SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K/A-1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
....................... TO ......................
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)
(305)859-4000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
(SECURITIES ARE LISTED ON NASDAQ NATIONAL MARKET)
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. YES [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of the registrant's Common Stock as of March
20, 1998 was $44.0 MILLION.
The number of shares outstanding of the registrant's Common Stock as of
March 20, 1998 was 11,529,599.
-----------------------------------
Documents Incorporated by Reference
NONE
<PAGE>
SPECIAL NOTE ABOUT FORWARD LOOKING STATEMENTS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED IN THIS AMENDMENT TO THE
COMPANY'S ANNUAL REPORT ON FORM 10-K/A-1 FOR THE FISCAL YEAR ENDED DECEMBER 31,
1997, CERTAIN MATTERS DISCUSSED HEREIN CONTAIN FORWARD LOOKING STATEMENTS BASED
ON MANAGEMENT'S EXPECTATIONS REGARDING, AND EVALUATIONS OF CURRENT INFORMATION
ABOUT, THE COMPANY'S BUSINESS THAT INVOLVE RISKS AND UNCERTAINTIES, AND ARE
SUBJECT TO FACTORS THAT COULD CAUSE ACTUAL FUTURE RESULTS TO DIFFER, BOTH
ADVERSELY AND MATERIALLY, FROM CURRENTLY ANTICIPATED RESULTS, INCLUDING, WITHOUT
LIMITATION, THE EFFECT OF ECONOMIC AND MARKET CONDITIONS; THE CYCLICAL NATURE OF
THE REAL ESTATE MARKET IN FLORIDA AND OTHER SOUTHEAST U.S. PRIMARY MARKETS; THE
INDUSTRY AND INDUSTRY SEGMENT CONDITIONS AND DIRECTIONS; INTEREST RATES; THE
AVAILABILITY AND COST OF FINANCING REAL ESTATE ACQUISITIONS AND DEVELOPMENTS;
THE SALEABILITY OF PREDECESSOR ASSETS; CONSTRUCTION COSTS; WEATHER; THE
AVAILABILITY OF HIGH QUALITY REAL ESTATE PARCELS IN PRIMARY FLORIDA AND OTHER
SOUTHEAST U.S. MARKETS; THE AVAILABILITY AND COST OF MATERIALS AND LABOR;
CONSUMER PREFERENCES AND TASTES; GOVERNMENTAL REGULATION; COMPETITIVE PRESSURES;
THE COMPANY'S OWN DEBT AND EQUITY STRUCTURE AND RELATED FINANCING CONTINGENCIES
AND RESTRICTIONS; MANAGEMENT LIMITATIONS; THE COMPANY'S ABILITY TO CLOSE
FINANCINGS OF NEW REAL ESTATE AT PARTICULAR TIMES RELATIVE TO THE COMPANY'S CASH
FLOW NEEDS AT SUCH TIMES; THE COMPANY'S ABILITY TO REFINANCE EXISTING
INDEBTEDNESS; LEGISLATION; RESOLUTION OF PENDING LITIGATION IN WHICH THE COMPANY
IS A DEFENDANT; AND THE SUCCESS OR LACK THEREOF OF THE COMPANY'S CURRENT
DEVELOPMENT PROJECTS.
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INTRODUCTION
Atlantic Gulf Communities Corporation (the "Company") is filing this
Form 10-K/A-1 in order to amend its Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 (which was filed on March 31, 1998 -- the "1997
Form 10-K") to (1) add the following Part III disclosures which were not
included in the 1997 Form 10-K, as filed, and (2) to amend Part IV, Item 14.
Exhibits, Financial Statements and Forms 8-K, to add certain additional
Exhibits.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following table sets forth certain information concerning the
directors of the Company:
<TABLE>
<CAPTION>
Name Age Position(s) with the Company
---- --- ----------------------------
<S> <C> <C>
Gerald D. Agranoff (1)(7)(8)(9) 51 Director and Chairman of the Compliance Committee
James M. DeFrancia (3)(5)(6)(9) 56 Director
Stuart F. Koenig (4)(5)(6) 45 Director
Ricardo Koenigsberger (4)(5)(6)(7)(8) 31 Director and Chairman of the Audit Committee
Charles K. MacDonald (1)(7)(9) 39 Director
Lee Neibart (4)(6)(8) 47 Director and Chairman of the Compensation/Stock
Option Committee and the Acquisitions/Dispositions
Committee
J. Larry Rutherford (2)(8)(9) 52 Director, President, Chief Executive Officer and
Chairman of the Refinancing Committee
</TABLE>
- ---------------------------
(1) A Class 1 Director whose term on the Board of Directors of the Company
(the "Board") will expire at the Company's Annual Meeting of
Stockholders (the "Stockholders") in 1999 (the "1999 Annual Meeting").
(2) A Class 2 Director whose term on the Board will expire at the Company's
Annual Meeting of Stockholders in 2000 (the "2000 Annual Meeting").
(3) A Class 3 Director whose term on the Board will expire at the Company's
Annual Meeting of Stockholders in 1998 (the "1998 Annual Meeting").
(4) Appointed by AP-AGC, LLC ("Apollo") (an "Apollo Director"), for a
one-year term, which will expire at the 1998 Annual Meeting. Apollo is
the sole holder of the 20% Cumulative Redeemable Convertible Preferred
Stock, Series A, of the Company (the "Series A Preferred Stock").
Pursuant to the Investment Agreement (as defined below), Apollo has the
right to appoint three (3) directors to the Board.
(5) Member of the Audit Committee.
(6) Member of the Compensation/Stock Option Committee. Mr. Koenigsberger is
an alternate member of the Compensation/Stock Option Committee in the
absence of Mr. Koenig or Mr. Neibart.
(7) Member of the Compliance Committee.
(8) Member of the Acquisitions/Dispositions Committee.
(9) Member of the Refinancing Committee, which was formed in February 1998.
3
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Immediately following the election of directors at the Company's Annual
Meeting of Stockholders in 1997, the Board consisted of Gerald N. Agranoff,
James W. Apthorp, Allen A. Blase, Jerome C. Cohen, Raymond Ehrlich, W.D.
Frederick, J. Larry Rutherford, W. Edward Scheetz, Lawrence B. Seidman and John
W. Temple. Effective upon the closing (the "Closing, which occurred on June 24,
1997) of the Amended and Restated Investment Agreement (the "Investment
Agreement"), dated as of February 7, 1997, amended as of March 20, 1997, and
amended and restated as of May 15, 1997, by and between the Company and Apollo:
- Messrs. Apthorp, Blase, Cohen, Ehrlich, Frederick, Seidman and
Temple resigned from the Board in accordance with the terms of
the Investment Agreement;
- Apollo appointed Messrs. Neibart and Koenigsberger to the Board
(see Note 4 to the Director table above);
- Mr. Rutherford, who was a Class 3 director, resigned from the
Board and was immediately reappointed to the Board as a Class 2
director;
- Mr. Agranoff, who was a Class 3 director, resigned from the Board
and was immediately reappointed to the Board as a Class 1
director;
- Mr. Scheetz, the original Apollo designee on the Board, resigned
from the Board and was immediately reappointed to the Board by
Apollo (see Note 4 to the Director table above);
- Mr. DeFrancia was appointed to the Board as a Class 3 director;
and
- Mr. MacDonald was appointed to the Board as a Class 1 director.
In October, 1997, Mr. Scheetz resigned from the Board, and Apollo
appointed Mr. Koenig to the Board, in accordance with the right granted to it
under the Investment Agreement to appoint three (3) directors to the Board, to
fill the vacancy left by Mr. Scheetz's resignation.
PRINCIPAL OCCUPATIONS AND DIRECTORSHIPS HELD BY THE DIRECTORS
Mr. Agranoff has been a director since June 1994. He is a general
partner of, and general counsel to, Edelman Securities Company, L.P. (formerly
Arbitrage Securities Company), a registered broker-dealer. He has been
affiliated with Edelman Securities Company, L.P. since January 1982. In
addition, Mr. Agranoff is currently counsel to the law firm of Pryor, Cashman,
Sherman & Flynn, in New York. From 1975 through 1981, Mr. Agranoff was engaged
exclusively in the private practice of law in New York. In addition, he was an
adjunct instructor at New York University's Institute of Federal Taxation. Prior
to entering private practice, Mr. Agranoff served as attorney-advisor to a judge
of the United States Tax Court. Mr. Agranoff is a director of Datapoint
Corporation, Canal Capital Corporation, Bull Run Corporation and American Energy
Group, Ltd.
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<PAGE>
Mr. DeFrancia has been a principal of Lowe Enterprises, Inc., a
national real estate development company engaged in residential, commercial and
resort development activities, since 1987. Since 1995, he has served as Chairman
of Lowe Enterprises Mid-Atlantic Inc., and president of Lowe Enterprises
Community Development, which is headquartered in suburban Washington, D.C., and
manages the development of large scale community projects nationally. He has
also managed projects where Lowe has been retained by banks, insurance companies
and Federal agencies as a consultant/development manager for properties in
numerous states.
Mr. Koenig joined Apollo Real Estate Advisors in 1995 as Chief
Financial Officer. Prior to that time, Mr. Koenig was a Vice President in the
Real Estate Principal Investment Area of Goldman, Sachs & Co., where he served
as Controller and Director of Investor Relations for the three Whitehall real
estate investment funds.
Mr. Koenigsberger has been associated with Apollo Real Estate Advisors
I, L.P., since 1995 and a partner of Apollo Real Estate Advisors II, L.P. since
1996, which, together with affiliates, act as managing general partners of the
Apollo Real Estate Investment Funds, private real estate investment funds which
invest in direct and indirect real property interests, including real estate
related public and private debt and equity securities. Since prior to 1995, Mr.
Koenigsberger has been associated with Apollo Advisors, L.P., which acts as
managing general partner of Apollo Investment Fund, L.P. and AIF II, L.P.,
private securities investment funds. Mr. Koenigsberger is a director of
Meadowbrook Golf, Inc., and CB Commercial.
Mr. MacDonald is President of Morgandane Management Corp., an
investment advisory firm. From 1987 to 1995, he was a securities analyst and
portfolio manager with Elliott Associates, L.P. Mr. MacDonald is a director of
Marvel Entertainment Group, Inc.
Mr. Neibart has been a partner of Apollo Real Estate Advisors I, L.P.,
since 1993 and of Apollo Real Estate Advisors II, L.P., since 1996, which,
together with affiliates, act as managing general partners of the Apollo Real
Estate Investment Funds, private real estate investment funds which invest in
direct and indirect real property interests, including real estate related
public and private debt and equity securities. Since prior to 1992, Mr. Neibart
was Executive Vice President and Chief Operating Officer of The Robert Martin
Company, a private real estate development and management firm based in
Westchester County, New York. Mr. Neibart is a director of Koger Equity, Inc.,
Metropolis Realty, Inc., NextHealth, Inc., Meadowbrook Golf, Inc., All-Right
Parking Corp. and Roland International, Inc.
See ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT --
EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES below for biographical information
concerning Mr. Rutherford.
COMMITTEES OF THE BOARD ("COMMITTEES") AND MEETINGS OF THE BOARD AND COMMITTEES
The Board has five (5) standing Committees, the
Acquisitions/Dispositions Committee, the Audit Committee, the Compensation/Stock
Option Committee (formerly known as the Human Relations Committee), the
Compliance Committee and the Refinancing Committee.
5
<PAGE>
The Acquisitions/Dispositions Committee held no meetings in fiscal year
1997. The current members of the Acquisitions/Dispositions Committee are Messrs.
Agranoff, Koenigsberger, Neibart (the Chairman) and Rutherford. The principal
functions of the Acquisitions/Dispositions Committee are to (1) approve all
operational decisions to implement the Board-approved business plan(s), (2)
approve real estate acquisitions which commit no more than $5 million of Company
equity in any single transaction, (3) approve dispositions of Company assets
with gross sales prices no greater than $3 million per transaction and (4)
delegate certain authorities to the President and Chief Executive Officer of the
Company relating to acquisitions, dispositions and personnel matters, subject to
the restrictions set forth with respect to these matters in the Investment
Agreement.
The Audit Committee held one (1 ) meeting in fiscal year 1997. The
current members of the Audit Committee are Messrs. DeFrancia, Koenig and
Koenigsberger (the Chairman). The principal functions of the Audit Committee are
to (1) select and engage on the Company's behalf, and fix the compensation of, a
firm of certified public accountants whose duty it shall be to audit the books
and accounts of the Company and its subsidiaries for the fiscal year in respect
of which they are appointed, and who shall report to the Audit Committee, and
(2) confer with the accountants and determine, and from time to time report to
the Board upon, the scope of audit procedures, accounting practices and internal
accounting and financial controls of the Company and its subsidiaries.
The Compensation/Stock Option Committee held three (3) meetings in
fiscal year 1997. The current members of the Compensation/Stock Option Committee
are Messrs. DeFrancia, Koenig and Neibart (the Chairman). Mr. Koenigsberger is
an alternate member of the Compensation/Stock Option Committee. The principal
functions of the Compensation/Stock Option Committee are to (1) administer and
approve all elements of compensation for Company officers and senior staff
members, (2) administer and approve participation in all awards, grants and
related actions under the provisions of each of the Company's annual incentive
and/or stock option programs, including under the Company's Employee Stock
Option Plan, as amended (the "Employee Option Plan") and (3) report to
Stockholders on executive compensation items, as required by the Securities and
Exchange Commission (the "SEC").
The Compliance Committee held no meetings in fiscal year 1997. The
current members of the Compliance Committee are Messrs. Agranoff (the Chairman),
Koenigsberger and MacDonald. The principal function of the Compliance Committee
is to monitor the Company's compliance with the terms of the November 1992 Final
Judgment of Permanent Injunction against the Company as it relates to the
Company's sales and marketing practices.
The Refinancing Committee was formed in February 1998. The current
members of the Refinancing Committee are Messrs. Agranoff, DeFrancia, MacDonald
and Rutherford (the Chairman). The principal function of the Refinancing
Committee is to approve all decisions concerning negotiations with Apollo for
the release of its security interest in the Company's projects in connection
with a Company corporate debt refinancing.
The Board currently consists of Messrs. Agranoff, DeFrancia, Koenig,
Koenigsberger, MacDonald, Neibart and Rutherford (the Chairman of the Board).
The Board held six (6) regularly scheduled meetings (including the Board meeting
held in connection with the Annual Meeting of Stockholders in 1997) and seven
(7) special meetings during fiscal year 1997. Each director attended at least
75% of the aggregate number of meetings of the Board (that were held during his
term on the Board) and
6
<PAGE>
committees on which he served during 1997 (except that Mr. Koenigsberger
attended the last two Compensation/Stock Option Committee meetings held during
1997 in Mr. Neibart's absence).
EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES
The following table sets forth certain information about the current
executive officers and certain other key employees of the Company:
<TABLE>
<CAPTION>
Name Age Position(s) with the Company
---- --- ----------------------------
<S> <C> <C>
J. Larry Rutherford 52 President, Chief Executive Officer, Director and Chairman of the Board
Thomas W. Jeffrey 38 Executive Vice President and Chief Financial Officer
John Laguardia 59 Executive Vice President and Chief Operating Officer
Jay C. Fertig (1) 38 Former Senior Vice President - National Land Sales
J. Thomas Gillette, III 53 Senior Vice President - Community Development for North Florida
Frank C. Weed 49 Senior Vice President - Resorts
Kimball D. Woodbury 46 Senior Vice President - Acquisitions
Paula J. Cook 39 Vice President and Controller
John H. Fischer 40 Vice President and Treasurer
Joel K. Goldman 32 Vice President, Secretary and General Counsel
Susan M. Kinsey 46 Vice President - Human Resources
Marcia Langley (2) 37 Former Vice President and Special Counsel - Business Development and
Assistant Secretary
Kevin M. O'Grady 43 Vice President - Business Development
Claudia Troisi 48 Vice President - South Florida General Manager
</TABLE>
- ----------------------
(1) Mr. Fertig's employment with the Company terminated in January 1998.
See ITEM 11. EXECUTIVE COMPENSATION - SEVERANCE ARRANGEMENTS below.
(2) Ms. Langley's employment with the Company terminated in April 1998.
Officers of the Company are appointed by and serve at the discretion of
the Board and the Company. Certain officers of the Company have employment
agreements with the Company which entitle them, in certain circumstances, to
receive certain payments and other benefits from the Company in the event their
employment with the Company is terminated prior to the expiration of the terms
of their employment agreements.
7
<PAGE>
Mr. Rutherford was elected Chairman of the Board in June 1997 and has
been the Chief Executive Officer of the Company since March 1991 and the
President of the Company since January 1991. Mr. Rutherford has been a director
of the Company since January 1991, when he was also named the Company's Acting
Chief Executive Officer. Mr. Rutherford joined the Company in September 1990 as
its Executive Vice President-Operations. Before his employment with the Company,
from May 1989 to August 1990, Mr. Rutherford served as President and Chief
Executive Officer of Gulfstream Land & Development Corp. ("Gulfstream"), a
Florida-based community development and homebuilding company. In this capacity,
Mr. Rutherford was charged with restructuring $300 million in Gulfstream debt.
Gulfstream actively developed seven large-scale mixed-use communities totaling
27,000 acres in Fort Lauderdale, Tampa, Jacksonville, Sarasota and Orlando,
Florida; Atlanta, Georgia; and Richmond, Virginia. In addition, Gulfstream
managed a homebuilding subsidiary which sold approximately 500 units per year.
Prior to being named Gulfstream's Chief Executive Officer, Mr. Rutherford served
Gulfstream as President and Chief Operating Officer from 1986 until May 1989,
and as Senior Vice President from 1982 until 1986. From 1974 to 1982, Mr.
Rutherford worked in various real estate-related financial and operational
capacities for Wintergreen Development, Inc. and the Cabot, Cabot & Forbes
Company. In 1992, Mr. Rutherford was named as a defendant in a three-count
Information filed by the State Attorney for Broward County, Florida. The charges
in the Information, which include a charge of vehicular homicide, relate to an
April 1991 traffic accident in which a passenger was killed. As of April 1998,
no trial date has been scheduled. Following review of the circumstances
surrounding this accident and the charges, the Board has expressed its
continuing confidence in Mr. Rutherford's ability to perform his duties as
President and Chief Executive Officer.
Mr. Jeffrey has been the Company's Executive Vice President and Chief
Financial Officer since October 1994. Mr. Jeffrey joined the Company in June
1991 as Senior Vice President - Law and Secretary and was named its General
Counsel in September 1991. From 1987 to 1991, Mr. Jeffrey practiced bankruptcy
and securities law with Wilmer, Cutler & Pickering, in Washington, D.C., and
developed a specialization in financial restructurings. Prior to 1987, Mr.
Jeffrey served as a judicial clerk to the Hon. Nathanial R. Jones, Judge on the
United States Court of Appeals for the Sixth Circuit, Cincinnati, Ohio, and to
the Hon. Richard A. Enslen, Judge on the United States District Court for the
Western District of Michigan, Kalamazoo, Michigan.
Mr. Laguardia joined the Company as Executive Vice President and Chief
Operating Officer in December 1997. From 1995 until 1997, Mr. Laguardia had been
President and CEO of American Heritage Homes, having served as Receiver and
Trustee of American Heritage's predecessor since 1992. During Mr. Laguardia's
tenure, American Heritage returned to financial health and grew to become a
major homebuilder in the Orlando and Tampa markets. From 1990 to 1992, Mr.
Laguardia was Senior Vice President & CFO of Fairfield Communities, Inc., a
large scale developer of resort and primary home communities. Prior to that, he
served for one year as Senior Vice President and Chief Financial Officer of the
Michael Swerdlow Companies, Inc., a fully integrated, Florida-based real estate
development company. From 1982 to 1989, Mr. Laguardia served in a number of
capacities, including Executive Vice President and Chief Operating Officer, with
Gulfstream.
Mr. Gillette joined the Company in 1991, and since February 1996 has
been Senior Vice President Community Development for North Florida overseeing
the Company's projects in Tampa and Jacksonville, Florida, and Cary, North
Carolina. Prior to 1996, he served as Vice President and General Manager for the
Company's Jacksonville and Tampa projects. Prior to joining the Company, Mr.
Gillette
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held the position of Vice President and General Manager for Westinghouse
Treasure Coast Communities in Vero Beach, Florida for approximately two years
where he directed all activities associated with a luxury residential project.
During most of the 1980's, Mr. Gillette was President of the Northeast Florida
Division for Gulfstream. Previously, Mr. Gillette owned and operated a home
building and brokerage company in Richmond, Virginia for seven years.
Mr. Weed joined the Company in July 1997 as Senior Vice President -
Resorts Division and has management oversight responsibility for the West Bay
project in Naples, Florida, as well as the Jupiter Ocean Grande Project in
Jupiter, Florida. Prior to joining the Company, Mr. Weed was Chief Executive
Officer of Island Developers, Ltd., the developer of Fisher Island, Florida. He
was also responsible for the development of several large-scale residential
communities such as Boca West and Cherry Valley.
Mr. Woodbury has served as Senior Vice President - Acquisitions since
April 1997 and is responsible for evaluating potential major market land
acquisitions. From July 1995 until March 1997, Mr. Woodbury was Senior Vice
President - Community Development and was responsible for the Company's South
Florida subdivision homesite projects. Mr. Woodbury served as Senior Vice
President - Business Development from September 1994 until July 1995. Prior to
that time, he served as the Company's Vice President - Planning and Business
Development from December 1991 and has been with the Company in various land
planning capacities since 1981. From 1976 until joining the Company, Mr.
Woodbury worked in a variety of government planning positions and as a private
development consultant.
Ms. Cook was named Vice President and Controller in November 1997 after
working in the Company's tax department since 1994. Prior to joining the
Company, Ms. Cook practiced in public accounting for five years with Deloitte &
Touche and Coopers & Lybrand. Ms. Cook is a Certified Public Accountant.
Mr. Fischer has been a Vice President of the Company since March 1992
and was appointed Treasurer in February 1994. Mr. Fischer has worked for the
Company in various capacities since August 1988. Prior to joining the Company,
from 1981 to 1987, Mr. Fischer was employed by the Florida Power & Light Company
in its financial resources department.
Mr. Goldman joined the Company as Vice President and Assistant General
Counsel in January 1996. In March 1997, Mr. Goldman was named Vice President,
Secretary and General Counsel of the Company. From 1990 until 1996, Mr. Goldman
was a real estate associate with the law firm of Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A. in Miami.
Ms. Kinsey joined the Company in 1989 as Director - Human Resources and
was promoted to Vice President Human Resources in May 1992. Prior to joining the
Company, Ms. Kinsey was with Arvida for 14 years in various human resources
positions.
Mr. O'Grady joined the Company in 1995 as Vice President - Business
Development. Prior to joining the Company, Mr. O'Grady spent nearly 20 years in
the real estate industry and was involved both in commercial and residential
investment and development. Mr. O'Grady was with Rosenthal-Shuler Realty
Partners, Ahmanson Development as Vice President - Venture Operations and
President of Robert Trent Jones International Development Company in Washington,
D.C.
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Ms. Troisi joined the Company as Vice President, South Florida General
Manager, in April 1997. Ms. Troisi has more than 20 years experience in the real
estate business. Prior to joining the Company, she was the Vice President,
General Manager, for Arvida/JMB Partners for three years. Prior to joining
Arvida, she was Senior Vice President for the Baldwin Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the directors and certain officers of the Company and beneficial
owners of more than ten percent (10%) of the Company's Common Stock to file
reports of securities ownership and changes in such ownership with the SEC.
Based solely upon a review of the copies of such forms furnished to the Company
and the representations made by such persons to the Company, the Company
believes that during fiscal year 1997 its directors, officers and ten percent
beneficial owners complied with all filing requirements under Section 16(a) of
the Exchange Act, with the exception of (1) Mr. McLaughlin who filed one Form 4
late and (2) Mr. Weed who filed a Form 3 late.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation accrued/paid by the
Company during the periods indicated for services rendered to the Company and
its subsidiaries by (1) the Company's Chief Executive Officer, (2) the four
highest paid executive officers other than the Chief Executive Officer and (3)
up to two other executive officers who left the employ of the Company prior to
December 31, 1997, but who would have been included in (2) above if they had
been officers of the Company on December 31, 1997 (the "Named Executive
Officers").
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<TABLE>
<CAPTION>
Annual Compensation(1) Long Term Compensation
-------------------------------------- ----------------------------------------
Awards Payouts
------------------------- ------------
Other Restricted Securities
Fiscal Annual Stock Underlying All Other
Year Salary Bonus Compensation(6) Award(s) Option(s) LTIP Payouts Compensation(7)
------ -------- -------- --------------- ----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Larry Rutherford, 1997 $425,000 $306,000 -- -0- 3,000,000(11) -0- $ 3,673
President and Chief 1996 400,000 295,000 -- -0- -0- -0- 3,183
Executive Officer 1995 350,000 230,000 -- -0- 50,000 -0- 2,288
Thomas W. Jeffrey, 1997 $200,000 $105,000 -- -0- -0- $ 4,563
Executive Vice 1996 175,000 85,000 -- -0- 250,000(12) -0- 3,403
President and Chief 1995 175,000 55,220 -- -0- 20,000 -0- 2,616
Financial Officer 40,000
Jay C. Fertig, Senior 1997 $ 70,000 $210,997(2) -- -0- -0- -0- $ 4,059
Vice President(8) 1996 70,000 329,777(2) -- -0- 10,000 -0- 3,946
1995 70,000 152,992(2) -- -0- 10,000 -0 1,922
Kimball D. Woodbury, 1997 $150,000 $ 77,308(9) -- -0- -0- -0- $ 3,943
Senior Vice President 1996 135,000 25,783(9) -- -0- 10,000 -0- -0-
- - Acquisitions 1995 128,367 28,123(9) -- -0- 10,000 -0- 1,359
Kevin M. O'Grady, Vice 1997 $100,000 $210,781(5) $ -- -0- -0- -0- $ 626
President(3) 1996 100,000 168,914(5) -- -0- 5,000 -0- -0-
1995 42,433 50,000(2) 9,274 -0- -0- -0- -0-
Brian A. McLaughlin, 1997 $ 76,923 $570,269(2) $ -- -0- -0- -0- $ 193,445(10)
Former President - 1996 250,000 618,907(2) -- -0- -0- -0- 2,250
Atlantic Gulf Land 1995 110,577 66,887(2) 24,138 -0- -0- -0- -0-
Company(3)(4)
</TABLE>
- ------------------
(1) Salary and commissions are included in the table on a when paid basis
and bonuses are included on a when accrued basis.
(2) These amounts consist entirely of commissions.
(3) Messrs. O'Grady and McLaughlin joined the Company in July 1995.
(4) Mr. McLaughlin left the Company in April 1997. See ITEM 11. EXECUTIVE
COMPENSATION -- CONSULTING, BROKERAGE AND OTHER SIMILAR ARRANGEMENTS
WITH FORMER NAMED EXECUTIVE OFFICERS - LP MANAGEMENT SERVICES AGREEMENT
and OG MANAGEMENT SERVICES AGREEMENT below.
(5) The bonus amounts for Mr. O'Grady include commissions of $200,781 and
$153,914 in 1997 and 1996, respectively.
(6) While the Named Executive Officers receive certain perquisites, except
as stated herein, such perquisites did not exceed the lesser of $50,000
or 10% of any such officer's salary and bonus for any periods
presented. Other Annual Compensation for Mr. McLaughlin included
$20,413 for relocation expenses in 1995.
(7) Represents amounts contributed on the officer's behalf by the Company
to its 401(k) Plan.
(8) Mr. Fertig left the Company in January 1998. See ITEM 11. EXECUTIVE
COMPENSATION -- SEVERANCE ARRANGEMENTS and CONSULTING, BROKERAGE AND
OTHER SIMILAR ARRANGEMENTS WITH FORMER NAMED EXECUTIVE OFFICERS --
EXCLUSIVE BROKERAGE AND CONSULTING AGREEMENT WITH BAYSHORE LAND GROUP,
INC. below.
11
<PAGE>
(9) The bonus amounts for Mr. Woodbury include commissions of $10,308,
$15,783 and $7,438 in 1997, 1996 and 1995, respectively.
(10) All other Compensation for Mr. McLaughlin in 1997 consists of severance
of $173,077, vacation pay of $16,277 and 401(k) plan contributions of
$4,091.
(11) All of these stock options are subject to Stockholder approval, which
approval has not yet been obtained. See ITEM 11. EXECUTIVE COMPENSATION
-- STOCK OPTION GRANTS DURING FISCAL YEAR 1997 and EMPLOYMENT
AGREEMENTS below.
(12) Includes 200,000 of options which are subject to Stockholder approval,
which approval has not yet been obtained. See ITEM 11. EXECUTIVE
COMPENSATION -- STOCK OPTION GRANTS DURING FISCAL YEAR 1997 and
EMPLOYMENT AGREEMENTS below.
STOCK OPTION GRANTS DURING FISCAL YEAR 1997
The following table sets forth summary information concerning options
to purchase Common Stock granted to Named Executive Officers in 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Percent of Total Options
Granted to Employees in Exercise Expiration Grant Date
Name Options Granted Fiscal Year Price Date Present Value(4)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
J. Larry Rutherford 3,000,000(1) 92.3% (1) 11/17/04(1) (1)
- -----------------------------------------------------------------------------------------------------------------------------
Thomas W. Jeffrey 50,000(2) 1.5% $4.3125 11/17/04 $1.94
200,000(3) 6.2% (3) 11/17/04(3) (3)
- -----------------------------------------------------------------------------------------------------------------------------
Jay C. Fertig 0 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Kimball D. Woodbury 0 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Kevin M. O'Grady 0 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Brian A. McLaughlin 0 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This option is subject to Stockholder approval, which approval has not
yet been obtained. No portion of this option may be exercised before
such approval is obtained. Assuming such approval is obtained, this
option will vest in 750,000 share tranches on each of the Stockholder
approval date and December 31, 1998, 1999 and 2000. If the Stockholders
do not approve this option prior to September 30, 1998, the option will
be deemed null and void ab initio, and Mr. Rutherford will have the
right to terminate his Employment Agreement with the Company. See ITEM
11. EXECUTIVE COMPENSATION -- EMPLOYMENT AGREEMENTS - MR. RUTHERFORD'S
EMPLOYMENT AGREEMENT below. The per share exercise price of this option
will be the fair market value of the Common Stock on the date the
Stockholders approve the option. The grant date present value of this
option cannot be determined until its exercise price is set.
(2) This option will vest according to the following schedule: (a) options
for 16,667 shares of Common Stock vested on November 17, 1997, (b)
options for 16,667 shares will vest on June 30, 1998 and (c) options
for 16,666 shares will vest on June 30, 1999.
(3) This option is subject to Stockholder approval, which approval has not
yet been obtained. No portion of this option may be exercised before
such approval is obtained. Assuming such approval is obtained, this
option will vest according to the following schedule: (a) options for
66,667 shares will vest on each of the Stockholder approval date and
June 30, 1998 and (b) options for 66,666 shares will vest on June 30,
1999. If the Stockholders do not approve this option on or before
September 30, 1998, the option will expire retroactively to its
original grant date, and Mr. Jeffrey will have the right to terminate
his Employment Agreement with the Company. See ITEM 11. EXECUTIVE
COMPENSATION - EMPLOYMENT AGREEMENTS - MR. JEFFREY'S EMPLOYMENT
AGREEMENT below. The per share exercise price of this option will be
the fair market value of the Common Stock on the date the Stockholders
approve the option. The grant date present value of this option cannot
be determined until its exercise price is set.
(4) The grant date present values are calculated based on the "risk-free"
Black-Scholes model. The assumptions used in the calculations include
an expected volatility of .417, a rate of return of 5.8%, no dividend
yield and a time to exercise of five years.
12
<PAGE>
AGGREGATED STOCK OPTION EXERCISES IN FISCAL YEAR 1997 AND STOCK OPTION VALUES AT
DECEMBER 31, 1997
The following table sets forth information concerning options to
purchase Common Stock held by each of the Named Executive Officers during fiscal
year 1997 and the value of their unexercised options at December 31, 1997. None
of the Named Executive Officers exercised any options to purchase Common Stock
during fiscal year 1997.
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options at Options at
on Value December 31, 1997 December 31, 1997(1)
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Larry Rutherford -0- $ -0- 192,500 3,082,500 $ -0- $ -0-
Thomas W. Jeffrey -0- -0- 74,667 295,333 3,125 6,250
Jay C. Fertig -0- -0- 18,000 22,000 -0- -0-
Kimball D. Woodbury -0- -0- 18,000 22,000 -0- -0-
Kevin M. O'Grady -0- -0- -0- -0- -0- -0-
Brian A. McLaughlin -0- -0- -0- -0- -0- -0-
- ----------------
</TABLE>
(1) Represents the difference between the fair market value of the Common
Stock on December 31, 1997 (i.e., $4.50 per share) and the per share
exercise prices of the options.
DEFINED BENEFIT RETIREMENT PLAN
The Company has a defined benefit plan (the "Retirement Plan") that
covers most employees who met certain age and service requirements before
December 31, 1990. The Retirement Plan was amended in 1990 to fix benefits and
service accruals as of December 31, 1990. The following table reflects estimated
annual benefits payable on retirement under the Retirement Plan in the form of a
life annuity. Because credited service ceased in 1990 and none of the Company's
executive officers has 15 years of credited service, the table does not display
more than 15 years. Benefits payable under the Retirement Plan are subject to
certain limitations imposed by the Internal Revenue Code of 1986, as amended
(the "Code"), and benefits in certain situations may be subject to offsets for
Social Security.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Years of Credited Service
--------------------------------------------------------
5 10 15
Assumed Highest Average Compensation - -- --
- ----------------------------------------------------------------------------------------------------------
$ 75,000 $4,467 $ 8,935 $13,402
- ----------------------------------------------------------------------------------------------------------
100,000 6,155 12,310 18,465
- ----------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Because of the 1990 amendment to the Retirement Plan, of the executive
officers named in the Summary Compensation Table, only Mr. Fertig and Mr.
Woodbury are entitled to participate in the Retirement Plan. Their credited
service is frozen at 6 and 10 years, respectively, and their benefits are fixed
at their average salaries for the five years ended December 31, 1990 of $46,454
and $50,192, respectively.
COMPENSATION OF DIRECTORS
Under the 1996 Non-Employee Directors' Stock Plan, each Non-Employee
Director receives (1) an annual retainer of $25,000 paid in Common Stock
quarterly based on the share price at the end of the previous quarter, (2)
$3,000 per Board meeting attended in person and (3) $1,000 per Board meeting
attended by telephone. Board meeting fees are paid in cash quarterly. No fees
are paid for attending Board Committee meetings or for serving as Chairman of a
Board Committee. Mr. Rutherford is an employee Director and, therefore, is not
entitled to participate in the Non-Employee Directors' Stock Plan. Effective
April 1, 1998, the Board amended the 1996 Non-Employee Directors' Stock Plan to
provide that (a) sixty percent (60%) of the annual retainer (i.e., $15,000)
would be paid in Common Stock and (2) the remaining forty percent (40%) of the
annual retainer (i.e., $10,000) would be paid in cash. The purpose of this
change is to provide the Non-Employee Directors with cash in an amount
sufficient to pay their taxes on the annual retainer.
Under the Non-Employee Directors' Stock Option Plan, each Non-Employee
Director who was a director on February 6, 1995 (1) was granted an option to
acquire 20,000 shares of Common Stock and (2) is granted an option to acquire
5,000 shares of Common Stock at the first meeting of directors following each
subsequent election or appointment of such director to the Board. Each person
who became (or becomes) a Non-Employee Director after February 6, 1995, (1) was
(will be) granted an option to acquire 20,000 shares of Common Stock and (2) is
(will be) granted an option to acquire 5,000 shares of Common Stock at the first
meeting of directors following each subsequent election or appointment of such
person to the Board. The exercise price of each of these options is 100% of the
fair market value of the Common Stock on the option grant date. Each option is
fully vested on the grant date and has a term of 10 years. Options for a maximum
of 350,000 shares of Common Stock may be granted under this plan. Effective
April 1, 1998, the Board amended the Non-Employee Directors' Stock Option Plan
to provide that each Apollo Director will be granted an option to purchase 1,667
shares of Common Stock each time he is re-appointed to the Board. Every third
year that an Apollo Director is re-appointed to the Board his option grant will
cover 1,666 shares of Common Stock, with the result that an Apollo Director who
is re-appointed to the Board for three consecutive years will receive three (3)
options covering the same number of shares of Common Stock (i.e., 5,000) as a
Class 1, 2 or 3 Director who is re-elected to a three-year term.
In 1997, the Stockholders approved an amendment to the Non-Employee
Directors' Stock Option Plan to extend the exercise periods of the options
granted under that plan to the seven (7) directors (Messrs. Apthorp, Blase,
Cohen, Ehrlich, Frederick, Seidman and Temple) who resigned effective as of the
Closing in accordance with the terms of the Investment Agreement (the "Former
Directors") from 90 days following their resignation dates to the earlier of (1)
the scheduled expiration dates of such options (i.e., the tenth anniversary of
their grant dates) or (2) the expiration of the period ending on the second
anniversary of the effective dates of their resignations plus the
14
<PAGE>
expiration of the period equal to 6 months for each full 12 months such Former
Director served as a Board member. Consequently, the exercise periods of the
options held by the seven Former Directors were extended as follows: Mr. Apthorp
- - 20,000 options until June 2002; Mr. Blase - 25,000 options until June 2000;
Mr. Cohen - 20,000 options until December 2001; Mr. Ehrlich - 25,000 options
until December 2001; Mr. Frederick - 25,000 options until June 2001; Mr. Seidman
- - 20,000 options until December 1999; and Mr. Temple - 25,000 options until
December 2001.
EMPLOYMENT AGREEMENTS
Defined terms used in each of the subsections of this section are
applicable solely for purposes of the subsection in which they are used and not
for any other purpose, section or subsection herein.
MR. RUTHERFORD'S EMPLOYMENT AGREEMENT. On November 17, 1997, Mr.
Rutherford and the Company entered into that certain Employment Agreement (as
amended on November 26, 1997, and on December 29, 1997), pursuant to which the
Company agreed to continue to employ Mr. Rutherford as President and Chief
Executive Officer of the Company for the period commencing on and as of July 1,
1997 and ending on December 31, 2000, unless terminated sooner in accordance
with its terms.
Pursuant to his Employment Agreement, Mr. Rutherford will be paid a
base salary of $450,000 per year ("Base Salary"). Beginning January 1, 1999, the
Base Salary will be reviewed, at least annually, by the Board. Mr. Rutherford
received a bonus in the amount of $206,000 on the date he signed his Employment
Agreement. Mr. Rutherford is eligible to receive annual bonuses in 1998 and 1999
("Bonuses"), as described below, and a Warrant Reset Bonus, as described below.
The Bonuses and the Warrant Reset Bonus are collectively referred to herein as
Mr. Rutherford's "Incentive Compensation."
Mr. Rutherford is eligible to receive Bonuses of up to $600,000 per
year in each of 1998 and 1999. Twenty-five percent (25%) of each Bonus will be
payable in the discretion of the Board. The remaining seventy-five percent (75%)
of each Bonus will be payable based on the achievement by the Company of certain
objectives determined by the Compensation/Stock Option Committee for the
calendar year to which such Bonus applies (the "Objectives"). The Objectives
will be set by the Compensation/Stock Option Committee on or before March 31st
of each calendar year. The Objectives will be based upon any or all of the
following criteria for the Company, and/or specified subsidiaries, and/or
business units or development projects of the Company and/or specified
subsidiaries: (i) net cash flow, (ii) net pre-tax or net after-tax earnings,
(iii) earnings before interest, taxes depreciation and amortization, (iv)
earnings per share, (v) return on equity, (vi) return on capital, (vii) return
on investment, (viii) ratio of debt to Stockholders equity and (ix) total
Stockholder return (or total Stockholder return as compared to total return (on
a comparable basis) of a publicly available index). Subject to obtaining
Stockholders approval for this arrangement, 50% of each Bonus, to the extent
earned, will be paid in Common Stock, valued at its fair market value as of the
date of the payment. The other 50% of each Bonus will be paid in cash. The
Company has agreed to loan to Mr. Rutherford the federal income taxes required
to be withheld by the Company with respect to the Common Stock component of his
Bonuses. The loan will (X) be evidenced by a recourse promissory note, secured
by the shares of the Common Stock component
15
<PAGE>
of the Bonus, (Y) bear interest at the prime rate as published in the Wall
Street Journal from time to time (the "WSJ Rate"), payable monthly in arrears,
and (Z) be payable in full one year from the date of the loan. If the
Stockholders do not approve the payment of 50% of the Bonuses in Common Stock,
then all Bonuses will be paid entirely in cash. If the Stockholders approve this
arrangement prior to March 15, 1999, 50% of the Bonuses, starting with the 1998
Bonus, will be payable in Common Stock.
On June 24, 1997, the Company issued certain warrants to Apollo (the
"Apollo Warrants"). The exercise price of the Apollo Warrants is subject to a
downward adjustment by March 31, 1999, to the extent the Company does not
achieve certain cumulative cash flow targets for 1998 and 1999. Mr. Rutherford
is eligible to receive a $250,000 bonus (the "Warrant Reset Incentive") in the
event there is no downward adjustment in the exercise price of the Apollo
Warrants. Subject to the Stockholders approving this arrangement, 50% of the
Warrant Reset Incentive, to the extent earned, will be paid in Common Stock,
valued at its fair market value as of the date of payment. The other 50% of the
Warrant Reset Incentive will be paid in cash. If the Stockholders do not approve
the payment of 50% of the Warrant Reset Incentive in Common Stock, then the
Warrant Reset Incentive will be paid entirely in cash.
Mr. Rutherford's Employment Agreement provides for other fringe
benefits, including participation in medical, dental, hospitalization,
accidental death and dismemberment, disability, travel and life insurance plans
and any and all other welfare or benefit plans offered by the Company to its
executives, including savings, pension, profit-sharing and deferred compensation
plans.
The Company has granted Mr. Rutherford an option (the "Option") to
acquire up to 3,000,000 shares of Common Stock. The terms of the Option are set
forth in that certain Stock Incentive Plan and Agreement for Mr. Rutherford,
dated as of November 17, 1997 (the "Option Agreement"), a copy of which is
attached as Exhibit A to Mr. Rutherford's Employment Agreement. No portion of
the Option is exercisable prior to the date on which the Stockholders approve
the Option Agreement. The Option has a 7-year term. The per share exercise price
of the Option will be the fair market value of the Common Stock on the date the
Option Agreement is approved by the Stockholders. Subject to obtaining such
approval, the Option will be exercisable as to 750,000 shares of Common Stock on
each of the Stockholder approval date and on each of December 31, 1998, 1999 and
2000. The Option will become immediately exercisable in full if a "change of
control" of the Company (as defined in the Option Agreement) occurs or if a
committee of outside directors appointed by the Board or the Board gives notice
canceling, effective on the date of consummation of certain major transactions
(specified in the Option Agreement), any Option that remains unexercised on such
date. If the Stockholders do not approve the Option Agreement on or before
September 30, 1998, the Option will expire retroactively to its original grant
date and, as discussed below, Mr. Rutherford will have the right to terminate
his Employment Agreement for good reason.
In accordance with the terms of his Employment Agreement, subject to
compliance with applicable margin rules, the Company loaned Mr. Rutherford
$199,000 in 1997, and, subject to obtaining Stockholder approval, agreed to loan
him an additional $199,000 in 1998 (the "Recourse Loans"), to be used by Mr.
Rutherford to purchase Common Stock in the NASDAQ National Market
16
<PAGE>
or from third parties. In addition, subject to prior approval of the
Stockholders, Mr. Rutherford has agreed to purchase $600,000 of Common Stock
from the Company. Subject to compliance with the applicable margin rules, the
Company has agreed to loan Mr. Rutherford $600,000 to fund such purchase (the
"$600,000 Loan"). The Recourse Loans and the $600,000 Loan (the "Loans") will be
secured by a pledge of the shares purchased by Mr. Rutherford, subject to
applicable margin rules. The Recourse Loans will be full recourse loans to Mr.
Rutherford. The $600,000 Loans will be nonrecourse to Mr. Rutherford. The term
of each Loan will be 5 years, payable in annual installments of interest only,
with principal and unpaid interest due and payable in full at maturity. Interest
will accrue on the Loans at the WSJ Rate. In addition to other customary events
of default, the Loans will become due and payable in full upon termination by
the Company of Mr. Rutherford's employment for cause or termination by Mr.
Rutherford of his employment with the Company.
The Company has the right, in its sole and absolute discretion, to
terminate Mr. Rutherford's employment with the Company for cause, as defined in
Mr. Rutherford's Employment Agreement. Upon the occurrence of any such
termination, Mr. Rutherford will be entitled to receive (1) any accrued and
unpaid Base Salary through the termination date and (2) any accrued and earned
but unpaid Incentive Compensation for bonus periods ending on or before the
termination date. Any and all unexercised and unvested Options will terminate 5
business days after the termination date.
Mr. Rutherford's Employment Agreement will terminate on his death, and
the Company will have the right to terminate Mr. Rutherford's employment with
the Company if Mr. Rutherford, as a result of physical or mental disability (as
defined in his Employment Agreement), is unable to perform his duties for a
period of 180 days in any 12-month period. Upon the occurrence of such
termination, Mr. Rutherford (or his estate, in the case of his death) will be
entitled to receive (1) any accrued and unpaid Base Salary through the
termination date, (2) any accrued and earned but unpaid Incentive Compensation
for bonus periods ending on or before the termination date and (3) 6 months
additional Base Salary according to the Company's normal payroll schedule. Any
and all unexercised and unvested Options will terminate 90 days after the
termination date.
Finally, the Company has the right at all times, in its sole and
absolute discretion, to terminate Mr. Rutherford's employment without cause.
Upon the occurrence of any such termination, Mr. Rutherford will be entitled to
receive (1) any accrued and unpaid Base Salary through the termination date, (2)
any accrued and earned but unpaid Incentive Compensation for bonus periods
ending on or before the termination date and (3) his Base Salary (according to
the Company's normal payroll schedule) until the earlier of (a) 2 years from the
date of termination or (b) December 31, 2000. Any and all unexercised and
unvested Options will terminate 90 days after the termination date.
Mr. Rutherford has the right at all times, on 60 days' written notice,
to terminate his employment with the Company. Upon any such termination (other
than by Mr. Rutherford for good reason, as defined below), Mr. Rutherford will
be entitled to receive (1) any accrued and unpaid Base Salary through the
termination date and (2) any accrued and earned but unpaid Incentive
Compensation for bonus periods ending on or before the termination date. Any and
all unexercised and unvested Options will terminate 30 days after the
termination date.
17
<PAGE>
In the event the Stockholders do not approve his Option Agreement, Mr.
Rutherford has the right to terminate his employment with the Company for good
reason at any time before October 15, 1998. Upon any such termination, Mr.
Rutherford will be entitled to receive (1) any accrued and unpaid Base Salary
through the termination date, (2) any accrued and earned but unpaid Incentive
Compensation for bonus periods ending on or before the termination date and (3)
a pro rata share of any Incentive Compensation (to the extent earned) for the
bonus period including the termination date. In addition, all of the restrictive
covenants in the Employment Agreement applicable to Mr. Rutherford will
terminate. Any and all unexercised and unvested Options will terminate 30 days
after the termination date.
At all times while he is employed by the Company and unless (1) his
employment with the Company is terminated by the Company prior to the expiration
of his Employment Agreement without cause or (2) he terminates his employment
with the Company for good reason, for a 2-year period following termination of
his employment with the Company, Mr. Rutherford is prohibited from competing,
directly or indirectly, with the Company (with certain limited exceptions, as
set forth in his Employment Agreement). He is also prohibited at any time from
disclosing, using to the detriment of the Company or for the benefit of any
other persons or misusing the Company's confidential information. Finally,
during his employment and for a 2-year period following termination of his
employment for any reason, he is prohibited from (a) employing or attempting to
employ any Company employee unless such employee has not been employed by the
Company for a period in excess of 6 months or (b) calling on or soliciting
actual or prospective clients of the Company on behalf of any competitor of the
Company.
Mr. Rutherford's Employment Agreement provides that, for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder ("Section 162(m)"), for each fiscal
year of the Company, payment of the portion of Mr. Rutherford's Incentive
Compensation earned for that fiscal year that would not otherwise be deductible
by reason of Section 162(m) (the "Section 162(m) Portion") shall be subject to
the following conditions: (1) the Objectives for such year shall be determined
by the Compensation/Stock Option Committee at such times as may be required for
the Section 162(m) Portion to be deductible under Section 162(m), (2) the
Company's attainment of the Objectives shall be determined by the Compensation
Committee, in its sole discretion, (3) payment of the Section 162(m) Portion
shall be subject to the prior approval of the Stockholders of the material terms
of such Objectives (including the maximum amount of compensation that may be
paid to Mr. Rutherford for any calendar year) and (4) the sum of the Incentive
Compensation and the Warrant Reset Incentive payable to Mr. Rutherford in any
calendar year shall not exceed $1 million. Notwithstanding any other provision
of Mr. Rutherford's Employment Agreement, compensation otherwise payable to Mr.
Rutherford thereunder that, for any calendar year, does not meet one of the
exceptions to the deduction limitation in Section 162(m), will not, for such
year, exceed the Section 162(m) deduction limitation. In addition, the grant of
the Option to Mr. Rutherford and any rights to purchase Common Stock for a
nonrecourse note will be subject to and conditioned upon (a) approval of the
Compensation/Stock Option Committee and (b) approval by the Stockholders of Mr.
Rutherford's Option Agreement. As discussed above, the 1998 Recourse Loan to Mr.
Rutherford also will require Stockholder approval.
18
<PAGE>
MR. JEFFREY'S EMPLOYMENT AGREEMENT. On November 17, 1997, Mr. Jeffrey
and the Company entered into that certain Employment Agreement, effective as of
July 1, 1997, pursuant to which the Company agreed to continue to employ Mr.
Jeffrey as Executive Vice President and Chief Financial Officer of the Company
for the period commencing on July 1, 1997 and ending on June 30, 1999, unless
terminated sooner in accordance with the terms thereof.
Pursuant to his Employment Agreement, Mr. Jeffrey (1) was paid $200,000
for the last 6 months of 1997 and (2) is to be paid an annual base salary of
$225,000 per year starting in 1998 ("Base Compensation"). Mr. Jeffrey is
eligible to receive an annual bonus, to the extent earned (a "Performance
Bonus"), of up to 50% of his Base Compensation, based upon the Company's and his
performance. Performance Bonuses will be determined based upon objectives and
other criteria set by the President and approved by the Board in consultation
with Mr. Jeffrey. Mr. Jeffrey received a cash bonus of $90,000 when he signed
his Employment Agreement in payment for his agreement to terminate his
employment arrangement with the Company that was authorized by the Board on
December 9, 1996 . The $90,000 will be applied against Mr. Jeffrey's 1997
Performance Bonus.
Mr. Jeffrey's Employment Agreement also provides that he will be
entitled to such other fringe benefits and perquisites as are provided to any or
all of the Company's senior executives, including (but not limited to), life
insurance and health insurance, four weeks of paid vacation, the right to
participate in the Company's 401(k) plan, a Company leased car and up to $1,000
per year of tax planning and return preparation services.
The Company granted Mr. Jeffrey, effective as of November 17, 1997, an
Option to acquire up to 50,000 shares of Common Stock (the "Existing Plan
Option"). The terms of the Existing Plan Option are set forth in that certain
Existing Plan Stock Option Agreement, dated as of November 17, 1997 (the
"Existing Plan Option Agreement"), a copy of which is attached as Exhibit A to
Mr. Jeffrey's Employment Agreement. The Existing Plan Option has a 7-year term.
The exercise price of the Existing Plan Option is $4.3125 per share. Existing
Plan Options to purchase 16,667 shares of Common Stock became exercisable on
November 17, 1997. Existing Plan Options to purchase another 16,667 shares of
Common Stock will become exercisable on June 30, 1998, and Existing Plan Options
to acquire the final 16,666 shares of Common Stock will become exercisable on
June 30, 1999. The Existing Plan Option will become immediately exercisable in
full if a "change of control" of the Company (as defined in the Option
Agreements) occurs or if a committee of outside directors appointed by the Board
or the Board gives 30 days' notice canceling, effective on the date of
consummation of certain major transactions (specified in the Existing Plan
Option Agreement), any Existing Plan Option that remains unexercised on such
date.
The Company also granted Mr. Jeffrey, effective as of November 17,
1997, an Option to acquire up to another 200,000 shares of Common Stock (the
"New Plan Option"). The terms of the New Plan Option are set forth in that
certain New Plan Stock Option Agreement, dated as of November 17, 1997 (the "New
Plan Option Agreement"), a copy of which is attached as Exhibit B to Mr.
Jeffrey's Employment Agreement. No portion of the NewPlan Option is exercisable
prior to the date on which the Stockholders approve the New Plan Option
Agreement in satisfaction of the requirements of Section 162(m). The New Plan
option has a 7-year term. The exercise price of the New Plan Option will be
equal to the fair market value of the Common Stock on the date the New
19
<PAGE>
Plan Option Agreement is approved by the Stockholders. Subject to obtaining
Stockholder approval, New Plan Options to acquire 66,667 shares of Common Stock
will become exercisable on each of the Stockholder approval date and June 30,
1998, and New Plan Options to acquire 66,666 shares of Common Stock will become
exercisable on June 30, 1999. If the Stockholders do not approve the New Plan
Option Agreement on or before September 30, 1998, the New Plan Option will
expire retroactively to its original grant date, and Mr. Jeffrey will have the
right to terminate his Employment Agreement for good reason, as described below.
The New Plan Option will become immediately exercisable in full if a "change of
control" of the Company (as defined in the New Plan Option Agreement) occurs or
if a committee of outside directors appointed by the Board or the Board gives 30
days' notice canceling, effective on the date of consummation of certain major
transactions (specified in the Option Agreements), any New Plan Option that
remains unexercised on such date.
The Company has the right to terminate Mr. Jeffrey's employment with
the Company for cause, as defined in Mr. Jeffrey's Employment Agreement. Upon
any such a termination, Mr. Jeffrey will not be entitled to receive any further
compensation, and all of his Options will terminate 5 business days after the
termination date.
Mr. Jeffrey's Employment Agreement will terminate immediately upon his
death or total and permanent disability (i.e., if he is unable to perform his
regular duties for 180 or more consecutive days). Upon such a termination, Mr.
Jeffrey or his estate will be entitled to receive (1) any accrued but unpaid
Base Compensation through the termination date, (2) any accrued and earned but
unpaid Performance Bonus and (3) a severance payment equal to 6 months of Base
Compensation. Any and all unexercised and unvested Options will terminate 90
days after the termination date.
The Company also has the right, upon 60 days' notice, to terminate Mr.
Jeffrey's employment without cause. Upon any such termination, Mr. Jeffrey will
be entitled to receive (1) any Performance Bonus earned but unpaid and (2) a
cash severance payment in the amount of $300,000, payable bi-weekly over the
twelve-month period following the termination date . The Company will continue
Mr. Jeffrey's (a) leased car expense reimbursement and his tax preparation
reimbursement for a period of 3 months following the termination date or,
alternatively, pay Mr. Jeffrey the after-tax equivalent of such benefits and (b)
insurance benefits for a period of 12 months following the termination date or,
alternatively, pay Mr. Jeffrey the after-tax equivalent of such benefits. The
Company also will pay, on Mr. Jeffrey's behalf, up to $10,000 of outplacement
service costs. Any and all unexercised and unvested Options will terminate 90
days after the termination date.
Mr. Jeffrey has the right, on 90 days' written notice, to terminate his
employment with the Company. Upon any such termination (but not in the event
such termination arises out of the failure of the Stockholders to approve the
New Plan Option Agreement on or before September 30, 1998), Mr. Jeffrey will be
not be entitled to receive any further compensation, and any and all unexercised
and unvested Options will terminate 30 days after the termination date.
If the Stockholders do not approve his New Plan Option Agreement on or
before September 30, 1998, Mr. Jeffrey will have the right to terminate his
employment for good reason
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<PAGE>
at any time prior to the earlier of 15 days following disapproval by the
Stockholders or October 15, 1998. Upon such a termination, Mr. Jeffrey will be
entitled to receive (1) accrued but unpaid Base Compensation through the
termination date and (2) accrued and earned but unpaid Performance Bonus, if
any. In addition, if, and only to the extent that the Performance Bonus would
have been payable to Mr. Jeffrey for the bonus period in which Mr. Jeffrey
terminates his employment for good reason based upon satisfaction of the
pre-determined objectives set by the President and approved by the Board, Mr.
Jeffrey will be entitled to receive a pro rata share of his Performance Bonus
that is earned for the bonus period in which his employment terminates. All New
Plan Options will terminate automatically if the Stockholders do not approve the
New Plan Option Agreement on or before September 30, 1998, whether or not Mr.
Jeffrey terminates his employment for good reason. Any and all unexercised and
unvested Existing Plan Options will terminate 30 days after the termination date
in the event Mr. Jeffrey terminates his employment for good reason.
At all times while he is employed by the Company, Mr. Jeffrey is
prohibited from competing, directly or indirectly, with the Company in the real
estate development and sales business in the State of Florida. He is also
prohibited at any time from disclosing or using any of the Company's
confidential information except as required by the performance of his duties and
solely for the Company's benefit except as may be required by any law or court
order . Finally, during his employment and for a period of 180 days following
the termination of his employment with the Company, Mr. Jeffrey is prohibited
from soliciting, encouraging or inducing any employee of the Company to leave
his employment with the Company.
SEVERANCE ARRANGEMENTS
MR. FERTIG'S TERMINATION AGREEMENT. On January 16, 1998, Mr. Fertig and
the Company entered into that certain Termination of Employment Agreement (the
"Termination Agreement") pursuant to which Mr. Fertig left the employ of the
Company effective as of the same date. Pursuant to Mr. Fertig's Termination
Agreement, the Company agreed to pay Mr. Fertig (1) termination pay equal to 12
months base salary (i.e., $200,000), less all applicable withholding amounts, in
26 bi-weekly installments, beginning on January 17, 1998 and ending on January
16, 1999, (2) for all accrued and unused vacation time and (3) all bonuses,
overrides and the like for the fiscal year ended December 31, 1997. The Company
also agreed to maintain in force Mr. Fertig's group insurance through January
31, 1999. Mr. Fertig will be eligible for COBRA continuation coverage effective
February 1, 1999. The Company will continue to pay for Mr. Fertig's leased
vehicle through September 15, 1999. Mr. Fertig (X) waived any and all
employment/termination of employment claims he might have against the Company,
(Y) agreed not to disclose or make use of any Company confidential information
and (Z) agreed during the 12-month termination pay payout period to reasonably
cooperate with and assist the Company concerning matters he worked on while
employed by the Company (and the Company agreed to reimburse Mr. Fertig for any
reasonable out-of-pocket expenses he incurred in connection with providing such
cooperation and assistance).
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<PAGE>
CONSULTING, BROKERAGE AND OTHER SIMILAR ARRANGEMENTS WITH FORMER NAMED EXECUTIVE
OFFICERS
EXCLUSIVE BROKERAGE AND CONSULTING AGREEMENT WITH BAYSHORE LAND GROUP,
INC. On January 16, 1998, the Company entered into an Exclusive Brokerage and
Consulting Agreement, dated as of the same date (the "Bayshore Agreement"), with
Bayshore Land Group, Inc. ("Bayshore"). Mr. Fertig, who terminated his
employment with the Company in January 1998, is the president and a stockholder
of Bayshore.
Pursuant to the Bayshore Agreement, the Company has retained Bayshore,
on an exclusive basis, to serve as its exclusive broker, and as a consultant to
the Company, in connection with the advertising, marketing, promotion and sale
of certain Company-owned Tracts (as identified therein), Lots (as identified
therein) and one Commercial Parcel (as identified therein), all located in
Florida and Tennessee (collectively, the "Property").
The term of the Bayshore Agreement is one year for the sale of Tracts,
two years for the sale of Lots and two years for the sale of the Commercial
Parcel. In consideration for Bayshore's services, the Company agreed to pay
Bayshore the following commissions ("Commissions"): (1) 6% of the gross sales
price for the sale of certain Lots and Tracts that were already under contract
at the time the parties entered into the Bayshore Agreement, (2) 6% of the gross
sales price for all other Lots and Tracts (3.5% in the case of certain sales in
the Sabal Trace development), and (3) 4% of the gross sales price of the
Commercial Parcel (6% of the gross sales price if a co-broker is retained, but
Bayshore will be responsible for paying the co-broker). From January 16, 1998
through March 31, 1998, the Company paid a total of $284,126 in commissions to
Bayshore.
The Company may terminate the Bayshore Agreement (1) without cause (as
defined therein) at any time upon thirty days prior written notice to Bayshore
and (2) at any time with cause (as defined therein). In the event of a
termination without cause, the Company has agreed to pay Bayshore (a) all
Commissions payable under the Bayshore Agreement with respect to sales under
contract on the termination date which close thereafter, (b) subject to (c)
below, in the case of all properties not under contract on the termination date,
between 3% and 6% of the listing price for the Properties (as shown on an
attachment to the Bayshore Contract) depending on when the Bayshore Agreement is
terminated and (c) if a Property not under contract on the termination date is
sold within 120 days after the termination date, the full Commission on the
Property (less amounts already paid under (b) above) with respect to sales to
parties to whom Bayshore showed the Property prior to the termination date.
LP MANAGEMENT SERVICES AGREEMENT. On July 1, 1997, the Company entered
into a Management Services Agreement (the "LP Management Agreement") with
Development Management Group, Inc. ("DMG"), pursuant to which the Company
retained DMG to provide certain development and operating management services to
the Company's LaBelle Plantations project (the "Project") on behalf of the
Company. Mr. McLaughlin, who terminated his employment with the Company in April
1997, is the president and a stockholder of DMG.
Pursuant to the LP Management Agreement, DMG agreed to (1) oversee the
design, development, sales, marketing and day-to-day operations of the Project
and (2) obtain all necessary
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<PAGE>
development approvals for the project. The term of the LP Management Agreement
was scheduled to expire on the earliest to occur of (a) the sale of the last
plantation (the Project consists of several smaller plantation tracts), (b)
December 31, 1999 or (c) the early termination date, as described below. In
consideration for DMG's services, the Company agreed to pay DMG (a) a base fee
of $6,000 per month ("Base Fee") and (b) incentive compensation equal to 5% of
the gross amount of all sales, transfers or dispositions relating to the Project
("Incentive Compensation").
The Company terminated the LP Management Agreement without cause in
March 1998. In accordance with the terms of the LP Management Agreement, the
Company agreed to pay DMG any Base Fee earned through the termination date plus
six months additional Base Fee, and DMG will retain any rights it may have to
Incentive Compensation earned but unpaid as of the termination date.
OG MANAGEMENT SERVICES AGREEMENT. On July 1, 1997, the Company entered
into a Management Services Agreement (the "OG Management Agreement") with DMG
and Ocean Grove Associates, Ltd., a Florida limited partnership ("OGLP"). The
Company is the parent of Ocean Grove, Inc. ("OGI"). OGI is the general partner
of OGLP. OGLP owns a project in Jupiter, Florida (the "Project"). Pursuant to
the OG Management Services Agreement, the Company, OGLP and OGI retained DMG to
provide certain development and operating management services to the Project on
behalf of OGLP. As discussed above, Mr. McLaughlin, who terminated his
employment with the Company in April 1997, is the president and a stockholder of
DMG.
Pursuant to the OG Management Agreement, DMG agreed to (1) oversee the
redesign, development and construction, sales, marketing and day-to-day
operations and (2) obtain all approvals necessary to commence construction, of
the Project. The term of the OG Management Agreement was scheduled to expire on
the earliest to occur of (a) the receipt of the certificate of occupancy for the
last building to be built on the Project and the sale of the last residential
unit and/or cabana, (b) December 31, 2003 or (c) the termination date, as
described below. In consideration for DMG's services, OGLP agreed to pay DMG (i)
a base fee of $15,000 per month ("Base Fee"), provided that in no event will the
Base Fee exceed 5% of the projected total gross sales from the Project, (ii)
incentive compensation equal to 1.5% of the gross amount of all sales, transfers
or dispositions relating to the Project ("Incentive Compensation") and (iii)
bonus compensation in an amount equal to 1% of the gross sales amount of all
sales, transfers and dispositions relating to the Project upon repayment to OGLP
of its equity capital invested in the Project.
OGLP terminated the OG Management Agreement without cause in March
1998. In accordance with the terms of the OG Management Agreement, OGLP agreed
to pay DMG any Base Fee earned through the termination date plus six months
additional Base Fee, and DMG will retain any rights it may have to Incentive
Compensation earned but unpaid as of the termination date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation/Stock Option Committee during fiscal
year 1997 were Messrs. DeFrancia, Koenig and Neibart (the Chairman). None of the
executive officers of the Company serves or served on the compensation committee
of another entity or on any other committee of the board of directors of another
entity performing similar functions during fiscal year
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<PAGE>
1997, and no executive officer of the Company serves or served as a director of
another entity one of whose executive officers serves or served on the
Compensation/Stock Option Committee or the Board.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of shares of Common Stock as of April 1, 1998, by (i) each
person (or group of affiliated persons) known by the Company to be the
beneficial owner of more than five percent (5%) of the outstanding shares of
Common Stock, (ii) each of the Company's directors, (iii) each Named Executive
Officer (as defined in ITEM 11. EXECUTIVE COMPENSATION -- SUMMARY COMPENSATION
TABLE) and (iv) all directors and Named Executive Officers as a group.
<TABLE>
<CAPTION>
Number of
Name and Address of Beneficial Owner (1) Shares(2) Percent (2)
---------------------------------------- --------- -----------
<S> <C> <C>
AP-AGC, LLCP (3)(4) 9,982,500 46.4%
Morgan Stanley Group (5) 4,135,075 30.3%
Elliott Group (6) 2,378,573 18.3%
Corinthian Capital Company (7) 714,785 6.2%
Luther King Capital Management (8) 610,279 5.3%
Gerald N. Agranoff (9) 47,816 (20)
James M. DeFrancia (10) 23,441 (20)
Stuart F. Koenig (3)(4)(11) 9,935,618 46.3%
Ricardo Koenigsberger (3)(4)(12) 9,937,008 46.3%
Charles K. MacDonald (13) 23,441 (20)
Lee Neibart (3)(4)(14) 9,937,008 46.3%
J. Larry Rutherford (15) 261,204 2.2%
Thomas W. Jeffrey (16) 88,010 (20)
Jay C. Fertig (17) 18,000 (20)
Kimball D. Woodbury(18) 21,500 (20)
Kevin M. O'Grady 0 0
Brian A. McLaughlin(19) 5,000 (20)
All Named Executive Officers and Directors as a
Group (10 persons)(17)(19) 30,275,046 72.6%
</TABLE>
- ------------------
(1) Unless otherwise indicated, the address of each of the persons named
above is c/o Atlantic Gulf Communities Corporation, 2601 South Bayshore
Drive, Miami, Florida 33133.
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<PAGE>
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon the
exercise of options or warrants. Each beneficial owner's number of
shares is determined by assuming that options or warrants that are held
by such person (but not those held by any other person) and that are
exercisable within 60 days from the date hereof have been exercised.
The total outstanding shares used to calculate each beneficial owner's
percentage includes such exercisable options and warrants of that
person only. Unless otherwise noted, the Company believes that all
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(3) Messrs. Koenig, Koenigsberger and Neibart, the Apollo Directors, are
affiliated with Apollo. Accordingly, Apollo may be deemed to be the
beneficial owner of the shares owned by each of Messrs. Koenig,
Koenigsberger and Neibart and, in turn, each of them may be deemed to
be the beneficial owner of the shares owned by Apollo.
(4) Consisting of (a) 4,913,567 shares of Common Stock issuable upon the
conversion of 2.5 million shares of Series A Preferred Stock into
Common Stock (at a conversion price of $5.75 per share), (b) 5,000,000
shares of Common Stock issuable upon the exercise of 5 million warrants
(at an exercise price of $5.75 per share), (c) 2,051 shares of Common
Stock owned by Mr. Koenig, (d) 20,000shares of Common Stock issuable to
Mr. Koenig upon the exercise of a stock option (at an exercise price of
$4.813 per share), (e) 3,441 shares of Common Stock owned by Mr.
Koenigsberger, (f) 20,000 shares of Common Stock issuable to Mr.
Koenigsberger upon the exercise of a stock option (at an exercise price
of $6.6406 per share), (g) 3,441 shares of Common Stock owned by Mr.
Neibart and (h) 20,000 shares of Common Stock issuable to Mr. Neibart
upon the exercise of a stock option (at an exercise price of $6.6406
per share).
(5) According to a Schedule 13G, dated February 24, 1998, the following
parties, which have elected to file as a 13G group (the "Morgan Stanley
Group"), reported beneficial ownership of the following shares of
Common Stock:
(i) Morgan Stanley, Dean Witter, Discover & Co.("MS") : beneficial
ownership - 4,135,075 shares (including the shares described
in (ii), (iii), (iv) and (v) below), shared voting power -
2,035,900 shares and shared dispositive power - 4,135,075
shares;
(ii) Morgan Stanley Asset Management Inc. (a wholly-owned
subsidiary of MS): beneficial ownership - 2,685,914 shares
(including the shares described in (iii) below), shared voting
power - 1,409,996 shares and shared dispositive power -
2,685,914 shares (including the shares described in (iii)
below);
(iii) Morgan Stanley Institutional Fund, Inc. - U.S. Real Estate
Portfolio: beneficial ownership - 1,245,079 shares, shared
voting power - 589,684 shares and shared dispositive power -
1,245,079 shares;
(iv) Van Kampen American Capital Asset Management, Inc. (a
wholly-owned subsidiary of MS): beneficial ownership -
1,449,161 shares (including the shares described in (v)
below), shared voting power - 625,904 shares and shared
dispositive power - 1,449,161 shares (including the shares
described in (v) below); and
(v) Van Kampen American Capital Life Investment Trust - Real
Estate Securities Fund: beneficial ownership - 1,002,287
shares, shared voting power - 433,224 shares and shared
dispositive power - 1,002,287 shares.
The address of the Morgan Stanley Group is 1585 Broadway, 38th Floor,
New York, New York 10036.
(6) According to a Schedule 13D, dated July 1, 1997, the following parties,
which have elected to file as a 13D group (the "Elliott Group"),
reported beneficial ownership of the following shares of Common Stock:
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<PAGE>
(i) Elliott Associates, L.P. ("Elliott"): beneficial ownership -
2,378,573 shares and sole dispositive power - 2,378,573
shares;
(ii) Westgate International, L.P. ( a wholly-owned subsidiary of
Elliott): beneficial ownership - 537,390 shares, shared voting
power - 537,390 shares and shared dispositive power - 537,390
shares; and
(iii) Martley International, Inc.(a wholly-owned subsidiary of
Elliott): beneficial ownership - 537,390 shares, shared voting
power - 537,390 shares and shared dispositive power - 537,390
shares.
The address of the Elliott Group is 712 Fifth Avenue, 36th Floor, New
York, New York 10019.
(7) Consisting solely of shares of Common Stock. The address of Corinthian
Capital Company is 1700 Broadway, Suite 712, Denver, Colorado 80290.
(8) Consisting solely of shares of Common Stock. The address of Luther King
Capital Management is 301 Commerce Street, Suite 1600, Fort Worth,
Texas 76102.
(9) Consisting of (a) 22,816 shares of Common Stock, (b) 20,000 shares of
Common Stock issuable upon the exercise of a stock option (at an
exercise price of $8.75 per share), and (c) 5,000 shares of Common
Stock issuable upon the exercise of a stock option (at an exercise
price of $7.875 per share).
(10) Consisting of (a) 3,441 shares of Common Stock and (b) 20,000 shares of
Common Stock issuable upon the exercise of a stock option (at an
exercise price of $6.6406 per share).
(11) Consisting of (a) 4,913,567 shares of Common Stock issuable to Apollo
upon the conversion of 2.5 million shares of Series A Preferred Stock
into Common Stock (at a conversion price of $5.75 per share), (b)
5,000,000 shares of Common Stock issuable to Apollo upon the exercise
of 5 million warrants (at an exercise price of $5.75 per share), (c)
2,051 shares of Common Stock owned by Mr. Koenig and (d) 20,000 shares
of Common Stock issuable to Mr. Koenig upon the exercise of a stock
option (at an exercise price of $4.813 per share). Mr. Koenig disclaims
beneficial ownership of the Company securities owned by Messrs.
Koenigsberger and Neibart.
(12) Consisting of (a) 4,913,567 shares of Common Stock issuable to Apollo
upon the conversion of 2.5 million shares of Series A Preferred Stock
into Common Stock (at a conversion price of $5.75 per share), (b)
5,000,000 shares of Common Stock issuable to Apollo upon the exercise
of 5 million warrants (at an exercise price of $5.75 per share), (c)
3,441 shares of Common Stock owned by Mr. Koenigsberger and (d) 20,000
shares of Common Stock issuable to Mr. Koenigsberger upon the exercise
of a stock option (at an exercise price of $6.6406 per share). Mr.
Koenigsberger disclaims beneficial ownership of the Company securities
owned by Messrs. Koenig and Neibart.
(13) Consisting of (a) 3,441 shares of Common Stock and (b) 20,000 shares of
Common Stock issuable upon the exercise of a stock option (at an
exercise price of $6.6406 per share).
26
<PAGE>
(14) Consisting of (a) 4,913,567 shares of Common Stock issuable to Apollo
upon the conversion of 2.5 million shares of Series A Preferred Stock
into Common Stock (at a conversion price of $5.75 per share), (b)
5,000,000 shares of Common Stock issuable to Apollo upon the exercise
of 5 million warrants (at an exercise price of $5.75 per share), (c)
3,441 shares of Common Stock owned by Mr. Neibart and (d) 20,000 shares
of Common Stock issuable to Mr. Neibart upon the exercise of a stock
option (at an exercise price of $6.6406 per share). Mr. Neibart
disclaims beneficial ownership of the Company securities owned by
Messrs. Koenig and Koenigsberger.
(15) Consisting of (a) 55,200 shares of Common Stock, (b) 202,500 shares of
Common Stock issuable upon the exercise of stock options (at an
exercise price ranging from $6.50 to $12.00 per share), (c) 1,728
shares of Common Stock issuable upon the conversion of 888 shares of
Series B Preferred Stock into Common Stock (at a conversion price of
$5.75 per share), and (d) 1,776 shares of Common Stock issuable upon
the exercise of 1,776 warrants (at an exercise price of $5.75 per
share). Does not include 3,072,500 shares of Common Stock issuable upon
the exercise of options that are not exercisable within 60 days of the
date hereof.
(16) Consisting of (a) 1,000 shares of Common Stock, (b) 86,667 shares of
Common Stock issuable upon the exercise of stock options (at an
exercise price ranging from $4.3125 to $12.00 per share), (c) 169
shares of Common Stock issuable upon the conversion of 87 shares of
Series B Preferred Stock into Common Stock (at a conversion price of
$5.75 per share), and (d) 174 shares of Common Stock issuable upon the
exercise of 174 warrants (at an exercise price of $5.75 per share).
Does not include 283,333 shares of Common Stock issuable upon the
exercise of options that are not exercisable within 60 days of the date
hereof.
(17) Consisting of 18,000 shares of Common Stock issuable upon the exercise
of stock options (at an exercise price ranging from $5.50 to $12.00 per
share). Mr. Fertig's employment with the Company terminated in January
1998 and, therefore, he is not included in the group entitled "All
Named Executive Officers and Directors as a Group".
(18) Consisting of 21,500 shares of Common Stock issuable upon the exercise
of stock options (at an exercise price ranging from $5.50 to $12.00 per
share). Does not include 18,500 shares of Common Stock issuable upon
the exercise of options that are not exercisable within 60 days of the
date hereof.
(19) Consisting of 5,000 shares of Common Stock. Mr. McLaughlin's employment
with the Company terminated in April 1997 and, therefore, he is not
included in the group entitled "All Named Executive Officers and
Directors as a Group".
(20) Less than one percent.
27
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEMNIFICATION ARRANGEMENTS. The charter and bylaws of the Company
provide for indemnification of its directors and officers, and the advancement
to them of expenses in connection with proceedings and claims, to the fullest
extent permitted by the Delaware General Corporation Law. During 1997, the
Company entered into indemnification and release agreements with each of its
Former Directors, which agreements became effective as of the Closing. The
agreements provide for indemnification and expense advancement, including
related provisions meant to facilitate the Former Directors' receipt of such
benefits, and certain releases. Under such agreements, the Company for itself ,
its subsidiaries and any other entities that the Company controls released each
of the Former Directors from any and all claims that any of such entities may
have against the Former Directors. In addition, the Company has purchased
customary directors' and officers' liability insurance policies for its
directors and officers. The Investment Agreement also provides for continuing
indemnification following the Closing for the Company's directors to the fullest
extent provided by law, as well as continuing coverage under the Company's
directors' and officers' liability insurance policies. Finally, Messrs.
Rutherford's and Jeffrey's Employment Agreements contain indemnification
provisions.
FEBRUARY 1997 PAYMENT TO MR. APTHORP. In February 1997, the Company
paid to Mr. Apthorp, then Chairman of the Board, $250,000 as compensation for
his services in connection with the Company obtaining the release in January
1997 of approximately $12.1 million in cash, $4.2 million in principal amount of
Unsecured 12% Notes and $2 million in principal amount of the Unsecured Cash
Flow Notes held in trust under the Reorganization Plan for the benefit of
certain purchasers of lots from the Company's predecessor company.
MR. APTHORP'S EMPLOYMENT AGREEMENT. On July 1, 1997, the Company and
Mr. Apthorp entered into that certain Employment Agreement, pursuant to which
the Company retained Mr. Apthorp, in the position of "Chairman Emeritus,"
principally to coordinate the Company's statewide governmental relations
program. The term of Mr. Apthorp's Employment Agreement commenced on July 1,
1997 and will terminate on June 30, 1999, unless terminated sooner in accordance
with the terms thereof.
28
<PAGE>
Pursuant to his Employment Agreement, Mr. Apthorp is (1) paid an annual
salary of $175,000 and (2) eligible to receive an annual bonus as determined by
the Board in its sole discretion, based on Mr. Apthorp's performance. Mr.
Apthorp is also eligible to receive such comparable fringe benefits and
perquisites as may be provided to the Company's other senior executives.
The Company has the right to terminate Mr. Apthorp's employment for
cause, as defined in Mr. Apthorp's Employment Agreement. Upon any such a
termination, Mr. Apthorp will not be entitled to receive any further
compensation, bonus or benefits.
Mr. Apthorp's Employment Agreement will terminate immediately upon his
death or total and permanent disability (i.e., if he is unable to perform his
regular duties for 180 or more consecutive days). Upon such a termination, Mr.
Apthorp will not be entitled to any further compensation, bonus or benefits,
except he shall continue to be eligible to receive disability and life insurance
benefits.
The Company also has the right, upon 90 days' written notice, to
terminate Mr. Apthorp's employment without cause. Upon any such termination, Mr.
Apthorp will be entitled to receive his base compensation through the remainder
of the term of his Employment Agreement.
Mr. Apthorp has the right, on 90 days' written notice, to terminate his
employment with the Company. Upon any such termination, Mr. Apthorp will not be
entitled to receive any further compensation, bonus or benefits.
At all times while he is employed by the Company, Mr. Apthorp is
prohibited from disclosing or using any of the Company's confidential
information except as required by the performance of his duties and solely for
the Company's benefit. During his employment and for a period of 180 days
following the termination of his employment with the Company, Mr. Apthorp is
prohibited from soliciting, encouraging or inducing any employee of the Company
to leave his employment with the Company.
STOCK PURCHASES BY APOLLO PURSUANT TO THE TERMS OF THE INVESTMENT
AGREEMENT. During 1997, Apollo, pursuant to the terms of the Investment
Agreement, made the following purchases of Series A Preferred Stock and Investor
Warrants:
- On June 24, 1997, 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.
- On June 30, 1997, Apollo purchased an additional 334,000 shares of
Series A Preferred Stock and Investor Warrants to purchase an
additional 668,000 shares of Common Stock for an aggregate purchase
price of $3,340,000.
- On July 31, 1997, Apollo purchased an additional 850,000 shares of
Series A Preferred Stock and Investor Warrants to purchase an
additional 1,700,000 shares of Common Stock for an aggregate
purchase price of $8,500,000.
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<PAGE>
- On August 7, 1997, Apollo purchased an additional 259,000 shares of
Series A Preferred Stock and Investor Warrants to purchase an
additional 518,000 shares of Common Stock for an aggregate purchase
price of $2,590,000.
- On October 6, 1997, Apollo purchased an additional 100,000 shares
of Series A Preferred Stock and Investor Warrants to purchase an
additional 200,000 shares of Common Stock for an aggregate purchase
price of $1,000,000.
- On November 7, 1997, Apollo purchased an additional 180,000 shares
of Series A Preferred Stock and Investor Warrants to purchase an
additional 360,000 shares of Common Stock for an aggregate purchase
price of $1,800,000.
- On December 8, 1997, Apollo purchased an additional 50,000 shares
of Series A Preferred Stock and Investor Warrants to purchase an
additional 100,000 shares of Common Stock for an aggregate purchase
price of $500,000.
- On March 31, 1998, Apollo purchased an additional 173,525 shares of
Series A Preferred Stock and Investor Warrants to purchase an
additional 347,050 shares of Common Stock for an aggregate purchase
price of $1,735,248.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
a. Consolidated Balance Sheets as of December 31, 1997 and 1996
(1)
b. Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995 (1)
c. Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 (1)
d. Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1997, 1996 and 1995 (1)
2. Financial Statement Schedules required to be filed by Item 8 and by
Item 14(d).
a. Schedule II - Valuation and Qualifying Accounts (1)
30
<PAGE>
3. Exhibits required by Item 601 of Regulation S-K. See (c) below.(1)
(1) These financial statements are incorporated herein by reference to
Atlantic Gulf's Annual Report on Form 10-K, as filed with the SEC.
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on November 26, 1997, pursuant to
Item 5, Other Events, reporting Employment Agreements between the
Company and each of J. Larry Rutherford, John Laguardia and Thomas W.
Jeffrey.
(c) Exhibits Required for Form 10-K by Item 601 of Regulation S-K, as
indicated in the Exhibit Table in Item 601.
3. Articles of Incorporation and By-laws
a. Amended and Restated Certificate of Incorporation of the
Company.(7)
b. Restated By-laws of the Company dated November 17, 1997.(13)
4. Instruments defining the rights of security holders, including
indentures
a. Second Amended and Restated Revolving Loan Agreement dated as of
September 30, 1996, as amended as of March 31, 1997.(6)
b. Second Amended and Restated Secured Floating Rate Note Agreement
dated as of September 30, 1996.(6)
c. Form of warrant granted on September 30, 1996.(6)
d. Indemnification Agreement between Atlantic Gulf Communities
Corporation, General Development Utilities, Inc., NationsBank of
North Carolina, N.A., Barclays Bank, PLC, New York Branch, and
The Bank of New York dated as of December 28, 1993.(3)
e. The Company is a party to a number of other instruments defining
the rights of holders of long-term debt. No such instrument
authorizes an amount of securities in excess of 10 percent of
the total assets of the Company and its subsidiaries on a
consolidated basis. On request, the Company agrees to furnish a
copy of each such instrument to the Commission.
10(i). Certain material contracts not in the ordinary course of business
1. Final Judgment of Permanent Injunction and Other Relief as to
Defendant General Development Corporation dated November 30,
1990, entered in United States of America v. General Development
Corporation, Case No. 90-
31
<PAGE>
879-CIV-Nesbitt (S.D. Fla) (with Restitution Program attached as
exhibit to Final Judgment).(1)
2. Modification of Final Judgment of Permanent Injunction and Other
Relief as to Defendant General Development Corporation dated
July 25, 1996.(13)
3. Trust Agreement among GDC and NCNB National Bank of Florida as
Trustee, dated as of January 17, 1991 (for GDC-owned developed
lots in Florida).(1)
4. Tennessee Trust Agreement between GDC and Joe M. Looney, Esq. as
Trustee, dated as of December 29, 1989 (for GDC-owned lots in
Tennessee).(1)
5. Trust Agreement No. 2 between GDC and Joe M. Looney, Esq. as
Trustee, dated as of May 31, 1991 (for GDFS-owned lots in
Tennessee).(1)
6. Class 14 Utility Trust Agreement between Atlantic Gulf
Communities Corporation and First Union National Bank of Florida
as Trustee, dated as of December 8, 1992.(2)
7. Homesite Program Utility Fund Trust Agreement between Atlantic
Gulf Communities Corporation and First Union National Bank of
Florida as Trustee, dated as of December 8, 1992.(2)
8. Agreement of Nanjing Ya Dong International Corporation Limited,
dated September 1993, between Nanjing Huan Dong
Enterprise/Nanjing Xianlin Agricultural and Grazing Farm and
Atlantic Gulf Asia Holdings N.V.(3)
9. Joint Venture Contract of Nanjing Ya Dong International
Corporation Limited, dated September 1993, between Nanjing Huan
Dong Enterprise/Nanjing Xianlin Agricultural and Grazing Farm
and Atlantic Gulf Asia Holdings N.V.(3)
10. Articles of Association of Nanjing Ya Dong International
Corporation Limited, dated September 1993, between Nanjing Huan
Dong Enterprise/Nanjing Xianlin Agricultural and Grazing Farm
and Atlantic Gulf Asia Holdings N.V.(3)
11. Division Class 14 Utility Fund Trust Agreement between the State
of Florida, Department of Business Regulation, Division of
Florida Land Sales, Condominiums, and Mobile Homes, Atlantic
Gulf Communities Corporation and First Union National Bank of
Florida dated as of April 10, 1993.(3)
12. Improvements Fund Trust Agreement between the State of Florida,
Department of Business Regulation, Division of Florida Land
Sales,
32
<PAGE>
Condominiums, and Mobile Homes, Atlantic Gulf Communities
Corporation and First Union National Bank of Florida dated as of
April 10, 1993.(3)
13. Registration Rights Agreement dated as of September 30, 1996
between Atlantic Gulf Communities Corporation and the lenders
set forth in Exhibit A of the agreement.(6)
14. Utility Lot Trust Agreement, dated as of December 26, 1996,
between Atlantic Gulf Communities Corporation and the Division
of Florida Land Sales, Condominiums, and Mobile Homes, and
Peninsula State Title, as Trustee.(8)
15. Restated, Amended and Consolidated Trust Agreement, dated as of
December 26, 1996, amended as of December 30, 1996, between the
State of Florida, Department of Business Regulation, Division of
Florida Land Sales, Condominiums, and Mobile Homes, Atlantic
Gulf Communities Corporation and First Union National Bank of
Florida, as Trustee.(8)
16. First Amendment to the Restated, Amended and Consolidated Trust
Agreement, dated as of December 26, 1996, amended as of December
30, 1996.(8)
17. Amended and Restated Investment Agreement between the Company
and Apollo dated as of February 7, 1997, amended as of March 20,
1997, and amended and restated as of May 15, 1997, and as
approved by the Company's Stockholders at the Annual Meeting of
Shareholders on June 23, 1997.(9)
18. Secured Agreement between the Company, certain of its
subsidiaries and Apollo dated as of February 7, 1997, and
amended and restated as of May 15, 1997.
10(iii). Certain management contracts, compensatory plans, contracts or
arrangements
1. Debtor's Motion for Authority to Establish and Implement Key
Executive Retention Plan and Separation Pay Plan and to Revise
Vacation Plan dated November 5, 1990, entered in In re General
Development Corporation, et al, Case No. 90-12231-BKC-AJC (S.D.
Fla).(1)
2. Order Authorizing Debtors to Establish and Implement Key
Executive Retention Plan and Separation Pay Plan and to Revise
Vacation Plan dated January 15, 1991, entered in In re General
Development Corporation, et al, Case No. 90-12231-BKC-AJC (S.D.
Fla).(1)
3. Atlantic Gulf Communities Corporation 401(k) Plan.(2)
33
<PAGE>
4. Atlantic Gulf Communities Corporation Employee Stock Option Plan
as amended, as adopted by Atlantic Gulf's Board on April 6,
1993, and as approved by Atlantic Gulf's common stockholders at
the 1993 Annual Meeting of Shareholders.(3)
5. Non-Employee Directors' Stock Option Plan as approved by
Atlantic Gulf's common stockholders at the 1995 Annual Meeting
of Shareholders.(5)
6. Employment Agreement between the Company and Brian A. McLaughlin
dated July 1, 1995.(10)
7. Atlantic Gulf Communities Corporation 1996 Non-Employee
Directors' Stock Plan.(11)
8. Employment Agreement dated November 17, 1997, effective July 1,
1997, between Atlantic Gulf Communities Corporation and J. Larry
Rutherford, with form of Stock Incentive Plan and Agreement for
J. Larry Rutherford and Amendment to Employment Agreement, dated
November 26, 1997.(12)
9. Modification of Employment Agreement between the Company and J.
Larry Rutherford dated December 27, 1997.(13)
10. Employment Agreement dated November 19, 1997, effective November
17, 1997, between Atlantic Gulf Communities Corporation and John
Laguardia, with form of Stock Option Plan and Agreement for John
Laguardia.(12)
11. Employment Agreement dated November 17, 1997, effective July 1,
1997, between Atlantic Gulf Communities Corporation and Thomas W
Jeffrey, with form of Existing Plan Stock Option Agreement for
Thomas W. Jeffrey and New Stock Option Plan and Agreement for
Thomas W. Jeffrey.(12)
21. Subsidiaries of the Company(13)
23. Accountants' Consent - Ernst & Young LLP(13)
27. Financial Data Schedule(13)
- --------------------
(1) These exhibits are incorporated herein by reference to the
Predecessor Company's Annual Report on Form 10-K for the year ended
December 31, 1991, as filed with the Securities and Exchange
Commission ("SEC").
(2) These exhibits are incorporated herein by reference to Atlantic
Gulf's Annual Report on Form 10-K for the year ended December 31,
1992, as filed with the SEC.
34
<PAGE>
(3) These exhibits are incorporated herein by reference to Atlantic
Gulf's Annual Report on Form 10-K for the year ended December 31,
1993, as filed with the SEC.
(4) These exhibits are incorporated herein by reference to Atlantic
Gulf's Annual Report on Form 10-K for the year ended December 31,
1994, as filed with the SEC.
(5) These exhibits are incorporated herein by reference to Atlantic
Gulf's Annual Report on Form 10-K for the year ended December 31,
1995, as filed with the SEC.
(6) These exhibits are incorporated herein by reference to Atlantic
Gulf's Annual Report on Form 10-K for the year ended December 31,
1996, as filed with the SEC.
(7) These exhibits are incorporated herein by reference to Atlantic
Gulf's Proxy Statement dated May 21, 1997, as filed with the SEC.
(8) These exhibits are incorporated herein by reference to Atlantic
Gulf's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, as filed with the SEC.
(9) These exhibits are incorporated herein by reference to Atlantic
Gulf's Current Report on Form 8-K, dated June 5, 1997, as filed with
the SEC.
(10) These exhibits are incorporated herein by reference to Atlantic
Gulf's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995, as filed with the SEC.
(11) These exhibits are incorporated herein by reference to Atlantic
Gulf's Proxy Statement dated April 22, 1996, as filed with the SEC.
(12) These exhibits are incorporated herein by reference to Atlantic
Gulf's Current Report on Form 8-K, dated November 26, 1997, as filed
with the SEC.
(13) These exhibits are incorporated herein by reference to Atlantic
Gulf's Annual Report on Form 10-K for the year ended December 31,
1997, as filed with the SEC.
(d) Financial Statement Schedules required by Regulation S-X that are
excluded from the Annual Report to Shareholders by Rule 14a-3(b)
promulgated pursuant to Section 14 of the Securities Exchange Act of
1934, including (1) separate financial statements of subsidiaries and 50
percent of less owned persons; (2) separate financial statements of
affiliates whose securities are pledged as collateral; and (3)
schedules.
35
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ATLANTIC GULF COMMUNITIES CORPORATION
By: /s/ THOMAS W. JEFFREY
---------------------
Thomas W. Jeffrey, Executive Vice President
and Chief Financial Officer
Date: April 30, 1998
36
Atlantic Gulf Communities Corporation Exhibit to the 1997 Form 10-K/A-1
Exhibit (c)10(i)18. Secured Agreement between the Company, certain of its
subsidiaries and Apollo dated as of February 7, 1997, and amended and restated
as of May 15, 1997.
-------------------------------------
ATLANTIC GULF COMMUNITIES CORPORATION
-AND-
THE SUBSIDIARIES SET FORTH
ON THE SIGNATURE PAGES HEREOF
------------------------------------
SECURED AGREEMENT
DATED AS OF FEBRUARY 7, 1997
AMENDED AND RESTATED AS OF MAY 15, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS 1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 14
SECTION 2. ISSUANCE AND TERMS OF SECURED INSTRUMENT 15
2.1 Secured Instrument 15
2.2 Payment of Secured Instrument 15
2.3 Conversion of Secured Instrument
into Preferred Stock 15
2.4 Interest Rates and Interest
Payment Dates 16
2.5 Computation of Interest and Fees 16
2.6 Pro Rata Treatment and Payments 16
2.7 Taxes 16
2.8 Use of Proceeds 17
2.9 Fees 17
2.10 Maximum Interest Rate 17
SECTION 3. COLLATERAL 17
3.1 Liens in Subsidiary Stock,
Contract Receivables, Real Property
and Personal Property 17
3.2 Security Documents 18
3.3 Section 365(j) Property 20
3.4 [intentionally omitted] 20
3.5 Subordinations and Releases of
Mortgage and Related Personal
Property Liens 20
3.6 Subsidiary Guaranties 21
3.7 Special Purpose Subsidiary 21
SECTION 4. REPRESENTATIONS AND WARRANTIES 22
4.1 Financial Condition 22
4.2 No Material Adverse Change 23
4.3 Corporate Existence; Compliance
with Law 23
4.4 Corporate Power; Authorization;
Enforceable Obligations 24
4.5 No Legal Bar 24
4.6 No Material Litigation 24
4.7 No Default 25
4.8 Ownership of Property; Liens 25
4.9 Intellectual Property 25
4.10 Taxes 25
4.11 Federal Regulations 25
4.12 ERISA 25
4.13 Investment Company Act; Other
Regulations 26
4.14 Subsidiaries and Joint Ventures 26
4.15 Environmental Matters 26
4.16 Indebtedness 27
4.17 Contingent Obligations 27
4.18 Restitution Program and Final
Judgment 27
4.19 Certain Fees 27
4.20 Disclosure 27
4.21 Insurance 28
4.22 Total Real Property Matters 28
4.23 Reorganization Proceedings 28
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<PAGE>
4.24 Excluded Subsidiaries; Unrestricted
Subsidiaries 28
4.25 [intentionally omitted] 28
4.26 Bank Accounts 28
4.27 Utility Fund Trusts 28
4.28 [intentionally omitted] 28
4.29 SPUD Subsidiaries 28
4.30 DRI and Zoning 28
SECTION 5. CONDITIONS PRECEDENT 29
5.1 Conditions to Issuance 29
5.2 [intentionally omitted] 32
SECTION 6. AFFIRMATIVE COVENANTS 32
6.1 Financial Statements 32
6.2 Certificates; Other Information 33
6.3 Payment of Obligations 34
6.4 Conduct of Business and Maintenance
of Existence 34
6.5 Maintenance of Property; Insurance 35
6.6 Inspection of Collateral; Books and
Records; Appraisals 35
6.7 Notices 35
6.8 Environmental Laws 36
6.9 Business Plan 36
6.10 Compliance with Other Transaction
Documents 36
6.11 Dividends from Subsidiaries 36
6.12 Supplemental Reports Regarding
Real Property 37
6.13 Compliance with Laws 37
6.14 Other Notices 37
6.15 The Company Operating Account Control
Agreement 37
6.16 Foothill Reports 37
SECTION 7. NEGATIVE COVENANTS 37
7.1 Maintenance of Consolidated
Net Worth; Interest Charge
Coverage Ratio 37
7.2 Limitation of Indebtedness 38
7.3 Limitation on Liens 39
7.4 Limitation on Guarantee Obligations 40
7.5 Limitations on Fundamental Changes 40
7.6 Limitation on Sale of Assets 40
7.7 Limitation on Dividends 41
7.8 Limitation on Capital Expenditures 41
7.9 Limitation on Investments, Loans,
and Advances 41
7.10 Limitation on Optional Payments and
Modifications of Debt Instruments 42
7.11 Transactions with Affiliates 42
7.12 Sale and Leaseback 43
7.13 Fiscal Year 43
7.14 Limitation on Negative Pledge
Clauses 43
7.15 Deviation from Business Plan 43
7.16 Unsold Housing Inventory 43
7.17 Limitation of Bank Accounts 43
7.18 Venture Subsidiaries and Joint
Ventures 43
7.19 Excluded Subsidiaries;
Unrestricted Subsidiaries 43
SECTION 8. EVENTS OF DEFAULT; REMEDIES 43
8.1 Events of Default; Remedies 43
-ii-
<PAGE>
SECTION 9. THE COLLATERAL AGENT 46
9.1 [intentionally omitted] 46
9.2 Appointment of Collateral Agent 46
9.3 [intentionally omitted] 46
9.4 Delegation of Duties 46
9.5 Exculpatory Provisions 47
9.6 Reliance by the Obligee 47
9.7 Notice of Default 47
9.8 Non-Reliance on Collateral Agent 47
9.9 Indemnification 48
9.10 [intentionally omitted] 48
9.11 [intentionally omitted] 48
9.12 Successor Collateral Agent 48
SECTION 10. MISCELLANEOUS 49
10.1 Amendments and Waivers 49
10.2 Notices 49
10.3 No Waiver; Cumulative Remedies 50
10.4 Survival of Certain Provisions 50
10.5 Payment of Expenses and Taxes 50
10.6 Successors and Assigns;
Participations; Purchasing Obligee 51
10.7 Adjustments; Setoff 53
10.8 Appointment of the Obligee
as the Company's Lawful Attorney 53
10.9 Counterparts 53
10.10 Severability 53
10.11 Integration 53
10.12 GOVERNING LAW 54
10.13 SUBMISSION TO JURISDICTION;
WAIVERS 54
10.14 Acknowledgments 54
10.15 WAIVERS OF JURY TRIAL 55
10.16 Confidentiality 55
10.17 Controlling Agreement 55
SECTION 11 THE CO-MAKERS 55
11.1 Certain Defined Terms 55
11.2 All Co-Makers Liable 55
11.3 Limitation on Obligations
of Subsidiaries; Contribution
among Subsidiaries 55
11.4 Liability of Co-Makers
Absolute 57
11.5 Waivers by Co-Maker 58
11.6 Payment by Mortgagor
Subsidiaries; Application of
Payments 59
11.7 Co-Makers' Rights of
Subrogation, Contribution, Etc. 59
11.8 Subordination of Other Obligations 59
11.9 Expenses 60
11.10 Continuing Agreement 60
11.11 Authority of the Co-Makers 60
11.12 Financial Condition of the Company 60
11.13 Rights Cumulative 60
11.14 Bankruptcy; Post-Petition Interest;
Reinstatement of Agreement 60
11.15 Setoff 61
SECTION 12. MISCELLANEOUS 61
12.1 Acknowledgement Regarding
Certain Environmental Obligations 61
-iii-
<PAGE>
SCHEDULES
Schedule E-1 Excluded Subsidiaries
Schedule N-1 Net Cash Flow
Schedule N-2 Net Operating Cash Flow
Schedule P-1 Principal Raw Land
Schedule U-1 Unrestricted Subsidiaries
Schedule V-1 Venture Subsidiaries
Schedule 4.1 Additional Liabilities of the Company;
Purchases and Dispositions by the Company
Schedule 4.2 Material Adverse Effect
Schedule 4.4 Consents and Authorizations
Schedule 4.5 Certain Contractual Obligations
Schedule 4.6 Litigation
Schedule 4.7 Defaults
Schedule 4.10 Tax
Schedule 4.12 ERISA
Schedule 4.14(A) Subsidiaries
Schedule 4.14(B) Joint Ventures
Schedule 4.15 Hazardous Materials
Schedule 4.16 Indebtedness
Schedule 4.17 Guaranties
Schedule 4.21 Insurance
Schedule 4.24 Unrestricted Subsidiaries' Assets and Businesses
Schedule 4.26 Bank Accounts
Schedule 4.29 SPUD Subsidiaries
Schedule 4.30 Representations and Warranties regarding
DRI and Zoning Matters
Schedule 5.1(k) Real Property Matters
Schedule 7.3 Liens
Schedule 7.17 Restricted Bank Accounts
-iv-
<PAGE>
EXHIBITS
Exhibit A-1 Form of Deed of Trust
Exhibit B-1 Form of Mortgage and Security Agreement
Exhibit C-1 Form of Secured Instrument
Exhibit D-1 Form of Deposit Account Security Agreement
Exhibit E-1 Form of Due Diligence Fee Agreement
Exhibit F-1 Form of Monthly Management Business Plan
Update
Exhibit G-1 Form of Land Sales Report
Exhibit H-1 Form of Junior Assignment of Notes and
Deeds of Trust
Exhibit H-2 Form of Junior Assignment of Notes and
Mortgages
Exhibit I-1 Form of Intercreditor Agreement
Exhibit J-1 Form of Joint Venture Pledge Agreement
Exhibit P-1 Form of Personal Property Security
Agreement
Exhibit R-1 Copy of Reorganization Plan
Exhibit S-1 Form of Stock Pledge Agreement
Exhibit S-2 Form of Subsidiary Guaranty
-v-
<PAGE>
THIS SECURED AGREEMENT, dated as of February 7, 1997 and
amended and restated as of May 15, 1997, among ATLANTIC GULF COMMUNITIES
CORPORATION, a Delaware corporation (the "COMPANY"), the Subsidiaries of the
Company named on the signature pages hereof (the "SUBSIDIARIES," and together
with the Company, the "CO-MAKERS"), AP-AGC, LLC, a Delaware limited liability
company (the "OBLIGEE") and the entities named as collateral agent on the
signature pages hereof as collateral agents for the Obligee (hereinafter, in
such capacity, together with any successors thereto in such capacity, referred
to collectively as "COLLATERAL AGENT").
RECITALS
WHEREAS, in accordance with an Investment Agreement between
the Company and the Obligee dated as of the date hereof, the Co-Makers desire to
be able to borrow up to $10,000,000 from the Obligee on the terms hereinafter
set forth and the Obligee is willing, on the terms and subject to the conditions
set forth in this Agreement, to commit to lend up to $10,000,000 to the
Co-Makers; and
WHEREAS, the Obligee has agreed, on the terms and subject to
the conditions set forth in the Investment Agreement, to purchase preferred
stock to be issued by the Company and, whether or not the Co-Makers have
borrowed from the Obligee under this Agreement, this Agreement provides for the
issuance of an instrument which will evidence certain secured repurchase
obligations of the Company and the other Co-Makers in respect of such preferred
stock and certain other obligations of the Company and the other Co-Makers, and
sets forth certain obligations of the Co-Makers to Obligee relating to such
preferred stock and the rights of the Obligee and obligations of the Co-Makers;
and
WHEREAS, the execution and delivery of this Agreement is a
condition to the obligations of the Obligee under the Investment Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"ADMINISTRATIVE CLAIMS": as defined in Article I of the
Reorganization Plan.
"AFFILIATE": with respect to any Person, (a) any other Person
which is a Subsidiary of such Person, (b) any other Person (and each
Subsidiary thereof) of which such Person is a Subsidiary, and (c) any
other Person which is under common control with such Person.
"AG ASIA": Atlantic Gulf Asia Holdings N.V., a Netherlands
Antilles corporation.
"AGREEMENT": this Secured Agreement, as amended, supplemented
or otherwise modified from time to time.
"ANNUAL NET INCOME": income as shown on the consolidated
statements of income provided by the Company under Section 6.1, but in
no event less than 0.
"ASSIGNMENTS": the Junior Assignment of Notes and Deeds of
Trust and the Junior Assignment of Notes and Mortgages, in the form of
Exhibits H-1 and H-2 respectively, to be executed on or before the
Issuance Date, as the same may be amended, supplemented or otherwise
modified from time to time.
<PAGE>
"BANK ACCOUNTS": any and all deposit accounts, money market
accounts and any other deposits and investments of the Company or any
Subsidiary held in any bank or other financial institution, any
brokerage firm or any other Person and all money, instruments,
securities, documents and other investments held pursuant thereto,
whether now existing or owned or hereafter created or acquired
(exclusive of all but the residual, remainder or beneficial interest of
the Company and its Subsidiaries in the Reserve Accounts, the Claims
Disbursement Account and all other escrow, restricted, custodial and
fiduciary accounts the pledge of which by the Company or any Subsidiary
is prohibited by agreements existing on the date hereof or by law as
set forth in SCHEDULE 7.17, which may be amended from time to time by
written notice to the Obligee to include other restricted accounts).
"BANKRUPTCY CODE": Title 11 of the United States Code entitled
"Bankruptcy" from time to time in effect, or any successor statute.
"BANKRUPTCY COURT": the United States Bankruptcy Court for the
Southern District of Florida or if such court ceases to exercise
jurisdiction over the Reorganization Proceedings, the court that
exercises jurisdiction over the Reorganization Proceedings in lieu of
the United States Bankruptcy Court for the Southern District of
Florida.
"BEIGE BOOK": the book prepared by the Company dated December
1994, setting forth the estimated fair market value of the Real
Property of the Company and its Subsidiaries.
"BOOK VALUE": with respect to a specified asset of a specified
Person, the carrying value of the specified asset on the balance sheet
of such Person prepared in accordance with GAAP and delivered to the
Obligee from time to time pursuant to the Transaction Documents.
"BORROWING BASE": as defined in the Revolving Loan Agreement.
"BUSINESS DAY": any day excluding Saturday, Sunday and any day
which either is a legal holiday under the laws of the States of
California or New York or is a day on which banking institutions
located in the States of California or New York are authorized or
required by law or other governmental action to close.
"BUSINESS PLAN": as of the Issuance Date and until a new
Business Plan is delivered to the Obligee in accordance with Section
6.9, the business plan of the Company and its Subsidiaries dated
October 23, 1996, and thereafter the business plan of the Company and
its Subsidiaries delivered to and approved by the Obligee in December
of each year in accordance with Section 6.9.
"CAPITAL STOCK": with respect to any Person, any and all
shares, interests, or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in a
Person (other than a corporation) and any and all warrants or options
to purchase any of the foregoing.
"CASH COLLATERAL ACCOUNTS": any and all accounts that
Collateral Agent, for the benefit of the Obligee, may from time to time
require to be established and maintained with financial institutions
reasonably satisfactory to Obligee and pledged to Collateral Agent
pursuant to cash collateral account agreements in form and substance
reasonably satisfactory to Obligee.
"CASH EQUIVALENTS": (a) securities issued or directly and
fully guaranteed or insured by the United States Government or any
agency or instrumentality thereof having maturities of not more than 90
days from the date of acquisition, (b) time deposits and certificates
of deposit having maturities of not more
-2-
<PAGE>
than 90 days from the date of acquisition issued by any domestic
commercial bank, or non-domestic commercial bank provided that such
non-domestic commercial bank shall have offices in the United States,
having capital and surplus in excess of $500,000,000, (c) repurchase
obligations with a term of not more than 30 days for underlying
securities of the types described in clauses (a) and (b) entered into
with any bank meeting the qualifications specified in clause (b) above,
and (d) commercial paper rated at least A-1 or the equivalent thereof
by Standard & Poor's Corporation or P-1 or the equivalent thereof by
Moody's Investors Service, Inc. or which is issued by any domestic
commercial bank having capital and surplus in excess of $500,000,000
(or any holding company thereof) and, in any such case, maturing within
90 days after the date of acquisition.
"CERTIFICATE OF DESIGNATION": means the "Series A Preferred
Stock Certificate of Designation," as defined in the Investment
Agreement.
"CLAIMS DISBURSEMENT ACCOUNT": the segregated account
established for purposes of holding funds borrowed to pay
Administrative Claims, Priority Claims and Convenience Class Claims
pursuant to Sections 3.2.4 and 8.1.1 of the Reorganization Plan.
"CODE": the Internal Revenue Code of 1986, as amended from
time to time.
"COLLATERAL": as defined in Section 3.1.
"COLLATERAL AGENT": Foothill Capital Corporation and The Bank
of New York, each solely in its individual capacity as collateral agent
for the Obligee under the Security Documents, and their respective
successors in such capacity. Unless otherwise agreed, Foothill Capital
Corporation and its successors shall serve as Collateral Agent with
respect to properties in which pursuant to the Intercreditor Agreement
the holders of the Foothill Debt hold a senior lien and The Bank of New
York and its successors shall serve as Collateral Agent with respect to
properties in which pursuant to the Intercreditor Agreement the Obligee
holds a senior lien.
"COMMERCIAL REAL ESTATE": all Real Property of the Company and
its Subsidiaries (including condominium and cooperative units), other
than Real Property reserved for sale as single residential homes or
lots.
"COMMERCIAL RECEIVABLES": all promissory notes and mortgages
and deeds of trust payable to, or held by, the Company or any
Subsidiary, and all other documents, instruments and agreements
executed in connection therewith, whether currently existing or
hereafter created or acquired, arising from the sale of single family
homesites or arising from the sale of other Real Property and all cash
and non-cash proceeds thereof.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes
the Company and which is treated as a single employer under Section 414
of the Code.
"COMPANY OPERATING ACCOUNT" means that certain deposit
account number 6189189013641 maintained by the Company with Sun Trust
Bank, Miami, N.A. or such other deposit account maintained by the
Company at a financial institution reasonably satisfactory to Obligee.
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<PAGE>
"COMPANY OPERATING ACCOUNT CONTROL AGREEMENT" means a written
agreement which may in the future be executed among the Company, the
Collateral Agent, the "Collateral Agent" under the Foothill Loan
Documents, and Operating Account Bank, with respect to the Company
Operating Account, in form and substance reasonably satisfactory to the
Obligee, pursuant to which Operating Account Bank acknowledges the
security interests granted by the Company to the Collateral Agent for
the benefit of the Obligee in the Company Operating Account, waives
rights of setoff with respect to the Company Operating Account, and
agrees to act upon the instructions of the Collateral Agent with
respect to the disposition of funds in the Company Operating Account
should Operating Account Bank receive such instructions from the
Collateral Agent. The Company Operating Account Control Agreement will
be executed and delivered by the Company upon request of Obligee and in
any event will be executed and delivered by the Company in the event it
enters into a similar agreement for the benefit of the holders of the
Foothill Debt.
"CONDEMNATION AWARDS": any and all proceeds (including
proceeds in the form of promissory notes or other agreements for the
payment of proceeds) from (i) the taking by eminent domain,
condemnation or otherwise, or acquisition pursuant to contract, of any
property of the Company or any Subsidiary by the United States of
America, the State of Florida or any political subdivision thereof, or
any agency, department, bureau, board, commission or instrumentality of
any of them, including any award and/or other compensation awarded to
or for the benefit of, or received by or on behalf of, the Company or
GDU, whether as a result of litigation, arbitration, settlement or
otherwise, or (ii) any sale by the Company or any Subsidiary of a water
and utility system to a Person, whether now owned or hereafter created
or acquired.
"CONFIRMATION ORDER": the order entered on March 27, 1992, by
the Bankruptcy Court, confirming the Reorganization Plan.
"CONSOLIDATED NET WORTH": at any particular date, all amounts
which, in accordance with GAAP, would be included as Shareholders'
Equity on a consolidated balance sheet of the Company and its
consolidated Subsidiaries at such date.
"CONTRACTUAL OBLIGATION": with respect to any Person, any
provision of any security issued by such Person or of any agreement,
instrument or other undertaking to which that Person is a party or by
which it or any of its property is bound.
"CONVENIENCE CLASS CLAIMS": as described in Subsection 2.13
of the Reorganization Plan.
"DEED OF TRUST": the Junior Deed of Trust and Security
Agreement to be executed on or before the Issuance Date and from time
to time thereafter between the Company or a Subsidiary and Collateral
Agent, in the form of EXHIBIT A-1, as the same be amended,
supplemented or otherwise modified from time to time, pursuant to
which the Company and Subsidiaries grant a security interest in the
Real Property located in Tennessee (and such other jurisdictions where
"deeds of trust" are used to encumber real property) and related
Personal Property of the Company or Subsidiaries to Collateral Agent,
for the benefit of the Obligee as required by this Agreement.
"DEFAULT": any of the events specified in Section 8.1, whether
or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"DEFAULT RATE": has the meaning assigned that term in Section
2.4(b).
"DEPOSIT ACCOUNT SECURITY AGREEMENT": the Deposit Account
Security Agreement, in the form of EXHIBIT D-1, to be executed by the
Company and each of its Subsidiaries in favor of Collateral Agent on or
before the Issuance Date, for the benefit of the Obligee, as the same
may be amended, supplemented or otherwise modified from time to time.
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"DOLLARS" and "$": dollars in lawful currency of the United
States of America.
"DUE DILIGENCE FEE AGREEMENT": the Due Diligence Fee
Agreement, in the form of EXHIBIT E-1, to be executed by the Company
and the Obligee, providing among other things for payment of a fixed
due diligence and investment analysis fee on the last day of each
calendar month as compensation for the due diligence and investment
analysis services described therein.
"ENVIRONMENTAL LAWS": any and all applicable Federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or requirements of any Governmental
Authority regulating, relating to or imposing liability or standards of
conduct concerning environmental protection matters, including, without
limitation, Hazardous Materials, as now or may at any time hereafter be
in effect.
"ERISA": the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"EVENT OF DEFAULT": any of the events specified in Section
8.1, provided that any requirement for the giving of notice, the lapse
of time, or both, or any other condition, has been satisfied.
"EXCLUDED PROPERTY": (a) the Capital Stock of General
Development Acceptance Corporation and GDV Financial Corporation, (b)
34% of the Capital Stock of AG Asia, (c) all money or property now or
hereafter deposited into a Reserve Account pursuant to the
Reorganization Plan (exclusive of the residual, remainder or
beneficial interests of the Company and its Subsidiaries therein), (d)
any portions of payments made on Homesite Contracts Receivable which
are, as a matter of law or pursuant to such Homesite Contracts
Receivable, required to be placed in a restricted account for the
payment of utility charges or paid toward real estate taxes on the lots
subject to the respective Homesite Contracts Receivable giving rise to
such payments, and (e) the Trust Property.
"EXCLUDED SUBSIDIARIES": the direct or indirect subsidiaries
of the Company listed on SCHEDULE E-1.
"FINANCING LEASE": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a consolidated balance sheet
of the Company and Subsidiaries.
"FOOTHILL DEBT": Indebtedness outstanding under the Foothill
Loan Documents.
"FOOTHILL LOAN DOCUMENTS": means, collectively, (i) the
Revolving Loan Agreement, (ii) the "Loan Documents," as defined in the
Revolving Loan Agreement, (iii) the Secured Floating Rate Note
Agreement, and (iv) the "Secured Floating Rate Note Documents," as
defined in the Secured Floating Rate Note Agreement, each of the
foregoing as in effect on the date hereof.
"GAAP": generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a
significant segment of the accounting profession, that are applicable
to the circumstances as of the date of determination; PROVIDED that
calculations in connection with the definitions, covenants and other
provisions of this Agreement shall utilize accounting principles and
policies in conformity with those used to prepare the financial
statements referred to in Section 4.1.
"GDC": General Development Corporation, a Delaware
corporation, under which name the Company was formerly known.
"GDU": the Company's Subsidiary, General Development
Utilities, Inc., a Florida corporation.
"GOVERNMENTAL AUTHORITY": any nation or government, any state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, government.
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"GUARANTEE OBLIGATION": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including any bank under any letter of credit) as to which the
guaranteeing person has issued a reimbursement, counter indemnity or
similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations
(the "primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly, including any
obligation of the guaranteeing person, whether or not contingent, (i)
to purchase any such primary obligation or any property constituting
direct or indirect security therefor, (ii) to advance or supply funds
(x) for the purchase or payment of any such primary obligation or (y)
to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor,
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; PROVIDED,
HOWEVER, that, as used herein, the term "Guarantee Obligation" shall
neither include endorsements of instruments for deposit or collection
in the ordinary course of business, nor constitute Indebtedness. The
amount of any Guarantee Obligation of any guaranteeing person shall be
deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in which case the amount
of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as
reasonably determined by the Company in good faith.
"HAZARDOUS MATERIALS": any hazardous materials, hazardous
wastes, hazardous constituents, hazardous or toxic substances,
petroleum products (including crude oil or any fraction thereof),
defined or regulated as such in or under any Environmental Law.
"HOMESITE CONTRACTS RECEIVABLE": all contracts for deed,
promissory notes, mortgages, deeds of trust and other agreements,
currently existing or hereafter created or acquired, pursuant to which
the Company or any Subsidiary has the right to receive payment in any
form whatsoever for the sale of single-family homesites (excluding
Commercial Receivables), including any and all accounts, contract
rights, chattel paper, general intangibles and unpaid seller's rights,
relating to the foregoing or arising therefrom, reserves and credit
balances arising thereunder and cash and non-cash proceeds of any and
all of the foregoing.
"HOMESITE PROGRAM": as defined in Article I of the
Reorganization Plan.
"HOUSING INVENTORY": as at any date, the amount that would be
set forth under "housing units completed or under construction" or
other similar entry in the notes to a consolidated balance sheet of the
Company and its Subsidiaries prepared at such date in accordance with
GAAP.
"INDEBTEDNESS": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (other than incurred in the
ordinary course of business and payable in accordance with customary
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations (contingent or otherwise) of such
Person arising out of letters of credit issued for the account or upon
the application of such Person, (c) all obligations of such Person
under Financing Leases, (d) all obligations of such Person in respect
of acceptances issued or created for the account of such Person, (e)
all liabilities secured by any Lien on any property owned by such
Person even though such Person may have not assumed or otherwise become
liable for the payment thereof, and (f) the Unsecured Cash Flow Notes.
As used herein, the term "Indebtedness" shall not include Guarantee
Obligations.
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"INSOLVENCY": with respect to any Multi-employer Plan, the
condition that such plan is insolvent within the meaning of Section
4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTELLECTUAL PROPERTY": as defined in Section 4.9.
"INTERCREDITOR AGREEMENT": that certain Intercreditor
Agreement dated as of June 23, 1997 by and between the Obligee, the
Collateral Agent, the lenders party to the Foothill Loan Documents, and
the collateral agents for such lenders, in the form of EXHIBIT I-1, as
such agreement may be supplemented, amended or otherwise modified from
time to time.
"INTEREST CHARGES": means, with respect to any period, the sum
(without duplication) of the following (eliminating all intercompany
items required to be eliminated in the course of preparing consolidated
financial statements for the Company and its Subsidiaries in ac-
cordance with GAAP) (a) all interest in respect of the Indebtedness of
the Company and its Subsidiaries (including imputed interest on
Financing Leases) deducted in determining consolidated net income for
such period and (b) all debt discount and expense amortized or required
to be amortized in the determination of consolidated net income for
such period.
"INTEREST CHARGES COVERAGE RATIO": at any time, the ratio of
(a) Net Operating Cash Flow for the period of four fiscal quarters
ending on, or most recently ended prior to, such time, taken as a
whole, to (b) Interest Charges for such period.
"INTEREST PAYMENT DATE": the last day of each calendar month
to occur while any obligation evidenced by the Secured Instrument is
outstanding.
"INVESTMENT AGREEMENT": that certain Investment Agreement of
even date herewith by and between the Company and the Obligee,
providing among other things for the execution and delivery of this
Agreement and the issuance of the Preferred Stock.
"INVESTMENTS": any and all promissory notes, Capital Stock
(other than Subsidiary Stock), bonds, debentures and securities, held
by the Company or any Subsidiary, whether now owned or hereafter
acquired.
"ISSUANCE DATE": the date on or before June 24, 1997 upon
which all of the conditions set forth in Section 5 have been met or
waived by the Obligee in its sole discretion and the Secured Instrument
is issued.
"JOINT VENTURES": collectively, (a) the joint ventures
identified on SCHEDULE 4.14(B), and (b) any other partnership, joint
venture, limited liability company, or other entity in which a
Subsidiary acquires, after the date hereof and as permitted under
Section 7.9(g) and 7.18, equity interests therein representing 50% or
less of such entity's contributed capital; and "JOINT VENTURE" means
any one of them.
"JOINT VENTURE PLEDGE AGREEMENT": the Junior Joint Venture
Pledge Agreement in the form of EXHIBIT J-1, to be executed by each of
the Venture Subsidiaries and Collateral Agent on or before the
Issuance Date, as the same may be amended, supplemented or otherwise
modified from time to time, pursuant to which the Venture Subsidiaries
pledge all of their right, title, and interest in and to the Joint
Ventures to Collateral Agent for the benefit of the Obligee.
"JV REAL PROPERTY": any and all real property and fixtures and
interests in real property and fixtures now owned or hereafter acquired
by any Joint Venture.
"JV RECEIVABLES": all contracts for deed, promissory notes,
mortgages, deeds of trust and other agreements, currently existing or
hereafter created or acquired, pursuant to which any Joint Venture has
the right to receive payment in any form whatsoever for the sale of JV
Real Property, and cash and non-cash proceeds of any and all of the
foregoing.
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"LIEN": any mortgage, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement, any
Financing Lease having substantially the same economic effect as any of
the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction in
respect of any of the foregoing).
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise)
or prospects of (i) the Company and its Subsidiaries taken as a whole
or (ii) Special Purpose Subsidiary, (b) the ability of the Company to
perform its obligations under this Agreement, the Secured Instrument,
the Security Documents, or the other Transaction Documents or (c) the
validity or enforceability of this Agreement, the Secured Instrument,
the Security Documents or the other Transaction Documents or the rights
or remedies of Collateral Agent or the Obligee hereunder or thereunder.
"MATURITY DATE": December 31, 1998.
"MORTGAGES": the Junior Mortgage and Security Agreements to be
executed on or before the Issuance Date and from time to time
thereafter by the Company or a Subsidiary in favor of Collateral Agent,
substantially in the form of EXHIBIT B-1, as the same may be amended,
supplemented or otherwise modified from time to time, pursuant to which
the Company and Subsidiaries grant a security interest in the Real
Property located in Florida (and in such other jurisdictions where
"mortgages" are used to encumber real property) and related Personal
Property of the Company or Subsidiaries to Collateral Agent, for the
benefit of the Obligee, as required by this Agreement.
"MULTI-EMPLOYER PLAN": a Plan which is a multi-employer plan
as defined in Section 4001(a)(3) of ERISA.
"NEGATIVE SHAREHOLDER VOTE": the "Stockholders Approval" (as
defined in the Investment Agreement) not having been obtained by May
22, 1997.
"NET CASH PROCEEDS": with respect to any sale of assets, all
cash payments (including any cash received by way of deferred payment
pursuant to, or monetization of, a note receivable or otherwise, but
only as and when so received) received from such sale net of bona fide
direct costs of sale.
"NET CASH FLOW": with respect to any fiscal period of a
Person, on a consolidated basis, the actual consolidated pre-tax net
cash flow as determined on the basis set forth in SCHEDULE N-1.
"NET OPERATING CASH FLOW": with respect to any Person for any
applicable fiscal period, the actual consolidated pre-tax net
operating cash flow as determined on the basis set forth in SCHEDULE
N-2.
"OBLIGATIONS": all obligations of every nature (whether of
payment, of performance or otherwise) of the Company and the other
Co-Makers from time to time owed to the Obligee or Collateral Agent or
either of them under any Transaction 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.
"OBLIGEE": the Obligee, as defined in the Preamble to this
Agreement, whether in its capacity as obligee hereunder, holder of the
Preferred Stock, payee of any Secured Obligation, or otherwise,
together with its permitted successors and assigns.
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"OFFICIAL UNSECURED CREDITORS COMMITTEE": the official
committee of creditors appointed by the United States Trustee in the
Reorganization Proceedings.
"OPERATING ACCOUNT BANK": Sun Trust Bank, Miami, N.A. or such
other domestic commercial bank having capital and surplus in excess of
$500,000,000 reasonably satisfactory to holders of the Foothill Debt.
"PBGC": the Pension Benefit Guarantee Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor thereto.
"PERMITTED SALE ASSET" has the meaning assigned that term in
Section 7.6.
"PERSON": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"PERSONAL PROPERTY": the following personal property of the
Company or any Subsidiary (exclusive of Homesite Contracts Receivable
and Commercial Receivables of the Company or any Subsidiary):
(a) the Bank Accounts;
(b) the Investments;
(c) any and all accounts, contract rights, chattel paper,
instruments and documents, including any right to payment for goods
sold or leased or services rendered, whether now owned or hereafter
acquired;
(d) any and all machinery, apparatus, equipment, fittings,
furniture, fixtures, motor vehicles and other tangible personal
property of every kind and description, whether now owned or hereafter
acquired, and wherever located, and all parts, accessories and special
tools and replacements therefor;
(e) any and all general intangibles, whether now owned or
hereafter created or acquired, including all choses in action, causes
of action, rights in and to any and all Condemnation Awards, corporate
or other business records, deposit accounts, inventions, designs,
patents, patent applications, trademarks, trade names, trade secrets,
goodwill, copyrights, registrations, licenses, franchises, customer
lists, tax refund claims, computer programs, any other Intellectual
Property, all claims under guarantees, security interests or other
security to secure payment of any accounts by an account debtor, all
rights to indemnification and all other intangible property of every
kind and nature, including (i) the interests, if any, of the Company or
any Subsidiary in payments, proceeds, residuals and remainders from, or
as a beneficiary of, the Reserve Accounts, Claims Disbursement Account,
or other such accounts, (ii) any and all beneficial interests in the
trusts pursuant to which title to the Trust Property is held and (iii)
any and all other proceeds or choses in action with respect to, or
rights to receive proceeds from, any condemnation of any Real Property
or Personal Property of the Company or any Subsidiary, whether now in
existence or hereafter created or acquired;
(f) any and all goods which are, or may at any time be, goods
held for sale or lease or furnished under 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 ac-
quired, including all such property the sale or other disposition of
which has given rise to accounts and which has been returned to or
repossessed or stopped in transit;
(g) all monies, cash, residues and property of any kind, now
or at any time hereafter in the possession or under the control of the
Obligee or Collateral Agent or any agent or bailee of the Obligee or
Collateral Agent, any holder of Foothill Debt or any agent therefor, or
any other person;
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(h) all accessions to, all substitutions for, and all
replacements, products and proceeds of, the foregoing, including
proceeds of insurance policies insuring the aforesaid property and
documents covering the aforesaid property, all property received wholly
or partly in trade or exchange for such property, and all rents,
revenues, issues, profits and proceeds arising from the sale, lease,
license, encumbrance, correction or any other temporary or permanent
disposition of such items or any interest therein whether or not they
constitute "proceeds" as defined in the Uniform Commercial Code; and
(i) all books, records, documents and ledger receipts
pertaining to any of the foregoing, including customer lists, credit
files, computer records, computer programs, storage media and computer
software used or acquired in connection with generating, processing
and storing such books and records or otherwise used or acquired in
connection with documenting information pertaining to the aforesaid
property.
"PERSONAL PROPERTY SECURITY AGREEMENT": the Junior Personal
Property Security Agreement in the form of EXHIBIT P-1, to be executed
on or before the Issuance Date by the Company and the Subsidiaries now
or hereafter party thereto in favor of Collateral Agent, for the
benefit of the Obligee, as the same may be amended, supplemented or
otherwise modified from time to time.
"PLAN": at a particular time, any employee benefit plan which
is covered by ERISA and in respect of which the Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"PREFERRED STOCK": the Cumulative Redeemable Convertible
Preferred Stock, Series A, liquidation preference $1,000 per share, of
the Company to be issued pursuant to the Investment Agreement.
"PRINCIPAL RAW LAND": the parcels of Real Property of the
Company and its Subsidiaries identified on SCHEDULE P-1.
"PRIORITY CLAIMS": as defined in Article I of the
Reorganization Plan.
"REAL PROPERTY": any and all real property and fixtures and
interests in real property and fixtures, now owned or hereafter
acquired by the Company or any Subsidiary.
"REORGANIZATION": with respect to any Multi-employer Plan,
the condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"REORGANIZATION PLAN": the Restated Second Amended Joint Plan
of Reorganization of General Development Corporation jointly proposed
in the Reorganization Proceedings by the Company and the Official
Unsecured Creditors' Committee, filed on October 9, 1991, with the
Clerk of the Bankruptcy Court, as modified by Modification filed March
9, 1992, a copy of which is attached hereto as EXHIBIT R-1.
"REORGANIZATION PROCEEDINGS": the cases commenced on April 6
and April 12, 1990 under Chapter 11 of Title 11 of the United States
Code in the Bankruptcy Court by GDC (Case No. 90-12231-BKC-AJC),
General Development Financial Services, Inc. (Case No.
90-12232-BKC-AJC), General Development Resorts, Inc. (Case No. 90-12233
BKC-AJC), Town & Country II, Inc. (formerly Florida Residential
Communities, Inc.) (Case No. 90-12234-BKC-AJC), Five Star Homes Group,
Inc. (Case No. 90-12235-BKC-AJC), Five Star Homes, Inc. (Case No.
90-12338-BKC-AJC), GDV Financial Corporation (Case No.
90-12236-BKC-AJC) and Environmental Quality Laboratory, Incorporated
(Case No. 90-12237-BKC-AJC).
"REPORTABLE EVENT": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty-day
notice period is waived under Subsections .13, .14, .16, .18, .19 or
.20 of PBGC Reg. ss. 2615.
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"REQUIREMENT OF LAW": as to any Person, the charter, the
certificate of incorporation and bylaws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
"RESERVE ACCOUNTS": the Disbursement Account (as defined in
Section 8.4 of the Reorganization Plan); the Disputed Claims Reserve
Account (as defined in Section 8.7 of the Reorganization Plan); any
reserve of securities, utility-satisfied lots, cash or other assets
that is established pursuant to the Reorganization Plan, the Homesite
Program, or any agreement resolving a claim of the State of Florida in
the Reorganization Proceedings, to satisfy requests for utility
service; and any reserve of securities or cash established to fund road
or other improvements pursuant to any agreement resolving a claim of
the State of Florida in the Reorganization Proceedings, including,
without limitation: the Division Class 14 Utility Fund Trust Agreement
and the Improvement Fund Trust Agreement, executed by and among the
State of Florida, Department of Business Regulation, Division of
Florida Land Sales, Condominiums and Mobile Homes, the Company and the
Trustee, the Class 14 Utility Fund Trust Agreement and the Homesite
Program Utility Fund Trust Agreement executed by and between the
Company and the Trustee, the Class 14 Utility Lot Trust Agreement
executed by and between the Company and the Trustee, as described in
Section 7.6 of the Reorganization Plan, if any.
"RESPONSIBLE OFFICER": the chief executive officer and the
president of the Company, or with respect to corporate proceedings,
the secretary or any assistant secretary of the Company, or, with
respect to financial matters, the chief financial officer or treasurer
of the Company.
"REVERSE STOCK SPLIT": the proposal to amend the Company's
restated certificate of incorporation to effect, if subsequently
determined by the Company's board of directors, a reverse stock split
of the Company's outstanding common stock as of 5:00 p.m. (Florida
time) on the effective date of the amendment (the "Reverse Split
Effective Date"), pursuant to which each 100 shares or 200 shares (as
determined by the Company's board of directors in its discretion) then
outstanding will be converted into one share (the "Reverse Stock
Split"), and to effect a forward split of the Company's common stock as
of 6:00 a.m. (Florida time) on the day following the Reverse Split
Effective Date, pursuant to which each share of common stock then
outstanding as of such date will be converted into the number of shares
of the Company's common stock that each share represented immediately
prior to the Reverse Split Effective Date, all as set forth in the
Company's proxy statement dated April 22, 1996, provided that the
Obligee consents thereto in writing in its sole and absolute discretion
prior to the commencement thereof.
"REVOLVING LOAN AGREEMENT": the Second Amended and Restated
Revolving Loan Agreement dated as of September 30, 1996 by and among
the Company, the Revolving Loan Bank, and Foothill Capital Corporation,
a California corporation, as collateral agent for the Revolving Loan
Bank, pursuant to which the Revolving Loan Bank has agreed to make
certain loans to the Company, together with all amendments,
modifications, extensions, substitutions and renewals thereof.
"REVOLVING LOAN BANK": Foothill Capital Corporation, a
California corporation, and its successors and assigns.
"REVOLVING LOANS": the Revolving Loans outstanding from time
to time under the Revolving Loan Agreement.
"SALE AND LEASEBACK": any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of real or
personal property which has been or is to be sold or transferred by the
Company or such Subsidiary to such Person or to any other Person to
whom funds have been or are to be advanced by such Person on the se-
curity of such property or rental obligations of the Company or
Subsidiary.
"SECTION 365(J) PROPERTY": the property now or hereafter
made subject to substitute Liens in favor of Homesite Purchasers (as
defined in the Reorganization Plan) pursuant to Section 5.2.2 of the
Reorganization Plan.
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"SECURED FLOATING RATE NOTE AGREEMENT": the Second Amended and
Restated Secured Floating Rate Note Agreement dated as of September 30,
1996 among the parties to the Revolving Loan Agreement, together with
all amendments, modifications, extensions, substitutions and renewals
thereof.
"SECURED FLOATING RATE NOTES": the notes issued pursuant to
the Secured Floating Rate Note Agreement.
"SECURED INSTRUMENT": the Secured Evidence of Joint and
Several Repurchase Obligation to be issued by the Company and the
Subsidiaries under this Agreement in the form of Exhibit C-1, and any
further or additional similar secured instruments issued by the Company
and/or the Subsidiaries to the Obligee under this Agreement, as any of
them may from time to time be amended, supplemented, modified,
renewed, extended, restated, or replaced.
"SECURED INSTRUMENT DOCUMENTS": this Agreement, the Secured
Instrument, the Due Diligence Fee Agreement, the Subsidiary Guaranty
and the Security Documents.
"SECURED OBLIGATIONS": collectively, all Obligations now or
hereafter owed under this Agreement, or any other Secured Instrument
Document together with, after the issuance of the Preferred Stock, all
Obligations owed pursuant to Section 8 of the Certificate of
Designation or, after the occurrence of an Event of Default, as defined
in the Certificate of Designation, pursuant to Section 7.2 of the
Investment Agreement.
"SECURITY AGREEMENTS": the Personal Property Security
Agreement, the Deposit Account Security Agreement, and any other
security agreements, between the Company and/or a Subsidiary and the
Obligee or Collateral Agent, as the same may be amended supplemented or
otherwise modified from time to time, pursuant to which the Company and
Subsidiaries assign and grant a security interest in Homesite Contracts
Receivables and Commercial Receivables and Personal Property of the
Company or Subsidiaries to the Obligee or Collateral Agent, for the
benefit of the Obligee, as required by this Agreement.
"SECURITY DOCUMENTS": the Stock Pledge Agreement, the Joint
Venture Pledge Agreement, the Security Agreements, the Mortgages, the
Deed of Trust, the Assignments, the Company Operating Account Control
Agreement, the Special Purpose Subsidiary Security Documents, any cash
collateral account agreements, and any and all other agreements,
instruments, documents, financing statements, assignments, notices,
mortgages and other written matter necessary or reasonably required by
the Obligee or Collateral Agent at any time to create, perfect,
maintain or continue the Obligee's and Collateral Agent's Lien in the
Collateral, together with all amendments, modifications, extensions,
substitutions and renewals thereof.
"SHAREHOLDERS' EQUITY": as to any corporation, an amount equal
to the excess of the assets of such corporation over its liabilities
(including minority interests), determined in accordance with GAAP, and
as shown on the most recently prepared applicable balance sheet of such
corporation.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV
of ERISA, but which is not a Multi-employer Plan.
"SPECIAL PURPOSE SUBSIDIARY": collectively, a newly formed
special purpose Subsidiary directly wholly owned by the Company and
each Subsidiary of Special Purpose Subsidiary.
SPECIAL PURPOSE SUBSIDIARY SECURITY DOCUMENTS": the Security
Documents in favor of Obligee or Collateral Agent encumbering
Collateral owned by Special Purpose Subsidiary.
"SP SUB COLLATERAL": as defined in the Intercreditor
Agreement.
"SPUD SUBSIDIARY": as defined in Section 7.2(h).
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"STOCK PLEDGE AGREEMENT": the Junior Stock Pledge Agreement,
in the form of EXHIBIT S-1, to be executed on or before the Issuance
Date among the Company, each of its Subsidiaries and Collateral Agent,
as the same may be amended, supplemented or otherwise modified from
time to time, pursuant to which the Company and Subsidiaries pledge
Subsidiary Stock to Collateral Agent for the benefit of the Obligee.
"SUBSIDIARY": as to any Person, a corporation, partnership,
trust (exclusive of any trust created in connection with a Reserve
Account) or other entity of which shares of stock, partnership
interests, beneficial interests or other ownership interests having
ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership, trust (exclusive of any
trust created in connection with a Reserve Account) or other entity are
at the time owned, or the management of which is otherwise controlled,
directly or indirectly, through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Company. Unless otherwise indicated,
all references to a Subsidiary or Subsidiaries of the Company (a) shall
not mean, include, or refer to the Unrestricted Subsidiaries or the
Joint Ventures, and (b) shall mean, include and refer to Special
Purpose Subsidiary.
"SUBSIDIARY GUARANTY": the Subsidiary Guaranty, in the form of
EXHIBIT S-2, to be executed by each Subsidiary created or acquired
after July 1, 1997 by the Company or any Subsidiary, including unless
Obligee shall consent otherwise each such newly formed or newly
acquired Unrestricted Subsidiary or Special Purpose Subsidiary, in
favor of Collateral Agent, for the benefit of the Obligee, as the same
may be amended, supplemented or otherwise modified from time to time.
"SUBSIDIARY PROPERTY UNDER DEVELOPMENT": collectively, the
Real Property of any Subsidiary which is acquired for the purpose of
being developed, or which is in the process of being improved or
developed, either by the construction of roads, curb cuts, sewer and
water facilities or other improvements, or by the construction of
residential units and appurtenances thereto.
"SUBSIDIARY STOCK": the Capital Stock of any and all
Subsidiaries (including the Unrestricted Subsidiaries).
"TAX SERVICING CONTRACTS": collectively, the tax servicing
contracts required to be delivered under the Foothill Loan Documents,
and all amendments, modifications, extensions, substitutions and
renewals thereof.
"TOTAL REAL PROPERTY": collectively, the Real Property and
the JV Real Property.
"TOTAL UNSECURED CLAIMS": as defined in Article I of the
Reorganization Plan.
"TRANSACTION DOCUMENTS": the Secured Instrument Documents, the
Intercreditor Agreement, the Investment Agreement, the Preferred Stock,
the Warrants, the Certificate of Designation relating to the Preferred
Stock, and each exhibit, schedule, certificate and document to be
executed or delivered pursuant hereto or thereto, each as from time to
time amended, supplemented or otherwise modified.
"TRUST PROPERTY": the real property held in trust pursuant to
(a) Trust Agreement No. 06-01-009-6082101, dated as of January 17,
1991, by and between NCNB National Bank of Florida, as Trustee for the
benefit of the Company, the Beneficiary, (b) Trust Agreement No. 06-
01-009-6081954, dated as of January 17, 1991, by and between NCNB
National Bank of Florida, as Trustee for the benefit of the Company,
the Beneficiary, (c) Trust Agreement No. 06-01-009-6082655, dated as of
January 17, 1991, by and between NCNB National Bank of Florida, as
Trustee for the benefit of the Company and General Development
Financial Services, Inc., the Beneficiaries, and (d) Trust Agreement
No. 2, dated as of May 31, 1991, by and between Jake Gamble, Esquire,
as successor Trustee for the benefit of the Company and Cumberland
Cove, Inc., the Beneficiaries.
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"UNRESTRICTED SUBSIDIARIES": collectively, (a) the direct or
indirect subsidiaries of the Company listed on SCHEDULE U-1, and (b)
any other direct or indirect subsidiary of the Company that is formed
or acquired after the date hereof, that does not have or make any
investment in any Joint Venture (nor was formed or acquired for the
purpose of having or making any such investment), and that the Obligee
agrees in writing shall constitute an Unrestricted Subsidiary under and
for all purposes of this Agreement and the other Loan Documents, upon
which SCHEDULE U-1 automatically shall be deemed to be amended to
reflect the inclusion on such schedule of such new Unrestricted
Subsidiary; and "UNRESTRICTED SUBSIDIARY" means any one of them.
"UNSECURED CASH FLOW NOTES": the "New Unsecured Cash Flow
Notes," as defined in Article I of the Reorganization Plan.
"UNSOLD HOUSING INVENTORY": as at any date, all Housing
Inventory applicable to Unsold Residential Dwelling Units.
"UNSOLD RESIDENTIAL DWELLING UNITS": single-family dwelling
units (whether detached or included within a townhouse, villa or
cluster containing more than one such unit) or condominium units
(excluding timeshare units) completed or under construction by the
Company or any Subsidiary that are not subject to a contract for sale
to any third-party purchaser.
"VENTURE SUBSIDIARIES": collectively, (a) the direct or
indirect subsidiaries of the Company listed on SCHEDULE V-1, and (b)
any other direct or indirect subsidiary of the Company that is formed
or acquired after the date hereof, that has or makes any investment in
any Joint Venture, and that the Obligee agrees in writing shall
constitute a Venture Subsidiary under and for all purposes of this
Agreement and the other Loan Documents, upon which SCHEDULE V-1
automatically shall be deemed to be amended to reflect the inclusion on
such schedule of such new Venture Subsidiary; and "VENTURE SUBSIDIARY"
means any one of them.
"WARRANTS": as defined in the Investment Agreement.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have such defined meanings when used in the Secured Instrument
or any certificate or other document made or delivered pursuant hereto.
(b) As used herein and in the Secured Instrument, and any
certificate or other document made or delivered pursuant hereto, accounting
terms relating to the Company and its Subsidiaries not defined in Section 1.1
and accounting terms partly defined in Section 1.1, to the extent not defined,
shall have the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) References to "Sections", "subsections", Exhibits and
Schedules are to Sections, Sections, Exhibits and Schedules, respectively, of
this Agreement unless otherwise specifically provided.
(f) Unless the context of this Agreement clearly requires
otherwise, the term "including" is not limiting.
(g) Except as may be expressly specified otherwise herein, each
reference to an agreement or instrument amended, supplemented or otherwise
modified from time to time means such agreement or instrument as amended,
supplemented or modified in accordance with the terms hereof and thereof and the
Intercreditor Agreement, if applicable.
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(h) Each reference herein to a Security Document shall mean,
collectively, unless otherwise specified, such Security Document as executed by
Foothill Capital Corporation or its successors as Collateral Agent with respect
to Collateral other than SP Sub Collateral and such Security Document as ex-
ecuted by The Bank of New York or its successors as Collateral Agent with
respect to SP Sub Collateral.
SECTION 2. ISSUANCE AND TERMS OF SECURED INSTRUMENT
2.1 SECURED INSTRUMENT. The Obligee hereby agrees that on the Issuance
Date, subject to the terms and conditions set forth herein, the Company and the
Subsidiaries shall execute and deliver to the Obligee the Secured Instrument. If
the Obligee is making a loan hereunder to the Company and the Subsidiaries on
the Issuance Date: the original outstanding principal amount of the Secured
Instrument shall be the principal amount of such loan as specified by the
Company, up to $10,000,000; there shall be only one borrowing hereunder; and if
such loan is less than $10,000,000 the Obligee's commitment shall terminate with
respect to any remaining portion of such $10,000,000. If no loan is made
hereunder prior to the issuance of Preferred Stock pursuant to the Investment
Agreement, on the Issuance Date: there shall be no borrowings hereunder and the
Secured Instrument shall evidence the joint and several obligation of the
Company and the other Co-Makers to repurchase Preferred Stock under Section 8 of
the Certificate of Designation and pay all other Secured Obligations, all of
which shall be secured by the Security Documents.
2.2 PAYMENT OF SECURED INSTRUMENT. (A) If the Obligee has made a loan
hereunder to the Company and the Subsidiaries on the Issuance Date, the
following provisions shall be applicable: The then outstanding principal amount
of the Secured Instrument shall be due and payable, and shall be paid in full by
the Company and the Subsidiaries, on the Maturity Date. In addition: (a) a
principal installment in an amount designated in writing by the Obligee in its
sole discretion to the Company on or before December 2, 1997, not to exceed the
lesser of (x) the outstanding amount due under the Secured Instrument and (y)
$5,000,000, shall be due with respect to the Secured Instrument on December 31,
1997, provided that if the Obligee shall fail to designate any amount by such
date, the amount of such installment shall be the lesser of (x) the outstanding
amount due under the Secured Instrument and (y) $5,000,000, and (b) in the event
of any acceleration of the maturity of any of the principal of the Secured
Instrument pursuant to the provisions of Section 8 hereof or pursuant to the
terms of the Secured Instrument, such accelerated principal shall be immediately
due and payable. The principal of the Secured Instrument may be prepaid in whole
or in part, from time to time, without premium or penalty. On any date that any
principal is due and payable hereunder, anything herein to the contrary
notwithstanding, all accrued and unpaid interest with respect to such principal
likewise shall be due and payable on such date.
(B) If no loan is made hereunder prior to the issuance of the
Preferred Stock pursuant to the Investment Agreement, the obligations evidenced
by the Secured Instrument shall be due and payable in accordance with the terms
of the relevant Transaction Document.
2.3 CONVERSION OF SECURED INSTRUMENT INTO PREFERRED STOCK. If the
Obligee has made a loan hereunder to the Company and the Subsidiaries on the
Issuance Date, the following provisions shall be applicable: The outstanding
principal amount of the Secured Instrument shall be convertible into Preferred
Stock on the terms and subject to the conditions set forth in the Investment
Agreement. All interest and other amounts (other than principal) theretofore
accrued and owing hereunder or under the Due Diligence Fee Agreement shall be
paid in full prior to or concurrent with such conversion. If the Secured
Instrument is converted into Preferred Stock and the Obligee purchases
additional Preferred Stock as set forth in the Investment Agreement, the Company
will be obligated to repurchase all such Preferred Stock on the happening of
certain conditions set forth in the Certificate of Designation. From and after
such conversion of the Secured Instrument into Preferred Stock, the Secured
Instrument shall no longer evidence an indebtedness for borrowed money, and
notwithstanding anything herein to the contrary the term Secured Obligations as
used in this Agreement and each other Transaction Document shall not mean or
include any indebtedness for principal or interest, but the Secured Instrument
shall remain in full force and effect to evidence the obligation of the Company
to repurchase all such Preferred Stock under Section 8 of the Certificate of
Designation and pay all other Secured Obligations then
outstanding and the joint and several obligation of each and every Subsidiary to
pay the Secured Obligations then outstanding, all of which shall continue to be
secured by the Security Documents.
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2.4 INTEREST RATES AND INTEREST PAYMENT DATES.
(a) From and after the Issuance Date, subject to Sections 2.4(b)
and 2.10, as well before as after judgment, the outstanding principal amount of
any loan made hereunder by the Obligee on the Issuance Date at all times shall
bear interest at a rate per annum equal to twenty percent (20%).
(b) Section 2.4(a) notwithstanding, but subject to Section 2.10,
from and after the occurrence and during the continuance of an Event of Default
and in any event at all times after a Negative Shareholder Vote, all amounts due
hereunder and not paid when due shall bear interest at a per annum rate, as well
before as after judgment, equal to twenty-three percent (23%) (the "DEFAULT
RATE").
(c) Interest on the outstanding principal amount of any loan made
hereunder by the Obligee on the Issuance Date shall be payable in arrears on
each Interest Payment Date, provided that from and after the occurrence and
during the continuance of an Event of Default interest accruing pursuant to
paragraph (b) of this Section 2.4 also shall be payable on demand.
2.5 COMPUTATION OF INTEREST AND FEES.
(a) Interest and fees shall be calculated on the basis of a 360-day
year for the actual days elapsed.
(b) Each determination of an interest rate by the Obligee pursuant
to any provision of this Agreement shall be conclusive and binding in the
absence of manifest error.
2.6 PRO RATA TREATMENT AND PAYMENTS. If the Secured Instrument is
replaced with multiple Secured Instruments pursuant to Section 10.6, each
payment (including each prepayment) by the Company on account of such Secured
Instruments shall be made PRO RATA according to the respective outstanding
amounts of the Secured Instruments. All payments (including prepayments) to be
made by the Company hereunder and under the Secured Instruments shall be made
without setoff or counterclaim and shall be made prior to noon, New York City
time, on the due date thereof, in Dollars and in immediately available funds to
the following account: FBO: Apollo Real Estate Investment Fund II,
L.P.-Operating Money Market Account, Chase Manhattan Bank, 380 Madison Avenue,
ABA #: 021-000-021, Account #: 230-211755, or to such other account as Obligee
may specify in writing. If any payment hereunder becomes due and payable on a
day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at then applicable rate during such extension.
2.7 TAXES. Any Obligee that is not organized under the laws of the
United States of America or a state thereof agrees that it will deliver to the
Company and the Obligee (a) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor applicable form, as the case may
be, and (b) an Internal Revenue Service Form W-8 or W-9 or successor applicable
form. Each such Obligee also agrees to deliver to the Company two further copies
of the said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms
or other manner of certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Company, and such extensions or renewals thereof as may reasonably be requested
by the Company, unless in any such case any change in treaty, law or regulation
has occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Obligee from duly completing and delivering any such form with respect to it and
such the Obligee so advises the Company and any other Obligees. Such Obligee
shall certify (a) in the case of a Form 1001 or 4224, that it is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes, and (b) in the case of a Form W-8 or W-9,
that it is entitled to an exemption from United States backup withholding tax.
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2.8 USE OF PROCEEDS. The proceeds of any loan made by the Obligee
hereunder shall be used only for the lawful and permitted corporate purposes
relating to the Company's domestic business specified pursuant to Section
5.1(z). The proceeds of the issuance of Preferred Stock shall be used as
specified in the Investment Agreement.
2.9 FEES. The Company shall pay (a) to the Collateral Agent such fees
as may be required under any agreement between the Company and the Collateral
Agent with respect to compensation of the Collateral Agent in respect of its
services, and (b) to each other person or entity to whom the Company has agreed
to pay a fee in connection with this Agreement or the other Transaction
Documents and the transactions contemplated hereby or thereby, such fees as may
be required under such agreement; PROVIDED in each case that such agreement has
been approved by the Obligee.
2.10 MAXIMUM INTEREST RATE. Nothing contained in this Agreement, the
Secured Instrument or any other Transaction Document shall require the Company
or the Subsidiaries to pay interest at a rate exceeding the maximum rate
permitted by applicable law. If the amount of interest paid or payable on any
date, computed pursuant to applicable law and the Transaction Documents, would
exceed the maximum amount permitted by applicable law to be charged, the amount
of interest paid or payable on such date shall be automatically reduced to such
maximum permissible amount and the excess applied to principal or, if no
principal shall be outstanding and such amount has been paid, returned to the
payor. If the amount of interest payable to the Obligee in respect of any
interest computation period is reduced pursuant to the preceding sentence of
this Section and the amount of interest payable for its account in respect of
any subsequent interest computation period, computed pursuant to applicable law
and the Transaction Documents, would be less than the maximum amount permitted
by applicable law to be charged, then the amount of interest payable to the
Obligee in respect of such subsequent interest computation period shall be
automatically increased to such maximum permissible amount; PROVIDED that at no
time shall the aggregate amount by which interest paid had been increased
pursuant to this sentence exceed the aggregate amount by which interest has
theretofore been reduced pursuant to the preceding sentence of this Section.
SECTION 3. COLLATERAL
3.1 LIENS IN SUBSIDIARY STOCK, CONTRACT RECEIVABLES, REAL PROPERTY AND
PERSONAL PROPERTY. To secure the prompt payment of the Secured Obligations,
together with all costs, expenses, fees and other obligations payable by the
Company or the Subsidiaries hereunder or under any Transaction Document with
respect to the Secured Obligations, on or before the Issuance Date the Company
shall grant, and shall cause each Subsidiary to grant, to Collateral Agent a
continuing Lien, junior to the Lien created by, and securing the obligations of
the Company and Subsidiaries under, the Foothill Loan Documents with respect to
property of the Company and the Subsidiaries other than the SP Sub Collateral
and senior to the Lien created by, and securing the obligations of the Company
and Subsidiaries under, the Foothill Loan Documents with respect to SP Sub
Collateral, in and to all of the following property and interests in property of
the Company and the Subsidiaries, except the Excluded Property, whether now
owned or existing or hereafter acquired or arising, or in which the Company and
the Subsidiaries now or hereafter have any rights, and wheresoever located, and
all proceeds thereof ("COLLATERAL"):
(a) the Subsidiary Stock;
(b) the Homesite Contracts Receivable;
(c) the Commercial Receivables;
(d) the Real Property; and
(e) the Personal Property.
At such times as any Excluded Property is freed of contractual or legal
restrictions against becoming subject to a Lien to secure the Secured
Obligations or upon the distribution of any Trust Property to the Company or a
Subsidiary (including an Unrestricted Subsidiary or Joint Venture), such
property shall, automatically, become subject to the Liens created by the
Security Documents, and the Company shall notify the Obligee in writing of such
event and take such further actions as may be required by the Obligee and/or
Collateral Agent to evidence and perfect such Liens; provided that, in no event,
shall a Lien be granted on any assets required to be placed in a Reserve Account
pursuant to the Reorganization Plan or the Homesite Program.
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3.2 SECURITY DOCUMENTS. To evidence and perfect the Liens of the
Obligee and Collateral Agent in the Collateral in accordance with applicable
law, on or before the Issuance Date the Company shall execute and deliver and
will cause the Subsidiaries to execute and deliver, to Collateral Agent the
Security Documents, which Security Documents will be delivered to the Obligee
and filed and recorded, and the Company will deliver, and shall cause the
Subsidiaries to deliver (or, if such Collateral shall be in the possession of
the collateral agent for the holders of the Foothill Debt, shall cause such
agent to acknowledge that it is holding such Collateral for the benefit of the
Obligee as well as the holders of the Foothill Debt) to Collateral Agent any
Collateral if the perfection of a Lien against such Collateral requires
possession thereof for purposes of perfecting such Liens, all at the cost and
expense of the Company. Specifically, but without limiting the generality of the
foregoing, on or before the Issuance Date the Company will do, and will cause
the Subsidiaries to do, the following, in the case of property of the Company
and the Subsidiaries other than the SP Sub Collateral subject to the senior and
prior Liens created by, and securing the obligations of the Company and
Subsidiaries under, the Foothill Loan Documents and in the case of the SP Sub
Collateral senior and prior to the Liens created by, and securing the
obligations of the Company and Subsidiaries under, the Foothill Loan Documents:
(a) STOCK PLEDGE. To evidence and perfect the Liens of Collateral
Agent in the Subsidiary Stock, the Company and the Subsidiaries owning other
Subsidiaries or Unrestricted Subsidiaries shall execute and deliver the Stock
Pledge Agreement and will execute and deliver related undated stock powers
executed in blank by the Company and shall deliver all original certificates
representing the Subsidiary Stock to Collateral Agent and will cause all issuers
of Subsidiary Stock to execute and deliver pledge acknowledgments pursuant to
the Stock Pledge Agreement.
(b) HOMESITE CONTRACTS RECEIVABLES AND COMMERCIAL RECEIVABLES. To
evidence and perfect the Liens of Collateral Agent in the Homesite Contracts
Receivable and Commercial Receivables, the Company and the Subsidiaries will
execute and deliver to Collateral Agent the Security Agreements, together with
related financing statements, which will be filed and recorded in accordance
with applicable law, and the Company and Subsidiaries shall duly endorse any and
all promissory notes included in the Homesite Contracts Receivable and
Commercial Receivables to the order of Collateral Agent and shall deliver such
promissory notes and the related mortgages or deeds of trust to Collateral Agent
or its designee, and shall execute and deliver assignments of promissory notes
and mortgages or deeds of trust, filed and recorded in accordance with appli-
cable law, and, as to Commercial Receivables acquired following March 31, 1992,
accompanied by ALTA title insurance policies naming Collateral Agent as the
insured mortgagee thereunder.
(c) REAL PROPERTY. To evidence and perfect the Liens of Collateral
Agent in the Real Property, the Company shall execute and deliver to Collateral
Agent the Mortgages, and the Subsidiaries shall execute and deliver to
Collateral Agent the Mortgages and Deed of Trust, as applicable, and related
financing statements encumbering such Real Property, which will be filed and
recorded in accordance with applicable law, accompanied by ALTA title insurance
policies insuring the Obligee's Lien represented thereby, and, if requested by
the Obligee, surveys of such Real Property.
(d) JOINT VENTURE PLEDGE. To evidence and perfect the Liens of
Collateral Agent in the interests of the Venture Subsidiaries in the Joint
Ventures, the Company will cause the Venture Subsidiaries to execute and deliver
the Joint Venture Pledge Agreement and all requisite consents in respect of such
Liens.
(e) PERSONAL PROPERTY. To evidence and perfect the Liens of
Collateral Agent in the Personal Property, the Company and Subsidiaries shall
execute and deliver to Collateral Agent the Security Agreements, together with
related financing statements, which have been or will be filed and recorded in
accordance with applicable law, and, to the extent that the Personal Property
comprises Investments or Bank Accounts, the Company and Subsidiaries shall take
the following actions:
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(i) with respect to any Investment or
Bank Account which is or becomes evidenced by an agreement, instrument,
certificate or document, including promissory notes, stock
certificates, bonds, debentures, securities and certificates of
deposit, the Company shall from time to time deliver, or shall from
time to time cause such Subsidiary to deliver, the original thereof to
the Collateral Agent, together with appropriate assignments and
endorsements or other specific evidence of assignment thereof to the
Collateral Agent, in form and substance acceptable to the Collateral
Agent;
(ii) with respect to any Investment or
Bank Account which is not certificated or otherwise evidenced as
described in clause (i) above, including uncertificated securities and
depository and other accounts maintained with financial institutions
and any other Persons, the Company shall notify the Obligee thereof and
take, or cause such Subsidiary to take, any and all steps which are
required by the Obligee for purposes of perfecting the Collateral
Agent's Lien therein;
(iii) the Company shall keep the Obligee
informed of any and all Bank Accounts maintained by the Company or any
such Subsidiary with any financial institution or other Person and, if
requested by the Obligee, the Company or any such Subsidiary shall
execute a cash collateral account agreement in form and substance
satisfactory to the Obligee, pursuant to which the Lien of Collateral
Agent in such Bank Accounts is perfected and preserved; and
(iv) if deemed by the Obligee, in its sole
discretion, to be necessary for purposes of perfecting the Lien of the
Collateral Agent in any Bank Account, the Company shall transfer to and
maintain in a cash collateral account, and shall cause the
Subsidiaries to transfer to and maintain in a cash collateral account,
the funds in each such Bank Account and, if deemed necessary by the
Obligee, shall execute and cause any such Subsidiary to execute a cash
collateral account agreement in form and substance reasonably
satisfactory to Collateral Agent, pursuant to which the Lien of
Collateral Agent in such Bank Account shall be perfected and preserved;
provided, however, the Company shall not be required to deposit the
residual, remainder or beneficial interest of the Company and any such
Subsidiary in the Reserve Accounts, the Claims
Disbursement Accounts and other escrow, restricted, custodial and
fiduciary accounts until such time as all amounts required to be
disbursed to the intended beneficiaries thereof have been disbursed
and the residual or remainder is available to the Company and its
Subsidiaries for deposit in an unrestricted account.
(f) ADDITIONAL ACTS. The Company shall, and shall cause the
Subsidiaries to, take all actions and execute all documents deemed necessary by
the Obligee or Collateral Agent to ensure that, upon the issuance of the Secured
Instrument, the Obligee or Collateral Agent, for the benefit of the Obligee,
shall have a security interest in the Collateral granted by the Security
Documents (a) junior only to the Liens thereon established under the Foothill
Loan Documents in the case of Collateral other than SP Sub Collateral and (b)
senior to all Liens thereon, including the Liens thereon established under the
Foothill Loan Documents, in the case of SP Sub Collateral. If the perfection or
recordation of Collateral Agent's Lien or the Lien of the Obligee pursuant
hereto upon any Collateral acquired hereafter by the Company or any Subsidiary
requires any additional act of possession or filing or recordation of any
Security Document, the Company shall notify the Obligee of the acquisition of
such Collateral and, at the Obligee's request, the Company shall execute and
deliver and shall cause the Subsidiaries to execute and deliver such Security
Documents for filing or recordation and deliver such items of Collateral as
Collateral Agent or the Obligee may reasonably request for purposes thereof and
the Company shall pay the cost of preparing any such Security Documents and the
filing and recordation thereof. Without limiting the generality of the
foregoing, the Company agrees to, and to cause each Subsidiary (other than with
respect to property required to be released pursuant to Section 3.6) to notify
the Obligee upon the acquisition of any Real Property acquired after the date
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hereof, except as provided by Section 3.6, and upon request of the Obligee, to
provide to the Obligee an appraisal and an environmental report (each in form
and substance satisfactory to the Obligee) covering such property, and to cause
such Real Property to be subjected to a Mortgage or Deed of Trust in favor of
Collateral Agent for the benefit of Obligee. With respect to any such Mortgages
or Deed of Trust, the Company or such Subsidiary shall deliver to the Obligee
the following, all in form and substance satisfactory to the Obligee: (i)
executed Mortgages or Deed of Trust and financing statements encumbering such
property and (ii) ALTA lenders' extended coverage policies of title insurance on
such property, in liability, amount and form and issued by a title company
satisfactory to the Obligee showing the Mortgage or Deed of Trust as a perfected
lien upon the property, subject only to Liens permitted pursuant to Section 7.3
and such other exceptions as may be approved by the Obligee in writing, together
with endorsements reasonably required by the Obligee and affirmative assurances
that the improvements are wholly located within the boundaries of the insured
land.
3.3 SECTION 365(J) PROPERTY. Pursuant to the Reorganization Plan and
the Confirmation Order, the Company has designated the property which comprises
the Section 365(j) Property, which property, at the time of execution of the
mortgage encumbering the Section 365(j) Property in favor of the trustee for the
holders of Section 365(j) Liens, had a value, as appraised pursuant to the
Company's land plan book dated May, 1991, no greater than 120% of the value of
the Section 365(j) Liens established pursuant to the Reorganization Plan. The
Liens granted to Collateral Agent pursuant hereto in the Section 365(j) Property
are subordinate to the Liens of the Section 365(j) Liens and Collateral Agent
shall not be permitted to exercise its rights or remedies of foreclosure against
such property or exercise any other rights with respect to such property until
such time as the Section 365(j) Liens have been satisfied or have been
transferred to other property acceptable to the Bankruptcy Court.
3.4 [intentionally omitted]
3.5 SUBORDINATIONS AND RELEASES OF MORTGAGE AND RELATED PERSONAL
PROPERTY LIENS.
(a) [intentionally omitted]
(b) Except with respect to SP Sub Collateral, at such times as
Liens are granted by the Company or any Subsidiary, as permitted pursuant to
Section 7.3(n), so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, and provided the Obligee has received a
certificate of a Responsible Officer certifying and demonstrating that all of
the conditions set forth in Section 7.3(n) have been satisfied, the Obligee
shall instruct Collateral Agent to and Collateral Agent shall execute
documentation subordinating the Lien of the Mortgages to such Liens, in form and
substance satisfactory to the Obligee and Collateral Agent, unless such Real
Property qualifies for the release provisions in Section 3.5(c), in which event
the provisions of Section 3.5(c) shall apply.
(c) Except with respect to SP Sub Collateral, at such time as Liens
are granted by any Subsidiary, as permitted by Section 7.3(n), so long as no
Default or Event of Default has occurred and is continuing or would result
therefrom, and provided the Obligee has received a certificate of a Responsible
Officer certifying and demonstrating that all of the conditions set forth in
Section 7.3(n) have been satisfied, the Obligee shall instruct Collateral Agent
to and Collateral Agent shall release the Lien of the Mortgages on any
Subsidiary Property Under Development if (i)(x) such Real Property is financed
under the acquisition and project financing provisions of Sections 7.2(f) or
7.2(j), and (y) the terms of such financing prohibit subordinate Liens upon such
Real Property, or (ii) such Real Property is contributed by the Company to a
Subsidiary pursuant to Section 7.8(g). The Company shall use reasonable efforts
to cause any lender/seller providing the acquisition and/or project financing on
Subsidiary Property Under Development to permit the subordination of Collateral
Agent's Liens on such Subsidiary Property Under Development, and thereby to
eliminate the need for Collateral Agent to release its Liens on such Subsidiary
Property Under Development. In connection with the release of any Liens on
Subsidiary Property Under Development pursuant to this Section 3.5(c), upon the
request of the Company, the Obligee shall instruct Collateral Agent to, and
Collateral Agent shall, release any Liens upon any Personal Property related to,
and integral to the use of, the Real Property being released; provided that the
Company provides a detailed list of such Personal Property to be released in
form and substance satisfactory to the Obligee. If such lender/seller will
permit such subordination, then, notwithstanding the foregoing provisions of
this Section 3.5(c), Collateral Agents's Liens on such Subsidiary Property Under
Development will not be released and will become subordinate Liens pursuant to
documentation in form and substance satisfactory to the Obligee.
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(d) [intentionally omitted]
3.6 SUBSIDIARY GUARANTIES. The Company shall not create or acquire any
Subsidiary after the date hereof and prior to July 1, 1997. The Company shall
cause any entity becoming a Subsidiary after July 1, 1997 to execute and deliver
guarantees in the form of the Subsidiary Guaranties and counterparts of the
Transaction Documents to which Subsidiaries of the Company are parties (other
than the Secured Instrument, the Secured Agreement and the initial Mortgages
recorded in Florida), and to take all such steps as shall be necessary to create
in favor of the Collateral Agent duly perfected and recorded Liens securing the
Secured Obligations including by executing and delivering additional Security
Documents in substantially the form of the Security Documents. In the case of
any subsequent Florida Mortgages executed by such subsequent Subsidiaries to
secure their obligations under the Subsidiary Guaranties, the amount of recovery
under such subsequent Mortgages shall be limited to an amount not greater than
the value of the respective additional mortgaged property.
3.7 SPECIAL PURPOSE SUBSIDIARY. Without the express prior written
consent of Obligee, Special Purpose Subsidiary shall not, and the Company shall
not permit Special Purpose Subsidiary (which term, as used in this Agreement,
includes Special Purpose Subsidiary and its Subsidiaries) to, directly or
indirectly:
(a) create, incur, assume or suffer to exist any Indebtedness,
other than Indebtedness under the Transaction Documents and,
on a basis subordinate to the Indebtedness under the
Transaction Documents consistent with the Intercreditor
Agreement, Indebtedness permitted by Section 7.2(b);
(b) create, incur, assume or suffer to exist any Lien upon the
Capital Stock of Special Purpose Subsidiary or upon any of
the property, assets or revenues of Special Purpose
Subsidiary, whether now owned or hereafter acquired, other
than Liens under the Transaction Documents and, on a basis
subordinate to the Indebtedness under the Transaction
Documents consistent with the Intercreditor Agreement, Liens
securing Indebtedness permitted by Section 7.2(b);
(c) create, incur, assume or suffer to exist any Guarantee
Obligation, other than Guarantee Obligations under the
Transaction Documents and, on a basis subordinate to the
Guarantee Obligations under the Transaction Documents
consistent with the Intercreditor Agreement, Guarantee
Obligations in respect of Indebtedness permitted by Section
7.2(b);
(d) except to the extent such merger, consolidation or
amalgamation is of a Subsidiary of Special Purpose
Subsidiary with and into Special Purpose Subsidiary, or
between or among wholly owned Subsidiaries of Special
Purpose Subsidiary, enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, all or
substantially all of its property, business or assets;
(e) except as expressly approved by the Board of Directors of
the Company in connection with a Board-approved real estate
development project, convey, sell, lease, assign, transfer
or otherwise dispose of any of its property, business or
assets (including receivables and leasehold interests),
whether now owned or hereafter acquired;
(f) declare or pay any dividend on, or make any payment on
account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of any Capital Stock of the
Company other than the Preferred Stock, whether now or
hereafter outstanding, or make any other distributions in
respect thereof, either directly or indirectly, whether in
cash or property or in obligations of Special Purpose Sub-
sidiary, except for dividends declared and paid by any
Subsidiary of Special Purpose Subsidiary to Special Purpose
Subsidiary or any Subsidiary of Special Purpose Subsidiary
and except as permitted by Section 6.14(d)(iii) or (d)(iv)
of the Investment Agreement;
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<PAGE>
(g) except as expressly approved by the Board of Directors of
the Company in connection with a Board-approved real estate
development project, make, or enter into any agreement the
performance of the terms of which would require Special
Purpose Subsidiary to make (by way of the acquisition of
securities of a Person or otherwise), any expenditures in
respect of the purchase or other acquisition of fixed or
capital assets;
(h) except as expressly approved by the Board of Directors of
the Company in connection with a Board-approved real estate
development project, make any advance, loan, extension of
credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any
assets constituting a business unit of, or make any other
Investment in, any Person;
(i) make any optional payment or optional prepayment on, or
optional redemption of, or purchase or otherwise acquire any
interest in, any Indebtedness other than any Indebtedness to
Obligee; amend, modify or change, or consent or agree to any
amendment, modification or change to any of the terms of any
Indebtedness, including Foothill Debt, or any other
agreement executed in connection with any Indebtedness; or
amend any subordination provisions of any instrument
governing any Indebtedness;
(j) except as permitted by Section 6.14(d)(iii) or (d)(iv) of
the Investment Agreement enter into any transaction,
including any purchase, sale, lease, loan or transfer
exchange of property or the rendering of any service, with
any Affiliate (other than any Subsidiary of Special Purpose
Subsidiary), including the Company or any Subsidiary other
than a Subsidiary of Special Purpose Subsidiary;
(k) enter into any Sale and Leaseback;
(l) enter into any agreement with any Person other than the
Obligee pursuant hereto which prohibits or limits the
ability of Special Purpose Subsidiary to create, incur,
assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired;
(m) own any assets or properties (including cash, Cash
Equivalents and Investments) on which Obligee does not have
a perfected first lien pursuant to the Security Documents;
or
(n) create or permit to exist any Subsidiary.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Obligee that:
4.1 FINANCIAL CONDITION.
(a) The consolidated balance sheets of the Company and its
consolidated Subsidiaries as at December 31, 1996 and the related consolidated
statements of income and of cash flows for the fiscal year ended on such date,
reported on by Ernst & Young, a copy of which has been furnished to the Obligee,
fairly and accurately present the consolidated financial condition of the
Company and its consolidated Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for the fiscal
year then ended.
(b) In the event the Issuance Date occurs after May 15, 1997: The
unaudited consolidated balance sheets of the Company and its consolidated
Subsidiaries as at March 31, 1997, and the related consolidated statements of
income and cash flows for the three months then ended, a copy of which has been
delivered to the Obligee, fairly and accurately presents the consolidated
financial condition of the Company and its consolidated Subsidiaries as at such
date, and the consolidated results of their operations and their consolidated
cash flows for the three months, then ended (subject to normal year-end
adjustments) and a Responsible Officer has so certified to the Obligee.
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<PAGE>
(c) All such financial statements described in clauses (a) and (b)
above, including the related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods involved
(except for such inconsistencies as approved by such accountants or Responsible
Officer, as the case may be, and as disclosed therein). Neither the Company nor
any of its consolidated Subsidiaries had, at the date of the most recent balance
sheet referred to above, any material Guarantee Obligation, contingent liability
or liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including any interest rate or foreign currency swap or exchange
transaction, which is not reflected in the foregoing statements or in the notes
thereto or in SCHEDULE 4.1. Since December 31, 1996, there has been no sale,
transfer or other disposition or agreement therefor by the Company or any of its
consolidated Subsidiaries of any material part of its business or property and
no purchase or other acquisition of any business or property (including any
capital stock of any other Person) which is material in relation to the
consolidated financial condition of the Company and its consolidated
Subsidiaries at December 31, 1996, except as described in SCHEDULE 4.1 or
consented to in writing by the Obligee in its sole discretion.
(d) The three-year Management Business Plan update for the period
1996-1998 delivered to the Obligee prior to the date hereof (i) was prepared in
good faith upon assumptions believed by the Company to be reasonable, it being
understood that the projections therein contained as to future events are
subject to certain uncertainties and contingencies which are beyond the control
of the Company and may be significant, and thus no assurance can be given that
such projections will be realized, and (ii) presents fairly, in all material
respects, the actual results of operations of the Company and Subsidiaries for
the period from January 1, 1996 through the date thereof, in accordance with
GAAP, subject to recurring year-end audit adjustments and the absence of
footnotes.
4.2 NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, (a) there has
been no development or event nor any prospective development or event, which
has had or could reasonably be expected to have a Material Adverse Effect,
except such developments or events or prospective developments or events as have
been disclosed by the Company in filings with the Securities and Exchange
Commission made prior to the date hereof and true and correct copies of which
have been delivered to the Obligee or as set forth on SCHEDULE 4.2, and (b) no
dividends or other distributions have been declared, paid or made upon the
Capital Stock of the Company nor has any of the Capital Stock of the Company
been redeemed, retired, purchased or otherwise acquired for value by the Company
or any of its Subsidiaries. As of the date hereof and the Issuance Date, no
motion for the conversion of the case, appointment of a trustee, or dismissal is
pending or has been denied, the reversal of which on appeal would affect the
validity of this Agreement and no appeal has been taken from the entry of the
Confirmation Order in the Reorganization Proceedings, the reversal,
modification, or affirmance of which will affect the validity or enforceability,
or change the provisions, of this Agreement or any other Transaction Document.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Company and
its Subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, except, in the case of
any such Subsidiary, where all such failures to be in good standing are not
reasonably likely, in the aggregate, to have a Material Adverse Effect, (b) has
the corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except to the extent that all such failures to be
so qualified and in good standing are not reasonably likely, in the aggregate,
to have a Material Adverse Effect, and (d) is in compliance with all
Requirements of Law except to the extent that any failures to comply therewith
is not reasonably likely, in the aggregate, to have a Material Adverse Effect.
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<PAGE>
4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
(a) THE COMPANY. The Company has the corporate power and authority,
and the legal right, to make, deliver and perform this Agreement, the Secured
Instrument and other Transaction Documents, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement, the Secured Instrument and the other Transaction Documents including
the issuance of the Preferred Stock and the Initial Warrants. Except as set
forth on SCHEDULE 4.4, no consent or authorization of, filing with or other act
by or in respect of, any Governmental Authority or any other Person is required
in connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement, the Secured
Instrument or the other Transaction Documents, except such consents,
authorizations, filings or other acts as have been obtained, made or performed,
as the case may be, and as remain in full force and effect. This Agreement and
the other Transaction Documents to which the Company is party have been or will
be, duly executed and delivered on behalf of the Company. This Agreement, and
each other Transaction Document executed and delivered constitutes, or when
executed and delivered will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(b) SUBSIDIARIES. Each of the Subsidiaries (including Unrestricted
Subsidiaries) party to the Transaction Documents has the corporate power and
authority, and the legal right, to make, deliver and perform the Transaction
Documents to which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance of the Transaction Documents
to which it is a party. Except as set forth on SCHEDULE 4.4, no consent or
authorization of, filing with or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the execution,
delivery, performance, validity or enforceability of the Transaction Documents
to which it is a party, except such consents, authorizations, filings or other
acts as have been obtained, made or performed, as the case may be, and as remain
in full force and effect. Each Transaction Document to which any Subsidiary
(including Unrestricted Subsidiaries) is a party has been or will be duly
executed and delivered on behalf of each such Subsidiary. Each Transaction
Document to which any Subsidiary (including Unrestricted Subsidiaries) is a
party, executed and delivered constitutes, or when executed and delivered will
constitute, a legal, valid and binding obligation of each such Subsidiary,
enforceable against each such Subsidiary in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.5 NO LEGAL BAR. The execution, delivery and performance of this
Agreement, the Secured Instrument and the other Transaction Documents, and the
use of the proceeds of the Secured Instruments will not violate (i) any
Requirement of Law or (ii) except as disclosed on SCHEDULE 4.5 hereto, any
material Contractual Obligation of the Company or of any of its Subsidiaries or
Unrestricted Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation.
4.6 NO MATERIAL LITIGATION. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Company, threatened by or against the Company or any of its
Subsidiaries or against any of its or their respective properties or revenues
(a) with respect to this Agreement, the Secured Instrument or other Transaction
Documents or any of the transactions contemplated hereby or thereby or (b) which
is reasonably likely to have a Material Adverse Effect, which has not been
disclosed (including, estimates of the Dollar amounts involved) in the Company's
filings with the Securities and Exchange Commission made prior to the date
hereof, true and correct copies of which have been delivered to the Obligee or
on SCHEDULE 4.6 hereto.
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<PAGE>
4.7 NO DEFAULT. Neither the Company nor any of its Subsidiaries is in
default under or with respect to any of its Contractual Obligations in any
respect which is reasonably likely to have a Material Adverse Effect, except as
disclosed, including estimates of the Dollar amounts involved, in the Company's
filings with the Securities and Exchange Commission made prior to the date
hereof, true and correct copies of which have been delivered to the Obligee or
on SCHEDULE 4.7. No Default or Event of Default has occurred and is continuing.
No default has occurred and is continuing under any of the Foothill Loan
Documents or the indenture governing the Unsecured Cash Flow Notes.
4.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Company and its
Subsidiaries, as the case may be, has good record and marketable title in fee
simple to, or a valid leasehold interest in, all of the Collateral and all its
other real property, and good title to all its other property necessary for the
operation of its business, and none of such property of the Company or such
Subsidiaries is subject to any Lien except as permitted by Section 7.3. To the
best knowledge of the Company, after diligent inquiry, the Collateral includes
all property of the Company and its Subsidiaries that is not Excluded Property.
4.9 INTELLECTUAL PROPERTY. The Company and each of its Subsidiaries
owns, or is licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which is not reasonably
likely to have a Material Adverse Effect (the "INTELLECTUAL PROPERTY"). No claim
has been asserted and is pending by any Person challenging or questioning the
use of any such Intellectual Property or the validity or effectiveness of any
such Intellectual Property, nor does the Company know of any valid basis for any
such claim. The use of such Intellectual Property by the Company and its
Subsidiaries does not infringe on the rights of any Person, except for such
claims and infringements that, in the aggregate, do not have a Material Adverse
Effect. To the knowledge of the Company, there exists no infringement upon the
Intellectual Property rights of the Company and Subsidiaries by any other
Person.
4.10 TAXES. Each of the Company and its Subsidiaries (including
Unrestricted Subsidiaries and Joint Ventures) has filed or caused to be filed
all tax returns which, to the knowledge of the Company, are required to be filed
and has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental Authority
(other than any taxes, fees or other charges the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Company or its Subsidiaries (including Unrestricted Subsidiaries
and Joint Ventures), as the case may be) except tax claims which are to be paid
on a deferred basis pursuant to the Reorganization Plan; no tax Lien has been
filed, and, to the knowledge of the Company, no claim is being asserted, with
respect to any such tax, fee or other charge, except as disclosed on SCHEDULE
4.10.
4.11 FEDERAL REGULATIONS. No part of the proceeds of the Secured
Instrument will be used for "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation G, T, U or
X of the Board of Governors of the Federal Reserve System as now and from time
to time hereafter in effect or for any purpose which violates the provisions of
the Regulations of such Board of Governors.
4.12 ERISA. Except as disclosed on SCHEDULE 4.12 or by letter to the
Obligee referring to this Section 4.12 delivered on or prior to the date hereof
in accordance with Section 6.7(d), no Reportable Event has occurred during the
five-year period prior to the date on which this representation is made or
deemed made with respect to any Plan. The Company and each Commonly Controlled
Entity are in substantial compliance with the applicable provisions of ERISA
with respect to each Plan. The present value of all accrued benefits under each
Single Employer Plan (based on the reasonable assumptions used by the
independent actuary for such Plan for purposes of establishing the minimum
funding requirements under Section 412 of the Code) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
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accrued benefits, individually or in the aggregate for all Single Employer Plans
(excluding for purposes of such computation any Single Employer Plans with
respect to which the value of the assets exceed the present value of the accrued
benefits), by more than $4,600,000. Neither the Company nor any Commonly
Controlled Entity is liable under Title IV of ERISA by reason of the termination
of a Single Employer Plan or the withdrawal from a Single Employer Plan in which
it was a "substantial employer" within the meaning of Section 4001(a)(2) of
ERISA. Each Plan intended to be qualified under Section 401(a) of the Code,
including each Single Employer Plan, is qualified in operation under Section
401(a) of the Code and is qualified in form under Section 401(a) of the Code,
except with respect to any required amendments with respect to which the
remedial amendment period under Section 401(b) of the Code has not expired.
Neither the Company nor any Commonly Controlled Entity has had a complete or
partial withdrawal from any Multiemployer Plan and neither the Company nor any
Commonly Controlled Entity would become subject to any liability under ERISA if
the Company or any such Commonly Controlled Entity were to withdraw from all
Multiemployer Plans in complete withdrawals within the meaning of Section 4203
of ERISA as of the valuation dates for such plans most closely preceding the
date on which this representation is made or deemed made. No Multiemployer Plan
is in Reorganization or Insolvent. Neither the Company nor any Commonly
Controlled Entity is liable for fines, penalties, taxes or related charges under
Chapter 43 of the Code or under Sections 409, 502(c), 502(i), 502(1) or 4071 of
ERISA in an amount exceeding $50,000 in the aggregate at any time. There are no
material claims (other than routine claims for benefits) against any Plan (other
than a Multiemployer Plan) or against the Company or any Commonly Controlled
Entity in connection with any such Plan. Neither the Company nor any Commonly
Controlled Entity is liable for post retirement benefits to be provided to their
current and former employees under Plans which are welfare benefit plans (as
defined in Section 3(1) of ERISA) except as required by Section 4980B of the
Code and Section 601 of ERISA.
4.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Company is not an
"investment company," or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended. The
Company is not subject to regulation under any Federal or state statute or
regulation which limits its ability to incur Indebtedness.
4.14 SUBSIDIARIES AND JOINT VENTURES. The Subsidiaries listed on
SCHEDULE 4.14(A) constitute all of the Subsidiaries and such schedule identifies
the shareholders of such Subsidiary, the Joint Ventures listed on SCHEDULE
4.14(B) constitute all of the Joint Ventures and such schedule identifies all
owners of the Joint Venture interests thereof and the percentage equity
ownership of such owners, and neither the Company nor any Subsidiary other than
a Venture Subsidiary owns any Joint Venture interest.
4.15 ENVIRONMENTAL MATTERS. Each of the representations and warranties
set forth in paragraphs (a) through (g) of this Section is true and correct,
except as disclosed on SCHEDULE 4.15 or described in the certificate regarding
environmental matters required pursuant to Section 5.1(i) or except to the
extent that the facts and circumstances giving rise to any such failure to be so
true and correct is not reasonably likely to have a Material Adverse Effect:
(a) The Total Real Property does not contain, and has not
previously contained, therein, thereon, or thereunder, including the soil and
groundwater thereunder, any Hazardous Materials in violation of any
Environmental Law.
(b) The Company, its Subsidiaries, the Joint Ventures, the Total
Real Property, and all operations and facilities at the Total Real Property,
are in compliance with all Environmental Laws, and there are no Hazardous
Materials or violations of any Environmental Law which could interfere with the
continued operation of any of the Total Real Property or impair the fair
saleable value of any thereof.
(c) Neither the Company nor any of its Subsidiaries nor any of the
Joint Ventures has received any complaint or any notice of violation, alleged
violation or investigation or of potential liability or designating any of such
Persons as a potentially responsible party under any Environmental Law regarding
environmental protection matters or environmental permit compliance with regard
to the Total Real Property, nor is the Company aware that any Governmental
Authority is contemplating delivering to the Company or any of its Subsidiaries
or any of the Joint Ventures any such notice. Neither the Company nor any of its
Subsidiaries nor any of the Joint Ventures has reported any releases of
Hazardous Materials to any Governmental Authority.
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(d) Hazardous Materials have not been generated, treated, stored
or disposed of, at, on or under any of the Total Real Property in violation of
any Environmental Law, nor have any Hazardous Materials been transferred from
the Total Real Property to any other location in violation of any Environmental
Law nor have there been any treatment, storage or disposal operations on any of
the Total Real Property requiring any approval or permit from any Governmental
Authority. Neither the Company nor any of its Subsidiaries nor any of the Joint
Ventures has ever owned or operated or currently owns or operates any waste
disposal or storage facilities, underground storage tanks or surface
impoundments except as disclosed on SCHEDULE 4.15.
(e) There are no governmental or administrative actions or
judicial proceedings pending or, to the knowledge of the Company, contemplated
under any Environmental Laws to which the Company or any of its Subsidiaries or
any of the Joint Ventures is or, to the knowledge of the Company, will be named
as a party with respect to the Total Real Property, nor are there any consent
decrees or other decrees, consent orders, administrative orders or other orders,
or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Company or any of its Subsidiaries or any
of the Joint Ventures or to any of the Total Real Property.
(f) There is no environmental condition associated with any of the
Total Real Property which would impede the development thereof, including the
presence of endangered or threatened species, or ecologically sensitive habitat
or water rights or quality issues.
(g) Copies of all permits, authorizations and environmental
reports for or with respect to the Total Real Property have been made available
to the Obligee.
4.16 INDEBTEDNESS. SCHEDULE 4.16 lists all Indebtedness (including
available commitments) of the Company and its Subsidiaries as existing on the
date hereof.
4.17 CONTINGENT OBLIGATIONS. SCHEDULE 4.17 lists all Guarantee
Obligations of the Company and all Guarantee Obligations of any of its
Subsidiaries.
4.18 RESTITUTION PROGRAM AND FINAL JUDGMENT. The Company and its
Subsidiaries are in compliance with the "Restitution Program" and the "Final
Judgment," as defined in the Reorganization Plan.
4.19 CERTAIN FEES. No broker's or finder's fee or commission will be
payable with respect to this Agreement or any other Transaction Document or any
of the transactions contemplated hereby or thereby except for the fee payable
by the Company to Banker's Trust pursuant to an engagement letter dated August
3, 1995, as amended by a letter agreement dated February 29, 1996, which the
Company agrees to pay, and the Company hereby indemnifies the Obligee against,
and agrees that it will hold the Obligee harmless from, any claim, demand or
liability for any such broker's or finder's fees alleged to have been incurred
in connection herewith or therewith and any expenses (including reasonable fees,
expenses and disbursements of counsel) arising in connection with any such
claim, demand or liability.
4.20 DISCLOSURE. No representation or warranty of the Company or any of
its Subsidiaries contained in any Transaction Document or in any other document,
certificate or written statement furnished to the Obligee by or on behalf of the
Company or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement or any other Transaction Document contains any
untrue statement of a material fact or omits to state a material fact (known to
the Company in the case of any document not furnished by it) necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances in which the same were made. Any projections and pro forma
financial information contained in such materials are based upon good faith
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estimates and assumptions believed by the Company to be reasonable at the time
made, it being recognized by the Obligee that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results. There are no facts known (or which should upon the reasonable exercise
of diligence be known) to the Company (other than matters of an economic nature
affecting business enterprises generally) that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect
and have not been disclosed herein or in such other written documents,
certificates and statements furnished to the Obligee for use in connection with
the transactions contemplated hereby.
4.21 INSURANCE. The Company and each of its Subsidiaries maintain, with
financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and business of its Subsidiaries,
against loss and damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar business of such types
and in such amounts as are customarily carried under similar circumstances by
such other corporations. Attached as SCHEDULE 4.21 is a complete and accurate
description of all policies of insurance that will be in effect as of the
Issuance Date for the Company and each of its Subsidiaries.
4.22 TOTAL REAL PROPERTY MATTERS. The Company and each of its
Subsidiaries (including the Joint Ventures) is in compliance with all
development orders obtained by the Company and its Subsidiaries (including the
Joint Ventures) with respect to any Total Real Property, except to the extent
noncompliance could not reasonably be expected to have a Material Adverse
Effect.
4.23 REORGANIZATION PROCEEDINGS. The Company has delivered to the
Obligee true, correct and complete copies of the Reorganization Plan and
Confirmation Order, together with copies of any modifications thereto or
subsequent proceedings with the Bankruptcy Court. The Company and its
Subsidiaries are in all material respects in compliance with the Reorganization
Plan and Confirmation Order.
4.24 EXCLUDED SUBSIDIARIES; UNRESTRICTED SUBSIDIARIES.
(a) The Excluded Subsidiaries do not have, nor are they
anticipated to have, any assets or revenues. The Excluded Subsidiaries do not
currently conduct, nor are they anticipated to begin to conduct, any business.
(b) The Unrestricted Subsidiaries do not have, nor are they
anticipated to have, any assets or revenues other than the assets disclosed on
SCHEDULE 4.24 as being owned by them and the revenues arising therefrom. The
Unrestricted Subsidiaries do not currently conduct, nor are they anticipated to
begin to conduct, any business other than the businesses disclosed on SCHEDULE
4.24 as being conducted by them.
4.25 [intentionally omitted]
4.26 BANK ACCOUNTS. SCHEDULE 4.26 (as amended from time to time by
written notice to the Obligee) is a true and correct list of all Bank Accounts
of the Company and its Subsidiaries.
4.27 UTILITY FUND TRUSTS. All of the Company's obligations under each
of the Class 14 Utility Fund Trust Agreement and the Homesite Program Utility
Fund Trust Agreement, each dated December 8, 1992, and entered into by and
between the Company and First Union National Bank of Florida as Trustee have
been fully funded in the amount of $10,000,000.
4.28 [intentionally omitted]
4.29 SPUD SUBSIDIARIES. Except as disclosed on SCHEDULE 4.29, no
Subsidiary is a SPUD Subsidiary.
4.30 DRI AND ZONING. The representations and warranties set forth in
SCHEDULE 4.30 are by this reference incorporated herein as though fully set
forth and made in this Section 4.30.
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SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS TO ISSUANCE. The obligation of the Obligee to accept the
Secured Instrument and make the loan contemplated hereby and/or purchase
Preferred Stock pursuant to the Investment Agreement is subject to the
satisfaction, or waiver by the Obligee, on or before May 22, 1997, of the
following conditions precedent:
(a) SECURED INSTRUMENT DOCUMENTS. The Obligee shall have received
(i) this Agreement, executed and delivered by a duly authorized officer of the
Company and the Subsidiaries, (ii) a Secured Instrument conforming to the
requirements hereof and executed and delivered by a duly authorized officer of
the Company and the Subsidiaries, (iii) each other Secured Instrument Document
conforming to the requirements hereof and executed and delivered by a duly
authorized officer of the Company or each of its Subsidiaries (including each of
the Unrestricted Subsidiaries as to its Acknowledgment under the Stock Pledge
Agreement), as the case may be, which are parties to such Secured Instrument
Document, (iv) each other Transaction Document, executed and delivered by a
duly authorized officer of each party thereto and (v) copies, certified as true
and correct copies by a Responsible Officer, of the Security Documents.
(b) CORPORATE PROCEEDINGS OF THE COMPANY. The Obligee shall have
received a copy of the resolutions, in form and substance satisfactory to the
Obligee and dated on or prior to the date hereof, of the Board of Directors of
the Company authorizing the execution, delivery and performance of this
Agreement, the Secured Instrument, and the other Transaction Documents to which
it is a party, certified by the secretary or an assistant secretary of the
Company as of the Issuance Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded and are in full force and effect and shall be in form and substance
satisfactory to the Obligee.
(c) CORPORATE PROCEEDINGS OF THE SUBSIDIARIES. The Obligee shall
have received a copy of the resolutions, in form and substance satisfactory to
the Obligee and dated on or prior to the date hereof, of the Board of Directors
of each Subsidiary which is a party to any Transaction Document authorizing the
execution, delivery and performance of the Transaction Documents to which it is
a party, certified by its secretary or an assistant secretary as of the Issuance
Date, which certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded and are in full force and
effect and shall be in form and substance satisfactory to the Obligee.
(d) CORPORATE DOCUMENTS. The Obligee shall have received true and
complete copies of (i) the certificate or articles of incorporation of the
Company and each of its Subsidiaries which is a party to any Transaction
Document certified by the Secretary of State of their respective jurisdictions
of incorporation as of a recent date prior to the Issuance Date, (ii) the Bylaws
of the Company and each of its Subsidiaries which is a party to any Transaction
Document certified as of the Issuance Date by its secretary or an assistant
secretary, (iii) good standing certificates, including, in states which provide
such certificates, certification of tax status, of the Company and each of its
Subsidiaries which is a party to any Transaction Document certified by the
Secretary of State of their respective jurisdictions of incorporation and of
each jurisdiction in which they are qualified to do business as a foreign
corporation dated as of a recent date prior to the Issuance Date and (iv)
incumbency and signature certificates for the Company and each Subsidiary
executing any Transaction Document as of the Issuance Date.
(e) OTHER DOCUMENTS. The Obligee shall have received copies,
certified as true and correct by a Responsible Officer, of (i) the indenture
relating to the Unsecured Cash Flow Notes and the Foothill Loan Documents, each
as amended through the Issuance Date, and (ii) the Business Plan and the Beige
Book.
(f) NO VIOLATION. The consummation of the transactions
contemplated hereby and by the other Transaction Documents shall not
contravene, violate or conflict with, nor involve the Obligee in any violation
of, any Requirement of Law.
(g) CONSENTS, AUTHORIZATIONS, AND FILINGS. The Obligee shall have
received a certificate of a Responsible Officer (i) attaching copies of all
consents, authorizations, and filings referred to in Section 4.4 and in any
similar provision of any of the other Transaction Documents, and (ii) stating
that such consents, authorizations, and filings are in full force and effect and
each such consent, authorization, and filing shall be in form and substance
satisfactory to the Obligee.
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(h) LEGAL OPINIONS. The Collateral Agent and the Obligee shall
have received executed legal opinions dated as of the Issuance Date in form and
substance satisfactory to the Obligee:
(i) Arent Fox Kintner Plotkin & Kahn,
counsel to the Company and its Subsidiaries;
(ii) corporate counsel to the Company and
its Subsidiaries;
(iii) Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A., special Florida counsel to the
Company and its Subsidiaries;
(iv) Chambliss & Bahner, special Tennessee
counsel to the Company and its Subsidiaries; and
(v) Carlton Fields Ward Emmanuel Smith &
Cutler, P.A., special Florida counsel to the Obligee.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement and the other Transaction Documents
as the Obligee may reasonably require.
(i) CERTIFICATION AS TO ENVIRONMENTAL MATTERS. The Obligee shall
have received a certificate of a Responsible Officer (i) stating that the
Company is not aware of any environmental matters in connection with any of the
Total Real Property which could reasonably be expected to result in a liability
to the Company or any Subsidiary or any Joint Venture in excess of $200,000
except as listed on a schedule attached to such certificate and (ii) certifying
that the Company has made, and agreeing that the Company will continue to make,
available to the Obligee copies all notices, citations, requests for information
and reports from the Environmental Protection Agency, Florida Department of
Environmental Regulation or other Federal, state or local environmental
regulatory agency having jurisdiction over any of the Total Real Property, and
any report or audit prepared by a private company with respect thereto.
(j) CONTINUED PERFECTION OF SECURITY INTERESTS. The Company and
its Subsidiaries party to any of the Security Documents shall have taken or
cause to be taken all such actions deemed necessary or desirable by the Obligee
to ensure that Collateral Agent or the Obligee has and continues to have a valid
and perfected security interest in the Collateral granted by the Security
Documents subject to the Liens permitted pursuant to this Agreement and the
Security Documents (and the Obligee and Collateral Agent shall have received
satisfactory evidence thereof). Such action shall include: (i) the delivery by
the Company pursuant to the Stock Pledge Agreement of certificates (which
certificates shall be registered in the name of Collateral Agent or properly
endorsed in blank for transfer or accompanied by irrevocable undated stock
powers duly endorsed in blank, all in form and substance satisfactory to
Collateral Agent and the Obligee) representing all Subsidiary Stock; (ii) the
delivery to Collateral Agent of Uniform Commercial Code financing statements,
executed by each of the Company and each of its Subsidiaries as to the
Collateral granted by each such party for all jurisdictions as may be necessary
or desirable to perfect or continue the perfection of Collateral Agent's secu-
rity interest in such Collateral; and (iii) evidence reasonably satisfactory to
Collateral Agent and the Obligee that all other filings, recordings and other
actions Collateral Agent and the Obligee deems necessary or advisable to
establish, preserve and perfect the Liens and the priority thereof granted to
Collateral Agent and the Obligee hereunder shall have been made.
(k) REAL PROPERTY MATTERS. The Obligee shall have received: (i)
such Mortgages and Deeds of Trust as may be requested by the Obligee, in each
case in form and substance satisfactory to the Obligee and its local counsel, to
protect and preserve the Lien and priority of the Mortgages and Deeds of Trust
as they secure the Secured Obligations and other amounts due hereunder and under
the other Transaction Documents, together with new ALTA lender's extended
coverage policies of title insurance or amendments of the existing ALTA lender's
extended coverage policies of title insurance on the Real Property encumbered by
the Mortgages and Deeds of Trust in liability, amount and form issued by a title
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company satisfactory to the Obligee showing the Mortgages and Deeds of Trust as
first Liens upon the respective Real Property, subject only to Liens permitted
hereunder and thereunder and such other exceptions or exclusions as may be
approved by the Obligee in its sole discretion, together with any endorsements
reasonably required by the Obligee, and affirmative assurance that the
improvements are fully located within the boundaries of the insured land; and
(ii) in respect of the Total Real Property listed on SCHEDULE 5.1(K) and subject
to Section 5.3(a), copies of such appraisals, surveys, environmental audit
reports, satisfactory evidence of entitlements (including so-called "zoning
letters"), and other documents as the Obligee may request, each as specified or
contemplated on SCHEDULE 5.1(K). The legal descriptions of real property
Collateral shall be satisfactory to Obligee and its local counsel.
(l) [intentionally omitted]
(m) [intentionally omitted]
(n) [intentionally omitted]
(o) EVIDENCE OF INSURANCE. The Company shall have delivered to the
Obligee certificates of insurance naming Collateral Agent on behalf of the
Obligee as loss payee under the casualty and surety policies required pursuant
to Section 6.5.
(p) NO MATERIAL ADVERSE EFFECT. On the Issuance Date, the Obligee
shall have received an officer's certificate executed by a Responsible Officer
stating that no Material Adverse Effect has occurred since September 30, 1996.
(q) INTERCREDITOR AGREEMENT. The Intercreditor Agreement shall
have been executed and delivered by each of the parties thereto, and the Obligee
shall have received a fully executed copy thereof in form and substance
satisfactory to the Obligee.
(r) FEES, COSTS, AND EXPENSES. The Company shall have paid, when
and as invoiced: (i) to the Obligee all fees, costs, and expenses of the Obligee
and its counsel incurred in connection with the preparation, negotiation, and
execution of this Agreement, the other Transaction Documents, and any other
documents executed in connection herewith or therewith; and (ii) to the
Collateral Agent all fees, costs, and penses of Collateral Agent and its
counsel incurred in connection with the preparation, negotiation, and execution
of this Agreement, any other Transaction Documents to which it is a party and
any other documents executed in connection herewith or therewith.
(s) BORROWING REQUEST. The Company shall have delivered a
Borrowing Request, signed by a Responsible Officer, specifying the amount of the
borrowing requested and the date such borrowing is to be made and certifying, as
of the date of such certificate and the date of such borrowing, to the fact that
no Default or Event of Default has occurred and that each representation and
warranty of the Company or any Subsidiary contained in this Agreement and each
other Transaction Document was true and correct in all material respects when
made and on as of the date of such certificate and the date of such borrowing.
(t) [intentionally omitted]
(u) CONSENTS UNDER CERTAIN LOAN DOCUMENTS. Any consents necessary
under the terms of the Security Documents and other Foothill Loan Documents in
connection with the transactions contemplated by the Transaction Documents shall
have been obtained and shall be in form and substance satisfactory to the
Obligee.
(v) OTHER MATTERS. The Company shall have made available to the
Obligee such other documents and information, or taken such other actions, as
the Obligee may reasonably request.
(w) [intentionally omitted]
(x) TAX SERVICING CONTRACTS. Provision reasonably satisfactory to
the Obligee shall have been made for delivery to it of all reports and
information delivered to the holders of the Foothill Debt pursuant to any Tax
Servicing Contracts existing in favor of such holders in respect of Real
Property located in Florida and Tennessee.
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(y) [intentionally omitted]
(z) USE OF PROCEEDS. The Obligee shall have received an officer's
certificate executed by a Responsible Officer specifically describing the use to
be made of the proceeds of the issuance of the Secured Instrument and the
Obligee shall approve such use, in its sole and absolute discretion.
(aa) COLLATERAL AGENT. Persons reasonably satisfactory to the
Obligee shall have agreed to serve as Collateral Agent under the Transaction
Documents and shall have executed and delivered each Transaction Document to
which the Collateral Agent is a party.
5.2 [intentionally omitted]
SECTION 6. AFFIRMATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof and
until the "Closing Date" (as defined in the Investment Agreement) and
thereafter at any time while there shall be due and owing and unpaid any
Repurchase Obligation under Section 8 of the Certificate of Designation, the
Company shall, and shall cause each of its Subsidiaries (including the Special
Purpose Subsidiary, except to the extent that any agreement between the Obligee
and the Company with respect to the Special Purpose Subsidiary shall provide to
the contrary) to:
6.1 FINANCIAL STATEMENTS. Furnish to the Obligee:
(a) as soon as available, but in any event not later than 90 days
after the end of each fiscal year of the Company, a copy of the consolidated
balance sheet of the Company and its consolidated Subsidiaries (including
Unrestricted Subsidiaries) as at the and of such year and the related
consolidated statements of income and retained earnings and of cash flows for
such year, setting forth in each case in comparative form the figures for the
previous year, reported on without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by Ernst &
Young or other independent certified public accountants of nationally recognized
standing acceptable to the Obligee;
(b) as soon as available, but in any event not later than 90 days
after the end of each fiscal year of the Company, a copy of the consolidating
balance sheet of the Company and its consolidated Subsidiaries (including
Unrestricted Subsidiaries) as at the end of such year and the related
consolidating statements of income and retained earnings and of cash flows for
such year, setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly stated in all
material respects;
(c) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal year
of the Company, the unaudited consolidated and consolidating balance sheet of
the Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) as at the end of such quarter and the related unaudited
consolidated and consolidating statements of income and retained earnings and of
cash flows of the Company and its consolidated Subsidiaries (including
Unrestricted Subsidiaries) for such quarter and the portion of the fiscal year
through the end of such quarter, setting forth in each case in comparative form
the figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects when considered in relation to the
consolidated and consolidating financial statements of the Company and its
consolidated Subsidiaries (subject to normal year-end audit adjustments);
(d) as soon as available, but in any event not later than 30 days
after the end of each calendar month, the unaudited consolidated balance sheet
of the Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) as at the end of such month and the related unaudited consolidated
statements of income and retained earnings and of cash flows of the Company and
its consolidated Subsidiaries (including Unrestricted Subsidiaries) for such
month, setting forth in each case in comparative form the figures for such month
as set forth on the Business Plan and, beginning in fiscal year 1996, with a
comparison to the same calendar month of the preceding fiscal year, certified by
a Responsible Officer as being fairly stated in all material respects when
considered in relation to the consolidated financial statements of the Company
and its consolidated Subsidiaries (including Unrestricted Subsidiaries) (subject
to normal year-end audit adjustments); and
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(e) as soon as available, but in any event not later than 45 days
after the end of each fiscal quarter, projections by the Company of the
operating cash flow budget of the Company and its Subsidiaries for (i) the
following two fiscal quarters, prepared on a monthly basis and (ii) the two
fiscal quarters thereafter, prepared on a quarterly basis, certified by a
Responsible Officer as being prepared in good faith on the basis of the
assumptions stated therein, which assumptions were reasonable in light of
conditions existing at the time of delivery thereof and represented, at the time
of delivery, the Company's best estimate of its future financial performance;
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
Furnish, or cause each Subsidiary with an investment in a
Borrowing Base Joint Venture to furnish, to the Obligee:
(f) as soon as available, but in any event not later than 90 days
after the end of each fiscal year of the relevant Borrowing Base Joint Venture,
a copy of the balance sheet of such Joint Venture as at the end of such year and
the related consolidated statements of income and retained earnings and of cash
flows for such year, setting forth in each case in comparative form the figures
for the previous year; if such financial statements are required under the
relevant Borrowing Base Joint Venture's governing or charter documents or other
material agreement (including financing agreements) to be audited, then such
financial statements shall be reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of the
audit, by independent certified public accountants acceptable to the Obligee;
(g) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of the relevant
Borrowing Base Joint Venture, the unaudited balance sheet of such Borrowing Base
Joint Venture as at the end of such quarter and the related unaudited statements
of income and retained earnings and of cash flows of such Borrowing Base Joint
Venture for such quarter and the portion of the fiscal year through the end of
such quarter, setting forth in each case in comparative form the figures for the
previous year, certified by the chief accounting officer or treasurer of the
relevant Venture Subsidiary as being fairly stated in all material respects when
considered in relation to the financial statements of such Borrowing Base Joint
Venture (subject to normal year-end audit adjustments); and
(h) as soon as available, but in any event not later than 30 days
after the end of each calendar month, the unaudited balance sheet of the
relevant Borrowing Base Joint Venture as at the end of such month and the
related unaudited consolidated statements of income and retained earnings and of
cash flows of such Borrowing Base Joint Venture for such month, certified by the
chief accounting officer or treasurer of the relevant Venture Subsidiary as
being fairly stated in all material respects when considered in relation to the
financial statements of such Borrowing Base Joint Venture (subject to normal
year-end audit adjustments); all such financial statements to be complete and
correct in all material respects and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Obligee:
(i) concurrently with the delivery of the
financial statements referred to in Section 6.1(a), a certificate of
the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary
therefor such accounting firm has obtained no knowledge that a Default
or Event of Default has occurred and is continuing, except as specified
in such certificate;
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(ii) concurrently with the delivery of the
financial statements referred to in Sections 6.1(a), (b) and (c), a
certificate of a Responsible Officer stating that, to the best of such
Responsible Officer's knowledge, the Company and each Subsidiary during
such period has observed or performed the covenants of Section 7 and
all other of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and in the Secured Instrument
and in the other Transaction Documents to which it is a party to be
observed, performed or satisfied by it, and that such Officer has
obtained no knowledge that a Default or Event of Default has occurred
and is continuing except as specified in such certificate, and, if a
Default or Event of Default exists, stating the details thereof and
what actions the Company proposes to take with respect thereto;
(iii) within five Business Days after the same are
sent, copies of all financial statements and reports which the Company
sends to its stockholders and all financial statements and reports
which the Company or any of its Subsidiaries sends to the holders or
trustee of any Unsecured Cash Flow Notes, and within five Business Days
after the same are filed, copies of all financial statements and
reports which the Company may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental
Authority;
(iv) within 10 Business Days after the same are
delivered, copies of all financial statements and all material reports,
management letters or other financial information prepared for its
Board of Directors;
(v) on a monthly basis and, in any event, by no
later than the 30th day of each month: (w) a detailed calculation of
the Borrowing Base; (x) a summary listing, by Borrowing Base category,
of the Total Real Property included directly or indirectly in the
Borrowing Base and, by Joint Venture, of the investments of the Venture
Subsidiaries in Joint Ventures, with, in each case, a summary
reconciliation to such listing provided in respect of the prior month;
(y) a detailed aging, by total, of the Homesite Commercial Receivables
and of the Commercial Receivables and of the JV Receivables; and (z) a
summary aging, by vendor, of the Company's accounts payable and any
book overdraft; in each case, in form satisfactory to the Obligee;
(vi) not later than the tenth Business Day of
every month, the monthly Management Business Plan update for the
previous month, in form substantially equivalent to that attached
hereto as SCHEDULE F-1;
(vii) not later than the tenth Business Day of
every month, the "Land Sales Report" for the previous month, in form
substantially equivalent to that attached hereto as SCHEDULE G-1; and
(viii) promptly, such additional financial and
other information as the Obligee may from time to time reasonably
request.
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings, and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Company or its Subsidiaries, as the case may be or where the terms of this
Agreement or the Reorganization Plan would prohibit such payment, discharge, or
satisfaction.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Subject to
Sections 7.5, 7.6, 7.7 and 7.9: continue (a) to engage in business of the same
general type as now conducted by it and preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business; and (b) to comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith is not
reasonably likely to, in the aggregate, have a Material Adverse Effect.
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6.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful and
necessary in its business in good working order and condition; maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks as are usually
insured against in the same general area by companies engaged in the same or a
similar business; and furnish to the Obligee, upon written request, full
information as to the insurance carried. Each such policy of insurance shall
name Collateral Agent as a loss payee thereunder and shall provide for at least
thirty days prior written notice to the Obligee of any material modification or
cancellation of such policies. On the Issuance Date and on each anniversary
thereafter, the Company and its Subsidiaries shall submit to the Obligee
certificates of insurance evidencing compliance with this Section 6.5.
6.6 INSPECTION OF COLLATERAL; BOOKS AND RECORDS; APPRAISALS. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of the Obligee with respect to the Company and its Subsidiaries,
to inspect the Collateral and related properties and examine and make abstracts
from any of its books and records at any reasonable time and as often as may
reasonably be desired and to discuss the business, operations, properties and
financial and other condition of the Company and its Subsidiaries with officers
and employees of the Company and such Subsidiaries and with its independent
certified public accountants. From time to time, if the Obligee determines that
obtaining appraisals is necessary or appropriate, the Obligee will obtain
appraisal reports from appraisers satisfactory to the Obligee, stating then
current fair market values of all or any portion of the Total Real Property.
Anything herein to the contrary notwithstanding, the Company shall not be
obligated to reimburse the Obligee with respect to appraisals of the same
particular item of Total Real Property that occur more frequently than once in
any year, unless an Event of Default has occurred and is continuing or there has
occurred a material adverse change in the value of the Collateral, in which case
the Company shall be obligated to reimburse the Obligee with respect to as many
appraisals as the Obligee deems necessary to conduct.
6.7 NOTICES. Promptly give notice to the Obligee of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Company or, to the knowledge of the Company, any of its
Subsidiaries or (ii) litigation, investigation or proceeding which may exist at
any time between the Company or, to the knowledge of the Company, any of its
Subsidiaries and any Governmental Authority, which in either case, if not cured
or if adversely determined, as the case may be, would have a Material Adverse
Effect;
(c) any litigation or proceeding affecting the Company or, to the
knowledge of the Company, any of its Subsidiaries in which the amount involved
is $250,000 or more and, not covered by insurance or in which injunctive or
similar relief is sought;
(d) as soon as possible and in any event within 30 days after the
Company knows or has reason to know thereof, the occurrence or expected
occurrence of any event or condition described in Section 4.12 which could
reasonably be expected to result in liability of the Company or any Commonly
Controlled Entity in excess of $100,000 and which is not reflected in the
financial statements most recently delivered to the Obligee pursuant to Section
6.1; and
(e) any development or event which could reasonably be expected to
have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and stating what action the Company proposes to take with
respect thereto.
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6.8 ENVIRONMENTAL LAWS.
(a) Comply with, and use its best efforts to insure compliance by
all tenants and subtenants, if any, with, all Environmental Laws and obtain and
comply with and maintain, and insure that all tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals, registrations or
permits required by Environmental Laws, except in each case to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect;
(b) Conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities respecting Environmental Laws, except to the
extent that the same are being contested in good faith by appropriate
proceedings and the pendency of such proceedings could not reasonably be
expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Obligee, and its
employees, agents, officers and directors, from and against any and all claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses
of whatever kind or nature known or unknown, contingent or otherwise, arising
out of, or in any way relating to, the violation of or noncompliance with any
Environmental Laws applicable to the real property owned or operated by the
Company or any of its Subsidiaries, or any orders, requirements or demands of
Governmental Authorities related thereto, including attorney's and consultant's
fees, investigation and laboratory fees, court costs and litigation expenses,
except to the extent that any of the foregoing arise out of the gross negligence
or willful misconduct of the party seeking indemnification therefor. The
agreements in this Section shall survive the payment of the Secured Instrument
and all other amounts payable hereunder.
6.9 BUSINESS PLAN. Furnish to the Obligee on or before the tenth day
following approval by the Company's Board of Directors, but in no event later
than December 31 of each fiscal year and within 10 days (after approval by the
Company's Board of Directors, if applicable) of any amendment, modification or
update thereto, a Business Plan of the Company and its Subsidiaries for the
next succeeding fiscal year in a form and in substance satisfactory to the
Obligee setting forth in reasonable detail a projected statement for such
fiscal year's income and cash flow with a projected balance sheet as of the
close of the succeeding fiscal year end, accompanied by a statement of a
Responsible Officer that the Business Plan projected statements of income, cash
flow and balance sheet for the succeeding fiscal year have been adopted by the
Board of Directors of the Company. The Company and its Subsidiary shall at all
times conduct their business substantially in accordance with the Business Plan
and shall not materially modify or deviate from such Business Plan without the
prior written approval of the Obligee.
6.10 COMPLIANCE WITH OTHER TRANSACTION DOCUMENTS. Comply with, and
cause the Subsidiaries to comply with, all of the Transaction Documents.
6.11 DIVIDENDS FROM SUBSIDIARIES. Cause the Subsidiaries (other than
the Special Purpose Subsidiary, to the extent the Transaction Documents provide
to the contrary) to pay dividends to the Company from the Net Cash Proceeds of
any sales of assets (including Real Property Sales) to the extent not
prohibited by law, including the proceeds of any utility condemnations; PROVIDED
that proceeds from the sale of residential units, lots or tracts by Subsidiaries
(a) from developed phases of a multi-phase project comprising Subsidiary
Property Under Development may be used to pay all costs associated with
development of the same phase or additional phases of the same project,
including reasonable reserves for such anticipated costs during the period
commencing on the date of sale to the date 180 days after the date of sale
(excluding any costs which are an allocated share of corporate general and
administrative expenses of the Company or any Subsidiary), and (b) from single
phase projects comprising Subsidiary Property Under Development to the extent
units, lots or tracts may be sold in accordance with applicable laws and
regulations prior to completion of the projects may be used to pay all costs
associated with development of such project (excluding any costs which are an
allocated share of corporate general and administrative expenses of the Company
or any other Subsidiary), in either case until the conclusion of the project, at
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and following which time all such proceeds shall be distributed to the Company.
For purposes hereof, "conclusion of the project" shall mean the completion of
structure or infrastructure development of the project (or, with multi-phase
projects: (a) (i) the final phase of the project, or (ii) the sale of
substantially all units thereon; and (b) the payment of the Indebtedness in
respect of Subsidiary Property Under Development that prohibits such
distributions) in accordance with the requirements of applicable laws and
regulations.
6.12 SUPPLEMENTAL REPORTS REGARDING REAL PROPERTY.
(a) Furnish to the Obligee such supplemental title reports on the
Real Property subject to the Deed of Trust and Mortgages as the Obligee may
reasonably request from time to time; PROVIDED the Company shall not be required
to provide such supplemental reports more than once per quarter.
(b) No later than 60 days after the Issuance Date, the Company
shall deliver to the Obligee such third party appraisals, environmental
reports, surveys, and ALTA title policies, as would have complied with the
provisions of Section 5.1(l) if delivered on the Issuance Date with respect to
all Real Property to the extent such reports were not required by the Obligee to
be delivered on or prior to the Issuance Date.
6.13 COMPLIANCE WITH LAWS. The Company shall, and shall cause each of
its Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority, noncompliance with which
would or could be reasonably expected to cause a Material Adverse Effect.
6.14 OTHER NOTICES. Promptly give notice to the Obligee of:
(a) the creation of any new Deposit Account; and
(b) the organization or formation of any new Venture Subsidiary,
any other Subsidiary, any Unrestricted Subsidiary, or any Joint Venture; or the
disposition or dissolution of any Excluded Subsidiary; in each case, together
with such information related thereto as the Obligee may request.
6.15 THE COMPANY OPERATING ACCOUNT CONTROL AGREEMENT. Maintain in full
force and effect the Company Operating Account Control Agreement. At all times
from and after the date hereof, the Company shall continue to maintain the
Company's cash management system substantially as such system exists on the date
hereof, and shall continue to concentrate the funds of the Company into the
Company Operating Account except to the extent that such funds reasonably are
required to be held in other accounts for permitted uses by the Company, and
except to the extent that such funds are invested in investments permitted by
Section 7.9.
6.16 FOOTHILL REPORTS. Deliver to the Obligee a copy of each report,
certificate or other document or information delivered to the lenders or agent
pursuant to the Foothill Loan Documents, concurrently with the delivery thereof
to such lenders or agent, including all annexes or attachments thereto.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof and
until the "Closing Date" (as defined in the Investment Agreement) and
thereafter at any time while there shall be due and owing and unpaid any
Repurchase Obligation under Section 8 of the Certificate of Designation, the
Company shall not, and shall not permit any of its Subsidiaries (other than the
Special Purpose Subsidiary) to, directly or indirectly:
7.1 MAINTENANCE OF CONSOLIDATED NET WORTH; INTEREST CHARGE COVERAGE
RATIO. Permit (i) Consolidated Net Worth at any time to be less than the amounts
set forth below (hereinafter referred to as the "Minimum Consolidated Net
Worth") the sum of: (a) $23,500,000; and (b) 50% of the Annual Net Income for
the prior fiscal year; PROVIDED, HOWEVER, that the amount determined under this
clause (b) shall never be less than zero, or (ii) permit the Interest Charges
Coverage Ratio at any time to be less than 1.5.
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To demonstrate compliance with the Minimum Consolidated Net Worth
and the Interest Charges Coverage Ratio covenants set forth in this Section,
the Company shall furnish to the Obligee (i) within 45 days of the close of each
calendar quarter a certificate of a Responsible Officer setting forth Minimum
Consolidated Net Worth and the Interest Charges Coverage Ratio for such date
calculated in accordance with this Section 7.1, and the calculation upon which
it is based; and (ii) within 90 days of the close of each fiscal year, a
certificate of a Responsible Officer setting forth Minimum Consolidated Net
Worth and the Interest Charges Coverage Ratio as of such date calculated in
accordance with this Section 7.1 and the calculation upon which it is based,
reflecting in such annual certificate any addition to the Minimum Consolidated
Net Worth that the Company is required to maintain resulting from the Annual Net
Income for the fiscal year then ended, but only as calculated under clause (b)
of this Section 7.1.
7.2 LIMITATION OF INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Company under or in respect of the
Transaction Documents;
(b) Indebtedness under or in respect of (i) the Revolving Loan
Agreement (including Indebtedness in respect of Letters of Credit issued under
the Revolving Loan Agreement), and any replacement of the Revolving Loans, not
to exceed $45,000,000 in the aggregate principal amount outstanding at any time
(unless increased to an amount up to $50,000,000 pursuant to an increase in the
Working Capital Loan Commitments (as defined in the Revolving Loan Agreement)
from $20,000,000 to an amount up to $25,000,000 in accordance with the terms of
the "Intercreditor Agreement" included in the Foothill Loan Documents) or (ii)
the Secured Floating Rate Note Agreement, and any replacement Indebtedness, not
to exceed the amount then outstanding under such Note Agreement, provided that
any such replacement loans shall be on terms and conditions collectively no less
favorable to the Company than those set forth in the Revolving Loan Agreement or
the Secured Floating Rate Note Agreement, as applicable;
(c) [intentionally omitted];
(d) Indebtedness of the Company in respect of the Unsecured Cash
Flow Notes;
(e) Indebtedness of the Company and its Subsidiaries at any time
outstanding, whether recourse or nonrecourse and whether incurred in connection
with Subsidiary Property Under Development or otherwise, not exceeding
$55,000,000 (less the face amount of all outstanding Guarantee Obligations
permitted under Section 7.4(c) in respect of Indebtedness of any Unrestricted
Subsidiary or Joint Venture) in the aggregate; PROVIDED, HOWEVER, that the
proceeds of such Indebtedness used to acquire, finance, or refinance Real
Property shall not exceed 80% of the lesser of the purchase price or fair market
value of such Real Property at the time of application of such proceeds;
(f) Indebtedness of the Company to any Subsidiary or of any
Subsidiary to the Company; PROVIDED that (i) such intercompany Indebtedness
shall not be evidenced by promissory notes or any other instruments, and (ii)
all Indebtedness of Subsidiaries to the Company shall not exceed an aggregate
principal amount of $20,000,000 at any time;
(g) Indebtedness of the Company and its Subsidiaries outstanding
on the date hereof and listed on SCHEDULE 4.16;
(h) The limitations otherwise imposed by Section 7.2(e)
notwithstanding, Indebtedness of any Subsidiary to Persons extending
acquisition or project development financing in connection with Subsidiary
Property Under Development of the Subsidiary (any Subsidiary incurring such
Indebtedness shall be referred to in this Section 7.2(h) as a "SPUD
Subsidiary"); PROVIDED that (i) neither the Company nor any Subsidiary other
than that SPUD Subsidiary is liable for such Indebtedness in respect of that
Subsidiary Property Under Development, directly or pursuant to a Guarantee
Obligation or otherwise, (ii) such outstanding Indebtedness permitted pursuant
to this Section 7.2(h) shall not exceed in the aggregate $75,000,000 MINUS other
outstanding Indebtedness of the Company and Subsidiaries permitted pursuant to
Section 7.2(e), and (iii) the proceeds of any such Indebtedness used to acquire,
finance or refinance Real Property shall not exceed 80% of the purchase price or
fair market value of such property, whichever is less, at the time of the
application of such proceeds;
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(i) [intentionally omitted];
(j) [intentionally omitted]; and
(k) Indebtedness of Subsidiaries for the development of
infrastructure, common areas, or recreational facilities owing to
quasi-governmental entities such as community development and special districts
to the extent financed through the issuance of industrial revenue bonds or other
similar public financing; PROVIDED that (except for Liens permitted pursuant to
Section 7.3(q)) there is no direct or indirect recourse to the Company with
respect to such Indebtedness (other than inchoate Liens arising by operation of
law in respect of such Indebtedness) and such Indebtedness shall not exceed
$15,000,000 in the aggregate at any one time outstanding; PROVIDED FURTHER that
the Company shall give the Obligee prior written notice of the incurrence of any
such Indebtedness under this Section 7.2(k).
Anything to the contrary notwithstanding, in no event shall the
Company or any Subsidiary co-make, endorse, guarantee (except to the extent
permitted under Section 7.4(c)), or otherwise become liable or have any recourse
with respect to any Indebtedness of any of the Unrestricted Subsidiaries.
7.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens securing Indebtedness permitted by Section 7.2(a);
(b) Liens securing Indebtedness permitted by Section 7.2(b);
(c) [intentionally omitted];
(d) Liens against the Section 365(j) Property securing the
Section 365(j) Claims pursuant to the Reorganization Plan;
(e) Liens for taxes (i) which are not yet delinquent, or (ii)
which are not in an aggregate amount, as to the Company and all Subsidiaries, of
greater than $1,000,000, or (iii) which are being contested in good faith by
appropriate proceedings, provided that adequate reserves with respect thereto
are maintained on the books of the Company or its Subsidiaries, as the case may
be, in conformity with GAAP;
(f) carriers', warehousemen's, mechanics', construction,
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business which do not remain unsatisfied or undischarged for a period of more
than 60 days or which are being contested in good faith by appropriate pro-
ceedings;
(g) pledges or deposits in connection with workers compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(h) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(i) easements, rights-of-way, restrictions, development orders,
plats, and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount and which do not
in any case materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the Company or
such Subsidiary;
(j) Liens granted by the Company or any Subsidiary, as lessee, in
the ordinary course of business on leased equipment, leasehold improvements and
furnishings;
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(k) Liens created, incurred or assumed in connection with the
acquisition of, or the refinancing or any subsequent refinancing of
Indebtedness incurred in connection with property, plant and equipment acquired
after the date hereof and attaching only to the property, plant and equipment
being acquired or refinanced, if the Indebtedness secured thereby does not
exceed (i) in any acquisition, 80% of the purchase price or fair market value of
any Real Property, whichever is less, at the time of such acquisition and (ii)
in any refinancing, the outstanding Indebtedness being refinanced;
(l) other Liens in existence on the date hereof listed on SCHEDULE
7.3, provided that no such Lien is spread to cover any additional property after
the date hereof and that the amount of any Indebtedness or other obligations
secured thereby is not increased;
(m) Liens granted pursuant to Section 7.7 of the Reorganization
Plan;
(n) Liens granted by the Company or Subsidiaries upon Real
Property and related Personal Property which is Subsidiary Property Under
Development and which is either financed by Indebtedness incurred by
Subsidiaries pursuant to Section 7.2(e) or 7.2(h), or contributed by the Company
to a Subsidiary pursuant to Section 7.9(g);
(o) [intentionally omitted];
(p) [intentionally omitted]; and
(q) inchoate Liens solely arising by operation of law in respect
of Indebtedness incurred pursuant to Section 7.2(k).
7.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation, except: (a) the Guarantee Obligations
listed on SCHEDULE 4.17; (b) Guarantee Obligations made in the ordinary course
of its business by the Company of obligations (other than Indebtedness) of any
of its Subsidiaries, which obligations are otherwise permitted under this
Agreement; (c) Guarantee Obligations by the Company of Indebtedness of any
Subsidiary, Unrestricted Subsidiary, or Joint Venture; PROVIDED, HOWEVER, that
any outstanding Guarantee Obligations permitted under this Section 7.4(c) in
respect of Indebtedness of any Unrestricted Subsidiary or Joint Venture shall
reduce on a dollar-for-dollar basis the $55,000,000 limitation otherwise
available for Indebtedness permitted under Section 7.2(e) and that the sum of
all Indebtedness permitted under Section 7.2(e) and all Guarantee Obligations
permitted pursuant to this Section 7.4(c) shall not exceed $55,000,000 in the
aggregate; PROVIDED FURTHER, that the Company may not incur any Guarantee
Obligation with respect to Indebtedness of any Subsidiary permitted pursuant to
Section 7.2(h).
7.5 LIMITATIONS ON FUNDAMENTAL CHANGES. Except to the extent such
merger, consolidation, or amalgamation is of a Subsidiary with and into the
Company, or between or among wholly owned Subsidiaries, enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets; PROVIDED that the Company or any Subsidiary may convey, sell, assign,
transfer or have condemned or otherwise disposed of assets to the extent
permitted by Section 7.6 so long as the proceeds of any such sale are applied in
accordance with this Agreement.
7.6 LIMITATION ON SALE OF ASSETS. So long as no Default or Event of
Default has occurred and is continuing or would result therefrom (unless the
Permitted Sale Asset is the subject of a binding written contract of sale with
an unaffiliated third party entered into prior to the first date on which the
applicable Default or Event of Default occurred)), convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including receivables and leasehold interests), whether now owned or hereafter
acquired, except the following ("Permitted Sale Assets"):
(a) raw land;
(b) homes or homesites in the ordinary course of its business;
(c) obsolete or worn out property disposed of in the ordinary
course of business;
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(d) Commercial Real Estate;
(e) (i) the sale or discount without recourse of Commercial
Receivables or Homesite Contract Receivables in the ordinary course of business;
and (ii) during the period commencing on October 1, 1996 and ending on December
31, 1997, the sale or discount with recourse of Commercial Receivables relating
solely to homesites located in Tennessee in an aggregate amount not to exceed
$8,000,000;
(f) dispositions on or after October 1, 1996 not otherwise
permitted hereunder the proceeds of which, in the aggregate, do not exceed
$2,000,000 in any 12-month period;
(g) sales or other transfers of any partnership interests or joint
venture interests in entities that are not wholly owned, collectively, by the
Company and its Subsidiaries; and
(h) transactions permitted under Section 7.5.
Upon any permitted sale as aforesaid, Collateral Agent shall execute releases of
Collateral Agent's Lien upon the Collateral included in any such sale; PROVIDED
that there exists no Default or Event of Default hereunder and no Default or
Event of Default would result therefrom; and PROVIDED FURTHER, that Collateral
Agent's Lien shall continue against the proceeds of such sale, as evidenced by
any and all documents and filings as may be required by the Obligee.
7.7 LIMITATION ON DIVIDENDS. Declare or pay any dividend (other than
dividends payable solely in common stock or preferred stock of the Company) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any Capital Stock of the Company other than the Preferred Stock,
whether now or hereafter outstanding, or make any other distributions in respect
thereof, either directly or indirectly, whether in cash or property (other than
distributions or dividends in the form of common stock or preferred stock of the
Company) or in obligations of the Company or any Subsidiary, except for divi-
dends declared and paid by any Subsidiary to the Company or any Subsidiary.
7.8 LIMITATION ON CAPITAL EXPENDITURES. Make, or enter into any
agreement the performance of the terms of which would require the Company or any
Subsidiary to make (by way of the acquisition of securities of a Person or
otherwise), any expenditures in respect of the purchase or other acquisition of
fixed or capital assets (excluding any such asset acquired in connection with
nominal replacement and maintenance programs properly charged to current
operations), exceeding in the aggregate $25,000,000 for the Company and its
Subsidiaries during any 12-month period from and after October 1, 1996.
7.9 LIMITATION ON INVESTMENTS, LOANS, AND ADVANCES. Except to the
extent of assets in the Reserve Accounts, make any advance, loan, extension of
credit or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting a business unit of,
or make any other Investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees of the Company or its
Subsidiaries for travel, entertainment and relocation expenses and for advances
on salary prior to, and otherwise payable during, an employee's vacation, in the
ordinary course of business in an aggregate amount for the Company and its
Subsidiaries not to exceed $500,000 in any one time outstanding;
(d) investments by the Company in any Subsidiary or by any
Subsidiary in the Company or any other Subsidiary in connection with cash
management procedures in the ordinary course of business;
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(e) (i) loans by the Company to its Subsidiaries or by any
Subsidiary of the Company to the Company to the extent such Indebtedness is
permitted pursuant to Section 7.2(f); and (ii) capital contributions to
Subsidiaries other than Venture Subsidiaries so long as the Company or its
Subsidiary making the capital contribution receives stock equal to the value of
the capital contributed as determined in accordance with GAAP; PROVIDED, that
Collateral Agent's Lien shall continue against such stock received by the
Company or its Subsidiary as aforesaid, which Lien shall be evidenced by any and
all documents and filings as may be required by Collateral Agent and the
Obligee;
(f) extensions of credit for sale of assets;
(g) capital contributions to Venture Subsidiaries for the purpose
of making investments in Joint Ventures and to Unrestricted Subsidiaries so long
as the Company or its Subsidiary making the capital contribution receives stock,
partnership interests, joint venture interests, or beneficial interests,
respectively, equal to the value of the capital contributed as determined in
accordance with GAAP (and upon any permitted capital contribution as aforesaid,
Collateral Agent shall execute releases of Collateral Agent's Lien upon any
Collateral contributed); PROVIDED, (i) that no Default or Event of Default
exists hereunder or would result therefrom, (ii) that Collateral Agent's Lien
shall continue against such stock or other interests received by the Company or
its Subsidiary as aforesaid, which Lien shall be evidenced by any and all
documents and filings as may be required by Collateral Agent and the Obligee,
(iii) such capital contributions shall be limited to assets (including cash)
having fair market values for any single enterprise or project no greater than
$15,000,000 and fair market values in the aggregate amount not greater than
$35,000,000 plus an amount equal to 75% of all dividends (without duplication)
paid to the Company by all Subsidiaries having investments in Joint Ventures
after October 1, 1996.
7.10 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS.
(a) Make any optional payment or optional prepayment on, or
optional redemption of, or purchase or otherwise acquire any interest in, any
Indebtedness (including payments on Indebtedness under the Unsecured Cash Flow
Notes) other than the Secured Instrument, except payments on the Foothill Debt.
(b) Amend, modify or change, or consent or agree to any amendment,
modification or change to any of the terms of any Unsecured Cash Flow Notes or
any Indebtedness outstanding under the Foothill Loan Documents or any other
agreement executed in connection with either thereof or otherwise in connection
with any Indebtedness (other than: (1) terms other than payment terms of
Indebtedness permitted to be incurred pursuant to subsections 7.2(e), (f), (g)
(but exclusive of Indebtedness permitted pursuant thereto consisting of
intercompany Indebtedness among the Company and its Subsidiaries, the Unsecured
Cash Flow Notes, and Financing Leases), (h), and (k); and (2) other than any
such amendment, modification, or change to any such other Indebtedness which
would extend the maturity or reduce the amount of any payment of principal
thereof or which would reduce the rate or the amount of interest payable or
extend the date for payment of interest thereon; but in the case of either (1)
or (2), solely to the extent the amendment, modification, or change to any such
Indebtedness is not prohibited by any other provision in this Agreement or the
other Transaction Documents; and
(c) Amend any subordination provisions of any instrument
governing any Indebtedness (except for amendments pursuant to this Agreement and
the Security Documents or the Revolving Loan Agreement and the security
documents in respect thereof).
7.11 TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including any purchase, sale, lease or exchange of property or the rendering of
any service, with any Affiliate (other than any Subsidiary), unless such
transaction is otherwise permitted under this Agreement, is in the ordinary
course of the Company's or such Affiliate's business and is upon fair and
reasonable terms no less favorable to the Company or such Affiliate, as the case
may be, than it would obtain in a comparable arms length transaction with a
Person not an Affiliate.
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7.12 SALE AND LEASEBACK. Enter into any Sale and Leaseback to the
extent the aggregate Book Value of all assets sold and leased under all such
transactions exceeds $2,000,000 during the period from October 1, 1996 through
the termination of this Agreement.
7.13 FISCAL YEAR. Permit the fiscal year of the Company to end on a day
other than December 31.
7.14 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into any agreement,
other than the Foothill Loan Documents, any industrial revenue bonds, community
development district financing, purchase money mortgages, Financing Leases, or
agreements executed in connection with Indebtedness incurred in connection with
Subsidiary Property Under Development permitted by this Agreement (in which
cases, any prohibition or limitation shall only be effective against the assets
financed thereby), with any Person other than the Obligee pursuant hereto which
prohibits or limits the ability of the Company or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired.
7.15 DEVIATION FROM BUSINESS PLAN. Allow either:
(a) the actual Net Operating Cash Flow during any fiscal year, to
deviate from the Net Operating Cash Flow projected under the Business Plan by a
negative margin equal to or greater than 30 percent, as of the end of each
fiscal quarter on a cumulative basis; or
(b) the total actual Net Cash Flow for any fiscal year, including
major asset dispositions, to deviate from the annual Net Cash Flow projected
under the Business Plan for such year by a negative margin equal to or greater
than 40 percent.
7.16 UNSOLD HOUSING INVENTORY. Permit Unsold Housing Inventory to
exceed, in the aggregate, $10,000,000 at any one time.
7.17 LIMITATION OF BANK ACCOUNTS. So long as the Secured Instrument is
outstanding, allow cash and Cash Equivalents maintained in Bank Accounts of the
Company and Subsidiaries other than in the Cash Collateral Account and the
restricted accounts set forth in SCHEDULE 7.17 (including any beneficial
interest therein), less the amount of checks outstanding to pay current expenses
in the ordinary course of business or to prepay expenses to be incurred in the
immediately subsequent three-month period consistent with past practices, to
exceed $5,000,000 in the aggregate at any time.
7.18 VENTURE SUBSIDIARIES AND JOINT VENTURES.
(a) Cause, suffer, or permit any Venture Subsidiary to have any
asset or revenues other than the Joint Venture interests owned by such Venture
Subsidiary as disclosed on SCHEDULE 4.14(B) and the revenues arising from such
interests.
(b) Cause, suffer, or permit any Venture Subsidiary to create,
incur, assume, or suffer to exist any Lien (other than Liens in favor of
Collateral Agent for the benefit of the Obligee and the holders of the Foothill
Debt) upon any of such Venture Subsidiary's property, assets, or revenues,
whether now owned or hereafter acquired (including the Joint Venture interests
owned by such Venture Subsidiary as disclosed on SCHEDULE 4.14(B) and the
revenues arising from such interests).
7.19 EXCLUDED SUBSIDIARIES; UNRESTRICTED SUBSIDIARIES. Except as
disclosed on SCHEDULE 7.19, permit any Excluded Subsidiary to own any assets,
have any revenues or liabilities, or conduct any business or except as
specifically agreed in writing by the Obligee permit any Unrestricted Subsidiary
to own any assets, have any revenues or liabilities or conduct any business.
SECTION 8. EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT; REMEDIES. If any of the following events shall
occur and be continuing:
(a) (i) The Company or any Subsidiary shall fail to pay when due
any amount payable to Obligee hereunder or under any other Transaction Document;
or
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(b) Any representation or warranty made or deemed made by the
Company or any of its Subsidiaries herein or in any other Transaction Document
or which is contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this Agreement shall
prove to have been incorrect in any material respect on or as of the date made
or deemed made; or
(c) The Company shall default in the observance or performance of
any agreement contained in Section 7; or
(d) The Company or any Subsidiary shall default in the observance
or performance of any other agreement contained in this Agreement (other than as
provided in paragraphs (a) through (c) of this Section) or in any other
Transaction Document, and such default shall continue unremedied for a period
of thirty (30) days; or
(e) The Company shall fail to pay any obligations under the
Foothill Loan Documents or any principal of or interest on any Unsecured Cash
Flow Notes (whether at scheduled maturity or by required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such obligation under the Foothill Loan Documents or any Unsecured
Cash Flow Notes; or
(f) Any Foothill Debt or any Unsecured Cash Flow Notes shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
(g) Any Subsidiary of the Company shall fail to pay any principal
of, or interest on, any Indebtedness or any Guarantee Obligation (other than any
Guarantee Obligation created pursuant to any Transaction Document) in excess of
$1,000,000, when due and payable (whether at scheduled maturity or by required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument under which such Indebtedness or Guarantee Obligation was created
and, if such agreement or instrument permits the acceleration of the maturity of
such Indebtedness or Guarantee Obligation as a result of such failure, such
Indebtedness or Guarantee Obligation shall be declared to be due and payable, or
required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or any such Indebtedness or
Guarantee Obligation shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity; or
(h) The Company shall (i) default in any payment of principal of or
interest on any Indebtedness (other than the Secured Instrument, the Foothill
Debt, or any Unsecured Cash Flow Notes) or in the payment of any Guarantee
Obligation in excess of $1,000,000, beyond the period of grace, if any, provided
in the instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or performance of any
other agreement or condition relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or permit the holder
or holders of such Indebtedness or beneficiary or beneficiaries of such
Guarantee Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable; or
(i) (i) The Company or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Company or any
of its Subsidiaries shall make a general assignment for the benefit of
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its creditors, or (ii) there shall be commenced against the Company or any of
its Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days, or (iii) there shall be commenced against the
Company or any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof, or (iv)
the Company or any of its Subsidiaries shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clauses (i), (ii), or (iii) above, or (v) the Company or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due, provided that the
Company or any of its Subsidiaries may admit in writing that it is "insolvent"
as such term is defined in, and for purposes of, Section 108(a)(1)(8) of the
Code, or (vi) the Company or any of its Subsidiaries shall cause to be
reinstated the Reorganization Proceedings; or
(j) The Confirmation Order shall be reversed, withdrawn, modified
(in any manner adverse to the Company or any of its Subsidiaries), or any
rehearing shall be ordered with respect thereto by the Bankruptcy Court or by
any court having jurisdiction over the Company; or
(k) (i) There occurs one or more events or conditions described in
Section 4.12 which individually or in the aggregate result in liability of the
Company or any Commonly Controlled Entity in excess of $4,600,000; or the
present value of all accrued benefits under each Single Employer Plan (based on
the reasonable assumptions used by the independent actuary for such Plan for
purposes of establishing the minimum funding requirements under Section 412 of
the Code), as of the last annual valuation date, exceed the value of the assets
of such plan allocable to such accrued benefits, individually or in the
aggregate for all Single Employer Plans with respect to which the value of the
assets exceed the present value of the accrued benefits, by more than
$4,600,000; or
(l) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance) of $500,000 or more in the case of the
Company or any of its Subsidiaries and all such judgments or decrees shall not
have been vacated, discharged, stayed or bonded pending appeal within 60 days
from the entry thereof; or
(m) (i) Any Subsidiary Guaranty or any Security Document shall
cease, for any reason, to be in full force and effect or the Company or any of
its Subsidiaries, as the case may be, party thereto shall so assert in writing,
or (ii) any Security Document shall cease to be effective to grant a perfected
Lien on the collateral described therein with the priority purported to be
created thereby (other than as a result of any action or inaction on the part
of the Obligee or their agents or bailees or other than with respect to Col-
lateral having an aggregate value of $100,000 or less); or
(n) Other than the Obligee or any Affiliate of the Obligee and any
Person acting in concert with the Obligee or any Affiliate of the Obligee, any
Person that is not a transferee of the Obligee or of any Affiliate of the
Obligee or two or more such Persons acting in concert shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended) of
30% or more of the outstanding Capital Stock of the Company, or fewer than three
members of the Board of Directors of the Company shall be a designee of the
Obligee, other than as a result of the Obligee's failure to nominate a successor
to a designee who has resigned or been removed for cause; or
(o) Any event or change shall occur that has caused or evidences,
either in any case or in the aggregate, a Material Adverse Effect; or
(p) The Total Unsecured Claims shall exceed $1.5 Billion; or
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(q) The Company or Special Subsidiary shall default in the
observance or performance of any agreement contained in Section 3.7; then, and
in any such event: (A) if such event is an Event of Default specified in clause
(i), (ii), (iv), (v) or (vi) of Section 8.1(i) above, automatically the entire
amount of the Secured Instrument and all other amounts owing under this
Agreement and the Secured Instrument shall immediately become due and payable in
full, which amount shall accrue interest or dividends, as applicable, at the
Default Rate as well before as after judgment, and the Obligee and Collateral
Agent shall have all rights and remedies given to the Obligee and Collateral
Agent pursuant to the Security Documents and all rights of a secured party,
mortgagee and pledgee under applicable law, all of which rights and remedies
shall be cumulative and non-exclusive, to the extent permitted by law; and (B)
if such event is any other Event of Default, the Obligee may, by notice of
default to the Company, declare the entire amount of the Secured Instrument and
all other amounts owing under this Agreement and the Secured Instrument to be
due and payable in full, which amount shall accrue interest or dividends, as
applicable, at the Default Rate as well before as after judgment, and the
Obligee and Collateral Agent shall have all rights and remedies given to the
Obligee and Collateral Agent pursuant to the Security Documents and all rights
of a secured party, mortgagee and pledgee under applicable law, all of which
rights and remedies shall be cumulative and non-exclusive, to the extent
permitted by law.
SECTION 9. THE COLLATERAL AGENT
9.1 [intentionally omitted]
9.2 APPOINTMENT OF COLLATERAL AGENT. The Obligee hereby irrevocably
designates and appoints each of The Bank of New York and Foothill Capital
Corporation as Collateral Agent under this Agreement and the Security Documents
to which the Collateral Agent is a party with respect to the SP Sub Collateral
and the Collateral other than SP Sub Collateral, respectively, and the
Collateral Agent hereby accepts such appointment, subject to the terms and
provisions of this Agreement, the Intercreditor Agreement and the Security
Documents to which it is a party. The Obligee hereby further authorizes and
directs Collateral Agent to enter into the Security Documents, the Intercreditor
Agreement and all other documents, consents, joinders, acknowledgments and other
written matter to be executed and delivered by Collateral Agent on the Issuance
Date and agrees to be bound by the terms thereof. The Obligee irrevocably
authorizes the Collateral Agent, as Collateral Agent for the Obligee, to take
such action on its behalf under the provisions of this Agreement, the
Intercreditor Agreement and the Security Documents to which Collateral Agent is
a party, and to exercise such powers and perform such duties as are expressly
delegated to Collateral Agent by the terms of this Agreement, the Intercreditor
Agreement and the Security Documents to which it is a party, together with such
other powers as are reasonably incidental thereto; PROVIDED that Collateral
Agent shall not enter into any consent to any amendment, modification,
termination or waiver of any provision contained in this Agreement or any
Security Document to which it is party without the prior written consent of the
Obligee. The Obligee hereby authorizes Collateral Agent to release Collateral
only as expressly permitted or required under this Agreement, the Intercreditor
Agreement or the Security Documents and agrees that a certificate executed by
Collateral Agent evidencing such release of Collateral shall be conclusive
evidence of such release to any third party. Collateral Agent shall not
subordinate or release any Liens under any of the Security Documents except as
provided in this Agreement, the Intercreditor Agreement or upon the written
direction of the Obligee. All notices and directions to Collateral Agent shall
be given in writing by the Obligee.
9.3 [intentionally omitted]
9.4 DELEGATION OF DUTIES. Collateral Agent may execute any of its
duties under this Agreement and the other Secured Instrument Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Collateral Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care. Notwithstanding any provision to the
contrary elsewhere in this Agreement, Collateral Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with the Obligee, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Secured Instrument Document or otherwise exist against
Collateral Agent; and Collateral Agent is acting hereunder and under the other
Secured Note Documents solely as the collateral agent of the Obligee pursuant
hereto and thereto, and Collateral Agent is not acting as trustee for the
Obligee.
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9.5 EXCULPATORY PROVISIONS. Neither the Obligee, Collateral Agent nor
any of their respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or any other Transaction Document (except for its or such Persons
own gross negligence or willful misconduct) or (b) responsible in any manner for
any recitals, statements, representations or warranties made by the Company or
any officer thereof contained in this Agreement or any other Transaction
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Obligee under or in connection with, this
Agreement or any other Secured Floating Rate Note Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or the Secured Instrument or any other Transaction Document or for any
failure of the Company to perform its obligations hereunder or thereunder.
Neither the Obligee nor Collateral Agent shall be under any obligation to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions to, this Agreement or any other
Transaction Document or as to the use of proceeds of the Secured Instrument or
the Investment Agreement or of the existence or possible existence of a Default
or Event of Default, or to inspect the properties, books or records of the
Company.
9.6 RELIANCE BY THE OBLIGEE.
(a) Each of the Obligee and Collateral Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Secured Instrument,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to the Company), independent
accountants and other experts selected by the Obligee or Collateral Agent, as
the case may be.
(b) Collateral Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Transaction
Document unless (i) it shall first receive such advice or concurrence as it
deems appropriate from the Obligee, or (ii) it shall first be indemnified to its
satisfaction by the Obligee against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action,
except in the case of Collateral Agent's gross negligence or willful misconduct.
Collateral Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement, the Secured Instrument and the
other Transaction Documents in accordance with a request of the Obligee and such
request and any action taken or failure to act pursuant thereto shall be binding
upon the Obligee and all future holders of the Secured Instrument.
9.7 NOTICE OF DEFAULT. Neither the Obligee nor Collateral Agent shall
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default unless the Obligee or Collateral Agent, as the case may be, has
received notice from the Obligee (in the case of Collateral Agent) or the
Company referring to this Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default." If the Obligee receives
such a notice, the Obligee shall promptly give notice thereof to Collateral
Agent. If Collateral Agent receives such a notice, Collateral Agent shall
promptly give notice thereof to the Obligee. Collateral Agent shall take such
action with respect to such Default or Event of Default as shall be directed by
the Obligee (subject to the provisions of Section 9.6(b)); PROVIDED that unless
and until Collateral Agent shall have received such directions, Collateral Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Obligee.
9.8 NON-RELIANCE ON COLLATERAL AGENT. The Obligee expressly
acknowledges that neither Collateral Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by Collateral Agent hereinafter taken,
including any review of the affairs of the Company or any of its Subsidiaries,
shall be deemed to constitute any representation or warranty by Collateral Agent
to the Obligee. The Obligee represents to Collateral Agent that it has,
independently and without reliance upon Collateral Agent, and based on such
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documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Company and its Subsidiaries and
made its own decision to enter into this Agreement. The Obligee also represents
that it will, independently and without reliance upon Collateral Agent, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Transaction
Documents, and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries. Except for the notices,
reports and other documents expressly required to be furnished by the Collateral
Agent to the Obligee hereunder, if any, Collateral Agent shall not have any duty
or responsibility to provide the Obligee with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Company or any of its
Subsidiaries which may come into the possession of Collateral Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
9.9 INDEMNIFICATION. The Obligee agrees to indemnify Collateral Agent
in its capacity as such (to the extent not reimbursed by the Company and without
limiting the obligation of the Company to do so) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including at any time following the payment of the Secured Instrument) be
imposed on, incurred by or asserted against Collateral Agent in any way relating
to or arising out of this Agreement, any of the other Transaction Documents or
any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
Collateral Agent under or in connection with any of the foregoing; provided that
the Obligee shall not be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from Collateral Agent's gross
negligence or willful misconduct. The agreements in this Section shall survive
the payment of the Secured Instrument and all other amounts payable hereunder.
9.10 [intentionally omitted]
9.11 [intentionally omitted]
9.12 SUCCESSOR COLLATERAL AGENT. Collateral Agent may resign as
Collateral Agent, upon 30 days' notice to the Obligee. If Collateral Agent shall
resign as Collateral Agent under this Agreement and the other Transaction
Documents, then the Obligee shall appoint a successor collateral agent for the
Obligee, which successor collateral agent, except if an Event of Default shall
have occurred and be continuing, shall be approved by the Company (which
approval shall not be unreasonably withheld), whereupon, effective upon
acceptance of its appointment as successor collateral agent, such successor
collateral agent shall succeed to the rights, powers and duties of Collateral
Agent and the term "Collateral Agent" shall mean such successor collateral
agent, and the former Collateral Agent's rights, powers and duties as Collateral
Agent shall be terminated, without any other or further act or deed on the part
of such former Collateral Agent or any of the parties to this Agreement or any
holder of the Secured Instrument. If the Obligee fails to appoint a successor
collateral agent for the Obligee as provided above within 30 days after the
resignation of Collateral Agent, then Collateral Agent may appoint a successor
collateral agent for the Obligee, which successor collateral agent, except if an
Event of Default shall have occurred and be continuing, shall be approved by the
Company (which approval shall not be unreasonably withheld), whereupon,
effective upon acceptance of its appointment as successor collateral agent, such
successor collateral agent shall succeed to the rights, powers and duties of
Collateral Agent and the term "Collateral Agent" shall mean such successor
collateral agent and the former Collateral Agent's rights, powers and duties as
Collateral Agent, as the case may be, shall be terminated, without any other or
further act or deed on the part of such former Collateral Agent or any of the
parties to this Agreement or any holder of the Secured Instrument. After any
retiring Collateral Agent's resignation as Collateral Agent, the provisions of
this Section 9 shall inure and survive to its benefit as to any actions taken or
omitted to be taken (or any matter related thereto) by it while it was
Collateral Agent under this Agreement and the other Transaction Documents.
Notwithstanding anything herein to the contrary, the resignation of Collateral
Agent shall not be effective unless and until a successor collateral agent has
been appointed and has accepted such appointment.
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SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. Neither this Agreement, the Secured
Instrument, any other Transaction Document, nor any terms hereof or thereof may
be amended, supplemented or modified except with the prior written consent of
the Obligee. No such amendment, supplement or modification shall amend, modify
or waive any provision of Section 9 without the written consent of then
Collateral Agent affected thereby. Any such waiver of a Default or Event of
Default in accordance with the terms hereof and any such amendment, supplement
or modification shall be binding upon the Company, the Obligee, Collateral Agent
and all future holders of the Secured Instrument. In the case of any waiver, the
Company, the Obligee, and Collateral Agent shall be restored to their former
position and rights hereunder and under the outstanding Secured Instrument and
any other Transaction Documents, and any Default or Event of Default waived
shall be deemed to be cured and not continuing; but no such waiver shall extend
to any subsequent or other Default or Event of Default, or impair any right
consequent thereon.
10.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or five Business Days after
being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when the recipient has confirmed receipt, addressed as follows in the
case of the Company, the Obligee, and Collateral Agent:
The Company: Atlantic Gulf Communities Corporation
2601 South Bayshore Drive
Miami, Florida 33133-5461
Attention: John H. Fischer,
Vice President and Treasurer
Telecopy: (305) 859-4623
Copy to: Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Attention: Carter Strong, Esquire
Telecopy: (202) 857-6395
The Obligee: AP-AGC, LLC
Two Manhattanville Road
Purchase, New York 10577
Attention: W. Edward Scheetz
Telecopy: (212) 261-4060
Copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Philip Mindlin, Esquire
Trevor Norwitz, Esquire
Telecopy: (212) 403-2000
The Collateral
Agent With Respect
to Collateral Other
than SP Sub
Collateral: Foothill Capital Corporation
Suite 1500
11111 Santa Monica Boulevard
Los Angeles, California 90025
Attention: Jeffrey Nikorla
Telecopy: (310) 479-0461
Copy to: Brobeck, Phleger & Harrison LLP
Suite 2100
550 South Hope Street
Los Angeles, California 90071
Attention: Jeffrey S. Turner, Esquire
Telecopy: (213) 745-3345
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The Collateral
Agent With Respect
to SP Sub
Collateral: The Bank of New York
c/o The Bank of New York Trust Company
of Florida, N.A.
10161 Centurion Parkway
Jacksonville, Florida 32256
Attention: Janalee R. Scott
Telecopy: (904) 645-1998
and, in the case of the other parties hereto, as set forth under that party's
name on the signature pages hereof, or, in each case, to such other address as
may be hereafter notified by the respective parties hereto and any future
holders of the Secured Instruments; PROVIDED, HOWEVER, that any notice, request
or demand to or upon Collateral Agent or the Obligee shall not be effective
until received.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of Collateral Agent or the Obligee, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights, rem-
edies, powers and privileges provided by law.
10.4 SURVIVAL OF CERTAIN PROVISIONS. All representations and warranties
made hereunder or under any other Transaction Document and in any document,
certificate or statement delivered pursuant hereto or thereto or in connection
herewith or therewith, all indemnities made hereunder or under any thereof
agreements or undertakings herein or in any thereof in favor of the Obligee, the
Obligee or Collateral Agent and all agreements or undertakings in Section 3
hereof or otherwise contained herein or in any thereof relating to the
Collateral shall survive the execution and delivery of this Agreement and the
Secured Instrument and the payment in full of the Secured Instrument and all
Obligations hereunder. Without limiting the generality of the foregoing, the
following agreements and undertakings shall continue in full force and effect so
long as the Secured Instrument, any Preferred Stock or any unpaid Repurchase
Price or Optional Redemption Price (each as defined in the Certificate of
Designation) remains outstanding, whether or not any loan shall be outstanding
hereunder: (i) each term and provision of the Secured Instrument, the Subsidiary
Guaranties, and the Security Documents, (ii) Section 3, (iii) Sections 6 and 7,
but only during the period specified in the introductory paragraph to each such
Section, except that the last paragraph of Section 7.6 shall remain in effect
whether or not the balance of Section 7 shall at the time be in effect and (iv)
Sections 9, 10 and 11 and (in each case) the relevant definitions.
10.5 PAYMENT OF EXPENSES AND TAXES. The Company agrees (a) to pay or
reimburse the Obligee and Collateral Agent for all its out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement, the
Secured Instrument, the Intercreditor Agreement, and the other Transaction
Documents and any other documents prepared in connection herewith or therewith,
and the consummation of the transactions contemplated hereby and thereby,
including the reasonable fees and disbursements of counsel to the Obligee and
counsel to Collateral Agent, and the reasonable allocated costs of in-house
counsel to the Obligee and in-house counsel to Collateral Agent, (b) to pay or
reimburse the Obligee and Collateral Agent for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement, the Secured Instrument, the Intercreditor Agreement, the other
Transaction Documents and any such other documents, including fees and
disbursements of counsel to the Obligee and counsel to Collateral Agent, and the
reasonable allocated costs of in-house counsel to the Obligee and in-house
counsel to Collateral Agent, (c) to pay, indemnify, and hold the Obligee and
Collateral Agent harmless from, any and all recording and filing fees, any and
all Florida documentary stamp taxes and Florida intangible personal property
taxes and any and all other stamp, excise and other taxes (other than any taxes
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which are determined based solely upon the income or revenues of the Obligee or
Collateral Agent), if any, which may be payable or determined to be payable in
connection with the execution and delivery of, or consummation of any of the
transactions contemplated by this Agreement, the Secured Instrument, the other
Transaction Documents, and any such other documents, and any and all liabilities
with respect to, or resulting from any delay in paying any of such fees and
taxes, (d) to pay the costs of furnishing all opinions of counsel for the
Company, or obtaining technical assistance advisories, required hereunder, (e)
to pay the costs of obtaining any required consents, amendments, waivers or
other modifications to the Foothill Loan Documents and the agreements governing
the Unsecured Cash Flow Notes, and any other agreements, (f) to pay the costs
and expenses incurred to continue the perfection of any Liens in favor of the
Obligee and Collateral Agent pursuant to any of the Security Documents,
including the costs of title searches, title insurance premiums, UCC searches
and UCC filing charges and (g) to pay, indemnify, and hold each the Obligee and
Collateral Agent harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the Secured Instrument, the Intercreditor Agreement, the other
Transaction Documents, and any such other documents (all the foregoing,
collectively, the "INDEMNIFIED LIABILITIES"), provided, that the Company shall
have no obligation hereunder to Collateral Agent or the Obligee, with respect to
indemnified liabilities arising from (i) the gross negligence or willful
misconduct of Collateral Agent or the Obligee, as to such party or (ii) as to
the Obligee, legal proceedings commenced against the Obligee by any Transferee
(as defined in Section 10.6). The agreements in this Section shall survive
repayment of the Secured Instrument and all other amounts payable hereunder.
10.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING OBLIGEE.
(a) This Agreement shall be binding upon and inure to the benefit
of the Company, the Obligee, Collateral Agent, all future holders of the Secured
Instrument and their respective successors and assigns, except that the Company
may not assign or transfer any of its rights or obligations under this Agreement
and the other Transaction Documents without the prior written consent of the
Obligee.
(b) Subject to Sections 10.6(h) and (k), the Obligee may at any
time sell to one or more banks or other entities ("PARTICIPANTS") participating
interests in the Secured Instrument or any other interest of the Obligee
hereunder and under the other Transaction Documents. In the event of any such
sale by the Obligee of participating interests to a Participant, the Obligee's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, the Obligee shall remain solely responsible for the
performance thereof, the Obligee shall remain the holder of its Secured
Instrument for all purposes under this Agreement and the other Transaction
Documents, and the Company and Collateral Agent shall continue to deal solely,
and directly, with the Obligee in connection with the Obligee's rights and
obligations under this Agreement and the other Transaction Documents. The
Company agrees that if amounts outstanding under this Agreement and the Secured
Instrument are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement and the Secured Instrument to the
same extent as if the amount of its participating interest were owing directly
to it as the Obligee under this Agreement or the Secured Instrument, provided
that such Participant shall only be entitled to such right of setoff if it shall
have agreed in the agreement pursuant to which it shall have acquired its
participating interest to share with the Obligee the proceeds thereof as
provided in Section 10.7. The Company also agrees that each Participant shall be
entitled to the benefits of Sections 2.7, 2.9 and 10.5 with respect to its
participation in the Secured Instrument outstanding from time to time; provided,
that no Participant shall be entitled to receive any greater amount pursuant to
such Sections than the transferor Obligee would have been entitled to receive in
respect of the amount of the participation transferred by such transferor the
Obligee to such Participant had no such transfer occurred. Notwithstanding
anything herein to the contrary, participants shall not be entitled to require
the Obligee to take or omit to take any action hereunder except with respect to
amendments or waivers resulting in (i) the extension of the regularly scheduled
maturity dates of any portion of a Secured Instrument in which such Participant
is participating (it being understood that any waiver of an installment on, or
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the application of, any prepayment or the method of application of any
prepayment to the amortization of the Secured Instruments shall not constitute
an extension of the regularly scheduled maturity dates), (ii) a reduction of the
amount of, or the rate of interest or dividends, as applicable (except in
connection with a waiver of the applicability of any post-default increase in
interest rates or dividends, as applicable, or margins) or fees payable on the
Secured Instrument in which such participant is participating, or (iii) the
release of all or substantially all of the Collateral or any Subsidiary Guaranty
(except as otherwise expressly provided in the Transaction Documents).
(c) Subject to Sections 10.6(h) and (k), the Obligee may at any
time sell to any bank or other entity ("PURCHASING OBLIGEE") all or any part of
its rights and obligations under this Agreement and the Secured Instrument and
other Transaction Documents, whereupon (i) the Purchasing Obligee shall be a
party hereto and have the rights and obligations of a Obligee hereunder and
under the other Transaction Documents, and (ii) the transferor Obligee shall, to
the extent of such transfer, be released from its obligations under this
Agreement and under the other Transaction Documents (and, in the case of a
transfer covering all or the remaining portion of a transferor Obligee's rights
and obligations under this Agreement and under the other Secured Instrument
Documents, such transferor Obligee shall cease to be a party hereto and
thereto). Such transfer shall be deemed to amend this Agreement to the extent,
and only to the extent, necessary to reflect the addition of such Purchasing
Obligee under this Agreement and the Secured Instrument and other Secured
Instrument Documents. On or prior to the transfer effective date, the Company,
at its own expense, shall execute and deliver to the Obligee new Secured
Instrument(s) to the order of such Purchasing Bank in an amount equal to the
Secured Instrument or Secured Instrument portion acquired by it and, if the
transferor Obligee has retained a portion of the Secured Instrument hereunder,
new Secured Instrument(s) to the order of the transferor Obligee in an amount
equal to the portion retained by it. Such new Secured Instrument(s) shall be
dated the same date as, and shall otherwise be in the form of, the Secured
Instrument(s) replaced thereby. The Secured Instrument(s) replaced by the new
Secured Instrument(s), marked "renewed and replaced," shall be attached to the
new Secured Instrument(s); and a copy thereof shall be sent to the Company.
(d) [intentionally omitted]
(e) [intentionally omitted]
(f) Subject to Section 10.16, the Company authorizes the Obligee
to disclose to any Participant or Purchasing Obligee (each, a "TRANSFEREE") and
any prospective Transferee any and all information in the Obligee's possession
concerning the Company and its Affiliates; provided, however, that such
Transferee agrees in writing to be bound by the terms of Section 10.16.
(g) If, pursuant to this Section 10.6, any interest in this
Agreement or any Secured Instrument is transferred to any Purchasing Obligee
which is organized under the laws of any jurisdiction other than the United
States or any state thereof, the Company will not be required to pay any
increased withholding taxes of the United States or any political subdivision
thereof unless, prior to the date of transfer, the transferor Obligee shall
cause such Purchasing Obligee to comply with the requirements of Section 2.7.
(h) [intentionally omitted]
(i) Nothing herein shall prohibit any Obligee which is a bank from
pledging or assigning any Secured Instrument to any Federal Reserve Bank in
accordance with applicable law.
(j) Notwithstanding the foregoing provisions of this Section 10.6,
no holder of a Secured Instrument shall transfer such Secured Instrument in a
manner which would violate any Requirement of Law.
(k) Notwithstanding the foregoing provisions of this Section 10.6,
the initial Obligee hereunder agrees not to sell or assign the Secured
Instrument prior to the earliest of (a) the second anniversary of the Issuance
Date, (b) the occurrence of an Event of Default and (c) a Negative Shareholder
Vote.
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10.7 ADJUSTMENTS; SETOFF.
(a) If at any time when there is more than one Obligee any Obligee
(a "BENEFITTED OBLIGEE") shall at any time receive any payment of all or part of
its Secured Instrument(s), or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by setoff, pursuant to
events or proceedings of the nature referred to in Section 8.1(i), or
otherwise), in a greater proportion than any such payment to or collateral
received by, any other Obligee, if any, in respect of such other Obligee's
Secured Instrument(s), or interest thereon, or fees due to it hereunder, such
Benefitted Obligee shall purchase for cash from the other Obligee such portion
of each such other Obligee's Secured Instrument(s), or make such payment on
account of such fees, or shall provide such other Obligee with the benefits of
any such collateral, or the proceeds thereof, as shall be necessary to cause
such Benefitted Obligee to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Obligees; PROVIDED, HOWEVER,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such Benefitted Obligee, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent of such recovery, but
without interest. The Company agrees, that each Obligee purchasing a portion of
another Obligee's Secured Instrument(s) owing to it may exercise all rights of
payment (including, without limitation, rights of setoff) with respect to such
portion as fully as if such Obligee were the direct holder of such portion.
(b) In addition to any rights and remedies of the Obligee provided
by law, each Obligee shall have the right, without prior notice to the Company,
any such notice being expressly waived by the Company to the extent permitted by
applicable law, upon any Secured Obligations becoming due (whether at the stated
maturity, by acceleration or otherwise) to set off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Obligee to
or for the credit or the account of the Company. Each Obligee agrees promptly to
notify the Company and each other Obligee after any such setoff and application
made by such the Obligee, provided that the failure to give such notice shall
not affect the validity of such setoff and application.
10.8 APPOINTMENT OF THE OBLIGEE AS THE COMPANY'S LAWFUL ATTORNEY. The
Company irrevocably designates, makes, constitutes and appoints the Obligee
(and all Persons designated by the Obligee) as the Company's true and lawful
attorney (and agent-in-fact) coupled with an interest, with the power to sign
the name of the Company on any instruments, documents and agreements, including,
without limitation, security agreements, pledge agreements, mortgages, and
financing statements, as deemed by the Obligee as necessary or reasonably
required by the Obligee to grant, perfect, maintain and continue the Liens in
the Collateral or to monitor or administer the Secured Instrument, together
with any and all amendments, modifications, extensions, substitutions and
renewals thereof and deliver any of such instruments, documents and agreements
to such persons as the Obligee, in its sole discretion, may elect, and in such
event copies thereof shall be delivered to the Company.
10.9 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and the Obligee.
10.10 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.11 INTEGRATION. This Agreement, together with the other Transaction
Documents represents the entire agreement of the Company, Collateral Agent and
the Obligee and supersedes all prior agreements with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by Collateral Agent or the Obligee relative to subject matter hereof
not expressly set forth or referred to herein or in the other Transaction
Documents.
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10.12 GOVERNING LAW. THIS AGREEMENT, THE SECURED INSTRUMENTS AND THE
RIGHTS AND OF THE PARTIES UNDER THIS AGREEMENT AND THE SECURED INSTRUMENTS SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
10.13 SUBMISSION TO JURISDICTION; WAIVERS. THE COMPANY HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO
WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN
RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATES OF CALIFORNIA AND NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA
FOR THE CENTRAL DISTRICT OF CALIFORNIA AND THE SOUTHERN DISTRICT OF NEW YORK,
AND APPELLATE COURTS FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS SET FORTH IN SECTION 10.2 OR AT SUCH OTHER ADDRESS OF
WHICH THE OBLIGEE SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS MANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO SUE IN ANY OTHER JURISDICTION;
(e) WAIVES (i) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF
PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE,
SETTLEMENT, EXTENSION OR RENEWAL OF THE SECURED INSTRUMENTS AND ALL OTHER
SECURED INSTRUMENT DOCUMENTS AND HEREBY RATIFIES AND CONFIRMS WHATEVER THE
OBLIGEE OR COLLATERAL AGENT MAY DO IN THIS REGARD, (ii) ALL RIGHTS TO NOTICE OF
A HEARING PRIOR TO THE OBLIGEE'S OR COLLATERAL AGENT'S ATTACHMENT OR LEVY UPON
THE COLLATERAL, AND ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT
PRIOR TO ALLOWING THE OBLIGEE OR COLLATERAL AGENT TO EXERCISE ANY OF THE
OBLIGEE'S OR COLLATERAL AGENT'S REMEDIES, AND (iii) THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND
(f) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN
THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
10.14 ACKNOWLEDGMENTS. The Company hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement, the Secured Instrument and the other Transaction
Documents;
(b) neither Collateral Agent nor the Obligee has any fiduciary
relationship to the Company, and the relationship between the Obligee, on one
hand, and the Company, on the other hand, is solely that of debtor and creditor;
and
(c) no joint venture exists between the Company and the Obligee.
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10.15 WAIVERS OF JURY TRIAL. THE COMPANY AND THE OBLIGEE HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR THE SECURED INSTRUMENT OR ANY OTHER
TRANSACTION DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.16 CONFIDENTIALITY. The Obligee agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all
non-public information provided to it by the Company or any of its Subsidiaries,
or by Collateral Agent on the Company's behalf, in connection with this
Agreement or any other Transaction Document and agrees and undertakes that
neither it nor any of its Affiliates shall use any such information for any
purpose or in any manner other than pursuant to the terms contemplated by this
Agreement and the other Transaction Documents. The Obligee may disclose such
information (a) at the request of any regulatory authority or in connection with
an examination of the Obligee by any such authority; (b) pursuant to subpoena or
other court process; (c) when required to do so in accordance with the
provisions of any applicable law; (d) at the express direction of any other
agency of any State of the United States of America or of any other
jurisdiction, in which the Obligee conducts its business; (e) to the Obligee's
independent auditors and other professional advisors; (f) following an Event of
Default, in connection with the sale or other realization on the Collateral
under the Security Documents; (g) in connection with any litigation or dispute
between (i) the Obligee and (ii) the Company and/or any Subsidiary; and (h) in
connection with any litigation or dispute involving the Obligee if the
disclosure is determined by the Obligee to be necessary for the defense or
protection of the Obligee's rights and/or interests. The Obligee further agrees,
upon receipt by the Obligee of a request to disclose any information to a
Governmental Authority or courts (other than governmental bank examiners and
independent auditors of the Obligee, to notify the Company of such request and
to permit, to the extent practicable, the Company to seek a protective order
with respect thereto; PROVIDED, HOWEVER, that no the Obligee shall be requested
to notify the Company of any such request if (i) it is not permitted to do so by
applicable law and regulations, (ii) it is requested not to notify the Company
by any Person acting or purporting to act on behalf of a Governmental Authority,
or (iii) it otherwise reasonably believes that it is not permitted to so notify
the Company.
10.17 CONTROLLING AGREEMENT. In the event of any conflict between the
terms and conditions of this Agreement and the terms and conditions of any other
Secured Instrument Document, the terms and conditions of this Agreement shall
control.
SECTION 11. THE CO-MAKERS
11.1 CERTAIN DEFINED TERMS. As used in this Section, the following terms
shall have the following meanings unless the context otherwise requires:
"PAYMENT IN FULL," "PAID IN FULL" or any similar term means payment
in full in cash of the Secured Obligations including all redemption or
repurchase obligations, principal, dividends, interest, costs, fees and expenses
(including, without limitation, reasonable legal fees and expenses) of Obligee
and Collateral Agent as required under the Transaction Documents.
11.2 ALL CO-MAKERS LIABLE. Subject to the provisions of subsection 11.3,
all Co-Makers are jointly and severally irrevocably and unconditionally liable,
as primary obligors and not merely as sureties, for the due and punctual payment
in full of the Secured Obligations when the same shall become due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.
362(a)).
11.3 LIMITATION ON OBLIGATIONS OF SUBSIDIARIES; CONTRIBUTION AMONG
SUBSIDIARIES.
(a) Anything contained in this Agreement to the contrary
notwithstanding, the obligations of each Subsidiary hereunder shall be limited
to a maximum aggregate amount equal to the largest amount that would not render
its obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
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applicable provisions of comparable state law (collectively, the "FRAUDULENT
TRANSFER LAWS"), in each case after giving effect to all other liabilities of
such Subsidiary, contingent or otherwise, that are relevant under the Fraudulent
Transfer Laws (specifically excluding, however, any liabilities of such
Subsidiary (i) in respect of intercompany indebtedness to Company or other
affiliates of Company to the extent that such indebtedness would be discharged
in an amount equal to the amount paid by such Subsidiary hereunder and (ii)
under any guaranty of subordinated indebtedness which guaranty contains a
limitation as to maximum amount similar to that set forth in this subsection
11.3(a), pursuant to which the liability of such Subsidiary hereunder is
included in the liabilities taken into account in determining such maximum
amount) and after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, reimbursement, indemnification or contribution of such Subsidiary
pursuant to applicable law or pursuant to any agreement.
(b) The Co-Makers under this Agreement and each guarantor under any
Subsidiary Guaranty together desire to allocate among themselves (collectively,
the "CONTRIBUTING PARTIES"), in a fair and equitable manner, their obligations
arising under this Agreement and the Subsidiary Guaranties. Accordingly, if any
payment or distribution is made on any date by any Co-Maker under this Agreement
or a guarantor under a Subsidiary Guaranty (a "FUNDING PARTY") that exceeds its
Fair Share (as defined below) as of such date, that Funding Party shall be
entitled to a contribution from each of the other Contributing Parties in the
amount of such Contributing Party's Fair Share Shortfall (as defined below) as
of such date, with the result that all such contributions will cause each
Contributing Party's Aggregate Payments (as defined below) to equal its Fair
Share as of such date. "FAIR SHARE" means, with respect to a Contributing Party
as of any date of determination, an amount equal to (i) the ratio of (x) the
Adjusted Maximum Amount (as defined below) with respect to such Contributing
Party to (y) the aggregate of the Adjusted Maximum Amounts with respect to all
Contributing Parties, multiplied by (ii) the aggregate amount paid or
distributed on or before such date by all Funding Parties under this Agreement
and the Subsidiary Guaranties in respect of the Secured Obligations. "FAIR SHARE
SHORTFALL" means, with respect to a Contributing Party as of any date of
determination, the excess, if any, of the Fair Share of such Contributing Party
over the Aggregate Payments of such Contributing Party. "ADJUSTED MAXIMUM
AMOUNT" means, with respect to a Contributing Party as of any date of
determination, the maximum aggregate amount of the obligations of such
Contributing Party under this Agreement and the Subsidiary Guaranties,
determined as of such date in accordance with subsection 11.3(a) or, if
applicable, a similar provision in the Subsidiary Guaranties; provided that,
solely for purposes of calculating the Adjusted Maximum Amount with respect to
any Contributing Party for purposes of this subsection 11.3(b), any assets or
liabilities of such Contributing Party arising by virtue of any rights to
subrogation, reimbursement or indemnification or any rights to or obligations of
contribution hereunder or under any similar provision in a Subsidiary Guaranty
shall not be considered as assets or liabilities of such Contributing Party.
"AGGREGATE PAYMENTS" means, with respect to a Contributing Party as of any date
of determination, an amount equal to (i) the aggregate amount of all payments
and distributions made on or before such date by such Contributing Party in
respect of this Agreement and the Subsidiary Guaranties (including, without
limitation, in respect of this subsection 11.3(b) or any similar provision
contained in a Subsidiary Guaranty) minus (ii) the aggregate amount of all
payments received on or before such date by such Contributing Party from the
other Contributing Parties as contributions under this subsection 11.3(b) or any
similar provision contained in any Subsidiary Guaranty. The amounts payable as
contributions hereunder shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Party. The allocation
among Contributing Parties of their obligations as set forth in this subsection
11.3(b) or any similar provision contained in a Subsidiary Guaranty shall not be
construed in any way to limit the liability of any Contributing Party hereunder
or under a Subsidiary Guaranty or to entitle any Funding Party or Contributing
Party to fail or refuse to make a payment to Obligee otherwise required
hereunder or under a Subsidiary Guaranty. Without limiting the generality of the
preceding sentence, the failure of any Funding Party to receive a contribution
from Contributing Parties in the amount of their respective Fair Share
Shortfalls shall not excuse payment by it of obligations to Obligee hereunder or
under a Subsidiary Guarantee or constitute a defense or offset to payment of
such obligations and no party shall pay its Fair Share Shortfall to a Funding
Party before Obligee has received payment of all sums due to it from such party.
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Each Contributing Party under a Subsidiary Guaranty is a third-party beneficiary
to the contribution agreement set forth in this subsection 11.3(b). The
obligations of any party under a Subsidiary Guaranty are not secured by any
Mortgages made by the Co-Makers and recorded in Florida, which Mortgages secure
the direct obligations of the Co-Makers rather than guaranties of the
obligations of others.
11.4 LIABILITY OF CO-MAKERS ABSOLUTE. Each Co-Maker agrees that its
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a co-maker other than indefeasible payment in full of the
Secured Obligations. In furtherance of the foregoing and without limiting the
generality thereof, each Co-Maker agrees as follows:
(a) The obligation of each Co-Maker is independent, primary and
original, and not dependent upon failure of Obligee to collect from any other
Co-Maker.
(b) Obligee may enforce this Agreement against the Subsidiaries
notwithstanding the existence of any dispute between Obligee and Company or any
Subsidiary with respect to the existence of an Event of Default.
(c) The obligations of each Subsidiary hereunder are independent of
the obligations of Company under the Transaction Documents and the obligations
of any other Co-Maker or any guarantor, and a separate action or actions may be
brought and prosecuted against such Subsidiary whether or not any action is
brought against Company or any of such other Co-Makers or guarantor and whether
or not Company is joined in any such action or actions.
(d) Payment by any Co-Maker of a portion, but not all, of the
Secured Obligations shall in no way limit, affect, modify or abridge any other
Co-Maker's liability for any portion of the Secured Obligations which has not
been paid. Without limiting the generality of the foregoing, if Obligee is
awarded a judgment in any suit brought to enforce any Co-Maker's covenant to pay
a portion of the Secured Obligations, such judgment shall not be deemed to
release such Co-Maker from its covenant to pay the portion of the Secured
Obligations that is not the subject of such suit, and such judgment shall not,
except to the extent satisfied by such Co-Maker, limit, affect, modify or
abridge any other Co-Maker's liability hereunder in respect of the Secured
Obligations.
(e) Obligee, upon such terms as it deems appropriate, without
notice or demand and without affecting the validity or enforceability of this
Agreement or giving rise to any reduction, limitation, impairment, discharge or
termination of any Co-Maker's liability hereunder, from time to time may (i)
renew, extend, accelerate, increase the rate of interest on, or otherwise change
the time, place, manner or terms of payment of the Secured Obligations, (ii)
settle, compromise, release or discharge, or accept or refuse any offer of
performance with respect to, or substitutions for, the Secured Obligations or
any agreement relating thereto and/or subordinate the payment of the same to the
payment of any other obligations; (iii) request and accept guaranties of the
Secured Obligations and take and hold security for the payment of this Agreement
or the Secured Obligations; (iv) release, surrender, exchange, substitute,
compromise, settle, rescind, waive, alter, subordinate or modify, with or
without consideration, any security for payment of the Secured Obligations, any
guaranties of the Secured Obligations, or any other obligation of any Person
(including any other Co-Maker) with respect to the Secured Obligations; (v)
enforce and apply any security now or hereafter held by or for the benefit of
Obligee in respect of this Agreement or the Secured Obligations and direct the
order or manner of sale thereof, or exercise any other right or remedy that
Obligee may have against any such security, as Obligee in its discretion may
determine consistent with this Agreement and any applicable security agreement
or mortgage, including foreclosure on any such security pursuant to one or more
judicial or nonjudicial sales, whether or not every aspect of any such sale is
commercially reasonable, and even though such action operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
any Co-Maker against any other Co-Maker or any security for the Secured
Obligations; and (vi) exercise any other rights available to it under the
Transaction Documents.
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(f) This Agreement and the obligations of the Co-Makers hereunder
shall be valid and enforceable and shall not be subject to any reduction,
limitation, impairment, discharge or termination for any reason (other than
indefeasible payment in full of the Secured Obligations), including the
occurrence of any of the following, whether or not any Co-Maker shall have had
notice or knowledge of any of them: (i) any failure or omission to assert or
enforce, or agreement or election not to assert or enforce, or the stay or
enjoining, by order of court, by operation of law or otherwise, of the exercise
or enforcement of, any claim or demand or any right, power or remedy (whether
arising under the Transaction Documents, at law, in equity or otherwise) with
respect to the Secured Obligations or any agreement relating thereto, or with
respect to any guaranty of or security for the payment of the Secured
Obligations; (ii) any rescission, waiver, amendment or modification of, or any
consent to departure from, any of the terms or provisions (including provisions
relating to events of default) of this Agreement, any of the other Transaction
Documents or any agreement or instrument executed pursuant thereto, or of any
guaranty or security for the Secured Obligations, in each case whether or not in
accordance with the terms of the Agreement or such Transaction Document or any
agreement relating to such guaranty or security; (iii) the Secured Obligations,
or any agreement relating thereto, at any time being found to be illegal,
invalid or unenforceable in any respect; (iv) the application of payments
received from any source (other than payments received pursuant to the other
Transaction Documents or from the proceeds of any security for the Secured
Obligations, except to the extent such security also serves as collateral for
indebtedness other than the Secured Obligations) to the payment of indebtedness
other than the Secured Obligations, even though Obligee might have elected to
apply such payment to any part or all of the Secured Obligations; (v) Obligee's
consent to the change, reorganization or termination of the corporate structure
or existence of Company or any of its Subsidiaries and to any corresponding
restructuring of the Secured Obligations; (vi) any failure to perfect or
continue perfection of a security interest in any collateral which secures any
of the Secured Obligations; (vii) any defenses, setoffs or counterclaims which
any Co-Maker may allege or assert against Obligee in respect of the Secured
Obligations, including failure of consideration, breach of warranty, payment,
statute of frauds, statute of limitations, accord and satisfaction and usury;
and (viii) any other act or thing or omission, or delay to do any other act or
thing, which may or might in any manner or to any extent vary the risk of any
Co-Maker as an obligor in respect of the Secured Obligations.
11.5 WAIVERS BY CO-MAKER. Each Co-Maker hereby waives, for the benefit of
Obligee:
(a) any right to require Obligee, as a condition of payment or
performance by such Co-Maker, to (i) proceed against Company, any Subsidiary or
any guarantor of the Secured Obligations or any other Person, (ii) proceed
against or exhaust any security held from Company, any other Subsidiary or any
guarantor of the Secured Obligations or any other Person, (iii) proceed against
or have resort to any balance of any deposit account or credit on the books of
Obligee in favor of Company or any other Person, or (iv) pursue any other remedy
in the power of Obligee whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of any Co-Maker including any
defense based on or arising out of the lack of validity or the unenforceability
of the Secured Obligations or any agreement or instrument relating thereto or by
reason of the cessation of the liability of any Co-Maker from any cause other
than indefeasible payment in full of the Secured Obligations;
(c) any defense based upon any statute or rule of law which provides
that the obligation of a co-maker must be neither larger in amount nor in other
respects more burdensome than that of any other obligor;
(d) any defense based upon Obligee's errors or omissions in the
administration of the Secured Obligations, except behavior which amounts to bad
faith;
(e) (i) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of this Agreement or which
result or might result in any legal or equitable discharge of such Co-Maker's
obligations hereunder, (ii) the benefit of any statute of limitations affecting
such Co-Maker's liability hereunder or the enforcement hereof, (iii) any rights
to setoffs, recoupments and counterclaims, and (iv) promptness, diligence and
any requirement that Obligee protect, secure, perfect or insure any security
interest or lien or any property subject thereto;
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(f) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including acceptance
of this Agreement, notices of default under this Agreement or any agreement or
instrument related thereto, notices of any renewal, extension or modification of
the Secured Obligations or any agreement related thereto, notices of any
extension of credit to any other Co-Maker and notices of any of the matters
referred to in subsection 11.4 and any right to consent to any thereof; and
(g) any defenses or benefits that may be derived from or afforded by
law which limit the liability of or exonerate co-makers, guarantors or sureties,
or which may conflict with the terms of this Agreement.
11.6 PAYMENT BY SUBSIDIARIES; APPLICATION OF PAYMENTS. Subject to the
provisions of subsection 11.3(a), the Subsidiaries hereby jointly and severally
agree, in furtherance of the foregoing and not in limitation of any other right
which Obligee or any other Person may have at law or in equity against any
Subsidiary by virtue hereof, that upon the failure of Company to pay any of the
Secured Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a)), the
Subsidiaries will upon demand pay, or cause to be paid, in cash, to Obligee, an
amount equal to all Secured Obligations then due as aforesaid, including accrued
and unpaid interest on such Secured Obligations (including interest which, but
for the filing of a petition in bankruptcy with respect to Company, would have
accrued on such Secured Obligations, whether or not a claim is allowed against
Company for such interest in any such bankruptcy proceeding) and all other
Secured Obligations then owed to Obligee as aforesaid. All such payments shall
be applied promptly from time to time by Obligee in accordance with this
Agreement.
11.7 CO-MAKERS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Each Co-Maker
hereby waives any claim, right or remedy, direct or indirect, that such Co-Maker
now has or may hereafter have against any other Co-Maker or any of its assets in
connection with this Agreement or the performance by such Co-Maker of its
obligations hereunder, in each case whether such claim, right or remedy arises
in equity, under contract, by statute, under common law or otherwise and
including without limitation (a) any right of subrogation, reimbursement or
indemnification that such Co-Maker now has or may hereafter have against
Company, (b) any right to enforce, or to participate in, any claim, right or
remedy that Obligee now has or may hereafter have against any other Co-Maker,
and (c) any benefit of, and any right to participate in, any collateral or
security now or hereafter held by Obligee. In addition, until the Secured
Obligations shall have been indefeasibly paid in full, each Co-Maker shall
withhold exercise of any right of contribution such Co-Maker may have against
any guarantor of the Secured Obligations (including any such right of
contribution under any guaranty). Each Co-Maker further agrees that, to the
extent the waiver or agreement to withhold the exercise of its rights of
subrogation, reimbursement, indemnification and contribution as set forth herein
is found by a court of competent jurisdiction to be void or voidable for any
reason, any rights of subrogation, reimbursement or indemnification such
Co-Maker may have against any other Co-Maker or against any collateral or
security, and any rights of contribution such Co-Maker may have against any such
guarantor, shall be junior and subordinate to any rights Obligee may have
against Company and the other Co-Makers, to all right, title and interest
Obligee may have in any such collateral or security, and to any right Obligee
may have against such guarantor. If any amount shall be paid to any Co-Maker on
account of any such subrogation, reimbursement, indemnification or contribution
rights at any time when all Secured Obligations shall not have been paid in
full, such amount shall be held in trust for Obligee and shall forthwith be paid
over to Obligee to be credited and applied against the Secured Obligations,
whether matured or unmatured, in accordance with the terms hereof.
11.8 SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of any
Co-Maker now or hereafter held by any other Co-Maker is hereby subordinated in
right of payment to the obligations of such indebted Co-Maker in respect of the
Secured Obligations, and any such indebtedness of a Co-Maker to another Co-Maker
collected or received by such other Co-Maker after an Event of Default has
occurred and is continuing shall be held in trust for Obligee and shall
forthwith be paid over to Obligee to be credited and applied against the Secured
Obligations but without affecting, impairing or limiting in any manner the
liability of any Co-Maker under any other provision of this Agreement.
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11.9 EXPENSES. Co-Makers jointly and severally agree to pay, or cause to
be paid, on demand, and to save Obligee harmless against liability for, any and
all costs and expenses (including reasonable fees and disbursements of counsel
and allocated costs of internal counsel) incurred or expended by Obligee in
connection with the enforcement of, or preservation of any rights under, this
Agreement.
11.10 CONTINUING AGREEMENT. This Agreement shall remain in effect as
against each Co-Maker until all of the Secured Obligations shall have been
indefeasibly paid in full. Each Co-Maker hereby irrevocably waives any right to
revoke this Agreement as to future transactions giving rise to any Secured
Obligations.
11.11 AUTHORITY OF THE CO-MAKERS. It is not necessary for Obligee to
inquire into the capacity or powers of any Co-Maker or the officers, directors
or any agents acting or purporting to act on behalf of any of them.
11.12 FINANCIAL CONDITION OF THE COMPANY. Any Secured Obligations may be
incurred by Company or continued from time to time without notice to or
authorization from any Subsidiary regardless of the financial or other condition
of Company at the time of any such grant or continuation. The Obligee shall have
no obligation to disclose or discuss with any Subsidiary its assessment, or any
Subsidiary's assessment, of the financial condition of Company. Each Subsidiary
has adequate means to obtain information from Company on a continuing basis con-
cerning the financial condition of Company and its ability to perform its
obligations under the Transaction Documents, and each Subsidiary assumes the
responsibility for being and keeping informed of the financial condition of
Company and of all circumstances bearing upon the risk of nonpayment of the Se-
cured Obligations. Each Subsidiary hereby waives and relinquishes any duty on
the part of Obligee to disclose any matter, fact or thing relating to the
business, operations or conditions of Company now known or hereafter known by
lender.
11.13 RIGHTS CUMULATIVE. The rights, powers and remedies given to Obligee
by this Agreement are cumulative and shall be in addition to and independent of
all rights, powers and remedies given to Obligee by virtue of any statute or
rule of law or in any of the other Transaction Documents or any agreement
between any Subsidiary and Obligee or between Company and Obligee. Any
forbearance or failure to exercise, and any delay by Obligee in exercising, any
right, power or remedy hereunder shall not impair any such right, power or
remedy or be construed to be a waiver thereof, nor shall it preclude the further
exercise of any such right, power or remedy.
11.14 BANKRUPTCY; POST-PETITION INTEREST; REINSTATEMENT OF AGREEMENT.
(a) So long as any Secured Obligations remain outstanding, no
Co-Maker shall, without the prior written consent of Obligee in accordance with
the Agreement, commence or join with any other Person in commencing any
bankruptcy, reorganization or insolvency proceedings of or against any other
Co-Maker. The obligations of the Co-Makers under this Agreement shall not be
reduced, limited, impaired, discharged, deferred, suspended or terminated by any
proceeding, voluntary or involuntary, involving the bankruptcy, insolvency,
receivership, reorganization, liquidation or arrangement of any other or by any
defense which any other Co-Maker may have by reason of the order, decree or
decision of any court or administrative body resulting from any such proceeding.
(b) Each Co-Maker acknowledges and agrees that any interest on any
portion of the Secured Obligations which accrues after the commencement of any
proceeding referred to in clause (a) above (or, if interest on any portion of
the Secured Obligations ceases to accrue by operation of law by reason of the
commencement of said proceeding, such interest as would have accrued on such
portion of the Secured Obligations if said proceedings had not been commenced)
shall be included in the Secured Obligations because it is the intention of
Co-Makers and Obligee that the Secured Obligations of each Co-Maker pursuant to
this Agreement should be determined without regard to any rule of law or order
which may relieve any other Co-Maker of any portion of such Secured Obligations.
The Co-Makers will permit any trustee in bankruptcy, receiver, debtor in
possession, assignee for the benefit of creditors or similar person to pay
Obligee, or allow the claim of Obligee in respect of, any such interest accruing
after the date on which such proceeding is commenced.
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(c) If all or any portion of the Secured Obligations is paid by
any Co-Maker, the obligations of the other Co-Makers hereunder shall continue
and remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from Obligee as a preference, fraudulent transfer or
otherwise, and any such payments which are so rescinded or recovered shall
constitute Secured Obligations for all purposes under this Agreement.
11.15 SETOFF. In addition to any other rights Obligee may have under law
or in equity, if any amount shall at any time be due and owing by any Co-Maker
to Obligee under this Agreement, Obligee is authorized at any time or from time
to time, without notice (any such notice being hereby expressly waived), to set
off and to appropriate and to apply any and all deposits (general or special,
including but not limited to indebtedness evidenced by certificates of deposit,
whether matured or unmatured) and any other indebtedness of Obligee owing to
such Co-Maker and any other property of such Co-Maker held by Obligee to or for
the credit or the account of such Co-Maker against and on account of the Secured
Obligations and liabilities of such Co-Maker to Obligee under this Agreement;
PROVIDED, HOWEVER, that the foregoing shall not apply to Excluded Property and
the restricted Bank Accounts identified in Schedule 7.17 of this Agreement.
SECTION 12. MISCELLANEOUS
12.1 ACKNOWLEDGMENT REGARDING CERTAIN ENVIRONMENTAL OBLIGATIONS. Each
Subsidiary hereby acknowledges and agrees that the Secured Obligations includes
Company's obligation under this Agreement to comply with the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 and all other
Environmental Laws and to indemnify and hold harmless Obligee and Collateral
Agent from and against any and all liability arising out of, or in connection
with the presence of Hazardous Materials at any property of Company or any
Subsidiary given as security for the Secured Obligations, and each Subsidiary
hereby expressly undertakes as Co-Maker the payment, performance and discharge
of such obligations and liabilities of Company.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
ATLANTIC GULF COMMUNITIES CORPORATION, a Delaware corporation
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Executive Vice President
and Chief Financial Officer
AG TITLE CORPORATION
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
AGC CL-LIMITED PARTNER, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
AGC HOMES, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
AGC SANCTUARY CORPORATION
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
AG SANCTUARY OF ORLANDO, INC.
By:
------------------------------------------------
Name: John H. Fischer
Title: Vice President
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ATLANTIC GULF COMMUNITIES
MANAGEMENT CORPORATION
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
ATLANTIC GULF COMMERCIAL REALTY,
INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
ATLANTIC GULF COMMUNITIES
SERVICE CORPORATION
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
ATLANTIC GULF OF TAMPA, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
ATLANTIC GULF REALTY, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
ATLANTIC GULF UTILITIES, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
CUMBERLAND COVE, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
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ENVIRONMENTAL QUALITY LABORATORY
INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
EQL ENVIRONMENTAL SERVICES, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
FIVE STAR HOMES, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
GENERAL DEVELOPMENT RESORTS, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
GENERAL DEVELOPMENT UTILITIES,
INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
HUNTER TRACE DEVELOPMENT
CORPORATION
By:
------------------------------------------------
Name: John H. Fischer
Title: Vice President
LAKESIDE DEVELOPMENT OF ORLANDO,
INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
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OCEAN GROVE, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
PANTHER CREEK CORP.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
REGENCY ISLAND DUNES, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
SABAL TRACE DEVELOPMENT
CORPORATION
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
SUNSET LAKES DEVELOPMENT
CORPORATION
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: Vice President
TOWN & COUNTRY II, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
WEST BAY DEVELOPMENT CORPORATION
(f/k/a Estero Pointe
Development Corporation)
By:
------------------------------------------------
Name: John H. Fischer
Title: Vice President
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<PAGE>
WINDSOR PALMS CORPORATION
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President
AGC-SP, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President and Chief Executive Officer
AGC-SP1, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President and Chief Executive Officer
AGC-SP2, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President and Chief Executive Officer
AGC-SP3, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President and Chief Executive Officer
AGC-SP4, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President and Chief Executive Officer
AGC-SP5, INC.
By:
------------------------------------------------
Name: Thomas W. Jeffrey
Title: President and Chief Executive Officer
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AP-AGC, LLC, as Obligee
By:
------------------------------------------------
Name: Ricardo Koenigsberger
Title: Vice President of Kronus
Property, Inc., its Manager
THE BANK OF NEW YORK,
as Collateral Agent with
respect to SP Sub Collateral
By:
------------------------------------------------
Name:
Title:
FOOTHILL CAPITAL CORPORATION,
as Collateral Agent with respect
to Collateral other than SP Sub
Collateral
By:
------------------------------------------------
Name:
Title:
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