' Assets and Businesses
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 to be delivered by the Effective Date
Schedule 7.3 Liens
Schedule 7.17 Restricted Bank Accounts
</TABLE>
v
<PAGE> 7
EXHIBITS
<TABLE>
<S> <C>
Exhibit A-1 Form of Acknowledgment Agreement
Exhibit C-1 Form of Consolidation Note
Exhibit D-1 Form of Deposit Account Security Agreement
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 Guarantee
Exhibit S-3 Form of Supplemental Note
Exhibit 5.1(h)-1 Form of Legal Opinion of Arent Fox Kintner Plotkin & Kahn, counsel to
Company
Exhibit 5.1(h)-2 Form of Legal Opinion of corporate counsel to Company
Exhibit 5.1(h)-3 Form of Legal Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A., special Florida counsel to Company
Exhibit 5.1(h)-4 Form of Legal Opinion of Chambliss & Bahner, special Tennessee counsel
to Company
Exhibit 5.1(h)-5 Form of Legal Opinion of Annis, Mitchell, Cockey, Edwards & Roehn,
P.A., special Florida counsel to Agent and Collateral Agent
Exhibit 10-6 Form of Note Transfer Supplement
</TABLE>
vi
<PAGE> 8
THIS SECOND AMENDED AND RESTATED SECURED FLOATING RATE NOTE AGREEMENT, dated as
of September 30, 1996, among ATLANTIC GULF COMMUNITY CORPORATION, a Delaware
corporation (the "Company"), FOOTHILL CAPITAL CORPORATION, a California
corporation (together with each financial institution that may become a party
to this Agreement as herein provided, referred to herein individually as a
"Bank" and collectively as the "Banks"), FOOTHILL CAPITAL CORPORATION, a
California corporation, and its successors and assigns, as agent for the Banks
hereunder (hereinafter, in such capacity, together with any successors thereto
in such capacity, referred to as "Agent"), and FOOTHILL CAPITAL CORPORATION, a
California corporation, as collateral agent for the Banks (hereinafter, in such
capacity, together with any successors thereto in such capacity, referred to as
"Collateral Agent").
RECITALS
WHEREAS, the Company, the Existing Banks, and Chase, as agent for the
Existing Banks (the "Existing Agent"), are parties to that certain Amended and
Restated Secured Floating Rate Note Agreement with the Company dated as of
September 21, 1994 (as amended and modified from time to time prior to the
Effective Date, the "Existing Note Agreement");
WHEREAS, pursuant to the Purchase Agreement, the Existing Banks have
assigned to the Banks all right, title, and interest in and to the Existing
Note Agreement, the Existing Notes, and all other related documents and claims,
it being understood that no repayment of the Existing Notes is being effected
thereby;
WHEREAS, prior to the Effective Date, the Company issued to the
Existing Banks the Existing Notes payable to the order of such Existing Banks,
in each case in the face amount stated thereon, which Existing Notes have been
assigned by the Existing Banks to the Banks pursuant to the terms of the
Purchase Agreement, and which Existing Notes have an outstanding principal
balance, as of the Effective Date, of $37,792,602.99;
WHEREAS, as a condition to the Revolving Loan Bank entering into the
Revolving Loan Agreement, the Company has required that the Banks agree to
amend and restate the Existing Note Agreement as provided herein, and the
Company, the Banks, and Agent have agreed to amend and restate the Existing
Note Agreement pursuant to this Agreement;
WHEREAS, the parties hereto intend that the amendment and restatement
provided for herein shall not effect a repayment of any outstanding obligations
under the Existing NOTE Agreement or the Existing Notes, but merely an
amendment and restatement of the terms thereof in accordance with the terms
hereof;
WHEREAS, on the Effective Date, subject to the terms and conditions
set forth herein, the Banks will advance to or for the benefit of the Company
an additional loan in the principal amount of $2,207,397.01, evidenced by the
Supplemental Note, such that the total outstanding principal
1
<PAGE> 9
balance under the Existing Notes and the Supplemental Note, on the
Effective Date, after giving effect to such additional loan, shall be
$40,000,000.00;
WHEREAS, on the Effective Date, the Company will execute and deliver
to the Banks the Consolidation Note, dated as of the Effective Date, in the
original principal amount of $40,000,000.00, which Consolidation Note shall
evidence the consolidation of the loans theretofore evidenced by the Existing
Notes and the Supplemental Note, and which Consolidation Note shall
consolidate, amend, restate, and renew the Existing Notes and the Supplemental
Note, provided that the obligations evidenced by such consolidated, amended,
restated, and renewed Notes shall not under any circumstances be deemed to have
been repaid by virtue of the execution, delivery, or acceptance of the
Consolidation Note or the consolidation, amendment, restatement, and renewal of
the Existing Notes and the Supplemental Note thereby;
WHEREAS, the Existing Agent has resigned as agent for the Banks under
the Existing Note Agreement, the Banks have appointed the Agent as the
successor to the Existing Agent in such capacity and for certain purposes with
respect to this Agreement, and the Agent has accepted such appointment and
Banks have appointed the Collateral Agent as the collateral Agent for the Banks
under for certain purposes with respect to this Agreement, and the Collateral
Agent has accepted such appointment.
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:
"Acknowledgment Agreement": that certain Acknowledgment
Agreement regarding certain Security Documents, dated the Effective
Date, executed by Company and its Subsidiaries listed on the signature
pages thereof, substantially in the form of Exhibit A-1.
"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 Second Amended and Restated Secured
Floating Rate Note Agreement, as amended, supplemented or otherwise
modified from time to time.
2
<PAGE> 10
"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.
"Available Cash": as defined in Article I of the
Reorganization Plan.
"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 Effective
Date or by law as set forth in Schedule 7.17, which may be amended
from time to time by written notice to Agent to include other
restricted accounts).
"Bankruptcy Code": Title 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.
"Banks": the Banks, as defined in the Preamble to this
Agreement, together with their permitted successors and assigns.
"Beige Book": the book prepared by Company dated December
1994, setting forth the estimated fair market value of the Real
Property of Company and its Subsidiaries.
"Book Value", with respect to a specified asset of a specified
Person, means the carrying value of the specified asset on the balance
sheet of such Person prepared in accordance with GAAP and delivered to
Agent from time to time pursuant to the Loan Documents.
"Borrowing Base": as defined in the Revolving Loan Agreement.
"Borrowing Base Joint Ventures": 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 State of
California or is a day on which banking institutions located in the
State of California are authorized or required by law or other
governmental action to close.
3
<PAGE> 11
"Business Plan": as of the Effective Date and until a new
Business Plan is delivered to Banks in accordance with Section 6.9,
the business plan of Company and its Subsidiaries dated September,
1996, and thereafter the business plan of Company and its Subsidiaries
delivered to and approved by Required Banks 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 an all
warrants or options to purchase any of the foregoing.
"Cash Collateral Accounts": any and all accounts that
Collateral Agent, for the benefit of Banks and the Revolving Loan
Banks, 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.
"Cash Flow Agent": Chase, as agent for the banks who are
parties to, and as defined in, the Secured Cash Flow Note Agreement.
"Chase": The Chase Manhattan Bank, formerly known as
Chemical Bank.
"Claims Disbursement Account": the segregated account
established for purposes of holding funds borrowed pursuant to the DIP
Loan 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.
4
<PAGE> 12
"Collateral Agent": Foothill Capital Corporation solely in
its capacity as collateral agent for Banks under the Security
Documents pursuant to the terms of this Agreement and the Security
Documents.
"Commercial Real Estate": all Real Property of 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, 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 Company with Sun Trust Bank, Miami,
N.A. or such other deposit account maintained by Company at a
financial institution reasonably satisfactory to Collateral Agent.
"Company Operating Account Control Agreement" means a written
agreement among Company, Foothill (in its capacity as Collateral Agent
hereunder and in its capacity as the "Collateral Agent" under the
Revolving Loan Agreement), and Operating Account Bank, with respect to
the Company Operating Account, in form and substance reasonably
satisfactory to Foothill, pursuant to which Operating Account Bank
acknowledges the security interests granted by Company to Foothill in
the Company Operating Account, waives rights of setoff with respect to
the Company Operating Account, and agrees to act upon the instructions
of Foothill with respect to the disposition of funds in the Company
Operating Account should Operating Account Bank receive such
instructions from Foothill.
"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 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, arising from the Utility Condemnation Proceedings, 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.
5
<PAGE> 13
"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.
"Consolidation Note": that certain Consolidated, Amended, and
Restated Renewal Secured Floating Rate Note dated as of the Effective
Date made by the Company to the order of the Banks in the original
principal amount of $40,000,000.00, which consolidates, amends,
restates, and renews the Existing Notes and the Supplemental Note (and
which effects a consolidation, amendment, restatement, and renewal,
but not a repayment, of the obligations evidenced thereby), in the
form of Exhibit C-1.
"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.
"Creditors Committee": as defined in Article I of the
Reorganization Plan.
"Deeds of Trust": the Subordinate Deeds of Trust executed
from time to time between the Company or a Subsidiary and Collateral
Agent, substantially in the form of the Deeds of Trust in existence as
of the Effective Date, 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 Banks, 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, dated of even date herewith, substantially in the
form of Exhibit D-1, executed by Company and each of its Subsidiaries
in favor of Collateral Agent, for the benefit of Banks, as the same
may be amended, supplemented or otherwise modified from time to time.
6
<PAGE> 14
"Designated Raw Land": Real Property of the Company and its
Subsidiaries consisting of raw land that Company or any Subsidiary has
committed (in writing) to be sold on or before December 31, 1996.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Effective Date": the date, on or before October 11, 1996,
upon which all of the conditions set forth in Section 5 of this
Agreement have been met or waived by the Banks in their sole
discretion and this Agreement becomes effective.
"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.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Escrow Agent": Chase, in its individual trust capacity, and
not in its capacity as one of the holders of the Existing Notes (or
the Existing Agent), nor in its capacity as one of the holders of the
Secured Cash Flow Notes (or the agent for such holders).
"Escrow Agreement": an escrow agreement, in form and
substance satisfactory to each of Foothill, Escrow Agent, the holders
of the Existing Notes, the Existing Agent, the holders of the Secured
Cash Flow Notes, and the Cash Flow Agent, relative to the receipt and
application of all funds required to effectuate the Recapitalization
Transactions.
"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 Company listed on Schedule E-1.
7
<PAGE> 15
"Existing Agent": Chase, as agent for the Existing Banks
under the Existing Note Agreement.
"Existing Banks": collectively, Chase, NationsBank of
Florida, N.A., NationsBank of Georgia, N.A., Midland Bank PLC, New
York Branch, Lehman Government Securities, Inc., Berliner Handels-Und
Frankfurter Bank, and their respective successors.
"Existing Note Agreement": that certain Amended and Restated
Secured Floating Rate Note Agreement, dated as of September 21, 1994,
executed by and among the Company, Chase as agent, and the Existing
Banks, as modified from time to time prior to the Effective Date.
"Existing Notes": the secured floating rate notes issued by
Company prior to the Effective Date pursuant to the Existing Note
Agreement, which notes have an aggregate outstanding principal balance
on the Effective Date, immediately prior to the effectiveness of this
Agreement and prior to the making of the supplemental $2,207,397.01
loan by the Banks hereunder, of $37,792,602.99.
"Financial Institution": (a) a commercial bank, insurance
company or commercial finance company, which possesses stated capital
and earned surplus in an aggregate amount ("Stockholder Equity") of
not less than $100,000,000 (as demonstrated through audited financial
statements and determined in accordance with GAAP ("Qualified
Institution");
(b) an Investment Bank which (i) is a wholly-owned
subsidiary of a Qualified Institution, and (ii) possesses Stockholder
Equity or, in the case of a partnership, an aggregate capital account,
of not less than $10,000,000 (as demonstrated through audited
financial statements and determined in accordance with GAAP);
(c) an Investment Bank which possesses Stockholder Equity
or, in the case of a partnership, an aggregate capital account, of not
less than $25,000,000 (as demonstrated through audited financial
statements and determined in accordance with GAAP) ("Qualified
Investment Bank");
(d) (i) a wholly-owned subsidiary of a Qualified
Investment Bank (i) which subsidiary and such Qualified Investment
Bank parent, together, possess combined Stockholder Equity or, in the
case of a partnership, an aggregate capital account, of not less than
$50,000,0()0 (as demonstrated through consolidated, audited financial
statements and determined in accordance with GAAP), and (ii) which
subsidiary is an Investment Bank possessing Stockholder Equity, or in
the case of a partnership, an aggregate capital account, of not less
than $10,000,000 (as demonstrated through audited financial statements
and determined in accordance with GAAP).
8
<PAGE> 16
"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.
"Funds Flow Memo": a funds flow memorandum, in form and
substance satisfactory to Agent and Collateral Agent, documenting the
sources and applications of funds in respect of the consummation of
the Recapitalization Transactions and the payment of the amounts
required to be paid hereunder to Agent and Banks on the Effective
Date.
"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 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 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) to induce the
creation of which obligation 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 otherwise 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
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<PAGE> 17
"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 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 Company in
good faith.
"Guarantees": collectively, the guarantees of the
Obligations, made by the Subsidiaries pursuant to the Subsidiary
Guarantees.
"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
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 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
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<PAGE> 18
liable for the payment thereof, and (f) the Public Debt Securities. 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 Agent, Banks,
Collateral Agent, and the Revolving Loan Banks, and the agent for the
Revolving Loan Banks, substantially in the form of Exhibit I-1, as such
agreement may be supplemented, amended or otherwise modified from time
to time.
"Interest Payment Date": with respect to any Note, the last
day of each calendar month to occur while any obligation evidenced by
such Note is outstanding.
"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
"Investment Bank": a financial institution that (a) (i)
purchases new securities from an issuer for, or sells for an
issuer in connection with, the distribution of any security, or (ii)
participates or has a direct or indirect participation in any such
undertaking, or (iii) participates or has a participation in the direct
or indirect underwriting of any such undertaking, and (b) is registered
with the Securities and Exchange Commission and the National
Association of Securities Dealers; however, such term shall not include
any entity whose activities are limited solely to earning commissions
as a broker or dealer, or any entity engaging in the business of buying
and selling securities to or for any third parties only.
"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 Effective Date 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 Consolidated, Amended
and Restated Assignment of Partnership Interests, dated of even
date herewith, substantially in the form of Exhibit Jot, among each of
the Venture Subsidiaries and Collateral Agent, 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 Banks.
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<PAGE> 19
"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 Borrowing Base
Joint Venture has the right to receive payment in any form whatsoever
for the sale of JV Real Property, and cash and non-cash proceeds of
any and all of the foregoing.
"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, without limitation, 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 other Secured Floating
Rate Note Documents, or (c) the validity or enforceability of this
Agreement, the Notes, the Security Documents or other Secured Floating
Rate Note Documents or the rights or remedies of Collateral Agent,
Agent, or the Banks hereunder or thereunder.
"Maturity Date": June 30, 1998.
"Mortgages": the Mortgage and Security Agreements executed
from time to time by the Company or a Subsidiary in favor of
Collateral Agent, substantially in the form of the Mortgages in
existence as of the Effective Date, 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 Banks, as required by this Agreement.
"Multi-employer Plan": a Plan which is a multi-employer plan
as defined in Section 4001(a)(3) of ERISA.
"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.
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<PAGE> 20
"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.
"Notes" or "Secured Floating Rate Notes": the collective
reference to the Existing Notes issued under the Existing Note
Agreement and assigned to the Banks, the Supplemental Note, the
Consolidation Note, and any further or additional notes issued by the
Company to the Banks or any of them under this Agreement, as any of
them may from time to time be amended, supplemented, modified,
renewed, extended, restated, or replaced; provided that, with respect
to all periods of time after the Consolidation Note has replaced the
Existing Notes and the Supplemental Note, such term shall no longer
refer to the Existing Notes or the Supplemental Note.
"Note Percentage": as to any Bank at any time, the
outstanding principal amount of the Notes then held by such Bank
expressed as a percentage of the total outstanding principal amount of
all Notes.
"Obligations": all obligations of every nature of Company
from time to time owed to Agent, Banks, or Collateral Agent or any of
them under the Secured Floating Rate Note Documents, whether for
principal, interest, fees, costs, expenses, indemnification or
otherwise.
"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 financial institution reasonably satisfactory to Foothill.
"PBGC": the Pension Benefit Guaranty 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
Company or any Subsidiary (exclusive of Homesite Contracts Receivable
and Commercial Receivables of Company or any Subsidiary):
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<PAGE> 21
(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 located, 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 choses 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 secrets, goodwill, copyrights, registrations, licenses,
franchises, customer lists, tax refund claims, computer programs, any
other Intellectual Property, all claims under guaranties, 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 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 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 contracts 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 Agent, Collateral Agent or any Bank or any agent or bailee
of Agent, Collateral Agent or any Bank;
(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
14
<PAGE> 22
or permanent disposition of such items or any interest therein whether
or not they constitute "proceeds" as defined in the Uniform Commercial
Code; and
(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 Consolidated,
Amended, and Restated Personal Property Security Agreement, dated of
even date herewith, substantially in the form of Exhibit P-1, executed
by Company and the Subsidiaries now or hereafter party thereto in
favor of Collateral Agent, for the benefit of Banks, as the same may
be amended, supplemented or otherwise 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.
"Principal Raw Land": the parcels of Real Property of Company
and its Subsidiaries identified on Schedule P-1. Parcels of Designated
Raw Land constituting Principal Raw Land shall be marked on such
schedule with an asterisk (*).
"Priority Claims": as defined in Article I of the
Reorganization Plan.
"Public Debt Securities": the collective reference to the
Unsecured 12% Notes and Unsecured Cash Flow Notes.
"Purchase Agreement": the Purchase Agreement of even date
herewith between the Existing Banks and the Banks, pursuant to which
the Existing Banks have assigned to the Banks all right, title, and
interest in and to the Existing Note Agreement, the Existing Notes,
and all other related documents and claims, it being understood that
no repayment of the Existing Notes is being effected thereby.
"Real Property": any and all real property and fixtures and
interests in real property and fixtures, now owned or hereafter
acquired by the Company or any Subsidiary.
"Recapitalization Transactions": (a)(i) the transfer by Chase
to Escrow Agent for the benefit of Company of (y) all Net Cash
Proceeds from the Julington Creek transaction held as cash collateral
under that certain Cash Collateral Account Agreement, dated as of June
7, 1996, between Company and Chase (as Cash Flow Agent and as the
Existing Agent), and (z) all Net Cash Proceeds from the Harbourton
Capital transaction held as cash collateral under that certain Cash
Collateral Account Agreement, dated as of June 21, 1996, between
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<PAGE> 23
Company and Chase (as Cash Flow Agent and as the Existing Agent); (ii)
the use by Company of all of the Net Cash Proceeds in respect of
clause (a)(i) of this definition together with unrestricted and
unencumbered cash of Company, in each case, in accordance with the
Funds Flow Memo, to finance, in part, clause (c) of this definition;
(b)(i) the purchase by Banks of all of the Existing Notes from the
holders thereof pursuant to the Purchase Agreement for a purchase
price (the "Purchase Price") equal to 100% of the principal amount
thereof outstanding, plus all accrued and unpaid interest thereon,
plus all fees and costs payable with respect thereto; (ii) the
purchase by Banks of the Supplemental Note in the aggregate principal
amount equal to (y) $40,000,000, less (z) the Purchase Price; (iii)
the amendment and restatement in full of the Existing Loan Agreement
(as defined in the Revolving Loan Agreement) pursuant to the Revolving
Loan Agreement; and (iv) the use by Company of all of the Net Cash
Proceeds in respect of clause (b)(ii) of this definition and of the
proceeds of a Working Capital Loan (as defined in the Revolving Loan
Agreement) on the Effective Date, in an aggregate amount not greater
than $20,000,000 and of the proceeds of a Reducing Revolving Loan (as
defined in the Revolving Loan Agreement) on the Effective Date, in
each case, in accordance with the Funds Flow Memo, to finance the
balance of clause (c) of this definition; and (c) (i) the retirement
(by prepayment) by Company of all of the outstanding Secured Cash Flow
Notes for an aggregate amount not greater than $40,000,000 in cash and
1,500,000 warrants to purchase the common stock of Company and (ii)
the termination of all Liens securing the Secured Cash Flow Notes.
"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 Debt": collectively, the Notes and the
Public Debt Securities.
"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 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 of Title 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.
90-12235BKC-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).
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"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.
"Required Banks": at any time, Banks, the Note Percentages of
which aggregate at least 51 % .
"Requirement of Law": as to any Person, the charter, the
certificate of incorporation and bylaws or other organizational 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 established 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 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 Company's
restated certificate of incorporation to effect, if subsequently
determined by Company's board of directors, a reverse stock split of
Company's outstanding common stock as of 5:00 p.m. (Florida time) on
the effective date of the amendment (the "Reverse Split Effective
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
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<PAGE> 25
Date, all as set forth in the Company's proxy statement dated April
22, 1996, provided that the only funds the Company uses to pay for the
less than whole shares of its common stock resulting from consummation
of the Reverse Stock Split are the net proceeds from the sale by the
Company of its common stock.
"Revolving Loan Bank": Foothill Capital Corporation, a
California corporation, and its successors and assigns.
"Revolving Loan Agreement": the Second Amended and Restated
Revolving Loan Agreement dated of even date herewith 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 Commitment": means the obligation of the
Revolving Loan Bank, if any, to make loans to the Company under the
Revolving Loan Agreement.
"Sale and Leaseback": any arrangement with any Person
providing for the leasing by Company or any Subsidiary of real or
personal property which has been or is to be sold or transferred by
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 Company or
Subsidiary
"Section 365(j) Property": the property now or hereafter 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 Cash Flow Note Agreement": that certain Amended and
Restated Secured Cash Flow Note dated of September 21, 1994 executed
by and among the Company, Banks (as defined therein), and Chase as
agent for such Banks.
"Secured Cash Flow Notes": the Secured Cash Flow Notes issued
by Company under the Secured Cash Flow Note Agreement.
"Secured Debt": all amounts and other obligations now or
hereafter owed to the Banks and Agent hereunder and under the Notes
and other Secured Floating Rate Note Documents.
"Secured Floating Rate Note Documents": this Agreement, the
Notes, the Guarantees, and the Security Documents.
"Security Agreements": the Personal Property Security
Agreement, the Deposit Account Security Agreement, and any other
security agreements, between Company and/or
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<PAGE> 26
a Subsidiary and Agent or Collateral Agent, as the same may be amended
supplemented or otherwise modified from time to time (including as
amended by the Acknowledgment Agreement), pursuant to which Company
and Subsidiaries assign and grant a security interest in Homesite
Contracts Receivables and Commercial Receivables and Personal Property
of Company or Subsidiaries to Agent or Collateral Agent, for the
benefit of Banks, as required by this Agreement.
"Security Documents": the Stock Pledge Agreement, the Joint
Venture Pledge Agreement, the Security Agreements, the Mortgages, the
Deeds of Trust, 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
Agent or Collateral Agent at any time to create, perfect, maintain or
continue Agent'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 Second Amended and Restated
Stock Pledge Agreement, dated of even date herewith, substantially in
the form of Exhibit Sol, among 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 Company and
Subsidiaries pledge Subsidiary Stock to Collateral Agent for the
benefit of Banks.
"Subsidiary": as to any Person, a corporation, partnership,
trust (exclusive of any trust created in connection 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 Reserve Account) or other entity
are at the time owned, or the management of which is otherwise
controlled, directly 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 Company.
Unless otherwise indicated, all references to a Subsidiary or
Subsidiaries of Company shall not mean, include, or refer to the
Unrestricted Subsidiaries or the Joint Ventures.
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<PAGE> 27
"Subsidiary Guarantee": the Consolidated Second Amended and
Restated Subsidiary Guarantee, dated of even date herewith,
substantially in the form of Exhibit S 2, executed by Company and each
of its Subsidiaries in favor of Agent, for the benefit of Banks, 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).
"Supplemental Note": that certain promissory note dated as of
the Effective Date made by the Company to the order of the Banks in
the original principal amount of $2,207,397.01, in the form of
Exhibit S-3.
"Tax Servicing Contracts": collectively, the tax servicing
contracts required to be delivered under Section 5.3, 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.
"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 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 Company listed on Schedule U-1, and (b) any
other direct or indirect subsidiary of Company that is formed or
acquired after the Effective Date, 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 Agent
agrees in writing that such entity 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
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<PAGE> 28
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.
"Unsecured 12% Notes": the "New Unsecured 12% 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 Company
or any Subsidiary that are not subject to a contract for sale to any
third party purchaser.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined
in this Agreement shall have such defined meanings when 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.
SECTION 2. ISSUANCE AND TERMS OF SECURED FLOATING RATE NOTES
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2.1 Notes. On the Effective Date, the Banks, as assignee of the
Existing Banks pursuant to the Purchase Agreement, are the holders of the
Existing Notes, with an outstanding principal balance of $37,792,602.99. On the
Effective Date, subject to the terms and conditions set forth herein, (a) the
Banks shall make an additional loan to the Company in the principal amount of
$2,207,397.01, evidenced by the Supplemental Note, and (b) the Company shall
execute and deliver to the Banks the Consolidation Note, amending, restating,
and renewing the Existing Notes and the Supplement al Note, and effecting a
consolidation (but not a repayment) of the aggregate $40,000,000.00 outstanding
principal balance under the Existing Notes and the Supplemental Note, which
from and after the Effective Date shall be repayable in accordance with the
terms and provisions of the Consolidation Note and of this Agreement.
2.2 Payment of Notes. The aggregate outstanding principal amount
of the Notes then outstanding shall be due and payable, and shall be paid in
full by the Company, on the Maturity Date. In addition: (a) an aggregate
principal installment of $13,333,333.33 shall be due with respect to the Notes
on June 30, 1997, (b) an aggregate principal installment of $13,333,333.33
shall be due with respect to the Notes on December 31, 1997, and (c) in the
event of any acceleration of the maturity of any of the principal of the Notes
pursuant to the provisions of Section 8 hereof or pursuant to the terms of any
of the Notes, such accelerated principal shall be immediately due and payable.
The principal of the Notes may be prepaid from time to time, without premium or
penalty, upon five Business Days prior written notice to Agent, in minimum
prepayments of $500,000 each, each to be applied the mandatory payment
obligations hereunder in inverse order of maturity. 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 Intentionally Omitted. {Intentionally omitted}
2.4 Interest Rates and Interest Payment Dates.
(a) From and after the Effective Date, subject to Section
2.4(b), each Note at all times shall bear interest at a rate per annum
equal to fifteen percent (15%).
(b) Section 2.4(a) notwithstanding, from and after the
occurrence and during the continuance of an Event of Default, each
Note at all such times shall bear interest at a per annum rate equal
to nineteen percent (19%) (the "Default Rate").
(c) Interest shall be payable in arrears on each Interest
Payment Date, provided that 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.
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(b) Each determination of an interest rate by Agent
pursuant to any provision of this Agreement shall be conclusive and
binding on the Company and the Banks in the absence of manifest error.
2.6 Pro Rata Treatment and Payments. Each payment (including each
prepayment) by the Company on account of principal of and interest on the Notes
shall be made pro I, according to the respective outstanding principal amounts
of the Notes then held by the Banks. 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 set-off or
counterclaim and shall be made prior to 9:00 a.m., California time, on the due
date thereof, to Agent, for the account of the Banks, at Agent's office
specified in Section 10.2, in Dollars and in immediately available funds. Agent
shall distribute such payments to the Banks promptly upon receipt in like funds
as received. 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 the then applicable rate during such extension.
2.7 Taxes. Each Bank 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 Agent (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 Bank also agrees to deliver to the Company and Agent 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 or Agent, 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 Bank from duly completing and
delivering any such form with respect to it and such Bank so advises the
Company and Agent. Such Bank 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 Intentionally Omitted. {Intentionally omitted}
2.9 Fees. The Company shall pay to the Banks, in addition to the
commitment fee heretofore paid with respect to the prior commitment of Foothill
Capital Corporation with respect to the $40,000,000 "Tranche C" referred to in
such prior commitment, a funding fee of $400,000, payable on the Effective
Date.
SECTION 3. COLLATERAL
3.1 Liens in Subsidiary Stock, Contract Receivables, Real Property
and Personal Property. To secure the prompt payment to the Banks of the Secured
Debt, including, but not limited to, the
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Notes, together with all costs, expenses and fees payable by the Company
hereunder, the Company has granted, and has caused or shall cause each
Subsidiary to grant, to Collateral Agent a continuing Lien 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.
At such times as any Excluded Property is freed of contractual or legal
restrictions against becoming subject to a Lien to secure the Secured Debt or
upon the distribution of any Trust Property to the Company or a Subsidiary,
such property shad, automatically, become subject to the Liens created by the
Security Documents, and the Company shad notify Agent in writing of such event
and take such further actions as may be required by Agent and/or Collateral
Agent to evidence and perfect such Liens; provided that, in no event, shad 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 Agent
and Collateral Agent in the Collateral in accordance with applicable law, the
Company has executed and delivered and win execute and deliver, and has caused
and shall cause the Subsidiaries to execute and deliver, to Collateral Agent
the Security Documents, which Security Documents have been or win be delivered
to Agent and filed and recorded, and the Company has delivered and win deliver,
and has caused and shad cause the Subsidiaries to deliver, 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, the Company has done or win do, and has caused or win cause the
Subsidiaries to do, the following:
(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 Subsidiaries
have executed and delivered the Stock Pledge Agreement and have
executed and delivered and will execute and deliver related undated
stock powers executed in blank by the Company and have delivered and
shad deliver an original certificates representing the Subsidiary
Stock to Collateral Agent and have causes and win cause an issuers of
Subsidiary Stock to execute and deliver pledge acknowledgments
pursuant to the Stock Pledge Agreement.
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<PAGE> 32
(b) Homesite Contracts Receivables and Commercial
Receivables. To evidence and perfect the Liens of Collateral
Agent in the Homesite Contracts Receivable and Commercial Receivables,
the Company and the Subsidiaries have executed and delivered, and win
execute and deliver, to Collateral Agent the Security Agreements,
together with related financing statements, which have been or win be
filed and recorded in accordance with applicable law, and the Company
and Subsidiaries have duly endorsed and shad duly endorse any and all
promissory notes included in the Homesite Contracts Receivable and
Commercial Receivables to the order of Collateral Agent and have
delivered and shad deliver such promissory notes and the related
mortgages or deeds of trust to Collateral Agent or its designee, and
have executed and delivered and shad 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 and Subsidiaries
have executed and delivered, and shad execute and deliver, to
Collateral Agent the Mortgages and Deeds of Trust and related
financing statements encumbering such Real Property, which have been
or win be filed and recorded in accordance with applicable law,
accompanied by ALTA title insurance policies insuring Agent's Lien
represented thereby, and, if requested by Agent, 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, Company has caused, and 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 have executed and delivered, and shad 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
Company 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 has
delivered and shad from time to time deliver,
or has caused and 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;
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<PAGE> 33
(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 shad notify
Agent thereof and take, or cause such
Subsidiary to take, any and an steps which
are required by the Agent for purposes of
perfecting the Agent's Lien therein;
(iii) the Company shad keep the Agent and the Banks
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 Agent or
Required Banks, the Company or any such
Subsidiary shall execute a cash collateral
account agreement in form and substance
satisfactory to Agent. pursuant to which the
Lien of Collateral Agent in such Bank
Accounts is perfected and preserved; and
(iv) if deemed by Agent or Required Banks, in its
or their 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 Agent, 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 preserved; 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.
(f) Additional Acts. The Company shall, and shall cause
the Subsidiaries to, take all actions and execute all documents deemed
necessary by the Agent or Collateral Agent to ensure that, upon the
consummation of the transactions contemplated by the Purchase
Agreement, Agent or Collateral Agent, for the benefit of the Banks,
shall have a first priority security interest in the Collateral
granted by the Security Documents. If the perfection or recordation of
Collateral Agent's Lien or Agent's Lien pursuant hereto upon any
Collateral acquired hereafter by the Company or any Subsidiary
requires any additional act of possession or filing or reeordation of
any Security Document, Company shall notify Agent of the acquisition
of such Collateral and, at Agent's request, the Company shall execute
and deliver
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<PAGE> 34
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 Agent may reasonably request for
purposes thereof and the Company shall pay the cost of any such
Security Documents and the filing and recordation thereof. Without
limiting the generality of the foregoing, 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 Agent upon the
acquisition of any Real Property acquired after the date hereof,
except as provided by Section 3.6, and upon request of Agent, to
provide to Agent an appraisal and an environmental report (each in
form and substance satisfactory to Agent) covering such property, and
to cause such Real Property to be subjected to a first priority
Mortgage or Deed of Trust in favor of Collateral Agent for the benefit
of Banks. With respect to any such Mortgages or Deeds of Trust,
Company or such Subsidiary shall deliver to Agent the following, all
in form and substance satisfactory to Agent: (i) executed Mortgages
or Deeds 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 Agent showing the Mortgage or Deed of Trust as
a first lien upon the property, subject only to Liens permitted
pursuant to Section 7.3 and such other exceptions as may be approved
by Agent in writing, together with endorsements reasonably required by
Agent and affirmative assurances that the improvements are wholly
located within the boundaries of the insured land.
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 [intentionally omitted]
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3.6 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 Agent 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, Agent
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 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 Agent 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, Agent shall instruct Collateral
Agent to and Collateral Agent shall release, 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
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 Company, Agent 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 Agent. 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 Agent.
(d) [intentionally omitted]
3.7 Guarantees. The payment and performance by the Company of its
obligations under this Agreement, including the repayment of all Obligations by
the Company, and any and all other liabilities of the Company to the Banks, the
Agent, and Collateral Agent, whether now existing or
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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 Guarantees.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to Agent and each Bank
that:
4.1 Financial Condition.
(a) The consolidated balance sheets of 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, copies of which
have been or will be furnished to each Bank, 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 she
fiscal year then ended.
(b) [intentionally omitted]
(c) All such financial statements described in clause (a)
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 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. During the
period from June 30, 1996 to and including the date hereof there has
been no sale, transfer or other disposition or agreement therefor by
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 Company and its consolidated Subsidiaries at June 30, 1996, except
as described in Schedule 4.1.
4.2 No Material Adverse Change.
Since June 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 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 Banks 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
Company nor has any of the Capital Stock of Company been redeemed, retired,
purchased or otherwise acquired for value by Company or any of its
Subsidiaries. As of the date hereof and the
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Effective 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.
4.3 Corporate Existence; Compliance with Law.
Each of 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 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) Company. Company has the corporate power and
authority, and the legal right, to make, deliver and perform this Agreement,
the Notes and other Secured Floating Rate Documents, and to borrow hereunder
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 other
Secured Floating Rate Documents. 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 Notes or the other Secured Floating Rate
Documents, except such consents, authorizations, filings or other acts as have
been obtained, made or performed, as the case may be, prior to the Original
Effective Date and as remain in full force and effect or which the failure to
obtain, make or perform, as the case may be, could not reasonably be expected
to have a Material Adverse Effect. This Agreement and the other Secured
Floating Rate Documents to which Company is party have been or will be, duly
executed and delivered on behalf of Company. This Agreement, and each other
Secured Floating Rate Document executed and delivered constitutes, or when
executed and delivered will constitute, a legal, valid and binding obligation
of Company enforceable against 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).
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(b) Subsidiaries. Each of the Subsidiaries (including
Unrestricted Subsidiaries) party to the Secured Floating Rate Documents has the
corporate power and authority, and the legal right, to make, deliver and
perform the Secured Floating Rate Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
performance of the Secured Floating Rate 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 Secured Floating Rate 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, prior to the Original
Effective Date and as remain in full force and effect or which the failure to
obtain, make or perform, as the case may be, could not reasonably be expected
to have a Material Adverse Effect. Each Secured Floating Rate 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
Secured Floating Rate 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
Notes, the Guarantees and the other Secured Floating Rate Note Documents, and
the use of the proceeds of the Notes will not violate any Requirement of Law or
Contractual Obligation of Company or of any of its Subsidiaries or Unrestricted
Subsidiaries, the violation of which could reasonably be expected to have a
Material Adverse Effect 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.
As of the Effective Date, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of Company, threatened by or against Company or any of its
Subsidiaries or against any of its or their respective properties or revenues
(a) with respect to this Agreement, the Notes or other Loan 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 Company's filings with
the Securities and Exchange Commission made prior to the Effective Date, true
and correct copies of which have been delivered to Banks or on Schedule 4.6
hereto.
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4.7 No Default.
As of the Effective Date, neither 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 Company's filings with the Securities and Exchange Commission,
true and correct copies of which have been delivered to Banks or on Schedule
4.7. As of the Effective Date, no Default or Event of Default has occurred and
is continuing. As of the Effective Date, no default has occurred and is
continuing under the Secured Cash Flow Note Agreement, the Revolving Loan
Agreement, or the indentures governing the Public Debt Securities.
4.8 Ownership of Property: Liens.
As of the Effective Date, each of 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 Company or such
Subsidiaries is subject to any Lien except as permitted by Section 7.3.
4.9 Intellectual Property.
As of the Effective Date, 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 Company know of any
valid basis for any such claim. The use of such Intellectual Property by
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 Company, there exists no
infringement upon the Intellectual Property rights of Company and Subsidiaries
by any other Person.
4.10 Taxes.
As of the Effective Date, each of 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 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, 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 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 Company, no claim
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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 any of the Notes 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 Agent
with copies to each Bank 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. 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
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 Company nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan and
neither Company nor any Commonly Controlled Entity would become subject to any
liability under ERISA if 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 Company
or any Commonly Controlled Entity in connection with any such Plan. Neither
Company nor any Commonly Controlled Entity is liable for post retirement
benefits to be provided to their current and former employees under Plans
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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.
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. 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.
As of the Effective Date, (a) the Subsidiaries listed on
Schedule 4.14(A) constitute all of the Subsidiaries and such schedule
identifies the shareholders of such Subsidiary, (b) 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 (c) neither 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 Matenal Adverse Effect:
(a) The Total Real Property does not contain, and has not
previously contained, therein, thereon, or thereunder, including the soil and
groundwater thereunder, any Hazardous Materials in violation of any
Environmental Law.
(b) Company, its Subsidiaries, the Borrowing Base 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 Company nor any of its Subsidiaries nor any
of the Borrowing Base 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 Company aware
that any Governmental Authority is contemplating delivering to Company or any
of its Subsidiaries or any of the Borrowing Base Joint Ventures any such
notice. Neither Company nor any of its Subsidiaries nor any of the Borrowing
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Base 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 Company nor any of its Subsidiaries
nor any of the Borrowing Base 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 Company, contemplated
under any Environmental Laws to which Company or any of its Subsidiaries or any
of the Borrowing Base Joint Ventures is or, to the knowledge of 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 Company or any of its Subsidiaries
or any of the Borrowing Base Joint Ventures or to any of the Total Real
Property.
(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 Agent.
4.16 Indebtedness.
Schedule 4.16 lists all Indebtedness (including available
commitments) of Company and its Subsidiaries as existing on the Effective Date.
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4.17 Contingent Obligations.
Schedule 4.17 lists all guarantees by Company and all
guarantees by any of its Subsidiaries.
4.18 Restitution Program and Final Judgment.
As of the Effective Date, 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 of the transactions contemplated hereby, and
Company hereby indemnifies Banks against, and agrees that it will hold Banks
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 Company or any of its
Subsidiaries contained in any Secured Floating Rate Note Document or in any
other document, certificate or written statement furnished to Banks by or on
behalf of Company or any of its Subsidiaries for use in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state a material fact (known to 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 made. Any projections and pro forma financial information
contained in such materials are based upon good faith estimates and assumptions
believed by Company to be reasonable at the time made, it being recognized by
Banks 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 Company
(other than matters of an economic nature) 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 Banks for use in connection with the
transactions contemplated hereby.
4.21 Insurance.
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
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are customarily carried under similar circumstances by such other corporations.
Attached as Schedule 4.21 is a complete and accurate description of an policies
of insurance that win be in effect as of the Effective Date for Company and
each of its Subsidiaries.
4.22 Total Real Property Matters.
Company and each of its Subsidiaries (including the Joint
Ventures) is in compliance with all development orders obtained by 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.
Company has delivered to Agent and Banks 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.
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.
(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 Existing Banks Compliance with Existing Note Agreement. etc.
At all times prior to the Effective Date, the Existing Banks
and the Existing Agent have (a) performed and complied in all material respects
with an obligations required to be performed or complied with by them under the
Secured Floating Rate Note Documents (as defined in the Existing Note
Agreement), (b) have acted in a commercially reasonable manner, in good faith
and consistent with obligations of fair dealing with Company and Subsidiaries
with respect to the Secured Floating Rate Note Documents (as defined in the
Existing Note Agreement), and (c) have not engaged in any acts, conduct or
omissions that could give rise to a defense of Company or the Subsidiaries to
any of their respective obligations under the Secured Floating Rate Note
Documents (as defined in the Existing Note Agreement) or result in any such
obligations being avoided reduced, impaired, subordinated or disallowed.
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4.26 Bank Accounts.
Schedule 4.26 (as amended from time to time by written notice
to Agent) is a true and correct list of all Bank Accounts of Company and its
Subsidiaries.
4.27 Utility Fund Trusts.
All of 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 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 Effectiveness. The effectiveness of this
Agreement is subject to the satisfaction or waiver by the Banks, on or before
the date hereof, of the following conditions precedent:
(a) Secured Floating Rate Note Documents. Agent shall
have received (i) this Agreement, executed and delivered by a duly
authorized officer of the Company, with a counterpart for each Bank,
(ii) for the account of each Bank, a Note conforming to the
requirements hereof and executed and delivered by a duly authorized
officer of the Company, (iii) each other Secured Floating Rate 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 Floating Rate Note Document,
with a counterpart for each Bank, (iv) the Escrow Agreement, executed
and delivered by a duly authorized officer of each party thereto, and
(v) copies, certified as true and correct copies by a Responsible
Officer, of the Security Documents, as amended through the Effective
Date listed in Schedule I to the Acknowledgment Agreement.
Agent and Collateral Agent shall have received (vi) in form and
substance satisfactory to Agent and Collateral Agent, a duly executed
agreement with Annis, Mitchell, Cockey, Edwards & Roehn, P.A. of
Tampa, Florida with respect to certain services to be provided thereby
to Agent and Collateral Agent, respectively, and (vii) the Funds Flow
Memo.
(b) Corporate Proceedings of the Company. Agent shall
have received, with a counterpart for each Bank, a copy of the
resolutions, in form and substance satisfactory to
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Agent, of the Board of Directors of the Company authorizing the
execution, delivery and performance of this Agreement, the Note, and
the other Secured Floating Rate Note Documents to which it is a party,
certified by the secretary or an assistant secretary of the Company as
of the Effective 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 Agent.
(c) Corporate Proceedings of the Subsidiaries. Agent
shall have received, with a counterpart for each Bank, a copy of the
resolutions, in form and substance satisfactory to Agent, of the Board
of Directors of each Subsidiary which is a party to any Secured
Floating Rate Note Document authorizing the execution, delivery and
performance of the Secured Floating Rate Note Documents to which it is
a party, certified by the secretary or an assistant secretary of the
Company as of the date hereof, 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 Agent.
(d) Corporate Documents. Agent shall have received, with
a counterpart for each Bank, 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 Secured Floating Rate Note
Document certified by the Secretary of State of their respective
jurisdictions of incorporation as of a recent date prior to the
Effective Date, (ii) the Bylaws of the Company and each of its
Subsidiaries which is a party to any Secured Floating Rate Note
Document certified as of the Effective 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
Secured Floating Rate Note 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 foreign
corporation dated as of a recent date prior to the Effective Date and
(iv) incumbency and signature certificates for Company and each
Subsidiary executing any Secured Floating Rate Note Documents as of
the Effective Date.
(e) Other Documents. Agent shall have received, with a
counterpart for each Bank, copies, certified as true and correct by a
Responsible Officer, of (i) the indentures relating to the Public Debt
Securities as amended through the Effective Date, and (ii) the
Business Plan and the Beige Book.
(f) No Violation. The consummation of the transactions
contemplated hereby and by the other Secured Floating Rate Note
Documents shall not contravene, violate or conflict with, nor involve
Agent or any Bank in any violation of, any Requirement of Law.
(g) Consents. Authorizations. and Filings. Agent shall
have received, with a counterpart for each Bank, 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 Secured Floating Rate Note
Documents, and (ii) stating that such consents,
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authorizations, and filings are in full force and effect and each such
consent, authorization, and filing shall be in form and substance
satisfactory to Agent.
(h) Legal Opinions. Agent shall have received, with a
counterpart for each Bank, the following executed legal opinions dated
as of the Effective Date in form and substance satisfactory to Agent
and addressed to Agent and Banks:
(i) the executed legal opinion of Arent Fox
Kintner Plotkin & Kahn, counsel to Company, substantially in the form
of
Exhibit 5.1(h)-1;
(ii) the executed legal opinion of corporate
counsel to Company, substantially in the form of Exhibit 5.1(h)-2;
(iii) the executed legal opinion of Greenberg,
Traurig, Hoffman, Ripoff, Rosen & Quentel, P.A., special Florida
counsel to Company, substantially in the form of
Exhibit 5.1(h)-3; and
(iv) the executed legal opinion of Chambliss &
Bahner, special Tennessee counsel to Company, substantially in the
form of Exhibit 5.1(h)-4.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as Agent may reasonably require.
Collateral Agent and Agent shall have received, with a
counterpart for each Bank, the following executed legal opinion dated as of the
Effective Date in form and substance satisfactory to Collateral Agent and Agent
and addressed to Collateral Agent, Agent, Banks:
(v) the executed legal opinion of Annis,
Mitchell, Cockey, Edwards & Roehn, P.A., special Florida counsel to
Agent and Collateral Agent, substantially in the form of Exhibit
5.1(h)-5.
Such legal opinion shall cover such other matters incident to the transactions
contemplated by this Agreement as Collateral Agent and Agent may reasonably
require.
(i) Certification as to Environmental Matters. Agent
shall have received, with a counterpart for each Bank, a certificate
of a Responsible Officer (i) stating that 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 Company or any Subsidiary or any Borrowing Base Joint Venture in
excess of $200,000 except as listed on a schedule attached to such
certificate and (ii) certifying that Company has made, and agreeing
that Company will continue to make, available to Agent 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
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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. 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 Agent
has and continues to have a valid and perfected first priority
security interest in the Collateral granted by the Security Documents
subject to the Liens permitted pursuant to this Agreement and the
Security Documents (and Agent and Collateral Agent shall have received
satisfactory evidence thereof). Such action shall include: (i) the
delivery by 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
Agent) representing all Subsidiary Stock; (ii) the delivery to
Collateral Agent of Uniform Commercial Code financing statements,
executed by each of 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 Agent that
all other filings, recordings and other actions Collateral Agent and
Agent deems necessary or advisable to establish, preserve and perfect
the Liens and the priority thereof granted to Collateral Agent and
Agent hereunder shall have been made.
(k) Real Property Matters. Agent shall have received:
(i) such new Mortgages and Deeds of Trust or such amendments to the
existing Mortgages and Deeds of Trust as may be requested by Agent, in
each case in form and substance satisfactory to Agent and its local
counsel, to protect and preserve the Lien and priority of the
Mortgages and Deeds of Trust as they secure the Loans and other
amounts due hereunder, 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 Trusts in
liability, amount and form issued by a title company satisfactory to
Agent 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 Agent in its sole discretion, together with any
endorsements reasonably required by Agent, 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 Agent may request, each as specified or
contemplated on Schedule 5. l(k).
(1) [intentionally omitted]
(m) Revolving Loan Agreement and Secured Cash Flow Note
Agreement. (i) The Revolving Loan Agreement shall have been entered
into and such agreements and any other
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documentation entered into connection therewith shall be in form and
substance satisfactory to Agent and Banks and true and correct copies
thereof shall have been delivered to Agent and each Bank.
(ii) The Secured Cash Flow Notes shall have been
prepaid in their entirety by Company for an aggregate amount not to
exceed $40,000,000 in cash and 1,500,000 warrants to purchase the
common stock of Company, such Secured Cash Flow Notes shall have been
cancelled by Company, and the Secured Cash Flow Note Agreement and any
other documentation entered into, or Liens securing the Secured Cash
Flow Notes granted, in connection therewith shall have been terminated
pursuant to termination documents in form and substance satisfactory
to Agent and Banks, and true and correct copies thereof shall have
been delivered to Agent and each Bank.
(n) Acknowledgment Agreement. Agent shall have received,
with an executed counterpart for each Bank, duly executed copies of
the Acknowledgment Agreement.
(o) Evidence of Insurance. Company shall have delivered
to Agent certificates of insurance naming Collateral Agent on behalf
of Banks as loss payee under the casualty and surety policies required
pursuant to Section 6.5.
(p) No Material Adverse Effect. On the Effective Date,
Agent shall have received an officer's certificate executed by a
Responsible Officer stating that no Material Adverse Effect has
occurred since June 30, 1996, other than as reflected in the Company's
Form 10-Q for the quarter ending June 30, 1996, as filed with the
Securities and Exchange Commission.
(q) Intercreditor Agreement. The Intercreditor Agreement
shall have been executed and delivered by each of the parties thereto,
and Agent shall have received a fully executed copy thereof in form
and substance satisfactory to Agent.
(r) Fees, Costs. and Expenses. As of the Effective Date,
the Company shall have paid: (i) to Existing Agent all interest and
fees accrued under the Existing NOTE Agreement on or before the
Effective Date; (ii) to the Agent all fees, costs, and EXPENSES of
Agent and its counsel incurred in connection with the preparation,
negotiation, and execution of this Agreement, the Revolving Loan
Agreement, the Intercreditor Agreement, and any other documents
executed in connection herewith and therewith; and
(iii) 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,
the Revolving Loan Agreement, the Intercreditor Agreement, and any
other documents executed in connection herewith and therewith..
(s) Recapitalization Transactions. Each of the
Recapitalization Transactions shall have been consummated in
accordance with all applicable law, the underlying transaction
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documents, and the Escrow Agreement, and Agent shall have received
evidence of such consummation satisfactory to Agent.
(t) Change of Collateral Agent. Agent and the agent under
the Revolving Loan Agreement shall have received the written
resignation of Chase as collateral agent under the Existing Note
Agreement and the Existing Revolving Loan Agreement, in form and
substance satisfactory to Agent and the agent under the Revolving Loan
Agreement.
(u) Amendment of Certain Loan Documents. The Security
Documents and other Loan Documents shall have been amended in form and
substance satisfactory to Agent.
(v) Other Matters. Company shall have made available to
Agent and Banks such other documents and information, or taken such
other actions, as Agent and Banks may reasonably request.
5.2 [intentionally omitted].
5.3 Conditions Subsequent.
As a condition subsequent to the execution and delivery of
this Agreement by Agent and the Banks, Company shall perform or cause to be
performed the following (and the failure by Company to so perform or so cause
to be performed shall constitute an Event of Default):
(a) Real Property Matters Regarding Unsold Designated Raw
Land. No later than March 3, 1997, Agent shall have received such
title insurance, surveys, environmental audit reports, satisfactory
evidence of entitlements, and other documents as Agent may reasonably
request, in respect of all Designated Raw Land constituting Principal
Raw Land not sold on or before December 31, 1996, in each case that,
but for Agent's agreement that the same may be delivered on or before
March 3, 1997, were required to be delivered under Section 5.1(k).
(b) Tax Servicing Contracts. (i) No later than 60 days
after the Effective Date, Agent and Collateral Agent shall have
received a tax servicing contract in respect of such portion of the
Total Real Property located in Florida as shall be satisfactory to
Agent and Collateral Agent, in form and substance satisfactory to
Agent and Collateral Agent, among Company, Agent, Collateral Agent,
and a tax servicing firm satisfactory to Agent and Collateral Agent.
(ii) No later than 90 days after the Effective
Date Agent and Collateral Agent shall have received a tax servicing
contract in respect of the Real Property located in Tennessee. in form
and substance satisfactory to Agent and Collateral Agent among
Company. Agent Collateral Agent and a tax servicing firm satisfactory
to Agent and Collateral Agent. unless all or substantially all of such
Total Real Property shall have been sold prior to such date
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(c) Company Operating Account Control Agreement. Within
30 days following the Effective Date, Company, Collateral Agent, and
Operating Account Bank shall have executed and delivered the Company
Operating Account Control Agreement
SECTION 6. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as any Note remains
outstanding and unpaid or any other amount is owing to any Bank or Agent
hereunder, the Company shall, and shall cause each of its Subsidiaries to:
6.l Financial Statements. Furnish to each Bank:
(a) as soon as available, but in any event not later than
90 days after the end of each fiscal year of Company, a copy of the
consolidated balance sheet of 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 from 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 Required Banks;
(b) as soon as available, but in any event not later than
90 days after the end of each fiscal year of Company, a copy of the
consolidating balance sheet of 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 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 Company, the unaudited consolidated and
consolidating balance sheet of 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
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 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 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
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flows of 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 Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) (subject to nominal 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 Company of
the operating cash flow budget of 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,
Company's best estimate of its future financial performance;
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 each Bank:
(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 Borrowing Base
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 Required Banks;
(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
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<PAGE> 53
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
statements of such Borrowing Base Joint Venture (subject to nominal
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.
(a) Furnish to each Bank:
(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, Company and each Subsidiary during
such period has observed or performed the covenants of Sections 7.1,
7.2, 7.3, 7.6, 7.8, 7.9, 7.15, 7.16, and 7.17 and all other of its
covenants and other agreements, and satisfied every condition,
contained in this Agreement and in the Notes and in the other Secured
Floating Rate Note 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 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 Company
sends to its stockholders and all financial statements and reports
which Company or any of its Subsidiaries sends to the holders or
trustee of any Public Debt Securities, and within five Business Days
after the same are filed, copies of all financial statements and
reports which 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; and
(v) promptly, such additional financial and other
information as any Bank may from time to time reasonably request.
(b) Furnish to Agent:
(i) 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 Borrowing Base Joint Venture, of the
investments of the Venture Subsidiaries in Borrowing Base 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 Company's accounts payable and any book overdraft; in each
case, in form satisfactory to Agent; and
(ii) promptly, such additional financial and other
information as any Bank 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: (a) continue 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
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 each Bank, 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 Agent of any material modification or
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<PAGE> 55
cancellation of such policies. On the Effective Date and on each anniversary
thereafter, Company and its Subsidiaries shall submit to Agent 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 Agent, and each Bank, 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
Agent determines that obtaining appraisals is necessary or appropriate, Agent
will either cause its personnel to appraise, or obtain appraisal reports from
appraisers satisfactory to Agent, stating the then current fair market values
of all or any portion of the Total Real Property. Anything herein to the
contrary notwithstanding, Company shall not be obligated to reimburse Agent
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 Company shall be obligated to
reimburse Agent with respect to as many appraisals as Agent deems necessary to
conduct.
6.7 Notices. Promptly give notice to Agent and each Bank of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
Contractual Obligation of Company or, to the knowledge of Company, any
of its Subsidiaries or (ii) litigation, investigation or proceeding
which may exist at any time between Company or, to the knowledge of
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 Company or, to
the knowledge of 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 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
Company or any Commonly Controlled Entity in excess of $100,000 and
which is not reflected in the financial statements most recently
delivered to Banks pursuant to Section 6.1; and
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<PAGE> 56
(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 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 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 Agent and Banks,
and their respective 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 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 Notes and all other amounts
payable hereunder.
6.9 Business Plan.
Furnish to each Bank on or before the tenth day following
approval by Company's Board of Directors, but in no event later than
December 31 of each fiscal year and within 10 days (after approval by
Company's Board of Directors, if applicable) of any amendment,
modification or update thereto, a Business Plan of Company and its
Subsidiaries for the next succeeding fiscal year in a form and in
substance satisfactory to the Required Banks 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
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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
Company. 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 Agent and the Required Banks.
6.10 [intentionally omitted]
6.11 Dividends from Subsidiaries.
Cause the Subsidiaries to pay dividends to Company from the
Net Cash Proceeds of 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 multiphase 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 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 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 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 Agent such supplemental title reports on
the Real Property subject to the Deeds of Trust and Mortgages as Agent
and Required Banks may reasonably request from time to time; provided
Company shall not be required to provide such supplemental reports
more than once per quarter.
(b) No later than 60 days after the Effective Date,
Company shall deliver to Agent such third party appraisals,
environmental reports, surveys, and ALTA title policies, as would have
complied with the provisions of Section 5.1(1) if delivered on the
Effective Date with respect to all Real Property to the extent such
reports were not required by Banks to be delivered on or prior to the
Effective Date.
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6.13 Compliance with Laws.
Company shall, and shall cause each of its Subsidiaries to
comply with the requirements of all applicable laws, rules, regulations and
orders of any 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 Agent 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 Agent
may request.
6.15 Company Operating Account Control Agreement. At all times from
and after the date of its execution and delivery, maintain in full force and
effect the Company Operating Account Control Agreement. At all times from and
after the Effective Date, Company shall continue to maintain Company's cash
management system substantially as such system exists on the Effective Date
after giving effect to the consummation of the transactions contemplated to
occur on such date, and shall continue to concentrate the funds of 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 Company, and
except to the extent that such funds are invested in investments permitted by
Section 7.9.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees that, so long as any Note remains
outstanding and unpaid any other amount is owing to any Bank or Agent
hereunder, the Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly:
7.l Maintenance of Consolidated Net Worth.
Permit 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) (i) from the Effective Date
through December 31, 1996, $26,500,000; and (ii) at any time
thereafter, $23,500,000; and (b) 50% of the Annual Net Income for the
prior fiscal year; provided however, that the amount determined under
this clause (b) shall never be less than zero
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To demonstrate compliance with the Minimum Consolidated Net Worth
covenant set forth in this Section, Company shall furnish to Banks (i)
within 45 days of the close of each calendar quarter a certificate of
a Responsible Officer setting forth Minimum Consolidated Net Worth 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 as of the 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 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 in respect of the Notes;
(b) Indebtedness in respect of the Revolving Loans
(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), provided that any such
replacement loans shall be on terms and conditions collectively no
less favorable TO THE COMPANY THAN those for the Revolving set forth
in the Revolving Loan Agreement or, if applicable, on such other terms
and conditions as approved in accordance with Section 4.5(b) of the
Intercreditor Agreement, and shall be subject to the Intercreditor
Agreement;
(c) [intentionally omitted];
(d) Indebtedness of the Company in respect of the Public
Debt Securities;
(e) Indebtedness of 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 Company to any Subsidiary or of any
Subsidiary to Company; provided that (i) such intercompany
Indebtedness shall not be evidenced by promissory notes
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or any other instruments, and (ii) all Indebtedness of Subsidiaries to
Company shall not exceed an aggregate principal amount of $20,000,000
at any time;
(g) Indebtedness of Company and its Subsidiaries
outstanding on the Effective Date 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 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 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 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 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 Company shall give Agent 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 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);
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(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's, 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;
(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 Effective Date 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;
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(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 Effective Date 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);
(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 Company of obligations (other than
Indebtedness) of any of its Subsidiaries, which obligations are otherwise
permitted under this Agreement; (c) Guarantee Obligations by 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 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
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 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
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otherwise dispose of any of its property, business or assets (including
receivables and 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
the Effective Date 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 after the Effective Date 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 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 Agent.
7.7 Limitation on Dividends. Declare or pay any dividend (other
than dividends payable solely in common stock or preferred stock of Company)
on, or, except for the Reverse Stock Split, 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 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 form of common
stock or preferred stock of Company) or in obligations of Company or any
Subsidiary, except for dividends declared and paid by any Subsidiary to 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 Company or any
Subsidiary to make (by way of the
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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 Company and its Subsidiaries during any 12 month
period from and after the Effective Date.
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 Company to its Subsidiaries or by any
Subsidiary of Company to Company to the extent such Indebtedness is
permitted pursuant to Section 7.2(fl; and (ii) capital contributions
to Subsidiaries other than Venture Subsidiaries so long as 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 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 Agent;
(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 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
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other interests received by 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 Agent, (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 Company by all Subsidiaries having investments in
Joint Ventures after the Effective Date.
(h) any Utility Condemnation Proceeds Note.
7.10 Limitation on Optional Payments and Modifications of Debt
Instruments. (a) Make any optional payment or optional prepayment on, or
optional redemption of, any Indebtedness (including payments on Indebtedness
under the Public Debt Securities) except (i) payments on the Revolving Loans or
the Notes, (ii) payments on Public Debt Securities but only if made out of
Available Cash pursuant to Section 8.6(c) of the Reorganization Plan, or (iii)
so long as no Event of Default has occurred and is continuing or would result
therefrom, payments made pursuant to Indebtedness permitted pursuant to Section
7.2(e), (f), (g) (but exclusive of Indebtedness permitted pursuant thereto
consisting of intercompany Indebtedness among Company and its Subsidiaries, the
Public Debt Securities, and Financing Leases), (h), or (k);
(b) Amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms of any Public Debt
Securities or any other agreement executed in connection therewith or otherwise
in connection with any Indebtedness (other than: (1) 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 Company and its Subsidiaries, the Public Debt Securities, and Financing
Leases), (h), and (k); and (2) other than any such amendment, 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 Loan 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.
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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 term 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 Revolving Loan Agreement, 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
Banks 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.
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; and
(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 Notes are
outstanding, allow cash and Cash Equivalents maintained in Bank Accounts of
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. 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.(a)(iii) of the Revolving
Loan
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Agreement, all remaining cash of 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 revenue.
(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 Banks and the holders of the Secured
Floating Rate Notes) upon any of such Venture Subsidiary's property, assets, or
revenues, whether now owned or hereafter acquired (including the Joint Venture
interests owned by such Venture Subsidiary as disclosed on Schedule 4.14(B) and
the revenues arising from such revenue).
SECTION 8. EVENTS OF DEFAULT; REMEDIES
8.1 Events of Default; Remedies. If any of the following events
shall occur and be continuing:
(a) The Company shall fail to pay any principal when due
of any Note in accordance with the terms thereof or hereof; or the
Company shall fail to pay any interest due on any Note or any other
amount payable hereunder, 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) shall occur and be continuing, it shall not constitute an Event
of Default until and unless the Agent 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 Secured
Floating Rate Note 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 Secured Floating Rate Note Document, and
such default shall continue unremedied for a period of thirty (30)
days; or
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(e) Company shall fail to pay any obligations under the
Revolving Loan Agreement or any principal of or interest on any Public
Debt Securities (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
Revolving Loan Agreement or any Public Debt Securities; or
(f) Any Revolving Loan or any Public Debt Securities
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 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 Secured Floating Rate Note 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 Revolving Loans, or any Public Debt Securities) 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 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,
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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 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 Company or any Commonly Controlled Entity in
excess of $4,600,000; or 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), 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 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 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) Any of the Guarantees or any Security Document
hereunder shall cease, for any reason, to be in full force and effect
or 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
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purported to be created thereby (other than as a result of any action
or inaction on the part of Agent or Banks or their agents or bailees
or other than with respect to Collateral having an aggregate value of
$100,000 or less); or
(n) Any Person or two or more 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 Company;
(o) [intentionally omitted]; or
(p) The Total Unsecured Claims shall exceed $1.5 Billion;
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 Notes (with accrued interest thereon)
and all other amounts owing under this Agreement and the Notes shall
immediately become due and payable in full, and Agent and Collateral Agent
shall have all rights and remedies given to Agent 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, with the consent of the Required Banks,
Agent may, or upon the request of the Required Banks, Agent shall, by notice of
default to the Company, declare the principal amount of the Notes (with accrued
interest thereon) and all other amounts owing under this Agreement and the
Notes to be due and payable in full, and Agent shall have all rights and
remedies given to Agent 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; provided, however, with regard to clause (B) hereof,
that unless and until Agent shall have received such directions, 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 Banks.
SECTION 9. AGENT
9.1 Appointment of Agent. Each Bank hereby irrevocably designates
and appoints Foothill as Agent of such Bank under this Agreement and the other
Secured Floating Rate Note Documents (including, without limitation, as Agent
of each Bank for the purpose of taking possession of any and all Collateral if
the perfection of the Liens upon such Collateral created pursuant to the
Security Documents requires possession; and, thereby, perfecting such Liens)
and Foothill hereby accepts such appointment, subject to the terms and
provisions of this Agreement and the other Secured Floating Rate Note
Documents; and each such Bank irrevocably authorizes Foothill, as Agent for
such Bank, to take such action on its behalf under this Agreement and the other
Secured Floating Rate Note Documents and to exercise such powers and perform
such duties as are expressly delegated to Agent by the terms of this Agreement
and the other Secured Floating Rate Note Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary
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elsewhere in this Agreement, Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Secured Floating Rate Note Document or otherwise exist
against Agent; and Agent is acting hereunder and under the other Secured
Floating Rate Note Documents solely as the agent of the Banks pursuant hereto
and thereto, and is not acting as trustee for the Banks.
Each Bank hereby further authorizes Agent to enter into the Security
Documents to be executed and delivered by Agent, on behalf of and for the
benefit of Banks, on the Effective Date and agrees to be bound by the terms
thereof. Each Bank irrevocably authorizes Agent to take such action on its
behalf under the provisions of the Security Documents, and to exercise such
powers and perform such duties as are expressly delegated to Agent by the terms
of the Security Documents, together with such other powers as are reasonably
incidental thereto; provided that 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 written consent of
Required Banks. Each Bank agrees that no Bank shall have any right individually
to realize upon the collateral granted by the Security Documents (including
through the exercise of a right of set-off against call deposits, if any, of
such Bank in which any funds on deposit in the Cash Collateral Accounts may
from time to time be invested), it being understood and agreed that such rights
and remedies may be exercised only by Agent at the direction of Required Banks,
for the benefit of Banks, in accordance with the terms of such agreements. Each
Bank hereby authorizes Agent to release Collateral only as expressly permitted
or required under this Agreement or the Security Documents, and agrees that a
certificate executed by Agent evidencing such release of Collateral shall be
conclusive evidence of such release to any third party.
9.2 Appointment of Collateral Agent.
Each Bank hereby irrevocably designates and appoints Foothill
as Collateral Agent of such Bank under this Agreement and the Security
Documents to which Foothill is a party, and Foothill hereby accepts such
appointment, subject to the terms and provisions of this Agreement and the
Security Documents to which it is a party. Each Bank hereby further authorizes
Collateral Agent to enter into the Security Documents to be executed and
delivered by Collateral Agent on the Effective Date and agrees to be bound by
the terms thereof. Each Bank irrevocably authorizes Foothill, as Collateral
Agent for such Bank, 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
written consent of Required Banks. Each Bank agrees that no Bank shall have any
right individually to realize upon the security granted by the Security
Documents to which Collateral Agent is party, it being understood and agreed
that such rights and remedies may be exercised only by Collateral Agent at the
direction of Agent on behalf of Required Banks, for the benefit of Banks, in
accordance with the terms of such agreements. Each Bank hereby authorizes
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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 Agent on behalf
of the Required Banks. All notices and directions to Collateral Agent shall be
given by Agent on behalf of and at the direction of Required Banks.
9.3 [intentionally omitted].
9.4 Delegation of Duties. Agent and Collateral Agent may execute
any of their respective duties under this Agreement and the other Secured
Floating Rate 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. Neither Agent nor Collateral Agent shall 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, neither Agent nor Collateral Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Secured Floating Rate Note Document or otherwise exist
against Agent or Collateral Agent; and Agent and Collateral Agent are acting
hereunder and under the other Secured Floating Rate Note Documents solely as
the agent and collateral agent, respectively, of Banks pursuant hereto and
thereto, and neither Agent nor Collateral Agent is acting as trustee for Banks.
9.5 Exculpatory Provisions. Neither Agent, 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 Secured Floating Rate Note Document (except for its
or such Persons own gross negligence or willful misconduct) or (b) responsible
in any manner to any of Banks for any recitals, statements, representations or
warranties made by Company or any officer thereof contained in this Agreement
or any other Secured Floating Rate Note Document or in any certificate, report,
statement or other document referred to or provided for in, or received by
Agent 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 Notes or any other
Secured Floating Rate Note Document or for any failure of Company to perform
its obligations hereunder or thereunder. Neither Agent nor Collateral Agent
shall be under any obligation to any Bank 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 Secured Floating Rate Note Document or as to
the use of proceeds of the Loans or of the existence or possible existence of a
Default or Event of Default, or to inspect the properties, books or records of
Company. Notwithstanding anything herein to the contrary, neither Agent nor
Collateral Agent shall have any liability arising from confirmations of the
amount of outstanding Notes.
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9.6 Reliance by Agent.
(a) Each of Agent 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 Company), independent
accountants and other experts selected by Agent or Collateral Agent, as the
case may be. Agent and Collateral Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with Agent.
(b) Each of Agent and Collateral Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Secured Floating Rate Note Document unless (i) it shall first receive
such advice or concurrence as it deems appropriate from Agent, in the case of
Collateral Agent or from any Bank, Banks or Required Banks in the case of
Agent, as may ',)e required pursuant to this Agreement for such action, or (ii)
it shall first be indemnified to its satisfaction by such Banks 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 Agent's or Collateral
Agent's, as the case may be, gross negligence or willful misconduct. Each of
Agent and Collateral Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement, the Notes and the other
Secured Floating Rate Note Documents in accordance with a request of any Bank,
Banks or Required Banks in the case of Agent, or Agent in the case of
Collateral Agent, as required pursuant hereto and such request and any action
taken or failure to act pursuant thereto shall be binding upon all Banks and
all future holders of the Notes.
9.7 Notice of Default. Neither Agent nor Collateral Agent shall be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless Agent or Collateral Agent, as the case may be, has received
notice from a Bank or Company referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default." If Agent receives such a notice, Agent shall promptly give notice
thereof to Banks and Collateral Agent. If Collateral Agent receives such a
notice, Collateral Agent shall give notice thereof to Agent. Agent and
Collateral Agent shall take such action with respect to such Default or Event
of Default as shall be directed by Agent in the case of Collateral Agent and by
any Bank Banks or Required Banks in the case of Agent, as required pursuant
hereto (subject to the provisions of Section 9.4(b)); provided that unless and
until Agent or Collateral Agent, as the case may be, shall have received such
directions, Agent or Collateral Agent, as the case may be, 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 Banks.
9.8 Non-Reliance on Agents and Other Banks. Each Bank expressly
acknowledge that neither Agent, Collateral Agent nor any of their respective
officers, directors, employees. agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by Agent or
Collateral Agent hereinafter taken, including any review of the affairs of
Company or any of its Subsidiaries, shall be deemed to constitute any
representation or warranty by Agent or Collateral Agent to any Bank. Each Bank
represents to Agent and Collateral Agent that it has,
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independently and without reliance upon Agent or Collateral Agent or any other
Bank, 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 Company and its
Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Bank also represents that it will, independently and
without reliance upon Agent, Collateral Agent or any other Bank, 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 Secured Floating Rate Note
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 Company and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to Banks by
Agent hereunder, neither Agent nor Collateral Agent shall have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of Company or any of its Subsidiaries
which may come into the possession of Agent or Collateral Agent or any of their
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
9.9 Indemnification. The Banks agree to indemnify Agent and
Collateral Agent in their respective capacities as such (to the extent not
reimbursed by the Company and without limiting the obligation of the Company to
do so), ratably according to their respective Note Percentages, 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 Notes) be imposed on, incurred by or asserted against Agent or
Collateral Agent in any way relating to or arising out of this Agreement, any
of the other Secured Floating Rate Note 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 Agent or Collateral Agent under or in
connection with any of the foregoing; provided that no Bank shall 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 Agent's or Collateral Agent's gross negligence or willful
misconduct. The agreements in this Section shall survive the payment of the
Notes and all other amounts payable hereunder.
9.10 [intentionally omitted]
9.11 Agent in Its Individual Capacity. Agent and its Affiliates may
make loans to, accept deposits from and generally engage in any kind of
business with the Company as though Agent were not Agent hereunder and under
the other Secured Floating Rate Note Documents. With respect to any Note issued
to it, Agent shall have the same rights and powers under this Agreement and the
other Secured Floating Rate Note Documents as any Bank and may exercise the
same as though it were not Agent, and the terms "Bank" and "Banks" shall
include Agent in its individual capacity.
9.12 Successor Agents. Each of Agent and Collateral Agent may
resign as Agent or Collateral Agent, as the case may be, upon 30 days notice to
Agent in the case of Collateral Agent and to Banks in the case of Agent. If
Agent or Collateral Agent shall resign as Agent or Collateral
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Agent, as the case may be, under this Agreement and the other Secured Floating
Rate Note Documents, then the Required Banks shall appoint from among Banks a
successor agent or collateral agent for Banks, which successor agent or
collateral agent, except if an Event of Default shall have occurred and be
continuing, shall be approved by Company (which approval shall not be
unreasonably withheld), whereupon, effective upon acceptance of its appointment
as successor agent or collateral agent, such successor agent or collateral
agent shall succeed to the rights, powers and duties of Agent or Collateral
Agent, as the case may be, and the terms "Agent" and "Collateral Agent" shall
mean such successor agent or collateral agent, as the case may be, and the
former Agent's or Collateral Agent's rights, powers and duties as Agent or
Collateral Agent, as the case may be, shall be terminated, without any other or
further act or deed on the part of such former Agent or Collateral Agent or any
of the parties to this Agreement or any holders of the Notes. If the Required
Banks fail to appoint a successor or collateral agent for Banks as provided
above within 30 days after the resignation of Agent or Collateral Agent, then
Agent or Collateral Agent, as the case may be, may appoint a successor agent or
collateral agent for Banks, which successor agent or collateral agent, except
if an Event of Default shall have occurred and be continuing, shall be approved
by Company (which approval shall not be unreasonably withheld), whereupon,
effective upon acceptance of its appointment as successor agent or collateral
agent, such successor agent or collateral agent shall succeed to the rights,
powers and duties of Agent or Collateral Agent, as the case may be, and the
terms "Agent" and "Collateral Agent" shall mean such successor agent or
collateral agent and the former Agent's or Collateral Agent's rights, powers
and duties as Agent or Collateral Agent, as the case may be, shall be
terminated, without any other or further act or deed on the part of such former
Agent or Collateral Agent or any of the parties to this Agreement or any
holders of the Notes. After any retiring Agent's or Collateral Agent's
resignation as Agent or Collateral Agent, as the case may be, 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 Agent
or Collateral Agent under this Agreement and the other Secured Floating Rate
Note Documents. Notwithstanding anything herein to the contrary, the
resignation of Agent or Collateral Agent shall not be effective unless and
until a successor agent or collateral agent has been appointed and has accepted
such appointment.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreements any Note, any
other Secured Floating Rate Note Document, nor any terms hereof or thereof may
be amended, supplemented or modified except in accordance with the provisions
of this Section. With the prior written consent of the Required Banks, Agent
and the Company may, from time to time, enter into written amendments,
supplements or modifications hereto and to the Notes and the other Secured
Floating Rate Note Documents for the purpose of adding any provisions to this
Agreement or the Notes, or the other Secured Floating Rate Note Documents or
changing in any maimer the rights of the Banks or of the Company hereunder or
thereunder or waiving, on such terms and conditions as Agent may specify in
such instrument, any of the requirements of this Agreement or the Notes or the
other Secured Floating Rate Note Documents or any Default or Event of Default
and its consequences; provided, however, that no such waiver and no such
amendment, supplement or modification shall (a) reduce the amount of the
Obligations or extend the maturity of the Obligations, or reduce the rate or
extend the time of payment of interest thereon, or reduce the amount or extend
the time of payment of any
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fee payable to any Bank hereunder, in each case without the consent of the Bank
affected thereby, or (b) amend, modify or waive any provision of this Section
or reduce the percentage specified in the definition of Required Banks. Or
consent to the assignment or transfer by the Company of any of its rights and
obligations under this Agreement and the other Secured Floating Rate Note
Documents, or release and/or subordinate the Liens with respect to any
Collateral in excess of 5% of the value of the Collateral on a Book Value basis
during the term of this Agreement (except as expressly required or provided for
hereunder, including as provided in Section 7.3(n) or in the Security Documents
or as otherwise required by law), or release any Subsidiary from its Guarantee,
or amend, modify or waive the provisions of Section 10.5 (or any defined term
used in such Section) or any provision hereof or of any other Secured Floating
Rate Note Document which, by its terms, shall be taken or permitted only with
the consent of all the Banks, in each case without the written consent of all
the Banks, or (c) amend, modify or waive any provision of Section 9, without
the written consent of the then Agent or Collateral Agent affected thereby. Any
such waiver and any such amendment, supplement or modification shall apply
equally to each of the Banks and shall be binding upon the Company, the Banks,
Agent, Collateral Agent, and all future holders of the Notes. In the case of
any waiver, the Company, the Banks, Agent, and Collateral Agent shall be
restored to their former position and rights hereunder and under the
outstanding Notes and any other Secured Floating Rate Note 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, Agent, 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
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
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The Agent: Foothill Capital Corporation
60 State Street, Suite 1150
Boston, Massachusetts 02109
Attention: Business Finance Division
Manager
Telecopy: (617) 523-1675
Copy to: Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071-2604
Attention: John Francis Hilson,
Esquire
Telecopy: (213) 239-1324
The Collateral
Agent: Foothill Capital Corporation
60 State Street, Suite 50
Boston, Massachusetts 02109
Attention: Business Finance Division
Manager
Telecopy: (617) 523-1675
Copy to: Annis, Mitchell, Cockey, Edwards &
Roehn, P.A.
One Tampa City Center, Suite 2100
Tampa, Florida 33602
Attention: Stephen L. Kussner,
Esquire
Telecopy: (813) 223-9067
and Copy to: Brobeck, Phleger & Harrison LLP
550 South Hope Street
Los Angeles, California 90071-2604
Attention: John Francis Hilson,
Esquire
Telecopy: (213) 239-1324
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, Agent, or the Banks shall not be effective until
received.
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10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of Collateral Agent, Agent, or any Bank, 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 Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered Pursuant hereto or in connection herewith Shall survive
the execution and delivery of this Agreement and the Notes.
10.5 Payment of Expenses and Taxes. The Company agrees (a) to pay
or reimburse Agent, Collateral Agent, and each Bank 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 Notes, the Purchase Agreement, the Intercreditor Agreement, and the other
Secured Floating Rate Note 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 Agent, counsel to Collateral Agent, and the several
counsel to Banks, and the reasonable allocated costs of in-house counsel to
Agent, in-house counsel to Collateral Agent, and the several in-house counsel
to Banks, (b) to pay or reimburse each Bank, Agent, and Collateral Agent for
all its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Notes, the Intercreditor
Agreement, the Purchase Agreement, the other Secured Floating Rate Note
Documents and any such other documents, including fees and disbursements of
counsel to Agent, counsel to Collateral Agent, and to the several counsel to
Banks, and the reasonable allocated costs of in-house counsel to Agent and
in-hose counsel to Collateral Agent, (c) to pay, indemnify, and hold each Bank,
Agent, 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 any such Bank, Agent, or Collateral Agent), if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by this
Agreement, the Notes, the other Secured Floating Rate
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Note 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 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 agreements governing the Public Debt Securities, and any
other agreements, (f) to pay the costs and expenses incurred to continue the
perfection of any Liens in favor of Agent 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 Bank, Agent, 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 Notes, the Intercreditor Agreement,
the Purchase Agreement, the other Secured Floating Rate Note 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, Agent, or any Bank with respect to indemnified liabilities
arising from (i) the gross negligence or willful misconduct of Collateral
Agent, Agent, or any such Bank, or (ii) legal proceedings commenced against
Agent or any such Bank by any other or by any Transferee (as defined in Section
10.6), and (h) to pay or reimburse Agent 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 Agent, the replaced counsel to Collateral
Agent, and the new counsel to Collateral Agent, and the reasonable allocated
costs of in-house counsel to Agent and in-house counsel to Collateral Agent.
The agreements in this Section shall survive repayment of the Notes and all
other amounts payable hereunder.
10.6 Successors and Assigns; Participations; Purchasing Banks.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company, the Banks, Agent, Collateral Agent, all future
holders of the Notes 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 Seed Floating Rate
Note Documents without the prior written consent of each Bank.
(b) Subject to Section 10.6(h), any Bank may, in the
ordinary course of its commercial banking business and in accordance
with applicable law, at any time sell to one or more banks or other
entities ("
Participants") participating interests in any Note held by such Bank
or any other interest of such Bank hereunder and under the other
Secured Floating Rate Note Documents. In the event of any such sale by
a Bank of participating interests to a Participant, such Bank's
obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, such Bank shall remain the
holder of any such Note for all purposes under this Agreement and the
other Secured Floating Rate Note Documents, and the Company and Agent
shall continue to deal solely, and directly, with such Bank in
connection with such Bank's rights and obligations under this
Agreement and the other Secured Floating Rate Note Documents. The
Company agrees that if amounts outstanding under this Agreement and
the Notes 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 set-off in
respect of its participating interest in amounts owing under this
Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this
Agreement or any Note, provided that such Participant shall only be
entitled to such right of set-off if it shall have agreed in the
agreement pursuant to which it shall have acquired its participating
interest to share with the Banks 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 Notes outstanding from time to time;
provided, that no Participant shall be entitled to receive any greater
amount pursuant to such Sections than the transferor Bank would have
been entitled to receive in respect of the amount of the participation
transferred by such
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transferor Bank to such Participant had no such transfer occurred.
Notwithstanding anything herein to the contrary, participants shall
not be entitled to require the applicable Bank 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 Notes in which such participant is
participating, or (iii) the release of all or substantially all of the
Collateral or any of the Guarantees (except as otherwise expressly
provided in the Secured Floating Rate Note Documents).
(c) Subject to Section 10.6(h), any Bank may, in the
ordinary course of its commercial banking business and in accordance
with applicable law, at any time sell to any Bank or any Affiliate
thereof or to one or more banks or Financial Institutions ("Purchasing
Banks") all or any part of its rights and obligations under this
Agreement and the Notes and other Secured Floating Rate Note Documents
pursuant to a Note Transfer Supplement, substantially in the form of
Exhibit 10.6, executed by such Purchasing Bank and such transferor
Bank, and delivered to Agent for its acceptance and recording in the
Register. Upon such execution, delivery, acceptance and recording,
from and after the Transfer Effective Date determined pursuant to such
Note Transfer Supplement, (i) the Purchasing Bank thereunder shall be
a party hereto and, to the extent provided in such Note Transfer
Supplement, have the rights and obligations of a Bank hereunder and
under the other Secured Floating Rate Note Documents, and (ii) the
transferor Bank thereunder shall, to the extent provided in such Note
Transfer Supplement, be released from its obligations under this
Agreement and under the other Secured Floating Rate Note Documents
(and, in the case of a Note Transfer Supplement covering, all or the
remaining portion of a transferor Bank's rights and obligations under
this Agreement and under the other Secured Floating Rate Note
Documents, such transferor Bank shall cease to be a party hereto and
thereto). Such Note Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect
the addition of such Purchasing Bank under this Agreement and the
Notes and other Secured Floating Rate Note Documents. On or prior to
the Transfer Effective Date determined pursuant to such Note Transfer
Supplement, the Company, at its own expense, shall execute and deliver
to Agent new Note(s) to the order of such Purchasing Bank in an amount
equal to the Note or Note portion acquired by it pursuant to such Note
Transfer Supplement and, if the transferor Bank has retained a portion
of any Note hereunder, new Note(s) to the order of the transferor Bank
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.
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(d) Agent shall maintain at its address referred to in
Section 10.2 a copy of each Note Transfer Supplement delivered to it
and a register (the "Register") for the recordation of the names and
addresses of the Banks and the principal amount of the Notes payable
to, each Bank from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Company,
Collateral Agent, Agent and the Banks may treat each Person whose name
is recorded in the Register as the owner of the Notes recorded therein
for all purposes of this Agreement. The Register shall be available
for inspection by the Company or any Bank at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of a Note Transfer Supplement
executed by a transferor Bank and Purchasing Bank, Agent shall (i)
promptly accept such Note Transfer Supplement, (ii) forward a copy of
such Note Transfer Supplement to the Company, and (iii) on the
Transfer Effective Date determined pursuant thereto record the
information contained therein in the Register and give notice of such
acceptance and recordation to the Banks and the Company.
(f) Subject to Section 10.16, the Company authorizes each
Bank to disclose to any Participant or Purchasing Bank (each, a "
Transferee") and any prospective Transferee any and all
financial information in such Bank's possession concerning the Company
and its Affiliates which has been delivered to such Bank by or on
behalf of the Company pursuant to this Agreement or which has been
delivered to such Bank by or on behalf of the Company in connection
with such Bank's credit evaluation of the Company and its Affiliates
prior to becoming a party to this Agreement; 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 Bank 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 the United States or any political
subdivision thereof unless, prior to the date of transfer, the
transferor Bank shall cause such Purchasing Bank to comply with the
requirements of Section 2.7.
(h) Unless at least 65 % of the outstanding principal
amount of the Note(s) held by a Bank is transferred to one Transferee,
the terms of the transfer to such Transferee shall not require the
Transferee's consent to any amendments, supplements, waivers or other
modifications of any provision of the Secured Floating Rate Note
Documents, the consent to any departure by any party to any of the
Secured Floating Rate Note Documents therefrom, or the consent to the
exercise or non-exercise of any powers or rights which such Bank may
have under or in respect of the Secured Floating Rate Note Documents,
except if any such amendment, supplement, waiver, consent or other
modification, or such exercise or non-exercise, would require the
written approval of all of the Banks.
(i) Nothing herein shall prohibit any Bank from pledging
or assigning any Note to any Federal Reserve Bank in accordance with
applicable law.
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(j) Notwithstanding the foregoing provisions of this
Section 10.6, no holder of any Note shall transfer such Note in a
manner which would violate any Requirement of Law.
10.7 Adjustments; Set-off.
(a) If any Bank (a "Benefitted Bank") 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 set-off, 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 Bank, if any, in respect of such
other Bank's Note(s), or interest thereon, or fees due to it
hereunder, such Benefitted Bank shall purchase for cash from the other
Banks such portion of each such other Banks' Note(s), or make such
payment on account of such fees, OF shall provide such other Banks
with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Bank to share the excess
payment or benefits of such collateral or proceeds ratably with each
of the Banks; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such
Benefitted Bank, 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 Bank so purchasing a
portion of another Bank's Note(s) owing to it may exercise all rights
of payment (including, without limitation, rights of set-off with
respect to such portion as fully as if such Bank were the direct
holder of such portion.
(b) In addition to any rights and remedies of the Banks
provided by law, each Bank 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 Debt
(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
Bank to or for the credit or the account of the Company. Each Bank
agrees promptly to notify the Company and Agent after any such set-off
and application made by such Bank, provided that the failure to give
such notice shall not affect the validity of such set-off and
application.
10.8 Appointment of Agent as Company's Lawful Attorney. The Company
irrevocably designates, makes, constitutes and appoints Agent (and all Persons
designated by Agent) 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 Agent as necessary or reasonably required by Agent to
grant, perfect, maintain and continue the Liens in the Collateral or to monitor
or administer the Notes, 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 Agent, in its sole
discretion, may elect, and in such event copies thereof shall be delivered to
the Company.
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10.9 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any numbed of separate counterparts, and all
of said counterparts taken together shall be domed 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 Agent.
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.
10.11 Integration. This Agreement, together with the other Secured
Floating Rate Note Documents represents the entire agreement of the Company,
Collateral Agent, Agent, and the Banks and supersedes all prior agreements with
respect to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by Collateral Agent, Agent, or any Bank relative
to subject matter hereof not expressly set forth or referred to herein or in
the other Secured Floating Rate Note 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 SECURED
FLOATING RATE NOTE 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 STATE OF
CALIFORNIA, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE CENTRAL
DISTRICT OF CALIFORNIA, 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
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<PAGE> 84
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 AGENT 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 FLOATING RATE NOTE DOCUMENTS AND HEREBY RATIFIES AND
CONFIRMS WHATEVER BANKS OR AGENT OR COLLATERAL AGENT MAY DO IN THIS
REGARD, (ii) ALL RIGHTS TO NOTICE OF A HEARING PRIOR TO BANKS' OR
AGENT'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 BANKS OR AGENT OR COLLATERAL AGENT TO EXERCISE ANY OF BANKS'
OR AGENT'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 Notes and the other
Secured Floating Rate Note Documents;
(b) none of Collateral Agent, Agent, or any Bank has any
fiduciary relationship to the Company, and the relationship between
Agent and Banks, on one hand, and the Company, on the other hand, is
solely that of debtor and creditor; and
(c) no joint venture exists among the Banks or among the
Company and the Banks.
10.15 WAIVERS OF JURY TRIAL. THE COMPANY, AGENT AND THE BANKS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER SECURED
FLOATING RATE NOTE DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
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<PAGE> 85
10.16 Confidentiality. Each Bank agrees to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all non-public information provided to it by Company or any of its
Subsidiaries, or by Agent or Collateral Agent on Company's behalf, in
connection with this Agreement or any other Secured Floating Rate Note 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. Any Bank may disclose such
information (a) at the request of any regulatory authority or in connection
with an examination of such Bank 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 any other
agency of any State of the United States of America or of any other
jurisdiction, in which such Bank conducts its business; (e) to such Bank'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) such Bank and (ii) Company and/or any Subsidiary; and (h) in
connection with any litigation or dispute involving such Bank if the disclosure
is determined by such Bank to be necessary for the defense or protection of
such Bank's rights and/or interests. Each Bank further agrees, upon receipt by
such Bank of a request to disclose any information to a Governmental Authority
or courts (other than governmental bank examiners and independent auditors of
such Bank), to notify Company of such request and to permit, to the extent
practicable, Company to seek a protective order with respect thereto; provided
however that no Bank shall be requested to notify 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 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 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 Floating Rate Note Document, the terms and conditions of this
Agreement shall control.
10.18 Counsel to Collateral Agent.
If Company reasonably and in good faith requests in writing to
Collateral Agent and Agent that Collateral Agent replace, at Company's sole
expense, the then existing counsel to Collateral Agent, Collateral Agent shall
consider such request and, so long as no Default or Event of Default has
occurred and is continuing, Collateral Agent shall not unreasonably withhold
its consent to such request.
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<PAGE> 86
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
CORPORATION, a Delaware corporation
By:
-------------------------------------
Name: John H. Fischer
Title: Vice President
FOOTHILL CAPITAL CORPORATION, as Agent
and as a Bank
By:
-------------------------------------
Name: Nancy L. Perry
Title: Assistant Vice
President
FOOTHILL CAPITAL CORPORATION, as
Collateral Agent
By:
-------------------------------------
Name: Nancy L. Perry
Title: Assistant Vice
President
79
<PAGE> 1
Atlantic Gulf Communities Corporation Exhibit to the 1996 Form 10-K
Exhibit (c) 4.c. Form of warrant granted on September 30, 1996
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS. IN ADDITION SECTION 8
OF THIS WARRANT CONTAINS OTHER RESTRICTIONS ON TRANSFER.
WARRANT TO PURCHASE A MAXIMUM OF
__________ SHARES OF COMMON STOCK OF
ATLANTIC GULF COMMUNITIES CORPORATION
(Void after September 30, 2006)
This certifies that _______________________________ (the "Holder"),
for value received, is entitled to purchase from Atlantic Gulf Communities
Corporation, a Delaware corporation (the "Company") having a place of business
at 2601 South Bayshore Drive, Miami, Florida 33133-5461, a maximum of
_____________ fully paid and nonassessable shares of the Company's common stock
par value $.10 per share ("Common Stock"), for cash at a price of $6.50 per
share (the "Stock Purchase Price") at any time after the first anniversary of
the date hereof (except as provided in section 3.1(b) or (c)) or from time to
time thereafter up to and including 5:00 p.m. (Eastern time) on September 30,
2006 (the "Expiration Date") upon surrender to the Company at its principal
office (or at such other location as the Company may advise the Holder in
writing) of this Warrant properly endorsed with the Form of Subscription
attached hereto duly filled in and signed and upon payment in cash or by check
of the aggregate Stock Purchase Price for the number of shares for which this
Warrant is being exercised determined in accordance with the provisions hereof.
The number and character of the securities purchasable upon exercise
of this Warrant and the Stock Purchase Price are subject to adjustment as
provided in Section 3 hereof. The term "Warrant" as used herein shall include
this Warrant and any warrants issued in substitution for or replacement of this
Warrant, or any warrant into which this Warrant may be divided or exchanged.
The shares of Common Stock purchasable upon exercise of this Warrant shall be
referred to hereinafter collectively as the "Warrant Shares."
The Warrant is subject to the following terms and conditions:
Section 1. Exercise; Issuance of Certificates; Payment for Shares.
Subject to the restrictions contained herein, this Warrant is exercisable at
the Holder's option, at any time or from time to time after the first
anniversary of the date hereof (except as provided in section 3.1(b) or (c)),
up to the Expiration Date for all or any part of the Common Stock (but not for
a fraction of a share) which may be purchased hereunder. The Company agrees
that the Common Stock purchased under this Warrant shall be and is deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall
<PAGE> 2
have been surrendered and payment made for such shares. Certificates for the
Common Stock so purchased, together with any other securities or property to
which the Holder hereof is entitled upon such exercise, shall be delivered to
the Holder hereof by the Company at the Company's expense within a reasonable
time after the rights represented by this Warrant have been so exercised. In
case of a purchase of less than all the Common Stock which may be purchased
under this Warrant, the Company shall cancel this Warrant and execute and
deliver a new Warrant or Warrants of like tenor for the balance of the Common
Stock purchasable under the Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time. Each stock certificate so delivered
shall be in such denominations of Common Stock as may be requested by the
Holder hereof and shall be registered in the name of such Holder or its initial
issuance designee.
Section 2. Shares to be Fully Paid; Reservation of Shares. The
Company covenants and agrees that all Common Stock which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required
to provide for the exercise of the rights represented by this Warrant. The
Company will take all such action as may be necessary to assure that such
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange 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 Section 9.
The Company will not take any action which would result in any adjustment of
the Stock Purchase Price (as described in Section 3 hereof) if the total number
of shares of Common Stock issuable after such action upon exercise of all
outstanding warrants, together with all Common Stock then outstanding and all
Common Stock then issuable upon exercise of all options and upon the conversion
of all convertible securities then outstanding, would exceed the total number
of shares of Common Stock then authorized by the Company's Certificate of
Incorporation, as amended.
Section 3. Adjustment of Stock Purchase Price and Number of
Warrant Shares. The number and kind of securities that may be acquired upon
the exercise of this Warrant and the Stock Purchase Price shall be subject to
adjustment, from time to time, upon the happening of any of the following
events:
3.1 Dividends, Subdivisions, Combinations, or Consolidations
of Common Stock.
(a) In the event that the Company shall declare, pay,
or make any dividend upon its outstanding Common Stock payable in Common Stock
or shall effect a
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<PAGE> 3
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock, then the number of Warrant Shares that may thereafter
be purchased upon the exercise of the rights represented hereby shall be
increased in proportion to the increase in the number of outstanding shares of
Common Stock through such dividend or subdivision, and the Stock Purchase Price
shall be decreased in such proportion. In case the Company shall at any time
combine the outstanding shares of its Common Stock into a smaller number of
shares of Common Stock, the number of Warrant Shares that may thereafter be
acquired upon the exercise of the rights represented hereby shall be decreased
in proportion to the decrease through such combination and the Stock Purchase
Price shall be increased in such proportion.
(b) If the Company declares, pays or makes any
dividend or other distribution upon its outstanding Common Stock payable in
securities (excluding cash dividends and dividends payable in Common Stock, but
including, without limitation, shares of any other class of the Company's stock
or stock or other securities convertible into or exchangeable for shares of
Common Stock or any other class of the Company's stock ("Convertible
Securities")), then the Company shall, at its option, cause an effective
provision to be made so that the Holder shall have the right thereafter, by the
exercise of this Warrant, to acquire for the aggregate Stock Purchase Price
described in this Warrant the kind and amount of shares of stock and other
securities, property and interests as would be issued or payable with respect
to or in exchange for the number of Warrant Shares that are then purchasable
pursuant to this Warrant as if such Warrant Shares had been issued to the
Holder immediately prior to such event. The securities deliverable to the
Holder upon the exercise of this Warrant shall be in the same ratio to the
total securities reserved for the Holder as the number of Warrant Shares with
respect to which this Warrant is then exercised is to the total Warrant Shares
that may be acquired pursuant to this Warrant at the time the securities were
reserved for the Holder. If the Company shall declare, pay or make such a
dividend or distribution in securities, the notice of such transaction pursuant
to section 4.2 shall include a reasonably detailed description of the
securities to be distributed and, beginning upon on the announcement of the
record date for such dividend or distribution, the Holder shall be entitled to
exercise this Warrant notwithstanding the prohibition otherwise applicable on
the exercise of this Warrant prior to the first anniversary of the date hereof.
(c) If the Company declares, pays or makes any
dividend or other distribution upon its outstanding Common Stock payable in
property (excluding cash dividends payable from current income and dividends or
other distributions payable in securities), then immediately following the
record date for such dividend or distribution, the Company shall decrease the
Stock Purchase Price in effect immediately prior to such dividend or other
distribution to equal the amount determined by multiplying the Stock Purchase
Price in effect immediately prior thereto by a fraction, of which the numerator
shall be the total number of shares of Common Stock outstanding on the record
date for such dividend or distribution multiplied by the Current Market Price
per share on such record date, less the aggregate fair market value as
determined in good faith by the Company's board of directors of such dividend
or distribution, and of which the denominator shall be the total number of
shares of Common Stock outstanding on such record date multiplied by such
Current Market Price per share. The "Current Market Price" per share on any
date shall be deemed to be the average of the daily closing prices of the
Common
- 3 -
<PAGE> 4
Stock for twenty consecutive trading days ending the trading day before such
date. The closing price for each day shall be (i) the last reported sale price
regular way on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, (ii) if not so listed or admitted to
trading, the last reported sale price regular way reported on the NASDAQ
National Market or its successor, (iii) if not listed or admitted to trading on
the NASDAQ National Market or its successor, the closing bid price as reported
by the NASDAQ System or its successor, or (iv) if the Common Stock is not
publicly traded, the Current Market Price per share shall mean the quotient
obtained by dividing the consolidated stockholders' equity of the Company and
its subsidiaries as of the last day of the Company's last full fiscal quarter
by the total number of outstanding shares of Common Stock on such last day. If
the Company shall declare, pay or make such a dividend or distribution in
property, the notice of such transaction pursuant to section 4.2 shall include
a reasonably detailed description of the property to be distributed and,
beginning upon on the announcement of the record date for such dividend or
distribution, the Holder shall be entitled to exercise this Warrant
notwithstanding the prohibition otherwise applicable on the exercise of this
Warrant prior to the first anniversary of the date hereof.
(d) If the Company shall declare a dividend
payable in money on its outstanding Common Stock and at substantially the same
time offer to its shareholders a right to purchase new shares of Common Stock
from the proceeds of such dividend or for an amount substantially equal to the
dividend, all shares of Common Stock so issued shall, for purposes of this
Warrant, be deemed to have been issued as a stock dividend subject to the
adjustments set forth in Section 3.1(a).
(e) If the Company shall declare a dividend
payable in money on its outstanding Common Stock and at substantially the same
time offer to its shareholders a right to purchase new shares of a class of
stock (other than Common Stock), Convertible Securities, or other interests
from the proceeds of such dividend or for an amount substantially equal to the
dividend, all shares of stock, Convertible Securities, or other interests so
issued or transferred shall, for purposes of this Warrant, be deemed to have
been issued as a dividend or other distribution subject to the adjustments set
forth in Section 3.1(b).
3.2 Pro Rata Subscription Rights. If at any time the
Company grants to its stockholders rights to subscribe pro rata for additional
securities of the Company, whether Common Stock, Convertible Securities, or for
any other securities or interests that the Holder would have been entitled to
subscribe for if, immediately prior to such grant, the Holder had exercised
this Warrant, then the Company shall also grant to the Holder the same
subscription rights that the Holder would be entitled to if the Holder had
exercised this Warrant in full immediately prior to such grant.
3.3 Effect of Reclassification, Reorganization,
Consolidation, Merger, or Sale of Assets.
(a) Upon the occurrence of any of the following
events, the Company shall cause an effective provision to be made so that the
Holder shall have the right thereafter, by
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<PAGE> 5
the exercise of this Warrant, to acquire for the aggregate Stock Purchase Price
described in this Warrant the kind and amount of shares of stock and other
securities, property and interests as would be issued or payable with respect
to or in exchange for the number of Warrant Shares that are then purchasable
pursuant to this Warrant as if such Warrant Shares had been issued to the
Holder immediately prior to such event: (i) reclassification, capital
reorganization, or other change of outstanding Common Stock (other than a
change as a result of an issuance of Common Stock under Subsection 3.1), (ii)
consolidation or merger of the Company with or into another corporation or
entity (other than a consolidation or merger in which the Company is the
continuing corporation and that does not result in any reclassification,
capital reorganization or other change of the outstanding shares of Common
Stock or the Warrant Shares issuable upon exercise of this Warrant) or (iii)
spin off of assets, a subsidiary or any affiliated entity, or the sale, lease,
pledge, mortgage, conveyance or exchange of a material portion of the Company's
assets taken as a whole, in a transaction pursuant to which the Company's
shareholders of record are to receive securities in a successor entity. Any
such provision made by the Company for adjustments with respect to this Warrant
shall be as nearly equivalent to the adjustments otherwise provided for in this
Warrant as is reasonably practicable. The foregoing provisions of this Section
3.3(a) shall similarly apply to successive reclassifications, capital
reorganizations and similar changes of shares of Common Stock and to successive
consolidations, mergers, spin-offs, sales, leases or exchanges.
(b) If any sale, lease, pledge, mortgage,
conveyance or exchange of all, or substantially all, of the Company's assets or
business or any dissolution, liquidation or winding up of the Company (a
"Termination of Business") shall be proposed, the Company shall deliver written
notice to the Holder of this Warrant in accordance with Section 4 below as a
condition precedent to the consummation of that Termination of Business. If
the result of the Termination of Business is that shareholders of the Company
are to receive securities or other interests of a successor entity, the
provisions of Section 3.3(a) above shall apply. However, if the result of the
Termination of Business is that shareholders of the Company are to receive
money or property other than securities or other interests in a successor
entity, the Holder of this Warrant shall be entitled to exercise this Warrant
and, with respect to any Warrant Shares so acquired, shall be entitled to all
of the rights of the other shareholders of Common Stock with respect to any
distribution by the Company in connection with the Termination of Business. In
the event no successor entity is involved and Section 3.3(a) does not apply,
all acquisition rights under this Warrant shall terminate at the close of
business on the date as of which shareholders of record of the Common Stock
shall be entitled to participate in a distribution of the assets of the Company
in connection with the Termination of Business; provided, that, in no event
shall that date be less than 30 days after delivery to the Holder of this
Warrant of the written notice described above and in Section 4. If the
termination of acquisition rights under this Warrant is to occur as a result of
the event at issue, a statement to that effect shall be included in that
written notice.
3.4 Obligation of Successors or Transferees. The Company
shall not effect any consolidation, merger, or sale or conveyance of assets
within the meaning of Section 3.3(a)(ii) or (iii), unless prior to or
simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation
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<PAGE> 6
purchasing such assets shall assume by written instrument executed and mailed
or delivered to the Holder pursuant to Section 11 herein, (i) the obligation to
deliver to the Holder such shares of stock, securities, or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to acquire
and (ii) the other duties and obligations of the Company under this Warrant.
In no event shall the securities received pursuant to this Section be
registerable or transferable other than pursuant and subject to the terms of
this Warrant.
3.5 Stock Purchase Price Adjustments.
(a) Except as otherwise provided in this Section
3, upon any adjustment of the Stock Purchase Price, the Holder shall be
entitled to purchase, based upon the new Stock Purchase Price, the number of
shares of Common Stock, calculated to the nearest full share, obtained by
multiplying the number of Warrant Shares that may be acquired pursuant to this
Warrant immediately prior to the adjustment of the Stock Purchase Price by the
Stock Purchase Price in effect immediately prior to its adjustment and dividing
the product so obtained by the new Stock Purchase Price.
(b) If consideration other than money is received
or issued by the Company upon the issuance, sale or purchase of Common Stock,
Convertible Securities, or other securities or interests, the fair market value
of such consideration, as reasonably determined in good faith by the Company's
board of directors shall be used for purposes of any adjustment required by
this Section 3. The fair market value of such consideration shall be
determined as of the date of the adoption of the resolution of the Company's
board of directors that authorizes the transaction giving rise to the
adjustment. In case of the issuance or sale of the Common Stock, Convertible
Securities, or other securities or property without separate allocation of the
purchase price, the Company's board of directors shall reasonably determine in
good faith an allocation of the consideration among the items being issued or
sold. The reclassification of securities other than Common Stock into
securities including Common Stock shall be deemed to involve the issuance of
that Common Stock for a consideration other than money immediately prior to the
close of business on the date fixed for the determination of shareholders
entitled to receive the Common Stock. The Company shall promptly deliver
written notice of all such determinations to the Holder of this Warrant.
3.6 Application of this Section. The provisions of this
Section 3 shall apply to successive events that may occur from time to time but
shall only apply to a particular event if it occurs prior to the expiration of
this Warrant either by its terms or by its exercise in full.
3.7 Definition of Common Stock. Unless the context
requires otherwise, whenever reference is made in this Section 3 to the issue
or sale of shares of Common Stock, the term "Common Stock" shall mean (a) the
$0.10 par value common stock of the Company, (b) any other class of stock
ranking on a parity with, and having substantially similar rights and
privileges as the Company's $0.10 par value common stock, and (c) any
Convertible Security convertible into either (a) or (b). However, subject to
the provisions of Section 3.3(a) above, Warrant Shares
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<PAGE> 7
issuable upon exercise of this Warrant shall include only shares of common
stock designated as $0.10 par value common stock of the Company as of the date
of this Warrant.
3.8 Company-Held Stock. For purposes of Section 3.1
above, shares of 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 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 Company.
Section 4. Notice to the Holder.
4.1 Notice of Adjustment. Upon the happening of an event
requiring adjustment of the Stock Purchase Price or the kind or amount of
securities or property purchasable hereunder, the Company shall forthwith give
notice to the Holder which indicates the event requiring the adjustment, the
adjusted Stock Purchase Price and the adjusted number of Warrant Shares that
may be acquired or the kind and amount of any such securities or property so
purchasable upon exercise of this Warrant, as the case may be, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company's independent public accountant shall
determine the method of calculating the adjustment and shall prepare a
certificate setting forth such calculations, the reason for the methodology
chosen and the facts upon which the calculation is based. Such certificate
shall accompany the notice to be provided to the Holder pursuant to this
Section 4.1.
4.2 Other Notices. If, prior to the expiration of this
Warrant either by its terms or by exercise in full, any of the following shall
occur:
(a) the Company shall declare a dividend or
authorize any other distribution on its Common Stock, including those of the
type identified in Section 3.1 hereof; (b) the Company shall authorize the
granting to the shareholders of its Common Stock of rights to subscribe for or
purchase any securities or any other similar rights; (c) any reclassification,
reorganization or similar change of the Common Stock, or any consolidation or
merger to which the Company is a party, or the sale, lease, pledge, mortgage
exchange, or other conveyance of all or substantially all of the assets of the
Company; (d) the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or (e) any purchase, retirement or redemption by the Company
of its Common Stock; then, and in any such case, the Company shall deliver to
the Holder written notice thereof at least 25 days prior to the earliest
applicable date specified below with respect to which notice is to be given,
which notice shall state the following: (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights, or, if a record
is not to be taken, the date as of which the shareholders of Common Stock of
record to be entitled to such dividend, distribution or rights are to be
determined; (y) the date on which such reclassification, reorganization,
consolidation, merger, sale, lease, pledge, mortgage, exchange, transfer,
dissolution, liquidation, winding up or purchase, retirement or redemption is
expected to become effective, and the date if any, as of which the Company's
shareholders of Common Stock
- 7 -
<PAGE> 8
of record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reclassification, reorganization,
consolidation, merger, sale, lease, pledge, mortgage, exchange, transfer,
dissolution, liquidation, winding up, purchase, retirement or redemption; and
(z) if any matters referred to in the foregoing clauses (x) and (y) are to be
voted upon by shareholders of Common Stock, the date as of which those
shareholders to be entitled to vote are to be determined.
Section 5. Issue Tax. The issuance of certificates for Common
Stock by the Company upon the exercise of the Warrant shall be made without
charge to the Holder of the Warrant for any issue tax (other than any
applicable income taxes) in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of the Warrant being exercised.
Section 6. Closing of Books. The Company will at no time close
its transfer books against the transfer of any warrant or of any Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
Section 7. No Voting or Dividend Rights; Limitation of
Liability. Nothing contained in this Warrant shall be construed as conferring
upon the Holder hereof the right to vote or to consent or to receive notice as
a stockholder of the Company or any other matters or any rights whatsoever as a
stockholder of the Company. No dividends or interest shall be payable or
accrued in respect of this Warrant or the interest represented hereby or the
shares purchasable hereunder until, and only to the extent that, this Warrant
shall have been exercised. No provisions hereof, in the absence of affirmative
action by the Holder to purchase Common Stock, and no mere enumeration herein
of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Stock Purchase Price or as a stockholder of
the Company, whether such liability is asserted by the Company or by its
creditors. The Company will furnish the Holder with a copy of the annual and
quarterly reports of the Company and such other public reports as the Holder
may reasonably request.
Section 8. Warrants Transferable. Subject to the provisions of
this Section 8, this Warrant and all rights hereunder are transferable, in
whole or in part, without charge to the Holder hereof (except for transfer
taxes), upon surrender of this Warrant properly endorsed. Notwithstanding
anything to the contrary, this Warrant may only be sold or otherwise
transferred (i) if the transaction would qualify for an exemption from
registration under Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), except for the requirement of Regulation D that such
securities be sold by the issuer thereof, or (ii) if the transaction would
qualify for an exemption from registration under Rule 144A of the Securities
Act. Further, as a condition to such transaction, if the Company requests, the
Holder shall provide a reasonably acceptable opinion of counsel as to the
exemption of such transaction with the registration provisions of the
Securities Act. The Warrant shall not be sold or otherwise transferred in
reliance upon Rule 144 under the Securities Act.
- 8 -
<PAGE> 9
Section 9. Registration Rights. The Common Stock issuable upon
the exercise of this Warrant has not been registered under the Securities Act
and may be entitled to registration rights in accordance with the Registration
Rights Agreement, dated as of the date hereof, between the Company and the
parties set forth in Exhibit A thereto (the "Registration Rights Agreement").
A copy of the Registration Rights Agreement is attached hereto as Exhibit A.
Section 10. Modification and Waiver. This Warrant and any
provision hereof may be changed, waived, discharged or terminated by an
instrument in writing signed by the party against which enforcement of the same
is sought.
Section 11. Notices. Any notice, request or other document
required or permitted to be given or delivered to the Holder hereof or the
Company shall be delivered or shall be sent by certified mail, postage prepaid,
to the Holder at its address as shown on the Company's books or to the Company
at the address indicated therefor in the first paragraph of this Warrant or
such other address as either may from time to time provide to the other. Any
required notice shall be deemed to have been given three days after deposit in
the U.S. Mail as provided herein.
Section 12. Binding Effect on Successors. This Warrant shall be
binding upon any corporation succeeding the Company by merger or consolidation.
Section 13. Descriptive Headings and Governing Law. The
description headings of the several sections and paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant.
This Warrant shall be construed and enforced in accordance with, and the rights
of the parties shall be governed by, the laws of the State of Delaware.
Section 14. Lost Warrants or Stock Certificates. The Company
represents and warrants to the Holder hereof that upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant or any stock certificate representing the shares
issued upon exercise of this Warrant and, in the case of any such loss, theft
or destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company, at its expense, will make
and deliver a new Warrant or stock certificate, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Warrant or stock certificate.
Section 15. Fractional Shares. No fractional shares shall be
issued upon exercise of this Warrant. The Company shall, in lieu of issuing
any fractional share, pay the Holder entitled to such fraction a sum in cash
equal to such fraction multiplied by the then effective Stock Purchase Price.
Section 16. Best Efforts. The Company covenants that it will
not, by amendment of its Certificate of Incorporation or bylaws, or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities, or any other voluntary action, avoid or seek to avoid
the observation or performance of any of the terms of this Warrant.
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<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this ____ day of September,
1996.
Atlantic Gulf Communities Corporation,
a Delaware corporation
By:
-------------------------------
Title:
------------------------------
ATTEST:
- ----------------------------
Secretary
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To:
------------------------
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ___________________ (______) shares of Common Stock of
Atlantic Gulf Communities Corporation, a Delaware corporation (the "Company"),
and herewith makes payment of ____________________________________ Dollars
($________) therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to,
___________________________________________________, whose address is
_______________________________________________.
If this exercise is not being made in conjunction with registration
under the Securities Act, the undersigned represents that it is acquiring such
Common Stock for its own account for investment and not with a view to or for
sale in connection with any distribution thereof and to induce the issuance of
such Common Stock makes to the Company the representation and warranties set
forth on the investment representation statement attached hereto.
DATED: _____________
------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant)
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<PAGE> 11
___________________________
___________________________
__________________
(1) Insert here the number of shares (or, in the case of a partial
exercise, the portion thereof as to which the Warrant is being
exercised), in either case without making any adjustment for
additional Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant, may be deliverable upon exercise.
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<PAGE> 12
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned, the Holder of the within Warrant,
hereby sells, assigns and transfers all of the rights of the undersigned under
the within Warrant, with respect to the number of shares of Common Stock
covered thereby set forth hereinbelow, unto:
Name of Assignee Address No. of Shares
Dated: _____________
------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
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<PAGE> 1
Atlantic Gulf Communities Corporation Exhibit to the 1996 Form 10-K
Exhibit (c) 10(i)28. Registration Rights Agreement dated as of
September 30, 1996
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of September 30, 1996 by and between Atlantic Gulf Communities
Corporation, a Delaware corporation (the "Company"), and the parties set forth
in Exhibit A hereto (the "Banks").
WHEREAS, in connection with the proposed recapitalization of certain
debt (the "Recapitalization Plan") of the Company and as a material condition
to the completion of the Company's Recapitalization Plan, the Banks have
entered into a letter agreement dated as of August 22, 1996 (the "Letter
Agreement") pursuant to which the Company has certain rights to prepay at a
discount the Secured Cash Flow Notes due December 31, 1998; and
WHEREAS, the Company, pursuant to a warrant agreement dated as of the
date hereof (the "Warrant Agreement"), has issued warrants (the "Warrants") to
the Banks to acquire up to 1,500,000 shares of the Company's common stock, par
value $.10 per share (the "Common Stock"); and
WHEREAS, as an inducement to the Banks to enter into the Letter
Agreement, and as a condition to closing under, the Warrant Agreement, the
Company has agreed to provide, upon the prepayment of the Secured Cash Flow
Notes, certain registration rights to holders of the Warrants as set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Agreement" is defined in the Preamble to this Agreement.
"Banks" is defined in the Recitals to this Agreement.
"Common Stock" is defined in the Recitals to this Agreement.
"Company" is defined in the Preamble to this Agreement.
"Demand Period" is defined in section 3.2 hereof.
"Demand Registration" is defined in section 3.2 hereof.
<PAGE> 2
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar law then in force.
"Holder" or "Holders" means any person who owns or has the
right under the Warrant Agreement to acquire Registrable
Securities, provided that any subsequent holder shall be
subject to the requirements of section 2.2 hereof.
"Letter Agreement" is defined in the Recitals to this
Agreement.
"Material Transaction"means any merger or consolidation
involving the Company or a material subsidiary thereof, or
sale of all or substantially all of the assets of the Company
or a material subsidiary thereof, or financing or securities
offering by the Company, or any material subsidiary thereof,
or any material acquisition or disposition of assets by the
Company or any subsidiary thereof, or any material transaction
similar to any of the foregoing mentioned transactions
involving the Company or any material subsidiary.
"Other Holders" is defined in section 4.4 hereof.
"Person" means an individual, a partnership, an association, a
joint venture, a corporation, a trust, an unincorporated
organization and a government or any department, agency or
principal subdivision thereof.
"Piggyback Notice" is defined in section 4.1 hereof.
"Piggyback Registration" is defined in section 4.1 hereof.
"Prospectus" is the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective
amendments and material incorporated by reference in such
prospectus.
"Registrable Securities" means (i) Common Stock issued to the
Banks pursuant to the Warrant Agreement, (ii) any Common Stock
issued to the Banks' transferees pursuant to a transfer
permitted pursuant to section 2.2 hereof, and (iii) any Common
Stock issued or issuable with respect to the Common Stock
referred to in clauses (i) or (ii) by way of replacement,
share dividend, share split or in connection with a
combination of shares, recapitalization, merger, consolidation
or other reorganization.
- 2 -
<PAGE> 3
"Registration Statement" means any registration statement of
the Company which covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits
and all materials incorporated by reference in such
Registration Statement.
"Registration Expenses" is defined in section 6.1 hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar federal law then in force.
"Warrant" is defined in the Recitals to this Agreement.
"Warrant Agreement" is defined in the Recitals to this
Agreement.
"Warrant Holder" is defined in section 3.1 hereof.
Section 2. Registrable Securities.
2.1 Registrable Securities. The securities entitled to
the benefits of this Agreement are the Registrable Securities.
2.2 Rights of Subsequent Holder. Subject to the
restrictions on transfer set forth on the certificates representing the
Registrable Securities, any subsequent holder of 50,000 or more Registrable
Securities (such amount to be adjusted as provided in section 3 of the Warrant
Agreement) shall be entitled to all benefits hereunder as a Holder of such
Registrable Securities.
Section 3. Demands for Registration.
3.1 Demanding Shareholders. Any record holder or record
holders of Warrants (a "Warrant Holder" or collectively "Warrant Holders") for
the greater of (i) in respect of Warrant Holders on the date hereof, 10% of the
Registrable Securities covered by the then outstanding Warrants, and, in
respect of all subsequent Warrant Holders, 20% of such Registrable Securities,
or (ii) 100,000 shares of Common Stock (such amount to include all shares of
Registrable Securities purchased or purchasable under the Warrants and to be
adjusted as provided in section 3 of the Warrant Agreement) may make a request
to the Company for registration under the Securities Act of all or part of
their Registrable Securities ("Demanding Shareholders" or individually a
"Demanding Shareholder").
3.2 Demand Period. Demanding Shareholders, in addition
to other rights enumerated in this Agreement, will have three opportunities to
request registration under the
- 3 -
<PAGE> 4
Securities Act of all or part of their Registrable Securities (a "Demand
Registration") from the 270th day after the date of this Agreement until
termination of this Agreement pursuant to section 9.3 hereof (the "Demand
Period").
3.3 Demand Procedure.
3.3.1 Subject to subsection 3.3.2 hereof, during the Demand
Period any Demanding Shareholder or combination of Demanding Shareholders may
deliver to the Company a written request (a "Demand Registration Request") that
the Company register any or all of such Demanding Shareholders' Registrable
Securities.
3.3.2 Demanding Shareholders may only make one Demand
Registration Request in any six-month period during the Demand Period (the
"Interim Demand Period") and except as provided in subsections 3.3.4 and 3.3.8,
in the aggregate may only make three Demand Registration Requests. The Company
shall only be required to file one registration statement (as distinguished
from supplements or pre-effective or post-effective amendments thereto) in
response to each Demand Registration Request.
3.3.3 A Demand Registration Request from Demanding
Shareholders shall (i) set forth the number of Registrable Securities intended
to be sold pursuant to the Demand Registration Request, (ii) disclose whether
all or any portion of a distribution pursuant to such registration will be
sought by means of an underwriting, and (iii) identify any underwriter or
underwriters proposed for the underwritten portion, if any, of such
registration.
3.3.4 If during any Interim Demand Period, the Company
receives a Demand Registration Request from Demanding Shareholders satisfying
the requirements of section 3.1 hereof, the Company shall, subject to the
limitations in subsection 3.3.5 and section 5 hereof, promptly prepare and file
a Registration Statement on the appropriate form to register for sale all of
the Registrable Securities that the Demanding Shareholders requested to be
registered in the Demand Registration Request and in any Supplemental Demand
Registration Request received by the Company in accordance with section 3.3.6
hereof with the SEC. The Company shall use its best efforts to prepare and
file the Registration Statement within 90 days of the receipt of the Demand
Registration Request. The Company shall use its best efforts (a) to cause such
Registration Statement to become effective, and (b) thereafter to keep it
continuously effective and to prevent the happening of an event of the kind
described in section 5.1.3(f) hereof that requires the Company to give notice
pursuant to section 5.2 hereof, until the earlier of such time as the Demanding
Shareholders shall have sold or otherwise disposed of all of their Registrable
Securities included in the Registration Statement or 245 days from the date of
effectiveness of such Registration Statement. If prior to the earlier of such
dates, the Company shall fail to keep such registration statement continuously
effective or fail to prevent the happening of an event of the kind described in
section 5.1.3(f) hereof that requires the Company to give notice pursuant to
section 5.2 hereof, and such failure shall materially interfere with the
completion of the distribution contemplated by such Registration Statement,
such Registration Statement shall not
- 4 -
<PAGE> 5
be considered to be one of the three required Demand Registrations. Further,
if any such failure by the Company results in Registrable Securities failing to
be sold pursuant to what would otherwise constitute the last Demand
Registration that the Company is required to provide pursuant to section 3.3.2,
then the Company shall, at its option, either (i) grant the Holders of such
Registrable Securities not sold, one additional Demand Registration hereunder
with respect to such Registrable Securities not sold in the offering, on the
same terms and conditions as would have applied to such Holders had such
earlier Demand Registration not been made (except for the minimum threshold
requirements referred to in section 3.1 hereof shall not apply) or (ii) within
20 business days of the date demand is made for such additional Demand
Registration, purchase such Registrable Securities not sold in the offering at
the average per share closing price for such securities, as reported on the
principal securities exchange or inter-dealer quotation system on which such
securities are then listed, for the last five trading days preceding the date
of demand (as reported by the Wall Street Journal or, if not reported thereby,
any authoritative source reasonably acceptable to the Holders of such
securities).
3.3.5 The Company will use its best efforts to use Form S-3
or, if not available for any reason, Form S-2 (or any comparable successor
form) for any Registration Statement prepared and filed in connection with a
Demand Registration Statement hereunder. It is anticipated that the
Registration Statement filed with the SEC will allow for different means of
distribution, including sales by means of an underwriting as well as sales into
the open market. If the Demanding Shareholders desire to distribute all or
part of the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company in writing in their initial
Demand Registration Request as described in section 3.3.3 hereof. A
determination of whether all or part of the distribution will be by means of an
underwriting shall be made by Demanding Shareholders holding a majority of the
Registrable Securities to be included in the registration. If all or part of
the distribution is to be by means of an underwriting, all subsequent decisions
concerning the underwriting which are to be made by the Demanding Shareholders
pursuant to this Agreement, which shall include the selection of the
underwriter or underwriters to be engaged and the representative, if any, of
the underwriters so engaged, shall be made by the Demanding Shareholders who
hold a majority of the Registrable Securities to be included in the
underwriting, subject to approval by the Company's Board of Directors (the
"Board") which approval shall not be unreasonably withheld. The Company agrees
to provide the Holders with notice of filing of the Registration Statement
pursuant to this section 3 and the filing of any amendments or supplements
thereto.
3.3.6 Upon the receipt by the Company of a Demand
Registration Request in accordance with subsection 3.3.3 hereof, the Company
shall, within 10 days following receipt of such Demand Registration Request,
give written notice of such request to all Holders. The Company shall include
in such notice information concerning whether all, part or none of the
distribution is expected to be made by means of an underwriting, and, if more
than one means of distribution is contemplated, may require Holders to notify
the Company of the means of distribution of their Registrable Securities to be
included in the registration. If any Holder who is not a Demanding Shareholder
desires to sell any Registrable Securities owned by such Holder,
- 5 -
<PAGE> 6
such Holder may elect to have all or any portion of their Registrable
Securities included in the registration statement by notifying the Company in
writing (a "Supplemental Demand Registration Request") within twenty (20) days
of receiving notice of the Demand Registration Request from the Company. The
right of any Holder to include all or any portion of its Registrable Securities
in an underwriting shall be conditioned upon the Company's having received a
timely written request for such inclusion by way of a Demand Registration
Request or Supplemental Demand Registration Request (which right shall be
further conditioned to the extent provided in this Agreement). All Holders
proposing to distribute their Registrable Securities through an underwriting
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting.
3.3.7 In any registered offering pursuant to this section 3
that becomes effective in which a Holder participates, the Company shall use
its best efforts to keep available to the Holder a Prospectus meeting the
requirements of Section 10(a)(3) of the Securities Act and shall file all
amendments and supplements under the Securities Act required for those purposes
during the period specified in section 3.3.4. The Company agrees to supplement
or amend such Registration Statement, if required by the rules and regulations
or instructions applicable to the registration form utilized by the Company, or
the rules and regulations thereunder for shelf registrations pursuant to Rule
415 promulgated under the Securities Act, or as reasonably requested by the
Holders of the Registrable Securities covered by the Registration Statement, or
any underwriter of the Registrable Securities. In any offering pursuant to
this section 3 the Company will promptly use its best efforts to effect such
qualification and compliance as may be requested and as would permit or
facilitate the distribution of the Registrable Securities, including, without
limitation, appropriate qualifications under applicable blue sky or other state
securities laws, appropriate compliance with any other governmental
requirements and listing on a national securities exchange or inter-dealer
quotation system on which the Registrable Securities are then listed.
3.3.8 Notwithstanding any other provision of this section
3, if the managing underwriter advises the Company in writing that in their
opinion marketing factors require a limitation on the number of shares to be
underwritten, then the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among the Holders in proportion
(as nearly as practicable) to the respective amounts of Registrable Securities
each Holder otherwise sought to have registered pursuant to its Demand
Registration Request or Supplemental Demand Registration Request (or in such
other proportion as they shall mutually agree). Registrable Securities
excluded or withdrawn from the underwriting in accordance with this section
3.3.8 shall be withdrawn from the registration. If any such limitation results
in Registrable Securities being excluded or withdrawn from what would otherwise
constitute the last Demand Registration the Company is required to provide
pursuant to section 3.3.2, then the Company shall, at its option, either (i)
grant the Holders of such Registrable Securities excluded or withdrawn from
such registration one additional Demand Registration hereunder with respect to
such Registrable Securities not included in the offering, on the same terms and
conditions as would have applied to such Holders had such earlier Demand
Registration not been made (except
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<PAGE> 7
for the minimum threshold requirements referred to in section 3.1 hereof shall
not apply) or (ii) within 20 business days of the date demand is made for such
additional Demand Registration, purchase such excluded or withdrawn Registrable
Securities at the average per share closing price for such securities, as
reported on the principal securities exchange or inter-dealer quotation system
on which such securities are then listed, for the last five trading days
preceding the date of demand (as reported by the Wall Street Journal or, if not
reported thereby, any authoritative source reasonably acceptable to the Holders
of such securities).
3.4 Priority on Demand Registration.
3.4.1. The Company will not include in any Demand
Registration any securities which are not Registrable Securities without the
prior written consent of the Holders of a majority of the shares of Registrable
Securities included in such registration. If the Holders of a majority of the
shares of Registrable Securities so request, the Company may, in its reasonable
discretion, include in any Demand Registration securities owned by Holders of
Registrable Securities which are not Registrable Securities. If the Company
permits the inclusion of such securities, the Holders owning such securities,
in addition to the costs set forth in section 6.2., shall pay all incremental
costs associated with the inclusion of such securities in the Registration
Statement, including, but not limited to, all increments in registration,
filing fees and NASD fees.
3.4.2. If a Demand Registration is an underwritten offering
and the managing underwriter advises the Company in writing that in their
opinion the number of Registrable Securities and, if permitted hereunder, other
securities requested to be included in such offering exceeds the number of
securities that can be sold in such offering without a material adverse effect
on the number of Registrable Securities or the price of the Registrable
Securities in such offering, then the Company will include in such Demand
Registration prior to the inclusion of any securities which are not Registrable
Securities the number of shares of Registrable Securities requested to be
included that in the opinion of such underwriters can be sold in such offering
without a material adverse effect on the price of the Registrable Securities in
such offering, pro rata among the respective Holders thereof on the basis of
the number of shares of Registrable Securities owned by each such Holder.
Section 4. Piggyback Registrations.
4.1 Right to Piggyback. If the Company proposes to
undertake an offering of Common Stock for its account or for the account of
Other Holders (other than on Form S-4, Form S-8 or any comparable successor
form) (a "Piggyback Registration"), then each such time the Company will give
written notice of a proposed offering (a "Piggyback Notice") to all Holders of
Registrable Securities of its intention to effect such a registration at least
25 days prior to the anticipated filing date of such registration. The
Piggyback Notice shall offer the Holders the opportunity to include in such
Registration Statement such amount of Registrable Securities as they may
request ("Piggyback Registration"). The Company will use its best efforts to
cause to be included in such Registration Statement (and related qualifications
under blue sky laws) and the
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<PAGE> 8
underwriting involved therein, all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within 15
business days of sending the Piggyback Notice. Notwithstanding the above, the
Company may determine, at any time, not to proceed with such Registration
Statement. Such determination, however, will be without prejudice to the
rights of Demanding Shareholders to demand the continuation of such
Registration Statement under section 3 hereof.
4.2 Underwriting Agreement. To the extent that Holders
request Piggyback Registration of their Registrable Securities, the Holders
shall (together with the Company) enter into an underwriting agreement in
customary form with the managing underwriter selected by the Company for such
underwriting.
4.3 Priority on Primary Registrations. Notwithstanding any
other provisions of this Agreement, if the managing underwriter of the proposed
offering delivers a written opinion to the Holders that the total amount or
kind of securities which the Holders and any other Persons entitled to be
included in the offering would have a material adverse effect on the number of
Registrable Securities or the price of the Registrable Securities in such
offering, then the managing underwriter may limit some or all of the
Registrable Securities that may be included in the registration and
underwriting as follows: (a) first, the securities the Company proposes to
sell, (b) second, the Registrable Securities requested to be included in such
registration and any other securities requested to be included in such
registration pursuant to the Company's Registration Rights Agreement dated
September 21, 1994, pro rata among the holders of Registrable Securities and
such holders of such other securities requesting such registration on the basis
of the number of shares of such securities owned by each such holder and (c)
third, any other securities requested to be included in such registration that
are held by Persons receiving registration rights after the date of this
Agreement.
4.4 Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities other than the Holders of Registrable Securities (the
"Other Holders"), and the managing underwriters advise the Company in writing
that in their opinion the number of securities requested to be included in such
registration exceeds the number that can be sold in an orderly manner in such
offering within a price range acceptable to the Other Holders requesting such
registration, the Company will include in such registration (a) first, the
securities requested to be included therein by the Other Holders requesting
such registration and (b) second, the Registrable Securities requested to be
included in such registration hereunder, pro rata among the Holders of
Registrable Securities requesting such registration on the basis of the number
of shares of such securities owned by each such Holder.
4.5 No Demand Registration. No registration of the
Registrable Securities under this section 4 of the Agreement shall be deemed to
be a Demand Registration.
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<PAGE> 9
Section 5. Registration Procedures. Whenever the Holders of
Registrable Securities have requested that any Registrable Securities be sold
pursuant to this Agreement, the Company will use its reasonable best efforts to
effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and pursuant
thereto the Company will as expeditiously as possible:
5.1.1 Registration Statement. (a) Prepare and file with
the SEC, as soon as practicable, a Registration Statement or Registration
Statements relating to the applicable Registration on any appropriate form
(subject to the requirements of section 3.3.5 hereof) under the Securities Act,
which form shall be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution thereof and
shall include all financial statements required by the SEC to be filed
therewith; (b) cooperate and assist in any filings required to be made with the
National Association of Securities Dealers ("NASD"); and (c) use its best
efforts to cause such Registration Statement to become effective; provided,
however, that before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, the Company will furnish to the Holders
whose Registrable Securities are covered by such Registration Statement and the
underwriters, if any, copies of all such documents proposed to be filed, which
documents will be subject to the reasonable review of such Holders and
underwriters and the Company will not file any Registration Statement, or any
amendment or supplement thereto, (except a Piggyback Registration or any
amendment or supplement thereto) to which the Holders of a majority of the
Registrable Securities covered by such Registration Statement, or the
Underwriters, if any, shall reasonably object;
5.1.2 Amendments and Supplements. (a) Prepare and file
with the SEC such amendments and post-effective amendments to the Registration
Statement as may be necessary to keep the Registration Statement continuously
effective for the applicable period, or such shorter period which will
terminate when all the Registrable Securities covered by such Registration
Statement have been sold; (b) cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and (c) comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth in
such Registration Statement or supplement to the Prospectus;
5.1.3 Notifications. Notify the Holders of the Registrable
Securities covered thereby and the managing underwriters, if any, promptly, and
(if requested by any such person) confirm such advice in writing, (a) when the
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to the Registration Statement or any post-effective
amendment, when the same has become effective; (b) of any request by the SEC
for amendments or supplements to the Registration Statement or the Prospectus
or for additional information; (c) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (d) if at any time to the representations and
warranties of the Company contemplated by section 5.1.14 below cease
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to be true and correct; (e) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; or (f) of the happening of any event which makes
any statement made in the Registration Statement, the Prospectus or any
document incorporated therein by reference untrue or which requires the making
of any changes in the Registration Statement, the Prospectus or any document
incorporated therein by reference in order to make the statements therein not
misleading;
5.1.4 Stop-Orders and Suspensions. In the event of the
issuance of a stop-order or a suspension in the sale of the Common Stock, make
every reasonable effort to obtain the withdrawal of any order suspending the
effectiveness of the Registration Statement or otherwise prohibiting the offer
or sale of the Registrable Securities, including those issued by state
governmental authorities, at the earliest possible moment;
5.1.5 Distribution Disclosures. If requested by the
managing underwriter or underwriters or a Holder of Registrable Securities
being sold in connection with an underwritten offering, promptly incorporate in
a Prospectus supplement or post-effective amendment such information as the
managing underwriters and the Holders of a majority of the Registrable
Securities being sold reasonably agree should be included therein relating to
the plan of distribution with respect to such Registrable Securities,
including, without limitation, information with respect to the amount of
Registrable Securities being sold to such underwriters, the purchase price
being paid therefor by such underwriters and with respect to any other terms of
the underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment. The Company may require each of such Holders to furnish to the
Company such information regarding the distribution of such Registrable
Securities as the Company may from time to time reasonably request in writing;
5.1.6 Copies of Registration Statement. Furnish to each
Holder of Registrable Securities and each managing underwriter, without charge,
at least one signed copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference);
5.1.7 Copies of the Prospectus. Deliver to each Holder of
such Registrable Securities and the underwriters, if any, without charge, as
many copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such persons may reasonably request; the
Company hereby consents to the use of the Prospectus or any amendment or
supplement thereto by each of such Holders and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
the Prospectus or any amendment or supplement thereto;
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5.1.8 Blue Sky Laws. Prior to any public offering of the
Registrable Securities, register or qualify or cooperate with the Holders of
such Registrable Securities, the underwriters, if any, and their respective
counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions as any such Holder or underwriter reasonably requests in
writing and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided, however, that the Company will
not be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action which would subject it to
general service of process in any jurisdiction where it is not then so subject
or subject the Company to any income or sale tax in any such jurisdiction where
it is not then so subject;
5.1.9 Removal of Legends. Cooperate with the Holders of
such Registrable Securities and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends; and
enable such to be in such denominations and registered in such names as the
managing underwriters may request at least two business days prior to any sale
of Registrable Securities to the underwriters;
5.1.10 Other Governmental Filings. Use its best efforts to
cause the Registrable Securities covered by the applicable Registration
Statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the Holders thereof or the
underwriters, if any, to consummate the disposition of such Registrable
Securities;
5.1.11 Prospectus Amendments and Supplements. Upon the
occurrence of any event contemplated by section 5.1.3(f) above, prepare a
supplement or post-effective amendment to the Registration Statement or the
related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers
of the Registrable Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading;
5.1.12 Securities Exchange Listings. Use its best efforts
to cause all Registrable Securities covered by the Registration Statement to be
listed on each securities exchange or inter-dealer quotation system on which
similar securities issued by the Company are then listed, if any; and to the
extent that the Company is unable to obtain such listing, then the Company in
any event shall cause such Registrable Securities covered by the Registration
Statement to be listed on a securities exchange or inter-dealer quotation
system if any securities issued by the Company are then listed;
5.1.13 Delivery of Certificates. Not later than the
effective date of the applicable Registration Statement, provide a CUSIP number
for the Registrable Securities and provide the transfer agent with printed
certificates for the Registrable Securities which are in a form eligible for
deposit with Depository Trust Company;
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5.1.14 Agreements and Further Actions. Enter into such
customary agreements (including an underwriting agreement) and take all such
other reasonable actions in connection therewith in order to facilitate the
disposition of such Registrable Securities and in such connection, whether or
not an underwriting agreement is entered into and whether or not the
Registration is an underwritten registration (a) make such representations and
warranties to the Holders of such Registrable Securities and the underwriters,
if any, in form, substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings and covering matters including,
without limitation, those set forth in an underwriting agreement; (b) obtain
opinions of counsel to the Company and updates thereof (which opinions (in
form, scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and not objected to by the Holders of a majority of the
Registrable Securities being sold), addressed to each Holder selling
Registrable Securities and the underwriters, if any, covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by a majority of the Holders
selling such Registrable Securities and the underwriters, if any; (c) obtain
"cold comfort" letters and updates thereof from the Company's independent
certified public accountants addressed to the Holders of such Registrable
Securities and the underwriters, if any, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort" letters
by accountants in connection with primary underwritten offerings; (d) if an
underwriting agreement is entered into, the same shall set forth in full the
indemnification provisions and procedures of section 7 hereof with respect to
all parties to be indemnified pursuant to such section; and (e) the Company
shall deliver such documents and certificates as may be requested by the
Holders of a majority of the Registrable Securities being sold and the managing
underwriters, if any, to evidence compliance with section 5.1.11 above and with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company. The above shall be done at each closing
under such underwriting or similar agreement or as and to the extent required
thereunder;
5.1.15 Due Diligence Examination. Make available for
inspection by a representative of the Holders of a majority of the Registrable
Securities being sold and any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant retained
by such underwriters, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with
such Registration Statement;
5.1.16 Earning Statements. Otherwise use its best efforts
to comply with all applicable rules and regulations of the SEC, and make
generally available to its security holders, earnings statements satisfying the
provision of Section 11(a) of the Securities Act, no later than 45 days after
the end of each 12-month period (or 90 days after the end of each 12-month
period, if such period is a fiscal year) (a) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in a
firm or best efforts underwritten offering; or (b) if not sold to underwriters
in such an offering, beginning with the first month of the Company's first
fiscal
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<PAGE> 13
quarter commencing after the effective date of the Registration Statement,
which statements shall cover each of such 12-month periods;
5.1.17 Incorporated Documents. Promptly prior to the
filing of any document which is to be incorporated by reference into the
Registration Statement or the Prospectus (after initial filing of the
Registration Statement), provide copies of such document to counsel to the
Holders of Registrable Securities included in such Registration Statement and
to the managing underwriters, if any; and make the Company's representatives
available for discussion of such document, and make such changes in such
document (other than exhibits thereto) prior to the filing thereof as counsel
for such Holders or underwriters may reasonably request.
5.2. Discontinuation of Distribution by Holders. Each
Holder agrees, by acquisition of such Registrable Securities, that, upon
receipt of any notice from the Company of the happening of any event of the
kind described in section 5.1.11 hereof, such Holder will forthwith discontinue
disposition of Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by section 5.1.11
hereof, or until it is advised in writing (the "Advice") by the Company that
the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in the
Prospectus, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the time periods regarding the maintenance
of the effectiveness of any Registration Statement in section 3.3.4 hereof and
the term of this Agreement in section 9.3 shall be extended by the number of
days during the period from and including the date of the giving of such notice
pursuant to section 5.1.3(f) hereof to and including the date when each seller
of Registrable Securities covered by such Registration Statement shall have
received the copies of the supplemented or amended prospectus contemplated by
section 5.1.11 hereof or the Advice.
5.3 Company's Ability to Postpone. Notwithstanding
anything to the contrary contained herein, the Company shall have the right
once in any twelve-month period to postpone the filing of any registration
statement under sections 3 or 4 hereof if the Company furnishes the Holders of
Registrable Securities a certificate signed by the Chairman of the Board or the
Company's President stating that, in its good faith judgment, the Board (or the
executive committee thereof) has determined that effecting the registration at
such time would require the Company to make public disclosure of information
the public disclosure of which would have a material adverse effect upon the
Company or would interfere with a Material Transaction, and in the case of a
Material Transaction that constitutes a securities offering by the Company or
any material subsidiary thereof (an "Offering"), the managing underwriter, if
any, requests that the Holders not effect a public sale or distribution of
Registrable Securities. Such right may be exercised not more than three times
in the aggregate during the term of this Agreement subject to the following
further limitations: (a) such right may not be exercised more than once during
the term of this Agreement with respect to an Offering and the period of such
postponement may not
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<PAGE> 14
exceed the 10 day period prior to the commencement of such Offering, and the 60
day period after the completion of such Offering and (b) the period of
postponement with respect to Material Transactions other than an Offering shall
not exceed 90 days.
Section 6. Registration Expenses.
6.1 Expenses Borne by Company. Except as specifically
otherwise provided in subsections 3.3 and 6.2 hereof, the Company will be
responsible for payment of all expenses incident to the Company's performance
of or compliance with this Agreement and any registration hereunder, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel for the underwriters in connection with the blue sky
qualifications of the Registrable Securities as the managing underwriter or
Holders of a majority of the Registrable Securities being sold may designate),
fees and expenses associated with filings required to be made with the NASD,
printing expenses (including expenses of printing certificates for the
Registrable Securities in a form eligible for deposit with Depository Trust
Company and of prospectuses), messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants (including the expenses of any special audit and "cold comfort"
letters required by or incident to such performance), underwriters (excluding
discounts, commissions or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to the
distribution of the Registrable Securities), Securities Act liability insurance
if the Company so desires and other Persons retained by the Company in
connection with such registration (all such expenses borne by the Company being
herein called the "Registration Expenses").
6.2 Expenses Borne by Selling Securityholders. The selling
securityholders will be responsible for payment of brokerage discounts,
commissions and other sales expenses incident to the registration of any
Registrable Shares registered hereunder. In addition, the selling
securityholders will be responsible for the payment of their own legal fees if
they retain legal counsel separate from that of the Company, unless the Company
requires the selling securityholders to obtain their own legal counsel, in
which case the reasonable fees and expenses of one counsel representing the
securityholders jointly shall be paid by the Company. The selling
securityholders shall be responsible for payment of their out-of-pocket
expenses and the out-of-pocket expenses of any agents who manage their
accounts. The selling securityholders shall also be responsible for payment of
any underwriting fees if the selling securityholders have requested
participation of an underwriter with respect to an offering subject to a Demand
Registration or have elected to participate in a Piggyback Registration using
their own underwriter. Any such expenses which are common to the selling
securityholders shall be divided among such securityholders (including the
Company and holders of the Company's securities other than Registrable
Securities, to the extent that securities are being registered on behalf of
such Persons) pro rata on the basis of the number of shares being registered on
behalf of each such securityholder, or as such securityholders may otherwise
agree.
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Section 7. Indemnification.
7.1 Indemnification by Company. The Company agrees to
indemnify, to the fullest extent permitted by law, and hold harmless each
Holder of Registrable Securities and each officer, director and employee of,
and each Person who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act and the rules and regulations
promulgated thereunder) such Holder and each other Person who participates as
an underwriter in the offering or sale of such Registrable Securities, against
all losses, claims, damages, liabilities and expenses (including attorneys
fees) in connection with defending against any such losses, claims, damages and
liabilities or in connection with any investigation or inquiry, in each case
caused by or based on any untrue or alleged untrue statement of material fact
contained in any Registration Statement, Prospectus or preliminary prospectus
or any amendment thereof or supplement thereto, or any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will reimburse each such
indemnified person for any legal or any other expenses reasonably incurred by
them or any of them in connection with investigating or defending any such
claim (or action or proceeding in respect thereof); provided that the Company
shall not be liable in any such case to the extent that (a) same arises out of
or is based on an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, any such Prospectus or
preliminary prospectus, or in any amendment or supplement thereof in reliance
on and in conformity with written information furnished to the Company by a
Holder specifically stating that it is for use in the preparation thereof, (ii)
such Holder failed to deliver a copy of the Prospectus or any amendments or
supplements thereto to the Person asserting such loss, claim, damage,
liability, or expense if the Company had furnished such Holder with a
reasonably sufficient number of copies of the same, or (iii) such Holder failed
to discontinue disposition of shares after receiving notice from the Company
pursuant to section 5.2 hereof. In connection with an underwritten offering,
the Company will indemnify such underwriters, their officers and directors and
each Person who controls (within the meaning of the Securities Act) such
underwriters at least to the same extent as provided above with respect to the
indemnification of the Holders of Registrable Securities. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of a Holder or any such underwriter and shall survive the transfer of
the Registrable Securities by a Holder.
7.2 Indemnification by Holder. In connection with any
Registration Statement in which a Holder of Registrable Securities is
participating, each such Holder will furnish to the Company in writing such
information as the Company reasonably requests for use in connection with any
such Registration Statement or Prospectus and, to the extent permitted by law,
each Holder severally, and not jointly, will indemnify the Company, its
directors and officers, and each Person who controls (within the meaning of the
Securities Act) the Company against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the Registration Statement, Prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but
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<PAGE> 16
only to the extent that such untrue statement or omission is contained in any
information so furnished in writing by such Holder expressly for use in
connection with such Registration Statement; provided that the obligation to
indemnify will be individual to each Holder (and not joint) and will be limited
to the net amount of proceeds received by such Holder from the sale of
Registrable Securities pursuant to such Registration Statement. In connection
with an underwritten offering, each such Holder will indemnify such
underwriters, their officers and directors and each Person who controls (within
the meaning of the Securities Act) such underwriters at least to the same
extent as provided above with respect to the indemnification of the Company.
7.3 Assumption of Defense by Indemnifying Party. Any
Person entitled to indemnification hereunder will (a) give prompt written
notice to the indemnifying party of any claim with respect to which it seeks
indemnification and (b) permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party;
provided, however, that any Person entitled to indemnification hereunder shall
have the right to employ separate counsel and to participate in the defense of
such claim, but the fees and expenses of such counsel shall be at the expense
of such Person unless (i) the indemnifying party has agreed to pay such fees or
expenses, or (ii) the indemnifying party shall have failed to assume the
defense of such claim and employ counsel reasonably satisfactory to such Person
or (iii) in the reasonable judgment of any such Person, based upon written
advice of its counsel, a conflict of interest may exist between such Person and
the indemnifying party with respect to such claims (in which case, if the
Person notifies the indemnifying party in writing that such Person elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such
claims on behalf of such Person). If such defense is not assumed, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which case the
indemnifying party shall pay the fees and expenses of such additional counsel
or counsels. The failure of any indemnified party to provide the notice
required by section 7.3(a) above shall not relieve the indemnifying party under
this section 7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice.
7.4 Contribution. If for any reason the indemnification
provided for in sections 7.1 and 7.2 is unavailable to an indemnified party or
insufficient to hold it harmless as contemplated by sections 7.1 and 7.2, then
the indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the indemnified party and the indemnifying party, but also the relative
fault of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations; provided that no Holder shall be required to
contribute in an amount greater than the dollar amount of the net amount of
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proceeds received by such Holder with respect to the sale of any of the
Registrable Securities. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
7.5 Binding Effect. The indemnification provided for
under this Agreement will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling Person of such indemnified party and will survive the
transfer of securities.
Section 8. Participation in Underwritten Registrations. No Person
may participate in any Registration Statement hereunder which is
underwritten unless such Person (a) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under such underwriting arrangements.
Section 9. Miscellaneous.
9.1 No Inconsistent Agreements. The Company will not on or
after the date hereof enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with any
other agreement to which the Company is a party.
9.2 Remedies. All remedies under this Agreement, or by law
or otherwise afforded to any party hereto, shall be cumulative and not
alternative. Any Person having rights under any provision of this Agreement
will be entitled to enforce such rights specifically to recover damages caused
by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party may in its sole discretion apply to any court
of law or equity of competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive relief in order to
enforce or prevent violation of the provisions of this Agreement.
9.3 Term. Except as specifically otherwise provided herein,
the provisions of this Agreement shall apply until such time as all Registrable
Securities have ceased to be "Restricted Securities" (as that term is defined
by Rule 144 promulgated under the Securities Act), but in no event later than
two years from the last date of issuance of Registrable Securities pursuant to
the Warrant Agreement.
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9.4 Rule 144 and Rule 144A. With a view to making available
certain exemptions from the registration provisions of the Securities Act for
the sale of the Warrants and Restricted Securities, the Company covenants that:
9.4.1 At all times that the Common Stock is registered
under Section 12(b) or 12(g) of the Exchange Act, the Company will exercise its
best efforts to file timely the reports required to be filed by the Company
under the Securities Act and the Exchange Act (or, if the Company is not
registered under Section 12(b) or 12(g) of the Exchange Act and is not
otherwise required to file such reports under Sections 13 or 15(d) thereunder,
it will, upon the request of any holder of Registerable Securities, make
publicly available such other information required under Rule 144 for so long
as necessary to permit sales pursuant to Rule 144 under the Securities Act),
and it will take such further action as any Holder may reasonably request to
the extent required from time to time to enable such Holder to sell the
Registrable Securities without registration under the Securities Act within the
limitations of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time or (b) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any Holder, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
9.4.2 So long as the Registrable Securities constitute
restricted securities, the Company will furnish each Holder a copy of the
annual and quarterly reports of the Company and such other public reports as
any Holder may reasonably request.
9.4.3 At all times the Company is not subject to Section 13
or 15(d) of the Exchange Act, the Company will use its best efforts to provide
Warrant Holders, upon their request, the information regarding the Company
required by section (d)(4)(i) and (ii) of Rule 144A so as to enable the Warrant
Holders to sell Warrants under Rule 144A.
9.5 Amendments and Waivers. Except as otherwise specifically
provided herein, this Agreement may be amended or waived only upon the prior
written consent of the Company and of the Holders of a majority of the then
outstanding shares of Registrable Securities.
9.6 Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and assigns of the parties hereto
permitted in accordance with section 2.2 whether so expressed or not; provided
however, the Company may not assign its responsibilities hereunder without the
express written consent of the Holders. In addition, whether or not any
express assignment has been made, the provisions of this Agreement which are
for the benefit of Holders of Registrable Securities are also for the benefit
of, and enforceable by, any subsequent Holder of such Registrable Securities
permitted in accordance with section 2.2 so long as such securities continue to
be Restricted Securities.
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9.7 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
9.8 Counterparts. This Agreement may be executed in multiple
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the
same Agreement.
9.9 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
9.10 Governing Law. All questions concerning the
construction, validity and interpretation of this Agreement will be governed by
and construed in accordance with the domestic laws of the State of Delaware,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.
9.11 Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto with respect of the subject matter contained herein. This agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
9.12 Notices. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be delivered personally to the recipient, sent to
the recipient by reputable express courier service (charges prepaid), mailed to
the recipient by certified or registered mail, return receipt requested and
postage prepaid or by telecopy and shall be deemed to have been received at the
time of personal delivery, on the next business day if delivered by express
courier, three business days after deposit in the mail, or at the time of
transmission, if sent by telecopy during the recipient's business hours (or
otherwise on the next business day). Such notices, demands and other
communications will be sent to each Holder at the address indicated on the
records of the Company and to the Company at the address indicated below:
- 19 -
<PAGE> 20
(a) If to the Company:
Atlantic Gulf Communities Corporation
2601 South Bayshore Drive
Miami, Florida 33133-5461
Attn: Thomas W. Jeffrey
Chief Financial Officer
with a copy, which shall not constitute notice, to:
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Attn: Carter Strong, Esquire
(b) If to the Banks:
To their respective addresses shown on the Company's
records or to such other address or to the attention of such other person as
the recipient party has specified by prior written notice to the sending party.
9.13 Delays or Omissions. No failure to exercise or
delay in the exercise of any right, power or remedy accruing to a Holder on any
breach or default of the Company under this Agreement shall impair any such
right, power or remedy nor shall it be construed to be a waiver of any such
breach.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
"THE COMPANY"
ATLANTIC GULF COMMUNITIES
CORPORATION
By:
---------------------------
Its:
-------------------------
"THE BANKS"
- 20 -
<PAGE> 21
THE CHASE MANHATTAN BANK
By:
------------------------------
Craig Moore
Vice President
Notice Address:
270 Park Avenue
New York, New York 10017
Telecopy: (212) 661-8396
Attention: Craig Moore
Vice President
CARGILL FINANCIAL SERVICES CORPORATION
By:
-----------------------------
- 21 -
<PAGE> 22
Notice Address:
6000 Clearwater Drive
Minnetonka, Minnesota 55345-9497
Telecopy:
Attention: Christopher T. Pears
MAGTEN ASSET MANAGEMENT CORP.
By:
-----------------------------
Notice Address:
35 East 21st Street
New York, New York 10010
Telecopy:
Attention: Bob Capozzi
CERBERUS PARTNERS, L.P.
By: Cerebus Associates, L.P., its general partner
By:
----------------------------
its General Partner
Notice Address:
c/o Blackacre Capital Group, L.P.
950 Third Avenue, 17th Floor
New York, New York 10022
Telecopy:
Attention: Jeff Citrin
- 22 -
<PAGE> 23
MERRILL LYNCH, PIERCE FENNER & SMITH, INCORPORATED
By:
-----------------------------
Notice Address:
World Financial Center
250 Vasey Street, 16th Floor
New York, NY 10281-1307
Telecopy: (212) 449-9435
Attn: Michael McNamara
SIGNATURES CONTINUED ON THE FOLLOWING SIGNATURE PAGES
- 23 -
<PAGE> 24
HUGHES MASTER RETIREMENT TRUST
By: MAGTEN ASSET MANAGEMENT CORP.,
its attorney-in-fact
By:
----------------------------------------------
Notice Address:
35 East 21st Street
New York, New York 10010
Telecopy:
Attention: Bob Capozzi
L.A. FIRE AND POLICE PENSION SYSTEMS
By: MAGTEN ASSET MANAGEMENT CORP.,
its attorney-in-fact
By:
---------------------------------------------
Notice Address:
35 East 21st Street
New York, New York 10010
Telecopy:
Attention: Bob Capozzi
WESTERN UNION PENSION PLAN
By: MAGTEN ASSET MANAGEMENT CORP.,
its attorney-in-fact
By:
-----------------------------------------------
Notice Address:
35 East 21st Street
New York, New York 10010
Telecopy:
- 24 -
<PAGE> 25
Attention: Bob Capozzi
NAVY EXCHANGE SERVICE COMMAND
RETIREMENT TRUST
By: MAGTEN ASSET MANAGEMENT CORP.,
its attorney-in-fact
By:
-------------------------------------------
Notice Address:
35 East 21st Street
New York, New York 10010
Telecopy:
Attention: Bob Capozzi
- 25 -
<PAGE> 26
EXHIBIT A
The Chase Manhattan Bank
Cargill Financial Services Corporation
Cerebus Partners, L.P.
Hughes Master Retirement Trust
L. A. Fire and Police Pension Systems
Western Union Pension Plan
Navy Exchange Service Command Retirement Trust
Merrill Lynch, Pierce Fenner & Smith, Incorporated
<PAGE> 1
ATLANTIC GULF COMMUNITIES EXHIBIT TO THE 1996 FORM 10-K
EXHIBIT (c) 21. SUBSIDIARIES OF THE COMPANY
AG AGRICULTURE, INC.
AG SANCTUARY OF ORLANDO, INC.
AG TITLE CORPORATION
AGC AFFORDABLE HOUSING CORPORATION
AGC CL LIMITED PARTNER, INC.
AGC HOMES, INC.
AGC SANCTUARY CORPORATION
ATLANTIC GULF COMMERCIAL REALTY, INC.
ATLANTIC GULF COMMUNITIES MANAGEMENT CORPORATION
ATLANTIC GULF COMMUNITIES SERVICE CORPORATION
ATLANTIC GULF CONSTRUCTION WEST, INC.
ATLANTIC GULF DEVELOPMENT, INC.
ATLANTIC GULF ENGINEERING COMPANY
ATLANTIC GULF REALTY, INC.
ATLANTIC GULF RECEIVABLES CORPORATION
ATLANTIC GULF OF TAMPA, INC.
ATLANTIC GULF UTILITIES, INC.
C.C. VILLAGE DEVELOPMENT CORPORATION
COMMUNITY TITLE AGENCY, INC.
CUMBERLAND COVE, INC. (TENNESSEE)
ENVIRONMENTAL QUALITY LABORATORY, INCORPORATED
EQL ENVIRONMENTAL SERVICES, INC.
ESTERO POINTE DEVELOPMENT CORPORATION
FIVE STAR HOMES, INC.
FLORIDA HOME FINDERS GROUP, INC.
FOX CREEK DEVELOPMENT CORPORATION
FRC INVESTMENTS, INC.
GDV FINANCIAL CORPORATION
GENERAL DEVELOPMENT ACCEPTANCE CORPORATION (DELAWARE)
1
<PAGE> 2
GENERAL DEVELOPMENT AIR SERVICE, INC.
GENERAL DEVELOPMENT BROKER SERVICES CORPORATION
GENERAL DEVELOPMENT COMMERCIAL CREDIT CORPORATION
GENERAL DEVELOPMENT HEADQUARTERS CORPORATION
GENERAL DEVELOPMENT RESORTS, INC.
GENERAL DEVELOPMENT SALES CORPORATION
GENERAL DEVELOPMENT SERVICE CORPORATION
GENERAL DEVELOPMENT UTILITIES, INC.
HUNTER TRACE DEVELOPMENT CORPORATION
LAKESIDE DEVELOPMENT OF ORLANDO, INC.
LONGWOOD UTILITIES, INC.
MAPLEWOOD DEVELOPMENT CORPORATION
OCEAN GROVE, INC.
PARKSIDE MORTGAGE, INC.
PANTHER CREEK CORP. (NORTH CAROLINA)
REGENCY ISLAND DUNES, INC.
SABAL TRACE DEVELOPMENT CORPORATION
SUMMERCHASE DEVELOPMENT CORPORATION
SUNSET LAKES DEVELOPMENT CORPORATION
TOWN & COUNTRY II, INC.
UTILITY MANAGEMENT SERVICE, INC.
WINDSOR PALMS CORPORATION
XYZ INSURANCE, INC.
ATLANTIC GULF ASIA HOLDINGS N.V. (NETHERLANDS ANTILLES CORPORATION)
Principal place of business in Curcao, Netherlands Antilles
2
<PAGE> 1
Atlantic Gulf Communities Corporation Exhibit to the 1996 Form 10-K
Exhibit (c) 23. Accountant's Consent - Ernst & Young LLP
Consent of Independent Certified Public Accountants
Ernst & Young LLP
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-78284, as amended by Amendments 1 and 2), and (Form S-8 No.
33-78282) pertaining to the Company's Employee Stock Option Plan, of our report
dated February 27, 1997, with respect to the consolidated financial statements
and schedule of Atlantic Gulf Communities Corporation included in the Annual
Report (Form 10-K) for the year ended December 31, 1996.
April 7, 1997
Miami, Florida
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1996 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,084
<SECURITIES> 0
<RECEIVABLES> 73,449 <F1>
<ALLOWANCES> 0
<INVENTORY> 153,417
<CURRENT-ASSETS> 0 <F2>
<PP&E> 6,376 <F3>
<DEPRECIATION> (3,465)<F3>
<TOTAL-ASSETS> 263,393
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 169,215
0
0
<COMMON> 980
<OTHER-SE> 55,408
<TOTAL-LIABILITY-AND-EQUITY> 263,393
<SALES> 127,565
<TOTAL-REVENUES> 165,287
<CGS> 103,314
<TOTAL-COSTS> 118,825
<OTHER-EXPENSES> 45,583
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,430
<INCOME-PRETAX> (12,551)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12,551)
<DISCONTINUED> 0
<EXTRAORDINARY> 13,732
<CHANGES> 0
<NET-INCOME> 1,181
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
<FN>
<F1>THE VALUE FOR RECEIVABLES REPRESENTS A NET AMOUNT.
<F2>THE COMPANY DOES NOT PREPARE A CLASSIFIED BALANCE SHEET THEREFORE, CURRENT
ASSETS AND CURRENT LIABILITIES ARE NOT APPLICABLE.
<F3>PER FOOTNOTE 6 OF THE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
