SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q/A
AMENDMENT NO. 2
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission File Number: 1-8967
ATLANTIC GULF COMMUNITIES CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 59-0720444
- --------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2601 South Bayshore Drive
MIAMI, FLORIDA 33133-5461
- --------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (305) 859-4000
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
There are 11,509,077 shares of the Registrant's Common Stock outstanding as of
August 12, 1997.
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
NO.
----
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996 ................................... 1
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1997 and 1996 ......... 2
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996 ................. 3
Notes to Consolidated Financial Statements .......... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ...... 7
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings ................................... 26
Item 2. Change in Securities ................................ 27
Item 4. Submission of Matters to a Vote of Security Holders . 28
Item 6. Exhibits and Reports on Form 8-K .................... 29
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
(in thousands of dollars)
June 30, December 31,
1997 1996
--------- -----------
ASSETS (unaudited)
------
Cash and cash equivalents $ 4,461 $ 7,050
Restricted cash and cash equivalents 3,971 6,034
Contracts receivable, net 7,979 9,649
Mortgages, notes and other receivables, net 41,119 63,800
Land and residential inventory 140,066 153,417
Property, plant and equipment, net 2,730 2,911
Other assets, net 25,704 20,532
--------- ---------
Total assets $ 226,030 $ 263,393
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Accounts payable and accrued liabilities $ 11,408 $ 16,914
Customers' and other deposits 4,369 5,483
Other liabilities 12,378 15,393
Notes, mortgages and capital leases 130,241 169,215
--------- ---------
158,396 207,005
--------- ---------
Cumulative Redeemable Convertible Preferred Stock
Series A preferred stock 7,796 --
Series B preferred stock 9,055 --
--------- ---------
16,851 --
--------- ---------
Stockholders' equity
Common stock, $.10 par value; 70,000,000
and 15,665,000 shares authorized;
11,595,354 and 9,795,642 shares issued 1,160 980
Contributed capital 132,284 122,123
Accumulated deficit (76,652) (60,706)
Minimum pension liability adjustment (6,000) (6,000)
Treasury stock, 86,277 shares, at cost (9) (9)
--------- ---------
Total stockholders' equity 50,783 56,388
--------- ---------
Total liabilities and stockholders' equity $ 226,030 $ 263,393
========= =========
See accompanying notes to consolidated financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Three and Six Months Ended June 30, 1997 and 1996
(in thousands, except per share data)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- -------------------
Revenues: 1997 1996 1997 1996
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Real estate sales:
Homesite $ 9,532 $ 9,627 $ 12,082 $24,225
Tract 6,042 30,204 12,706 35,949
Residential 2,201 6,451 9,271 9,321
-------- ------- -------- -------
Total real estate sales 17,775 46,282 34,059 69,495
Other operating revenue 852 1,149 1,445 2,282
Interest income 1,517 1,789 2,889 3,130
Other income:
Reorganization reserves 1,365 -- 1,794 1,267
Other income 530 2,509 530 7,329
-------- ------- -------- -------
Total revenues 22,039 51,729 40,717 83,503
-------- ------- -------- -------
Costs and expenses:
Cost of real estate sales:
Homesite 9,268 7,494 11,256 18,413
Tract 5,538 24,906 11,693 29,609
Residential 3,082 4,896 8,398 7,071
-------- ------- -------- -------
Total cost of real estate sales 17,888 37,296 31,347 55,093
Selling expense 1,889 3,272 4,018 5,824
Other operating expense 298 558 628 1,257
Other real estate costs 2,896 4,435 5,802 8,692
General and administrative expense 2,456 2,256 4,656 5,386
Depreciation 169 223 353 472
Cost of borrowing, net of amounts capitalized 4,471 3,098 8,506 6,386
Other expense 642 95 1,353 302
-------- ------- -------- -------
Total costs and expenses 30,709 51,233 56,663 83,412
-------- ------- -------- -------
Income (loss) before extraordinary item (8,670) 496 (15,946) 91
Extraordinary gain on extinguishment of debt -- -- -- 3,770
-------- ------- -------- -------
Net income (loss) $ (8,670) $ 496 $(15,946) $ 3,861
======== ======= ======== =======
Net income (loss) before extraordinary item
per common share $ (.88) $ .05 $ (1.63) $ .01
======== ======= ======== =======
Net income (loss) per common share $ (.88) $ .05 $ (1.63) $ .40
======== ======= ======== =======
Weighted average common shares outstanding 9,863 9,699 9,793 9,716
======== ======= ======== =======
See accompanying notes to consolidated financial statements.
2
</TABLE>
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996
(in thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(15,946) $ 3,861
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,998 2,605
Gain from utility condemnations or sales -- (5,684)
Extraordinary gain from extinguishment of debt -- (3,770)
Other income (1,337) (1,881)
Reorganization items 179 (882)
Land acquisitions (5,572) (7,903)
Other net changes in assets and liabilities:
Restricted cash 2,063 2,738
Receivables 11,697 10,002
Land and residential inventory 19,197 37,295
Other assets (8,668) (6,462)
Accounts payable and accrued liabilities (5,252) (4,867)
Customer deposits (1,114) (1,638)
Other liabilities (483) (1,060)
Other, net -- (261)
-------- --------
Net cash provided by (used in) operating activities (2,238) 22,093
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment, net (172) (167)
Proceeds from sale of property, plant and equipment, net -- 773
Proceeds from utility condemnations or sales -- 25,690
Funds withdrawn from utility trust accounts 12,109 --
-------- --------
Net cash provided by investing activities 11,937 26,296
-------- --------
Cash flows from financing activities:
Borrowings under credit agreements 59,738 25,448
Repayments under credit agreements (99,683) (66,081)
Principal payments on other liabilities (1,218) (2,380)
Proceeds from issuance of common stock 10,000 --
Proceeds from issuance of preferred stock 18,875 --
-------- --------
Net cash used in financing activities (12,288) (43,013)
-------- --------
Increase (decrease) in cash and cash equivalents (2,589) 5,376
Cash and cash equivalents at beginning of period 7,050 3,560
-------- --------
Cash and cash equivalents at end of period $ 4,461 $ 8,936
======== ========
Supplemental cash flow information:
Interest payments, net of amounts capitalized $ 4,889 $ 3,827
======== ========
Reorganization item payments $ 900 $ 2,861
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
(unaudited)
(1) The June 30, 1997 financial statements are unaudited and subject to
year-end adjustments. In management's opinion, the interim financial
statements reflect all adjustments, principally consisting of normal
recurring accruals, necessary for a fair presentation of the financial
position and results of operations. Results for interim periods are not
necessarily indicative of results for the full year. For a complete
description of the Company's accounting policies, see "Notes to
Consolidated Financial Statements" included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 ("1996 Annual
Report"). Certain prior year amounts have been reclassified to conform
with the 1997 presentation.
(2) The net income (loss) per common share is based on the weighted average
number of shares of common stock outstanding during the periods. The
effect of any outstanding warrants and options to purchase common stock
on the per share computation was anti-dilutive or not material during
the periods.
(3) The Company capitalizes interest primarily on land inventory being
developed for sale which is subsequently charged to income when the
related asset is sold. Capitalized interest was $1,447,000 and
$2,722,000 for the three and six-month periods ended June 30, 1997,
respectively, and $1,369,000 and $3,261,000 for the three and six-month
periods ended June 30, 1996, respectively.
(4) Revenue from the sale of residential units other than Regency Island
Dunes ("Regency") condominium units is recognized when the earnings
process is complete. Revenue from the sale of Regency condominium units
is recognized using the percentage-of-completion method. Earned revenue
is based on the percentage of costs incurred to date to total estimated
costs to be incurred. This percentage is then applied to the expected
revenue associated with units that have been sold to date. Revenue from
the sale of land is recognized when the cash received, as a percentage
of the sales price, is at least 20% for land sales other than retail
land sales and 10% for retail land sales, the earnings process is
complete and the collection of any remaining receivable is reasonably
assured.
(5) Due to the necessity to establish reserves against future mandatory
debt, and capital and operating expenditures, the Company did not have
Available Cash, as defined in the Company's loan agreements, at June
30, 1997, to enable it to make any interest payments on the Cash Flow
Notes for the six-month period commencing January 1, 1997 and ending
June 30, 1997. In addition, the Company did not have any Available Cash
enabling it to make any interest payments for the year ended December
31, 1996. Interest on the Cash Flow Notes is noncumulative. Therefore,
the Company has not recorded interest expense associated with the Cash
Flow Notes during the six months ended June 30, 1997 and 1996. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
(6) Pursuant to the Company's 1996 Non-Employee Directors' Stock Plan, the
Company issued 12,355 shares of Atlantic Gulf's common stock to the
Non-Employee Directors at a price of $4.3125 per share for the first
quarter of 1997 and 11,158 shares at a price of $5.50 per share for the
second quarter of 1997.
4
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
(unaudited)
(7) The Company and AP-AGC, LLC a Delaware limited liability company
("Apollo"), entered into an Amended and Restated Investment Agreement
dated as of February 7, 1997, amended as of March 20, 1997, and amended
and restated as of May 15, 1997 (the "Investment Agreement"). In
addition, the Company, certain of its subsidiaries and Apollo entered
into a Secured Agreement dated as of February 7, 1997, and amended and
restated as of May 15, 1997 (the "Secured Agreement" and, together with
the Investment Agreement, the "Agreements"). Apollo is an affiliate of
Apollo Real Estate Investment Fund II, L.P. ("Apollo Fund II"), a
private real estate investment fund, the general partner of which is
Apollo Real Estate Advisors II, L.P., a New York-based investment fund.
Pursuant to the Agreements, Apollo agreed to purchase from the Company
up to 2,500,000 shares of 20% Series A Cumulative Redeemable
Convertible Preferred Stock (the "Series A Preferred Stock") at a per
share price of $9.88, and 5,000,000 warrants to purchase up to
5,000,000 shares of Common Stock (the "Investor Warrants"), at a per
warrant price of $.06, for an aggregate purchase price of up to $25
million (the "Apollo Transaction"). See Part II. Item 2. CHANGES IN
SECURITIES.
On June 24, 1997, pursuant to the Agreements, Apollo purchased 553,475
shares of Series A Preferred Stock and Investor Warrants to purchase an
additional 1,106,950 shares of Common Stock, for an aggregate purchase
price of $5,534,752.
Also on June 24, 1997, the Company and certain purchasers (the "Private
Purchasers") consummated a private placement pursuant to which the
Private Purchasers purchased for an aggregate price of $20 million; (a)
1,776,199 shares of Common Stock for $10 million, and (b) 1,000,000
shares of 20% Series B Cumulative Redeemable Convertible Preferred
Stock (the "Series B Preferred Stock"), at a per share price of $9.88,
and 2,000,000 Series B Warrants to purchase 2,000,000 shares of Common
Stock at a per warrant price of $.06 for an aggregate purchase price of
$10 million. The Series B Preferred Stock balance at June 30, 1997 is
the total aggregate purchase price of $10 million net of corresponding
Series B Warrants purchased - $0.120 million and net of Series B
issuance costs - $0.825 million for a net Series B Preferred Stock
balance of $9.055 million.
The Series A Preferred Stock, Investor Warrants, Series B Preferred
Stock and Series B Warrants are convertible or exercisable into Common
Stock, at $5.75 per share, subject to certain adjustments.
Of the total proceeds of approximately $25.5 million from the
above-mentioned transactions, $13.3 million were used to reduce the
amount outstanding under the Term Loan and $7.9 million were used to
reduce the amount outstanding under the Reducing Revolving Loan.
On June 30, 1997, pursuant to the Agreements, Apollo purchased, for an
aggregate purchase price of $3,340,000, an additional 334,000 shares of
Series A Preferred Stock and Investor Warrants to purchase an
additional 668,000 shares of Common Stock. The Company used
approximately $3.0 million of these proceeds plus an acquisition loan
of $2.6 million to acquire a 2.9-acre parcel in the
5
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997
(unaudited)
downtown business district of Fort Lauderdale, Florida upon which the
Company plans to construct a high-rise luxury apartment complex to be
called Las Olas Tower.
The Series A Preferred Stock balance at June 30, 1997 is the total
aggregate purchase price of Series A Preferred Stock issued to Apollo
as of that date - $8.875 million, net of corresponding Investor
Warrants purchased - $.106 million and net of Series A issuance costs -
$.973 million for a net Series A Preferred Stock balance of $7.796
million.
On July 31, 1997, pursuant to the Agreements, Apollo purchased, for an
aggregate purchase price of $8.5 million, an additional 850,000 shares
of Series A Preferred Stock and Investor Warrants to purchase an
additional 1,700,000 shares of Common Stock. On July 31, 1997,
approximately $7.5 million of these proceeds were used to acquire
approximately 600 acres in Frisco, Texas which is near Dallas, Texas.
This property is anticipated to yield approximately 1,725 single family
units.
On August 7, 1997, pursuant to the Agreements, Apollo purchased, for an
aggregate purchase price of $2,590,000, an additional 259,000 shares of
Series A Preferred Stock and Investor Warrants to purchase an
additional 518,000 shares of Common Stock. On August 7, 1997, the
Company utilized approximately $2.5 million of these proceeds plus a
purchase money mortgage of $8.0 million to acquire approximately 515
acres of residential property in the Fort Myers, Florida area in a
project known as West Bay Club. Subsequent to this acquisition, the
Company owns a total of approximately 841 acres in West Bay Club and is
planning to assemble a total of 879 acres in this project which is
anticipated to yield approximately 545 single family homes and 520
high-rise condominium units.
The holders of the Series A Preferred Stock and the Series B Preferred
Stock are entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available therefore, cash dividends on
each share of preferred stock at an annual rate equal to 20% of the
Liquidation Preference in effect from time to time. All dividends are
cumulative, whether or not declared, on a daily basis from the date on
which the preferred stock is originally issued by the Company, and will
be payable quarterly in arrears on March 31, June 30, September 30, and
December 31 of each year commencing on September 30, 1997. As of June
30, 1997, the Series A Preferred Stock Liquidation Preference was
$8.875 million and the corresponding undeclared but accumulated and
unpaid dividends were $0.023 million. As of June 30, 1997, the Series B
Preferred Stock Liquidation Preference was $10 million and the
corresponding undeclared but accumulated and unpaid dividends were
$0.038 million. The total undeclared but accumulated dividends as of
June 30, 1997 did not materially affect the net income (loss) per
common share. Following an Event of Default (as defined in the
respective Statement of Designation with respect to the Series A
Preferred Stock or the Series B Preferred Stock, dividends accumulate
at an annual rate equal to 23% of the Liquidation Preference.
6
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
CURRENT BUSINESS
- ----------------
Atlantic Gulf Communities Corporation is a Florida-based real estate
development and asset management company. The Company's primary lines of
business are acquisition, development and sale of new subdivision and scattered
developed homesites, sale of land tracts and residential construction and sales.
Additional lines of business which contribute to the Company's overall
operations include portfolio management of mortgages and contracts receivable
and environmental services.
The Company acquires and develops real estate to: (i) enhance the value
of certain properties, (ii) maintain a continuing inventory of marketable tracts
and (iii) supply finished homesites to independent builders in Florida's fastest
growing markets and in other related markets. The Company's acquisition and
development activities are comprised of four primary functions: business
development, planning, community development and residential construction. See
Item 1. Business in the 1996 Annual Report for a more detailed description of
the Company's current business.
BUSINESS PLAN
- -------------
The Company's goal is to produce superior returns for stockholders by
liquidating predecessor assets, paying off debt, matching overhead to
development and construction activities, and becoming the leading supplier of
finished homesites to independent homebuilders in Florida's fastest growing
markets and in selected primary markets in the southeastern United States,
including North Carolina and Texas. Predecessor assets are those real estate
assets inherited by the Company from its predecessor company and consist of
tracts and scattered homesites located in secondary markets throughout Florida
and in one community in Tennessee.
The Company's business plan is centered on its three principal lines of
business: (i) sales of finished homesites to independent homebuilders, (ii)
sales of tract land to end users as well as to investors and (iii) residential
construction and sales. The intent of the plan is to monetize the Company's
predecessor assets as rapidly as market conditions permit while entering into
new markets with a higher risk-adjusted return potential. The business plan also
contemplates modifying the Company's capital structure by reducing debt,
improving financial flexibility, and reducing overhead by focusing on the
Company's core assets and businesses.
The Company is also actively marketing predecessor assets on a bulk
sale basis as well as on an individual tract/lot basis through the Company's
Atlantic Gulf Land Company. The Company currently has approximately $23.4
million in pending contracts and letters of intent on predecessor assets. There
are no assurances that the above-mentioned negotiations, pending contracts and
letters of intent will result in material sales or in material sales at prices
which, in the aggregate, equal the Company's book value in the properties sold.
See Item 1. Business in the 1996 Annual Report for additional information on the
Company's business plan.
7
<PAGE>
This Quarterly Report includes "forward looking" statements that are
subject to risks and uncertainties. Such forward-looking statements include (a)
expectations and estimates as to the Company's future financial performance,
including growth and opportunities for growth in revenues, net income and cash
flow; (b) estimated and targeted annual unit sales, sales prices, and margins
and (c) those other statements preceded by, followed by or that include the
words "believes," "expects," "intends," "anticipate," "potential" or similar
expressions. For these statements, the Company claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The following important factors, in addition to
those discussed elsewhere in this Quarterly Report, could affect the Company's
future results and could cause those results to differ materially from those
expressed in the forward-looking statements: (a) the inability to generate
growth in revenues and net income; (b) the inability to generate sufficient cash
flows from operations to fund capital expenditures and debt service; (c)
unanticipated capital expenditures, including costs associated with real estate
development projects; (d) unanticipated costs, difficulties or delays in
completing or realizing the intended benefits of development projects; (e)
adverse changes in current financial markets and general economic conditions,
including interest rate increases; (f) adverse changes in current real estate
markets and the real estate industry; and (g) actions by competitors.
8
<PAGE>
Results of Operations
---------------------
Comparison of the Six Months Ended June 30, 1997 and 1996
---------------------------------------------------------
The Company's results of operations for the six months ended June 30,
1997 and 1996 are summarized by line of business, as follows:
<TABLE>
<CAPTION>
Combining Results of Operations by Line of Business
---------------------------------------------------
Six Months Ended June 30, 1997
(in thousands of dollars)
(unaudited)
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 $ 12,082 $ 12,706 $ 9,271 $ $ $ $ 34,059
Other operating revenues 401 1,044 1,445
Interest income 2,198 691 2,889
Other income:
Reorganization reserves 532 1,262 1,794
Other income 530 530
-----------------------------------------------------------------------------------
Total revenues 12,483 12,706 9,271 3,774 2,483 40,717
-----------------------------------------------------------------------------------
Costs and expenses:
Cost of real estate sales 11,256 11,693 8,398 31,347
Selling expense 2,116 1,631 239 32 4,018
Other operating expense 628 628
Other real estate costs:
Property tax, net 1,731 1,731
Other real estate overhead 650 699 138 348 1,347 889 4,071
General and administrative expense 4,656 4,656
Depreciation 7 31 2 62 251 353
Cost of borrowing, net 8,506 8,506
Other expense 96 462 795 1,353
-----------------------------------------------------------------------------------
Total costs and expenses 14,029 14,054 8,777 1,134 1,841 16,828 56,663
-----------------------------------------------------------------------------------
Net income (loss) $ (1,546) $ (1,348) $ 494 $ 2,640 $ (1,841) $ (14,345) $ (15,946)
===================================================================================
9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Combining Results of Operations by Line of Business
---------------------------------------------------
Six Months Ended June 30, 1996
(in thousands of dollars)
(unaudited)
HOMESITE TRACT RESIDENTIAL OTHER BUSINESS ADMINISTRATIVE
SALES SALES SALES OPERATIONS DEVELOPMENT & OTHER TOTAL
----- ----- ----- ---------- ----------- ------- -----
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate sales $ 24,225 $ 35,949 $ 9,321 $ $ $ $ 69,495
Other operating revenue 2,282 2,282
Interest income 2,079 1,051 3,130
Other income:
Reorganization reserves 1,267 1,267
Other income 5,675 1,654 7,329
----------------------------------------------------------------------------------------
Total revenues 24,225 35,949 9,321 10,036 3,972 83,503
----------------------------------------------------------------------------------------
Costs and expenses:
Cost of real estate sales 18,413 29,609 7,071 55,093
Selling expense 2,881 2,037 906 5,824
Other operating expense 1,257 1,257
Other real estate costs:
Property tax, net 30 2,902 2,932
Other real estate overhead 935 864 533 623 1,587 1,218 5,760
General and administrative 5,386 5,386
Depreciation 18 45 14 188 207 472
Cost of borrowing, net 6,386 6,386
Other expense (11) 313 302
----------------------------------------------------------------------------------------
Total costs and expenses 22,236 32,555 8,524 2,098 1,900 16,099 83,412
----------------------------------------------------------------------------------------
Income (loss) before
extraordinary item 1,989 3,394 797 7,938 (1,900) (12,127) 91
Extraordinary gain on
extinguishment of debt 3,770 3,770
----------------------------------------------------------------------------------------
Net income (loss) $ 1,989 $ 3,394 $ 797 $ 7,938 $(1,900) $ (8,357) $ 3,861
========================================================================================
</TABLE>
During the first six months of 1997, the Company incurred a net loss of
$15.9 million compared to net income of $3.9 million during the first six months
of 1996 primarily due to an $11.7 million decrease in the gross margins
generated from real estate sales, a $6.3 million decrease in other income and a
$3.8 million extraordinary gain in the first quarter of 1996 resulting from the
cancellation of debt. The lower gross margins resulted from lower real estate
sales revenues and lower gross margin percentages. Gross margin represents
10
<PAGE>
the difference between the Company's real estate revenue and related cost of
sales. The decrease in other income was principally attributable to a gain of
approximately $4.1 million in the first quarter of 1996 from an $18.75 million
settlement of the Port St. Lucie condemnation litigation.
Homesite Sales
--------------
The net operating results from homesite sales decreased $3.5 million
during the first six months of 1997 compared to the first six months of 1996
primarily due to lower gross margins generated from homesite sales in 1997
resulting from lower homesite sales revenues and lower gross margin percentages.
Revenues from homesite sales decreased $12.1 million in the first six
months of 1997 from the first six months of 1996. The decrease resulted from a
44% decrease in the average sales price per homesite and a 10% decrease in the
number of homesites sold. The decrease in the average sales price was primarily
due to a change in the sales mix. The following table summarizes homesite sales
activity for the six months ended June 30 (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
------------------------------------ -------------------------------------
Number Average Number Average
of lots Revenue sales price of lots Revenue sales price
------- ------- ----------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Subdivision homesite
sales 270 $ 8,468 $31.4 542 $18,455 $34.0
Scattered homesite sales 872 3,614 4.1 730 5,770 7.9
----- ------- ----- ----- ------- -----
1,142 $12,082 $10.6 1,272 $24,225 $19.0
===== ======= ===== ===== ======= =====
</TABLE>
The decrease in subdivision homesite sales revenue is primarily due to
approximately $7.6 million of sales in the first six months of 1996 in Julington
Creek Plantation, a project in Jacksonville, Florida, including a bulk sale of
the remaining 126 homesites in this project for $5.6 million in June 1996. In
addition, there was a $3.6 million decrease in sales in Windsor Palms, a project
located in southwest Broward County, Florida. The Company sold the remaining 102
homesites in Windsor Palms for approximately $4.5 million in June 1997.
Partially offsetting these decreases were sales of 41 homesites for $1.3 million
in the first six months of 1997 in West Meadows, a project in Tampa, Florida.
Subdivision revenues for the full year of 1997 are anticipated to be lower than
1996 due to the bulk sale of Julington Creek Plantation in 1996 and the sale of
75% of the inventory in Windsor Palms in 1996, which represented the Company's
two largest subdivision projects at that time. Current subdivision projects
under development along with recently acquired projects and projects to be
acquired, utilizing in part, proceeds from the issuance of Series A Preferred
Stock to Apollo, are anticipated to generate increased subdivision revenues
beginning in 1998. The decrease in the average sales price of subdivision
homesite sales is primarily due to the homesite sales in Julington Creek
Plantation in the first six months of 1996 which yielded an average sales price
of approximately $43,000.
Revenues from scattered homesite sales decreased in the first six
months of 1997 compared to the first six months of 1996 due to a 48% decrease in
the average sales price per homesite, partially offset by a 19.5% increase in
the number of homesites sold. The decrease in the average sales price is
principally due to a 37% decrease in the average sales price in the Company's
Cumberland Cove community in Tennessee and to an increase in bulk sales of
scattered homesites in secondary markets in Florida which yield a lower sales
price. The decrease in the average sales price in Cumberland Cove is primarily
due to the mix of homesites sold. The volume of scattered homesites sales
increased primarily due to the increase in the number of bulk homesites sold.
The Company anticipates it will continue to supplement scattered homesite sales
volume in secondary markets through bulk homesite sales and through the
marketing activities of the Atlantic Gulf Land Company as part of its plan to
accelerate the disposition of assets in secondary real estate markets in
Florida.
11
<PAGE>
Other income in the first six months of 1997 included a $322,000
management fee received from Country Lakes, Ltd., a Virginia limited
partnership, of which the Company is a limited partner. This partnership was
formed to acquire, plan, develop and market approximately 1,750 acres located in
Dade and Broward counties Florida, formerly known as Viacom/Blockbuster Park.
The Company provides the day-to-day management, development, marketing and sales
coordination for the partnership. The $322,000 management fee represented 3.5%
of $9.2 million of revenues from a sale of 280 acres in this project in June
1997.
As of June 30, 1997, the Company had under contract approximately 2,768
scattered homesite lots for $5.9 million and approximately 344 subdivision
homesites for $6.3 million which are anticipated to close in 1997.
Substantially, all of the Company's subdivision homesites currently under
development are under "contract" for sale. As of June 30, 1996, the Company had
approximately 1,030 total homesites under contract totaling approximately $8.6
million.
The homesite sales gross margin percentages were 6.8% in 1997 compared
to 24.0% in 1996. The gross margin percentage in the first six months of 1996
reflects targeted gross margins of 20% to 30% for this line of business. The
lower gross margin percentage in the first six months of 1997 is attributable to
a negative 10% gross margin on the Windsor Palms sales and to an increase in
bulk homesite sales which are priced to sell and therefore yield lower gross
margins. The negative gross margin in Windsor Palms was due to the realization
of a lower than expected sales price for the remaining 102 lots sold in 1997 and
to higher than anticipated costs associated with the entire project. The Company
realized a gross margin of approximately 6.5% on the Windsor Palms project in
its entirety. The gross margin in the first six months of 1997 was 23.0% for
sales other than Windsor Palms and bulk homesite sales.
Homesite selling expense decreased primarily due to a decrease in
direct selling expenses resulting from the decrease in revenues and to a
reduction in costs in Cumberland Cove. Homesite selling expense as a percentage
of revenues increased from 11.9% in 1996 to 17.5% in 1997, primarily due to the
decreased revenues over which to spread fixed selling costs.
Homesite sales other real estate overhead decreased in the first six
months of 1997 compared to the first six months of 1996 primarily due to lower
overhead costs associated with managing the Company's subdivision homesite
projects in Florida's primary real estate markets.
Tract Sales
-----------
The net operating results from tract sales decreased in the first six
months of 1997 compared to the first six months of 1996 primarily due to lower
gross margins generated from tract sales in 1997 resulting from lower tract
sales revenues and lower gross margin percentages.
Revenues from tract sales decreased $23.2 million in the first six
months of 1997 compared to the first six months of 1996 primarily due to several
large sales in 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. Tract sales acreages and corresponding revenues from such sales
often vary significantly from quarter to quarter depending on the timing and
size of individual sales. Despite the decrease in tract sales in the first six
months of 1997, tract sales are expected to be a significant source of revenue
for the Company in 1997 due to the Company's plan to monetize the Company's
predecessor assets located in secondary markets. As of June 30, 1997, there were
pending tract sales contracts totaling approximately $15.5 million which,
subject to certain contingencies, are anticipated to close in 1997. Pending
sales contracts increased to approximately $19.1 million as of July 31, 1997
primarily due to the addition of an anticipated sale in 1997 for $5.1 million of
the remaining 1,200 acres
12
<PAGE>
of a parcel known as River Trace in Port St. Lucie. As of June 30, 1996, there
were pending tract sales contracts totaling approximately $15 million.
Tract sales gross margins are summarized as follows for the six months
ended June, 30:
<TABLE>
<CAPTION>
1997 1996
----------------------- ----------------------
Targeted Actual Targeted Actual
Margins Margins Margins Margins
------- ------- ------- -------
<S> <C> <C> <C>
Port LaBelle agricultural acreage 0% (2.3)% 5% -
Julington Creek bulk sale - - - 6.3%
Other tract acreage 5-10% 10.6% 20% 23.0%
</TABLE>
The targeted gross margin is lower for Port LaBelle agricultural
acreage as management has determined that approximately 18,000 acres of the Port
LaBelle agricultural property is not an integral part of the Company's long-term
business strategy. In order to accelerate the disposal of this property, the
sales value for this property was adjusted from a "retail" to a "wholesale"
basis, which reduced the targeted gross margin for this property. During the
first six months of 1997 the Company sold 2,156 acres of Port LaBelle
agricultural property for approximately $2.5 million.
The low gross margin in Julington Creek in 1996 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 margins for other tract acreage in 1997 and 1996
generally reflect the targeted gross margins. The targeted gross margins have
been reduced primarily due to the Company's plan to accelerate land sales in
secondary real estate market locations.
Tract sales selling expenses decreased in the first six months of 1997
compared to the first six months of 1996 primarily due to lower direct selling
expenses resulting from a decrease in revenues. Tract sales selling expense as a
percentage of revenues increased from 5.7% in the first six months of 1996 to
12.8% in the first six months of 1997 primarily due to lower direct selling
expenses associated with several large sales in 1996 including the Summerchase
and Julington Creek sales and to lower revenues in 1997 over which to spread
fixed selling costs.
Residential Sales
-----------------
Net income from residential sales, which includes single family homes
and condominiums, decreased $303,000 during the six months ended June 30, 1997
compared to the corresponding prior year period principally due to a decrease in
the gross margin generated from the Company's Regency Island Dunes condominium
project, partially offset by decreases in selling and other real estate overhead
costs.
13
<PAGE>
Residential sales are summarized as follows for the six months ended
June 30 (in thousand of dollars):
1997 1996
----- -----
Condominium sales - Regency Island Dunes:
First Building $1,310 $2,015
Second Building 7,885 4,526
----- -----
Total condominium sales 9,195 6,541
Single family home sales 76 2,780
----- -----
$9,271 $9,321
====== ======
The revenues and profits associated with Regency Island Dunes
condominium sales are recorded using the percentage of completion method. The
Regency Island Dunes condominium project consists of two 72-unit buildings. As
of December 31, 1995, the Company recorded 97% of the expected revenues and
profits on 61 units that were under contract in the first building as of
December 31, 1995 based on a construction completion percentage of 97%. The
condominium revenues of $2.0 million in the first building during the first six
months of 1996 represent the incremental revenue earned upon the completion of
59 of the 61 units in the first six months of 1996 and the sale and closing of
an additional five units in 1996. The condominium revenues of $1.3 million in
the first building in 1997 represent revenue earned upon the closing of an
additional four units in 1997. As of June 30, 1997, 71 of the 72 units in the
first building have been sold and closed. The revenues of approximately $4.5
million in the second building in the first six months of 1996 were derived from
45 units under contract as of June 30, 1996 with construction on the second
building 30% complete. As of December 31, 1996, the Company recorded 79% of the
expected revenues and profits on 56 units that were under contract in the second
building as of December 31, 1996 based on a construction completion percentage
of 79%. The revenues of approximately $7.9 million in the second building in the
first six months of 1997 were derived from an increase in the completion
percentage from 79% as of December 31, 1996 to 100% as of June 30, 1997 and to
an additional twelve units sold during the first six months of 1997 for a total
of 68 units sold in the second building. As of June 30, 1997, 24 of the 72 units
in the second building have closed and the Company anticipates that all 72 units
in the second building will be sold and closed in 1997.
Single family home sales revenues decreased during the first six months
of 1997 compared to the first six months of 1996 due a decrease in closings from
32 in 1996 to one in 1997. Closings decreased as a result of the Company's
decision in mid-1995 to begin phasing out its single family home business in
predecessor communities and substantially completed the withdrawal in 1996. The
Company may seek to re-enter the single family home business in primary markets
where this business would complement current or potential land development
activities. As of June 30, 1997, the Company had two single family home
residential units in inventory, neither of which were under contract. As of June
30, 1996, the Company had two single family home residential units under
contract totalling $168,000.
Residential sales gross margins are summarized as follows for the six
months ended June 30:
1997 1996
---- ----
Condominiums 9.6% 29.7%
Single family homes (15.8)% 11.1%
The gross margin for condominiums in the first six months of 1997 was
low due to project-to-date adjustments made in the second quarter of 1997
affecting both current and prior period profits resulting from higher than
anticipated construction costs associated with Regency Island Dunes. The overall
gross margin
14
<PAGE>
for this project is anticipated to be approximately 16.5% which is lower than
the targeted gross margin of approximately 20% to 25% for this line of business
due to the higher than anticipated construction costs.
The single family home gross margin in the first six months of 1997 was
generated from one unit which was priced to sell as the Company has withdrawn
from this line of business.
Residential selling expense decreased $667,000 or 74% and decreased as
a percentage of revenues from 9.7% in the first six months of 1996 to 2.6% in
the first six months of 1997. The decreases were due to closing costs incurred
in the first six months of 1996 associated with the closing of 64 condominium
units compared to 28 units closed in the first six months of 1997, an adjustment
to reduce incentive expenses as a result of the decrease in profits associated
with Regency Island Dunes and to a decrease in fixed selling costs as a result
of the phasing-out of the single family home operations.
Other real estate overhead decreased $395,000 or 74% in the first six
months of 1997 compared to the first six months of 1996 primarily due to a
$313,000 reduction in overhead costs associated with the Regency Island Dunes
condominium project, most notably due to a reduction in condominium association
costs. In addition, single family overhead costs decreased due to the
phasing-out of this operation.
Other Operations
----------------
Net income from other operations decreased $5.3 million in the first
six months of 1997 compared to the first six months of 1996 primarily due to a
$5.1 million decrease in other income.
Other operating revenues and expenses decreased in the first six months
of 1997 from the same prior year period primarily due to the absence of revenues
and expenses from the Port LaBelle utility system sold in February 1996 and the
Julington Creek utility system sold in June 1996.
Interest income increased in the first six months of 1997 from the
corresponding prior year period primarily due to adjustments in the first
quarter of 1996 associated with the Company's land mortgage receivable
portfolio, partially offset by a lower average balance of contracts receivable
during the periods under review.
Other income of $532,000 in the first six months of 1997 represents the
amortization of the Company's utility connections reserve. Other income in the
first six months of 1996 included a gain of approximately $4.1 million on an
$18.75 million settlement in March 1996 with the City of Port St. Lucie
regarding litigation pursuant to condemnation proceedings associated with the
taking of the Company's Port St. Lucie system. In addition, other income in the
first six months of 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 $865,000 on the sale of the Company's Julington Creek
utility system sold in June 1996 for $6.0 million.
Other operations other real estate overhead decreased 44% in the first
six months of 1997 compared to the first six months of 1996 primarily due to
lower community operations costs associated with the Company's predecessor
assets located in secondary markets in Florida.
Business Development
--------------------
Total business development expenditures were similar in the first six
months of 1997 compared to the first six months of 1996. Business development
expenditures consist primarily of costs associated with the pursuit of business
opportunities in primary market locations within Florida and other southeastern
United States locations.
15
<PAGE>
Business development other expenses included $405,000 in the first six
months of 1997 and $313,000 in the first six months of 1996 representing the
Company's 50% share of the net loss of the Ocean Grove joint venture. The loss
resulted from pre-sales advertising and other selling and overhead costs.
Administrative & Other
----------------------
The net loss from administrative & other activities increased $6.0
million in the first six months of 1997 from the first six months of 1996
principally due to an extraordinary gain of $3.8 million in 1996 resulting from
the cancellation of debt and to a $2.1 million increase in borrowing costs.
Interest income decreased in the first six months of 1997 from the
corresponding prior year period primarily due to a decrease in short term
investment interest income.
Other income included gains of $1.3 million in the first six months of
1997 and $1.3 million in the first six months of 1996 resulting from the
resolution of certain reorganization items. This process is expected to continue
during the remainder of the year with adjustments to be recorded as the final
disposition of various claims and other liabilities is concluded. Other income
also included gains of $250,000 in the first six months of 1997 and
approximately $1.0 million in the first six months of 1996 due to reductions in
the Company's environmental reserve and gains of $250,000 in the first six
months of 1997 and approximately $600,000 in the first six months of 1996 due to
reductions in the Company's land mortgages receivable valuation reserve.
Property tax, net of capitalized property taxes decreased in the first
six months of 1997 compared to the first six months of 1996 primarily due to a
reduction of land inventory not under development. The decrease in inventory
under development corresponds to sales activity and to the completion of various
projects during the intervening period.
Other real estate overhead decreased 27% in the first six months of
1997 compared to the same period in 1996 primarily due to a decrease in legal
costs associated with supporting increased real estate sales activity.
General and administrative expenses decreased $730,000 or 14% in the
first six months of 1997 compared to the first six months of 1996 principally
due to financial advisory and due diligence costs incurred in the first six
months of 1996 associated with the Company's recapitalization efforts.
Cost of borrowing, net of capitalized interest increased $2.1 million
in the first six months of 1997 compared to the same period in 1996 primarily
due to a $1.3 million increase in debt issue costs including a $1.0 million fee
paid to Foothill in 1997 pursuant to an amendment of the Revolving Loan
Agreement on March 31, 1997. Additionally, there was a $539,000 decrease in
interest capitalized to land inventory corresponding to a decrease in land under
development. During the six months ended June 30, 1997 and 1996, the Company did
not accrue interest on its Cash Flow Notes because of the absence of Available
Cash during the periods. See "LIQUIDITY AND CAPITAL RESOURCES."
Other expense in the first six months of 1997 included a $468,000 loss
on the sale of $9.3 million of land mortgage receivables to the First Bank of
Boston in March 1997 for an initial cash distribution of $7.0 million plus a
residual interest in the portfolio. The proceeds were used to reduce corporate
debt and to fund ongoing operations.
In February 1996, the Company recorded an extraordinary gain of
approximately $3.8 million due to the cancellation of approximately $1.9 million
of Unsecured 12% Notes and $1.9 million of Unsecured Cash Flow Notes. These
notes, held in the disputed claims reserve account, were in excess of the
requirements necessary to satisfy the Company's obligations in accordance with
the Company's plan of reorganization (the "POR").
16
<PAGE>
Comparison of the Three Months Ended June 30, 1997 and 1996
-----------------------------------------------------------
The comparison of the three months ended June 30, 1997 and 1996 should
be read in conjunction with the comparison of the six months ended June 30, 1997
and 1996 for a more comprehensive discussion of the result of operations. The
Company's results of operations for the three months ended June 30, 1997 and
1996 are summarized by line of business, as follows:
<TABLE>
<CAPTION>
Combining Results of Operations by Line of Business
Three Months Ended June 30, 1997
(in thousands of dollars)
(unaudited)
HOMESITE TRACT RESIDENTIAL OTHER BUSINESS ADMINISTRATIVE
SALES SALES SALES OPERATIONS DEVELOPMENT & OTHER TOTAL
----- ----- ----- ---------- ----------- ------- -----
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate sales $ 9,532 $ 6,042 $ 2,201 $ $ $ $ 17,775
Other operating revenue 391 461 852
Interest income 1,080 437 1,517
Other income:
Reorganization reserves 265 1,100 1,365
Other income 530 530
-----------------------------------------------------------------------------------------
Total revenues 9,923 6,042 2,201 1,806 2,067 22,039
-----------------------------------------------------------------------------------------
Costs and expenses:
Cost of real estate sales 9,268 5,538 3,082 17,888
Selling expense 1,205 828 (168) 24 1,889
Other operating expense 298 298
Other real estate costs:
Property tax, net 820 820
Other real estate overhead 287 355 115 160 690 469 2,076
General and administrative 2,456 2,456
Depreciation 3 16 33 117 169
Cost of borrowing, net 4,471 4,471
Other expense 287 355 642
-----------------------------------------------------------------------------------------
Total costs and expenses 10,763 6,737 3,029 491 1,001 8,688 30,709
-----------------------------------------------------------------------------------------
Net income (loss) $ (840) $ (695) $ (828) $ 1,315 $(1,001) $ (6,621) $ (8,670)
=========================================================================================
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Combining Results of Operations by Line of Business
---------------------------------------------------
Three Months Ended June 30, 1996
(in thousands of dollars)
(unaudited)
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 $ 9,627 $ 30,204 $ 6,451 $ $ $ $ 46,282
Other operating revenue 1,149 1,149
Interest income 1,265 524 1,789
Other income:
Reorganization reserves
Other income 855 1,654 2,509
--------------------------------------------------------------------------------------------
Total revenues 9,627 30,204 6,451 3,269 2,178 51,729
--------------------------------------------------------------------------------------------
Costs and expenses:
Cost of real estate sales 7,494 24,906 4,896 37,296
Selling expense 1,496 1,394 382 3,272
Other operating expense 558 558
Other real estate costs:
Property tax, net 20 1,473 1,493
Other real estate overhead 385 369 111 372 1,003 702 2,942
General and administrative 2,256 2,256
Depreciation 9 27 2 81 104 223
Cost of borrowing, net 3,098 3,098
Other expense (23) 118 95
--------------------------------------------------------------------------------------------
Total costs and expenses 9,361 26,696 5,391 1,031 1,121 7,633 51,233
--------------------------------------------------------------------------------------------
Net income (loss) $ 266 $ 3,508 $ 1,060 $ 2,238 $ (1,121) $ (5,455) $ 496
============================================================================================
</TABLE>
During the second quarter of 1997, the Company incurred a net loss of
$8.7 million compared to net income of $496,000 in the second quarter of 1996
primarily due to a $9.1 million decrease in the gross margins generated from
real estate sales. The lower gross margins resulted from lower real estate sales
revenues and lower gross margin percentages.
18
<PAGE>
Homesite Sales
--------------
The net operating results from homesite sales decreased $1.1 million in
the second quarter of 1997 compared to the second quarter of 1996 despite
similar revenues, primarily due to lower gross margin percentages in the second
quarter of 1997.
Revenues from homesite sales were similar in the second quarter of 1997
compared to the second quarter of 1996 despite a 49% increase in the number of
homesites sold due to a 34% decrease in the average sales price per homesite.
The following table summarizes homesite activity for the three months ended June
30 (in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
------------------------------------ -------------------------------------
Number Average Number Average
of lots Revenue sales price of lots Revenue sales price
------- ------- ----------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Subdivision homesite
sales 203 $6,999 $34.5 158 $6,373 $40.3
Scattered homesite sales 695 2,533 3.6 445 3,254 7.3
--- ----- --- --- ----- ---
898 $9,532 $10.6 603 $9,627 $16.0
=== ====== ===== === ====== =====
</TABLE>
The increase in subdivision homesite sales revenue is primarily due to
sales in the second quarter of 1997 of $4.5 million in Windsor Palms and $1.1
million in West Meadows and to a $553,000 increase in sales in Lakeside Estates,
partially offset by the bulk sale of the remaining 126 subdivision homesites in
Julington Creek Plantation for $5.6 million in June 1996. The decrease in the
average sales price of subdivision homesite sales is primarily due to the sales
in Julington Creek Plantation in the second quarter of 1996 which yielded an
average selling price of approximately $44,600.
Revenues from scattered homesite sales decreased in the second quarter
of 1997 compared to the second quarter of 1996 due to a 51% decrease in the
average selling price, partially offset by a 56% increase in the number of
homesites sold. The decrease in the average sales price is principally due to a
41.5% decrease in the average sales price in the Company's Cumberland Cove
community in Tennessee and to an increase in bulk sales of scattered homesites
in secondary markets in Florida which yield a lower sales price. The average
sales price in Cumberland Cove decreased from $20,700 in the second quarter of
1996 to $12,100 in the second quarter of 1997 primarily due to the mix of
homesites sold. The volume of scattered homesite sales increased due to the
increase in the number of bulk homesites sold.
Other income in the second quarter of 1997 included a $322,000
management fee received from Country Lakes, Ltd., a Virginia limited
partnership, of which the Company is a limited partner. This partnership was
formed to acquire, plan, develop and market approximately 1,750 acres located in
Dade and Broward counties Florida, formerly known as Viacom/Blockbuster Park.
The Company provides the day-to-day management, development, marketing and sales
coordination for the partnership. The $322,000 management fee represented 3.5%
of $9.2 million of revenues from a sale of 280 acres in this project in June
1997.
The homesite sales gross margin percentages were 2.8% in the second
quarter of 1997 compared to 22.2% in the second quarter of 1996. The gross
margin percentage in the second quarter of 1996 reflects targeted gross margins
of 20% to 30% for this line of business. The lower gross margin percentage in
the second quarter of 1997 is attributable to a negative 10% gross margin on the
Windsor Palms sales and to an increase in bulk homesite sales which are priced
to sell and therefore yield lower gross margins. The negative
19
<PAGE>
gross margin in Windsor Palms was due to the realization of a lower than
expected sales price for the remaining 102 lots sold in the second quarter of
1997 and to higher than anticipated costs associated with the entire project.
The Company realized a gross margin of approximately 6.5% on the Windsor Palms
project in its entirety. The gross margin in the second quarter of 1997 was
22.3% for sales other than Windsor Palms and bulk homesite sales.
Homesite selling expense decreased $291,000 or 19.5% in the second
quarter of 1997 and as a percentage of sales from 15.5% in the second quarter of
1996 to 12.6% in the second quarter of 1997 primarily due a decrease in fixed
selling costs, most particularly in the Cumberland Cove community in Tennessee.
Tract Sales
-----------
The net operating results from tract sales decreased $4.2 million in
the second quarter of 1997 compared to the second quarter of 1996 primarily due
to lower gross margins generated from tract sales in 1997 resulting from lower
tract sales revenues and lower gross margin percentages.
Revenues from tract sales decreased $24.2 million in the second quarter
of 1997 compared to the second quarter of 1996 primarily due to several large
sales during the second quarter of 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. Tract sales acreages and corresponding revenues
from such sales often vary significantly from quarter to quarter depending on
the timing and size of individual sales.
Tract sales gross margins are summarized as follows for the three
months ended June 30:
1997 1996
----------------------- ----------------------
Targeted Actual Targeted Actual
Margins Margins Margins Margins
-------- ------- ------- -------
Julington Creek bulk sale - - - 6.3%
Other tract acreage 5-10% 8.3% 20% 24.5%
The lower 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 margins in the second quarter of 1997 and the second
quarter of 1996 for other tract acreage generally reflect the targeted gross
margins. The targeted gross margins have been reduced primarily due to the
Company's plan to accelerate land sales in secondary real estate market
locations.
Tract sales selling expense decreased in the second quarter of 1997
compared to the second quarter of 1996 primarily due to lower direct selling
expenses due to a decrease in revenues and to a decrease in fixed selling costs.
Tract sales selling expense as a percentage of revenues increased from 4.6% in
the second quarter of 1996 to 13.7% in the second quarter of 1997 due to lower
direct selling expenses associated with several large sales in the second
quarter of 1996 including the Summerchase and Julington Creek sales and to lower
revenues over which to spread fixed selling costs in the second quarter of 1997.
20
<PAGE>
Residential Sales
-----------------
The net operating results from residential sales, which includes single
family homes and condominiums, decreased $1.9 million during the second quarter
of 1997 compared to the corresponding prior year period. This decrease
corresponds to a decrease in the gross margin generated from the Company's
Regency Island Dunes condominium project, partially offset by a decrease in
selling costs.
Residential sales are summarized as follows for the three months ended
June 30 (in thousand of dollars):
1997 1996
------- -------
Condominium sales - Regency Island Dunes:
First Building $ - $ 1,105
Second Building 2,201 4,526
------- -------
Total condominium sales 2,201 5,631
Single family home sales - 820
------- -------
$ 2,201 $ 6,451
======= =======
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
condominium revenues of $2.2 million in the second building in the second
quarter of 1997 were derived from an increase in the second building completion
percentage during the quarter from 96% as of March 31, 1997 to 100% as of June
30, 1997 and to four additional units under contract during the quarter from 64
units as of March 31, 1997 to 68 units as of June 30, 1997. The revenues of $4.5
million in the second building in the second quarter of 1996 were derived from
45 units under contract in the second building as of June 30, 1996 with
construction on the second building 30% complete. The condominium revenues of
$1.1 million from the first building in the second quarter of 1996 were
generated primarily from the closing of three units in the second quarter of
1996 which were sold in 1996.
Single family home sales revenues in the second quarter of 1996 were
generated from 10 closings with an average selling of price of $82,000. There
were no closings in the second quarter of 1997 due to the Company's decision in
mid-1995 to withdraw from the single family home business.
Residential sales gross margins are summarized as follows for the three
months ended June 30:
1997 1996
---- ----
Condominiums (40.0)% 27.0%
Single family homes - 4.4%
The gross margin for condominiums in the second quarter of 1997 was
negative due to project-to-date adjustments made in the second quarter of 1997
affecting both current and prior period profits resulting from higher than
anticipated construction costs associated with Regency Island Dunes. The overall
gross margin for this project is anticipated to be approximately 16.5% which is
lower than the targeted gross margin of approximately 20% to 25% for this line
of business due to the higher than anticipated construction costs.
The single family home gross margins in the second quarter of 1996 were
low due to the mix of product sold and to the winding down of this operation.
21
<PAGE>
Residential selling expense decreased in the second quarter of 1997
compared to the second quarter of 1996 and was negative in the second quarter of
1997 primarily due to an adjustment made in the second quarter of 1997 to reduce
incentive expenses, some of which were accrued in prior periods, as a result of
the decrease in profits associated with Regency Island Dunes. Also contributing
to the decrease in selling expenses were lower direct selling expenses due to
lower revenues in the second quarter of 1997 and to a decrease in fixed selling
costs as a result of the phasing-out of the single family home operations.
Other Operations
----------------
Net income from other operations decreased in the second quarter of
1997 compared to the second quarter of 1996 primarily due to an decrease in
other income.
Other operating revenues and expenses decreased in the second quarter
of 1997 from the second quarter of 1996 primarily due to the absence of revenues
and expenses from the Julington Creek utility system sold in June 1996.
Interest income decreased in the second quarter of 1997 from the
corresponding prior year period primarily due to a lower average balance of
contracts receivable during the periods under review.
Other income of $265,000 in the second quarter of 1997 represents the
amortization of the Company's utility connections reserve. Other income in the
second quarter of 1996 consisted primarily of a gain of $865,000 on the sale of
the Company's Julington Creek utilities system sold in June 1996 for $6.0
million.
Other operations other real estate overhead decreased 57% in the second
quarter of 1997 compared to the second quarter of 1996 primarily due to lower
community operations costs associated with the Company's predecessor assets
located in secondary markets in Florida.
Business Development
--------------------
Total business development expenditures were similar in the second
quarter of 1997 compared to the second quarter of 1996. Business development
expenditures consist primarily of costs associated with the pursuit of business
opportunities in primary market locations within Florida and other southeastern
United States locations.
Business development other expenses in the second quarter of 1997 and
in the second quarter of 1996 consisted of the Company's 50% share of the net
loss of the Ocean Grove joint venture. The loss resulted from pre-sales
advertising and other selling and overhead costs.
Administrative & Other
----------------------
The net loss from administrative & other activities increased $1.2
million in the second quarter of 1997 from the second quarter of 1996
principally due to a $1.4 million increase in borrowing costs.
Other income in the second quarter of 1997 included gains of $1.1
million resulting from the resolution of certain reorganization items. This
process is expected to continue during the remainder of the year with
adjustments to be recorded as the final disposition of various claims and other
liabilities is concluded. Other income also included gains of $250,000 in the
second quarter of 1997 and approximately $1.0 million in the second quarter of
1996 due to reductions in the Company's environmental reserve and gains of
$250,000 in the second quarter of 1997 and approximately $600,000 in the second
quarter of 1996 due to reductions in the
22
<PAGE>
Company's land mortgages receivable valuation reserve.
Property tax, net decreased in the second quarter of 1997 compared to
the second quarter of 1996 primarily due to a reduction of land inventory not
under development. This decrease in inventory corresponds to sales activity in
the intervening period.
Other real estate overhead decreased 33% in the second quarter of 1997
compared to the same period in 1996 primarily due to a decrease in legal costs
associated with supporting increased real estate sales activity.
Cost of borrowing, net of capitalized interest increased $1.4 million
in the second quarter of 1997 compared to the same period in 1996 primarily due
to the $1.0 million fee paid to Foothill in 1997 pursuant to an amendment of the
Revolving Loan Agreement on March 31, 1997. During the three months ended June
30, 1997 and 1996, the Company did not accrue interest on its Cash Flow Notes
because of the absence of Available Cash during the periods. See "LIQUIDITY AND
CAPITAL RESOURCES."
Liquidity & Capital Resources
- -----------------------------
As of June 30, 1997, the Company's cash and cash equivalents totaled
approximately $4.5 million. The Company also had restricted cash and cash
equivalents of $4.0 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 $2.6 million
decrease in cash and cash equivalents during the first six months of 1997, $2.2
million was used in operating activities and $12.3 million was used in financing
activities, partially offset by $11.9 million provided by investing activities.
Cash used in operating activities includes approximately (i) $7.6
million for interest payments, (ii) $5.4 million for property tax payments,
(iii) $9.8 million for construction and development expenditures and (iv) $4.2
million of fees associated with the Company's refinancing and recapitalization
efforts. These uses were offset in part by net cash generated through real
estate sales and other operations.
Cash provided by investing activities consisted of $12.1 million of
funds released on January 2, 1997 from various utility trust accounts which were
funded by the Company during the reorganization proceedings. The terms of these
trusts require the Company to periodically assess the adequacy of the property
in these trusts. Pursuant to a review of these trusts in December 1996, it was
determined that approximately $12.1 million in cash and $6.2 million of notes
could be released from these trust accounts.
Cash used in financing activities includes $37.5 million of principal
payments on January 3, 1997 to repay in full the Company's Unsecured 12% Notes,
a scheduled principal payment of $13.3 million on the Company's Term Loan and
$1.2 million in net 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 proceeds of
$10.0 million from the issuance of Common Stock and approximately $18.9 million
from the issuance of Series A and B Preferred Stock as more fully described
below. In addition, the Company had net borrowings of $5.8 million under the
Reducing Revolving Loan, $2.2 million associated with the financing of the
Company's mortgage and contract receivables and $2.8 million on new project
financings.
The Company has, pursuant to a Revolving Loan Agreement dated as of
September 30, 1996 with Foothill Capital Corporation ("Foothill"), (i) a $20
million working capital facility maturing December 1, 1998 ("Working Capital
Facility"), and a $25 million reducing revolving loan maturing June 30, 1998
("Reducing Revolving Loan "), with principal reductions as set forth below.
Amounts under the Reducing Revolving Loan are available only when (i) the
Working Capital Facility is fully utilized, and (ii) the Company is in
compliance with, among other conditions, a "borrowing base" formula based on the
value of certain of the Company's
23
<PAGE>
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 June 30, 1997, the Working Capital Facility
was fully drawn and there was $7.6 million outstanding on the Reducing Revolving
Loan.
The Company's remaining material obligations for 1997 include (i)
principal repayments on the Foothill debt up to $21.7 million as more fully
described below, and (ii) the final principal and interest payments on the
Company's Section 365(j) lien and deferred property tax liabilities totaling
approximately $1.5 million which are due in the third quarter of 1997. The
Company's 1997 business plan also contemplates full year expenditures for
development, construction and other capital improvements estimated at
approximately $50 million, of which a substantial portion will require funding
through individual project development loans or joint venture arrangements, many
of which are already in place. If the Company is unable to obtain the capital
resources to fund these expenditures, the implementation of the Company's
business plan will be adversely affected, thus slowing the Company's expected
revenue growth and increasing the expected time necessary for the Company to
achieve profitability.
On September 30, 1996, the Company closed on three credit facilities
totalling $85.0 million with Foothill (the "Foothill Refinancing"). Pursuant to
the Foothill Refinancing, Foothill has provided the Company with (i) an
extension to December 1, 1998 of the $20 million Working Capital Facility as
discussed above; (ii) a $40 million Term Loan at an interest rate of 15% per
annum, maturing June 30, 1998; and (iii) a Reducing Revolving Loan of up to $25
million maturing on June 30, 1998, as discussed above. The Term Loan requires
principal repayments of one-third on each of December 31, 1997 and June 30,
1998. The commitment under the Reducing Revolving Loan will also be reduced by
one-third on each of 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. At June 30, 1997, the
Company had outstanding the full $20 million under the Working Capital Facility,
approximately $26.7 million under the Term Loan and approximately $7.6 million
of the $16.7 million currently available under the Reducing Revolving Loan.
The Company does not currently have sufficient liquid capital resources
to satisfy the up to $21.7 million of Foothill debt due on December 31, 1997.
However, management believes that the Company, through a combination of sources
as more fully described below, will be able to obtain sufficient liquidity and
capital resources necessary to continue implementing its business plan and to
satisfy its debt obligations as they become due.
The Company's ongoing business plan is to continue to monetize its
non-core tract and scattered homesite assets ("Predecessor assets") to reduce
corporate debt. The Company made substantial progress in this regard as it sold
$55.6 million of tract and scattered homesite assets in 1996 and $15.7 in the
first six months of 1997. In addition, the Company currently has pending under
contract or letter of intent a combination of Predecessor asset sale
transactions which would generate, if consummated, approximately $23.4 million
of cash and notes. The transactions under contract are subject to a variety of
customary conditions, in some cases including a financing condition.
Transactions subject to a letter of intent are also subject to further
negotiation and documentation and there are no assurances that any particular
transaction under contract or letter of intent will be consummated.
As part of the effort to monetize the Predecessor assets pursuant to
its business plan, the Company is actively monetizing mortgage and note
receivables generated from the sale of Predecessor tracts and scattered
homesites. The Company raised approximately $17.8 million of cash proceeds in
1996 and an additional $14.6 million in the first six months of 1997, and
received certain residual interests, from the sale
24
<PAGE>
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.
As disclosed in Note 7 in the Notes to Consolidated Financial
Statements, the Company closed on a series of preferred and common stock
transactions with (i) Apollo to purchase up to $25 million of Series A Preferred
Stock and warrants to purchase 5,000,000 shares of common stock; and (ii)
through a private placement, the issuance of 1,776,199 shares of Common Stock
for $10 million and $10 million of Series B Preferred Stock with Series B
Warrants to purchase 2,000,000 shares of Common Stock.
As of June 30, 1997, the entire $20 million purchase price for the full
private placement of Series B Preferred Stock, Series B Warrants and Common
Stock was paid as well as $8.9 million of the aggregate $25 million purchase
price corresponding to 887,475 shares of Series A Preferred Stock with Investor
Warrants to purchase 1,774,950 shares of Common Stock.
As of August 8, 1997, an additional $11.1 million was paid by Apollo to
purchase 1,109,000 shares of Series A Preferred Stock with warrants to purchase
2,218,000 shares of Common Stock for a total outstanding of $20 million of the
aggregate $25 million purchase price of the Series A Preferred Stock and
Investor Warrants. As required by the Agreements, these funds have been and will
be used primarily to acquire and develop properties in certain wholly owned
subsidiaries of the Company where Apollo has a first lien over the assets and
stock of such subsidiaries securing the Company's repurchase and redemption
obligations in respect of the Series A Preferred Stock.
The Company plans to issue up to an additional $10 million of Series B
Preferred Stock along with Series B Warrants to purchase up to 2,000,000 shares
of Common Stock to be offered through a rights offering to existing stockholders
and to the holders of warrants issued by the Company in September 1996 to
purchase up to 1,500,000 shares of Common Stock. An S-3 registration statement
has been filed and is currently pending with the Securities and Exchange
Commission. The Company expects to close the transaction October, 1997.
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.
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 June
30, 1997. Accordingly, the Company did not accrue any interest on the Cash Flow
Notes during the six months ended June 30, 1997 and 1996. Also, based upon the
Company's existing debt obligations, its anticipated net cash flows and its
business plan, management does not anticipate the Company having, in respect of
the Cash Flow Notes, Available Cash on a payment date in the foreseeable future.
25
<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
FLORIDA HOME FINDERS, INC. In March, 1995, the Company sold Florida
Home Finders, Inc. ("Florida Home Finders") to the FHF Trust, owned by Ian R.
Law and Benjamin Schiff, for $3.5 million. It has been alleged in litigation
filed against Florida Home Finders that FHF Trust withdrew escrow deposits held
by Florida Home Finders for the benefit of tenant and owner clients and utilized
those funds to purchase a certificate of deposit. It is further alleged that the
certificate of deposit was pledged as security to County National Bank for a
personal loan to Messrs. Law and Schiff, and that a portion of the proceeds of
that loan were utilized to pay the Company approximately $2.0 million of the
amount due under the purchase money note given by FHF Trust in favor of the
Company at the time of the sale of Florida Home Finders. The Company had no
knowledge of the source of the payment.
Subsequent to the foregoing alleged events, the Florida Real Estate
Commission discovered that escrow deposits were missing from Florida Home
Finder's accounts and brought an action in St. Lucie County circuit court
seeking the appointment of a receiver for the property and business of Florida
Home Finders. State of Florida, Department of Business and Professional
Regulation v. Florida Home Finders, Inc. et al., Case No. 95-1092-CA 17 (St.
Lucie Cty. Cir. Ct.) A receiver was appointed for Florida Home Finders in
October 1995. In November 1995, the Company intervened in the receivership
proceeding to (i) protect the Company's interest in the $2.0 million paid under
the purchase money note given by FHF Trust in favor of the Company, and (ii)
assert claims against the receivership estate for money owed to the Company in
connection with the sale of Florida Home Finders to Messrs. Law and Schiff. The
receivers have sold the Florida Home Finders' assets (other than litigation
claims against third parties, which have been retained by the receiver) to All
Florida Property Management, Inc., a Florida corporation; however the sales
proceeds are being held by the receiver pending the court's order directing
disbursement.
In November 1995, the receiver filed a lawsuit against several parties,
including the Company, seeking a return and recovery of the missing escrow
deposits. Spire v. Ian R. Law et al., Case No. 95-1300-CA 17 (St. Lucie Cty.
Cir. Ct.). The Company filed a motion to dismiss the complaint, contending that
the complaint failed to identify any knowledge, notice or wrongdoing on the part
of the Company. This case was voluntarily dismissed without prejudice on
February 6, 1997.
The Company agreed with the receiver on May 5, 1997 to a tentative
settlement of all matters pending final documentation, the satisfaction of
certain conditions and court approval. The documentation of the settlement was
finalized and submitted to the court for approval on or about August 6, 1997. At
a hearing on August 26, 1997, the court indicated that it would approve the
terms of the settlement agreement, although no such Order has been entered by
the court at this time. If a final Order is entered by the court approving the
settlement agreement, the terms of the settlement will not have a material,
adverse financial affect on the Company.
REGENCY ISLAND DUNES. In connection with the construction of the
Regency Island Dunes Condominium Project in Jensen Beach, Florida, various
disputes have arisen between the Company's subsidiary, Regency Island Dunes,
Inc. ("Regency"), and the general contractor, Foley and Associates Construction
Company, Inc. ("Foley"), regarding completion of the first phase of the project
containing 72 units. As a result, Foley filed suit in the Circuit Court of St.
Lucie County under the caption of Foley and Associates Construction, Inc. v.
Regency Island Dunes, Inc. and Atlantic Gulf Communities Corporation, Case No.
96-1569-CA-03 (St. Lucie Cty. Cir. Ct.) alleging breach of the construction
contract, claims for lost profits and delay damages as well as various counts
claiming fraudulent transfers of funds from Regency to the Company. This case
was filed by Foley in addition to Foley's demand for arbitration before the
American Arbitration Association as required pursuant to the terms of the
construction contract between Regency and Foley. Regency has asserted
counterclaims for Foley's failure to properly staff the job and refusal to
perform corrective work which was performed at Regency's expense, and all such
sums incurred by Regency would offset Foley's contract claim. The costs of
corrective work already incurred together with Regency's claims for delay
damages and penalties exceed Foley's claims for the unpaid contract balance. In
addition, in the case
26
<PAGE>
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. The preceding two cases
have been consolidated and partially stayed pending resolution of the contract
disputes in arbitration. In Regency Island Dunes, Inc. v. National Fire
Insurance Company of Hartford and Foley and Associates Construction Company,
Inc., refiled under Case No. 97-14075, U.S.D.C., Southern District of Florida,
Regency filed suit to recover damages against Foley's surety for corrective work
performed by Regency as well as various other claims for damages asserted by
Regency in the arbitration described above. The Federal Court dismissed this
action because the arbitration proceeding will be dispositive of the issues
against the surety. The arbitration proceeding commenced on July 1, 1997 and was
completed on July 28, 1997. The arbitration panel entered an award on August
26,1997, in which $2,839,546 was awarded Foley on its claims and $442,000 was
awarded Regency on its counterclaims. The Company intends to vigorously contest
the arbitration panel's award.
In addition, based upon a separate construction contract between
Regency and Foley for the construction of the second phase of the Regency Island
Dunes Condominium Project, Foley filed a demand for arbitration in March 1997
asserting breach of contract relating to change orders, release of retainage and
Foley's requests for extensions of time. The dispute with Foley in connection
with the second phase has escalated and Foley has filed a claim of lien, which
includes retainage, overhead and unauthorized change orders. The Company
continues discussions with Foley to resolve the phase two matters. In the event
the settlement discussions are unsuccessful, the Company and Regency will
vigorously defend the claims asserted by Foley and aggressively pursue their
claims against Foley and the surety.
Item 2. Changes in Securities
---------------------
(a) Effective June 24, 1997, as approved by the Company's stockholders, the
Company's certificate of incorporation was amended to repeal the right of the
holders of its Common Stock to receive, semiannually, mandatory dividends equal
to 25% of the Company's Available Cash (as defined in the Company's POR).
(b) Effective June 24, 1997, as approved by the Company's stockholders, the
Company's certificate of incorporation was amended to authorize the issuance of
Series A Preferred Stock and Series B Preferred Stock. The holders of each
series are entitled to preferential receipt of dividends and preferential
distribution from the assets of the Company upon liquidation, dissolution or
winding up as compared to holders of Common Stock. Holders of the Series A
Preferred Stock, voting as a single class, are entitled to elect three members
of the Company's seven-member Board of Directors.
(c) On June 25, 1997, the Company sold and issued an aggregate of 553,475 shares
of Series A Preferred Stock, together with Investor Warrants to purchase
1,106,950 shares of Common Stock, divided evenly among Class A Warrants, Class B
Warrants and Class C Warrants, to Apollo, for an aggregate purchase price of
$5,534,752 in a private placement exempt from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended (the "Securities Act"). Apollo is
an accredited investor as defined in Rule 501 promulgated under the Securities
Act. On June 30, 1997, the Company sold and issued to Apollo an additional
334,000 shares of Series A Preferred Stock and Investor Warrants to purchase
668,000 shares of Common Stock, for an aggregate purchase price of $3,340,000.
On June 25, 1997, the Company sold and issued an aggregate of 1,000,000
shares of its Series B Preferred Stock, together with 1,776,199 shares of Common
Stock and Series B Warrants to purchase 2,000,000 shares of Common Stock,
divided evenly among Series B Class A Warrants, Series B Class B Warrants and
Series B Class C Warrants, to a group of institutional and other sophisticated
investors, for an aggregate purchase price of $20,000,000, in a private
placement exempt from registration pursuant to Section 4(2) of the Securities
Act and Rule 506 promulgated thereunder.
27
<PAGE>
The Series A Preferred Stock and the Series B Preferred Stock are each
convertible at $5.75 per share, at the option of the holder thereof, in whole or
in part, into Common Stock, subject to certain adjustments as provided in the
applicable Certificate of Designations. The Investor Warrants and Series B
Warrants may be exercised at the option of the holder thereof, in whole or in
part, to purchase Common Stock at $5.75 per share, subject to certain
adjustments, at any time within seven years of their respective dates of
issuance, subject to certain terms and conditions set forth in the warrants, and
in the case of the Series B Warrants, in the related Warrant Agreement.
Item 4. Submission of Matters to a vote of Security Holders
---------------------------------------------------
The annual meeting of stockholders was held at the Hyatt Regency Miami, 400 S.E.
Second Avenue, Miami, Florida on June 23, 1997.
The stockholders voted on the following matters as set forth in the Company's
Proxy Statement dated May 21, 1997:
1. APOLLO TRANSACTION. The stockholders approved the proposal to (a) amend
the Company's restated certificate of incorporation, in the form attached as
Appendix A to the Proxy Statement, to, among other things (i) increase the
Common Stock from 15,665,000 shares to 70,000,000 shares and (ii) authorize the
Company's issuance of 4,500,000 shares of preferred stock with a liquidation
preference of $10 per share, of which (x) 2,500,000 shares would be 20%
cumulative redeemable convertible preferred stock, designated as Series A
Preferred Stock, and (y) 2,000,000 shares would be 20% cumulative redeemable
convertible preferred stock, designated as Series B Preferred Stock; (b) approve
certain investment transactions involving, among other things, (i) the issuance
to Apollo of up to 2,500,000 shares of Series A Preferred Stock in the aggregate
amount of $25,000,000 and warrants to purchase 5,000,000 shares of Common Stock,
(ii) the granting to Apollo of representation on the Company's board of
directors (the "Board"), (iii) the issuance and sale in a potential private
placement to certain other investors of up to 1,000,000 shares of Series B
Preferred Stock in the aggregate amount of $10,000,000, newly issued Common
Stock with a fair market value of up to $10,000,000, and warrants to purchase up
to 2,000,000 shares of Common Stock and (iv) subject to compliance with
securities registration and other laws, the making available for sale to
stockholders in a rights offering up to 1,000,000 shares of Series B Preferred
Stock in the aggregate amount of $10,000,000 and warrants to purchase up to
2,000,000 shares of Common Stock; and (c) amend the 1994 non-employee directors'
stock option plan to provide for the extension of the exercise period of those
options held by directors who will resign upon consummation of certain of the
investment transactions. The voting tabulation was as follows: 5,627,429 votes
in favor of the proposal; 654,155 votes against the proposal; and 44,954
abstentions.
2. ELECTION OF DIRECTORS. The stockholders voted to elect three class 2
directors, James W. Apthorp, Jerome J. Cohen and Lawrence B. Seidman, to
three-year terms expiring at the annual meeting of stockholders in 2000 or until
their successors are duly elected and qualified. The voting tabulation for each
nominee was as follows:
James W. Apthorp -- 6,036,163 votes in favor of election; 1,121,729 votes
withheld.
Jerome J. Cohen -- 6,069,626 votes in favor of election; 1,088,266 votes
withheld.
Lawrence B. Seidman -- 6,442,212 votes in favor of election;
715,680 votes withheld.
Upon consummation of the Apollo Transaction on June 24, 1997, the Board was
reduced from ten to seven
28
<PAGE>
members. James W. Apthorp, Allen A. Blase, Jerome J. Cohen, Raymond Ehrlich,
W.D. Frederick, Jr., Lawrence B. Seidman and John W. Temple resigned as
directors of the Company. To fill the vacancies, the Board appointed the
following directors: Charles K. MacDonald as a class 1 director whose term
expires at the annual meeting in 1999; James M. DeFrancia as a class 3 director
whose term expires at the annual meeting in 1998; and Ricardo Koenigsberger and
Lee Neibart as directors elected by the holders of the Series A Preferred Stock.
J. Larry Rutherford, W. Edward Scheetz and Gerald N. Agranoff also resigned as
directors of the Company so that they could be reappointed to the Board. The
Board reappointed Gerald N. Agranoff as a class 1 director, J. Larry Rutherford
as a Class 2 director and W. Edward Scheetz as a director elected by the holders
of the Company Series A Preferred Stock.
3. REVERSE STOCK SPLIT AND SUBSEQUENT FORWARD SPLIT OF THE COMPANY'S
COMMON STOCK. The stockholders approved the proposal to amend the Company's
restated certificate of incorporation (a) to effect, as determined by the Board
in its discretion, either of two different reverse stock splits of the
outstanding Common Stock as of 5:00 p.m. (Florida time) on the effective date of
the amendment (the "Effective Date"), pursuant to which either (i) each 100
shares then outstanding will be converted into one share (the "1-for-100 Reverse
Split") , or (ii) each 200 shares then outstanding will be converted into one
share (the "1-for-200 Reverse Split" and together with the 1-for-100 Reverse
Split, the "Reverse Split" or "Reverse Splits") and (b) to effect a forward
split of the Common Stock as of 6:00 a.m. (Florida time) on the day following
the Effective Date of the Reverse Split, pursuant to which each share of Common
Stock then outstanding as of such date will be converted into the number of
shares of the Common Stock that each share represented immediately prior to the
Effective Date ("Forward Split"). The voting tabulation was as follows:
6,886,682 votes in favor of the amendment; 98,084 votes against the amendment;
and 47,203 abstentions. Consummation of the Reverse Split would be subject to,
among other things, the approval of Foothill and Apollo, and the availability of
sufficient funds.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------ --------------------------------
(a) Exhibits required by Item 601 of Regulation S-K
10 (a) Form of Mortgage and Security Agreement, as of June 23,
1997, to the Bank of New York.
(b) Form of Personal Property Security Agreement, as of
June 23, 1997, in favor of The Bank of New York.
(c) Form of Stock Pledge Agreement, as of June 23, 1997, in
favor of The Bank of New York.
(d) Form of Junior Mortgage and Security Agreement, as of
June 23, 1997, to Foothill Capital Corporation.
(e) Form of Junior Personal Property Security Agreement, as
of June 23, 1997, in favor of Foothill Capital
Corporation.
(f) Form of Junior Stock Pledge Agreement, as of June 23,
1997, in favor of Foothill Capital Corporation.
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on June 5, 1997, pursuant to
Item 5, Other Events, reporting that the Company and Apollo entered into an
Amended and Restated Investment Agreement dated as of February 7, 1997, amended
as of March 20, 1997, and amended and restated as of May 15, 1997.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
ATLANTIC GULF COMMUNITIES CORPORATION
Date: September 22, 1997 /s/ J. LARRY RUTHERFORD
----------------------------------
J. Larry Rutherford
Chairman of the Board,
President, and
Chief Executive Officer
Date: September 22, 1997 /s/ CALLIS N. CARLETON
----------------------------------
Callis N. Carleton
Vice President and Controller
(Principal Accounting Officer)
30
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
10 (a) Form of Mortgage and Security Agreement, as of June 23,
1997, to the Bank of New York.
(b) Form of Personal Property Security Agreement, as of
June 23, 1997, in favor of The Bank of New York.
(c) Form of Stock Pledge Agreement, as of June 23, 1997, in
favor of The Bank of New York.
(d) Form of Junior Mortgage and Security Agreement, as of
June 23, 1997, to Foothill Capital Corporation.
(e) Form of Junior Personal Property Security Agreement, as
of June 23, 1997, in favor of Foothill Capital
Corporation.
(f) Form of Junior Stock Pledge Agreement, as of June 23,
1997, in favor of Foothill Capital Corporation.
27 Financial Data Schedule.
THIS INSTRUMENT WAS PREPARED BY:
PAULA MCDONALD RHODES, ESQUIRE
CARLTON, FIELDS, WARD, EMMANUEL,
SMITH & CUTLER, P.A.
P.O. BOX 3239
TAMPA, FLORIDA 33601
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT ("MORTGAGE"), is made effective as
of the 23rd day of June, 1997, from WEST BAY CLUB DEVELOPMENT CORPORATION, a
Florida corporation, formerly known as Estero Pointe Development Corporation
("WEST BAY CLUB"), having an office at 2601 South Bayshore Drive, Miami, Florida
33133 ("MORTGAGOR"), to THE BANK OF NEW YORK, a New York banking corporation,
and its successors and assigns, having an office at Towermarc Plaza, 2nd Floor,
10161 Centurion Parkway, Jacksonville, Florida 32256 ("MORTGAGEE"), as
collateral agent for AP-AGC, LLC, a Delaware limited liability company
("OBLIGEE").
W I T N E S S E T H:
--------------------
WHEREAS, Mortgagor owns the parcels of real property (the "LAND")
described in EXHIBIT A attached hereto and hereby made a part hereof, together
with all buildings and improvements presently located thereon;
THIS MORTGAGE IS ONE OF SEVERAL MORTGAGES SECURING THE OBLIGATIONS SECURED
HEREBY, WHICH SECURED OBLIGATIONS ARE THE JOINT AND SEVERAL PRIMARY OBLIGATIONS
OF THE MORTGAGORS HEREUNDER AND UNDER THAT CERTAIN JUNIOR MORTGAGE AND SECURITY
AGREEMENT GIVEN BY ATLANTIC GULF COMMUNITIES CORPORATION, ENVIRONMENTAL QUALITY
LABORATORY, INCORPORATED, GENERAL DEVELOPMENT UTILITIES, INC., FIVE STAR HOMES,
INC., AND ATLANTIC GULF OF TAMPA, INC. IN FAVOR OF FOOTHILL CAPITAL CORPORATION,
AS COLLATERAL AGENT FOR OBLIGEE ("AG AGENT"), BEING RECORDED CONTEMPORANEOUSLY
HEREWITH IN THE FLORIDA COUNTIES OF BREVARD, BROWARD, CHARLOTTE, CITRUS, DESOTO,
GLADES, HENDRY, HILLSBOROUGH, INDIAN RIVER, LEE, MARION, PALM BEACH, ST. LUCIE
AND SARASOTA ("COMPANION MORTGAGE"). DOCUMENTARY STAMP TAXES IN THE AMOUNT OF
$87,500.00 DUE ON THE OBLIGATIONS SECURED HEREBY AND BY THE COMPANION MORTGAGE
ARE BEING PAID UPON RECORDATION OF THIS MORTGAGE IN LEE COUNTY, FLORIDA. NO
INTANGIBLE PERSONAL PROPERTY TAXES ARE DUE UPON RECORDATION OF THIS MORTGAGE OR
THE COMPANION MORTGAGE AS THE OBLIGATIONS SECURED HEREBY AND THEREBY ARE
CONTINGENT IN NATURE.
<PAGE>
WHEREAS, pursuant to that certain Investment Agreement dated as of
February 7, 1997, amended as of March 20, 1997, and amended and restated as of
May 15, 1997 (together with any and all modifications, amendments, replacements,
renewals and extensions thereof, the "INVESTMENT AGREEMENT") among Obligee,
Atlantic Gulf Communities Corporation, a Delaware corporation ("COMPANY"), and
the subsidiaries of the Company, Obligee has agreed to purchase up to
$25,000,000 in the aggregate of preferred stock to be issued by the Company;
WHEREAS, Obligee, the Company, and the Mortgagor, among others, are
parties to that certain Secured Agreement dated February 7, 1997, and amended
and restated as of May 15, 1997 (together with any and all modifications,
amendments, replacements, renewals and extensions thereof, the "SECURED
AGREEMENT");
WHEREAS, all capitalized terms used herein and not otherwise defined
shall have the meaning given such terms in the Secured Agreement;
WHEREAS, pursuant to the Secured Agreement and the Investment
Agreement, the Company, the Mortgagor, and the other subsidiaries of the Company
have executed and delivered to the Obligee that certain Secured Evidence of
Joint and Several Repurchase Obligations (together with any and all additions,
modifications, amendments, renewals, extensions thereof, the "INSTRUMENT"),
evidencing (a) after the issuance of the Preferred Stock, the joint and several
obligations of the Company, the Mortgagor and other subsidiaries of the Company
pursuant to Section 8 of the Certificate of Designation to repurchase Preferred
Stock on the happening of certain conditions set forth in the Certificate of
Designation at a repurchase price equal to the Liquidation Preference in respect
thereof, as defined in the Certificate of Designation, consisting of, at any
time, $10.00 per share of Preferred Stock, plus accumulated and unpaid dividends
thereon through the date of such determination, whether or not funds are legally
available therefor, the aggregate amount of which, upon issuance of the
2,500,000 shares of Preferred Stock to be issued pursuant to the Investment
Agreement, shall be $25,000,000, plus accumulated and unpaid dividends, and (b)
after the occurrence of an Event of Default, as defined in the Certificate of
Designation, the joint and several obligations of the Company, Mortgagor and
other subsidiaries of the Company to indemnify Obligee from and against any and
all losses, claims, damages, expenses (including reasonable fees, disbursements
and other charges of counsel) or other liabilities resulting from any breach of
any covenant, agreement, representation or warranty of the Company in this
Mortgage or in any other Secured Instrument Document pursuant to Section 7.2 of
the Investment Agreement (collectively, the "OBLIGATIONS");
WHEREAS, it is a condition precedent to Obligee making the investment
contemplated by the Investment Agreement that the Mortgagor provide, as
collateral security for the payment of the Obligations, a mortgage lien upon the
Mortgaged Property (as such term is hereinafter defined).
NOW, THEREFORE, in order to induce Obligee to make the investment
contemplated by the Investment Agreement and for the purpose of securing payment
of the Secured Obligations, Mortgagor hereby agrees as follows:
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<PAGE>
TO SECURE,
a. the Obligations, whether or not from time to time
decreased or extinguished and later increased, created or incurred and all or
any portion of such obligations that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from Obligee or
Mortgagee as a preference, fraudulent transfer or otherwise,
b. all obligations of every nature (whether of payment, of
performance or otherwise) of the Company, the Mortgagor and other subsidiaries
of the Company from time to time owed to Obligee or Mortgagee or either of them
under the Secured Agreement or any other Secured Instrument Document other than
any Subsidiary Guaranty, whether for principal, interest (including interest
accruing after the commencement of a bankruptcy case, whether or not enforceable
in such case), repurchase or redemption obligations, dividend obligations, fees,
costs, expenses, indemnification liabilities or other obligations, of whatsoever
nature and whether now or hereafter made, incurred or created, whether absolute
or contingent, liquidated or unliquidated, regardless of class, whether due or
not due, and however arising,
c. all future or additional advances as described in Article
38 of this Mortgage as and when the same shall be made with the same force and
effect as if such future or additional advances had been made on the date
hereof, and
d. any amounts advanced by Mortgagee pursuant to paragraph 17
or any other paragraph of this Mortgage
(the foregoing being hereinafter collectively referred to as the "SECURED
OBLIGATIONS"), Mortgagor does hereby convey, grant, assign, transfer, mortgage
and set over to Mortgagee, all of Mortgagor's right, title and interest in and
to the following (collectively, the "MORTGAGED PROPERTY"):
The Land;
TOGETHER with the right, title and interest if any of Mortgagor, now
owned or hereafter acquired, in and to the streets, the land lying in the bed of
any streets, roads or avenues, opened or proposed, in front of, adjoining, or
abutting the Land to the center line thereof and strips and gores within or
adjoining the Land, the air space and right to use said air space above the
Land, all rights of way, privileges, liberties, hereditaments, all easements or
rights-of-way now or hereafter affecting the Land, all royalties and all rights
appertaining to the use and enjoyment of said Land, including, without
limitation, all alley, vault, drainage, mineral, water, oil and gas rights;
TOGETHER with the buildings, structures and improvements now or
hereafter erected or located on the Land (the "IMPROVEMENTS") (the Land,
together with the Improvements are hereinafter collectively called the "REAL
ESTATE");
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<PAGE>
TOGETHER with all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the Real Estate, and the
reversion or reversions, remainder or remainders, rents, issues, profits and
revenue thereof; and also all the estate, right, title, interest, dower and
right of dower, curtesy and rights of curtesy, property, possession, claim and
demand whatsoever, both in law and equity, of Mortgagor, of, in and to the Real
Estate and of, in and to every part and parcel thereof, with the appurtenances,
at any time belonging or in anywise appertaining thereto;
TOGETHER with all of the fixtures of every kind and nature whatsoever
currently owned or hereafter acquired by Mortgagor, and all appurtenances and
additions thereto and substitutions or replacements thereof, now or hereafter
attached to, the Real Estate (said fixtures of every kind and nature whatsoever,
and all appurtenances thereof, are hereinafter collectively referred to as the
"FIXTURES"), including, but without limiting the generality of the foregoing,
all plumbing, ventilating, air conditioning and air-cooling apparatus,
refrigerating, incinerating, and escalator, elevator, power, loading and
unloading equipment and systems, sprinkler systems and other fire prevention and
extinguishing apparatus and pipes, pumps, tanks, conduits, fittings and
fixtures; it being understood and agreed that all Fixtures are appropriated to
the use of the Real Estate and, whether affixed or annexed or not, for the
purposes of this Mortgage shall be deemed conclusively to be Real Estate and
mortgaged hereby; and Mortgagor hereby agrees to execute and deliver, from time
to time, such further instruments (including financing statements), as may be
requested by Mortgagee to confirm the lien of this Mortgage on the Fixtures;
TOGETHER with all unearned premiums, accrued, accruing or to accrue
under insurance policies now or hereafter obtained by Mortgagor and Mortgagor's
interest in and to all proceeds of the conversion and the interest payable
thereon, voluntary or involuntary, of the Mortgaged Property, or any part
thereof, into cash or liquidated claims, including, without limiting the
generality of the foregoing, proceeds of casualty insurance, title insurance or
any other insurance maintained on the Real Estate and the Fixtures, and the
right to collect and receive the same, and all awards and/or other compensation
including the interest payable thereon and the right to collect and receive the
same (in the alternative and collectively, "AWARDS"), heretofore and hereafter
made to the present and all subsequent owners of the Real Estate and the
Fixtures by the United States, the State of Florida or any political subdivision
thereof, or any agency, department, bureau, board, commission, or
instrumentality of any of them, now existing or hereafter created (collectively,
"GOVERNMENTAL AUTHORITY") for the taking by eminent domain, condemnation or
otherwise, of all or any part of the Real Estate and Fixtures or any easement or
other right therein, including, without limiting the generality of the
foregoing, Awards for any change or changes of grade or the widening of streets,
roads or avenues affecting the Real Estate, to the extent of all amounts which
may be secured by this Mortgage as of the date of receipt, notwithstanding the
fact that the amount thereof may not then be due and payable, and to the extent
of reasonable attorneys' fees, costs and disbursements incurred by Mortgagee in
connection with the collection of such Awards. Mortgagor hereby assigns to
Mortgagee, and Mortgagee is hereby authorized to collect and receive such Awards
(subject to any Mortgagor's right to be paid directly and apply certain Awards
as expressly provided by this Mortgage), and to give proper receipts and
acquittances therefor and, subject to the other provisions hereof, to apply the
same toward the Secured Obligations, notwithstanding the fact
4
<PAGE>
that the full amount thereof may not then be due and payable; Mortgagor hereby
agrees, upon demand of Mortgagee, to make, execute and deliver, from time to
time, such further instruments as may be reasonably requested by Mortgagee to
confirm such assignment of said Awards to Mortgagee, free and clear and
discharged of any encumbrances of any kind or nature whatsoever;
TOGETHER with all right, title and interest of Mortgagor in and to all
substitutes and replacements of, and all additions and appurtenances to, the
Real Estate and the Fixtures, hereafter acquired by or released to Mortgagor or
constructed, assembled or placed by Mortgagor on the Real Estate, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further mortgage, conveyance,
assignment or other act by Mortgagor, shall become subject to the lien of this
Mortgage as fully and completely, and with the same effect, as though now owned
by Mortgagor and specifically described herein;
TOGETHER with all of the rights and interest of Mortgagor as the
declarant and as the developer under any document affecting the Land including,
but not limited to, any condominium documents or property association documents.
Notwithstanding the foregoing, Mortgagee shall not have any obligation as the
developer or declarant unless Mortgagee executes an agreement expressly assuming
such obligation;
TOGETHER with all proceeds, both cash and noncash, of the foregoing
which may be sold or otherwise be disposed of;
TOGETHER with any and all monies now or hereafter on deposit for the
payment of real estate taxes or special assessments against the Real Estate or
for the payment of premiums on policies of fire and other hazard insurance
covering the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property, together with all and
singular of the rights, privileges, tenements, hereditaments and appurtenances
thereto in any way incident or belonging unto Mortgagee and to its successors
and assigns forever, subject to the terms and conditions herein:
PROVIDED, HOWEVER, that this Mortgage shall be void upon the payment,
when the same shall become due, of the Secured Obligations and the payment and
performance of all other covenants, agreements, obligations and liabilities
secured hereby.
Mortgagor represents, warrants, covenants and agrees as follows:
1. WARRANTIES OF TITLE.
-------------------
Mortgagor warrants that Mortgagor has and owns good and
marketable fee simple title in and to the Land and the Improvements thereon and
has the right to mortgage the same; that Mortgagor owns the Fixtures on the Land
free and clear of all liens, claims or other encumbrances except as set forth in
Schedule B, Section 2 of the title insurance commitment issued by Lawyers Title
Insurance Corporation in connection with this Mortgage
5
<PAGE>
(the "TITLE COMMITMENT"); and that this Mortgage is a valid and enforceable lien
on the Mortgaged Property of the Mortgagor, the covenants, restrictions,
reservations, conditions, and easements approved by the Mortgagee. Mortgagor
covenants that it shall (a) preserve such title and the validity and priority of
the lien hereof and shall forever warrant and defend the same to Mortgagee
against the claims of all and every person or persons, corporation or
corporations and parties whomsoever claiming or threatening to claim the same or
any part thereof, and (b) make, execute, acknowledge, and deliver all such
further or other mortgages, documents, instruments or assurances, and cause
other mortgages, documents, instruments or assurances, and cause to be done all
such further acts and things as may at any time hereafter be reasonably desired
or required by Mortgagee to fully protect the lien of this Mortgage.
2. PAYMENT OF SECURED OBLIGATIONS. Mortgagor shall pay the
Secured Obligations at the times and places and in the manner specified in the
relevant Secured Instrument Documents.
3. PROPER CARE AND USE.
-------------------
a. Mortgagor shall:
(i) not abandon the Mortgaged Property,
(ii) maintain the Mortgaged Property and any future
abutting grounds, sidewalks, roads, parking and landscape areas in good repair,
order and condition, except as otherwise may be permitted pursuant to Subsection
3a(iii) hereof,
(iii) keep all Improvements and all personal property
comprising the Mortgaged Property in good working order and condition, in the
ordinary course of business and in a manner consistent with the prior practice
of Mortgagor,
(iv) not commit or suffer waste with respect to the
Mortgaged Property,
(v) diligently pursue to completion, without
interruption (other than interruptions due to force majeure) and in a good and
workmanlike manner, any future Improvements constructed on the Land,
(vi) not commit, suffer or permit any act to be done
in or upon the Mortgaged Property in violation of any law, ordinance or
regulation, PROVIDED, HOWEVER, that the Company may contest any such law,
ordinance or regulation in any reasonable manner which shall not, in the sole
opinion of the Mortgagee, adversely affect the Mortgagee's rights or the
priority of its lien on the Mortgaged Property,
(vii) refrain from impairing or diminishing the value
or integrity of the Mortgaged Property or the security value of this Mortgage,
6
<PAGE>
(viii) not remove, demolish or in any material respect
alter any of the Improvements or Fixtures unless such Improvement or Fixture is
of a temporary nature (temporary meaning that it is an Improvement intended to
be removed within a year after its placement on the Land), the removal or
demolition would benefit the Mortgaged Property, the removal is of land fill
only for sale in the ordinary course of Mortgagor's business, or the removal or
demolition is not inconsistent with the Business Plan (as such term is defined
in the Secured Agreement), without the prior written consent of the Mortgagee,
which consent shall not be unreasonably withheld or delayed, PROVIDED, HOWEVER,
Mortgagor may without the necessity of any consent perform or cause to be
performed alterations to the Improvements and Fixtures which do not materially
impair the value of the Mortgaged Property and (a) are not inconsistent with the
Business Plan, or (b) do not cost more than $500,000 or, if the cost of such
alterations exceeds $500,000, the cost of which when added to the cost of other
alterations not requiring consent previously made during the calendar year in
which Mortgagor is making such alterations to the Mortgaged Property, does not
result in an aggregate cost in excess of $1,000,000. Failure by the Mortgagee to
deny any requested consent by Mortgagor pursuant to this clause (viii) within
thirty (30) days following the date such request is telecopied to and confirmed
received by Mortgagee shall be deemed to constitute a consent to such request by
the Mortgagee. For purposes of determining the cost of any alteration to the
Mortgaged Property, all aspects of the proposed alteration as a whole shall be
taken into account regardless of when made and by whom the work may be
performed,
(ix) not make, install or permit to be made or
installed, any additions thereto if doing so will materially impair the value of
the Mortgaged Property, without the prior written consent of the Mortgagee, and
(x) not make, suffer or permit any nuisance to exist
on any of the Real Estate.
b. Mortgagee and any persons authorized by Mortgagee shall
have the right to enter and inspect the Mortgaged Property at reasonable times
upon written notice. When so requested by Mortgagor, Mortgagee and its
representatives shall be accompanied by Mortgagor or its representative. If an
Event of Default shall have occurred and be continuing, or in the event of an
emergency, Mortgagee and any persons authorized by Mortgagee, without any notice
and without escort (and without being obligated to do so) may enter or cause
entry to be made upon the Real Estate and repair and/or maintain the same as
Mortgagee may reasonably deem necessary or advisable, and may (without being
obligated to do so) make such expenditures and outlays of money as Mortgagee may
reasonably deem appropriate for the preservation of the Mortgaged Property. All
expenditures and outlays of money made by Mortgagee pursuant hereto shall be
secured hereby and shall be payable on demand together with interest at the
Default Rate (as such term is defined in the Secured Agreement).
4. HAZARDOUS MATERIALS. Except as otherwise disclosed in the
Secured Agreement or the Business Plan, Mortgagor represents, warrants and
covenants that to the best of its knowledge Mortgagor has not used Hazardous
Materials (as defined hereinafter) on, from, or affecting the Mortgaged Property
in any manner which violates Federal, state or local laws,
7
<PAGE>
ordinances, rules, regulations, or policies governing the use, storage,
treatment, transportation, manufacture, refinement, handling, production or
disposal of Hazardous Materials, and that, to the best of Mortgagor's knowledge,
no prior owner of the Mortgaged Property or any tenant, subtenant, prior tenant
or prior subtenant have used Hazardous Materials on, from, affecting, or related
to the Mortgaged Property in any manner which violates Federal, state or local
laws, ordinances, rules, regulations or policies governing the use, storage,
treatment, transportation, manufacture, refinement, handling, production or
disposal of Hazardous Materials. Mortgagor shall use its best efforts to keep or
cause the Mortgaged Property to be kept free of Hazardous Materials. Without
limiting the foregoing, Mortgagor shall not cause or permit the Mortgaged
Property to be used to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer, produce or process Hazardous Materials, except in
compliance with all applicable Federal, state or local laws or regulations, nor
shall Mortgagor cause or permit, as a result of any intentional or unintentional
act or omission on the part of Mortgagor or any tenant or subtenant, a release
of Hazardous Materials onto the Mortgaged Property or onto any other property.
Mortgagor shall comply with and shall, by covenants in all future leases, seek
to ensure compliance by all tenants and subtenants with all applicable Federal,
state and local laws, ordinances, rules and regulations, whenever and by
whomever triggered, and shall obtain and comply with, and by covenants in all
future leases, seek to ensure that all tenants and subtenants obtain and comply
with, any and all approvals, registrations or permits required thereunder.
Mortgagor shall (a) conduct and complete all investigations, studies, sampling,
and testing, and all remedies, removal, and other actions necessary to clean up
and remove all Hazardous Materials on, from, or affecting the Mortgaged Property
(i) in accordance with all applicable Federal, state and local laws, ordinances,
rules, regulations and policies, and (ii) in accordance with the orders and
directives of all Federal, state, and local governmental authorities, and (b)
defend, indemnify, and hold harmless Mortgagee, Obligee and their respective
employees, agents, officers, and directors, from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs or expenses
of whatever kind or nature, known or unknown contingent or otherwise arising out
of, or in any way related to, (i) the presence, disposal, release, or threatened
release of any Hazardous Materials which are on, from, affecting, or related to
the soil, water, vegetation, buildings, personal property, persons, animals, of
or otherwise on, the Mortgaged Property; (ii) any personal injury (including
wrongful death) or property damage (real or personal arising out of or related
to such Hazardous Materials; (iii) any lawsuit brought or threatened, settlement
reached, or government order relating to such Hazardous Materials, and/or (iv)
any violation of any laws, orders, regulations, requirement, or demands of
Governmental Authorities, which are based upon or in any way related to such
Hazardous Materials including, without limitation, attorney and consultant fees,
investigation and laboratory fees, court costs, and litigation expenses;
provided, in any event, that the foregoing arises out of the Mortgaged Property.
In the event this Mortgage is foreclosed, or Mortgagor tenders a deed in lieu of
foreclosure, Mortgagor shall deliver the Mortgaged Property to Mortgagee free of
any and all Hazardous Materials so that the conditions of the Mortgaged Property
shall conform with all applicable Federal, state and local laws, ordinances,
rules or regulations affecting the Mortgaged Property. For purposes of this
Paragraph, "Hazardous Materials" includes, without limit, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
solvent mixtures, hazardous or toxic substances, or related materials defined in
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as
8
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amended (42 U.S.C. Section 9601, et. seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1810 et seq.), the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 9601, et seq.) and
in the regulations adopted and publications promulgated pursuant thereto, or any
other applicable Federal, state or local environmental law, ordinance, rule, or
regulation. The provisions of this paragraphs shall be in addition to any and
all other obligations and liabilities Mortgagor may have to Mortgagee and/or
Obligee, at common law, and shall survive the transactions contemplated herein.
5. COMPLIANCE. Mortgagor shall comply with any and all material
obligations affecting its Mortgaged Property which could adversely affect title
to, or the value of, the Mortgaged Property including, but not limited to, all
agreements, covenants, and restrictions of record. Mortgagor shall have the
right, at Mortgagor's sole cost and expense, to contest or object to any such
obligations of Mortgagor affecting the Mortgaged Property by appropriate legal
proceedings, but such right shall not be deemed or construed in any way as
relieving, modifying or extending Mortgagor's covenant to comply with such
obligations on a timely basis unless Mortgagor has given prior written notice to
Mortgagee of Mortgagor's intent so to contest or object to such obligations, and
unless (i) non-compliance with such obligations shall not under any
circumstances potentially subject Mortgagor to any criminal liability or to any
fine or monetary liability exceeding $25,000 to which effect Mortgagor shall
certify to Mortgagee at the time of Mortgagor's notice, and (ii) the legal
proceedings shall operate conclusively to prevent, prior to final determination
of such proceedings, (y) any loss or forfeiture of title to, or the imposition
of any lien upon, the Mortgaged Property, or any part thereof and (z) the
impairment of the validity, priority and enforceability of this Mortgage.
Mortgagor shall and do hereby agree to defend, save and hold Mortgagee harmless
from any loss and/or liability (including reasonable attorneys' fees and
disbursements) by reason of such non-compliance or contest, and Mortgagor shall
keep Mortgagee regularly advised in writing as to the status of such
proceedings.
6. REQUIREMENTS. Mortgagor, at Mortgagor's sole cost and expense,
shall promptly comply with, or cause to be complied with, and conform to all
present and future laws, statutes, codes, ordinances, orders, judgments,
decrees, injunctions, rules, regulations and requirements pertaining to the
Mortgaged Property, including any applicable environmental, zoning or building,
use and land use laws, ordinances, rules or regulations and all covenants,
restrictions and conditions now or hereafter of record, and shall keep in full
force and effect all permits which may be applicable to it or to any of the
Mortgaged Property, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Mortgaged Property (collectively, the "LEGAL REQUIREMENTS"). Mortgagor shall
have the right, at Mortgagor's sole cost and expense, to contest or object to
any Legal Requirements affecting the Mortgaged Property by appropriate legal
proceedings, but such right shall not be deemed or construed in any way as
relieving, modifying or extending Mortgagor's covenant to comply with any Legal
Requirements on a timely basis unless Mortgagor has given prior written notice
to Mortgagee of Mortgagor's intent so to contest or object to such Legal
Requirements and unless (i) non-compliance with such Legal Requirements shall
not under any circumstances potentially subject Mortgagor to any criminal
liability or to any fine or liability exceeding $25,000 to which effect
Mortgagor shall certify to Mortgagee at the time of Mortgagor's notice, and (ii)
the legal proceedings shall operate conclusively to prevent, prior to final
determination of such proceedings,
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(y) any loss or forfeiture of title to, the imposition of any lien upon, or the
condemnation of, the Mortgaged Property, or any part thereof and (z) the
impairment of the validity, priority and enforceability of this Mortgage.
Mortgagor shall and does hereby agree to defend, save and hold Mortgagee
harmless from any loss and/or liability (including reasonable attorney's fees
and disbursements) by reason of such non-compliance or contest, and Mortgagor
shall keep Mortgagee regularly advised in writing as to the status of such
proceedings.
7. PAYMENT OF IMPOSITIONS.
----------------------
a. Mortgagor shall pay and discharge prior to delinquency
all taxes of every kind and nature (including, without limitation, all real and
personal property, income, franchise, withholding, profits and gross receipts
taxes), all charges for any easement or agreement maintained for the benefit of
any of the Mortgaged Property, all general and special assessments, levies,
permits, inspection and license fees, all water and sewer rents and charges and
all other public charges whether of a like or different nature, even if
unforeseen or extraordinary, imposed upon or assessed of or against Mortgagor or
any of the Mortgaged Property, together with any penalties or interest on any of
the foregoing (all of the foregoing are hereinafter collectively referred to as
the "IMPOSITIONS"). Mortgagor shall have the right, at Mortgagor's sole cost and
expense, to contest or object to the amount or validity of any such Imposition
by appropriate legal proceedings, but such right shall not be deemed or
construed in any way as relieving, modifying or extending Mortgagor's covenant
to pay any such Imposition at the time and in the manner provided in this
Article 7, unless Mortgagor has given prior written notice to Mortgagee of
Mortgagor's intent so to contest or object to an Imposition, and unless, (i)
legal proceedings shall operate conclusively to prevent the sale of the
Mortgaged Property, or any part thereof, to satisfy such Impositions prior to
final determination of such proceedings; or (ii) Mortgagor shall furnish a good
and sufficient bond or surety or other security reasonably satisfactory to
Mortgagee in the amount of the Impositions which are being contested plus any
interest and penalty which may be imposed thereon and which could become a lien
against the Mortgaged Property; or (iii) Mortgagor shall have provided a good
and sufficient undertaking as may be required or permitted by law to accomplish
a stay of such proceedings. Subject to the foregoing, and if Mortgagee shall so
request, within ten (10) days after the date when an Imposition is due and
payable, Mortgagor shall deliver to Mortgagee evidence acceptable to Mortgagee
showing the payment of such Imposition.
b. Mortgagee shall have the right, after demand to Mortgagor,
to pay any Impositions after the date such Imposition shall have become due
(subject to Mortgagor's right to contest such Impositions as hereinbefore
provided), and to add to the Secured Obligations the amount so paid, together
with interest thereon from the date of such payment at Default Rate and nothing
herein contained shall affect such right and such remedy. Any sums paid by
Mortgagee in discharge of any Impositions shall be (i) a lien on the Real Estate
secured hereby prior to any right or title to, interest in, or claim upon the
Real Estate subordinate to the lien of this Mortgage, and (ii) payable on
demand.
c. Following the occurrence of an Event of Default specified
in subsection (a) of Article 20 of this Mortgage or upon any failure on the part
of Mortgagor to pay any Imposition as and when required to be paid pursuant to
this Mortgage (subject to
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applicable grace periods), Mortgagor, upon Mortgagee's request, shall hereafter
pay to Mortgagee, on a monthly basis, an amount equal to one-twelfth of the
annual Impositions reasonably estimated by Mortgagee so that Mortgagee shall
have sufficient funds to pay the Impositions on the first day of the month
preceding the month in which they become due. In such event Mortgagor further
agrees to cause all bills, statements or other documents relating to Impositions
to be sent or mailed directly to Mortgagee. Upon receipt of such bills,
statements or other documents, and providing Mortgagor has deposited sufficient
funds with Mortgagee pursuant to this Article 7, Mortgagee shall pay such
amounts as may be due thereunder out of the funds so deposited with Mortgagee.
If at any time and for any reason the funds deposited with Mortgagee are or will
be insufficient to pay such amounts as may then or subsequently be due,
Mortgagee shall notify Mortgagor and Mortgagor shall immediately deposit an
amount equal to such deficiency with Mortgagee. Notwithstanding the foregoing,
nothing contained herein shall cause Mortgagee to be deemed a trustee of said
funds or to be obligated to pay any amounts in excess of the amount of funds
deposited with Mortgagee pursuant to this Article 7. If amounts collected by
Mortgagee under this paragraph (c) exceed amounts necessary in order to pay
Impositions, Mortgagee may impound or reserve for future payment of Impositions
such portion of such excess payments as Mortgagee in its absolute reasonable
discretion may deem proper. Should Mortgagor fail to deposit with Mortgagee sums
sufficient to pay such Impositions in full at least thirty (30) days before
delinquency thereof, Mortgagee may, at Mortgagee's election, but without any
obligation so to do, advance any amounts required to make up any deficiency,
which advances, if any, shall be added to the Secured Obligations and shall be
secured hereby and shall be repayable to Mortgagee with interest at Default
Rate, as herein elsewhere provided, or at the option of Mortgagee the latter
may, without making any advance whatever, apply any sums held by it upon any
obligation of Mortgagor secured hereby.
8. INSURANCE.
---------
a. As to any portion of the Land improved with Improvements
having a value in excess of $500,000 (an "IMPROVED PARCEL"), Mortgagor shall,
(i) keep such Improved Parcel (A) insured against loss or damage by fire,
lightning, windstorm, tornado and by such other further and additional risks and
hazards as now are or hereafter may be covered by extended coverage and "all
risk" endorsements (flood and earthquake excepted), (B) insured against loss or
damage by any other risk commonly insured against by persons occupying or using
like properties in the locality in which the Improved Parcel is situate, (C) if
appropriate, insured by a policy of business interruption and/or loss of rental
insurance in amounts which shall be subject to review annually, and (D) insured
by a policy of boiler and machinery insurance covering pressure vessels, air
tanks, boilers, machinery, pressure piping, heating, air conditioning and
elevator equipment, provided that the Improvements on the Improved Parcel
contain equipment of such nature, and insurance against loss of occupancy or use
arising from the breakdown of such machinery, (ii) keep the Fixtures on such
Improved Parcel insured against loss or damage by fire, lightning, vandalism,
windstorm, tornado, malicious mischief, and theft and by such other further and
additional risks as now or hereafter may be covered by extended coverage and
"all risk" endorsements (flood and earthquake' excepted) and (iii) to the extent
the Land lies within an area identified by the Secretary of Housing and Urban
Development as an area having special flood hazards, keep the Real Estate
insured under a policy of flood insurance in an amount no less than the
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maximum list of coverage available under the National Flood Insurance Act of
1968, as amended. In addition, Mortgagor shall obtain and maintain (A)
comprehensive public liability insurance on an occurrence basis (to the extent
available) against claims for personal injury including bodily injury, death or
property damage occurring on, in or about the Mortgaged Property and the
adjoining streets, sidewalks and passageways, such insurance to afford primary
coverage of not less than $10,000,000 combined single limit for personal injury
or death to one or more persons or damage to property and (B) workmen's
compensation insurance (including employer's liability insurance if requested by
Mortgagee) for all employees of Mortgagor engaged on or with respect to the
Mortgaged Property in such amounts as are required to be maintained by law, or
if no amounts are established by law, then in such amounts as are reasonably
satisfactory to Mortgagee. Each insurance policy (other than flood insurance
written under the National Flood Insurance Act of 1968, as amended, in which
case to the extent available) shall (i) be noncancelable (which term shall
include any reduction in the scope or limits of coverage) without at least
thirty days' prior written notice to Mortgagee or the maximum notice period then
available, whichever is shorter, (ii) except in the case of worker's
compensation and comprehensive public liability insurance, be endorsed to name
Mortgagee as its interest may appear, with loss payable to Mortgagee, without
contribution, under a standard mortgagee clause, (iii) in the case of public
liability insurance, provide for broad form coverage, including liquor liability
coverage, (iv) in the case of property insurance contain a satisfactory
"Replacement Cost Endorsement", (v) be written by Lloyds of London or by
companies having an Alfred M. Best Company, Inc. rating of A or higher and a
financial size category of not less than VII with respect to primary coverage
and (and A/XII with respect to excess coverage) unless waived in writing by
Mortgagee, and (vi) contain an endorsement or agreement by the insurer that any
loss shall be payable in accordance with the terms of such policy
notwithstanding any act or negligence of Mortgagor which might otherwise result
in forfeiture of said insurance and the further agreement of the insurer waiving
all rights of set-off, counterclaim, deduction or subrogation against Mortgagor.
If said insurance or any part thereof shall expire, be withdrawn, become void by
breach of any condition thereof by Mortgagor or otherwise, or if for any reason
said insurance shall become unsatisfactory, Mortgagor shall immediately obtain
new or additional insurance complying with the requirements of this Mortgage.
Mortgagor shall not take out any separate or additional insurance which is
contributing in the event of loss unless it is properly compatible with all
other insurance carried by it with respect to the Mortgaged Property.
b. Mortgagor shall (i) pay as they become due all premiums
for such insurance, (ii) not later than twenty (20) days prior to the expiration
of each policy to be furnished pursuant to the provisions of this Article 7,
deliver a valid certificate of insurance, (or if such certificate is not then
available, a renewal binder) evidencing a renewed policy or policies marked
"premium paid," or accompanied by such other evidence of payment satisfactory to
Mortgagee with standard noncontributory mortgagee clauses in favor of, and
acceptable to, Mortgagee. Such certificate of insurance (or renewal binder)
shall be accompanied by a written statement of Mortgagor certifying that the
insurance coverage evidenced thereby complies with the requirements of this
Article 8.
c. If Mortgagor shall be in default of its obligations to so
insure or deliver any such prepaid certificate or insurance or renewal binder
then Mortgagee, at Mortgagee's
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option (without obligation to do so) and without prior notice, may effect such
insurance from year to year, and pay the premium or premiums therefor, and
following notice from Mortgagee that such insurance has been effected and paid
for, Mortgagor shall pay to Mortgagee such premium or premiums so paid by
Mortgagee with interest from the time of payment at Default Rate on demand, and
the same shall be deemed added to the Secured Obligations and shall be secured
by this Mortgage.
d. Mortgagor promptly shall comply with and conform to (i)
all provisions of each such insurance policy and (ii) all requirements of the
insurers thereunder applicable to Mortgagor or to any of its Mortgaged Property
or to the use, manner of use, occupancy, possession, operation, maintenance,
alteration or repair of any of this Mortgaged Property. If Mortgagor shall use
any of the Mortgaged Property in any manner which would permit the insurer to
cancel any insurance policy, Mortgagor immediately shall obtain a substitute
policy to be effective at or prior to the time of any such cancellation.
e. If any Improvement on an Improved Parcel, or any portion
thereof, the value of which is $100,000 or less, shall be destroyed or damaged
by fire or any other casualty, whether insured or uninsured, and regardless of
any amount of proceeds of insurance which are available to Mortgagor, and
provided no Event of Default has occurred or is continuing, Mortgagor shall
elect whether to repair or replace such Improvement or any portion thereof;
provided, however, in the event Mortgagor elects not to repair or replace such
Improvement or portion thereof, the proceeds shall be applied by Mortgagee to
the Secured Obligations in whatever manner Mortgagee, in its sole discretion,
may determine. Mortgagor shall give immediate notice of any such destruction or
damage to Mortgagee who may make proof of loss if not promptly made by Mortgagor
and except as may otherwise be provided herein each insurance company concerned
is hereby authorized and directed to make payment for any loss directly to
Mortgagee. Mortgagee shall have the right, at its option, (but not the
obligation) to participate in the adjustment of any loss with any insurer or
insurers. The insurance proceeds or any part thereof received by Mortgagee, if
paid as a result of a damage or destruction in the amount of $100,000 or less,
shall be paid by Mortgagee to Mortgagor so long as no Event of Default has
occurred or is continuing. The insurance proceeds or any part thereof received
by Mortgagee, if paid as a result of a damage or destruction in an amount
greater than $100,000, may be applied by Mortgagee toward reimbursement of all
costs and expenses of Mortgagee in collecting such proceeds, and the balance
shall be applied in the following order: (i) first, to the payment of any
Secured Obligations or any other amount secured hereby which has become due
prior to the date application of the insurance proceeds has been made and
remains unpaid; (ii) next, to the restoration and repair of the affected
Improvement pursuant to the provisions of Article 9 of this Mortgage; and (iii)
finally, if conditions (i) and (ii) above have been satisfied and funds remain,
said balance shall be returned to Mortgagor.
f. The property insurance required by this Mortgage may be
effected by blanket policies issued to Mortgagor covering the Mortgaged Property
and other properties (real and personal) owned or leased by Mortgagor, provided
that such policies otherwise comply with the provisions of this Mortgage and
allocate with respect to the Mortgaged Property the coverage specified form time
to time, without possibility of reduction or coinsurance by reason of, or damage
to, any other property (real or personal) named therein,
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and if the insurance required by this Mortgage shall be effected by any such
blanket or umbrella policies, Mortgagor shall furnish to Mortgagee valid
certificates of insurance evidencing such policies, with schedules attached
thereto showing the amount of insurance afforded by such policies applicable to
the Mortgaged Property and a certification from Mortgagor to the effect that
such insurance coverage complies in all respects with the requirements of this
Mortgage.
g. Any transfer of the Mortgaged Property by foreclosure or
deed in lieu of foreclosure shall transfer therewith all of Mortgagor's
interest, including any unearned premiums, in all insurance policies then in
force covering the Mortgaged Property, subject to all of the terms and
conditions of such policies.
h. Following the occurrence of an Event of Default specified
in subsection (a) of Article 20 of this Mortgage or upon any failure on the part
of Mortgagor to pay any insurance premiums as and when required to be paid
pursuant to this Mortgage (subject to applicable grace periods), Mortgagor, upon
Mortgagee's request, shall thereafter pay to Mortgagee an amount equal to
one-twelfth of the estimated aggregate annual insurance premiums on all policies
of insurance required by this Mortgage on a specified date each month. Upon
Mortgagee's request, Mortgagor shall cause copies of all bills, statements or
other documents relating to the foregoing insurance premiums to be sent or
mailed directly to Mortgagee. Upon receipt of such bills, statements or other
documents by Mortgagee, and providing Mortgagor has deposited sufficient funds
with Mortgagee pursuant to this Article 8, Mortgagee shall pay such amounts as
may be due thereunder out of the funds so deposited with Mortgagee. If at any
time and for any reason the funds deposited with Mortgagee are or will be
insufficient to pay such amounts as may be or subsequently are due, Mortgagee
shall notify Mortgagor and Mortgagor shall immediately deposit an amount equal
to such deficiency with Mortgagee. Notwithstanding the foregoing, nothing
contained herein shall cause Mortgagee to be deemed a trustee of said funds or
to be obligated to pay any amounts in excess of the amount of funds deposited
with Mortgagee pursuant to this Article 8. Should Mortgagor fail to deposit with
Mortgagee sums sufficient to pay in full such insurance premiums at least thirty
(30) days before delinquency thereof, Mortgagee may, at Mortgagee's election,
but without any obligation so to do, advance any amounts required to make up the
deficiency, which advances, if any, with interest thereon at Default Rate, from
the date of advance thereof shall be secured hereby and shall be repaid to
Mortgagee on demand or at the option of Mortgagee the latter may, without making
any advance whatever, apply any sums held by it upon any obligation of Mortgagor
secured hereby.
i. Any provision of this Article 8 to the contrary
notwithstanding, so long as no Event of Default shall have occurred and be
continuing, Mortgagor shall have the right to receive the proceeds from any
business interruption and/or loss of rentals insurance policy.
9. RESTORATION.
-----------
a. Funds in excess of $100,000 made available by Mortgagee
to Mortgagor for restoration of any of the Mortgaged Property pursuant to the
provisions of
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Article 8 hereof shall be disbursed by Mortgagor only in accordance with the
following conditions:
(i) prior to the commencement of restoration, the
contracts, contractors, architects, plans and specifications for the restoration
shall have been approved by the Consulting Professional (as such term is defined
in subsection (c) of this Article 9), and the Consulting Professional shall have
the right to require an acceptable surety bond insuring satisfactory completion
of the restoration;
(ii) at the time of any disbursement of the
restoration funds, (A) no Event of Default shall then exist, (B) no mechanics'
or materialmen's liens shall have been filed and remain undischarged, except
those bonded while being contested and those discharged by the disbursement of
the requested restoration funds and (C) a satisfactory continuation of title
insurance on the Real Estate shall be delivered to Mortgagee;
(iii) disbursements shall be made monthly in an amount
not exceeding the cost of the work completed since the last disbursement, upon
receipt of a certificate from an architect approved to do the plans and
specifications;
(iv) there shall, at all times, remain adequate funds
to complete the restoration so that the remaining amount of available proceeds
received from insurance and otherwise pursuant to paragraph (b) below equals or
exceeds the contracted cost of construction less the amount paid for work that
has been certified as having been completed;
(v) such other reasonable conditions may be imposed
and as are customarily imposed by construction lenders for borrowers having a
similar financial position as then existing for the Mortgagor, including but not
limited to, the maintenance of a policy of builders risk insurance with
completed value and extended coverage endorsements and worker's compensation
coverage as shall be required by law; and
(vi) any restoration funds remaining after the
application thereof in accordance with the provisions hereof shall be disbursed
to Mortgagor provided no Event of Default shall have occurred and then be
continuing.
b. Mortgagor shall pay the cost of the restoration to the
extent that it exceeds the amount of insurance proceeds or condemnation proceeds
awarded. Mortgagor (i) shall evidence to Mortgagee a source of funds to pay for
such restoration, and (ii) agree to use said funds to complete restoration of
the Improvements. Any sum so added by Mortgagor which remains in the restoration
fund upon completion of restoration shall be refunded to Mortgagor.
c. The administration of the restoration procedures set forth
in subsection (a) of this Article 9 shall be delegated by Mortgagee to, and
performed by, an independent bonded consulting professional experienced in the
administration of such procedures who shall be designated by Mortgagor and
approved by Mortgagee (the "CONSULTING PROFESSIONAL"). The failure by Mortgagee
to approve or disapprove any Consulting Professional proposed by Mortgagor
within fifteen (15) Business Days following
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request for such a approval shall be deemed approved by Mortgagee. All fees,
costs and expenses of such Consulting Professional shall be borne and timely
paid by Mortgagor.
d. In the event of any fire or casualty where the cost of
repair and restoration of the Mortgaged Property does not exceed $100,000 as
determined by Mortgagor's insurance carrier for the Improvements, the proceeds
of insurance shall be collected and applied by Mortgagor (rather than disbursed
by Mortgagee).
e. In the event Mortgagor receives any condemnation award the
actual proceeds of which do not exceed $100,000, Mortgagor shall retain such
amount and use such amount to the extent necessary to repair and restore the
Mortgaged Property.
10. CONDEMNATION/EMINENT DOMAIN.
---------------------------
a. Immediately upon obtaining knowledge of the institution of
any proceedings of the condemnation of the Mortgaged Property, or any portion
thereof, Mortgagor will notify Mortgagee of the pendency of such proceedings.
Mortgagee may (but shall not be obligated to) participate in any such
proceedings and Mortgagor shall from time to time deliver to Mortgagee all
instruments requested by it to permit such participation. Mortgagor shall, at
its expense, diligently prosecute any such proceeding and shall consult with
Mortgagee, its attorneys and experts and cooperate with it in any defense of any
such proceedings. Except as otherwise expressly provided in paragraph (e) of
Article 9 above, all awards and proceeds of condemnation shall be assigned to
Mortgagee to be applied in the same manner as insurance proceeds, and Mortgagor
agrees to execute any such assignments of all such awards as Mortgagee may
request.
b. After application of all awards and proceeds of
condemnation toward all practical repair and restoration of the Mortgaged
Property as directed by the Consulting Professional, any remaining funds shall
be applied as follows: (i) in the event that value and utility of the Mortgaged
Property shall have been substantially restored as determined by the Consulting
Professional, any remaining funds shall be returned to Mortgagor, or (ii) in the
event the value and utility of the Mortgaged Property shall not have been
substantially restored as determined by the Consulting Professional, any
remaining funds shall, at the option of Mortgagee, be applied in reduction of
the Secured Obligations.
11. HOMESTEAD EXEMPTIONS. Mortgagor hereby represents and declares
that the Mortgaged Property forms no part of any property owned, used or claimed
by Mortgagor as exempted from forced sale under the laws of the State of
Florida, and disclaims, waives and renounces all and every claim to exemption
under any homestead exemption law or other similar laws.
12. DISCHARGE OF LIENS, UTILITIES.
-----------------------------
a. Mortgagor shall not, without the prior written consent of
the Obligee, create, consent to or suffer the creation of any liens, charges or
encumbrances, on any of the Mortgaged Property (each, a "PROHIBITED LIEN"),
whether or not such Prohibited Lien is subordinate to this Mortgage, except for
the Junior Mortgages as described in Article 41
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hereof, and except as permitted by the Secured Agreement and those liens arising
by operation of law which secure obligations not yet due and payable, nor shall
Mortgagor fail to have any Prohibited Lien which may be imposed without
Mortgagor's consent discharged and satisfied of record within 10 days after it
is imposed, except those liens bonded while being contested. Mortgagor shall pay
prior to delinquency all lawful claims and demands of mechanics, materialmen,
laborers and others which, if unpaid, might result in, or permit the creation of
a Prohibited Lien, except that Mortgagor shall have the right to contest such
claims or demands, provided that Mortgagor shall furnish a good and sufficient
bond, surety or other security as requested by, and found satisfactory to,
Mortgagee.
b. Mortgagor shall pay prior to delinquency all utility
charges which are incurred by it for gas, electricity, water or sewer services
to its Mortgaged Property and all other assessments or charges of a similar
nature, whether public or private and whether or not such taxes, assessments or
charges are liens on the Mortgaged Property.
13. BOOKS AND RECORDS. Mortgagor shall at all times keep and
maintain or cause to be kept and maintained records and books of account with
respect to its Mortgaged Property.
14. ESTOPPEL CERTIFICATES. Mortgagee and Mortgagor within 10 days
following written request, shall deliver to the requesting party, a written
statement, duly acknowledged, setting forth (i) the amount of the Obligations,
and (ii) that there exist no offsets, claims, counterclaims or defenses against
the Obligations or describe in detail the nature of any such offset, claim,
counterclaim or defense.
15. EXPENSES. Mortgagor shall pay, together with any interest or
penalties imposed in connection therewith, all expenses incident to the
preparation, execution, acknowledgement, delivery and/or recording of this
Mortgage, including all filing registration or recording fees and all federal,
state, county and municipal, internal revenue or other stamp taxes and other
taxes duties, imposts, assessments and charges now or hereafter required by the
federal, state, county or municipal government.
16. MORTGAGEE'S COSTS AND EXPENSES. Upon the occurrence of any
Event of Default or the exercise by Mortgagee of any of Mortgagee's rights
hereunder, or if any action or proceeding be commenced, to which action or
proceeding Mortgagee is or becomes party or in which it becomes necessary to
defend or uphold the lien of this Mortgage, or if the taking, holding or
servicing of this Mortgage by Mortgagee is alleged to subject Mortgagee to any
civil fine, or if Mortgagee's review and approval of any document is requested
by Mortgagor or required by Mortgagee, all reasonable costs, out-of-pocket
expenses and fees incurred by Mortgagee in connection therewith (including any
civil fines and reasonable attorneys' fees and disbursements) shall, on notice
and demand, be paid by Mortgagor, together with interest thereon from the date
of disbursement until paid at the Default Rate and shall be a lien on the
Mortgaged Property and shall be secured by this Mortgage; and, in any action to
foreclose this Mortgage, or to recover or collect the Secured Obligations, the
provisions of this Article 16 with respect to the recovery of costs,
disbursements and allowances shall prevail unaffected by the provisions of any
law with
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respect to the same to the extent that the provisions of this Article 16 are not
inconsistent therewith or violative thereof.
17. MORTGAGEE'S RIGHT TO PERFORM. If any Event of Default shall
have occurred hereunder and be continuing, Mortgagee, without waiving or
releasing Mortgagor from any obligation or default under this Mortgage, may (but
shall be under no obligation to), at any time perform the same, and the cost
thereof, with interest at Default Rate, shall immediately be due from Mortgagor
to Mortgagee, and the same shall be a lien on the Mortgaged Property prior to
any right, title to, interest in, or claim upon, the Mortgaged Property
attaching subsequent to the lien of this Mortgage. No payment or advance of
money by Mortgagee under this Article 17 shall be deemed or construed to cure
Mortgagor's default or waive any right or remedy of Mortgagee hereunder.
18. FURTHER ASSURANCES. Mortgagor and Mortgagee agree, upon demand
of the other, to promptly correct any defect, error or omission which may be
discovered in the contents of this Mortgage or in the execution or
acknowledgment hereof or in any other instrument executed in connection herewith
or in the execution or acknowledgment of such instrument, or do any act or
execute any additional documents (including, but not limited to, security
agreements on any Fixtures or personal property included or to be included in
the Mortgaged Property) as may be reasonably required by Mortgagee to confirm
the lien of this Mortgage.
19. ASSIGNMENT OF RENTS. All of the rents, royalties, issues,
profits, revenue, income and other benefits of the Mortgaged Property arising
from the use and enjoyment of all or any portion thereof or from any lease or
agreement pertaining thereto (the "RENTS AND PROFITS") are hereby absolutely and
unconditionally assigned, transferred, conveyed and set over to Mortgagee to be
applied by Mortgagee in payment of the principal and interest and all other sums
payable on the Obligations, and of all other sums payable under this Mortgage.
Until such time as an Event of Default shall have occurred, Mortgagor shall
collect and receive all Rents and Profits.
20. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default by Mortgagor hereunder:
a. the occurrence of any Event of Default under the
Instrument or the Secured Agreement (whether or not any Obligations or other
Secured Obligations shall be at the time outstanding under the Secured
Agreement, or the Instrument or the Secured Agreement shall have terminated for
other purposes) or the occurrence of any Event of Default under the Certificate
of Designation; or
b. a failure to make payment of any sums required to be paid
to Mortgagee other than the Obligations pursuant to the terms of this Mortgage
within five days after the same shall become due hereunder; or
c. if any default shall occur in the performance of any
covenant contained in this Mortgage not elsewhere specified in this Article 20
which shall continue for thirty (30) days after notice from Mortgagee or if such
default cannot be cured in such 30-day
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period, such longer period as shall be necessary to cure such default, provided
that Mortgagor shall commence curing such default within such 30-day period and
thereafter shall prosecute such cure diligently to completion; or
d. (i) if Mortgagor shall commence any case, proceeding or
other action (a) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (b) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or Mortgagor shall make a general assignment for
the benefit of its creditors, (ii) if there shall be commenced against Mortgagor
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 sixty (60) days, (iii) if there shall be commenced against Mortgagor any
case, proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof, (iv) if Mortgagor 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, (v) if
Mortgagor 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 Mortgagor 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) Mortgagor shall cause to
be reinstated the Reorganization Proceedings, as such term is defined in the
Secured Agreement; or
e. the occurrence of any default or event of default (and the
expiration of applicable grace periods) pursuant to any mortgage encumbering the
Mortgaged Property or any portion thereof, or pursuant to any note or other
evidence of indebtedness secured thereby.
21. DUE ON SALE. Except as otherwise expressly provided in the
Secured Agreement or Article 35 hereof, in the event that, without the prior
written consent of the Mortgagee, Mortgagor shall, either directly or
indirectly, convey, grant, assign or transfer all or any portion of its right,
title or interest in the Mortgaged Property, whether legal or equitable, by
outright sale, deed, installment sale contract, land contract, contract for
deed, option, lease option, leasehold interest, contract, or any other method of
conveyance of real property interests, to any person or entity, then in any such
event, Mortgagee shall have the right, at its sole option, to declare the entire
Secured Obligations, immediately due and payable. The foregoing notwithstanding,
Mortgagor shall have the right without Mortgagee's consent to sell worn and
obsolete Fixtures in conjunction with the replacement thereof in the ordinary
course of Mortgagor's business where (x) such replacements are in quantity and
of quality not less than that of the Fixtures being sold when originally new and
(y) title to the replacement Fixtures is owned by Mortgagor at the time of such
sale.
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22. REMEDIES. Upon the occurrence of an Event of Default
hereunder, (y) if such event is an Event of Default specified in paragraph (d)
of Article 20 above, automatically the Secured Obligations and all amounts owing
under this Mortgage shall immediately become due and payable, and (z) if such
event is an Event of Default other than those specified in paragraph (d) of
Article 20 above, Mortgagee may in Mortgagee's sole discretion declare the
Secured Obligations and all amounts owing under this Mortgage to be immediately
due and payable without presentment, demand, protest or notice of any kind, and
Mortgagee may take such action, without notice or demand, as it deems advisable
to protect and enforce Mortgagee's rights in and to the Mortgaged Property,
including, but not limited to, the following actions:
a. (i) To the extent permitted by law, the Mortgagee itself,
or by such officers or agents as it may appoint, may enter and take possession
of all the Mortgaged Property and may exclude Mortgagor and its agents and
employees wholly therefrom and may have joint access with Mortgagor to the
books, papers and accounts of Mortgagor; and Mortgagor will pay monthly in
advance to Mortgagee, on Mortgagee's entry into possession, or to any receiver
appointed to collect the rents, income and other benefits of the Mortgaged
Property and the businesses conducted thereon or thereat, the fair and
reasonable rental value for the use and occupation of such part of the Mortgaged
Property as may be in possession of Mortgagor, and upon default in any such
payment will vacate and surrender possession of such part of the Mortgaged
Property to Mortgagee or to such receiver and, in default thereof, Mortgagor may
be evicted by summary proceedings or otherwise.
(ii) If Mortgagor shall for any reason fail to
surrender or deliver the Mortgaged Property or any part thereof after
Mortgagee's demand, Mortgagee may obtain a judgment or decree conferring on
Mortgagee the right to immediate possession or requiring Mortgagor to deliver
immediate possession of all or part of the Mortgaged Property to Mortgagee, to
the entry of which judgment or decree Mortgagor hereby specifically consents.
Mortgagor shall pay to Mortgagee, upon demand, all costs and expenses of
obtaining such judgment or decree and reasonable compensation to Mortgagee, its
attorneys and agents, and all such costs, expenses and compensation shall, until
paid, be secured by the lien of this Mortgage.
(iii) Upon every such entering upon or taking of
possession, Mortgagee may hold, store, use, operate, manage and control the
Mortgaged Property and conduct the business thereof, and, from time to time:
(A) make all necessary and proper maintenance,
repairs, renewals, replacements, additions, betterments and improvements thereto
and thereon and purchase or otherwise acquire additional fixtures, personal and
other mortgaged property;
(B) insure or keep the Mortgaged Property
insured;
(C) manage and operate the Mortgaged Property
and exercise all the rights and powers of Mortgagor in its name or otherwise
with respect to the same; and
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(D) enter into agreements with others to
exercise the powers herein granted Mortgagee, all as Mortgagee from time to time
may determine; and Mortgagee may collect and receive all the rents, income and
other benefits thereof, including those past due as well as those accruing
thereafter; and shall apply the monies so received by Mortgagee in such priority
as Mortgagee may determine to (1) the payment of interest, principal, and other
payments due and payable on the Obligations, or pursuant to this Mortgage, (2)
the deposits for taxes and assessments and insurance premiums due, (3) the cost
of insurance, taxes, assessments and other proper charges upon the Mortgaged
Property or any part thereof, (4) any sums due and payable on any approved prior
encumbrance; and (5) the compensation, expenses and disbursements of the agents,
attorneys and other representatives of Mortgagee.
b. Institute an action of mortgage foreclosure, or take
action as the law may allow, at law or in equity, for enforcement of this
mortgage, and proceed there onto final judgment and execution of the entire
unpaid balance of the Obligations including costs of suit, interest and
reasonable attorneys' fees. In case of any sale of the Mortgaged Property by
virtue of judicial proceedings, the Mortgaged Property may be sold in one parcel
and as an entirety or in such parcels, manner or order as the Mortgagee, in its
sole discretion, may elect.
c. Institute partial foreclosure proceedings with respect to
the portion of the Secured Obligations so in default, as if under a full
foreclosure, and without declaring the entire Secured Obligations due, PROVIDED
that if foreclosure sale is made because of default of a part of the Secured
Obligations, such sale may be made subject to the continuing lien of this
Mortgage for the unmatured part of the Secured Obligations; and it is agreed
that such sale pursuant to a partial foreclosure, if so made, shall not in any
manner affect the unmatured part of this Mortgage and the lien thereof shall
remain in full force and effect just as though no foreclosure sale had been made
under the provisions of this subsection. Notwithstanding the filing of any
partial foreclosure or entry of a decree of a sale therein, Mortgagee may elect
at any time prior to a foreclosure sale pursuant to such decree, to discontinue
such partial foreclosure and to accelerate the Secured Obligations by reason of
any uncured default or defaults upon which such partial foreclosure was
predicated or by reason of any other defaults, and proceed with full foreclosure
proceedings. It is further agreed that several foreclosure sales may be made
pursuant to partial foreclosures without exhausting the right of full or partial
foreclosure sale for any unmatured part of the Secured Obligations, it being the
purpose to provide for a partial foreclosure sale of any matured portion of the
Secured Obligations without exhausting the power to foreclose and to sell the
Mortgaged Property pursuant to any such partial foreclosure for any other part
of the Secured Obligations whether matured at the time or subsequently maturing;
and without exhausting any right of acceleration and full foreclosure.
d. Appoint a receiver of the rents, issues and profits of the
Mortgaged Property and of the businesses conducted thereon and therefrom,
without the necessity of proving the depreciation or the inadequacy of the value
of the security or the insolvency of Mortgagor or any person who may be legally
or equitably liable to pay moneys secured hereby, and Mortgagor and each such
person waive such proof and hereby consent to the appointment of a receiver, to
enter upon and take possession of the Mortgaged Property and
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to collect all rents, income and other benefits thereof and apply the same as
the court may direct and any such receiver shall be entitled to hold, store,
use, operate, manage and control the Mortgaged Property and conduct the business
thereof as would Mortgagee pursuant to paragraph a above. The expenses,
including receiver's fees, attorneys' fees, costs and agent's compensation,
incurred pursuant to the powers herein contained shall be secured by this
Mortgage. The right to enter and take possession of, and to manage and operate,
the Mortgaged Property and to collect all rents, income and other benefits
thereof, whether by a receiver or otherwise, shall be cumulative to any other
right or remedy hereunder or afforded by law and may be exercised concurrently
therewith or independently thereof. Mortgagee shall be liable to account only
for such rents, income and other benefits actually received by the Mortgagee,
whether received pursuant to this paragraph or paragraph a above.
Notwithstanding the appointment of any receiver or other custodian, Mortgagee
shall be entitled as pledgee to the possession and control of any cash,
deposits, or instruments at the time held by, or payable or deliverable under
the terms of this Mortgage to, Mortgagee.
e. Institute an action for specific performance of any
covenant contained herein or in aid of the execution of any power herein
granted.
f. Apply on account of the unpaid Secured Obligations and the
interest thereon or on account of any arrearages of interest thereon, or on
account of any balance due to the Mortgagee after a foreclosure sale of the
Mortgaged Property, or any part thereof, any unexpended moneys still retained by
the Mortgagee that were paid by Mortgagor to the Mortgagee pursuant to Article
7(c) or Article 8(h) hereof.
g. Exercise any and all other rights and remedies granted
under this Mortgage or now or hereafter existing in equity, at law, by virtue of
statute or otherwise.
23. DISCONTINUANCE OF PROCEEDINGS. If Mortgagee has proceeded to
enforce any right under the Obligations or this Mortgage and such proceedings
have been discontinued or abandoned for any reason, then in every such case,
Mortgagor and Mortgagee will be restored to their former positions and the
rights, remedies and powers of Mortgagee will continue as if no such proceedings
had been taken.
24. SALE OF THE PROPERTIES; APPLICATION OF PROCEEDS. Subject to
the requirements of applicable law, the proceeds or avails of foreclosure sale
and all moneys received by Mortgagee pursuant to any right given or action taken
under the provisions of Article 22 of this Mortgage shall be applied as follows:
First: To the payment of the costs and expenses of any such
sale or other enforcement proceedings in accordance with the terms hereof and of
any judicial proceeding wherein the same may be made, and in addition thereto,
all actual out-of-pocket expenses, advances, liabilities and sums made or
furnished or incurred by Mortgagee or the holder of the Obligations under this
Mortgage including, without limitation, attorneys fees and costs, and fees and
costs incurred by other professionals and consultants retained by Mortgagee,
together with interest at the Default Rate (or such lesser amount as may be the
maximum amount permitted by law), and all taxes, assessments or other charges in
connection with
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such foreclosure, except any taxes, assessments or other charges subject to
which the Mortgaged Property shall have been sold;
Second: To the payment of the amount then due, owing or unpaid
upon the Obligations for principal and interest on such amount; and in case such
proceeds shall be insufficient to pay in full the whole amount so due and
unpaid, then first, to the payment of all amounts of interest at the time due
and payable on the Obligations, without preference or priority of any
installment of interest over any other installment of interest, and second, to
the payment of all amounts of principal without preference or priority of any
amount of principal over any other amount of principal, or any part of the
Secured Obligations over any other part of the Secured Obligations;
Third: To the payment of any other sums required to be paid
by Mortgagor pursuant to any provision of this Mortgage; and
Fourth: To the payment of all other Secured Obligations; and
Fifth: With payment of the surplus, if any, to whomsoever
may be lawfully entitled to receive the same.
25. REMEDIES NOT EXCLUSIVE. Mortgagee shall be entitled to enforce
payment and performance of the Secured Obligations or any obligations secured
hereby and to exercise all rights and powers under this Mortgage or other
agreement or any laws now or hereafter in force, notwithstanding some or all of
the Secured Obligations and obligations may now or hereafter be otherwise
secured, whether by mortgage, deed of trust, pledge, lien, assignment or
otherwise. Neither the acceptance of this Mortgage nor its enforcement, whether
by court action or pursuant to the power of sale or the powers herein contained,
shall prejudice or in any manner affect Mortgagee's right to realize upon or
enforce any other security now or hereafter held by Mortgagee it being agreed
that Mortgagee shall be entitled to enforce this Mortgage and any other security
now or hereafter held by Mortgagee in such order as it may in its absolute
discretion determine. No remedy herein conferred upon or reserved to Mortgagee
is intended to be exclusive of any other remedy given hereunder or now or
hereafter existing at law or in equity or by statute. Every power or remedy
given to Mortgagee or to which Mortgagee may be otherwise entitled, may be
exercised concurrently or independently, from time to time and as often as may
be deemed expedient by Mortgagee.
26. EXTENSION, RELEASE, ETC. Without affecting the lien or charge
of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of all unpaid obligations,
Mortgagee may, subject to the Secured Agreement, from time to time and without
notice, agree to (i) extend the maturity or alter any of the terms of any such
obligation, (ii) grant other indulgences, (iii) release or reconvey, or cause to
be released or reconveyed at any time at Mortgagee's option any parcel, portion
or all of the Mortgaged Property, (iv) take or release any other or additional
security for any obligation herein mentioned, or (v) make compositions or other
arrangements with debtors in relation thereto.
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27. WAIVER OF APPRAISEMENT, VALUATION. Mortgagor hereby waives, to
the full extent that it may lawfully do so, the benefit of all appraisement,
valuation, stay and extension laws now or hereafter in force and all rights of
marshalling of assets in the event of any sale of the Mortgaged Property, any
part thereof or any interest therein, and any court having jurisdiction to
foreclose the lien hereof may sell the Mortgaged Property (real or personal, or
both) as an entirety or in such parcels, lots, manner or order as the Mortgagee
in its sole discretion may elect.
28. SUCCESSOR MORTGAGOR. In the event ownership of the Mortgaged
Property or any portion thereof becomes vested in a person other than Mortgagor,
except as permitted by the Secured Agreement or Section 35 of this Mortgage,
Mortgagee may, without notice to the Mortgagor herein named, whether or not
Mortgagee has given written consent to such change in ownership, deal with such
successor or successors in interest with reference to this Mortgage and the
Secured Obligations, and in the same manner as with the Mortgagor herein named,
without in any way vitiating or discharging Mortgagor's liability hereunder or
under the Secured Obligations.
29. SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE. It is the
intention of the parties hereto that this Mortgage shall constitute a Security
Agreement within the meaning of the Uniform Commercial Code. Notwithstanding the
filing of a financing statement covering any of the Mortgaged Property in the
records normally pertaining to personal property, all of the Mortgaged Property,
for all purposes and in all proceedings, legal or equitable, shall be regarded,
at Mortgagee's option (to the extent permitted by law), as part of the Real
Estate whether or not such item is physically attached to the Real Estate or
serial numbers are used for the better identification of certain items. The
mention in any such financing statement of any of the Mortgaged Property shall
never be construed as in any way derogating from or impairing this declaration
and hereby stated intention of the parties that such mention in the financing
statement is hereby declared to be for the protection of Mortgagee in the event
any court shall at any time hold that notice of Mortgagee's priority of interest
to be effective against any third party, including the federal government and
any authority or agency thereof, must be filed in the Uniform Commercial Code
records. Pursuant to the provision of the Uniform Commercial Code, Mortgagor
hereby authorizes Mortgagee, without the signature of Mortgagor, to execute and
file financing and continuation statements if Mortgagee shall determine, in its
sole discretion, that such are necessary or advisable in order to perfect its
security interest in the Fixtures covered by this Mortgage, and Mortgagor shall
pay to Mortgagee, on demand, any reasonable out-of-pocket expenses incurred by
Mortgagee in connection with the preparation, execution, and filing of such
statements that may be filed by Mortgagee.
30. INDEMNIFICATION; WAIVER OF CLAIM.
--------------------------------
a. If Mortgagee is made a party defendant to any litigation,
mediation, arbitration, administrative or bankruptcy proceedings and any appeals
therefrom, concerning this Mortgage or the Mortgaged Property or any part
thereof or interest therein, or the occupancy thereof by Mortgagor, then
Mortgagor shall indemnify, defend and hold Mortgagee harmless from all liability
by reason of said action other than that arising solely from Mortgagee's own
willful misconduct or gross negligence, including reasonable
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attorneys' fees and paralegals' fees and reasonable out-of-pocket expenses
incurred by Mortgagee in any such action, whether or not any such action is
prosecuted to judgment, including, without limitation reasonable attorneys' fees
and paralegals' fees and reasonable out-of-pocket expenses incurred in
connection with any such action. If Mortgagee commences an action against
Mortgagor to enforce any of the terms hereof or because of the breach by
Mortgagor of any of the terms hereof, or for the recovery of any sum secured
hereby, Mortgagor shall pay to Mortgagee reasonable attorneys' fees and
paralegals' fees and reasonable out-of-pocket expenses, including, without
limitation reasonable attorneys' fees and paralegals' fees and reasonable
out-of-pocket expenses incurred in connection with any litigation, mediation,
arbitration, administrative or bankruptcy proceedings and any appeals therefrom,
together with interest thereon at the rate provided in the Secured Agreement
from the date the same are paid by Mortgagee to the date of reimbursement by
Mortgagor, and the right to such reasonable attorneys' fees and paralegals' fees
and reasonable out-of-pocket expenses shall be deemed to have accrued on the
commencement of such action, and shall be enforceable whether or not such action
is prosecuted to judgment. If an Event of Default shall have occurred, Mortgagee
may engage an attorney or attorneys to protect its rights hereunder, and in the
event of such engagement, Mortgagor shall pay Mortgagee reasonable attorneys'
fees and paralegals' fees and reasonable out-of-pocket expenses incurred by
Mortgagee, whether or not an action is actually commenced against Mortgagor by
reason of breach, including, without limitation reasonable attorneys' and
paralegals' fees and reasonable out-of-pocket expenses incurred in connection
with any litigation, mediation, arbitration, administrative or bankruptcy
proceedings and any appeals therefrom.
b. Mortgagor waives any and all right to claim or recover
against Mortgagee, its officers, employees, agents and representative, for loss
of or damage to Mortgagor, the Mortgaged Property, Mortgagor's property or the
property of others under Mortgagor's control from any cause whatsoever, except
for the willful misconduct or gross negligence of Mortgagee, its officers,
employees, agent or representatives.
c. The obligations of Mortgagor in this Article 30 hereof
shall survive satisfaction of this Mortgage and the discharge of Mortgagor's
other obligations under this Mortgage, the Secured Agreement and the other
Secured Instrument Documents.
31. NO WAIVERS, ETC. Any failure by Mortgagee to insist upon the
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor;
Mortgagee may release, regardless of consideration and without the necessity for
any notice to, or consent by, the holder of any subordinate lien on the
Mortgaged Property, any part of the security held for the obligations secured by
this Mortgage without, as to the remainder of the security, in anywise impairing
or affecting the lien of this Mortgage or the priority of such a lien over any
subordinate lien. Mortgagee may resort for the payment of the Secured
Obligations secured by this Mortgage to any other security therefor held by
Mortgagee in such order and manner as Mortgagee may elect.
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32. WAIVERS BY MORTGAGOR. Upon the happening and continuation of
an Event of Default hereunder, Mortgagor hereby waives, to the extent permitted
by applicable law, all errors and imperfections in any proceedings instituted by
Mortgagee under this Mortgage and all notices of any Event of Default (except as
may be provided for under the terms hereof or of the Secured Agreement) or of
Mortgagee's election to exercise or its actual exercise of any right, remedy or
recourse provided for under this Mortgage and Mortgagor shall not at any time
insist upon or plead, or in any manner whatever claim or take any benefit or
advantage of, any present or future statute, law, regulation or judicial
decision which (a) exempts any of the Mortgaged Property or any other property,
real or personal, or any part of the proceeds arising from any sale thereof from
attachment, levy or sale under execution, (b) provides for any stay of
execution, moratorium, marshalling of assets, exemption from civil process,
redemption, extension of time for payment or valuation or appraisement of any of
the Mortgaged Property, or (c) conflicts with any provision, covenant or term of
this Mortgage.
33. SURRENDER. Upon the occurrence of any Event of Default and
pending the exercise by Mortgagee or its agents or attorneys of its right to
exclude Mortgagor from all or any part of the Mortgaged Property, Mortgagor
agrees to vacate and surrender possession of the Mortgaged Property to Mortgagee
or to a receiver, if any, and in default thereof may be evicted by any summary
action or proceeding for the recovery of possession of premises for nonpayment
of rent, however designated.
34. NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing, and unless
otherwise expressly provided herein, shall be considered to have been duly given
or made when received by receipted hand delivery, or by facsimile or telecopy
transmission, receipt confirmed, addressed as follows, or to such other address
as may be hereafter notified by the respective parties thereto:
The Mortgagor: Atlantic Gulf Communities Corporation
2601 South Bayshore Drive
Miami, Florida 33133-5461
Attention: John H. Fischer
Vice President
Telecopy: (305) 859-4623
Copy to: Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Matthew B. Gorson, Esq.
The Mortgagee: The Bank of New York
Towermarc Plaza, 2nd Floor
10161 Centurion Parkway
Jacksonville, Florida 32256
Attn: Janalee R. Scott
Telecopy: (904) 645-1998
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Copy to: Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: Rick Koenigsberger
Telecopy: (212) 459-3301
Copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Philip Mindlin, Esq.
Telecopy: (212) 403-2000
Copy to: Carlton, Fields, Ward, Emmanuel, Smith
& Cutler, P.A.
Post Office Box 3239
Tampa, Florida 33601
Attn: Paula McDonald Rhodes, Esq.
Telecopy: (813) 229-4133
provided, that any notice, request or demand to or upon Mortgagor pursuant to
Article 20 shall be effective two (2) days after being deposited in the mail,
postage prepaid, PROVIDED FURTHER, that in the case at any such notice, request
or demand to or upon Mortgagor pursuant to Article 20, Mortgagee shall use its
best efforts to notify Mortgagor concurrently with any notice by mail, by
telecopy transmission or hand delivery, it being agreed that the failure to give
any such notice, request or demand by telecopy transmission shall not have any
adverse effect upon the effectiveness of any such notice, request or demand
given by mail.
35. PARTIAL RELEASES. Mortgagee shall release parcels of the
Mortgaged Property or otherwise subordinate this Mortgage upon the terms and
conditions set forth in the Secured Agreement and whenever required pursuant to
the Intercreditor Agreement (as defined in Article 51). The Mortgagee shall
execute such partial releases, in form and substance satisfactory to Mortgagee,
prepared by Mortgagor at its expense. Parcels to be released need not be
contiguous to any of the parcels previously released from this Mortgage.
Mortgagee agrees that notwithstanding anything to the contrary contained herein,
the lien of this Mortgage is subordinate and inferior to the contract rights of
any purchaser of any lot in which the subject property has been platted, and
Mortgagee shall release any such lot from the lien and operation of this
Mortgage upon the sole condition that such purchaser has complied with the terms
and provisions of his purchase agreement with Mortgagor. Mortgagee further
agrees that in the event of default by Mortgagor, the aforesaid provisions of
this Article 35 shall survive the final judgment in the event this Mortgage is
foreclosed and shall be binding on any purchaser in a foreclosure sale. Such
releases from the lien hereof shall not affect the lien hereby granted as to the
remainder of the Mortgaged Property.
36. REACQUISITION OF RELEASED LOTS. The lien of this Mortgage
shall encumber, and the Mortgaged Property shall include, any and all portions
of the Mortgaged Property which may hereafter be released from the lien hereof
in connection with the sale of lots by
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Mortgagor ("RELEASED LOTS") if such Released Lots are reacquired by Mortgagor at
any time prior to the satisfaction of this Mortgage in full.
37. DEVELOPMENT MATTERS. To the extent required by applicable law,
the Mortgagee, without incurring any obligation to file or record any
documentation and at Mortgagor's cost and expense, shall join in the execution
of subdivision plats, easements and declarations covering all or any part of the
Mortgaged Property and other documents with respect to which Mortgagee's joinder
is necessary for the development of the Mortgaged Property as contemplated in
the Business Plan, PROVIDED that such subdivision plats, easements, declarations
and other documents are in form and substance reasonably satisfactory to
Mortgagee and Mortgagor shall have complied in all respects with all applicable
provisions of law with respect thereto.
38. COUNTERPARTS. This Mortgage is being executed in multiple
counterparts, all of which shall for all purposes constitute one agreement
binding on all the parties hereto, in order to permit its being recorded
concurrently in all of the counties in which the Mortgaged Property is located.
39. FUTURE ADVANCES. This Mortgage shall secure not only the
Secured Obligations described hereinabove, but also such future or additional
advances as may be made by Obligee (including its successors and assigns) from
time to time, whether obligatory or at its option, for any purpose, provided
that all those advances are to be made within 20 years from the date of this
Mortgage or within such lesser period of time as may be provided hereafter by
law as a prerequisite for the sufficiency and actual notice or record notice of
the optional future or additional advances as against the rights of creditors or
subsequent purchases for valuable consideration. The total amount of the Secured
Obligations secured by this Mortgage may decrease or increase from time to time
but the total unpaid indebtedness (exclusive of any interest and expenses
included as part of the Secured Obligations) as secured at any one time by this
Mortgage shall not exceed the maximum principal amount of ONE HUNDRED MILLION
AND NO/100 DOLLARS ($100,000,000.00), plus interest, and any disbursements made
for the payment of taxes, levies, or insurance on the property covered by the
lien of this Mortgage with interest on those disbursements. It shall be a
default hereunder if Mortgagor shall file for record a notice limiting the
maximum principal amount which may be secured by this Mortgage if the effect of
the filing of such notice would in any way prohibit Mortgagee from making future
advances to be secured by this Mortgage in the full amount hereinabove set
forth.
40. TAXES ON MORTGAGEE.
------------------
a. If any Governmental Authority shall levy, assess, or
charge any tax, assessment or imposition upon this Mortgage, the Secured
Obligations, the interest of Mortgagee in the Mortgaged Property, or Mortgagee
by reason of or as holder of any of the foregoing, Mortgagor shall pay (or
provide funds to Mortgagee for such payment), to the extent required in the
Secured Agreement, all such taxes, assessment and impositions to, for, or on
account of Mortgagee (other than federal, state or local income taxes of
Mortgagee or franchise taxes imposed on the Mortgagee or the holder of the
Obligations assessed other than on the basis of Mortgagee's or such holder's
holding this Mortgage) as they become due
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and payable and on demand shall furnish proof of such payment to Mortgagee. In
the event of passage of any law or regulation permitting, authorizing or
requiring the tax, assessment or imposition to be levied, assessed or charged,
which law or regulation prohibits Mortgagor from paying the tax, assessment or
imposition to or for Mortgagee (and from providing funds to the Mortgagee to pay
any such tax, assessment or imposition), or which shall make such payment by
Mortgagor result in the imposition of interest exceeding the maximum permitted
by law, then, unless the affected portion of the Mortgaged Property is released
from the lien of this Mortgage pursuant to the terms hereof and of the Secured
Agreement, Mortgagee may declare the Secured Obligations secured hereby
immediately due and payable.
b. In the event of the passage after the date of this
Mortgage of any law of the jurisdiction in which the Real Estate is located
deducting from the value of the Real Estate for the purposes of taxation any
lien thereon or changing in any way the laws for the taxation of mortgages or
debts secured by mortgages for state or local purposes or the manner of the
collection of any such taxes and imposing a tax, either directly or indirectly,
on this Mortgage or any Secured Instrument Document, as defined in the Secured
Agreement, Mortgagee shall have the right to declare all sums outstanding
secured by this Mortgage immediately due and payable, provided, however, that
such election shall be ineffective if (i) Mortgagor is exempt from such tax or,
if not exempt from such tax, is permitted by law to pay the whole of such tax
(or to provide funds to Mortgagee to pay such taxes) in addition to all other
payments required hereunder and if Mortgagor pays such tax (or provides funds to
Mortgagee to pay such tax) when the same is due and payable and agrees in
writing to pay such tax when the same is due and payable and agrees in writing
to pay such tax when thereafter levied or assessed against the Real Estate; or
(ii) the affected portion of the Mortgaged Property is released from the lien of
this Mortgage in accordance with the terms hereof and of the Secured Agreement.
41. JUNIOR MORTGAGES; NOTICES. Mortgagor agrees to forward to
Mortgagee copies of all correspondence to or from the holder of all junior
mortgages promptly after mailing or receiving same, either constituting notices
of a material default thereunder or relating to payment of principal and/or
interest in respect of all junior mortgages.
42. NO MODIFICATION; BINDING OBLIGATIONS. This Mortgage may not be
modified, amended, discharged or waived in whole or in part except by an
agreement in writing signed by the party against whom enforcement of any such
modification, amendment, discharge or waiver is sought. The covenants of this
Mortgage shall run with the land and bind Mortgagor, the heirs, distributees,
personal representatives, successors and assigns of Mortgagor, and all present
and subsequent encumbrancers, lessees and sublessees of any of the Mortgaged
Property, and shall inure to the benefit of Mortgagee and its successors,
assigns and endorsees.
43. MISCELLANEOUS. As used in this Mortgage, the singular shall
include the plural as the context requires and the following words and phrases
shall have the following meanings: (a) "including" shall mean "including but not
limited to"; (b) "provisions" shall mean "provisions, terms, covenants and/or
conditions"; (c) "lien" shall mean "lien, charge, encumbrance, security
interest, mortgage and/or deed of trust"; (d) "obligation" shall mean
"obligation, duty, covenant and/or condition"; and (e) "any of the Mortgaged
Property" shall
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<PAGE>
mean "the Mortgaged Property or any part thereof or interest therein."
Capitalized terms not defined herein shall have the meanings give them in the
Secured Agreement. Any act which Mortgagee is permitted to perform hereunder may
be performed at any time and from time to time by Mortgagee or any person or
entity designated by Mortgagee. Any act which is prohibited to Mortgagor
hereunder is also prohibited to all lessees of any of the Mortgaged Property.
Each appointment of Mortgagee as attorney-in-fact for Mortgagor under the
Mortgage is irrevocable and coupled with an interest.
44. CAPTIONS. The captions or headings at the beginning of each
Article hereof are for the convenience of the parties and are not a part of this
Mortgage.
45. SUCCESSORS AND ASSIGNS. The covenants contained herein shall
run with the land and bind Mortgagor, its successors and assigns, and all
subsequent owners, encumbrances and tenants of the Mortgaged Property, and shall
inure to the benefit of the Mortgagee.
46. ENFORCEABILITY. The validity and enforceability of this
Mortgage shall be construed and interpreted according to the laws of the State
of Florida; provided, however, that nothing in this Section shall be construed
to affect in any way the intent of the parties that the Instrument and the
Secured Agreement, and the rights and obligations of the parties thereto and
thereunder, shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York where the Instrument, this Mortgage, the
Secured Agreement and the other Secured Instrument Documents were negotiated and
the payment of amounts due in respect of the Secured Obligations shall be made
and rendered to Mortgagee.
47. SEVERABILITY. Whenever possible, each provision of this
Mortgage shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Mortgage shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remaining provisions
of this Mortgage.
48. AUTHORITY OF MORTGAGEE. The rights and responsibilities of
Mortgagee under this Mortgage with respect to any action taken by Mortgagee or
the exercise or non-exercise by Mortgagee of any option, right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Mortgage shall, as among Mortgagee and Obligee, be governed by the
Secured Agreement, and by such other agreements with respect thereto as may
exist from time to time among them, but, as among Mortgagee and Mortgagor,
Mortgagee shall be conclusively presumed to be acting as agent for the holder of
the Obligations with full and valid authority so to act or refrain from acting,
and Mortgagor shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
49. RECEIPT OF COPY. Mortgagor acknowledges that it has received a
true copy of this Mortgage.
50. SUBORDINATION AND ADDITIONAL PARTIAL RELEASE OF MORTGAGE
LIENS. Mortgagee shall release or subordinate parcels of the Mortgaged Property
from the lien of this Mortgage upon the terms and conditions set forth in the
Secured Agreement pursuant to partial releases
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or subordinations, in form and substance satisfactory to Mortgagee, prepared by
Mortgagor at its expense.
51. INTERCREDITOR AGREEMENT. All of the Mortgaged Property is
subject to other mortgages given to other lenders and more particularly
identified in Schedule 1 attached hereto (the "JUNIOR MORTGAGES"). The relative
priority of the mortgages is governed by the terms and provisions of that
certain Intercreditor Agreement ("INTERCREDITOR AGREEMENT"), pursuant to the
terms of which Obligee has agreed to permit, and consents to, the placing of
mortgage liens upon the Land and all Improvements, Fixtures and tangible
personal property located thereon or used in connection therewith to secure
certain obligations of the Company as more particularly described in, and
subject to the terms and conditions of, the Intercreditor Agreement. The terms
of this Mortgage are subject to the terms and provisions of the Intercreditor
Agreement.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage and Security
Agreement effective as of the date first set forth above.
Witnesses: MORTGAGOR:
WEST BAY CLUB DEVELOPMENT CORPORATION,
a Florida corporation,
formerly known as Estero Pointe
Development Corporation
- ------------------------------------
Signature (Corporate Seal)
- ------------------------------------
Printed Name
By:
---------------------------------------
John H. Fischer
- ------------------------------------ Vice President
Signature
- ------------------------------------
Printed Name Address:
2601 South Bayshore Drive
Miami, Florida 33133-5461
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STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this ___ day of
June, 1997, by John H. Fischer, as Vice President of WEST BAY CLUB DEVELOPMENT
CORPORATION, a Florida corporation, formerly known as Estero Pointe Development
Corporation, behalf of the corporation, who is personally known to me or has
produced a Florida driver's license number F260-468-57-430-0 as identification.
---------------------------------
NOTARY PUBLIC
Name:
----------------------------
Serial #:
------------------------
My Commission Expires:
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<PAGE>
EXHIBIT A
(Land)
<PAGE>
SCHEDULE 1
----------
1. That certain Junior Mortgage and Security Agreement (Revolving
Loan) dated of even date herewith, executed by Mortgagors to and for the benefit
of The Bank of New York, as collateral agent for the Banks, as defined therein,
and
2. That certain Junior Mortgage and Security Agreement (Secured
Floating Rate) dated of even date herewith, executed by Mortgagors to and for
the benefit of The Bank of New York, as collateral agent for the Banks, as
defined therein, both of which are recorded immediately subsequent to this
Mortgage.
PERSONAL PROPERTY SECURITY AGREEMENT
THIS PERSONAL PROPERTY SECURITY AGREEMENT (the "SECURITY AGREEMENT") is
dated effective as of June 23, 1997, and is entered into by AGC-SP, INC., a
Delaware corporation ("AGC-SP"), and each of the undersigned Subsidiaries of
AGC-SP (the "SUBSIDIARY GRANTORS;" AGC-SP and the Subsidiary Grantors each
individually a "GRANTOR" and collectively, the "GRANTORS"), in favor of THE BANK
OF NEW YORK, a New York banking corporation, as collateral agent (in such
capacity herein called "COLLATERAL AGENT"), for AP-AGC, LLC, a Delaware limited
liability company ("OBLIGEE").
R E C I T A L S
---------------
WHEREAS, Atlantic Gulf Communities Corporation, a Delaware corporation
("COMPANY"), Grantors, Obligee and Collateral Agent are parties to that certain
Secured Agreement dated February 7, 1997 and amended and restated as of May 15,
1997 (as hereafter amended, supplemented or otherwise modified from time to
time, the "SECURED AGREEMENT"; capitalized terms used herein without definition
shall have the meanings given such terms in the Secured Agreement);
WHEREAS, Company, Grantors and Obligee are parties to that certain
Investment Agreement dated February 7, 1997, amended as of March 20, 1997, and
amended and restated as of May 15, 1997 (as hereafter amended, supplemented or
otherwise modified from time to time, the "INVESTMENT AGREEMENT");
WHEREAS, Company and Obligee are parties to that certain Due Diligence
Fee Agreement dated of even date herewith (as hereafter amended, supplemented or
otherwise modified from time to time, the "FEE AGREEMENT");
WHEREAS, it is a condition precedent to Obligee entering into the
Secured Agreement, the Investment Agreement and the Fee Agreement and all other
and investing capital thereunder that the Grantors herein execute and deliver
this Security Agreement, and the Grantors desire to enter into this Security
Agreement.
NOW, THEREFORE, in consideration of the premises set forth herein and
in order to induce Obligee to enter into the Secured Agreement, the Investment
Agreement, the Fee Agreement, and all other Secured Instrument Documents, the
Grantors hereby agree as follows:
SECTION 1. DEFINED TERMS. The following terms shall have the following
meanings:
"BANK ACCOUNTS" means any and all deposit accounts, money
market accounts and any other deposits and investments of Grantors 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 Grantors in all escrow, restricted,
custodial and
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fiduciary accounts the pledge of which by Grantors is prohibited by
agreements existing as of the date hereof or by law, as set forth in
Schedule 7.17 to the Secured Agreement and hereby made a part hereof
(which may be amended from time to time by written notice to Collateral
Agent and Obligee to include other restricted accounts)).
"CAPITAL STOCK" means any and all shares, interests, or other
equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"COLLATERAL" has the meaning assigned such term in SECTION 2
of this Agreement.
"COMMERCIAL RECEIVABLES" means all promissory notes and
mortgages and deeds of trust payable to, or held by, Grantors, 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 (as defined in the
Secured Agreement) or arising from the sale of other Real Property and
all cash and non-cash proceeds thereof.
"CONDEMNATION AWARDS" means any and all proceeds (including,
without limitation, 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 any Grantor 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, without limitation, any awards and/or other
compensation awarded to any Grantor whether as a result of litigation,
arbitration, settlement or otherwise, or (b) any sale by any Grantor of
a water and utility system to a Person, whether now owned or hereafter
created or acquired.
"EXCLUDED PROPERTY" means 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.
"HOMESITE CONTRACTS RECEIVABLE" means all contracts for deed,
unsecured promissory notes, and other agreements, currently existing or
hereafter created or acquired, pursuant to which any Grantor 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.
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<PAGE>
"INTELLECTUAL PROPERTY" means all now existing or hereafter
created or acquired trademarks, trade names, copyrights, technology,
know-how and processes necessary for the conduct of any Grantor's
business, and any and all licenses to use any of the foregoing.
"INVESTMENTS" means any and all promissory notes, Capital
Stock (other than Subsidiary Stock), bonds, debentures and securities,
held by Grantors, whether now owned or hereafter acquired.
"PERSONAL PROPERTY" means the following personal property of
Grantors:
(a) the Bank Accounts;
(b) the Investments;
(c) any and all accounts, contract rights, chattel
paper, instruments and documents, including, without
limitation, 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 (collectively, "EQUIPMENT");
(e) any and all general intangibles, whether now
owned or hereafter created or acquired, including, without
limitation, 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, without limitation, any proceeds
or choses in action with respect to, or rights to receive
proceeds from, any condemnation of any Real Property or
Personal Property of any Grantor, 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, without
limitation, 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 (collectively,
"INVENTORY");
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<PAGE>
(g) all monies, cash, residues and property of any
kind, now or at any time hereafter in the possession or under
the control of Collateral Agent or Obligee or any agent or
bailee of Collateral Agent or Obligee;
(h) all Homesite Contracts Receivable and Commercial
Receivables;
(i) all accessions to, all substitutions for, and
all replacements, products and proceeds of, the foregoing,
including, without limitation, 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, collection or any other temporary or
permanent disposition of such items or any interest therein
whether or not they constitute "PROCEEDS" as defined in the
Code; and
(j) all books, records, documents and ledger receipts
pertaining to any of the foregoing, including, without
limitation, 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.
"REAL PROPERTY" means any and all real property and fixtures
and interests in real property and fixtures now owned or hereafter
acquired by any Grantor.
"SUBSIDIARY" means, as to any Person, a corporation,
partnership, trust 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 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.
"SUBSIDIARY STOCK" means the Capital Stock of any and all
Subsidiaries.
SECTION 2. GRANT OF SECURITY. (a) Each Grantor, in order to secure the
Secured Obligations (as defined in SECTION 3), hereby assigns and pledges to
Collateral Agent for benefit of Obligee and hereby grants to Collateral Agent
for the benefit of Obligee a first-priority security interest, subject to
Permitted Liens (as hereinafter defined in SECTION 5(C) hereof), in all of the
Grantor's right, title and interest in and to the following, in each case
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<PAGE>
whether now or hereafter existing or in which the Grantor now has or hereafter
acquires an interest and wherever the same may be located and all proceeds
thereof (the "COLLATERAL"):
(i) All of the Personal Property (other than the Excluded
Property); and
(ii) All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance
(whether or not Collateral Agent or Obligee is the loss payee thereof),
or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral.
For purposes of this Agreement, the term "proceeds" includes whatever
is receivable or received when Collateral or proceeds are sold,
collected, exchanged or otherwise disposed of, whether such disposition
is voluntary or involuntary, and includes, without limitation, all
rights to payment, including returned premiums, with respect to any
insurance relating thereto.
(b) At such time as any Personal Property comprising Excluded Property
is freed of contractual or legal restrictions against becoming subject to a Lien
to secure the Secured Obligations, such Excluded Property shall, automatically,
become subject to the Lien hereof.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, (a) after the issuance of the Preferred
Stock, the joint and several obligations of the Company, the Grantors and other
subsidiaries of the Company pursuant to Section 8 of the Certificate of
Designation to repurchase Preferred Stock on the happening of certain conditions
set forth in the Certificate of Designation at a repurchase price equal to the
Liquidation Preference in respect thereof, as defined in the Certificate of
Designation, consisting of, at any time, $10.00 per share of Preferred Stock,
plus accumulated and unpaid dividends thereon through the date of such
determination, whether or not funds are legally available therefor, the
aggregate amount of which, upon issuance of the 2,500,000 shares of Preferred
Stock to be issued pursuant to the Investment Agreement, shall be $25,000,000,
plus accumulated and unpaid dividends, and (b) after the occurrence of an Event
of Default, as defined in the Certificate of Designation, the joint and several
obligations of the Company, Grantors and other subsidiaries of the Company to
indemnify Obligee from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities resulting from any breach of any covenant, agreement, representation
or warranty of the Company in this Security Agreement or in any other Secured
Instrument Document pursuant to Section 7.2 of the Investment Agreement, as
evidenced by that certain Secured Evidence of Joint and Several Repurchase
Obligations dated of even date herewith, executed by the Company, Grantors, and
other subsidiaries of the Company to and for the benefit of Obligee (together
with any and all additions, modifications, amendments, renewals, and extensions
thereof, the "INSTRUMENT"), whether or not from time to time decreased or
extinguished and later increased, created or incurred and all or any portion of
such obligations that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Obligee or Collateral Agent as
a preference, fraudulent transfer or otherwise, and all obligations of every
nature (whether of payment, of performance or otherwise) of the Company, the
Grantors and other subsidiaries of the Company from time to time owed to Obligee
or Collateral Agent or either of them
5
<PAGE>
under the Secured Agreement or any other Secured Instrument Document, whether
for principal, interest (including interest accruing after the commencement of a
bankruptcy case, whether or not enforceable in such case), repurchase or
redemption obligations, dividend obligations, fees, costs, expenses,
indemnification liabilities or other obligations, of whatsoever nature and
whether now or hereafter made, incurred or created, whether absolute or
contingent, liquidated or unliquidated, regardless of class, whether due or not
due, and however arising (the foregoing being hereinafter collectively referred
to as the "SECURED OBLIGATIONS").
SECTION 4. GRANTORS REMAIN LIABLE. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under any contracts and
agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Collateral Agent of
any of the rights hereunder shall not release the Grantor from any of its duties
or obligations under the contracts and agreements included in the Collateral and
(c) Collateral Agent or Obligee shall not have any obligation or liability under
any contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Collateral Agent or Obligee be obligated to perform any of
the obligations or duties of the Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and
warrants as follows:
(a) LOCATION OF EQUIPMENT AND INVENTORY; OFFICE LOCATIONS;
FICTITIOUS NAMES. As of the Effective Date, all of the Equipment and
Inventory of Grantor is located at the places specified on SCHEDULE I
hereto. As of the Effective Date, the chief place of business and the
chief executive office of the Grantor is specified on SCHEDULE I
hereto. As of the Effective Date, the offices where the Grantor keeps
its material records regarding the Collateral and all originals of all
chattel paper that evidence Collateral are set forth on SCHEDULE II
hereto. As of the Effective Date, the Grantor does not do business
under any trade name or fictitious business name except as set forth on
SCHEDULE II hereto.
(b) DELIVERY OF CERTAIN COLLATERAL. All chattel paper, notes
and other instruments (excluding checks) comprising any or all of the
items of Collateral of Grantor have been delivered to Collateral Agent
duly endorsed and accompanied by duly executed instruments of transfer
or assignment in blank.
(c) OWNERSHIP OF COLLATERAL. Except for the security interest
created by this Agreement and Liens permitted by each of the agreements
governing the Secured Obligations from time to time in effect,
including, without limitation, Liens of The Bank of New York, as SP
Collateral Agent, as defined in the Intercreditor Agreement
(collectively, "PERMITTED LIENS"), the Grantor owns the Collateral
pledged by the Grantor hereunder free and clear of any Lien. Except as
may have been filed in
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favor of Collateral Agent relating to this Agreement or in connection
with Permitted Liens, no effective financing statement or other
instrument similar in effect covering all or any part of the Collateral
is on file in any filing or recording office.
(d) PERFECTION. Subject only to Permitted Liens, in the case
of existing Collateral, this Agreement creates, and in the case of
after acquired Collateral, at the time the Grantor first has rights in
such after acquired Collateral, this Agreement will create, in each
case upon the making of the filings described in clause (e) below or
the taking of possession by Collateral Agent with respect to security
interests in Collateral which can only be perfected by taking
possession of such Collateral, for all Collateral, a valid, perfected,
first priority security interest, in each case securing the payment and
performance of the Secured Obligations. Upon making the filings
described in clause (e) below or the taking of possession by Collateral
Agent with respect to security interests in Collateral which can only
be perfected by taking possession of such Collateral, in each case for
all Collateral, all filings and other actions necessary or desirable to
protect and to perfect the security interests referenced above shall
have been duly taken.
(e) GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either (i) for the grant by
the Grantor of the security interest granted hereby or for the
execution, delivery or performance of this Agreement by the Grantor or
(ii) for the perfection of (except as otherwise specified in paragraph
(d) of this SECTION 5), or the exercise by, Collateral Agent of its
rights and remedies hereunder, except for the filing of (x) a Uniform
Commercial Code financing statement with the appropriate authorities in
the jurisdictions listed on SCHEDULE III hereto, (y) certificates of
title with respect to motor vehicles of the Grantor in the appropriate
jurisdictions and (z) notifications and/or transfer documents with
respect to certain regulatory permits of the Grantor in the appropriate
jurisdictions.
(f) OTHER INFORMATION. All information heretofore, herein or
hereafter supplied to Collateral Agent by, or on behalf of, the Grantor
with respect to the Collateral (in each case as such information has
been amended, supplemented or updated as of the date this
representation is deemed made) is accurate and complete in all material
respects.
SECTION 6. FURTHER ASSURANCES.
(a) Each Grantor agrees that from time to time, at the expense of the
Grantor, the Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that Collateral Agent may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
each Grantor will: (i) at the reasonable request of Collateral Agent, mark
conspicuously each chattel paper and each material contract included in the
Collateral and each of its
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<PAGE>
material records pertaining to the Collateral with a legend, in form and
substance reasonably satisfactory to Collateral Agent, indicating that such
items are subject to the security interest granted hereby; (ii) if any
Collateral shall be evidenced by a promissory note or other instrument
(excluding checks), deliver and pledge to Collateral Agent hereunder for the
benefit of Obligee such note or instrument duly endorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to Collateral Agent; (iii) at the request of Collateral Agent,
deliver and pledge to Collateral Agent all promissory notes and other
instruments (including checks if an Event of Default shall have occurred and be
continuing) and all original counterparts of chattel paper constituting
Collateral duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Collateral
Agent; (iv) upon the reasonable request of Collateral Agent, execute and file
with the registrar of motor vehicles or other appropriate authority of any
jurisdiction under the law of which indication of a security interest on a
certificate of title is required as a condition of perfection an application or
other document requesting the notation or other indication of the security
interest created hereunder on such certificate of title and will deliver to
Collateral Agent copies of all such applications or other documents filed and
copies of all such certificates of title issued indicating the security interest
created hereunder in such Collateral; (v) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Collateral Agent may reasonably
request, in order to perfect and preserve the security interests granted or
purported to be granted hereby; (vi) at any reasonable time and upon reasonable
notice, upon demand by Collateral Agent exhibit the Collateral to and allow
inspection of the Collateral by Collateral Agent, or persons designated by
Collateral Agent; and (vii) at Collateral Agent's reasonable request, appear in
and defend any action or proceeding that may affect the Grantor's title to or
Collateral Agent's security interest in the Collateral.
(b) Each Grantor hereby authorizes Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of the Grantor where permitted
by law. A carbon, photographic or other reproduction of this Agreement or a
financing statement signed by such Grantor shall be sufficient as a financing
statement where permitted by law.
(c) Each Grantor will furnish to Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Collateral Agent may
reasonably request, all in reasonable detail.
SECTION 7. COVENANTS OF THE GRANTORS. Each Grantor shall:
(a) Not use or permit any Collateral to be used in violation of any
provision of this Agreement, or any applicable statute, regulation or ordinance
or any policy of insurance covering the Collateral (unless such violation
together with all other violations does not and could not reasonably be expected
to have a material adverse effect on the value or use of any material portion of
the Collateral);
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(b) Notify Collateral Agent of any change in the Grantor's name, trade
names, fictitious business names, identity or corporate structure at least 30
days prior to such change;
(c) Give Collateral Agent 30 days' prior written notice of any change
in the location of the Grantor's (i) chief place of business, (ii) chief
executive office and (iii) offices where the Grantor's records regarding
Collateral and the originals of all chattel paper that evidence Collateral are
kept;
(d) Keep the Equipment and Inventory (other than Inventory sold in the
ordinary course of business and other than such Equipment and Inventory which,
either singly or in the aggregate, is not material) at the places therefor
specified on SCHEDULE I hereto or at such other places in jurisdictions where
all action has been taken that may be necessary or desirable, or that Collateral
Agent may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Collateral Agent
to exercise and enforce its rights and remedies hereunder with respect to such
Equipment and Inventory;
(e) Keep records of the Inventory which are correct and accurate in all
material respects, itemizing and describing the kind, type and quantity of
Inventory and the Grantor's cost therefor all in accordance with the past
practices of the Grantor;
(f) If any Inventory is in possession or control of any of the
Grantor's agents or processors, then upon the occurrence of an Event of Default,
at the request of Collateral Agent, instruct such agent or processor to hold all
such Inventory for the account of Collateral Agent and subject to the
instructions of Collateral Agent;
(g) Keep its chief place of business and chief executive office and the
office where it keeps its material records concerning the Collateral, and all
originals of all chattel paper that evidence Collateral, at the location
therefor specified in SECTION 5(A) or at such other locations in a jurisdiction
where all action that may be necessary or desirable, or that Collateral Agent
may request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to such Collateral has
been taken. Each Grantor will hold and preserve such material records and
chattel paper in accordance with Grantor's past practice and will permit
representatives of Collateral Agent at any time during normal business hours and
upon reasonable notice to inspect and make abstracts from such material records
and chattel paper and each Grantor agrees to render to Collateral Agent, at the
Grantor's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto; and
(h) Perform and comply in all material respects with all contractual
obligations relating to the Collateral.
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SECTION 8. INSURANCE.
(a) Unless otherwise agreed in writing by Collateral Agent, each
insurance policy covering the Collateral shall in addition (i) name the Grantor
and Collateral Agent as insured parties thereunder (without any representation
or warranty by or obligation upon Collateral Agent) as their interests may
appear, (ii) contain an agreement by the insurer that, to the extent provided in
the Collateral Documents, any loss thereunder shall be payable to Collateral
Agent notwithstanding any action, inaction or breach of representation or
warranty by the Grantor, (iii) have attached thereto a lender's loss payable
endorsement or its equivalent, or a loss payable clause acceptable to Collateral
Agent, for the benefit of Obligee, (iv) provide that there shall be no recourse
against Collateral Agent for payment of premiums or other amounts with respect
thereto and (v) provide that at least 30 days' prior written notice of
cancellation or lapse, material amendment, or material reduction in scope or
limits of coverage shall be given to Collateral Agent by the insurer. Each
Grantor shall, if so requested by Collateral Agent, deliver to Collateral Agent
original or duplicate policies of such insurance and, as often as Collateral
Agent may reasonably request (but, unless an Event of Default shall have
occurred and be continuing, in no event more than once each calendar year), a
report of a reputable insurance broker with respect to such insurance. Further,
each Grantor shall, at the request of Collateral Agent, duly execute and deliver
instruments of assignment of such insurance policies to comply with the
requirements of SECTION 6 hereof and use its best efforts to cause the
respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by a Grantor
pursuant to this SECTION 8 may be paid directly to the person who shall have
incurred liability covered by such insurance. In case of any material loss
involving damage to Equipment or Inventory when subsection (c) of this SECTION 8
is not applicable, any proceeds of insurance maintained by the Grantor shall be
paid to the Grantor and the Grantor shall use such proceeds to make necessary
repairs or replacements of such Equipment and Inventory or to purchase
additional Equipment or Inventory or other property of equivalent value and
constituting Collateral hereunder.
(c) Upon the occurrence and during the continuance of an Event of
Default, at the request of Collateral Agent, all insurance payments in respect
of such Equipment and Inventory shall be paid to and applied by Collateral Agent
as specified in SECTION 16.
(d) Prior to the expiration of each insurance policy with respect to
the Equipment and Inventory, upon written request of Collateral Agent, each
Grantor shall furnish Collateral Agent with evidence satisfactory to Collateral
Agent of the reissuance of a policy continuing insurance in force as required by
this Agreement and at or prior to the date payment of the premium therefor is
due, evidence satisfactory to Collateral Agent of such payment. In the event a
Grantor fails to provide, maintain, keep in force or deliver and furnish to
Collateral Agent the policies of insurance required by this SECTION 8,
Collateral Agent, upon 30 days' prior written notice to such Grantor, may (but
shall not be obligated to) procure such insurance or single interest insurance
for such risks covering Obligee's interests, and such Grantor will pay all
premiums thereon promptly upon demand by Collateral Agent, together
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with interest thereon at the Default Rate, from the date of expenditure by
Collateral Agent until reimbursement by such Grantor.
SECTION 9. LICENSE OF TRADEMARKS AND TRADE NAMES. Each Grantor hereby
assigns, transfers and conveys to Collateral Agent, effective upon the
occurrence of, and during the continuance of, any Event of Default, the
nonexclusive right and license to use all trademarks, trade names and copyrights
owned or used by the Grantor that relate to the Collateral and any other
collateral granted by the Grantor as security for the Secured Obligations,
together with any goodwill associated therewith, all to the extent necessary to
enable Collateral Agent to use, possess and realize on the Collateral and any
successor or assignee to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of Collateral Agent and its successors,
assigns and transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise.
Such right and license is granted free of charge, without requirement that any
monetary payment whatsoever be made to the Grantor. If (a) an Event of Default
shall have occurred and, by reason of waiver, modification, amendment or
otherwise, no longer be continuing, (b) no other Event of Default shall be
continuing, (c) an assignment to Collateral Agent shall have been previously
made pursuant to this SECTION 9, and (d) the Secured Obligations shall not have
become immediately due and payable, upon the written request of the Grantor,
Collateral Agent shall promptly execute and deliver to the Grantor such
assignments as may be necessary to reassign to the Grantor any rights, title and
interests as may have been assigned pursuant to this SECTION 9, subject to any
disposition thereof that may have been made by Collateral Agent pursuant hereto;
PROVIDED that, after giving effect to such reassignment, Collateral Agent's
security interest and conditional assignment granted pursuant to this SECTION 9,
as well as all other rights and remedies of Collateral Agent granted hereunder,
shall continue to be in full force and effect; and PROVIDED, FURTHER, that the
rights, title and interests so reassigned shall be free and clear of all Liens
other than Liens (if any) encumbering such rights, title and interest at the
time of their assignment to Collateral Agent.
SECTION 10. TRANSFERS AND OTHER LIENS. Each Grantor shall not:
(a) Except as permitted by the Secured Agreement, sell, assign
(by operation of law or otherwise) or otherwise dispose of any of the
Collateral.
(b) Except for the Permitted Liens, create or suffer to exist
any Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any person or entity.
SECTION 11. COLLATERAL AGENT. Collateral Agent has been appointed as
Collateral Agent hereunder pursuant to the Secured Agreement. Collateral Agent
shall be obligated, and shall have the right hereunder, to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without
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limitation, the release or substitution of Collateral) in accordance with the
Secured Agreement and the Intercreditor Agreement. Collateral Agent may resign
and a successor Collateral Agent may be appointed in the manner provided for in
the Secured Agreement for resignation and appointment of a successor Collateral
Agent. Upon the acceptance of any appointment as Collateral Agent by a successor
Collateral Agent, the successor Collateral Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the retiring
Collateral Agent under this Agreement, and the retiring Collateral Agent shall
thereupon be discharged from its duties and obligations under this Agreement and
shall deliver any Collateral in its possession to the successor Collateral
Agent. After any retiring Collateral Agent's resignation, the provisions of this
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it under this Agreement while it was Collateral Agent.
SECTION 12. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Each Grantor
hereby irrevocably appoints Collateral Agent the Grantor's attorney-in-fact,
with full authority in the place and stead of the Grantor and in the name of the
Grantor, Collateral Agent or otherwise, from time to time in Collateral Agent's
reasonable discretion to take any action and to execute any instrument that
Collateral Agent may deem necessary or advisable, subject to the terms and
conditions of this Agreement, to accomplish the purposes of this Agreement,
including, without limitation:
(a) Subject to the last sentence of SECTION 8(D) hereof, to
obtain and adjust insurance required to be maintained by the Grantor or
paid to Collateral Agent pursuant to SECTION 8 hereof;
(b) Upon the occurrence of, and during the continuance of, an
Event of Default, to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(c) Upon the occurrence of, and during the continuance of, an
Event of Default, to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clauses
(a) and (b) above;
(d) Upon the occurrence of, and during the continuance of, an
Event of Default, to file any claims or take any action or institute
any proceedings that Collateral Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of Collateral Agent with respect to any of the Collateral;
(e) To pay or discharge taxes (other than taxes not then
required to be paid or discharged by any of the agreements governing
the Secured Obligations, from time to time in effect including without
limitation the Secured Agreement) or Liens (other than Permitted
Liens), levied or placed upon or threatened against the Collateral, the
legality or validity thereof and the amounts necessary to discharge the
same to be determined by Collateral Agent in its reasonable discretion,
and such payments made
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by Collateral Agent to become obligations of the Grantor to Collateral
Agent, due and payable immediately without demand;
(f) Upon the occurrence of, and during the continuance of, an
Event of Default, to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with
accounts and other documents relating to the Collateral; and
(g) Upon the occurrence of, and during the continuance of, an
Event of Default, generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though Collateral Agent were the absolute
owner thereof for all purposes, and to do, at Collateral Agent's option
and the Grantor's expense, at any time, or from time to time, all acts
and things that Collateral Agent deems necessary to protect, preserve
or realize upon the Collateral and Collateral Agent's security interest
therein, in order to effect the intent of this Agreement, all as fully
and effectively as the Grantor might do.
The Grantors hereby ratify all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
SECTION 13. COLLATERAL AGENT MAY PERFORM. If any Grantor fails to
perform any agreement contained herein, Collateral Agent may, upon 30 days'
notice to the Grantor (unless otherwise expressly set forth in this Agreement or
an Event of Default shall have occurred and be continuing, in which case, no
such notice shall be required), itself perform, or cause performance of, such
agreement, and the expenses of Collateral Agent incurred in connection therewith
shall be payable by such Grantor under SECTION 17 hereof.
SECTION 14. COLLATERAL AGENT'S DUTIES AND LIABILITIES.
(a) The powers conferred on Collateral Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Collateral Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. Collateral Agent shall be deemed to exercise
reasonable care in the custody and preservation of such Collateral if such
Collateral is accorded treatment substantially equivalent to that which
Collateral Agent accords its own property.
(b) Collateral Agent shall not be liable to any Grantor (i) for any
loss or damage sustained by it, or (ii) for any loss, damage, depreciation or
other diminution in the value of any of the Collateral, that may occur as a
result of, in connection with or that is in any way related to (x) any exercise
by Collateral Agent of any right or remedy under this Agreement or (y) any other
act of or failure to act by Collateral Agent, except to the extent that the
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same shall be determined by a judgment of a court of competent jurisdiction to
be the result of acts or omissions on the part of Collateral Agent constituting
gross negligence or willful misconduct.
(c) Except to the extent resulting from acts or omissions on the part
of Collateral Agent or its affiliates, directors, officers, employees,
attorneys, or agents constituting gross negligence or willful misconduct, no
claim may be made by any Grantor against Collateral Agent or its affiliates,
directors, officers, employees, attorneys or agents for any special, indirect,
or consequential damages in respect of any breach or wrongful conduct (whether
the claim therefor is based on contract, tort or duty imposed by law) in
connection with, arising out of or in any way related to the transactions
contemplated and relationship established by this Agreement, or any act,
omission or event occurring in connection therewith. Except to the extent
resulting from acts or omissions on the part of Collateral Agent or its
affiliates, directors, officers, employees, attorneys, or agents constituting
gross negligence or willful misconduct, each Grantor hereby waives, releases and
agrees not to sue upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
SECTION 15. REMEDIES UPON DEFAULT.
(a) EVENTS OF DEFAULT. The occurrence of any "EVENT OF DEFAULT" as
defined in the Secured Agreement (whether or not any Secured Obligations shall
be at the time outstanding thereunder or the Secured Agreement shall have
terminated for some other purpose) or the occurrence of any default under the
Certificate of Designation between the Company and Obligee dated of even date
herewith which default has continued beyond any applicable cure period, shall
constitute an Event of Default under this Agreement.
(b) REMEDIES UPON AN EVENT OF DEFAULT. If any Event of Default shall
have occurred and be continuing, Collateral Agent may exercise in respect of the
Collateral, (i) all the rights and remedies of a secured party on default under
the Uniform Commercial Code of the State of New York (the "CODE") (whether or
not the Code applies to the affected Collateral), (ii) all of the rights and
remedies provided for in this Agreement, the Secured Agreement, and any other
agreement between any Grantor and Obligee and (iii) such other rights and
remedies as may be provided by law or otherwise (such rights and remedies of
Obligee to be cumulative and non-exclusive). If an Event of Default shall have
occurred and be continuing, Collateral Agent also may (i) require each Grantor
to, and each Grantor hereby agrees that it will, at its expense and upon request
of Collateral Agent forthwith, assemble all or part of the Collateral as
directed by Collateral Agent and make it available to Collateral Agent at a
place to be designated by Collateral Agent that is reasonably convenient to both
parties, (ii) enter onto the property where any Collateral is located and take
possession thereof with or without judicial process, (iii) prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Collateral Agent deems appropriate, (iv) take possession of any
Grantor's premises or place custodians in exclusive control thereof, remain on
such premises and use the same and any of such Grantor's equipment for the
purpose of completing any work in process, taking any actions described in the
preceding clause (iii) and collecting any Secured Obligation, and (v) without
notice except as specified
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below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of Collateral Agent's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and upon such other
terms as Collateral Agent may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of sale shall be required at law, at least 10 days'
notice to the Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Collateral Agent may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
If an Event of Default shall have occurred and be continuing,
Collateral Agent may retain any of the directors, officers and employees of any
Grantor, in each case upon such terms as Collateral Agent and any such person
may agree, notwithstanding the provisions of any employment, confidentiality or
non-disclosure agreement between any such person and any such Grantor, and each
Grantor hereby waives its rights under any such agreement and consents to each
such retention.
SECTION 16. APPLICATION OF PROCEEDS. All proceeds received by
Collateral Agent in respect of any sale of, collection from or other realization
upon all or any part of the Collateral may, in the discretion of Collateral
Agent, be held by Collateral Agent as Collateral for, and/or then, or at any
other time thereafter applied, in full or in part by Collateral Agent against
the Secured Obligations in the following order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization and all other expenses, liabilities and
advances made or incurred by Collateral Agent in connection therewith
and all amounts for which Collateral Agent is entitled to
indemnification hereunder and all advances made by Collateral Agent
hereunder for the account of the Grantors and for the payment of all
costs and expenses paid or incurred by Collateral Agent in connection
with the exercise of any right or remedy hereunder, all in accordance
with SECTION 17 hereof;
SECOND: To the payment of the Secured Obligations in the order
set forth in the Secured Agreement and in accordance with the
Intercreditor Agreement; and
THIRD: After payment in full of the amounts specified in the
preceding subparagraphs, to the payment to, or upon the order of, the
Grantors, or whosoever may be lawfully entitled to receive the same or
as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
SECTION 17. INDEMNITY AND EXPENSES.
(a) Each Grantor agrees to indemnify Collateral Agent and Obligee and
each of the officers, directors, agents, employees and affiliates of each of
them (each an "INDEMNITEE") from and against any and all claims, losses and
liabilities growing out of or
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resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting from the gross
negligence or willful misconduct of the Indemnitee seeking indemnification.
(b) Each Grantor will upon demand pay to Collateral Agent the amount of
any and all reasonable expenses, including the reasonable fees and disbursements
of its counsel and of any experts and agents, that Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Collateral Agent hereunder or (iv) the failure by the
Grantor to perform or observe any of the provisions hereof.
(c) The obligations of Grantor in this SECTION 17 hereof shall survive
termination of this Agreement and the discharge of Grantor's other obligations
under this Agreement, the Secured Agreement and the other Secured Instrument
Documents.
SECTION 18. CONTINUING SECURITY INTEREST; TERMINATION. This Agreement
shall create a continuing security interest in the Collateral and shall (a)
remain in full force and effect until the indefeasible payment in full of the
Secured Obligations and termination of Obligee's obligations to lend and extend
credit under the Secured Agreement, (b) be binding upon each Grantor, its
successors and assigns and (c) inure, together with the rights and remedies of
Collateral Agent and Obligee hereunder, to the benefit of Collateral Agent and
Obligee and the successors, transferees and assigns of each. Without limiting
the generality of the foregoing clause (c), Obligee may, subject to the
provisions of the Secured Agreement, assign or otherwise transfer the Note, or
portion thereof, or any other obligations secured hereby and any agreements or
instruments executed in connection therewith to any other person or entity, and
such other person or entity shall thereupon become vested with all the benefits
in respect thereof granted to Obligee herein or otherwise. Upon the indefeasible
payment in full of the Secured Obligations and termination of Obligee's
obligations to lend or extend credit under the Secured Agreement, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the Grantors. Upon any such termination, Collateral Agent will, at the
Grantors' expense, execute and deliver to the Grantors, against receipt and
without recourse to or warranty by Collateral Agent, such documents as the
Grantors shall reasonably request to evidence such termination.
SECTION 19. SECURITY INTEREST ABSOLUTE. All rights of Collateral Agent
on its behalf and on behalf of Obligee, assignments and pledges made and created
hereunder, and all obligations of the Grantors, shall be absolute and
unconditional, irrespective of:
(a) Any lack of validity or enforceability of any of the
Secured Obligations or any agreement or instrument relating thereto;
(b) Any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations, or any
other amendment or
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waiver of, or any consent to any departure from, any agreement or
instrument relating to the Secured Obligations;
(c) Any exchange, release, subordination or nonperfection of
any other collateral, or any release or amendment or waiver of or
consent to any departure from any guaranty, for all or any of the
Secured Obligations; or
(d) Any other circumstance, other than indefeasible payment in
full of the Secured Obligations (including, but not limited to, any
statute of limitations) which might otherwise constitute a defense
available to, or a discharge of, the Grantors or a third party grantor
or a security interest.
SECTION 20. PARTIAL RELEASES. Collateral Agent shall execute and
deliver partial releases of the Liens created pursuant thereto, pursuant to, and
as expressly provided in the Secured Agreement.
SECTION 21. AMENDMENTS; ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by any Grantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by
Collateral Agent on behalf of Obligee, and then such waiver or consent shall be
effective only in the specified instance and for the specific purpose for which
given.
SECTION 22. ADDRESSES FOR NOTICES. Unless otherwise specifically
provided herein, any notice or other communication herein required or permitted
to be given shall be in writing and may be personally served, telecopied,
telexed or sent by United States mail or courier service and shall be deemed to
have been given when delivered in person, upon confirmed receipt (in the case of
telecopy or telex) or 5 Business Days after depositing it in the United States
mail, registered or certified, with postage prepaid and properly addressed;
PROVIDED that any notice sent to Collateral Agent or Obligee shall not be
effective until received. For purposes hereof, the addresses of the parties
hereto (until notice of a change thereof) is delivered as provided in this
SECTION 22) shall be as set forth under each party's name on the signature pages
hereof or in the Secured Agreement.
SECTION 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All
judicial proceedings brought against each Grantor with respect to this Agreement
may be brought in any state or Federal court of competent jurisdiction sitting
in New York, New York and by execution and delivery of this Agreement each
Grantor accepts for itself and in connection with the Collateral, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
irrevocably agrees to be bound by any judgement rendered thereby in connection
with this Agreement. Each Grantor agrees that service of process sufficient for
personal jurisdiction in any action against Grantor in the State of New York may
be made by registered or certified mail, return receipt requested, to Grantor at
its address provided in SECTION 22 and Grantor hereby acknowledges that such
service shall be effective and binding
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in every respect. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of Collateral Agent to
bring proceedings against any Grantor in the courts of any other jurisdiction.
SECTION 24. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise
defined herein or in the Secured Agreement, terms used in Article 9 of the
Uniform Commercial Code in the State of New York are used herein as therein
defined.
SECTION 25. WAIVER OF JURY TRIAL. EACH GRANTOR AND COLLATERAL AGENT
HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. 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 transaction,
including without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. Each Grantor and
Collateral Agent each (a) acknowledge that this waiver is a material inducement
for the Grantor and Collateral Agent to enter into a business relationship, that
the Grantor and Collateral Agent have already relied on the waiver in entering
into this Agreement and that each will continue to rely on the waiver in their
related future dealings and (b) further warrant and represent that each has
reviewed this waiver with its legal counsel, and that each 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 THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 26. WAIVER. Except as otherwise expressly provided herein, each
Grantor hereby waives promptness, diligence, notice of acceptance and any other
notice with respect to any of the Secured Obligations and this Agreement and any
requirement that Collateral Agent or Obligee protect, secure, perfect or insure
any security interest or lien or any property subject thereto or exhaust any
right or take any action against the Grantor or any other person or entity or
any of the Collateral.
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SECTION 27. NO WAIVER. No failure on the part of Collateral Agent to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; and no
single or partial exercise by Collateral Agent of any right, power or remedy
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein provided are to the
fullest extent permitted by law cumulative, and are not exclusive of any
remedies provided by law.
SECTION 28. MARSHALLING; PAYMENT SET ASIDE. Collateral Agent shall not
be under any obligation to marshal any assets in favor of the Grantors or any
other party or against or in payment of any or all of the Secured Obligations.
To the extent that any Grantor makes a payment or payments to Collateral Agent
or Agent enforces its security interests or exercises its rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
SECTION 29. HEADINGS. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.
SECTION 30. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation and in any other jurisdiction,
shall not in any way be affected or impaired thereby.
SECTION 31. COUNTERPARTS. This Agreement, and any amendments, waivers,
consents or supplements, may be executed in one or more counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which together shall constitute one and the same Agreement.
SECTION 32. ADDITIONAL GRANTORS. The initial Grantors hereunder shall
be AGC-SP and such of the Subsidiaries of AGC-SP as are signatories hereto on
the date hereof. From time to time subsequent to the date hereof, additional
Subsidiaries of AGC-SP, as required by the Secured Agreement, may become parties
hereto, as additional Grantors (each an "ADDITIONAL GRANTOR"), by executing and
delivering (a) a joinder agreement substantially in the form of EXHIBIT A
attached hereto, pursuant to which each such Additional Grantor shall agree to
join in and become bound by the provisions of this Agreement as a Grantor and
(b)
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such documents as Collateral Agent may request in order to grant the Collateral
Agent for the benefit of Obligee a perfected security interest in the personal
property of such Additional Grantor.
SECTION 33. INTERCREDITOR AGREEMENT. Obligee, Collateral Agent and
Foothill Capital Corporation, as AG Collateral Agent, are parties to the
Intercreditor Agreement which, among other things, concerns priorities of Liens
in the Collateral and the exercise of remedies by the parties thereto, and the
manner and priority of distribution of the proceeds of the Collateral among
Obligee and Foothill Capital Corporation, as AG Collateral Agent, and the terms
of this Agreement are subject to the terms and provisions of the Intercreditor
Agreement.
[remainder of page intentionally left blank]
20
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IN WITNESS WHEREOF, each Grantor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized effective as of the date first above written.
GRANTORS: AGC-SP, INC., a Delaware corporation,
AGC-SP1, INC., a Florida corporation,
AGC-SP2, INC., a Florida corporation,
AGC-SP3, INC., a Florida corporation,
AGC-SP4, INC., a Florida corporation,
AGC-SP5, INC., a Florida corporation, and
WEST BAY CLUB DEVELOPMENT CORPORATION,
a Florida corporation, f/k/a Estero Pointe
Development Corporation
By:
---------------------------------------
John H. Fischer
Vice President
Address:
c/o ATLANTIC GULF COMMUNITIES
CORPORATION
2601 South Bayshore Drive, 9th Floor
Miami, Florida 33133-5461
Attention: John H. Fischer, Vice President
Facsimile: (305) 859-4623
COLLATERAL AGENT: THE BANK OF NEW YORK, a New York
banking corporation, as Collateral Agent
By: The Bank of New York Trust Company of
Florida, N.A., its agent
By:
----------------------------------
Janalee R. Scott
Assistant Vice President
Address:
Towermarc Plaza, 2nd Floor
10161 Centurion Parkway
Jacksonville, Florida 32256
Attention: Janalee R. Scott
Facsimile: (904) 645-1998
21
<PAGE>
Copy to: Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: Rick Koenigsberger
Telecopy: (212) 459-3301
Copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Philip Mindlin, Esq.
Telecopy: (212) 403-2000
Copy to: Carlton, Fields, Ward, Emmanuel, Smith &
Cutler, P.A.
Post Office Box 3239
Tampa, Florida 33601
Attn: Paula McDonald Rhodes, Esq.
Telecopy: (813) 229-4133
22
<PAGE>
SCHEDULE I
TO PERSONAL PROPERTY SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
23
<PAGE>
SCHEDULE II
TO PERSONAL PROPERTY SECURITY AGREEMENT
Address of offices where records regarding Payment Rights and Chattel Paper are
maintained:
Trade names and/or fictitious business names under which business is conducted:
24
<PAGE>
SCHEDULE III
TO PERSONAL PROPERTY SECURITY AGREEMENT
Filing Jurisdictions
--------------------
25
<PAGE>
EXHIBIT A
TO PERSONAL PROPERTY SECURITY AGREEMENT
Subsidiary Joinder
------------------
__________, 199_
The Bank of New York
Towermarc Plaza, 2nd Floor
10161 Centurion Parkway
Jacksonville, Florida 32256
Attention: Janalee R. Scott
Re: Subsidiary Joinder
------------------
Ladies and Gentlemen:
Reference hereby is made to that certain Personal Property Security
Agreement (the "SECURITY AGREEMENT"), dated effective as of June 23, 1997, by
and among THE BANK OF NEW YORK, a New York banking corporation, as collateral
agent (in such capacity herein called "COLLATERAL AGENT"), for AP-AGC, LLC, a
Delaware limited liability company ("OBLIGEE"), on the one hand, and AGC-SP,
INC., a Delaware corporation ("AGC-SP"), and the Subsidiaries of AGC-SP
signatory thereto from time to time, on the other hand. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Security Agreement.
This Subsidiary Joinder is executed and delivered this ___ day of
__________, 199_ by each entity identified as an Additional Grantor on the
signature page hereof (individually, an "ADDITIONAL GRANTOR," and collectively,
the "ADDITIONAL GRANTORS") in favor of Collateral Agent.
SECTION 1. JOINDER. Pursuant to Section 32 of the Security Agreement,
each Additional Grantor hereby joins in and agrees to be bound by each and all
of the provisions of the Security Agreement and, in so doing, hereby becomes a
Grantor. Without limiting the generality of the foregoing, each Additional
Grantor, as a Grantor, hereby grants to Collateral Agent, pursuant to Section 2
of the Security Agreement, a continuing security interest in all currently
existing and hereafter acquired or arising Collateral and hereby agrees to
execute and deliver such documents as Collateral Agent may request in order to
grant, affirm, perfect, or continue perfected such security interests under
applicable law.
SECTION 2. REPRESENTATIONS AND WARRANTIES. Each Additional Grantor
hereby represents and warrants to Collateral Agent that: (a) the execution,
delivery, and performance of this Subsidiary Joinder, the Security Agreement,
and any other Secured Instrument Document to which such Additional Grantor is
party are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in
26
<PAGE>
contravention of any law, rule, or regulation, or any order, judgment, decree,
writ, injunction, or award of any arbitrator, court, or governmental authority,
or of the terms of its charter or bylaws, or of any contract or undertaking to
which it is a party or by which any of its properties may be bound or affected;
(b) this Subsidiary Joinder, the Security Agreement, and any and all other
Secured Instrument Documents to which such Additional Grantor is party
constitute its legal, valid, and binding obligations, enforceable against such
Additional Grantor in accordance with their respective terms; (c) the chief
executive office and federal employer identification number of such Additional
Grantor are identified on SCHEDULE 1 attached hereto; and (e) each other
representation and warranty applicable to such Additional Grantor as a Grantor
under the Secured Instrument Documents is and will be true and correct as of the
date hereof.
SECTION 3. BINDING EFFECT. This Subsidiary Joinder is binding upon and
enforceable against each Additional Grantor and its successors and assigns. It
shall inure to the benefit of and may be enforced by Collateral Agent and its
successors and assigns.
SECTION 4. NOTICES. Notices to the Additional Grantors shall be given
in the manner set forth in SECTION 22 of the Security Agreement.
SECTION 5. SECURED INSTRUMENT DOCUMENT. This Subsidiary Joinder is a
Secured Instrument Document.
SECTION 6. SECURED INSTRUMENT DOCUMENT REFERENCES. (a) Each reference
in the Security Agreement and the other Secured Instrument Documents to
"Grantors," or words of like import referring to the Grantors shall include and
refer to each of the Additional Grantors; (b) each reference in the Security
Agreement to "this Agreement," "hereunder," "herein," "hereof" or words of like
import referring to the Security Agreement shall mean and refer to the Security
Agreement as supplemented by this Subsidiary Joinder; and (c) each reference in
the Secured Instrument Documents to the "Security Agreement," "thereunder,"
"therein," "thereof" or words of like import referring to the Security Agreement
shall mean and refer to the Security Agreement as supplemented by this
Subsidiary Joinder.
SECTION 7. COUNTERPARTS. This Subsidiary Joinder may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Subsidiary
Joinder by signing any such counterpart.
[remainder of page intentionally left blank]
27
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Subsidiary
Joinder to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
ADDITIONAL GRANTORS:
[ADDITIONAL GRANTOR]
By:
-------------------------------------
Name:
Title:
[ADDITIONAL GRANTOR]
By:
-------------------------------------
Name:
Title:
Acknowledged and Agreed:
AGC-SP, INC., a Delaware corporation, for itself
and each of the other Grantors
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
THE BANK OF NEW YORK, a New York banking
corporation, as Collateral Agent
BY: THE BANK OF NEW YORK TRUST COMPANY
OF FLORIDA, N.A., its agent
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
28
<PAGE>
SCHEDULE 1
TO SUBSIDIARY JOINDER
Chief Executive Office/Federal Employer Identification Number
-------------------------------------------------------------
29
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "PLEDGE AGREEMENT") is dated
effective as of June 23, 1997, and is entered into by ATLANTIC GULF COMMUNITIES
CORPORATION, a Delaware corporation ("COMPANY"), and AGC-SP, INC., a Delaware
corporation ("AGC-SP;" Company and AGC-SP each individually referred to herein
as a "PLEDGOR" and together as "PLEDGORS;" PROVIDED that after the Effective
Date, "Pledgors" shall be deemed to include any new subsidiary of any Pledgor
which executes an acknowledgement to this Agreement pursuant to SECTION 6 hereof
agreeing to be bound by the terms hereof) in favor of THE BANK OF NEW YORK, a
New York banking corporation, as collateral agent (in such capacity referred to
herein as "COLLATERAL AGENT") for AP-AGC, LLC, a Delaware limited liability
company ("OBLIGEE").
RECITALS
WHEREAS, Company, Obligee and Collateral Agent are parties to that
certain Secured Agreement dated February 7, 1997, and amended and restated as of
May 15, 1997 (as hereafter amended, supplemented or otherwise modified from time
to time, "SECURED AGREEMENT"; capitalized terms used herein without definition
shall have the meanings given such terms in the Secured Agreement);
WHEREAS, Company and Obligee are parties to that certain Investment
Agreement dated February 7, 1997, amended as of March 20, 1997, and amended and
restated as of May 15, 1997 (as hereafter amended, supplemented or otherwise
modified from time to time, the "INVESTMENT AGREEMENT");
WHEREAS, Company and Obligee are parties to that certain Due Diligence
Fee Agreement dated of even date herewith (as hereafter amended, supplemented or
otherwise modified from time to time, the "FEE AGREEMENT");
WHEREAS, it is a condition precedent to Obligee entering into the
Secured Agreement, the Investment Agreement, the Fee Agreement and all other
Secured Instrument Documents and investing capital thereunder that the Pledgors
execute and deliver this Pledge Agreement, and the Pledgors desire to execute
and deliver this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises set forth herein and
to induce Obligee to enter into the Secured Agreement, the Investment Agreement,
the Fee Agreement and all other Secured Instrument Documents, each of the
Pledgors agree as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgors hereby pledge and assign to
Collateral Agent, and hereby grant to Collateral Agent a security interest in,
all of Pledgors' right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
<PAGE>
(a) the shares described on SCHEDULE I hereto (the "PLEDGED
SHARES") and the certificates representing the Pledged Shares and any interest
of Pledgors in the entries on the books of any financial intermediary pertaining
to the Pledged Shares, and all dividends, cash, warrants, rights, instruments
and other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the Pledged
Shares;
(b) all intercompany indebtedness of Pledgors, all promissory
notes made in favor of Pledgors in respect of proceeds from utility
condemnations and all other promissory notes that do not constitute either
Homesite Contracts Receivable or Commercial Receivables (collectively, the
"PLEDGED DEBT"), the instruments evidencing the Pledged Debt, and all interest,
cash, instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of, or in exchange for, any or
all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into
and warrants, options and other rights to purchase or otherwise acquire, stock
of any issuer of the Pledged Shares from time to time acquired by Pledgors in
any manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgors in
the entries on the books of any financial intermediary pertaining to such
additional shares, and all dividends, cash, warrants, rights, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights;
(d) all additional indebtedness from time to time owed to Pledgors
by any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
(e) all shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any Person that, after the date of this Agreement, becomes, as a result of any
occurrence, a direct Subsidiary or direct Unrestricted Subsidiary of any Pledgor
(which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such shares, securities,
warrants, options or other rights and any interest of Pledgors in the entries on
the books of any financial intermediary pertaining to such shares, and all
dividends, cash, warrants, rights, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such shares, securities, warrants, options or
other rights;
(f) all indebtedness from time to time owed to Pledgors by any
Person that, after the date of this Pledge Agreement, becomes, as a result of
any occurrence, a direct or indirect Subsidiary of Pledgors, and all interest,
cash, instruments and other property or
2
<PAGE>
proceeds from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of such indebtedness; and
(g) to the extent not covered by clauses (a) through (f) above,
all proceeds of any or all of the foregoing Pledged Collateral. For purposes of
this Pledge Agreement, the term "PROCEEDS" includes whatever is receivable or
received when Pledged Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes, without limitation, proceeds of any indemnity or guaranty payable to
Pledgors or Collateral Agent from time to time with respect to any of the
Pledged Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Pledge Agreement secures,
and the Pledged Collateral is collateral security for, (a) after the issuance of
the Preferred Stock, the joint and several obligations of the Company, the
Pledgors and other subsidiaries of the Company pursuant to Section 8 of the
Certificate of Designation to repurchase Preferred Stock on the happening of
certain conditions set forth in the Certificate of Designation at a repurchase
price equal to the Liquidation Preference in respect thereof, as defined in the
Certificate of Designation, consisting of, at any time, $10.00 per share of
Preferred Stock, plus accumulated and unpaid dividends thereon through the date
of such determination, whether or not funds are legally available therefor, the
aggregate amount of which, upon issuance of the 2,500,000 shares of Preferred
Stock to be issued pursuant to the Investment Agreement, shall be $25,000,000,
plus accumulated and unpaid dividends, and (b) after the occurrence of an Event
of Default, as defined in the Certificate of Designation, the joint and several
obligations of the Company, Pledgors and other subsidiaries of the Company to
indemnify Obligee from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities resulting from any breach of any covenant, agreement, representation
or warranty of the Company herein or in any other Secured Instrument Document
pursuant to Section 7.2 of the Investment Agreement, as evidenced by that
certain Secured Evidence of Joint and Several Repurchase Obligations dated of
even date herewith, executed by the Company, Pledgors, and other subsidiaries of
the Company to and for the benefit of Obligee (together with any and all
additions, modifications, amendments, renewals, and extensions thereof, the
"INSTRUMENT"), whether or not from time to time decreased or extinguished and
later increased, created or incurred and all or any portion of such obligations
that are paid, to the extent all or any part of such payment is avoided or
recovered directly or indirectly from Obligee or Collateral Agent as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature (whether of payment, of performance or otherwise) of the Company, the
Pledgors and other subsidiaries of the Company from time to time owed to Obligee
or Collateral Agent or either of them under the Secured Agreement or any other
Secured Instrument Document, whether for principal, interest (including interest
accruing after the commencement of a bankruptcy case, whether or not enforceable
in such case), repurchase or redemption obligations, dividend obligations, fees,
costs, expenses, indemnification liabilities or other obligations, of whatsoever
nature and whether now or
3
<PAGE>
hereafter made, incurred or created, whether absolute or contingent, liquidated
or unliquidated, regardless of class, whether due or not due, and however
arising (the foregoing being hereinafter collectively referred to as the
"SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or, as applicable, shall be accompanied
by the relevant Pledgor's endorsement, where necessary, or duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Collateral Agent. If an Event of Default shall have occurred and
be continuing, Collateral Agent shall have the right, at any time in its
discretion and without notice to any Pledgor, to transfer to or to register in
the name of Collateral Agent or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in SECTION 7(a)
hereof. In addition, Collateral Agent shall have the right at any time to
exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Each Pledgor represents
and warrants as follows:
(a) PLEDGED EQUITY AND PLEDGED DEBT. All of the Pledged Shares
pledged by such Pledgor have been duly authorized and validly issued and are
fully paid and nonassessable. All of the Pledged Debt pledged by such Pledgor
has been duly authorized, authenticated or issued and delivered, and is the
legal, valid and binding obligation of the issuers thereof (except as may be
limited by bankruptcy, reorganization, moratorium, or similar laws relating to
or limiting creditors' rights generally or by general principles of equity
relating to enforceability), and is not in default. The Pledged Shares
constitute all of the issued and outstanding shares of capital stock of each
issuer thereof, and there are no outstanding options, warrants, rights to
subscribe, stock purchase rights or other agreements outstanding with respect
to, or property that is now or hereafter convertible into, or that requires the
issuance or sale of, any Pledged Shares. The Pledged Debt constitutes all of the
issued and outstanding intercompany indebtedness owing to Pledgor by Company or
any direct or indirect Subsidiary or direct Unrestricted Subsidiary of Company.
(b) OWNERSHIP OF PLEDGED COLLATERAL. Pledgor is the legal, record
and beneficial owner of the Pledged Collateral pledged by such Pledgor free and
clear of any lien, except for the security interests created by this Pledge
Agreement and the junior lien of The Bank of New York, as Collateral Agent.
(c) CONSENTS. No consent of any other party (including, without
limitation, stockholders or creditors of Pledgor or any Person under any
contractual obligation of such Pledgor) and no consent, authorization, approval
or other action by, and no notice to or
4
<PAGE>
filing with any governmental authority or regulatory body is required either (i)
for the pledge by Pledgor of the Pledged Collateral pledged by such Pledgor
pursuant to this Pledge Agreement and the grant by Pledgor of the security
interest granted hereby or for the execution, delivery or performance of this
Pledge Agreement by Pledgor or (ii) for the exercise by Collateral Agent of the
voting or other rights provided for in this Pledge Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Pledge Agreement (except (x)
those which have been obtained or made or (y) as may be required in connection
with a disposition of Pledged Collateral by laws affecting the offering and sale
of securities generally).
(d) PERFECTION. The pledge and delivery to Collateral Agent of the
Pledged Collateral pursuant to this Pledge Agreement creates a valid and
perfected first priority security interest in favor of Collateral Agent, on
behalf of Obligee, in the Pledged Collateral of such Pledgor, securing the
payment of the Secured Obligations, and all actions necessary or desirable to
perfect and protect such security interest have been duly taken.
(e) MARGIN REGULATIONS. The pledge of the Pledged Collateral
pursuant to this Pledge Agreement does not violate Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System.
(f) OTHER INFORMATION. All information heretofore, herein or
hereafter supplied to Obligee on behalf of Pledgors with respect to the Pledged
Collateral is accurate and complete in all material respects.
SECTION 5. CERTAIN COVENANTS. Each Pledgor hereby covenants that,
until the Secured Obligations have been indefeasibly paid in full, such Pledgor
shall:
(a) not, (i) except as expressly permitted by the Secured
Agreement, sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Pledged
Collateral pledged hereunder by such Pledgor, (ii) create or permit to
exist any lien upon or with respect to any of the Pledged Collateral,
except for the security interest created by this Pledge Agreement and
liens permitted by the Secured Agreement, or (iii) permit, except as
expressly permitted by the Secured Agreement, any issuer of Pledged
Shares to merge or consolidate with any Person;
(b) except as expressly permitted by the Secured Agreement,
(i) cause each issuer of Pledged Shares not to issue any stock or other
securities in substitution for the Pledged Shares issued by such
issuer, except to Pledgor, (ii) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional
shares of stock or other securities of each issuer of Pledged Shares,
and (iii) pledge hereunder, immediately upon its acquisition (directly
or indirectly) thereof, any and all shares of stock of any Person
which, after the date of this Pledge Agreement,
5
<PAGE>
becomes, as a result of any occurrence, a direct Subsidiary or a direct
Unrestricted Subsidiary of Pledgors;
(c) (i) pledge hereunder, immediately upon their issuance, any
and all instruments or other evidences of additional indebtedness from
time to time owed (directly or indirectly) to Pledgors by any direct or
indirect Subsidiary of the Company, and (ii) pledge hereunder,
immediately upon their issuance, any and all instruments or other
evidences of indebtedness from time to time owed (directly or
indirectly) to Pledgor by any Person that after the date of this Pledge
Agreement becomes, as a result of any occurrence, a direct or indirect
Subsidiary of Pledgor; and
(d) promptly deliver to Collateral Agent all written notices
received by it with respect to the Pledged Collateral.
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Each Pledgor agrees that at any time and from time to time, at
the expense of Pledgors, Pledgors shall promptly execute and deliver all further
instruments and documents, and take all further actions, that may be necessary
or desirable, or that Collateral Agent may reasonably request, to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral.
(b) Each Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder
as provided in SECTION 5(b) OR (c) hereof, promptly (and in any event within 5
Business Days) deliver to Collateral Agent a Pledge Amendment, duly executed by
Pledgor, in substantially the form of SCHEDULE II hereto (a "PLEDGE AMENDMENT"),
in respect of the additional Pledged Shares or Pledged Debt to be pledged
pursuant to this Pledge Agreement. Pledgor hereby authorizes Collateral Agent to
attach each Pledge Amendment to this Pledge Agreement and agrees that all
Pledged Shares or Pledged Debt listed on any Pledge Amendment delivered to
Collateral Agent shall for all purposes hereunder be considered Pledged
Collateral; PROVIDED that the failure of Pledgor to execute a Pledge Amendment
with respect to any additional Pledged Shares or Pledged Debt pledged pursuant
to this Pledge Agreement shall not impair the security interest of Collateral
Agent therein or otherwise adversely affect the rights and remedies of
Collateral Agent hereunder with respect thereto.
(c) Each Pledgor further agrees that it will cause any direct or
indirect Subsidiary and any direct Unrestricted Subsidiary acquired or created
after the effective date of this Agreement promptly after such acquisition or
creation of such new Subsidiary or Unrestricted Subsidiary (in any event within
5 Business Days after the date such acquisition or creation, as the case may be)
to deliver to Collateral Agent an acknowledgment and
6
<PAGE>
agreement duly executed by such new Subsidiary or Unrestricted Subsidiary in
substantially the form of SCHEDULE III hereto (a "PLEDGE ACKNOWLEDGMENT").
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
-----------------------------
(a) So long as no Event of Default (as defined below) shall have
occurred and be continuing:
(i) Pledgors shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Pledge Agreement and the Secured Agreement. It is understood, however,
that neither (A) the voting by Pledgors of any Pledged Shares for or
Pledgors' consent to the election of directors at a regularly scheduled
annual or other meeting of stockholders or with respect to incidental
matters at any such meeting nor (B) Pledgors' consent to or approval of
any action otherwise permitted under the Secured Agreement shall be
deemed inconsistent with the Secured Agreement within the meaning of
this SECTION 7(a)(i), and no notice of any such voting or consent need
be given to Collateral Agent.
(ii) Pledgors shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Pledge Agreement, any and
all dividends and interest paid in respect of the Pledged Collateral;
PROVIDED, HOWEVER that any and all
(A) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property
(other than cash) received, receivable or otherwise
distributed in respect of, or in exchange for, any Pledged
Collateral,
(B) dividends and other distributions paid or payable
in cash in respect of any Pledged Collateral in connection
with a partial or total liquidation or dissolution (except any
distribution upon liquidation to another Pledgor to the extent
permitted under the Secured Agreement), or in connection with
a reduction of capital, capital surplus or paid-in-surplus,
and
(C) cash paid, payable or otherwise distributed in
respect of principal or in redemption of or in exchange for
any Pledged Collateral, shall be, and shall forthwith be
delivered to Collateral Agent to hold as, Pledged Collateral
and shall, if received by Pledgors, be received in trust for
the benefit of Collateral Agent, be segregated from the other
property or funds of Pledgors and be forthwith delivered to
Collateral Agent as Pledged Collateral in the same form as so
received (with all necessary endorsements).
7
<PAGE>
(iii) Collateral Agent shall promptly execute and deliver (or
cause to be executed and delivered) to the appropriate Pledgor all such
proxies, dividend payment orders and other instruments as such Pledgor
may from time to time reasonably request for the purpose of enabling
such Pledgor to exercise the voting and other consensual rights which
it is entitled to exercise pursuant to paragraph (i) above and to
receive the dividends, principal or interest payments which it is
authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) Upon written notice from Collateral Agent to Company,
all rights of Pledgors to exercise the voting and other consensual
rights which they would otherwise be entitled to exercise pursuant to
SECTION 7(a)(i) shall cease, and all such rights shall thereupon become
vested in Collateral Agent who shall thereupon have the right to
exercise such voting and other consensual rights.
(ii) All rights of Pledgors to receive the dividends and
interest payments which they would otherwise be authorized to receive
and retain pursuant to SECTION 7(a)(ii) shall cease, and all such
rights shall thereupon become vested in Collateral Agent who shall
thereupon have the right to receive and hold as Pledged Collateral such
dividends and interest payments which shall, upon written notice from
Collateral Agent, be paid to Collateral Agent.
(iii) All dividends, principal and interest payments which
are received by any Pledgor contrary to the provisions of paragraph
(ii) of this SECTION 7(b) shall be received in trust for the benefit of
Collateral Agent, shall be segregated from other funds of such Pledgor
and shall forthwith be paid over to Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsements).
(c) In order to permit Collateral Agent to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to SECTION
7(b)(i) hereof and to receive all dividends and other distributions which it may
be entitled to receive under SECTION 7(a)(ii) hereof or SECTION 7(b)(ii) hereof,
Pledgors shall promptly execute and deliver (or cause to be executed and
delivered) to Collateral Agent all such proxies, dividend payment orders and
other instruments as Collateral Agent may from time to time reasonably request.
SECTION 8. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Each Pledgor
hereby irrevocably appoints Collateral Agent as such Pledgor's attorney-in-fact,
with full authority in the place and stead of such Pledgor and in the name of
such Pledgor or otherwise, from time to time in Collateral Agent's reasonable
discretion to take any action and to execute any instrument, which Collateral
Agent may deem necessary or advisable, subject to the terms and conditions of
this Pledge Agreement, to accomplish the purposes of this Pledge Agreement,
including, without limitation, (a) to file one or more financing or
8
<PAGE>
continuation statements or amendments thereto, relative to all or part of the
Pledged Collateral without the signature of such Pledgor, (b) to receive,
endorse and collect all instruments made payable to such Pledgor representing
any dividend, principal or interest payment or other distribution in respect of
the Pledged Collateral or any part thereof and to give full discharge for the
same, and (c) if an Event of Default shall have occurred and be continuing, to
ask, demand, collect, sue for, recover, compound, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any of the
Pledged Collateral, and (d) to file any claims or take any action or institute
any proceedings which Collateral Agent may deem necessary or desirable for the
collection of any of the Pledged Collateral or to enforce the rights of
Collateral Agent with respect to any of the Pledged Collateral.
SECTION 9. COLLATERAL AGENT MAY PERFORM. If a Pledgor fails to
perform any agreement contained herein, Collateral Agent may, upon 30 days'
notice to such Pledgor (unless otherwise expressly set forth in this Pledge
Agreement or an Event of Default shall have occurred and be continuing, in which
case, no notice shall be required) itself perform, or cause performance of, such
agreement, and the expenses of Collateral Agent incurred in connection therewith
shall be payable by Pledgors under SECTION 16(b) hereof.
SECTION 10. STANDARD OF CARE. The powers conferred on Collateral Agent
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose on it any duty to exercise such powers. Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equivalent to that which Collateral Agent accords its
own property consisting of negotiable securities, it being understood that
Collateral Agent shall have no responsibility for (a) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Pledged Collateral, whether or not Obligee has or
is deemed to have knowledge of such matters, (b) taking any necessary action
(other than actions taken in accordance with the standard of care set forth
above to maintain possession of the Pledged Collateral) to preserve rights
against any parties with respect to any Pledged Collateral, (c) taking any
necessary actions to collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Pledged Collateral or (d)
initiating any action to protect the Pledged Collateral against the possibility
of a decline in market value.
SECTION 11. EVENTS OF DEFAULT. The occurrence of any "Event of
Default" as defined in the Secured Agreement (whether or not any Secured
Obligations shall be at the time outstanding thereunder or the Secured Agreement
shall have terminated for some other purpose) or the occurrence of any default
under the Investment Agreement or the Certificate of Designation, which default
has continued beyond any applicable cure period, shall constitute an Event of
Default under this Pledge Agreement.
9
<PAGE>
SECTION 12. REMEDIES UPON DEFAULT. (a) If any Event of Default shall
have occurred and be continuing, Collateral Agent may exercise in respect of the
Pledged Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured party on
default under the Code as in effect in the State of New York (or any other state
with jurisdiction over the Pledged Collateral) at that time, and Collateral
Agent may also in its sole discretion, without notice (except as specified
below), sell the Pledged Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker's board or at any of
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Collateral Agent may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Pledged Collateral.
Collateral Agent, on behalf of Obligee, may be the purchaser of any or all of
the Pledged Collateral at any such sale and shall be entitled, for the purpose
of bidding and making settlement or payment of the purchase price for all or any
portion of the Pledged Collateral sold at any such public sale, to use and apply
any of the Secured Obligations as a credit on account of the purchase price of
any Pledged Collateral payable by Collateral Agent at such sale. Each purchaser
at any such sale shall hold the property sold absolutely free from any claim or
right on the part of any Pledgor, and each Pledgor hereby waives (to the extent
permitted by law) all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Pledgors agree that, to the extent notice of sale
shall be required by law, at least 10 days' notice to Pledgors of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Collateral Agent shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Pledgor hereby waives any claims against Collateral Agent
arising by reason of the fact that the price at which any Pledged Collateral may
have been sold at such a private sale was less than the price which might have
been obtained at a public sale, even if Collateral Agent accepts the first offer
received and does not offer such Pledged Collateral to more than one offeree. If
the proceeds of any sale or other disposition of the Pledged Collateral are
insufficient to pay all the Secured Obligations, Pledgors shall be liable for
the deficiency and the fees of any attorneys employed by Collateral Agent to
collect such deficiency, subject in the case of the Subsidiary Pledgors to any
limitations contained in the Guarantees.
(b) Each Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as from time to time
amended (the "SECURITIES ACT"), and applicable state securities laws, Collateral
Agent may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or
10
<PAGE>
resale thereof. Each Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable to Collateral Agent than those obtainable
through a public sale without such restrictions (including, without limitation,
a public offering made pursuant to a registration statement under the Securities
Act) and, notwithstanding such circumstances and the registration rights granted
to the Collateral Agent pursuant to SECTION 13, each Pledgor agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner and that Collateral Agent shall have no obligation to engage in public
sales and no obligation to delay the sale of any Pledged Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to
so register it.
(c) If Collateral Agent determines to exercise its right to sell
any or all of the Pledged Collateral, upon written request, Pledgors shall and
shall cause each issuer of any Pledged Shares to be sold hereunder from time to
time to furnish to Collateral Agent all such information as Collateral Agent may
request in order to determine the number of shares and other instruments
included in the Pledged Collateral which may be sold by Collateral Agent in
exempt transactions under the Securities Act and the rules and regulations of
the Securities and Exchange Commission thereunder, as the same are from time to
time in effect.
SECTION 13. REGISTRATION RIGHTS. If Collateral Agent shall determine
to exercise its right to sell all or any of the Pledged Collateral pursuant to
SECTION 12, each Pledgor agrees that, upon request of Collateral Agent (which
request may be made by Collateral Agent in its sole discretion), Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Pledged
Collateral contemplated to be sold and the directors and officers thereof to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts and things, as may be necessary or, in the opinion of
Collateral Agent, advisable to register such Pledged Collateral under the
provisions of the Securities Act and to cause the registration statement
relating thereto to become effective and to remain effective for a period of 1
year from the date of the first public offering of the Pledged Shares so
registered, and to make all amendments and supplements hereto and to the related
prospectus which, in the opinion of Collateral Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable
thereto;
(b) use its best efforts to qualify the Pledged Collateral
under all applicable state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of the Pledged Collateral, as
requested by Collateral Agent;
11
<PAGE>
(c) cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement which will satisfy the
provisions of Section 11(a) of the Securities Act;
(d) do or cause to be done all such other acts and things as
may be necessary to make such sale of the Pledged Collateral or any part thereof
valid and binding and in compliance with applicable law; and
(e) bear all costs and expenses, including reasonable
attorneys' fees, of carrying out its obligations under this SECTION 13.
Each Pledgor further agrees that a breach of any of the covenants
contained in this SECTION 13 will cause irreparable injury to Secured Party,
that Secured Party has no adequate remedy at law in respect of such breach and,
as a consequence, that each and every covenant contained in this SECTION 13
shall be specifically enforceable against such Pledgor, and each Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no default has occurred
giving rise to the Secured Obligations becoming due and payable prior to their
stated maturities. Nothing in this SECTION 13 shall in any way alter the rights
of Collateral Agent under SECTION 12.
SECTION 14. APPLICATION OF PROCEEDS. All Proceeds received by
Collateral Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Collateral may, in the
discretion of Collateral Agent, be held by Collateral Agent as Pledged
Collateral for, and/or then or at any time thereafter applied in whole or in
part by Collateral Agent against the Secured Obligations in the following order
of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, and all expenses, liabilities and
advances made or incurred by Collateral Agent in connection therewith
and all amounts for which the Collateral Agent is entitled to
indemnification hereunder and all advances made by the Collateral Agent
hereunder for the account of Pledgors or for the payment of all costs
and expenses paid or incurred by the Collateral Agent in connection
with the exercise of any right or remedy hereunder, all in accordance
with SECTION 16 hereof;
SECOND: To the payment in full of all other Secured
Obligations in the order specified in the Secured Agreement and in
accordance with the Intercreditor Agreement; and
THIRD: To the payment to or upon the order of Pledgors, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
12
<PAGE>
SECTION 15. COLLATERAL AGENT. Collateral Agent has been appointed as
Collateral Agent hereunder pursuant to the Secured Agreement. Collateral Agent
shall be obligated and shall have the right hereunder, to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking any action (including, without limitation, the release or
substitution of Collateral) in accordance with the Secured Agreement and the
Intercreditor Agreement. Collateral Agent may resign and a successor Collateral
Agent may be appointed in the manner provided for resignation and appointment of
a successor in the Secured Agreement. Upon the acceptance of any appointment as
a Collateral Agent by a successor Collateral Agent, such successor Collateral
Agent shall thereupon succeed to, and become vested with all the rights, powers,
privileges and duties of, the retiring Collateral Agent under this Pledge
Agreement, and the retiring Collateral Agent shall thereupon be discharged from
its duties and obligations under this Pledge Agreement and shall deliver any
Collateral in its possession to the successor Collateral Agent. After any
retiring Collateral Agent's resignation, the provisions of this Pledge Agreement
shall inure to its benefit as to any actions taken or omitted to be taken by it
under this Pledge Agreement while it was Collateral Agent.
SECTION 16. INDEMNITY AND EXPENSES. (a) Pledgors jointly and severally
agree to indemnify Collateral Agent, Obligee and each of the officers,
directors, agents, employees and affiliates of each of them (each an
"INDEMNITEE"), from and against any and all claims, losses and liabilities in
any way relating to, growing out of or resulting from this Pledge Agreement and
the transactions contemplated hereby (including, without limitation, enforcement
of this Pledge Agreement), except claims, losses or liabilities resulting from
the gross negligence or willful misconduct of the Indemnitee seeking
indemnification.
(b) Pledgors will upon demand pay to Collateral Agent the amount
of any and all costs and expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, which Collateral Agent may incur in
connection with (i) the administration of this Pledge Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of Collateral Agent hereunder or (iv) the
failure by any Pledgor to perform or observe any of the provisions hereof.
(c) The obligations of Pledgors in this Section 16 hereof shall
survive termination of this Pledge Agreement and the discharge of Pledgors'
other obligations under this Pledge Agreement, the Secured Agreement and the
other Secured Instrument Documents.
SECTION 17. CONTINUING SECURITY INTEREST; TRANSFER OF SECURED
OBLIGATIONS. This Pledge Agreement shall create a continuing security interest
in the Pledged Collateral and shall (a) remain in full force and effect until
indefeasible payment in full of all Secured Obligations, (b) be binding upon
each Pledgor, its successors and assigns, and (c) inure, together with the
rights and remedies of Collateral Agent hereunder, to the
13
<PAGE>
benefit of Collateral Agent and Obligee and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), subject to the provisions of the Secured Agreement, Obligee may assign or
otherwise transfer any Secured Obligations held by it to any other person or
entity, and such other person or entity shall thereupon become vested with all
the benefits in respect thereof granted to Obligee herein or otherwise. Upon the
indefeasible payment in full of all Secured Obligations, each Pledgor shall be
entitled to the return, upon its request and at its expense, against receipt and
without recourse to Collateral Agent, of such of the Pledged Collateral pledged
by such Pledgor hereunder as shall not have been sold or otherwise applied
pursuant to the terms hereof.
SECTION 18. NO WAIVER BY OBLIGEE; AUTHORITY OF PLEDGOR. No failure on
the part of Collateral Agent to exercise, and no course of dealing with respect
to, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise by
Collateral Agent of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative to the fullest extent permitted by
law and are not exclusive of any remedies provided by law. It is not necessary
for Collateral Agent to inquire into the powers of any Pledgor or the officers,
directors or agents acting or purporting to act on behalf of any of them.
SECTION 19. AMENDMENT, ETC. No amendment or waiver of any provision of
this Pledge Agreement, nor consent to any departure by any Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by Collateral Agent on behalf of Obligee, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
SECTION 20. ADDRESSES FOR NOTICES. Unless otherwise specifically
provided herein, any notice or other communication herein required or permitted
to be given shall be in writing and may be personally served, telecopied,
telexed or sent by United States mail or courier service and shall be deemed to
have been given when delivered in person, upon confirmed receipt (in the case of
telecopy or telex) or 5 Business Days after depositing it in the United States
mail, registered or certified, with postage prepaid and properly addressed;
PROVIDED that any notice sent to Collateral Agent or Obligee shall not be
effective until received. For purposes hereof, the addresses of the parties
hereto (until notice of a change thereof is delivered as provided in this
SECTION 20) shall be as set forth under each party's name on the signature pages
hereof or in the Secured Agreement.
SECTION 21. GOVERNING LAW; TERMS. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING
14
<PAGE>
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein or in the
Secured Agreement, terms defined in Article 9 of the Code are used herein as
therein defined.
SECTION 22. SEVERABILITY. Any provisions of this Pledge Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdictions, 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.
SECTION 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR WITH RESPECT TO THIS PLEDGE
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
SITTING IN NEW YORK, NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS PLEDGE
AGREEMENT, EACH PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS PLEDGE AGREEMENT. Each Pledgor hereby agrees
that service of process sufficient for personal jurisdiction in any action
against such Pledgor in the State of New York may be made by registered or
certified mail, return receipt requested, to such Pledgor at its address
provided in SECTION 20, and each Pledgor hereby acknowledges that such service
shall be effective and binding in every respect. Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of Collateral Agent to bring proceedings against any Pledgor in the courts
of any other jurisdiction.
SECTION 24. WAIVER OF JURY TRIAL. EACH PLEDGOR AND COLLATERAL AGENT
HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS PLEDGE AGREEMENT. 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 transaction,
including, without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. Each Pledgor and
Collateral Agent (a) acknowledge that this waiver is a material inducement for
such
15
<PAGE>
Pledgor and Collateral Agent to enter into a business relationship, that each
Pledgor and Collateral Agent have already relied on the waiver in entering into
this Pledge Agreement and that each will continue to rely on the waiver in their
related future dealings and (b) further warrant and represent that each has
reviewed this waiver with its legal counsel, and that each 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 THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS PLEDGE AGREEMENT. In the event of
litigation, this Pledge Agreement may be filed as a written consent to trial by
the court.
SECTION 25. MARSHALING; PAYMENTS SET ASIDE. Agent shall not be under
any obligation to marshal any assets in favor of any Pledgor or any other party
or against or in payment of any or all of the Secured Obligations. To the extent
that any Pledgor makes a payment or payments to Collateral Agent or Collateral
Agent enforces its security interests or exercises its rights of setoff, and
such payment or payments or proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied, and all liens, rights and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
SECTION 26. HEADINGS. Section and subsection headings in this Pledge
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Pledge Agreement or be given any substantive effect.
SECTION 27. COUNTERPARTS. This Pledge Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original and all
of which together shall constitute one and the same Agreement.
SECTION 28. INTERCREDITOR AGREEMENT. Obligee, Collateral Agent and
Foothill Capital Corporation, as AG Collateral Agent, are parties to the
Intercreditor Agreement which, among other things, concerns priorities of Liens
in the Collateral and the exercise of remedies by the parties thereto, and the
manner and priority of distribution of the proceeds of the Collateral among
Obligee and Foothill Capital Corporation, as AG Collateral Agent, and the terms
of this Agreement are subject to the terms and provisions of the Intercreditor
Agreement.
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<PAGE>
IN WITNESS WHEREOF, Pledgors have caused this Pledge Agreement to be
duly executed and delivered by their officers thereunto duly authorized
effective as of the date first above written.
PLEDGORS: ATLANTIC GULF COMMUNITIES
CORPORATION, a Delaware corporation and
AGC-SP, INC., a Delaware corporation
By:
-----------------------------------------------
John H. Fischer
Vice President
Notice Address:
c/o ATLANTIC GULF COMMUNITIES
CORPORATION
2601 South Bayshore Drive, 9th Floor
Miami, Florida 33133-5461
Attention: John H. Fischer,
Vice President
Facsimile: (305) 859-4623
COLLATERAL AGENT: THE BANK OF NEW YORK, a New York
banking corporation, as Collateral Agent
By: THE BANK OF NEW YORK TRUST
COMPANY OF FLORIDA, N.A., its agent
By:
------------------------------------------
Janalee R. Scott
Assistant Vice President
Notice Address:
Towermarc Plaza, 2nd Floor
10161 Centurion Parkway
Jacksonville, Florida 32256
Attention: Janalee R. Scott
Facsimile: (904) 645-1998
17
<PAGE>
Copy to: Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: Rick Koenigsberger
Telecopy: (212) 459-3301
Copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Philip Mindlin, Esq.
Telecopy: (212) 403-2000
Copy to: Carlton, Fields, Ward, Emmanuel, Smith &
Cutler, P.A.
Post Office Box 3239
Tampa, Florida 33601
Attn: Paula McDonald Rhodes, Esq.
Telecopy: (813) 229-4133
18
<PAGE>
SCHEDULE I
TO STOCK PLEDGE AGREEMENT
Attached to and forming a part of the Stock Pledge Agreement dated effective as
of June 23, 1997 between Pledgors and The Bank of New York, as Collateral Agent.
PLEDGED SHARES
--------------
<TABLE>
<CAPTION>
=======================================================================================
ISSUER SHARES CERTIFICATE
OUTSTANDING NUMBER(S)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
PLEDGOR: ATLANTIC GULF COMMUNITIES CORPORATION
- ---------------------------------------------------------------------------------------
1. AGC-SP, INC. 100 1
- ---------------------------------------------------------------------------------------
PLEDGOR: AGC-SP, INC.
- ---------------------------------------------------------------------------------------
1. AGC-SP1, INC. 100 1
- ---------------------------------------------------------------------------------------
2. AGC-SP2, INC. 100 1
- ---------------------------------------------------------------------------------------
3. AGC-SP3, INC. 100 1
- ---------------------------------------------------------------------------------------
4. AGC-SP4, INC. 100 1
- ---------------------------------------------------------------------------------------
5. AGC-SP5, INC. 100 1
- ---------------------------------------------------------------------------------------
6. WEST BAY CLUB DEVELOPMENT 1,000 2
CORPORATION, f/k/a Estero Pointe
Development Corporation
=======================================================================================
</TABLE>
19
<PAGE>
SCHEDULE II
TO STOCK PLEDGE AGREEMENT
[FORM OF PLEDGE AMENDMENT]
This Pledge Amendment, dated ___________, 19__, is delivered pursuant to
Section 6 of the Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Stock Pledge Agreement,
dated effective as of June 23, 1997, between Atlantic Gulf Communities
Corporation and its Subsidiaries who are signatories thereto and The Bank of New
York, a New York banking corporation, as Collateral Agent (the "PLEDGE
AGREEMENT"; capitalized terms used herein without definition shall have the
meanings given such terms in the Pledge Agreement) and that the [Pledged
Shares]/[Pledged Debt] listed on this Pledge Amendment shall be deemed to be
part of the [Pledged Shares]/[Pledged Debt] and shall become part of the Pledged
Collateral and shall secure the Secured Obligations as provided in the Pledge
Agreement.
[PLEDGOR]
By:
--------------------------------------
[Name]
[Title]
PLEDGED SHARES
--------------
Stock Issuer Stock Number
Certificate of
Number(s) Shares
PLEDGED DEBT
------------
Debt Issuer Amount of Indebtedness
20
<PAGE>
SCHEDULE III
TO STOCK PLEDGE AGREEMENT
[FORM OF ACKNOWLEDGEMENT AND AGREEMENT OF NEW SUBSIDIARY]
Reference hereby is made to the Stock Pledge Agreement, dated effective as
of June 23, 1997 (the "PLEDGE AGREEMENT"), between Atlantic Gulf Communities
Corporation and its Subsidiaries who are signatories thereto and The Bank of New
York, a New York banking corporation, as Collateral Agent, in which this
Acknowledgement and Agreement and attachments are incorporated.
The undersigned is a new Subsidiary and, as such, is required to pledge its
Pledged Shares and its Pledged Debt to secure the Secured Obligations (all as
defined in the Pledge Agreement) as provided in the Pledge Agreement. The
undersigned hereby represents and warrants (a) that it is the legal and
beneficial owner of the shares of capital stock described in Part A of Schedule
1 hereto which shares constitute all of the issued and outstanding shares of all
classes of capital stock of the Subsidiary or Subsidiaries so listed and (b)
that it is the legal and beneficial owner of the indebtedness described in Part
B of said Schedule 1.
The undersigned acknowledges the terms of the Pledge Agreement and agrees to
be bound thereby.
[NEW SUBSIDIARY]
By:
--------------------------------------
[Name]
[Title]
Address:
[ ]
[ ]
[ ]
21
<PAGE>
SCHEDULE 1
TO THE ACKNOWLEDGEMENT OF NEW SUBSIDIARY
PART A: Capital Stock of Subsidiaries
PART B: Indebtedness owned by new Subsidiary
22
THIS INSTRUMENT WAS PREPARED BY:
PAULA MCDONALD RHODES, ESQUIRE
CARLTON, FIELDS, WARD, EMMANUEL,
SMITH & CUTLER, P.A.
P.O. BOX 3239
TAMPA, FLORIDA 33601
JUNIOR MORTGAGE AND SECURITY AGREEMENT
THIS JUNIOR MORTGAGE AND SECURITY AGREEMENT ("JUNIOR MORTGAGE"), is
made effective as of June 23, 1997, from ATLANTIC GULF COMMUNITIES CORPORATION,
a Delaware corporation (the "COMPANY"), ENVIRONMENTAL QUALITY LABORATORY,
INCORPORATED, a Florida corporation ("EQ LAB"), GENERAL DEVELOPMENT UTILITIES,
INC., a Florida corporation ("GDU"), FIVE STAR HOMES, INC., a Florida
corporation ("FIVE STAR") and ATLANTIC GULF OF TAMPA, INC., a Florida
corporation ("AG TAMPA"), each having an office at 2601 South Bayshore Drive,
Miami, Florida 33133, (the Company, EQ Lab, GDU, Five Star and AG Tampa being
referred to collectively as the "MORTGAGORS" and individually each a
"MORTGAGOR"), to FOOTHILL CAPITAL CORPORATION, a California corporation, and its
successors and assigns, having an office at 60 State Street, Suite 1150, Boston,
Massachusetts 02190 ("MORTGAGEE"), as collateral agent for AP-AGC, LLC, a
Delaware limited liability company ("OBLIGEE").
THIS JUNIOR MORTGAGE IS BEING EXECUTED IN FOURTEEN (14) COUNTERPARTS FOR
RECORDATION IN THE FLORIDA COUNTIES OF BREVARD, BROWARD, CHARLOTTE, CITRUS,
DESOTO, GLADES, HENDRY, HILLSBOROUGH, INDIAN RIVER, LEE, MARION, PALM BEACH, ST.
LUCIE AND SARASOTA, AND IS ONE OF SEVERAL MORTGAGES SECURING THE OBLIGATIONS
SECURED HEREBY, WHICH SECURED OBLIGATIONS ARE THE JOINT AND SEVERAL PRIMARY
OBLIGATIONS OF THE MORTGAGORS HEREUNDER AND UNDER THAT CERTAIN MORTGAGE AND
SECURITY AGREEMENT GIVEN BY WEST BAY CLUB DEVELOPMENT CORPORATION, IN FAVOR OF
THE BANK OF NEW YORK, AS COLLATERAL AGENT FOR OBLIGEE ("SP AGENT"), BEING
RECORDED CONTEMPORANEOUSLY HEREWITH IN LEE COUNTY, FLORIDA ("COMPANION
MORTGAGE"). DOCUMENTARY STAMP TAXES IN THE AMOUNT OF $87,500.00 DUE ON THE
OBLIGATIONS SECURED HEREBY AND BY THE COMPANION MORTGAGE ARE BEING PAID UPON
RECORDATION OF THE COMPANION MORTGAGE IN LEE COUNTY, FLORIDA, UNDER CLERK'S FILE
NO._______________. NO INTANGIBLE PERSONAL PROPERTY TAXES ARE DUE UPON
RECORDATION OF THIS MORTGAGE OR THE COMPANION MORTGAGE AS THE OBLIGATIONS
SECURED HEREBY AND THEREBY ARE CONTINGENT IN NATURE.
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W I T N E S S E T H:
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WHEREAS, the Company owns the parcels of real property described in
EXHIBIT A-1 attached hereto and hereby made a part hereof (the "COMPANY LAND"),
Five Star owns the parcels of real property described in EXHIBIT A-2 attached
hereto and hereby made a part hereof ("FIVE STAR LAND"), GDU owns the parcels of
real property described in EXHIBIT A-3 attached hereto and hereby made a part
hereof ("GDU LAND"), EQ Lab owns the parcels of real property described in
EXHIBIT A-4 attached hereto and hereby made a part hereof ("EQ LAB LAND"), and
AG Tampa owns the parcels of real property described in EXHIBIT A-5 attached
hereto and hereby made a part hereof (the "AG TAMPA LAND" and, together with the
Company Land, the Five Star Land, the GDU Land, and the EQ Lab Land, the
"LAND"), together with, in each case, all buildings and improvements presently
located thereon;
WHEREAS, pursuant to that certain Investment Agreement dated as of
February 7, 1997, amended as of March 20, 1997, and amended and restated as of
May 15, 1997 (together with any and all modifications, amendments, replacements,
renewals and extensions thereof, the "INVESTMENT AGREEMENT") among Obligee, the
Company and the subsidiaries of the Company, Obligee has agreed to purchase up
to $25,000,000 in the aggregate of preferred stock to be issued by the Company;
WHEREAS, Obligee, the Company, and the other Mortgagors, among others,
are parties to that certain Secured Agreement dated February 7, 1997, and
amended and restated as of May 15, 1997 (together with any and all
modifications, amendments, replacements, renewals and extensions thereof, the
"SECURED AGREEMENT");
WHEREAS, all capitalized terms used herein and not otherwise defined
shall have the meaning given such terms in the Secured Agreement;
WHEREAS, pursuant to the Secured Agreement and the Investment
Agreement, the Company, the Mortgagors, and the other subsidiaries of the
Company have executed and delivered to the Obligee that certain Secured Evidence
of Joint and Several Repurchase Obligations (together with any and all
additions, modifications, amendments, renewals, extensions thereof, the
"INSTRUMENT"), evidencing (a) after the issuance of the Preferred Stock, the
joint and several obligations of the Company, the Mortgagors and other
subsidiaries of the Company pursuant to Section 8 of the Certificate of
Designation to repurchase Preferred Stock on the happening of certain conditions
set forth in the Certificate of Designation at a repurchase price equal to the
Liquidation Preference in respect thereof, as defined in the Certificate of
Designation, consisting of, at any time, $10.00 per share of Preferred Stock,
plus accumulated and unpaid dividends thereon through the date of such
determination, whether or not funds are legally available therefor, the
aggregate amount of which, upon issuance of the 2,500,000 shares of Preferred
Stock to be issued pursuant to the Investment Agreement, shall be $25,000,000,
plus accumulated and unpaid dividends, and (b) after the occurrence of an Event
of Default, as defined in the Certificate of Designation, the joint and several
obligations of the Company, Mortgagors and other subsidiaries of the Company to
indemnify Obligee from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities resulting from any breach of any covenant, agreement, representation
or warranty
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of the Company in this Junior Mortgage or in any other Secured Instrument
Document pursuant to Section 7.2 of the Investment Agreement (collectively, the
"OBLIGATIONS");
WHEREAS, it is a condition precedent to Obligee making the investment
contemplated by the Investment Agreement that the Mortgagors provide, as
collateral security for the payment of the Obligations, a junior mortgage lien
upon the Mortgaged Property (as such term is hereinafter defined) subject only
to the lien of the Senior Mortgages, as defined in Article 41 hereof.
NOW, THEREFORE, in order to induce Obligee to make the investment
contemplated by the Investment Agreement and for the purpose of securing payment
of the Secured Obligations, Mortgagors hereby agree as follows:
TO SECURE,
a. the Obligations, whether or not from time to time decreased or
extinguished and later increased, created or incurred and all or any portion of
such obligations that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Obligee or Mortgagee as a
preference, fraudulent transfer or otherwise,
b. all obligations of every nature (whether of payment, of
performance or otherwise) of the Mortgagors and other subsidiaries of the
Company from time to time owed to Obligee or Mortgagee or either of them under
the Secured Agreement or any other Secured Instrument Document other than any
Subsidiary Guaranty, whether for principal, interest (including interest
accruing after the commencement of a bankruptcy case, whether or not enforceable
in such case), repurchase or redemption obligations, dividend obligations, fees,
costs, expenses, indemnification liabilities or other obligations, of whatsoever
nature and whether now or hereafter made, incurred or created, whether absolute
or contingent, liquidated or unliquidated, regardless of class, whether due or
not due, and however arising,
c. all future or additional advances as described in Article 39
of this Junior Mortgage as and when the same shall be made with the same force
and effect as if such future or additional advances had been made on the date
hereof, and
d. any amounts advanced by Mortgagee pursuant to paragraph 17 or
any other paragraph of this Junior Mortgage
(the foregoing being hereinafter collectively referred to as the "SECURED
OBLIGATIONS"), Mortgagors hereby convey, grant, assign, transfer, mortgage and
set over to Mortgagee, all of Mortgagors' right, title and interest in and to
the following (collectively, the "MORTGAGED PROPERTY"):
The Land;
TOGETHER with the right, title and interest if any of Mortgagors, now
owned or hereafter acquired, in and to the streets, the land lying in the bed of
any streets, roads or
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avenues, opened or proposed, in front of, adjoining, or abutting the Land to the
center line thereof and strips and gores within or adjoining the Land, the air
space and right to use said air space above the Land, all rights of way,
privileges, liberties, hereditaments, all easements or rights-of-way now or
hereafter affecting the Land, all royalties and all rights appertaining to the
use and enjoyment of said Land, including, without limitation, all alley, vault,
drainage, mineral, water, oil and gas rights;
TOGETHER with the buildings, structures and improvements now or
hereafter erected or located on the Land (the "IMPROVEMENTS") (the Land,
together with the Improvements are hereinafter collectively called the "REAL
ESTATE");
TOGETHER with all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the Real Estate, and the
reversion or reversions, remainder or remainders, rents, issues, profits and
revenue thereof; and also all the estate, right, title, interest, dower and
right of dower, curtesy and rights of curtesy, property, possession, claim and
demand whatsoever, both in law and equity, of Mortgagors, of, in and to the Real
Estate and of, in and to every part and parcel thereof, with the appurtenances,
at any time belonging or in anywise appertaining thereto;
TOGETHER with all of the fixtures of every kind and nature whatsoever
currently owned or hereafter acquired by Mortgagors, and all appurtenances and
additions thereto and substitutions or replacements thereof, now or hereafter
attached to, the Real Estate (said fixtures of every kind and nature whatsoever,
and all appurtenances thereof, are hereinafter collectively referred to as the
"FIXTURES"), including, but without limiting the generality of the foregoing,
all plumbing, ventilating, air conditioning and air-cooling apparatus,
refrigerating, incinerating, and escalator, elevator, power, loading and
unloading equipment and systems, sprinkler systems and other fire prevention and
extinguishing apparatus and pipes, pumps, tanks, conduits, fittings and
fixtures; it being understood and agreed that all Fixtures are appropriated to
the use of the Real Estate and, whether affixed or annexed or not, for the
purposes of this Junior Mortgage shall be deemed conclusively to be Real Estate
and mortgaged hereby; and Mortgagors hereby agree to execute and deliver, from
time to time, such further instruments (including financing statements), as may
be requested by Mortgagee to confirm the lien of this Junior Mortgage on the
Fixtures;
TOGETHER with all unearned premiums, accrued, accruing or to accrue
under insurance policies now or hereafter obtained by Mortgagors and Mortgagors'
interest in and to all proceeds of the conversion and the interest payable
thereon, voluntary or involuntary, of the Mortgaged Property, or any part
thereof, into cash or liquidated claims, including, without limiting the
generality of the foregoing, proceeds of casualty insurance, title insurance or
any other insurance maintained on the Real Estate and the Fixtures, and the
right to collect and receive the same, and all awards and/or other compensation
including the interest payable thereon and the right to collect and receive the
same (in the alternative and collectively, "AWARDS"), heretofore and hereafter
made to the present and all subsequent owners of the Real Estate and the
Fixtures by the United States, the State of Florida or any political subdivision
thereof, or any agency, department, bureau, board, commission, or
instrumentality of any of them, now existing or hereafter created (collectively,
"GOVERNMENTAL AUTHORITY") for the taking by eminent domain, condemnation or
otherwise, of
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all or any part of the Real Estate and Fixtures or any easement or other right
therein, including, without limiting the generality of the foregoing, Awards for
any change or changes of grade or the widening of streets, roads or avenues
affecting the Real Estate, to the extent of all amounts which may be secured by
this Junior Mortgage as of the date of receipt, notwithstanding the fact that
the amount thereof may not then be due and payable, and to the extent of
reasonable attorneys' fees, costs and disbursements incurred by Mortgagee in
connection with the collection of such Awards, subject, however, to the rights,
if any, of the holder of the Senior Mortgages, as defined in Article 41 hereof.
Mortgagors hereby assign to Mortgagee, and Mortgagee is hereby authorized to
collect and receive such Awards (subject to any Mortgagor's right to be paid
directly and apply certain Awards as expressly provided by this Junior
Mortgage), and to give proper receipts and acquittances therefor and, subject to
the other provisions hereof, to apply the same toward the Secured Obligations,
notwithstanding the fact that the full amount thereof may not then be due and
payable; each Mortgagor hereby agrees, upon demand of Mortgagee, to make,
execute and deliver, from time to time, such further instruments as may be
reasonably requested by Mortgagee to confirm such assignment of said Awards to
Mortgagee, free and clear and discharged of any encumbrances of any kind or
nature whatsoever;
TOGETHER with all right, title and interest of Mortgagors in and to all
substitutes and replacements of, and all additions and appurtenances to, the
Real Estate and the Fixtures, hereafter acquired by or released to any Mortgagor
or constructed, assembled or placed by any Mortgagor on the Real Estate, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further mortgage, conveyance,
assignment or other act by Mortgagors, shall become subject to the lien of this
Junior Mortgage as fully and completely, and with the same effect, as though now
owned by Mortgagors and specifically described herein;
TOGETHER with all of the rights and interest of Mortgagors as the
declarant and as the developer under any document affecting the Land including,
but not limited to, any condominium documents or property association documents.
Notwithstanding the foregoing, Mortgagee shall not have any obligation as the
developer or declarant unless Mortgagee executes an agreement expressly assuming
such obligation;
TOGETHER with all proceeds, both cash and noncash, of the foregoing
which may be sold or otherwise be disposed of;
TOGETHER with any and all monies now or hereafter on deposit for the
payment of real estate taxes or special assessments against the Real Estate or
for the payment of premiums on policies of fire and other hazard insurance
covering the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property, together with all and
singular of the rights, privileges, tenements, hereditaments and appurtenances
thereto in any way incident or belonging unto Mortgagee and to its successors
and assigns forever, subject to the terms and conditions herein:
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PROVIDED, HOWEVER, that this Junior Mortgage shall be void upon the
payment, when the same shall become due, of the Secured Obligations and the
payment and performance of all other covenants, agreements, obligations and
liabilities secured hereby.
Mortgagors represent, warrant, covenant and agree as follows:
1. WARRANTIES OF TITLE.
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Each Mortgagor jointly and severally warrants that the
Mortgagors or a Mortgagor has and owns good and marketable fee simple title in
and to the Land and the Improvements thereon and has the right to mortgage the
same; that Mortgagors or a Mortgagor owns the Fixtures on the Land free and
clear of all liens, claims or other encumbrances except as set forth in Schedule
B, Section 2 of the title insurance commitment issued by Lawyers Title Insurance
Corporation in connection with this Junior Mortgage (the "TITLE COMMITMENT");
and that this Junior Mortgage is a valid and enforceable lien on the Mortgaged
Property of the Mortgagors subject only to the liens of the Senior Mortgages (as
defined in Section 41 hereof), the covenants, restrictions, reservations,
conditions, and easements approved by the Mortgagee and liens permitted by the
Secured Agreement. Each Mortgagor jointly and severally covenants that it shall
(a) preserve such title and the validity and priority of the lien hereof and
shall forever warrant and defend the same to Mortgagee against the claims of all
and every person or persons, corporation or corporations and parties whomsoever
claiming or threatening to claim the same or any part thereof, and (b) make,
execute, acknowledge, and deliver all such further or other mortgages,
documents, instruments or assurances, and cause other mortgages, documents,
instruments or assurances, and cause to be done all such further acts and things
as may at any time hereafter be reasonably desired or required by Mortgagee to
fully protect the lien of this Junior Mortgage.
2. PAYMENT OF SECURED OBLIGATIONS. Mortgagors shall pay the
Secured Obligations at the times and places and in the manner specified in the
relevant Secured Instrument Documents.
3. PROPER CARE AND USE.
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a. Mortgagors shall:
(i) not abandon the Mortgaged Property,
(ii) maintain the Mortgaged Property and any
future abutting grounds, sidewalks, roads, parking and landscape areas in good
repair, order and condition, except as otherwise may be permitted pursuant to
Subsection 3a(iii) hereof,
(iii) keep all Improvements and all personal
property comprising the Mortgaged Property in good working order and condition,
in the ordinary course of business and in a manner consistent with the prior
practice of Mortgagors,
(iv) not commit or suffer waste with respect to
the Mortgaged Property,
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(v) diligently pursue to completion, without
interruption (other than interruptions due to force majeure) and in a good and
workmanlike manner, any future Improvements constructed on the Land,
(vi) not commit, suffer or permit any act to be
done in or upon the Mortgaged Property in violation of any law, ordinance or
regulation, PROVIDED, HOWEVER, that the Company may contest any such law,
ordinance or regulation in any reasonable manner which shall not, in the sole
opinion of the Mortgagee, adversely affect the Mortgagee's rights or the
priority of its lien on the Mortgaged Property,
(vii) refrain from impairing or diminishing the
value or integrity of the Mortgaged Property or the security value of this
Junior Mortgage,
(viii) not remove, demolish or in any material
respect alter any of the Improvements or Fixtures unless such Improvement or
Fixture is of a temporary nature (temporary meaning that it is an Improvement
intended to be removed within a year after its placement on the Land), the
removal or demolition would benefit the Mortgaged Property, the removal is of
land fill only for sale in the ordinary course of Mortgagors' business, or the
removal or demolition is not inconsistent with the Business Plan (as such term
is defined in the Secured Agreement), without the prior written consent of the
Mortgagee, which consent shall not be unreasonably withheld or delayed,
PROVIDED, HOWEVER, Mortgagors may without the necessity of any consent perform
or cause to be performed alterations to the Improvements and Fixtures which do
not materially impair the value of the Mortgaged Property and (a) are not
inconsistent with the Business Plan, or (b) do not cost more than $500,000 or,
if the cost of such alterations exceeds $500,000, the cost of which when added
to the cost of other alterations not requiring consent previously made during
the calendar year in which Mortgagors are making such alterations to the
Mortgaged Property, does not result in an aggregate cost in excess of
$1,000,000. Failure by the Mortgagee to deny any requested consent by Mortgagors
pursuant to this clause (viii) within thirty (30) days following the date such
request is telecopied to and confirmed received by Mortgagee shall be deemed to
constitute a consent to such request by the Mortgagee. For purposes of
determining the cost of any alteration to the Mortgaged Property, all aspects of
the proposed alteration as a whole shall be taken into account regardless of
when made and by whom the work may be performed,
(ix) not make, install or permit to be made or
installed, any additions thereto if doing so will materially impair the value of
the Mortgaged Property, without the prior written consent of the Mortgagee, and
(x) not make, suffer or permit any nuisance to
exist on any of the Real Estate.
b. Mortgagee and any persons authorized by Mortgagee
shall have the right to enter and inspect the Mortgaged Property at reasonable
times upon written notice. When so requested by any Mortgagor, Mortgagee and its
representatives shall be accompanied by Mortgagor or its representative. If an
Event of Default shall have occurred and be continuing, or in the event of an
emergency, Mortgagee and any persons authorized
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by Mortgagee, without any notice and without escort (and without being obligated
to do so) may enter or cause entry to be made upon the Real Estate and repair
and/or maintain the same as Mortgagee may reasonably deem necessary or
advisable, and may (without being obligated to do so) make such expenditures and
outlays of money as Mortgagee may reasonably deem appropriate for the
preservation of the Mortgaged Property. All expenditures and outlays of money
made by Mortgagee pursuant hereto shall be secured hereby and shall be payable
on demand together with interest at the Default Rate (as such term is defined in
the Secured Agreement).
4. HAZARDOUS MATERIALS. Except as otherwise disclosed in the
Secured Agreement or the Business Plan, each Mortgagor represents, warrants and
covenants that to the best of its knowledge such Mortgagor has not used
Hazardous Materials (as defined hereinafter) on, from, or affecting the
Mortgaged Property in any manner which violates Federal, state or local laws,
ordinances, rules, regulations, or policies governing the use, storage,
treatment, transportation, manufacture, refinement, handling, production or
disposal of Hazardous Materials, and that, to the best of such Mortgagor's
knowledge, no prior owner of the Mortgaged Property or any tenant, subtenant,
prior tenant or prior subtenant have used Hazardous Materials on, from,
affecting, or related to the Mortgaged Property in any manner which violates
Federal, state or local laws, ordinances, rules, regulations or policies
governing the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials. Each Mortgagor shall
use its best efforts to keep or cause the Mortgaged Property to be kept free of
Hazardous Materials. Without limiting the foregoing, no Mortgagor shall cause or
permit the Mortgaged Property to be used to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce or process Hazardous
Materials, except in compliance with all applicable Federal, state or local laws
or regulations, nor shall any Mortgagor cause or permit, as a result of any
intentional or unintentional act or omission on the part of such Mortgagor or
any tenant or subtenant, a release of Hazardous Materials onto the Mortgaged
Property or onto any other property. Each Mortgagor shall comply with and shall,
by covenants in all future leases, seek to ensure compliance by all tenants and
subtenants with all applicable Federal, state and local laws, ordinances, rules
and regulations, whenever and by whomever triggered, and shall obtain and comply
with, and by covenants in all future leases, seek to ensure that all tenants and
subtenants obtain and comply with, any and all approvals, registrations or
permits required thereunder. Each Mortgagor shall (a) conduct and complete all
investigations, studies, sampling, and testing, and all remedies, removal, and
other actions necessary to clean up and remove all Hazardous Materials on, from,
or affecting the Mortgaged Property (i) in accordance with all applicable
Federal, state and local laws, ordinances, rules, regulations and policies, and
(ii) in accordance with the orders and directives of all Federal, state, and
local governmental authorities, and (b) defend, indemnify, and hold harmless
Mortgagee, Obligee and their respective employees, agents, officers, and
directors, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs or expenses of whatever kind or nature, known or
unknown contingent or otherwise arising out of, or in any way related to, (i)
the presence, disposal, release, or threatened release of any Hazardous
Materials which are on, from, affecting, or related to the soil, water,
vegetation, buildings, personal property, persons, animals, of or otherwise on,
the Mortgaged Property; (ii) any personal injury (including wrongful death) or
property damage (real or personal arising out of or related to such Hazardous
Materials;
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(iii) any lawsuit brought or threatened, settlement reached, or government order
relating to such Hazardous Materials, and/or (iv) any violation of any laws,
orders, regulations, requirement, or demands of Governmental Authorities, which
are based upon or in any way related to such Hazardous Materials including,
without limitation, attorney and consultant fees, investigation and laboratory
fees, court costs, and litigation expenses; provided, in any event, that the
foregoing arises out of the Mortgaged Property. In the event this Junior
Mortgage is foreclosed, or any Mortgagor tenders a deed in lieu of foreclosure,
such Mortgagor or Mortgagors shall deliver the Mortgaged Property to Mortgagee
free of any and all Hazardous Materials so that the conditions of the Mortgaged
Property shall conform with all applicable Federal, state and local laws,
ordinances, rules or regulations affecting the Mortgaged Property. For purposes
of this Paragraph, "Hazardous Materials" includes, without limit, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
solvent mixtures, hazardous or toxic substances, or related materials defined in
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended (42 U.S.C. Section 9601, et. seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1810 et seq.), the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 9601, et seq.) and
in the regulations adopted and publications promulgated pursuant thereto, or any
other applicable Federal, state or local environmental law, ordinance, rule, or
regulation. The provisions of this paragraphs shall be in addition to any and
all other obligations and liabilities Mortgagors may have to Mortgagee and/or
Obligee, at common law, and shall survive the transactions contemplated herein.
5. COMPLIANCE. Each Mortgagor shall comply with any and all
material obligations affecting its Mortgaged Property which could adversely
affect title to, or the value of, the Mortgaged Property including, but not
limited to, all agreements, covenants, and restrictions of record. Each
Mortgagor shall have the right, at such Mortgagor's sole cost and expense, to
contest or object to any such obligations of such Mortgagor affecting the
Mortgaged Property by appropriate legal proceedings, but such right shall not be
deemed or construed in any way as relieving, modifying or extending such
Mortgagor's covenant to comply with such obligations on a timely basis unless
such Mortgagor has given prior written notice to Mortgagee of such Mortgagor's
intent so to contest or object to such obligations, and unless (i)
non-compliance with such obligations shall not under any circumstances
potentially subject such Mortgagor to any criminal liability or to any fine or
monetary liability exceeding $25,000 to which effect such Mortgagor shall
certify to Mortgagee at the time of Mortgagor's notice, and (ii) the legal
proceedings shall operate conclusively to prevent, prior to final determination
of such proceedings, (y) any loss or forfeiture of title to, or the imposition
of any lien upon, the Mortgaged Property, or any part thereof and (z) the
impairment of the validity, priority and enforceability of this Junior Mortgage.
Mortgagors shall and do hereby agree to defend, save and hold Mortgagee harmless
from any loss and/or liability (including reasonable attorneys' fees and
disbursements) by reason of such non-compliance or contest, and each Mortgagor
shall keep Mortgagee regularly advised in writing as to the status of such
proceedings.
6. REQUIREMENTS. Mortgagors, at Mortgagors' sole cost and
expense, shall promptly comply with, or cause to be complied with, and conform
to all present and future laws, statutes, codes, ordinances, orders, judgments,
decrees, injunctions, rules, regulations
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and requirements pertaining to the Mortgaged Property, including any applicable
environmental, zoning or building, use and land use laws, ordinances, rules or
regulations and all covenants, restrictions and conditions now or hereafter of
record, and shall keep in full force and effect all permits which may be
applicable to it or to any of the Mortgaged Property, or to the use, manner of
use, occupancy, possession, operation, maintenance, alteration, repair or
reconstruction of any of the Mortgaged Property (collectively, the "LEGAL
REQUIREMENTS"). Each Mortgagor shall have the right, at such Mortgagor's sole
cost and expense, to contest or object to any Legal Requirements affecting the
Mortgaged Property by appropriate legal proceedings, but such right shall not be
deemed or construed in any way as relieving, modifying or extending such
Mortgagor's covenant to comply with any Legal Requirements on a timely basis
unless such Mortgagor has given prior written notice to Mortgagee of such
Mortgagor's intent so to contest or object to such Legal Requirements and unless
(i) non-compliance with such Legal Requirements shall not under any
circumstances potentially subject Mortgagor to any criminal liability or to any
fine or liability exceeding $25,000 to which effect such Mortgagor shall certify
to Mortgagee at the time of Mortgagor's notice, and (ii) the legal proceedings
shall operate conclusively to prevent, prior to final determination of such
proceedings, (y) any loss or forfeiture of title to, the imposition of any lien
upon, or the condemnation of, the Mortgaged Property, or any part thereof and
(z) the impairment of the validity, priority and enforceability of this Junior
Mortgage. Mortgagors shall and do hereby agree to defend, save and hold
Mortgagee harmless from any loss and/or liability (including reasonable
attorney's fees and disbursements) by reason of such non-compliance or contest,
and each Mortgagor shall keep Mortgagee regularly advised in writing as to the
status of such proceedings.
7. PAYMENT OF IMPOSITIONS.
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a. Each Mortgagor shall pay and discharge prior to
delinquency all taxes of every kind and nature (including, without limitation,
all real and personal property, income, franchise, withholding, profits and
gross receipts taxes), all charges for any easement or agreement maintained for
the benefit of any of the Mortgaged Property, all general and special
assessments, levies, permits, inspection and license fees, all water and sewer
rents and charges and all other public charges whether of a like or different
nature, even if unforeseen or extraordinary, imposed upon or assessed of or
against Mortgagor or any of the Mortgaged Property, together with any penalties
or interest on any of the foregoing (all of the foregoing are hereinafter
collectively referred to as the "IMPOSITIONS"). Each Mortgagor shall have the
right, at such Mortgagor's sole cost and expense, to contest or object to the
amount or validity of any such Imposition by appropriate legal proceedings, but
such right shall not be deemed or construed in any way as relieving, modifying
or extending Mortgagor's covenant to pay any such Imposition at the time and in
the manner provided in this Article 7, unless such Mortgagor has given prior
written notice to Mortgagee of such Mortgagor's intent so to contest or object
to an Imposition, and unless, (i) legal proceedings shall operate conclusively
to prevent the sale of the Mortgaged Property, or any part thereof, to satisfy
such Impositions prior to final determination of such proceedings; or (ii) such
Mortgagor shall furnish a good and sufficient bond or surety or other security
reasonably satisfactory to Mortgagee in the amount of the Impositions which are
being contested plus any interest and penalty which may be imposed thereon and
which could become a lien against the Mortgaged Property; or (iii) such
Mortgagor shall have provided a
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good and sufficient undertaking as may be required or permitted by law to
accomplish a stay of such proceedings. Subject to the foregoing, and if
Mortgagee shall so request, within ten (10) days after the date when an
Imposition is due and payable, the appropriate Mortgagor shall deliver to
Mortgagee evidence acceptable to Mortgagee showing the payment of such
Imposition.
b. Mortgagee shall have the right, after demand to
Mortgagors, to pay any Impositions after the date such Imposition shall have
become due (subject to each Mortgagor's right to contest such Impositions as
hereinbefore provided), and to add to the Secured Obligations the amount so
paid, together with interest thereon from the date of such payment at Default
Rate and nothing herein contained shall affect such right and such remedy. Any
sums paid by Mortgagee in discharge of any Impositions shall be (i) a lien on
the Real Estate secured hereby prior to any right or title to, interest in, or
claim upon the Real Estate subordinate to the lien of this Junior Mortgage, and
(ii) payable on demand.
c. Following the occurrence of an Event of Default specified
in subsection (a) of Article 20 of this Junior Mortgage or upon any failure on
the part of any Mortgagor to pay any Imposition as and when required to be paid
pursuant to this Junior Mortgage (subject to applicable grace periods),
Mortgagors, upon Mortgagee's request, shall hereafter pay to Mortgagee, on a
monthly basis, an amount equal to one-twelfth of the annual Impositions
reasonably estimated by Mortgagee so that Mortgagee shall have sufficient funds
to pay the Impositions on the first day of the month preceding the month in
which they become due (unless the same is already being deposited with the
holder of the Senior Mortgages under the Senior Mortgages). In such event the
appropriate Mortgagor further agrees to cause all bills, statements or other
documents relating to Impositions to be sent or mailed directly to Mortgagee.
Upon receipt of such bills, statements or other documents, and providing
Mortgagors have deposited sufficient funds with Mortgagee pursuant to this
Article 7, Mortgagee shall pay such amounts as may be due thereunder out of the
funds so deposited with Mortgagee. If at any time and for any reason the funds
deposited with Mortgagee are or will be insufficient to pay such amounts as may
then or subsequently be due, Mortgagee shall notify Mortgagors and Mortgagors
shall immediately deposit an amount equal to such deficiency with Mortgagee.
Notwithstanding the foregoing, nothing contained herein shall cause Mortgagee to
be deemed a trustee of said funds or to be obligated to pay any amounts in
excess of the amount of funds deposited with Mortgagee pursuant to this Article
7. If amounts collected by Mortgagee under this paragraph (c) exceed amounts
necessary in order to pay Impositions, Mortgagee may impound or reserve for
future payment of Impositions such portion of such excess payments as Mortgagee
in its absolute reasonable discretion may deem proper. Should Mortgagors fail to
deposit with Mortgagee sums sufficient to pay such Impositions in full at least
thirty (30) days before delinquency thereof, Mortgagee may, at Mortgagee's
election, but without any obligation so to do, advance any amounts required to
make up any deficiency, which advances, if any, shall be added to the Secured
Obligations and shall be secured hereby and shall be repayable to Mortgagee with
interest at Default Rate, as herein elsewhere provided, or at the option of
Mortgagee the latter may, without making any advance whatever, apply any sums
held by it upon any obligation of Mortgagors secured hereby.
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8. INSURANCE.
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a. As to any portion of the Land improved with Improvements
having a value in excess of $500,000 (an "IMPROVED PARCEL"), Mortgagors shall,
(i) keep such Improved Parcel (A) insured against loss or damage by fire,
lightning, windstorm, tornado and by such other further and additional risks and
hazards as now are or hereafter may be covered by extended coverage and "all
risk" endorsements (flood and earthquake excepted), (B) insured against loss or
damage by any other risk commonly insured against by persons occupying or using
like properties in the locality in which the Improved Parcel is situate, (C) if
appropriate, insured by a policy of business interruption and/or loss of rental
insurance in amounts which shall be subject to review annually, and (D) insured
by a policy of boiler and machinery insurance covering pressure vessels, air
tanks, boilers, machinery, pressure piping, heating, air conditioning and
elevator equipment, provided that the Improvements on the Improved Parcel
contain equipment of such nature, and insurance against loss of occupancy or use
arising from the breakdown of such machinery, (ii) keep the Fixtures on such
Improved Parcel insured against loss or damage by fire, lightning, vandalism,
windstorm, tornado, malicious mischief, and theft and by such other further and
additional risks as now or hereafter may be covered by extended coverage and
"all risk" endorsements (flood and earthquake' excepted) and (iii) to the extent
the Land lies within an area identified by the Secretary of Housing and Urban
Development as an area having special flood hazards, keep the Real Estate
insured under a policy of flood insurance in an amount no less than the maximum
list of coverage available under the National Flood Insurance Act of 1968, as
amended. In addition, Mortgagors shall obtain and maintain (A) comprehensive
public liability insurance on an occurrence basis (to the extent available)
against claims for personal injury including bodily injury, death or property
damage occurring on, in or about the Mortgaged Property and the adjoining
streets, sidewalks and passageways, such insurance to afford primary coverage of
not less than $10,000,000 combined single limit for personal injury or death to
one or more persons or damage to property and (B) workmen's compensation
insurance (including employer's liability insurance if requested by Mortgagee)
for all employees of Mortgagor engaged on or with respect to the Mortgaged
Property in such amounts as are required to be maintained by law, or if no
amounts are established by law, then in such amounts as are reasonably
satisfactory to Mortgagee. Each insurance policy (other than flood insurance
written under the National Flood Insurance Act of 1968, as amended, in which
case to the extent available) shall (i) be noncancelable (which term shall
include any reduction in the scope or limits of coverage) without at least
thirty days' prior written notice to Mortgagee or the maximum notice period then
available, whichever is shorter, (ii) except in the case of worker's
compensation and comprehensive public liability insurance, be endorsed to name
Mortgagee as its interest may appear, with loss payable to Mortgagee, without
contribution, under a standard mortgagee clause (subject to the rights, if any,
of the holder of the Senior Mortgages), (iii) in the case of public liability
insurance, provide for broad form coverage, including liquor liability coverage,
(iv) in the case of property insurance contain a satisfactory "Replacement Cost
Endorsement", (v) be written by Lloyds of London or by companies having an
Alfred M. Best Company, Inc. rating of A or higher and a financial size category
of not less than VII with respect to primary coverage and (and A/XII with
respect to excess coverage) unless waived in writing by Mortgagee, and (vi)
contain an endorsement or agreement by the insurer that any loss shall be
payable in accordance with the terms of such policy notwithstanding any act or
negligence of
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Mortgagors which might otherwise result in forfeiture of said insurance and the
further agreement of the insurer waiving all rights of set-off, counterclaim,
deduction or subrogation against Mortgagors. If said insurance or any part
thereof shall expire, be withdrawn, become void by breach of any condition
thereof by Mortgagors or otherwise, or if for any reason said insurance shall
become unsatisfactory, Mortgagors shall immediately obtain new or additional
insurance complying with the requirements of this Junior Mortgage. No Mortgagor
shall take out any separate or additional insurance which is contributing in the
event of loss unless it is properly compatible with all other insurance carried
by it with respect to the Mortgaged Property.
b. Mortgagors shall (i) pay as they become due all premiums
for such insurance, (ii) not later than twenty (20) days prior to the expiration
of each policy to be furnished pursuant to the provisions of this Article 7,
deliver a valid certificate of insurance, (or if such certificate is not then
available, a renewal binder) evidencing a renewed policy or policies marked
"premium paid," or accompanied by such other evidence of payment satisfactory to
Mortgagee with standard noncontributory mortgagee clauses in favor of, and
acceptable to, Mortgagee. Such certificate of insurance (or renewal binder)
shall be accompanied by a written statement of Mortgagors certifying that the
insurance coverage evidenced thereby complies with the requirements of this
Article 8.
c. If Mortgagors shall be in default of its obligations to so
insure or deliver any such prepaid certificate or insurance or renewal binder
then Mortgagee, at Mortgagee's option (without obligation to do so) and without
prior notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and following notice from Mortgagee that such insurance
has been effected and paid for, Mortgagors shall pay to Mortgagee such premium
or premiums so paid by Mortgagee with interest from the time of payment at
Default Rate on demand, and the same shall be deemed added to the Secured
Obligations and shall be secured by this Junior Mortgage.
d. Each Mortgagor promptly shall comply with and conform to
(i) all provisions of each such insurance policy and (ii) all requirements of
the insurers thereunder applicable to Mortgagor or to any of its Mortgaged
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Mortgaged Property. If any
Mortgagor shall use any of the Mortgaged Property in any manner which would
permit the insurer to cancel any insurance policy, such Mortgagor immediately
shall obtain a substitute policy to be effective at or prior to the time of any
such cancellation.
e. If any Improvement on an Improved Parcel, or any portion
thereof, the value of which is $100,000 or less, shall be destroyed or damaged
by fire or any other casualty, whether insured or uninsured, and regardless of
any amount of proceeds of insurance which are available to Mortgagors, and
provided no Event of Default has occurred or is continuing, Mortgagors shall
elect whether to repair or replace such Improvement or any portion thereof;
provided, however, in the event Mortgagors elect not to repair or replace such
Improvement or portion thereof, the proceeds shall be applied by Mortgagee to
the Secured Obligations in whatever manner Mortgagee, in its sole discretion,
may determine. Mortgagors shall give immediate notice of any such destruction or
damage to Mortgagee who may make proof of loss if not promptly made by
Mortgagors and except as
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may otherwise be provided herein each insurance company concerned is hereby
authorized and directed to make payment for any loss directly to Mortgagee.
Mortgagee shall have the right, at its option, (but not the obligation) to
participate in the adjustment of any loss with any insurer or insurers. The
insurance proceeds or any part thereof received by Mortgagee, if paid as a
result of a damage or destruction in the amount of $100,000 or less, shall be
paid by Mortgagee to the affected Mortgagor so long as no Event of Default has
occurred or is continuing. The insurance proceeds or any part thereof received
by Mortgagee, if paid as a result of a damage or destruction in an amount
greater than $100,000, may be applied by Mortgagee toward reimbursement of all
costs and expenses of Mortgagee in collecting such proceeds, and the balance
shall be applied in the following order: (i) first, to the payment of any
Secured Obligations or any other amount secured hereby which has become due
prior to the date application of the insurance proceeds has been made and
remains unpaid; (ii) next, to the restoration and repair of the affected
Improvement pursuant to the provisions of Article 9 of this Junior Mortgage; and
(iii) finally, if conditions (i) and (ii) above have been satisfied and funds
remain, said balance shall be returned to the affected Mortgagor. The provisions
of this paragraph e shall be subject to the rights, if any, of the holder of the
Senior Mortgages.
f. The property insurance required by this Junior Mortgage
may be effected by blanket policies issued to Mortgagors covering the Mortgaged
Property and other properties (real and personal) owned or leased by Mortgagors,
provided that such policies otherwise comply with the provisions of this Junior
Mortgage and allocate with respect to the Mortgaged Property the coverage
specified form time to time, without possibility of reduction or coinsurance by
reason of, or damage to, any other property (real or personal) named therein,
and if the insurance required by this Junior Mortgage shall be effected by any
such blanket or umbrella policies, Mortgagors shall furnish to Mortgagee valid
certificates of insurance evidencing such policies, with schedules attached
thereto showing the amount of insurance afforded by such policies applicable to
the Mortgaged Property and a certification from Mortgagors to the effect that
such insurance coverage complies in all respects with the requirements of this
Junior Mortgage.
g. Any transfer of the Mortgaged Property by foreclosure or
deed in lieu of foreclosure shall transfer therewith all of the affected
Mortgagor's interest, including any unearned premiums, in all insurance policies
then in force covering the Mortgaged Property, subject to all of the terms and
conditions of such policies.
h. Following the occurrence of an Event of Default specified
in subsection (a) of Article 20 of this Junior Mortgage or upon any failure on
the part of Mortgagors to pay any insurance premiums as and when required to be
paid pursuant to this Junior Mortgage (subject to applicable grace periods),
Mortgagors, upon Mortgagee's request, shall thereafter pay to Mortgagee an
amount equal to one-twelfth of the estimated aggregate annual insurance premiums
on all policies of insurance required by this Junior Mortgage on a specified
date each month (unless the same is already being deposited with the holder of
the Senior Mortgages under the Senior Mortgages). Upon Mortgagee's request,
Mortgagors shall cause copies of all bills, statements or other documents
relating to the foregoing insurance premiums to be sent or mailed directly to
Mortgagee. Upon receipt of such bills, statements or other documents by
Mortgagee, and providing Mortgagors have deposited
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sufficient funds with Mortgagee pursuant to this Article 8, Mortgagee shall pay
such amounts as may be due thereunder out of the funds so deposited with
Mortgagee. If at any time and for any reason the funds deposited with Mortgagee
are or will be insufficient to pay such amounts as may be or subsequently are
due, Mortgagee shall notify Mortgagors and Mortgagors shall immediately deposit
an amount equal to such deficiency with Mortgagee. Notwithstanding the
foregoing, nothing contained herein shall cause Mortgagee to be deemed a trustee
of said funds or to be obligated to pay any amounts in excess of the amount of
funds deposited with Mortgagee pursuant to this Article 8. Should Mortgagors
fail to deposit with Mortgagee or the holder of the Senior Mortgages sums
sufficient to pay in full such insurance premiums at least thirty (30) days
before delinquency thereof, Mortgagee may, at Mortgagee's election, but without
any obligation so to do, advance any amounts required to make up the deficiency,
which advances, if any, with interest thereon at Default Rate, from the date of
advance thereof shall be secured hereby and shall be repaid to Mortgagee on
demand or at the option of Mortgagee the latter may, without making any advance
whatever, apply any sums held by it upon any obligation of Mortgagors secured
hereby.
i. Any provision of this Article 8 to the contrary
notwithstanding, so long as no Event of Default shall have occurred and be
continuing, Mortgagor shall have the right to receive the proceeds from any
business interruption and/or loss of rentals insurance policy.
9. RESTORATION.
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a. Funds in excess of $100,000 made available by Mortgagee to
Mortgagors for restoration of any of the Mortgaged Property pursuant to the
provisions of Article 8 hereof shall be disbursed by Mortgagor only in
accordance with the following conditions:
(i) prior to the commencement of restoration, the
contracts, contractors, architects, plans and specifications for the restoration
shall have been approved by the Consulting Professional (as such term is defined
in subsection (c) of this Article 9), and the Consulting Professional shall have
the right to require an acceptable surety bond insuring satisfactory completion
of the restoration;
(ii) at the time of any disbursement of the
restoration funds, (A) no Event of Default shall then exist, (B) no mechanics'
or materialmen's liens shall have been filed and remain undischarged, except
those bonded while being contested and those discharged by the disbursement of
the requested restoration funds and (C) a satisfactory continuation of title
insurance on the Real Estate shall be delivered to Mortgagee;
(iii) disbursements shall be made monthly in an amount
not exceeding the cost of the work completed since the last disbursement, upon
receipt of a certificate from an architect approved to do the plans and
specifications;
(iv) there shall, at all times, remain adequate
funds to complete the restoration so that the remaining amount of available
proceeds received from insurance and otherwise pursuant to paragraph (b) below
equals or exceeds the contracted cost of construction less the amount paid for
work that has been certified as having been completed;
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(v) such other reasonable conditions may be imposed
and as are customarily imposed by construction lenders for borrowers having a
similar financial position as then existing for the Mortgagors, including but
not limited to, the maintenance of a policy of builders risk insurance with
completed value and extended coverage endorsements and worker's compensation
coverage as shall be required by law; and
(vi) any restoration funds remaining after the
application thereof in accordance with the provisions hereof shall be disbursed
to the appropriate Mortgagor provided no Event of Default shall have occurred
and then be continuing.
b. Mortgagors shall pay the cost of the restoration to the
extent that it exceeds the amount of insurance proceeds or condemnation proceeds
awarded. Mortgagors (i) shall evidence to Mortgagee a source of funds to pay for
such restoration, and (ii) agree to use said funds to complete restoration of
the Improvements. Any sum so added by Mortgagors which remains in the
restoration fund upon completion of restoration shall be refunded to Mortgagors.
c. The administration of the restoration procedures set forth
in subsection (a) of this Article 9 shall be delegated by Mortgagee to, and
performed by, an independent bonded consulting professional experienced in the
administration of such procedures who shall be designated by the appropriate
Mortgagor and approved by Mortgagee (the "CONSULTING PROFESSIONAL"). The failure
by Mortgagee to approve or disapprove any Consulting Professional proposed by
any such Mortgagor within fifteen (15) Business Days following request for such
a approval shall be deemed approved by Mortgagee. All fees, costs and expenses
of such Consulting Professional shall be borne and timely paid by Mortgagors.
d. In the event of any fire or casualty where the cost of
repair and restoration of the Mortgaged Property does not exceed $100,000 as
determined by Mortgagors' insurance carrier for the Improvements, the proceeds
of insurance shall be collected and applied by Mortgagors (rather than disbursed
by Mortgagee).
e. In the event a Mortgagor receives any condemnation award
the actual proceeds of which do not exceed $100,000, such Mortgagor shall retain
such amount and use such amount to the extent necessary to repair and restore
the Mortgaged Property.
10. CONDEMNATION/EMINENT DOMAIN.
---------------------------
a. Immediately upon obtaining knowledge of the institution of
any proceedings of the condemnation of the Mortgaged Property, or any portion
thereof, the affected Mortgagor will notify Mortgagee of the pendency of such
proceedings. Mortgagee may (but shall not be obligated to) participate in any
such proceedings and such Mortgagor shall from time to time deliver to Mortgagee
all instruments requested by it to permit such participation. Such Mortgagor
shall, at its expense, diligently prosecute any such proceeding and shall
consult with Mortgagee, its attorneys and experts and cooperate with it in any
defense of any such proceedings. Except as otherwise expressly provided in
paragraph (e) of Article 9 above, all awards and proceeds of condemnation shall
be assigned to Mortgagee to
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be applied in the same manner as insurance proceeds, and each Mortgagor agrees
to execute any such assignments of all such awards as Mortgagee may request
(subject, however, to the rights of the holder of the Senior Mortgages).
b. After application of all awards and proceeds of
condemnation toward all practical repair and restoration of the Mortgaged
Property as directed by the Consulting Professional, any remaining funds shall
be applied as follows: (i) in the event that value and utility of the Mortgaged
Property shall have been substantially restored as determined by the Consulting
Professional, any remaining funds shall be returned to the appropriate
Mortgagor, or (ii) in the event the value and utility of the Mortgaged Property
shall not have been substantially restored as determined by the Consulting
Professional, any remaining funds shall, at the option of Mortgagee, be applied
in reduction of the Secured Obligations.
11. HOMESTEAD EXEMPTIONS. Each Mortgagor hereby represents and
declares that the Mortgaged Property forms no part of any property owned, used
or claimed by any Mortgagor as exempted from forced sale under the laws of the
State of Florida, and disclaims, waives and renounces all and every claim to
exemption under any homestead exemption law or other similar laws.
12. DISCHARGE OF LIENS, UTILITIES.
-----------------------------
a. No Mortgagor shall, without the prior written consent of
the Obligee, create, consent to or suffer the creation of any liens, charges or
encumbrances (each, a "PROHIBITED LIEN)" on any of the Mortgaged Property,
whether or not such Prohibited Lien is subordinate to this Junior Mortgage,
other than the Senior Mortgages, as permitted by the Secured Agreement and those
liens arising by operation of law which secure obligations not yet due and
payable, or fail to have any Prohibited Lien which may be imposed without
Mortgagors' consent discharged and satisfied of record within 10 days after it
is imposed, except those liens bonded while being contested. Each Mortgagor
shall pay prior to delinquency all lawful claims and demands of mechanics,
materialmen, laborers and others which, if unpaid, might result in, or permit
the creation of a Prohibited Lien, except that Mortgagors shall have the right
to contest such claims or demands, provided that Mortgagors shall furnish a good
and sufficient bond, surety or other security as requested by, and found
satisfactory to, Mortgagee.
b. Each Mortgagor shall pay prior to delinquency all utility
charges which are incurred by it for gas, electricity, water or sewer services
to its Mortgaged Property and all other assessments or charges of a similar
nature, whether public or private and whether or not such taxes, assessments or
charges are liens on the Mortgaged Property.
13. BOOKS AND RECORDS. Each Mortgagor shall at all times keep and
maintain or cause to be kept and maintained records and books of account with
respect to its Mortgaged Property.
14. ESTOPPEL CERTIFICATES. Mortgagee and each Mortgagor within 10
days following written request, shall deliver to the requesting party, a written
statement, duly acknowledged, setting forth (i) the amount of the Obligations,
and (ii) that there exist no
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offsets, claims, counterclaims or defenses against the Obligations or describe
in detail the nature of any such offset, claim, counterclaim or defense.
15. EXPENSES. Mortgagors shall pay, together with any interest or
penalties imposed in connection therewith, all expenses incident to the
preparation, execution, acknowledgement, delivery and/or recording of this
Junior Mortgage, including all filing registration or recording fees and all
federal, state, county and municipal, internal revenue or other stamp taxes and
other taxes duties, imposts, assessments and charges now or hereafter required
by the federal, state, county or municipal government.
16. MORTGAGEE'S COSTS AND EXPENSES. Upon the occurrence of any
Event of Default or the exercise by Mortgagee of any of Mortgagee's rights
hereunder, or if any action or proceeding be commenced, to which action or
proceeding Mortgagee is or becomes party or in which it becomes necessary to
defend or uphold the lien of this Junior Mortgage, or if the taking, holding or
servicing of this Junior Mortgage by Mortgagee is alleged to subject Mortgagee
to any civil fine, or if Mortgagee's review and approval of any document is
requested by Mortgagors or required by Mortgagee, all reasonable costs,
out-of-pocket expenses and fees incurred by Mortgagee in connection therewith
(including any civil fines and reasonable attorneys' fees and disbursements)
shall, on notice and demand, be paid by Mortgagors, together with interest
thereon from the date of disbursement until paid at the Default Rate and shall
be a lien on the Mortgaged Property and shall be secured by this Junior
Mortgage; and, in any action to foreclose this Junior Mortgage, or to recover or
collect the Secured Obligations, the provisions of this Article 16 with respect
to the recovery of costs, disbursements and allowances shall prevail unaffected
by the provisions of any law with respect to the same to the extent that the
provisions of this Article 16 are not inconsistent therewith or violative
thereof.
17. MORTGAGEE'S RIGHT TO PERFORM. If any Event of Default shall
have occurred hereunder and be continuing, Mortgagee, without waiving or
releasing any Mortgagor from any obligation or default under this Junior
Mortgage, may (but shall be under no obligation to), at any time perform the
same, and the cost thereof, with interest at Default Rate, shall immediately be
due from Mortgagors to Mortgagee, and the same shall be a lien on the Mortgaged
Property prior to any right, title to, interest in, or claim upon, the Mortgaged
Property attaching subsequent to the lien of this Junior Mortgage. No payment or
advance of money by Mortgagee under this Article 17 shall be deemed or construed
to cure Mortgagors' default or waive any right or remedy of Mortgagee hereunder.
18. FURTHER ASSURANCES. Mortgagors and Mortgagee agree, upon
demand of the other, to promptly correct any defect, error or omission which may
be discovered in the contents of this Junior Mortgage or in the execution or
acknowledgment hereof or in any other instrument executed in connection herewith
or in the execution or acknowledgment of such instrument, or do any act or
execute any additional documents (including, but not limited to, security
agreements on any Fixtures or personal property included or to be included in
the Mortgaged Property) as may be reasonably required by Mortgagee to confirm
the lien of this Junior Mortgage.
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19. ASSIGNMENT OF RENTS. All of the rents, royalties, issues,
profits, revenue, income and other benefits of the Mortgaged Property arising
from the use and enjoyment of all or any portion thereof or from any lease or
agreement pertaining thereto (the "RENTS AND PROFITS") are hereby absolutely and
unconditionally assigned, transferred, conveyed and set over to Mortgagee to be
applied by Mortgagee in payment of the principal and interest and all other sums
payable on the Instrument, and of all other sums payable under this Junior
Mortgage, subject, however, to the rights, if any, of the holder of the Senior
Mortgages. Until such time as an Event of Default shall have occurred,
Mortgagors shall collect and receive all Rents and Profits.
20. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an Event of Default by Mortgagors hereunder:
a. the occurrence of any Event of Default under the Secured
Agreement (whether or not any Obligations or other Secured Obligations shall be
at the time outstanding under the Secured Agreement, or the Instrument or the
Secured Agreement shall have terminated for other purposes) or the occurrence of
any Event of Default under the Certificate of Designation; or
b. a failure to make payment of any sums required to be paid
to Mortgagee other than the Obligations pursuant to the terms of this Junior
Mortgage within five days after the same shall become due hereunder; or
c. if any default shall occur in the performance of any
covenant contained in this Junior Mortgage not elsewhere specified in this
Article 20 which shall continue for thirty (30) days after notice from Mortgagee
or if such default cannot be cured in such 30- day period, such longer period as
shall be necessary to cure such default, provided that Mortgagor shall commence
curing such default within such 30-day period and thereafter shall prosecute
such cure diligently to completion; or
d. (i) if any Mortgagor shall commence any case, proceeding
or other action (a) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (b) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its assets, or any Mortgagor shall make a
general assignment for the benefit of its creditors, (ii) if there shall be
commenced against any Mortgagor 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 sixty (60) days, (iii) if there shall
be commenced against any Mortgagor any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof, (iv) if
any Mortgagor shall take any action in furtherance of, or indicating its consent
to, approval
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of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii)
above, (v) if any Mortgagor 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 any Mortgagor 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) any
Mortgagor shall cause to be reinstated the Reorganization Proceedings, as such
term is defined in the Secured Agreement; or
e. the occurrence of any default or event of default (and the
expiration of applicable grace periods) pursuant to any mortgage encumbering the
Mortgaged Property or any portion thereof, including, without limitation, the
Senior Mortgages, or pursuant to any note or other evidence of indebtedness
secured thereby.
21. DUE ON SALE. Except as otherwise expressly provided in the
Secured Agreement or Article 35 hereof, in the event that, without the prior
written consent of the Mortgagee, any Mortgagor shall, either directly or
indirectly, convey, grant, assign or transfer all or any portion of its right,
title or interest in the Mortgaged Property, whether legal or equitable, by
outright sale, deed, installment sale contract, land contract, contract for
deed, option, lease option, leasehold interest, contract, or any other method of
conveyance of real property interests, to any person or entity, then in any such
event, Mortgagee shall have the right, at its sole option, to declare the entire
Secured Obligations, immediately due and payable. The foregoing notwithstanding,
any Mortgagor shall have the right without Mortgagee's consent to sell worn and
obsolete Fixtures in conjunction with the replacement thereof in the ordinary
course of such Mortgagor's business where (x) such replacements are in quantity
and of quality not less than that of the Fixtures being sold when originally new
and (y) title to the replacement Fixtures is owned by such Mortgagor at the time
of such sale.
22. REMEDIES. Upon the occurrence of an Event of Default
hereunder, (y) if such event is an Event of Default specified in paragraph (d)
of Article 20 above, automatically the Secured Obligations and all amounts owing
under this Junior Mortgage shall immediately become due and payable, and (z) if
such event is an Event of Default other than those specified in paragraph (d) of
Article 20 above, Mortgagee may in Mortgagee's sole discretion declare the
Secured Obligations and all amounts owing under this Junior Mortgage to be
immediately due and payable without presentment, demand, protest or notice of
any kind, and Mortgagee may take such action, without notice or demand, as it
deems advisable to protect and enforce Mortgagee's rights in and to the
Mortgaged Property, including, but not limited to, the following actions:
a. (i) To the extent permitted by law, the Mortgagee
itself, or by such officers or agents as it may appoint, may enter and take
possession of all the Mortgaged Property and may exclude Mortgagors and their
agents and employees wholly therefrom and may have joint access with Mortgagors
to the books, papers and accounts of Mortgagors; and Mortgagors will pay monthly
in advance to Mortgagee, on Mortgagee's entry into possession, or to any
receiver appointed to collect the rents, income and other benefits of the
Mortgaged Property and the businesses conducted thereon or thereat, the fair and
reasonable rental value for the use and occupation of such part of the Mortgaged
Property as may be in possession of Mortgagors, and upon default in any such
payment will vacate and surrender
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possession of such part of the Mortgaged Property to Mortgagee or to such
receiver and, in default thereof, Mortgagors may be evicted by summary
proceedings or otherwise.
(ii) If Mortgagors shall for any reason fail to
surrender or deliver the Mortgaged Property or any part thereof after
Mortgagee's demand, Mortgagee may obtain a judgment or decree conferring on
Mortgagee the right to immediate possession or requiring Mortgagors to deliver
immediate possession of all or part of the Mortgaged Property to Mortgagee, to
the entry of which judgment or decree Mortgagors hereby specifically consent.
Mortgagors shall pay to Mortgagee, upon demand, all costs and expenses of
obtaining such judgment or decree and reasonable compensation to Mortgagee, its
attorneys and agents, and all such costs, expenses and compensation shall, until
paid, be secured by the lien of this Junior Mortgage.
(iii) Upon every such entering upon or taking of
possession, Mortgagee may hold, store, use, operate, manage and control the
Mortgaged Property and conduct the business thereof, and, from time to time:
(A) make all necessary and proper
maintenance, repairs, renewals, replacements, additions, betterments and
improvements thereto and thereon and purchase or otherwise acquire additional
fixtures, personal and other mortgaged property;
(B) insure or keep the Mortgaged Property
insured;
(C) manage and operate the Mortgaged Property
and exercise all the rights and powers of Mortgagors in its name or otherwise
with respect to the same; and
(D) enter into agreements with others to
exercise the powers herein granted Mortgagee, all as Mortgagee from time to time
may determine; and Mortgagee may collect and receive all the rents, income and
other benefits thereof, including those past due as well as those accruing
thereafter; and shall apply the monies so received by Mortgagee in such priority
as Mortgagee may determine to (1) the payment of interest, principal, and other
payments due and payable on the Instrument, or pursuant to this Junior Mortgage,
(2) the deposits for taxes and assessments and insurance premiums due, (3) the
cost of insurance, taxes, assessments and other proper charges upon the
Mortgaged Property or any part thereof, (4) any sums due and payable on any
approved prior encumbrance; and (5) the compensation, expenses and disbursements
of the agents, attorneys and other representatives of Mortgagee.
b. Institute an action of mortgage foreclosure, or take
action as the law may allow, at law or in equity, for enforcement of this Junior
Mortgage, and proceed there onto final judgment and execution of the entire
unpaid balance of the Instrument including costs of suit, interest and
reasonable attorneys' fees. In case of any sale of the Mortgaged Property by
virtue of judicial proceedings, the Mortgaged Property may be sold in one parcel
and as an entirety or in such parcels, manner or order as the Mortgagee, in its
sole discretion, may elect.
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c. Institute partial foreclosure proceedings with respect to
the portion of the Secured Obligations so in default, as if under a full
foreclosure, and without declaring the entire Secured Obligations due, PROVIDED
that if foreclosure sale is made because of default of a part of the Secured
Obligations, such sale may be made subject to the continuing lien of this Junior
Mortgage for the unmatured part of the Secured Obligations; and it is agreed
that such sale pursuant to a partial foreclosure, if so made, shall not in any
manner affect the unmatured part of this Junior Mortgage and the lien thereof
shall remain in full force and effect just as though no foreclosure sale had
been made under the provisions of this subsection. Notwithstanding the filing of
any partial foreclosure or entry of a decree of a sale therein, Mortgagee may
elect at any time prior to a foreclosure sale pursuant to such decree, to
discontinue such partial foreclosure and to accelerate the Secured Obligations
by reason of any uncured default or defaults upon which such partial foreclosure
was predicated or by reason of any other defaults, and proceed with full
foreclosure proceedings. It is further agreed that several foreclosure sales may
be made pursuant to partial foreclosures without exhausting the right of full or
partial foreclosure sale for any unmatured part of the Secured Obligations, it
being the purpose to provide for a partial foreclosure sale of any matured
portion of the Secured Obligations without exhausting the power to foreclose and
to sell the Mortgaged Property pursuant to any such partial foreclosure for any
other part of the Secured Obligations whether matured at the time or
subsequently maturing; and without exhausting any right of acceleration and full
foreclosure.
d. Appoint a receiver of the rents, issues and profits of the
Mortgaged Property and of the businesses conducted thereon and therefrom,
without the necessity of proving the depreciation or the inadequacy of the value
of the security or the insolvency of Mortgagors or any person who may be legally
or equitably liable to pay moneys secured hereby, and Mortgagors and each such
person waive such proof and hereby consent to the appointment of a receiver, to
enter upon and take possession of the Mortgaged Property and to collect all
rents, income and other benefits thereof and apply the same as the court may
direct and any such receiver shall be entitled to hold, store, use, operate,
manage and control the Mortgaged Property and conduct the business thereof as
would Mortgagee pursuant to paragraph a above. The expenses, including
receiver's fees, attorneys' fees, costs and agent's compensation, incurred
pursuant to the powers herein contained shall be secured by this Junior
Mortgage. The right to enter and take possession of, and to manage and operate,
the Mortgaged Property and to collect all rents, income and other benefits
thereof, whether by a receiver or otherwise, shall be cumulative to any other
right or remedy hereunder or afforded by law and may be exercised concurrently
therewith or independently thereof. Mortgagee shall be liable to account only
for such rents, income and other benefits actually received by the Mortgagee,
whether received pursuant to this paragraph or paragraph a above.
Notwithstanding the appointment of any receiver or other custodian, Mortgagee
shall be entitled as pledgee to the possession and control of any cash,
deposits, or instruments at the time held by, or payable or deliverable under
the terms of this Junior Mortgage to, Mortgagee.
e. Institute an action for specific performance of any
covenant contained herein or in aid of the execution of any power herein
granted.
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f. Apply on account of the unpaid Secured Obligations and the
interest thereon or on account of any arrearages of interest thereon, or on
account of any balance due to the Mortgagee after a foreclosure sale of the
Mortgaged Property, or any part thereof, any unexpended moneys still retained by
the Mortgagee that were paid by the Mortgagor to the Mortgagee pursuant to
Article 7(c) or Article 8(h) hereof.
g. Exercise any and all other rights and remedies granted
under this Junior Mortgage or now or hereafter existing in equity, at law, by
virtue of statue or otherwise.
23. DISCONTINUANCE OF PROCEEDINGS. If Mortgagee has proceeded to
enforce any right under the Instrument or this Junior Mortgage and such
proceedings have been discontinued or abandoned for any reason, then in every
such case, Mortgagors and Mortgagee will be restored to their former positions
and the rights, remedies and powers of Mortgagee will continue as if no such
proceedings had been taken.
24. SALE OF THE PROPERTIES; APPLICATION OF PROCEEDS. Subject to
the requirements of applicable law, the proceeds or avails of foreclosure sale
and all moneys received by Mortgagee pursuant to any right given or action taken
under the provisions of Article 22 of this Junior Mortgage, after taking into
account all moneys due to the holder of the Senior Mortgages, shall be applied
as follows:
First: To the payment of the costs and expenses of any such
sale or other enforcement proceedings in accordance with the terms hereof and of
any judicial proceeding wherein the same may be made, and in addition thereto,
all actual out-of-pocket expenses, advances, liabilities and sums made or
furnished or incurred by Mortgagee or the holder of the Instrument under this
Junior Mortgage including, without limitation, attorneys fees and costs, and
fees and costs incurred by other professionals and consultants retained by
Mortgagee, together with interest at the Default Rate (or such lesser amount as
may be the maximum amount permitted by law), and all taxes, assessments or other
charges in connection with such foreclosure, except any taxes, assessments or
other charges subject to which the Mortgaged Property shall have been sold;
Second: To the payment of the amount then due, owing or unpaid
upon the Instrument for principal and interest on such amount; and in case such
proceeds shall be insufficient to pay in full the whole amount so due and
unpaid, then first, to the payment of all amounts of interest at the time due
and payable on the Instrument, without preference or priority of any installment
of interest over any other installment of interest, and second, to the payment
of all amounts of principal without preference or priority of any amount of
principal over any other amount of principal, or any part of the Secured
Obligations over any other part of the Secured Obligations;
Third: To the payment of any other sums required to be paid
by Mortgagors pursuant to any provision of this Junior Mortgage;
Fourth: To the payment of all other Secured Obligations; and
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Fifth: With payment of the surplus, if any, to whomsoever may
be lawfully entitled to receive the same.
25. REMEDIES NOT EXCLUSIVE. Mortgagee shall be entitled to enforce
payment and performance of the Secured Obligations or any obligations secured
hereby and to exercise all rights and powers under this Junior Mortgage or other
agreement or any laws now or hereafter in force, notwithstanding some or all of
the Secured Obligations and obligations may now or hereafter be otherwise
secured, whether by mortgage, deed of trust, pledge, lien, assignment or
otherwise. Neither the acceptance of this Junior Mortgage nor its enforcement,
whether by court action or pursuant to the power of sale or the powers herein
contained, shall prejudice or in any manner affect Mortgagee's right to realize
upon or enforce any other security now or hereafter held by Mortgagee it being
agreed that Mortgagee shall be entitled to enforce this Junior Mortgage and any
other security now or hereafter held by Mortgagee in such order as it may in its
absolute discretion determine. No remedy herein conferred upon or reserved to
Mortgagee is intended to be exclusive of any other remedy given hereunder or now
or hereafter existing at law or in equity or by statute. Every power or remedy
given to Mortgagee or to which Mortgagee may be otherwise entitled, may be
exercised concurrently or independently, from time to time and as often as may
be deemed expedient by Mortgagee.
26. EXTENSION, RELEASE, ETC. Without affecting the lien or charge
of this Junior Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of all unpaid obligations,
Mortgagee may, subject to the Secured Agreement, from time to time and without
notice, agree to (i) extend the maturity or alter any of the terms of any such
obligation, (ii) grant other indulgences, (iii) release or reconvey, or cause to
be released or reconveyed at any time at Mortgagee's option any parcel, portion
or all of the Mortgaged Property, (iv) take or release any other or additional
security for any obligation herein mentioned, or (v) make compositions or other
arrangements with debtors in relation thereto.
27. WAIVER OF APPRAISEMENT, VALUATION. Each Mortgagor hereby
waives, to the full extent that it may lawfully do so, the benefit of all
appraisement, valuation, stay and extension laws now or hereafter in force and
all rights of marshalling of assets in the event of any sale of the Mortgaged
Property, any part thereof or any interest therein, and any court having
jurisdiction to foreclose the lien hereof may sell the Mortgaged Property (real
or personal, or both) as an entirety or in such parcels, lots, manner or order
as the Mortgagee in its sole discretion may elect.
28. SUCCESSOR MORTGAGOR. In the event ownership of the Mortgaged
Property or any portion thereof becomes vested in a person other than the
Mortgagors herein named, except as permitted by the Secured Agreement or Section
35 of this Junior Mortgage, Mortgagee may, without notice to the Mortgagors
herein named, whether or not Mortgagee has given written consent to such change
in ownership, deal with such successor or successors in interest with reference
to this Junior Mortgage and the Secured Obligations, and in the same manner as
with the Mortgagors herein named, without in any way vitiating or discharging
Mortgagors' liability hereunder or under the Secured Obligations.
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29. SECURITY AGREEMENT UNDER UNIFORM COMMERCIAL CODE. It is the
intention of the parties hereto that this Junior Mortgage shall constitute a
Security Agreement within the meaning of the Uniform Commercial Code.
Notwithstanding the filing of a financing statement covering any of the
Mortgaged Property in the records normally pertaining to personal property, all
of the Mortgaged Property, for all purposes and in all proceedings, legal or
equitable, shall be regarded, at Mortgagee's option (to the extent permitted by
law), as part of the Real Estate whether or not such item is physically attached
to the Real Estate or serial numbers are used for the better identification of
certain items. The mention in any such financing statement of any of the
Mortgaged Property shall never be construed as in any way derogating from or
impairing this declaration and hereby stated intention of the parties that such
mention in the financing statement is hereby declared to be for the protection
of Mortgagee in the event any court shall at any time hold that notice of
Mortgagee's priority of interest to be effective against any third party,
including the federal government and any authority or agency thereof, must be
filed in the Uniform Commercial Code records. Pursuant to the provision of the
Uniform Commercial Code, each Mortgagor hereby authorizes Mortgagee, without the
signature of such Mortgagor, to execute and file financing and continuation
statements if Mortgagee shall determine, in its sole discretion, that such are
necessary or advisable in order to perfect its security interest in the Fixtures
covered by this Junior Mortgage, and Mortgagors shall pay to Mortgagee, on
demand, any reasonable out-of-pocket expenses incurred by Mortgagee in
connection with the preparation, execution, and filing of such statements that
may be filed by Mortgagee.
30. INDEMNIFICATION; WAIVER OF CLAIM.
--------------------------------
a. If Mortgagee is made a party to any litigation, mediation,
arbitration, administrative or bankruptcy proceedings or appeals therefrom
concerning this Junior Mortgage or the Mortgaged Property or any part thereof or
interest therein, or the occupancy thereof by Mortgagors, then Mortgagors shall
indemnify, defend and hold Mortgagee harmless from all liability by reason of
said action other than that arising solely from Mortgagee's own willful
misconduct or gross negligence, including reasonable attorneys' fees and
paralegals' fees and reasonable out-of-pocket expenses incurred by Mortgagee in
any such action, whether or not any such action is prosecuted to judgment,
including, without limitation reasonable attorneys' fees and paralegals' fees
and reasonable out-of-pocket expenses incurred in connection with any such
action. If Mortgagee commences an action against Mortgagors to enforce any of
the terms hereof or because of the breach by a Mortgagor of any of the terms
hereof, or for the recovery of any sum secured hereby, such Mortgagor shall pay
to Mortgagee reasonable attorneys' fees and paralegals' fees and reasonable
out-of-pocket expenses, including, without limitation reasonable attorneys' fees
and paralegals' fees and reasonable out-of-pocket expenses incurred in
connection with any litigation, mediation, arbitration, administrative or
bankruptcy proceedings and any appeals therefrom, together with interest thereon
at the rate provided in the Instrument from the date the same are paid by
Mortgagee to the date of reimbursement by such Mortgagor, and the right to such
reasonable attorneys' fees and paralegals' fees and reasonable out-of-pocket
expenses shall be deemed to have accrued on the commencement of such action, and
shall be enforceable whether or not such action is prosecuted to judgment. If an
Event of Default shall have occurred, Mortgagee may engage an attorney or
attorneys to protect its rights hereunder, and in the event of such engagement,
Mortgagors shall pay Mortgagee reasonable
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attorneys' fees and paralegals' fees and reasonable out-of-pocket expenses
incurred by Mortgagee, whether or not an action is actually commenced against
Mortgagors by reason of breach, including, without limitation reasonable
attorneys' and paralegals' fees and reasonable out-of-pocket expenses incurred
in connection with any litigation, mediation, arbitration, administrative or
bankruptcy proceedings and any appeals therefrom.
b. Mortgagors waive any and all right to claim or recover
against Mortgagee, its officers, employees, agents and representative, for loss
of or damage to Mortgagors, the Mortgaged Property, any Mortgagor's property or
the property of others under any Mortgagor's control from any cause whatsoever,
except for the willful misconduct or gross negligence of Mortgagee, its
officers, employees, agent or representatives.
c. The obligations of Mortgagors in this Article 30 hereof
shall survive satisfaction of this Junior Mortgage and the discharge of
Mortgagors' other obligations under this Junior Mortgage, the Secured Agreement
and the other Secured Instrument Documents.
31. NO WAIVERS, ETC. Any failure by Mortgagee to insist upon the
strict performance by Mortgagors of any of the terms and provisions of this
Junior Mortgage shall not be deemed to be a waiver of any of the terms and
provisions hereof, and Mortgagee, notwithstanding any such failure, shall have
the right thereafter to insist upon the strict performance by Mortgagors of any
and all of the terms and provisions of this Junior Mortgage to be performed by
Mortgagors; Mortgagee may release, regardless of consideration and without the
necessity for any notice to, or consent by, the holder of any subordinate lien
on the Mortgaged Property, any part of the security held for the obligations
secured by this Junior Mortgage without, as to the remainder of the security, in
anywise impairing or affecting the lien of this Junior Mortgage or the priority
of such a lien over any subordinate lien. Mortgagee may resort for the payment
of the Secured Obligations secured by this Junior Mortgage to any other security
therefor held by Mortgagee in such order and manner as Mortgagee may elect.
32. WAIVERS BY MORTGAGORS. Upon the happening and continuation of
an Event of Default hereunder, each Mortgagor hereby waives, to the extent
permitted by applicable law, all errors and imperfections in any proceedings
instituted by Mortgagee under this Junior Mortgage and all notices of any Event
of Default (except as may be provided for under the terms hereof or of the
Secured Agreement) or of Mortgagee's election to exercise or its actual exercise
of any right, remedy or recourse provided for under this Junior Mortgage and
Mortgagors shall not at any time insist upon or plead, or in any manner whatever
claim or take any benefit or advantage of, any present or future statute, law,
regulation or judicial decision which (a) exempts any of the Mortgaged Property
or any other property, real or personal, or any part of the proceeds arising
from any sale thereof from attachment, levy or sale under execution, (b)
provides for any stay of execution, moratorium, marshalling of assets, exemption
from civil process, redemption, extension of time for payment or valuation or
appraisement of any of the Mortgaged Property, or (c) conflicts with any
provision, covenant or term of this Junior Mortgage.
33. SURRENDER. Upon the occurrence of any Event of Default and
pending the exercise by Mortgagee or its agents or attorneys of its right to
exclude Mortgagors from all
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or any part of the Mortgaged Property, each Mortgagor agrees to vacate and
surrender possession of the Mortgaged Property to Mortgagee or to a receiver, if
any, and in default thereof may be evicted by any summary action or proceeding
for the recovery of possession of premises for nonpayment of rent, however
designated.
34. NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing, and unless
otherwise expressly provided herein, shall be considered to have been duly given
or made when received by receipted hand delivery, or by facsimile or telecopy
transmission, receipt confirmed, addressed as follows, or to such other address
as may be hereafter notified by the respective parties thereto:
The Mortgagors: Atlantic Gulf Communities Corporation
2601 South Bayshore Drive
Miami, Florida 33133-5461
Attention: John H. Fischer
Vice President
Telecopy: (305) 859-4623
Copy to: Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Matthew B. Gorson, Esq.
The Mortgagee: Foothill Capital Corporation
11111 Santa Monica Blvd., Suite 1500
Los Angeles, CA 90025-3333
Attn: Benjamin W. Silver
Telecopy: (310) 479-2690
Copy to: Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: Rick Koenigsberger
Telecopy: (212) 459-3301
Copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Philip Mindlin, Esq.
Telecopy: (212) 403-2000
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Copy to: Carlton, Fields, Ward, Emmanuel, Smith
& Cutler, P.A.
Post Office Box 3239
Tampa, Florida 33601
Attn: Paula McDonald Rhodes, Esq.
Telecopy: (813) 229-4133
Copy to: Annis, Mitchell, Cockey, Edwards &
Roehn, P.A.
201 North Florida Avenue, Suite 2100
Tampa, Florida 33602
Attn: Stephen J. Szabo, III, Esquire
Telecopy: (813/223-9067
provided, that any notice, request or demand to or upon any Mortgagor pursuant
to Article 20 shall be effective two (2) days after being deposited in the mail,
postage prepaid, PROVIDED FURTHER, that in the case at any such notice, request
or demand to or upon Mortgagors pursuant to Article 20, Mortgagee shall use its
best efforts to notify the Mortgagors concurrently with any notice by mail, by
telecopy transmission or hand delivery, it being agreed that the failure to give
any such notice, request or demand by telecopy transmission shall not have any
adverse effect upon the effectiveness of any such notice, request or demand
given by mail.
35. PARTIAL RELEASES. Mortgagee shall release parcels of the
Mortgaged Property or otherwise subordinate this Junior Mortgage upon the terms
and conditions set forth in the Secured Agreement and whenever required pursuant
to the Intercreditor Agreement (as defined in Article 53). The Mortgagee shall
execute such partial releases, in form and substance satisfactory to Mortgagee,
prepared by Mortgagors at their expense. Parcels to be released need not be
contiguous to any of the parcels previously released from this Junior Mortgage.
Mortgagee agrees that notwithstanding anything to the contrary contained herein,
the lien of this Junior Mortgage is subordinate and inferior to the contract
rights of any purchaser of any lot in which the subject property has been
platted, and Mortgagee shall release any such lot from the lien and operation of
this Junior Mortgage upon the sole condition that such purchaser has complied
with the terms and provisions of his purchase agreement with Mortgagor.
Mortgagee further agrees that in the event of default by Mortgagor, the
aforesaid provisions of this Article 35 shall survive the final judgment in the
event this Junior Mortgage is foreclosed and shall be binding on any purchaser
in a foreclosure sale. Such releases from the lien hereof shall not affect the
lien hereby granted as to the remainder of the Mortgaged Property.
36. REACQUISITION OF RELEASED LOTS. The lien of this Junior
Mortgage shall encumber, and the Mortgaged Property shall include, any and all
portions of the Mortgaged Property which may hereafter be released from the lien
hereof in connection with the sale of lots by Mortgagors ("RELEASED LOTS") if
such Released Lots are reacquired by Mortgagors at any time prior to the
satisfaction of this Junior Mortgage in full.
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37. DEVELOPMENT MATTERS. To the extent required by applicable law,
the Mortgagee, without incurring any obligation to file or record any
documentation and at Mortgagors' cost and expense, shall join in the execution
of subdivision plats, easements and declarations covering all or any part of the
Mortgaged Property and other documents with respect to which Mortgagee's joinder
is necessary for the development of the Mortgaged Property as contemplated in
the Business Plan, PROVIDED that such subdivision plats, easements, declarations
and other documents are in form and substance reasonably satisfactory to
Mortgagee and Mortgagors shall have complied in all respects with all applicable
provisions of law with respect thereto.
38. COUNTERPARTS. This Junior Mortgage is being executed in
multiple counterparts, all of which shall for all purposes constitute one
agreement binding on all the parties hereto, in order to permit its being
recorded concurrently in all of the counties in which the Mortgaged Property is
located.
39. FUTURE ADVANCES. This Junior Mortgage shall secure not only
the Secured Obligations described hereinabove, but also such future or
additional advances as may be made by Obligee (including its successors and
assigns) from time to time, whether obligatory or at its option, for any
purpose, provided that all those advances are to be made within 20 years from
the date of this Junior Mortgage or within such lesser period of time as may be
provided hereafter by law as a prerequisite for the sufficiency and actual
notice or record notice of the optional future or additional advances as against
the rights of creditors or subsequent purchases for valuable consideration. The
total amount of the Secured Obligations secured by this Junior Mortgage may
decrease or increase from time to time but the total unpaid indebtedness
(exclusive of any interest and expenses included as part of the Secured
Obligations) as secured at any one time by this Junior Mortgage shall not exceed
the maximum principal amount of ONE HUNDRED MILLION AND NO/100 DOLLARS
($100,000,000.00), plus interest, and any disbursements made for the payment of
taxes, levies, or insurance on the property covered by the lien of this Junior
Mortgage with interest on those disbursements. It shall be a default hereunder
if Mortgagors shall file for record a notice limiting the maximum principal
amount which may be secured by this Junior Mortgage if the effect of the filing
of such notice would in any way prohibit Mortgagee from making future advances
to be secured by this Junior Mortgage in the full amount hereinabove set forth.
40. TAXES ON MORTGAGEE.
------------------
a. If any Governmental Authority shall levy, assess, or
charge any tax, assessment or imposition upon this Junior Mortgage, the Secured
Obligations, the interest of Mortgagee in the Mortgaged Property, or Mortgagee
by reason of or as holder of any of the foregoing, Mortgagors shall pay (or
provide funds to Mortgagee for such payment), to the extent required in the
Secured Agreement, all such taxes, assessment and impositions to, for, or on
account of Mortgagee (other than federal, state or local income taxes of
Mortgagee or franchise taxes imposed on the Mortgagee or the holder of the
Instrument assessed other than on the basis of Mortgagee's or such holder's
holding this Junior Mortgage) as they become due and payable and on demand shall
furnish proof of such payment to Mortgagee. In the event of passage of any law
or regulation permitting, authorizing or requiring the tax,
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assessment or imposition to be levied, assessed or charged, which law or
regulation prohibits Mortgagor from paying the tax, assessment or imposition to
or for Mortgagee (and from providing funds to the Mortgagee to pay any such tax,
assessment or imposition), or which shall make such payment by Mortgagor result
in the imposition of interest exceeding the maximum permitted by law, then,
unless the affected portion of the Mortgaged Property is released from the lien
of this Junior Mortgage pursuant to the terms hereof and of the Secured
Agreement, Mortgagee may declare the Secured Obligations secured hereby
immediately due and payable.
b. In the event of the passage after the date of this Junior
Mortgage of any law of the jurisdiction in which the Real Estate is located
deducting from the value of the Real Estate for the purposes of taxation any
lien thereon or changing in any way the laws for the taxation of mortgages or
debts secured by mortgages for state or local purposes or the manner of the
collection of any such taxes and imposing a tax, either directly or indirectly,
on this Junior Mortgage or any Secured Instrument Document, as defined in the
Secured Agreement, Mortgagee shall have the right to declare all sums
outstanding secured by this Junior Mortgage immediately due and payable,
provided, however, that such election shall be ineffective if (i) the affected
Mortgagor is exempt from such tax or, if not exempt from such tax, is permitted
by law to pay the whole of such tax (or to provide funds to Mortgagee to pay
such taxes) in addition to all other payments required hereunder and if
Mortgagor pays such tax (or provides funds to Mortgagee to pay such tax) when
the same is due and payable and agrees in writing to pay such tax when the same
is due and payable and agrees in writing to pay such tax when thereafter levied
or assessed against the Real Estate; or (ii) the affected portion of the
Mortgaged Property is released from the lien of this Junior Mortgage in
accordance with the terms hereof and of the Secured Agreement.
41. SENIOR MORTGAGES. This Junior Mortgage is subject and
subordinate to those certain mortgages described in SCHEDULE 1 attached hereto
and hereby made a part hereof ("SENIOR MORTGAGES").
42. PRIOR JUNIOR MORTGAGES; NOTICES. Mortgagors agree to
forward to Mortgagee copies of all correspondence to or from the holder of the
Senior Mortgages, and all other prior or subordinate mortgages promptly after
mailing or receiving same, either constituting notices of a material default
thereunder, or relating to payment of principal and/or interest in respect of
all prior or subordinate mortgages.
43. NO MODIFICATION; BINDING OBLIGATIONS. This Junior Mortgage
may not be modified, amended, discharged or waived in whole or in part except by
an agreement in writing signed by the party against whom enforcement of any such
modification, amendment, discharge or waiver is sought. The covenants of this
Junior Mortgage shall run with the land and bind Mortgagors, the heirs,
distributees, personal representatives, successors and assigns of Mortgagors,
and all present and subsequent encumbrancers, lessees and sublessees of any of
the Mortgaged Property, and shall inure to the benefit of Mortgagee and its
successors, assigns and endorsees.
44. MISCELLANEOUS. As used in this Junior Mortgage, the
singular shall include the plural as the context requires and the following
words and phrases shall have the following
30
<PAGE>
meanings: (a) "including" shall mean "including but not limited to"; (b)
"provisions" shall mean "provisions, terms, covenants and/or conditions"; (c)
"lien" shall mean "lien, charge, encumbrance, security interest, mortgage and/or
deed of trust"; (d) "obligation" shall mean "obligation, duty, covenant and/or
condition"; and (e) "any of the Mortgaged Property" shall mean "the Mortgaged
Property or any part thereof or interest therein." Capitalized terms not defined
herein shall have the meanings give them in the Secured Agreement. Any act which
Mortgagee is permitted to perform hereunder may be performed at any time and
from time to time by Mortgagee or any person or entity designated by Mortgagee.
Any act which is prohibited to Mortgagors hereunder is also prohibited to all
lessees of any of the Mortgaged Property. Each appointment of Mortgagee as
attorney-in-fact for Mortgagors under the Mortgage is irrevocable and coupled
with an interest.
45. CAPTIONS. The captions or headings at the beginning of
each Article hereof are for the convenience of the parties and are not a part of
this Junior Mortgage.
46. SUCCESSORS AND ASSIGNS. The covenants contained herein
shall run with the land and bind each Mortgagor, its successors and assigns, and
all subsequent owners, encumbrances and tenants of the Mortgaged Property, and
shall inure to the benefit of the Mortgagee.
47. ENFORCEABILITY. The validity and enforceability of this
Junior Mortgage shall be construed and interpreted according to the laws of the
State of Florida; provided, however, that nothing in this Section shall be
construed to affect in any way the intent of the parties that the Instrument and
the Secured Agreement, and the rights and obligations of the parties thereto and
thereunder, shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York where the Instrument, this Junior
Mortgage, the Secured Agreement and the other Secured Instrument Documents (as
defined in the Secured Agreement) were negotiated and the payment of amounts due
in respect of the Secured Obligations shall be made and rendered to Mortgagee.
48. SEVERABILITY. Whenever possible, each provision of this
Junior Mortgage shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Junior Mortgage shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Junior Mortgage.
49. AUTHORITY OF MORTGAGEE. The rights and responsibilities of
Mortgagee under this Junior Mortgage with respect to any action taken by
Mortgagee or the exercise or non-exercise by Mortgagee of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Junior Mortgage shall, as among Mortgagee and the Obligee,
be governed by the Secured Agreement, and by such other agreements with respect
thereto as may exist from time to time among them, but, as among Mortgagee and
Mortgagors, Mortgagee shall be conclusively presumed to be acting as agent for
the holder of the Instrument with full and valid authority so to act or refrain
from acting, and Mortgagors shall not be under any obligation, or entitlement,
to make any inquiry respecting such authority.
31
<PAGE>
50. RECEIPT OF COPY. Each Mortgagor acknowledges that it has
received a true copy of this Junior Mortgage.
51. JOINT AND SEVERAL OBLIGATIONS. The obligations,
liabilities and agreements of the Mortgagors hereunder shall be joint and
several.
52. SUBORDINATION AND ADDITIONAL PARTIAL RELEASE OF MORTGAGE
LIENS. Mortgagee shall release or subordinate parcels of the Mortgaged Property
from the lien of this Junior Mortgage upon the terms and conditions set forth in
the Secured Agreement pursuant to partial releases or subordinations, in form
and substance satisfactory to Mortgagee, prepared by Mortgagors at their
expense.
53. INTERCREDITOR AGREEMENT. All of the Mortgaged Property is
subject to other mortgages given to other lenders. The relative priority of the
mortgages is governed by the terms and provisions of that certain Intercreditor
Agreement ("INTERCREDITOR AGREEMENT") dated of even date herewith, pursuant to
the terms of which Obligee has agreed to permit, and consents to, the placing of
the mortgage liens upon the Land and all Improvements, Fixtures and tangible
personal property located thereon or used in connection therewith to secure
certain obligations of the Company as more particularly described in, and
subject to the terms and conditions of, the Intercreditor Agreement. The terms
of this Junior Mortgage are subject to the terms and provisions of the
Intercreditor Agreement.
IN WITNESS WHEREOF, Mortgagors have executed this Junior Mortgage and
Security Agreement as of the date first set forth above.
Witnesses: MORTGAGORS:
ATLANTIC GULF COMMUNITIES
CORPORATION, a Delaware corporation
- -----------------------------------
Signature (Corporate Seal)
- -----------------------------------
Printed Name
By:
-----------------------------------
John H. Fischer
- ----------------------------------- Vice President
Signature
- -----------------------------------
Printed Name Address:
2601 South Bayshore Drive
Miami, Florida 33133-5461
32
<PAGE>
ENVIRONMENTAL QUALITY
LABORATORY, INCORPORATED, a
Florida corporation
- -----------------------------------
Signature (Corporate Seal)
- -----------------------------------
Printed Name
By:
-----------------------------------
John H. Fischer
- ----------------------------------- Vice President
Signature
- -----------------------------------
Printed Name Address:
2601 South Bayshore Drive
Miami, Florida 33133-5461
GENERAL DEVELOPMENT
UTILITIES, INC., a Florida corporation
- -----------------------------------
Signature (Corporate Seal)
- -----------------------------------
Printed Name
By:
-----------------------------------
John H. Fischer
- ----------------------------------- Vice President
Signature
- -----------------------------------
Printed Name Address:
2601 South Bayshore Drive
Miami, Florida 33133-5461
FIVE STAR HOMES, INC., a Florida
corporation
- -----------------------------------
Signature (Corporate Seal)
- -----------------------------------
Printed Name
By:
-----------------------------------
John H. Fischer
- ----------------------------------- Vice President
Signature
- -----------------------------------
Printed Name Address:
2601 South Bayshore Drive
Miami, Florida 33133-5461
33
<PAGE>
ATLANTIC GULF OF TAMPA, INC.,
a Florida corporation
- -----------------------------------
Signature (Corporate Seal)
- -----------------------------------
Printed Name
By:
-----------------------------------
John H. Fischer
- ----------------------------------- Vice President
Signature
- -----------------------------------
Printed Name Address:
2601 South Bayshore Drive
Miami, Florida 33133-5461
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this ___ day of
June, 1997, by John H. Fischer, as Vice President of Atlantic Gulf Communities
Corporation, a Delaware corporation, f/k/a General Development Corporation, on
behalf of the corporation, who is personally known to me or has produced a
Florida driver's license number F260-468- 57-430-0 as identification.
---------------------------------
NOTARY PUBLIC
Name:
----------------------------
Serial #:
------------------------
My Commission Expires:
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this ___ day of
June, 1997, by John H. Fischer, as Vice President of Environmental Quality
Laboratory, Incorporated, a Florida corporation, on behalf of the corporation,
who is personally known to me or has produced a Florida driver's license number
F260-468-57-430-0 as identification.
---------------------------------
NOTARY PUBLIC
Name:
----------------------------
Serial #:
------------------------
My Commission Expires:
34
<PAGE>
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this ___ day of
June, 1997, by John H. Fischer, as Vice President of General Development
Utilities, Inc., a Florida corporation, on behalf of the corporation, who is
personally known to me or has produced a Florida driver's license number
F260-468-57-430-0 as identification.
---------------------------------
NOTARY PUBLIC
Name:
----------------------------
Serial #:
------------------------
My Commission Expires:
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this ___ day of
June, 1997, by John H. Fischer, as Vice President of Five Star Homes, Inc., a
Florida corporation, on behalf of the corporation, who is personally known to me
or has produced a Florida driver's license number F260-468-57-430-0 as
identification.
---------------------------------
NOTARY PUBLIC
Name:
----------------------------
Serial #:
------------------------
My Commission Expires:
STATE OF FLORIDA
COUNTY OF HILLSBOROUGH
The foregoing instrument was acknowledged before me this ___ day of
June, 1997, by John H. Fischer, as Vice President of Atlantic Gulf of Tampa,
Inc., a Florida corporation, behalf of the corporation, who is personally known
to me or has produced a Florida driver's license number F260-468-57-430-0 as
identification.
---------------------------------
NOTARY PUBLIC
Name:
----------------------------
Serial #:
------------------------
My Commission Expires:
35
<PAGE>
EXHIBIT A
---------
(Land)
36
<PAGE>
SCHEDULE "1"
------------
37
JUNIOR PERSONAL PROPERTY SECURITY AGREEMENT
THIS JUNIOR PERSONAL PROPERTY SECURITY AGREEMENT (the
"SECURITY AGREEMENT") is made effective as of June 23, 1997, and is entered into
by ATLANTIC GULF COMMUNITIES CORPORATION, a Delaware corporation ("COMPANY"),
and each of the undersigned Subsidiaries of Company (the "SUBSIDIARY GRANTORS;"
the Company and the Subsidiary Grantors each individually a "GRANTOR" and
collectively, the "GRANTORS"), in favor of FOOTHILL CAPITAL CORPORATION, a
California corporation, as collateral agent (in such capacity herein called
"COLLATERAL AGENT"), for AP-AGC, LLC, a Delaware limited liability company
("OBLIGEE").
R E C I T A L S
---------------
WHEREAS, Company, Obligee and Collateral Agent are parties to that
certain Secured Agreement dated February 7, 1997, and amended and restated as of
May 15, 1997 (as hereafter amended, supplemented or otherwise modified from time
to time, the "SECURED AGREEMENT"; capitalized terms used herein without
definition shall have the meanings given such terms in the Secured Agreement);
WHEREAS, Company, Grantors and Obligee are parties to that certain
Investment Agreement dated February 7, 1997, amended as of March 20, 1997, and
amended and restated as of May 15, 1997 (as hereafter amended, supplemented or
otherwise modified from time to time, the "INVESTMENT AGREEMENT");
WHEREAS, Company and Obligee are parties to that certain Due Diligence
Fee Agreement dated of even date herewith (as hereafter amended, supplemented or
otherwise modified from time to time, the "FEE AGREEMENT");
WHEREAS, it is a condition precedent to Obligee entering into the
Secured Agreement, the Investment Agreement, the Fee Agreement and all other
Secured Instrument Documents and investing capital thereunder that the Grantors
herein execute and deliver this Security Agreement, and the Grantors desire to
enter into this Security Agreement.
NOW, THEREFORE, in consideration of the premises set forth herein and
in order to induce Obligee to enter into the Secured Agreement, the Investment
Agreement, the Fee Agreement and all other Secured Instrument Documents, the
Grantors hereby agree as follows:
SECTION 1. DEFINED TERMS. The following terms shall have the following
meanings:
"AG ASIA" means Atlantic Gulf Asia Holdings N.V., a
Netherlands Antilles corporation.
<PAGE>
"BANK ACCOUNTS" means any and all deposit accounts, money
market accounts and any other deposits and investments of Grantors 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 Grantors in all escrow, restricted,
custodial and fiduciary accounts the pledge of which by Grantors is
prohibited by agreements existing as of the date hereof or by law, as
set forth in Schedule 7.17 to the Secured Agreement and hereby made a
part hereof (which may be amended from time to time by written notice
to Collateral Agent and Obligee to include other restricted accounts)).
"CAPITAL STOCK" means any and all shares, interests, or other
equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"CLAIMS DISBURSEMENT ACCOUNT" means the segregated account
established for purposes of holding funds borrowed to pay
Administrative Claims, Priority Claims, and Convenience Claims pursuant
to SECTION 3.2.4 and 8.1.1 of the Reorganization Plan.
"COLLATERAL" has the meaning assigned such term in SECTION 2
of this Agreement.
"COMMERCIAL RECEIVABLES" means all promissory notes and
mortgages and deeds of trust payable to, or held by, Grantors, 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 (as defined in the
Secured Agreement) or arising from the sale of other Real Property and
all cash and non-cash proceeds thereof.
"CONDEMNATION AWARDS" means any and all proceeds (including,
without limitation, 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 any Grantor 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, without limitation, any awards and/or other
compensation awarded to any Grantor whether as a result of litigation,
arbitration, settlement or otherwise, or (b) any sale by any Grantor of
a water and utility system to a Person, whether now owned or hereafter
created or acquired.
2
<PAGE>
"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
interest 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 real estate taxes on the lots subject to the respective
Homesite Contracts Receivable giving rise to such payments, and (e) the
Trust Property.
"HOMESITE CONTRACTS RECEIVABLE" means all contracts for deed,
unsecured promissory notes, and other agreements, currently existing or
hereafter created or acquired, pursuant to which any Grantor 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 such term in
Article I of the Reorganization Plan.
"INTELLECTUAL PROPERTY" means all now existing or hereafter
created or acquired trademarks, trade names, copyrights, technology,
know-how and processes necessary for the conduct of any Grantor's
business, and any and all licenses to use any of the foregoing.
"INVESTMENTS" means any and all promissory notes, Capital
Stock (other than Subsidiary Stock), bonds, debentures and securities,
held by Grantors, whether now owned or hereafter acquired.
"PERSONAL PROPERTY" means the following personal property of
Grantors:
(a) the Bank Accounts;
(b) the Investments;
(c) any and all accounts, contract rights,
chattel paper, instruments and documents, including, without
limitation, 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
3
<PAGE>
description, whether now owned or hereafter acquired, and
wherever located, and all parts, accessories and special tools
and replacements therefor (collectively, "EQUIPMENT");
(e) any and all general intangibles, whether now
owned or hereafter created or acquired, including, without
limitation, 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, without limitation, (i) the
interests, if any, of any Grantor 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 proceeds or choses in action with respect to, or
rights to receive proceeds from, any condemnation of any Real
Property or Personal Property of any Grantor, 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, without limitation, 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 (collectively, "INVENTORY");
(g) all monies, cash, residues and property of
any kind, now or at any time hereafter in the possession or
under the control of Collateral Agent or Obligee or any agent
or bailee of Collateral Agent or Obligee;
(h) all Homesite Contracts Receivable and
Commercial Receivables;
(i) all accessions to, all substitutions for,
and all replacements, products and proceeds of, the foregoing,
including, without limitation, 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, collection or any other temporary or
permanent disposition of such items or any interest therein
whether or not they constitute "PROCEEDS" as defined in the
Code; and
4
<PAGE>
(j) all books, records, documents and ledger
receipts pertaining to any of the foregoing, including,
without limitation, 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.
"REAL PROPERTY" means any and all real property and fixtures
and interests in real property and fixtures now owned or hereafter
acquired by any Grantor.
"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.
"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. 90-12234-BKC-AJC), Five Star Homes Group,
Inc. (Case No. 90-12235-BKC-AJC), Five Star Homes, Inc. (Case No.
90-12338-BKC-AJC), GDV Financial Corporation (Case No. 90-12236--
BKC-AJC) and Environmental Quality Laboratory, Incorporated (Case No.
90-12237-BKC-AJC).
"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,
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, 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.
5
<PAGE>
"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 a 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 STOCK" means the Capital Stock of any and all
Subsidiaries.
"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. 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, as subsequently amended.
SECTION 2. GRANT OF SECURITY. (a) Each Grantor, in order to secure the
Secured Obligations (as defined in SECTION 3), hereby assigns and pledges to
Collateral Agent for benefit of Obligee and hereby grants to Collateral Agent
for the benefit of Obligee a junior security interest, subject to Permitted
Liens (as hereinafter defined in SECTION 5(c) hereof), in all of the Grantor's
right, title and interest in and to the following, in each case whether now or
hereafter existing or in which the Grantor now has or hereafter acquires an
interest and wherever the same may be located and all proceeds thereof (the
"COLLATERAL"):
(i) All of the Personal Property (other than the Excluded
Property); and
(ii) All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance
(whether or not Collateral Agent or Obligee is the loss payee thereof),
or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the
6
<PAGE>
foregoing Collateral. For purposes of this Agreement, the term
"proceeds" includes whatever is receivable or received when Collateral
or proceeds are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes,
without limitation, all rights to payment, including returned premiums,
with respect to any insurance relating thereto.
(b) At such time as any Personal Property comprising Excluded Property
is freed of contractual or legal restrictions against becoming subject to a Lien
to secure the Secured Obligations, such Excluded Property shall, automatically,
become subject to the Lien hereof, 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.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Collateral is collateral security for, (a) after the issuance of the Preferred
Stock, the joint and several obligations of the Company, the Grantors and other
subsidiaries of the Company pursuant to SECTION 8 of the Certificate of
Designation to repurchase Preferred Stock on the happening of certain conditions
set forth in the Certificate of Designation at a repurchase price equal to the
Liquidation Preference in respect thereof, as defined in the Certificate of
Designation, consisting of, at any time, $10.00 per share of Preferred Stock,
plus accumulated and unpaid dividends thereon through the date of such
determination, whether or not funds are legally available therefor, the
aggregate amount of which, upon issuance of the 2,500,000 shares of Preferred
Stock to be issued pursuant to the Investment Agreement, shall be $25,000,000,
plus accumulated and unpaid dividends, and (b) after the occurrence of an Event
of Default, as defined in the Certificate of Designation, the joint and several
obligations of the Company, Grantors and other subsidiaries of the Company to
indemnify Obligee from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities resulting from any breach of any covenant, agreement, representation
or warranty of the Company in this Security Agreement or in any other Secured
Instrument Document pursuant to SECTION 7.2 of the Investment Agreement, as
evidenced by that certain Secured Evidence of Joint and Several Repurchase
Obligations dated of even date herewith, executed by the Company, Grantors, and
other subsidiaries of the Company to and for the benefit of Obligee (together
with any and all additions, modifications, amendments, renewals, and extensions
thereof, the "INSTRUMENT"), whether or not from time to time decreased or
extinguished and later increased, created or incurred and all or any portion of
such obligations that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Obligee or Collateral Agent as
a preference, fraudulent transfer or otherwise, and all obligations of every
nature (whether of payment, of performance or otherwise) of the Company, the
Grantors and other subsidiaries of the Company from time to time owed to Obligee
or Collateral Agent or either of them under the Secured Agreement or any other
Secured Instrument Document, whether for principal, interest (including interest
accruing after the commencement of a bankruptcy case, whether or not enforceable
in such case), repurchase or redemption obligations, dividend obligations, fees,
costs, expenses, indemnification liabilities or other obligations, of
7
<PAGE>
whatsoever nature and whether now or hereafter made, incurred or created,
whether absolute or contingent, liquidated or unliquidated, regardless of class,
whether due or not due, and however arising (the foregoing being hereinafter
collectively referred to as the "SECURED OBLIGATIONS").
SECTION 4. GRANTORS REMAIN LIABLE. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under any contracts and
agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Collateral Agent of
any of the rights hereunder shall not release the Grantor from any of its duties
or obligations under the contracts and agreements included in the Collateral and
(c) Collateral Agent or Obligee shall not have any obligation or liability under
any contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Collateral Agent or Obligee be obligated to perform any of
the obligations or duties of the Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and
warrants as follows:
(a) LOCATION OF EQUIPMENT AND INVENTORY; OFFICE LOCATIONS;
FICTITIOUS NAMES. As of the Effective Date, all of the Equipment and
Inventory of Grantor is located at the places specified on SCHEDULE I
hereto. As of the Effective Date, the chief place of business and the
chief executive office of the Grantor is specified on SCHEDULE I
hereto. As of the Effective Date, the offices where the Grantor keeps
its material records regarding the Collateral and all originals of all
chattel paper that evidence Collateral are set forth on SCHEDULE II
hereto. As of the Effective Date, the Grantor does not do business
under any trade name or fictitious business name except as set forth on
SCHEDULE II hereto.
(b) DELIVERY OF CERTAIN COLLATERAL. All chattel paper, notes
and other instruments (excluding checks) comprising any or all of the
items of Collateral of Grantor have been delivered to Collateral Agent
duly endorsed and accompanied by duly executed instruments of transfer
or assignment in blank.
(c) OWNERSHIP OF COLLATERAL. Except for the security interest
created by this Agreement and Liens permitted by each of the agreements
governing the Secured Obligations from time to time in effect,
including, without limitation, Liens of Foothill Capital Corporation,
as AG Collateral Agent, as defined in the Intercreditor Agreement
(collectively, "PERMITTED LIENS"), the Grantor owns the Collateral
pledged by the Grantor hereunder free and clear of any Lien. Except as
may have been filed in favor of Collateral Agent relating to this
Agreement or in connection with
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Permitted Liens, no effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file
in any filing or recording office.
(d) PERFECTION. Subject only to Permitted Liens, in the case
of existing Collateral, this Agreement creates, and in the case of
after acquired Collateral, at the time the Grantor first has rights in
such after acquired Collateral, this Agreement will create, in each
case upon the making of the filings described in clause (e) below or
the taking of possession by Collateral Agent with respect to security
interests in Collateral which can only be perfected by taking
possession of such Collateral, for all Collateral, a valid, perfected,
first priority security interest, in each case securing the payment and
performance of the Secured Obligations. Upon making the filings
described in clause (e) below or the taking of possession by Collateral
Agent with respect to security interests in Collateral which can only
be perfected by taking possession of such Collateral, in each case for
all Collateral, all filings and other actions necessary or desirable to
protect and to perfect the security interests referenced above shall
have been duly taken.
(e) GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either (i) for the grant by
the Grantor of the security interest granted hereby or for the
execution, delivery or performance of this Agreement by the Grantor or
(ii) for the perfection of (except as otherwise specified in paragraph
(d) of this SECTION 5), or the exercise by, Collateral Agent of its
rights and remedies hereunder, except for the filing of (x) a Uniform
Commercial Code financing statement with the appropriate authorities in
the jurisdictions listed on SCHEDULE III hereto, (y) certificates of
title with respect to motor vehicles of the Grantor in the appropriate
jurisdictions and (z) notifications and/or transfer documents with
respect to certain regulatory permits of the Grantor in the appropriate
jurisdictions.
(f) OTHER INFORMATION. All information heretofore, herein or
hereafter supplied to Collateral Agent by, or on behalf of, the Grantor
with respect to the Collateral (in each case as such information has
been amended, supplemented or updated as of the date this
representation is deemed made) is accurate and complete in all material
respects.
SECTION 6. FURTHER ASSURANCES.
------------------
(a) Each Grantor agrees that from time to time, at the expense of the
Grantor, the Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that Collateral Agent may reasonably request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
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each Grantor will: (i) at the reasonable request of Collateral Agent, mark
conspicuously each chattel paper and each material contract included in the
Collateral and each of its material records pertaining to the Collateral with a
legend, in form and substance reasonably satisfactory to Collateral Agent,
indicating that such items are subject to the security interest granted hereby;
(ii) if any Collateral shall be evidenced by a promissory note or other
instrument (excluding checks), deliver and pledge to Collateral Agent hereunder
for the benefit of Obligee such note or instrument duly endorsed and accompanied
by duly executed instruments of transfer or assignment, all in form and
substance satisfactory to Collateral Agent; (iii) at the request of Collateral
Agent, deliver and pledge to Collateral Agent all promissory notes and other
instruments (including checks if an Event of Default shall have occurred and be
continuing) and all original counterparts of chattel paper constituting
Collateral duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Collateral
Agent; (iv) upon the reasonable request of Collateral Agent, execute and file
with the registrar of motor vehicles or other appropriate authority of any
jurisdiction under the law of which indication of a security interest on a
certificate of title is required as a condition of perfection an application or
other document requesting the notation or other indication of the security
interest created hereunder on such certificate of title and will deliver to
Collateral Agent copies of all such applications or other documents filed and
copies of all such certificates of title issued indicating the security interest
created hereunder in such Collateral; (v) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as Collateral Agent may reasonably
request, in order to perfect and preserve the security interests granted or
purported to be granted hereby; (vi) at any reasonable time and upon reasonable
notice, upon demand by Collateral Agent exhibit the Collateral to and allow
inspection of the Collateral by Collateral Agent, or persons designated by
Collateral Agent; and (vii) at Collateral Agent's reasonable request, appear in
and defend any action or proceeding that may affect the Grantor's title to or
Collateral Agent's security interest in the Collateral.
(b) Each Grantor hereby authorizes Collateral Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of the Grantor where permitted
by law. A carbon, photographic or other reproduction of this Agreement or a
financing statement signed by such Grantor shall be sufficient as a financing
statement where permitted by law.
(c) Each Grantor will furnish to Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Collateral Agent may
reasonably request, all in reasonable detail.
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SECTION 7. COVENANTS OF THE GRANTORS. Each Grantor shall:
-------------------------
(a) Not use or permit any Collateral to be used in violation of any
provision of this Agreement, or any applicable statute, regulation or ordinance
or any policy of insurance covering the Collateral (unless such violation
together with all other violations does not and could not reasonably be expected
to have a material adverse effect on the value or use of any material portion of
the Collateral);
(b) Notify Collateral Agent of any change in the Grantor's name, trade
names, fictitious business names, identity or corporate structure at least 30
days prior to such change;
(c) Give Collateral Agent 30 days' prior written notice of any change
in the location of the Grantor's (i) chief place of business, (ii) chief
executive office and (iii) offices where the Grantor's records regarding
Collateral and the originals of all chattel paper that evidence Collateral are
kept;
(d) Keep the Equipment and Inventory (other than Inventory sold in the
ordinary course of business and other than such Equipment and Inventory which,
either singly or in the aggregate, is not material) at the places therefor
specified on SCHEDULE I hereto or at such other places in jurisdictions where
all action has been taken that may be necessary or desirable, or that Collateral
Agent may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Collateral Agent
to exercise and enforce its rights and remedies hereunder with respect to such
Equipment and Inventory;
(e) Keep records of the Inventory which are correct and accurate in all
material respects, itemizing and describing the kind, type and quantity of
Inventory and the Grantor's cost therefor all in accordance with the past
practices of the Grantor;
(f) If any Inventory is in possession or control of any of the
Grantor's agents or processors, then upon the occurrence of an Event of Default,
at the request of Collateral Agent, instruct such agent or processor to hold all
such Inventory for the account of Collateral Agent and subject to the
instructions of Collateral Agent;
(g) Keep its chief place of business and chief executive office and the
office where it keeps its material records concerning the Collateral, and all
originals of all chattel paper that evidence Collateral, at the location
therefor specified in SECTION 5(a) or at such other locations in a jurisdiction
where all action that may be necessary or desirable, or that Collateral Agent
may request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to such Collateral has
been taken. Each Grantor will hold and preserve such material records and
chattel paper in accordance with Grantor's past practice and will permit
representatives of Collateral Agent at any time during normal
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business hours and upon reasonable notice to inspect and make abstracts from
such material records and chattel paper and each Grantor agrees to render to
Collateral Agent, at the Grantor's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto; and
(h) Perform and comply in all material respects with all contractual
obligations relating to the Collateral.
SECTION 8. INSURANCE.
---------
(a) Unless otherwise agreed in writing by Collateral Agent, each
insurance policy covering the Collateral shall in addition (i) name the Grantor
and Collateral Agent as insured parties thereunder (without any representation
or warranty by or obligation upon Collateral Agent) as their interests may
appear, (ii) contain an agreement by the insurer that, to the extent PROVIDED in
the Collateral Documents, any loss thereunder shall be payable to Collateral
Agent notwithstanding any action, inaction or breach of representation or
warranty by the Grantor, (iii) have attached thereto a lender's loss payable
endorsement or its equivalent, or a loss payable clause acceptable to Collateral
Agent, for the benefit of Obligee, (iv) provide that there shall be no recourse
against Collateral Agent for payment of premiums or other amounts with respect
thereto and (v) provide that at least 30 days' prior written notice of
cancellation or lapse, material amendment, or material reduction in scope or
limits of coverage shall be given to Collateral Agent by the insurer. Each
Grantor shall, if so requested by Collateral Agent, deliver to Collateral Agent
original or duplicate policies of such insurance and, as often as Collateral
Agent may reasonably request (but, unless an Event of Default shall have
occurred and be continuing, in no event more than once each calendar year), a
report of a reputable insurance broker with respect to such insurance. Further,
each Grantor shall, at the request of Collateral Agent, duly execute and deliver
instruments of assignment of such insurance policies to comply with the
requirements of SECTION 6 hereof and use its best efforts to cause the
respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by a Grantor
pursuant to this SECTION 8 may be paid directly to the person who shall have
incurred liability covered by such insurance. In case of any material loss
involving damage to Equipment or Inventory when subsection (c) of this SECTION 8
is not applicable, any proceeds of insurance maintained by the Grantor shall be
paid to the Grantor and the Grantor shall use such proceeds to make necessary
repairs or replacements of such Equipment and Inventory or to purchase
additional Equipment or Inventory or other property of equivalent value and
constituting Collateral hereunder.
(c) Upon the occurrence and during the continuance of an Event of
Default, at the request of Collateral Agent, all insurance payments in respect
of such Equipment and Inventory shall be paid to and applied by Collateral Agent
as specified in SECTION 16.
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(d) Prior to the expiration of each insurance policy with respect to
the Equipment and Inventory, upon written request of Collateral Agent, each
Grantor shall furnish Collateral Agent with evidence satisfactory to Collateral
Agent of the reissuance of a policy continuing insurance in force as required by
this Agreement and at or prior to the date payment of the premium therefor is
due, evidence satisfactory to Collateral Agent of such payment. In the event a
Grantor fails to provide, maintain, keep in force or deliver and furnish to
Collateral Agent the policies of insurance required by this SECTION 8,
Collateral Agent, upon 30 days' prior written notice to such Grantor, may (but
shall not be obligated to) procure such insurance or single interest insurance
for such risks covering Obligee's interests, and such Grantor will pay all
premiums thereon promptly upon demand by Collateral Agent, together with
interest thereon at the Default Rate, from the date of expenditure by Collateral
Agent until reimbursement by such Grantor.
SECTION 9. LICENSE OF TRADEMARKS AND TRADE NAMES. Each Grantor hereby
assigns, transfers and conveys to Collateral Agent, effective upon the
occurrence of, and during the continuance of, any Event of Default, the
nonexclusive right and license to use all trademarks, trade names and copyrights
owned or used by the Grantor that relate to the Collateral and any other
collateral granted by the Grantor as security for the Secured Obligations,
together with any goodwill associated therewith, all to the extent necessary to
enable Collateral Agent to use, possess and realize on the Collateral and any
successor or assignee to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of Collateral Agent and its successors,
assigns and transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or otherwise.
Such right and license is granted free of charge, without requirement that any
monetary payment whatsoever be made to the Grantor. If (a) an Event of Default
shall have occurred and, by reason of waiver, modification, amendment or
otherwise, no longer be continuing, (b) no other Event of Default shall be
continuing, (c) an assignment to Collateral Agent shall have been previously
made pursuant to this SECTION 9, and (d) the Secured Obligations shall not have
become immediately due and payable, upon the written request of the Grantor,
Collateral Agent shall promptly execute and deliver to the Grantor such
assignments as may be necessary to reassign to the Grantor any rights, title and
interests as may have been assigned pursuant to this SECTION 9, subject to any
disposition thereof that may have been made by Collateral Agent pursuant hereto;
PROVIDED that, after giving effect to such reassignment, Collateral Agent's
security interest and conditional assignment granted pursuant to this SECTION 9,
as well as all other rights and remedies of Collateral Agent granted hereunder,
shall continue to be in full force and effect; and PROVIDED, FURTHER, that the
rights, title and interests so reassigned shall be free and clear of all Liens
other than Liens (if any) encumbering such rights, title and interest at the
time of their assignment to Collateral Agent.
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SECTION 10. TRANSFERS AND OTHER LIENS. Each Grantor shall not:
-------------------------
(a) Except as permitted by the Secured Agreement, sell, assign
(by operation of law or otherwise) or otherwise dispose of any of the
Collateral.
(b) Except for the Permitted Liens, create or suffer to exist
any Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any person or entity.
SECTION 11. COLLATERAL AGENT. Collateral Agent has been appointed as
Collateral Agent hereunder pursuant to the Secured Agreement. Collateral Agent
shall be obligated, and shall have the right hereunder, to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking action (including, without limitation, the release or
substitution of Collateral) in accordance with the Secured Agreement and the
Intercreditor Agreement. Collateral Agent may resign and a successor Collateral
Agent may be appointed in the manner provided for in the Secured Agreement for
resignation and appointment of a successor Collateral Agent. Upon the acceptance
of any appointment as Collateral Agent by a successor Collateral Agent, the
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring Collateral Agent under
this Agreement, and the retiring Collateral Agent shall thereupon be discharged
from its duties and obligations under this Agreement and shall deliver any
Collateral in its possession to the successor Collateral Agent. After any
retiring Collateral Agent's resignation, the provisions of this Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it under
this Agreement while it was Collateral Agent.
SECTION 12. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Each Grantor
hereby irrevocably appoints Collateral Agent the Grantor's attorney-in-fact,
with full authority in the place and stead of the Grantor and in the name of the
Grantor, Collateral Agent or otherwise, from time to time in Collateral Agent's
reasonable discretion to take any action and to execute any instrument that
Collateral Agent may deem necessary or advisable, subject to the terms and
conditions of this Agreement, to accomplish the purposes of this Agreement,
including, without limitation:
(a) Subject to the last sentence of SECTION 8(d) hereof, to
obtain and adjust insurance required to be maintained by the Grantor or
paid to Collateral Agent pursuant to SECTION 8 hereof;
(b) Upon the occurrence of, and during the continuance of, an
Event of Default, to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
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(c) Upon the occurrence of, and during the continuance of, an
Event of Default, to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clauses
(a) and (b) above;
(d) Upon the occurrence of, and during the continuance of, an
Event of Default, to file any claims or take any action or institute
any proceedings that Collateral Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the
rights of Collateral Agent with respect to any of the Collateral;
(e) To pay or discharge taxes (other than taxes not then
required to be paid or discharged by any of the agreements governing
the Secured Obligations, from time to time in effect including without
limitation the Secured Agreement) or Liens (other than Permitted
Liens), levied or placed upon or threatened against the Collateral, the
legality or validity thereof and the amounts necessary to discharge the
same to be determined by Collateral Agent in its reasonable discretion,
and such payments made by Collateral Agent to become obligations of the
Grantor to Collateral Agent, due and payable immediately without
demand;
(f) Upon the occurrence of, and during the continuance of, an
Event of Default, to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with
accounts and other documents relating to the Collateral; and
(g) Upon the occurrence of, and during the continuance of, an
Event of Default, generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though Collateral Agent were the absolute
owner thereof for all purposes, and to do, at Collateral Agent's option
and the Grantor's expense, at any time, or from time to time, all acts
and things that Collateral Agent deems necessary to protect, preserve
or realize upon the Collateral and Collateral Agent's security interest
therein, in order to effect the intent of this Agreement, all as fully
and effectively as the Grantor might do.
The Grantors hereby ratify all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
SECTION 13. COLLATERAL AGENT MAY PERFORM. If any Grantor fails to
perform any agreement contained herein, Collateral Agent may, upon 30 days'
notice to the Grantor (unless otherwise expressly set forth in this Agreement or
an Event of Default shall have occurred and be continuing, in which case, no
such notice shall be required), itself perform,
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or cause performance of, such agreement, and the expenses of Collateral Agent
incurred in connection therewith shall be payable by such Grantor under SECTION
17 hereof.
SECTION 14. COLLATERAL AGENT'S DUTIES AND LIABILITIES.
-----------------------------------------
(a) The powers conferred on Collateral Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder,
Collateral Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. Collateral Agent shall be deemed to exercise
reasonable care in the custody and preservation of such Collateral if such
Collateral is accorded treatment substantially equivalent to that which
Collateral Agent accords its own property.
(b) Collateral Agent shall not be liable to any Grantor (i) for any
loss or damage sustained by it, or (ii) for any loss, damage, depreciation or
other diminution in the value of any of the Collateral, that may occur as a
result of, in connection with or that is in any way related to (x) any exercise
by Collateral Agent of any right or remedy under this Agreement or (y) any other
act of or failure to act by Collateral Agent, except to the extent that the same
shall be determined by a judgment of a court of competent jurisdiction to be the
result of acts or omissions on the part of Collateral Agent constituting gross
negligence or willful misconduct.
(c) Except to the extent resulting from acts or omissions on the part
of Collateral Agent or its affiliates, directors, officers, employees,
attorneys, or agents constituting gross negligence or willful misconduct, no
claim may be made by any Grantor against Collateral Agent or its affiliates,
directors, officers, employees, attorneys or agents for any special, indirect,
or consequential damages in respect of any breach or wrongful conduct (whether
the claim therefor is based on contract, tort or duty imposed by law) in
connection with, arising out of or in any way related to the transactions
contemplated and relationship established by this Agreement, or any act,
omission or event occurring in connection therewith. Except to the extent
resulting from acts or omissions on the part of Collateral Agent or its
affiliates, directors, officers, employees, attorneys, or agents constituting
gross negligence or willful misconduct, each Grantor hereby waives, releases and
agrees not to sue upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
SECTION 15. REMEDIES UPON DEFAULT.
---------------------
(a) EVENTS OF DEFAULT. The occurrence of any "EVENT OF DEFAULT" as
defined in the Secured Agreement (whether or not any Secured Obligations shall
be at the time outstanding thereunder or the Secured Agreement shall have
terminated for some other purpose) or the occurrence of any default under the
Certificate of Designation between the Company and
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Obligee dated of even date herewith which default has continued beyond any
applicable cure period, shall constitute an Event of Default under this
Agreement.
(b) REMEDIES UPON AN EVENT OF DEFAULT. If any Event of Default shall
have occurred and be continuing, Collateral Agent may exercise in respect of the
Collateral, (i) all the rights and remedies of a secured party on default under
the Uniform Commercial Code of the State of New York (the "CODE") (whether or
not the Code applies to the affected Collateral), (ii) all of the rights and
remedies provided for in this Agreement, the Secured Agreement and any other
agreement between any Grantor and Obligee and (iii) such other rights and
remedies as may be provided by law or otherwise (such rights and remedies of
Obligee to be cumulative and non-exclusive). If an Event of Default shall have
occurred and be continuing, Collateral Agent also may (i) require each Grantor
to, and each Grantor hereby agrees that it will, at its expense and upon request
of Collateral Agent forthwith, assemble all or part of the Collateral as
directed by Collateral Agent and make it available to Collateral Agent at a
place to be designated by Collateral Agent that is reasonably convenient to both
parties, (ii) enter onto the property where any Collateral is located and take
possession thereof with or without judicial process, (iii) prior to the
disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Collateral Agent deems appropriate, (iv) take possession of any
Grantor's premises or place custodians in exclusive control thereof, remain on
such premises and use the same and any of such Grantor's equipment for the
purpose of completing any work in process, taking any actions described in the
preceding clause (iii) and collecting any Secured Obligation, and (v) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of Collateral Agent's offices
or elsewhere, for cash, on credit or for future delivery, and at such price or
prices and upon such other terms as Collateral Agent may deem commercially
reasonable. Each Grantor agrees that, to the extent notice of sale shall be
required at law, at least 10 days' notice to the Grantor of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Collateral Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given.
Collateral Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
If an Event of Default shall have occurred and be continuing,
Collateral Agent may retain any of the directors, officers and employees of any
Grantor, in each case upon such terms as Collateral Agent and any such person
may agree, notwithstanding the provisions of any employment, confidentiality or
non-disclosure agreement between any such person and any such Grantor, and each
Grantor hereby waives its rights under any such agreement and consents to each
such retention.
SECTION 16. APPLICATION OF PROCEEDS. All proceeds received by
Collateral Agent in respect of any sale of, collection from or other realization
upon all or any part of the
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Collateral may, in the discretion of Collateral Agent, be held by Collateral
Agent as Collateral for, and/or then, or at any other time thereafter applied,
in full or in part by Collateral Agent against the Secured Obligations in the
following order of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization and all other expenses, liabilities and
advances made or incurred by Collateral Agent in connection therewith
and all amounts for which Collateral Agent is entitled to
indemnification hereunder and all advances made by Collateral Agent
hereunder for the account of the Grantors and for the payment of all
costs and expenses paid or incurred by Collateral Agent in connection
with the exercise of any right or remedy hereunder, all in accordance
with SECTION 17 hereof;
SECOND: To the payment of the Secured Obligations in the order
set forth in the Secured Agreement and in accordance with the
Intercreditor Agreement; and
THIRD: After payment in full of the amounts specified in the
preceding subparagraphs, to the payment to, or upon the order of, the
Grantors, or whosoever may be lawfully entitled to receive the same or
as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
SECTION 17. INDEMNITY AND EXPENSES.
----------------------
(a) Each Grantor agrees to indemnify Collateral Agent and Obligee and
each of the officers, directors, agents, employees and affiliates of each of
them (each an "INDEMNITEE") from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or liabilities
resulting from the gross negligence or willful misconduct of the Indemnitee
seeking indemnification.
(b) Each Grantor will upon demand pay to Collateral Agent the amount of
any and all reasonable expenses, including the reasonable fees and disbursements
of its counsel and of any experts and agents, that Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of Collateral Agent hereunder or (iv) the failure by the
Grantor to perform or observe any of the provisions hereof.
(c) The obligations of Grantor in this SECTION 17 hereof shall survive
termination of this Agreement and the discharge of Grantor's other obligations
under this Agreement, the Secured Agreement and the other Secured Instrument
Documents.
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SECTION 18. CONTINUING SECURITY INTEREST; TERMINATION. This Agreement
shall create a continuing security interest in the Collateral and shall (a)
remain in full force and effect until the indefeasible payment in full of the
Secured Obligations and termination of Obligee's obligations to lend and extend
credit under the Secured Agreement, (b) be binding upon each Grantor, its
successors and assigns and (c) inure, together with the rights and remedies of
Collateral Agent and Obligee hereunder, to the benefit of Collateral Agent and
Obligee and the successors, transferees and assigns of each. Without limiting
the generality of the foregoing clause (c), Obligee may, subject to the
provisions of the Secured Agreement, assign or otherwise transfer the Note, or
portion thereof, or any other obligations secured hereby and any agreements or
instruments executed in connection therewith to any other person or entity, and
such other person or entity shall thereupon become vested with all the benefits
in respect thereof granted to Obligee herein or otherwise. Upon the indefeasible
payment in full of the Secured Obligations and termination of Obligee's
obligations to lend or extend credit under the Secured Agreement, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the Grantors. Upon any such termination, Collateral Agent will, at the
Grantors' expense, execute and deliver to the Grantors, against receipt and
without recourse to or warranty by Collateral Agent, such documents as the
Grantors shall reasonably request to evidence such termination.
SECTION 19. SECURITY INTEREST ABSOLUTE. All rights of Collateral Agent
on its behalf and on behalf of Obligee, assignments and pledges made and created
hereunder, and all obligations of the Grantors, shall be absolute and
unconditional, irrespective of:
(a) Any lack of validity or enforceability of any of the
Secured Obligations or any agreement or instrument relating thereto;
(b) Any change in the time, manner or place of payment of, or
in any other term of, all or any of the Secured Obligations, or any
other amendment or waiver of, or any consent to any departure from, any
agreement or instrument relating to the Secured Obligations;
(c) Any exchange, release, subordination or nonperfection of
any other collateral, or any release or amendment or waiver of or
consent to any departure from any guaranty, for all or any of the
Secured Obligations; or
(d) Any other circumstance, other than indefeasible payment in
full of the Secured Obligations (including, but not limited to, any
statute of limitations) which might otherwise constitute a defense
available to, or a discharge of, the Grantors or a third party grantor
or a security interest.
19
<PAGE>
SECTION 20. PARTIAL RELEASES. Collateral Agent shall execute and
deliver partial releases of the Liens created pursuant thereto, pursuant to, and
as expressly provided in the Secured Agreement.
SECTION 21. AMENDMENTS; ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by any Grantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by
Collateral Agent on behalf of Obligee, and then such waiver or consent shall be
effective only in the specified instance and for the specific purpose for which
given.
SECTION 22. ADDRESSES FOR NOTICES. Unless otherwise specifically
provided herein, any notice or other communication herein required or permitted
to be given shall be in writing and may be personally served, telecopied,
telexed or sent by United States mail or courier service and shall be deemed to
have been given when delivered in person, upon confirmed receipt (in the case of
telecopy or telex) or 5 Business Days after depositing it in the United States
mail, registered or certified, with postage prepaid and properly addressed;
PROVIDED that any notice sent to Collateral Agent or Obligee shall not be
effective until received. For purposes hereof, the addresses of the parties
hereto (until notice of a change thereof) is delivered as provided in this
SECTION 22) shall be as set forth under each party's name on the signature pages
hereof or in the Secured Agreement.
SECTION 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All
judicial proceedings brought against each Grantor with respect to this Agreement
may be brought in any state or Federal court of competent jurisdiction sitting
in New York, New York and by execution and delivery of this Agreement each
Grantor accepts for itself and in connection with the Collateral, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts and
irrevocably agrees to be bound by any judgement rendered thereby in connection
with this Agreement. Each Grantor agrees that service of process sufficient for
personal jurisdiction in any action against Grantor in the State of New York may
be made by registered or certified mail, return receipt requested, to Grantor at
its address provided in SECTION 22 and Grantor hereby acknowledges that such
service shall be effective and binding in every respect. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of Collateral Agent to bring proceedings against any Grantor in
the courts of any other jurisdiction.
SECTION 24. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO
20
<PAGE>
CONFLICTS OF LAWS PRINCIPLES, EXCEPT AS REQUIRED BY MANDATORY PROVISION OF LAW
AND EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY
INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK. Unless otherwise defined herein or in the Secured Agreement, terms
used in Article 9 of the Uniform Commercial Code in the State of New York are
used herein as therein defined.
SECTION 25. WAIVER OF JURY TRIAL. EACH GRANTOR AND COLLATERAL AGENT
HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. 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 transaction,
including without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. Each Grantor and
Collateral Agent each (a) acknowledge that this waiver is a material inducement
for the Grantor and Collateral Agent to enter into a business relationship, that
the Grantor and Collateral Agent have already relied on the waiver in entering
into this Agreement and that each will continue to rely on the waiver in their
related future dealings and (b) further warrant and represent that each has
reviewed this waiver with its legal counsel, and that each 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 THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 26. WAIVER. Except as otherwise expressly provided herein, each
Grantor hereby waives promptness, diligence, notice of acceptance and any other
notice with respect to any of the Secured Obligations and this Agreement and any
requirement that Collateral Agent or Obligee protect, secure, perfect or insure
any security interest or lien or any property subject thereto or exhaust any
right or take any action against the Grantor or any other person or entity or
any of the Collateral.
SECTION 27. NO WAIVER. No failure on the part of Collateral Agent to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; and no
single or partial exercise by Collateral Agent of any right, power or remedy
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein
21
<PAGE>
provided are to the fullest extent permitted by law cumulative, and are not
exclusive of any remedies provided by law.
SECTION 28. MARSHALLING; PAYMENT SET ASIDE. Collateral Agent shall not
be under any obligation to marshal any assets in favor of the Grantors or any
other party or against or in payment of any or all of the Secured Obligations.
To the extent that any Grantor makes a payment or payments to Collateral Agent
or Agent enforces its security interests or exercises its rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
SECTION 29. HEADINGS. Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.
SECTION 30. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation and in any other jurisdiction,
shall not in any way be affected or impaired thereby.
SECTION 31. COUNTERPARTS. This Agreement, and any amendments, waivers,
consents or supplements, may be executed in one or more counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which together shall constitute one and the same Agreement.
SECTION 32. ADDITIONAL GRANTORS. The initial Grantors hereunder shall
be Company and such of the Subsidiaries of Company as are signatories hereto on
the date hereof. From time to time subsequent to the date hereof, additional
Subsidiaries of Company, as required by the Secured Agreement, may become
parties hereto, as additional Grantors (each an "ADDITIONAL GRANTOR"), by
executing and delivering (a) a joinder agreement substantially in the form of
EXHIBIT A attached hereto, pursuant to which each such Additional Grantor shall
agree to join in and become bound by the provisions of this Agreement as a
Grantor and (b) such documents as Collateral Agent may request in order to
22
<PAGE>
grant the Collateral Agent for the benefit of Obligee a perfected security
interest in the personal property of such Additional Grantor.
SECTION 33. INTERCREDITOR AGREEMENT. Obligee, Collateral Agent and
Foothill Capital Corporation, as AG Collateral Agent (as defined in the
Intercreditor Agreement), are parties to the Intercreditor Agreement which,
among other things, concerns priorities of Liens in the Collateral and the
exercise of remedies by the parties thereto, and the manner and priority of
distribution of the proceeds of the Collateral among Obligee and Foothill
Capital Corporation, as AG Collateral Agent and the terms of this Agreement are
subject to the terms and provisions of the Intercreditor Agreement.
IN WITNESS WHEREOF, each Grantor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized effective as of the date first above written.
GRANTORS: ATLANTIC GULF COMMUNITIES CORPORATION,
a Delaware corporation,
ATLANTIC GULF COMMUNITIES MANAGEMENT CORPORATION,
a Florida corporation,
GENERAL DEVELOPMENT RESORTS, INC.,
a Florida corporation,
ENVIRONMENTAL QUALITY LABORATORY, INCORPORATED,
a Florida corporation,
CUMBERLAND COVE, INC.,
a Tennessee corporation,
GENERAL DEVELOPMENT UTILITIES, INC.,
a Florida corporation,
TOWN & COUNTRY II, INC.,
a Florida corporation,
FIVE STAR HOMES, INC.,
a Florida corporation,
AG TITLE CORPORATION,
a Florida corporation,
ATLANTIC GULF COMMERCIAL REALTY, INC.,
a Florida corporation,
AGC SANCTUARY CORPORATION,
a Florida corporation,
ATLANTIC GULF OF TAMPA, INC.,
a Florida corporation,
OCEAN GROVE, INC.,
a Florida corporation,
ATLANTIC GULF UTILITIES, INC.,
a Florida corporation,
SUNSET LAKES DEVELOPMENT CORPORATION,
a Florida corporation,
EQL ENVIRONMENTAL SERVICES, INC.,
a Florida corporation,
AGC CL LIMITED PARTNER, INC.,
a Florida corporation,
23
<PAGE>
AG SANCTUARY OF ORLANDO, INC.,
a Florida corporation,
AGC HOMES, INC.,
a Florida corporation,
ATLANTIC GULF COMMUNITIES SERVICE CORPORATION,
a Florida corporation,
ATLANTIC GULF REALTY, INC.,
a Florida corporation
By:
-------------------------------------
John H. Fischer
Vice President
Address:
c/o ATLANTIC GULF COMMUNITIES
CORPORATION
2601 South Bayshore Drive, 9th Floor
Miami, Florida 33133-5461
Attention: John H. Fischer, Vice President
Facsimile: (305) 859-4623
COLLATERAL AGENT: FOOTHILL CAPITAL CORPORATION, a
California corporation, as Collateral Agent
By:
-------------------------------------
Benjamin W. Silver
Assistant Vice President
Address:
11111 Santa Monica Blvd. Suite 1500
Los Angeles, CA 90025-3333
Attention: Benjamin W. Silver
Facsimile: (310) 479-2690
24
<PAGE>
Copy to: Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: Rick Koenigsberger
Telecopy: (212) 459-3301
Copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Philip Mindlin, Esq.
Telecopy: (212) 403-2000
Copy to: Carlton, Fields, Ward, Emmanuel, Smith
& Cutler, P.A.
Post Office Box 3239
Tampa, Florida 33601
Attn: Paula McDonald Rhodes, Esq.
Telecopy: (813) 229-4133
Copy to: Annis, Mitchell, Cockey, Edwards &
Roehn, P.A.
201 North Florida Avenue, Suite 2100
Tampa, Florida 33602
Attn: Stephen J. Szabo, III, Esq.
Telecopy: (813) 223-9067
25
<PAGE>
SCHEDULE I
TO JUNIOR PERSONAL PROPERTY SECURITY AGREEMENT
Locations of Equipment:
Locations of Inventory:
<PAGE>
SCHEDULE II
TO JUNIOR PERSONAL PROPERTY SECURITY AGREEMENT
Address of offices where records regarding Payment Rights and Chattel Paper are
maintained:
Trade names and/or fictitious business names under which business is conducted:
<PAGE>
SCHEDULE III
TO JUNIOR PERSONAL PROPERTY SECURITY AGREEMENT
Filing Jurisdictions
--------------------
<PAGE>
EXHIBIT A
TO JUNIOR PERSONAL PROPERTY SECURITY AGREEMENT
Subsidiary Joinder
------------------
___________, 199_
FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attention:___________________________
Re: Subsidiary Joinder
------------------
Ladies and Gentlemen:
Reference hereby is made to that certain Junior Personal Property
Security Agreement (the "SECURITY AGREEMENT"), dated effective as of June 23,
1997, by and among FOOTHILL CAPITAL CORPORATION, as collateral agent (in such
capacity herein called "COLLATERAL AGENT"), for AP-AGC, LLC, a Delaware limited
liability company ("OBLIGEE"), on the one hand, and Atlantic Gulf Communities
Corporation, a Delaware corporation ("COMPANY"), and the Subsidiaries of Company
signatory thereto from time to time, on the other hand. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Security Agreement.
This Subsidiary Joinder is executed and delivered this ___ day of
__________, 199_ by each entity identified as an Additional Grantor on the
signature page hereof (individually, an "ADDITIONAL GRANTOR," and collectively,
the "ADDITIONAL GRANTORS") in favor of Collateral Agent.
SECTION 1. JOINDER. Pursuant to SECTION 32 of the Security Agreement,
each Additional Grantor hereby joins in and agrees to be bound by each and all
of the provisions of the Security Agreement and, in so doing, hereby becomes a
Grantor. Without limiting the generality of the foregoing, each Additional
Grantor, as a Grantor, hereby grants to Collateral Agent, pursuant to SECTION 2
of the Security Agreement, a continuing security interest in all currently
existing and hereafter acquired or arising Collateral and hereby agrees to
execute and deliver such documents as Collateral Agent may request in order to
grant, affirm, perfect, or continue perfected such security interests under
applicable law.
SECTION 2. REPRESENTATIONS AND WARRANTIES. Each Additional Grantor
hereby represents and warrants to Collateral Agent that: (a) the execution,
delivery, and performance of this Subsidiary Joinder, the Security Agreement,
and any other Secured
<PAGE>
Instrument Document to which such Additional Grantor is party are within its
corporate powers, have been duly authorized by all necessary corporate action,
and are not in contravention of any law, rule, or regulation, or any order,
judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected; (b) this Subsidiary Joinder, the Security Agreement,
and any and all other Secured Instrument Documents to which such Additional
Grantor is party constitute its legal, valid, and binding obligations,
enforceable against such Additional Grantor in accordance with their respective
terms; (c) the chief executive office and federal employer identification number
of such Additional Grantor are identified on SCHEDULE 1 attached hereto; and (e)
each other representation and warranty applicable to such Additional Grantor as
a Grantor under the Secured Instrument Documents is and will be true and correct
as of the date hereof.
SECTION 3. BINDING EFFECT. This Subsidiary Joinder is binding upon and
enforceable against each Additional Grantor and its successors and assigns. It
shall inure to the benefit of and may be enforced by Collateral Agent and its
successors and assigns.
SECTION 4. NOTICES. Notices to the Additional Grantors shall be given
in the manner set forth in SECTION 22 of the Security Agreement.
SECTION 5. SECURED INSTRUMENT DOCUMENT. This Subsidiary Joinder is a
Secured Instrument Document.
SECTION 6. SECURED INSTRUMENT DOCUMENT REFERENCES. (a) Each reference
in the Security Agreement and the other Secured Instrument Documents to
"Grantors," or words of like import referring to the Grantors shall include and
refer to each of the Additional Grantors; (b) each reference in the Security
Agreement to "this Agreement," "hereunder," "herein," "hereof" or words of like
import referring to the Security Agreement shall mean and refer to the Security
Agreement as supplemented by this Subsidiary Joinder; and (c) each reference in
the Secured Instrument Documents to the "Security Agreement," "thereunder,"
"therein," "thereof" or words of like import referring to the Security Agreement
shall mean and refer to the Security Agreement as supplemented by this
Subsidiary Joinder.
SECTION 7. COUNTERPARTS. This Subsidiary Joinder may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Subsidiary
Joinder by signing any such counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this
Subsidiary Joinder to be duly executed and delivered by its officer thereunto
duly authorized as of the date first above written.
ADDITIONAL GRANTORS:
[ADDITIONAL GRANTOR]
By:
-------------------------------------
Name:
Title:
[ADDITIONAL GRANTOR]
By:
-------------------------------------
Name:
Title:
Acknowledged and Agreed:
ATLANTIC GULF COMMUNITIES CORPORATION,
a Delaware corporation, for itself
and each of the other Grantors
By:
------------------------------------
Title:
------------------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Collateral Agent
By:
------------------------------------
Title:
------------------------------------
<PAGE>
SCHEDULE 1
TO SUBSIDIARY JOINDER
Chief Executive Office/Federal Employer Identification Number
-------------------------------------------------------------
JUNIOR STOCK PLEDGE AGREEMENT
THIS JUNIOR STOCK PLEDGE AGREEMENT (this "PLEDGE AGREEMENT") is made
effective as of June 23, 1997, and is entered into by ATLANTIC GULF COMMUNITIES
CORPORATION, a Delaware corporation ("COMPANY"), and each of the undersigned
direct and indirect Subsidiaries of the Company (the "SUBSIDIARY PLEDGORS;"
Company and the Subsidiary Pledgors each individually referred to herein as a
"PLEDGOR" and collectively as "PLEDGORS;" PROVIDED that after the Effective
Date, "Pledgors" shall be deemed to include any new subsidiary of any Pledgor
which executes an acknowledgement to this Agreement pursuant to SECTION 6 hereof
agreeing to be bound by the terms hereof) in favor of FOOTHILL CAPITAL
CORPORATION, a California corporation, as collateral agent (in such capacity
referred to herein as "COLLATERAL AGENT") for AP-AGC, LLC, a Delaware limited
liability company ("OBLIGEE").
RECITALS
WHEREAS, Company, Obligee and Collateral Agent are parties to that
certain Secured Agreement dated February 7, 1997, and amended and restated as of
May 15, 1997 (as hereafter amended, supplemented or otherwise modified from time
to time, "SECURED AGREEMENT"; capitalized terms used herein without definition
shall have the meanings given such terms in the Secured Agreement);
WHEREAS, Company and Obligee are parties to that certain Investment
Agreement dated February 7, 1997, amended as of March 20, 1997, and amended and
restated as of May 15, 1997 (as hereafter amended, supplemented or otherwise
modified from time to time, the "INVESTMENT AGREEMENT");
WHEREAS, Company and Obligee are parties to that certain Due Diligence
Fee Agreement dated of even date herewith (as hereafter amended, supplemented or
otherwise modified from time to time, the "FEE AGREEMENT");
WHEREAS, it is a condition precedent to Obligee entering into the
Secured Agreement, the Investment Agreement, the Fee Agreement and all other
Secured Instrument Documents and investing capital thereunder that the Pledgors
execute and deliver this Pledge Agreement, and the Pledgors desire to execute
and deliver this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises set forth herein and
to induce Obligee to enter into the Secured Agreement, the Investment Agreement,
the Fee Agreement and all other Secured Instrument Documents, each of the
Pledgors agree as follows:
SECTION 1. PLEDGE OF SECURITY. Pledgors hereby pledge and assign to
Collateral Agent, and hereby grant to Collateral Agent a security interest in,
all of Pledgors' right, title and interest in and to the following (the "PLEDGED
COLLATERAL"):
(a) the shares described on SCHEDULE I hereto (the "PLEDGED SHARES")
and the certificates representing the Pledged Shares and any interest of
Pledgors in the entries on the books of any financial intermediary pertaining to
the Pledged Shares, and all dividends, cash, warrants, rights, instruments and
other property or proceeds from time to time received,
<PAGE>
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Shares;
(b) all intercompany indebtedness of Pledgors, all promissory notes
made in favor of Pledgors in respect of proceeds from utility condemnations and
all other promissory notes that do not constitute either Homesite Contracts
Receivable or Commercial Receivables (collectively, the "PLEDGED DEBT"), the
instruments evidencing the Pledged Debt, and all interest, cash, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of, or in exchange for, any or all of the Pledged Debt;
(c) all additional shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire, stock of
any issuer of the Pledged Shares from time to time acquired by Pledgors in any
manner (which shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of Pledgors in
the entries on the books of any financial intermediary pertaining to such
additional shares, and all dividends, cash, warrants, rights, instruments and
other property or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional
shares, securities, warrants, options or other rights;
(d) all additional indebtedness from time to time owed to Pledgors by
any obligor on the Pledged Debt and the instruments evidencing such
indebtedness, and all interest, cash, instruments and other property or proceeds
from time to time received, receivable or otherwise distributed in respect of or
in exchange for any or all of such indebtedness;
(e) all shares of, and all securities convertible into and warrants,
options and other rights to purchase or otherwise acquire, stock of any Person
that, after the date of this Agreement, becomes, as a result of any occurrence,
a direct Subsidiary or direct Unrestricted Subsidiary of any Pledgor (which
shares shall be deemed to be part of the Pledged Shares), the certificates or
other instruments representing such shares, securities, warrants, options or
other rights and any interest of Pledgors in the entries on the books of any
financial intermediary pertaining to such shares, and all dividends, cash,
warrants, rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such shares, securities, warrants, options or other rights;
(f) all indebtedness from time to time owed to Pledgors by any Person
that, after the date of this Pledge Agreement, becomes, as a result of any
occurrence, a direct or indirect Subsidiary of Pledgors, and all interest, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such indebtedness; and
(g) to the extent not covered by clauses (a) through (f) above, all
proceeds of any or all of the foregoing Pledged Collateral. For purposes of this
Pledge Agreement, the term "PROCEEDS" includes whatever is receivable or
received when Pledged Collateral or proceeds are sold, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary, and
includes, without limitation, proceeds of any indemnity or
2
<PAGE>
guaranty payable to Pledgors or Collateral Agent from time to time with respect
to any of the Pledged Collateral.
SECTION 2. SECURITY FOR OBLIGATIONS. This Pledge Agreement secures, and
the Pledged Collateral is collateral security for, (a) after the issuance of the
Preferred Stock, the joint and several obligations of the Company, the Pledgors
and other subsidiaries of the Company pursuant to Section 8 of the Certificate
of Designation to repurchase Preferred Stock on the happening of certain
conditions set forth in the Certificate of Designation at a repurchase price
equal to the Liquidation Preference in respect thereof, as defined in the
Certificate of Designation, consisting of, at any time, $10.00 per share of
Preferred Stock, plus accumulated and unpaid dividends thereon through the date
of such determination, whether or not funds are legally available therefor, the
aggregate amount of which, upon issuance of the 2,500,000 shares of Preferred
Stock to be issued pursuant to the Investment Agreement, shall be $25,000,000,
plus accumulated and unpaid dividends, and (b) after the occurrence of an Event
of Default, as defined in the Certificate of Designation, the joint and several
obligations of the Company, Pledgors and other subsidiaries of the Company to
indemnify Obligee from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities resulting from any breach of any covenant, agreement, representation
or warranty of the Company herein or in any other Secured Instrument Document
pursuant to Section 7.2 of the Investment Agreement, as evidenced by that
certain Secured Evidence of Joint and Several Repurchase Obligations dated of
even date herewith, executed by the Company, Pledgors, and other subsidiaries of
the Company to and for the benefit of Obligee (together with any and all
additions, modifications, amendments, renewals, and extensions thereof, the
"INSTRUMENT"), whether or not from time to time decreased or extinguished and
later increased, created or incurred and all or any portion of such obligations
that are paid, to the extent all or any part of such payment is avoided or
recovered directly or indirectly from Obligee or Collateral Agent as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature (whether of payment, of performance or otherwise) of the Company, the
Pledgors and other subsidiaries of the Company from time to time owed to Obligee
or Collateral Agent or either of them under the Secured Agreement or any other
Secured Instrument Document, whether for principal, interest (including interest
accruing after the commencement of a bankruptcy case, whether or not enforceable
in such case), repurchase or redemption obligations, dividend obligations, fees,
costs, expenses, indemnification liabilities or other obligations, of whatsoever
nature and whether now or hereafter made, incurred or created, whether absolute
or contingent, liquidated or unliquidated, regardless of class, whether due or
not due, and however arising (the foregoing being hereinafter collectively
referred to as the "SECURED OBLIGATIONS").
SECTION 3. DELIVERY OF PLEDGED COLLATERAL. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Collateral Agent pursuant hereto and shall be in
suitable form for transfer by delivery, or, as applicable, shall be accompanied
by the relevant Pledgor's endorsement, where necessary, or duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Collateral Agent. If an Event of Default shall have occurred and
be continuing, Collateral Agent shall have the right, at any time in its
discretion and
3
<PAGE>
without notice to any Pledgor, to transfer to or to register in the name of
Collateral Agent or any of its nominees any or all of the Pledged Collateral
(subject, in the case of the stock of General Development Utilities, Inc., to
Section 367.071 of the Florida Statutes or any successor statute) subject only
to the revocable rights specified in SECTION 7(A) hereof. In addition,
Collateral Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Collateral for certificates or
instruments of smaller or larger denominations.
SECTION 4. REPRESENTATIONS AND WARRANTIES. Each Pledgor represents and
warrants as follows:
(a) PLEDGED EQUITY AND PLEDGED DEBT. All of the Pledged Shares pledged
by such Pledgor have been duly authorized and validly issued and are fully paid
and nonassessable. All of the Pledged Debt pledged by such Pledgor has been duly
authorized, authenticated or issued and delivered, and is the legal, valid and
binding obligation of the issuers thereof (except as may be limited by
bankruptcy, reorganization, moratorium, or similar laws relating to or limiting
creditors' rights generally or by general principles of equity relating to
enforceability), and is not in default. The Pledged Shares constitute all of the
issued and outstanding shares of capital stock of each issuer thereof (except
that the Pledged Shares of Atlantic Gulf Asia Holdings N.V. ("AG ASIA")
constitute 66% of its outstanding shares of capital stock) and there are no
outstanding options, warrants, rights to subscribe, stock purchase rights or
other agreements outstanding with respect to, or property that is now or
hereafter convertible into, or that requires the issuance or sale of, any
Pledged Shares. The Pledged Debt constitutes all of the issued and outstanding
intercompany indebtedness owing to Pledgor by Company or any direct or indirect
Subsidiary or direct Unrestricted Subsidiary of Company.
(b) OWNERSHIP OF PLEDGED COLLATERAL. Pledgor is the legal, record and
beneficial owner of the Pledged Collateral pledged by such Pledgor free and
clear of any lien, except for the security interests created by this Pledge
Agreement and the lien of Foothill Capital Corporation, as AG Collateral Agent
(as defined in the Intercreditor Agreement).
(c) CONSENTS. No consent of any other party (including, without
limitation, stockholders or creditors of Pledgor or any Person under any
contractual obligation of such Pledgor) and no consent, authorization, approval
or other action by, and no notice to or filing with any governmental authority
or regulatory body is required either (i) for the pledge by Pledgor of the
Pledged Collateral pledged by such Pledgor pursuant to this Pledge Agreement and
the grant by Pledgor of the security interest granted hereby or for the
execution, delivery or performance of this Pledge Agreement by Pledgor or (ii)
except with respect to AG Asia, for the exercise by Collateral Agent of the
voting or other rights provided for in this Pledge Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Pledge Agreement (except (x)
those which have been obtained or made or (y) as may be required in connection
with a disposition of Pledged Collateral by laws affecting the offering and sale
of securities generally).
(d) PERFECTION. Except with respect to the Pledged Shares of AG Asia,
the pledge and delivery to Collateral Agent of the Pledged Collateral pursuant
to this Pledge Agreement creates a valid and perfected first priority security
interest in favor of Collateral Agent, on
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behalf of Obligee, in the Pledged Collateral of such Pledgor, securing the
payment of the Secured Obligations, and all actions necessary or desirable to
perfect and protect such security interest have been duly taken. With respect to
the Pledged Shares of AG Asia, the making of notations reflecting the security
interest created by this Pledge Agreement in the stock register of AG Asia
creates a valid and perfected security interest in favor of Collateral Agent, on
behalf of Obligee, in such Pledged Shares, securing the payment of the Secured
Obligations, subject only to liens securing the Foothill Debt, and all actions
necessary or desirable to perfect and protect such security interest have been
duly taken.
(e) MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant
to this Pledge Agreement does not violate Regulations G, T, U or X of the Board
of Governors of the Federal Reserve System.
(f) OTHER INFORMATION. All information heretofore, herein or hereafter
supplied to Obligee on behalf of Pledgors with respect to the Pledged Collateral
is accurate and complete in all material respects.
SECTION 5. CERTAIN COVENANTS. Each Pledgor hereby covenants that, until
the Secured Obligations have been indefeasibly paid in full, such Pledgor shall:
(a) not, (i) except as expressly permitted by the Secured
Agreement, sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Pledged
Collateral pledged hereunder by such Pledgor, (ii) create or permit to
exist any lien upon or with respect to any of the Pledged Collateral,
except for the security interest created by this Pledge Agreement and
liens permitted by the Secured Agreement, or (iii) permit, except as
expressly permitted by the Secured Agreement, any issuer of Pledged
Shares to merge or consolidate with any Person;
(b) except as expressly permitted by the Secured Agreement,
(i) cause each issuer of Pledged Shares not to issue any stock or other
securities (x) except with respect to AG Asia, in addition to or (y) in
substitution for the Pledged Shares issued by such issuer, except to
Pledgor, (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional shares of
stock or other securities of each issuer of Pledged Shares, and (iii)
pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all shares of stock of any Person which,
after the date of this Pledge Agreement, becomes, as a result of any
occurrence, a direct Subsidiary or a direct Unrestricted Subsidiary of
Pledgor;
(c) (i) pledge hereunder, immediately upon their issuance, any
and all instruments or other evidences of additional indebtedness from
time to time owed (directly or indirectly) to Pledgor by any direct or
indirect Subsidiary of the Company, and (ii) pledge hereunder,
immediately upon their issuance, any and all instruments or other
evidences of indebtedness from time to time owed (directly or
indirectly) to Pledgor by any Person that after the date of this Pledge
Agreement becomes, as a result of any occurrence, a direct or indirect
Subsidiary of Pledgor; and
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(d) promptly deliver to Collateral Agent all written notices
received by it with respect to the Pledged Collateral.
SECTION 6. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
-------------------------------------
(a) Each Pledgor agrees that at any time and from time to time, at the
expense of Pledgors, Pledgors shall promptly execute and deliver all further
instruments and documents, and take all further actions, that may be necessary
or desirable, or that Collateral Agent may reasonably request, to perfect and
protect any security interest granted or purported to be granted hereby or to
enable Collateral Agent to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral.
(b) Each Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder
as provided in SECTION 5(B) OR (C) hereof, promptly (and in any event within 5
Business Days) deliver to Collateral Agent a Pledge Amendment, duly executed by
Pledgor, in substantially the form of SCHEDULE II hereto (a "PLEDGE AMENDMENT"),
in respect of the additional Pledged Shares or Pledged Debt to be pledged
pursuant to this Pledge Agreement. Pledgor hereby authorizes Collateral Agent to
attach each Pledge Amendment to this Pledge Agreement and agrees that all
Pledged Shares or Pledged Debt listed on any Pledge Amendment delivered to
Collateral Agent shall for all purposes hereunder be considered Pledged
Collateral; PROVIDED that the failure of Pledgor to execute a Pledge Amendment
with respect to any additional Pledged Shares or Pledged Debt pledged pursuant
to this Pledge Agreement shall not impair the security interest of Collateral
Agent therein or otherwise adversely affect the rights and remedies of
Collateral Agent hereunder with respect thereto.
(c) Each Pledgor further agrees that it will cause any direct or
indirect Subsidiary and any direct Unrestricted Subsidiary acquired or created
after the effective date of this Agreement promptly after such acquisition or
creation of such new Subsidiary or Unrestricted Subsidiary (in any event within
5 Business Days after the date such acquisition or creation, as the case may be)
to deliver to Collateral Agent an acknowledgment and agreement duly executed by
such new Subsidiary or Unrestricted Subsidiary in substantially the form of
SCHEDULE III hereto (a "PLEDGE ACKNOWLEDGMENT").
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC.
-----------------------------
(a) So long as no Event of Default (as defined below) shall have
occurred and be continuing:
(i) Pledgors shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Pledge Agreement and the Secured Agreement. It is understood, however,
that neither (A) the voting by Pledgors of any Pledged Shares for or
Pledgors' consent to the election of directors at a regularly scheduled
annual or other meeting of stockholders or with respect to incidental
matters at any such meeting nor (B) Pledgors' consent to or approval of
any action otherwise permitted under the Secured Agreement shall be
deemed inconsistent with
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the Secured Agreement within the meaning of this SECTION 7(A)(I), and
no notice of any such voting or consent need be given to Collateral
Agent.
(ii) Pledgors shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Pledge Agreement, any and
all dividends and interest paid in respect of the Pledged Collateral;
PROVIDED, HOWEVER that any and all
(A) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property
(other than cash) received, receivable or otherwise
distributed in respect of, or in exchange for, any Pledged
Collateral,
(B) dividends and other distributions paid or payable
in cash in respect of any Pledged Collateral in connection
with a partial or total liquidation or dissolution (except any
distribution upon liquidation to another Pledgor to the extent
permitted under the Secured Agreement), or in connection with
a reduction of capital, capital surplus or paid-in-surplus,
and
(C) cash paid, payable or otherwise distributed in
respect of principal or in redemption of or in exchange for
any Pledged Collateral, shall be, and shall forthwith be
delivered to Collateral Agent to hold as, Pledged Collateral
and shall, if received by Pledgors, be received in trust for
the benefit of Collateral Agent, be segregated from the other
property or funds of Pledgors and be forthwith delivered to
Collateral Agent as Pledged Collateral in the same form as so
received (with all necessary endorsements).
(iii) Collateral Agent shall promptly execute and deliver (or
cause to be executed and delivered) to the appropriate Pledgor all such
proxies, dividend payment orders and other instruments as such Pledgor
may from time to time reasonably request for the purpose of enabling
such Pledgor to exercise the voting and other consensual rights which
it is entitled to exercise pursuant to paragraph (i) above and to
receive the dividends, principal or interest payments which it is
authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of
Default:
(i) Upon written notice from Collateral Agent to Company,
except with respect to AG Asia, all rights of Pledgors to exercise the
voting and other consensual rights which they would otherwise be
entitled to exercise pursuant to SECTION 7(A)(I) shall cease, and all
such rights shall thereupon become vested in Collateral Agent who shall
thereupon have the right to exercise such voting and other consensual
rights. With respect to AG Asia, upon written notice from Collateral
Agent to Company, all Pledged Shares shall be registered in the name of
Collateral Agent who shall thereupon have the right to exercise such
voting and consensual rights.
(ii) All rights of Pledgors to receive the dividends and
interest payments which they would otherwise be authorized to receive
and retain pursuant to SECTION 7(A)(II) shall cease, and all such
rights shall thereupon become vested in Collateral Agent who shall
thereupon have the right to receive and hold as Pledged Collateral
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such dividends and interest payments which shall, upon written notice
from Collateral Agent, be paid to Collateral Agent.
(iii) All dividends, principal and interest payments which are
received by any Pledgor contrary to the provisions of paragraph (ii) of
this SECTION 7(B) shall be received in trust for the benefit of
Collateral Agent, shall be segregated from other funds of such Pledgor
and shall forthwith be paid over to Collateral Agent as Pledged
Collateral in the same form as so received (with any necessary
endorsements).
(c) In order to permit Collateral Agent to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to SECTION
7(B)(I) hereof and to receive all dividends and other distributions which it may
be entitled to receive under SECTION 7(A)(II) hereof or SECTION 7(B)(II) hereof,
Pledgors shall promptly execute and deliver (or cause to be executed and
delivered) to Collateral Agent all such proxies, dividend payment orders and
other instruments as Collateral Agent may from time to time reasonably request.
SECTION 8. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. Each Pledgor
hereby irrevocably appoints Collateral Agent as such Pledgor's attorney-in-fact,
with full authority in the place and stead of such Pledgor and in the name of
such Pledgor or otherwise, from time to time in Collateral Agent's reasonable
discretion to take any action and to execute any instrument, which Collateral
Agent may deem necessary or advisable, subject to the terms and conditions of
this Pledge Agreement, to accomplish the purposes of this Pledge Agreement,
including, without limitation, (a) to file one or more financing or continuation
statements or amendments thereto, relative to all or part of the Pledged
Collateral without the signature of such Pledgor, (b) to receive, endorse and
collect all instruments made payable to such Pledgor representing any dividend,
principal or interest payment or other distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the same, and (c)
if an Event of Default shall have occurred and be continuing, to ask, demand,
collect, sue for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any of the Pledged
Collateral, and (d) to file any claims or take any action or institute any
proceedings which Collateral Agent may deem necessary or desirable for the
collection of any of the Pledged Collateral or to enforce the rights of
Collateral Agent with respect to any of the Pledged Collateral.
SECTION 9. COLLATERAL AGENT MAY PERFORM. If a Pledgor fails to perform
any agreement contained herein, Collateral Agent may, upon 30 days' notice to
such Pledgor (unless otherwise expressly set forth in this Pledge Agreement or
an Event of Default shall have occurred and be continuing, in which case, no
notice shall be required) itself perform, or cause performance of, such
agreement, and the expenses of Collateral Agent incurred in connection therewith
shall be payable by Pledgors under SECTION 16(B) hereof.
SECTION 10. STANDARD OF CARE. The powers conferred on Collateral Agent
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose on it any duty to exercise such powers. Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if
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the Pledged Collateral is accorded treatment substantially equivalent to that
which Collateral Agent accords its own property consisting of negotiable
securities, it being understood that Collateral Agent shall have no
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not Obligee has or is deemed to have knowledge of
such matters, (b) taking any necessary action (other than actions taken in
accordance with the standard of care set forth above to maintain possession of
the Pledged Collateral) to preserve rights against any parties with respect to
any Pledged Collateral, (c) taking any necessary actions to collect or realize
upon the Secured Obligations or any guarantee therefor, or any part thereof, or
any of the Pledged Collateral or (d) initiating any action to protect the
Pledged Collateral against the possibility of a decline in market value.
SECTION 11. EVENTS OF DEFAULT. The occurrence of any "Event of Default"
as defined in the Secured Agreement (whether or not any Secured Obligations
shall be at the time outstanding thereunder or the Secured Agreement shall have
terminated for some other purpose) or the occurrence of any default under the
Investment Agreement or the Certificate of Designation, which default has
continued beyond any applicable cure period, shall constitute an Event of
Default under this Pledge Agreement.
SECTION 12. REMEDIES UPON DEFAULT. (a) If any Event of Default shall
have occurred and be continuing, Collateral Agent may exercise in respect of the
Pledged Collateral, in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a secured party on
default under the Code as in effect in the State of New York (or any other state
with jurisdiction over the Pledged Collateral) at that time, and Collateral
Agent may also in its sole discretion, without notice (except as specified
below), sell the Pledged Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker's board or at any of
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Collateral Agent may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Pledged Collateral.
Collateral Agent, on behalf of Obligee, may be the purchaser of any or all of
the Pledged Collateral at any such sale and shall be entitled, for the purpose
of bidding and making settlement or payment of the purchase price for all or any
portion of the Pledged Collateral sold at any such public sale, to use and apply
any of the Secured Obligations as a credit on account of the purchase price of
any Pledged Collateral payable by Collateral Agent at such sale. Each purchaser
at any such sale shall hold the property sold absolutely free from any claim or
right on the part of any Pledgor, and each Pledgor hereby waives (to the extent
permitted by law) all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Pledgors agree that, to the extent notice of sale
shall be required by law, at least 10 days' notice to Pledgors of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Collateral Agent shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Pledgor hereby waives any claims against Collateral Agent
arising by reason of the fact that the price at
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which any Pledged Collateral may have been sold at such a private sale was less
than the price which might have been obtained at a public sale, even if
Collateral Agent accepts the first offer received and does not offer such
Pledged Collateral to more than one offeree. If the proceeds of any sale or
other disposition of the Pledged Collateral are insufficient to pay all the
Secured Obligations, Pledgors shall be liable for the deficiency and the fees of
any attorneys employed by Collateral Agent to collect such deficiency, subject
in the case of the Subsidiary Pledgors to any limitations contained in the
Guarantees.
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (the
"SECURITIES ACT"), and applicable state securities laws, Collateral Agent may be
compelled, with respect to any sale of all or any part of the Pledged Collateral
conducted without prior registration or qualification of such Pledged Collateral
under the Securities Act and/or such state securities laws, to limit purchasers
to those who will agree, among other things, to acquire the Pledged Collateral
for their own account, for investment and not with a view to the distribution or
resale thereof. Each Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable to Collateral Agent than those obtainable
through a public sale without such restrictions (including, without limitation,
a public offering made pursuant to a registration statement under the Securities
Act) and, notwithstanding such circumstances and the registration rights granted
to the Collateral Agent pursuant to SECTION 13, each Pledgor agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner and that Collateral Agent shall have no obligation to engage in public
sales and no obligation to delay the sale of any Pledged Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to
so register it.
(c) If Collateral Agent determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgors shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Collateral Agent all such information as Collateral Agent may
request in order to determine the number of shares and other instruments
included in the Pledged Collateral which may be sold by Collateral Agent in
exempt transactions under the Securities Act and the rules and regulations of
the Securities and Exchange Commission thereunder, as the same are from time to
time in effect.
SECTION 13. REGISTRATION RIGHTS. If Collateral Agent shall determine to
exercise its right to sell all or any of the Pledged Collateral pursuant to
SECTION 12, each Pledgor agrees that, upon request of Collateral Agent (which
request may be made by Collateral Agent in its sole discretion), Pledgor will,
at its own expense:
(a) execute and deliver, and cause each issuer of the Pledged
Collateral contemplated to be sold and the directors and officers thereof to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts and things, as may be necessary or, in the opinion of
Collateral Agent, advisable to register such Pledged Collateral under the
provisions of the Securities Act and to cause the registration statement
relating thereto to become effective and to remain effective for a period of 1
year from the date of the first public offering of the Pledged Shares so
registered, and to make all amendments and supplements hereto and to the related
prospectus which, in the opinion of
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Collateral Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto;
(b) use its best efforts to qualify the Pledged Collateral under all
applicable state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Pledged Collateral, as requested by
Collateral Agent;
(c) cause each such issuer to make available to its security holders,
as soon as practicable, an earnings statement which will satisfy the provisions
of Section 11(a) of the Securities Act;
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Pledged Collateral or any part thereof valid
and binding and in compliance with applicable law; and
(e) bear all costs and expenses, including reasonable attorneys' fees,
of carrying out its obligations under this SECTION 13.
Each Pledgor further agrees that a breach of any of the covenants
contained in this SECTION 13 will cause irreparable injury to Secured Party,
that Secured Party has no adequate remedy at law in respect of such breach and,
as a consequence, that each and every covenant contained in this SECTION 13
shall be specifically enforceable against such Pledgor, and each Pledgor hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no default has occurred
giving rise to the Secured Obligations becoming due and payable prior to their
stated maturities. Nothing in this SECTION 13 shall in any way alter the rights
of Collateral Agent under SECTION 12.
SECTION 14. APPLICATION OF PROCEEDS. All Proceeds received by
Collateral Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Collateral may, in the
discretion of Collateral Agent, be held by Collateral Agent as Pledged
Collateral for, and/or then or at any time thereafter applied in whole or in
part by Collateral Agent against the Secured Obligations in the following order
of priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, and all expenses, liabilities and
advances made or incurred by Collateral Agent in connection therewith
and all amounts for which the Collateral Agent is entitled to
indemnification hereunder and all advances made by the Collateral Agent
hereunder for the account of Pledgors or for the payment of all costs
and expenses paid or incurred by the Collateral Agent in connection
with the exercise of any right or remedy hereunder, all in accordance
with SECTION 16 hereof;
SECOND: To the payment in full of all other Secured
Obligations in the order specified in the Secured Agreement and in
accordance with the Intercreditor Agreement; and
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THIRD: To the payment to or upon the order of Pledgors, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
SECTION 15. COLLATERAL AGENT. Collateral Agent has been appointed as
Collateral Agent hereunder pursuant to the Secured Agreement. Collateral Agent
shall be obligated and shall have the right hereunder, to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking any action (including, without limitation, the release or
substitution of Collateral) in accordance with the Secured Agreement and the
Intercreditor Agreement. Collateral Agent may resign and a successor Collateral
Agent may be appointed in the manner provided for resignation and appointment of
a successor in the Secured Agreement. Upon the acceptance of any appointment as
a Collateral Agent by a successor Collateral Agent, such successor Collateral
Agent shall thereupon succeed to, and become vested with all the rights, powers,
privileges and duties of, the retiring Collateral Agent under this Pledge
Agreement, and the retiring Collateral Agent shall thereupon be discharged from
its duties and obligations under this Pledge Agreement and shall deliver any
Collateral in its possession to the successor Collateral Agent. After any
retiring Collateral Agent's resignation, the provisions of this Pledge Agreement
shall inure to its benefit as to any actions taken or omitted to be taken by it
under this Pledge Agreement while it was Collateral Agent.
SECTION 16. INDEMNITY AND EXPENSES. (a) Pledgors jointly and severally
agree to indemnify Collateral Agent, Obligee and each of the officers,
directors, agents, employees and affiliates of each of them (each an
"INDEMNITEE"), from and against any and all claims, losses and liabilities in
any way relating to, growing out of or resulting from this Pledge Agreement and
the transactions contemplated hereby (including, without limitation, enforcement
of this Pledge Agreement), except claims, losses or liabilities resulting from
the gross negligence or willful misconduct of the Indemnitee seeking
indemnification.
(b) Pledgors will upon demand pay to Collateral Agent the amount of any
and all costs and expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which Collateral Agent may incur in
connection with (i) the administration of this Pledge Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of Collateral Agent hereunder or (iv) the
failure by any Pledgor to perform or observe any of the provisions hereof.
(c) The obligations of Pledgors in this Section 16 hereof shall survive
termination of this Pledge Agreement and the discharge of Pledgors' other
obligations under this Pledge Agreement, the Secured Agreement and the other
Secured Instrument Documents.
SECTION 17. CONTINUING SECURITY INTEREST; TRANSFER OF SECURED
OBLIGATIONS. This Pledge Agreement shall create a continuing security interest
in the Pledged Collateral and shall (a) remain in full force and effect until
indefeasible payment in full of all Secured Obligations, (b) be binding upon
each Pledgor, its successors and assigns, and (c) inure, together with the
rights and remedies of Collateral Agent hereunder, to the
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benefit of Collateral Agent and Obligee and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), subject to the provisions of the Secured Agreement, Obligee may assign or
otherwise transfer any Secured Obligations held by it to any other person or
entity, and such other person or entity shall thereupon become vested with all
the benefits in respect thereof granted to Obligee herein or otherwise. Upon the
indefeasible payment in full of all Secured Obligations, each Pledgor shall be
entitled to the return, upon its request and at its expense, against receipt and
without recourse to or warranty by Collateral Agent, of such of the Pledged
Collateral pledged by such Pledgor hereunder as shall not have been sold or
otherwise applied pursuant to the terms hereof.
SECTION 18. NO WAIVER BY OBLIGEE; AUTHORITY OF PLEDGOR. No failure on
the part of Collateral Agent to exercise, and no course of dealing with respect
to, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise by
Collateral Agent of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein provided are cumulative to the fullest extent permitted by
law and are not exclusive of any remedies provided by law. It is not necessary
for Collateral Agent to inquire into the powers of any Pledgor or the officers,
directors or agents acting or purporting to act on behalf of any of them.
SECTION 19. AMENDMENT, ETC. No amendment or waiver of any provision of
this Pledge Agreement, nor consent to any departure by any Pledgor herefrom,
shall in any event be effective unless the same shall be in writing and signed
by Collateral Agent on behalf of Obligee, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
SECTION 20. ADDRESSES FOR NOTICES. Unless otherwise specifically
provided herein, any notice or other communication herein required or permitted
to be given shall be in writing and may be personally served, telecopied,
telexed or sent by United States mail or courier service and shall be deemed to
have been given when delivered in person, upon confirmed receipt (in the case of
telecopy or telex) or 5 Business Days after depositing it in the United States
mail, registered or certified, with postage prepaid and properly addressed;
PROVIDED that any notice sent to Collateral Agent or Obligee shall not be
effective until received. For purposes hereof, the addresses of the parties
hereto (until notice of a change thereof is delivered as provided in this
SECTION 20) shall be as set forth under each party's name on the signature pages
hereof or in the Secured Agreement.
SECTION 21. GOVERNING LAW; TERMS. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT
TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
13
<PAGE>
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK. Unless otherwise defined herein or in the Secured Agreement,
terms defined in Article 9 of the Code are used herein as therein defined.
SECTION 22. SEVERABILITY. Any provisions of this Pledge Agreement which
are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdictions, 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.
SECTION 23. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR WITH RESPECT TO THIS PLEDGE
AGREEMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
SITTING IN NEW YORK, NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS PLEDGE
AGREEMENT, EACH PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH THIS PLEDGE AGREEMENT. Each Pledgor hereby agrees
that service of process sufficient for personal jurisdiction in any action
against such Pledgor in the State of New York may be made by registered or
certified mail, return receipt requested, to such Pledgor at its address
provided in SECTION 20, and each Pledgor hereby acknowledges that such service
shall be effective and binding in every respect. Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of Collateral Agent to bring proceedings against any Pledgor in the courts
of any other jurisdiction.
SECTION 24. WAIVER OF JURY TRIAL. EACH PLEDGOR AND COLLATERAL AGENT
HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS PLEDGE AGREEMENT. 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 transaction,
including, without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. Each Pledgor and
Collateral Agent (a) acknowledge that this waiver is a material inducement for
such Pledgor and Collateral Agent to enter into a business relationship, that
each Pledgor and Collateral Agent have already relied on the waiver in entering
into this Pledge Agreement and that each will continue to rely on the waiver in
their related future dealings and (b) further warrant and represent that each
has reviewed this waiver with its legal counsel, and that each 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 THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR
14
<PAGE>
MODIFICATIONS TO THIS PLEDGE AGREEMENT. In the event of litigation, this
Pledge Agreement may be filed as a written consent to trial by the court.
SECTION 25. MARSHALING; PAYMENTS SET ASIDE. Agent shall not be under
any obligation to marshal any assets in favor of any Pledgor or any other party
or against or in payment of any or all of the Secured Obligations. To the extent
that any Pledgor makes a payment or payments to Collateral Agent or Collateral
Agent enforces its security interests or exercises its rights of setoff, and
such payment or payments or proceeds of such enforcement or setoff or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied, and all liens, rights and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
SECTION 26. HEADINGS. Section and subsection headings in this Pledge
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Pledge Agreement or be given any substantive effect.
SECTION 27. COUNTERPARTS. This Pledge Agreement and any amendments,
waivers, consents or supplements may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original and all
of which together shall constitute one and the same Agreement.
SECTION 28. INTERCREDITOR AGREEMENT. Obligee, Collateral Agent and
Foothill Capital Corporation, as AG Collateral Agent, are parties to the
Intercreditor Agreement, which, among other things, concerns priorities of Liens
in the Collateral and the exercise of remedies by the parties thereto, and the
manner and priority of distribution of the proceeds of the Collateral among
Obligee and Foothill Capital Corporation, as AG Collateral Agent, and the terms
of this Agreement are subject to the terms and provisions of the Intercreditor
Agreement.
15
<PAGE>
IN WITNESS WHEREOF, Pledgors have caused this Pledge Agreement to be
duly executed and delivered by their officers thereunto duly authorized as of
the date first above written.
PLEDGORS: ATLANTIC GULF COMMUNITIES CORPORATION,
a Florida corporation
ENVIRONMENTAL QUALITY LABORATORY, INCORPORATED,
a Florida corporation
GENERAL DEVELOPMENT RESORTS, INC.,
a Florida corporation
TOWN & COUNTRY II, INC.,
a Florida corporation
By:
--------------------------------------
John H. Fischer
Vice President
Notice Address:
c/o ATLANTIC GULF COMMUNITIES CORPORATION
2601 South Bayshore Drive, 9th Floor
Miami, Florida 33133-5461
Attention: John H. Fischer,
Vice President
Facsimile: (305) 859-4623
COLLATERAL AGENT: FOOTHILL CAPITAL CORPORATION, a
California corporation, as Collateral Agent
By:
--------------------------------------
Benjamin W. Silver
Assistant Vice President
Notice Address:
11111 Santa Monica Blvd. Suite 1500
Los Angeles, CA 90025-3333
Attention: Benjamin W. Silver
Facsimile: (310) 479-2690
16
<PAGE>
Copy to: Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: Rick Koenigsberger
Telecopy: (212) 459-3301
Copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Philip Mindlin, Esq.
Telecopy: (212) 403-2000
Copy to: Carlton, Fields, Ward, Emmanuel, Smith &
Cutler, P.A.
Post Office Box 3239
Tampa, Florida 33601
Attn: Paula McDonald Rhodes, Esq.
Telecopy: (813) 229-4133
Copy to: Annis, Mitchell, Cockey, Edwards &
Roehn, P.A.
201 North Florida Avenue, Suite 2100
Tampa, Florida 33602
Attn: Stephen J. Szabo, III, Esq.
Telecopy: (813) 223-9067
17
<PAGE>
SCHEDULE I
TO JUNIOR STOCK PLEDGE AGREEMENT
Attached to and forming a part of the Junior Stock Pledge Agreement dated
effective as of June 23, 1997 between Pledgors and FOOTHILL CAPITAL CORPORATION,
as Collateral Agent.
PLEDGED SHARES
--------------
<TABLE>
<CAPTION>
=====================================================================================================
ISSUER SHARES CERTIFICATE
OUTSTANDING NUMBER(S)
- -----------------------------------------------------------------------------------------------------
PLEDGOR: ATLANTIC GULF COMMUNITIES CORPORATION
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. AG Title Corporation 1,000 1
- -----------------------------------------------------------------------------------------------------
2. AGC CL Limited Partner, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
3. AGC Homes, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
4. AGC Sanctuary of Orlando, Inc. 100 1
- -----------------------------------------------------------------------------------------------------
5. AGC Sanctuary Corporation 1,000 1
- -----------------------------------------------------------------------------------------------------
6. Atlantic Gulf Asia Holdings N.V. 6,000 N/A
(uncertificated) outstanding
3,960
pledged
- -----------------------------------------------------------------------------------------------------
7. Atlantic Gulf Commercial Realty, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
8. Atlantic Gulf Communities Management 14 1
Corporation
- -----------------------------------------------------------------------------------------------------
9. Atlantic Gulf Communities Service Corporation 1,000 2
- -----------------------------------------------------------------------------------------------------
10. Atlantic Gulf Development, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
11. Atlantic Gulf Engineering Company 1,000 2
- -----------------------------------------------------------------------------------------------------
12. Atlantic Gulf Realty, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
13. Atlantic Gulf Receivables Corporation 100 1
- -----------------------------------------------------------------------------------------------------
14. Atlantic Gulf of Tampa, Inc. 1,000 2
- -----------------------------------------------------------------------------------------------------
15. Atlantic Gulf Utilities, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
16. Atlantic Gulf C.C. Corp., f/k/a C.C. Village 1,000 1
Development Corporation
- -----------------------------------------------------------------------------------------------------
17. Community Title Agency, Incorporated
- -----------------------------------------------------------------------------------------------------
18. Cumberland Cove, Inc. 1,000 2
- -----------------------------------------------------------------------------------------------------
19. Environmental Quality Laboratory, Incorporated 1,000 2
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================
ISSUER SHARES CERTIFICATE
OUTSTANDING NUMBER(S)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
20. Five Star Homes, Inc. 1,000 3
- -----------------------------------------------------------------------------------------------------
21. Fox Creek Development Corporation
- -----------------------------------------------------------------------------------------------------
22. GDV Financial Corporation 500 2
- -----------------------------------------------------------------------------------------------------
23. General Development Air Service, Inc. 100 1
- -----------------------------------------------------------------------------------------------------
24. General Development Commercial Credit
Corporation
- -----------------------------------------------------------------------------------------------------
25. General Development Headquarters Corporation 1,000 1
- -----------------------------------------------------------------------------------------------------
26. General Development Resorts, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
27. General Development Sales Corporation 1,000 1
- -----------------------------------------------------------------------------------------------------
28. General Development Service Corporation 1,000 1
- -----------------------------------------------------------------------------------------------------
29. General Development Utilities, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
30. Hunter Trace Development Corporation
- -----------------------------------------------------------------------------------------------------
31. Lakeside Development of Orlando, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
32. Longwood Utilities, Inc. 625 20
- -----------------------------------------------------------------------------------------------------
33. Maplewood Development Corporation 100 1
- -----------------------------------------------------------------------------------------------------
34. Ocean Grove, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
35. Regency Island Dunes, Inc. 1,000 1
- -----------------------------------------------------------------------------------------------------
36. Sabal Trace Development Corporation 1,000 1
- -----------------------------------------------------------------------------------------------------
37. Summerchase Development Corporation 100 1
- -----------------------------------------------------------------------------------------------------
38. Sunset Lakes Development Corporation 1,000 1
- -----------------------------------------------------------------------------------------------------
39. Town & Country II, Inc. 7,150 6, 8
2,850 17, 19, 20
54,816.2
21,849.8
5,334
- -----------------------------------------------------------------------------------------------------
40. Windsor Palms Corporation 1,000 1
- -----------------------------------------------------------------------------------------------------
41. XYZ Insurance, Inc.
- -----------------------------------------------------------------------------------------------------
42. Panther Creek Corp.
- -----------------------------------------------------------------------------------------------------
43. AGC-SP, Inc.
- -----------------------------------------------------------------------------------------------------
PLEDGOR: ENVIRONMENTAL QUALITY LABORATORY, INCORPORATED
- -----------------------------------------------------------------------------------------------------
1. EQL Environmental Services, Inc. 1,000 1
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
=====================================================================================================
ISSUER SHARES CERTIFICATE
OUTSTANDING NUMBER(S)
- -----------------------------------------------------------------------------------------------------
PLEDGOR: GENERAL DEVELOPMENT RESORTS, INC.
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. General Development Acceptance Corporation
(Delaware)
- -----------------------------------------------------------------------------------------------------
PLEDGOR: TOWN & COUNTRY II, INC.
- -----------------------------------------------------------------------------------------------------
1. FRC Investments, Inc. 60 4
=====================================================================================================
</TABLE>
20
<PAGE>
SCHEDULE II
TO JUNIOR STOCK PLEDGE AGREEMENT
[FORM OF PLEDGE AMENDMENT]
This Pledge Amendment, dated ___________, 19__, is delivered pursuant to
Section 6 of the Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment may be attached to the Junior Stock Pledge
Agreement, dated effective as of June 23, 1997, between Atlantic Gulf
Communities Corporation and its Subsidiaries who are signatories thereto and
FOOTHILL CAPITAL CORPORATION, a California corporation, as Collateral Agent (the
"PLEDGE AGREEMENT"; capitalized terms used herein without definition shall have
the meanings given such terms in the Pledge Agreement) and that the [Pledged
Shares]/[Pledged Debt] listed on this Pledge Amendment shall be deemed to be
part of the [Pledged Shares]/[Pledged Debt] and shall become part of the Pledged
Collateral and shall secure the Secured Obligations as provided in the Pledge
Agreement.
[PLEDGOR]
By:
--------------------------------------
[Name]
[Title]
PLEDGED SHARES
--------------
Stock Issuer Stock Number
Certificate of
Number(s) Shares
PLEDGED DEBT
------------
Debt Issuer Amount of Indebtedness
21
<PAGE>
SCHEDULE III
TO JUNIOR STOCK PLEDGE AGREEMENT
[FORM OF ACKNOWLEDGEMENT AND AGREEMENT OF NEW SUBSIDIARY]
Reference hereby is made to the Junior Stock Pledge Agreement, dated
effective as of June 23, 1997 (the "PLEDGE AGREEMENT"), between Atlantic Gulf
Communities Corporation and its Subsidiaries who are signatories thereto and
FOOTHILL CAPITAL CORPORATION, a California corporation, as Collateral Agent, in
which this Acknowledgement and Agreement and attachments are incorporated.
The undersigned is a new Subsidiary and, as such, is required to pledge
its Pledged Shares and its Pledged Debt to secure the Secured Obligations (all
as defined in the Pledge Agreement) as provided in the Pledge Agreement. The
undersigned hereby represents and warrants (a) that it is the legal and
beneficial owner of the shares of capital stock described in Part A of Schedule
1 hereto which shares constitute all of the issued and outstanding shares of all
classes of capital stock of the Subsidiary or Subsidiaries so listed and (b)
that it is the legal and beneficial owner of the indebtedness described in Part
B of said Schedule 1.
The undersigned acknowledges the terms of the Pledge Agreement and agrees
to be bound thereby.
[NEW SUBSIDIARY]
By:
--------------------------------------
[Name]
[Title]
Address:
[ ]
[ ]
[ ]
22
<PAGE>
SCHEDULE 1
TO THE ACKNOWLEDGEMENT OF NEW SUBSIDIARY
PART A: Capital Stock of Subsidiaries
PART B: Indebtedness owned by new Subsidiary
23
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997 (UNAUDITED) AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000771934
<NAME> ATLANTIC GULF COMMUNITIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,432
<SECURITIES> 0
<RECEIVABLES> 49,098<F1>
<ALLOWANCES> 0
<INVENTORY> 140,066
<CURRENT-ASSETS> 0<F2>
<PP&E> 2,730<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 226,030
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 130,241
16,851
0
<COMMON> 1,160
<OTHER-SE> 49,623
<TOTAL-LIABILITY-AND-EQUITY> 226,030
<SALES> 34,059
<TOTAL-REVENUES> 40,717
<CGS> 31,347
<TOTAL-COSTS> 35,993
<OTHER-EXPENSES> 12,164
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,506
<INCOME-PRETAX> (15,946)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,946)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,946)
<EPS-PRIMARY> (1.63)
<EPS-DILUTED> (1.63)
<FN>
<F1> The values for receivables and PP&E represent net amounts.
<F2> The Company does not prepare a classified balance sheet, therefore current
assets and current liabilities are not applicable.
</FN>
</TABLE>
