SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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 jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2601 South Bayshore Drive
Miami, Florida 33133-5461
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code (305) 859-4000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE (OVER THE COUNTER BULLETIN BOARD)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
The exhibit index for this Form 10-K is located at page 41.
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]
As of March 26, 1999, the aggregate market value of the registrant's
Common Stock held by non-affiliates of the registrant was approximately $21.5
million.
As of March 26, 1999, there were 12,299,418 shares of the registrant's
Common Stock outstanding, including 3,000 outstanding shares held in a disputed
claims reserve.
Documents incorporated by reference:
Portions of the following documents are incorporated herein by
reference:
Part III - The registrant's definitive Proxy Statement for its 1999
Annual Meeting of Stockholders, or an Amended Annual Report on Form 10-K/A, to
be filed not later than 120 days after the end of the Registrant's fiscal year.
<PAGE>
SPECIAL NOTE ABOUT FORWARD LOOKING STATEMENTS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED IN THIS ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, CERTAIN MATTERS DISCUSSED
HEREIN INCLUDING, WITHOUT LIMITATION, PART I, ITEM 1. "THE BUSINESS," PART I,
ITEM 3. "LEGAL PROCEEDINGS" AND PART II, ITEM 7. "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," 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 PRIMARY MARKETS IN FLORIDA AND
OTHER AREAS IN THE SOUTHEASTERN UNITED STATES AND LUXURY/RESORT 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
MARKETS IN THE SOUTHEASTERN UNITED STATES; 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; THE SUCCESS OR LACK THEREOF OF THE COMPANY'S CURRENT
DEVELOPMENT PROJECTS; AND THE SUCCESS OR LACK THEREOF OF THE COMPANY'S STRATEGIC
ALTERNATIVE INITIATIVE.
<PAGE>
UNLESS THE CONTEXT CLEARLY INDICATES OTHERWISE, ALL REFERENCES HEREIN TO (1)
"ATLANTIC GULF" REFER SOLELY TO ATLANTIC GULF COMMUNITIES CORPORATION AND (2)
THE "COMPANY" INCLUDE ATLANTIC GULF AND ITS DIRECT AND INDIRECT WHOLLY OWNED
SUBSIDIARIES.
PART I
ITEM 1. BUSINESS
GENERAL
The Company is a Florida-based, planned community development and asset
management company. The Company's CORE BUSINESS consists of:
- PRIMARY MARKET OPERATIONS, consisting of the acquisition,
development and sale of real estate projects ("PRIMARY
PROJECTS") containing residential homesite components such as
single-family lots, multi-family lots/units and residential
tract sales ("HOMESITES") and/or non-residential components
such as commercial, industrial, office and institutional
("COMMERCIAL DEVELOPMENT ") in primary markets in Florida and
other selected primary markets in the southeastern United
States ("PRIMARY MARKETS").
- LUXURY/RESORT OPERATIONS, consisting of the acquisition,
development and sale of real estate projects ("LUXURY/RESORT
PROJECTS") in which the Company engages in one or more of the
following activities: Homesite development, construction of
VERTICAL RESIDENTIAL UNITS (i.e., single family housing,
condominiums and timeshare units), and construction and
operation of equity golf clubs and other amenities
("AMENITIES"). The Company's existing Luxury/Resort Projects
are located in selected markets in Florida and Colorado
("LUXURY/RESORT MARKETS").
The Company's (1) Primary Markets and Luxury/Resort Markets
are referred to as its "CORE MARKETS" and (2) Primary Projects
and Luxury/Resort Projects are referred to as its "CORE
PROJECTS."
- OTHER OPERATIONS, consisting principally of:
-- ENVIRONMENTAL SERVICES, consisting of the provision
of environmental services to third parties on a
contract basis; and
-- RECEIVABLES PORTFOLIO MANAGEMENT, consisting of
portfolio management of MORTGAGE RECEIVABLES (as
defined below) and CONTRACT RECEIVABLES (as defined
below) resulting principally from the sale or other
disposition of PREDECESSOR ASSETS (as defined below).
As of December 31, 1998, the Company owned outright, or had ownership
interests in, 12 Core Projects, consisting of eight Primary Projects and four
Luxury/Resort Projects. The Company also has an
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active business development pipeline including, as of December 31, 1998, four
additional planned Primary Projects under control which, once acquired, entitled
and approved, will yield significant additional inventory for development and
sale. The 12 existing Core Projects and four planned Primary Projects are
referred to as the Company's "CORE DEVELOPMENT PORTFOLIO."
The Company also is engaged in the orderly disposition of scattered
PREDECESSOR HOMESITES (as defined below) and PREDECESSOR TRACTS (as defined
below) located in secondary markets in Florida and Tennessee (collectively,
"PREDECESSOR ASSETS"). As discussed below, the continuing disposition of
Predecessor Assets is a run-off business and not part of the Company's Core
Business.
General Development Corporation, Atlantic Gulf's predecessor (the
"PREDECESSOR COMPANY"), was formed in 1954 as a Florida-based community
development and land sales company. From 1955 through 1990, the Predecessor
Company acquired and developed nine large-scale communities in Florida and one
in Tennessee, comprising nearly 290,000 acres. During that period, the
Predecessor Company developed 357,000 homesites, deeded 283,000 developed
homesites to customers, and constructed and sold approximately 35,000 homes. The
Predecessor Company filed for reorganization under the federal bankruptcy laws
in 1990. In March 1992, when the Company emerged from bankruptcy, (1) its assets
consisted primarily of 92,000 acres of undeveloped tract land ("PREDECESSOR
TRACTS"), 27,000 scattered homesites ("PREDECESSOR HOMESITES") and certain water
and sewer utility companies ("PREDECESSOR UTILITIES") and (2) its liabilities
included $302 million of secured and unsecured corporate debt not associated
with development operations (the "REORGANIZATION DEBT"), all maturing on or
before December 31, 1998. For additional information concerning the bankruptcy
proceedings, see Atlantic Gulf's 1992 Annual Report on Form 10-K ("1992 10-K").
The Company's strategic plan, which it formulated in 1992 and 1993 and
has been refining and implementing since then (its "STRATEGIC PLAN"), consists
of three components:
- liquidating its Predecessor Assets in an orderly fashion,
- using the proceeds therefrom to service and retire its
Reorganization Debt, and
- at the same time, building its Core Business.
It was clear from the outset that acquiring new Core Projects would be
difficult because of the severe capital limitations imposed on the Company as a
result of the short term demands of its Reorganization Debt. Nevertheless,
management believed that the Company could successfully leverage off of certain
core competencies of its Predecessor Company, principally its expertise in
planning and permitting large residential communities in an increasingly
difficult regulatory environment. Management believes that implementation of the
Company's Strategic Plan provides the most appropriate utilization of the
Company's financial resources with respect to its Core Business and, at the same
time, the most prudent management of the orderly disposition of its remaining
Predecessor Assets.
Since 1992, the Company has:
- disposed of $256 million of Predecessor Tracts and Predecessor
Homesites and all of its Predecessor Utilities and
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- retired all $302 million of its Reorganization Debt.
Between 1994 and 1998, the Company:
- reduced current overhead expenses and related interest expense
by more than 50%,
- acquired, directly or through joint ventures, 19 new Core
Projects, successfully entering 10 new Core Markets in five
states,
- increased the percentage of real estate related revenues
attributable to Core Business operations from ten percent
(10%) to sixty-six percent (66%) and
- expanded its core competencies beyond Primary Market Homesite
development to include Primary Market Commercial Development
and Luxury/Resort Market development and operations.
In 1998, the Company began to realize financial returns on several of
its recently acquired Core Projects. That trend should continue in 1999 as
additional new Core Projects come on line. The Company believes that it will
fully implement its Strategic Plan in 1999, assuming availability of appropriate
capital resources during 1999, which cannot be assured.
OPERATING AND FINANCIAL STRATEGIES
GENERAL. The Company intends to continue its focus on Primary Market
Operations. Primary Projects are principally wholesale operations in which the
Company supplies developed or developable, permitted Homesites to third party
homebuilders. To the extent that the homebuilding market continues to be robust
and quality homesites in master-planned, Primary Market subdivisions remain in
short supply, the Company believes that its Primary Market strategy is sound.
The Company intends to increase its focus on Luxury/Resort Operations.
In this segment, the Company develops waterfront or highly amenitized
communities for high-end retirement or pre-retirement homebuyers. The Company's
Luxury/Resort Market strategy is more retail focused -- selling Homesites and
Vertical Residential Units directly to the individual consumer and operating
resort-type Amenities. Management believes that the country's demographic trends
and recent real estate activity in the current Luxury/Resort Markets strongly
support the Company's Luxury/Resort Operations strategy.
The Company's overall operating strategy is to (1) develop its 12
existing Core Projects and (2) complete the acquisitions of, and then develop,
the other four planned Primary Projects that it currently has under control.
The Company's financial strategy is to grow its recurring EBITDA
(earnings before interest, taxes, depreciation and amortization) by the end of
fiscal year 2000 to a level sufficient to support a long-term bond issue to
retire any remaining corporate debt and to redeem any outstanding Preferred
Stock. See PART II, ITEM 5. MARKET FOR ATLANTIC GULF'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS below for a description of Atlantic Gulf's Series A
Preferred Stock and Series B Preferred Stock (the "PREFERRED STOCK"). The
three-year, no call period on the majority of the Preferred Stock expires in the
second half of fiscal year 2000. The Company's goal is to be able to redeem
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its Preferred Stock, or alternatively, to force a conversion of the Preferred
Stock into Common Stock in late fiscal year 2000. See PART II, ITEM 5. MARKET
FOR ATLANTIC GULF'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS below for a
description of Atlantic Gulf's Common Stock. The Company believes that it's Core
Development Portfolio should, subject to fluctuations in the national and local
economies and in the timing of any individual project, be generating sufficient
EBITDA by the end of fiscal 2000 to execute this financial strategy.
DEVELOPMENT OPPORTUNITIES IN CORE DEVELOPMENT PORTFOLIO. The Company's
Core Development Portfolio, once fully entitled and approved, should yield (1)
an estimated 410 acres of new Commercial Development (approximately 180 acres of
which is already entitled and approved), (2) an estimated 17,923 Homesites and
(3) an estimated 1,332 Vertical Residential Units. The chart below summarizes
the estimated development potential of the Company's Core Development Portfolio.
POTENTIAL DEVELOPMENT SUPPLY FROM CORE DEVELOPMENT PORTFOLIO
<TABLE>
<CAPTION>
Homesites Vertical Residential Units
----------------------- ---------------------------------
Single Multi- Single Multi- Timeshare Commercial
Family (1) Family (1) Family(1) Family (1) Cabins (2) Development (3)
----------------------- --------------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Primary Projects(4)....... 12,984 4,163 - - - 398
Luxury/Resort Projects(4).. 776 - 81 1,176 75 12
----------------------- --------------------------------- ---------------
Total...................... 13,760 4,163 81 1,176 75 410
======================= ================================= ===============
Entitled and Approved(5)... 6,366 1,297 81 1,176 - 180
Entitlements/
Approvals in Process....... 7,394 2,866 - 50 75 230
</TABLE>
(1) Number of units.
(2) Currently planned as 300 quarter shares.
(3) Number of acres.
(4) Some of these potential units are not yet owned by the Company or a
joint venture ("JV") in which the Company is a joint venturer but are
pending acquisitions or subject to options or other similar
arrangements. SEE PART I, ITEM 1. BUSINESS OPERATING AND FINANCIAL
STRATEGIES -- ADDITIONS TO CORE DEVELOPMENT PORTFOLIO IN 1998.
(5) "Entitled" means having the necessary discretionary local, state, and
federal government approvals and permits to proceed with development.
ADDITIONS TO CORE DEVELOPMENT PORTFOLIO IN 1998. The Company believes
that its diverse development capabilities, including its planning and permitting
expertise, provide it with a competitive advantage in identifying and acquiring
additional development opportunities. In 1998, the Company invested
approximately $27.3 million in the acquisition of new Core Projects, and also
identified several new development opportunities which are now under the
Company's control, directly or through joint
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ventures. Following is a summary of the significant Core Projects acquired or
put under the Company's control in 1998:
- ASPEN SPRINGS RANCH, acquired by the Company in September
1998, is a 5,906-acre Luxury/Resort Project located in the
Roaring Fork Valley of Colorado, five miles south of Glenwood
Springs, approximately 30 miles down valley from Aspen, 34
miles west of the Eagle/Vail Airport and 40 minutes by car to
nine major ski resorts. Aspen Springs Ranch is currently
planned for 497 Homesites, ranging in size from two acres to
more than 35 acres, and 75 2,500 square foot cabins that the
Company intends to market as quarter share units. The Company
also intends to construct and operate up to two 18-hole equity
golf courses and an equestrian facility at Aspen Springs
Ranch. This project is currently in the local entitlement
process and the Company hopes to have entitlements complete
and to begin Homesite sales in 1999.
- DAVE'S CREEK, entitled and acquired by the Company in April
1998, was a 1,372-acre Primary Market Project located north of
Atlanta in Forsythe County, Georgia. Although Dave's Creek was
the Company's first project in the Atlanta market, by virtue
of the Company's planning and permitting expertise the project
was entitled for 1,087 Homesites, 361 multi-family units, 1.37
million square feet of commercial usage, and 1.88 million
square feet of office/industrial usage -- valuable density for
that submarket. Before it committed any money for
infrastructure improvements, the Company sold the Dave's Creek
Project to another national developer already operating in the
Atlanta market and recorded a $4.1 million profit in 1998.
- ORLANDO NAVAL TRAINING CENTER is a 1,093-acre former military
base located just north of downtown in the City of Orlando,
Florida, adjacent to the City of Winter Park. Due to the
site's urban infill location, the announcement that the Navy
and the City of Orlando would make the property available to
private interests for redevelopment attracted keen interest
from Florida's finest community development companies.
Following an intense six-month competition, the Company and
its joint venture partners were selected by the local
government to redevelop the property. The joint venture's
redevelopment plan calls for over 3,040 residential units,
350,000 square feet of retail and commercial space, 1.5
million square feet of office space, and extensive public
parks. The joint venture plans to close on the acquisition of
the property in the second quarter of 1999.
- GRAND OAKS is a proposed 503-acre community located within the
City of Royal Palm Beach in Palm Beach County, Florida. The
community is planned for a total of 1,222 residential units,
consisting of 733 single-family Homesites and 489 attached
townhouse and villa Homesites. The Grand Oaks master plan also
anticipates an 18-hole semi-private golf course, six tennis
courts and a community clubhouse with a pool. The Company
controls Grand Oaks through a purchase contract on which the
Company intends to close in the second quarter of 1999.
- HARBOR BAY is a proposed water-oriented community comprised of
754 acres located on Tampa Bay, south of Tampa, Florida, in
Hillsborough County. The Company controls Harbor Bay by virtue
of a purchase contract on which the Company intends to close,
subject to obtaining certain entitlements, in late 1999.
Harbor Bay is part of a larger Development
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of Regional Impact ("DRI") that commenced in the 1960's. Prior
owners have completed certain land development work, including
the creation of a canal system with access to Tampa Bay. The
Company's proposed land plan for Harbor Bay anticipates 1,726
Homesites (including approximately 600 canal or lake front
lots with direct or indirect access to Tampa Bay) and 44 acres
of Commercial Development.
- RAYLAND consists of two noncontiguous parcels, totalling
approximately 3,300 acres, located south of Jacksonville,
Florida, in northern St. John's County, which the Company
controls by virtue of two separate purchase contracts. The
Company intends to acquire these parcels in late 1999, subject
to completing certain entitlement work, including two separate
pending DRI's. The eastern parcel, known as Eastbourne, is
approximately 2,000 gross acres proposed for 2,200 total
Homesites, 57 acres of Commercial Development and an 18-hole
golf course. The western parcel, Westbourne, is approximately
1,300 gross acres proposed for 1,700 Homesites and at least
nine additional holes of golf. Westbourne is directly adjacent
to the 4,200-acre Julington Creek Plantation project, which
the Company developed from 1992 through 1996, when the
remaining land was sold to a third party developer.
OTHER SIGNIFICANT BUSINESS DEVELOPMENTS IN 1998.
- In March 1998, Atlantic Gulf sold 173,525 shares of Series A
Preferred Stock and warrants to purchase an additional 347,050
shares of Common Stock to Apollo for an aggregate purchase
price of $1,735,248 (thereby completing the sale to Apollo,
which began in 1997, of a total of 2.5 million shares of
Series A Preferred Stock and warrants to purchase an up to 5
million shares of Common Stock).
- Atlantic Gulf reduced the outstanding principal balance under
its Working Capital Facility from $20 million at the beginning
of the year to $18.1 million as of December 31, 1998.
- On or about June 30, 1998, Atlantic Gulf repaid the entire
outstanding balances under its (1) Term Loan Facility ($13.333
million outstanding at December 31, 1997) and (2) Reducing
Revolving Loan Facility ($7.653 million outstanding at
December 31, 1997).
- On February 1, 1999 (dated as of December 31, 1998),
Atlantic Gulf closed on its $39.5 million NEW REVOLVING LOAN
FACILITY.
- On February 1, 1999 (dated as of December 31, 1998),
Atlantic Gulf closed on its $26.5 million NEW TERM LOAN
FACILITY.
- On February 1, 1999 (dated as of December 31, 1998), AGC-SP,
Inc., terminated Atlantic Gulf's obligation to repay the $11
million SP SUB LOAN.
- On December 31, 1998, Atlantic Gulf recovered from the Trustee
for its Unsecured 12% Notes due December 31, 1996 (the "12%
NOTES"), approximately $7.9 million of unclaimed funds.
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- On February 2, 1999, Atlantic Gulf repaid the entire
outstanding balance ($13.7 million) under its Working Capital
Facility and the entire outstanding balance ($39.5 million)
under its Unsecured 13% Cash Flow Notes due December 31, 1998
(the "13% NOTES") with funds drawn under its New Revolving
Loan Facility and New Term Loan Facility and other available
cash.
See PART II, ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES below for
a detailed description of Atlantic Gulf's New Revolving Loan Facility and New
Term Loan Facility.
CORE BUSINESS
GENERAL. The Company's Core Business consists of three principal
business lines:
- Development of Primary Projects;
- Development of Luxury/Resort Projects; and
- Other Operations, principally including Environmental Services
and Receivables Portfolio Management.
PRIMARY PROJECTS. During 1998, the Company was engaged in the
acquisition, development and sale of Primary Projects in Florida, North
Carolina, Georgia and Texas. The Company defines a Primary Market as a
geographic market in which more than 5,000 single family home construction
permits are issued annually. There is substantial focus in a Primary Market on
factors such as industrial or employment growth in the area, the current and
projected supply of finished homesites, the quality of schools, transportation
infrastructure, etc.
The Company's activities in connection with the development of Primary
Markets consist of four principal functions:
- BUSINESS DEVELOPMENT, consisting of (1) identifying new
Primary Markets for the Company's consideration, (2)
evaluating specific real estate opportunities within these
markets (i.e., producing and reviewing financial and market
feasibility studies of potential projects and conducting due
diligence with respect to planning, zoning and permitting
requirements) to determine which potential projects meet the
Company's investment criteria; and (3) formulating acquisition
and financing strategies for generating superior returns from
the best projects within these Primary Markets.
- PLANNING, consisting of (1) master land use planning, (2)
zoning and land use entitlements, (3) environmental
permitting, (4) mitigation design and (5) obtaining all other
regulatory approvals necessary to develop a specified
property. Once the Company's planning department has finished
its entitlement work with respect to a particular parcel of
property, it has frequently added enough value to the property
that the property can be sold at a profit without further
infrastructure improvements.
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- COMMUNITY DEVELOPMENT, consisting of construction of roads,
utilities, amenities and other infrastructure. In large
master-planned subdivisions, the Company usually conducts
construction activities in phases, so that it does not have an
oversupply of developed inventory awaiting sale to third party
builders.
- MARKETING AND SALES, consisting principally of selling
Homesites in bulk to homebuilders and permitted and improved
Commercial Development projects to commercial users or other
investor/developers. While the Company frequently retains some
master marketing responsibility in Primary Projects, the
Company's Primary Project sales efforts are typically
wholesale in nature.
WHOLLY-OWNED PRIMARY PROJECTS. The following table shows (in
units/acres and by net book value) the Company's wholly-owned Primary Projects:
<TABLE>
<CAPTION>
UNITS/ACRES NET BOOK VALUE (3)
------------------------------------ -------------------------------
AS OF DECEMBER 31, AS OF DECEMBER 31,
------------------------------------ -------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Homesites .............. 3,213(1) 3,756(1) 2,237(1) $ 27,001 $ 30,224 $ 20,407
Commercial Development.. 26(2) 26(2) 16(2) 270 623 484
-------- -------- --------
Total ............ $ 27,271 $ 30,847 $ 20,891
======== ======== ========
</TABLE>
(1) Number of remaining planned units.
(2) Number of remaining planned acres.
(3) Net book value means total remaining capitalized costs less project
debt as of the date indicated.
JOINT VENTURE PRIMARY PROJECTS. The following table shows (by
investment account balance and the Company's share of income (loss)) the Primary
Projects in which the Company holds its equity interest through joint ventures:
<TABLE>
<CAPTION>
INVESTMENT ACCOUNT BALANCE (1) COMPANY'S SHARE OF INCOME (LOSS)
--------------------------- --------------------------------
AS OF DECEMBER 31, AS OF DECEMBER 31,
--------------------------- --------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Homesites ............. $ 9,998 $12,131 $ 9,161 $ 802 $ (235) $ (75)
Commercial Development.. 367 291 307 240 -- --
------- ------- ------- ------- ------- -------
Total ............ $10,365 $12,422 $ 9,468 $ 1,042 $ (235)(2) $ (75)
======= ======= ======= ======= ======= =======
</TABLE>
(1) Includes all unamortized costs capitalized to the joint venture
interests, as required by GAAP, including corporate interest.
(2) This amount is reduced by capitalized interest of $746,000.
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PRIMARY PROJECT COMPONENTS, BY PROJECT. The following tables
summarize the scope and principal components of the Company's Primary Projects,
by Project:
<TABLE>
<CAPTION>
Scope of Project(10)
------------------------------
Ownership/ Total Total
Profit Gross Total Gross
Interest Residential Lots/ Commercial
12/31/98 Acres Units Acres
-----------------------------------------
<S> <C> <C> <C> <C>
Owned Properties
- - ----------------
Lakeside Estates (1) .................. 100% 748 1,379 -
Saxon Woods (2) ....................... 100% 127 408 -
West Meadows (3) ...................... 100% 1,133 1,316 76
The Trails of West Frisco (4) ......... 100% 740 1,641 -
------------------------------
Subtotal Owned Properties ............. 2,748 4,744 76
------------------------------
Joint Venture Properties
- - ------------------------
Sunset Lakes (5) ...................... 65% 1,970 1,767 15
Falcon Trace (6) ...................... 65% 390 871 -
Cary Glen (7) ......................... 40% 470 1,134 -
Country Lakes (8) ..................... 20% 1,363 4,089 388
------------------------------
Subtotal Joint Venture Properties ..... 4,193 7,861 403
------------------------------
Controlled Properties (9)
- - -------------------------
Grand Oaks ............................ 100% 503 1,222 -
Rayland ............................... 100% 3,243 3,900 57
Orlando Naval Training Center ......... 17% 964 3,040 129
Harbor Bay ............................ 100% 710 1,726 44
------------------------------
Subtotal Controlled Properties ........ 5,420 9,888 230
------------------------------
Total All Properties .................. 12,361 22,493 709
==============================
</TABLE>
(1) This Project is located in the Orlando, Florida Primary Market area.
The Company acquired the Project in 1994 and 1995 for approximately
$10.2 million.
(2) This Project is located in the Orlando, Florida Primary Market area.
The Company acquired the Project in August 1997 for approximately $2.9
million.
(3) This Project is located in the Tampa, Florida Primary Market area. The
Company acquired the Project in February 1995 for approximately $5
million.
(4) This Project is located in Frisco, Texas, just north of Dallas. The
Company acquired the Project in July 1997, for approximately $7.5
million.
(5) This Project is located in Miramar, Florida, in southwest Broward
County. In addition to the Company's profit participation, the Company
is also entitled to receive a development fee equal to 4% of hard
costs. The joint venture was formed in 1995.
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(6) This Project is located in the Orlando, Florida Primary Market area.
The Project was acquired in 1996 for approximately $5.3 million.
(7) This Project is located in North Carolina, near Raleigh-Durham. The
Project was acquired in 1996 for approximately $8.0 million. See PART
I, ITEM 3. LEGAL PROCEEDINGS - OTHER LITIGATION AND PENDING DISPUTES --
CARY GLEN PROJECT.
(8) This Project is located in Miramar, Florida. In addition to its
partnership interest, the Company is entitled to receive a management
fee equal to 3.5% of gross proceeds. The Project was acquired in 1995
for $39.5 million. In March 1999, the Company sold its partnership
interest in the Country Lakes JV and received a prepayment of its
management fee in exchange for which it will continue to manage the
Project.
(9) Represents properties which the Company does not currently own but
which it has entered into contractual relationships to acquire, such as
letters of intent, purchase agreements with customary conditions
precedent, option agreements, joint venture arrangements and other
similar arrangements. There can be no assurance the Company will
actually acquire these properties. For information concerning these
Projects, see PART I, ITEM 1. BUSINESS - OPERATING AND FINANCIAL
STRATEGIES -- ADDITIONS TO CORE DEVELOPMENT PORTFOLIO IN 1998.
(10) As currently planned.
<TABLE>
<CAPTION>
==============================================================
LOTS/UNITS/ACRES AT DECEMBER 31, 1998 (1)
--------------------------------------------------------------
Single Family Multi-family Commercial
--------------------------------------------------------------
Total Total Total Total Total Total
Lots Entitled Units Entitled Acres Entitled
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Owned Properties
- - ----------------
Lakeside Estates .................. 528 528 - - - -
Saxon Woods ....................... 383 383 - - - -
West Meadows ...................... 759 759 - - 26 26
The Trails of West Frisco ......... 1,543 1,543 - - - -
--------------------------------------------------------------
Subtotal Owned Properties ......... 3,213 3,213 - - 26 26
--------------------------------------------------------------
Joint Venture Properties
- - ------------------------
Sunset Lakes ...................... 1,242 1,242 - - - -
Falcon Trace ...................... 640 640 - - - -
Cary Glen ......................... 867 867 257 257 - -
Country Lakes ..................... - - 1,040 1,040 142 142
--------------------------------------------------------------
Subtotal Joint Venture Properties . 2,749 2,749 1,297 1,297 142 142
--------------------------------------------------------------
Controlled Properties
- - ---------------------
Grand Oaks ........................ 1,222 - - - - -
Rayland ........................... 3,550 - 350 - 57 -
Orlando Naval Training Center ..... 911 - 2,129 - 129 -
Harbor Bay ........................ 1,339 - 387 - 44 -
--------------------------------------------------------------
Subtotal Controlled Properties .... 7,022 - 2,866 - 230 -
--------------------------------------------------------------
Total All Properties .............. 12,984 5,962 4,163 1,297 398 168
==============================================================
</TABLE>
10
(1) Varying from project to project, unsold units are developed, under
development or to be developed in the future.
<PAGE>
PRIMARY PROJECT SALES ACTIVITIES, BY PROJECT. The following
tables summarize the sales activities during 1998 and 1997 at the Company's
Primary Projects, by Project:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
HOMESITES
-------------------------------------------- --------------------------------------------
1997 Activity 1998 Activity
-------------------------------------------- --------------------------------------------
Total Total Revisions Total
Lots/units Unit Lot Lots/units & Unit Lot Lots/units
1/1/97 Acq. Sales Sales 12/31/97 Acq. Transfers(1) Sales Sales 12/31/98
-------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Owned Properties
- - ----------------
Lakeside Estates .................. 938 - - (267) 671 - (2) - (141) 528
Saxon Woods ....................... - 408 - - 408 - - - (25) 383
West Meadows ...................... 1,178 - - (142) 1,036 - 74 - (351) 759
The Trails of West Frisco ......... - 1,641 - - 1,641 - - - (98) 1,543
Windsor Palms ..................... 102 - - (102) - - - - - -
Sanctuary ......................... 19 - - (19) - - - - - -
-------------------------------------------- --------------------------------------------
Subtotal Owned Properties ......... 2,237 2,049 - (530) 3,756 - 72 - (615) 3,213
-------------------------------------------- --------------------------------------------
Joint Venture Properties
- - ------------------------
Sunset Lakes ...................... 1,767 - - - 1,767 - (255) (270) - 1,242
Falcon Trace ...................... 871 - - (22) 849 - - - (209) 640
Cary Glen ......................... 1,134 - - - 1,134 - - - (10) 1,124
Country Lakes ..................... 1,856 - (740) - 1,116 - 1,858 (1,934) - 1,040
-------------------------------------------- --------------------------------------------
Subtotal Joint Venture Properties . 5,628 - (740) (22) 4,866 - 1,603 (2,204) (219) 4,046
-------------------------------------------- --------------------------------------------
Total All Properties .............. 7,865 2,049 (740) (552) 8,622 1,675 (2,204) (834) 7,259
============================================ ============================================
</TABLE>
(1) Includes revisions to estimates of potential development or building
size, or transfers of property between Homesites and other categories
of property.
11
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
COMMERCIAL DEVELOPMENT
---------------------------------------- ------------------------------------------
1997 ACTIVITY 1998 ACTIVITY
---------------------------------------- ------------------------------------------
TOTAL TOTAL REVISIONS & TOTAL
ACRES ACRES TRANSFERS ACRES
1/1/97 ACQ. SALES 12/31/97 ACQ. SALES 12/31/98
---------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OWNED PROPERTIES
West Meadows 16 26 (16) 26 - - - 26
Dave's Creek - - - - 1,372 - (1,372) -
---------------------------------------- ------------------------------------------
SUBTOTAL OWNED PROPERTIES 16 26 (16) 26 1,372 - (1,372) 26
---------------------------------------- ------------------------------------------
JOINT VENTURE PROPERTIES
Sunset Lakes 10 - - 10 - 5 (15) -
Country Lakes 268 - - 268 - (126) - 142
---------------------------------------- ------------------------------------------
SUBTOTAL JOINT VENTURE PROPERTIES 278 - - 278 - (121) (15) 142
---------------------------------------- ------------------------------------------
TOTAL ALL PROPERTIES 294 26 (16) 304 1,372 (121) (1,387) 168
======================================== ==========================================
</TABLE>
LUXURY/RESORT PROJECTS. The Company also is engaged in the acquisition,
development and sale of master planned Luxury/Resort Projects in Luxury/Resort
Markets in Florida and Colorado. A Luxury/Resort Market is typically not a
Primary Market in terms of the volume of new single family home construction
permits, but relative demand is usually strong and the average retail price of
new construction is usually much higher. Also, there is much less focus in a
Luxury/Resort Market on industrial or employment growth in the area or the
quality of schools, and more focus on natural and/or man-made Amenities. Bearing
these differences in mind, the early functions of the Company's activities in
connection with the Development of Luxury/Resort Markets (i.e., business
development, planning and community development) are similar to those discussed
above in connection with the Development of Primary Markets. The operating
differences in a Luxury/Resort Market are as follows:
- RESIDENTIAL CONSTRUCTION, which currently consists principally
of construction of Vertical Residential Units. Depending on
the Luxury/Resort Project and the product, the Company
participates either directly as the owner-developer or as a
joint venture partner in the owner-developer. In either case,
the actual construction work is performed by a third party
general contractor. In 1999, the Company plans to be involved
in the presale and construction of two condominium towers and
a patio home subdivision in two Luxury/Resort Projects: West
Bay Club, on the Estero Bay between Naples and Ft. Myers,
Florida; and Jupiter Ocean Grande, facing the Atlantic Ocean
in Jupiter, Florida. By 2000, the Company hopes to be
pre-selling and building quarter share cabins in a third
Luxury/Resort Project, Aspen Springs Ranch, in Colorado.
- MARKETING AND SALES, consisting of the sale of Homesites and
Vertical Residential Units directly to the individual customer
through a central sales facility. Where the Company acts as
the selling broker for a third party builder, the Company
receives a standard sales
12
<PAGE>
commission. Centralized sales allow the Company to more
closely control the quality and consistency of the
Luxury/Resort Project marketing, as well as to capture a
greater percentage of the revenue (through lot premiums and
sales commissions) in lower volume markets.
- AMENITIES, consisting of the construction and operation of
luxury amenities, such as equity golf clubs, dining facilities
and related amenities. The Company believes that the equity
club memberships in its existing Luxury/Resort Projects can be
sold at prices allowing the Company to operate the Amenities
at a significant profit until such time as the operations can
be turned over to the Amenities members.
WHOLLY-OWNED LUXURY/RESORT PROJECTS. The following table shows
(in units/acres and by net book value) the Company's wholly-owned Luxury/Resort
Projects:
<TABLE>
<CAPTION>
UNITS/ACRES NET BOOK VALUE(5)
------------------------------- ---------------------------
AS OF DECEMBER 31, AS OF DECEMBER 31,
------------------------------- ---------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Vertical Residential Units(4). 1,954(1) 578(1) 403(3) $65,064 $41,121 $16,451
Commercial Development ....... 12(2) 12(2) 205 205 205
------- ------- -------
Total ................. $65,269 $41,326 $16,656
======= ======= =======
</TABLE>
(1) Number of remaining planned units.
(2) Number of remaining planned acres.
(3) Includes 326 acres of assembled land for the West Bay Club Project and
77 units remaining at the Regency Island Dunes Project.
(4) Includes both Homesites and Vertical Residential Units.
(5) Net book value means total remaining capitalized costs less project
debt as of the date indicated.
(6) Due to the Percentage of Completion Accounting Method used to record
the sales activity for the Regency Island Dunes Project, the revenue
recognized, which decreased the inventory balance, did not match the
timing of the cash received, which reduces project debt. The resulting
negative net book value of $4.4 million is included in this amount.
JOINT VENTURE LUXURY/RESORT PROJECTS. The following table
shows (by investment account balance and the Company's share of income (loss))
from the Company's Luxury Resort Projects in which it holds its equity interest
through joint ventures:
<TABLE>
<CAPTION>
INVESTMENT
ACCOUNT BALANCES(1) COMPANY'S SHARE OF NET LOSS
----------------------- ---------------------------
AS OF DECEMBER 31, AS OF DECEMBER 31,
----------------------- ---------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Vertical Residential Units..... $1,489 $2,118 $2,876 $ (629) $ (758) $ (437)
====== ====== ====== ====== ====== ======
</TABLE>
(1) Includes all unamortized costs capitalized to this joint venture
interest, as required by GAAP, including corporate interest.
13
<PAGE>
LUXURY/RESORT PROJECT COMPONENTS, BY PROJECT. The following
tables summarize the scope and the principal components of the Company's
Luxury/Resort Projects, by Project:
Scope of Project(5)
--------------------------------
Ownership/ Total Total
Profit Gross Total Gross
Interest Residential Lots/ Commercial
12/31/98 Acres Units Acres
----------------------------------------------
Owned Properties
- - ----------------
West Bay Club(1) .......... 100% 867 1,082 12
Aspen Springs Ranch(2) .... 100% 5,906 497 -0-
Riverwalk Tower(3) ........ 100% 2 375 1
--------------------------------
Subtotal Owned Properties.. 6,775 1,954 13
--------------------------------
Joint Venture Properties
- - ------------------------
Jupiter Ocean Grande(4) ... 50% 6 154 -
--------------------------------
Total All Properties ...... 6,781 2,108 13
==============================================
(1) This Project is located in the Naples/Fort Myers, Florida Primary
Market area. The Company acquired the Project in a series of
transactions from 1995 through 1997 for approximately $19.3 million.
(2) For information concerning this Project, see PART I, ITEM 1. BUSINESS -
OPERATING AND FINANCIAL STRATEGIES -- ADDITIONS TO CORE DEVELOPMENT
PORTFOLIO IN 1998.
(3) This Project is located in Fort Lauderdale, Florida. The Company
acquired the Project in June 1997, for approximately $5.6 million. In
1998, the Company sold one commercial acre for $7.0 million.
(4) This Project is located in Jupiter, Florida. The Project was acquired
in phases in 1995 and 1996 for $4.2 million.
(5) As currently planned.
<TABLE>
<CAPTION>
LOTS/UNITS/ACRES AT DECEMBER 31, 1998 (1)
-------------------------------------------------------------------------------
HOMESITES VERTICAL RESIDENTIAL UNITS COMMERCIAL
---------------------------------------------- --------------
SINGLE FAMILY SINGLE FAMILY MULTI-FAMILY TIMESHARE CABINS DEVELOPMENT
-------------------------------------------------------------------------------
TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL
LOTS ENTITLED UNITS ENTITLED UNITS ENTITLED UNITS ENTITLED ACRES ENTITLED
-------------------------------------------------------------------------------
Owned Properties
- - ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
West Bay Club ............. 404 404 81 81 597 597 - - 12 12
Aspen Springs Ranch ....... 372 - - - 50 - 75 - - -
Riverwalk Tower ........... - - - - 375 375 - - - -
-------------------------------------------------------------------------------
SUBTOTAL OWNED PROPERTIES . 776 404 81 81 1,022 972 75 - 12 12
-------------------------------------------------------------------------------
Joint Venture Properties
- - ------------------------
Jupiter Ocean Grande ...... - - - - 154 154 - - - -
-------------------------------------------------------------------------------
TOTAL ALL PROPERTIES ...... 776 404 81 81 1,176 1,126 75 - 12 12
===============================================================================
</TABLE>
(1) Varying from project to project, unsold units are developed, under
development, or to be developed in the future.
14
<PAGE>
LUXURY/RESORT PROJECT SALES ACTIVITIES, BY PROJECT. In 1996,
the Company closed 67 units in the Regency Island Dunes Project. In 1997, the
Company closed the remaining 77 units in the first and second buildings. The
only sales activity recorded in this business line in 1998 was the sale of one
acre of commercial property in the Riverwalk Tower project for $7.0 million. In
West Bay Club, the Company substantially completed infrastructure development in
1998 and began sales in the first quarter of 1999. Aspen Springs Ranch was only
acquired by the Company in September 1998 and the Company is still in the
entitlement process. With respect to Jupiter Ocean Grande, the Company completed
certain local approval amendments in 1998 and is actively preselling the first
condominium building in the 1998-1999 selling season. The Company expects to
record contracts on the first building beginning in the second quarter of 1999.
OTHER OPERATIONS
ENVIRONMENTAL SERVICES. EQ Lab, a wholly owned subsidiary of
the Company, is a full service ecological consulting firm and laboratory. It
performs water and soil testing and environmental assessments for the Company
and third parties, including both governmental and private entities, acts as the
primary surface water laboratory for two regional Water Management Districts
(government), performs environmental chemistry analyses for the Aqua Source
(private utilities), the Consolidated Citrus, Inc. (agriculture) and numerous
marina projects (development) and performs wetlands mitigation, monitoring and
exotic control for numerous public and private clients. EQ Lab also provides
services to the Company and clients in the areas of hazardous substance testing
and site remediation, endangered species management plans and wetlands
identification and mitigation. EQ Lab's capabilities permit the Company to
quickly and cost-effectively assess and address environmental concerns involving
its existing real property assets and other properties it may seek to acquire.
The following table summarizes revenues recorded by EQL (in thousands
of dollars):
December 31
-----------
1998 1997 1996
---- ---- ----
Revenues from
affiliated parties $ 999 $ 94 $ 110
Revenues from
unaffiliated parties 584 1,048 1,065
------ ------ ------
Total Revenues $1,583 $1,142 $1,175
====== ====== ======
RECEIVABLES PORTFOLIO MANAGEMENT. The Company is actively
engaged in the management and collection of a portfolio of (1) contract
receivables originated by the Predecessor Company's homesite installment sales
program (the "CONTRACT RECEIVABLES") and (2) mortgage receivables generated
primarily from the Company's sales of Predecessor Tracts (the "MORTGAGE
RECEIVABLES," which, together with the Contract Receivables, are collectively
referred to as the "RECEIVABLES PORTFOLIO"). The Company collected for its own
account a total of approximately $3.0 million, $4.9 million and $8.2 million,
respectively, in principal and interest payments on its Contract Receivables in
1998, 1997 and 1996. As of December 31, 1998 and 1997, the portfolio of Contract
Receivables had a net book value of $4.1 million and $6.3 million, respectively,
and the portfolio of
15
<PAGE>
Mortgage Receivables had a net book value of $20.2 million and $28.1 million,
respectively.
Stated interest rates on the Contract Receivables outstanding at
December 31, 1998, 1997 and 1996 ranged from 4% to 12.5% (averaging
approximately 7.0%). The original terms of the Contract Receivables were 10 to
12 years. The Company has established the reserve for estimated future
cancellations and the reserve for Contract Receivables termination refunds based
on its actual cash collections and actual cancellations, which amounted to
$442,000 in 1998 and $1.0 million in 1997.
The mortgages in the Mortgage Receivables portfolio are typically three
to five year notes with 15-20 year amortization schedules and a balloon payment
at the end. Most mortgages in this portfolio are secured by Predecessor Tracts.
The stated interest rate on the mortgages is typically Prime plus two percent.
The Company has established a reserve for estimated future delinquencies in this
portfolio amounting to $2.5 million at December 31, 1998 and $2.6 million at
December 31, 1997.
PREDECESSOR ASSETS
Since 1992, Atlantic Gulf has pursued a strategy of disposing of its
approximately 92,000 acres of Predecessor Commercial Developments, approximately
27,000 Predecessor Homesites and eight (8) Predecessor Utilities. Through 1998,
the Company disposed of approximately 87,000 acres of Predecessor Commercial
Development for approximately $191 million and approximately 11,000 Predecessor
Homesites for approximately $65 million. The Company has used the proceeds from
these sales to reduce its corporate debt by approximately $240 million since
1992 and to reduce the overhead expenses associated with maintaining these
Predecessor Assets.
The remaining Predecessor Commercial Developments include commercial,
industrial, institutional, residential, and agricultural acreage. Predecessor
Tract sales, while highly variable from quarter to quarter, constituted
approximately 29%, 46% and 32% of the Company's total real estate revenues in
1998, 1997 and 1996, respectively. The Company plans to sell the remaining
Predecessor Tracts as quickly as possible while avoiding negative gross margins
on the sale.
The Company also owns approximately 16,000 Predecessor Homesites. The
Company intends to continue its practice of selling such Predecessor Homesites
on a wholesale basis as fast as the local markets
16
<PAGE>
can absorb them, but it anticipates having Predecessor Homesite inventory for
the foreseeable future. Predecessor Homesite sales represented approximately 4%,
15% and 12% of the Company's total real estate revenues in 1998, 1997 and 1996,
respectively. The Company does not anticipate that Predecessor Homesite sales
will have a material impact on future cash flows or profitability.
The following tables summarize the Company's Predecessor Asset
activities in 1998 and 1997:
<TABLE>
<CAPTION>
----------------------------------------- -----------------------------
1997 Homesite Activity 1998 Homesite Activity
----------------------------------------- -----------------------------
Total Lot/ Total Lot/ Total
Lots/units Acq./ Unit Lots/units Acq./ Unit Lots/units
1/1/97 (Trans.) Sales 12/31/97 (Trans.) Sales 12/31/98
----------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Owned Properties
- - ----------------
North Port(1) ........... 5,094 35 1,204 3,925 25 160 3,790
Port Charlotte(1) ....... 3,157 1 234 2,924 (54) 50 2,820
Port St. Lucie(1) ....... 878 (16) 181 681 (8) 54 619
Port Malabar(1) ......... 4,889 426 1,539 3,776 90 357 3,509
Port Labelle(1) ......... 1,941 42 1 1,982 30 212 1,800
Sabal Trace(2) .......... 92 - 13 79 - 4 75
Silver Springs Shores(3) 3,302 36 276 3,062 13 86 2,989
Cumberland Cove(4) ...... 335 22 130 227 14 3 238
Other(5) ................ 304 1 132 173 - 89 84
----------------------------------------- -----------------------------
Total Owned Properties .. 19,992 547 3,710 16,829 110 1,015 15,924
========================================= =============================
</TABLE>
(1) Scattered lots are located in the aforementioned communities, all of
which are located in Florida.
(2) This Project is located in North Port, Florida.
(3) Scattered lots located North of Ocala, Florida.
(4) Lots located in the Cumberland Mountains, midway between Knoxville and
Nashville, Tennessee.
(5) Scattered lots located in Port St. John, Florida; City of Sebastian,
Florida; and Vero Beach Highlands and Vero Shores, Florida.
17
<PAGE>
The table below summarizes the Company's Predecessor Homesite inventory
by secondary market area as of December 31, 1998.
Predecessor Homesite Inventory Summary
(in homesites)
<TABLE>
<CAPTION>
Other Total
Standard Developed Buildable Other Predecessor
Market Area Buildable Lots (1) Reserved (2) Restricted (3) Homesites
- - ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North Port 3,603 9 47 131 3,790
Port Charlotte 760 77 1,622 361 2,820
Port St. Lucie 205 27 324 63 619
Port Malabar 193 6 1,771 1,539 3,509
Port Labelle 68 - 23 1,709 1,800
Sabal Trace - 75 - - 75
Silver Springs Shores 2,397 85 227 280 2,989
Cumberland Cove 230 - - 8 238
Other 48 - 31 5 84
--------------------------------------------------------------------
Total 7,504 279 4,045 4,096 15,924
====================================================================
</TABLE>
(1) Includes commercial/industrial and other premium lots.
(2) Includes 3,795 lots held for Utility Reserves.
(3) Represents Predecessor Homesites which may not be Buildable Predecessor
Homesites due to lack of utility availability or engineering or title
issues, and may only be sold under certain conditions. The Company's
inventory of Predecessor Homesites that are not buildable has declined
and is expected to decline further as currently non-buildable
Predecessor Homesites become buildable. These Predecessor Homesites
become buildable as the communities in which these lots are located
grow and extend utility services to these lots and the Company
satisfies title or engineering issues with respect to these lots. The
Company's plans are to continue to take the appropriate actions to
convert these lots to Buildable Predecessor Homesites consistent with
market demand and to monetize these assets and repay debt.
18
<PAGE>
The following table summarizes the Company's Predecessor Tract
activities in 1998 and 1997:
<TABLE>
<CAPTION>
---------------------------------- -------------------------
1997 1998
Predecessor Tract Sales Predecessor Tract Sales
Activity Activity
---------------------------------- -------------------------
Total Total Total
Acres Acquired/ Acres Acquired/ Acres
1/1/97 (Donation) Sales 12/31/97 (Donation) Sales 12/31/98
---------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Owned Properties
- - ----------------
North Port ........... 2,532 (204) 1,388 940 (117) 202 621
Port Charlotte ....... 2,034 192 618 1,608 13 200 1,421
Port St. Lucie ....... 2,186 (41) 1,700 445 1 119 327
Port Malabar ......... 2,842 62 417 2,487 78 1,647 918
Port Labelle ......... 21,459 (1,089) 4,885 15,486 (17) 14,578 891
Sabal Trace .......... 109 -- 94 15 -- 15 --
Silver Springs Shores 171 (132) -- 39 63 66 36
Cumberland Cove ...... 2,525 42 -- 2,566 (1,881) -- 685
Other ................ 440 (14) 380 46 6 13 39
---------------------------------- -------------------------
Total Owned Properties 34,298 (1,184) 9,482 23,632 (1,854) 16,840 4,938
================================== =========================
</TABLE>
GENERAL ECONOMIC AND FINANCIAL FACTORS INFLUENCING THE COMPANY'S CORE BUSINESS
The Company's Core Business is highly sensitive to the following
general economic and financial factors:
- the real estate industry and specific industry segment
conditions and directions, i.e., supply and demand for
Homesites, Vertical Residential Units and/or Commercial
Developments in the Company's Core Markets, as well as local
economic and market conditions the Company's Core Markets,
- the cyclical nature of the real estate market in Florida and
the Company's other Core Markets,
- movements in interest rates and employment levels in Core
Markets,
- the availability and cost of financing for acquisition and
development, the availability and cost of materials and labor,
weather conditions and changes in consumer preferences;
- governmental regulation, specifically, compliance of projects
with local, regional, state and federal planning, zoning,
design, construction, development, environmental, permitting,
sales, disclosure and related rules and regulations and
- competitive pressures, specifically, other public and private
developments in the Company's Core Markets, and the pricing
and availability of such competing developments.
19
<PAGE>
Currently, all of these general economic/financial factors are
reasonably favorable to the Company. The economy, both at the national and Core
Market levels, is currently strong. Interest rates and unemployment rates are
both currently at historic lows, and credit is generally available to qualified
borrowers. Moreover, while the real estate business is highly competitive, none
of the Company's Core Markets currently has an oversupply of finished homesites
and/or vertical residential units.
Notwithstanding the favorable current conditions for the Company's Core
Business in general, any significant increase in interest rates or general
economic downturn or significant decline in employment growth, increase in
unemployment, decline in growth of real wages, increase in inflation or downturn
in other demographics in the Company's Core Markets could adversely impact new
home starts, and therefore the Company's Core Business, in the future.
SPECIFIC ECONOMIC AND FINANCIAL FACTORS INFLUENCING THE COMPANY'S CORE BUSINESS
The Company's Core Business is also subject to certain economic and
financial factors specific to the Company and its Core Business, including but
are not limited to, the following:
- the Company's high cost of institutional capital (debt and
Preferred Stock) and related institutional financing
contingencies and restrictions,
- sales pressure attributable to near term debt maturities,
- the availability of high quality projects in the Company's
Core Markets, the availability and cost of financing for such
projects, substantial project carrying costs (because of the
substantial time interval between project acquisition,
development and sale),
- the ability of the Company to continue to (1) realize fee
income from the provision of Environmental Services and (2)
monetize the full face value of its Receivables Portfolio and
- management limitations.
While managing all of the foregoing factors, the Company also is
dealing with the issue of reduced sales margins attributable to its Predecessor
Assets.
For a discussion of other factors that could cause the Company's actual
operating results to differ materially from those anticipated, see PART II, ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS below. The Company does not undertake to update the foregoing list of
specific factors in any subsequent disclosures made from time to time by or on
behalf of the Company.
EMPLOYEES
As of December 31, 1998, the Company had approximately 158 full-time
employees and three part-time employees. In addition, the Company employs on a
daily basis such additional personnel as may be required to perform various
other activities. The Company's relations with its employees are satisfactory
and there have been no work stoppages.
20
<PAGE>
YEAR 2000 COMPLIANCE
GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS
OF THE YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS. The Year
2000 Issue is the result of computer programs being written using two digits
rather than four to define the applicable year. Any of the Company's computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Based on recent assessments, the Company determined that it has
completed the modification or replacement of significant portions of its
software and certain hardware so that those systems will properly utilize dates
beyond December 31, 1999.
The Company's plan to resolve the Year 2000 Issue involves the
following four phases: assessment, remediation, testing, and implementation. To
date, the Company has fully completed its assessment of all systems that could
be significantly affected by the Year 2000. The completed assessment indicated
that most of the Company's significant information technology systems could be
affected, particularly the general ledger, billing, and inventory systems. In
addition, the Company has gathered information about the Year 2000 compliance
status of its significant suppliers and subcontractors and continues to monitor
their compliance.
STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT, INCLUDING TIMETABLE
FOR COMPLETION OF EACH REMAINING PHASE. For its information technology
exposures, to date the Company has completed the remediation phase, including
software reprogramming and replacement. Once the software was reprogrammed or
replaced for a system, the Company began testing and implementation. The Company
has completed its testing and implementation of its remediated systems.
NATURE AND LEVEL OF IMPORTANCE OF THIRD PARTIES AND THEIR EXPOSURE TO
THE YEAR 2000. The Company has queried its significant suppliers and
subcontractors that do not share information systems with the Company (external
agents). To date, the Company is not aware of any external agent with a Year
2000 issue that would materially impact the Company's results of operations,
liquidity, or capital resources. However, the Company has no means of ensuring
that external agents will be Year 2000 ready. The inability of external agents
to complete their Year 2000 resolution process in a timely fashion could
materially impact the Company.
The effect of non-compliance by external agents is not determinable.
COSTS. The Company has utilized both internal and external resources to
reprogram, or replace, test, and implement the software and operating equipment
for Year 2000 modifications. The total cost of the Year 2000 project was
approximately $600,000 and had been funded through operating cash flows.
RISKS. Management of the Company believes it has an effective program
in place to resolve the Year 2000 issue in a timely manner. In addition,
disruptions in the economy generally resulting from Year 2000 issues could also
materially adversely affect the Company. The Company could be subject to
litigation for computer systems product failure, for example, equipment shutdown
or failure to properly date business records. The amount of potential liability
and lost revenue cannot be reasonably estimated at this time.
21
<PAGE>
CONTINGENCY PLANS. The Company has contingency plans for certain
critical applications and is working on such plans for others. These contingency
plans involve, among other actions, manual workarounds, increasing inventories,
and adjusting staffing strategies.
ITEM 2. PROPERTIES
The Company's inventory of real estate is described in PART I, ITEM 1.
BUSINESS, - CORE BUSINESS - PRIMARY PROJECTS and - LUXURY/RESORT PROJECTS and -
PREDECESSOR ASSETS.
ITEM 3. LEGAL PROCEEDINGS
CONDEMNATION PROCEEDINGS INVOLVING GENERAL DEVELOPMENT UTILITIES, INC. AND
RELATED PROCEEDINGS
ATLANTIC GULF COMMUNITIES CORPORATION, ET AL. V. LOFTUS, ET AL., CASE
NO. 94-1931 CA (CHARLOTTE CTY. CIR. CT.). In December 1994, Atlantic Gulf and
GDU (all references herein to "GDU" are to General Development Utilities, Inc.,
a wholly owned subsidiary of Atlantic Gulf) filed a declaratory judgment action
in the Circuit Court for the Twentieth Judicial Circuit in and for Charlotte
County against a defendant class based upon a demand made upon the Company by
Richard D. Loftus and others for a portion of the proceeds from the Charlotte
County eminent domain case entitled Charlotte County, et al. v. GDU, et al.,
Case No. 90-936 (Charlotte Cty. Cir. Ct.), in which the Charlotte County Circuit
Court entered a stipulated Final Judgment setting full and complete compensation
to Atlantic Gulf and GDU for certain water and wastewater systems taken by
Charlotte County in June 1991 totaling $110 million, $65 million of which was
paid as a good faith deposit at the time of the taking and the balance of which
was paid in December of 1994. The demand made upon the Company was based upon
the theory that there exists a class of property owners in Charlotte County,
Florida who have an interest in the proceeds from the condemnation proceeding
because of "contributions in aid of construction." The case has been transferred
from Charlotte County to the Fifteenth Judicial Circuit Court, Palm Beach
County, Florida, and notice has been provided to the members of the class. No
rulings have been made by the Court, and discovery has not begun in any
meaningful way. The Company believes, based on the advice of counsel, that the
defendants' claim has no merit under Florida law. The Company intends to
vigorously pursue the class action suit for declaratory judgement, seeking an
order of the Court that the class members have no interest in the proceeds from
the Charlotte County condemnation case.
RETENTION OF JURISDICTION BY THE BANKRUPTCY COURT
THE PLAN OF REORGANIZATION (THE "POR"). On March 15, 1995, the
Bankruptcy Court entered a final decree in the Predecessor Company's bankruptcy
case. The Bankruptcy Court does, however, retain jurisdiction over the Company
with respect to various matters, including, among other things, matters
pertaining to (1) the allowance and disallowance of claims and interests, (2)
distributions under the POR, (3) the reduction and maintenance of claim
reserves, (4) appeals from orders entered by the Bankruptcy Court, (5) the
receipt, use or application of condemnation proceeds, (6) utility trusts created
or implemented pursuant to the POR, (7) the Homesite Purchaser Assurance
Program, (8) Oxford Finance Company's and its affiliates' chapter 11 bankruptcy
and their business practices as they may affect the Company, (9) the enforcement
of all orders entered by the Court and (10) tax issues arising under the POR.
22
<PAGE>
OTHER LITIGATION AND PENDING DISPUTES
FINAL JUDGMENT OF PERMANENT INJUNCTION. On December 9, 1998, the
Company was released from the Final Judgment of Permanent Injunction (the "FINAL
JUDGMENT") entered November 30, 1990, by the United States District Court for
the Southern District of Florida in the civil action United States of America v.
General Development Corporation, No. 90-87-Civ-NESBITT.
REGENCY ISLAND DUNES PROJECT. Control of the Regency Island Dunes
Condominium Association (the "ASSOCIATION") was turned over to the condominium
owners on or about November 20, 1997. As part of the turnover process, the
Association inspected the project and provided the Company and its developer
subsidiary, Regency Island Dunes, Inc. ("REGENCY"), together with the general
contractor who constructed the project, with a list of the Association's claims
of deficient work. The Company and Regency have inspected the project with their
consultants and are in the process of preparing a response to the Association's
claims. No lawsuit has been filed in connection with this matter, and no amount
of damages has been specified.
CARY GLEN PROJECT. On February 8, 1999, Panther Creek Corp., a
wholly-owned subsidiary of the Atlantic Gulf (the "Developer"), was terminated
by Panther Creek-Raleigh Limited Partnership (the "OWNER"), as the developer of
the Cary Glen Project, for purported delays in the development schedule and
sales program. Furthermore, on February 26, 1999, the Owner demanded that the
Developer and Atlantic Gulf pay to the Owner approximately $5.5 million for
alleged future potential project cost overruns pursuant to the Hearthstone
Master Form Acquisition and Development Agreement between the Owner and the
Developer and the Guaranty Agreement given by Atlantic Gulf. Atlantic Gulf
disputes whether (1) the termination was a proper termination for cause, (2) the
Developer is liable for cost overruns not incurred prior to the termination date
and (3) the Owner correctly calculated the projected cost overruns. No lawsuit
has been filed at this time, and the Company continues to pursue a resolution of
this matter. In the event litigation is filed by the Owner, the Company will
assert certain defenses and counterclaims against the Owner and will otherwise
vigorously defend the claims asserted against it and the Developer
OTHER
In addition to those legal proceedings specifically discussed in this
PART I, ITEM 3. LEGAL PROCEEDINGS, the Company is, from time to time, involved
in various litigation matters primarily arising in the normal course of its
business. It is the opinion of management that the resolution of these matters
will not have a material adverse affect on the Company's business or financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of 1998.
23
<PAGE>
PART II
ITEM 5. MARKET FOR ATLANTIC GULF'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET FOR REGISTRANT'S COMMON STOCK. The common stock, $.10 par value
per share, of Atlantic Gulf ("COMMON STOCK") was quoted on the NASDAQ National
Market ("NNM"), under the symbol "AGLF," through the close of business on
December 10, 1998, at which time it was de-listed from the NNM because of
Atlantic Gulf's failure to meet the NNM's net tangible assets continued listing
requirement. The Common Stock began trading on the Over The Counter Bulletin
Board (the "OTCBB") on December 14, 1998, under the symbol "AGLF". The following
table sets forth the high/ask and low/bid prices of the Common Stock for the
periods indicated.
1998 1997
Prices Prices
------ ------
Quarter Ended High Low High Low
- - ------------- ---- --- ---- ---
March 31 4 1/4 3 1/4 6 4 1/8
June 30 3 11/16 2 6 41/64 5 1/2
September 30 2 3/8 1 6 3/4 5 5/8
December 31 1 5/16 5/8 6 1/8 3 1/4
HOLDERS OF RECORD OF THE COMMON STOCK. As of March 26, 1999, there were
approximately 30,000 record holders of the Common Stock.
DIVIDENDS. No dividends have been paid on the Common Stock during the
last two fiscal years, and Atlantic Gulf is prohibited from paying dividends on
its Common Stock by the terms of its New Revolving Loan Facility, New Term Loan
Facility and Secured Agreement. See PART II, ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL
RESOURCES below. The holders of Atlantic Gulf's 20% Cumulative Redeemable
Convertible Preferred Stock, Series A (the "SERIES A PREFERRED STOCK"), and 20%
Cumulative Redeemable Convertible Preferred Stock, Series B (the "SERIES B
PREFERRED Stock") (the Series A Preferred Stock and Series B Preferred Stock
are, together, referred to as the "PREFERRED STOCK") are entitled to receive,
when, as and if declared by the Board of Directors of Atlantic Gulf (the
"BOARD"), out of funds legally available therefore, cash dividends on each share
of Preferred Stock at an annual rate equal to 20% of the Liquidation Preference
(defined as $10 per share plus accumulated and unpaid dividends) in effect from
time to time. All dividends are cumulative, whether or not declared, on a daily
basis from the date on which the Preferred Stock was originally issued by
Atlantic Gulf, and will be payable, subject to declaration by the Board,
quarterly in arrears on March 31, June 30, September 30, and December 31 of each
year commencing as of September 30, 1997. As of December 31, 1998, the Series A
Preferred Stock Liquidation Preference was $32.7 million, including undeclared
but accumulated and unpaid dividends of $7.7 million and the Series B Preferred
Stock Liquidation Preference was $25.9 million, including undeclared but
accumulated and unpaid dividends of $5.9 million.
24
<PAGE>
Effective June 24, 1997, Atlantic Gulf's stockholders approved an
amendment to Atlantic Gulf's certificate of incorporation to repeal the right of
the holders of its Common Stock to receive, semiannually, mandatory dividends
equal to 25 percent of Atlantic Gulf's Available Cash, as defined. See Note 10
to the Notes to the Company's December 31, 1998, Consolidated Financial
Statements.
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
Selected financial data for each of the five years during the period
ended December 31, 1998, are summarized below (in millions of dollars, except
per share amounts):
<TABLE>
<CAPTION>
Years
Ended
December 31,
--------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
- - ----------------------------
Total revenues $ 83.8 $ 76.6 $ 138.8 $ 98.0 $ 70.3
Income (loss) before extraordinary items 3.7 (58.3) (12.6) (20.6) 1.1
Net income (loss) 3.7 (58.3) 1.2 (20.6) 1.1
Net income (loss) applicable to
common stock (8.0) (62.1) 1.2 (20.6) 1.1
Net income (loss) per common share (.68) (5.82) .12 (2.12) .11
Weighted average common
shares outstanding 11.64 10.66 9.71 9.71 9.64
- - -----------------------------------------------------------------------------------------
Balance Sheet Data (at period end)
- - ----------------------------------
Cash (including restricted amounts) $ 10.5 $ 10.9 $ 13.1 $ 12.0 $ 25.0
Land and Residential Inventory 166.9 130.5 153.4 218.3 228.5
Receivables Portfolio 33.4 41.2 73.4 59.8 55.2
Total assets 229.8 203.1 263.4 332.8 348.6
Notes, mortgages, capital leases and
other debt 151.8 132.4 169.2 221.0 190.3
Preferred stockholders' equity 54.8 41.7 - - -
Common stockholders' equity (deficit) (2.6) 5.3 56.4 54.4 74.7
</TABLE>
(1) The net income (loss) per common share amounts have been restated so as
to comply with Statement of Financial Accounting Standards No. 128,
EARNINGS PER SHARE. For further discussion of earnings
25
<PAGE>
per share and the impact of Statement No. 128, see the Notes to
Company's December 31, 1998 Consolidated Financial Statements beginning
on page F-7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The tables below summarize the Company's real estate operations from
Core Business and Predecessor Assets for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Combining Results of Real Estate Operations
---------------------------------------------------
Year Ended December 31, 1998
(in thousands of dollars)
Primary Luxury
Market Resort Predecessor
Operations Operations Assets Total
--------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Real estate sales
Homesite ............................ 14,259 - 3,017 17,276
Commercial .......................... 27,270 7,010 21,245 55,525
Vertical Residential Units .......... - - - -
--------------------------------------------
Total real estate sales 41,529 7,010 24,262 72,801
Costs and expenses:
Cost of real estate sales
Homesite ............................ 12,108 - 2,675 14,783
Commercial .......................... 23,161 2,076 19,733 44,970
Vertical Residential Units .......... - - - -
--------------------------------------------
Total cost of real estate sales ........... 35,269 2,076 22,408 59,753
--------------------------------------------
Gross margin real estate sales ............ 6,260 4,934 1,854 13,048
============================================
Results of Joint Venture Operations (1).... 1,042 (629) - (413)
============================================
</TABLE>
(1) Included in Other Operating Revenues
26
<PAGE>
<TABLE>
<CAPTION>
Combining Results of Real Estate Operations
---------------------------------------------------
Year Ended December 31, 1997
(in thousands of dollars)
Primary Luxury
Market Resort Predecessor
Operations Operations Assets Total
----------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Real estate sales
Homesite ............................ 13,851 - 10,755 24,606
Commercial .......................... 590 - 31,439 32,029
Vertical Residential Units .......... - 10,908 76 10,984
----------------------------------------------
Total real estate sales 14,441 10,908 42,270 67,619
Costs and expenses:
Cost of real estate sales
Homesite ............................ 12,941 - 10,431 23,372
Commercial .......................... 484 - 35,303 35,787
Vertical Residential Units .......... - 12,944 89 13,033
----------------------------------------------
Total cost of real estate sales ........... 13,425 12,944 45,823 72,191
----------------------------------------------
Gross margin real estate sales ............ 1,016 (2,036) (3,553) (4,573)
==============================================
Results of Joint Venture Operations(1)..... (235) (758) - (993)
==============================================
</TABLE>
(1) Included in Other Operating Revenues.
27
<PAGE>
<TABLE>
<CAPTION>
Combining Results of Real Estate Operations
---------------------------------------------------
Year Ended December 31, 1996
(in thousands of dollars)
Primary Luxury
Market Resort Predecessor
Operations Operations Assets Total
----------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Real estate sales
Homesite ............................ 38,090 - 14,820 52,910
Commercial .......................... 12,935 - 40,758 53,693
Vertical Residential Units .......... - 17,809 3,153 20,962
----------------------------------------------
Total real estate sales ................ 51,025 17,809 58,731 127,565
Costs and expenses:
Cost of real estate sales
Homesite ............................ 30,782 - 11,476 42,258
Commercial .......................... 11,469 - 32,862 44,331
Vertical Residential Units .......... - 13,906 2,819 16,725
----------------------------------------------
Total cost of real estate sales ........... 42,251 13,906 47,157 103,314
----------------------------------------------
Gross margin real estate sales............. 8,774 3,903 11,574 24,251
==============================================
Results of Joint Venture Operations(1)..... (75) (437) - (512)
==============================================
</TABLE>
(1) Included in Other Operating Revenues.
THE YEAR ENDED DECEMBER 31, 1998 ("1998") COMPARED TO THE YEAR ENDED DECEMBER
31, 1997 ("1997")
During 1998, the Company reported a net loss applicable to Common Stock
of $8.0 million compared to a net loss of $62.1 million applicable to Common
Stock in 1997. The reduction in loss from 1997 to 1998 of $54.1 million was
primarily due to (1) a $17.6 million increase in real estate gross margins, (2)
a reduction in the charge to inventory valuation reserves of $14.3 million (3)
an increase in other income of $12.2 million associated with reorganization
reserves (4) a $7.8 million decrease in the cost of borrowings (5) a $5.4
million decrease in real estate costs and (6) a $2.4 million reduction in
general and administrative expenses, partially offset by (7) a $7.9 million
increase in preferred stock dividends and accretion changes.
PRIMARY MARKET OPERATIONS.
HOMESITES. Net margins from Homesite sales increased $1.2
million in 1998 compared to 1997 primarily due to increased margins on Primary
Market Residential sales. The increased margins in Primary Market Residential
sales were primarily related to (1) an increase of $307,000 in West Meadows
related to increased sales volume, (2) a combined increase of $587,000 in Saxon
Woods and West Frisco, which did not have sales in 1997, (3) a decrease in
Lakeside of $413,000 related to decreased sales volume
28
<PAGE>
as a result of tornado damage during 1998 and (4) a reduction of $760,000 of
negative margin associated with Sanctuary and Windsor Palms which had final
sales in 1997.
Revenues from Homesite sales decreased $7.3 million in 1998 compared to
1997 primarily due to a $ 7.7 million decreased in Other Predecessor Assets
revenue which was slightly off-set by a $409,000 increase in Primary Markets
Residential revenue. The decreased revenue associated with Other Predecessor
Assets was related to the Company's orderly disposition of the remaining
Predecessor Assets. The increase in revenue from Primary Market Residential
sales was primarily related to (1) an increase of $2.7 million in the West
Meadows Project, (2) a combined increase of $4.2 million in the Saxon Woods
Project and West Frisco Project, which did not have sales in 1997, (3) a
decrease in Lakeside of $1.7 million related to decreased sales as a result of
tornado damage during 1998 and (4) a decrease of $4.9 million associated with
the Sanctuary Project and Windsor Palms Project which had final sales in 1997.
As of December 31, 1998, the Company had under contract approximately
650 Homesites for $19.8 million with 11 homebuilders in the Lakeside Project,
the Saxon Project, the West Meadows Project and the Trails of West Frisco
Project. As of December 31, 1997, the Company had under contract approximately
869 Homesites for $24.7 million with 11 homebuilders in the Lakeside Project,
the West Meadows Project and the Trails of West Frisco Project.
Homesite sales gross margin percentaged was 15.1% in 1998 compared to
6.6% in 1997. The higher gross margin percentage in 1998 is primarily due to
lower margins in 1997 which were attributable principally to the sale of the
final 102 lots in the Windsor Palms Project for $4.5 million, generating a
negative 14% gross margin. This sale was necessitated by the Company's need for
liquidity to meet a June 30, 1997 debt payment.
COMMERCIAL DEVELOPMENT. Commercial Development revenues
increased $26.7 million in 1998 compared to 1997 primarily due to a large tract
sale in 1998. In April 1998, the Company sold and closed Dave's Creek for $24.8
million. Additional sales proceeds of $2.5 million were received in the third
quarter of 1998 after the Company received an Army Corp of Engineers permit.
There were no comparable sales in 1997.
JOINT VENTURES. Results of Joint Ventures increased $1.3
million in 1998 from 1997. This is primarily due to improved net income at the
Sunset Lakes Project. As of December 31, 1998, the Company's JV Projects had 787
Homesites under contract, totaling approximately $37.3 million in future gross
revenue, a portion of which is allocable to the Company as a joint venturer.
LUXURY/RESORT OPERATIONS.
During 1998, sales consisted of one commercial tract sale. In June
1998, the Company sold a 0.9 acre office/hotel parcel for approximately $7.0
million which was part of the 2.8 acre Riverwalk Tower site. Additionally, the
Company began development of the West Bay Club Project, Ocean Grande Project and
the Aspen Springs Ranch Project. Initial sales are expected on these three
Projects in 1999 or 2000.
As of December 31, 1998, the Company had under contract approximately
12 Homesites for $2.4 million in the West Bay Club Project with 7 homebuilders.
There were no pending sales contracts as of December 31, 1997.
29
<PAGE>
Vertical Residential Unit sales are summarized as follows for the years
ended December 31 (in thousands of dollars):
1998 1997
---- ----
Condominium sales - Regency Island Dunes Project:
First Building $ - $ 1,620
Second Building - 9,288
---- -------
Total condominium sales $ - $10,908
==== =======
The revenues and profits associated with sales at the Regency Island
Dunes Project were recorded using the percentage of completion method. The
Project consisted of two 72-unit buildings for a total of 144 units, all of
which were sold and closed as of December 31, 1997. The condominium revenues of
$1.6 million in the first building in 1997 represented revenue earned upon the
closing of an additional five units in 1997 for a total of 72 units sold and
closed in the first building. The revenues of approximately $9.3 million in the
second building in 1997 were derived from an increase in the completion
percentage from 79% to 100% in 1997, and to an additional 16 units sold and
closed in 1997 for a total of 72 units sold and closed in the second building.
The gross margin for Vertical Residential Units in 1997 was negative
primarily due to a $2.85 million settlement in December 1997 with the Company's
general contractor for the Regency Island Dunes Project. See PART I, ITEM 3.
LEGAL PROCEEDINGS in Atlantic Gulf's 1997 Annual Report on Form 10-K (the "1997
10-K"). The settlement costs were applied solely against the revenues earned in
1997, resulting in a large negative gross margin in 1997. The overall gross
margin for this Project was approximately 12.1%.
JOINT VENTURES. Results of Joint Ventures increased by approximately
$129,000 in 1998, from 1997 due to reduced losses on the Jupiter Ocean Grand
Project.
PREDECESSOR ASSETS.
PREDECESSOR HOMESITES. Revenues from Predecessor Homesite
sales decreased $7.7 million in 1998 compared to 1997 due to a 77.7% decrease in
the number of Predecessor Homesites sold, partially offset by a 25.5% increase
in the average sales price per Predecessor Homesite. The decrease in the number
of Predecessor Homesite sales and the increase in the average sales price were
due to fewer bulk sales in 1998 compared to 1997. Bulk sales are usually made at
a discount and have lower gross margin percentages.
As of December 31, 1998, the Company had under contract two commercial
lots allocated Predecessor Homesites for $99,000. As of December 31, 1997, the
Company had under contract approximately 129 Predecessor Homesites for $806,000.
The Predecessor Homesite sales gross margin percentage was 11.3% in
1998 compared to 3.0% in 1997. Predecessor Homesite sales gross margin was also
adversely affected in 1997 by the increase in the bulk sale of Predecessor
Homesites yielding lower margin to accelerate the disposal of the Predecessor
Homesites. The margin in 1998 is consistent with an orderly liquidation of the
predecessor assets.
PREDECESSOR TRACTS. Revenues from Predecessor Tract sales
decreased $10.2 million in 1998 compared to 1997 primarily due to fewer sales
from a declining inventory balance. As of December 31, 1998, there were pending
Predecessor Tract sales contracts or letters of intent totaling approximately
$980,000. As of December 31, 1997,
30
<PAGE>
there were comparable pending Predecessor Tract sales contracts or letters of
intent totaling approximately $3.4 million.
The 7.1% gross margin percentage for Predecessor Tract sales in 1998 is
due to fewer sales at a more profitable level. The 1997 negative gross margin of
(12.3%) is attributable principally to the Company's business plan to accelerate
the liquidation of Predecessor Assets.
PREDECESSOR VERTICAL RESIDENTIAL UNITS. There were no Vertical
Residential Unit sales in 1998 because of the Company's decision in mid-1995 to
begin phasing out its single family home business in Predecessor communities,
which was substantially completed in 1996. 1997 sales of $76 were due to the
final closing of this business activity.
OTHER RESULTS OF OPERATIONS.
INVENTORY VALUATION RESERVE CHARGES. Inventory valuation
reserve charges of $195,000 in 1998 represented a reduction in the carrying
value of the Company's inventory based upon a review of the fair values. The
charges were primarily related to Predecessor Assets.
SELLING EXPENSES. Selling expenses decreased $2.0 million in
1998 compared to 1997 primarily due to a reduction in selling expenses at
Cumberland Cove due to the closing of the on-site sales operation in September
1997. Selling expense as a percentage of real estate sales decreased to 8.9% in
1998 from 12.6% in 1997 primarily due to (1) lower direct selling expenses
associated with the large sale in 1998 of the Dave's Creek Project and (2) the
closing of the Cumberland Cove sales center noted above.
OTHER REAL ESTATE COSTS. Other real estate costs decreased by
$5.4 million, or 36%, in 1998 compared to 1997 due to (1) a decline in property
taxes associated with a reduction in land inventory not under development
corresponding to sales activity during the intervening period and (2) reduced
legal costs associated with supporting real estate activity.
COSTS OF BORROWING NET OF CAPITALIZED INTEREST. Costs of
borrowing net of capitalized interest, decreased $7.8 million compared to 1997
principally due to a decrease in corporate debt resulting from proceeds of the
Atlantic Gulf's Preferred Stock sales, which were substantially completed in
1997.
OTHER INCOME - REORGANIZATION RESERVES. Other income - other
reorganization reserves consisted of gains of $13.4 million in 1998 and $3.5
million in 1997 resulting from the resolution of certain reorganization items.
The $13.4 million gain in 1998 consisted of (a) a $1.1 million amortization of
utility connection reserves, (b) a $3.7 million utility trust withdrawal, (c) a
gain of $8.5 million associated with the receipt of proceeds from unclaimed
expired 12% Notes and (d) $104,000 of contract receivables termination refunds.
The $3.5 million gain in 1997 consisted of (1) a $1.1 million amortization of
utility connection reserves, (2) a $706,000 gain due to the reduction of the
Contract Receivables termination refunds reserve and (3) adjustments of various
other reorganization reserves, none of which were individually significant.
OTHER EXPENSE ITEMS. Other expense - miscellaneous of $78,000
in 1998 and $810,000 in 1997 consisted of net gains and losses associated with
various reserve adjustments and settlements, none of which were individually
significant.
31
<PAGE>
PREFERRED STOCK ACCRUAL. During 1998, the Company recorded a
$10.3 million accrual for dividends associated with its Preferred Stock. The
dividends were accumulated but unpaid as of December 31, 1998. The dividend rate
is 20% of the liquidation preference value of the Preferred Stock. The
liquidation preference value of the Preferred Stock is $10 per share, plus
accumulated and unpaid dividends. In addition, the Company accreted $1.3 million
of the value of its Preferred Stock to the redemption amount in 1998. The total
of approximately $11.6 million of accrued Preferred Stock dividends and
Preferred Stock accretion was charged to contributed capital in the accompanying
December 31, 1998 consolidated balance sheet.
1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996 ("1996")
During 1997, the Company reported a net loss applicable to Common Stock
of $62.1 million compared to net income of $1.2 million applicable to Common
Stock in 1996. The loss was primarily due to (1) a 47% reduction in real estate
revenues and increased costs of real estate sales in 1997, (2) a $22.9 million
decrease in other income and (3) $0 of extraordinary gains (compared to $13.7
million of extraordinary gains in 1996), partially offset by (4) a $9.4 million
reduction in selling expenses and other real estate costs. As discussed below,
the reduction in real estate revenues in 1997 were primarily due to (a) the
Company's bulk sales in 1996 of its Julington Creek Plantation Project and
Summerchase Project (there were no substantial bulk sales in 1997, other than a
bulk sale of 102 lots in the Windsor Palms Project) and (b) decreasing revenues
from Predecessor Assets. Increased costs of real estate sales were principally
attributable to (i) a bulk sale (at a loss of $632,000) of the final 102 lots in
the Windsor Palms Project to provide liquidity for a scheduled debt payment and
(ii) a $2.85 million settlement in connection with the litigation involving the
Regency Island Dunes Project.
PRIMARY MARKET OPERATIONS.
HOMESITES. Net gross margins from Homesite sales decreased
$6.4 million in 1997 compared to 1996 primarily due to (1) the loss of the
revenue formerly generated by the Julington Creek Plantation Project, which the
Company sold in bulk in 1996, (2) a $9.0 million bulk sale in 1996 of the
Summerchase Project and (3) the bulk sale at a loss of the remaining 102 lots in
the Windsor Palms Project, in order to fund a debt payment due June 30, 1997.
Revenues from Homesite sales decreased $24.2 million in 1997 compared
to 1996 primarily due to (1) the bulk sale of the Julington Creek Plantation
Project and the Summerchase Project in 1996 and (2) the sale of 75% of the
inventory in the Windsor Palms Project in 1996. The Julington Creek Plantation
Project generated sales revenue of approximately $7.6 million in 1996, including
a bulk sale of the remaining 126 Homesites for $5.6 million in June 1996. The
Summerchase Project, which was permitted for 640 Homesites, was sold in bulk in
1996 for $9.0 million. Sales revenues at the Windsor Palms Project decreased
from $12.5 million in 1996 to $4.5 million in 1997. Partially offsetting these
decreases was a $2.7 million increase in sales in 1997 in the West Meadows
Project.
As of December 31, 1997, the Company had under contract approximately
869 Homesites for $24.7 million with 12 homebuilders in the Lakeside Project,
the West Meadows Project and The Trails of West Frisco Project. As of December
31, 1996, the Company had under contract approximately 616 Homesites for $15.2
million with 7 homebuilders in the Lakeside Estates Project, the West Meadows
Project and the Sanctuary Project.
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Homesite sales gross margin percentage was 6.6% in 1997 compared to
19.2% in 1996. The lower gross margin percentage in 1997 is attributable
principally to the sale of the final 102 lots in the Windsor Palms Project for
$4.5 million, generating a negative 14% gross margin. This sale was necessitated
by the Company's need for liquidity to meet a June 30, 1997 debt payment. The
gross margin in 1997 for the Lakeside Project and the West Meadows Project was
20.2%, which approximates the targeted gross margin of 20% to 30% for this line
of business.
COMMERCIAL DEVELOPMENT. Revenues from Commercial Development
sales decreased $12.3 million in 1997 compared to 1996 primarily due to several
large sales in 1996, including the sale of the Julington Creek Plantation
Project, which included $11.6 million of Commercial Development. There were no
comparable sales in 1997.
The Commercial Development gross margin percentage increased to 18% in
1997 from 11.3% in 1996 primarily due to the low margin of 6.5% on the Julington
Creek Plantation Project sale in 1996.
JOINT VENTURES. Results of Joint Ventures decreased $160,000
in 1997 compared to 1996. This was primarily due to a $375,000 loss associated
with the Country Lakes Project, which was offset by improved net income at the
Sunset Lakes project. As of December 31, 1997, the Company's JV Projects had
3,389 Homesites under contract with 10 homebuilders, totaling approximately
$85.0 million in future gross revenue, a portion of which is allocable to the
Company as a joint venturer.
LUXURY/RESORT OPERATIONS.
Gross margins from Vertical Residential Units decreased $5.9 million in
1997 compared to 1996 principally due to a decrease in the gross margin from the
Regency Island Dunes Project. The Company realized lower revenues in 1997 as a
result of (1) the close out of the Regency Island Dunes Project in 1997 and (2)
a $2.85 million settlement with the general contractor on this project.
Vertical Residential Unit sales are summarized as follows for the years
ended December 31 (in thousands of dollars):
1997 1996
---- ----
Condominium sales - Regency Island Dunes Project:
First Building $ 1,620 $ 3,008
Second Building 9,288 14,801
------- -------
Total condominium sales $10,908 $17,809
======= =======
The revenues and profits associated with sales at the Regency Island
Dunes Project were recorded using the percentage of completion method. The
Project consisted of two 72-unit buildings for a total of 144 units, all of
which were sold and closed as of December 31, 1997. As of December 31, 1995, the
Company recorded 97% of the expected revenues and profits on 61 units in the
first building, based on a construction completion percentage of 97%. The
condominium revenues of $3.0 million in the first building in 1996 represented
the incremental revenue earned upon the completion of 59 of the 61 units in 1996
and the sale and closing of an additional eight units in 1996. The condominium
revenues of $1.6 million in the first building in 1997 represented revenue
earned upon the closing of an additional five units in 1997 for a total of 72
units sold and closed in the first building. The revenues of approximately $14.8
million in the second building in 1996 were derived from 56 units under contract
as of December 31, 1996, with construction
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on the second building 79% complete. The revenues of approximately $9.3 million
in the second building in 1997 were derived from an increase in the completion
percentage from 79% to 100% in 1997, and to an additional 16 units sold and
closed in 1997 for a total of 72 units sold and closed in the second building.
The gross margin for Vertical Residential Units in 1997 was negative
primarily due to a $2.85 million settlement in December 1997 with the Company's
general contractor for the Regency Island Dunes Project. See PART I, ITEM 3.
LEGAL PROCEEDINGS in Atlantic Gulf's 1997 10-K. The settlement costs were
applied solely against the revenues earned in 1997, resulting in a large
negative gross margin in 1997. The overall gross margin for this Project was
approximately 12.1%.
PREDECESSOR ASSETS.
PREDECESSOR HOMESITES. Revenues from Predecessor Homesite
sales decreased $4.1 million in 1997 compared to 1996 due to a 43.1% decrease in
the average sales price per Predecessor Homesite, partially offset by a 21.3%
increase in the number of Predecessor Homesites sold. The decrease in the
average sales price is principally due to (1) a 38% decrease in the number of
Predecessor Homesites sold in the Cumberland Cove Project, the Company's highest
priced Predecessor Homesite Project, and (2) a 43% increase in bulk sales of
Predecessor Homesites in Florida. In addition, the average sales price in the
Cumberland Cove Project decreased 42% in 1997 from approximately $20,300 in 1996
to approximately $11,800 in 1997 due to the mix of Predecessor Homesites sold.
The volume of Predecessor Homesites sold in the Cumberland Cove Project
decreased in 1997 because this Project was winding down and, accordingly, the
Company closed its on-site sales operation in September 1997. The volume of
Predecessor Homesites sales increased primarily due to the increase in the
number of bulk Predecessor Homesites sold.
As of December 31, 1997, the Company had under contract 129 Predecessor
Homesites for $806,000. As of December 31, 1996, the Company had under contract
approximately 475 Predecessor Homesites for $1.2 million.
The Predecessor Homesite sales gross margin percentage was 3.0% in 1997
compared to 22.6% in 1996. Predecessor Homesite sales margin was also adversely
affected in 1997 by the increase in the bulk sale of Predecessor Homesites
yielding lower margins to accelerate the disposal of the Predecessor Homesites.
PREDECESSOR TRACT. Revenues from Predecessor Tract sales
decreased $9.3 million in 1997 compared to 1996 primarily due to several large
sales in 1996. There were no comparable sales in 1997. As of December 31, 1997,
there were pending Predecessor Tract sales contracts or letters of intent
totaling approximately $3.4 million. As of December 31, 1996, there were
comparable pending Predecessor Tract sales contracts or letters of intent
totaling approximately $18.1 million.
The (12.3%) actual gross margin for Predecessor Tract in 1997 is
attributable principally to the Company's business plan to accelerate the
liquidation of Predecessor Assets. The 19.4% actual gross margin for Predecessor
Tract in 1996 generally reflects the previously targeted gross margin.
PREDECESSOR VERTICAL RESIDENTIAL UNITS. Single family home
sales revenues decreased $3.1 million in 1997 compared to 1996 due to a decrease
in closings from 36 in 1996 to 1 in 1997.
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Closings decreased because of the Company's decision in mid-1995 to begin
phasing out its single family home business in Predecessor communities, which
was substantially completed in 1996.
OTHER RESULTS OF OPERATIONS.
OTHER OPERATING REVENUES. Other operating revenues decreased
in 1997 compared to 1996 primarily due to the absence of revenues and expenses
from the Port Labelle utility system and the Julington Creek Plantation utility
system, both of which were sold in 1996. In addition, other operating revenues
in 1996 included $1.0 million of development impact fees.
INVENTORY VALUATION RESERVE CHARGES. Inventory valuation
reserve charges of $14.5 million in 1997 represented a reduction in the carrying
value of the Company's inventory based upon a review of the fair values. The
charges consisted of $10.9 million for Predecessor Tracts, $1.9 million for
Predecessor Homesites and $1.7 million for the Sabal Trace Project.
SELLING EXPENSES. Selling expenses decreased $5.0 million in
1997 compared to 1996 primarily due to lower direct selling expenses resulting
from a decrease in revenues. Selling expense as a percentage of real estate
sales increased from 10.6% in 1996 to 12.5% in 1997 primarily due to (1) lower
direct selling expenses associated with several large sales in 1996, including
the Julington Creek Plantation Project, and (2) lower revenues in 1997 over
which to spread fixed selling costs.
OTHER REAL ESTATE COSTS. Other real estate costs decreased by
$4.4 million in 1997 compared to 1996 due to (1) a decline in property taxes
associated with a reduction in land inventory not under development
corresponding to sales activity during the intervening period and (2) reduced
legal costs associated with supporting real estate activity.
COSTS OF BORROWING NET OF CAPITALIZED INTEREST. Costs of
borrowing net of capitalized interest decreased $1.2 million compared to 1996
principally due to a decrease in corporate debt resulting from the proceeds of
the Atlantic Gulf's Preferred Stock sales, which were substantially completed in
1997.
OTHER INCOME - REORGANIZATION RESERVES. Other income -
reorganization reserves of $1.1 million in 1997 represent the amortization of
the Company's utility connections reserve. Other income - reorganization
reserves of $16.0 million in 1996 included (1) a $4.1 million gain due to a
reduction in the Company's utility connections reserve in conjunction with the
Company's annual review of certain reorganization items and (2) a net gain of
$11.9 million from the recovery of funds from certain utility trust accounts.
OTHER INCOME - UTILITY CONDEMNATION. Other income - utility
condemnation in 1996 represented a gain of approximately $4.1 million on an
$18.75 million litigation settlement with the City of Port St. Lucie pursuant to
condemnation proceedings associated with the taking of the Company's Port St.
Lucie system.
OTHER INCOME - OTHER REORGANIZATION RESERVES. Other income -
other reorganization reserves consisted of gains of $2.5 million in 1997 and
$2.1 million in 1996 resulting from the resolution of certain reorganization
items. The $2.5 million gain in 1997 consisted of (1) a $706,000 gain due to the
reduction of the Company's Contract Receivables termination refunds reserve and
(2) adjustments of various other reorganization reserves, none of which were
individually significant. The $2.1 million gain in 1996
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included (a) a gain of $703,000 due to a reduction in the Company's Contract
Receivables future servicing reserve and (b) adjustments of various other
reorganization reserves, none of which were individually significant.
OTHER EXPENSE ITEMS. Other expense - miscellaneous of $810,000
in 1997 consisted of net gains and losses associated with various reserve
adjustments and settlements, none of which were individually significant. Other
income - miscellaneous of $2.3 million in 1996 included gains of (1)
approximately $1.3 million due to a reduction in the Company's environmental
reserve and (2) $1.0 million due to a reduction in the Mortgage Receivables net
of valuation reserve.
EXTRAORDINARY GAINS. During 1996, the Company recorded
extraordinary gains totaling $13.7 million consisting of (1) an extraordinary
gain of approximately $3.8 million due to the extinguishment of approximately
$1.9 million of 12% Notes and $1.9 million of Unsecured Cash Flow Notes; (2) an
extraordinary gain of approximately $3.9 million on the prepayment at a discount
of its Secured Cash Flow Notes for $40.0 million in cash plus warrants to
purchase up to 1.5 million shares of the Company's Common Stock at $6.50 per
share; and (3) an extraordinary gain of approximately $6.0 million due to the
extinguishment of approximately $4.2 million of 12% Notes and $1.8 million of
13% Notes, net of a $210,000 unamortized discount.
PREFERRED STOCK ACCRUAL. During 1997, the Company recorded a
$3.3 million accrual for dividends associated with its Preferred Stock. The
dividends were accumulated but unpaid as of December 31, 1997. The dividend rate
is 20% of the liquidation preference value of the Preferred Stock. The
liquidation preference value of the Preferred Stock is $10 per share, plus
accumulated and unpaid dividends. In addition, the Company accreted $427,000 of
the value of its Preferred Stock to the redemption amount in 1997. The total of
approximately $3.7 million of accrued Preferred Stock dividends and Preferred
Stock accretion was charged to contributed capital in the accompanying December
31, 1997 consolidated balance sheet.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. As of December 31, 1998, the Company's (1) cash and cash
equivalents totaled approximately $9.4 million and (2) restricted cash and cash
equivalents totaled $1.0 million, consisting primarily of (a) escrows for the
sale or development of real estate properties, (b) funds held in trust to pay
certain bankruptcy claims and (c) various other escrow accounts. Of the $225,000
increase in cash and cash equivalents during 1998, (i) $898,000 was provided by
investing activities and (ii) $319,000 was provided by operating activities,
partially offset by (iii) $992,000 was used in financing activities.
Cash used in operating activities includes approximately (1) $15.4
million for interest payments, (2) $4.3 million for property tax payments, (3)
$6.7 million for construction and development expenditures, (4) $24.9 million
related to property acquisitions and (5) $940,000 of fees associated with the
Company's refinancing efforts. Cash used in operating activities was offset in
part by net cash generated from real estate sales and other operations.
Cash provided by investing activities consisted primarily of $3.8
million of funds released from a utility trust account funded during the
reorganization proceedings and partially offset by $2.9 million of property
plant and equipment additions.
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Cash provided by financing activities includes proceeds of (1)
approximately $1.7 million from the issuance of Series A Preferred Stock and
related warrants and (2) $7.8 million of funds released to the Company by the
trustee for the 12% Notes issued in 1992 pursuant to the POR, which 12% Notes
matured on December 31, 1996 and were paid in full on January 3, 1997. In
addition, in 1998, the Company had net borrowings of $23.4 million under various
project financings and the Reducing Revolving Facility, (b) $5.9 million from
the financing of Mortgage Receivables and Contract Receivables and (c) $3.6
million of new project financings. These borrowings were partially offset by (a)
$23.8 million of principal payments that fully repaid the Reducing Revolving
Facility and Term Loan Facility in 1998, and (b) $1.7 million of net payments on
the Working Capital Facility.
JUNE 1998 DEBT RESTRUCTURING. On or about July 1, 1998, Atlantic Gulf
repaid the entire outstanding balances under (1) its Term Loan Facility with
Foothill Capital Corporation ("FOOTHILL"), consisting of approximately $13.3
million of principal and $171,000 of interest, and (2) its Reducing Revolving
Facility with Foothill, consisting of $3.7 million of principal and $35,000 of
interest, with $6.2 million of funds drawn on its Working Capital Facility with
Foothill and $11.0 million of funds borrowed from AGC-SP, Inc, a wholly-owned
special purpose subsidiary of Atlantic Gulf ("SP SUB" and the "SP SUB LOAN").
DECEMBER 1998 DEBT REFINANCING. Dated as of December 31, 1998,
effective on February 2, 1999, (1) Atlantic Gulf closed on its $39.5 million New
Revolving Loan Facility and its $26.5 million New Term Loan Facility
(collectively, the "NEW SENIOR LOAN FACILITIES"), (2) Atlantic Gulf entered into
amendments to its Secured Agreement and Investment Agreement with Apollo, (3)
SP-Sub canceled Atlantic Gulf's obligation to repay its $11 million SP Sub Loan
and (4) Apollo, the New Revolving Loan Lenders and the New Term Loan Lenders and
the collateral agent entered into a New Intercreditor Agreement. These
transactions are collectively referred to herein as the "DECEMBER 1998 DEBT
REFINANCING."
NEW REVOLVING LOAN FACILITY. The lenders (the "NEW REVOLVING
LOAN LENDERS") under Atlantic Gulf's New Revolving Loan Facility are DK
Acquisition Partners, L.P., Comac Partners, Halcyon/Alan B. Slifka Management
Co. LLC, East West Partners, Stonehill Investment Corp. and Anglo American
Financial and its participants. M. H. Davidson, LLC. ("MHD"), is the agent and
collateral agent.
The New Revolving Loan Facility will mature on August 1, 2000 and bears
interest at the rate of (1) eleven percent (11%) per annum (fifteen percent
(15%) per annum upon the occurrence and continuation of an event of default)
upon all amounts other than letter of credit guarantees and (2) fifteen percent
(15%) per annum (nineteen percent (19%) per annum upon the occurrence and
continuation of an event of default) upon all draws under letter of credit
guarantee amounts.
The aggregate outstanding borrowings under the New Revolving Loan
Facility are subject to a borrowing base limitation based on the value of
certain of the Company's assets. The New Revolving Loan Facility contains
standard and customary representations, warranties and covenants for a facility
of its type, size and term, including, a consolidated net worth covenant.
The $39.5 million commitment under the New Revolving Loan Facility will
automatically be reduced (1) by $4 million by March 31, 1999; (2) by an
additional $1 million by May 31, 1999; (3) by seventy five percent (75%) of the
net cash proceeds realized from certain bulk sales of lots and/or land in
certain eligible subdivision projects; (4) by an additional $1.7 million on each
of February 15, 2000, March 15, 2000 and April 15, 2000; and (5) by an
additional $2.3 million on each of May 15, 2000, June 15, 2000,
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and July 15, 2000. The remaining outstanding balance under the New Revolving
Loan Facility is due and payable in full on August 1, 2000. The Company is
currently working on closing several transactions, the proceeds from which will
be used to fund the March 31, 1999, commitment reduction. The Company is also in
the process of finalizing negotiation of an amendment/waiver with its New
Revolving Loan Lenders in the event it is unable to close one or more of these
transactions by March 31, 1999.
On the closing date, the Revolving Lenders delivered to the trustee for
Atlantic Gulf's 13% Notes $7.5 million of cash collateral to secure the payment,
when presented, of up to $7.5 million of the 13% Notes. The cash collateral,
which is treated as a letter of credit guarantee amount, is deemed to be part of
the New Revolving Loan Facility.
On the closing date, Atlantic Gulf paid (1) the collateral agent a
closing fee of $1.28 million and (2) the agent a letter of credit guarantee fee
of $150,000. Atlantic Gulf also has agreed to pay (a) the collateral agent a
servicing fee of $10,000 per month so long as any amounts remain outstanding
under the New Revolving Loan Facility and (b) the agent a second letter of
credit guarantee fee of $150,000 on the second anniversary of the effective date
of the New Revolving Loan Facility if any portion of the letter of credit
guarantee amount remains outstanding on that date.
NEW TERM LOAN FACILITY. The lenders (the "NEW TERM LOAN
LENDERS") under Atlantic Gulf's new term loan facility (the "NEW TERM LOAN
FACILITY") are Anglo American Financial and General Motors Employees Global
Group Pension Trust. Anglo American Financial is the agent, and MHD is the
collateral agent.
The New Term Loan Facility will mature on the earlier of February 1,
2002, or the date that is thirty (30) days prior to the first date on which any
of the holders of the Preferred Stock have the right to require Atlantic Gulf to
repurchase any shares of Preferred Stock and bears interest at the rate of
fifteen percent (15%) per annum (nineteen percent (19%) per annum upon the
occurrence, and continuation, of an event of default). The New Term Loan
Facility contains standard and customary representations, warranties and
covenants for a facility of its type, size and term, including a consolidated
net worth covenant.
On the closing date, Atlantic Gulf paid the agent a closing fee of $2.0
million.
AMENDMENTS TO THE SECURED AGREEMENT AND INVESTMENT AGREEMENT.
As part of the December 1998 Debt Refinancing:
1. Apollo consented to Atlantic Gulf entering into the New Senior
Loan Agreements and agreed to subordinate its collateral
interest in certain Company assets, and in exchange therefor:
a. Atlantic Gulf issued an $850,000 promissory note to
Apollo (the "$850,000 NOTE"). The $850,000 Note will
mature on February 1, 2002, and provides for current
payments of interest only at the rate of ten percent
(10%) per annum (fifteen percent (15%) per annum upon
the occurrence and continuation of an event of
default), monthly in arrears.
b. Atlantic Gulf issued a $1 million promissory note to
Apollo (the "$1 MILLION NOTE"). The $1 Million Note
will mature on February 1, 2002, and provides for
payments of interest only at the rate of ten percent
(10%) per annum (fifteen percent
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(15%) per annum upon the occurrence and continuation
of an event of default), monthly in arrears. Atlantic
Gulf has the obligation, under certain circumstances,
to prepay seventy five percent (75%) of the original
principal amount of the $ 1 Million Note by conveying
a 20% net profits interest in a specified project to
Apollo.
The $850,000 Note and $1 Million Note, both of which
are secured by certain Company assets, are together
referred to herein as the "NOTES".
c. Atlantic Gulf issued 500,000 shares of Common Stock
to Apollo (the "ADDITIONAL SHARES").
2. Apollo and Atlantic Gulf entered into amendments to the
Amended and Restated Secured Agreement and Amended and
Restated Investment Agreement to (a) conform such agreements
to the terms and conditions of the New Senior Loan Agreements,
(b) reflect the terms of the Apollo Notes, (c) delete all SP
Subsidiary provisions, (e) include the Additional Shares as
Registrable Securities and make all of Apollo's Registrable
Securities, Warrants and Notes freely transferable (subject to
the requirements of the applicable securities laws) and (f)
make certain other, technical conforming changes.
NEW INTERCREDITOR AGREEMENT. Atlantic Gulf's obligations under
the New Senior Loan Facilities and the Secured Agreement are fully secured by
security interests in substantially all of Atlantic Gulf's assets (the
"COLLATERAL") and guaranteed by certain of Atlantic Gulf's subsidiaries. In
connection with the December 1998 Debt Refinancing, Apollo, the New Revolving
Loan Lenders, the New Term Loan Lenders and MHD, as collateral agent, entered
into a new Intercreditor Agreement (the "NEW INTERCREDITOR AGREEMENT") pursuant
to which the parties agreed (1) that the liens of the parties upon the
Collateral would have the following priorities and rank: (a) the New Revolving
Loan Facility liens and obligations would have first priority, (b) the New Term
Loan Facility liens and obligations would have second priority and (c) the
Secured Agreement liens and obligations would have third priority and (2) to
certain repayment subordinations, standstill periods, blockage periods, payment
turnover provisions and related matters.
REPAYMENT OF WORKING CAPITAL FACILITY, 13% NOTES AND
RECEIVABLE DEBT. On February 2, 1999, the Company repaid (1) the entire
outstanding balance ($13.7 million) under its Working Capital Facility, (2) the
entire outstanding balance ($39.5 million) under its 13% Notes and (3) its
outstanding Mortgage Receivables Loans and Contract Receivables Loans ($7.8
million) with $32 million drawn under its New Revolving Loan Facility (including
$7.5 million of cash collateral treated as letter of credit guarantees), $26.5
million drawn under its New Term Loan Facility and $800,000 of other available
cash.
OTHER MATERIAL OBLIGATIONS COMING DUE IN 1999. In addition to the
mandatory reductions in the $39.5 million commitment under the New Revolving
Loan Facility in 1999, Atlantic Gulf's other material obligations coming due in
1999 include approximately $3 million in property taxes due March 31, 1999. The
Company's 1999 business plan contemplates approximately $144 million of
expenditures for development, construction and other capital improvements, a
substantial portion of which will be funded through individual project
development loans or joint venture arrangements, many of which are already in
place. If the Company is unable to obtain the capital resources to fund these
obligations and
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expenditures, the implementation of the Company's business plan will be
adversely affected, slowing the Company's anticipated revenue growth and
increasing the time necessary to achieve profitability. However, management
believes that the Company, through a combination of sources, will be able to
obtain the funds necessary to continue to implement its business plan and, at
the same time, satisfy its debt obligations as they become due.
SUBSEQUENT EVENTS
STRATEGIC TRANSACTION. On March 26, 1999, the Company announced that
(1) its Board of Directors had formed a Special Committee to explore strategic
alternatives to maximize stockholder value and (2) it has retained BT Alex.
Brown, a leading investment banking firm, to assist the Special Committee in
reviewing strategic transactions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The Financial Statements and supplemental data required under this ITEM
8. are provided as Exhibits under ITEM 14. below and are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
None.
PART III
The information required by PART III, ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT, PART III, ITEM 11. EXECUTIVE COMPENSATION, PART III, ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, and PART III,
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, is incorporated herein
by reference to any amendment filed hereto on Form 10-K/A or, alternatively, to
the Company's definitive Proxy Statement for its 1999 Annual Meeting of
Stockholders, which shall be filed with the Securities and Exchange Commission
within 120 days from the end of 1998.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM
8-K
(a) 1. FINANCIAL STATEMENTS
A. Consolidated Balance Sheets as of December 31, 1998
and 1997
B. Consolidated Statements of Operations for fiscal
years 1998, 1997 and 1996
C. Consolidated Statements of Cash Flows for fiscal
years 1998, 1997 and 1996
D. Consolidated Statements of Stockholders' Equity for
the fiscal years 1998, 1997 and 1996
2. FINANCIAL STATEMENT SCHEDULES REQUIRED TO BE FILED BY PART II,
ITEM 8 AND BY PART II, ITEM 14(D).
A. Schedule II - Valuation and Qualifying Accounts
3. EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K. See c. below.
(b) REPORTS ON FORM 8-K DURING THE LAST QUARTER OF FISCAL YEAR 1998
1. The Company filed a report on Form 8-K on December 11, 1998,
pursuant to Item 5, Other Events announcing that NASDAQ had
de-listed Atlantic Gulf's securities from the NASDAQ National
Market, effective as of the close of business on Thursday,
December 10, 1998.
(c) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K (THE EXHIBIT NUMBERS
BELOW CORRESPOND TO THE EXHIBIT NUMBERS IN ITEM 601 OF REGULATION S-K,
EXHIBIT TABLE):
3. ARTICLES OF INCORPORATION AND BYLAWS:
3.1. Amended and Restated Certificate of Incorporation of
Atlantic Gulf.(7)
3.2. Restated Bylaws of Atlantic Gulf, dated November 17,
1997 (the "Bylaws").(13)
3.3. Amendment to the Bylaws, dated March 24, 1999.
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:
4.1. Third Amended and Restated Revolving Loan Agreement,
dated as of December 31, 1998, by and among Atlantic
Gulf, the lenders signatory thereto and M.H.
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Davidson & Co., LLC ("MHD"), as agent and collateral
agent (the "Revolving Loan Agreement").
4.2. Term Loan Agreement, dated as of December 31, 1998,
by and among by and among Atlantic Gulf, the lenders
signatory thereto, Anglo American Financial, as
agent, and MHD as collateral agent (the "Term Loan
Agreement").
4.3. Secured Agreement, dated as of February 7, 1997,
amended and restated as of May 15, 1997, by and among
Atlantic Gulf, certain of its subsidiaries, AP-AGC,
LLC ("Apollo"), and MHD, as collateral agent (the
"Amended and Restated Secured Agreement").(14)
4.4 First Amendment to Amended and Restated Secured
Agreement, dated as of December 31, 1998, by and
among Atlantic Gulf, certain of its subsidiaries,
Apollo and MHD, as collateral agent.
4.5. Investment Agreement, dated as of February 7, 1997,
amended as of March 20, 1997, amended and restated as
of May 15, 1997, by and between Atlantic Gulf and
Apollo (the "Investment Agreement").(9)
4.6. First Amendment to Amended and Restated Investment
Agreement, dated as of December 31, 1998, by and
among Atlantic Gulf and Apollo.
4.7. Intercreditor Agreement, dated as of December 31,
1998, by and among the Revolving Loan Agreement
lenders, the Term Loan Agreement lenders, the Secured
Agreement obligee and MHD, as collateral agent.
4.8 Form of Warrant granted on September 30, 1996.(6)
4.9 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 ten percent (10) 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. MATERIAL CONTRACTS:
10.1 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)
10.2 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)
10.3 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)
10.4 Atlantic Gulf's 401(k) Plan.(2)
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10.5 Atlantic Gulf's Employee Stock Option Plan as
amended, as adopted by Atlantic Gulf's Board on April
6, 1993, as approved by Atlantic Gulf's common
stockholders at the 1993 Annual Meeting of
Stockholders (the "Employee Stock Option Plan"). (3)
10.6 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)
10.7 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)
10.8 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)
10.9 Non-Employee Directors' Stock Option Plan as approved
by Atlantic Gulf's common stockholders at the 1995
Annual Meeting of Shareholders.(5)
10.10 Atlantic Gulf 1996 Non-Employee Directors' Stock
Plan.(11)
10.11 Registration Rights Agreement dated as of September
30, 1996 between the Atlantic Gulf and the lenders
set forth in Exhibit A of the agreement.(6)
10.12 Utility Lot Trust Agreement, dated as of December 26,
1996, between Atlantic Gulf and the Division of
Florida Land Sales, Condominiums, and Mobile Homes,
and Peninsula State Title, as Trustee.(8)
10.13 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 and
First Union National Bank of Florida, as Trustee.(8)
10.14 First Amendment to the Restated, Amended and
Consolidated Trust Agreement, dated as of December
26, 1996, amended as of December 30, 1996.(8)
10.15 Employment Agreement, dated November 17, 1997,
effective July 1, 1997, between Atlantic Gulf 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)
10.16 Modification of Employment Agreement between the
Company and J. Larry Rutherford, dated December 27,
1997.(13)
43
<PAGE>
10.17 Employment Agreement, dated November 19, 1997,
effective November 17, 1997, between Atlantic Gulf
and John Laguardia, with form of Stock Option Plan
and Agreement for John Laguardia.(12)
10.18 Employment Agreement, dated November 17, 1997,
effective July 1, 1997, between Atlantic Gulf 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)
10.19 Amendment to the Employee Stock Option Plan, as
approved by Atlantic Gulf's common stockholders at
the 1997 Annual Meeting of Stockholders.
10.20 Amendment of the Non-Employee Directors' Stock Plan,
dated as of April 1, 1998.
10.21 Amendment of the Non-Employee Directors' Stock Option
Plan, dated as of April 15, 1998.
10.22 Order Granting Government's Motion for Early
Termination of Compliance Program and Special Master,
dated as of December 9, 1998.
21. SUBSIDIARIES OF THE COMPANY
23. ACCOUNTANTS' CONSENT - Ernst & Young LLP
27. FINANCIAL DATA SCHEDULE
- - ----------
(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.
(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) Reserved.
(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.
44
<PAGE>
(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.
(14) These exhibits are incorporated herein by reference to
Atlantic Gulf's Amended Annual Report on Form 10-K/A 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 Stockholders 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.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
ATLANTIC GULF COMMUNITIES CORPORATION
By: /s/ THOMAS W. JEFFREY
-------------------------------------------------
Thomas W. Jeffrey
Executive Vice President
and Chief Financial Officer
Date: March 31, 1999
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated:
/s/ J. LARRY RUTHERFORD Date: March 31, 1999
- - ------------------------------
J. Larry Rutherford
Chairman of the Board,
President and Chief
Executive Officer,
Director
/s/ PAULA J. COOK Date: March 31, 1999
- - ------------------------------
Paula J. Cook
Vice President and Controller
(Principal Accounting Officer)
/s/ GERALD N. AGRANOFF Date: March 31, 1999
- - ------------------------------
Gerald N. Agranoff
Director
/s/ JAMES M. DEFRANCIA Date: March 31, 1999
- - ------------------------------
James M. DeFrancia
Director
<PAGE>
/s/ STUART F. KOENIG Date: March 31, 1999
- - ------------------------------
Stuart F. Koenig
Director
/s/ RICARDO KOENIGSBERGER Date: March 31, 1999
- - ------------------------------
Ricardo Koenigsberger
Director
/s/ CHARLES K. MACDONALD Date: March __, 1999
- - ------------------------------
Charles K. MacDonald
Director
/s/ LEE NEIBART Date: March 31, 1999
- - ------------------------------
Lee Neibart
Director
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Atlantic Gulf Communities Corporation and Subsidiaries
Consolidated Financial Statements
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Common Stockholders' Equity
for the Years Ended December 31, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-7
Consolidated Financial Statement Schedule for each of the
periods in the three years ended December 31, 1998:
Schedule II - Valuation and Qualifying Accounts S-1
All schedules other than those indicated in the index have been omitted
as the required information is inapplicable or not material, or the
information is presented in the Consolidated Financial Statements
and Notes thereto.
<PAGE>
Report of Ernst & Young LLP
Independent Certified Public Accountants
Board of Directors and Stockholders
Atlantic Gulf Communities Corporation
We have audited the accompanying consolidated balance sheets of Atlantic Gulf
Communities Corporation and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of operations, common stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1998. Our audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Atlantic Gulf Communities Corporation and subsidiaries at December 31, 1998 and
1997, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Ernst & Young LLP
Miami, Florida
March 11, 1999, except for the last
paragraph of Note 20, as to
which the date is March 26, 1999.
F-2
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1998 and 1997
(in thousands, except share amounts and par value)
1998 1997
--------- ---------
Assets
------
<S> <C> <C>
Cash and cash equivalents $ 9,413 $ 9,188
Restricted cash and cash equivalents 1,041 1,713
Contracts receivable, net 4,109 6,336
Mortgages, notes and other receivables, net 29,273 34,910
Land and residential inventory 166,870 130,506
Property, plant and equipment, net 3,950 1,754
Other assets, net 15,150 18,664
--------- ---------
Total assets $ 229,806 $ 203,071
========= =========
Liabilities and Stockholders' (Deficit) Equity
----------------------------------------------
Accounts payable and accrued liabilities $ 17,533 $ 13,615
Other liabilities 8,207 10,046
Notes and mortgages payable 151,805 132,408
--------- ---------
177,545 156,069
--------- ---------
Redeemable Preferred Stock
Series A, 20%, $.01 par value, 2,500,000
shares authorized; 2,500,000 shares issued
` and outstanding, having a liquidation
preference of $32,706, as of December 31,1998;
2,326,475 shares issued and outstanding, having
a liquidation preference of $25,254,
as of December 31, 1997 30,403 22,378
Series B, 20%, $.01 par value; 2,000,000
shares authorized; 2,000,000 shares issued
and outstanding, having a liquidation
preference of $25,898 and $21,307 as of
December 31, 1998 and 1997, respectively 24,417 19,306
--------- ---------
54,820 41,684
--------- ---------
Commitments and Contingencies
Common stockholders' (deficit) equity
Common stock, $.10 par value, 70,000,000
shares authorized; 11,933,359 and 11,607,526
shares issued as of December 31, 1998 and
1997, respectively 1,193 1,161
Contributed capital 117,994 128,930
Accumulated deficit (115,379) (119,052)
Accumulated other comprehensive loss (6,351) (5,712)
Treasury stock, 158,536 and 86,277 shares, at cost (16) (9)
--------- ---------
Total common stockholders' (deficit) equity (2,559) 5,318
--------- ---------
Total liabilities and common stockholders' (deficit) equity $ 229,806 $ 203,071
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31, 1998, 1997 and 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Real estate sales:
Homesite $ 17,276 $ 24,606 $ 52,910
Commercial 55,525 32,029 53,693
Vertical residential units -- 10,984 20,962
--------- --------- ---------
Total real estate sales 72,801 67,619 127,565
Other operating revenue 6,017 3,011 4,919
Interest income 4,937 6,018 6,295
--------- --------- ---------
Total revenues 83,755 76,648 138,779
--------- --------- ---------
Costs and expenses:
Direct cost of real estate sales:
Homesite 14,783 23,372 42,258
Commercial 44,970 35,787 44,331
Vertical residential units -- 13,033 16,725
--------- --------- ---------
Total direct cost of real estate sales 59,753 72,192 103,314
Inventory valuation reserves 195 14,457 12,283
Selling expense 6,510 8,502 13,525
Operating expenses 2,010 1,505 1,986
Real estate costs 9,598 14,984 19,384
General and administrative expense 9,908 12,297 12,410
Cost of borrowing, net of amounts capitalized 4,375 12,222 13,430
Other expense 853 1,463 512
--------- --------- ---------
Total costs and expenses 93,202 137,622 176,844
--------- --------- ---------
Operating loss (9,447) (60,974) (38,065)
--------- --------- ---------
Other income (expense):
Reorganization reserves
Utility trust accounts 3,666 -- 11,859
Utility connection reserve 1,063 1,063 4,097
Contract receivables termination refunds 104 706 (112)
Refund of unclaimed expired notes 8,549 -- --
Other reorganization reserves -- 1,761 2,246
Utility condemnation -- -- 4,122
Land mortgages receivable valuation discount (184) (92) 1,020
Miscellaneous (78) (810) 2,282
--------- --------- ---------
Total other income (expense) 13,120 2,628 25,514
--------- --------- ---------
Income (loss) before extraordinary items 3,673 (58,346) (12,551)
Extraordinary gains on extinguishment of debt -- -- 13,732
--------- --------- ---------
Net income (loss) 3,673 (58,346) 1,181
--------- --------- ---------
Less:
Accrued preferred stock dividends 10,309 3,296 --
Accretion of preferred stock to redemption amount 1,332 427 --
--------- --------- ---------
11,641 3,723 --
--------- --------- ---------
Net (loss) income applicable to common stock $ (7,968) $ (62,069) $ 1,181
========= ========= =========
Basic and diluted earnings per common share:
Net (loss) income per common share $ (0.68) $ (5.82) $ .12
========= ========= =========
Weighted average common shares outstanding 11,640 10,661 9,709
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,673 $ (58,346) $ 1,181
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 4,807 5,033 5,244
Other income (3,259) (2,396) (19,337)
Loss from sale of property, plant and equipment 3 36 94
Gains from utility condemnations or sales -- -- (5,504)
Extraordinary gains from extinguishment of debt -- -- (13,732)
Reorganization items 746 549 (1,477)
Inventory valuation reserves 195 14,457 12,283
Land acquisitions (24,875) (21,423) (9,338)
Other net changes in assets and liabilities:
Restricted cash 672 4,321 2,427
Receivables 7,499 19,351 (403)
Land and residential inventory 6,702 45,091 61,694
Other assets 3,514 (9,401) (12,367)
Accounts payable and accrued liabilities 3,866 (3,046) (2,753)
Other liabilities (3,224) (5,648) (2,731)
Other, net -- (103) (273)
--------- --------- ---------
Net cash provided by (used in) operating activities 319 (11,525) 15,008
--------- --------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (2,876) (455) (228)
Proceeds from sale of property, plant and equipment -- 1 1,885
Proceeds from utility condemnations or sales -- -- 28,699
Funds withdrawn from utility trust accounts 3,774 12,109 --
--------- --------- ---------
Net cash provided by investing activities 898 11,655 30,356
--------- --------- ---------
Cash flows from financing activities:
Borrowings under credit agreements 71,412 120,097 123,848
Repayments under credit agreements (74,531) (168,860) (161,477)
Principal payments on other liabilities -- (2,494) (4,250)
Proceeds from issuance of common stock 632 10,000 --
Proceeds from issuance of preferred stock 1,495 43,265 --
Proceeds from exercise of stock options -- -- 5
--------- --------- ---------
Net cash (used in) provided by financing activities (992) 2,008 (41,874)
--------- --------- ---------
Increase in cash and cash equivalents 225 2,138 3,490
Cash and cash equivalents at beginning of period 9,188 7,050 3,560
--------- --------- ---------
Cash and cash equivalents at end of period $ 9,413 $ 9,188 $ 7,050
========= ========= =========
Supplemental cash flow information:
Income tax payments $ -- $ 103 $ --
========= ========= =========
Interest payments, net of amounts capitalized $ 322 $ 6,552 $ 12,268
========= ========= =========
Reorganization item payments $ 46 $ 1,756 $ 5,099
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Common Stockholders' Equity
Years Ended December 31, 1998, 1997 and 1996
(in thousands)
Accumulated
Common Stock Other
------------- Contributed Accumulated Comprehensive Treasury
Shares(1) Amount Capital Deficit Loss Stock Total
------ ------ ------- ------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------------------------------
Balance, January 31, 1996 9,772 $ 977 $120,115 $ (61,887) $(4,825) $ - $ 54,380
- - -------------------------------------------------------------------------------------------------------------------------------
Net income - - - 1,181 - - 1,181
Minimum pension liability adjustment - - - - (1,175) - (1,175)
--------
Comprehensive income 6
--------
Stock returned (86) - - - - (9) (9)
Shares issued under director stock plan 18 2 98 - - - 100
Warrants issued to pay down Secured
Cash Flow Notes - - 1,875 - - - 1,875
Exercise of stock options 1 - 5 - - - 5
Shares issued to director as
recapitalization committee fee 4 1 30 - - - 31
- - -------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 9,709 980 122,123 (60,706) (6,000) (9) 56,388
- - -------------------------------------------------------------------------------------------------------------------------------
Net loss - - - (58,346) - - (58,346)
Minimum pension liability adjustment - - - - 288 - 288
--------
Comprehensive loss (58,058)
--------
Shares issued under director stock plan 36 3 189 - - - 192
Common shares issued 1,776 178 9,822 - - - 10,000
Proceeds from issuance of warrants - - 519 - - - 519
Accrued preferred stock dividends - - (3,296) - - - (3,296)
Preferred stock accretion - - (427) - - - (427)
- - -------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 11,521 1,161 128,930 (119,052) (5,712) (9) 5,318
- - -------------------------------------------------------------------------------------------------------------------------------
Net income - - - 3,673 - - 3,673
Minimum pension liability adjustment - - - - (639) - (639)
--------
Comprehensive income 3,034
--------
Stock returned (72) - - - - (7) (7)
Shares issued under director stock plan 43 4 101 - - - 105
Common shares issued 283 28 583 - - - 611
Proceeds from issuance of warrants - - 21 - - - 21
Accrued preferred stock dividends - (10,309) - - - (10,309)
Preferred stock accretion - - (1,332) - - - (1,332)
- - -------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 11,775 $ 1,193 $117,994 $ (115,379) $(6,351) $(16) $ (2,559)
- - -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
(1) Net of treasury stock shares.
F-6
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) GENERAL. Atlantic Gulf Communities Corporation's
("Atlantic Gulf" or the "Company") core business consists of three
principal business lines: (1) "Primary Market Operations," consisting
of the acquisition, development and sale of real estate projects such
as single family lots, multi-family lots/units, and residential tract
sales ("Primary Projects") containing residential homesite components
("Homesites") and/or non-residential components, such as commercial,
industrial, office and institutional ("Commercial Development') in
primary markets in Florida and selected primary markets in the
southeastern United States ("Primary Markets"); (2) "Luxury/Resort
Operations," consisting of the acquisition, development and sale of
real estate projects ("Luxury/Resort Projects") involving one or more
of the following activities: Homesite development, construction of
"Vertical Residential Units" (i.e., single family housing, condominiums
and timeshare units), and construction and operation of equity golf
clubs and other amenities ("Amenities") in selected markets in Florida
and Colorado ("Luxury/Resort Markets"); and (3) "Other Operations,"
consisting principally of (a) "Environmental Services," consisting of
the provision of environmental services to third parties on a contract
basis and (b) "Receivables Portfolio Management," consisting of
portfolio management of primarily contracts receivables and mortgages
receivables. The Company's (i) Primary Markets and Luxury/Resort
Markets are referred to as its "Core Markets" and (ii) Primary Projects
and Luxury/Resort Projects are referred to as its "Core Projects."
The Company is also engaged in the orderly disposition of
scattered predecessor homesites ("Predecessor Homesites") and tracts
("Predecessor Tracts") located in secondary markets in Florida and
Tennessee (collectively, "Predecessor Assets"). The continuing
disposition of Predecessor Assets is a run-off business and not part
of the Company's core business.
(b) CONSOLIDATION. The consolidated financial statements
include the accounts of the Company and all majority-owned subsidiaries
controlled by the Company. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(c) USE OF ESTIMATES. The preparation of the financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that effect the
amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
(d) REORGANIZATION. In April 1990 (the "Petition Date"),
Atlantic Gulf's predecessor corporation ("Predecessor Company") and
certain of its subsidiaries filed for reorganization under Chapter 11
of the United States Bankruptcy Code. The Predecessor Company's Plan of
Reorganization ("POR") was confirmed on March 27, 1992 by the
Bankruptcy Court and became effective on March 31, 1992 ("Effective
Date"). Atlantic Gulf, as the successor Company, adopted a new charter
and business plan.
F-7
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(e) SALES REVENUES AND COSTS OF SALES. Revenue from sales of
residential units (other than sales of Regency Island Dunes ("Regency
Island Dunes") condominium units) is recognized when the earnings
process is complete. Revenue from the sale of Regency Island Dunes
condominium units was recognized using the percentage-of-completion
method. Earned revenue was based on the percentage of costs incurred to
date to total estimated costs to be incurred. This percentage was then
applied to the expected revenue associated with units that had been
sold to date. Revenue from the sale of land is recognized when (i) the
cash received is at least 20% of the selling price (10% for retail land
sales), (ii) the earnings process is complete and (iii) the collection
of any remaining receivable is reasonably assured.
Cost of sales of residential units (other than Regency
condominium sales) is determined on a specific identification basis.
Cost of sales of Regency condominium units was determined using the
percentage-of-completion method. Cost of sales of land is determined on
a Project basis, using the relative sales value method.
(f) INVENTORY. Costs capitalized are allocated on a specific
Project identification basis. Residential unit costs are accounted for
on a specific identification basis and all inventory is stated at cost
or at values determined in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.
Inventory under development and held for future development is
evaluated at least quarterly for impairment if impairment indicators
are present. An impairment write-down to fair value is made if the
estimated undiscounted cash flows from an item of inventory are less
than the carrying amount of such inventory. Inventory that is
substantially complete and ready for its intended use is carried at the
lower of carrying amount or fair value less cost to sell. The
determination of whether the carrying amount of inventory requires a
write-down is based on an evaluation of each individual parcel
(g) DEPRECIATION. Depreciation and amortization is provided on
a straight-line basis on the following assets:
Estimated
useful lives in
years
---------------
Land improvements 5 to 33
Buildings 10 to 40
Fixtures and equipment 3 to 10
Maintenance and repairs are charged to income as incurred.
Renewals and betterments to owned properties are capitalized.
Betterments to leased properties are capitalized and amortized over the
shorter of the terms of the leases or the lives of the betterments.
(h) INCOME TAXES. Income taxes have been provided using the
liability method in accordance with SFAS No. 109, ACCOUNTING FOR
INCOME TAXES.
F-8
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(i) CAPITALIZED INTEREST. The Company capitalizes interest on
Core Projects under development and joint ventures accounted for on the
equity method on a specific Project identification basis. Capitalized
interest approximated $15,130,000, $7,804,000 and $5,693,000 for 1998,
1997 and 1996, respectively.
(j) CASH AND CASH EQUIVALENTS. The Company includes in cash
and cash equivalents all highly liquid debt instruments purchased with
a maturity of three months or less. The credit risk associated with
cash and cash equivalents is considered low due to the high quality of
the financial instruments in which these assets are invested.
Restricted cash and cash equivalents include amounts held in
sale escrow accounts, development cash collateral accounts, funds in a
trust to pay certain bankruptcy claims and various other escrow
accounts.
(k) DEFERRED DEBT ISSUANCE COSTS. Costs associated with the
issuance of the Company's various debt instruments or closing of other
financing transactions have been deferred and are being amortized over
the term of the related debt. Amortization of deferred debt issuance
costs, included in cost of borrowing, net in the accompanying
consolidated statements of operations, was $4,130,000, $1,463,000 and
$1,187,000 for 1998, 1997 and 1996, respectively.
(l) REPORTING ON ADVERTISING COSTS. The Company expenses
advertising costs as incurred. The Company recognized advertising
expenses of $1,498,000, $1,608,000 and $3,577,000 for 1998, 1997 and
1996, respectively, and these expenses are included in selling and
other real estate costs in the accompanying consolidated statements of
operations. The Company did not incur any direct response advertising
cost, as defined by SOP 93-7, during the period.
(m) ACCOUNTING FOR STOCK-BASED COMPENSATION. The Company will
continue to account for stock-based compensation plans under the
provisions of APB 25 - Accounting for Stock Issued to Employees. The
Company discloses the pro forma information required for stock-based
compensation plans in accordance with SFAS No. 123, Accounting for
Stock Based Compensation.
(n) EARNINGS PER COMMON SHARE. Basic and diluted earnings per
share is calculated and presented to conform with the requirements of
SFAS No. 128, Earnings Per Share.
(o) RECENT ACCOUNTING PRONOUNCEMENTS. As of January 1, 1998,
the Company adopted SFAS No. 130, Reporting Comprehensive Income. SFAS
No. 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this
Statement had no impact on the Company's net loss or shareholders'
equity. SFAS No. 130 requires unrealized gains or losses on the
Company's minimum pension liability adjustments, which prior to
adoption were reported separately in shareholders' equity, to be
included in other comprehensive income. The Company has elected to
report comprehensive income in the consolidated statements of
stockholders' equity. Prior year amounts have been reclassified to
conform to the requirements of SFAS No. 130.
Effective January 1, 1998, the Company adopted the Financial
Accounting Standards Board's SFAS No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 superseded SFAS
No. 14, FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE. SFAS
No. 131
F-9
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
establishes standards for the way that public business enterprises
report information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial reports. SFAS
No. 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The
adoption of SFAS No. 131 did not affect results of operations or
financial position. See Note 19.
During 1998, the Company adopted SFAS No. 132, EMPLOYERS'
DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS, that
supersedes the disclosure requirements of SFAS No. 87, EMPLOYERS'
ACCOUNTING FOR PENSIONS, and SFAS No. 106, EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. The Company adopted SFAS
No. 132 on January 1, 1998. This statement revises employers'
disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of those plans.
(p) RECLASSIFICATION. Certain amounts in the consolidated
financial statements have been reclassified to conform with the 1998
presentation.
(2) RECEIVABLES PORTFOLIO
The receivables portfolio consists of:
(a) CONTRACT RECEIVABLES. At December 31, Contract
Receivables consisted of the following (in thousands of dollars):
1998 1997
-------- --------
Contract Receivables, gross $ 4,551 $ 7,347
Reserve for estimated future cancellations,
net of estimated land recoveries - (244)
Valuation discounts to yield 15% (442) (767)
-------- --------
$ 4,109 $ 6,336
======== ========
Stated interest rates on the Contract Receivables outstanding
at December 31, 1996, 1997 and 1998 ranged from 4% to 12.5% (averaging
approximately 7.0%). The original terms of the Contract Receivables
were 10 to 12 years.
Total future cancellations are estimated at $550,000 and
$1,128,000 as of December 31, 1998 and 1997, respectively, based on
prior cancellation experience. When a contract cancels, the Company
recovers/restores the Predecessor Asset to inventory at its current
fair value. Total future recoveries are estimated at $550,000 and
$884,000 as of December 31, 1998 and 1997, respectively. Based on
actual collection and cancellation activity, the estimated future
cancellations and recoveries were adjusted resulting in net gains of
$141,000 and $47,000 in 1998 and 1997, respectively, and a net loss of
$395,000 in 1996 recorded in other income (expense) in the accompanying
consolidated statements of operations. There are no significant
concentrations of credit risk associated with the Contract Receivables.
F-10
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company amortizes the valuation discounts over the
expected life of the Contract Receivables. This amortization, included
in results of operations in the accompanying consolidated statements of
operations, amounted to $325,000, $673,000 and $1,153,000 for 1998,
1997 and 1996, respectively. The valuation discounts were increased by
$44,000 in 1998 due to lower than anticipated collection activity in
1998 resulting in a loss of $44,000 recorded in other income (expense)
in the accompanying consolidated statements of operations. The
valuation discounts were reduced by $106,000 in 1997 due to higher than
anticipated collection and cancellation activity since the Effective
Date resulting in a gain of $106,000 recorded in other income (expense)
in the accompanying consolidated statements of operations.
As of December 31, 1998, scheduled principal collections on
the Contract Receivables for the next five years ending December 31,
2003 and thereafter are as follows: 1999 - $1,853,000, 2000 -
$1,335,000, 2001 - $837,000, 2002 - $369,000, 2003 - $109,000 and
thereafter - $48,000.
The Contract Receivables serve as collateral for a portion of
the Company's indebtedness (see Note 8).
(b) MORTGAGES AND OTHER RECEIVABLES. At December 31, 1998,
Mortgages and Other Receivables, net consisted of (in thousands of
dollars):
1998 1997
---------- ---------
Mortgage Receivables,
net of valuation reserves of
$2,483 and $2,605 $ 20,246 $ 28,091
Sunset Lakes Receivable 1,794 1,193
Jupiter Ocean Grande Receivable 2,478 1,269
Other Receivables 4,755 4,357
--------- ---------
$ 29,273 $ 34,910
========= =========
(i) MORTGAGE RECEIVABLES. The Mortgage Receivables
are typically three to five year notes using 15-20 year amortization
schedules with a balloon payment at the end. Most Mortgage Receivables
are secured by Predecessor Tracts. The stated interest rate on Mortgage
Receivables is typically prime plus two percent. The Company has
established a reserve for estimated future delinquencies on its
Mortgage Receivables. The value of the land securing the Mortgage
Receivables is estimated to equal or exceed the net book value of the
related receivables as adjusted by valuation reserves.
The Company entered into two-secured borrowing transactions
(one in March 1997 and another in December 1997) with the First
National Bank of Boston ("BankBoston") pursuant to which the Company
(i) borrowed approximately $7.0 million and $5.2 million, respectively,
from
F-11
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
BankBoston and (ii) transferred approximately $9.3 million and $6.9
million, respectively, of Mortgage Receivables to BankBoston as
collateral for the borrowings. The Company financed an additional $1
million net amount of Mortgage Receivables under the agreement in
January 1998 for approximately $0.8 million. The Company used the
proceeds from these transactions to reduce its corporate debt and to
fund ongoing operations. These borrowings were subsequently repaid on
February 2, 1999. See Note 20.
In July 1996, the Company sold approximately $19.8 million of
Mortgage Receivables to a limited partnership financed by Harbourton
Residential Capital Company, Ltd. ("Harbourton"). The Company received
approximately $13.3 million at closing, plus a residual interest in the
limited partnership. The Company used the proceeds from this
transaction to reduce corporate debt and to fund ongoing operations
(see Note 8). These borrowings were subsequently repaid on February 2,
1999. See Note 20.
As part of a settlement with certain Predecessor Homesite
customers, the Company established various trusts. The Company funded
these trusts with cash, stock and notes based on estimates of the
costs of its future improvement obligations. The Company periodically
assesses the adequacy of the property in the trusts and reserves and
any excess or deficiency accrues to the benefit or becomes an
obligation of the Company (see Note 12). In December 1996, it was
determined that approximately $12.1 million in cash plus $6.2 million
of notes could be recovered from various utility trusts. A receivable
for the $12.1 million, which was received in January 1997, was
recorded as of December 31, 1996, and a gain of $11.9 million, net of
expenses, was recorded in other income (expense) in the accompanying
consolidated statements of operations.
(ii) SUNSET LAKES RECEIVABLE. The Sunset Lakes
Receivable consists of a management fee accrual from the Sunset Lakes
JV of $1,174,000 and $521,000 in 1998 and 1997, respectively, of which
$653,000 and $458,000 were earned in 1998, and 1997, respectively. The
Sunset Lakes Receivable also includes $620,000 and $672,000 as of
December 31, 1998 and 1997 respectively, of interest accrued on amounts
loaned by one of the Company's consolidated subsidiaries to the Sunset
Lakes JV Project.
(iii) JUPITER OCEAN GRANDE RECEIVABLE. The Jupiter
Ocean Grande Receivable consists of a $2,271,000 and a $1,186,000 loan
to the Jupiter Ocean Grande JV Project plus $206,000 and $83,000 of
accrued interest for 1998 and 1997, respectively.
(c) SCHEDULED COLLECTIONS. Scheduled collections of principal
on Mortgages and Other Receivables for the next five years ending
December 31, 2003 and thereafter are as follows: 1999 - $5,676,000,
2000 - $3,484,000, 2001 - $4,034,000, 2002 - $5,243,000, 2003 -
$2,630,000 and
F-12
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
thereafter - $213,000. Substantially all other receivables are
non-interest bearing and have no stated maturity.
(d) Collateral. Substantially all of the Mortgages and Other
Receivables serve as collateral for a portion of the Company's
indebtedness (see Note 8).
(3) LAND AND RESIDENTIAL INVENTORY
(a) General. At December 31, land and residential inventory
consisted of the following (in thousands of dollars):
1998 1997
--------- ---------
Primary Market Operations $ 48,720 $ 39,975
Luxury/Resort Operations 81,806 34,867
Predecessor Assets 41,259 70,508
Other 950 1,772
--------- ---------
Gross Inventory 172,735 147,122
Valuation Reserves (5,865) (16,616)
--------- ---------
Total $ 166,870 $ 130,506
========= =========
(b) NET VALUATION RESERVES. Land and residential inventory are
net of net valuation reserves of $5.1 million and $15.6 million as of
December 31, 1998 and 1997, respectively. In conjunction with the
Company's reviews in 1998, 1997 and 1996 of the fair values associated
with its land and residential inventory, the Company provided
additional net valuation reserves to reduce the carrying value of its
land and residential inventory in the amounts of $195,000, $14.5
million and $10.4 million for 1998, 1997 and 1996, respectively, which
were charged to land and residential inventory valuation reserves in
the accompanying consolidated statements of operations.
(c) ENVIRONMENTAL RESERVES. Land and residential inventory
also is net of environmental reserves of $770,000 and $950,000 as of
December 31, 1998 and 1997, respectively. See Note 12. Based on a
review of the environmental reserve and recent changes in Florida state
laws, this reserve was reduced by $180,000, $250,000 and $1.3 million
in 1998, 1997 and 1996, respectively, and recorded in other income
(expense) in the accompanying consolidated statements of operations.
(d) CORE PROJECTS ACQUIRED IN 1998. In 1998, the Company
acquired the following Core Projects:
F-13
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(i) In April 1998, the Company acquired and sold the
Dave's Creek Project, in Forsythe County, Georgia. The project was sold
for approximately $27.3 million, with a cost of approximately $23.2
million.
(ii) In September 1998, the Company acquired the
Aspen Springs Ranch Project, in Glenwood Springs, Colorado, for
approximately $17.8 million, of which $2.0 million was paid in cash and
the balance was financed by an acquisition loan.
(e) CORE PROJECTS ACQUIRED IN 1997. In 1997, the Company
acquired the following Core Projects:
(i) In June 1997, the Company acquired the Riverwalk
Tower Project, in Fort Lauderdale, Florida, for approximately $5.6
million, of which $2.6 million was financed by an acquisition loan and
the balance was paid for in cash.
(ii) In July 1997, the Company acquired the Trails of
West Frisco Project in Frisco, Texas, for approximately $7.5 million,
which was paid for in cash.
(iii) In August 1997, the Company acquired the Saxon
Woods Project, in Orlando, Florida, for approximately $2.9 million, of
which $1.3 million was financed by an acquisition loan and the balance
was paid for in cash.
(iv) In the third quarter of 1997, the Company
acquired an additional 551 acres (bringing its total number of acres
owned to approximately 868) in its West Bay Club Project for
approximately $13.7 million, of which $8.7 was financed with seller
financing secured by mortgages on the property and the balance was paid
for in cash. The seller financed amounts are non-cash financing
activities and, therefore, are not reflected in the accompanying
consolidated statements of cash flows.
(f) Collateral. Substantially all of the Company's land and
residential inventory serves as collateral for a portion of the
Company's indebtedness (see Note 8) and certain of its other
liabilities and commitments (see Notes 7 and 12).
F-14
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) PROPERTY, PLANT AND EQUIPMENT
(a) GENERAL. At December 31, property, plant and equipment,
net, at cost, consisted of (in thousands of dollars):
1998 1997
------ ------
Land and improvements $ 87 $ 80
Buildings 1,227 1,345
Fixtures and equipment 4,155 3,402
Accumulated depreciation (3,680) (3,211)
Construction in progress 2,161 138
------ ------
$3,950 $1,754
====== ======
(b) UTILITY SYSTEMS SOLD IN 1996. During 1996, the Company
sold its two remaining utility systems.
(i) PORT LABELLE UTILITY SYSTEM. In February 1996,
the Company sold its Port LaBelle utility system to Hendry County for
$4.5 million resulting in a gain of $686,000 which is included in other
income (expense) in the accompanying consolidated statements of
operations. The Company used the proceeds to repay indebtedness.
(ii) JULINGTON CREEK UTILITY SYSTEM. In June 1996,
the Company sold its Julington Creek utility system for $6.0 million
resulting in a gain of $696,000 which is included in other income
(expense) in the accompanying consolidated statements of operations. Of
the net proceeds of approximately $5.7 million from this sale,
approximately $5.0 million was used to repay indebtedness.
(c) COLLATERAL. Substantially all property, plant and
equipment serve as collateral for a portion of the Company's
indebtedness (see Note 8).
(5) OTHER ASSETS
(a) GENERAL. At December 31, other assets consisted of the
following (in thousands of dollars):
1998 1997
------- -------
Sunset Lakes JV Project $ 5,205 $ 7,830
Falcon Trace JV Project 3,874 3,733
Jupiter Ocean Grande JV Project 2,094 2,459
Other real estate related assets 1,601 2,008
Other assets 2,376 2,634
------- -------
$15,150 $18,664
======= =======
F-15
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(b) SUNSET LAKES JV PROJECT. The Company is the managing
general partner with an unaffiliated third party in the Sunset Lakes
Joint Venture ("Sunset Lakes JV"). The Sunset Lakes JV owns the Sunset
Lakes JV Project, which is located in southwest Broward County,
Florida. The Company (i) has a 65% interest in the profits and losses
of the Sunset Lakes JV and (ii) is entitled to a fee from Sunset Lakes
JV in an amount equal to 4% of development costs. The Company does not
control the Sunset Lakes JV. The Company's partner must consent to
major transactions and actions of Sunset Lakes JV, including the sale
of substantially all of its properties and assets, modifications of its
business plan, phasing of sales, development and construction
activities, financing and the acquisition of additional property.
Accordingly, the Company accounts for the Sunset Lakes JV Project under
the equity method.
(c) FALCON TRACE JV PROJECT. In April 1996, the Company
acquired the Falcon Trace JV, in Orlando, Florida, for approximately
$5.3 million, of which $2.4 million was financed by Cypress Realty
Limited Partnership ("Cypress") through an acquisition loan secured by
a mortgage on the property and the balance was paid for in cash. In
December 1996 (and as amended in March 1997), the Company and Cypress
agreed to a restructuring in which the Company contributed its net
investment in the Falcon Trace Project and its partner, Cypress,
through an affiliate, contributed its mortgage on the property, to
Falcon Trace Partners Limited Partnership. The Company has a 65%
limited partnership interest in the Falcon Trace JV Project after
expenses and fixed returns to the partners. The Company does not
control the partnership. Cypress is the managing venturer and must
consent to major transactions and actions of the partnership including
the sale of the property and assets of the Falcon Trace JV,
modification of its business plan, development and construction
activities, financing, and the acquisition of additional property.
Accordingly, the Company accounts for the Falcon Trace JV Project under
the equity method.
(d) JUPITER OCEAN GRANDE JV PROJECT. In January 1995, the
Company acquired two acres in its Jupiter Ocean Grande Project for
approximately $2 million in cash. In January 1996, the Company
purchased the remaining four acres of the Jupiter Ocean Grande Project
for an additional $2.2 million in cash. In June 1995, an unaffiliated
third party acquired a 50% Joint Venture interest in the Jupiter Ocean
Grande Project for $4.3 million, $1.8 million of which was paid in June
1995, $2 million of which was paid in January 1996, and the remaining
$0.5 million was a credit for reimbursable Jupiter Ocean Grande JV
Project expenses.
(e) OTHER. Other real estate related assets include refundable
deposits to acquire additional property and costs incurred to obtain
regulatory permits and approvals to develop property under contract.
F-16
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
(a) GENERAL. At December 31, accounts payable and accrued
liabilities consisted of (in thousands of dollars):
1998 1997
-------- --------
Accounts payable, principally trade $ 5,591 $ 2,156
Accrued interest 5,005 952
Taxes, other than income taxes 3,109 4,293
Employee earnings and benefits 1,758 3,270
Other accrued liabilities 2,070 2,944
-------- --------
$ 17,533 $ 13,615
======== ========
(b) TERMS OF ONE YEAR OR LESS. Substantially all accounts
payable and accrued liabilities are payable within one year.
(7) OTHER LIABILITIES
(a) GENERAL. At December 31, other liabilities consisted of
the following (in thousands of dollars):
1998 1997
------- --------
Reserve for Contract Receivables
termination refunds $ 2,333 $ 2,744
Accrued pension liability 2,208 2,087
Utility connection reserve 2,130 3,196
Bankruptcy and other reserves 797 838
Customers' and other deposits 739 1,181
------- --------
$ 8,207 $ 10,046
======= ========
(b) RESERVE FOR CONTRACT RECEIVABLES. The reserve for Contract
Receivables termination refunds and other costs relates to the
Company's obligations to retail land sales customers whose contracts
were not terminated or rejected in the reorganization proceedings.
Under the terms of the retail land sales contract, if a customer
defaults and the contract is canceled, the customer is entitled to a
refund of principal payments in excess of the Company's damages, which
generally has been stipulated at 20% of the sales price.
F-17
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
This reserve also provides for the estimated future costs to maximize
receivable collections and minimize cancellations and termination
refunds during the remaining life of this portfolio. Based on estimates
of these future costs, the future servicing reserve was increased in
1997 resulting in an expense of $375,000 in 1997 and reduced in 1996
resulting in a gain of $703,000 included in other income (expense) in
the accompanying consolidated statements of operations. There was no
change in the estimate for 1998.
(c) ACCRUED PENSION LIABILITY. The accrued pension liability
is related to a frozen plan (see Note 14). The Company's estimated
funding obligation for the next two years is as follows: 1999 -
$774,000 and 2000 - $578,000. Thereafter, the Company does not
anticipate any significant additional funding requirements.
(d) UTILITY CONNECTION RESERVE. The utility connection
reserve consists of the Company's obligation to provide utility
connection credits to qualified claimants. Based on minimal fundings
to date and minimal fundings anticipated in the future, the utility
connection credit reserves were reduced by $1.1 million in 1998 and
1997 and 4.1 million in 1996, which were recorded as gains in other
income (expense) in the accompanying consolidated statements of
operations (see Note 11).
(e) BANKRUPTCY AND OTHER RESERVES. Bankruptcy and other
reserves primarily includes the remaining claims related to the
Predecessor Company with respect to approved claimants. The remaining
outstanding claims corresponding to the issuance of stock and notes to
claimants should be satisfied in 1999. The Company's income tax
provision balance, included in other reserves, was $13,000 and $14,000
as of December 31, 1998 and 1997, respectively. As of December 31,
1998, approximately $177,000 is included in restricted cash and cash
equivalents to fund a portion of these remaining claims (see Note 1).
(8) NOTES AND MORTGAGES PAYABLE
(a) GENERAL. At December 31, notes and mortgages payable
consisted of the following (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Cash Flow Notes, due December 31, 1998, net of
unamortized discount of $-0- and $2,138 $ 39,496 $ 37,479
Working Capital Facility 18,291 20,000
Term Loan - 13,333
Reducing Revolving Loan - 7,653
Project acquisition and development loans 85,578 35,717
Mortgage Receivables loans 6,072 13,540
Other 2,368 4,686
-------- --------
$151,805 $132,408
======== ========
</TABLE>
F-18
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In connection with the POR, the Company (i) issued $100
million in Mandatory Interest Notes, consisting of Secured Floating
Rate Notes and Unsecured Notes ("12% Notes"), (ii) issued $100 million
in Cash Flow Notes, consisting of Secured Cash Flow 12% Notes and
Unsecured 13% Cash Flow Notes ("13% Notes"), discounted to a value of
$76.5 million, (iii) refinanced the debt incurred during the
reorganization through a $50 million Term Loan and (iv) obtained a $20
million Working Capital Facility. The balance of the $50 million Term
Loan was fully repaid in December 1994. In December 1998, the Company
recorded approximately $8.5 million of other income in connection with
the receipt of proceeds from the remaining unpaid 12% Notes. In
February 1996, the Company recorded an extraordinary gain of
approximately $3.8 million due to the cancellation of approximately
$1.9 million of 12% Notes and $1.9 million of 13% Notes. As of February
28, 1999, $15,000 of cash plus accrued interest and $15,000 of the 13%
Notes are remaining to be distributed in accordance with the POR.
In December 1996, the Company recorded an extraordinary gain
of approximately $6.0 million due to the extinguishment of
approximately $4.2 million of 12% Notes and $1.8 million of 13% Notes,
net of a $210,000 unamortized discount, which were held in various
utility trust accounts (see Notes 11 and 12).
(b) FOOTHILL DEBT. On September 30, 1996, the Company closed
on three credit facilities totaling $85.0 million with Foothill (the
"Foothill Debt"). Pursuant to the Foothill Debt, Foothill provided the
Company with (i) an extension to December 1, 1998 of the $20 million
Working Capital Facility; (ii) a $40 million Term Loan maturing on June
30, 1998 and (iii) a $25 million Reducing Revolving Loan maturing on
June 30, 1998. See Note 20.
The $20 million Working Capital Facility bore interest at the
Norwest Bank of Minnesota, N.A. "base rate," plus two percentage
points. The Working Capital Facility matured on December 1, 1998, was
extended through February 2, 1999 and was repaid in full on February 2,
1999. The Working Capital Facility was secured by a first lien on
substantially all of the Company assets, with certain exceptions as to
which the lenders received junior liens. As of December 31, 1998, there
was no additional credit available under the Working Capital Facility.
The Company was required to pay an unused line fee equal to 1/2 of 1%
per annum of the average unused portion of the Working Capital
Facility.
The remaining $13.3 million of the Term Loan, which bore
interest at 15%, matured, and was repaid in full on June 30, 1998.
The remaining $7.7 million of the Reducing Revolving Loan,
which bore interest at prime plus four percent, matured, and was repaid
in full, on June 30, 1998.
(c) CASH FLOW NOTES. The Cash Flow Notes, as of December 31,
1997, consisted of $39.5 million of 13% Notes. On September 30, 1996,
the Company utilized proceeds from the Working Capital Facility, the
Reducing Revolving Loan and cash on hand for a total of $40 million
plus
F-19
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
warrants to purchase up to 1,500,000 shares of Common Stock at $6.50
per share, to fully repay at a discount the Secured Cash Flow Notes. As
a result of the extinguishment of the Secured Cash Flow Notes, the
Company recorded an extraordinary gain of approximately $3.9 million
representing the difference between the book value of these notes of
$49.1 million, consisting of a par value of $54.9 million less an
unamortized discount of $5.8 million, and the consideration given of
$41.9 million, consisting of cash of $40.0 million and the estimated
fair market value of the warrants of $1.9 million, less $3.3 million of
expenses. Interest on the Cash Flow Notes, which was non-cumulative,
was payable semiannually, only out of Available Cash. The amortization
of the Cash Flow Notes discount is included in cost of borrowing, net,
in the accompanying consolidated statements of operations and
approximated $2,138,000, $1,876,000 and $3,157,000 for 1998, 1997 and
1996, respectively. The 13% Notes were repaid in full on February 2,
1999.
The Company did not have any Available Cash at December 31,
1998, 1997 and 1996 to make any interest payment on the Cash Flow Notes
for the payment periods through December 31, 1998. Therefore, the
Company has not recorded any interest expense related to the Cash Flow
Notes during the years ended December 31, 1998, 1997 and 1996.
(d) DECEMBER 1998 DEBT REFINANCING. On February 2, 1999
(effective December 31, 1998), (i) Atlantic Gulf closed on its $39.5
million New Revolving Loan Facility and its $26.5 million New Term Loan
Facility (collectively, the "New Senior Loan Facilities"), (ii)
Atlantic Gulf entered into amendments to its Secured Agreement and
Investment Agreement with Apollo and (iii) Apollo, the New Revolving
Loan Lenders (See Note 20) and the New Term Loan Lenders (See Note 20)
and the collateral agent entered into a New Intercreditor Agreement.
These transactions are collectively referred to herein as the "December
1998 Debt Refinancing." See Note 20.
(e) PROJECT ACQUISITION AND DEVELOPMENT LOANS. At December 31,
1998, project acquisition and development loans include the following:
(i) WEST BAY CLUB PROJECT/LEHMAN BROTHERS LOAN. In
December 1997, Lehman Brothers Holdings loaned West Bay Club
Development Corporation, a wholly owned subsidiary of the Company,
$22.5 million to finance acquisition and construction costs at the West
Bay Club Project and to refinance approximately $10.6 million of
existing purchase money mortgages encumbering the project. The loan is
secured by, among other things, the common stock of West Bay Club
Development Corporation, with limited recourse to the Company. The loan
bears interest at LIBOR plus 4%, matures December 23, 2001 and will be
repaid with proceeds from closings in this project. Additional interest
of $11.25 million is due and payable in full at the maturity date or
such earlier date when the loan is paid in full. If the entire debt is
paid within 36 months, the additional interest will be reduced to
approximately $8.2 million. If the debt is paid between 36 and 42
months, the additional interest will be reduced to approximately $9.8
million. The balance outstanding including interest amounted to $24.9
million and $22.5 million as of December 31, 1998 and 1997,
respectively.
(ii) WEST BAY CLUB PROJECT/BANKBOSTON LOAN. In
December 1997, BankBoston, B.A. and certain other institutions made a
$33 million revolving loan to West Bay Club Development Corporation
pursuant to which the lenders have agreed to lend the Company the
maximum cumulative amount of $67.4 million to finance construction of
the West Bay Club Project. The Company has
F-20
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
$19.8 million outstanding under this loan as of December 31, 1998. The
loan bears interest at either LIBOR plus 4% or the higher of either
BankBoston's prime rate plus 1.25% or the overnight federal funds
effective rate plus 0.5% and matures on December 23, 2001. The balance
outstanding amounted to $19.8 million and $88,000 as of December 31,
1998 and 1997, respectively.
(iii) RIVERWALK TOWER PROJECT LOAN. In June 1997, Las
Olas Tower at Riverwalk, Inc., a wholly owned subsidiary of the
Company, borrowed $2.75 million to acquire the Riverwalk Tower site.
The loan bore interest at prime plus 0.75% and was secured by the
project property, with recourse to the Company. The balance outstanding
is $2.75 million as of December 31, 1998 and 1997, respectively.
(iv) LAKESIDE PROJECT LOAN. In March 1996, Lakeside
Development of Orlando, a wholly owned subsidiary of the Company,
obtained an acquisition loan and a development loan with a combined
commitment of $6.3 million to acquire and finance the development of
the Lakeside Project. As of December 31, 1998 and 1997, the Company has
a total of $2.7 and $2.1 million, respectively million outstanding
under these loans. These loans bear interest rates ranging from prime
plus 1.25% to 1.5%, are secured by the project property, with recourse
to the Company.
(v) SAXON WOODS PROJECT LOAN. In August 1997, the
Company obtained a $1.3 million loan to acquire the Saxon Woods
Project. In addition, the Company obtained a $2.2 million development
loan to fund development of the Saxon Woods Project. The loan bears
interest at prime plus 0.5%, is secured by the project property, with
recourse to the Company, and matures in September 1999. The balance
outstanding amounted to $2.3 million and $1.5 million as of December
31, 1998 and 1997, respectively.
(vi) WEST FRISCO PROJECT LOAN. In November 1997, West
Frisco Development Corporation, a wholly owned subsidiary of the
Company, obtained a $19 million loan to develop the Trails of West
Frisco Project. $4,589,000 was borrowed under this loan as of December
31, 1998. The loan bears interest at prime plus 1.375%, is secured by
the project property, with recourse to the Company, and matures in
December 1999.
(vii) ASPEN SPRINGS RANCH PROJECT/LEHMAN BROTHERS
LOAN. In September 1998, Lehman Brothers Holdings loaned Aspen Springs
Ranch, Inc., a wholly owned subsidiary of the Company, an $18.0 million
loan to finance acquisition and construction costs at the Aspen Springs
Ranch Project. Principal and accrued interest amounted to $19.8 million
as of December 31, 1998. The loan is secured by, among other things,
the common stock of Aspen Springs Ranch, Inc., with limited recourse to
the Company. The loan bears interest at LIBOR plus 4%, matures
September 1, 2002 and will be repaid with proceeds from closings in
this project. Additional interest of $15.0 million is due and payable
in full at the maturity date or such earlier date when the loan is paid
in full.
(viii) ASPEN SPRINGS RANCH PROJECT/BANKBOSTON LOAN.
In September 1998, BankBoston, B.A. and certain other institutions made
a $45 million revolving loan to Aspen Springs Ranch, Inc., to finance
construction of the Aspen Springs Ranch Project. The Company has $1.2
million outstanding under this loan as of December 31, 1998. The loan
bears interest at either LIBOR plus 4% or the higher of either
BankBoston's prime rate plus 1.25% or the overnight federal funds
effective rate plus 0.5% and matures on August 1, 2001.
(ix) West Meadows Project. A $5.9 million revolving
credit loan with an outstanding balance of $4.7 and 2.7 million as of
December 31, 1998 and 1997, respectively. This loan bears interest at
the LIBOR rate plus 3%, is secured by the project property with
recourse to the Company, and matures in February 2000. In addition, two
mortgage loans totaling $4.1 million and $2.8 million as of December
31, 1998 and 1997 respectively.
(x) Other Project Debt. Other project debt amounted
to $463,000 as of December 31, 1998 and $1.1 million as of December 31,
1997.
F-21
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(f) MORTGAGE RECEIVABLES LOANS. The Mortgage Receivables loans
were used to finance a portion of the Company's Mortgage Receivables in
1998 and 1997 (see Note 2). As of December 31, 1998, these loans
consisted of two loans with BankBoston for $1.2 million and $4.9
million. The $1.2 million BankBoston loan bears interest at 12% and
matures in December 2001. The $4.9 million BankBoston loan bears
interest at prime plus 3% and matures in June 2002. The BankBoston
loans are repaid with collections from the underlying Mortgage
Receivables. The Mortgage Receivables Loans were repaid on February 2,
1999.
(g) CONSTRUCTION LOAN. The Company obtained the construction
loan to finance the construction of the second of two 72-unit
condominium buildings at its Regency Project. The outstanding balance
of $9.3 million as of December 31, 1996 was repaid fully during 1997
with proceeds from the closings of condominium units in the second
building. The second loan was secured by, among other things, the
property under construction.
(h) PRINCIPAL PAYMENTS IN FUTURE PERIODS. Based on the
outstanding balances as of December 31, 1998, principal payments
required on the notes and mortgages for each of the five years
following December 31, 1998 and thereafter, are as follows: 1999 -
$87,741,000, 2000 - $25,305,000, 2001 - $16,532,000, 2002 - $37,000,
2003 - $-0-, and thereafter $22,190,000.
F-22
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) REDEEMABLE PREFERRED STOCK
(a) GENERAL. At December 31, 1998 and 1997, Redeemable
Preferred Stock consisted of the following (in thousands of dollars):
1998 1997
-------- --------
Series A
- - --------
Gross proceeds $ 25,000 $ 23,265
Accrued dividends 7,706 1,989
-------- --------
Liquidation Preference amount 32,706 25,254
Less issue costs (3,104) (2,885)
Less warrants purchased (300) (279)
Plus accretion of preferred stock to redemption amount 1,101 288
-------- --------
30,403 22,378
-------- --------
Series B
- - --------
Private Placement 6/24/97
Gross proceeds 10,000 10,000
Accrued dividends 3,453 1,068
-------- --------
Liquidation Preference amount 13,453 11,068
Less issue costs (950) (950)
Less warrants purchased (120) (120)
Plus accretion of preferred stock to redemption amount 369 110
-------- --------
12,752 19,306
-------- --------
Public Offering 11/19/97
Gross proceeds 10,000 10,000
Accrued dividends 2,446 239
-------- --------
Liquidation Preference amount 12,446 10,239
Less issue costs (950) (950)
Less warrants purchased (120) (120)
Plus accretion of preferred stock to redemption amount 289 29
-------- --------
11,665 9,198
-------- --------
Total Series B 24,417 19,306
-------- --------
Total redeemable preferred stock $ 54,820 $ 41,684
======== ========
F-23
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In 1997, the stockholders of the Company authorized the
issuance of up to 4.5 million shares of preferred stock, consisting of
2.5 million shares of 20% Series A Redeemable Preferred Stock ("Series
A Preferred Stock") and 2 million shares of 20% Series B Redeemable
Stock ("Series B Preferred Stock").
(b) APOLLO TRANSACTIONS. In June 1997, the Company and Apollo
entered into an Investment Agreement and Secured Agreement whereby
Apollo agreed to acquire 2.5 million shares of Series A Preferred Stock
at a per share price of $9.88, and warrants to purchase up to 5 million
shares of common stock, $.10 par value per share, of Atlantic Gulf
("Common Stock") (the "Investor Warrants"), at a per warrant price of
$.06, for an aggregate purchase price of $25 million (the "Apollo
Transaction"). As of December 31, 1997, Apollo had purchased 2,326,475
shares of Series A Preferred Stock with Investor Warrants to purchase
4,652,950 shares of Common Stock for a total purchase price of
approximately $23.3 million of the $25 million total. On March 31,
1998, Apollo purchased the remaining 173,525 shares of Series A
Preferred Stock and Investor Warrants to purchase an additional 347,050
shares of Common Stock, or an aggregate purchase price of $1,735,248.
The Company's repurchase and redemption obligations in respect of the
Series A Preferred Stock are secured by (a) a junior lien on
substantially all of the assets of the Company and its subsidiaries.
See Note 20.
(c) PRIVATE PLACEMENT. In June 1997, the Company and certain
sophisticated investors (the "Private Purchasers") entered into a
Securities Purchase Agreement whereby the Private Purchasers purchased
for an aggregate price of $20 million; (i) 1,776,199 shares of Common
Stock for $10 million, and (ii) 1 million shares of Series B Preferred
Stock at a per share price of $9.88, and warrants to purchase up to 2
million shares of Common Stock ("Series B Warrants") at a per warrant
price of $.06 for an aggregate purchase price of $10 million. The $20
million of proceeds from the private placement were applied primarily
to the reduction of aggregate debt.
(d) RIGHTS OFFERING. In November 1997, holders of Common Stock
acquired 1 million shares of Series B Preferred Stock and warrants to
purchase 2 million shares of Common Stock for $10 million in a rights
offering. These proceeds were applied primarily to the reduction of
corporate debt.
(e) CONVERSION RIGHTS OF THE PREFERRED STOCK. Each share of
Series A Preferred Stock and Series B Preferred Stock (collectively,
the "Preferred Stock") is convertible, at the holders election, into
shares of Common Stock at the rate of $5.75 per share. The Investor
Warrants and Series B Warrants are also exercisable at $5.75 per share,
although their strike price on the warrants is subject to a one-time
downward adjustment in 1999 based on actual cash flow results for 1997
and 1998.
The holders of the Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors of Atlantic Gulf
(the "Board"), out of funds legally available therefore, cash dividends
on each share of preferred stock at an annual rate equal to 20% of the
Liquidation Preference (defined as $10 per share plus accumulated and
unpaid dividends) in effect from time to time. All dividends are
cumulative, whether or not declared, on a daily basis from the date on
which the Preferred Stock was issued by the Company, and will be
payable, subject to declaration by the Board,
F-24
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
quarterly in arrears on March 31, June 30, September 30, and December
31 of each year commencing as of September 30, 1997. The excess of the
Liquidation Preference value over the carrying value is being accreted
by periodic charges to contributed capital over the life of the issues.
Beginning in 2001, the holders of the Preferred Stock are
entitled to redeem the Preferred Stock ratably over three years. The
aggregate redemption amounts of the Preferred Stock based on the
Liquidation Preference at December 31, 1998 for each of the five years
following December 31, 1998 and thereafter are as follows: 2001 -
$19,536,000, 2002 - $19,536,000 and thereafter - $19,536,000.
(10) COMMON STOCKHOLDERS' EQUITY
(a) COMMON STOCK. In 1997, the stockholders approved an
increase in the authorized number of shares of Common Stock from
15,665,000 shares to 70,000,000 shares. Under the terms of the POR,
9,750,000 shares were issued for distribution to creditors, of which
3,000 shares are being held in a Disputed Claims Reserve Account as of
February 28, 1999. The remaining shares are subject to distribution in
accordance with the POR during 1999 as remaining disputed claims are
resolved.
In June 1997, stockholders approved an amendment to the
Company's certificate of incorporation repealing the right of the
holders of its Common Stock to receive, semiannually, mandatory
dividends equal to 25 percent of the Company's Available Cash, as
defined (see Note 8).
Also, in June 1997, the Company and the Private Purchasers
consummated the private Placement. See Note 9.
In connection with the Company's prepayment, at a discount, of
its Secured Cash Flow Notes in September 1996, the Company issued 10-
year warrants to purchase up to 1.5 million shares of Common Stock at
an exercise price of $6.50 per share. The estimated fair market value
of the warrants given to the holders of the Secured Cash Flow Notes was
$1,875,000.
(b) STOCK OPTION PLANS. The Company has two fixed stock option
plans. In 1993, the stockholders adopted the Company's Employee Stock
Option Plan ("Employee Option Plan"), which provides for the issuance
of options to purchase up to 750,000 shares of Common Stock at a price
equal to the fair value of the Common Stock on the date of grant of
each option. In June 1998, the stockholders approved an amendment to
the Employee Option Plan increasing the number of shares of stock
subject to the plan to 1.25 million shares. Pursuant to this plan, the
Company issued options to acquire 500,000 shares in 1998, and 1,000
shares in 1996. No options were issued in 1997. In 1994, the
stockholders adopted the Company's 1994 Non-Employee Directors' Stock
Option Plan (the "Non-Employee Directors' Option Plan"), which provides
for the issuance of options to purchase up to 350,000 shares of Common
Stock at a price equal to the fair value of the Common Stock on the
date of grant of each option. See Note 17 for information on these
stock option plans.
F-25
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(c) STOCK PLAN. In 1996, the Company's stockholders adopted
the Company's 1996 Non-Employee Directors' Stock Plan (the
"Non-Employee Directors' Stock Plan"), which provides for the payment
quarterly of each Non-Employee Director's annual $25,000 retainer in
Common Stock based on the share price at the end of the previous
quarter. In 1998, the Board adopted an amendment to the Non-Employee
Directors' Stock Plan which provided that, from and after April 1,
1998, 40% of the annual retainer would be paid in cash and the balance
would be paid in shares of Common Stock. During 1996, the Company
issued to the Non-Employee Directors (a) 8,328 shares at a price of
$6.00 per share for the third quarter of 1996 and (b) 10,256 shares at
a price of $4.875 for the fourth quarter of 1996. During 1997, the
Company issued to the Non-Employee Directors (a) 12,355 shares at a
price of $4.3125 per share for the first quarter of 1997, (b) 11,158
shares at a price of $5.50 per share plus 288 shares at $6.625 per
share for the second quarter of 1997, (c) 5,884 shares at a price of
$6.375 per share for the third quarter of 1997 and (d) 6,000 shares at
a price of $6.25 per share for the fourth quarter of 1997. During 1998,
the Company issued to the Non-Employee Directors (a) 8,330 shares at a
price of $4.50 price per share for the first quarter of 1998, (b) 6,209
shares at a price of $3.62 per share for the second quarter of 1998 (c)
10,908 shares at a price of $2.06 per share for the third quarter of
1998 and (d) 18,006 shares at a price of $1.25 per share for the fourth
quarter of 1998.
(d) SHARES RESERVED FOR FUTURE ISSUANCE. At December 31, 1998,
the following shares of Common Stock were reserved for possible future
issuance (in thousands):
Series A Preferred Conversion $10,000
Investor Warrants 5,000
Series B Preferred Conversion 8,000
Series B Warrants 4,000
Warrants - Secured Cash Flow Notes 1,500
Employee Option Plan 741
Non-Employee Directors' Option Plan 350
Non-Employee Directors' Stock Plan 150
-------
$29,741
=======
(e) SHARES RECOVERED FROM RESERVES. In February 1996, the
Company received 75,730 shares of its Common Stock and, in August 1996,
it received 505 shares as distributions from the disputed claims
reserve in accordance with the POR. In March 1996, the Company issued
4,537 shares of its Common Stock to Gerald Agranoff, a Non-Employee
Director, representing a $30,000 partial payment to assist management
in the negotiation of proposed financing. In June 1996, the Company
received 8,728 shares of its Common Stock, $96,400 principal amount of
Mandatory Interest Notes and $103,800 principal amount of Cash Flow
Notes from the disputed claims reserve account in settlement of a
claim. The Company recorded the shares at par value because the shares
were never issued to a third party. The debt corresponding to the notes
was reduced and concurrently other bankruptcy reserves were increased
for the principal amount of the notes. In December 1996, Atlantic Gulf
received 1,314 shares of its Common Stock, $7,100 principal amount of
Mandatory
F-26
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Interest Notes and $8,900 principal amount of Cash Flow Notes in
accordance with the terms of the POR.
(11) NONRECURRING AND OTHER ITEMS
The Company recorded the following gains and provisions during
1998, 1997 and 1996 for several items included in other income
(expense) in the accompanying consolidated statements of operations:
During 1998, 1997 and 1996, the Company recorded net gains of
$13.4 million, $3.5 million and $18.1 million, respectively, in other
income (expense) - reorganization reserves in the accompanying
consolidated statements of operations resulting from its annual review
of certain reorganization items. The $3.5 million net gain in 1997
included gains of $1.1 million due to the reduction of the utility
credit reserves (see Note 7 and schedule below regarding utility
connection credit reserve account activity) and $706,000 due to the
reduction of the Contract Receivables termination refunds reserve (see
Note 7). The $18.1 million net gain in 1996 included gains of $11.9
million, net of expenses, due to the recovery of $12.1 million of funds
from certain Utility Trust accounts funded by the Company (see Note 2
and schedule below regarding utility trust account activity), $4.1
million due to the reduction of the utility connection credit reserves
(see Note 7 and schedule below regarding utility connection credit
reserve account activity) and a $703,000 gain due to the reduction in
the Contract Receivables future servicing reserve (see Note 7). This
process is expected to continue during 1999 with adjustments to be
recorded as the final disposition of various claims and other
liabilities is concluded.
F-27
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Utility Trust Accounts
Account Activity
(in thousands of dollars)
1998 1997 1996
-------- -------- --------
Description
Beginning balance $ 3,448 $ 15,198 $ 19,699
Additions - 1,155 1,623
Interest earned 293 154 675
Withdrawals (3,741) (12,645)(a) (1,005)(c)
Cancellation of notes - (414)(b) (5,794)(b)
-------- -------- --------
Ending balance $ - $ 3,448 $ 15,198
======== ======== ========
(a) Includes $12,109 withdrawal on January 2, 1997.
(b) Total cancellations of $6,208, including $414 canceled on January 2, 1997,
resulted in an extraordinary gain of $5,998 in 1996, net of a $210
unamortized discount.
(c) Represents wire transfer to Hendry County.
(d) Release of Utility Class 14 Trust cash on September 29,1998 for $3,741.
Utility Connection Credit Reserve
Account Activity
(in thousands of dollars)
1998 1997 1996
------- ------- -------
Description
Beginning balance $ 3,196 $ 4,264 $ 7,726
Additions - - 643
Amounts charged (credited) to
results of operations (1,065) (1,064) (4,097)
Deductions (1) (4) (8)
------- ------- -------
Ending balance $ 2,130 $ 3,196 $ 4,264
======= ======= =======
The activity for the land mortgage receivable valuation discount is included in
Schedule II of the 10-K.
F-28
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In the first quarter of 1996, the Company recorded a net gain
of $4.1 million on proceeds of $18.75 million resulting from the
settlement of utilities condemnation litigation with the City of Port
St. Lucie.
In February, 1996, the Company sold its Port LaBelle utility
system to Hendry County for $4.5 million, resulting in a gain of
$686,000. In June 1996, the Company sold its Julington Creek utility
system for $6.0 million resulting in a gain of $696,000 (see Note 4).
In 1996, the Company recorded extraordinary gains of
approximately $13.7 million consisting of (a) an extraordinary gain in
February 1996 of approximately $3.8 million due to the cancellation of
approximately $1.9 million of 12% Notes and $1.9 million of 13% Notes
in accordance with the POR, (b) an extraordinary gain in September 1996
of $3.9 million from the prepayment, at a discount, of Secured Cash
Flow Notes and (c) an extraordinary gain in December 1996 of
approximately $6.0 million from the extinguishment of approximately
$4.2 million of 12% Notes and $1.8 million of 13% Notes, net of a
$210,000 unamortized discount (see Notes 8 and 12).
(12) COMMITMENTS AND CONTINGENCIES
(a) LITIGATION. Atlantic Gulf is involved in various
litigation matters primarily arising in the normal course of its
business or with respect to the bankruptcy. It is the opinion of
management that the resolution of these matters will not have a
material adverse affect on the Company's financial statements.
(b) TRUST AND RESERVES. As part of a settlement of the
Company's improvement obligations to the Predecessor Company's retail
homesite customers, various trusts were established. The Company funded
these trusts with cash, stock and notes based on estimates of the costs
of the future improvement obligations. Certain other reserves were
established to make a minimum of 1,700 utility satisfied homesites
available for trade to customers whose homesites may not be utility
satisfied, and therefore not buildable, at the time they wish to
construct a home. The terms of these trusts and reserves require the
Company to periodically assess the adequacy of the property in the
trusts and reserves and any excess or deficiency will accrue to the
benefit or become an obligation of the Company. In December 1996,
pursuant to a review of the trusts and reserves it was determined that
approximately $12.1 million in cash, $4.2 million of 12% Notes and $2.0
million of 13% Notes could be released from these trust accounts (see
Notes 2, 8 and 11). Approximately $30,000 in cash, 3,000 shares of
stock and a lot reserve of 3,800 lots remain in the trusts as of
December 31, 1998. The Company believes the remaining property
currently held in trusts is sufficient to meet all future improvement
obligations required under the terms of the settlements.
(c) ENVIRONMENTAL MATTERS. A small portion of the Company's
land holdings contain residues or contaminants from current and past
activities by the Company, its lessees, prior owners and operators of
the properties and/or other third parties. Some of these areas have
been the subject of cleanup action by the Company voluntarily or
following the involvement of regulatory agencies. Additional cleanup in
the future also may be required. The business of the Company is subject
to
F-29
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
a variety of additional obligations under the environmental laws,
relating to both the ongoing operations and past activities. The
Company does not believe, however, that its obligations under the
environmental laws will have a material adverse effect on its business,
results of operations or financial position. See Note 3.
(d) RENTAL EXPENSE. Rental expense related to operating leases
was $1,302,000, $1,352,000 and $1,835,000 for 1998, 1997 and 1996,
respectively.
The Company leases its corporate office space under an
operating lease which expires in 2004. Minimum future rental
commitments under non-cancelable operating leases as of December
31,1998 are as follows: 1999 - $944,000, 2000 - $855,000, 2001 -
$887,000, 2002 - $918,000, and $1,474,000 thereafter.
(e) DEVELOPMENT OBLIGATIONS. As of December 31, 1998, the
Company had no material development obligations related to sold
property. The Company's business plan contemplates that 1999
expenditures for development, construction, and other capital
improvements could range up to $144 million, of which a substantial
portion would need to be funded through individual project development
loans or JV Project arrangements, many of which are already in place.
(13) INCOME TAXES
The difference between income taxes computed at the statutory
federal rate and the provision for income taxes consists of (in
thousands of dollars):
1998 1997 1996
------- --------- ------
Amount at statutory federal rate $ 1,249 $ (19,704) $ 402
Unrecognized (recognized) benefit
of change in valuation allowance
for temporary differences other
than net operating loss carryovers (1,249) 19,704 (402)
------- --------- ------
- - -
======= ========= ======
The Company's deferred taxes reflect the impact of temporary
differences between the amount of assets and liabilities for financial
reporting purposes and such amounts for tax purposes. The most
significant types of temporary differences that give rise to deferred
taxes are installment accounting practices, certain financial statement
reserves and cost capitalization methods.
The tax effect of temporary differences that give rise to
significant portions of deferred tax assets and liabilities at December
31, 1998 and 1997 are presented below (in thousands of dollars):
F-30
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1998 1997
--------- ---------
Deferred tax assets:
Excess of tax basis in land over
financial statement basis $ 11,747 $ 22,149
Net operating loss carryover 120,010 96,992
Other 963 6,380
Alternative minimum tax and
general business credit carryover 3,611 3,618
--------- ---------
Total gross deferred tax assets 136,331 129,139
Less - valuation allowance (123,395) (119,787)
--------- ---------
Net deferred tax assets 12,936 9,402
========= =========
Deferred tax liabilities:
Excess of tax basis in debt
obligations and reserves over
financial statement basis 5,856 2,197
Excess of financial statement basis
in other receivables over tax basis 2,607 3,275
Excess of financial statement basis
in Predecessor Homesite Covenants
Receivable over tax basis 4,473 3,930
--------- ---------
Net deferred tax amount $ -- $ --
========= =========
The net change in the valuation allowance for deferred tax
assets for 1998 was an increase of $3.6 million.
The nine months ended December 31, 1992 and each of the years
ended December 31, 1993 through 1998, have resulted in a net increase
in the valuation allowance. The Company has not utilized any net
operating losses.
At December 31, 1998, the Company had a net operating loss
carryover for tax purposes of approximately $318 million which expires
in years 1999 through 2018. Included in this amount is approximately
$24.1 million of net operating loss attributable to certain legal
entities that may only be used against future taxable income of these
same entities. Additionally, the Company has an unused general business
credit of approximately $2.7 million expiring in the years 1999 through
2004.
During 1997, the Company underwent an ownership change as
defined in Section 382 of the Internal Revenue Code of 1986, as
amended. The impact of this change in ownership will be to
significantly limit the amount of any net operating loss, general
business credit, and alternative minimum tax credit carryforwards that
will be available to reduce taxable income in future years. Certain of
these tax attributes will expire unused pursuant to IRS ss.382.
F-31
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company has an alternative minimum tax credit of
approximately $1 million. The alternative minimum tax credit does not
have an expiration date.
(14) RETIREMENT PLANS
The Company has a Defined Benefit Retirement Plan ("Retirement
Plan") for substantially all of the Predecessor Company employees under
which future benefit accruals were frozen in 1990. The Company's policy
generally has been to fund an amount at least equal to the minimum
required contribution but no greater than the maximum tax deductible
amount.
Assets of the Retirement Plan are invested in common stocks,
U.S. government agency issues, US treasury bonds and notes, corporate
bonds, foreign bonds and money market funds, and included approximately
87,068 shares of Common Stock with an aggregate fair value of December
31, 1998 of approximately $65,000.
The Company also has a defined contribution savings plan which
is available to substantially all employees. The Company matches 25% of
each employee's contributions, up to a maximum of 6% of base salary
beginning January 1, 1996. In addition, upon approval from the Board,
an annual supplemental contribution may be made in an amount up to the
Company's matching contribution made during the year. The Company's
matching contribution was approximately $142,000 in 1998 and $166,000
in 1997.
F-32
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At December 31, the funded status of the Company's Retirement
Plan was as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 10,394 $ 10,431
Interest cost 688 728
Actuarial gain 454 441
Benefits paid (1,208) (1,206)
------------ ------------
Benefit obligation at end of year $ 10,328 $ 10,394
============ ============
Change in plan assets:
Fair value of plan assets at 8,308 7,301
beginning of year
Actual return on plan assets at 184 1,145
Employer contribution 836 1,068
Benefits paid (1,208) (1,206)
------------ ------------
Fair value of plan assets at end of year 8,120 8,308
------------ ------------
Funded status (2,209) (2,087)
Unrecognized prior service cost (61) (65)
Unrecognized actuarial loss 6,716 6,133
Unrecognized net asset at transition (304) (355)
------------ ------------
Net amount recognized $ 4,142 $ 3,626
============ ============
Amount recognized in the statement of
financial position consist of:
Prepaid benefit cost $ 4,142 $ 3,626
Accrued benefit liability (6,351) (5,712)
Accumulated other comprehensive income 6,351 5,712
------------ ------------
Net amount recognized $ 4,142 $ 3,626
============ ============
Weighted-average assumptions as of December 31:
Discount rate 7.0% 7.5%
Expected return on plan assets 9.0% 9.0%
Components of net periodic benefit cost:
Interest cost 688 728
Expected return on plan assets (724) (674)
Amortization of net assets at transition (51) (51)
Recognized actuarial loss 411 313
Amortization of prior service cost (4) (4)
------------ ------------
Net periodic benefit cost $ 320 $ 312
============ ============
</TABLE>
F-33
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
15) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which it is
practicable to estimate that value.
(a) CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH
EQUIVALENTS. The carrying value of these instruments approximates fair
value because of the short maturity.
(b) CONTRACT RECEIVABLES. The net book value of Contract
Receivables represents the net expected future cash flow of the Company
discounted to a rate approximating 15%, which management believes
approximates fair value.
(c) MORTGAGES, NOTES AND OTHER RECEIVABLES. Substantially all
receivables which have a maturity in excess of one year have stated
rates that approximate market interest rates. Consequently, management
believes that the carrying value of these receivables approximates fair
value.
(d) OTHER INTEREST BEARING LIABILITIES. Other interest bearing
liabilities are at rates which approximate current incremental
borrowing rates.
(e) NOTES AND MORTGAGES. As discussed in Note 8, long term
debt includes Cash Flow Notes issued in connection with the POR. The
fair value of the Cash Flow Notes is estimated based on quoted market
prices for the Unsecured Notes. Long term debt also includes other
indebtedness including a Working Capital Facility, a Term Loan and a
Reducing Revolving Facility as well as various acquisition, development
and construction loans (see Note 8) for which the Company estimates the
carrying value to approximate fair value.
(f) REDEEMABLE PREFERRED STOCK. The fair value of the
Redeemable Preferred Stock was calculated based on quoted market
prices.
F-34
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(f) Estimated Fair Values of Instruments. The estimated fair
values of the Company's financial instruments at December 31 were as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
1998 1997
-------------------- -------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value (*) Value Value (*)
-------- ------- ------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 9,413 $ 9,413 $ 9,188 $ 9,188
Restricted cash and cash equivalents 1,041 1,041 1,713 1,713
Contract Receivables 4,109 4,109 6,336 6,336
Mortgages, notes and other receivables 29,273 29,273 34,910 34,910
Other interest bearing liabilities - - - -
Mandatory Interest Notes - - - -
Cash Flow Notes (39,496) (39,496) (37,479) (35,655)
Redeemable Preferred Stock (54,820) (23,062) (41,684) (43,265)
Other Indebtedness (112,309) (112,309) (94,929) (94,929)
</TABLE>
(*) These values represent an approximation of fair value and may never
actually be realized.
F-35
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(16) UNAUDITED QUARTERLY FINANCIAL DATA
Quarterly financial data for 1998 and 1997 are summarized
below (in thousands of dollars except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1998:
-----
<S> <C> <C> <C> <C>
Real estate sales 8,972 43,903 9,968 9,958
Other revenues 2,392 3,397 3,951 1,214
------- ------- ------- -------
Total revenues 11,364 47,300 13,919 11,172
======= ======= ======= =======
Gross margin on real estate sales (*) 483 7,397 3,612 1,557
======= ======= ======= =======
Net income (loss) (3,949) 2,066 3,337 2,219
======= ======= ======= =======
Net income (loss) applicable to
Common Stock (6,596) (801) 341 (912)
======= ======= ======= =======
Net income (loss) per common
share (**) (0.57) (0.07) 0.03 (0.08)
======= ======= ======= =======
</TABLE>
(*) Gross margin on real estate sales represents real estate sales
revenue less real estate cost of sales.
(**) All outstanding stock options, warrants and preferred stock are
anti-dilutive.
In conjunction with the Company's reviews in 1998 of the net
realizable values associated with its inventories and land holdings,
the Company provided an inventory valuation reserve in the fourth
quarter of 1998 of approximately $195,000 all of which was associated
with Predecessor Assets (see Note 3).
F-36
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
1997:
-----
<S> <C> <C> <C> <C>
Real estate sales $ 16,284 $ 17,775 $ 10,612 $ 22,948
Other revenues 1,965 2,597 1,814 2,653
-------- -------- -------- --------
Total revenues $ 18,249 $ 20,372 $ 12,426 $ 25,601
======== ======== ======== ========
Gross margin on real estate sales (*) $ 2,825 $ (113) $ (1,957) $ (5,328)
======== ======== ======== ========
Net loss $ (7,276) $ (8,670) $(10,801) $(31,599)
======== ======== ======== ========
Net loss applicable to
Common Stock $ (7,276) $ (8,740) $(12,302) $(33,751)
======== ======== ======== ========
Net loss per common share $ (.75) $ (.89) $ (1.07) $ (2.93)
======== ======== ======== ========
</TABLE>
(*) Gross margin on real estate sales represents real estate sales
revenue less real estate cost of sales.
In conjunction with the Company's ongoing business plan to
continue to monetize its Predecessor Assets, certain Predecessor Tracts
were targeted for bulk disposal in the fourth quarter of 1996 and
during 1997. The Company has priced its planned bulk disposals
attractively and as a result provided an inventory valuation reserve in
the fourth quarter of approximately $10.4 million (see Note 3). The
Company also reviewed its claims experience with respect to the utility
connection reserve and the number of customers eligible to make a claim
against the reserve. Based on these factors noted above, this reserve
was decreased by approximately $4.1 million (see Note 7).
(17) STOCK OPTIONS
(a) GENERAL. At December 31, 1998, the Company has three stock
based compensation plans (see Note 9). The Company applies APB Opinion
No. 25 and related interpretations in accounting for its stock based
compensation plans. Accordingly, no compensation cost has been
recognized for its fixed stock option plans. Compensation cost was
recognized for compensation paid under the Non-Employee Directors'
Stock Plan. The compensation cost charged against income for annual
retainer fees paid in Common Stock was $105,000 and $191,600 for 1998
and 1997, respectively. Forty percent of annual retainer fees were paid
in cash after March 31, 1998.
F-37
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Had compensation cost for the Company's two stock option plans
been determined consistent with SFAS No. 123, the Company's net income
and earnings per share results would have been reduced to the proforma
amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C>
Net (loss) income
applicable to
common stock As reported $(7,968,000) $(62,069,000) $1,181,000
Pro forma (8,541,803) (62,875,702) 649,380
Basic and diluted
earnings per
common share As reported $(.68) $(5.82) $.12
Pro forma (.73) (5.90) 0.07
</TABLE>
(b) FIXED STOCK OPTION PLANS. The Company has two fixed stock
option plans.
(i) EMPLOYEE OPTION PLAN. The Employee Option Plan
provides for the issuance of options to acquire up to 1,250,000 shares
of Common Stock at a price equal to the fair market value of the Common
Stock on the date of grant of each option (see Note 10). The options
vest 40% two years after the date of grant and 20% on each of the three
subsequent anniversaries of the date of grant or if there is a change
in control as defined in the Employee Option Plan. The options are
exercisable for a period of ten years from the date of the grant.
(ii) NON-EMPLOYEE DIRECTOR OPTION PLAN. The
Non-Employee Director Option Plan provides for the grant of (A) options
for 20,000 shares of Common Stock to each Non-Employee Director on
December 5, 1994, (B) options for 20,000 shares of Common Stock to each
new Non-Employee Director upon his/her first election or appointment to
the Board and (C) options for 5,000 shares of Common Stock to each
Non-Employee Director at the first meeting of directors following such
director's subsequent election or appointment to the Board. In 1998,
the Board amended the Non-Employee Director Option Plan to provide that
each Apollo director, who is appointed to the Board annually, will
receive, an option to acquire 1,667 shares at each meeting (1,666
shares at every third meeting) at which he is reappointed to the Board.
The option price for any grant under the Non-Employee Director Plan is
equal to the fair market value of Common Stock on the date of grant of
each option. Each option is immediately vested, exercisable, and
remains exercisable for a period of 10
F-38
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
years from the grant date. A maximum of 350,000 shares of Common Stock
may be issued pursuant to the Non-Employee Director Option Plan.
(iii) FAIR VALUE OF OPTIONS. In order to calculate
the proforma amounts shown above, the fair value of each option grant
is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions
used for grants in 1996, 1997 and 1998.
Dividend yield: None.
Expected volatility: Based on historical month-end close
stock prices from June, 1992 through
the month prior to the grant date as
reported by NASDAQ.
Expected life of grants: Five years.
Risk free interest rate: Yield on five-year U.S. Treasury
Notes maturing five years from date
of grant.
Contractual term of grant: Ten years.
(iv) SUMMARY. A summary of the status of the
Company's two fixed stock option plans as of December 31, 1998, 1997,
and 1996, respectively, and the changes during the years ended on those
dates are presented below.
F-39
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(A) EMPLOYEE STOCK OPTIONS. The following
table summarizes information about employee stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
Number of Weighted- Weighted- Number of Weighted-
Range of Options Average Average Options Average
Exercise Outstanding Remaining Exercise Exercisable Exercise
Price at 12/31/98 Life Price at 12/31/98 Price
----- ----------- ---- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
$2.00 - $2.99 500,000 6.7 $ 2.00 125,000 $ 2.00
$4.00 - $4.99 50,000 5.9 $ 4.31 33,333 $ 4.31
$5.00 - $5.99 116,250 6.3 $ 5.730 72,750 $ 5.734
$6.00 - $6.99 125,000 3.5 $ 6.792 123,500 $ 6.792
$7.00 - $7.99 17,750 4.9 $ 7.00 17,750 $ 7.00
$8.00 - $8.99 118,000 6.1 $ 8.871 70,800 $ 8.875
$12.00 - $12.99 166,500 5.7 $ 12.00 133,200 $ 12.00
------------ -----------
1,093,500 576,333
============ ===========
</TABLE>
F-40
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(B) NON-EMPLOYEE DIRECTOR STOCK OPTIONS. The
following tables summarize information about Non-Employee Director
stock options outstanding at December 31, 1998:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
Non-Employee
Director Weighted Avg. Weighted Avg. Weighted Avg.
Stock Options Shares Exercise Price Shares Exercise Price Shares Exercise Price
------------- ------ -------------- ------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
the beginning of
year 150,000 $8.825 185,000 $8.311 305,000 $ 7.414
Options granted 35,000 $6.107 120,000 $6.032 10,001 $ 2.125
Options exercised 0 0 0 0 0 0
Options forfeited 0 0 0 0 0 0
------- ------- --------
Outstanding at
end of year 185,000 $8.311 305,000 $7.414 315,001 $ 5.560
======= ======= ========
Options 185,000 - 305,000 - 315,001 -
exercisable at
year-end.
Weighted-avg. $2.881 - $2.750 - $ .94 -
fair value of
options granted
during the year
</TABLE>
Note: This schedule does not include the stock options issued in 1995
pursuant to the 1993 Plan and subsequently surrendered in accordance
with the adoption of the Non-Employee Director Option Plan.
<TABLE>
<CAPTION>
Number of Weighted-Average Weighted- Number of Weighted-
Range of Options Remaining Average Options Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Price at 12/31/98 Life Price at 12/31/98 Price
----- ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
$2.00 - $2.99 10,001 9.6 $2.125 10,001 $2.125
$4.00 - $4.99 40,000 8.4 $4.813 40,000 $4.813
$6.00 - $6.99 115,000 8.1 $6.479 115,000 $6.479
$7.00 - $7.99 10,000 6.3 $7.875 10,000 $7.875
$8.00 - $8.99 120,000 6.1 $8.875 120,000 $8.875
$9.00 - $9.99 20,000 6.2 $9.000 20,000 $9.000
------- -------
315,001 315,001
======= =======
</TABLE>
F-41
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(18) EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share for the following years (in thousands,
except per share data):
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------
<S> <C> <C> <C>
Numerator:
Income (loss) before extraordinary items $ 3,673 $ (58,346) $ (12,551)
Accrued preferred stock dividends (10,309) (3,296) -
Accretion of preferred stock to
redemption amount (1,332) (427) -
-------------------------------------------------
Loss before extraordinary items
applicable to common stock (7,968) (62,069) (12,551)
Extraordinary gain on extinguishment
of debt - - 13,732
-------------------------------------------------
Numerator for basic and diluted earnings per share
net (loss) income applicable
to common stock (7,968) $ (62,069) $ 1,181
=================================================
Denominator:
Denominator for basic and diluted earnings
per common share - weighted average
shares 11,640 10,661 9,709
=================================================
Basic and diluted earnings per common
share:
Loss before extraordinary items $ (0.68) $ (5.82) $ (1.29)
Extraordinary gain on extinguishment
of debt - - 1.41
-------------------------------------------------
Net (loss) income per common share $ (0.68) $ (5.82) $ 0.12
=================================================
</TABLE>
For additional disclosures regarding the outstanding preferred
stock, see Note 9. Options to purchase Common Stock, described in Note
17, were not included in the computation of diluted earnings per common
share because the options' exercise price was greater than the average
market price of the Common Stock and, therefore, the effect would be
anti-dilutive.
(19) SEGMENT REPORTING
(a) DESCRIPTION OF THE TYPES OF PRODUCTS AND SERVICES FROM
WHICH EACH REPORTABLE SEGMENT DERIVES ITS REVENUES. The Company has
four reportable segments: Primary Market Operations, Luxury/Resort
Operations, Predecessor Assets and
F-42
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
all other. The Company's primary markets residential division consists
of the acquisition, development and sale of residential homesites to
third party home builders. The Company's primary markets commercial
industrial division consists of the acquisition, development and sale
of commercial industrial land parcels to third parties. The Company's
luxury/resort operations division consists of the development of
waterfront or highly amenitized communities for high-end retirement or
pre-retirement homebuyers. The Company's other predecessor assets
consists of the sale of developed and undeveloped real estate inherited
from the Company's predecessor. All other includes the Company's
environmental services operations and their receivables portfolio
management.
(b) MEASUREMENT OF SEGMENT PROFIT OR LOSS AND SEGMENT ASSETS.
The Company evaluates performance and allocates resources based on
gross margins of each business segment, except for all other which is
only evaluated on a total revenues basis. The accounting policies of
the reportable segments are the same as those described in the summary
of significant accounting policies. The Company does not report assets
on a segment basis and therefore has not included this information.
(c) FACTORS MANAGEMENT USED TO IDENTIFY THE ENTERPRISE'S
REPORTABLE SEGMENTS. The Company's reportable segments are lines of
business that offer different products to different customers. The
reportable segments are each managed separately because they require
different production processes and are distinct products. The Company's
businesses are primarily conducted in the United States. No significant
part of the business is dependent upon a single customer.
F-43
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table summarizes the Company's information for
reportable segments for the year's ended December 31, 1998, 1997 and
1996:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Segment revenues:
Primary markets operations $ 41,529 $ 14,441 $ 51,025
Luxury resort operations 7,010 10,908 17,809
Predecessor assets 24,262 42,270 58,731
All other 4,922 3,608 4,741
--------- --------- ---------
77,723 71,227 132,306
Unallocated revenues:
Other operating revenues 4,434 771 2,434
Interest revenues 1,598 4,650 4,039
--------- --------- ---------
Total revenues $ 83,755 $ 76,648 $ 138,779
========= ========= =========
Gross margins:
Segment gross margins:
Primary markets residential $ 6,260 $ 1,016 $ 8,774
Luxury resort operations 4,934 (2,036) 3,903
Predecessor assets 1,854 (3,553) 11,574
--------- --------- ---------
13,048 (4,573) 24,251
Unallocated revenues and (expenses):
Other operating revenues 6,017 3,011 4,919
Interest revenues 4,937 6,018 6,295
Inventory valuation reserves (195) (14,457) (12,283)
Selling expense (6,510) (8,502) (13,525)
Operating expenses (2,010) (1,505) (1,986)
Real estate costs (9,598) (14,984) (19,384)
General and administrative expense (9,908) (12,297) (12,410)
Cost of borrowing, net of amounts capitalized (4,375) (12,222) (13,430)
Other expense (853) (1,463) (512)
Other income (expense):
Reorganization reserves
Utility trust accounts 3,666 -- 11,859
Utility connection reserve 1,063 1,063 4,097
Contracts receivable termination refunds 104 706 (112)
Cancellation of Notes 8,549 -- --
Other reorganization reserves -- 1,761 2,246
Utility Condemnation -- -- 4,122
Land mortgages receivable valuation discount (184) (92) 1,020
Miscellaneous (78) (810) 2,282
--------- --------- ---------
Income (loss) before extraordinary items $ 3,673 $ (58,346) $ (12,551)
========= ========= =========
</TABLE>
F-44
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(20) SUBSEQUENT EVENTS
(a) DECEMBER 1998 DEBT REFINANCING. On February 2, 1999
(effective December 31, 1998), (i) Atlantic Gulf closed on its $39.5
million New Revolving Loan Facility and its $26.5 million New Term Loan
Facility (collectively, the "New Senior Loan Facilities"), (ii)
Atlantic Gulf entered into amendments to its Secured Agreement and
Investment Agreement with Apollo, (iii) SP-Sub canceled Atlantic Gulf's
obligation to repay its $11 million SP Sub Loan and (iv) Apollo, the
New Revolving Loan Lenders and the New Term Loan Lenders and the
collateral agent entered into a New Intercreditor Agreement. These
transactions are collectively referred to herein as the "December 1998
Debt Refinancing."
(i) NEW REVOLVING LOAN FACILITY. The lenders (the
"New Revolving Loan Lenders") under Atlantic Gulf's New Revolving Loan
Facility are DK Acquisition Partners, L.P., Comac Partners,
Halcyon/Alan B. Slifka Management Co. LLC, East West Partners,
Stonehill Investment Corp. and Anglo American Financial and its
participants (the "Revolving Loan Lenders"). M. H. Davidson, LLC.
("MHD"), is the agent and collateral agent.
The New Revolving Loan Facility will mature on August 1, 2000
and bears interest at the rate of (1) eleven percent (11%) per annum
(fifteen percent (15%) per annum upon the occurrence, and continuation,
of an event of default) upon all amounts other than letter of credit
guarantees and (2) fifteen percent (15%) per annum (nineteen percent
(19%) per annum upon the occurrence, and continuation, of an event of
default) upon all draws under letter of credit guarantee amounts.
The aggregate outstanding borrowings under the New Revolving
Loan Facility are subject to a borrowing base limitation based on the
value of certain of the Company's assets. The New Revolving Loan
Facility contains standard and customary representations, warranties
and covenants for a facility of its type, size and term, including, a
consolidated net worth covenant.
The $39.5 million commitment under the New Revolving Loan
Facility will automatically be reduced (1) by $4 million by March 31,
1999; (2) by an additional $1 million by May 31, 1999; (3) by seventy
five percent (75%) of the net cash proceeds realized from certain bulk
sales of lots and/or land in certain eligible subdivision projects; (4)
by an additional $1,667,000 on each of February 15, 2000, March 15,
2000 and April 15, 2000; and (5) by an additional $2,333,000 on each of
May 15, 2000, June 15, 2000, and July 15, 2000. The remaining
outstanding balance under the New Revolving Loan Facility is due and
payable in full on August 1, 2000. The Company is currently working on
closing several transactions, the proceeds from which will be used to
fund the March 31, 1999 commitment reduction. The Company is also in
the process of finalizing negotiation of an amendment/waiver with its
New Revolving Loan Lenders in the event that it is unable to close one
or more of these transactions on or before March 31, 1999.
On the closing date, the Revolving Lenders delivered to the
trustee for Atlantic Gulf's $7.5 million of
F-45
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
cash collateral to secure the payment, when presented, of up to $7.5
million of the 13% Notes. The cash collateral, which is treated as a
letter of credit guarantee, is deemed to be part of the New Revolving
Loan Facility.
On the closing date, Atlantic Gulf paid (1) the collateral
agent a closing fee of $1.28 million and (2) the agent a letter of
credit guarantee fee of $150,000. Atlantic Gulf also has agreed to pay
(a) the collateral agent a servicing fee of $10,000 per month so long
as any amounts remain outstanding under the New Revolving Loan Facility
and (b) the agent a second letter of credit guarantee fee of $150,000
on the second anniversary of the effective date of the New Revolving
Loan Facility if any portion of the letter of credit guarantee amount
remains outstanding on that date.
(ii) NEW TERM LOAN FACILITY. The lenders (the "New
Term Loan Lenders") under Atlantic Gulf's new term loan facility (the
"New Term Loan Facility") are Anglo American Financial and General
Motors Employees Global Group Pension Trust (the "Term Loan Lenders").
Anglo American Financial is the agent, and MHD is the collateral agent.
The New Term Loan Facility will mature on the earlier of
February 1, 2002, or the date that is thirty (30) days prior to the
first date on which any of the holders of the Preferred Stock have the
right to require Atlantic Gulf to repurchase any shares of Preferred
Stock and bears interest at the rate of fifteen percent (15%) per annum
(nineteen percent (19%) per annum upon the occurrence, and
continuation, of an event of default). The New Term Loan Facility
contains standard and customary representations, warranties and
covenants for a facility of its type, size and term, including a
consolidated net worth covenant.
On the closing date, Atlantic Gulf paid the agent a closing
fee of $2.0 million.
(iii) AMENDMENTS TO THE SECURED AGREEMENT AND
INVESTMENT AGREEMENT. As part of the December 1998 Debt Refinancing:
- Apollo consented to Atlantic Gulf entering into the
New Senior Loan Agreements and agreed to subordinate
its collateral interest in certain Company assets,
and, in exchange therefor:
-- Atlantic Gulf issued an $850,000 promissory
note to Apollo (the "$850,000 Note"). The
$850,000 Note will mature on February 1,
2002, and provides for current payments of
interest only at the rate of ten percent
(10%) per annum (fifteen percent (15%) per
annum upon the occurrence and continuation
of an event of default), monthly in arrears.
-- Gulf issued a $1 million promissory note to
Apollo (the "$1 Million Note"). The $1
Million Note will mature on February 1,
2002, and provides for payments of interest
only at the rate of ten percent (10%) per
annum (fifteen percent (15%) per annum upon
the occurrence and continuation of an event
of default), monthly in arrears. Atlantic
Gulf has the obligation, under certain
circumstances, to prepay seventy five
F-46
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
percent (75%) of the original principal
amount of the $ 1 Million Note by conveying
a 20% net profits interest in a specified
project to Apollo.
The $850,000 Note and $1 Million Note, both
of which are secured by certain Company
assets, are together referred to herein as
the "Notes".
-- Atlantic Gulf issued 500,000 shares of
Common Stock to Apollo (the "Additional
Shares").
- Apollo and Atlantic Gulf entered into amendments to
the Amended and Restated Secured Agreement and
Amended and Restated Investment Agreement to (a)
conform such agreements to the terms and conditions
of the New Senior Loan Agreements, (b) reflect the
terms of the Apollo Notes, (c) delete all SP
Subsidiary provisions, (d) include the Additional
Shares as Registrable Securities and make all of
Apollo's Registrable Securities, Warrants and Notes
freely transferable (subject to the requirements of
the applicable securities laws) and (e) make certain
other, technical conforming changes.
(iv) NEW INTERCREDITOR AGREEMENT. Atlantic Gulf's
obligations under the New Senior Loan Agreements and the Secured
Agreement are fully secured by security interests in substantially all
of Atlantic Gulf's assets (the "Collateral") and guaranteed by certain
of Atlantic Gulf's subsidiaries. In connection with the December 1998
Debt Refinancing, Apollo, the New Revolving Loan Lenders, the New Term
Loan Lenders and MHD, as collateral agent, entered into a new
Intercreditor Agreement (the "New Intercreditor Agreement") pursuant to
which the parties agreed (1) that the liens of the parties upon the
Collateral would have the following priorities and rank: (a) the New
Revolving Loan Facility liens and obligations would have first
priority, (b) the New Term Loan Facility liens and obligations would
have second priority and (c) the Secured Agreement liens and
obligations would have third priority and (2) to certain repayment
subordinations, standstill periods, blockage periods, payment turnover
provisions and related matters.
(b) REPAYMENT OF WORKING CAPITAL FACILITY AND 13% NOTES. On
February 2, 1999, the Company repaid (i) the entire outstanding balance
($13.7 million) under its Working Capital Facility, (ii) the entire
outstanding balance ($39.5 million) under its 13% Notes and (iii) its
outstanding Mortgage Receivables loan and Contract Receivables loan
($7.8 million) with $32.0 million of funds drawn under its New
Revolving Loan Facility (including $7.5 million of cash collateral
treated as letter of credit guarantees), $26.5 million of funds drawn
under its New Term Loan Facility and $800,000 of other available cash.
(c) CARY GLEN PROJECT. On February 8, 1999, Panther Creek
Corp., a wholly-owned subsidiary of the Company (the "Developer"), was
terminated for cause by Panther Creek-Raleigh Limited Partnership (the
"Owner"), as the developer of the Cary Glen Project located in Cary,
North Carolina, for purported delays in the development schedule and
sales program. Furthermore, on February 26, 1999, the Owner demanded
that the Developer and the Company
F-47
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
pay to the Owner approximately $5.5 million for alleged future
potential project cost overruns pursuant to the Hearthstone Master Form
Acquisition and Development Agreement between the Owner and the
Developer and the Guaranty Agreement given by the Company. The Company
disputes whether (1) the termination was a proper termination for
cause, (2) the Developer is liable for cost overruns not incurred to
date and (3) the Owner correctly calculated the projected cost
overruns. No lawsuit has been filed at this time, and the Company
continues to pursue a resolution of this matter. In the event
litigation is filed by the Owner, the Company will assert certain
defenses and counterclaims against the Owner and will otherwise
vigorously defend the claims asserted against it and the Developer.
(d) STRATEGIC TRANSACTION. On March 26, 1999, the Company
announced that (1) its Board of Directors had formed a Special
Committee to explore strategic alternatives to maximize stockholder
value and (2) it had retained BT Alex. Brown, a leading investment
banking firm, to assist the Special Committee in reviewing strategic
transactions.
F-48
<PAGE>
ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
Years Ended December 31, 1998, 1997 and 1996
Schedule II -
Valuation and Qualifying Accounts
(In Thousands of Dollars)
<TABLE>
<CAPTION>
Amounts
Balance at Charged (Credited) Balance at
Beginning to Results of End of
of Period Operations Deductions(2) Period
--------- ---------- ------------- ------
Description
- - -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Predecessor Homesite Contract
Receivables reserves $4,353 $(1,300) $ 923 $2,130
Other receivable reserves (1) 3,806 (784) 290 2,732
------ ------- ------ ------
Total $8,159 $(2,084) $1,213 $4,862
====== ======= ====== ======
YEAR ENDED DECEMBER 31, 1997:
Predecessor Homesite Contract
Receivables reserves $2,130 $ (826) $ 293 $1,011
Other receivable reserves (1) 2,732 (440) 589 2,583
------ ------- ------ ------
Total $4,862 $ (386) $ 882 $3,594
====== ======= ====== ======
YEAR ENDED DECEMBER 31, 1998:
Predecessor Homesite Contract
Receivables reserves $1,011 $ (467) $ 141 $ 403
Other reasonable reserves (1) 2,583 -- 1,746 837
------ ------- ------ ------
$3,594 $ (467) $1,887 $1,240
====== ======= ====== ======
</TABLE>
- - ---------------
(1) Reserves are a deduction from mortgages, notes and other receivables.
(2) Deductions represents amounts charged to reserves resulting from the
cancellation, write-off, sale or other disposition of the related
receivables.
S-1
AMENDMENT TO ATLANTIC GULF COMMUNITIES CORPORATION
AMENDED AND RESTATED BYLAWS
This Amendment to Atlantic Gulf Communities Corporation Amended and
Restated Bylaws (this"Amendment") is entered into as of this 24th day of March,
1999 (the "Effective Date") .
Reference is hereby made to the Atlantic Gulf Communities Corporation
Amended and Restated Bylaws, dated as of February 17, 1997, as amended to date
(the "Bylaws"). Capitalized terms used herein and not otherwise defined have the
meanings given to them in the Bylaws.
The Board of Directors (the "Board") of Atlantic Gulf Communities
Corporation (the "Company") believes that is in the best interests of the
Company to amend the Bylaws to give itself the maximum flexibility in setting
the date and time of the Company's Annual Meeting of Stockholders.
Accordingly, the first paragraph of Section 2.1 of the Bylaws is hereby
amended and restated in its entirety to read as follows: "The annual meeting of
stockholders shall be held each year on such date (other than a legal holiday)
and at such time as the Board designates."
From and after the Effective Date of this Amendment, all references to
the Bylaws in the Bylaws shall be to the Bylaws as amended by this Amendment.
From and the Effective Date of this Amendment, except as expressly
amended hereby, the provisions of the Bylaws shall remain in full force and
effect.
- - ---------------------------------------------------------
THE UNDERSIGNED, BEING THE SECRETARY OF ATLANTIC GULF COMMUNITIES
CORPORATION (THE "COMPANY"), HEREBY CERTIFIES THAT THE FOREGOING AMENDMENT TO
ATLANTIC GULF COMMUNITIES CORPORATION AMENDED AND RESTATED BYLAWS WAS ADOPTED BY
THE BOARD OF DIRECTORS OF THE COMPANY, EFFECTIVE AS OF MARCH 24TH, 1999.
By:
--------------------------------
Joel K. Goldman
Secretary
THIRD AMENDED AND RESTATED
REVOLVING LOAN AGREEMENT
DATED AS OF DECEMBER 31, 1998
BY AND AMONG
ATLANTIC GULF COMMUNITIES CORPORATION,
THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES
HEREOF,
M.H. DAVIDSON & CO., LLC
AS AGENT
AND
M.H. DAVIDSON & CO., LLC
AS COLLATERAL AGENT
<PAGE>
THIRD AMENDED AND RESTATED REVOLVING LOAN AGREEMENT
ATLANTIC GULF COMMUNITIES CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SECTION 1 DEFINITIONS........................................................2
1.1 Certain Defined Terms..............................................2
1.2 Other Definitional Provisions.....................................28
SECTION 2 AMOUNT AND TERMS OF COMMITMENTS..................................29
2.1 Revolving Loans..................................................29
2.2 Notes............................................................30
2.3 Procedure for Borrowing..........................................30
2.4 Use of Proceeds of Loans.........................................31
2.5 Mandatory Reductions of Commitments and Prepayments of
Loans............................................................31
2.6 Optional Prepayments.............................................33
2.7 Repayment at Maturity............................................33
2.8 Interest Rates and Payment Dates.................................34
2.9 Fees.............................................................35
2.10 Computation of Interest and Fees.................................35
2.11 Pro Rata Treatment and Payments..................................36
2.12 Requirements of Law..............................................37
2.13 Taxes............................................................38
2.14 Funding Losses...................................................39
2.15 Issuance of L/C Guarantees and Banks' Purchase of Participations
Therein..........................................................39
SECTION 3 COLLATERAL.......................................................44
3.1 Liens in Subsidiary Stock, Contract Receivables, Real Property
and Personal Property............................................44
3.2 Security Documents...............................................45
3.3 Subordinations and Releases of Mortgage Liens....................48
3.4 Guarantees.......................................................50
SECTION 4 REPRESENTATIONS AND WARRANTIES...................................50
4.1 Financial Condition..............................................50
4.2 No Material Adverse Change.......................................51
4.3 Corporate Existence; Compliance with Law.........................51
4.4 Corporate Power; Authorization; Enforceable Obligations..........52
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
4.5 No Legal Bar.....................................................53
4.6 No Material Litigation...........................................53
4.7 No Default.......................................................53
4.8 Ownership of Property; Liens.....................................54
4.9 Intellectual Property............................................54
4.10 Taxes............................................................54
4.11 Federal Regulations..............................................55
4.12 ERISA............................................................55
4.13 Investment Company Act; Other Regulations........................56
4.14 Subsidiaries and Joint Ventures..................................56
4.15 Environmental Matters............................................56
4.16 Indebtedness.....................................................57
4.17 Contingent Obligations...........................................58
4.18 Restitution Program and Final Judgment...........................58
4.19 Certain Fees.....................................................58
4.20 Disclosure.......................................................58
4.21 Insurance........................................................59
4.22 Real Property Matters............................................59
4.23 Reorganization Proceedings.......................................59
4.24 Excluded Subsidiaries; Unrestricted Subsidiaries.................59
4.25 No Further Amounts Due Under Unsecured 1996 Notes................59
4.26 Bank Accounts....................................................60
4.27 [Intentionally Omitted]..........................................60
4.28 MPUD Subsidiary Groups...........................................60
4.29 SPUD Subsidiaries................................................60
4.30 DRI and Zoning Matters...........................................60
4.31 Bankruptcy Matters...............................................60
4.32 Series A Preferred Stock.........................................60
4.33 Series B Preferred Stock.........................................61
SECTION 5 CONDITIONS PRECEDENT.............................................61
5.1 Conditions to Effectiveness of this Agreement....................61
5.2 Conditions to Each Loan and Issuance of Each Letter of Credit....66
5.3 Conditions Subsequent............................................67
SECTION 6 AFFIRMATIVE COVENANTS............................................67
6.1 Financial Statements.............................................68
6.2 Certificates; Other Information..................................69
6.3 Payment of Obligations...........................................70
6.4 Conduct of Business and Maintenance of Existence.................71
6.5 Maintenance of Property; Insurance...............................71
6.6 Inspection of Property; Books and Records; Appraisals............71
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6.7 Notices..........................................................72
6.8 Environmental Laws...............................................73
6.9 Business Plan....................................................73
6.10 Authorizations...................................................74
6.11 Dividends from Subsidiaries......................................74
6.12 Supplemental Reports Regarding Real Property.....................75
6.13 Compliance with Laws.............................................75
6.14 Other Notices....................................................75
6.15 Company Operating Account Control Agreement......................76
6.16 Indemnification by Company.......................................76
6.17 Executive Officers...............................................76
SECTION 7 NEGATIVE COVENANTS...............................................77
7.1 Maintenance of Consolidated Net Worth............................77
7.2 Limitation of Indebtedness.......................................77
7.3 Limitation on Liens..............................................79
7.4 Limitation on Guarantee Obligations..............................81
7.5 Limitations on Fundamental Changes...............................81
7.6 Limitation on Sale of Assets.....................................81
7.7 Limitation on Dividends..........................................82
7.8 Limitation on Capital Expenditures...............................83
7.9 Limitation on Investments, Loans, and Advances...................83
7.10 Limitation on Optional Payments and Modifications of Debt
Instruments......................................................85
7.11 Transactions with Affiliates.....................................85
7.12 Sale and Leaseback...............................................85
7.13 Fiscal Year......................................................86
7.14 Limitation on Negative Pledge Clauses............................86
7.15 Deviation from Business Plan.....................................86
7.16 Inter Project Loans, Mergers, Consolidations and Investments.....86
7.17 Limitation of Bank Accounts......................................86
7.18 Venture Subsidiaries and Joint Ventures..........................87
7.19 Employee Benefits................................................87
7.20 Charter Documents................................................87
SECTION 8 EVENTS OF DEFAULT; REMEDIES......................................88
8.1 Events of Default; Remedies......................................88
SECTION 9 AGENTS...........................................................92
9.1 Appointment of Agent.............................................92
9.2 Appointment of Collateral Agent..................................93
9.3 Appointment of Issuing Bank......................................93
9.4 Delegation of Duties.............................................94
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
9.5 Exculpatory Provisions...........................................94
9.6 Reliance by Agent, Collateral Agent and Issuing Bank.............95
9.7 Notice of Default................................................96
9.8 Non-Reliance on Agents, Issuing Bank and Other Banks.............96
9.9 Indemnification..................................................97
9.10 [Intentionally Omitted]..........................................97
9.11 Agents and Issuing Bank in Individual Capacity...................97
9.12 Successor Agents.................................................98
9.13 Co-Agent and/or Co-Collateral Agent..............................99
SECTION 10 MISCELLANEOUS...................................................100
10.1 Amendments and Waivers..........................................100
10.2 Notices.........................................................101
10.3 No Waiver: Cumulative Remedies..................................101
10.4 Survival of Representations and Warranties......................101
10.5 Payment of Expenses and Taxes...................................101
10.6 Successors and Assigns: Participations; Purchasing Banks........102
10.7 Adjustments; Set-Off............................................105
10.8 Appointment of Agent as Company's Lawful Attorney...............106
10.9 Counterparts....................................................106
10.10 Severability....................................................107
10.11 Integration.....................................................107
10.12 Governing Law...................................................107
10.13 Submission to Jurisdiction; Waivers.............................107
10.14 Acknowledgments.................................................109
10.15 Waivers of Any Jury Trial.......................................109
10.16 Confidentiality.................................................109
10.17 Further Assurances..............................................110
10.18 Controlling Agreement...........................................111
</TABLE>
iv
<PAGE>
THIRD AMENDED AND RESTATED REVOLVING LOAN AGREEMENT
ATLANTIC GULF COMMUNITIES CORPORATION
THIS THIRD AMENDED AND RESTATED REVOLVING LOAN AGREEMENT (this
"AGREEMENT") is dated as of December 31, 1998, and entered into by and among
ATLANTIC GULF COMMUNITIES CORPORATION, a Delaware corporation, formerly known as
General Development Corporation ("COMPANY"), THE FINANCIAL INSTITUTIONS LISTED
ON THE SIGNATURE PAGES HEREOF (together with each financial institution that may
become a party to this Agreement as herein provided, referred to herein
individually as a "BANK" and collectively as "BANKS"), M.H. DAVIDSON & CO., LLC,
a New York limited liability company, as agent for Banks (hereinafter, in such
capacity, together with any successors thereto in such capacity, referred to as
"AGENT"), and M.H. DAVIDSON & CO., LLC, a New York limited liability company, as
collateral agent for Banks (hereinafter, in such capacity, together with any
successors thereto in such capacity, referred to as "COLLATERAL AGENT"). All
capitalized terms not otherwise defined herein have the meanings given such
terms in Section 1.
R E C I T A L S:
WHEREAS, pursuant to that certain Purchase Agreement, dated of
even date herewith (the "Purchase Agreement"), by and among FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), AGENT and COLLATERAL AGENT,
Foothill has assigned all right, title and interest in and to the Second Amended
and Restated Revolving Loan Agreement, dated as of September 30, 1996 (the
"Existing Loan Agreement"), the Fifth Amended and Restated Renewal Working
Capital Note dated January 15, 1999, in the original principal amount of
$20,000,000.00 (the "Existing Note"), and various other loan documents described
in the Purchase Agreement, it being understood that no repayment of the
indebtedness evidenced is being effected; and
WHEREAS, concurrently herewith, the Company is entering into
the Recapitalization Transactions; and
WHEREAS, Banks desire to appoint M.H. Davidson & Co., LLC, to
serve as Agent hereunder and under the Guarantees and to serve as Collateral
Agent for Banks under the Security Documents; and
WHEREAS, it is a condition to Agent and Collateral Agent
entering into the Purchase Agreement with Foothill that the Existing Loan
Agreement be amended and restated as provided in this Agreement; and
<PAGE>
2
WHEREAS, the parties hereto desire to amend and restate the
Existing Loan Agreement in its entirety as provided in this Agreement, it being
understood that no repayment of the obligations evidenced by or secured under
the Existing Loan Agreement is being effected hereby, but merely an amendment
and restatement in accordance with the terms hereof; and
WHEREAS, in connection with the Recapitalization Transactions,
Banks have agreed to extend additional credit in the amount of Nineteen Million
Five Hundred Thousand and No/100 Dollars ($19,500,000.00), consisting of
additional advances as evidenced by that certain Future Advance Working Capital
Note dated of even date herewith in the original principal amount of Twelve
Million and No/100 Dollars ($12,000,000.00) (the "Future Advance Note") and L/C
Guarantees issued for the account of Company from time to time in an amount up
to $7,500,000 in the aggregate as evidenced by that certain Future Advance
Letter of Credit Note dated of even date herewith in the original principal
amount of Seven Million Five Hundred Thousand Dollars ($7,500,000) (the "L/C
Note").
NOW THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Company, Banks, Agent,
and Collateral Agent agree as follows:
I.
DEFINITIONS
A. CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the
following meanings:
"ADMINISTRATIVE CLAIMS" has the meaning assigned that term in
Article I of the Reorganization Plan.
"AFFILIATE" with respect to any Person, means (a) any other
Person which is a Subsidiary of such Person, (b) any other Person (and each
Subsidiary thereof) of which such Person is a Subsidiary, and (c) any other
Person which is under common control with such Person.
"AGENT" has the meaning assigned that term in the introductory
paragraph to this Agreement.
"AGREEMENT" has the meaning set forth in the preamble hereto.
<PAGE>
3
"ANGLO AMERICAN" means Anglo American Financial, a New York
limited partnership.
"ANGLO AMERICAN COLLATERAL AGENT" means M.H. Davidson & Co.,
LLC, a New York limited liability company.
"ANGLO AMERICAN BANK GROUP" means the Banks party to the Anglo
American Loan Agreement and their respective successors and assigns.
"ANGLO AMERICAN LOAN" means the loan outstanding under the
Anglo American Loan Agreement.
"ANGLO AMERICAN LOAN AGREEMENT" means the Term Loan Agreement,
dated as of December 31, 1998, among Company, the Anglo American Bank Group and
M.H. Davidson & Co., LLC, as from time to time amended, supplemented or
otherwise modified in accordance with the terms hereof and thereof.
"ANGLO AMERICAN LOAN DOCUMENTS" means, collectively, (i) the
Anglo American Loan Agreement, and (ii) the "Loan Documents" as defined in the
Anglo American Loan Agreement, each of the foregoing as from time to time
amended, supplemented or otherwise modified in accordance with the terms hereof
and thereof.
"ANGLO AMERICAN LOAN OBLIGATIONS" means (i) the Anglo American
Loan outstanding under the Anglo American Loan Documents; (ii) all interest,
fees, prepayment premiums and late payment fees now or hereafter payable with
respect thereto; (iii) all existing and future guaranty obligations relating to
the foregoing; and (iv) all other fees (including, without limitation,
attorneys' and paralegals' fees and expenses) and other amounts now or hereafter
payable to the Anglo American Bank Group, or any of them, or their agents under
or in respect of the Anglo American Loan Documents.
"ANNUAL NET INCOME" means income as shown on the consolidated
statements of income provided by Company under Section 6.1, but in no event less
than 0.
"APOLLO" means AP-AGC, LLC, a Delaware limited liability
company.
"BANK" has the meaning assigned to that term in the first
paragraph hereof.
"BANK ACCOUNTS" means any and all deposit accounts, money
market accounts and any other deposits and investments of Company or any
Subsidiary held in
<PAGE>
4
any bank or other financial institution, any brokerage firm or any other Person
and all money, instruments, securities, documents and other investments held
pursuant thereto, whether now existing or owned or hereafter created or acquired
(exclusive of all but the residual, remainder or beneficial interest of Company
and its Subsidiaries in the Reserve Accounts, the Claims Disbursement Account
and all other escrow, restricted, custodial and fiduciary accounts, the pledge
of which by Company or any Subsidiary is prohibited by agreements existing on
the Effective Date or by law, asset forth in SCHEDULE 7.17, which may be amended
from time to time by written notice to Agent to include other restricted
accounts).
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy" from time to time in effect, or any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court
for the Southern District of Florida, or in the event that such court ceases to
exercise jurisdiction over the Reorganization Proceedings, the court that
exercises jurisdiction over the Reorganization Proceedings in lieu of the United
States Bankruptcy Court for the Southern District of Florida.
"BORROWING BASE" means the sum of
A. an amount equal to 75% of the principal amount of
Eligible Homesite Contract Receivables and Eligible
Commercial Receivables;
PLUS
B. an amount equal to 50% of the lesser of (i) the GAAP
Book Value or (ii) the appraised value of the
underlying real estate of Commercial Receivables or
Homesite Contract Receivables which are not Eligible
Homesite Contract Receivables and
Eligible Commercial Receivables;
PLUS
C. an amount equal to 50% of the GAAP Book Value of Real
Property consisting of identified scattered
homesites;
PLUS
D. an amount equal to 50% of the GAAP Book Value of
identified Eligible Tract Land;
<PAGE>
5
PLUS
E. an amount equal to 20% of the (i) Net Equity of the
West Meadow project, the Lakeside Estates project,
the Saxon Woods project, the Trails of West Frisco
project and the Riverwalk Tower project and (ii) Fair
Market Value of the Falcon Trace project and the
Sunset Lakes project
"BORROWING DATE" means any Business Day from and including the
date hereof to but not including the Maturity Date specified in a notice
pursuant to SECTION 2.3 as the date on which Company requests Banks to make
Loans hereunder.
"BUSINESS DAY" means any day excluding Saturday, Sunday and
any day which either is a legal holiday under the laws of the State of New York
or is a day on which banking institutions located in the State of New York are
authorized or required by law or other governmental action to close.
"BUSINESS PLAN" means as of the Effective Date and until a new
Business Plan is delivered to Banks in accordance with SECTION 6.9, the business
plan of Company and its Subsidiaries, dated January 26, 1999, and thereafter the
business plan of Company and its Subsidiaries delivered to and approved by
Required Banks in December of each year in accordance with SECTION 6.9.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
capital stock of a corporation any and all equivalent ownership interests in a
Person (other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"CASH COLLATERAL" has the meaning assigned that term in the
Escrow Agreement.
"CASH COLLATERAL ACCOUNTS" means any and all accounts that
Collateral Agent for the benefit of Banks and the Anglo American Bank Group may
from time to time require to be established and maintained with financial
institutions reasonably satisfactory to Collateral Agent and pledged to
Collateral Agent pursuant to cash collateral account agreements in form and
substance reasonably satisfactory to Collateral Agent.
"CASH EQUIVALENTS" means (a) securities issued or directly and
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than 90 days from the date
of acquisition, (b) time deposits and certificates of deposit having maturities
of not more
<PAGE>
6
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.
"CHANGE OF CONTROL" means, (i) directly or indirectly a sale,
transfer, or other conveyance of all or substantially all of the assets of the
Company, on a consolidated basis, to any "person" or "group" (as such terms are
used for purposes of Sections 13 (d) and 14 (d) of the Exchange Act, whether or
not applicable), as an entirety or substantially as an entirety in one
transaction or series of related transactions, in each case with the effect that
the Person or group of Persons that, as of the Effective Date, are not
shareholders of the Company (or any Person or group of Persons that, as of the
Effective Date, are Affiliates of such shareholders) own more than 30% of the
aggregate number of votes of all classes of Capital Stock of the Company which
ordinarily have voting power for the election of directors, managers or trustees
of the transferee entity immediately after such transaction, (ii) any "person"
or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of
the Exchange Act, whether or not applicable), other than the shareholders of the
Company as of the Effective Date (or any Person or group of Persons that, as of
the Effective Date, are Affiliates of such shareholders), is or becomes the
"beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, whether or not applicable, except that a Person shall be deemed to
have "beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 30% of the aggregate number of
votes of all classes of Capital Stock of the Company which ordinarily have
voting power for the election of directors of the Company, or (iii) during any
period of twenty-four (24) consecutive months, individuals who at the beginning
of such period constituted the board of directors of the Company, together with
any new directors whose election by such board or whose nomination for election
by the shareholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the board of
directors of the Company then in office.
<PAGE>
7
"CLAIMS DISBURSEMENT ACCOUNT" means the segregated account
established for purposes of holding funds to pay Administrative Claims, Priority
Claims and Convenience Class Claims pursuant to Sections 3.2.4 and 8.1.1 of the
Reorganization Plan.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COLLATERAL" has the meaning assigned that term in Section
3.1.
"COLLATERAL AGENT" means M.H. Davidson & Co., LLC solely in
its capacity as collateral agent for Banks under the Loan Documents pursuant to
the terms of this Agreement and the other Loan Documents.
"COLLECTIONS" means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"COMMERCIAL REAL ESTATE" means all Real Property of Company
and its Subsidiaries (including condominium and cooperative units), other than
Real Property reserved for sale as single family residential homes or lots.
"COMMERCIAL RECEIVABLES" means all promissory notes and
mortgages and deeds of trust payable to, or held by, Company or any Subsidiary,
and all other documents, instruments and agreements executed in connection
therewith, whether currently existing or hereafter created or acquired, arising
from the sale of single family homesites or arising from the sale of other Real
Property and all cash and non-cash proceeds thereof.
"COMMITMENT" means, as to any Bank, the obligation of such
Bank, if any, to make (i) a Loan to Company hereunder and (ii) to issue L/C
Guarantees hereunder, in an aggregate principal amount not to exceed the amount
set forth opposite such Bank's name on SCHEDULE 2.1; the Commitments of all
Banks, are collectively referred to herein as the "COMMITMENTS."
"COMMITMENT TRANSFER SUPPLEMENT" has the meaning assigned that
term in Section 10.6.
"COMMONLY CONTROLLED ENTITY" means an entity, whether or not
incorporated, which is under common control with Company within the meaning of
Section 4001 of ERISA or is part of a group which includes Company and which is
treated as a single employer under Section 414 of the Code.
<PAGE>
8
"COMPANY ACCOUNTANTS" shall mean Ernst & Young LLP or another
accounting firm designated by the Company and approved by Agent.
"COMPANY OPERATING ACCOUNT" means that certain deposit account
number 6189189013641 maintained by Company with Sun Trust Bank, Miami, N.A. or
such other deposit account maintained by Company at a financial institution
reasonably satisfactory to Collateral Agent.
"COMPANY OPERATING ACCOUNT CONTROL AGREEMENT" means a written
agreement among Company, M.H. Davidson & Co., LLC (in its capacity as Collateral
Agent), and Operating Account Bank, with respect to the Company Operating
Account, in form and substance reasonably satisfactory to Collateral Agent,
pursuant to which Operating Account Bank acknowledges the security interests
granted by Company to Collateral Agent in the Company Operating Account, waives
rights of setoff with respect to the Company Operating Account, and agrees to
act upon the instructions of Collateral Agent with respect to the disposition of
funds inthe Company Operating Account should Operating Account Bank receive such
instructions from M.H. Davidson & Co., LLC.
"CONDEMNATION AWARDS" means any and all proceeds (including
proceeds in the form of promissory notes or other agreements for the payment of
proceeds) from (a) the taking by eminent domain, condemnation or otherwise, or
acquisition pursuant to contract, of any property of Company or any Subsidiary
by the United States of America, the State of Florida or any political
subdivision thereof, or any agency, department, bureau, board, commission or
instrumentality of any of them, including any awards and/or other compensation
awarded to, or received by, the Company or GDU, whether as a result of
litigation, arbitration, settlement or otherwise, arising from the Utility
Condemnation Proceedings or (b) any sale by Company or any Subsidiary of a water
and utility system to a governmental entity in lieu of condemnation whether now
owned or hereafter created or acquired.
"CONFIRMATION ORDER" means the order issued on March 27, 1992
by the Bankruptcy Court, confirming the Reorganization Plan.
"CONSOLIDATED NET WORTH" means, at any particular date, all
amounts which, in accordance with GAAP, would be included as Shareholders'
Equity on a consolidated balance sheet of Company and its consolidated
Subsidiaries at such date.
"CONTRACTUAL OBLIGATION" means, with respect to any Person,
any provision of any security issued by that Person or of any agreement,
instrument or other undertaking to which that Person is a party or by which it
or any of its property is bound.
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9
"DEEDS OF TRUST" means the Deeds of Trust executed from time
to time between Company or a Subsidiary and Collateral Agent substantially in
the form of the Deeds of Trust in existence as of December 31, 1998, as the same
may be amended, supplemented or otherwise modified from time to time (including
any amendments or modifications made in connection with this Agreement),
pursuant to which Company and Subsidiaries grant a security interest in the Real
Property located in Tennessee (and in such other jurisdictions where "deeds of
trust" are used to encumber real property) and related Personal Property of
Company or Subsidiaries to Collateral Agent, for the benefit of Banks, as
required by this Agreement.
"DEFAULT" means any of the events specified in Section 8,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"DEFAULT RATE" has the meaning assigned to that term in
Section 2.8.
"DEPOSIT ACCOUNT SECURITY AGREEMENT" means that certain
Deposit Account Security Agreement, dated as of December 31, 1998, executed by
Company and each of its Subsidiaries in favor of Collateral Agent, for the
benefit of Banks.
"DOLLARS" and the sign "$" means the lawful money of the
United States of America.
"E&Y REPORT" means the Consultant's Report - Atlantic Gulf
Communities Corporation, October 9, 1998, prepared by Ernst & Young LLP.
"EFFECTIVE DATE" means February 1, 1999, the date this
Agreement became effective.
"ELIGIBLE COMMERCIAL RECEIVABLES" means those Commercial
Receivables that comply with each and all of the representations and warranties
representing Commercial Receivables made by Company or any Subsidiary to Agent
in the Loan Documents, and that are and at all times continue to be acceptable
to Agent in all respects; PROVIDED; HOWEVER, that standards of eligibility may
be fixed and revised from time to time by Agent in Agent's reasonable credit
judgment. Eligible Commercial Receivables shall not include any of the
following: (i) Commercial Receivables that are in material default; (ii)
Commercial Receivables with respect to which the obligor is an employee,
Affiliate, or agent of Company or any Subsidiary; (iii) Commercial Receivables
with respect to which the obligor is a creditor of Company or any Subsidiary,
has or has asserted a right of setoff, or has disputed its liability or made any
claim with respect to the Commercial Receivables; PROVIDED, HOWEVER, that such
Commercial Receivables only shall be deemed ineligible under this
<PAGE>
10
clause to the extent of the actual or likely offsetting amount as determined by
Agent, in its reasonable credit judgment, unless Agent believes that the dispute
or claim will jeopardize the repayment of all or substantially all of the
Commercial Receivable in a timely manner; (iv) Commercial Receivables that the
obligor has failed to pay within 90 days of due date; (v) Commercial Receivables
with respect to which the obligor is subject of any Insolvency Proceeding, or
becomes insolvent; and (vi) Commercial Receivables the collection of which
Agent, in its reasonable credit judgment, believes to be doubtful by reason of
the obligor's financial condition.
"ELIGIBLE HOMESITE CONTRACT RECEIVABLES" means those Homesite
Contract Receivables that comply with each and all of the representations and
<PAGE>
11
warranties respecting Homesite Contract Receivables by Company or any Subsidiary
to Agent in the Loan Documents, and that are and at all times continue to be
acceptable to Agent in all respects; PROVIDED, HOWEVER, that standards of
eligibility may be fixed and revised from time to time by Agent in Agent's
reasonable credit judgment. Eligible Homesite Contract Receivables shall not
include any of the following: (i) Homesite Contract Receivables that are in
material default; (ii) Homesite Contract Receivables with respect to which the
obligor is an employee, Affiliate, or agent of Company or of any Subsidiary;
(iii) Homesite Contract Receivables with respect to which the obligor is a
creditor of Company or any Subsidiary, has or has asserted a right of setoff, or
has disputed its liability or made any claim with respect to the Homesite
Contract Receivable; PROVIDED, HOWEVER, that such Homesite Contract Receivables
only shall be deemed ineligible under this clause to the extent of the actual or
likely offsetting amount as determined by Agent, in its reasonable credit
judgment, unless Agent believes that the dispute or claim will jeopardize the
repayment of all or substantially all of the Homesite Contract Receivable in a
timely manner; (iv) Homesite Contract Receivables that the obligor has failed to
pay within 90 days of due date; (v) Homesite Contract Receivables with respect
to which the obligor is the subject of any Insolvency Proceeding, or becomes
insolvent; and (vi) Homesite Contract Receivables the collection of which Agent,
in its reasonable judgment, believes to be doubtful of the obligor's financial
condition.
"ELIGIBLE JOINT VENTURE PROJECTS" means on the Effective Date,
the Joint Ventures initially consisting of Sunset Lakes project, the Jupiter
Ocean Grande project and the Falcon Trace project, each as described in the E&Y
Report and that certain joint venture project located in Cary, North Carolina
commonly known as "Cary Glen".
"ELIGIBLE SUBDIVISION PROJECTS" means only those real estate
projects owned in their entirety by Company or any of its Subsidiaries. On the
Effective Date, Eligible Subdivision Projects shall consist of the "West Bay
Club" project, the "Trails of West Frisco" project, "West Meadows" project, the
"Aspen-Glenwood Springs" project, the "Lakeside Estates" project, the "Saxon
Woods" project and the "Riverwalk Tower" project, each as described in the E&Y
Report, and that certain condominium project to be located in Lee County,
Florida, currently known as the "West Bay Club Condominium".
"ELIGIBLE TRACT LAND" means (1) those Parcels of Real Property
consisting of raw tract land identified on Schedule E-1 and (2) any tract land
the title to which is revested in Company as a result of foreclosure, or deed in
lieu of foreclosure, on a Commercial Receivable.
<PAGE>
12
"ENVIRONMENTAL LAWS" means any and all applicable Federal,
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or requirements of any Governmental Authority
regulating, relating to, or imposing liability or standards of conduct
concerning, environmental protectionmatters, including Hazardous Materials, as
now or may at any time hereafter be in effect.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time and any successor statute.
"ERISA EVENT" shall mean (a) any "reportable event", as
defined in Section 4043 of ERISA or the regulations issued thereunder, with
respect to a Plan; (b) the adoption of any amendment to a Plan that would
require the provision of security pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA; (c) the existence with respect to any Plan of an
"accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (d) the filing pursuant to Section
412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of
the minimum funding standard with respect to any Plan; (e) the incurrence of any
liability under Title IV of ERISA with respect to the termination of any Single
Employer Plan or the withdrawal or partial withdrawal of the Company or any of
its Commonly Controlled Entity from any Single Employer Plan or Multiemployer
Plan; (f) the receipt by the Company or any Commonly Controlled Entity from the
PBGC or a plan administrator of any notice relating to the intention to
terminate any Single Employer Plan or Single Employer Plans or to appoint a
trustee to administer any Single Employer Plan; (g) the receipt by the Company
or any Commonly Controlled Entity of any notice concerning the imposition of
withdrawal liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA; (h) the occurrence of a "prohibited transaction" with respect to which
the Company or any of the Subsidiaries is a "disqualified person" (within the
meaning of Section 4975 of the Code) or with respect to which the Company or any
such Subsidiary could otherwise be liable; and (i) any other event or condition
with respect to a Plan or Multiemployer Plan that could reasonably be expected
to have a Material Adverse Effect.
"ESCROW AGREEMENT" means that certain Escrow Agreement, dated
as of January 29, 1999 by and among Atlantic Gulf Communities Corporation,
United States Trust Company and each of the Banks.
"EVENT OF DEFAULT" means any of the events specified in
Section 8; PROVIDED that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
<PAGE>
13
"EXCLUDED PROPERTY" means (a) the Capital Stock of General
Development Acceptance Corporation and GDV Financial Corporation, (b) 34% of the
Capital Stock of AG Asia, (c) all money or property now or hereafter deposited
into a Reserve Account pursuant to the Reorganization Plan (exclusive of the
residual, remainder or beneficial interests of Company and its Subsidiaries
therein), (d) any portions of payments made on Homesite Contracts Receivable
which are, as a matterof 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" means the direct or indirect
subsidiaries of Company listed on SCHEDULE E-2.
"EXISTING LOAN AGREEMENT" has the meaning set forth in the
first WHEREAS clause of the Recitals hereto.
"EXISTING NOTE" has the meaning set forth in the first WHEREAS
clause of the Recitals hereto.
"FAIR MARKET VALUE" means, for each Eligible Subdivision
Project and/or Eligible Joint Venture Project, as applicable, at any time the
present value at such time of the pro forma statements of cash flows for such
project (which are included in Appendix L to the E&Y Report or, if so requested
by the Agent or the Required Banks (no more frequently than annually) in any
subsequent report of Ernst & Young or other consultant acceptable to Agent,
provided to Banks) using a discount rate of 15%, and which pro forma statement
shall be updated by the Company from time to time, but no less frequently than
quarterly for actual revenues, expenses and financings. For interim months
between quarterly updates, the pro forma statements shall be adjusted by adding
any project expenditures (contributed by financing or otherwise) less Net Cash
Proceeds from any sales.
"FINANCING LEASE" means 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
Company and Subsidiaries.
"FOOTHILL" means Foothill Capital Corporation, a California
corporation.
"FOOTHILL LOAN DOCUMENTS" means the Existing Loan Agreement
and all security documents and all other instruments and/or agreements related
thereto.
<PAGE>
14
"FUNDS FLOW MEMO" means a funds flow memorandum, in form and
substance satisfactory to Agent and Collateral Agent, documenting the sources
and applications of funds in respect of the consummation of the Recapitalization
Transactions and the payment of the amounts required to be paid hereunder to
Agent and Banks on the Effective Date.
"FUTURE ADVANCE NOTE" has the meaning set forth in the final
WHEREAS clause of the Recitals hereto.
"GAAP" means 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.
"GAAP BOOK VALUE" means book value as determined by Company
and reflected in Company's consolidated balance sheets prepared in accordance
with GAAP consistently applied, except as may be approved by Agent, and
delivered to Agent from time to time pursuant to this Agreement.
"GDC" means General Development Corporation, a Delaware
corporation, under which name Company was formerly known.
"GDU" means the Company's Subsidiary, General Development
Utilities, Inc., a Florida corporation.
"GOVERNMENTAL AUTHORITY" means any nation or government,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of, or
pertaining to, government.
"GUARANTEE OBLIGATION" means, as to any Person (the
"guaranteeing person"), any obligation of (a) the guaranteeing person or (b)
another Person (including any bank under any letter of credit) to induce the
creation of which obligation the guaranteeing person has issued a reimbursement,
counter indemnity or similar obligation, in either case guaranteeing or in
effect guaranteeing any Indebtedness, leases, dividends or other obligations
(the "primary obligations") of any other third Person (the "primary obligor") in
any manner, whether directly or indirectly, including
<PAGE>
15
any obligation of theguaranteeing 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. Theamount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (a) an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person may be liable are not stated
or determinable, in which case the amount of such Guarantee Obligation shall be
such guaranteeing person's maximum reasonably anticipated liability in respect
thereof as reasonably determined by Company in good faith.
"GUARANTEES" means, collectively, the guarantees of the
Obligations, made by the Subsidiaries and Unrestricted Subsidiaries pursuant to
the Subsidiary Guarantees.
"HAZARDOUS MATERIALS" means any hazardous materials, hazardous
waste, hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
"HOMESITE CONTRACTS RECEIVABLES" means all contracts for deed,
promissory notes, mortgages, deeds of trust and other agreements, currently
existing or hereafter created or acquired, pursuant to which Company or any
Subsidiary has the right to receive payment in any form whatsoever for the sale
of single-family homesites (excluding Commercial Receivables), including any and
all accounts, contract rights, chattel paper, general intangibles and unpaid
seller's rights, relating to the foregoing or arising therefrom, reserves and
credit balances arising thereunder and cash and non-cash proceeds of any and all
of the foregoing.
"HOMESITE PROGRAM" has the meaning assigned that term in
Article I of the Reorganization Plan.
<PAGE>
16
"HOMESITES" means any land now or hereafter held for the
purposes of sale as single-family homesites.
"INDEBTEDNESS" means, of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than incurred in the ordinary course of
business and payable in accordance with customary practices) or which is
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, and (e)
all liabilities secured by any Lien on any property owned by such Person even
though such Person may have not assumed or otherwise becomeliable for the
payment thereof. As used herein, the term "Indebtedness" shall not include
Guarantee Obligations.
"INSOLVENCY", means, with respect to any Multiemployer Plan,
the condition that such plan is insolvent within the meaning of Section 4245 of
ERISA.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"INSOLVENT" means pertaining to a condition of Insolvency.
"INTELLECTUAL PROPERTY" has the meaning assigned that term in
Section 4.9.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor
Agreement, dated as of December 31, 1998, by and among Agent, Banks, the Anglo
American Collateral Agent, the Anglo American Bank Group, the Secured Agreement
Banks and the Collateral Agent and the Secured Agreement Collateral Agent and
acknowledged by Company and its Subsidiaries (including Unrestricted
Subsidiaries and Excluded Subsidiaries) and The Bank of New York, substantially
in the form of EXHIBIT I-1, as such agreement may be supplemented, amended or
otherwise modified from time to time.
"INTEREST PAYMENT DATE" means, as to any Loan, the last day of
each calendar month to occur while such Loan is outstanding.
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17
"INVESTMENT AGREEMENT" has the meaning ascribed to such term
in the Intercreditor Agreement, but shall not refer to amendments,
modifications, supplements, or restatements thereof entered into after the
Effective Date without the prior consent of Agent and the Banks.
"INVESTMENT INSTRUMENTS" means the Investment Agreement, the
Preferred Stock, the certificate of designation of preferences and rights
relating to the Preferred Stock, and all other documents, instruments, and
agreements executed in connection therewith, each as from time to time amended,
supplemented or otherwise modified in accordance with the terms hereof, thereof,
and of the Intercreditor Agreement.
"INVESTMENTS" means any and all promissory notes, Capital
Stock (other than Subsidiary Stock), bonds, debentures and securities, held by
Company or any Subsidiary, whether now owned or hereafter acquired.
"ISSUING BANK" means, with respect to any L/C Guarantee, DK
Acquisition Partners, LLC or its designee.
"JOINT VENTURES" means, collectively, (a) the joint ventures
identified on Schedule 4.14(B), and (b) any other partnership, joint venture,
limited liability company, or other entity in which a Subsidiary acquires, after
the Effective Date and as permitted under Section 7.9(g) and 7.18, equity
interests therein representing 50% or less of such entity's contributed capital;
and "Joint Venture" means any one of them.
"JOINT VENTURE PLEDGE AGREEMENT" means that certain Assignment
of Partnership Interests, dated as of December 31, 1998, substantially in the
form of EXHIBIT J-1, among each of the Venture Subsidiaries and Collateral
Agent, pursuant to which the Venture Subsidiaries pledge all of their right,
title, and interest in and to the Joint Ventures to Collateral Agent for the
benefit of Banks.
"LAS OLAS PROPERTY" means the real property project in Fort
Lauderdale, Florida identified in the E&Y Report as the Riverwalk Tower project.
"BANKS" has the meaning assigned that term in the introductory
paragraph to this Agreement.
"L/C GUARANTEE" means a guarantee of payment or reimbursement
obligation with respect to a letter of credit issued by an issuing bank for the
account of Company.
<PAGE>
18
"L/C NOTE" has the meaning set forth in the final WHEREAS
clause of the Recitals hereto, which is a contingent obligation of the Company
as more particularly described in Section 2.15(f)
"LETTER OF CREDIT" or "LETTERS OF CREDIT" means Standby
Letters of Credit to be obtained by Issuing Bank for the account of Company
pursuant to Section 2.15.
"LETTER OF CREDIT USAGE" means, as of any date of
determination, the sum of (a) the maximum aggregate amount which is or at any
time thereafter may become available for drawing under all L/C Guarantees then
outstanding PLUS (b) the aggregate amount of all drawings under L/C Guarantees
honored by Issuing Bank and not theretofore reimbursed by Company (whether by
means of the proceeds of Loans pursuant to SECTION 2.15(E)(II) or otherwise).
"LIEN" means any mortgage, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any Financing Lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"LITCHFIELD" means Litchfield Financial Corporation.
"LOAN BORROWING DATE" means the Business Day specified in a
notice pursuant to SECTION 2.2 as a date on which Company requests Banks to make
the Loans hereunder.
"LOAN DOCUMENTS" means this Agreement, the Notes, the L/C
Guarantees, any applications for L/C Guarantees, the Subsidiary Guarantees, the
Security Documents, the Tax Servicing Contracts, and any other agreement entered
into, now or in the future, in connection with this Agreement.
"LOANS" has the meaning assigned that term in Section 2.1.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon
(a) the business, operations, property or condition (financial or otherwise) or
prospects of Company and its Subsidiaries taken as a whole, (b) the ability of
Company to perform its obligations under this Agreement, the Notes, the Security
Documents or other Loan Documents, or (c) the legality, validity, enforceability
of this Agreement, the Notes, the Security Documents or other Loan Documents,
the attachment, perfection or
<PAGE>
19
priority of any Liens created by the Loan Documents, or the rights or remedies
of Agent, Collateral Agent or Banks hereunder or thereunder.
"MATURITY DATE" means the close of business on the eighteen
month anniversary of the Effective Date.
"MAXIMUM PERMISSIBLE CREDIT AMOUNT" means the aggregate of the
Commitments of all of the Banks to make Loans and to obtain Letters of Credit
and issue L/C Guarantees, being, on any date of determination prior to the
Maturity Date, the Maximum Permissible Loan Amount plus $7,500,000, and on or
after the Maturity Date, $0.
"MAXIMUM PERMISSIBLE LOAN AMOUNT" means the aggregate of the
Commitments of all of the Banks to make Loans, being, on any date of
determination prior to the Maturity Date, $32,000,000 (as such amount may be
reduced from time to time in accordance with Section 2.5 hereof) and on or after
the Maturity Date, $0.
"MEZZANINE PROPERTY UNDER DEVELOPMENT" means, collectively,
the Real Property of any MPUD Subsidiary which is acquired for the purpose of
being developed, or which is in the process of being improved or developed,
either by theconstruction of roads, curb cuts, sewer and water facilities or
other improvements, or by the construction of residential units and
appurtenances thereto.
"MORTGAGES" means the Mortgage and Security Agreements
executed from time to time by Company or a Subsidiary in favor of Collateral
Agent, substantially in the form of the Mortgages in existence as of December
31, 1998, and as the same may be amended, supplemented, consolidated or
otherwise modified from time to time (including as any amendments and
modifications made in connection with this Agreement), pursuant to which Company
and Subsidiaries grant a security interest in the Real Property located in
Florida (or in such other jurisdictions where "mortgages" are used to encumber
real property) and related Personal Property of Company or Subsidiaries to
Collateral Agent, for the benefit of Banks.
"MPUD HOLDING COMPANY" means a Subsidiary of Company the sole
asset of which is all of the issued and outstanding stock of an MPUD Subsidiary.
"MPUD SUBSIDIARY" has the meaning assigned that term in
Section 7.2(h).
"MPUD SUBSIDIARY GROUP(S)" means an MPUD Subsidiary Holding
Company and all direct and/or indirect, wholly-owned Subsidiaries of such MPUD
Subsidiary ("MPUD Subsidiary Subsidiaries").
<PAGE>
20
"MULTIEMPLOYER PLAN" means a Plan which is a multiemployer
plan as defined in Section 4001(a) (3) of ERISA.
"NET CASH FLOW" means, with respect to any fiscal period of a
Person, on a consolidated basis, the actual consolidated net cash flow from
operations as determined on the basis set forth in SCHEDULE N-1.
"NET CASH PROCEEDS" means with respect to any sale of assets
all cash payments (including any cash received by way of deferred payment
pursuant to, or monetization of, a note receivable or otherwise, but only as and
when and so received) received from such sale net of bona fide direct costs of
sale.
"NET EQUITY" means, for each Eligible Subdivision Project, the
excess of (1) the Fair Market Value thereof over (2) the identified Project
Specific Debt related thereto outstanding as of the date of determination of
such Fair Market Value.
"NOTES" means the Sixth Note, the Future Advance Note, the L/C
Note, and any renewal, replacement or substitution for any of them.
"NOTIFICATION DATE" has the meaning assigned that term in
Section 2.15(a) (ii).
"OBLIGATIONS" means all obligations of every nature of Company
from time to time owed to Agent, Banks or Collateral Agent or any of them under
the Loan Documents, whether for principal, interest (including any interest
that, but for the provisions of the Bankruptcy Code, would have accrued),
premiums (including Early Termination Premiums), fees, costs, and expenses
(including any fees, costs, or expenses that, but for the provisions of the
Bankruptcy Code, would have accrued including without limitation, all interest
accruing after the commencement of an Insolvency Proceeding whether or not
allowed as a claim in an Insolvency Proceeding), indemnification, or otherwise.
"OPERATING ACCOUNT BANK" means Sun Trust Bank, Miami, N.A. or
such other financial institution reasonably satisfactory to Agent.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor
thereto.
"PERMITTED SALE ASSET" has the meaning assigned that term in
Section 7.6.
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21
"PERSON" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"PERSONAL PROPERTY" means the following personal property of
Company or any Subsidiary (exclusive of Homesite Contracts Receivable and
Commercial Receivables of Company or any Subsidiary):
(a) the Bank Accounts;
(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 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, taxrefund claims, computer programs, any other Intellectual
Property, all claims under guaranties, security interests or other security to
secure payment of any accounts by an account debtor, all rights to
indemnification and all other intangible property of every kind and nature,
including (i) the interests, if any, of Company or any Subsidiary in payments,
proceeds, residuals and remainders from, or as a beneficiary of, the Reserve
Accounts, Claims Disbursement Account, or other such accounts, (ii) any and all
beneficial interests in the trusts pursuant to which title to the Trust Property
is held and (iii) any and all other proceeds or causes of action with respect
to, or rights to receive proceeds from, any condemnation of any Real Property or
Personal Property of Company or any Subsidiary, whether now in existence or
hereafter created or acquired.
(f) any and all goods which are, or may at any time be,
goods held for sale or lease or furnished under contracts of service or raw
materials, work-in-process or materials used or consumed in business,
wheresoever located and whether now owned or hereafter created or acquired,
including all such property the sale or
<PAGE>
22
other disposition of which has givenrise 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 any Bank,
the Anglo American Bank Group or the Secured Agreement Obligees or any agent or
bailee of any Bank, the Anglo American Bank Group or the Secured Agreement
Obligees;
(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" means that certain
Personal Property Security Agreement, dated as of December 31, 1998, executed by
Company and the Subsidiaries (including Unrestricted Subsidiaries and Excluded
Subsidiaries) now or hereafter party thereto in favor of Collateral Agent, for
the benefit of Banks.
"PLAN" means, at a particular time, any employee benefit plan
which is covered by ERISA and in respect of which Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"PREFERRED STOCK" means the Company's (1) 20% Cumulative
Redeemable Convertible Preferred Stock, Series A (the "SERIES A PREFERRED
STOCK"), the terms and conditions of which are set forth in that certain
Statement of Preferences and Rights of the Series A Preferred Stock (the "SERIES
A STATEMENT"), a copy of which is attached as Annex A to the Company's Amended
and Restated Certificate of Incorporation and (2) 20% Cumulative Redeemable
Convertible Preferred Stock, Series B (the "SERIES B PREFERRED STOCK"), the
terms and conditions of which are set forth in that certain Statement of
Preferences and Rights of the Series B Prefer-red Stock (the
<PAGE>
23
"SERIES B STATEMENT"), a copy of which is attached as Annex B to the Company's
Amended and Restated Certificate of Incorporation.
"PRIORITY CLAIMS" has the meaning assigned that term in
Article I of the Reorganization Plan.
"PROJECT SPECIFIC DEBT" shall mean the total amount of all
third party debt incurred by all Subsidiaries in connection with the development
and ownership of the various projects being developed from time to time by
Subsidiaries.
"PRO RATA SHARE" means: the percentage obtained by dividing
(i) a Bank's Commitment, by (ii) the Commitments of all Banks; PROVIDED,
HOWEVER, that, in each case, in the event all Commitments have been terminated,
Pro Rata Share shall be determined according to the Commitments in effect
immediately prior to such termination and otherwise as set forth above.
"REAL PROPERTY" means any and all real property and fixtures
and interests in real property and fixtures now owned or hereafter acquired by
Company or any Subsidiary.
"REAL PROPERTY SALE" means the sale, assignment or other
transfer for value of any Real Property by Company or any Subsidiary.
"RECAPITALIZATION TRANSACTIONS" means: (a) the assignment of
the Foothill Loan Documents to Agent; (b) the execution and delivery of this
Agreement and the Anglo American Loan Agreement and the funding of the Loans in
accordance herewith and of the Anglo American Loans in accordance therewith; (c)
(i) the execution and delivery of the Intercreditor Agreement, (ii) the
resignation of The Bank of New York as SP Sub Collateral Agent, and (iii) the
transition of the SP Sub Collateral Agent functions from The Bank of New York to
DK Acquisition Partners, L.P.; and the use by Company of (i) the proceeds of the
Loans on the Effective Date, (ii) the proceeds of the Anglo American Loans and
the Loans, and (iii) unrestrictedand unencumbered cash of Company, in each case,
in accordance with the Funds Flow Memo, to finance: (A) the retirement by
Company of all of the outstanding Unsecured Cash Flow Notes in an aggregate
principal amount not greater than $39,496,400; and (B) the repurchase by Company
of Homesite Contract Receivables from (1) Litchfield in an aggregate amount not
to exceed $2,300,000, and (2) BankBoston N.A. in an aggregate amount not to
exceed $8,300,000.
"REORGANIZATION" means, with respect to any Multiemployer
Plan, the condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA
<PAGE>
24
"REORGANIZATION PLAN" means the Restated Second Amended Joint
Plan of Reorganization of General Development Corporation jointly proposed in
the Reorganization Proceedings by Company and the Official Unsecured Creditors
Committee, filed on October 9, 1991 with the Clerk of the Bankruptcy Court, as
modified by Modification filed March 9, 1992.
"REORGANIZATION PROCEEDINGS" means the cases commenced on
April 6 and April 12, 1990 under Chapter 11 of Title 11 of the United States
Code in the Bankruptcy Court by GDC (Case No. 90-12231-BKC-AJC), General
Development Financial Services, Inc. (Case No. 90-12232-BKC-AJC), General
Development Resorts, Inc. (Case No. 90-12233 BKC-AJC), Town & Country II, Inc.
(formerly Florida Residential Communities, Inc.) (Case No. 9012234-BKC-AJC),
Five Star Homes Group, Inc. (Case No. 90-12235-BKC-AJC), Five Star Homes, Inc.
(Case No. 90-12338-BKC-AJC), GDV Financial Corporation (Case No. 90-I2236BKC-MC)
and Environmental Quality Laboratory, Incorporated (Case No. 90-12237-BKC-AJC).
"REPORTABLE EVENT" means any of the events set forth in
Section 4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived.
"REQUIRED BANKS" means Banks holding at least 66 2/3% of the
aggregate amount of the Commitments.
"REQUIREMENT OF LAW" means, as to any Person, the certificate
or articles of incorporation and bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"RESERVE ACCOUNTS" means the Disbursement Account (as defined
in Section 8.4 of the Reorganization Plan); the Disputed Claims Reserve Account
(as defined in Section 8.7 of the Reorganization Plan); any reserve of
securities, utility-satisfied lots, cash or other assets that is established
pursuant to the ReorganizationPlan, the Homesite Program, or any agreement
resolving a claim of the State of Florida in the Reorganization Proceedings, to
satisfy requests for utility service; and any reserve of securities or cash
established to fund road or other improvements pursuant to any agreement
resolving a claim of the State of Florida in the Reorganization Proceedings,
including the Utility Lot Trust Agreement, dated December 26, 1996 executed by
and between Company and the State of Florida, Department of Business Regulation,
Division of Florida Land Sales, Condominiums and Mobile Homes.
<PAGE>
25
"RESPONSIBLE OFFICER" means the chief executive officer and
the president of Company, or with respect to corporate proceedings, the
secretary or any assistant secretary of Company, or, with respect to financial
matters, the chief financial officer or treasurer of Company.
"REVERSE STOCK SPLIT" has the meaning set forth in the
definition of "STOCK SPLIT".
"SALE AND LEASEBACK" means any arrangement with any Person
providing for the leasing by Company or any Subsidiary of real or personal
property which has been or is to be sold or transferred by Company or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of Company or Subsidiary.
"SECURED AGREEMENT" has the meaning ascribed to such term in
the Intercreditor Agreement, but shall not refer to amendments, modifications,
supplements, or restatements thereof entered into after the Effective Date
without the prior consent of Agent and Banks.
"SECURED AGREEMENT COLLATERAL AGENT" means DK Acquisition
Partners, L.P.
"SECURED AGREEMENT DOCUMENTS" means the Secured Agreement, the
"Transaction Documents" as defined in the Secured Agreement, the Investment
Instruments, the Secured Note and any and all instruments, documents and
agreements executed in connection therewith, as amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof and of
the Intercreditor Agreement.
"SECURED AGREEMENT OBLIGEES" has the meaning ascribed to such
term in the Intercreditor Agreement.
"SECURED AGREEMENT OBLIGATIONS" means: (i) any indebtedness
and obligations now or hereafter owing to the Secured Agreement Obligees under
or in connection with the Secured Agreement Documents, including, without
limitation,(x) redemption and repurchase obligations with respect to the Series
A Preferred Stock and (y) the Secured Note Obligations; (ii) all interest,
prepayment premiums and late payment fees now or hereafter payable with respect
thereto; (iii) all existing and future guaranty obligations relating to the
foregoing; and (iv) all other fees (including, without limitation, attorneys'
and paralegals' fees and expenses) and other amounts now or hereafter payable to
the Secured Agreement Obligees, or any of them, or their agents under or in
respect of the Secured Agreement Documents.
"SECURED DEBT DOCUMENTS" means, collectively, the Loan
Documents, the Anglo American Loan Documents, and the Secured Agreement
Documents, each as amended, supplemented or otherwise modified from time to time
in accordance with the terms hereof, thereof, and of the Intercreditor
Agreement.
<PAGE>
26
"SECURED NOTE" means, collectively, (a) that certain $850,000
promissory note dated as of December 31, 1998 and (b) that certain $1,000,000
promissory note dated as of December 31, 1998, each made by the Company to the
order of the Secured Agreement Obligees and each having a maturity date of
February 1, 2002.
"SECURED NOTE OBLIGATIONS" means all obligations of the
Company to the Secured Agreement Obligees under or with respect to the Secured
Note (whether for principal, interest, fees, costs, expenses, or otherwise) and
all obligations of any Subsidiary of the Company with respect thereto (whether
pursuant to a guaranty thereof, as a co-maker thereof or co-obligor with respect
thereto, or otherwise).
"SECURITY AGREEMENTS" means the Personal Property Security
Agreement, the Deposit Account Security Agreement, and any other security
agreements, between Company and/or a Subsidiary and Agent or Collateral Agent,
as the same may be amended supplemented or otherwise modified from time to time,
pursuant to which Company and Subsidiaries assign and grant a security interest
in Homesite Contracts Receivables and Commercial Receivables and Personal
Property of Company or Subsidiaries to Agent or Collateral Agent, for the
benefit of Banks, as required by this Agreement.
"SECURITY DOCUMENTS" means the Stock Pledge Agreement, the
Joint Venture Pledge Agreement, the Security Agreements, the Mortgages, the
Deeds of
<PAGE>
27
Trust, the Company Operating Account Control Agreement, any cash collateral
account agreements, and any and all other agreements, instruments, documents,
financing statements, assignments, notices, mortgages and other written matter
necessary or reasonably required by Agent or Collateral Agent at any time to
create, perfect, maintain or continue Agent's and Collateral Agent's Lien in the
Collateral, together with all amendments, modifications, extensions,
substitutions and renewals thereof.
"SERIES A DOCUMENTS" has the meaning set forth in Section
4.32.
"SERIES A PREFERRED STOCK" and "SERIES B PREFERRED STOCK" have
the meanings specified in the definition of Preferred Stock.
"SERIES A STATEMENT" has the definition assigned to that term
in the definition of "PREFERRED STOCK".
"SERIES B STATEMENT" has the definition assigned to that term
in the definition of "PREFERRED STOCK".
"SHAREHOLDERS' EQUITY" means, as to any corporation, an amount
equal to the excess of the assets of such corporation (including minority
interests) over its liabilities, determined in accordance with GAAP and as shown
on the most recently prepared applicable balance sheet of such corporation. The
Company's Preferred Stock shall not be treated as liabilities for purposes
hereof.
"SINGLE EMPLOYER PLAN" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"SIXTH NOTE" means the Sixth Amended and Restated Renewal
Working Capital Note dated as of December 31, 1998 made by the Company in favor
of Agent to renew, amend and restate the Existing Note.
"SPUD SUBSIDIARY" has the meaning assigned that term in
Section 7.2(h).
"STANDBY LETTER OF CREDIT" means any standby letter of credit
or similar instrument issued in accordance with the provisions of this Agreement
for the purpose of repayment of a portion (the "Repayment Amount") of the
principal of the Unsecured Cash Flow Notes in an aggregate amount not to exceed
$7,500,000 subject to reduction from time to time in accordance with the terms
of the Escrow Agreement.
"STOCK PLEDGE AGREEMENT" means the Fourth Amended and Restated
Stock Pledge Agreement, dated as of December 31, 1998, among Company, each of
its
<PAGE>
28
Subsidiaries and Collateral Agent, pursuant to which Company and Subsidiaries
pledge Subsidiary Stock to Collateral Agent for the benefit of Banks.
"STOCK SPLIT" means a proposal to amend Company's Amended and
Restated Certificate of Incorporation to effect, if subsequently determined by
Company's board of directors, (1) a reverse stock split of Company's outstanding
common stock on the effective date of the amendment (the "Reverse Split
Effective Date"), pursuant to which a fixed number of 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 all fractions created
in the Reverse Stock Split will be cashed out and (2) to effect a forward split
of the Company's common stock 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 a fixed number of whole shares of the Company's
common stock (as determined by the Company's board of directors in its
discretion).
"SUBSIDIARY" means, as to any Person, a corporation,
partnership, trust (exclusive of any trust created in connection with a Reserve
Account) or other entity of which shares of stock, partnership interests,
beneficial interests or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership, trust (exclusive
of any trust created in connection with a Reserve Account) or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly, through one or more intermediaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
Company. Unless otherwise indicated, all references to a Subsidiary or
Subsidiaries of Company shall not mean, include, or refer to the Unrestricted
Subsidiaries, the Excluded Subsidiaries, or the Joint Ventures.
"SUBSIDIARY GUARANTEE" means the Subsidiary Guarantee, dated
as of December 31, 1998, executed by Company and each of its Subsidiaries and
Unrestricted Subsidiaries in favor of Agent, for the benefit of Banks.
"SUBSIDIARY PROPERTY UNDER DEVELOPMENT" means, collectively,
the Real Property of any Subsidiary which is acquired for the purpose of being
developed, or which is in the process of being improved or developed, either by
the construction of roads, curb cuts, sewer and water facilities or other
improvements, or by the construction of residential units and appurtenances
thereto.
<PAGE>
29
"SUBSIDIARY STOCK" means the Capital Stock of any and all
Subsidiaries, Excluded Subsidiaries, and Unrestricted Subsidiaries.
"TAX SERVICING CONTRACTS" means, collectively, the tax
servicing contracts required to be delivered under Section 5.3, and all
amendments, modifications, extensions, substitutions and renewals thereof.
"TOTAL USAGE" means, as of any date of determination,
$7,500,000.
"TRUST PROPERTY" means the real property held in trust
pursuant to (a) Trust Agreement No. 06-01-009-6082101, dated as of January
17,1991, by and between NCNB National Bank of Florida, as Trustee for the
benefit of Company, the Beneficiary; (b) Trust Agreement No. 06-01-009-6081954,
dated as of January 17,1991, by and between NCNB National Bank of Florida, as
Trustee for the benefit of Company, the Beneficiary; (c) Trust Agreement No.
06-01-009-6082655, dated as of January 17, 1991, by and between NCNB National
Bank of Florida, as Trustee for the benefit of Company and General Development
Financial Services, Inc., the Beneficiaries; (d) Trust Agreement No. 2, dated as
of May 31, 1991, by and between Jake Gamble, Esq., as successor Trustee for the
benefit of Company and Cumberland Cove, Inc., the Beneficiaries; and (e) Utility
Lot Trust Agreement.
"20% PROFITS INTEREST" means that certain 20% net profits
interest granted by Company to Apollo or its designee in that certain project
located in Tampa, Florida, known as the Apollo Beach project currently under
consideration by the Company or another project hereafter acquired or to be
acquired by Company (or a Subsidiary of Company) satisfactory to Apollo of
economic value equivalent to the Apollo Beach project, which 20% net profits
interest represents an additional fee payable to Apollo in connection with the
consummation of the transactions contemplated herein and in the Anglo American
Loan Agreement.
"UCC" means the Uniform Commercial Code as shall be in effect
from time to time in the state of New York.
"UNRESTRICTED SUBSIDIARIES" means, collectively, (a) the
direct or indirect subsidiaries of Company listed on Schedule U-1, and (b) any
other direct or indirect subsidiary of Company that is formed or acquired after
the Effective Date, that does not have or make any investment in any Joint
Venture (nor was formed or acquired for the purpose of having or making any such
investment), and that Agent agrees in writing that such entity shall constitute
an Unrestricted Subsidiary under and for all purposes of this Agreement and the
other Loan Documents, upon which Schedule U-1 automatically shall be deemed to
be amended to reflect the inclusion on
<PAGE>
30
such schedule of such new Unrestricted Subsidiary; and "UNRESTRICTED SUBSIDIARY"
means any one of them.
"UNSECURED CASH FLOW NOTES" means those certain Unsecured 13%
Cash Flow Notes due December 31, 1998, issued pursuant to the Indenture dated as
of March 31, 1992.
"UNSECURED 1996 NOTES" means those certain 12% Notes due
December 31, 1996, issued pursuant to the Indenture dated as of March 31, 1992.
"UTILITY LOT TRUST AGREEMENT" means the Utility Lot Trust
Agreement, dated December 26, 1996, by and between Company and the State of
Florida.
"VENTURE SUBSIDIARY" means any Subsidiary whose sole asset is
its equity interest in a Joint Venture and whose sole revenues are derived from
such sole asset.
"WORKING CAPITAL RESERVES" has the meaning assigned that term
in Article I of the Reorganization Plan.
B. OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined
in this Agreement shall have such defined meanings when used in the other Loan
Documents or any certificate or other document made or delivered pursuant
hereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto, accounting
terms relating to Company and its Subsidiaries not defined in Section 1.1 and
accounting terms partly defined in Section 1.1, to the extent not defined, shall
have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(e) References to "Sections", "subsections", Exhibits and
Schedules are to Sections, Sub-sections, Exhibits and Schedules, respectively,
of this Agreement unless otherwise specifically provided.
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31
(f) Unless the context of this Agreement clearly requires
otherwise, the term "including" is not limiting.
(g) Unless the context of this Agreement or the other Loan
Documents clearly requires otherwise, any reference in this Agreement or in the
other Loan Documents to this Agreement, any of the other Loan Documents, any of
the other Secured Debt Documents, or the Intercreditor Agreement shall include
all alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable, made in accordance with the terms hereof, thereof, and of the
Intercreditor Agreement.
II.
AMOUNT AND TERMS OF COMMITMENTS
A. REVOLVING LOANS.
(a) Subject to the terms and conditions hereof, each Bank
severally agrees to make loans (collectively, the "Loans") to Company from time
to time in an aggregate amount such that at no time shall the sum of the
aggregate principal amount of all Loans then outstanding at such time exceed the
lesser of (i) the Maximum Permissible Loan Amount or (ii) the Borrowing Base.
The Loans shall be made by each of Banks on each Borrowing Date pro rata based
on such Bank's Pro Rata Share of the aggregate amount to be borrowed on such
Borrowing Date.
(b) Subject to the terms and conditions hereof, amounts
prepaid or repaid on account of the Loans may be reborrowed during the term of
this Agreement except that the Maximum Permissible Loan Amount shall be reduced
as provided in Sections 2.5(c), (d), (e), (f) and (g).
(c) After the cumulative amount of Loans advanced under the
Future Advance Note reaches its full face amount of $12,000,000, then (i) any
Loan repayments made in connection with a reduction of the Maximum Permissible
Loan Amount as provided in Sections 2.5(c), (d), (e), (f) and (g) shall be
deemed made against the Future Advance Note until the Maximum Permissible Loan
Amount is reduced to $20,000,000, and thereafter such repayments shall be deemed
made against the Sixth Note, (ii) any other Loan repayments (i.e., those that
can be reborrowed) shall be deemed made against the Sixth Note until the
outstanding principal balance of the Sixth Note is reduced to $0, and
thereafter, against the Future Advance Note, and (iii) any such reborrowings
shall be deemed made under the Sixth Note until the Sixth Note is fully drawn,
and thereafter such reborrowings shall be deemed made under the Future Advance
Note.
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32
(d) All Loans shall be made by Banks simultaneously, it
being understood that no Bank shall be responsible for any default by any other
Bank in the other Bank's obligations to make Loans hereunder nor shall the
Commitment of any Bank be increased as a result of the default by any other Bank
in such other Bank's obligation to make Loans hereunder. The default by any Bank
in its obligations to make Loans shall not excuse any other Bank from its
obligations to make Loans.
B. NOTES.
The Loans made by each Bank shall be evidenced by the Sixth
Note and the Future Advance Note, and any renewal, replacement or substitution
therefor,made in favor of the Agent for the benefit of all of the Banks. The
Agent is hereby authorized to record the date and amount of each Loan made by
such Bank and the date and amount of each payment or prepayment of principal
thereof or of interest on a Loan on the schedule annexed to and constituting a
part of its Note, and any such recordation shall constitute prima facie evidence
of the accuracy of the information so recorded. Each such Note shall (a) be
dated December 31, 1998, (b) be stated to mature as provided in SECTION 2.7 and
(c) provide for the computation and payment of interest in accordance with
SECTIONS 2.8 and 2.10.
C. PROCEDURE FOR BORROWING.
Subject to the conditions set forth in this Agreement, Company
may make a borrowing hereunder on any Business Day during the period from the
date hereof to but not including the Maturity Date. Company shall give Agent
irrevocable notice (which notice must be received by Agent prior to 2:00 p.m.,
New York time two Business Days prior to the requested Borrowing Date),
specifying (a) the amount to be borrowed and (b) the requested Borrowing Date.
Upon receipt of any such notice from Company, Agent shall promptly (and in any
event on the same Business Day) notify each Bank thereof. The notice of a
request for borrowing by Company shall be accompanied by a certificate of a
Responsible Officer of Company (a) representing and warranting that the purpose
for which the requested borrowing is to be used is permitted by, and is in
accordance with, the terms and conditions of this Agreement, and (b)
representing and warranting that, after giving effect to the requested borrowing
of Loans, the sum of the aggregate principal amount of all Loans outstanding at
such time does not exceed the lesser of (i) the Maximum Permissible Loan Amount
and (ii) the Borrowing Base at such time. Each Bank shall make the amount of its
Pro Rata Share of each requested borrowing available to Agent for the account of
Company at the office of Agent specified on the signature pages hereof prior to
10:00 a.m., New York time, on the requested Borrowing Date in funds immediately
available to Agent. Such borrowing will then be made available to Company by
Agent by paying to such deposit account as Company may designate in the notice
of such Borrowing the
<PAGE>
33
aggregate of the amounts made available to Agent by Banksand in like funds as
received by Agent; PROVIDED, HOWEVER, that if Agent or any Bank determines that
any condition precedent to such borrowing has not been met (and, in the case of
a Bank, such Bank has so notified Agent), Agent shall not make such borrowing
available to Company.
D. USE OF PROCEEDS OF LOANS.
The proceeds of the Loans shall be used by Company or its
Subsidiaries for the following purposes only: (i) to finance a portion of the
Recapitalization Transactions (as described in, and only to the extent set forth
in, such definition), (ii) to pay transactional fees, costs, and expenses
incurred in connection with this Agreement, and (iii) for the lawful and
permitted corporate purposes of the Company or its Subsidiaries consistent with
the terms and conditions hereof.
E. MANDATORY REDUCTIONS OF COMMITMENTS AND PREPAYMENTS OF LOANS.
Company shall make the following mandatory reductions of the
Commitments and prepayments of the Loans:
1. If, at any time the aggregate principal amount of the
Loans outstanding exceeds the lesser of (i) the Maximum Permissible Loan Amount,
or (ii) the Borrowing Base in effect at such time, Company shall immediately pay
to Agent, in cash, the amount of such excess for application to the prepayment
of the Loans.
2. If at any time the amount of cash or Cash Equivalents
held by Company and its Subsidiaries exceeds $5,000,000 (less any checks
outstanding to the extent such checks have been written to pay current expenses
and not to prepay expenses except for expenses to be incurred in the immediately
subsequent three-month period and consistent with past practices), Company shall
immediately pay to Agent, in cash, the amount of such excess for application to
the prepayment of the principal of the Loans.
3. Upon the closing of the sale of the Las Olas Property
and Company's receipt of the Net Cash Proceeds therefrom, the Maximum
Permissible Loan Amount shall automatically be reduced by $3,000,000 and Company
shall immediately pay to Agent, in cash, for application to the prepayment of
the principal of the Loans, together with accrued interest thereon, the amount
necessary to reduce the aggregate amount of the outstanding Loans to the Maximum
Permissible Loan Amount. In any event, taking into account any prior prepayment
of the principal of the Loans on or before March 31, 1999, Company shall have
prepaid to Agent the principal of the Loans, together with accrued interest
thereon, in an amount no less than $4,000,000,
<PAGE>
34
and immediately thereafter theMaximum Permissible Loan Amount shall
automatically be reduced by an equal amount.
4. Upon the closing of the sale of the Trails of West
Friscoproject and the Company's receipt of the Net Cash Proceeds therefrom, the
Maximum Permissible Loan Amount shall automatically be reduced by an amount
equal to the sum of $1,000,000 plus 75% of any excess in Net Cash Proceeds from
the sale of the Trails of West Frisco project over $15,000,000, and Company
shall immediately pay to Agent, in cash, for application to the prepayment of
the principal of the Loans, together with accrued interest thereon, the amount
necessary to reduce the aggregate amount of the outstanding Loans to the Maximum
Permissible Loan Amount. In any event, taking into account any prior prepayment
of the principal of the Loans made pursuant to Section 2.5(c) and the preceding
sentence of this Section 2.5(d), on or before May 31, 1999, Company shall have
prepaid the principal of the Loans in an amount no less than $5,000,000, and
immediately thereafter the Maximum Permissible Loan Amount shall automatically
be reduced by an equal amount.
5. Upon the closing of a bulk sale of the greater of (i)
one-third (1/3) or more of the total number of planned lots at the time of
acquisition and (ii) one-third (1/3) of the land that would otherwise comprise
such planned lots in any Eligible Subdivision Project at the time of acquisition
(other than the Riverwalk Tower project, the Trails of West Frisco project, the
Apollo Beach project, that certain project under consideration by the Company
and located in Palm Beach County, Florida currently known as "Grand Oaks", that
certain project under consideration by the Company and located in St. John's
County, Florida currently known as "Rayland") in a single transaction and
Company's receipt of the Net Cash Proceeds therefrom, the Maximum Permissible
Loan Amount shall automatically be reduced by an amount equal to 75% of such Net
Cash Proceeds, and Company shall immediately pay to Agent, in cash, for
application to the prepayment of the principal of the Loans, together with
accrued interest thereon, the amount necessary to reduce the aggregate amount of
the outstanding Loans to the Maximum Permissible Amount.
6. On the 15th day of February, March and April, 2000,
(or if any such day is not a Business Day, on the next Business Day), (i) the
Maximum Permissible Loan Amount shall automatically be reduced by $1,666,666.66,
and (ii) Company shall immediately pay to Agent, in cash, for application to the
prepayment of the principal of the Loans, together with accrued interest
thereon, the amount necessary to reduce the aggregate amount of the outstanding
Loans to the Maximum Permissible Amount. Any prepayment of the Loans required
under Section 2.5(e) shall be credited against succeeding prepayment obligations
required under Sections 2.5(f) and 2.5(g) in chronological order.
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35
7. On the 15th day of May, June and July, 2000 (or if any
such day is not a Business Day, on the next Business Day), the Maximum
Permissible Loan Amount shall automatically be reduced by $2,333,333.33, and
Company shall immediately pay to Agent, in cash, for application to the
prepayment of the principal of the Loans, together with accrued interest thereon
the amount necessary to reduce the aggregate amount of the outstanding Loans to
the Maximum Permissible Loan Amount. Any prepayment of the Loans required under
Section 2.5(e) shall be credited against succeeding prepayment obligations
required under Sections 2.5(f) and 2.5(g) in chronological order.
8. The prepayment of the Loans required under Sections 2.5
(a) and (b) shall not result in a reduction of the Maximum Permissible Loan
Amount. The reductions of the Maximum Permissible Loan Amount required under
Sections 2.5(c), (d), (e), (f) and (g) above shall be applied ratably to the
Commitment of each of the Banks. Commitments, when reduced, may not be
reinstated and Loans, when prepaid pursuant to any of the provisions of Sections
2.5(c), (d), (e), (f) and/or (g) may not be reborrowed.
9. If, on the date of any required prepayment of the
Loans under any of the foregoing clauses, such prepayment would exceed the
amount of the outstanding Loans on such date, then the amount of the required
prepayment shall be limited to the amount of the outstanding Loans. Moreover, if
a sale described in clause (c) above closes after March 31, 1999 and/or a sale
described in clause (d) above closes after May 31, 1999, then any prepayment of
the proceeds required thereunder shall not result in a further reduction of the
Maximum Permissible Loan Amount; provided, however, with respect to a sale of
the Trails of West Frisco project, the Maximum Permissible Loan Amount shall
automatically be reduced by only 75% of any excess in Net Cash Proceeds from
such sale over $15 million.
10. In the event that any of the foregoing prepayments of
the Loans shall reduce the Maximum Permissible Loan Amount to $O, any excess
prepayment amounts required hereunder shall be held by the Collateral Agent in
an interest bearing account and applied solely to the cash collateralization of
the Letters of Credit and L/C Guarantees in accordance with the provisions of
Section 2.15, up to the amount of the L/C Guarantees.
F. OPTIONAL PREPAYMENTS.
Company may at any time and from time to time prepay the
Loans, in whole or in part, without premium or penalty, upon at least one
Business Day's irrevocable prior notice to Agent, specifying the date and amount
of prepayment. Upon receipt of any such notice Agent shall promptly (and in any
event on the same Business
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36
Day) notify each Bank thereof. If any such notice isgiven, the amount specified
in such notice shall be due and payable on the date specified therein, together
with accrued interest and fees to such date on the amount prepaid. Partial
optional prepayments shall be in an aggregate principal amount of at least
$500,000. Optional prepayments made pursuant to this Section shall be applied in
accordance with SECTION 2.11.
G. REPAYMENT AT MATURITY.
On the Maturity Date, all Obligations immediately shall become
due and payable without notice or demand, and Company unconditionally agrees to
repay to Agent, for the ratable account of Banks, the principal amount of all
Loans in full, together with interest thereon and all other amounts then payable
hereunder and under the other Loan Documents including, without limitation, the
return to Agent of all outstanding Cash Collateral in accordance with the terms
of the Escrow Agreement. Company shall not be relieved or discharged of
Company's duties, Obligations, or covenants hereunder, and the continuing
security interests of Agent for the benefit of Banks in the Collateral shall
remain in effect until all Obligations have been fully and finally discharged
and the Banks' obligations to extend credit hereunder is terminated.
H. INTEREST RATES AND PAYMENT DATES.
1. RATE OF INTEREST. Company agrees to pay interest on
the outstanding principal amount of each Loan, from and including the date on
which such Loan is made to but not including the date on which such Loan shall
be paid in full, at a rate of eleven per cent (11%) per annum (calculated by
multiplying 11% times the average daily outstanding principal amount of each
Loan and dividing by 12).
2. DEFAULT RATE. If any Obligation, whether for principal
or (to the maximum extent permitted by applicable law) interest or other
amounts, is not paid in full when due (whether at stated maturity, by
acceleration or by required prepayment, and whether by operation of the
subordination provisions of the Intercreditor Agreement or otherwise), Company
agrees to pay interest on the amount in default, from and including the date on
which such amount became due (including any applicable cure or grace period) to
but not including the date on which such amount shall be paid in full, at a rate
equal to the lesser of (i) four (4%) percent per annum in excess of (a) the rate
of interest set forth in Section 2.8(a) above with respect to the Loans and (b)
the rate of interest set forth in Section 2.15(f)(i) with respect to the L/C
Guarantees, in the case of each of (a) and (b) compounded monthly, and (ii) the
maximum rate of interest allowed by applicable law (calculated as provided in
Section 2.8(a) above) (the "Default Rate"). In addition, after the occurrence
and during the continuance of an Event of Default, Company shall pay interest on
the outstanding
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37
principal amount of each Loan from and after the date of the occurrence of such
Default until such Event of Default is cured or waived.
3. INTEREST PAYMENT DATES. Accrued interest shall be
payable in arrears on each Interest Payment Date; PROVIDED, that interest
accruing pursuant to paragraph (b) of this Section also shall be payable from
time to time on demand.
4. MAXIMUM INTEREST RATE. Anything in this Agreement or
the Notes or the other Loan Documents to the contrary notwithstanding, in no
event shall any Bank be entitled to take, charge, collect or receive interest on
the Loans or on any other Obligations at a rate in excess of the maximum lawful
rate permitted under applicable law. In the event that any Bank inadvertently
shall take, charge, collect or receive interest in excess of such maximum lawful
rate, the excess amount of such interest shall automatically be applied to
reduce the principal amount of the Loans, and any excess remaining after such
application shall be applied to any remaining Obligations (other than such
interest) hereunder or under the other Loan Documents, and any excess remaining
after the aforesaid application shall be returned to Company.
I. FEES.
1. AGENT CLOSING FEE. Company shall pay to Collateral
Agent, for the sole and separate account of Banks, on the Effective Date, a
non-refundable closing fee of $1,280,000.
2. FINANCIAL EXAMINATION FEES. Company shall pay to
Agent: (i) a fee of $650 per day per examiner, plus reasonable out-of-pocket
expenses for each financial analysis and examination of Company or its
Subsidiaries (including Unrestricted Subsidiaries, Excluded Subsidiaries, and
Joint Ventures) performed by Agent or Banks or their agents; (ii) a fee of
$1,000 per day per appraiser, plus out-of-pocket expenses for each appraisal of
the Collateral performed by Agent or Banks or their agents; and (iii) the actual
charges paid or incurred by Agent if it elects to employ the services of one or
more non-Affiliates to perform such financial analyses and examinations (i.e.,
audits) of Company or to appraise the Collateral.
3. COLLATERAL AGENT SERVICING FEE. Company shall pay to
Agent for the sole and separate account of Collateral Agent, on the last day of
each month, in arrears, during the term of this Agreement, and thereafter so
long as any Obligations are outstanding, a servicing fee in an amount equal to
$10,000.
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38
J. COMPUTATION OF INTEREST AND FEES.
1. Interest on Loans and fees shall be calculated on the
basis of a 360-day year for a year of twelve 30-day months (e.g., 11% of the
average daily outstanding principal balance of the Loans divided by 12). Each
determination of an interest payment by Agent pursuant to any provision of this
Agreement shall be conclusive and binding on Company and Banks in the absence of
manifest error.
2. All payments of interest, fees, costs and expenses and
all other payments due to Agent under this Agreement or any other Loan Document
shall be paid by Company to Agent as and when incurred and/or payable by wire
transfer in accordance with directions specified by Agent from time to time.
K. PRO RATA TREATMENT AND PAYMENTS.
1. PRO RATA TREATMENT. Each borrowing by Company from
Banks hereunder and each payment by Company on account of any fee payable to the
Banks shall be made ratably according to the respective Pro Rata Shares of
Banks.
2. APPORTIONMENT OF PAYMENTS. Each payment (including
each prepayment) by Company on account of principal of and interest on the Loans
shall be made pro rata according to the effective outstanding principal amounts
of the Loans then held by Banks. All payments (including prepayments) to be made
by Company hereunder and under the Notes and the other Loan Documents, whether
onaccount of principal, interest, fees or otherwise, shall be made without set
off or counterclaim and shall be made not later than 12:00 p.m., New York time,
on the due date thereof, to Agent, for the account of Banks, at Agent's office
specified on the appropriate signature page hereof, in Dollars and in
immediately available funds. All such payments not relating to principal or
interest of specific Loans, or not constituting payment of specific fees shall
be applied as follows:
FIRST, to pay any fees, costs, or expense reimbursements then
due to Collateral Agent from Company;
SECOND, to pay any fees, costs, or expense reimbursements then
due to Agent from Company;
THIRD, to pay any fees, premiums, costs, or expense
reimbursements then due to Banks from Company;
FOURTH, ratably to pay any interest due in respect of the
Loans, until paid in full;
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39
FIFTH, ratably to pay principal of the Loans;
SIXTH, ratably to pay any other Obligations due to Agent or
any Bank by Company.
If any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day, and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension.
3. PAYMENTS BY BANKS. Unless Agent shall have been
notified in writing prior to any Loan Borrowing Date by any Bank having a
Commitment that such Bank will not make the amount that would constitute its Pro
Rata Share of the Loans to be borrowed on such an Borrowing Date, available on
such date to Agent, Agent may assume that such Bank has made such amount
available to Agent on such Loan Borrowing Date, and Agent may, in its sole
discretion, but shall not be obligated to, in reliance upon such assumption,
make available to Company a corresponding amount. If such corresponding amount
is not made available to Agent on such Loan Borrowing Date, Agent shall be
entitled to recover such corresponding amount from such Bank, together with
interest thereon, for each day from such Loan Borrowing Date until the date such
amount is paid to Agent, at the customary rate set by Agent for correction of
errors among banks for three Business Days and thereafter at the Default Rate. A
certificate of Agent submitted to any Bank with respect to any amounts owing
under this Section shall be conclusive in the absence of manifest error. If such
Bank does not pay such corresponding amount to Agent forthwith upon demand,
Agent shall promptly notify Company and Company shall immediately paysuch
corresponding amount to Agent with interest thereon, for each day from the Loan
Borrowing Date until the date such amount is paid to Agent, at the rate payable
under this Agreement for the Loans.
4. PAYMENTS BY COMPANY. Unless Agent shall have been
notified by Company in writing prior to any date on which a payment becomes due
from Company that Company will not make available to Agent on such date the
amount then due, Agent may assume that Company has made such amount available to
Agent on such date, and Agent may, in its sole discretion, but shall not be
obligated to, in reliance upon such assumption, make available to the relevant
Bank or Banks or Issuing Bank a corresponding amount. If such corresponding
amount is not made available to Agent on such date, then without prejudice to
any claim that Agent, Issuing Bank or any Bank may have against Company for the
amount not so paid and without prejudice to Company's obligation to pay default
interest thereon, Agent shall be entitled to recover such corresponding amount
from such Bank, together with interest thereon, for each day from such Loan
Borrowing Date until the date such amount is paid to Agent, at the customary
rate set by Agent for correction of errors among banks for three
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40
Business Days and thereafter at the Default Rate. A certificate of Agent
submitted to any Bank with respect to any amounts owing under this Section shall
be conclusive in the absence of manifest error. If such Bank does not pay such
corresponding amount to Agent forthwith upon demand, Agent shall promptly notify
Company and Company shall immediately pay such corresponding amount to Agent
with interest thereon, for each day from the Loan Borrowing Date until the date
such amount is paid to Agent, at the rate payable under this Agreement for the
Loans.
L. REQUIREMENTS OF LAW.
If any Bank shall have determined that any change in any
Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Bank or any corporation controlling
such Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority made subsequent to
the date hereof does or shall have the effect of reducing the rate of return on
such Bank's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which such Bank or such corporation could have
achieved but for such change or compliance (taking into consideration such
Bank's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, after
submission by such Bank to Company (with a copy to Agent) of a written request
therefor, Company shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction. The agreements in this Section
shall survive the payment of the Notes and all other amounts due hereunder.
M. TAXES.
1. PAYMENTS TO BE FREE AND CLEAR; GROSS-UP. All payments
made by Company under this Agreement and the Notes and the other Loan Documents
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding, (i) in the case
of Agent and each Bank, net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on Agent or such Bank, as the case may be, as a result
of a present or former connection between the jurisdiction of the government or
taxing authority imposing such tax and Agent or such Bank (excluding a
connection arising solely from Agent or such Bank having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Agreement, the Notes or any other Loan Document) or any political subdivision or
taxing authority thereof or therein and (ii) in the case of each Bank organized
under the laws of a jurisdiction outside the United States, United States
federal withholding tax payable with respect to payments by Company that would
not
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41
have been imposed had such Bank, to the extent then required thereunder,
delivered to Company and Agent the forms prescribed by Section 2.13(b) (all
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions and
withholdings being hereinafter called "Taxes"). If any Taxes are required by law
to be withheld from any amounts payable to Agent or any Bank hereunder or under
the Notes or under the other Loan Documents, the amounts so payable to Agent or
such Bank shall be increased to the extent necessary to yield to Agent or such
Bank (after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement and the
Notes and the other Loan Documents. If Company fails to pay any Taxes when due
to the appropriate taxing authority, Company shall indemnify Agent and Banks for
any incremental taxes, interest or penalties that may become payable by Agent or
any Bank as a result of any such failure. The agreements in this Section shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
2. TAX CERTIFICATES. Each Bank that is not organized
under the laws of the United States of America or a state thereof agrees that it
will deliver to Company and Agent (i) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the
case may be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor
applicable form. Each such Bank also agrees to deliver to Company and Agent two
further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms, or other manner of certification, as the case may be, on or
before the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to Company, and such extensions or renewals thereof as may
reasonably be requested by Company or Agent, unless in any such case any change
in treaty, law or regulation has occurred prior tothe date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank so advises Company and Agent. Such Bank
shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes and (ii) in the case of a Form W-8 or W-9,
that it is entitled to an exemption from United States backup withholding tax.
N. FUNDING LOSSES. If Company (i) for any reason
whatsoever, makes any payment of the Loans on any day other than the date on
which such payment originally is scheduled to become due, (ii) for any reason
fails to make any prepayment of the Loans on the date for which it has given
notice pursuant to Section 2.6 or is required to make payment pursuant to
Section 2.5 or (ii) fails to make a borrowing on a requested Borrowing Date
after notice has been given to Agent in accordance with Section 2.3, Company
shall reimburse each Bank on demand for any loss incurred by it in obtaining,
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42
liquidating or employing deposits or other funding (and any incidental costs
relating thereto). Such Bank shall deliver to the Agent a certificate of such
Bank as to the amount of such loss or expense, which certificate shall set forth
in reasonable detail the basis for such loss or expense, and the Agent, in turn,
shall promptly deliver such certificate to Company. Any such certificate shall
be conclusive and binding in the absence of manifest error. All reimbursements
shall be made by making payment thereof when due to the Agent, which shall
promptly distribute the relevant amount to the respective Bank.
O. ISSUANCE OF L/C GUARANTEES AND BANKS' PURCHASE OF
PARTICIPATIONS THEREIN.
1. LETTERS OF CREDIT AND L/C GUARANTEES. Subject to the
terms and conditions of this Agreement, Issuing Bank agrees to obtain standby
letters of credit for the account of Company (each, a "Letter of Credit") and to
issue guarantees of payment (each such guarantee, an "L/C Guarantee") with
respect to such Letters of Credit for the account of Company for the purposes
specified in the definition of Letter of Credit. Issuing Bank shall have no
obligation to obtain any Letter of Credit and/or issue any L/C Guarantee:
(a) if after giving effect to such L/C Guarantee,
the aggregate Letter of Credit Usage would exceed $7,500,000;
(b) having an expiration date later than the earlier
of (A) January 4, 2001 and (B) the date which is two (2) years from the
date of issuance of such L/C Guarantee; or
(c) denominated in a currency other than Dollars.
2. MECHANICS OF ISSUANCE.
(a) NOTICE OF ISSUANCE. Whenever Company desires the
issuance of a Letter of Credit, it shall deliver to Issuing Bank (with
a copy to Agent if Agent is not Issuing Bank) a Notice of Issuance of
Letter of Credit no later than 1:00 p.m. (New York time) at least four
Business Days or in such shorter period as may be agreed to by Issuing
Bank in any particular instance, in advance of the proposed date of
issuance. The Notice of Issuance of Letter of Credit shall specify (i)
the proposed date of issuance (which shall be a Business Day), (ii) the
face amount of the Letter of Credit, (iii) the expiration date of the
Letter of Credit, (iv) the name and address of the beneficiary, and (v)
the verbatim text of the proposed Letter of Credit or the proposed
terms and conditions thereof, including a precise description of any
documents and the verbatim text of any certificates to be presented by
the beneficiary which, if
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43
presented by the beneficiary prior to the expiration date of the Letter
of Credit would require the issuing bank to make payment under the
Letter of Credit; provided that Issuing Bank in its reasonable
discretion, may require changes in the text of the proposed Letter of
Credit or any such documents or certificates, including that such
Letter of Credit be governed by the Uniform Customs and Practices
publication number 500.
Company shall notify Issuing Bank (and Agent, if Agent
is not Issuing Bank) prior to the issuance of any Letter of Credit if
any of the matters to which Company is required to certify in the
applicable Notice of Issuance of Letter of Credit is no longer true and
correct as of the proposed date of issuance of such Letter of Credit,
and upon the issuance of any Letter of Credit, Company shall be deemed
to have re-certified, as of the date of such issuance, as to the
matters to which Company is required to certify in the applicable
Notice of Issuance of Letter of Credit.
(b) NOTIFICATION TO BANKS. Promptly after receipt of
a Notice of Issuance of Letter of Credit: (i) Agent shall notify each
Bank of the proposed issuance of such Letter of Credit, the amount of
any L/C Guarantee required to obtain such Letter of Credit and the
amount of such Bank's respective participation therein, determined in
accordance with SECTIONS 2.15(C) AND (L) and (ii) Agent shall deliver
to each other Bank a copy of such Notice of Issuance of Letter of
Credit.
(c) ISSUANCE OF LETTER OF CREDIT. Upon satisfaction
or waiver (in accordance with SECTION 10.1) of the conditions set forth
in SECTION 5.2, Issuing Bank shall obtain the requested Letter of
Credit and provide the related L/C Guarantee and upon obtaining such
Letter of Credit and providing such L/C Guarantee, Issuing Bank shall
promptly notify Agent and each Bank of such issuance, which notice
shall be accompanied by a copy of such Letter of Credit and related L/C
Guarantee.
(d) REPORTS TO BANKS. Within 15 days after the end
of each calendar quarter ending after the Effective Date, so long as
any Letter of Credit and/or L/C Guarantee shall have been outstanding
during such calendar quarter, Issuing Bank shall deliver to each other
Bank a report setting forth the average for such calendar quarter of
the daily maximum amount available to be drawn under the Letter(s) of
Credit obtained by Issuing Bank that were outstanding during such
calendar quarter.
3. BANKS' PURCHASE OF PARTICIPATIONS IN L/C GUARANTEES.
Immediately upon the issuance of each L/C Guarantee, each Bank shall be deemed
to,
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44
and hereby agrees to, have irrevocably purchased from Issuing Bank a
participation in such L/C Guarantee and drawings thereunder in an amount equal
to such Bank's Pro Rata Share of the maximum amount which is or at any time may
become available to be drawn thereunder.
4. FEES WITH RESPECT TO OBTAINING LETTERS OF CREDIT AND
ISSUING RELATED L/C GUARANTEES. Company agrees to pay the following amounts to
Issuing Bank or Agent, as the case may be, with respect to Letters of Credit
obtained and related L/C Guarantees issued by it:
(a) on the Effective Date, a non-refundable closing
fee of $150,000 to Agent for the sole and separate account of Banks;
(b) on the first anniversary of the Effective Date a
non-refundable fee of $150,000 to Agent for the sole and separate
account of Banks.
5. FUNDINGS UNDER L/C GUARANTEES.
If Issuing Bank funds a drawing under an L/C Guarantee
issued by it, such funding shall be deemed to be a funding under the
L/C Note.
6. INTEREST ON AMOUNTS ADVANCED ON L/C NOTE.
(a) PAYMENT OF INTEREST BY COMPANY. Company agrees
to pay interest on the outstanding principal amount under the L/C Note
at a rate equal to fifteen percent (15%) per annum (calculated by
multiplying 15% times the outstanding principal amount and dividing by
12) of the average daily maximum amount advanced under such L/C Note in
each case payable in arrears on and through the last day of each month.
(b) on the date of each advance under an L/C Note,
Company shall pay a non-refundable fee equal to 8% of each such advance
to Agent for the sole and separate account of Banks;
7. INDEMNIFICATION: NATURE OF ISSUING BANKS' DUTIES. In
addition to other amounts payable as provided in this Section 2.15, Company
hereby agrees to protect, indemnify, pay and save harmless Issuing Bank from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable fees, expenses and disbursements of
counsel and allocated costs of internal counsel) which Issuing Bank may incur or
be subject to as a consequence, direct or indirect, of the issuance of any L/C
Guarantee, or obtaining any Letter of Credit, by Issuing Bank, other than as a
result of (x) the gross negligence or willful misconduct of
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45
Issuing Bank as determined by a final judgment of a court of competent
jurisdiction or (y) the wrongful dishonor by Issuing Bank of a proper demand for
payment made under any L/C Guarantee issued by it.
8. Upon the termination of the Escrow Agreement and the
receipt by Collateral Agent of the various forms of Cash Collateral posted by
each Bank in connection with the Escrow Agreement, Collateral Agent shall
calculate and remit to each Bank such Bank's Pro Rata Share of actual interest
income earned on its posted Collateral. By way of example: if Bank A posted cash
collateral earning 3% interest, Bank A's Pro Rata Share of interest earned would
reflect such 3% interest rate, and if Bank B posted a municipal bond earning
interest at 9%, Bank B's Pro Rata Share of interest earned would reflect such 9%
interest rate.
9. INCREASED COSTS AND TAXES RELATING TO L/C GUARANTEES.
If Issuing Bank or any Bank shall determine (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto)
that any law, treaty or governmental rule, regulation or order, or any change
therein or in the interpretation, administration or application thereof
(including the introduction of any new law, treaty or governmental rule,
regulation or order), or any determination of a court or governmental authority,
in each case that becomes effective after the date hereof, or compliance by
Issuing Bank or any Bank with any guideline, request or directive issued or made
after the date hereof by any central bank or other governmental or
quasi-governmental authority (whether or not having the force of law):
(a) subjects Issuing Bank or any Bank (or its
applicable lending or letter of credit office) to any additional tax
(other than any tax on the overall net income of Issuing Bank or Bank)
with respect to the issuing or maintaining of any L/C Guarantee or the
purchasing or maintaining of any participations therein or any other
obligations under this Section 2.15, whether directly or by such being
imposed on or suffered by Issuing Bank;
(b) imposes, modifies or holds applicable any
reserve (including any marginal, emergency, supplemental, special or
other reserve), special deposit, compulsory loan, FDIC insurance or
similar requirement in respect of any L/C Guarantee issued by Issuing
Bank or participations therein purchased by any Bank; or
(c) imposes any other condition on or affecting
Issuing Bank or any Bank (or its applicable lending or letter of credit
office) regarding this Section 2.15 or any L/C Guarantee or any
participation therein;
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46
and the result of any of the foregoing is to increase the cost to Issuing Bank
or any Bank of agreeing to obtain any Letter of Credit and/or issue any L/C
Guarantee or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by Issuing Bank or Bank
(or its applicable lending or letter of credit office) with respect thereto;
then, in any case, Company shall promptly pay to Issuing Bank or any such Bank,
upon receipt of the statement referred to in the next sentence, such additional
amount or amounts as may be necessary to compensate Issuing Bank or such Bank
for any such increased cost or reduction in amounts received or receivable
hereunder. Issuing Bank or any such Bank shall deliver to Company a written
statement, setting forth in reasonable detail the basis for calculating the
additional amounts owed to Issuing Bank or such Bank under this Section 2.15(k),
which statement shall be conclusive and binding upon all parties hereto absent
manifest error.
10. L/C GUARANTEES.
(a) Company agrees to be bound by the issuing bank's
regulations and interpretations of any letters of credit guarantied by
Issuing Bank pursuant to an L/C Guarantee and opened to or for
Company's account or by Issuing Bank's interpretations of any Letter of
Credit issued by issuing bank to or for Company's account, even though
this interpretation may be different from Company's own, and Company
understands and agrees that Issuing Bank shall not be liable for any
error, negligence, or mistake, whether of omission or commission, in
following Company's instructions or those contained in the Letter of
Credit or any modifications, amendments, or supplements thereto.
Company understands that the L/C Guarantees may require Issuing Bank to
indemnify the issuing bank for certain costs or liabilities arising out
of claims by Company against such other issuing bank. Company hereby
agrees to indemnify, save, defend, and hold Issuing Bank harmless with
respect to any loss, cost, expense (including reasonable attorneys
fees), or liability incurred by Issuing Bank under any L/C Guarantee as
a result of Issuing Bank's indemnification of any such issuing bank.
(b) Company hereby authorizes and directs any bank
that issues a letter of credit guaranteed by Issuing Bank to deliver to
Issuing Bank all instruments, documents, and other writings and
property received by the issuing bank pursuant to such Letter of
Credit, and to accept and rely upon Issuing Bank's instructions and
agreements with respect to all matters arising in connection with such
Letter of Credit and the related application. Company may or may not be
the "applicant" or "account party" with respect to such Letter of
Credit.
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47
(c) Any and all charges, commissions, fees
(excluding issuance fees of third party issuers of Letters of Credit),
and costs incurred by Issuing Bank relating to the Letters of Credit
guaranteed by Issuing Bank shall be considered Obligations for purposes
of this Agreement and immediately shall be reimbursable by Company to
Issuing Bank.
III.
COLLATERAL
A. LIENS IN SUBSIDIARY STOCK, CONTRACT RECEIVABLES, REAL PROPERTY
AND PERSONAL PROPERTY.
To secure the prompt payment to Banks of the Obligations,
including the Loans, together with all costs, expenses and fees payable by
Company hereunder, Company has granted, and caused each Subsidiary to grant, to
Collateral Agent, for the ratable benefit of Agent, Collateral Agent, Issuing
Bank and Banks, a continuing Lien in and to all of the following property and
interests in property of Company and the Subsidiaries, except the Excluded
Property, whether now owned or existing or hereafter acquired or arising, or in
which Company and Subsidiaries now or hereafter have any rights, and wherever
located, and all proceeds thereof ("Collateral"):
1. the Subsidiary Stock;
2. the Homesite Contracts Receivable;
3. the Commercial Receivables;
4. the Real Property; and
5. 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 Obligations and
upon the distribution of any Trust Property to Company or a Subsidiary, such
property shall, automatically, become subject to the Liens created by the
Security Documents, and Company shall notify Agent in writing of such event and
take such further actions as may be required by Agent and/or Collateral Agent to
evidence and perfect such Liens; provided that, in no event, shall a Lien be
granted on any assets required to be placed in a Reserve Account pursuant to the
Reorganization Plan or the Homesite Program.
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48
B. SECURITY DOCUMENTS.
To evidence and perfect the Liens of Collateral Agent and
Agent in the Collateral in accordance with applicable law, Company has executed
and deliveredand will execute and deliver and has caused the Subsidiaries to
execute and deliver and will cause the Subsidiaries to execute and deliver to
Collateral Agent the Security Documents, which Security Documents have been or
will be filed and recorded, and Company has delivered and will deliver and has
caused the Subsidiaries to deliver and will cause the Subsidiaries to deliver to
Collateral Agent any Collateral if the perfection of a Lien against such
Collateral requires possession thereof for purposes of perfecting such Liens,
all at the cost and expense of Company. Specifically, but without limiting the
generality of the foregoing, Company has or will, and has caused or will cause
the Subsidiaries to, do the following:
1. Stock Pledge. To evidence and perfect the Liens of
Collateral Agent in the Subsidiary Stock, Company and the Subsidiaries owning
other Subsidiaries, Excluded Subsidiaries, or Unrestricted Subsidiaries have
executed and delivered the Stock Pledge Agreement and have executed and
delivered and will execute and deliver related undated stock powers executed in
blank and have delivered and will deliver the original certificates representing
the Subsidiary Stock to Collateral Agent and have caused and will cause all
issuers of Subsidiary Stock to execute and deliver pledge acknowledgments
pursuant to the Stock Pledge Agreement.
2. Homesite Contracts Receivables and Commercial
Receivables. To evidence and perfect the Liens of Collateral Agent in the
Homesite Contracts Receivable and Commercial Receivables, Company and
Subsidiaries have executed and delivered, and will execute and deliver, to
Collateral Agent the Security Agreements, together with related financing
statements, which have been or will be filed and recorded in accordance with
applicable law, and Company and Subsidiaries have duly endorsed, and will duly
endorse, any and all promissory notes included in the Homesite Contracts
Receivable and Commercial Receivables to the order of Collateral Agent and have
delivered, and will deliver, such promissory notes and the related mortgages or
deeds of trust to Collateral Agent or its designee, and have executed and
delivered, and will deliver, assignments of promissory notes and mortgages or
deeds of trust, filed and recorded in accordance with applicable law, and, as to
Commercial Receivables acquired following the Effective Date, accompanied by
ALTA title insurance policies naming Collateral Agent as the insured mortgagee
thereunder.
3. Real Property. To evidence and perfect the liens of
Collateral Agent in the Real Property, Company and Subsidiaries have executed
and delivered, and will execute and deliver, to Collateral Agent the Mortgages
and Deeds of Trust and related financing statements encumbering such Real
Property, which have been or will
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49
be filed and recorded in accordance withapplicable law, accompanied by ALTA
title insurance policies (if required) insuring Collateral Agent's Lien
represented thereby, and, if requested by Agent, surveys of such Real Property.
4. Joint Venture Pledge. To evidence and perfect the Liens
of Collateral Agent in the interests of the Venture Subsidiaries in the Joint
Ventures,Company has caused, and will cause, the Venture Subsidiaries to execute
and deliver the Joint Venture Pledge Agreement and all requisite consents in
respect of such Liens.
5. Personal Property. To evidence and perfect the Liens of
Collateral Agent or Agent in the Personal Property, Company and Subsidiaries
have executed and delivered, and will execute and deliver, to Collateral Agent
the Security Agreements, together with related financing statements, which have
been or will be filed and recorded in accordance with applicable law. To the
extent that the Personal Property comprised Investments or Bank Accounts,
Company and Subsidiaries shall take the following actions:
(a) with respect to any Investment or Bank Account
which is or becomes evidenced by an agreement, instrument, certificate
or document, including promissory notes, stock certificates, bonds,
debentures, securities and certificates of deposit, Company shall
deliver, or shall cause such Subsidiary to deliver, the original
thereof to Collateral Agent, together with appropriate assignments and
endorsements or other specific evidence of assignment thereof to
Collateral Agent, in form and substance acceptable to Collateral Agent;
(b) with respect to any Investment or Bank Account
which is not certificated or otherwise evidence as described in clause
(i) above, including uncertificated securities and depository and other
accounts maintained with financial institutions and any other Persons,
Company shall notify Agent thereof and take, or cause such Subsidiary
to take, any and all steps which are required by Agent for purposes of
perfecting Collateral Agent's Lien therein;
(c) Company shall keep Agent and Banks informed of
any and all Bank Accounts maintained by Company or any Subsidiary with
any financial institution or other Person and, if requested by Agent or
Required Banks, Company or such Subsidiary shall execute a cash
collateral account agreement in form and substance satisfactory to
Agent, pursuant to which the Lien of Collateral Agent in such Bank
Accounts is perfected and preserved; and
(d) if deemed by Agent or Required Banks, in its or
their sole discretion, to be necessary for purposes of perfecting the
Lien of Collateral Agent in any Bank Account, Company shall transfer to
and maintain in a cash
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50
collateral account and shall cause the Subsidiaries to transfer to and
maintain in a cash collateral account, the funds in each such Bank
Account and if deemed necessary by Agent shall cause such Subsidiary to
become party to a cash collateral account agreement in form and
substance reasonably satisfactory to Collateral Agent, pursuant to
which the Lien of Collateral Agent in such Bank Account shall be
perfected and preserved; provided, however, Company shall not be
required to deposit the residual, remainder or beneficial interest of
Company and its Subsidiaries in the Reserve Accounts, the Claims
Disbursement Accounts and other escrow, restricted, custodial and
fiduciary accounts until such time as all amounts required to be
disbursed to the intended beneficiaries thereof have been disbursed and
the residual and remainder is available to Company or any of its
Subsidiaries for deposit in an unrestricted account.
6. Additional Acts. Company shall, and shall cause the
Subsidiaries to, take all actions and execute all documents deemed necessary by
Agent or Collateral Agent to ensure that Collateral Agent, for the ratable
benefit of Agent, Collateral Agent, Issuing Bank and Banks, shall have a first
priority security interest in the Collateral granted by the Security Documents,
which security interest shall have the priority set forth in the Intercreditor
Agreement. In the event that the perfection or recordation of Collateral Agent's
or Agent's Lien pursuant hereto upon any Collateral acquired hereafter by
Company or any Subsidiary requires any additional act of possession or filing or
recordation of any Security Document, Company shall notify Agent of the
acquisition of such Collateral and at Agent's request Company shall execute and
deliver and shall cause the Subsidiaries to execute and deliver such Security
Documents for filing or recordation and deliver such items of Collateral as
Agent and Collateral Agent may reasonably request for purposes thereof and
Company shall pay the cost of any such Security Documents and the filing and
recordation thereof. Without limiting the generality of the foregoing, Company
agrees to, and to cause each Subsidiary (other than with respect to property
required to be released pursuant to Section 3.3) to, notify Agent upon the
acquisition of any Real Property acquired after the date hereof, except as
provided by Section 3.3, and upon request of Agent, to provide to Agent an
appraisal and an environmental report (each in form and substance satisfactory
to Agent) covering such property, and to cause such Real Property to be
subjected to a first priority Mortgage or Deed of Trust in favor of Collateral
Agent for the benefit of Banks, which Mortgage, or Deed of Trust shall have the
priority set forth in the Intercreditor Agreement. With respect to any such
Mortgages or Deeds of Trust, Company or such Subsidiary shall deliver to Agent
the following, all in form and substance satisfactory to Agent: (i) executed
Mortgages or Deeds of Trust and financing statements encumbering such property
and (ii) ALTA Banks' extended coverage policies of title insurance on such
property, in liability, amount and form and issued by a title company
satisfactory to Agent showing the Mortgage or Deed of Trust as a first
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51
lien uponthe property, subject only to Liens permitted pursuant to Section 7.3
and such other exceptions as may be approved by Agent in writing, together with
endorsements reasonably required by Agent and affirmative assurances that the
improvements are wholly located within the boundaries of the insured land.
C. SUBORDINATIONS AND RELEASES OF MORTGAGE LIENS.
1. [Intentionally Omitted].
2. At such times as Liens are granted by Company or any
Subsidiary, as permitted pursuant to Section 7.3(n), so long as no Default or
Event of Default has occurred and is continuing or would result therefrom and
provided Agent has received a certificate of a Responsible Officer certifying
and demonstrating that all of the conditions set forth in Section 7.3(n) have
been satisfied, Agent shall instruct Collateral Agent to and Collateral Agent
shall execute documentation subordinating the Lien of the Mortgages to such
Liens, in form and substance satisfactory to Collateral Agent, unless such Real
Property qualifies for the release provisions set forth in Section 3.3(c), in
which event the provisions of Section 3.3(c) shall apply.
3. At such time as Liens are granted by any Subsidiary, as
permitted by Section 7.3(n), so long as no Default or Event of Default has
occurred and is continuing or would result therefrom and provided Agent has
received a certificate of a Responsible Officer certifying and demonstrating
that all of the conditions set forth in Section 7.3(n) have been satisfied,
Agent shall instruct Collateral Agent to and Collateral Agent shall release the
Lien of the Mortgages on any Subsidiary Property Under Development if (i) (x)
such Real Property is financed under the acquisition and project financing
provisions of Section 7.2(e) or (h) and (y) the terms of such financing prohibit
subordinate Liens upon such Real Property or (ii) such Real Property is
contributed by Company to a Subsidiary pursuant to Section 7.9(g). Company shall
use reasonable efforts to cause any Bank/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 3.3(c), upon the request of Company, Agent shall instruct Collateral
Agent to, and Collateral Agent shall, release any Liens upon any Personal
Property related to and used or held for the use on the Real Property being
released; provided that Company provides a detailed list of such Personal
Property to be released in form and substance satisfactory to Agent. If such
Bank/seller will permit such subordination, then, notwithstanding the foregoing
provisions of this Section 3.3(c), Collateral Agent's Liens on such Subsidiary
Property
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52
Under Development will not be released and will become subordinateLiens pursuant
to documentation in form and substance satisfactory to Agent.
4. At such time as any Lien is granted by a Subsidiary,
pursuant to and as permitted by Section 7.3(o), so long as no Default or Event
of Default has occurred and is continuing or would result therefrom, and
provided Agent has received a certificate of Responsible Officer certifying and
demonstrating that all ofthe conditions set forth in Section 7.3(o) have been
satisfied, Agent shall instruct Collateral Agent to and Collateral Agent shall
(i) release the Lien of the Mortgages on any Mezzanine Property Under
Development that is subject to the Lien so granted, (ii) release the stock of
the MPUD Subsidiary which owns such Mezzanine Property under Development, and of
all of such MPUD Subsidiary's Subsidiaries from the Stock Pledge Agreement (but
not the stock of the MPUD Holding Company), (iii) release all members of the
MPUD Subsidiary Group from the Guarantees and the Security Documents and release
the Lien on any Personal Property related to and used or held for use on the
Real Property being released, but each of the foregoing actions shall be
required only if and to the extent that (A) the Mezzanine Property Under
Development is financed under the acquisition and project financing provisions
of Section 7.2(e) or Section 7.2(h) and (B) the terms of such financing require
the MPUD Subsidiary Group structure, prohibit subordinate Liens upon such Real
Property, related Personal Property and the stock of the MPUD Subsidiary and
MPUD Subsidiary Subsidiaries and prohibit members of the MPUD Subsidiary Group
from signing Guarantees.
D. GUARANTEES.
The payment and performance by Company of its obligations
under this Agreement, including the repayment of all Obligations by Company, and
any and all other liabilities of Company to Banks, Agent, and Collateral Agent
whether now existing or hereafter created or acquired, shall be guaranteed by
any and all Subsidiaries, which shall be evidenced by guarantees in the form of
the Subsidiary Guarantees. Upon the formation or acquisition of any Subsidiary
(excluding all MPUD Subsidiary Group Members) Company shall, and shall cause
such Subsidiary to, enter into such documents as Agent may reasonably request to
further evidence such guarantee.
IV.
REPRESENTATIONS AND WARRANTIES
To induce Agent, Collateral Agent, Issuing Bank and Banks to
enter into this Agreement and to make the Loans, Company hereby represents and
warrants to Agent, Collateral Agent, Issuing Bank and each Bank that:
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53
A. Financial Condition.
1. The consolidated balance sheets of Company and its
consolidated Subsidiaries as at December 31, 1997 and the related consolidated
statements of income and of cash flows for the fiscal year ended on such date,
reported on by Ernst & Young, copies of which have been furnished to each Bank,
fairly and accurately present the consolidated financial condition of Company
and its consolidated Subsidiaries as at such date, and the consolidated results
of their operations and their consolidated cash flows for the fiscal year then
ended.
2. The unaudited consolidated balance sheets of Company
and its consolidated Subsidiaries as at September 30, 1998 and the related
consolidated statements of income and of cash flows for the nine-month period
ended on such date, copies of which have been furnished to each Bank, fairly and
accurately present the consolidated financial condition of Company and its
consolidated Subsidiaries as at such date, and the consolidated results of their
operations and their consolidated cash flows for the fiscal year then ended
(subject to normal year-end audit adjustments).
3. All such financial statements described in clause (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
Company nor any of its consolidated Subsidiaries had, at the date of the most
recent balance sheet referred to above, any material Guarantee Obligation,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including any interest rate or foreign currency
swap or exchange transaction, which is not reflected in the foregoing statements
or in the notes thereto or in Schedule 4.1. During the period from September 30,
1998 to and including the date hereof there has been no sale, transfer or other
disposition or agreement therefor by Company or any of its consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) which is material in relation to the consolidated financial
condition of Company and its consolidated Subsidiaries at September 30, 1998,
except as described in Schedule 4.1.
B. NO MATERIAL ADVERSE CHANGE.
Since September 30, 1998, (a) there has been no development or
event nor any prospective development or event, which has had or could
reasonably be expected to have a Material Adverse Effect, except such
developments or events or prospective developments or events as have been
disclosed by Company in filings with the Securities and Exchange Commission made
prior to the date hereof and true and
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54
correct copies of which have beendelivered to Banks or as set forth on Schedule
4.2, and (b) no dividends or other distributions have been declared, paid or
made upon the Capital Stock of Company nor has any of the Capital Stock of
Company been redeemed, retired, purchased or otherwise acquired for value by
Company or any of its Subsidiaries. As of the date hereof and the Effective
Date, no motion for the conversion of the case, appointment of a trustee, or
dismissal is pending or has been denied, the reversal of which on appeal would
affect the validity of this Agreement and no appeal has been taken from the
entry of the Confirmation Order in the Reorganization Proceedings, the reversal,
modification, or affirmance of which will affect the validity or enforceability,
or change the provisions, of this Agreement or any of the other Loan Documents.
C. CORPORATE EXISTENCE; COMPLIANCE WITH LAW.
Each of Company and its Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, except, in the case of any such Subsidiary, where all such
failures to be in good standing are not reasonably likely, in the aggregate, to
have a Material Adverse Effect, (b) has the corporate power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, except to the extent
that all such failures to be so qualified and in good standing are not
reasonably likely, in the aggregate, to have a Material Adverse Effect, and (d)
is in compliance with all Requirements of Law except to the extent that any
failures to comply therewith is not reasonably likely, in the aggregate, to have
a Material Adverse Effect.
D. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
1. Company. Company has the corporate power and authority, and
the legal right, to make, deliver and perform this Agreement, the Notes and
other Loan Documents, and to borrow hereunder and has taken all necessary
corporate action to authorize the borrowings on the terms and conditions of this
Agreement, and the Notes and to authorize the execution, delivery and
performance of this Agreement, the Notes and other Loan Documents. Except as set
forth on Schedule 4.4, no consent or authorization of, filing with or other act
by or in respect of, any Governmental Authority or any other Person is required
in connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement, the Notes or the
other Loan Documents, except such consents, authorizations, filings or other
acts as have been obtained, made or performed, as the case may be, prior to the
Effective Date and as remain in full force and effect or which
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55
the failure toobtain, make or perform, as the case may be, could not reasonably
be expected to have a Material Adverse Effect or to impose any liability
whatsoever on Agent, Collateral Agent or any Bank. This Agreement and the other
Loan Documents to which the Company is party have been and all Loan Documents to
which Company hereafter becomes a party will be, duly executed and delivered on
behalf of the Company. This Agreement has been duly executed and delivered and
constitutes the, and each other Loan Document signed on the date hereof has been
duly executed and delivered and constitutes, and each other Loan Document when
executed and delivered will constitute, a legal, valid and binding obligation of
Company enforceable against Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors rights generally and by general equitable principals (whether
enforcement is sought by proceedings in equity or at law).
2. Subsidiaries. Each of the Subsidiaries (including
Unrestricted Subsidiaries and Excluded Subsidiaries) party to the Loan Documents
has the corporate power and authority, and the legal right, to make, deliver and
perform the Loan Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party. Except as set forth on Schedule 4.4, no
consent or authorization of, filing with or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of the Loan
Documents to which it is a party, except such consents, authorizations, filings
or other acts as have been obtained, made or performed, as the case may be,
prior to the Effective Date and as remain in full force and effect or which the
failure to obtain, make or perform, as the case may be, could not reasonably be
expected to have a Material Adverse Effect. Each Loan Document to which any
Subsidiary (including Unrestricted Subsidiaries) is a party has been or will be
duly executed and delivered on behalf of each such Subsidiary. Each Loan
Document to which any Subsidiary (including Unrestricted Subsidiaries) is a
party, executed and delivered constitutes, or when executed and delivered will
constitute, a legal, valid and binding obligation of each such Subsidiary,
enforceable against each such Subsidiary in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
E. NO LEGAL BAR.
The execution, delivery and performance of this Agreement, the
Notes, the Guarantees and the other Loan Documents, the borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation
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56
of Company or of any of its Subsidiaries, the violation of which could
reasonably be expected to have a Material Adverse Effect and will not result in,
or require, the creation or imposition of any Lien on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
F. NO MATERIAL LITIGATION.
As of the Effective Date, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of Company, threatened by or against Company or any of its
Subsidiaries or against any of its or their respective properties or revenues
(a) with respect to this Agreement, the Notes or other Loan Documents or any of
the transactions contemplated hereby or thereby or (b) which, if adversely
determined, is reasonably likely to have a Material Adverse Effect, which has
not been disclosed (including, estimates of the Dollar amounts involved) in
Company's filings with the Securities and Exchange Commission made prior to the
Effective Date, true and correct copies of which have been delivered to Banks or
on Schedule 4.6 hereto.
G. NO DEFAULT.
As of the Effective Date, neither Company nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which is reasonably likely to have a Material Adverse
Effect, except as disclosed, including estimates of the Dollar amounts involved,
in Company's filings with the Securities and Exchange Commission, true and
correct copies of which have been delivered to Banks or on Schedule 4.7. As of
the Effective Date, no Default or Event of Default has occurred and is
continuing. As of the Effective Date, no default has occurred and is continuing
under the Secured Agreement Documents.
H. OWNERSHIP OF PROPERTY; LIENS.
As of the Effective Date, each of Company and its
Subsidiaries, as the case may be, has good record and marketable title in fee
simple to, or a valid leasehold interest in, or a first mortgagee interest in,
all of the Collateral and all its other real property, and good title to all its
other property necessary for the operation of its business, and none of such
property of Company or such Subsidiaries is subject to any Lien except as
permitted by Section 7.3.
I. INTELLECTUAL PROPERTY.
Except as disclosed on Schedule 4.9, as of the Effective Date,
Company and each of its Subsidiaries owns, or is licensed to use, all
trademarks, tradenames,
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57
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which is not reasonably likely to have a Material Adverse Effect (the
"Intellectual Property"). No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does
Company know of any valid basis for any such claim. The use of such Intellectual
Property by Company and its Subsidiaries does not infringe on the rights of any
Person, except for such claims and infringements that, in the aggregate, do not
have a Material Adverse Effect. To the knowledge of Company, there exists no
infringement upon the Intellectual Property rights of Company and Subsidiaries
by any other Person.
J. TAXES.
As of the Effective Date, each of Company and its Subsidiaries
(including Unrestricted Subsidiaries and Joint Ventures) has filed or caused to
be filed all tax returns which, to the knowledge of Company, are required to be
filed and has paid all taxes shown to be due and payable on said returns or on
any assessments made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than any taxes, fees or other charges the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of Company or its Subsidiaries (including Unrestricted Subsidiaries and
Joint Ventures), as the case may be) except tax claims which are to be paid on a
deferred basis pursuant to the Reorganization Plan; no tax Lien has been filed,
and, to the knowledge of Company, no claim is being asserted, with respect to
any such tax, fee or other charge, except as disclosed on Schedule 4.10.
K. FEDERAL REGULATIONS.
No part of the proceeds of any Loans will be used for
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation 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.
L. ERISA.
Except as disclosed on Schedule 4.12, no Reportable Event has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan. Company and each
Commonly Controlled Entity are in substantial compliance with the applicable
provisions of ERISA with
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58
respect to each Plan. The present value of all accruedbenefits 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 Effective 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 (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 $2,200,000. Neither Company
nor any Commonly Controlled Entity is liable under Title IV of ERISA by reason
of the termination of a Single Employer Plan or the withdrawal from a Single
Employer Plan in which it was a "substantial employer" within the meaning of
Section 4001(a)(2) of ERISA. Each Plan intended to be qualified under Section
401(a) of the Code, including each Single Employer Plan, is qualified in
operation under Section 401(a) of the Code and is qualified in form under
Section 401(a) of the Code, except with respect to any required amendments with
respect to which the remedial amendment period under Section 401(b) of the Code
has not expired. Neither Company nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan with respect to which
there remains any unpaid liability and neither Company nor any Commonly
Controlled Entity would become subject to any liability under ERISA if Company
or any such Commonly Controlled Entity were to withdraw from all Multiemployer
Plans in complete withdrawals within the meaning of Section 4203 of ERISA as of
the valuation dates for such plans most closely preceding the date on which this
representation is made or deemed made. No Multiemployer Plan is in
Reorganization or Insolvent. Neither the Company nor any Commonly Controlled
Entity is liable for fines, penalties, taxes or related charges under Chapter 43
of the Code or under Sections 409, 502(c), 502(i), 502(1) or 4071 of ERISA in an
amount exceeding $50,000 in the aggregate at any time. There are no material
claims (other than routine claims for benefits) against any Plan (other than a
Multiemployer Plan) or against Company or any Commonly Controlled Entity in
connection with any such Plan. Neither Company nor any Commonly Controlled
Entity is liable for post retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) except as required by Section 4980B of the Code and
Section 601 of ERISA.
M. INVESTMENT COMPANY ACT; OTHER REGULATIONS.
Company is not an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended. Company is not subject to regulation under any
Federal or state statute or regulation which limits its ability to incur
Indebtedness.
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N. SUBSIDIARIES AND JOINT VENTURES.
As of the Effective Date, (a) the Subsidiaries (including
Unrestricted Subsidiaries and Excluded Subsidiaries) listed on Schedule 4.14(A)
constitute all of the Subsidiaries (including Unrestricted Subsidiaries and
Excluded Subsidiaries) and such schedule identifies the shareholders of such
Subsidiary, (b) the Joint Ventures listed on Schedule 4.14(B) constitute all of
the Joint Ventures and such schedule identifies all owners of the Joint Venture
interests thereof and the percentage equity ownership of such owners, and (c)
neither Company nor any Subsidiary (including Unrestricted Subsidiaries,
Excluded Subsidiaries, and Joint Ventures) other than a Venture Subsidiary owns
any Joint Venture interest.
O. 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 in the certificate regarding environmental matters
required pursuant to Section 5.1(i) or to the extent that the facts and
circumstances giving rise to any such failure to be so true and correct is not
reasonably likely to have a Material Adverse Effect and could not reasonably be
expected to impose any liability whatsoever on Agent, Collateral Agent or any
Bank:
1. The 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.
2. Company, its Subsidiaries, the Real Property, and all
operations and facilities at the 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 Real Property or impair the fair saleable value of any thereof.
3. Neither Company nor any of its Subsidiaries 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 Real Property, nor is Company aware that any Governmental Authority is
contemplating delivering to Company or any of its Subsidiaries any such notice.
Neither Company nor any of its Subsidiaries has reported any releases of
Hazardous Materials to any Governmental Authority.
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4. Hazardous Materials have not been generated, treated,
stored or disposed of, at, on or under any of the Real Property in violation of
any Environmental Law, nor have any Hazardous Materials been transferred from
the 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
Real Property requiring any approval or permit from any Governmental Authority.
Neither Company nor any of its Subsidiaries has ever owned or operated or
currently owns or operates any waste disposal or storage facilities, underground
storage tanks or surface impoundments.
5. There are no governmental or administrative actions or
judicial proceedings pending or, to the knowledge of Company, contemplated under
any Environmental Laws to which Company or any of its Subsidiaries is or, to the
knowledge of Company, will be named as a party with respect to the Real
Property, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to Company or
any of its Subsidiaries or to any of the Real Property.
6. There is no environmental condition associated with any
of the 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.
7. Copies of all permits, authorizations and environmental
reports for or with respect to the Real Property have been made available to
Agent.
P. INDEBTEDNESS.
Schedule 4.16 lists all Indebtedness (including available
commitments) of Company and its Subsidiaries as existing on the Effective Date.
Q. CONTINGENT OBLIGATIONS.
Schedule 4.17 lists all guarantees by Company and all
guarantees by any of its Subsidiaries.
R. RESTITUTION PROGRAM AND FINAL JUDGMENT.
As of the Effective Date, Company and its Subsidiaries have
fully complied with the "Restitution Program" and have been released from the
"Final Judgment," as defined in the Reorganization Plan.
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S. CERTAIN FEES.
Other than fees payable to Anglo American Financial, no
broker's or finder's fee or commission will be payable with respect to this
Agreement or any of the transactions contemplated hereby, and Company hereby
indemnifies Agent, Collateral Agent and Banks against, and agrees that it will
hold Banks harmless from, any claim, demand or liability for any such broker's
or finder's fees alleged to have been incurred in connection herewith or
therewith and any expenses (including reasonable fees, expenses and
disbursements of counsel) arising in connection with any such claim, demand or
liability.
T. DISCLOSURE.
No representation or warranty of Company or any of its
Subsidiaries contained in any Loan Document or in any other document,
certificate or written statement furnished to Banks by or on behalf of Company
or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact (known to Company in the case of any document
not furnished by it) necessary in order to make the statements contained herein
or therein not misleading in light of the circumstances in which the same were
made. Any projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by
Company to be reasonable at the time made, it being recognized by Banks that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Company (other than
matters of an economic nature) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect and have not been
disclosed herein or in such other writtendocuments, certificates and statements
furnished to Banks for use in connection with the transactions contemplated
hereby.
U. INSURANCE.
Company and each of its Subsidiaries maintain, with
financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and business of its Subsidiaries,
against loss and damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar business of such types
and in such amounts as are customarily carried under similar circumstances by
such other corporations. Attached as Schedule 4.21 is a complete and accurate
description of all policies of insurance that will be in effect as of the
Effective Date for Company and each of its Subsidiaries.
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V. REAL PROPERTY MATTERS.
Company and each of its Subsidiaries (including the Joint
Ventures) is in compliance with all development orders obtained by Company and
its Subsidiaries (including the Joint Ventures) with respect to any Real
Property, except to the extent noncompliance could not reasonably be expected to
have a Material Adverse Effect.
W. REORGANIZATION PROCEEDINGS.
Company has delivered to Agent, Collateral Agent, Issuing Bank
and Banks true, correct and complete copies of the Reorganization Plan and
Confirmation Order, together with copies of any modifications thereto.
X. EXCLUDED SUBSIDIARIES; UNRESTRICTED SUBSIDIARIES.
1. 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.
2. The Unrestricted Subsidiaries do not have, nor are they
anticipated to have, any asset or revenues other than the assets disclosed on
Part A of 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 Part A of Schedule 4.24 as being conducted by them.
Y. NO FURTHER AMOUNTS DUE UNDER UNSECURED 1996 NOTES.
There are no further amounts due from Company under the
Unsecured 1996 Notes and any unclaimed funds disbursed by The United States
Trust Company of New York to Company are owned free and clear of claims which
may be asserted thereto by third parties, including, without limitation, claims
by any state or other Governmental Authority that such unclaimed funds are
"abandoned property" under state escheat or other applicable laws.
Z. BANK ACCOUNTS.
Schedule 4.26 (as amended from time to time by written notice
to Agent) is a true and correct list of all Bank Accounts of Company and its
Subsidiaries.
AA. [INTENTIONALLY OMITTED].
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BB. MPUD SUBSIDIARY GROUPS.
Except as disclosed on Schedule 4.28, no Subsidiary is a
member of an MPUD Subsidiary Group.
CC. SPUD SUBSIDIARIES.
Except as disclosed on Schedule 4.29, no Subsidiary is a SPUD
Subsidiary.
DD. DRI AND ZONING MATTERS.
The representations and warranties set forth in Schedule 4.30
are by this reference incorporated herein as though fully set forth and made in
this Section 4.30.
EE. BANKRUPTCY MATTERS.
Neither the Company nor any of its Subsidiaries has any
continuing liabilities arising out of or in connection with the Reorganization
Proceedings or the Reorganization Plan which would have a Material Adverse
Effect.
FF. SERIES A PREFERRED STOCK.
The rights, obligations and duties of Company, its
Subsidiaries and the holders of the Series A Preferred Stock are set forth
exclusively in the Series A Statement, the Secured Agreement and the Investment
Agreement, both as amended through the Effective Date, and the other documents
described therein (the "Series A Documents"), and there is no note, debt
instrument or other security or collateral of any kind whatsoever given by
Company or any Subsidiary, other than as described in the Series A Documents, to
secure the repayment or performance of any of the obligations of Company or any
Subsidiary with respect to the Series A Preferred Stock.
GG. SERIES B PREFERRED STOCK.
The rights, obligations and duties of Company, its
Subsidiaries and the holders of the Series B Preferred Stock are set forth
exclusively in the Series B Statement and the Securities Purchase Agreement
dated as of June 24, 1997. There is no note, debt instrument or other security
or collateral of any kind whatsoever given by Company or any Subsidiary to
secure the repayment or performance of any of the obligations of Company or any
Subsidiary with respect to the Series B Preferred Stock.
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V.
CONDITIONS PRECEDENT
The effectiveness of this Agreement and the obligations of
Banks to make Loans hereunder are subject to the prior or concurrent
satisfaction of all the following conditions:
A. CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT.
1. Loan Documents. Agent shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of Company, with
a counterpart for each Bank, (ii) for the account of each Bank, a Note, (iii)
each other Loan Document, required to be delivered hereunder, conforming to the
requirements hereof and executed and delivered by a duly authorized officer of
Company or each of its Subsidiaries (including, the Unrestricted Subsidiaries
and the Excluded Subsidiaries, in each case as to their respective
acknowledgments under the Stock Pledge Agreement), as the case may be, which are
parties to such Loan Document, with a counterpart for each Bank, (iv) Funds Flow
Memo, executed and delivered by a duly authorized officer of each party thereto,
and (v) copies, certified as true and correct copies by a Responsible Officer,
of the Security Documents, as amended through the Effective Date listed in
Schedule I to the Acknowledgment Agreement.
Agent and Collateral Agent shall have received (vi) in form
and substance satisfactory to Agent and Collateral Agent, a duly executed
agreement with Annis, Mitchell, Cockey, Edwards & Roehn, P.A. of Tampa, Florida
with respect to certain services to be provided thereby to Agent and Collateral
Agent, respectively, and (vii) the Funds Flow Memo.
2. Corporate Proceedings of Company. Agent shall have
received, with a counterpart for each Bank, a copy of the resolutions, in form
and substance satisfactory to Agent, of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the Notes
and the other Loan Documents to which it is a party, certified by the Secretary
or an Assistant Secretary of the Company as of the Effective Date, which
certificate shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded and are in full force and effect and
shall be in form and substance satisfactory to Agent.
3. Corporate Proceedings of the Subsidiaries. Agent shall
have received, with a counterpart for each Bank, a copy of the resolutions, in
form and substance satisfactory to Agent, of the Board of Directors of each
Subsidiary of Company which is a party to any Loan Document authorizing the
execution, delivery and performance of the Loan Documents to which it is a
party, certified by the
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65
secretary or an assistant secretary of each Subsidiary as of the Effective Date,
which certificate shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded and are in full force and effect.
4. Corporate Documents. Agent shall have received, with a
counterpart for each Bank, true and complete copies of (i) the certificate or
articles of incorporation of the Company and each of its Subsidiaries which is a
party to any Loan Document certified by the Secretary of State of their
respective jurisdictions of incorporation as of a recent date prior to the
Effective Date, (ii) the Bylaws of the Company and each of its Subsidiaries
which is a party to any Loan Document certified as of the Effective Date by its
secretary or an assistant secretary, (iii) good standing certificates,
including, in states which provide such certificates, certification of tax
status, of the Company and each of its Subsidiaries which is a party to any Loan
Document certified by the Secretary of State of their respective jurisdictions
of incorporation and of each jurisdiction in which they are qualified to do
business as a foreign corporation dated as of a recent date prior to the
Effective Date and (iv) incumbency and signature certificates for Company and
each Subsidiary executing any Loan Documents as of the Effective Date.
5. Other Documents. Agent shall have received, with a
counterpart for each Bank, copies, certified as true, correct, and complete by a
Responsible Officer, of (i) the Anglo American Loan Agreement and the other
Anglo American Loan Documents, (ii) the Secured Agreement and the Investment
Instruments, (iii) the Secured Note, and (iv) the Business Plan, together with
evidence satisfactory to the Agent that the Anglo American Loan Agreement and
the Secured Agreement have become fully effective and available for utilization
or will become so effective and available simultaneously with the effectiveness
of this Agreement.
6. No Violation. The consummation of the transactions
contemplated hereby and by the other Loan Documents shall not contravene,
violate or conflict with, nor involve Agent or any Bank in any violation of, any
Requirement of Law.
7. Consents, Authorizations, and Filings. Agent shall have
received, with a counterpart for each Bank, a certificate of a Responsible
Officer (i) attaching copies of all consents, authorizations, and filings
referred to in Section 4.4 and in any similar provision of any of the other
Loan Documents, and (ii) stating that such consents, authorizations, and filings
are in full force and effect and each such consent, authorization, and filing
shall be in form and substance satisfactory to Agent.
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8. Legal Opinions. Agent shall have received, with a
counterpart for each Bank, opinions of the several counsel of Company and its
Subsidiaries, in each case, in form and substance satisfactory to Banks in their
sole discretion.
9. Certification as to Environmental Matters. Agent shall
have received, with a counterpart for each Bank, a certificate of a Responsible
Officer (i) stating that Company is not aware of any environmental matters in
connection with any of the Real Property which could reasonably be expected to
result in a liability to Company or any Subsidiary in excess of $200,000 except
as listed on a schedule attached to such certificate and (ii) certifying that
Company has made, and agreeing that Company will continue to make, available to
Agent promptly after receipt thereof copies of 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 Real
Property, and any report or audit prepared by a private company with respect
thereto.
10. Continued Perfection of Security Interests. Company and
its Subsidiaries party to any of the Security Documents shall have taken or
cause to be taken all such actions deemed necessary or desirable by Collateral
Agent to ensure that Collateral Agent or Agent has and continues to have a valid
and perfected first priority security interest in the Collateral granted by the
Security Documents (which security interest shall have the priority set forth in
the Intercreditor Agreement) subject to the Liens permitted pursuant to this
Agreement and the Security Documents (and Agent and Collateral Agent shall have
received satisfactory evidence thereof). Such action shall include: (i) the
delivery by Company pursuant to the Stock Pledge Agreement of certificates
(which certificates shall be registered in the name of Collateral Agent or
properly endorsed in blank for transfer or accompanied by irrevocable undated
stock powers duly endorsed in blank, all in form and substance satisfactory to
Collateral Agent and Agent) representing all Subsidiary Stock; (ii) the delivery
to Collateral Agent of Uniform Commercial Code financing statements, executed by
each of Company and each of its Subsidiaries as to the Collateral granted by
each such party for all jurisdictions as may be necessary or desirable to
perfect or continue the perfection of Collateral Agent's security interest in
such Collateral; (iii) the delivery by Company and its Subsidiaries of original
documents relative to Homesite Contract Receivables and Commercial Receivables,
including appropriate endorsements or assignments, all in form and substance
satisfactory to Collateral Agent and Agent, as may be necessary or desirable to
perfect or continue the perfection of Collateral Agent's security interest in
such Collateral; and (iv) evidence reasonably satisfactory to Collateral Agent
and Agent that all other filings, recordings and other actions Collateral Agent
and Agent deems necessary or advisable to establish, preserve and perfect the
Liens and the priority thereof granted to Collateral Agent and Agent hereunder
shall have been made.
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11. Real Property Matters. Agent shall have received: (i)
such new Mortgages and Deeds of Trust or such amendments to the existing
Mortgages and Deeds of Trust as may be requested by Agent, in each case in form
and substance satisfactory to Agent and its local counsel, to protect and
preserve the Lien and priority of the Mortgages and Deeds of Trust as they
secure the Loans and other amounts due hereunder, together with new ALTA Bank's
extended coverage policies of title insurance or amendments of the existing ALTA
Bank's extended coverage policies of title insurance on the Real Property
encumbered by the Mortgages and Deeds of Trusts in liability, amount and form
issued by a title company satisfactory to Agent showing the Mortgages and Deeds
of Trust as first Liens upon the respective Real Property, subject only to Liens
permitted hereunder and thereunder and such other exceptions or exclusions as
may be approved by Agent in its sole discretion, together with any endorsements
reasonably required by Agent, and affirmative assurance that the improvements
are fully located within the boundaries of the insured land; and (ii) in respect
of the Real Property listed on Schedule 5.1(k), copies of such appraisals,
surveys, environmental audit reports, satisfactory evidence of entitlements
(including so-called "zoning letters"), and other documents as Agent may
request, each as specified or contemplated on Schedule 5.1(k), and each prepared
by consultants or other experts satisfactory to Agent.
12. Evidence of Insurance. Company shall have delivered to
Agent certificates of insurance naming Collateral Agent on behalf of Banks as
loss payee under the casualty and surety policies required pursuant to Section
6.5.
13. No Material Adverse Effect. On the Effective Date,
Agent shall have received an officer's certificate executed by a Responsible
Officer stating that no Material Adverse Effect has occurred since September 30,
1998, except as disclosed in Company's Form 10-Q for the quarter ended as of
September 30, 1998 or except as disclosed on Schedule 5.1(m).
14. Intercreditor Agreement. The Intercreditor Agreement
shall have been executed and delivered by each of the parties thereto, and Agent
shall have received a fully executed copy thereof in form and substance
satisfactory to Agent.
15. Fees, Costs, and Expenses. As of the Effective Date,
Company shall have paid: (i) to the Agent all fees, costs, and expenses of Agent
and its counsel incurred in connection with the preparation, negotiation, and
execution of this Agreement, the Intercreditor Agreement, and any other
documents executed in connection herewith and therewith; and (ii) to the
Collateral Agent, the Anglo American Collateral Agent and Secured Agreement
Collateral Agent all fees, costs, and expenses thereof and of counsel thereof
incurred in connection with the preparation, negotiation, and execution of the
Anglo American Loan Agreement, the
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Secured Debt Documents and the Intercreditor Agreement, and any other documents
executed in connection herewith and therewith.
16. Recapitalization Transactions. Each of the
Recapitalization Transactions shall have been consummated in accordance with all
applicable law, the underlying transaction documents, and the Funds Flow Memo,
and Agent shall have received evidence of such consummation satisfactory to
Agent.
17. Amendment of Certain Loan Documents. The Security
Documents and other Loan Documents shall have been amended in form and substance
satisfactory to Agent.
18. [Intentionally Omitted].
19. Updated Field Survey. Agent shall have completed an
updated field survey with respect to the Collateral, and the results thereof
shall be acceptable to Agent in its sole discretion.
20. Collateral Appraisals. Agent shall have received
appraisals of the Collateral from an appraiser satisfactory to Agent, in form
and substance and prepared by appraisers satisfactory to Agent, and the results
thereof shall be satisfactory to Agent.
21. Business Plan. Agent shall have received (i) Company's
Business Plan as of the Effective Date, which shall be in form and substance
satisfactory to Banks, and (ii) evidence, satisfactory to Banks, that Company
has sufficient funds, or availability to sufficient funds, necessary to carry
out such Business Plan.
22. Effective Date. The Effective Date shall have occurred
on or before February 1, 1999.
23. Reorganization Proceedings. Agent shall have received
copies of the Reorganization Plan and Confirmation Order, together with copies
of any modifications thereto, in each case, certified by the Secretary of the
Company as true, correct and complete as of the Effective Date.
24. Other Matters. All other documents and legal matters in
connection with the transactions contemplated by this Agreement shall have been
executed, delivered, or recorded, and shall be in form and substance
satisfactory to Agent, the Banks, and their respective counsel.
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B. CONDITIONS TO EACH LOAN AND ISSUANCE OF EACH LETTER OF CREDIT.
The effectiveness of this Agreement and the agreement of each
Bank to make any Loan requested to be made by it on any Loan Borrowing Date, and
of Agent to issue each L/C Guarantee is subject to the satisfaction of the
further conditions precedent:
1. Representations and Warranties. Each of the
representations and warranties made by Company and its Subsidiaries in or
pursuant to each of the Loan Documents shall be true, correct and complete in
all material respects on and as of the date of such extension of credit, with
such exceptions, amendments or modifications as may be approved in writing by
Agent. For the purposes hereof with respect to any request for a Loan or
issuance of L/C Guarantee, any and all representations and warranties made by
Company or any of its Subsidiaries which are made "as of the Effective Date"
shall be required to be true and correct "as of the Loan Borrowing Date," or
date of issuance of the L/C Guarantee rather than "as of the Effective Date."
2. No Default. No Default or Event of Default shall have
occurred and be continuing as of the date of such extension of credit, as the
case may be, after giving effect to the Loans requested to be made or the L/C
Guarantee requested to be issued on such date.
3. Additional Security Documents; Other Documents. Agent
shall have received each additional Security Document as may be required
pursuant to Section 3.2 and each additional Guarantee required by Section 3.4,
in each case with a counterpart for each Bank, and each additional document,
instrument, legal opinion or item of information reasonably requested by it or
the Required Banks, with a counterpart for each Bank, including a copy of any
debt instrument, security agreement or other material contract to which Company
may be a party.
4. Officer's Certificate. In the case of any Loan or L/C
Guarantee requested by Company, Agent shall have received the certificate
required by Section 2.3, as the case may be, with a counterpart for each Bank.
5. Additional Matters. All corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be satisfactory in form and substance to Agent, and Agent
shall have received such other documents and legal opinions in respect of any
aspect or consequence of the transactions contemplated hereby or thereby as it
or the Required Banks shall reasonably request, with a counterpart for each
Bank.
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Each borrowing by Company or issuance of L/C Guarantee
hereunder shall constitute a representation and warranty by Company, as of the
date of such borrowing or issuance of L/C Guarantee, that the conditions
contained in this Section 5.2 have been satisfied.
C. CONDITIONS SUBSEQUENT.
As a condition subsequent to the making of the Loans, Company
shall perform or cause to be performed the following (and the failure by Company
to so perform or so cause to be performed shall constitute an Event of Default):
1. Tax Servicing Contracts. No later than 60 days after
the Effective Date, Agent and Collateral Agent shall have received a tax
servicing contract in respect of such portion of the Real Property located in
Florida as shall be satisfactory to Agent and Collateral Agent, in form and
substance satisfactory to Agent and Collateral Agent, among Company, Agent,
Collateral Agent, and a tax servicing firm satisfactory to Agent and Collateral
Agent.
2. Company Operating Account Control Agreement. Within 30
days following the Effective Date, Company, Collateral Agent, and Operating
Account Bank shall have executed and delivered the Company Operating Account
Control Agreement.
3. Other Account Control Agreements. Within 30 days
following the Effective Date, Company shall have furnished to Collateral Agent
such additional control agreements in form and substance satisfactory to
Collateral Agent and shall have taken all such other actions as Collateral Agent
or Agent deems necessary or desirable to ensure that Collateral Agent, on behalf
of Agent and Lenders, holds a perfected security interest in all of the deposit
accounts identified on Schedule 5.3(c) hereof.
VI.
AFFIRMATIVE COVENANTS
Company hereby agrees that, so long as the Commitments remain
in effect or any L/C Guarantee remains outstanding, or any Obligation remains
outstanding and unpaid or any other amount is owing to any Bank, Agent,
Collateral Agent or Issuing Bank hereunder, Company shall, and shall cause each
of its Subsidiaries to:
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A. FINANCIAL STATEMENTS.
FURNISH TO EACH BANK:
1. as soon as available, but in any event not later than
90 days after the end of each fiscal year of Company, a copy of the consolidated
balance sheet of Company and its consolidated Subsidiaries (including
Unrestricted Subsidiaries) as at the 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, reported on without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by Ernst &
Young or other independent certified public accountants of nationally recognized
standing acceptable to the Required Banks;
2. as soon as available, but in any event not later than
90 days after the end of each fiscal year of Company, a copy of the
consolidating balance sheet of Company and its consolidated Subsidiaries
(including Unrestricted Subsidiaries) as at the end of such year and the related
consolidating statements of income and retained earnings and of cash flows for
such year, setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly stated in all
material respects;
3. as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of each
fiscal year of Company, the unaudited consolidated and consolidating balance
sheet of Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) as at the end of such quarter and the related unaudited
consolidated and consolidating statements of income and retained earnings and of
cash flows of Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) for such quarter and the portion of the fiscal year through the
end of such quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being fairly stated
in all material respects when considered in relation to the consolidated and
consolidating financial statements of Company and its consolidated Subsidiaries
(subject to normal year-end audit adjustments);
4. as soon as available, but in any event not later than
30 days after the end of each calendar month, the unaudited consolidated balance
sheet of Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) as at the end of such month and the related unaudited consolidated
statements of income and retained earnings and of cash flows of Company and its
consolidated Subsidiaries (including Unrestricted Subsidiaries) for such month,
setting forth in each case in comparative form the figures for such month as set
forth on the Business Plan and, with a
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comparison to the same calendar month of the preceding fiscal year, certified by
a Responsible Officer as being fairly stated in all material respects when
considered in relation to the consolidated financial statements of Company and
its consolidated Subsidiaries (including Unrestricted Subsidiaries) (subject to
nominal year-end audit adjustments); and
5. as soon as available, but in any event not later than
45 days after the end of each fiscal quarter, projections by Company of the
operating cash flow budget of Company and its Subsidiaries for (i) the following
two fiscal quarters, prepared on a monthly basis and (ii) the two fiscal
quarters thereafter, prepared on a quarterly basis, certified by a Responsible
Officer as being prepared in good faith on the basis of the assumptions stated
therein, which assumptions were reasonable in light of conditions existing at
the time of delivery thereof and represented, at the time of delivery, Company's
best estimate of its future financial performance;
in each case, 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).;
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and (except in the case of cash
flows in (d) and (e) above) 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).
B. CERTIFICATES; OTHER INFORMATION.
1. Furnish to each Bank:
(a) 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;
(b) concurrently with the delivery of the financial
statements referred to in Sections 6.1(a), (b) and (c), a certificate
of a Responsible Officer stating that, to the best of such Responsible
Officer's knowledge, Company and each Subsidiary during such period has
observed or performed the covenants of Sections 7.1, 7.2, 7.3, 7.6,
7.8, 7.9, 7.15, 7.16, and 7.17 and all other of its
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covenants and other agreements, and satisfied every condition,
contained in this Agreement and in the Notes and in the other Loan
Documents to which it is a party to be observed, performed or satisfied
by it, and that such Officer has obtained no knowledge that a Default
or Event of Default has occurred and is continuing except as specified
in such certificate, and, if a Default or Event of Default exists,
stating the details thereof and what actions Company proposes to take
with respect thereto;
(c) within five Business Days after the same are
sent, copies of all financial statements and reports which Company
sends to its stockholders and all financial statements and reports
which Company or any of its Subsidiaries sends to the holders or
trustee of any Public Debt Securities, and within five Business Days
after the same are filed, copies of all financial statements and
reports which Company may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental
Authority;
(d) within 10 Business Days after the same are
delivered, copies of all financial statements and all material reports,
management letters or other financial information prepared for its
Board of Directors; and
(e) promptly, such additional financial and other
information as any Bank may from time to time reasonably request (which
may include, without limitation, new appraisals (no more frequently
than annually) and detailed ongoing information as to the real estate
underlying any Commercial Receivables, which are not Eligible
Commercial Receivables, absorption, sales and other related matters).
2. FURNISH TO AGENT:
(a) 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 of the Real Property included
directly or indirectly in the Borrowing Base, 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 (z) a summary aging,
by vendor, of Company's accounts payable and any book overdraft; in
each case, in form satisfactory to Agent, a monthly lot closing report
with respect to each project; and
(b) promptly, such additional financial and other
information as any Bank may from time to time reasonably request.
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C. PAYMENT OF OBLIGATIONS.
Pay, discharge or otherwise satisfy at or before maturity or
before they become delinquent, as the case may be, all its obligations of
whatever nature, except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, and reserves in conformity
with GAAP with respect thereto have been provided on the books of Company or its
Subsidiaries, as the case may be or where the terms of this Agreement or the
Reorganization Plan would prohibit such payment, discharge, or satisfaction.
D. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
Subject to Sections 7.5, 7.6, 7.7 and 7.9: (a) continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business; and (b) to comply with all
Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith is not reasonably likely to, in the aggregate, have
a Material Adverse Effect.
E. MAINTENANCE OF PROPERTY; INSURANCE.
Keep all property useful and necessary in its business in good
working order and condition; maintain with financially sound and reputable
insurance companies insurance on all its property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business; and furnish to each
Bank, upon written request, full information as to the insurance carried. Such
insurance in any event shall include, without limitation, shall cover all
replacement costs associated with building collapse, whether caused by
earthquake or structural defects or otherwise, on all Real Property of the
Borrower and each of its Subsidiaries. Each such policy of insurance shall name
Collateral Agent as a loss payee thereunder and shall provide for at least
thirty days prior written notice to Agent of any material modification or
cancellation of such policies. On the Effective Date and on each anniversary
thereafter, Company and its Subsidiaries shall submit to Agent certificates of
insurance evidencing compliance with this Section 6.5.
F. INSPECTION OF PROPERTY; BOOKS AND RECORDS; APPRAISALS.
Keep proper books of records and account in which full, true
and correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities; and permit
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75
representatives of Agent, and each Bank, with respect to Company and its
Subsidiaries, to visit and inspect any of the Collateral and related properties
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of Company
and its Subsidiaries with officers and employees of Company and such
Subsidiaries and with its independent certified public accountants. From time to
time, if Agent determines that obtaining appraisals is necessary or appropriate,
Agent will either cause its personnel to appraise, or obtain appraisal reports
from appraisers satisfactory to Agent, stating the then current fair market
values of all or any portion of the Real Property. Anything herein to the
contrary notwithstanding, Company shall not be obligated to reimburse Agent with
respect to appraisals of the same particular item of Real Property that occur
more frequently than once in any 6 consecutive month period, unless an Event of
Default has occurred and is continuing or there has occurred a material adverse
change in the value of the Collateral, in which case Company shall be obligated
to reimburse Agent with respect to as many appraisals as Agent deems necessary
to conduct.
G. NOTICES.
Promptly give notice to Agent and each Bank of:
1. the occurrence of any Default or Event of Default;
2. any (i) default or event of default under any
Contractual Obligation of Company or, to the knowledge of Company, any of its
Subsidiaries or (ii) litigation, investigation or proceeding which may exist at
any time between Company or, to the knowledge of Company, any of its
Subsidiaries and any Governmental Authority, which in either case, if not cured
or if adversely determined, as the case may be, would have a Material Adverse
Effect;
3. any litigation or proceeding affecting Company or, to
the knowledge of Company, any of its Subsidiaries in which the amount involved
is $250,000 or more and, not covered by insurance or in which injunctive or
similar relief is sought;
4. as soon as possible and in any event within 30 days
after Company knows or has reason to know thereof, the occurrence or expected
occurrence of any event or condition described in Section 4.12 which could
reasonably be expected to result in liability of Company or any Commonly
Controlled Entity in excess of $100,000 and which is not reflected in the
financial statements most recently delivered to Banks pursuant to Section 6.1;
and
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76
5. any development or event which could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action Company proposes to take with respect thereto.
H. ENVIRONMENTAL LAWS.
1. 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;
2. 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 develop and maintain a system, satisfactory to
Agent, for performing periodic environmental compliance reviews with respect to
all of its properties, and for reporting such reviews to Agent and Banks; and
3. Defend, indemnify and hold harmless Agent and Banks,
and their respective employees, agents, officers and directors, from and against
any and all claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to, the
violation of or noncompliance with any Environmental Laws applicable to the real
property owned or operated by Company or any of its Subsidiaries, or any orders,
requirements or demands of Governmental Authorities related thereto, including
attorney's and consultant's fees, investigation and laboratory fees, court costs
and litigation expenses, except to the extent that any of the foregoing arise
out of the gross negligence or willful misconduct of the party seeking
indemnification therefor. The agreements in this Section shall survive the
payment of the Notes and all other amounts payable hereunder.
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I. BUSINESS PLAN.
Furnish to each Bank on or before the tenth day following
approval by Company's Board of Directors, but in no event later than December 31
of each fiscal year and within 10 days (after approval by Company's Board of
Directors, if applicable) of any amendment, modification or update thereto, a
Business Plan of Company and its Subsidiaries for the next succeeding fiscal
year in a form and in substance satisfactory to the Required Banks setting forth
in reasonable detail a projected statement for such fiscal year's income and
cash flow with a projected balance sheet as of the close of the succeeding
fiscal year end, accompanied by a statement of a Responsible Officer that the
Business Plan projected statements of income, cash flow and balance sheet for
the succeeding fiscal year have been adopted by the Board of Directors of
Company. Company and its Subsidiary shall at all times conduct their business
substantially in accordance with the Business Plan and shall not materially
modify or deviate from such Business Plan without the prior written approval of
Agent and the Required Banks.
J. AUTHORIZATIONS.
Company will, and will cause each of its Subsidiaries to, use
its good faith diligent best efforts to promptly obtain and maintain in full
force and effect, all licenses, consents, permits, authorizations and filings
(collectively, "Governmental Approvals") necessary to develop, lease or own all
of its properties, and, upon obtaining the foregoing, Company will, and will
cause each of its Subsidiaries to, maintain the Governmental Approvals in full
force and effect and comply with the terms thereof, except only to the extent
that failure to maintain the Governmental Approvals and comply therewith is not
reasonably likely to have a Material Adverse Effect or result in any liability
to Agent, Collateral Agent or any Bank (prior to Agent, Collateral Agent or any
Bank exercising any of their remedies against the Collateral as provided for
herein or in the other Loan Documents).
K. DIVIDENDS FROM SUBSIDIARIES.
Cause the Subsidiaries to pay dividends to Company from the
Net Cash Proceeds of any sales of assets (including Real Property Sales) to the
extent not prohibited by law, including the proceeds of any utility
condemnations; provided that proceeds from the sale of residential units, lots
or tracts by Subsidiaries (a) from developed phases of a multi-phase project
comprising Subsidiary Property Under Development or Mezzanine Property Under
Development may be used to pay all costs associated with development of the same
phase or additional phases of the same project, including reasonable reserves
for such anticipated costs during the period commencing on the date of sale to
the date 180 days after the date of sale (excluding any costs which are an
allocated share of corporate general and administrative expenses of Company or
any Subsidiary), and (b) from single phase projects comprising Subsidiary
Property Under Development or Mezzanine 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
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are an allocated share of corporate general and administrative expenses of
Company or any other Subsidiary), in either case until the conclusion of the
project, at and following which time all such proceeds shall be distributed to
Company. For purposes hereof, "conclusion of the project" shall mean the
completion of structure or infrastructure development of the project (or, with
multi-phase projects: (i)(y) the final phase of the project, or (z) the sale of
substantially all units thereon; and (ii) the payment of the Indebtedness and
the Guarantee Obligations in respect of Subsidiary Property Under Development or
Mezzanine Property Under Development that prohibits such distributions) in
accordance with the requirements of applicable laws and regulations.
L. SUPPLEMENTAL REPORTS REGARDING REAL PROPERTY.
1. Furnish to Agent such supplemental title reports on the
Real Property subject to the Deeds of Trust and Mortgages as Agent and Required
Banks may reasonably request from time to time; provided Company shall not be
required to provide such supplemental reports more than once per quarter.
2. No later than 60 days after the Effective Date, Company
shall deliver to Agent such third party appraisals, environmental reports,
surveys, and ALTA title policies, as would have complied with the provisions of
Section 5.1(k) if delivered on the Effective Date with respect to all Real
Property to the extent such reports were not required by Banks to be delivered
on or prior to the Effective Date.
3. Without limiting the generality of Section 4.10,
Company shall cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against any Real
Property located in Tennessee and Texas to be paid in full before delinquency or
before the expiration of any extension period and promptly shall execute and
deliver to Agent and Collateral Agent appropriate certificates attesting to the
payment thereof or deposit with respect thereto; provided, however, that in the
case of Real Property with a Fair Market Value less than or equal to the
assessments or taxes with respect thereto, the Company may decide not to pay
such assessments or taxes. At any time during the existence of an Event of
Default, Agent and Collateral Agent shall have the right to require the
execution and delivery of a tax servicing contract in respect of the Real
Property located in Tennessee and Texas, in form and substance satisfactory to
Agent and Collateral Agent, among
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Company, Agent, Collateral Agent, and a tax servicing firm satisfactory to Agent
and Collateral Agent.
M. COMPLIANCE WITH LAWS.
Company shall, and shall cause each of its Subsidiaries to
comply with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority, noncompliance with which would or could be
reasonably expected to cause a Material Adverse Effect.
N. OTHER NOTICES.
Promptly give notice to Agent of:
1. the creation of any new deposit account; and
2. the organization or formation of any new Venture
Subsidiary, any other Subsidiary, any Unrestricted Subsidiary, or any Joint
Venture; or the disposition or dissolution of any Excluded Subsidiary;
in each case, together with such information related thereto as Agent may
request.
O. COMPANY OPERATING ACCOUNT CONTROL AGREEMENT.
At all times from and after the date of its execution and
delivery, maintain in full force and effect the Company Operating Account
Control Agreement. At all times from and after the Effective Date, Company shall
continue to maintain Company's cash management system substantially as such
system exists on the Effective Date after giving effect to the consummation of
the transactions contemplated to occur on such date, and shall continue to
concentrate the funds of Company into the Company Operating Account except to
the extent that such funds reasonably are required to be held in other accounts
for permitted uses by Company, and except to the extent that such funds are
invested in investments permitted by Section 7.9.
P. INDEMNIFICATION BY COMPANY.
Company agrees to and does hereby indemnify, hold harmless and
defend Banks from and against all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, and disbursements of any
kind or nature whatsoever which are imposed on, incurred by, or asserted against
Banks in any way relating to or arising out of any failure of Company to comply
with the terms of, or complete, the Reorganization Plan.
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Q. EXECUTIVE OFFICERS.
1. Company shall inform the Agent of the occurrence of an
event described in Item 401(f)(2) of Regulation S-K of the Securities Exchange
Act of 1934 (an "Event") within twenty-four (24) hours after the Company has
actual knowledge of the occurrence of such Event.
2. Company shall (i) promptly consult with Agent regarding
such Event and (ii) within five (5) Business Days after Company has actual
knowledge of the occurrence of such Event, notify Agent of any action proposed
to be taken by Company with respect to such Event.
3. If the occurrence of an "Event" could reasonably be
expected to have a Material Adverse Effect, Company shall promptly take such
corrective action with respect to such Event as may, in its reasonable judgment,
be required to avoid a Material Adverse Effect.
VII.
NEGATIVE COVENANTS
Company hereby agrees that, so long as the Commitments remain
in effect or any Obligations remain outstanding and unpaid or any other amount
is owing to any Bank or Agent hereunder, Company shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly:
A. MAINTENANCE OF CONSOLIDATED NET WORTH.
Permit Consolidated Net Worth at any time to be less than the
amounts set forth below (hereinafter referred to as the "Minimum Consolidated
Net Worth"): (a) from the Effective Date through December 31, 1999, $40,000,000
and (b) at any time thereafter, the sum of (i) $40,000,000; and (ii) 50% of the
Annual Net Income for the prior fiscal year; provided, however, that the amount
determined under this clause (b) shall never be less than zero.
To demonstrate compliance with the Minimum Consolidated Net
Worth covenant set forth in this Section, Company shall furnish to Banks (i)
within 45 days of the close of each calendar quarter a certificate of a
Responsible Officer setting forth Minimum Consolidated Net Worth for such date
calculated in accordance with this Section 7.1, and the calculation upon which
it is based; and (ii) within 90 days of the close of each fiscal year, a
certificate of a Responsible Officer setting forth Minimum Consolidated Net
Worth as of the such date calculated in accordance with this Section
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7.1 and the calculation upon which it is based, reflecting in such annual
certificate any addition to the Minimum Consolidated Net Worth that Company is
required to maintain resulting from the Annual Net Income for the fiscal year
then ended, but only as calculated under clause (b) of this Section 7.1.
B. LIMITATION OF INDEBTEDNESS.
Create, incur, assume or suffer to exist any Indebtedness,
except:
1. Indebtedness in respect of the Loans;
2. Indebtedness in respect of the Anglo American Loan or
any permitted replacement thereof on terms no less favorable to the Banks, so
long as the Intercreditor Agreement remains in full force and effect;
3. secured Indebtedness in respect of the Secured Note;
4. Indebtedness of the Company in respect of Apollo's 20%
Profits Interest;
5. Indebtedness of Company not otherwise permitted under
this Section 7.2(e) and Indebtedness of its Subsidiaries which is recourse to
the Company, at any time outstanding, whether incurred in connection with
Subsidiary Property Under Development or otherwise, not exceeding $80,000,000
(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;
6. Indebtedness of Company to any Subsidiary or of any
Subsidiary to Company; provided that (i) such inter-company Indebtedness shall
not be evidenced by promissory notes or other instruments and (ii) all
Indebtedness of Subsidiaries to Company shall not exceed an aggregate principal
amount of $4,000,000 at any time, of which no more than $1,000,000 in the
aggregate may be Indebtedness of MPUD Subsidiary Group members, SPUD
Subsidiaries, Venture Subsidiaries and Unrestricted Subsidiaries;
7. Intentionally omitted;
8. 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") or in connection
with
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Mezzanine Property Under Development of the Subsidiary (any Subsidiary incurring
such Indebtedness shall be referred to in this Section 7.2(h) as an "MPUD
Subsidiary"; provided that (i) neither Company nor any Subsidiary other than
that SPUD Subsidiary or MPUD Subsidiary, as the case may be, is liable for such
Indebtedness in respect of that Subsidiary Property Under Development or
Mezzanine Property Under Development, as the case may be, directly or pursuant
to a Guarantee Obligation or otherwise, (ii) the aggregate amount of all
Indebtedness permitted pursuant to this Section 7.2(h) at any one time
outstanding shall not exceed $170,000,000 minus all other outstanding
Indebtedness of Company and Subsidiaries permitted pursuant to Section 7.2(e),
and (iii) the shares of capital stock and other ownership interests of such MPUD
Subsidiary shall at all times be owned solely by a single MPUD Holding Company;
9. [Intentionally Omitted];
10. [Intentionally Omitted]; and
11. Indebtedness of Subsidiaries for the development of
infrastructure, common areas, or recreational facilities owing to
quasi-governmental entities such as community development and special districts
to the extent financed through the issuance of industrial revenue bonds or other
similar public financing; provided that (except for Liens permitted pursuant to
Section 7.3(q)) there is no direct or indirect recourse to Company with respect
to such Indebtedness (other than inchoate Liens arising by operation of law in
respect of such Indebtedness) and such Indebtedness shall not exceed $50,000,000
in the aggregate at any one time outstanding; provided further that Company
shall give Agent prior written notice of the incurrence of any such Indebtedness
under this Section 7.2(k).
Anything to the contrary notwithstanding, in no event shall Company or any
Subsidiary co-make, endorse, guarantee (except to the extent permitted under
Section 7.4(c)), or otherwise become liable or have any recourse with respect to
any Indebtedness of any of the Unrestricted Subsidiaries.
C. 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:
1. Liens securing Indebtedness permitted by Section
7.2(a);
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2. Liens in favor of the Collateral Agent securing
Indebtedness permitted by Section 7.2(b), so long as the Intercreditor Agreement
remains in full force and effect;
3. Liens in favor of the Collateral Agent securing the
Secured Agreement Obligations, so long as the Intercreditor Agreement remains in
full force and effect
4. Liens in favor of Apollo securing Indebtedness
permitted by Section 7.2(d);
5. Liens for taxes (i) which are not yet delinquent or
(ii) which are, not in an aggregate amount, as to Company and all Subsidiaries,
of greater than $1,000,000 or (iii) which are being contested in good faith by
appropriate proceedings; provided that adequate reserves with respect thereto
are maintained on the books of Company or its Subsidiaries, as the case may be,
in conformity with GAAP;
6. carriers, warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
do not remain unsatisfied or undischarged for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
7. 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;
8. 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;
9. easements, rights-of-way, restrictions, development
orders, plats, and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount and which do not
in any case materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of Company or
such Subsidiary;
10. Liens granted by Company or any Subsidiary, as lessee,
in the ordinary course of business on leased equipment, leasehold improvements
and furnishings;
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11. 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;
12. other Liens in existence on the Effective Date, listed
on Schedule 7.3; provided that no such Lien is spread to cover any additional
property after the Effective Date and that the amount of any Indebtedness or
other obligations secured thereby is not increased;
13. Liens granted pursuant to Section 7.7 of the
Reorganization Plan;
14. Liens granted by Company or Subsidiaries upon Real
Property and related Personal Property which is Subsidiary Property Under
Development and which is either financed by Indebtedness incurred by
Subsidiaries pursuant to Section 7.2(e) or 7.2(h), or contributed by Company to
a Subsidiary pursuant to Section 7.9(g);
15. Liens granted by Company or Subsidiaries upon Real
Property and related Personal Property which is Mezzanine Property Under
Development and which is either financed by Indebtedness incurred by
Subsidiaries pursuant to Section 7.2(e) or (h), or contributed by Company to a
Subsidiary pursuant to Section 7.9(g);
16. [Intentionally Omitted];
17. inchoate Liens solely arising by operation of law in
respect of Indebtedness incurred pursuant to Section 7.2(k).
D. LIMITATION ON GUARANTEE OBLIGATIONS.
Create, incur, assume or suffer to exist any Guarantee
Obligation, except: (a) the Guarantee Obligations listed on Schedule 4.17; (b)
Guarantee Obligations made in the ordinary course of its business by Company of
obligations (other than Indebtedness) of any of its Subsidiaries, which
obligations are otherwise permitted under this Agreement; (c) Guarantee
Obligations by Company of Indebtedness of any Subsidiary, Unrestricted
Subsidiary, or Joint Venture; provided, however, that any outstanding Guarantee
Obligations permitted under this Section 7.4(c) in respect of Indebtedness of
any Unrestricted Subsidiary or Joint Venture shall reduce on a dollar-for-dollar
basis the $80,000,000 limitation otherwise available for Indebtedness permitted
under Section 7.2(e) and that the sum of all Indebtedness
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permitted under Section 7.2(e) and all Guarantee Obligations permitted pursuant
to this Section 7.4(c) shall not exceed $80,000,000 in the aggregate; provided
further, that Company may not incur any Guarantee Obligation with respect to
Indebtedness of any Subsidiary permitted pursuant to Section 7.2(h); and (d)
Guarantee Obligations of the Subsidiaries of Company in respect of the Anglo
American Loan Obligations and the Secured Agreement Obligations, so long as the
Intercreditor Agreement remains in full force and effect.
E. LIMITATIONS ON FUNDAMENTAL CHANGES.
Except to the extent such merger, consolidation, or
amalgamation is of a Subsidiary with and into Company, or between or among
wholly owned Subsidiaries, enter into any merger, consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets; provided that
Company or any Subsidiary may convey, sell, assign, transfer or have condemned
or otherwise disposed of assets to the extent permitted by Section 7.6 so long
as the proceeds of any such sale are applied in accordance with this Agreement.
F. 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"):
1. raw land;
2. homes or homesites in the ordinary course of its
business;
3. obsolete or worn out property disposed of in the
ordinary course of business;
4. Commercial Real Estate;
5. the sale or discount without recourse of Commercial
Receivables or Homesite Contract Receivables in the ordinary course of business
6. [Intentionally Omitted];
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7. sales or other transfers of any partnership interests
or joint venture interests in entities that are not wholly owned, collectively,
by Company and its Subsidiaries; and
8. transactions permitted under Section 7.5.
Upon any permitted sale as aforesaid, Collateral Agent shall execute releases of
Collateral Agent's Lien upon the Collateral included in any such sale; provided
that there exists no Default or Event of Default hereunder and no Default or
Event of Default would result therefrom; and provided further, that Collateral
Agent's Lien shall continue against the proceeds of such sale, as evidenced by
any and all documents and filings as may be required by Agent. Notwithstanding
anything in this Section 7.6 to the contrary, Company shall not convey, sell,
lease, assign, transfer or otherwise dispose of any Eligible Subdivision Project
(other than the Riverwalk Tower project and the Trails of West Frisco project)
for consideration less than 75% of the Net Equity in respect of such Eligible
Subdivision Project.
G. LIMITATION ON DIVIDENDS.
Declare or pay any dividend (other than dividends payable
solely in common stock or preferred stock of Company) on, or, except for the
Reverse Stock Split, make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any Capital Stock of Company including 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 Company) or in obligations of Company or any Subsidiary,
except for: (a) dividends declared and paid by any Subsidiary to Company or any
Subsidiary and (b) dividends to the extent permitted by Section 4.14 of the
Intercreditor Agreement.
H. LIMITATION ON CAPITAL EXPENDITURES.
Make, or enter into any agreement the performance of the terms
of which would require Company or any Subsidiary to make (by way of the
acquisition of securities of a Person or otherwise), any expenditures in respect
of the purchase or other acquisition of fixed or capital assets (excluding any
such asset acquired in connection with nominal replacement and maintenance
programs properly charged to current operations), exceeding in the aggregate
$50,000,000 for Company and its Subsidiaries during any 12-month period from and
after the Effective Date.
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I. 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:
1. extensions of trade credit in the ordinary course of
business;
2. investments in Cash Equivalents;
3. (i) loans and advances to employees of Company or its
Subsidiaries for travel, entertainment and relocation expenses and for advances
on salary prior to, and otherwise payable during, an employee's vacation, in the
ordinary course of business in an aggregate amount for Company and its
Subsidiaries not to exceed $500,000 at any one time outstanding and (ii) loans
to J. Larry Rutherford, the President and Chief Executive Officer of the
Company, evidenced by the obligations described on Schedule 7.9(c);
4. [Intentionally Omitted.]
5. (i) loans by Company to its Subsidiaries (other than
Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary Group members and
Unrestricted Subsidiaries) or by any Subsidiary to Company to the extent such
Indebtedness is permitted pursuant to Section 7.2(f); and (ii) capital
contributions to Subsidiaries (other than Venture Subsidiaries, SPUD
Subsidiaries, MPUD Subsidiary Group members and Unrestricted Subsidiaries) so
long as Company or its Subsidiary making the capital contribution receives stock
equal to the value of the capital contributed as determined in accordance with
GAAP; provided, that Collateral Agent's Lien shall continue against such stock
received by Company or its Subsidiary as aforesaid, which Lien shall be
evidenced by any and all documents and filings as may be required by Collateral
Agent and Agent;
6. extensions of credit for sales of assets which require
a mandatory reduction of the Maximum Permissible Loan Amount pursuant to
Sections 2.5(c), (d) and (e); and
7. capital contributions to Venture Subsidiaries for the
purpose of making investments in Joint Ventures, to SPUD Subsidiaries, to MPUD
Subsidiary Group members and to Unrestricted Subsidiaries so long as Company or
its Subsidiary making the capital contribution receives stock, partnership
interests, joint venture interests, or beneficial interests, respectively, equal
to the value of the capital
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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, subject to the provisions of Section 3.3(d), Collateral Agent's Lien shall
continue against such stock or other interests received by Company or its
Subsidiary as aforesaid, which Lien shall be evidenced by any and all documents
and filings as may be required by Collateral Agent and Agent, and (iii) from and
after the Effective Date, the aggregate "net amount" of such capital
contributions shall be limited to (y) with respect to capital contributions to
Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary Group members and
Unrestricted Subsidiaries in existence on the Effective Date, assets (including
cash) having fair market values not greater than $4,700,000, and (z) with
respect to the Apollo Beach project, the Rayland project, the Grand Oaks
project, the West Bay Club Condominium project, and that certain project located
in Orlando, Florida, commonly known as the "Naval Training Center" under
consideration by Orlando NTC Partners, a Florida general partnership (the "NTC
Project"), capital contributions to Venture Subsidiaries, SPUD Subsidiaries,
MPUD Subsidiary Group members and Unrestricted Subsidiaries which acquire such
property after the Effective Date, assets (including cash) having fair market
values not greater than $5,500,000 (provided that no more than $300,000 of this
amount may be contributed with respect to the NTC Project). For purposes of this
Section 7.9(g), the "net amount" shall be equal to the aggregate amount of all
capital contributions less any dividends paid to the Company and/or
Subsidiaries, as the case may be, by the Venture Subsidiaries, SPUD
Subsidiaries, MPUD Subsidiary Group members and/or Unrestricted Subsidiaries.
Notwithstanding anything to the contrary in this Section 7.9,
no Subsidiary which owns any project may invest in any Subsidiary which has no
interest in such project.
J. LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS.
1. Make any optional payment or optional prepayment on, or
optional redemption of, any Indebtedness (including any payments on the Anglo
American Loan Obligations, and Secured Note Obligations) except: (i) payments on
the Loans; (ii) payment of the 20% Profits Interest; or (iii) so long as no
Event of Default has occurred and is continuing or would result therefrom,
payments made pursuant to Indebtedness permitted pursuant to Section 7.2(e),
(f), (h), or (k);
2. Amend, modify, or change, or consent or agree to any
amendment, modification or change to any of the terms of the Anglo American Loan
Obligations, the Secured Agreement Obligations, or any other agreement executed
in
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connection with the foregoing or otherwise in connection with any Indebtedness
(other than: (1) Indebtedness permitted to be incurred pursuant to subsections
7.2(e) and (f), (but exclusive of Indebtedness permitted pursuant thereto
consisting of intercompany Indebtedness among Company and its Subsidiaries and
Financing Leases), (h), and (k); and (2) any such amendment, modification, or
change to any such other Indebtedness which would extend the maturity or reduce
the amount of any payment of principal thereof or which would reduce the rate or
the amount of interest payable or extend the date for payment of interest
thereon; but in the case of either (1) or (2), solely to the extent the
amendment, modification, or change to any such Indebtedness is not prohibited by
any other provision in this Agreement or the other Loan Documents or in the
Intercreditor Agreement); and
3. Amend any subordination provisions of any instrument
governing any Indebtedness (except for amendments pursuant to this Agreement and
the other Loan Documents or pursuant to the Intercreditor Agreement).
K. TRANSACTIONS WITH AFFILIATES.
Enter into any transaction, including any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate (other than any Subsidiary of Company), unless such transaction is
otherwise permitted under this Agreement, is in the ordinary course of Company's
or such Affiliate's business and is upon fair and reasonable terms no less
favorable to Company or such Affiliate, as the case may be, than it would obtain
in a comparable arms length transaction with a Person not an Affiliate.
L. SALE AND LEASEBACK.
Enter into any Sale and Leaseback to the extent the aggregate
Book Value of all assets sold and leased under all such transactions exceeds
$2,000,000 during the term of this Agreement.
M. FISCAL YEAR.
Permit the fiscal year of Company to end on a day other than
December 31.
N. LIMITATION ON NEGATIVE PLEDGE CLAUSES.
Enter into any agreement, other than any Secured Debt
Documents, industrial revenue bonds, community development district financing,
purchase money mortgages, Financing Leases, or agreements executed in connection
with Indebtedness
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incurred in connection with Subsidiary Property Under Development permitted by
this Agreement (in which cases, any prohibition or limitation shall only be
effective against the assets financed thereby), with any Person other than Banks
pursuant hereto which prohibits or limits the ability of Company or any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired.
O. DEVIATION FROM BUSINESS PLAN.
Allow the total actual Net Cash Flow for any fiscal quarter,
including major asset dispositions, to deviate from the quarterly Net Cash Flow
projected under the Business Plan for such quarter by a negative margin equal to
or greater than forty percent (40%) or $3,000,000, whichever is greater.
Notwithstanding the foregoing, the first period tested will be the period
commencing on February 1, 1999 and ending on June 30, 1999.
P. INTER PROJECT LOANS, MERGERS, CONSOLIDATIONS AND INVESTMENTS.
Allow any Subsidiary which owns any project to borrow from or
lend to, merge, consolidate with or invest in any other Subsidiary which has no
interest in such project.
Q. LIMITATION OF BANK ACCOUNTS.
So long as any Obligations or Commitments are outstanding,
allow cash and Cash Equivalents maintained in Bank Accounts of Company and
Subsidiaries other than in the Cash Collateral Account and the restricted
accounts set forth in Schedule 7.17 (including any beneficial interest therein),
less the amount of checks outstanding to pay current expenses in the ordinary
course of business or to prepay expenses to be incurred in the immediately
subsequent three-month period consistent with past practices, to exceed
$5,000,000 in the aggregate at any time. Company and its Subsidiaries shall
deposit in the Company Operating Account, after application pursuant to Section
2.5 (b), all remaining cash of Company and its Subsidiaries in excess of amounts
permitted to be maintained in accounts other than a Cash Collateral Account
under this Section 7.17.
R. VENTURE SUBSIDIARIES AND JOINT VENTURES.
1. 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) as modified from time to
time after the Effective Date to include any new Joint Venture interests and the
revenues arising from such revenue.
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2. Cause, suffer, or permit any Venture Subsidiary to
create, incur, assume, or suffer to exist any Lien (other than Liens in favor of
the Collateral Agent, the Anglo American Collateral Agent or the Secured
Agreement Collateral Agent) upon any of such Venture Subsidiary's property,
assets, or revenues, whether now owned or hereafter acquired (including the
Joint Venture interests owned by such Venture Subsidiary as disclosed on
Schedule 4.14(B) and the revenues arising from such revenue).
S. EMPLOYEE BENEFITS.
1. Fail to comply in all material respects with the
applicable provisions of ERISA and the Code to the extent that such failure
results or could reasonably be expected to result in a Material Adverse Effect
and (b) Fail to furnish the Agent as soon as possible after, and in any event
within 10 days after any Responsible Officer of the Company or any Commonly
Controlled Entity knows or has reason to know that any ERISA Event has occurred
that, alone or together with any other ERISA Events that have occurred could
reasonably be expected to result in a Material Adverse Effect, a statement by a
Responsible Officer of the Company setting forth details as to such ERISA Event
and the action, if any, that the Company and/or the Subsidiaries propose to take
with respect thereto.
T. CHARTER DOCUMENTS.
Amend or modify the Series A Statement or the Series B
Statement or any other provision of its charter, certificate of incorporation or
other organizational documents relating to preferred stock (whether now
outstanding or hereafter issued) without obtaining the prior written consent of
Agent.
VIII.
EVENTS OF DEFAULT; REMEDIES
A. EVENTS OF DEFAULT; REMEDIES.
If any of the following events ("Events of Default") shall
occur and be continuing:
1. Company shall fail to pay any principal when due of any
Obligation in accordance with the terms hereof; or Company shall fail to pay any
interest due on any Obligation or any other amount payable hereunder within
three (3) days after the date any such interest or other amount becomes due in
accordance with the terms thereof or hereof; or
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2. Any representation or warranty made or deemed made by
Company or any of its Subsidiaries herein or in any other Loan Document or which
is contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement shall prove to
have been incorrect in any material respect on or as of the date made or deemed
made; or
3. Company shall default in the observance or performance
of any agreement contained in Section 7; or
4. Company or any Subsidiary shall default in the
observance or performance of any other agreement contained in this Agreement
(other than as provided in paragraphs (a) through (c) of this Section) or in any
other Loan Document, and such default shall continue unremedied for a period of
30 days; or
5. Company shall fail to pay any principal of or interest
on any Anglo American Loan Obligations or any Secured Agreement Obligations
(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 relevant agreement or instrument relating to such
obligations; or there shall occur any other "default" or "event of default" (as
defined in the Anglo American Loan Documents or the Secured Agreement Documents
or any other event that accelerates, or permits the acceleration, of any Anglo
American Loan Obligations or any Secured Agreement Obligations; or
6. Any Anglo American Loan Obligations or Secured
Agreement Obligations shall be declared to be due and payable, or required to be
prepaid prior to the stated maturity thereof; or
7. Any Subsidiary of Company shall fail to pay any
principal of, or interest on, any Indebtedness or any Guarantee Obligation
(other than any Guarantee Obligation created pursuant to any Loan Document) in
excess of $1,000,000, when due and payable (whether at scheduled maturity or by
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument under which such Indebtedness or Guarantee Obligation was created
and, if such agreement or instrument permits the acceleration of the maturity of
such Indebtedness or Guarantee Obligation as a result of 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
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8. Company shall (i) default in any payment of principal
of or interest on any Indebtedness (other than any Obligations, the Anglo
American Loan Obligations or the Secured Agreement Obligations) 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
9. (i) Company or any of its Subsidiaries shall commence
any case, proceeding or other action (x) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (y)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or Company or any of
its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Company or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (x) results in the entry of an order for relief or any
such adjudication or appointment or (y) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
Company or any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or (iv)
Company or any of its Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) Company or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due, provided that
Company or any of its Subsidiaries may admit in writing that it is "insolvent"
as such term is defined in, and for purposes of, Section 108(a)(1)(8) of the
Code; or (vi) Company or any of its Subsidiaries shall cause to be reinstated
the Reorganization Proceedings; or
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10. The Confirmation Order shall be reversed, withdrawn, or
modified (in any manner adverse to Company or any of its Subsidiaries), or any
rehearing shall be ordered with respect thereto by the Bankruptcy Court or by
any court having jurisdiction over Company; or
11. (i) There occurs one or more events or conditions
described in Section 4.12 or an ERISA Event which individually or in the
aggregate result in liability of Company or any Commonly Controlled Entity in
excess of $5,000,000; 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 $5,000,000; or
12. One or more judgments or decrees shall be entered
against Company or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance) of $500,000 or more in the
case of Company or any of its Subsidiaries and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof; or
13. (i) Any of the Guarantees, Security Documents, or other
Loan Documents hereunder shall cease, for any reason, to be in full force and
effect or Company or any of its Subsidiaries, as the case may be, party thereto
shall so assert in writing, or (ii) any Security Document shall cease to be
effective to grant a perfected Lien on the collateral described therein with the
priority purported to be created thereby (other than as a result of any action
or inaction on the part of Agent or Banks or their agents or bailees or other
than with respect to Collateral having an aggregate value of $100,000 or less);
or
14. Any event or change shall occur that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect; or
15. There shall occur any defined "Event of Default" under
any Secured Debt Documents other than the Loan Documents; or
16. There shall occur any defined "Event of Default" as
defined in the Series A Statement or the Series B Statement; or
17. There shall occur any event that results in the
accumulation of, or the right of "Holders" (as such term is defined and used in
the Series A Statement or
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the Series B Statement of the Series A or Series B Preferred Stock to receive
dividends at the "Default Dividend Rate" as defined therein; or
18. A Change of Control shall occur; or
19. Company shall fail to perform its agreements in Section
6.17, and such failure could reasonably be expected to have a Material Adverse
Effect.
20. If funds in excess of $100,000 are paid over pursuant
to the resolution of any claim asserted by any third party, including claims by
any state or other Governmental Authority, that any unclaimed funds disbursed by
the United States Trust Company of New York to Company out of the proceeds of
the Unsecured 1996 Notes are "abandoned property" under state escheat or other
applicable laws; or
21. There shall occur any transfer of any shares of Series
A Preferred Stock under circumstances in which the transferee does not become
bound by all of the provisions of the Intercreditor Agreement which, immediately
prior to such transfer, were applicable to the Secured Agreement Obligees; or
22. The occurrence or failure to occur of any act or event
which occurrence or failure to occur could give rise to the right on the part of
the Class A Preferred Shareholders and/or the Class B Preferred Shareholders to
require Company to repurchase such shares or any portion thereof;
then, and in any such event, (a) if such event is an Event of Default specified
in clause (i), (ii), (iv), (v) or (vi) of paragraph (i) above, (i) the
Commitments shall automatically immediately terminate, and (ii) the Loans
hereunder (with accrued interest thereon) and all other Obligations shall
immediately become due and payable in full, and Agent and Collateral Agent shall
have all rights and remedies given to Agent and Collateral Agent pursuant to the
Loan Documents and all rights of a secured party, mortgagee and pledgee under
applicable law, all of which rights and remedies shall be cumulative and
non-exclusive, to the extent permitted by law; and (b) if such event is any
other Event of Default, either or both of the following actions may be taken:
(i) with the consent of the Required Banks, Agent may, or upon the request of
the Required Banks, Agent shall, by notice to Company declare the Commitments to
be terminated forthwith, whereupon the Commitments shall immediately terminate;
and (ii) with the consent of the Required Banks, Agent may, or upon the request
of the Required Banks, Agent shall, by notice of default to Company, declare the
Loans hereunder (with accrued interest thereon) and all other Obligations to be
due and payable in full, and Agent shall have all rights and remedies given to
Agent and Collateral Agent pursuant to the Loan 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
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extent permitted by law; provided, however, with regard to clause (b) hereof,
that unless and until Agent shall have received such directions, Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interests of Banks.
IX.
AGENTS
A. APPOINTMENT OF AGENT.
Each Bank hereby irrevocably designates and appoints M.H.
Davidson & Co., LLC as Agent of such Bank under this Agreement and the other
Loan Documents, and M.H. Davidson & Co., LLC hereby accepts such appointment,
subject to the terms and provisions of this Agreement and the other Loan
Documents. Each Bank irrevocably authorizes M.H. Davidson & Co., LLC as Agent
for such Bank, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to Agent by the terms of this Agreement
and the other Loan Documents together with such other powers as are reasonably
incidental thereto. Agent may appoint sub-agents to assist Agent in its duties
as Agent.
Each Bank hereby further authorizes Agent to enter into the
Security Documents to be executed and delivered by Agent, on behalf of and for
the benefit of Banks, on the Effective Date and agrees to be bound by the terms
thereof. Each Bank irrevocably authorizes Agent to take such action on its
behalf under the provisions of the Security Documents, and to exercise such
powers and perform such duties as are expressly delegated to Agent by the terms
of the Security Documents, together with such other powers as are reasonably
incidental thereto; provided that Agent shall not enter into any consent to any
amendment, modification, termination or waiver of any provision contained in any
Security Document to which it is party without the prior written consent of
Required Banks. Each Bank agrees that no Bank shall have any right individually
to realize upon the collateral granted by the Security Documents (including
through the exercise of a right of set-off against call deposits, if any, of
such Bank in which any funds on deposit in the Cash Collateral Accounts may from
time to time be invested), it being understood and agreed that such rights and
remedies may be exercised only by Agent at the direction of Required Banks, for
the benefit of Banks, in accordance with the terms of such agreements. Each Bank
hereby authorizes Agent to release Collateral only as expressly permitted or
required under this Agreement or the Security Documents, and agrees that a
certificate executed by Agent evidencing such release of Collateral shall be
conclusive evidence of such release to any third party.
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B. APPOINTMENT OF COLLATERAL AGENT.
Each Bank hereby irrevocably designates and appoints M.H.
Davidson & Co., LLC as Collateral Agent of such Bank under this Agreement and
the Security Documents to which M.H. Davidson & Co., LLC is a party, and M.H.
Davidson & Co., LLC hereby accepts such appointment, subject to the terms and
provisions of this Agreement and the Security Documents to which it is a party.
Each Bank hereby further authorizes Collateral Agent to enter into the Security
Documents to be executed and delivered by Collateral Agent on the Effective Date
and agrees to be bound by the terms thereof. Each Bank irrevocably authorizes
M.H. Davidson & Co., LLC, as Collateral Agent for such Bank, to take such action
on its behalf under the provisions of this Agreement and the Security Documents
to which Collateral Agent is a party, and to exercise such powers and perform
such duties as are expressly delegated to Collateral Agent by the terms of this
Agreement and the Security Documents to which it is a party, together with such
other powers as are reasonably incidental thereto; provided that Collateral
Agent shall not enter into any consent to any amendment, modification,
termination or waiver of any provision contained in any Security Document to
which it is party without the prior written consent of Required Banks. Each Bank
agrees that no Bank shall have any right individually to realize upon the
security granted by the Security Documents to which Collateral Agent is party,
it being understood and agreed that such rights and remedies may be exercised
only by Collateral Agent at the direction of Agent on behalf of Required Banks,
for the benefit of Banks, in accordance with the terms of such agreements. Each
Bank hereby authorizes Collateral Agent to release Collateral only as expressly
permitted or required under this Agreement or the Security Documents and agrees
that a certificate executed by Collateral Agent evidencing such release of
Collateral shall be conclusive evidence of such release to any third party.
Collateral Agent shall not subordinate or release any Liens under any of the
Security Documents except as provided in this Agreement or upon the written
direction of Agent on behalf of the Required Banks. All notices and directions
to Collateral Agent shall be given by Agent on behalf of and at the direction of
Required Banks.
C. APPOINTMENT OF ISSUING BANK.
Each Bank hereby irrevocably designates and appoints DK
Acquisition Partners, L.P. as the Issuing Bank under this Agreement and the
other Loan Documents, and DK Acquisition Partners, L.P. hereby accepts such
appointment, subject to the terms and provisions of this Agreement and the other
Loan Documents. Each Bank irrevocably authorizes DK Acquisition Partners, L.P.,
as Issuing Bank, to issue and perform under each L/C Guarantee, to take such
action on its behalf under the provisions of the L/C Guarantees, this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to Issuing
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Bank by the terms of each L/C Guarantee, this Agreement and the other Loan
Documents together with such other powers as are reasonably incidental thereto.
Each Bank irrevocably authorizes Issuing Bank to take such
action on its behalf under the provisions of the L/C Guarantees, and to exercise
such powers and perform such duties as are expressly delegated to Issuing Bank
by the terms of the L/C Guarantees, together with such other powers as are
reasonably incidental thereto; provided that Issuing Bank shall not enter into
any consent to any amendment, modification, termination or waiver of any
provision contained in any L/C Guarantee to which it is party without the prior
written consent of Required Banks.
D. DELEGATION OF DUTIES.
Agent, Collateral Agent and Issuing Bank may execute any of
their respective duties under this Agreement and the other Loan Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Neither Agent nor Collateral
Agent nor Issuing Bank shall be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.
Notwithstanding any provision to the contrary elsewhere in this Agreement,
neither Agent nor Collateral Agent nor Issuing Bank shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent or
Collateral Agent or Issuing Bank; and Agent, Collateral Agent and Issuing Bank
are acting hereunder and under the other Loan Documents solely as the agent and
collateral agent, respectively, of Banks pursuant hereto and thereto, and
neither Agent nor Collateral Agent nor Issuing Bank is acting as trustee for
Banks.
E. EXCULPATORY PROVISIONS.
Neither Agent, Collateral Agent nor Issuing Bank, nor any of
their respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (a) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Persons own gross negligence or
willful misconduct) or (b) responsible in any manner to any of Banks for any
recitals, statements, representations or warranties made by Company or any third
party or any officer of any thereof contained in this Agreement or any other
Loan Document or in any certificate, report, statement or other document
referred to or provided for in, or received by Agent under or in connection
with, this Agreement or any other Loan Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
the Notes
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or any other Loan Document or for any failure of Company to perform its
obligations hereunder or thereunder. Neither Agent nor Collateral Agent nor
Issuing Bank shall be under any obligation to any Bank to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions to, this Agreement or any other Loan Document or as to the use
of proceeds of the Loans or of the existence or possible existence of a Default
or Event of Default, or to inspect the properties, books or records of Company.
Notwithstanding anything herein to the contrary, neither Agent nor Collateral
Agent nor Issuing Bank shall have any liability arising from confirmations of
the amount of outstanding Loans or L/C Guarantees.
F. RELIANCE BY AGENT, COLLATERAL AGENT AND ISSUING BANK.
1. Each of Agent, Collateral Agent and Issuing Bank shall
be entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to Company), independent
accountants and other experts selected by Agent, Collateral Agent and Issuing
Bank, as the case may be. Agent, Collateral Agent and Issuing Bank may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with Agent.
2. Each of Agent, Collateral Agent and Issuing Bank shall
be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless (i) it shall first receive such
advice or concurrence as it deems appropriate from Agent, in the case of
Collateral Agent or from any Bank, Banks or Required Banks in the case of Agent,
as may be required pursuant to this Agreement for such action, or (ii) it shall
first be indemnified to its satisfaction by such Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action, except in the case of Agent's or Collateral
Agent's or Issuing Bank's, as the case may be, gross negligence or willful
misconduct. Each of Agent and Collateral Agent and Issuing Bank shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement, the Notes and the other Loan Documents in accordance with a request
of any Bank, Banks or Required Banks in the case of Agent, or Agent in the case
of Collateral Agent, or its own discretion in the case of the Issuing Bank, as
required pursuant hereto and such request and any action taken or failure to act
pursuant thereto shall be binding upon all Banks and all future holders of the
Notes.
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G. NOTICE OF DEFAULT.
Neither Agent nor Collateral Agent nor Issuing Bank shall be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless Agent or Collateral Agent, as the case may be, has received
notice from a Bank or Company referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default." If Agent receives such a notice, Agent shall promptly give notice
thereof to Banks and Collateral Agent. If Collateral Agent or Issuing Bank
receives such a notice, Collateral Agent or Issuing Bank, as the case may be,
shall give notice thereof to Agent. Agent and Collateral Agent shall take such
action with respect to such Default or Event of Default as shall be directed by
Agent in the case of Collateral Agent and by any Bank, Banks or Required Banks
in the case of Agent, as required pursuant hereto (subject to the provisions of
Section 9.5(b)); provided that unless and until Agent or Collateral Agent, as
the case may be, shall have received such directions, Agent or Collateral Agent,
as the case may be, may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Banks.
H. NON-RELIANCE ON AGENTS, ISSUING BANK AND OTHER BANKS.
Each Bank expressly acknowledge that none of Agent, Collateral
Agent, Issuing Bank nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by Agent or Collateral Agent or Issuing Bank
hereinafter taken, including any review of the affairs of Company or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
Agent or Collateral Agent or Issuing Bank to any Bank. Each Bank represents to
Agent and Collateral Agent and Issuing Bank that it has, independently and
without reliance upon Agent or Collateral Agent or Issuing Bank or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of Company and its
Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Bank also represents that it will, independently and
without reliance upon Agent, Collateral Agent, Issuing Bank or any other Bank,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of Company and its Subsidiaries. Except for notices, reports
and other documents expressly required to be furnished to Banks by Agent
hereunder, neither Agent nor Collateral Agent nor Issuing Bank shall have any
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duty or responsibility to provide any Bank with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of Company or any of its Subsidiaries
which may come into the possession of Agent, Collateral Agent or Issuing Bank or
any of their respective officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
I. INDEMNIFICATION.
Banks agree to indemnify each of Agent, Collateral Agent and
Issuing Bank in their respective capacities as such (to the extent not
reimbursed by Company and without limiting the obligation of Company to do so),
ratably according to the respective outstanding principal amounts of their
Commitments, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including at any time following
the payment of the Notes) be imposed on, incurred by or asserted against Agent
or Collateral Agent or Issuing Bank in any way relating to or arising out of
this Agreement, any of the other Loan Documents or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by Agent or Collateral Agent or Issuing
Bank under or in connection with any of the foregoing; provided that no Bank
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from Agent's or Collateral Agent's or Issuing
Bank's gross negligence or willful misconduct. Anything in this Agreement or the
other Loan Documents to the contrary notwithstanding, in no event may Collateral
Agent seek indemnification from Company or any Bank, nor shall Company or any
Bank be obligated for indemnification, under this Agreement for any matters in
relation to foreclosure or exercise of remedies in Collateral or any of its
other duties as Collateral Agent unless the Collateral Agent has completed
foreclosure of the security interest in all of the Collateral and application of
the proceeds thereof as provided in the Intercreditor Agreement, and its costs
and expenses remain unpaid. The agreements in this Section 9.9 shall survive the
payment of the Obligations and all other amounts payable hereunder.
J. [INTENTIONALLY OMITTED].
K. AGENTS AND ISSUING BANK IN INDIVIDUAL CAPACITY.
Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with Company as though Agent
were not Agent hereunder and under the other Loan Documents. With respect to its
Loans made or renewed by it and any Note issued to it, Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any Bank
and may exercise the
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same as though it were not Agent, and the terms "Bank" and "Banks" shall include
Agent in its individual capacity.
Collateral Agent and its Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with Company as
though Collateral Agent were not Collateral Agent hereunder and under the other
Loan Documents. With respect to its Loans made or renewed by it and any Note
issued to it, Collateral Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Bank and may exercise the same as
though it were not Agent, and the terms "Bank" and "Banks" shall include
Collateral Agent in its individual capacity.
Issuing Bank and its Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with Company as
though Issuing Bank were not Issuing Bank hereunder and under the other Loan
Documents. With respect to its Loans made or renewed by it and any Note issued
to it, Issuing Bank shall have the same rights and powers under this Agreement
and the other Loan Documents as any Bank and may exercise the same as though it
were not Issuing Bank, and the terms "Bank" and "Banks" shall include Issuing
Bank in its individual capacity.
L. SUCCESSOR AGENTS.
Each of Agent and Collateral Agent may resign as Agent or
Collateral Agent, as the case may be, upon 30 days notice to Agent in the case
of Collateral Agent and to Banks in the case of Agent. In addition, at any time
after repayment in full of the Obligations, the Collateral Agent may be removed
by Agent or the Required Banks by giving notice of such removal to Collateral
Agent. If Agent or Collateral Agent shall resign as Agent or Collateral Agent,
as the case may be, or if Collateral Agent shall be removed, under this
Agreement and the other Loan Documents, then the Required Banks shall appoint
from among Banks a successor agent or collateral agent for Banks, which
successor agent or collateral agent, except if an Event of Default shall have
occurred and be continuing, shall be approved by Company (which approval shall
not be unreasonably withheld), whereupon, effective upon acceptance of its
appointment as successor agent or collateral agent, such successor agent or
collateral agent shall succeed to the rights, powers and duties of Agent or
Collateral Agent, as the case may be, and the terms "Agent" and "Collateral
Agent" shall mean such successor agent or collateral agent, as the case may be,
and the former Agent's or Collateral Agent's rights, powers and duties as Agent
or Collateral Agent, as the case may be, shall be terminated, without any other
or further act or deed on the part of such former Agent or Collateral Agent or
any of the parties to this Agreement or any holders of the Notes. If the
Required Banks fail to appoint a successor or collateral agent for Banks as
provided above within 30 days after the resignation of Agent or Collateral Agent
or removal of Collateral Agent as aforesaid, then Agent or Collateral Agent, as
the case
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103
may be, may appoint a successor agent or collateral agent for Banks, which
successor agent or collateral agent, except if an Event of Default shall have
occurred and be continuing, shall be approved by Company (which approval shall
not be unreasonably withheld), whereupon, effective upon acceptance of its
appointment as successor agent or collateral agent, such successor agent or
collateral agent shall succeed to the rights, powers and duties of Agent or
Collateral Agent, as the case may be, and the terms "Agent" and "Collateral
Agent" shall mean such successor agent or collateral agent and the former
Agent's or Collateral Agent's rights, powers and duties as Agent or Collateral
Agent, as the case may be, shall be terminated, without any other or further act
or deed on the part of such former Agent or Collateral Agent or any of the
parties to this Agreement or any holders of the Notes. After any retiring
Agent's or Collateral Agent's resignation as Agent or Collateral Agent, as the
case may be, the provisions of this Section 9 shall inure and survive to its
benefit as to any actions taken or omitted to be taken (or any matter related
thereto) by it while it was Agent or Collateral Agent under this Agreement and
the other Loan Documents. Notwithstanding anything herein to the contrary, the
resignation of Agent or Collateral Agent or removal of Collateral Agent shall
not be effective unless and until a successor agent or collateral agent has been
appointed and has accepted such appointment. The retiring Collateral Agent shall
take all steps necessary to transfer to any new Collateral Agent all Liens in
favor of the Collateral Agent, and all Collateral then in Collateral Agent's
physical possession.
M. CO-AGENT AND/OR CO-COLLATERAL AGENT.
1. Agent or Collateral Agent, as the case may be, without
the consent of Banks, from time to time may appoint a Co-Agent or Co-Collateral
Agent, as the case may be, to perform such functions as Agent or Collateral
Agent, as the case may be, may determine. Upon acceptance of its appointment as
such by the new Co-Agent or Co-Collateral Agent, as the case may be, the rights,
obligations, exculpations and indemnities of the Agent or Collateral Agent, as
the case may be, shall apply equally to the Co-Agent or the Co-Collateral Agent,
as the case may be.
2. Without the consent of Banks, from time to time, Agent
and/or Collateral Agent, as the case may be, may elect to act as Agent or
Collateral Agent, as the case may be, through a different office, branch or
Affiliate by giving notice to the Banks in accordance with Section 10.2.
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X.
MISCELLANEOUS
A. AMENDMENTS AND WAIVERS.
Neither this Agreement, any Note, any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section. With the
prior written consent of the Required Banks, Agent and Company may, from time to
time, enter into written amendments, supplements or modifications hereto and to
the Notes and the other Loan Documents for the purpose of adding any provisions
to this Agreement or the Notes, or the other Loan Documents or changing in any
manner the rights of Banks or of Company hereunder or thereunder or waiving, on
such terms and conditions as Agent may specify in such instrument, any of the
requirements of this Agreement or the Notes or the other Loan Documents or any
Default or Event of Default and its consequences; provided, however, that no
such waiver and no such amendment, supplement or modification shall (a) reduce
the amount of the Obligations or extend the maturity of the Obligations, or
reduce the rate or extend the time of payment of interest thereon, or reduce the
amount or extend the time of payment of any fee payable to any Bank hereunder or
change the amount of any Bank's Commitments, reduces the amount or postpones the
due date of any amount payable in respect of, in each case without the consent
of Bank affected thereby, or (b) amend, modify or waive any provision of this
Section or reduce the percentage specified in the definition of Required Banks,
or consent to the assignment or transfer by Company of any of its rights and
obligations under this Agreement and the other Loan Documents, or release and/or
subordinate the Liens with respect to any Collateral in excess of 5% of the
aggregate value of the Collateral on a Book Value basis during the term of this
Agreement (except as expressly required or provided for hereunder, including as
provided in Section 7.3(n), or in the Security Documents or as otherwise
required by law), or release any Subsidiary from its Guarantee, or amend, modify
or waive the provisions of Sections 2.1, 2.5, 2.6, 2.8, 2.9, 2.11, 2.13, 3.1,
3.2, 3.4, 5.2, or 10.5 (or any of the defined terms used in such Sections) or
any provision hereof or of any other Loan Document which, by its terms, shall be
taken or permitted only with the consent of all Banks, or extend the Maturity
Date, in each case without the written consent of all Banks, (c) amend, modify
or waive any provision of Section 9, without the written consent of the then
Agent or Collateral Agent or Issuing Bank affected thereby, or (d) in any way
change the duties or liabilities or rights of the Issuing Bank without the
written consent of the Issuing Bank. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of Banks and shall be
binding upon Company, Banks, Agent, Collateral Agent, Issuing Bank and all
future holders of the Notes. In the case of any waiver, Company, Banks, Agent,
Collateral Agent and Issuing Bank shall be restored to their former position and
rights hereunder and under the
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outstanding Notes and any other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
B. 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 of a written copy of such notice; provided
that any notice, request or demand to or upon Agent, Collateral Agent, Issuing
Bank or Banks shall not be effective until received. For the purposes hereof,
the addresses of the parties hereto (until a notice of change thereof is
delivered as provided in this Section 10.2) shall be as set forth under each
party's name on the signature pages hereof.
C. NO WAIVER: CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising, on the part
of Agent, Collateral Agent, Issuing Bank or any Bank, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
D. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made hereunder and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
Notes.
E. PAYMENT OF EXPENSES AND TAXES.
Company agrees (a) to pay or reimburse Agent, Collateral
Agent, Issuing Bank and each Bank for all its out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement, the Notes, the
Intercreditor Agreement, and the other Loan Documents and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby
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106
and thereby, including, without limitation (1) the reasonable fees and
disbursements of counsel to Agent, counsel to Collateral Agent, counsel to
Issuing Bank and the several counsels to Banks and the reasonable allocated
costs of in-house counsel to Agent, in-house counsel to Collateral Agent,
in-house counsel to Issuing Bank, and the several in-house counsel to Banks and
(2) the fees and expenses of all appraisers, engineers and other consultants in
connection with the Loan Documents, all recording costs, search fees and filing
fees, (b) to pay or reimburse each Bank, Agent, Collateral Agent and Issuing
Bank for all its costs and expenses incurred in connection with the enforcement
or preservation of any rights under this Agreement, the Notes, the Intercreditor
Agreement, the other Loan Documents and any such other documents, including fees
and disbursements of counsel to Agent, counsel to Collateral Agent, and to the
several counsel to Banks, and the reasonable allocated costs of in-house counsel
to Agent and in-house counsel to Collateral Agent and in-house counsel to
Issuing Bank, (c) to pay, indemnify, and hold each Bank, Agent, Collateral Agent
and Issuing Bank harmless from, any and all recording and filing fees, any and
all Florida documentary stamp taxes and Florida intangible personal property
taxes and any and all other stamp, excise and other taxes (other than any taxes
which are determined based solely upon the income or revenues of any such Bank,
Agent, Collateral Agent or Issuing Bank), if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation of any of the transactions contemplated by this Agreement,
including any and all advances of the Loans pursuant hereto, the Notes, the
other Loan Documents, and any such other documents, and any and all liabilities
with respect to, or resulting from any delay in paying any of such fees and
taxes, (d) to pay the costs of furnishing all opinions of counsel for Company,
or obtaining technical assistance advisories, required hereunder, (e) to pay the
costs of obtaining any required consents, amendments, waivers or other
modifications to the agreements governing the Anglo American Loan Obligations,
the Secured Agreement Obligations, and any other agreements, (f) to pay the
costs and expenses incurred to continue the perfection of any Liens in favor of
Agent and Collateral Agent pursuant to any of the Security Documents, including
the costs of title searches, title insurance premiums, UCC searches and UCC
filing charges, and (g) to pay, indemnify, defend and hold each Bank, Agent and
the Collateral Agent harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the Notes, the Intercreditor Agreement, the other Loan Documents, the
other Secured Debt Documents, and any such other documents(all the foregoing,
collectively, the "indemnified liabilities"); provided, that Company shall have
no obligation hereunder to Agent, the Collateral Agent or any Bank with respect
to indemnified liabilities arising from the gross negligence or willful
misconduct of Agent, the Collateral Agent or such Bank, as the case may be. The
agreements in this Section shall survive repayment to the Notes and all other
amounts payable hereunder.
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F. SUCCESSORS AND ASSIGNS: PARTICIPATIONS; PURCHASING BANKS.
1. This Agreement shall be binding upon and inure to the
benefit of Company, Banks, Agent, Collateral Agent, Issuing Bank all future
holders of the Notes and their respective successors and assigns, except that
Company may not assign or transfer any of its rights or obligations under this
Agreement and the other Loan Documents without the prior written consent of each
Bank.
2. Any Bank may, in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Bank, any Note held by such Bank, any
Commitment of such Bank, such Bank's participation in L/C Guarantees or any
other interest of such Bank hereunder and under the other Loan Documents. In the
event of any such sale by a Bank of participating interest to a Participant,
such Bank's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Bank shall remain solely responsible for
the performance thereof, such Bank shall remain the holder of any such Note for
all purposes under this Agreement and the other Loan Documents, and Company and
Agent shall continue to deal solely, and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement and the other Loan
Documents. Company agrees that if amounts outstanding under this Agreement and
the Notes are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement and any Note to the same extent
as if the amount of its participating interest were owing directly to it as a
Bank under this Agreement or any Note; provided that such Participant shall only
be entitled to such right of setoff if it shall have agreed in the agreement
pursuant to which it shall have acquired its participating interest to share
with Banks the proceeds thereof as provided in Section 10.7. Company also agrees
that each Participant shall be entitled to the benefits of Sections 2.12, 2.13
and 10.5 with respect to its participation in the Commitments and the Loans
outstanding from time to time; provided, that no Participant shall be entitled
to receive any greater amount pursuant to such Sections than the transferor Bank
would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Bank to such Participant had no
such transfer occurred. Participants shall not be entitled to require the
applicable Bank to take or omit to take any action hereunder except with respect
to amendments or waivers resulting in (i) the extension of the regularly
scheduled maturity dates of any portion of the principal of or interest on a
Loan in which such Participant is participating, (ii) a reduction of the
principal amount of, or the rate of interest (except in connection with a waiver
of the applicability of any post-default increase in interest rates or margins)
or fees payable on the Loans in which such participant is participating, (iii)
the release of a substantial
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portion of the Collateral or any of the Guarantees (except as otherwise
expressly provided in the Loan Documents) or (iv) an increase in the Commitments
in which such Participant is participating.
3. Any Bank may, in accordance with applicable law and
with the prior written consent of Issuing Bank, at any time sell to any Bank or
any Affiliate thereof or to one or more banks or financial institutions
("Purchasing Banks") all or any part of its rights and obligations under this
Agreement, the Notes and other Loan Documents pursuant to a Commitment Transfer
Supplement, substantially in the form of Exhibit 10.6, executed by such
Purchasing Bank and such transferor Bank, and delivered to Agent for its
acceptance and recording in the Register. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date determined
pursuant to such Commitment Transfer Supplement (the "Transfer Effective Date"),
(i) the Purchasing Bank thereunder shall be a party hereto and, to the extent
provided in such Commitment Transfer Supplement, have the rights and obligations
of a Bank hereunder and under the other Loan Documents, and (ii) the transferor
Bank thereunder shall, to the extent provided in such Commitment Transfer
Supplement, be released from its obligations under this Agreement and under the
other Loan Documents (and, in the case of a Commitment Transfer Supplement
covering all or the remaining portion of a transferor Bank's rights and
obligations under this Agreement and under the other Loan Documents, such
transferor Bank shall cease to be a party hereto and thereto). Such Commitment
Transfer Supplement shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Purchasing Bank
and the resulting adjustment of Commitment and Loan percentages arising from the
purchase by such Purchasing Bank of all or a portion of the rights and
obligations of such transferor Bank under this Agreement, the Notes and other
Loan Documents. At the request of Purchasing Bank, Company and Agent shall
negotiate in good faith with Purchasing Bank to accommodate Purchasing Bank's
reasonable requests with respect to the timing of the obligations of Company,
Agent and Banks set forth in Section 2.3. On or prior to the Transfer Effective
Date determined pursuant to such Commitment Transfer Supplement, Company, at its
own expense, shall execute and deliver to Agent in exchange for the surrendered
Note(s), new renewal Note(s) to the order of such Purchasing Bank in an amount
equal to the Commitment assumed by it pursuant to such Commitment Transfer
Supplement and, if the transferor Bank has retained a Commitment hereunder, new
Note(s) to the order of the transferor Bank in an amount equal to the Commitment
retained by it. Such new Note(s) shall be dated the Transfer Effective Date and
shall otherwise be in the form of the Note(s) replaced thereby. The Note(s)
replaced by such new Note(s), marked "renewed," shall be attached to such new
Note(s); and a copy thereof shall be sent to Company.
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4. Agent shall maintain at its address referred to in
Section 10.2 a copy of each Commitment Transfer Supplement delivered to it and a
register (the "Register") for the recordation of the names and addresses of
Banks and the Commitments of, and principal amount of the Loans owing to, each
Bank from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and Company, Agent, Collateral Agent, Issuing Bank
and Banks may treat each Person whose name is recorded in the Register as the
owner of the Loans recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by Company or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
5. Upon its receipt of a Commitment Transfer Supplement
executed by a transferor Bank and Purchasing Bank, Agent shall (i) promptly
accept such Commitment Transfer Supplement, (ii) forward a copy of such
Commitment Transfer Supplement to Company and (iii) on the Transfer Effective
Date determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to Banks and
Company.
6. Subject to Section 10.16, Company authorizes each Bank
to disclose to any Participant or Purchasing Bank (each, a "Transferee") and any
prospective Transferee any and all financial information in such Bank's
possession concerning Company and its Affiliates which has been delivered to
such Bank by or on behalf of Company pursuant to this Agreement or which has
been delivered to such Bank by or on behalf of Company in connection with such
Bank's credit evaluation of Company and its Affiliates prior to becoming a party
to this Agreement; provided, however, that such Transferee agrees in writing to
be bound by the terms of Section 10.16.
7. If, pursuant to this Section 10.6, any interest in this
Agreement or any Note is transferred to any Purchasing Bank which is organized
under the laws of any jurisdiction other than the United States or any state
thereof, Company will not be required to pay any increased withholding taxes of
the United States or any political subdivision thereof unless, prior to the date
of transfer, the transferor Bank shall cause such Purchasing Bank to comply with
the requirements of Section 2.13(b).
8. Nothing herein shall prohibit any Bank from pledging or
assigning any Note to any Federal Reserve Bank in accordance with applicable
law.
9. Notwithstanding the foregoing provisions of this
Section 10.6, no holder of any Note shall transfer such Note in a manner which
would violate any Requirement of Law.
<PAGE>
110
G. ADJUSTMENTS; SET-OFF.
1. If any Bank (which term, for purposes of this Section
10.7(a) shall not include Issuing Bank) (a "Benefited Bank") shall at any time
receive any payment of all or part of its Loans owing to it, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in the last paragraph of Section 8.1, or otherwise), in a greater
proportion than any such payment to or collateral received by, any other Bank,
if any, in respect of such other Bank's Loans owing to it, or interest thereon,
or fees due to it hereunder, such benefitted Bank shall purchase for cash from
the other Banks such portion of each such other Banks' Loans, or make such
payment on account of such fees, or shall provide such other Banks with the
benefits of any such collateral, or the proceeds thereof as shall be necessary
to cause such benefitted Bank to share the excess payment or benefits of such
collateral or proceeds ratably with each of Banks; provided, however, that if
all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Bank, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. Company agrees, that each Bank so purchasing a portion of another
Bank's Loan owing to it may exercise all rights of payment (including rights of
set-off) with respect to such portion as fully as if such Bank were the direct
holder of such portion.
2. In addition to any rights and remedies of Banks
provided by law, each Bank shall have the right, without prior notice to
Company, any such notice being expressly waived by Company to the extent
permitted by applicable law, upon any Obligations (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Bank to or
for the credit or the account of Company. Each Bank agrees promptly to notify
Company and Agent after any such set-off and application made by such Bank;
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
H. APPOINTMENT OF AGENT AS COMPANY'S LAWFUL ATTORNEY.
Company irrevocably designates, makes, constitutes and
appoints Agent (and all Persons designated by Agent) as Company's true and
lawful attorney (and agent-in-fact) coupled with an interest, with the power to
sign the name of Company on any instruments, documents and agreements, including
security agreements, pledge agreements, mortgages, and financing statements, as
deemed by Agent as necessary or reasonably required by Agent to grant, perfect,
maintain and continue the Liens in the
<PAGE>
111
Collateral or to monitor or administer the Loans, together with any and all
amendments, modifications, extensions, substitutions and renewals thereof and
deliver any of such instruments, documents and agreements to such persons as
Agent, in its sole discretion, may elect, and in such event copies thereof shall
be delivered to Company.
I. 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 Company and Agent.
J. 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.
K. INTEGRATION.
This Agreement, together with the other Loan Documents,
represents the entire agreement of Company, Agent, Collateral Agent, Issuing
Bank and Banks and supersedes all prior agreements with respect to the subject
matter hereof or thereof, and there are no promises, undertakings,
representations or warranties by Agent, Collateral Agent, Issuing Bank or any
Bank relative to subject matter hereof or thereof not expressly set forth or
referred to herein or in the other Loan Documents.
L. GOVERNING LAW.
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS AND TO THE
EXTENT EXPRESSLY PROVIDED TO THE CONTRARY IN SUCH OTHER LOAN DOCUMENT WITH
RESPECT TO SUCH OTHER LOAN DOCUMENT), AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
<PAGE>
112
M. SUBMISSION TO JURISDICTION; WAIVERS.
COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY:
1. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH
IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT
OF NEW YORK AND APPELLATE COURTS FROM ANY THEREOF, AND AGREES THAT ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT, THE NOTES OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN ANY OF THE AFORESAID COURTS, AS AGENT,
COLLATERAL AGENT, ISSUING BANK OR ANY BANK MAY ELECT IN ITS SOLE DISCRETION;
2. 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;
3. AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL) POSTAGE PREPAID, TO COMPANY AT
ITS ADDRESS SET FORTH ON THE SIGNATURE PAGES HEREOF OR AT SUCH OTHER ADDRESS OF
WHICH AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
4. AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT TO SUE IN ANY OTHER JURISDICTION;
5. WAIVES (I) PRESENTMENT, DEMAND AND PROTEST AND NOTICE
OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE,
SETTLEMENT, EXTENSION OR RENEWAL OF THE NOTES AND ALL OTHER LOAN DOCUMENTS AND
HEREBY RATIFIES AND CONFIRMS WHATEVER BANKS, AGENT OR
<PAGE>
113
COLLATERAL AGENT MAY DO IN THIS REGARD; (II) ALL RIGHTS TO NOTICE OF A HEARING
PRIOR TO BANKS' OR AGENT'S OR COLLATERAL AGENT'S ATTACHMENT OR LEVY UPON THE
COLLATERAL, AND ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR
TO ALLOWING BANKS, AGENT, COLLATERAL AGENT OR ISSUING BANK TO EXERCISE ANY OF
BANKS' OR AGENT'S OR COLLATERAL AGENT'S OR ISSUING BANK'S REMEDIES; AND (III)
THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND
6. 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.
N. ACKNOWLEDGMENTS.
Each party hereto hereby acknowledges that;
1. it has been advised by counsel in the negotiation,
execution and delivery of this Agreement, the Notes, and the other Loan
Documents;
2. none of Agent, Collateral Agent, Issuing Bank or any
Bank has any fiduciary relationship to Company, and the relationship between
Agent, Collateral Agent, Issuing Bank and Banks, on one hand, and Company, on
the other hand, is solely that of creditor and debtor, and
3. no joint venture exists among Banks or among Company
and Banks.
O. WAIVERS OF ANY JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. The
scope of this waiver is intended to be all encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of this
Agreement, including contract claims, tort claims, breach of duty claims, and
all other common law and statutory claims. Each party hereto acknowledges that
this waiver is a material inducement to enter into a business relationship, that
each has already belied on this waiver in entering into this Agreement, and that
each will continue to rely on this waiver in entering into any further
documentation related to the transactions
<PAGE>
114
contemplated hereby and otherwise in their related future dealings. Each party
hereto further warrants and represents that it has reviewed this waiver with its
legal counsel and that it knowingly and voluntarily waives its jury trial rights
following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.
P. CONFIDENTIALITY.
Each Bank agrees to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all non-public information
provided to it by Company or any of its Subsidiaries, or by Agent or Collateral
Agent on Company's behalf, in connection with this Agreement or any other Loan
Document and agrees and undertakes that neither it nor any of its Affiliates
shall use any such information for any purpose or in any manner other than
pursuant to the terms contemplated by this Agreement. Any Bank may disclose such
information (a) at the request of any regulatory authority or in connection with
an examination of such Bank by any such authority; (b) pursuant to subpoena or
other court process; (c) when required to do so in accordance with the
provisions of any applicable law; (d) at the express direction of any other
agency of any State of the United States of America or of any other
jurisdiction, in which such Bank conducts its business; (e) to such Bank's
independent auditors and other professional advisors; (f) following an Event of
Default, in connection with the sale or other realization on the collateral
under the Security Documents; (g) in connection with any litigation or dispute
between (i) such Bank and (ii) Company and/or any Subsidiary; and (h) in
connection with any litigation or dispute involving such Bank if the disclosure
is determined by such Bank to be necessary for the defense or protection of such
Bank's rights and/or interests. Each Bank further agrees, upon receipt by such
Bank of a request to disclose any information to a Governmental Authority or
courts (other than governmental bank examiners and independent auditors of such
Bank), to notify Company of such request and to permit, to the extent
practicable, Company to seek a protective order with respect thereto; provided
however that no Bank shall be requested to notify Company of any such request if
(i) it is not permitted to do so by applicable law and regulations, (ii) it is
requested not to notify Company by any Person acting or purporting to act on
behalf of a Governmental Authority, or (iii) it otherwise reasonably believes
that it is not permitted to so notify Company.
<PAGE>
115
Q. FURTHER ASSURANCES.
Company shall, and shall cause its Subsidiaries to, promptly
(a) cure any defects in the execution and delivery of Loan Documents and (b)
execute and deliver, or cause to be executed and delivered, all such other
documents, agreements and instruments as Agent may reasonably request to further
evidence and more fully describe the Collateral for the Loan to correct any
omissions in the Loan Documents, to perfect, protect or preserve any liens
created under any of the Loan Documents, or to make any recordings, file any
notices, or obtain any consents, as may be necessary or appropriate in
connection therewith.
R. CONTROLLING AGREEMENT.
In the event of any conflict between the terms and provisions
of this Agreement and the terms and provisions of any other Loan Document, the
terms and provisions of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
ATLANTIC GULF COMMUNITIES
CORPORATION
By:__________________________________________
Name:
Title:
Notice Address:
2601 South Bayshore Drive, 9th Floor
Miami, Florida 33133-5461
Telecopy: (305) 859-4623
Attention: Chief Financial Officer
<PAGE>
116
M.H. DAVIDSON & CO., LLC, as Collateral
Agent and as Agent
By:__________________________________________
Name: Thomas L. Kempner, Jr.
Title: Managing Member
Notice Address:
885 Third Avenue, Suite 3300
New York, New York 10022
Telecopy: (212) 371-4318
Attention: Daniel Zwirn
DK ACQUISITION PARTNERS, L.P.,
as Issuing Bank and as a Bank
By: M.H. Davidson & Co., its sole general
partner
By:__________________________________________
Name: Thomas L. Kempner, Jr.
Title:
Notice Address:
885 Third Avenue, Suite 3300
New York, New York 10022
Telecopy: (212) 371-4318
Attention: Daniel Zwirn
<PAGE>
117
HALCYON DISTRESSED SECURITIES, L.P.,
as a Bank,
HALCYON PRIVATE PAPER, L.P., as a Bank
HALCYON EVENT-DRIVEN STRATEGIES
FUND, L.P., as a Bank
By: Halcyon/Alan B. Slifka Management
Company LLC, Managing General Partner
By: Alan B. Slifka & Company Limited,
its Managing Member
By:__________________________________________
Name: James Pasquarelli
Title: Treasurer
Notice Address:
c/o Halcyon/Alan B. Slifka Management
Company LLC
477 Madison Avenue, 8th Floor
New York, New York 10022
Telecopy: (212) 935-1831
Attention: Bruce Falbaum
<PAGE>
118
GRYPHON HIDDEN VALUES LIMITED, as a
Bank
GRYPHON HIDDEN VALUES II LIMITED, as
a Bank
By: Halcyon/Alan B. Slifka Management
Company LLC, Investment Manager
By: Alan B. Slifka & Company
Limited, its Managing Member
By: __________________________________
Name: James Pasquarelli
Title: Treasurer
Notice Address:
c/o Halcyon/Alan B. Slifka Management
Company LLC
477 Madison Avenue, 8th Floor
New York, New York 10022
Telecopy: (212) 935-1831
Attention: Bruce Falbaum
GRYPHON HIDDEN VALUES III LIMITED, as
a Bank
By: Halcyon/Alan B. Slifka Management
Company LLC, its Investment Manager
By: Alan B. Slifka & Company
Limited, its Managing Member
By: __________________________________
Name: James Pasquarelli
Title: Treasurer
<PAGE>
119
Notice Address:
c/o Halcyon/Alan B. Slifka Management Company
LLC
477 Madison Avenue, 8th Floor
New York, New York 10022
Telecopy: (212) 935-1831
Attention: Bruce Falbaum
HALCYON OFFSHORE EVENT-DRIVEN STRATEGIES FUND,
as a Bank
By: Halcyon Offshore Management Company
LLC, its Investment Manager
By: _________________________________________
Name: James Pasquarelli
Title: Chief Financial Officer
Notice Address:
c/o Halcyon/Alan B. Slifka Management Company
LLC
477 Madison Avenue, 8th Floor
New York, New York 10022
Telecopy: (212) 935-1831
Attention: Bruce Falbaum
STONEHILL INSTITUTIONAL PARTNERS, L.P., as a
Bank
By: _________________________________________
Christopher Wilson
General Partner
<PAGE>
120
Notice Address:
c/o Stonehill Investment Corporation
110 East 59th Street, 30th Floor
New York, New York 10022
Telecopy: (212) 355-5336
Attention: Chris Wilson
STONEHILL PARTNERS, L.P., as a Bank
By: _____________________________________________
Christopher Wilson
General Partner
Notice Address:
c/o Stonehill Investment Corporation
110 East 59th Street, 30th Floor
New York, New York 10022
Telecopy: (212) 355-5336
Attention: Chris Wilson
---------------------------------------------
Roger L. Perry, as a Bank
Notice Address:
c/o East West Partners
190 Finley Golf Course Road
Chapel Hill, North Carolina 27514
Telecopy: (919) 967-0959
Attention: Roger L. Perry
<PAGE>
121
COMAC ACQUISITION CO., L.P., as a Bank
By: CoMac Advisers, Inc., its general partner
By: _________________________________________
Name:
Title:
Notice Address:
1 Greenwich Office Park
Third Floor
Greenwich, Connecticut 06831
Telecopy: (203) 552-9300
Attention: Paul J. Coughlin
With a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Telecopy: (212) 715-8000
Attention: Thomas T. Janover, Esq.
ANGLO AMERICAN FINANCIAL, as a Bank
By: _________________________________________
Name: Charles F. Robinson
Title: General Partner
<PAGE>
THIRD AMENDED AND RESTATED
REVOLVING LOAN AGREEMENT
DATED AS OF DECEMBER 31, 1998
SCHEDULE 2.1
REVOLVING COMMITMENTS
[ATTACHED BEHIND]
<PAGE>
THIRD AMENDED AND RESTATED
REVOLVING LOAN AGREEMENT
DATED AS OF DECEMBER 31, 1998
SCHEDULE 4.30
Representations and Warranties regarding DRI and Zoning Matters
[TO BE REPLACED WITH NEW SCHEDULE]
TERM LOAN AGREEMENT
DATED AS OF DECEMBER 31, 1998
BY AND AMONG
ATLANTIC GULF COMMUNITIES CORPORATION,
THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF,
ANGLO-AMERICAN FINANCIAL,
AS AGENT
AND
M. H. DAVIDSON & CO., LLC,
AS COLLATERAL AGENT
<PAGE>
<TABLE>
<CAPTION>
TERM LOAN AGREEMENT
ATLANTIC GULF COMMUNITIES CORPORATION
TABLE OF CONTENTS
<S> <C> <C> <C>
SECTION 1 DEFINITIONS...........................................................................1
1.1 Certain Defined Terms.................................................................1
1.2 Other Definitional Provisions........................................................23
SECTION 2 AMOUNT AND TERMS OF COMMITMENTS......................................................24
2.1 Term Loans...........................................................................24
2.2 Notes................................................................................24
2.3 Procedure for Borrowing..............................................................25
2.4 Use of Proceeds of Loans.............................................................25
2.5 Mandatory Prepayments of Loans.......................................................25
2.6 Optional Prepayments.................................................................25
2.7 Repayment at Maturity................................................................26
2.8 Interest Rates and Payment Dates.....................................................26
2.9 Fees.................................................................................27
2.10 Computation of Interest and Fees.....................................................27
2.11 Pro Rata Treatment and Payments......................................................27
2.12 Requirements of Law..................................................................29
2.13 Taxes................................................................................29
SECTION 3 COLLATERAL...........................................................................31
3.1 Liens in Subsidiary Stock, Contract Receivables, Real Property and Personal
Property.............................................................................31
3.2 Security Documents...................................................................31
3.3 Subordinations and Releases of Mortgage Liens........................................34
3.4 Guarantees...........................................................................35
SECTION 4 REPRESENTATIONS AND WARRANTIES.......................................................35
4.1 Financial Condition..................................................................36
4.2 No Material Adverse Change...........................................................36
4.3 Corporate Existence; Compliance with Law.............................................37
4.4 Corporate Power; Authorization; Enforceable Obligations..............................37
4.5 No Legal Bar.........................................................................38
4.6 No Material Litigation...............................................................38
4.7 No Default...........................................................................39
4.8 Ownership of Property; Liens.........................................................39
4.9 Intellectual Property................................................................39
4.10 Taxes................................................................................39
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
4.11 Federal Regulations..................................................................40
4.12 ERISA................................................................................40
4.13 Investment Company Act; Other Regulations............................................40
4.14 Subsidiaries and Joint Ventures......................................................41
4.15 Environmental Matters................................................................41
4.16 Indebtedness.........................................................................42
4.17 Contingent Obligations...............................................................42
4.18 Restitution Program and Final Judgment...............................................42
4.19 Certain Fees.........................................................................42
4.20 Disclosure...........................................................................43
4.21 Insurance............................................................................43
4.22 Real Property Matters................................................................43
4.23 Reorganization Proceedings...........................................................43
4.24 Excluded Subsidiaries; Unrestricted Subsidiaries.....................................44
4.25 No Further Amounts Due Under Unsecured 1996 Notes....................................44
4.26 Bank Accounts........................................................................44
4.27 [Intentionally omitted]..............................................................44
4.28 MPUD Subsidiary Groups...............................................................44
4.29 SPUD Subsidiaries ...................................................................44
4.30 DRI and Zoning Matters ..............................................................45
4.31 Bankruptcy Matters ..................................................................45
4.32 Series A Preferred Stock ............................................................45
4.33 Series B Preferred Stock ............................................................45
SECTION 5 CONDITIONS PRECEDENT.................................................................45
5.1 Conditions to Effectiveness of this Agreement........................................45
5.2 Additional Conditions to the Loan....................................................49
5.3 Conditions Subsequent................................................................50
SECTION 6 AFFIRMATIVE COVENANTS................................................................50
6.1 Financial Statements.................................................................51
6.2 Certificates; Other Information......................................................52
6.3 Payment of Obligations...............................................................53
6.4 Conduct of Business and Maintenance of Existence.....................................53
6.5 Maintenance of Property; Insurance...................................................53
6.6 Inspection of Property; Books and Records; Appraisals................................54
6.7 Notices..............................................................................55
6.8 Environmental Laws...................................................................55
6.9 Business Plan........................................................................56
6.10 Authorizations.......................................................................56
6.11 Dividends from Subsidiaries..........................................................57
6.12 Supplemental Reports Regarding Real Property.........................................57
6.13 Compliance with Laws.................................................................57
6.14 Other Notices........................................................................57
6.15 Company Operating Account Control Agreement..........................................58
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.16 Indemnification by Company ..........................................................58
SECTION 7 NEGATIVE COVENANTS...................................................................58
7.1 Maintenance of Consolidated Net Worth................................................58
7.2 Limitation of Indebtedness...........................................................59
7.3 Limitation on Liens..................................................................61
7.4 Limitation on Guarantee Obligations..................................................63
7.5 Limitations on Fundamental Changes...................................................63
7.6 Limitation on Sale of Assets.........................................................63
7.7 Limitation on Dividends..............................................................64
7.8 [Intentionally Omitted]..............................................................64
7.9 Limitation on Investments, Loans, and Advances.......................................64
7.10 Limitation on Optional Payments and Modifications or Renewals of Debt
Instruments..........................................................................65
7.11 Transactions with Affiliates.........................................................66
7.12 Sale and Leaseback...................................................................66
7.13 Fiscal Year..........................................................................66
7.14 Limitation on Negative Pledge Clauses................................................66
7.15 Deviation from Business Plan.........................................................67
7.16 Inter-Project Loans, Mergers, Consolidations and Investments.........................67
7.17 Limitation on Bank Accounts..........................................................67
7.18 Venture Subsidiaries and Joint Ventures..............................................67
7.19 Employee Benefits....................................................................67
7.20 Charter Documents ...................................................................68
SECTION 8 EVENTS OF DEFAULT; REMEDIES..........................................................68
8.1 Events of Default; Remedies..........................................................68
SECTION 9 AGENTS...............................................................................72
9.1 Appointment of Agent.................................................................72
9.2 Appointment of Collateral Agent......................................................72
9.3 [intentionally omitted]..............................................................73
9.4 Delegation of Duties.................................................................73
9.5 Exculpatory Provisions...............................................................73
9.6 Reliance by Agents...................................................................74
9.7 Notice of Default....................................................................74
9.8 Non-Reliance on Agents and Other Lenders.............................................75
9.9 Indemnification......................................................................75
9.10 Representations and Warranties of Collateral Agent...................................76
9.11 Agent in its Individual Capacity.....................................................77
9.12 Successor Agents.....................................................................77
9.13 Change of Agent's Office ............................................................78
SECTION 10 MISCELLANEOUS........................................................................78
10.1 Amendments and Waivers...............................................................78
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
10.2 Notices..............................................................................79
10.3 No Waiver: Cumulative Remedies.......................................................79
10.4 Survival of Representations and Warranties...........................................79
10.5 Payment of Expenses and Taxes........................................................80
10.6 Successors and Assigns: Participations; Purchasing Lenders...........................81
10.7 Adjustments; Set-Off.................................................................83
10.8 Appointment of Agent as Company's Lawful Attorney....................................84
10.9 Counterparts.........................................................................84
10.10 Severability.........................................................................84
10.11 Integration..........................................................................84
10.12 Governing Law........................................................................85
10.13 Submission to Jurisdiction; Waivers..................................................85
10.14 Acknowledgments......................................................................86
10.15 Waivers of Any Jury Trial............................................................86
10.16 Confidentiality......................................................................87
10.17 Further Assurances ..................................................................87
10.18 Controlling Agreement................................................................88
</TABLE>
SCHEDULES
Schedule 2.1 Commitments
Schedule 4.1 Financial Disclosures
Schedule 4.2 Material Adverse Events
Schedule 4.4 Consents
Scehdule 4.6 SEC Disclosures Regarding Litigation
Schedule 4.7 Defaults on Contractual Obligations
Schedule 4.9 Intellectual Property Exceptions
Schedule 4.10 Tax Claims
Schedule 4.12 ERISA Matters
Schedule 4.14(A) Subsidiaries
Schedule 4.14(B) Joint Ventures
Schedule 4.15 Environmental Matters
Schedule 4.16 Indebtedness
Schedule 4.17 Contingent Obligations
Schedule 4.21 Insurance
Schedule 4.24 Description of Assets and Business of Unrestricted Subsidiaries
Schedule 4.26 Bank Accounts
Schedule 4.28 MPUD Subsidiary Groups
Schedule 4.29 SPUD Subsidiaries
Schedule 4.30 DRI and Zoning Matters
Schedule 5.1(k) Real Property
Schedule 5.1(m) Material Adverse Effects
Schedule 5.3(c) Blocked Account Agreements
Schedule 7.3 Existing Liens
Schedule 7.9(c) Description of Loans to Rutherford
Schedule 7.17 Restricted Accounts
Schedule 10.6 Initial Participants
Schedule E-1 Eligible Tract Lands
Schedule E-2 Excluded Subsidiaries
-iv-
<PAGE>
Schedule N-1 Net Cash Flow
Schedule U-1 Unrestricted Subsidiaries
EXHIBITS
Exhibit I-1 Form of Intercreditor Agreement
Exhibit J-1 Form of Assignment of Partnership Interests
Exhibit 2.2 Form of Note
Exhibit 10.6 Form of Assignment and Assumption Agreement
-v-
<PAGE>
TERM LOAN AGREEMENT
ATLANTIC GULF COMMUNITIES CORPORATION
THIS TERM LOAN AGREEMENT (this "AGREEMENT") is dated as of
December 31, 1998, and entered into by and among ATLANTIC GULF COMMUNITIES
CORPORATION, a Delaware corporation, formerly known as General Development
Corporation ("COMPANY"), THE FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE
PAGES HEREOF (together with each financial institution that may become a party
to this Agreement as herein provided, referred to herein individually as a
"LENDER" and collectively as "LENDERS"), ANGLO-AMERICAN FINANCIAL, a New York
limited partnership, as agent for Lenders (hereinafter, in such capacity,
together with any successors thereto in such capacity, referred to as "AGENT"),
and M. H. DAVIDSON & CO., LLC, a New York limited liability company ("MHD") and
an Affiliate of DK Partners (as defined below), as collateral agent for Lenders
(hereinafter, in such capacity, together with any successors thereto in such
capacity, referred to as "COLLATERAL AGENT"). All capitalized terms not
otherwise defined herein have the meanings given such terms in Section 1.
R E C I T A L S:
WHEREAS, concurrently herewith, Company is entering into the
Recapitalization Transactions;
WHEREAS, Company wishes to borrow term loans in an aggregate
principal amount equal to $26,500,000 and Lenders are willing to make such loans
on the terms and conditions set forth in this Agreement; and
WHEREAS, Lenders desire to appoint Anglo-American Financial,
L.P. as Agent hereunder and under the Loan Documents and MHD to serve as
Collateral Agent for Lenders under the Loan Documents.
NOW THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Company, Lenders, Agent,
and Collateral Agent agree as follows:
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SECTION 1
DEFINITIONS
1.1 CERTAIN DEFINED TERMS.
The following terms used in this Agreement shall have the
following meanings:
"AAF FAIR VALUE" means, for each Eligible Subdivision Project
and/or Eligible Joint Venture Project, as applicable, at any time the present
value at such time of such project based on the pro forma statements of cash
flows for such project (which are included in Appendix L to the E&Y Report) or,
if so requested by the Agent or the Required Lenders (no more frequently than
annually and, if the DK Lenders have requested a subsequent report within such
annual period, then the subsequent report delivered to the DK Lenders shall
satisfy this requirement), in any subsequent report of Ernst & Young (or such
other independent consultant as may be acceptable to the Agent) provided to the
Lenders using a discount rate of the higher of (a) 20% or (b) the product of two
(2) TIMES the Prime Rate in effect at such time, and which pro forma statements
shall be updated by the Company from time to time, but no less frequently than
quarterly, for actual revenues, expenses and financings. For interim months
between quarterly updates, the pro forma statements shall be adjusted by adding
any project expenditures (contributed by financing or otherwise) less Net Cash
Proceeds from any sales.
"ADMINISTRATIVE CLAIMS" has the meaning assigned that term in
Article I of the Reorganization Plan.
"AFFILIATE" with respect to any Person, means (a) any other
Person which is a Subsidiary of such Person, (b) any other Person (and each
Subsidiary thereof) of which such Person is a Subsidiary, and (c) any other
Person which is under common control with such Person.
"AGENT" has the meaning assigned that term in the introductory
paragraph to this Agreement.
"AGREED PRIORITY" means, at any time when the DK Loan
Obligations or the Permitted Refinancing Indebtedness remains outstanding, a
second priority security interest (second only to the Liens of Collateral Agent
on behalf of the DK Lenders or any successor collateral agent on behalf of the
lenders holding the Permitted Refinancing Indebtedness), and at any time when no
DK Loan Obligation or any Permitted Refinancing Indebtedness remains
outstanding, a first priority security interest.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"ANNUAL NET INCOME" means net income as shown on the
consolidated statements of income provided by Company under Section 6.1, but in
no event less than 0.
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"APOLLO" means AP-AGC, LLC, a Delaware limited liability
company.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" has the meaning assigned
that term in Section 10.6.
"BANK ACCOUNTS" means any and all deposit accounts, money
market accounts and any other deposits and investments of Company or any
Subsidiary held in any bank or other financial institution, any brokerage firm
or any other Person and all money, instruments, securities, documents and other
investments held pursuant thereto, whether now existing or owned or hereafter
created or acquired (exclusive of all but the residual, remainder or beneficial
interest of Company and its Subsidiaries in the Reserve Accounts, the Claims
Disbursement Account and all other escrow, restricted, custodial and fiduciary
accounts, the pledge of which by Company or any Subsidiary is prohibited by
agreements existing on the Effective Date or by law, as set forth in SCHEDULE
7.17, which may be amended from time to time by written notice to Agent to
include other restricted accounts).
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy" from time to time in effect, or any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court
for the Southern District of Florida, or in the event that such court ceases to
exercise jurisdiction over the Reorganization Proceedings, the court that
exercises jurisdiction over the Reorganization Proceedings in lieu of the United
States Bankruptcy Court for the Southern District of Florida.
"BORROWING DATE" means any Business Day specified in a notice
pursuant to SECTION 2.3 as the date on which Company requests Lenders to make
the Loans hereunder.
"BUSINESS DAY" means any day excluding Saturday, Sunday and
any day which either is a legal holiday under the laws of the State of New York
or is a day on which banking institutions located in the State of New York are
authorized or required by law or other governmental action to close.
"BUSINESS PLAN" means as of the Effective Date and until a new
Business Plan is delivered to Lenders in accordance with SECTION 6.9, the
business plan of Company and its Subsidiaries dated January 26, 1999, and
thereafter the business plan of Company and its Subsidiaries delivered to and
approved by Required Lenders in December of each year in accordance with SECTION
6.9.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
capital stock of a corporation any and all equivalent ownership interests in a
Person (other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"CASH COLLATERAL ACCOUNTS" means any and all accounts that
Collateral Agent for the benefit of the DK Lenders and the Lenders may from time
to time require to be established
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and maintained with financial institutions reasonably satisfactory to Collateral
Agent and pledged to Collateral Agent pursuant to cash collateral account
agreements in form and substance reasonably satisfactory to Collateral Agent.
"CASH EQUIVALENTS" means (a) securities issued or directly and
fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than 90 days from the date
of acquisition, (b) time deposits and certificates of deposit having maturities
of not more than 90 days from the date of acquisition issued by any domestic
commercial bank, or non-domestic commercial bank provided that such non-domestic
commercial bank shall have offices in the United States, having capital and
surplus in excess of $500,000,000, (c) repurchase obligations with a term of not
more than 30 days for underlying securities of the types described in clauses
(a) and (b) entered into with any bank meeting the qualifications specified in
clause (b) above, and (d) commercial paper rated at least A-1 or the equivalent
thereof by Standard & Poor's Corporation or P-1 or the equivalent thereof by
Moody's Investors Service, Inc. or which is issued by any domestic commercial
bank having capital and surplus in excess of $500,000,000 (or any holding
company thereof) and, in any such case, maturing within 90 days after the date
of acquisition.
"CHANGE OF CONTROL" means, (i) directly or indirectly a sale,
transfer, or other conveyance of all or substantially all of the assets of the
Company, on a consolidated basis, to any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable), as an entirety or substantially as an entirety in one
transaction or series of related transactions, in each case with the effect that
the Person or group of Persons that, as of the Effective Date, are not
shareholders of the Company (or any Person or group of Persons that, as of the
Effective Date, are Affiliates of such shareholders) own more than 30% of the
aggregate number of votes of any class of Capital Stock of the Company which
ordinarily have voting power for the election of directors, managers or trustees
of the transferee entity immediately after such transaction, or (ii) any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable), other than the
shareholders of the Company as of the Effective Date (or any Person or group of
Persons that, as of the Effective Date, are Affiliates of such shareholders), is
or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5
under the Exchange Act, whether or not applicable, except that a Person shall be
deemed to have "beneficial ownership" of all shares that any such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 30% of the aggregate
number of votes of any class of Capital Stock of the Company which ordinarily
have voting power for the election of directors of the Company; provided that a
sale, transfer or other conveyance to Apollo or any Affiliate of Apollo shall
not constitute a Change of Control.
"CLAIMS DISBURSEMENT ACCOUNT" means 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" means the Internal Revenue Code of 1986, as amended
from time to time.
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"COLLATERAL" has the meaning assigned that term in Section
3.1.
"COLLATERAL AGENT" means MHD solely in its capacity as
collateral agent for Lenders under the Loan Documents pursuant to the terms of
this Agreement and the other Loan Documents.
"COLLECTIONS" means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"COMMERCIAL REAL ESTATE" means all Real Property of Company
and its Subsidiaries (including condominium and cooperative units), other than
Real Property reserved for sale as single family residential homes or lots.
"COMMERCIAL RECEIVABLES" means all promissory notes and
mortgages and deeds of trust payable to, or held by, Company or any Subsidiary,
and all other documents, instruments and agreements executed in connection
therewith, whether currently existing or hereafter created or acquired, arising
from the sale of single family homesites or arising from the sale of other Real
Property and all cash and non-cash proceeds thereof.
"COMMITMENT" means, as to any Lender, the obligation of such
Lender, if any, to make a Loan to Company hereunder in an aggregate principal
amount not to exceed the amount set forth opposite such Lender's name on
SCHEDULE 2.1; the Commitments of all Lenders, are collectively referred to
herein as the "COMMITMENTS."
"COMMONLY CONTROLLED ENTITY" means an entity, whether or not
incorporated, which is under common control with Company within the meaning of
Section 4001 of ERISA or is part of a group which includes Company and which is
treated as a single employer under Section 414 of the Code.
"COMPANY OPERATING ACCOUNT" means that certain deposit account
number 6189189013641 maintained by Company with Sun Trust Bank, Miami, N.A. or
such other deposit account maintained by Company at a financial institution
reasonably satisfactory to Collateral Agent.
"COMPANY OPERATING ACCOUNT CONTROL AGREEMENT" means a written
agreement among Company, MHD (in its capacity as Collateral Agent), and
Operating Account Bank, with respect to the Company Operating Account, in form
and substance reasonably satisfactory to Collateral Agent, pursuant to which
Operating Account Bank acknowledges the security interests granted by Company to
Collateral Agent in the Company Operating Account, waives rights of setoff with
respect to the Company Operating Account, and agrees to act upon the
instructions of Collateral Agent with respect to the disposition of funds in the
Company Operating Account should Operating Account Bank receive such
instructions from Collateral Agent.
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"CONDEMNATION AWARDS" means any and all proceeds (including
proceeds in the form of promissory notes or other agreements for the payment of
proceeds) from (a) the taking by eminent domain, condemnation or otherwise, or
acquisition pursuant to contract, of any property of Company or any Subsidiary
by the United States of America, the State of Florida or any political
subdivision thereof, or any agency, department, bureau, board, commission or
instrumentality of any of them, including any awards and/or other compensation
awarded to, or received by, the Company or GDU, whether as a result of
litigation, arbitration, settlement or otherwise, arising from the Utility
Condemnation Proceedings or (b) any sale by Company or any Subsidiary of a water
and utility system to a governmental entity in lieu of condemnation whether now
owned or hereafter created or acquired.
"CONFIRMATION ORDER" means the order issued on March 27, 1992
by the Bankruptcy Court, confirming the Reorganization Plan.
"CONSOLIDATED NET WORTH" means, at any particular date, all
amounts which, in accordance with GAAP, would be included as Shareholders'
Equity on a consolidated balance sheet of Company and its consolidated
Subsidiaries at such date.
"CONTRACTUAL OBLIGATION" means, with respect to any Person,
any provision of any security issued by that Person or of any agreement,
instrument or other undertaking to which that Person is a party or by which it
or any of its property is bound.
"CREDITORS COMMITTEE" has the meaning assigned that term in
Article 1 of the Reorganization Plan.
"DEEDS OF TRUST" means the Deeds of Trust executed from time
to time between Company or a Subsidiary and Collateral Agent substantially in
the form of (i) the Subordinate Deed of Trust and Security Agreement in
existence as of December 31, 1998 and (ii) the Junior Deed of Trust and Security
Agreement in existence as of December 31, 1998, as the same may be amended,
supplemented or otherwise modified from time to time (including any amendments
or modifications made in connection with this Agreement), pursuant to which
Company and Subsidiaries grant a security interest in the Real Property located
in Tennessee (and in such other jurisdictions where "deeds of trust" are used to
encumber real property) and related Personal Property of Company or Subsidiaries
to Collateral Agent, for the benefit of Lenders, as required by this Agreement.
"DEFAULT" means any of the events specified in Section 8,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"DEFAULT RATE" has the meaning assigned to that term in
Section 2.8(b).
"DEPOSIT ACCOUNT SECURITY AGREEMENT" means that certain Junior
Deposit Account Security Agreement, dated as of December 31, 1998, executed by
Company and each of its Subsidiaries in favor of Collateral Agent, for the
benefit of Lenders.
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"DK LENDERS"means the lenders party to the DK Loan Agreement
and their respective successors and assigns.
"DK LOAN(S)" means the loan(s) outstanding from time to time
under the DK Loan Agreement.
"DK LOAN AGREEMENT" means the Third Amended and Restated
Revolving Loan Agreement, dated as of December 31, 1998, among Company, the DK
Lenders and MHD, as from time to time amended, supplemented or otherwise
modified in accordance with the terms thereof.
"DK LOAN DOCUMENTS" means, collectively, (i) the DK Loan
Agreement and (ii) the "Loan Documents" as defined in the DK Loan Agreement,
each of the foregoing as from time to time amended, supplemented or otherwise
modified in accordance with the terms thereof.
"DK LOAN OBLIGATIONS" means (i) the DK Loans from time to time
outstanding under the DK Loan Documents; (ii) all interest, fees, prepayment
premiums and late payment fees now or hereafter payable with respect thereto;
(iii) all existing and future guaranty obligations relating to the foregoing;
and (iv) all other fees (including, without limitation, attorneys' and
paralegals' fees and expenses) and other amounts now or hereafter payable to the
DK Lenders, or any of them, or their agents under or in respect of the DK Loan
Documents.
"DK PARTNERS" means DK Acquistion Partners, L.P., a New York
limited partnership, and its successors.
"DOLLARS" and the sign "$" means the lawful money of the
United States of America.
"E & Y REPORT" means the Consultant's Report - Atlantic Gulf
Communities Corporation, October 9, 1998, prepared by Ernst & Young LLP.
"EFFECTIVE DATE" means the date, on or before February 2,
1999, upon which all of the conditions set forth in Section 5 of this Agreement
have been met or waived by the Lenders in their sole discretion and this
Agreement becomes effective.
"ELIGIBLE COMMERCIAL RECEIVABLES" means those Commercial
Receivables that comply with each and all of the representations and warranties
representing Commercial Receivables made by Company or any Subsidiary to Agent
or Lenders in the Loan Documents or in the DK Loan Documents, and that are and
at all times continue to be acceptable to Agent in all respects; provided,
however, that standards of eligibility may be fixed and revised from time to
time by Agent in Agent's reasonable credit judgment. Eligible Commercial
Receivables shall not include any of the following: (i) Commercial Receivables
that are in material default; (ii) Commercial Receivables with respect to which
the obligor is an employee, Affiliate or agent of Company or any Subsidiary;
(iii) Commercial Receivables with respect to which the obligor is a creditor of
Company or any Subsidiary, has or has asserted a right of setoff, or has
disputed its
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liability or made any claim with respect to the Commercial Receivables;
provided, however, that such Commercial Receivables only shall be deemed
ineligible under this clause to the extent of the actual or likely offsetting
amount as determined by Agent, in its reasonable credit judgment, unless Agent
believes that the dispute or claim will jeopardize the repayment of all or
substantially all of the Commercial Receivables in a timely manner; (iv)
Commercial Receivables that the obligor has failed to pay within 90 days of due
date; (v) Commercial Receivables with respect to which the obligor is the
subject of any Insolvency Proceeding, or becomes insolvent; and (vi) Commercial
Receivables the collection of which Agent, in its reasonable credit judgment,
believes to be doubtful by reason of the obligor's financial condition.
"ELIGIBLE HOMESITE CONTRACT RECEIVABLES" means those Homesite
Contract Receivables that comply with each and all of the representations and
warranties respecting Homesite Contract Receivables by Company or any Subsidiary
to Agent and Lenders in the Loan Documents or in the DK Loan Documents, and that
are and at all times continue to be acceptable to Agent in all respects;
provided, however, that standards of eligibility may be fixed and revised from
time to time by Agent in Agent's reasonable credit judgment. Eligible Homesite
Contract Receivables shall not include any of the following: (i) Homesite
Contract Receivables that are in material default; (ii) Homesite Contract
Receivables with respect to which the obligor is an employee, Affiliate or agent
of Company or any Subsidiary; (iii) Homesite Contract Receivables with respect
to which the obligor is a creditor of Company or any Subsidiary, has or has
asserted a right of setoff, or has disputed its liability or made any claim with
respect to the Homesite Contract Receivable; provided, however, that Homesite
Contract Receivables only shall be deemed ineligible under this clause to the
extent of the actual or likely offsetting amount as determined by Agent, in its
reasonable credit judgment, unless Agent believes that the dispute or claim will
jeopardize the repayment of all or substantially all of the Homesite Contract
Receivables in a timely manner; (iv) Homesite Contract Receivables that the
obligor has failed to pay within 90 days of due date; (v) Homesite Contract
Receivables with respect to which the obligor is the subject of any Insolvency
Proceeding, or becomes insolvent; and (vi) Homesite Contract Receivables the
collection of which Agent, in its reasonable judgment, believes to be doubtful
of the obligor's financial condition.
"ELIGIBLE JOINT VENTURE PROJECTS" means the Joint Ventures
initially consisting of the Sunset Lakes Project, Jupiter Ocean Grande Project
and the Falcon Trace Project, each as described in the E & Y Report, and that
certain joint venture project located in Cary, North Carolina, commonly known as
"Cary Glen", and that certain joint venture project located in Orlando, Florida,
known as the "Naval Training Center Project".
"ELIGIBLE SUBDIVISION PROJECTS" means only those projects
owned in their entirety by the Company or any of its Subsidiaries, or those
projects otherwise deemed eligible by Agent in its sole discretion from and
after the Effective Date. On the Effective Date, Eligible Subdivision Projects
shall consist of the West Bay Club Project, the Trails of West Frisco Project,
the West Meadows Project, the Aspen-Glenwood Springs Project, the Lakeside
Estates Project, the Saxon Woods Project and the Riverwalk Tower Project, each
as described in the E & Y Report, and that certain condominium project located
in Lee County, Florida, currently known as the "West Bay Club Condominium
Project".
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"ENVIRONMENTAL LAWS" means any and all applicable Federal,
state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or requirements of any Governmental Authority
regulating, relating to, or imposing liability or standards of conduct
concerning, environmental protection matters, including Hazardous Materials, as
now or may at any time hereafter be in effect.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time and any successor statute.
"ERISA EVENT" shall mean (a) any "reportable event", as
defined in Section 4043 of ERISA or the regulations issued thereunder, with
respect to a Plan; (b) the adoption of any amendment to a Plan that would
require the provision of security pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA; (c) the existence with respect to any Plan of an
"accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA) whether or not waived; (d) the filing pursuant to Section
412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of
the minimum funding standard with respect to any Plan; (e) the incurrence of any
liability under Title IV of ERISA with respect to the termination of any Single
Employer Plan or the withdrawal or partial withdrawal of the Company or any of
its Commonly Controlled Entities from any Single Employer Plan or Multiemployer
Plan; (f) the receipt by the Company or any Commonly Controlled Entity from the
PBGC or a plan administrator of any notice relating to the intention to
terminate any Single Employer Plan or Single Employer Plans or to appoint a
trustee to administer any Single Employer; (g) the receipt by the Company or any
Commonly Controlled Entity of any notice concerning the imposition of withdrawal
liability or a determination that a Multiemployer Plan is, or is expected to be,
insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the
occurrence of a "prohibited transaction" with respect to which the Company or
any of the Subsidiaries is a "disqualified person" (within the meaning of
Section 4975 of the Code) or with respect to which the Company or any such
Subsidiary could otherwise by liable; and (i) any other event or condition with
respect to a Plan or Multiemployer Plan that individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect.
"EVENT OF DEFAULT" means any of the events specified in
Section 8; PROVIDED that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"EXCLUDED PROPERTY" means (a) the Capital Stock of General
Development Acceptance Corporation and GDV Financial Corporation, (b) 34% of the
Capital Stock of AG Asia, (c) all money or property now or hereafter deposited
into a Reserve Account pursuant to the Reorganization Plan (exclusive of the
residual, remainder or beneficial interests of Company and its Subsidiaries
therein), (d) any portions of payments made on Homesite Contracts Receivable
which are, as a matter of law or pursuant to such Homesite Contracts Receivable,
required to be placed in a restricted account for the payment of utility charges
or paid toward real estate taxes on the lots subject to the respective Homesite
Contracts Receivable giving rise to such payments and (e) the Trust Property.
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"EXCLUDED SUBSIDIARIES" means the direct or indirect
subsidiaries of Company listed on SCHEDULE E-2.
"FINANCING LEASE" means 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
Company and Subsidiaries.
"FUNDS FLOW MEMO" means a funds flow memorandum, in form and
substance satisfactory to Agent and Collateral Agent, documenting the sources
and applications of funds in respect of the consummation of the Recapitalization
Transactions and the payment of the amounts required to be paid hereunder to
Agent and Lenders on the Effective Date.
"GAAP" means 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.
"GAAP BOOK VALUE" means book value as determined by the
Company and reflected on the Company's consolidated balance sheets prepared in
accordance with GAAP consistently applied, except as may be approved by the
Agent in writing, and delivered to Lenders from time to time in accordance with
this Agreement.
"GDC" means General Development Corporation, a Delaware
corporation, under which name Company was formerly known.
"GDU" means the Company's Subsidiary, General Development
Utilities, Inc., a Florida corporation.
"GOVERNMENTAL APPROVALS" has the meaning assigned to that term
in Section 6.10.
"GOVERNMENTAL AUTHORITY" means any nation or government,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of, or
pertaining to, government.
"GROSS ALLOWED AMOUNT" means, at any time, the sum at such
time of:
(a) an amount equal to 75% of the principal amount of
Eligible Homesite Contract Receivables and Eligible Commercial
Receivables;
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(b) an amount equal to 50% of the lesser of (i) the GAAP
Book Value or (ii) the appraised value (as of the date of the most
recent appraisal of such property that Company has furnished to Agent
and Lenders) of the underlying real estate of Commercial Receivables or
Homesite Contract Receivables which are not Eligible Commercial
Receivables or Eligible Homesite Contract Receivables;
(c) an amount equal to 50% of the GAAP Book Value of Real
Property consisting of identified scattered homesites;
(d) an amount equal to 50% of the sum of (1) the GAAP
Book Value of those parcels of eligible tract land set forth in Schedule E-1 and
(2) any tract land reacquired as the result of foreclosure or a deed in lieu of
foreclosure of Commercial Receivables;
(e) an amount equal to the product of 50% TIMES 92.5% of
the sum of (A) the AAF Fair Value of Eligible Subdivision Projects MINUS (B) all
third-party Indebtedness for such project which is outstanding as of the date of
determination of the AAF Fair Value; and
(f) an amount equal to 50% of the Venture Subsidiaries'
interest in 80% of the AAF Fair Value of Eligible Joint Venture Projects other
than Cary Glen and the Naval Training Center Project.
"GUARANTEE OBLIGATION" means, as to any Person (the
"guaranteeing person"), any obligation of (a) the guaranteeing person or (b)
another Person (including any bank under any letter of credit) to induce the
creation of which obligation the guaranteeing person has issued a reimbursement,
counter indemnity or similar obligation, in either case guaranteeing or in
effect guaranteeing any Indebtedness, leases, dividends or other obligations
(the "primary obligations") of any other third Person (the "primary obligor") in
any manner, whether directly or indirectly, including any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such 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
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person's maximum reasonably anticipated liability in respect thereof as
reasonably determined by Company in good faith.
"GUARANTEES" means, collectively, the guarantees of the
Obligations, made by the Subsidiaries and Unrestricted Subsidiaries pursuant to
the Subsidiary Guarantees.
"HAZARDOUS MATERIALS" means any hazardous materials, hazardous
waste, hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
"HOMESITE CONTRACTS RECEIVABLES" means all contracts for deed,
promissory notes, mortgages, deeds of trust and other agreements, currently
existing or hereafter created or acquired, pursuant to which Company or any
Subsidiary has the right to receive payment in any form whatsoever for the sale
of single-family homesites (excluding Commercial Receivables), including any and
all accounts, contract rights, chattel paper, general intangibles and unpaid
seller's rights, relating to the foregoing or arising therefrom, reserves and
credit balances arising thereunder and cash and non-cash proceeds of any and all
of the foregoing.
"HOMESITE PROGRAM" has the meaning assigned that term in
Article I of the Reorganization Plan.
"INDEBTEDNESS" of any Person at any date means (but without
duplication if an item of indebtedness falls in more than one category of this
definition): (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, and (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; provided that "Indebtedness" shall not include
Guarantee Obligations.
"INSOLVENCY", means, with respect to any Multiemployer Plan,
the condition that such plan is insolvent within the meaning of Section 4245 of
ERISA.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"INSOLVENT" means pertaining to a condition of Insolvency.
"INTELLECTUAL PROPERTY" has the meaning assigned that term in
Section 4.9.
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"INTERCREDITOR AGREEMENT" means that certain Intercreditor
Agreement, dated as of December 31, 1998, by and among Agent, Lenders, MHD, the
DK Lenders, the Secured Agreement Lenders and Collateral Agent and the Secured
Agreement Collateral Agent and acknowledged by Company and its Subsidiaries
(including Unrestricted Subsidiaries and Excluded Subsidiaries) and The Bank of
New York, substantially in the form of EXHIBIT I-1, as such agreement may be
supplemented, amended or otherwise modified from time to time.
"INTEREST PAYMENT DATE" means, as to any Loan, the last day of
each calendar month to occur while such Loan is outstanding and the date on
which such Loan is repaid in full.
"INVESTMENT AGREEMENT" has the meaning ascribed to such term
in the Intercreditor Agreement, but shall not refer to amendments,
modifications, supplements, or restatements thereof entered into after the
Effective Date without the prior consent of Agent and the Lenders.
"INVESTMENT INSTRUMENTS" means the Investment Agreement, the
Preferred Stock, the certificate of designation of preferences and rights
relating to the Preferred Stock, and all other documents, instruments, and
agreements executed in connection therewith, each as from time to time amended,
supplemented or otherwise modified in accordance with the terms hereof, thereof,
and of the Intercreditor Agreement.
"INVESTMENTS" means any and all promissory notes, Capital
Stock (other than Subsidiary Stock), bonds, debentures and securities, held by
Company or any Subsidiary, whether now owned or hereafter acquired.
"JOINT VENTURES" means, collectively, (a) the joint ventures
identified on Schedule 4.14(B), and (b) any other partnership, joint venture,
limited liability company, or other entity in which a Subsidiary acquires, after
the Effective Date and as permitted under Section 7.9(g) and 7.18, equity
interests therein representing 50% or less of such entity's contributed capital;
and "Joint Venture" means any one of them.
"JOINT VENTURE PLEDGE AGREEMENT" means that certain Junior
Assignment of Partnership Interests, dated as of December 31, 1998,
substantially in the form of EXHIBIT J-1, among each of the Venture Subsidiaries
and Collateral Agent, 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 Lenders.
"LENDERS" has the meaning assigned that term in the
introductory paragraph to this Agreement.
"LIEN" means any mortgage, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any Financing Lease having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the
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Uniform Commercial Code or comparable law of any jurisdiction in respect of any
of the foregoing).
"LOAN BORROWING DATE" means the Business Day specified in a
notice pursuant to SECTION 2.2 as the date on which Company requests Lenders to
make the Loans hereunder.
"LOAN DOCUMENTS" means this Agreement, the Notes, the
Subsidiary Guarantees, the Security Documents, the Tax Servicing Contracts, and
any other agreement entered into, now or in the future, in connection with this
Agreement.
"LOANS" has the meaning assigned that term in Section 2.1.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon
(a) the business, operations, property or condition (financial or otherwise) or
prospects of Company and its Subsidiaries taken as a whole, (b) the ability of
Company to perform its obligations under this Agreement, the Notes, the Security
Documents or other Loan Documents, or (c) the legality, validity, enforceability
of this Agreement, the Notes, the Security Documents or other Loan Documents,
the attachment, perfection or priority of any Liens created by the Loan
Documents, or the rights or remedies of Agent, Collateral Agent or Lenders
hereunder or thereunder.
"MATURITY DATE" means the earlier of February 1, 2002 or the
date that is 30 days prior to the first date on which any holders of the
Preferred Stock are entitled to require Company to purchase any shares of
Preferred Stock.
"MAXIMUM LOAN AMOUNT" means, on any date of determination
prior to the Maturity Date, the lesser of $26,500,000 or the Maximum Permissible
Loan, and on or after the Maturity Date, $0.
"MAXIMUM PERMISSIBLE LOAN" means, on any date of
determination, the Gross Allowed Amount less the sum of the aggregate
outstanding principal amount of the DK Loans and the aggregate stated amount of
all outstanding letter of credit guarantees under the DK Loan Agreement.
"MEZZANINE PROPERTY UNDER DEVELOPMENT" means, collectively,
the Real Property of any MPUD 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.
"MHD" means M. H. Davidson & Co., LLC, a New York limited
liability company.
"MORTGAGES" means the Mortgage and Security Agreements
executed from time to time by Company or a Subsidiary in favor of Collateral
Agent, substantially in the form of the Mortgages in existence as of the
Effective Date, and as the same may be amended, supplemented,
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consolidated or otherwise modified from time to time (including as any
amendments and modifications made in connection with this Agreement), pursuant
to which Company and Subsidiaries grant a security interest in the Real Property
located in Florida (or in such other jurisdictions where "mortgages" are used to
encumber real property) and related Personal Property of Company or Subsidiaries
to Collateral Agent, for the benefit of Lenders.
"MPUD HOLDING COMPANY" means a Subsidiary of Company the sole
asset of which is all of the issued and outstanding stock of an MPUD Subsidiary.
"MPUD SUBSIDIARY" has the meaning assigned that term in
Section 7.2(h).
"MPUD SUBSIDIARY GROUP(S)" means an MPUD Subsidiary, its MPUD
Holding Company and all direct and/or indirect, wholly-owned Subsidiaries of
such MPUD Subsidiary ("MPUD SUBSIDIARY SUBSIDIARIES").
"MULTIEMPLOYER PLAN" means a Plan which is a multiemployer
plan as defined in Section 4001(a) (3) of ERISA.
"NET CASH PROCEEDS" means with respect to any sale of assets
all cash payments (including any cash received by way of deferred payment
pursuant to, or monetization of, a note receivable or otherwise, but only as and
when and so received) received from such sale net of bona fide direct costs of
sale.
"NET CASH FLOW" means, with respect to any fiscal period of a
Person, on a consolidated basis, the actual consolidated pre-tax net cash flow
as determined on the basis set forth in SCHEDULE N-1.
"NOTES" has the meaning assigned that term in Section 2.2.
"OBLIGATIONS" means all obligations of every nature of Company
from time to time owed to Agent, Lenders or Collateral Agent or any of them
under the Loan Documents, whether for principal, interest (including any
interest that, but for the provisions of the Bankruptcy Code, would have
accrued), premiums (including Early Termination Fees), fees, costs, and expenses
(including any fees, costs, or expenses that, but for the provisions of the
Bankruptcy Code, would have accrued, including, without limitation, all interest
accruing after the commencement of an Insolvency Proceeding whether or not
allowed as a claim in an Insolvency Proceeding), indemnification, or otherwise.
"OFFICIAL UNSECURED CREDITORS COMMITTEE" means the official
committee of creditors appointed by the United States Trustee in the
Reorganization Proceedings.
"OPERATING ACCOUNT BANK" means Sun Trust Bank, Miami, N.A. or
such other financial institution reasonably satisfactory to Agent.
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"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor
thereto.
"PERMITTED SALE ASSET" has the meaning assigned that term in
Section 7.6.
"PERMITTED REFINANCING INDEBTEDNESS" has the meaning assigned
to that term in Section 7.2(b).
"PERSON" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"PERSONAL PROPERTY" means the following personal property of
Company or any Subsidiary (exclusive of Homesite Contracts Receivable and
Commercial Receivables of Company or any Subsidiary):
(a) the Bank Accounts;
(b) the Investments;
(c) any and all accounts, contract rights, chattel paper,
instruments and documents, including any right to payment for goods sold or
leased or services rendered, whether now owned or hereafter acquired;
(d) any and all machinery, apparatus, equipment,
fittings, furniture, fixtures, motor vehicles and other tangible personal
property of every kind and description, whether now owned or hereafter acquired,
and wherever located, and all parts, accessories and special tools and
replacements therefor;
(e) any and all general intangibles, whether now owned or
hereafter created or acquired, including all choses in action, causes of action,
rights in and to any and all Condemnation Awards, corporate or other business
records, deposit accounts, inventions, designs, patents, patent applications,
trademarks, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, tax refund claims, computer programs, any
other Intellectual Property, all claims under guaranties, security interests or
other security to secure payment of any accounts by an account debtor, all
rights to indemnification and all other intangible property of every kind and
nature, including (i) the interests, if any, of Company or any Subsidiary in
payments, proceeds, residuals and remainders from, or as a beneficiary of, the
Reserve Accounts, Claims Disbursement Account, or other such accounts, (ii) any
and all beneficial interests in the trusts pursuant to which title to the Trust
Property is held and (iii) any and all other proceeds, choses in action or
causes of action with respect to, or rights to receive proceeds from, any
condemnation of any Real Property or Personal Property of Company or any
Subsidiary, whether now in existence or hereafter created or acquired.
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(f) any and all goods which are, or may at any time be,
goods held for sale or lease or furnished under contracts of service or raw
materials, work-in-process or materials used or consumed in business,
wheresoever located and whether now owned or hereafter created or acquired,
including all such property the sale or other disposition of which has given
rise to accounts and which has been returned to or repossessed or stopped in
transit;
(g) all monies, cash, residues and property of any kind,
now or at any time hereafter in the possession or under the control of any
Lender, any DK Lender or any Secured Agreement Obligee, or any agent or bailee
of any Lender, any DK Lender or any Secured Agreement Obligee;
(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" means that certain
Junior Personal Property Security Agreement, dated as of December 31, 1998,
executed by Company and the Subsidiaries (including Unrestricted Subsidiaries
and Excluded Subsidiaries) now or hereafter party thereto in favor of Collateral
Agent, for the benefit of Lenders.
"PLAN" means, at a particular time, any employee benefit plan
which is covered by ERISA and in respect of which Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"PREFERRED STOCK" means the Company's (1) 20% Cumulative
Redeemable Convertible Preferred Stock, Series A (the "SERIES A PREFERRED
STOCK"), the terms and conditions of which are set forth in that certain
Statement of Preferences and Rights of the Series A Preferred Stock (the "SERIES
A STATEMENT"), a copy of which is attached as Annex A to the Company's Amended
and Restated Certificate of Incorporation, and (2) 20% Cumulative Redeemable
Convertible Preferred Stock, Series B (the "SERIES B PREFERRED STOCK"), the
terms and conditions of which are set forth in that certain Statement of
Preferences and Rights of the Series B Preferred Stock (the "SERIES B
STATEMENT"), a copy of which is attached as Annex B to the Company's Amended and
Restated Certificate of Incorporation.
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"PRIME RATE" means, for any day, the prime commercial lending
rate of interest for extensions of credit in U.S. Dollars by financial
institutions in the United States, as published on such day in THE WALL STREET
JOURNAL, or, for any Saturday, Sunday or other day on which said newspaper is
not published by reason of its regular publication schedule, on the next
preceding day on which such newspaper was published. If more than one such prime
commercial lending rate is so published for any day, the "Prime Rate" shall be
the arithmetic mean of the rates so published. If said newspaper ceases
publication, the Agent shall determine the Prime Rate based on the prime
commercial lending rate announced by one or more financial institutions selected
by the Agent in its sole discretion. The Prime Rate is a reference rate and not
necessarily the lowest rate of interest charged by any financial institution.
Each change in an interest rate based on the Prime Rate shall take effect as and
when the Prime Rate changes.
"PRO RATA SHARE" means, with respect to any Lender, the
percentage obtained by dividing (i) such Lender's Commitment or, if the Loans
have been made, the principal amount of such Lender's Loan, by (ii) the
Commitments of all Lenders or, if the Loans have been made, the aggregate
principal amounts of the Loans of all Lenders; PROVIDED, HOWEVER, that, in each
case, in the event all Commitments have been terminated and all Loans have been
repaid, Pro Rata Share shall be determined according to the principal amount of
the Loans in effect immediately prior to such termination and otherwise as set
forth above.
"REAL PROPERTY" means any and all real property and fixtures
and interests in real property and fixtures now owned or hereafter acquired by
Company or any Subsidiary.
"REAL PROPERTY SALE" means the sale, assignment or other
transfer for value of any Real Property by Company or any Subsidiary.
"RECAPITALIZATION TRANSACTIONS" means: (a) the assignment of
the Foothill Loan Documents (as defined in the DK Loan Documents) to MHD, as
agent for the DK Lenders, (b) the execution and delivery of this Agreement and
the DK Loan Agreement and the funding of the Loans in accordance herewith and of
the DK Loans in accordance therewith; (c) (i) the execution and delivery of the
Intercreditor Agreement, (ii) the resignation of The Bank of New York as "SP Sub
Collateral Agent", and (iii) the transition of the "SP Sub Collateral Agent"
functions from The Bank of New York to MHD; and (c) the use by Company of (i)
the proceeds of the Loans on the Effective Date, (ii) the proceeds of the DK
Loans and the Loans, and (iii) unrestricted and unencumbered cash of Company, in
each case, in accordance with the Funds Flow Memo, to finance: (A) the
retirement by Company of all of the outstanding Unsecured Cash Flow Notes in an
aggregate principal amount not greater than $39,496,400; and (B) the repurchase
by Company of Homesite Contract Receivables from (1) Litchfield Financial
Corporation in an aggregate amount not to exceed $2,300,000, and (2) BankBoston
N.A. in an aggregate amount not to exceed $8,300,000.
"REORGANIZATION" means, with respect to any Multiemployer
Plan, the condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
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"REORGANIZATION PLAN" means the Restated Second Amended Joint
Plan of Reorganization of General Development Corporation jointly proposed in
the Reorganization Proceedings by Company and the Official Unsecured Creditors
Committee, filed on October 9, 1991 with the Clerk of the Bankruptcy Court, as
modified by Modification filed March 9, 1992.
"REORGANIZATION PROCEEDINGS" means the cases commenced on
April 6 and April 12, 1990 under Chapter 11 of Title 11 of the United States
Code in the Bankruptcy Court by GDC (Case No. 90-12231-BKC-AJC), General
Development Financial Services, Inc. (Case No. 90-12232-BKC-AJC), General
Development Resorts, Inc. (Case No. 90-12233 BKC-AJC), Town & Country II, Inc.
(formerly Florida Residential Communities, Inc.) (Case No. 9012234- BKC-AJC),
Five Star Homes Group, Inc. (Case No. 90-12235-BKC-AJC), Five Star Homes, Inc.
(Case No. 90-12338-BKC-AJC), GDV Financial Corporation (Case No. 90-I2236BKC-MC)
and Environmental Quality Laboratory, Incorporated (Case No. 90-12237-BKC-AJC).
"REPORTABLE EVENT" means any of the events set forth in
Section 4043(b) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC
Reg. ss.2615.
"REQUIRED LENDERS" means Lenders holding at least 66-2/3% of
the aggregate principal amount of the Commitment or, if the Loans have been
made, of the Loans.
"REQUIREMENT OF LAW" means, as to any Person, the certificate
or articles of incorporation and bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"RESERVE ACCOUNTS" means the Disbursement Account (as defined
in Section 8.4 of the Reorganization Plan); the Disputed Claims Reserve Account
(as defined in Section 8.7 of the Reorganization Plan); any reserve of
securities, utility-satisfied lots, cash or other assets that is established
pursuant to the Reorganization Plan, the Homesite Program, or any agreement
resolving a claim of the State of Florida in the Reorganization Proceedings, to
satisfy requests for utility service; and any reserve of securities or cash
established to fund road or other improvements pursuant to any agreement
resolving a claim of the State of Florida in the Reorganization Proceedings,
including the Utility Lot Trust Agreement, dated December 26, 1996 executed by
and between Company and the State of Florida, Department of Business Regulation,
Division of Florida Land Sales, Condominiums and Mobile Homes.
"RESPONSIBLE OFFICER" means the chief executive officer and
the president of Company, or with respect to corporate proceedings, the
secretary or any assistant secretary of Company, or, with respect to financial
matters, the chief financial officer or treasurer of Company.
"REVERSE STOCK SPLIT" has the meaning set forth in the
definition of Stock Split.
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"SALE AND LEASEBACK" means any arrangement with any Person
providing for the leasing by Company or any Subsidiary of real or personal
property which has been or is to be sold or transferred by Company or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of Company or Subsidiary
"SECURED AGREEMENT" has the meaning ascribed to such term in
the Intercreditor Agreement, but shall not refer to amendments, modifications,
supplements, or restatements thereof entered into after the Effective Date
without the prior consent of Agent and Lenders.
"SECURED AGREEMENT COLLATERAL AGENT" means MHD, in its
capacity as collateral agent for the Secured Agreement Obligees, and its
successors in such capacity.
"SECURED AGREEMENT DOCUMENTS" means the Secured Agreement, the
"Transaction Documents" as defined in the Secured Agreement, the Investment
Instruments, the Secured Notes and any and all instruments, documents and
agreements executed in connection therewith, as amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof and of
the Intercreditor Agreement.
"SECURED AGREEMENT OBLIGEES" has the meaning ascribed to such
term in the Intercreditor Agreement.
"SECURED AGREEMENT OBLIGATIONS" means: (i) any indebtedness
and obligations now or hereafter owing to the Secured Agreement Obligees under
or in connection with the Secured Agreement Documents, including, without
limitation, (x) redemption and repurchase obligations with respect to the
Preferred Stock and (y) the Secured Note Obligations; (ii) all interest,
prepayment premiums and late payment fees now or hereafter payable with respect
thereto; (iii) all existing and future guaranty obligations relating to the
foregoing; and (iv) all other fees (including, without limitation, attorneys'
and paralegals' fees and expenses) and other amounts now or hereafter payable to
the Secured Agreement Obligees, or any of them, or their agents under or in
respect of the Secured Agreement Documents.
"SECURED DEBT DOCUMENTS" means, collectively, the Loan
Documents, the DK Loan Documents, and the Secured Agreement Documents, each as
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof, thereof, and of the Intercreditor Agreement.
"SECURED NOTE" means, collectively, (i) that certain $850,000
promissory note dated as of December 31, 1998 and (ii) that certain $1,000,000
promissory note dated as of December 31, 1998, each made by Company to the order
of the Secured Agreement Obligees and each having a maturity date of February 1,
2002.
"SECURED NOTE OBLIGATIONS" means all obligations of Company to
the Secured Agreement Obligees under or with respect to the Secured Note
(whether for principal, interest, fees, costs, expenses or otherwise) and all
obligations of any Subsidiary of Company with respect
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thereto (whether pursuant to a guaranty thereof, as a co-maker thereof or
co-obligor with respect thereto, or otherwise).
"SECURITY AGREEMENTS" means the Personal Property Security
Agreement, the Deposit Account Security Agreement, and any other security
agreements, between Company and/or a Subsidiary and Agent or Collateral Agent,
as the same may be amended supplemented or otherwise modified from time to time,
pursuant to which Company and Subsidiaries assign and grant a security interest
in Homesite Contracts Receivables and Commercial Receivables and Personal
Property of Company or Subsidiaries to Agent or Collateral Agent, for the
benefit of Lenders, as required by this Agreement.
"SECURITY DOCUMENTS" means the Stock Pledge Agreement, the
Joint Venture Pledge Agreement, the Security Agreements, the Mortgages, the
Deeds of Trust, the Company Operating Account Control Agreement, any cash
collateral account agreements, and any and all other agreements, instruments,
documents, financing statements, assignments, notices, mortgages and other
written matter necessary or reasonably required by Agent or Collateral Agent at
any time to create, perfect, maintain or continue Agent's and Collateral Agent's
Lien in the Collateral, together with all amendments, modifications, extensions,
substitutions and renewals thereof.
"SERIES A DOCUMENTS" has the meaning set forth in Section
4.32.
"SERIES A PREFERRED STOCK" and "SERIES B PREFERRED STOCK"
shall have the meanings specified in the definition of PREFERRED STOCK.
"SERIES A STATEMENT" has the meaning assigned to that term in
the definition of Preferred Stock.
"SERIES B STATEMENT" has the meaning assigned to that term in
the definition of Preferred Stock.
"SHAREHOLDERS' EQUITY" means, as to any corporation, an amount
equal to the excess of the assets of such corporation (including minority
interests) over its liabilities, determined in accordance with GAAP and as shown
on the most recently prepared applicable balance sheet of such corporation. The
Company's Preferred Stock shall not be treated as liabilities for purposes
hereof.
"SINGLE EMPLOYER PLAN" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"SPUD SUBSIDIARY" has the meaning assigned that term in
Section 7.2(h).
"STOCK PLEDGE AGREEMENT" means the Fourth Amended and Restated
Stock Pledge Agreement, dated as of the Effective Date, among Company, each of
its Subsidiaries and
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Collateral Agent, pursuant to which Company and Subsidiaries pledge Subsidiary
Stock to Collateral Agent for the benefit of Lenders.
"STOCK SPLIT" means a proposal to amend Company's Amended and
Restated Certificate of Incorporation to effect, if subsequently determined by
Company's board of directors, (1), a reverse stock split of Company's
outstanding common stock on the effective date of the amendment (the "REVERSE
SPLIT EFFECTIVE DATE"), pursuant to which a fixed number of 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
all fractions created in the Reverse Stock Split will be cashed out, and (2) to
effect a forward split of the Company's common stock 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 a fixed number of whole
shares of the Company's common stock (as determined by the Company's board of
directors in its discretion).
"SUBSIDIARY" means, as to any Person, a corporation,
partnership, trust (exclusive of any trust created in connection with a Reserve
Account) or other entity of which shares of stock, partnership interests,
beneficial interests or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership, trust (exclusive
of any trust created in connection with a Reserve Account) or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly, through one or more intermediaries, or both, by such Person.
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
Company. Unless otherwise indicated, all references to a Subsidiary or
Subsidiaries of Company shall not mean, include, or refer to the Unrestricted
Subsidiaries, the Excluded Subsidiaries, or the Joint Ventures.
"SUBSIDIARY GUARANTEE" means the Subsidiary Guarantee, dated
as of the Effective Date, executed by Company and each of its Subsidiaries and
Unrestricted Subsidiaries in favor of Agent, for the benefit of Lenders.
"SUBSIDIARY PROPERTY UNDER DEVELOPMENT" means, collectively,
the Real Property of any Subsidiary which is acquired for the purpose of being
developed, or which is in the process of being improved or developed, either by
the construction of roads, curb cuts, sewer and water facilities or other
improvements, or by the construction of residential units and appurtenances
thereto.
"SUBSIDIARY STOCK" means the Capital Stock of any and all
Subsidiaries, Excluded Subsidiaries, and Unrestricted Subsidiaries.
"TAX SERVICING CONTRACTS" means, collectively, the tax
servicing contracts required to be delivered under Section 5.3, and all
amendments, modifications, extensions, substitutions and renewals thereof.
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"TRUST PROPERTY" means the real property held in trust
pursuant to (a) Trust Agreement No. 06-01-009-6082101, dated as of January
17,1991, by and between NCNB National Bank of Florida, as Trustee for the
benefit of Company, the Beneficiary; (b) Trust Agreement No. 06-01-009-6081954,
dated as of January 17,1991, by and between NCNB National Bank of Florida, as
Trustee for the benefit of Company, the Beneficiary; (c) Trust Agreement No.
06-01-009-6082655, dated as of January 17, 1991, by and between NCNB National
Bank of Florida, as Trustee for the benefit of Company and General Development
Financial Services, Inc., the Beneficiaries; (d) Trust Agreement No. 2, dated as
of May 31, 1991, by and between Jake Gamble, Esq., as successor Trustee for the
benefit of Company and Cumberland Cove, Inc., the Beneficiaries; and (e) Utility
Lot Trust Agreement.
"20% PROFITS INTEREST" means that certain 20% net profits
interest granted by Company to Apollo or its designee in that certain project
located in Tampa, Florida, known as the Apollo Beach Project currently under
consideration by the Company or another project hereafter acquired or to be
acquired by Company (or a subsidiary of Company) satisfactory to Apollo of
economic value equivalent to the Apollo Beach Project, which 20% net profits
interest represents an additional fee payable to Apollo in connection with the
consummation of the transactions contemplated herein and in the DK Loan
Agreement.
"UCC" means the Uniform Commercial Code as shall be in effect
from time to time in the state of New York.
"UNRESTRICTED SUBSIDIARIES" means, collectively, (a) the
direct or indirect subsidiaries of Company listed on Schedule U-1, and (b) any
other direct or indirect subsidiary of Company that is formed or acquired after
the Effective Date, that does not have or make any investment in any Joint
Venture (nor was formed or acquired for the purpose of having or making any such
investment), and that Agent agrees in writing that such entity shall constitute
an Unrestricted Subsidiary under and for all purposes of this Agreement and the
other Loan Documents, upon which Schedule U-1 automatically shall be deemed to
be amended to reflect the inclusion on such schedule of such new Unrestricted
Subsidiary; and "UNRESTRICTED SUBSIDIARY" means any one of them.
"UNSECURED CASH FLOW NOTES" means those certain Unsecured 13%
Cash Flow Notes due December 31, 1998, issued pursuant to the Indenture dated as
of March 31, 1992.
"UNSECURED 1996 NOTES" means those certain 12% Notes due
December 31, 1996, issued pursuant to the Indenture dated as of March 31, 1992.
"UTILITY LOT TRUST AGREEMENT" means the Utility Lot Trust
Agreement, dated December 26, 1996, by and between Company and the State of
Florida.
"VENTURE SUBSIDIARY" means any Subsidiary whose sole asset is
its equity interest in a Joint Venture and whose sole revenues are derived from
such sole asset.
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"WORKING CAPITAL RESERVES" has the meaning assigned that term
in Article I of the Reorganization Plan.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined
in this Agreement shall have such defined meanings when used in the other Loan
Documents or any certificate or other document made or delivered pursuant
hereto.
(b) As used herein and in the other Loan Documents, and
any certificate or other document made or delivered pursuant hereto, accounting
terms relating to Company and its Subsidiaries not defined in Section 1.1 and
accounting terms partly defined in Section 1.1, to the extent not defined, shall
have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
(d) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
(e) References to "Sections", "subsections", Exhibits and
Schedules are to Sections, Sub-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) Unless the context of this Agreement or the other
Loan Documents clearly requires otherwise, any reference in this Agreement or in
the other Loan Documents to this Agreement, any of the other Loan Documents, any
of the other Secured Debt Documents, or the Intercreditor Agreement shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, and supplements, thereto and thereof, as
applicable, made in accordance with the terms hereof, thereof, and of the
Intercreditor Agreement.
SECTION 2
AMOUNT AND TERMS OF COMMITMENTS
2.1 TERM LOANS.
(a) Subject to the terms and conditions hereof, each
Lender severally agrees to make a term loan (collectively, the "Loans") to
Company on the Effective Date in an aggregate
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amount outstanding not to exceed at any one time such Lender's Pro Rata Share of
the Maximum Loan Amount.
(b) Amounts prepaid or repaid on account of the Loans,
whether voluntarily or mandatorily, may not be reborrowed.
(c) All Loans shall be made by Lenders simultaneously, it
being understood that no Lender shall be responsible for any default by any
other Lender in the other Lender's obligations to make Loans hereunder nor shall
the Commitment of any Lender be increased as a result of the default by any
other Lender in such other Lender's obligation to make Loans hereunder. The
default by any Lender in its obligations to make Loans shall not excuse any
other Lender from its obligations to make Loans.
2.2 NOTES.
The Loans made by each Lender shall be evidenced by a
promissory note of Company, substantially in the form of EXHIBIT 2.2 with
appropriate insertions as to payee, date and principal amount (a "Note"),
payable to the order of such Lender, in each case in the face amount of such
Lender's Pro Rata Share of the Maximum Loan Amount. Each Lender is hereby
authorized to record the date and amount of the Loan made by such Lender and the
date and amount of each payment or prepayment of principal thereof or of
interest on such Loan on the schedule annexed to and constituting a part of its
Note, and any such recordation shall constitute prima facie evidence of the
accuracy of the information so recorded. Each Note shall (a) be dated the
Effective Date, (b) be stated to mature as provided in SECTION 2.7 and (c)
provide for the computation and payment of interest in accordance with SECTIONS
2.8 and 2.10.
2.3 PROCEDURE FOR BORROWING.
Subject to the conditions set forth in this Agreement, Company may make
a borrowing hereunder on any one Business Day during the period from the date
hereof to and including January 31, 1999. Only one borrowing may be made under
this Agreement. Company shall give Agent irrevocable notice (which notice must
be received by Agent prior to 2:00 p.m., New York time two Business Days prior
to the requested Borrowing Date), specifying (a) the amount to be borrowed and
(b) the requested Borrowing Date. Upon receipt of any such notice from Company,
Agent shall promptly (and in any event on the same Business Day) notify each
Lender thereof. The notice of a request for borrowing by Company shall be
accompanied by a certificate of a Responsible Officer of Company (a)
representing and warranting that the purpose for which the requested borrowing
is to be used is permitted by, and is in accordance with, the terms and
conditions of this Agreement, and (b) representing and warranting that the
aggregate principal amount of the Loans outstanding as of the requested
Borrowing Date, shall not exceed the Maximum Permissible Loan. Each Lender shall
make the amount of its Pro Rata Share of the borrowing available to Agent for
the account of Company at the office of Agent specified on the signature pages
hereof prior to 10:00 a.m., New York time, on the requested Borrowing Date in
funds immediately available to Agent. Such borrowing will then be made available
to Company by Agent by paying to such deposit account as Company may designate
in the notice of such
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Borrowing the aggregate of the amounts made available to Agent by Lenders and in
like funds as received by Agent; PROVIDED, HOWEVER, that if Agent or any Lender
determines that any condition precedent to such borrowing has not been met (and,
in the case of a Lender, such Lender has so notified Agent), Agent shall not
make such borrowing available to Company.
2.4 USE OF PROCEEDS OF LOANS.
The proceeds of the Loans shall be used by Company or its
Subsidiaries for the following purposes only: (i) to finance a portion of the
Recapitalization Transactions (as described in, and only to the extent set forth
in, such definition), and (ii) to pay transactional fees, costs, and expenses
incurred in connection with this Agreement; and in any event in compliance with
all applicable laws, rules, regulations and orders.
2.5 MANDATORY PREPAYMENTS OF LOANS. Company shall make the
following mandatory prepayments of the Loans:
(a) If, at any time, the aggregate principal amount of
the Loans outstanding exceeds the Maximum Permissible Loan in effect at such
time, Company shall immediately pay to Agent, in cash, the amount of such excess
for application to the prepayment of the Loans, together with accrued interest
thereon.
(b) The parties acknowledge that payments under this
Section 2.5 may be subject to the terms and conditions of the Intercreditor
Agreement.
2.6 OPTIONAL PREPAYMENTS. Company may at any time and from time to
time prepay the Loans, in whole or in part, without premium or penalty, upon at
least one Business Day's irrevocable prior notice to Agent, specifying the date
and amount of prepayment. Upon receipt of any such notice Agent shall promptly
notify each Lender thereof. If any such notice is given, the amount specified in
such notice shall be due and payable on the date specified therein, together
with accrued interest and fees to such date on the amount prepaid. Partial
optional prepayments shall be in an aggregate principal amount of at least
$500,000. Optional prepayments made pursuant to this Section shall be applied in
accordance with SECTION 2.11.
2.7 REPAYMENT AT MATURITY. On the Maturity Date, all Obligations
immediately shall become due and payable without notice or demand, and Company
unconditionally agrees to repay to Agent, for the ratable account of Lenders,
the principal amount of all Loans in full, together with interest thereon and
all other amounts then payable hereunder and under the other Loan Documents.
Company shall not be relieved or discharged of Company's duties, Obligations, or
covenants hereunder, and the continuing security interests of Agent for the
benefit of Lenders in the Collateral shall remain in effect until all
Obligations have been fully and finally discharged and the Lenders' obligations
to extend credit hereunder is terminated.
2.8 INTEREST RATES AND PAYMENT DATES.
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(a) RATE OF INTEREST. Company agrees to pay interest on
the outstanding principal amount of each Loan, from and including the date on
which such Loan is made to but not including the date on which such Loan shall
be paid in full, at a per annum rate of fifteen per cent (15%) per annum.
(b) DEFAULT RATE. If any Obligation, whether for
principal or (to the maximum extent permitted by applicable law) interest or
other amounts, is, for any reason, not paid in full when due (whether at stated
maturity, by acceleration, by required prepayment, and whether by operation of
the subordination provisions of the Intercreditor Agreement or otherwise),
Company agrees to pay interest on the amount in default, from and including the
date on which such amount became due (including any applicable cure or grace
period) to but not including the date on which such amount shall be paid in
full, at a rate equal to the lesser of nineteen per cent (19%) per annum and the
maximum rate of interest allowed by applicable law (the "Default Rate"). In
addition, after the occurrence and during the continuance of an Event of
Default, Company shall pay interest on the outstanding principal amount of each
Loan at the Default Rate.
(c) INTEREST PAYMENT DATES. Accrued interest shall be
payable in arrears on each Interest Payment Date; PROVIDED, that interest
accruing pursuant to paragraph (b) of this Section also shall be payable from
time to time on demand.
(d) MAXIMUM INTEREST RATE. Anything in this Agreement or
the Notes or the other Loan Documents to the contrary notwithstanding, in no
event shall any Lender be entitled to take, charge, collect or receive interest
on the Loans or on any other Obligations at a rate in excess of the maximum
lawful rate permitted under applicable law. In the event that any Lender
inadvertently shall take, charge, collect or receive interest in excess of such
maximum lawful rate, the excess amount of such interest shall automatically be
applied to reduce the principal amount of the Loans, and any excess remaining
after such application shall be applied to any remaining Obligations (other than
such interest) hereunder or under the other Loan Documents, and any excess
remaining after the aforesaid application shall be returned to Company.
2.9 FEES.
(a) [INTENTIONALLY OMITTED]
(b) FINANCIAL EXAMINATION FEES. Company shall pay to
Agent after repayment of the DK Loan Obligations (and any Permitted Refinancing
Indebtedness): (i) a fee of $650 per day per examiner, plus reasonable
out-of-pocket expenses for each financial analysis and examination of Company or
its Subsidiaries (including Unrestricted Subsidiaries, Excluded Subsidiaries,
and Joint Ventures) performed by Agent or Lenders or their agents; (ii) a fee of
$1,000 per day per appraiser, plus out-of-pocket expenses for each appraisal of
the Collateral performed by Agent or Lenders or their agents; and (iii) the
actual charges paid or incurred by Agent if it elects to employ the services of
one or more non-Affiliates to perform such financial analyses and examinations
(i.e., audits) of Company or to appraise the Collateral.
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(a) COLLATERAL AGENT SERVICING FEE. Company shall pay to
Agent after repayment of the DK Loan Obligations (and any Permitted Refinancing
Indebtedness), for the sole and separate account of Collateral Agent, on the
first day of each month, in arrears, during the term of this Agreement, and
thereafter so long as any Obligations are outstanding, a servicing fee in an
amount equal to $5,000.00.
2.10 COMPUTATION OF INTEREST AND FEES.
(a) Interest on Loans and fees shall be calculated on the
basis of a 360-day year for a year of twelve 30-day months (e.g., 15% of the
average daily outstanding principal balance of the Loans divided by 12). Each
determination of an interest rate by Agent pursuant to any provision of this
Agreement shall be conclusive and binding on Company and Lenders in the absence
of manifest error.
(b) All payments of interest, fees, costs and expenses
and all other payments due to Agent or any Lender under this Agreement or any
other Loan Document shall be paid by Company to Agent as and when incurred
and/or payable by wire transfer in accordance with directions specified by Agent
in writing from time to time, as further provided in Section 2.11(b).
2.11 PRO RATA TREATMENT AND PAYMENTS.
(a) PRO RATA TREATMENT. Each borrowing by Company from
Lenders hereunder and each payment by Company on account of any fee payable to
the Lenders shall be made ratably according to the respective Pro Rata Shares of
Lenders.
(b) APPORTIONMENT OF PAYMENTS. Each payment (including
each prepayment) by Company on account of principal of and interest on the Loans
shall be made pro rata according to the effective outstanding principal amounts
of the Loans then held by Lenders. All payments (including prepayments) to be
made by Company hereunder and under the Notes and the other Loan Documents,
whether on account of principal, interest, fees or otherwise, shall be made
without set off or counterclaim and shall be made not later than 12:00 p.m., New
York time, on the due date thereof, to Agent, for the account of Lenders, at
Agent's office specified on the appropriate signature page hereof, in Dollars
and in immediately available funds. All such payments not relating to principal
or interest of specific Loans, or not constituting payment of specific fees
shall be applied as follows:
FIRST, to pay any fees, costs, or expense reimbursements then
due to Collateral Agent from Company;
SECOND, to pay any fees, costs, or expense reimbursements then
due to Agent from Company;
THIRD, to pay any fees, premiums, costs, or expense
reimbursements then due to Lenders from Company;
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FOURTH, ratably to pay any interest due in respect of the
Loans, until paid in full;
FIFTH, ratably to pay principal of the Loans;
SIXTH, ratably to pay any other Obligations due to Agent or
any Lender by Company.
If any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day, and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension. Each of the Lenders acknowledges
that Agent may be required by the terms of the Intercreditor Agreement, after
the receipt of any amount and prior to making any allocation or payment thereof
to the Lenders, to pay such amount to Collateral Agent for redistribution
pursuant to the Intercreditor Agreement.
(c) PAYMENTS BY LENDERS. Unless Agent shall have been
notified in writing prior to the Loan Borrowing Date by any Lender having a
Commitment that such Lender will not make the amount that would constitute its
Pro Rata Share of the Loans to be borrowed on the Loan Borrowing Date, available
on such date to Agent, Agent may assume that such Lender has made such amount
available to Agent on such Loan Borrowing Date, and Agent may, in its sole
discretion, but shall not be obligated to, in reliance upon such assumption,
make available to Company a corresponding amount. If such corresponding amount
is not made available to Agent on the Loan Borrowing Date, Agent shall be
entitled to recover such corresponding amount from such Lender, together with
interest thereon, for each day from such Loan Borrowing Date until the date such
amount is paid to Agent, at the customary rate set by Agent for correction of
errors among banks for three Business Days and thereafter at the Default Rate in
effect from time to time. A certificate of Agent submitted to any Lender with
respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error. If such Lender does not pay such corresponding amount
to Agent forthwith upon demand, Agent shall promptly notify Company and Company
shall immediately pay such corresponding amount to Agent with interest thereon,
for each day from the Loan Borrowing Date until the date such amount is paid to
Agent, at the rate payable under this Agreement for the Loans.
(d) PAYMENTS BY COMPANY. Unless Agent shall have been
notified by Company in writing prior to any date on which a payment becomes due
from Company that Company will not make the available to Agent on such date the
amount then due, Agent may assume that Company has made such amount available to
Agent on such date, and Agent may, in its sole discretion, but shall not be
obligated to, in reliance upon such assumption, make available to the relevant
Lender or Lenders a corresponding amount. If such corresponding amount is not
made available to Agent on such date, then without prejudice to any claim that
Agent or any Lender may have against Company for the amount not so paid and
without prejudice to Company's obligation to pay default interest thereon, Agent
shall be entitled to recover such corresponding amount from such Lender,
together with interest thereon, for each day from such Loan Borrowing Date until
the date such amount is paid to Agent, at the customary rate set by Agent for
correction of errors among banks for three Business Days and thereafter at the
Default
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Rate in effect from time to time. A certificate of Agent submitted to any Lender
with respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error. If such Lender does not pay such corresponding amount
to Agent forthwith upon demand, Agent shall promptly notify Company and Company
shall immediately pay such corresponding amount to Agent with interest thereon,
for each day from the Loan Borrowing Date until the date such amount is paid to
Agent, at the rate payable under this Agreement for the Loans.
2.12 REQUIREMENTS OF LAW.
If any Lender shall have determined that any change in any
Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any corporation controlling
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority made subsequent to
the date hereof does or shall have the effect of reducing the rate of return on
such Lender's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which such Lender or such corporation could have
achieved but for such change or compliance (taking into consideration such
Lender's or such corporation's policies with respect to capital adequacy) by an
amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to Company (with a copy to Agent) of a written request
therefor, Company shall pay to such Lender such additional amount or amounts as
will compensate such Lender for such reduction. The agreements in this Section
shall survive the payment of the Notes and all other amounts due hereunder.
2.13 TAXES.
(a) PAYMENTS TO BE FREE AND CLEAR; GROSS-UP. All payments
made by Company under this Agreement and the Notes and the other Loan Documents
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding, (i) in the case
of Agent and each Lender, net income taxes and franchise taxes (imposed in lieu
of net income taxes) imposed on Agent or such Lender, as the case may be, as a
result of a present or former connection between the jurisdiction of the
government or taxing authority imposing such tax and Agent or such Lender
(excluding a connection arising solely from Agent or such Lender having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement, the Notes or any other Loan Document) or any political
subdivision or taxing authority thereof or therein and (ii) in the case of each
Lender organized under the laws of a jurisdiction outside the United States,
United States federal withholding tax payable with respect to payments by
Company that would not have been imposed had such Lender, to the extent then
required thereunder, delivered to Company and Agent the forms prescribed by
Section 2.13(b) (all such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions and withholdings being hereinafter called "Taxes"). If any
Taxes are required by law to be withheld from any amounts payable to Agent or
any Lender hereunder or under the Notes or under the other Loan Documents, the
amounts so payable to Agent or such Lender shall be increased to the extent
necessary to yield to Agent or such Lender (after payment of all Taxes) interest
or any such other
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amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the Notes and the other Loan Documents. If Company fails to pay
any Taxes when due to the appropriate taxing authority, Company shall indemnify
Agent and Lenders for any incremental taxes, interest or penalties that may
become payable by Agent or any Lender as a result of any such failure. The
agreements in this Section shall survive the termination of this Agreement and
the payment of the Notes and all other amounts payable hereunder.
(b) TAX CERTIFICATES. Each Lender that is not organized
under the laws of the United States of America or a state thereof agrees that it
will deliver to Company and Agent (i) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the
case may be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor
applicable form. Each such Lender also agrees to deliver to Company and Agent
two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms, or other manner of certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to Company, and such extensions or renewals thereof
as may reasonably be requested by Company or Agent, unless in any such case any
change in treaty, law or regulation has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises Company
and Agent. Such Lender shall certify (i) in the case of a Form 1001 or 4224,
that it is entitled to receive payments under this Agreement without deduction
or withholding of any United States federal income taxes and (ii) in the case of
a Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax.
SECTION 3
COLLATERAL
3.1 LIENS IN SUBSIDIARY STOCK, CONTRACT RECEIVABLES, REAL PROPERTY
AND PERSONAL PROPERTY.
To secure the prompt payment to Lenders of the Obligations,
including the Loans, together with all costs, expenses and fees payable by
Company hereunder, Company has granted, and caused each Subsidiary to grant, to
Collateral Agent, for the benefit of Lenders, a continuing Lien in and to all of
the following property and interests in property of Company and the
Subsidiaries, except the Excluded Property, whether now owned or existing or
hereafter acquired or arising, or in which Company and Subsidiaries now or
hereafter have any rights, and wherever located, and all proceeds thereof
("COLLATERAL"):
(a) the Subsidiary Stock;
(b) the Homesite Contracts Receivable;
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(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 Obligations and
upon the distribution of any Trust Property to Company or a Subsidiary, such
property shall, automatically, become subject to the Liens created by the
Security Documents, and Company shall notify Agent in writing of such event and
take such further actions as may be required by Agent and/or Collateral Agent to
evidence and perfect such Liens; provided that, in no event, shall a Lien be
granted on any assets required to be placed in a Reserve Account pursuant to the
Reorganization Plan or the Homesite Program.
3.2 SECURITY DOCUMENTS.
To evidence and perfect the Liens of Collateral Agent and
Agent in the Collateral in accordance with applicable law, Company has executed
and delivered and will execute and deliver and has caused the Subsidiaries to
execute and deliver and will cause the Subsidiaries to execute and deliver to
Collateral Agent the Security Documents, which Security Documents have been or
will be filed and recorded, and Company has delivered and will deliver and has
caused the Subsidiaries to deliver and will cause the Subsidiaries to deliver to
Collateral Agent any Collateral if the perfection of a Lien against such
Collateral requires possession thereof for purposes of perfecting such Liens,
all at the cost and expense of Company. Specifically, but without limiting the
generality of the foregoing, Company has or will, and has caused or will cause
the Subsidiaries to, do the following:
(a) STOCK PLEDGE. To evidence and perfect the Liens of
Collateral Agent in the Subsidiary Stock, Company and the Subsidiaries owning
other Subsidiaries, Excluded Subsidiaries, or Unrestricted Subsidiaries have
executed and delivered the Stock Pledge Agreement and have executed and
delivered and will execute and deliver related undated stock powers executed in
blank and have delivered and will deliver the original certificates representing
the Subsidiary Stock to Collateral Agent and have caused and will cause all
issuers of Subsidiary Stock to execute and deliver pledge acknowledgments
pursuant to the Stock Pledge Agreement.
(b) HOMESITE CONTRACTS RECEIVABLES AND COMMERCIAL
RECEIVABLES. To evidence and perfect the Liens of Collateral Agent in the
Homesite Contracts Receivable and Commercial Receivables, Company and
Subsidiaries have executed and delivered, and will execute and deliver, to
Collateral Agent the Security Agreements, together with related financing
statements, which have been or will be filed and recorded in accordance with
applicable law, and Company and Subsidiaries have duly endorsed, and will duly
endorse, any and all promissory notes included in the Homesite Contracts
Receivable and Commercial Receivables to the order of Collateral Agent and have
delivered, and will deliver, such promissory notes and the related
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mortgages or deeds of trust to Collateral Agent or its designee, and have
executed and delivered, and will deliver, assignments of promissory notes and
mortgages or deeds of trust, filed and recorded in accordance with applicable
law, and, as to Commercial Receivables acquired following the Original Effective
Date, accompanied by ALTA title insurance policies naming Collateral Agent as
the insured mortgagee thereunder.
(c) REAL PROPERTY. To evidence and perfect the liens of
Collateral Agent in the Real Property, Company and Subsidiaries have executed
and delivered, and will execute and deliver, to Collateral Agent the Mortgages
and Deeds of Trust and related financing statements encumbering such Real
Property, which have been or will be filed and recorded in accordance with
applicable law, accompanied by ALTA title insurance policies (if required)
insuring Collateral Agent's Lien represented thereby, and, if requested by
Agent, surveys of such Real Property.
(d) JOINT VENTURE PLEDGE. To evidence and perfect the
Liens of Collateral Agent in the interests of the Venture Subsidiaries in the
Joint Ventures, Company has caused, and will cause, the Venture Subsidiaries to
execute and deliver the Joint Venture Pledge Agreement and all requisite
consents in respect of such Liens.
(e) PERSONAL PROPERTY. To evidence and perfect the Liens
of Collateral Agent or Agent in the Personal Property, Company and Subsidiaries
have executed and delivered, and will execute and deliver, to Collateral Agent
the Security Agreements, together with related financing statements, which have
been or will be filed and recorded in accordance with applicable law. To the
extent that the Personal Property comprises Investments or Bank Accounts,
Company and Subsidiaries shall take the following actions:
(i) with respect to any Investment or Bank
Account which is or becomes evidenced by an agreement, instrument,
certificate or document, including promissory notes, stock
certificates, bonds, debentures, securities and certificates of
deposit, Company shall deliver, or shall cause such Subsidiary to
deliver, the original thereof to Collateral Agent, together with
appropriate assignments and endorsements or other specific evidence of
assignment thereof to Collateral Agent, in form and substance
acceptable to Collateral Agent;
(ii) with respect to any Investment or Bank
Account which is not certificated or otherwise evidence as described in
clause (i) above, including uncertificated securities and depository
and other accounts maintained with financial institutions and any other
Persons, Company shall notify Agent thereof and take, or cause such
Subsidiary to take, any and all steps which are required by Agent for
purposes of perfecting Collateral Agent's Lien therein;
(iii) Company shall keep Agent and Lenders
informed of any and all Bank Accounts maintained by Company or any
Subsidiary with any financial institution or other Person and, if
requested by Agent or Required Lenders, Company or such Subsidiary
shall execute a cash collateral account agreement in form and substance
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satisfactory to Agent, pursuant to which the Lien of Collateral Agent
in such Bank Accounts is perfected and preserved; and
(iv) if deemed by Agent or Required Lenders, in
its or their sole discretion, to be necessary for purposes of
perfecting the Lien of Collateral Agent in any Bank Account, Company
shall transfer to and maintain in a cash collateral account and shall
cause the Subsidiaries to transfer to and maintain in a cash collateral
account, the funds in each such Bank Account and if deemed necessary by
Agent shall cause such Subsidiary to become party to a cash collateral
account agreement in form and substance reasonably satisfactory to
Collateral Agent, pursuant to which the Lien of Collateral Agent in
such Bank Account shall be perfected and preserved; provided, however,
Company shall not be required to deposit the residual, remainder or
beneficial interest of Company and its Subsidiaries in the Reserve
Accounts, the Claims Disbursement Accounts and other escrow,
restricted, custodial and fiduciary accounts until such time as all
amounts required to be disbursed to the intended beneficiaries thereof
have been disbursed and the residual and remainder is available to
Company or any of its Subsidiaries for deposit in an unrestricted
account.
(f) ADDITIONAL ACTS. Company shall, and shall cause the
Subsidiaries to, take all actions and execute all documents deemed necessary by
Agent or Collateral Agent to ensure that Collateral Agent, for the benefit of
Lenders, shall have a security interest in the Collateral granted by the
Security Documents having the Agreed Priority, which security interest shall
have the priority set forth in the Intercreditor Agreement. In the event that
the perfection or recordation of Collateral Agent's or Agent's Lien pursuant
hereto upon any Collateral acquired hereafter by Company or any Subsidiary
requires any additional act of possession or filing or recordation of any
Security Document, Company shall notify Agent of the acquisition of such
Collateral and at Agent's request Company shall execute and deliver and shall
cause the Subsidiaries to execute and deliver such Security Documents for filing
or recordation and deliver such items of Collateral as Agent and Collateral
Agent may reasonably request for purposes thereof and Company shall pay the cost
of any such Security Documents and the filing and recordation thereof. Without
limiting the generality of the foregoing, Company agrees to, and to cause each
Subsidiary (other than with respect to property required to be released pursuant
to Section 3.3) to, notify Agent upon the acquisition of any Real Property
acquired after the date hereof, except as provided by Section 3.3, and upon
request of Agent, to provide to Agent an appraisal and an environmental report
(each in form and substance satisfactory to Agent) covering such property, and
to cause such Real Property to be subjected to an Agreed Priority Mortgage or
Deed of Trust in favor of Collateral Agent for the benefit of Lenders, which
Mortgage, or Deed of Trust shall have the priority set forth in the
Interecreditor Agreement. With respect to any such Mortgages or Deeds of Trust,
Company or such Subsidiary shall deliver to Agent the following, all in form and
substance satisfactory to Agent: (i) executed Mortgages or Deeds of Trust and
financing statements encumbering such property and (ii) ALTA lenders' extended
coverage policies of title insurance on such property, in liability, amount and
form and issued by a title company satisfactory to Agent showing the Mortgage or
Deed of Trust as an Agreed Priority lien upon the property, subject only to
Liens permitted pursuant to Section 7.3 and such other exceptions as may be
approved by Agent in writing, together with endorsements
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reasonably required by Agent and affirmative assurances that the improvements
are wholly located within the boundaries of the insured land.
3.3 SUBORDINATIONS AND RELEASES OF MORTGAGE LIENS.
(a) [intentionally omitted]
(b) At such times as Liens are granted by Company or any
Subsidiary, as permitted pursuant to Section 7.3(n), so long as no Default or
Event of Default has occurred and is continuing or would result therefrom and
provided Agent has received a certificate of a Responsible Officer certifying
and demonstrating that all of the conditions set forth in Section 7.3(n) have
been satisfied, Agent shall instruct Collateral Agent to and Collateral Agent
shall execute documentation subordinating the Lien of the Mortgages to such
Liens, in form and substance satisfactory to Collateral Agent, unless such Real
Property qualifies for the release provisions set forth in Section 3.4(c), in
which event the provisions of Section 3.4(c) shall apply.
(c) At such time as Liens are granted by any Subsidiary,
as permitted by Section 7.3(n), so long as no Default or Event of Default has
occurred and is continuing or would result therefrom and provided Agent has
received a certificate of a Responsible Officer certifying and demonstrating
that all of the conditions set forth in Section 7.3(n) have been satisfied,
Agent shall instruct Collateral Agent to and Collateral Agent shall release the
Lien of the Mortgages on any Subsidiary Property Under Development if (i) (x)
such Real Property is financed under the acquisition and project financing
provisions of Section 7.2(e) or (h) and (y) the terms of such financing prohibit
subordinate Liens upon such Real Property or (ii) such Real Property is
contributed by Company to a Subsidiary pursuant to Section 7.9(g). Company shall
use reasonable efforts to cause any lender/seller providing the acquisition
and/or project financing on Subsidiary Property Under Development to permit the
subordination of Collateral Agent's Liens on such Subsidiary Property Under
Development, and thereby to eliminate the need for Collateral Agent to release
its Liens on such Subsidiary Property Under Development. In connection with the
release of any Liens on Subsidiary Property Under Development pursuant to this
Section 3.4(c), upon the request of Company, Agent shall instruct Collateral
Agent to, and Collateral Agent shall, release any Liens upon any Personal
Property related to and used or held for the use on the Real Property being
released; provided that Company provides a detailed list of such Personal
Property to be released in form and substance satisfactory to Agent. If such
lender/seller will permit such subordination, then, notwithstanding the
foregoing provisions of this Section 3.4(c), Collateral Agent's Liens on such
Subsidiary Property Under Development will not be released and will become
subordinate Liens pursuant to documentation in form and substance satisfactory
to Agent.
(d) At such time as any Lien is granted by a Subsidiary
pursuant to and as permitted by Section 7.3(o), so long as no Default or Event
of Default has occurred and is continuing or would result therefrom, and
provided Agent has received a certificate of a Responsible Officer certifying
and demonstrating that all of the conditions set forth in Section 7.3(o) have
been satisfied, Agent shall instruct Collateral Agent to and Collateral Agent
shall (i) release the Lien of the Mortgages on any Mezzanine Property Under
Development that is subject
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to the Lien so granted, (ii) release the stock of the MPUD Subsidiary which owns
such Mezzanine Property Under Development, and of all of such MPUD Subsidiary's
Subsidiaries from the Stock Pledge Agreement (but not the stock of the MPUD
Holding Company), (iii) release all members of the MPUD Subsidiary Group from
the Guarantees and the Security Documents and release the Lien on any Personal
Property related to and used or held for use on the Real Property being
released, but each of the foregoing actions shall be required only if and to the
extent that: (A) the Mezzanine Property Under Development is financed under the
acquisition and project financing provisions of Section 7.2(e) or Section 7.2(h)
and (B) the terms of such financing require the MPUD Subsidiary Group structure,
prohibit subordinate Liens upon such Real Property, related Personal Property
and the stock of the MPUD Subsidiary and MPUD Subsidiary Subsidiaries and
prohibit members of the MPUD Subsidiary Group from signing Guarantees.
3.4 GUARANTEES.
The payment and performance by Company of its obligations
under this Agreement, including the repayment of all Obligations by Company, and
any and all other liabilities of Company to Lenders, Agent, and Collateral Agent
whether now existing or hereafter created or acquired, shall be guaranteed by
any and all Subsidiaries, which shall be evidenced by guarantees in the form of
the Subsidiary Guarantees. Upon the formation or acquisition of any Subsidiary
(excluding all MPUD Subsidiary Group members), Company shall, and shall cause
such Subsidiary to, enter into such documents as Agent may reasonably request to
further evidence such guarantee.
SECTION 4
REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into this Agreement and
to make the Loans, Company hereby represents and warrants to Agent and each
Lender that:
4.1 FINANCIAL CONDITION.
(a) The consolidated balance sheets of Company and its
consolidated Subsidiaries as at December 31, 1997 and the related consolidated
statements of income and of cash flows for the fiscal year ended on such date,
reported on by Ernst & Young, copies of which have been furnished to each
Lender, fairly and accurately present the consolidated financial condition of
Company and its consolidated Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for the fiscal
year then ended.
(b) The unaudited consolidated balance sheets of Company
and its consolidated Subsidiaries as at September 30, 1998 and the related
consolidated statements of income and of cash flows for the nine-month period
ended on such date, copies of which have been furnished to each Lender, fairly
and accurately present the consolidated financial condition
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of Company and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows for
the period then ended (subject to normal year-end audit adjustments).
(c) All such financial statements described in clause (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
Company nor any of its consolidated Subsidiaries had, at the date of the most
recent balance sheet referred to above, any material Guarantee Obligation,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including any interest rate or foreign currency
swap or exchange transaction, which is not reflected in the foregoing statements
or in the notes thereto or in Schedule 4.1. During the period from September 30,
1998 to and including the date hereof there has been no sale, transfer or other
disposition or agreement therefor by Company or any of its consolidated
Subsidiaries of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) which is material in relation to the consolidated financial
condition of Company and its consolidated Subsidiaries at September 30, 1998,
except as described in Schedule 4.1.
4.2 NO MATERIAL ADVERSE CHANGE.
Since September 30, 1998, (a) there has been no development or
event nor any prospective development or event, which has had or could
reasonably be expected to have a Material Adverse Effect, except such
developments or events or prospective developments or events as have been
disclosed by Company in filings with the Securities and Exchange Commission made
prior to the date hereof and true and correct copies of which have been
delivered to Lenders or as set forth on Schedule 4.2, and (b) no dividends or
other distributions have been declared, paid or made upon the Capital Stock of
Company nor has any of the Capital Stock of Company been redeemed, retired,
purchased or otherwise acquired for value by Company or any of its Subsidiaries.
As of the date hereof and the Effective Date, no motion for the conversion of
the case, appointment of a trustee, or dismissal is pending or has been denied,
the reversal of which on appeal would affect the validity of this Agreement and
no appeal has been taken from the entry of the Confirmation Order in the
Reorganization Proceedings, the reversal, modification, or affirmance of which
will affect the validity or enforceability, or change the provisions, of this
Agreement or any of the other Loan Documents.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW.
Each of Company and its Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, except, in the case of any such Subsidiary, where all such
failures to be in good standing are not reasonably likely, in the aggregate, to
have a Material Adverse Effect, (b) has the corporate power and authority, and
the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign
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corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except to the extent that all such failures to be
so qualified and in good standing are not reasonably likely, in the aggregate,
to have a Material Adverse Effect, and (d) is in compliance with all
Requirements of Law except to the extent that any failures to comply therewith
is not reasonably likely, in the aggregate, to have a Material Adverse Effect.
4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
(a) COMPANY. Company has the corporate power and
authority, and the legal right, to make, deliver and perform this Agreement, the
Notes and other Loan Documents, and to borrow hereunder and has taken all
necessary corporate action to authorize the borrowings on the terms and
conditions of this Agreement, and the Notes and to authorize the execution,
delivery and performance of this Agreement, the Notes and other Loan Documents.
Except as set forth on Schedule 4.4, no consent or authorization of, filing with
or other act by or in respect of, any Governmental Authority or any other Person
is required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of this Agreement, the Notes
or the other Loan Documents, except such consents, authorizations, filings or
other acts as have been obtained, made or performed, as the case may be, prior
to the Effective Date and as remain in full force and effect or which the
failure to obtain, make or perform, as the case may be, could not reasonably be
expected to have a Material Adverse Effect or to impose any liability whatsoever
on Agent, Collateral Agent or any Lender.
This Agreement and the other Loan Documents to which Company
is party have been, and all Loan Documents to which Company hereafter becomes a
party will be, duly executed and delivered on behalf of Company. This Agreement
has been duly executed and delivered and constitutes, and each other Loan
Document signed on the date hereof has been duly executed and delivered and
constitutes, and each other Loan Document when executed and delivered will
constitute, a legal, valid and binding obligation of Company enforceable against
Company in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting the enforcement of creditors rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).
(b) SUBSIDIARIES. Each of the Subsidiaries (including
Unrestricted Subsidiaries and Excluded Subsidiaries) party to the Loan Documents
has the corporate power and authority, and the legal right, to make, deliver and
perform the Loan Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party. Except as set forth on Schedule 4.4, no
consent or authorization of, filing with or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of the Loan
Documents to which it is a party, except such consents, authorizations, filings
or other acts as have been obtained, made or performed, as the case may be,
prior to the Effective Date and as remain in full force and effect or which the
failure to obtain, make or perform, as the case may be, could not reasonably be
expected to have a
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Material Adverse Effect. Each Loan Document to which any Subsidiary (including
Unrestricted Subsidiaries) is a party has been and all Loan Documents to which
any Subsidiary hereafter becomes a party will be duly executed and delivered on
behalf of each such Subsidiary. Each Loan Document to which any Subsidiary
(including Unrestricted Subsidiaries) is a party, executed and delivered
constitutes, or when executed and delivered will constitute, a legal, valid and
binding obligation of each such Subsidiary, enforceable against each such
Subsidiary in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting the enforcement of creditors rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
4.5 NO LEGAL BAR.
The execution, delivery and performance of this Agreement, the
Notes, the Guarantees and the other Loan Documents, the borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or
Contractual Obligation of Company or of any of its Subsidiaries, the violation
of which could reasonably be expected to have a Material Adverse Effect and will
not result in, or require, the creation or imposition of any Lien on any of its
or their respective properties or revenues pursuant to any such Requirement of
Law or Contractual Obligation.
4.6 NO MATERIAL LITIGATION.
As of the Effective Date, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of Company, threatened by or against Company or any of its
Subsidiaries or against any of its or their respective properties or revenues
(a) with respect to this Agreement, the Notes or other Loan Documents or any of
the transactions contemplated hereby or thereby or (b) which, if adversely
determined, is reasonably likely to have a Material Adverse Effect, which has
not been disclosed (including, estimates of the Dollar amounts involved) in
Company's filings with the Securities and Exchange Commission made prior to the
Effective Date, true and correct copies of which have been delivered to Lenders
or on Schedule 4.6 hereto.
4.7 NO DEFAULT.
As of the Effective Date, neither Company nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which is reasonably likely to have a Material Adverse
Effect, except as disclosed, including estimates of the Dollar amounts involved,
in Company's filings with the Securities and Exchange Commission, true and
correct copies of which have been delivered to Lenders or on Schedule 4.7. As of
the Effective Date, no Default or Event of Default has occurred and is
continuing. As of the Effective Date, no default has occurred and is continuing
under the Secured Agreement Documents.
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4.8 OWNERSHIP OF PROPERTY; LIENS.
As of the Effective Date, each of Company and its
Subsidiaries, as the case may be, has good record and marketable title in fee
simple to, or a valid leasehold interest in, or a first mortgagee interest in,
all of the Collateral and all its other real property, and good title to all its
other property necessary for the operation of its business, and none of such
property of Company or such Subsidiaries is subject to any Lien except as
permitted by Section 7.3.
4.9 INTELLECTUAL PROPERTY.
Except as disclosed on Schedule 4.9, as of the Effective Date,
Company and each of its Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, technology, know-how and processes necessary
for the conduct of its business as currently conducted except for those the
failure to own or license which is not reasonably likely to have a Material
Adverse Effect (the "Intellectual Property"). No claim has been asserted and is
pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does Company know of any valid basis for any such claim. The use
of such Intellectual Property by Company and its Subsidiaries does not infringe
on the rights of any Person, except for such claims and infringements that, in
the aggregate, do not have a Material Adverse Effect. To the knowledge of
Company, there exists no infringement upon the Intellectual Property rights of
Company and Subsidiaries by any other Person.
4.10 TAXES.
As of the Effective Date, each of Company and its Subsidiaries
(including Unrestricted Subsidiaries and Joint Ventures) has filed or caused to
be filed all tax returns which, to the knowledge of Company, are required to be
filed and has paid all taxes shown to be due and payable on said returns or on
any assessments made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental
Authority (other than any taxes, fees or other charges the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of Company or its Subsidiaries (including Unrestricted Subsidiaries and
Joint Ventures), as the case may be) except tax claims which are to be paid on a
deferred basis pursuant to the Reorganization Plan; no tax Lien has been filed,
and, to the knowledge of Company, no claim is being asserted, with respect to
any such tax, fee or other charge, except as disclosed on Schedule 4.10.
4.11 FEDERAL REGULATIONS.
No part of the proceeds of any Loans will be used for
"purchasing" or "carrying" any "margin stock" within the respective meanings of
each of the quoted terms under Regulation 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.
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4.12 ERISA.
Except as disclosed on Schedule 4.12, no Reportable Event has occurred
during the five-year period prior to the date on which this representation is
made or deemed made with respect to any Plan. Company and each Commonly
Controlled Entity are in substantial compliance with the applicable provisions
of ERISA with respect to each Plan. The present value of all accrued benefits
under each Single Employer Plan (based on the reasonable assumptions used by the
independent actuary for such Plan for purposes of establishing the minimum
funding requirements under Section 412 of the Code) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits, individually or in the aggregate for all Single Employer Plans
(excluding for purposes of such computation any Single Employer Plans with
respect to which the value of the assets exceed the present value of the accrued
benefits), by more than $4,600,000. Neither Company nor any Commonly Controlled
Entity is liable under Title IV of ERISA by reason of the termination of a
Single Employer Plan or the withdrawal from a Single Employer Plan in which it
was a "substantial employer" within the meaning of Section 4001(a)(2) of ERISA.
Each Plan intended to be qualified under Section 401(a) of the Code, including
each Single Employer Plan, is qualified in operation under Section 401(a) of the
Code and is qualified in form under Section 401(a) of the Code, except with
respect to any required amendments with respect to which the remedial amendment
period under Section 401(b) of the Code has not expired. Neither Company nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan with respect to which there remains any unpaid liability, and
neither Company nor any Commonly Controlled Entity would become subject to any
liability under ERISA if Company or any such Commonly Controlled Entity were to
withdraw from all Multiemployer Plans in complete withdrawals within the meaning
of Section 4203 of ERISA as of the valuation dates for such plans most closely
preceding the date on which this representation is made or deemed made. No
Multiemployer Plan is in Reorganization or Insolvent. Neither the Company nor
any Commonly Controlled Entity is liable for fines, penalties, taxes or related
charges under Chapter 43 of the Code or under Sections 409, 502(c), 502(i),
502(1) or 4071 of ERISA in an amount exceeding $50,000 in the aggregate at any
time. There are no material claims (other than routine claims for benefits)
against any Plan (other than a Multiemployer Plan) or against Company or any
Commonly Controlled Entity in connection with any such Plan. Neither Company nor
any Commonly Controlled Entity is liable for post retirement benefits to be
provided to their current and former employees under Plans which are welfare
benefit plans (as defined in Section 3(1) of ERISA) except as required by
Section 4980B of the Code and Section 601 of ERISA.
4.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS.
Company is not an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended. Company is not subject to regulation under any
Federal or state statute or regulation which limits its ability to incur
Indebtedness or Guarantee Obligations.
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4.14 SUBSIDIARIES AND JOINT VENTURES.
As of the Effective Date, (a) the Subsidiaries (including
Unrestricted Subsidiaries and Excluded Subsidiaries) listed on Schedule 4.14(A)
constitute all of the Subsidiaries (including Unrestricted Subsidiaries and
Excluded Subsidiaries) and such schedule identifies the shareholders of such
Subsidiary, (b) the Joint Ventures listed on Schedule 4.14(B) constitute all of
the Joint Ventures and such schedule identifies all owners of the Joint Venture
interests thereof and the percentage equity ownership of such owners, and (c)
neither Company nor any Subsidiary (including Unrestricted Subsidiaries,
Excluded Subsidiaries, and Joint Ventures) 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 in the certificate regarding environmental matters
required pursuant to Section 5.1(i) or to the extent that the facts and
circumstances giving rise to any such failure to be so true and correct is not
reasonably likely to have a Material Adverse Effect and could not reasonably be
expected to impose any liability whatsoever on Agent, Collateral Agent or any
Lender:
(a) The Real Property does not contain, and has not
previously contained, therein, thereon, or thereunder, including the soil and
groundwater thereunder, any Hazardous Materials in violation of any
Environmental Law.
(b) Company, its Subsidiaries, the Real Property, and all
operations and facilities at the 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 Real Property or impair the fair saleable value of any thereof.
(c) Neither Company nor any of its Subsidiaries 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 Real Property, nor is Company aware that any Governmental Authority is
contemplating delivering to Company or any of its Subsidiaries any such notice.
Neither Company nor any of its Subsidiaries has reported any releases of
Hazardous Materials to any Governmental Authority.
(d) Hazardous Materials have not been generated, treated,
stored or disposed of, at, on or under any of the Real Property in violation of
any Environmental Law, nor have any Hazardous Materials been transferred from
the 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
Real Property requiring any approval or permit from any Governmental Authority.
Neither Company nor any of its Subsidiaries has ever owned or operated or
currently owns or operates any waste disposal or storage facilities, underground
storage tanks or surface impoundments.
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(e) There are no governmental or administrative actions
or judicial proceedings pending or, to the knowledge of Company, contemplated
under any Environmental Laws to which Company or any of its Subsidiaries is or,
to the knowledge of Company, will be named as a party with respect to the Real
Property, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to Company or
any of its Subsidiaries or to any of the Real Property.
(f) There is no environmental condition associated with
any of the 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 Real Property have been made
available to Agent.
4.16 INDEBTEDNESS.
Schedule 4.16 lists all Indebtedness (including available
commitments) of Company and its Subsidiaries as existing on the Effective Date.
4.17 CONTINGENT OBLIGATIONS.
Schedule 4.17 lists all guarantees by Company and all
guarantees by any of its Subsidiaries.
4.18 RESTITUTION PROGRAM AND FINAL JUDGMENT.
As of the Effective Date, Company and its Subsidiaries have
fully complied with the "Restitution Program" and have been released from the
"Final Judgment," as defined in the Reorganization Plan.
4.19 CERTAIN FEES.
Other than fees payable pursuant to Section 2.9 above, no
broker's or finder's fee or commission will be payable with respect to this
Agreement or any of the transactions contemplated hereby, and Company hereby
indemnifies Agent, Collateral Agent and Lenders against, and agrees that it will
hold Lenders 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.
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No representation or warranty of Company or any of its
Subsidiaries contained in any Loan Document or in any other document,
certificate or written statement furnished to Lenders by or on behalf of Company
or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact (known to Company in the case of any document
not furnished by it) necessary in order to make the statements contained herein
or therein not misleading in light of the circumstances in which the same were
made. Any projections and pro forma financial information contained in such
materials are based upon good faith estimates and assumptions believed by
Company to be reasonable at the time made, it being recognized by Lenders that
such projections as to future events are not to be viewed as facts and that
actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known (or which should
upon the reasonable exercise of diligence be known) to Company (other than
matters of an economic nature) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect and have not been
disclosed herein or in such other written documents, certificates and statements
furnished to Lenders for use in connection with the transactions contemplated
hereby.
4.21 INSURANCE.
Company and each of its Subsidiaries maintain, with
financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and business of its Subsidiaries,
against loss and damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar business of such types
and in such amounts as are customarily carried under similar circumstances by
such other corporations. Attached as Schedule 4.21 is a complete and accurate
description of all policies of insurance that will be in effect as of the
Effective Date for Company and each of its Subsidiaries.
4.22 REAL PROPERTY MATTERS.
Company and each of its Subsidiaries (including the Joint
Ventures) is in compliance with all development orders obtained by Company and
its Subsidiaries (including the Joint Ventures) with respect to any Real
Property, except to the extent noncompliance could not reasonably be expected to
have a Material Adverse Effect.
4.23 REORGANIZATION PROCEEDINGS.
Company has delivered to Agent and Lenders true, correct and
complete copies of the Reorganization Plan and Confirmation Order, together with
copies of any modifications thereto or subsequent proceedings with the
Bankruptcy Court.
4.24 EXCLUDED SUBSIDIARIES; UNRESTRICTED SUBSIDIARIES.
(a) The Excluded Subsidiaries do not have, nor are they
anticipated to have, any assets or revenues. The Excluded Subsidiaries do not
currently conduct, nor are they anticipated to begin to conduct, any business.
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(b) The Unrestricted Subsidiaries do not have, nor are
they anticipated to have, any asset or revenues other than the assets disclosed
on Part A of 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 Part A of Schedule 4.24 as being conducted by them.
4.25 NO FURTHER AMOUNTS DUE UNDER UNSECURED 1996 NOTES.
There are no further amounts due from Company under the
Unsecured 1996 Notes and any unclaimed funds disbursed by The United States
Trust Company of New York to Company are owned free and clear of claims which
may be asserted by third parties, including, without limitation, claims by any
state or other Governmental Authority that such unclaimed funds are "abandoned
property" under state escheat or other applicable laws.
4.26 BANK ACCOUNTS.
Schedule 4.26 (as amended from time to time by written notice
to Agent) is a true and correct list of all Bank Accounts of Company and its
Subsidiaries.
4.27 [INTENTIONALLY OMITTED].
4.28 MPUD SUBSIDIARY GROUPS.
Except as disclosed on Schedule 4.28, no Subsidiary is a
member of an MPUD Subsidiary Group.
4.29 SPUD SUBSIDIARIES.
Except as disclosed on Schedule 4.29, no Subsidiary is a SPUD
Subsidiary.
4.30 DRI AND ZONING MATTERS.
The representations and warranties set forth in Schedule 4.30
are by this reference incorporated herein as though fully set forth and made in
this Section 4.30.
4.31 BANKRUPTCY MATTERS.
Neither the Company nor any of its Subsidiaries has any
continuing liabilities arising out of or in connection with the Reorganization
Proceedings or the Reorganization Plan which individually or in the aggregate
would have a Material Adverse Effect.
4.32 SERIES A PREFERRED STOCK.
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The rights, obligations and duties of Company, its
Subsidiaries and the holders of the Series A Preferred Stock are set forth
exclusively in the Series A Statement, theSecured Agreement and the Investment
Agreement, both as amended through the Effective Date, and the other documents
described therein (the "Series A Documents"), and there is no note, debt
instrument or other security or collateral of any kind whatsoever given by
Company or any Subsidiary, other than as described in the Series A Documents, to
secure the repayment or performance of any of the obligations of Company or any
Subsidiary with respect to the Series A Preferred Stock.
4.33 SERIES B PREFERRED STOCK.
The rights, obligations and duties of Company, its
Subsidiaries and the holders of the Series B Preferred Stock are set forth
exclusively in the Series B Statement and the Securities Purchase Agreement
dated as of June 24, 1997. There is no note, debt instrument or other security
or collateral of any kind whatsoever given by Company or any Subsidiary to
secure the repayment or performance of any of the obligations of Company or any
Subsidiary with respect to the Series B Preferred Stock.
SECTION 5
CONDITIONS PRECEDENT
The effectiveness of this Agreement and the obligations of
Lenders to make Loans hereunder are subject to the prior or concurrent
satisfaction of all the following conditions:
5.1 CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT.
(a) LOAN DOCUMENTS. Agent shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of Company, with
a counterpart for each Lender, (ii) for the account of each Lender, a Note,
(iii) each other Loan Document, required to be delivered hereunder, conforming
to the requirements hereof and executed and delivered by a duly authorized
officer of Company or each of its Subsidiaries (including, the Unrestricted
Subsidiaries and the Excluded Subsidiaries, in each case as to their respective
acknowledgments under the Stock Pledge Agreement), as the case may be, which are
parties to such Loan Document, with a counterpart for each Lender, (iv) the
Funds Flow Memo, executed and delivered by a duly authorized officer of each
party thereto, and (v) copies, certified as true and correct copies by a
Responsible Officer, of the Security Documents, as amended through the Effective
Date.
Agent and Collateral Agent shall have received (vi) in form
and substance satisfactory to Agent and Collateral Agent, a duly executed
agreement with Annis, Mitchell, Cockey, Edwards & Roehn, P.A. of Tampa, Florida
with respect to certain services to be provided thereby to Agent and Collateral
Agent, respectively, and (vii) the Funds Flow Memo.
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(b) CORPORATE PROCEEDINGS OF COMPANY. Agent shall have
received, with a counterpart for each Lender, a copy of the resolutions, in form
and substance satisfactory to Agent, of the Board of Directors of Company
authorizing the execution, delivery and performance of this Agreement, the Notes
and the other Loan Documents to which it is a party, certified by the Secretary
or an Assistant Secretary of the Company as of the Effective Date, which
certificate shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded and are in full force and effect and
shall be in form and substance satisfactory to Agent.
(c) CORPORATE PROCEEDINGS OF THE SUBSIDIARIES. Agent
shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to Agent, of the Board of
Directors of each Subsidiary of Company which is a party to any Loan Document
authorizing the execution, delivery and performance of the Loan Documents to
which it is a party, certified by the secretary or an assistant secretary of
each Subsidiary as of the Effective Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded and are in full force and effect.
(d) CORPORATE DOCUMENTS. Agent shall have received, with
a counterpart for each Lender, true and complete copies of (i) the certificate
or articles of incorporation of the Company and each of its Subsidiaries which
is a party to any Loan Document certified by the Secretary of State of their
respective jurisdictions of incorporation as of a recent date prior to the
Effective Date, (ii) the Bylaws of the Company and each of its Subsidiaries
which is a party to any Loan Document certified as of the Effective Date by its
secretary or an assistant secretary, (iii) good standing certificates,
including, in states which provide such certificates, certification of tax
status, of the Company and each of its Subsidiaries which is a party to any Loan
Document certified by the Secretary of State of their respective jurisdictions
of incorporation and of each jurisdiction in which they are qualified to do
business as a foreign corporation dated as of a recent date prior to the
Effective Date and (iv) incumbency and signature certificates for Company and
each Subsidiary executing any Loan Documents as of the Effective Date.
(e) OTHER DOCUMENTS. Agent shall have received, with a
counterpart for each Lender, copies, certified as true, correct, and complete by
a Responsible Officer, of (i) the DK Loan Agreement and the other DK Loan
Documents, (ii) the Secured Agreement and the Investment Instruments, (iii) the
Secured Note, and (iv) the Business Plan, together with evidence satisfactory to
the Agent that the DK Loan Agreement and the Secured Agreement have become fully
effective and available for utilization or will become so effective and
available simultaneously with the effectiveness of this Agreement.
(f) NO VIOLATION. The consummation of the transactions
contemplated hereby and by the other Loan Documents shall not contravene,
violate or conflict with, nor involve Agent or any Lender in any violation of,
any Requirement of Law.
(g) CONSENTS, AUTHORIZATIONS, AND FILINGS. Agent shall
have received, with a counterpart for each Lender, a certificate of a
Responsible Officer (i) attaching copies of all consents, authorizations, and
filings referred to in Section 4.4, and (ii) stating that such consents,
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authorizations, and filings are in full force and effect and each such consent,
authorization, and filing shall be in form and substance satisfactory to Agent.
(h) LEGAL OPINIONS. Agent shall have received, with a
counterpart for each Lender, opinions of the several counsel of Company and its
Subsidiaries, in each case, in form and substance satisfactory to Lenders in
their sole discretion.
(i) CERTIFICATION AS TO ENVIRONMENTAL MATTERS. Agent
shall have received, with a counterpart for each Lender, a certificate of a
Responsible Officer (i) stating that Company is not aware of any environmental
matters in connection with any of the Real Property which could reasonably be
expected to result in a liability to Company or any Subsidiary in excess of
$200,000 except as listed on a schedule attached to such certificate and (ii)
certifying that Company has made, and agreeing that Company will continue to
make, available to Agent, promptly after receipt thereof, 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 Real Property, and any report or audit prepared by a private company
with respect thereto.
(j) CONTINUED PERFECTION OF SECURITY INTERESTS. Company
and its Subsidiaries party to any of the Security Documents shall have taken or
cause to be taken all such actions deemed necessary or desirable by Collateral
Agent to ensure that Collateral Agent or Agent has and continues to have a valid
and perfected security interest in the Collateral granted by the Security
Documents (which security interest shall have the priority set forth in the
Intercreditor Agreement) subject to the Liens permitted pursuant to this
Agreement and the Security Documents (and Agent and Collateral Agent shall have
received satisfactory evidence thereof). Such action shall include: (i) the
delivery by Company pursuant to the Stock Pledge Agreement of certificates
(which certificates shall be registered in the name of Collateral Agent or
properly endorsed in blank for transfer or accompanied by irrevocable undated
stock powers duly endorsed in blank, all in form and substance satisfactory to
Collateral Agent and Agent) representing all Subsidiary Stock; (ii) the delivery
to Collateral Agent of Uniform Commercial Code financing statements, executed by
each of Company and each of its Subsidiaries as to the Collateral granted by
each such party for all jurisdictions as may be necessary or desirable to
perfect or continue the perfection of Collateral Agent's security interest in
such Collateral; (iii) the delivery by Company and its Subsidiaries of original
documents relative to Homesite Contract Receivables and Commercial Receivables,
including appropriate endorsements or assignments, all in form and substance
satisfactory to Collateral Agent and Agent, as may be necessary or desirable to
perfect or continue the perfection of Collateral Agent's security interest in
such Collateral; and (iv) evidence reasonably satisfactory to Collateral Agent
and Agent that all other filings, recordings and other actions Collateral Agent
and Agent deems necessary or advisable to establish, preserve and perfect the
Liens and the priority thereof granted to Collateral Agent and Agent hereunder
shall have been made.
(k) REAL PROPERTY MATTERS. Agent shall have received: (i)
such new Mortgages and Deeds of Trust or such amendments to the existing
Mortgages and Deeds of Trust as may be requested by Agent, in each case in form
and substance satisfactory to Agent and its
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local counsel, to protect and preserve the Lien and priority of the Mortgages
and Deeds of Trust as they secure the Loans and other amounts due hereunder,
together with new ALTA lender's extended coverage policies of title insurance or
amendments of the existing ALTA lender's extended coverage policies of title
insurance on the Real Property encumbered by the Mortgages and Deeds of Trusts
in liability, amount and form issued by a title company satisfactory to Agent
showing the Mortgages and Deeds of Trust as first Liens upon the respective Real
Property, subject only to Liens permitted hereunder and thereunder and such
other exceptions or exclusions as may be approved by Agent in its sole
discretion, together with any endorsements reasonably required by Agent, and
affirmative assurance that the improvements are fully located within the
boundaries of the insured land; and (ii) in respect of the Real Property listed
on Schedule 5.1(k), copies of such appraisals, surveys, environmental audit
reports, satisfactory evidence of entitlements (including so-called "zoning
letters"), and other documents as Agent may request, each as specified or
contemplated on Schedule 5.1(k), and each prepared by consultants or other
experts satisfactory to Agent.
(l) EVIDENCE OF INSURANCE. Company shall have delivered
to Agent certificates of insurance naming Collateral Agent on behalf of Lenders
as loss payee under the casualty and surety policies required pursuant to
Section 6.5.
(m) NO MATERIAL ADVERSE EFFECT. On the Effective Date,
Agent shall have received an officer's certificate executed by a Responsible
Officer stating that no Material Adverse Effect has occurred since September 30,
1998, except as disclosed in Company's Form 10-Q for the quarter ended as of
September 30, 1998 or except as disclosed on Schedule 5.1(m).
(n) INTERCREDITOR AGREEMENT. The Intercreditor Agreement
shall have been executed and delivered by each of the parties thereto, and Agent
shall have received a fully executed copy thereof in form and substance
satisfactory to Agent.
(o) FEES, COSTS, AND EXPENSES. As of the Effective Date,
Company shall have paid: (i) to the Agent all fees, costs, and expenses of Agent
and its counsel incurred in connection with the preparation, negotiation, and
execution of this Agreement, the Intercreditor Agreement, and any other
documents executed in connection herewith and therewith; and (ii) to Collateral
Agent all fees, costs, and expenses thereof and of counsel thereof incurred in
connection with the preparation, negotiation, and execution of the Secured Debt
Documents and the Intercreditor Agreement, and any other documents executed in
connection herewith and therewith.
(p) RECAPITALIZATION TRANSACTIONS. Each of the
Recapitalization Transactions shall have been consummated in accordance with all
applicable law, the underlying transaction documents and the Funds Flow Memo,
and Agent shall have received evidence of such consummation satisfactory to
Agent.
(q) AMENDMENT OF CERTAIN LOAN DOCUMENTS.The Security
Documents and other Loan Documents shall have been amended in form and substance
satisfactory to Agent.
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(r) [INTENTIONALLY OMITTED].
(s) [INTENTIONALLY OMITTED].
(t) [INTENTIONALLY OMITTED].
(u) BUSINESS PLAN. Agent shall have received (i)
Company's Business Plan as of the Effective Date, which shall be in form and
substance satisfactory to Lenders, and (ii) evidence, satisfactory to Lenders,
that Company has sufficient funds, or availability to sufficient funds,
necessary to carry out such Business Plan.
(v) EFFECTIVE DATE. The Effective Date shall have
occurred on or before January 29, 1999.
(w) REORGANIZATION PROCEEDINGS. Agent shall have received
copies of the Reorganization Plan and Confirmation Order, together with copies
of any modifications thereto, in each case, certified by the Secretary of the
Company as true, correct and complete as of the Effective Date.
(x) OTHER MATTERS. All other documents and legal matters
in connection with the transactions contemplated by this Agreement shall have
been executed, delivered, or recorded, and shall be in form and substance
satisfactory to Agent, the Lenders, and their respective counsel.
5.2 ADDITIONAL CONDITIONS TO THE LOAN.
The effectiveness of this Agreement and the agreement of each
Lender to make the Loan requested to be made by it on the Loan Borrowing Date is
subject to the satisfaction of the further conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by Company and its Subsidiaries in or
pursuant to each of the Loan Documents shall be true, correct and complete on
and as of the date of such Loans, with such exceptions, amendments or
modifications as may be approved in writing by Agent. For the purposes hereof
with respect to any request for a Loan, any and all representations and
warranties made by Company or any of its Subsidiaries which are made "as of the
Effective Date" shall be required to be true and correct "as of the Loan
Borrowing Date," rather than "as of the Effective Date."
(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing as of the date of such extension of credit, as the
case may be, after giving effect to the Loans requested to be made on such date.
(c) ADDITIONAL SECURITY DOCUMENTS; OTHER DOCUMENTS. Agent
shall have received each additional Security Document as may be required
pursuant to Section 3.2 and each additional Guarantee required by Section 3.5,
in each case with a counterpart for each Lender,
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and each additional document, instrument, legal opinion or item of information
reasonably requested by it or the Required Lenders, with a counterpart for each
Lender, including a copy of any debt instrument, security agreement or other
material contract to which Company may be a party.
(d) OFFICER'S CERTIFICATE. In the case of any Loan
requested by Company, Agent shall have received the certificate required by
Section 2.3 with a counterpart for each Lender.
(e) ADDITIONAL MATTERS. All corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be satisfactory in form and substance to Agent, and Agent
shall have received such other documents and legal opinions in respect of any
aspect or consequence of the transactions contemplated hereby or thereby as it
or the Required Lenders shall reasonably request, with a counterpart for each
Lender.
The borrowing by Company hereunder shall constitute a representation and
warranty by Company, as of the date of such borrowing, that the conditions
contained in this Section 5.2 have been satisfied.
5.3 CONDITIONS SUBSEQUENT.
As a condition subsequent to the making of the Loans, Company
shall perform or cause to be performed the following (and the failure by Company
to so perform or so cause to be performed shall constitute an Event of Default):
(a) TAX SERVICING CONTRACTS. No later than 60
days after the Effective Date, Agent and Collateral Agent shall have
received a tax servicing contract in respect of such portion of the
Real Property located in Florida as shall be satisfactory to Agent and
Collateral Agent, in form and substance satisfactory to Agent and
Collateral Agent, among Company, Agent, Collateral Agent, and a tax
servicing firm satisfactory to Agent and Collateral Agent.
(b) COMPANY OPERATING ACCOUNT CONTROL AGREEMENT.
Within 30 days following the Effective Date, Company, Collateral Agent,
and Operating Account Bank shall have executed and delivered the
Company Operating Account Control Agreement.
(c) OTHER ACCOUNT CONTROL AGREEMENTS. Within 30
days following the Effective Date, Company shall have furnished to
Collateral Agent and Agent such additional control agreements in form
and substance satisfactory to Collateral Agent and Agent and shall have
taken all such other actions as Collateral Agent or Agent deems
necessary or desirable to ensure that Collateral Agent, on behalf of
Agent and Lenders, holds a perfected Agreed Priority security interest
in all of the deposit accounts of Company identified on Schedule 5.3(c)
hereof.
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SECTION 6
AFFIRMATIVE COVENANTS
Company hereby agrees that, so long as the Commitments remain
in effect or any Obligations remain outstanding and unpaid or any other amount
is owing to any Lender or Agent hereunder, Company shall, and shall cause each
of its Subsidiaries to:
6.1 FINANCIAL STATEMENTS.
Furnish to each Lender:
(a) as soon as available, but in any event not later than
90 days after the end of each fiscal year of Company, a copy of the consolidated
balance sheet of Company and its consolidated Subsidiaries (including
Unrestricted Subsidiaries) as at the 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, reported on without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by Ernst &
Young or other independent certified public accountants of nationally recognized
standing acceptable to the Required Lenders;
(b) as soon as available, but in any event not later than
90 days after the end of each fiscal year of Company, a copy of the
consolidating balance sheet of Company and its consolidated Subsidiaries
(including Unrestricted Subsidiaries) as at the end of such year and the related
consolidating statements of income and retained earnings and of cash flows for
such year, setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly stated in all
material respects;
(c) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of each
fiscal year of Company, the unaudited consolidated and consolidating balance
sheet of Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) as at the end of such quarter and the related unaudited
consolidated and consolidating statements of income and retained earnings and of
cash flows of Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) for such quarter and the portion of the fiscal year through the
end of such quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being fairly stated
in all material respects when considered in relation to the consolidated and
consolidating financial statements of Company and its consolidated Subsidiaries
(subject to normal year-end audit adjustments);
(d) as soon as available, but in any event not later than
30 days after the end of each calendar month, the unaudited consolidated balance
sheet of Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) as at the end of such month and the related unaudited consolidated
statements of income and retained earnings and of cash flows
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of Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) for such month, setting forth in each case in comparative form the
figures for such month as set forth on the Business Plan and, with a comparison
to the same calendar month of the preceding fiscal year, certified by a
Responsible Officer as being fairly stated in all material respects when
considered in relation to the consolidated financial statements of Company and
its consolidated Subsidiaries (including Unrestricted Subsidiaries) (subject to
nominal year-end audit adjustments); and
(e) as soon as available, but in any event not later than
45 days after the end of each fiscal quarter, projections by Company of the
operating cash flow budget of Company and its Subsidiaries for (i)the following
two fiscal quarters, prepared on a monthly basis and (ii) the two fiscal
quarters thereafter, prepared on a quarterly basis, certified by a Responsible
Officer as being prepared in good faith on the basis of the assumptions stated
therein, which assumptions were reasonable in light of conditions existing at
the time of delivery thereof and represented, at the time of delivery, Company's
best estimate of its future financial performance;
in each case, all such financial statements to be complete and correct in all
material respects and to be prepared in reasonable detail and (except in the
case of cash flows in (d) and (e) above) in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION.
(a) Furnish to each Lender:
(i) concurrently with the delivery of the
financial statements referred to in Section 6.1(a), a certificate of
the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary
therefor such accounting firm has obtained no knowledge that a Default
or Event of Default has occurred and is continuing, except as specified
in such certificate;
(ii) concurrently with the delivery of the
financial statements referred to in Sections 6.1(a), (b) and (c), a
certificate of a Responsible Officer stating that, to the best of such
Responsible Officer's knowledge, Company and each Subsidiary during
such period has observed or performed the covenants of Sections 7.1,
7.2, 7.3, 7.6, 7.8, 7.9, 7.15, 7.16, and 7.17 and all other of its
covenants and other agreements, and satisfied every condition,
contained in this Agreement and in the Notes and in the other Loan
Documents to which it is a party to be observed, performed or satisfied
by it, and that such Officer has obtained no knowledge that a Default
or Event of Default has occurred and is continuing except as specified
in such certificate, and, if a Default or Event of Default exists,
stating the details thereof and what actions Company proposes to take
with respect thereto;
(iii) within five Business Days after the same are
sent, copies of all financial statements and reports which Company
sends to its stockholders and all
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financial statements and reports which Company sends to the holders or
trustee of any public debt securities, and within five Business Days
after the same are filed, copies of all financial statements and
reports which Company may make to, or file with, the Securities and
Exchange Commission or any successor or analogous Governmental
Authority;
(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) promptly upon request therefor, new
appraisals (no more frequently than annually) and detailed ongoing
information as to the real estate underlying any Commercial Receivables
which are not Eligible Commercial Receivables, absorption, sales and
other related matters; and
(vi) promptly, such additional financial and
other information as any Lender may from time to time reasonably
request.
(b) Furnish to Agent:
(i) on a monthly basis and, in any event, by no
later than the 30th day of each month: (w) a detailed calculation of
the Gross Allowed Amount and the Maximum Permissible Loan; (x) a
summary listing of the Real Property included directly or indirectly in
the Gross Allowed Amount, 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 (z) a summary aging, by vendor, of
Company's accounts payable and any book overdraft and a monthly lot
closing report with respect to each project; in each case, in form
satisfactory to Agent; and
(ii) promptly, such additional financial and
other information as any Lender may from time to time reasonably
request.
6.3 PAYMENT OF OBLIGATIONS.
Pay, discharge or otherwise satisfy at or before maturity or
before they become delinquent, as the case may be, all its obligations of
whatever nature, except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, and reserves in conformity
with GAAP with respect thereto have been provided on the books of Company or its
Subsidiaries, as the case may be or where the terms of this Agreement or the
Reorganization Plan would prohibit such payment, discharge, or satisfaction.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
Subject to Sections 7.5, 7.6, 7.7 and 7.9: (a) continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect
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its corporate existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business; and (b) to comply with all Contractual Obligations and Requirements of
Law except to the extent that failure to comply therewith is not reasonably
likely to, in the aggregate, have a Material Adverse Effect.
6.5 MAINTENANCE OF PROPERTY; INSURANCE.
Keep all property useful and necessary in its business in good
working order and condition; maintain with financially sound and reputable
insurance companies insurance on all its property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business; and furnish to
each Lender, upon written request, full information as to the insurance carried.
Such insurance in any event shall include, without limitation, all replacement
costs associated with building collapse, whether caused by earthquake or
structural defects or otherwise, on all Real Property of the Borrower and each
of its Subsidiaries. Each such policy of insurance shall name Collateral Agent
as a loss payee thereunder and shall provide for at least thirty days prior
written notice to Agent of any material modification or cancellation of such
policies. On the Effective Date and on each anniversary thereafter, Company and
its Subsidiaries shall submit to Agent certificates of insurance evidencing
compliance with this Section 6.5.
6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; APPRAISALS.
Keep proper books of records and account in which full, true
and correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities; and permit representatives of Agent, and each Lender, with respect
to Company and its Subsidiaries, to visit and inspect any of the Collateral and
related properties and examine and make abstracts from any of its books and
records at any reasonable time and as often as may reasonably be desired and to
discuss the business, operations, properties and financial and other condition
of Company and its Subsidiaries with officers and employees of Company and such
Subsidiaries and with its independent certified public accountants. From time to
time, if Agent determines that obtaining appraisals is necessary or appropriate,
Agent will either cause its personnel to appraise, or obtain appraisal reports
from appraisers satisfactory to Agent, stating the then current fair market
values of all or any portion of the Real Property. Anything herein to the
contrary notwithstanding, Company shall not be obligated to reimburse Agent with
respect to appraisals of the same particular item of Real Property that occur
more frequently than once in any 6 consecutive month period, unless an Event of
Default has occurred and is continuing or there has occurred a material adverse
change in the value of the Collateral, in which case Company shall be obligated
to reimburse Agent with respect to as many appraisals as Agent deems necessary
to conduct.
6.7 NOTICES.
Promptly give notice to Agent and each Lender of:
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(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any
Contractual Obligation of Company or, to the knowledge of Company, any of its
Subsidiaries or (ii) litigation, investigation or proceeding which may exist at
any time between Company or, to the knowledge of Company, any of its
Subsidiaries and any Governmental Authority, which in either case, if not cured
or if adversely determined, as the case may be, would have a Material Adverse
Effect;
(c) any litigation or proceeding affecting Company or, to
the knowledge of Company, any of its Subsidiaries in which the amount involved
is $250,000 or more and, not covered by insurance or in which injunctive or
similar relief is sought;
(d) as soon as possible and in any event within 30 days
after Company knows or has reason to know thereof, the occurrence or expected
occurrence of any event or condition described in Section 4.12 which could
reasonably be expected to result in liability of Company or any Commonly
Controlled Entity in excess of $100,000 and which is not reflected in the
financial statements most recently delivered to Lenders pursuant to Section 6.1;
and
(e) any development or event which could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action Company proposes to take with respect thereto.
6.8 ENVIRONMENTAL LAWS.
(a) Comply with, and use its best efforts to insure
compliance by all tenants and subtenants, if any, with, all Environmental Laws
and obtain and comply with and maintain, and insure that all tenants and
subtenants obtain and comply with and maintain, any and all licenses, approvals,
registrations or permits required by Environmental Laws, except in each case to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect;
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not reasonably be expected to have a
Material Adverse Effect, and develop and maintain a system, satisfactory to
Agent, for performing periodic environmental compliance reviews with respect to
all of its properties, and for reporting such reviews to Agent and Lenders; and
(c) Defend, indemnify and hold harmless Agent and
Lenders, and their respective employees, agents, officers and directors, from
and against any and all claims,
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demands, penalties, fines, liabilities, settlements, damages, costs and expenses
of whatever kind or nature known or unknown, contingent or otherwise, arising
out of, or in any way relating to, the violation of or noncompliance with any
Environmental Laws applicable to the real property owned or operated by Company
or any of its Subsidiaries, or any orders, requirements or demands of
Governmental Authorities related thereto, including attorney's and consultant's
fees, investigation and laboratory fees, court costs and litigation expenses,
except to the extent that any of the foregoing arise out of the gross negligence
or willful misconduct of the party seeking indemnification therefor. The
agreements in this Section shall survive the payment of the Notes and all other
amounts payable hereunder.
6.9 BUSINESS PLAN.
Furnish to each Lender on or before the tenth day following
approval by Company's Board of Directors, but in no event later than December 31
of each fiscal year and within 10 days (after approval by Company's Board of
Directors, if applicable) of any amendment, modification or update thereto, a
Business Plan of Company and its Subsidiaries for the next succeeding fiscal
year in a form and in substance satisfactory to the Required Lenders setting
forth in reasonable detail a projected statement for such fiscal year's income
and cash flow with a projected balance sheet as of the close of the succeeding
fiscal year end, accompanied by a statement of a Responsible Officer that the
Business Plan projected statements of income, cash flow and balance sheet for
the succeeding fiscal year have been adopted by the Board of Directors of
Company. Company and its Subsidiary shall at all times conduct their business
substantially in accordance with the Business Plan and shall not materially
modify or deviate from such Business Plan without the prior written approval of
Agent and the Required Lenders.
6.10 AUTHORIZATIONS. Company will, and will cause each of its
Subsidiaries to use its good faith diligent best efforts to promptly obtain and
maintain in full force and effect, all licenses, consents, permits,
authorizations and filings (collectively, "Governmental Approvals") necessary to
develop, lease or own all of its properties, and, upon obtaining the foregoing,
Company will, and will cause each of its Subsidiaries to, maintain the
Governmental Approvals in full force and effect and comply with the terms
thereof, except only to the extent that failure to maintain the Governmental
Approvals and comply therewith is not reasonably likely to have a Material
Adverse Effect or result in any liability to Agent, Collateral Agent or any
Lender (at any time prior to Agent, Collateral Agent or any Lender taking title
to any of the Collateral pursuant to any exercise of remedies provided for
herein or in the other Loan Documents).
6.11 DIVIDENDS FROM SUBSIDIARIES.
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Cause the Subsidiaries to pay dividends to Company from the
Net Cash Proceeds of any sales of assets (including Real Property Sales) to the
extent not prohibited by law, including the proceeds of any utility
condemnations; provided that proceeds from the sale of residential units, lots
or tracts by Subsidiaries (a) from developed phases of a multi-phase project
comprising Subsidiary Property Under Development or Mezzanine Property Under
Development may be used to pay all costs associated with development of the same
phase or additional phases of the same project, including reasonable reserves
for such anticipated costs during the period commencing on the date of sale to
the date 180 days after the date of sale (excluding any costs which are an
allocated share of corporate general and administrative expenses of Company or
any Subsidiary), and (b) from single phase projects comprising Subsidiary
Property Under Development or Mezzanine Property Under Development to the extent
units, lots or tracts may be sold in accordance with applicable laws and
regulations prior to completion of the projects may be used to pay all costs
associated with development of such project (excluding any costs which are an
allocated share of corporate general and administrative expenses of Company or
any other Subsidiary), in either case until the conclusion of the project, at
and following which time all such proceeds shall be distributed to Company. For
purposes hereof, "conclusion of the project" shall mean the completion of
structure or infrastructure development of the project (or, with multi-phase
projects: (i)(y) the final phase of the project, or (z) the sale of
substantially all units thereon; and (ii) the payment of the Indebtedness and
Guarantee Obligations in respect of Subsidiary Property Under Development or
Mezzanine Property Under Development that prohibits such distributions) in
accordance with the requirements of applicable laws and regulations.
6.12 SUPPLEMENTAL REPORTS REGARDING REAL PROPERTY.
(a) Furnish to Agent such supplemental title reports on
the Real Property subject to the Deeds of Trust and Mortgages as Agent and
Required Lenders may reasonably request from time to time; provided Company
shall not be required to provide such supplemental reports more than once per
quarter.
(b) No later than 60 days after the Effective Date,
Company shall deliver to Agent such third party appraisals, environmental
reports, surveys, and ALTA title policies, as would have complied with the
provisions of Section 5.1(k) if delivered on the Effective Date with respect to
all Real Property to the extent such reports were not required by Lenders to be
delivered on or prior to the Effective Date.
(c) Without limiting the generality of Section 4.10,
Company shall cause all assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied, or assessed against any Real
Property located in Tennessee and Texas to be paid in full before delinquency or
before the expiration of any extension period and promptly shall execute and
deliver to Agent and Collateral Agent appropriate certificates attesting to the
payment thereof or deposit with respect thereto; provided, however, that in the
case of Real Property with a fair market value less than or equal to the
assessments or taxes with respect thereto, the Company may decide not to pay
such assessments or taxes. At any time during the existence of an Event of
Default, Agent and Collateral Agent shall have the right to require the
execution and delivery of
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a tax servicing contract in respect of the Real Property located in Tennessee
and Texas, in form and substance satisfactory to Agent and Collateral Agent,
among Company, Agent, Collateral Agent, and a tax servicing firm satisfactory to
Agent and Collateral Agent.
6.13 COMPLIANCE WITH LAWS.
Company shall, and shall cause each of its Subsidiaries to
comply with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority, noncompliance with which would or could be
reasonably expected to cause a Material Adverse Effect.
6.14 OTHER NOTICES.
Promptly give notice to Agent of:
(a) the creation of any new deposit account; and
(b) the organization or formation of any new Venture
Subsidiary, any other Subsidiary, any Unrestricted Subsidiary, or any Joint
Venture; or the disposition or dissolution of any Excluded Subsidiary;
in each case, together with such information related thereto as Agent may
request.
6.15 COMPANY OPERATING ACCOUNT CONTROL AGREEMENT.
At all times from and after the date of its execution and
delivery, maintain in full force and effect the Company Operating Account
Control Agreement. At all times from and after the Effective Date, Company shall
continue to maintain Company's cash management system substantially as such
system exists on the Effective Date after giving effect to the consummation of
the transactions contemplated to occur on such date, and shall continue to
concentrate the funds of Company into the Company Operating Account except to
the extent that such funds reasonably are required to be held in other accounts
for permitted uses by Company, and except to the extent that such funds are
invested in investments permitted by Section 7.9.
6.16 INDEMNIFICATION BY COMPANY. Company agrees to and does hereby
indemnify, hold harmless and defend Lenders from and against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever which are imposed
on, incurred by, or asserted against Lenders in any way relating to or arising
out of any failure of Company to comply with the terms of, or complete, the
Reorganization Plan.
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SECTION 7
NEGATIVE COVENANTS
Company hereby agrees that, so long as the Commitments remain
in effect or any Obligations remain outstanding and unpaid or any other amount
is owing to any Lender or Agent hereunder, Company shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly:
7.1 MAINTENANCE OF CONSOLIDATED NET WORTH.
Permit Consolidated Net Worth at any time to be less than the
amounts set forth below (hereinafter referred to as the "Minimum Consolidated
Net Worth") the sum of: (a) (i) from the Effective Date through December 31,
1999, $35,000,000; and (ii) at any time thereafter, $35,000,000; and (b) 50% of
the Annual Net Income for the prior fiscal year; provided, however, that the
amount determined under this clause (b) shall never be less than zero.
To demonstrate compliance with the Minimum Consolidated Net Worth covenant set
forth in this Section, Company shall furnish to Lenders (i) within 45 days of
the close of each calendar quarter a certificate of a Responsible Officer
setting forth Minimum Consolidated Net Worth for such date calculated in
accordance with this Section 7.1, and the calculation upon which it is based;
and (ii) within 90 days of the close of each fiscal year, a certificate of a
Responsible Officer setting forth Minimum Consolidated Net Worth as of the such
date calculated in accordance with this Section 7.1 and the calculation upon
which it is based, reflecting in such annual certificate any addition to the
Minimum Consolidated Net Worth that Company is required to maintain resulting
from the Annual Net Income for the fiscal year then ended, but only as
calculated under clause (b) of this Section 7.1.
7.2 LIMITATION OF INDEBTEDNESS.
Create, incur, assume or suffer to exist any Indebtedness,
except:
(a) Indebtedness in respect of the Loans;
(b) Indebtedness in respect of the DK Loans pursuant to
the DK Loan Documents as in effect on the date hereof, or any renewal, extension
or replacement of such Indebtedness but only to the extent that (1) the
aggregate principal amount of the loans so renewed, extended or replaced does
not at any time exceed the principal amount of the DK Loans in effect prior to
such renewal, extension or replacement, (2) any and all letters of credit and
letter of credit guarantees that remain outstanding under or in connection with
the DK Loan Agreement may remain outstanding under the new facility or may be
replaced by new letters of credit or letter of credit guarantees, but only to
the extent that the aggregate stated amount of any and all letters of credit and
letter of credit guarantees under the renewed, extended or replacement credit
facility do not exceed the aggregate stated amount of all letters of credit and
letter of credit guarantees that were outstanding under the DK Loan Agreement,
as the same may have been
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reduced, (3) the final maturity of all such loans as so renewed, extended or
replaced is no later than the Maturity Date, as defined herein (the expiry date
of the letters of credit and letter of credit guarantees under or in connection
with the DK Loan Agreement may not be renewed), (4) the internal rate of return
of such renewal, extension or replacement facility is no greater than the
internal rate of return of the DK Loans as in effect prior to such renewal,
extension or replacement (calculated at the ordinary, pre-default interest
rate), (5) such renewed, extended or replacement credit facility is otherwise on
commercially reasonable terms, and (6) the Intercreditor Agreement remains in
full force and effect with respect to the renewed, extended or replacement
credit facility (any such renewal, extension or replacement of the DK Loans
complying with the foregoing requirements being called "PERMITTED REFINANCING
INDEBTEDNESS");
(c) secured Indebtedness in respect of the Secured Note;
(d) Indebtedness of Company in respect of Apollo's 20%
Profits Interest;
(e) Indebtedness of Company not otherwise permitted
hereunder and Indebtedness of its Subsidiaries which is recourse to the Company,
at any time outstanding, whether incurred in connection with Subsidiary Property
Under Development, Mezzanine Property Under Developmeent or otherwise, not
exceeding $90,000,000 (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;
(f) Indebtedness of Company to any Subsidiary or of any
Subsidiary to Company; provided that (i) such inter-company Indebtedness shall
not be evidenced by any promissory notes or other instruments, and (ii) all
Indebtedness of Subsidiaries to Company shall not exceed an aggregate principal
amount of $10,000,000 at any time, of which no more than $5,000,000 in the
aggregate may be Indebtedness of MPUD Subsidiary Group members, SPUD
Subsidiaries, Venture Subsidiaries and Unrestricted Subsidiaries.
(g) [intentionally omitted]
(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") or in connection
with Mezzanine Property Under Development of the Subsidiary (any Subsidiary
incurring such Indebtedness shall be referred to in this Section 7.2(h) as an
"MPUD SUBSIDIARY"); provided that (i) neither Company nor any Subsidiary other
than that SPUD Subsidiary or MPUD Subsidiary, as the case may be, is liable for
such Indebtedness in respect of that Subsidiary Property Under Development or
Mezzanine Property Under Development, as the case may be, 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
$180,000,000 minus other outstanding Indebtedness of Company and Subsidiaries
permitted pursuant to Section 7.2(e), and (iii) the shares of capital stock and
other ownership
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interests of such MPUD Subsidiary shall at all times be owned solely by a single
MPUD Holding Company;
(i) [intentionally omitted]
(j) [intentionally omitted];
(k) Indebtedness of Subsidiaries for the development of
infrastructure, common areas, or recreational facilities owing to
quasi-governmental entities such as community development and special districts
to the extent financed through the issuance of industrial revenue bonds or other
similar public financing; provided that (except for Liens permitted pursuant to
Section 7.3(q)) there is no direct or indirect recourse to Company with respect
to such Indebtedness (other than inchoate Liens arising by operation of law in
respect of such Indebtedness) and such Indebtedness shall not exceed $75,000,000
in the aggregate at any one time outstanding; provided further that Company
shall give Agent prior written notice of the incurrence of any such Indebtedness
under this Section 7.2(k); and
Anything to the contrary notwithstanding, in no event shall Company or any
Subsidiary co-make, endorse, guarantee (except to the extent permitted under
Section 7.4(c)), or otherwise become liable or have any recourse with respect to
any Indebtedness of any of the Unrestricted Subsidiaries.
7.3 LIMITATION ON LIENS.
Create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired,
except for:
(a) Liens securing Indebtedness permitted by Section
7.2(a);
(b) Liens in favor of Collateral Agent securing
Indebtedness permitted by Section 7.2(b), so long as the Intercreditor Agreement
remains in full force and effect;
(c) Liens in favor of Collateral Agent securing the
Secured Agreement Obligations, so long as the Intercreditor Agreement remains in
full force and effect
(d) Liens in favor of Apollo securing Indebtedness
permitted by Section 7.2(d);
(e) Liens for taxes (i) which are not yet delinquent or
(ii) which are, not in an aggregate amount, as to Company and all Subsidiaries,
of greater than $1,000,000 or (iii) which are being contested in good faith by
appropriate proceedings; provided that adequate reserves with respect thereto
are maintained on the books of Company or its Subsidiaries, as the case may be,
in conformity with GAAP;
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(f) carriers, warehousemen's, mechanics's, materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
do not remain unsatisfied or undischarged for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
(g) pledges or deposits in connection with workers
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(h) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(i) easements, rights-of-way, restrictions, development
orders, plats, and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount and which do not
in any case materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of Company or
such Subsidiary;
(j) Liens granted by Company or any Subsidiary, as
lessee, in the ordinary course of business on leased equipment, leasehold
improvements and furnishings;
(k) Liens created, incurred or assumed in connection with
the acquisition of, or the refinancing or any subsequent refinancing of
Indebtedness incurred in connection with property, plant and equipment acquired
after the date hereof and attaching only to the property, plant and equipment
being acquired or refinanced;
(l) other Liens in existence on the Effective Date,
listed on Schedule 7.3; provided that no such Lien is spread to cover any
additional property after the Effective Date and that the amount of any
Indebtedness or other obligations secured thereby is not increased;
(m) Liens granted pursuant to Section 7.7 of the
Reorganization Plan;
(n) Liens granted by Company or Subsidiaries upon Real
Property and related Personal Property which is Subsidiary Property Under
Development and which is either financed by Indebtedness incurred by
Subsidiaries pursuant to Section 7.2(e) or 7.2(h), or contributed by Company to
a Subsidiary pursuant to Section 7.9(g);
(o) Liens granted by Company or Subsidiaries upon Real
Property and related Personal Property which is Mezzanine Property Under
Development and which is either financed by Indebtedness incurred by
Subsidiaries pursuant to Section 7.2(e) or (h), or contributed by Company to a
Subsidiary pursuant to Section 7.9(g); and
(p) [INTENTIONALLY OMITTED]
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(q) inchoate Liens solely arising by operation of law in
respect of Indebtedness incurred pursuant to Section 7.2(k).
7.4 LIMITATION ON GUARANTEE OBLIGATIONS.
Create, incur, assume or suffer to exist any Guarantee
Obligation, except: (a) the Guarantee Obligations listed on Schedule 4.17; (b)
Guarantee Obligations made in the ordinary course of its business by Company of
obligations (other than Indebtedness) of any of its Subsidiaries, which
obligations are otherwise permitted under this Agreement; (c) Guarantee
Obligations by Company of Indebtedness of any Subsidiary, Unrestricted
Subsidiary, or Joint Venture; provided, however, that any outstanding Guarantee
Obligations permitted under this Section 7.4(c) in respect of Indebtedness of
any Unrestricted Subsidiary or Joint Venture shall reduce on a dollar-for-dollar
basis the $90,000,000 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 $90,000,000 in the aggregate; provided further, that
Company may not incur any Guarantee Obligation with respect to Indebtedness of
any Subsidiary permitted pursuant to Section 7.2(h); and (d) Guarantee
Obligations of the Subsidiaries of Company in respect of the DK Loan Obligations
and the Secured Agreement Obligations, so long as the Intercreditor Agreement
remains in full force and effect.
7.5 LIMITATIONS ON FUNDAMENTAL CHANGES.
Except to the extent such merger, consolidation, or
amalgamation is of a Subsidiary with and into Company, or between or among
wholly owned Subsidiaries, enter into any merger, consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets; provided that
Company or any Subsidiary may convey, sell, assign, transfer or have condemned
or otherwise dispose 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;
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(c) obsolete or worn out property disposed of in the
ordinary course of business;
(d) Commercial Real Estate;
(e) the sale or discount without recourse of Commercial
Receivables or Homesite Contract Receivables in the ordinary course of business;
(f) [intentionally omitted];
(g) sales or other transfers of any partnership interests
or joint venture interests in entities that are not wholly owned, collectively,
by Company and its Subsidiaries; and
(h) transactions permitted under Section 7.5.
Upon any permitted sale as aforesaid, Collateral Agent shall execute releases of
Collateral Agent's Lien upon the Collateral included in any such sale; provided
that there exists no Default or Event of Default hereunder and no Default or
Event of Default would result therefrom; and provided further, that Collateral
Agent's Lien shall continue against the proceeds of such sale, as evidenced by
any and all documents and filings as may be required by Agent.
7.7 LIMITATION ON DIVIDENDS.
Declare or pay any dividend (other than dividends payable
solely in common stock or preferred stock of Company) on, or, except for the
Reverse Stock Split, make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any Capital Stock of Company including 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 Company) or in obligations of Company or any Subsidiary,
except for: (a) dividends declared and paid by any Subsidiary to Company or any
Subsidiary, and (b) dividends to the extent permitted by Section 4.14 of the
Intercreditor Agreement.
7.8 [INTENTIONALLY OMITTED.]
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;
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(b) investments in Cash Equivalents;
(c) (i) loans and advances to employees of Company or its
Subsidiaries for travel, entertainment and relocation expenses and for advances
on salary prior to, and otherwise payable during, an employee's vacation, in the
ordinary course of business in an aggregate amount for Company and its
Subsidiaries not to exceed $500,000 at any one time outstanding and (ii) the
loans to J. Larry Rutherford, the President and Chief Executive Officer of the
Company, evidenced by the obligations described on Schedule 7.9(c);
(d) investments by Company in any Subsidiary (other than
Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary Group members and
Unrestricted Subsidiaries) or by any Subsidiary in Company or any other
Subsidiary (other than Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary
Group members and Unrestricted Subsidiaries) in connection with cash management
procedures in the ordinary course of business;
(e) (i) loans by Company to its Subsidiaries (other than
Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary Group members and
Unrestricted Subsidiaries) or by any Subsidiary to Company to the extent such
Indebtedness is permitted pursuant to Section 7.2(f); and (ii) capital
contributions to Subsidiaries (other than Venture Subsidiaries, SPUD
Subsidiaries, MPUD Subsidiary Group members and Unrestricted Subsidiaries) so
long as Company or its Subsidiary making the capital contribution receives stock
equal to the value of the capital contributed as determined in accordance with
GAAP; provided, that Collateral Agent's Lien shall continue against such stock
received by Company or its Subsidiary as aforesaid, which Lien shall be
evidenced by any and all documents and filings as may be required by Collateral
Agent and Agent;
(f) extensions of credit to purchasers in connection with
sales of assets permitted under this Agreement; and
(g) capital contributions to Venture Subsidiaries for the
purpose of making investments in Joint Ventures, to SPUD Subsidiaries, to MPUD
Group members and to Unrestricted Subsidiaries so long as Company or its
Subsidiary making the capital contribution receives stock, partnership
interests, joint venture interests, or beneficial interests, respectively, equal
to the value of the capital contributed as determined in accordance with GAAP
(and upon any permitted capital contribution as aforesaid, Collateral Agent
shall execute releases of Collateral Agent's Lien upon any Collateral
contributed); provided, (i) that no Default or Event of Default exists hereunder
or would result therefrom, (ii) that Collateral Agent's Lien shall continue
against such stock or other interests received by Company or its Subsidiary as
aforesaid, which Lien shall be evidenced by any and all documents and filings as
may be required by Collateral Agent and Agent, and (iii) from and after the
Effective Date, the aggregate "net amount" of such capital contributions shall
be limited to $35,000,000 in the aggregate for all enterprises and projects, and
$15,000,000 for any single enterprise or project. For purposes of this Section
7.9(g), the "net amount" shall be equal to the aggregate amount of all capital
contributions less any dividends paid to the Company and/or Subsidiaries, as the
case may be, by
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the Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary Group members
and/or Unrestricted Subsidiaries.
Notwithstanding anything to the contrary in this Section 7.9,
no Subsidiary which owns any project may invest in any Subsidiary which has no
interest in such project.
7.10 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OR RENEWALS
OF DEBT INSTRUMENTS.
(a) Make any optional payment or optional prepayment on,
or optional redemption of, any Indebtedness (including any payments on the DK
Loan Obligations, and Secured Note Obligations) or Guarantee Obligation except:
(i) payments on the DK Loans and the Loans, (ii) payment of the 20% Profits
Interest or (iii) so long as no Event of Default has occurred and is continuing
or would result therefrom, payments made pursuant to Indebtedness permitted
pursuant to Section 7.2(e), (f), (g) (but exclusive of Indebtedness permitted
pursuant thereto consisting of intercompany Indebtedness among Company and its
Subsidiaries and Financing Leases), (h), or (k);
(b) Amend, modify, or change, or consent or agree to any
amendment, modification or change to any of the terms of the DK Loan
Obligations, the Secured Agreement Obligations, or any other agreement executed
in connection with the foregoing or otherwise in connection with any
Indebtedness or Guarantee Obligation (other than: (1) Indebtedness permitted to
be incurred pursuant to subsections 7.2(e) and (f) (but exclusive of
Indebtedness permitted pursuant thereto consisting of intercompany Indebtedness
among Company and its Subsidiaries and Financing Leases), (h), and (k); and (2)
any such amendment, modification, or change to any such other Indebtedness which
would extend the maturity or reduce the amount of any payment of principal
thereof or which would reduce the rate or the amount of interest payable or
extend the date for payment of interest thereon; but in the case of either (1)
or (2), solely to the extent the amendment, modification, or change to any such
Indebtedness is not prohibited by any other provision in this Agreement or the
other Loan Documents or in the Intercreditor Agreement); provided that Company
shall not agree to any renewal, extension, refinancing or replacement of the DK
Loan Obligations other than Permitted Refinancing Indebtedness; and
(c) Amend any subordination provisions of any instrument
governing any Indebtedness or Guarantee Obligation (except for amendments
pursuant to this Agreement and the other Loan Documents or pursuant to the
Intercreditor Agreement).
7.11 TRANSACTIONS WITH AFFILIATES.
Enter into any transaction, including any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate (other than any Subsidiary of Company), unless such transaction is
otherwise permitted under this Agreement, is in the ordinary course of Company's
or such Affiliate's business and is upon fair and reasonable terms
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no less favorable to Company or such Affiliate, as the case may be, than it
would obtain in a comparable arms length transaction with a Person not an
Affiliate.
7.12 SALE AND LEASEBACK.
Enter into any Sale and Leaseback to the extent the aggregate
Book Value of all assets sold and leased under all such transactions exceeds
$2,000,000 during the term of this Agreement.
7.13 FISCAL YEAR.
Permit the fiscal year of Company to end on a day other than
December 31.
7.14 LIMITATION ON NEGATIVE PLEDGE CLAUSES.
Enter into any agreement, other than any Secured Debt
Documents, industrial revenue bonds, community development district financing,
purchase money mortgages, Financing Leases, or agreements executed in connection
with Indebtedness or Guarantee Obligations incurred in connection with
Subsidiary Property Under Development and/or Mezzanine 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 Lenders pursuant hereto which prohibits or limits the
ability of Company or any of its Subsidiaries to create, incur, assume or suffer
to exist any Lien upon any of its property, assets or revenues, whether now
owned or hereafter acquired.
7.15 DEVIATION FROM BUSINESS PLAN.
After the DK Loan Obligations and any Permitted Refinancing
Indebtedness have been paid in full, allow the total actual Net Cash Flow for
any fiscal quarter, including major asset dispositions, to deviate from the
quarterly Net Cash Flow projected under the Business Plan for such year by a
negative margin equal to or greater than 50 percent or $5,000,000, whichever is
greater.
7.16 INTER-PROJECT LOANS, MERGERS, CONSOLIDATION AND INVESTMENTS.
Allow any Subsidiary which owns any project to borrow from or
lend to, merge, consolidate with or invest in any other Subsidiary which has no
interest in such project.
7.17 LIMITATION ON BANK ACCOUNTS.
So long as any Obligations or Commitments are outstanding, and
after the DK Loan Obligations have been paid in full, allow cash and Cash
Equivalents maintained in Bank Accounts of Company and Subsidiaries other than
in the Cash Collateral Account and the restricted accounts set forth in Schedule
7.17 (including any beneficial interest therein), less the amount of checks
outstanding to pay current expenses in the ordinary course of business or to
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prepay expenses to be incurred in the immediately subsequent three-month period
consistent with past practices, to exceed $5,000,000 in the aggregate at any
time. Company and its Subsidiaries shall deposit in the Company Operating
Account, after application pursuant to Section 2.11, all remaining cash of
Company and its Subsidiaries in excess of amounts permitted to be maintained in
accounts other than a Cash Collateral Account under this Section 7.17.
7.18 VENTURE SUBSIDIARIES AND JOINT VENTURES.
(a) Cause, suffer, or permit any Venture Subsidiary to
have any asset or revenues other than the Joint Venture interests owned by such
Venture Subsidiary as disclosed on Schedule 4.14(B) and the revenues arising
from such revenue.
(b) Cause, suffer, or permit any Venture Subsidiary to
create, incur, assume, or suffer to exist any Lien (other than Liens in favor of
Collateral Agent) upon any of such Venture Subsidiary's property, assets, or
revenues, whether now owned or hereafter acquired (including the Joint Venture
interests owned by such Venture Subsidiary as disclosed on Schedule 4.14(B) and
the revenues arising from such revenue).
7.19 EMPLOYEE BENEFITS.
(a) Fail to comply in all material respects with the
applicable provisions of ERISA and the Code to the extent that such failure,
individually or in the aggregate, results or could reasonably be expected to
result in a Material Adverse Effect and (b) fail to furnish the Agent as soon as
possible after, and in any event within 10 days after any Responsible Officer of
the Company or any Commonly Controlled Entity knows or has reason to know that
any ERISA Event has occurred that, alone or together with any other ERISA Events
that, individually or in the aggregate, have occurred could reasonably be
expected to result in a Material Adverse Effect, a statement by a Responsible
Officer of the Company setting forth details as to such ERISA Event and the
action, if any, that the Company and/or the Subsidiaries propose to take with
respect thereto.
7.20 CHARTER DOCUMENTS.
Amend or modify the Series A Statement or the Series B
Statement or any other provision of its charter, certificate of incorporation or
other organizational documents relating to preferred stock (whether now
outstanding or hereafter issued) without obtaining the prior written consent of
Lenders.
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SECTION 8
EVENTS OF DEFAULT; REMEDIES
8.1 EVENTS OF DEFAULT; REMEDIES.
If any of the following events ("Events of Default") shall
occur and be continuing:
(a) Company shall fail to pay any principal when due of
any Obligation in accordance with the terms hereof; or Company shall fail to pay
any interest due on any Obligation or any other amount payable hereunder within
five days after any such interest or other amount becomes due in accordance with
the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by
Company or any of its Subsidiaries herein or in any other Loan Document or which
is contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement shall prove to
have been incorrect in any material respect on or as of the date made or deemed
made; or
(c) Company shall default in the observance or
performance of any agreement contained in Section 7; or
(d) Company or any Subsidiary shall default in the
observance or performance of any other agreement contained in this Agreement
(other than as provided in paragraphs (a) through (c) of this Section) or in any
other Loan Document, and such default shall continue unremedied for a period of
30 days; or
(e) Company shall fail to pay any principal of or
interest on any DK Loan Obligations or any Secured Agreement Obligations
(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 relevant agreement or instrument relating to
such obligations; or there shall occur any other "default" or "event of default"
(as defined in the DK Loan Documents or the Secured Agreement Documents or any
other event that accelerates, or permits the acceleration, of any DK Loan
Obligations or any Secured Agreement Obligations; or
(f) Any DK Loan Obligations or Secured Agreement
Obligations shall be declared to be due and payable, or required to be prepaid
prior to the stated maturity thereof other than mandatory prepayments set forth
in the DK Loan Agreement; or
(g) Any Subsidiary of Company shall fail to pay any
principal of, or interest on, any Indebtedness or any Guarantee Obligation
(other than any Guarantee Obligation created pursuant to any Loan Document) in
excess of $1,000,000, when due and payable (whether at scheduled maturity or by
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument under which such Indebtedness or Guarantee Obligation was created
and, if such
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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) Company shall (i) default in any payment of principal
of or interest on any Indebtedness (other than any Obligations, the DK Loan
Obligations or the Secured Agreement Obligations) or in the payment of any
Guarantee Obligation in excess of $1,000,000, beyond the period of grace, if
any, provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become payable; or
(i) (i) Company or any of its Subsidiaries shall commence
any case, proceeding or other action (x) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (y)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or Company or any of
its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Company or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (x) results in the entry of an order for relief or any
such adjudication or appointment or (y) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
Company or any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof;
or (iv) Company or any of its Subsidiaries shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) Company or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due, provided that
Company or any of its Subsidiaries may admit in writing that it is "insolvent"
as such term is defined in, and for purposes of, Section 108(a)(1)(8) of the
Code; or (vi) Company or any of its Subsidiaries shall cause to be reinstated
the Reorganization Proceedings; or
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(j) The Confirmation Order shall be reversed, withdrawn,
or modified (in any manner adverse to Company or any of its Subsidiaries), or
any rehearing shall be ordered with respect thereto by the Bankruptcy Court or
by any court having jurisdiction over Company; or
(k) (i) There occurs one or more events or conditions
described in Section 4.12 or an ERISA Event which individually or in the
aggregate result in liability of Company or any Commonly Controlled Entity in
excess of $4,600,000; or the present value of all accrued benefits under each
Single Employer Plan (based on the reasonable assumptions used by the
independent actuary for such Plan for purposes of establishing the minimum
funding requirements under Section 412 of the Code), as of the last annual
valuation date, exceed the value of the assets of such plan allocable to such
accrued benefits, individually or in the aggregate for all Single Employer Plans
with respect to which the value of the assets exceed the present value of the
accrued benefits, by more than $4,600,000; or
(l) One or more judgments or decrees shall be entered
against Company or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance) of $500,000 or more in the
case of Company or any of its Subsidiaries and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof; or
(m) (i) Any of the Guarantees, Security Documents, or
other Loan Documents hereunder shall cease, for any reason, to be in full force
and effect or Company or any of its Subsidiaries, as the case may be, party
thereto shall so assert in writing, or (ii) any Security Document shall cease to
be effective to grant a perfected Lien on the collateral described therein with
the priority purported to be created thereby (other than as a result of any
action or inaction on the part of Agent or Lenders or their agents or bailees or
other than with respect to Collateral having an aggregate value of $100,000 or
less); or
(n) [intentionally omitted]
(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) There shall occur any defined "Event of Default"
under any Secured Debt Documents other than the Loan Documents; or
(q) There shall occur any defined "Event of Default" as
defined in the Series A Statement or Series B Statement; or
(r) There shall occur any event that results in the
accumulation of, or the right of "Holders" (as such term is defined and used in
the Series A Statement or the Series B Statement of the Series A or Series B
Preferred Stock to receive dividends at the "Default Dividend Rate" as defined
therein; or
(s) A Change of Control shall occur; or
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(t) There shall occur any transfer of any shares of
Series A Preferred Stock under circumstances in which the transferee does not
become bound by all of the provisions of the Intercreditor Agreement which,
immediately prior to such transfer, were applicable to the Secured Agreement
Obligees;
(u) Any funds in excess of $500,000 are paid over
pursuant to the resolution of any claim asserted by any third party, including
claims by any state or other Governmental Authority, that any unclaimed funds
disbursed by the United States Trust Company of New York to Company out of the
proceeds of the Unsecured 1996 Notes are "abandoned property" under state
escheat or other applicable laws; or
(v) The occurrence or failure to occur of any act or
event which occurrence or failure to occur could give rise to the right on the
part of the Class A Preferred Shareholders and/or the Class B Preferred
Shareholders to require Company to repurchase such shares or any portion
thereof;
then, and in any such event, (a) if such event is an Event of Default specified
in clause (i), (ii), (iv), (v) or (vi) of paragraph (i) above, (i) the
Commitments shall automatically immediately terminate, and (ii) the Loans
hereunder (with accrued interest thereon) and all other Obligations shall
immediately become due and payable in full, and Agent and Collateral Agent shall
have all rights and remedies given to Agent and Collateral Agent pursuant to the
Loan Documents and all rights of a secured party, mortgagee and pledgee under
applicable law, all of which rights and remedies shall be cumulative and
non-exclusive, to the extent permitted by law; and (b) if such event is any
other Event of Default, either or both of the following actions may be taken:
(i) with the consent of the Required Lenders, Agent may, or upon the request of
the Required Lenders, Agent shall, by notice to Company declare the Commitments
to be terminated forthwith, whereupon the Commitments shall immediately
terminate; and (ii) with the consent of the Required Lenders, Agent may, or upon
the request of the Required Lenders, Agent shall, by notice of default to
Company, declare the Loans hereunder (with accrued interest thereon) and all
other Obligations to be due and payable in full, and Agent shall have all rights
and remedies given to Agent and Collateral Agent pursuant to the Loan Documents
and all rights of a secured party, mortgagee and pledgee under applicable law,
all of which rights and remedies shall be cumulative and non-exclusive, to the
extent permitted by law; provided, however, with regard to clause (b) hereof,
that unless and until Agent shall have received such directions, Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default or Event of Default as it shall deem advisable in
the best interests of Lenders.
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SECTION 9
AGENTS
9.1 APPOINTMENT OF AGENT.
Each Lender hereby irrevocably designates and appoints
Anglo-American Financial as Agent of such Lender under this Agreement and the
other Loan Documents, and Anglo-American Financial hereby accepts such
appointment, subject to the terms and provisions of this Agreement and the other
Loan Documents. Each Lender irrevocably authorizes Anglo-American Financial, as
Agent for such Lender, to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to Agent by the terms of this
Agreement and the other Loan Documents together with such other powers as are
reasonably incidental thereto.
Each Lender hereby further authorizes Agent to enter into the
Security Documents to be executed and delivered by Agent, on behalf of and for
the benefit of Lenders, on the Effective Date and agrees to be bound by the
terms thereof. Each Lender irrevocably authorizes Agent to take such action on
its behalf under the provisions of the Security Documents, and to exercise such
powers and perform such duties as are expressly delegated to Agent by the terms
of the Security Documents, together with such other powers as are reasonably
incidental thereto; provided that Agent shall not enter into any consent to any
amendment, modification, termination or waiver of any provision contained in any
Security Document to which it is party without the prior written consent of
Required Lenders. Each Lender agrees that no Lender shall have any right
individually to realize upon the collateral granted by the Security Documents
(including through the exercise of a right of set-off against call deposits, if
any, of such Lender in which any funds on deposit in the Cash Collateral
Accounts may from time to time be invested), it being understood and agreed that
such rights and remedies may be exercised only by Agent at the direction of
Required Lenders, for the benefit of Lenders, in accordance with the terms of
such agreements. Each Lender hereby authorizes Agent to release Collateral only
as expressly permitted or required under this Agreement or the Security
Documents, and agrees that a certificate executed by Agent evidencing such
release of Collateral shall be conclusive evidence of such release to any third
party.
9.2 APPOINTMENT OF COLLATERAL AGENT.
Each Lender hereby irrevocably designates and appoints MHD as
Collateral Agent of such Lender under this Agreement and the Security Documents
to which MHD is a party, and MHD hereby accepts such appointment, subject to the
terms and provisions of this Agreement and the Security Documents to which it is
a party, and agrees to perform the duties of Collateral Agent as set forth
herein and therein. Each Lender hereby further authorizes Collateral Agent to
enter into the Security Documents to be executed and delivered by Collateral
Agent on the Effective Date and agrees to be bound by the terms thereof. Each
Lender irrevocably authorizes MHD, as Collateral Agent for such Lender, to take
such action on its behalf under the provisions of this Agreement and the
Security Documents to which Collateral Agent is a party, and to
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exercise such powers and perform such duties as are expressly delegated to
Collateral Agent by the terms of this Agreement and the Security Documents to
which it is a party, together with such other powers as are reasonably
incidental thereto; provided that Collateral Agent shall not enter into any
consent to any amendment, modification, termination or waiver of any provision
contained in any Security Document to which it is party without the prior
written consent of Required Lenders. Each Lender agrees that no Lender shall
have any right individually to realize upon the security granted by the Security
Documents to which Collateral Agent is party, it being understood and agreed
that such rights and remedies may be exercised only by Collateral Agent at the
direction of Agent on behalf of Required Lenders, for the benefit of Lenders, in
accordance with the terms of such agreements. Each Lender hereby authorizes
Collateral Agent to release Collateral only as expressly permitted or required
under this Agreement or the Security Documents and agrees that a certificate
executed by Collateral Agent evidencing such release of Collateral shall be
conclusive evidence of such release to any third party. Collateral Agent shall
not subordinate or release any Liens under any of the Security Documents except
as provided in this Agreement or upon the written direction of Agent on behalf
of the Required Lenders. All notices and directions to Collateral Agent shall be
given by Agent on behalf of and at the direction of Required Lenders.
9.3 [INTENTIONALLY OMITTED].
9.4 DELEGATION OF DUTIES.
Agent and Collateral Agent may execute any of their respective
duties under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Neither Agent nor Collateral Agent shall be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care. Notwithstanding any provision to the
contrary elsewhere in this Agreement, neither Agent nor Collateral Agent shall
have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent or
Collateral Agent; and Agent and Collateral Agent are acting hereunder and under
the other Loan Documents solely as the agent and collateral agent, respectively,
of Lenders pursuant hereto and thereto, and neither Agent nor Collateral Agent
is acting as trustee for Lenders.
9.5 EXCULPATORY PROVISIONS.
Neither Agent, Collateral Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(a) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except for its or such Persons own gross negligence or willful misconduct) or
(b) responsible in any manner to any of Lenders for any recitals, statements,
representations or warranties made by Company or any officer thereof contained
in this Agreement or any other Loan Document or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement
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or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Notes or any
other Loan Document or for any failure of Company to perform its obligations
hereunder or thereunder. Neither Agent nor Collateral Agent shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions to, this
Agreement or any other Loan Document or as to the use of proceeds of the Loans
or of the existence or possible existence of a Default or Event of Default, or
to inspect the properties, books or records of Company. Notwithstanding anything
herein to the contrary, neither Agent nor Collateral Agent shall have any
liability arising from confirmations of the amount of outstanding Loans.
9.6 RELIANCE BY AGENTS.
(a) Each of Agent and Collateral Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to Company), independent
accountants and other experts selected by Agent or Collateral Agent, as the case
may be. Agent and Collateral Agent may deem and treat the payee of any Note as
the owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with Agent.
(b) Each of Agent and Collateral Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless (i) it shall first receive such advice or concurrence
as it deems appropriate from Agent, in the case of Collateral Agent or from any
Lender, Lenders or Required Lenders in the case of Agent, as may be required
pursuant to this Agreement for such action, or (ii) it shall first be
indemnified to its satisfaction by such Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action, except in the case of Agent's or Collateral Agent's, as
the case may be, gross negligence or willful misconduct. Each of Agent and
Collateral Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement, the Notes and the other Loan
Documents in accordance with a request of any Lender, Lenders or Required
Lenders in the case of Agent, or Agent in the case of Collateral Agent, as
required pursuant hereto and such request and any action taken or failure to act
pursuant thereto shall be binding upon all Lenders and all future holders of the
Notes.
9.7 NOTICE OF DEFAULT.
Neither Agent nor Collateral Agent shall be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
Agent or Collateral Agent, as the case may be, has received notice from a Lender
or Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." If Agent receives
such a notice, Agent shall promptly give notice thereof to Lenders and
Collateral Agent. If Collateral Agent receives such a notice, Collateral Agent
shall give notice thereof to Agent. Agent and Collateral Agent shall take such
action with respect to such Default
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or Event of Default as shall be directed by Agent in the case of Collateral
Agent and by any Lender Lenders or Required Lenders in the case of Agent, as
required pursuant hereto (subject to the provisions of Section 9.5(b)); provided
that unless and until Agent or Collateral Agent, as the case may be, shall have
received such directions, Agent or Collateral Agent, as the case may be, may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of Lenders.
9.8 NON-RELIANCE ON AGENTS AND OTHER LENDERS.
Each Lender expressly acknowledge that neither Agent,
Collateral Agent nor any of their respective officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by Agent or Collateral Agent hereinafter taken,
including any review of the affairs of Company or any of its Subsidiaries, shall
be deemed to constitute any representation or warranty by Agent or Collateral
Agent to any Lender. Each Lender represents to Agent and Collateral Agent that
it has, independently and without reliance upon Agent or Collateral Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of
Company and its Subsidiaries and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon Agent, Collateral Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of Company and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to Lenders by
Agent hereunder, neither Agent nor Collateral Agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of Company or any of its Subsidiaries
which may come into the possession of Agent or Collateral Agent or any of their
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
9.9 INDEMNIFICATION.
Lenders agree to indemnify Agent and Collateral Agent in their
respective capacities as such (to the extent not reimbursed by Company and
without limiting the obligation of Company to do so), ratably according to the
respective outstanding principal amounts of their Commitments, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including at any time following the payment of the Notes) be
imposed on, incurred by or asserted against Agent or Collateral Agent in any way
relating to or arising out of this Agreement, any of the other Loan Documents or
any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
Agent or Collateral Agent under or in connection with any of the foregoing;
provided
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that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from Agent's or Collateral
Agent's gross negligence or willful misconduct. Anything in this Agreement or
the other Loan Documents to the contrary notwithstanding, in no event may
Collateral Agent seek indemnification from Company or any Lender, nor shall
Company or any Lender be obligated for indemnification, under this Agreement for
any matters in relation to foreclosure or exercise of remedies in Collateral or
any of its other duties as Collateral Agent unless Collateral Agent has
completed foreclosure of the security interest in all of the Collateral and
application of the proceeds thereof as provided in the Intercreditor Agreement,
and its costs and expenses remain unpaid. The agreements in this Section 9.9
shall survive the payment of the Obligations and all other amounts payable
hereunder.
9.10 REPRESENTATIONS AND WARRANTIES OF COLLATERAL AGENT. Collateral
Agent hereby represents and warrants to the Agent and the Lenders as follows:
(a) Collateral Agent (1) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (2) has the power and authority, and the legal right, to own and
operate its property and to conduct the business in which it is currently
engaged, (3) 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, and (4) is
in compliance in all material respects with all Requirements of Law.
(b) Collateral Agent has the power and authority, and the
legal right, to make, deliver and perform this Agreement and other Loan
Documents, and has taken all necessary action to authorize the execution,
delivery and performance of this Agreement and other Loan Documents. 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 by Collateral Agent or for the validity or
enforceability against Collateral Agent of this Agreement or the other Loan
Documents.
(c) The execution, delivery and performance by Collateral
Agent of this Agreement and the other Loan Documents will not violate any
Requirement of Law or Contractual Obligation of Collateral Agent 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.
(d) This Agreement and the other Loan Documents to which
Collateral Agent is party have been, and all Loan Documents to which Collateral
Agent hereafter becomes a party will be, duly executed and delivered on behalf
of Collateral Agent. This Agreement has been duly executed and delivered and
constitutes, and each other Loan Document signed on the date hereof has been
duly executed and delivered and constitutes, and each other Loan Document when
executed and delivered by Collateral Agent will constitute, a legal, valid and
binding obligation of Collateral Agent, enforceable against Collateral Agent in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization,
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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).
9.11 AGENT IN ITS INDIVIDUAL CAPACITY; OTHER RELATIONSHIPS.
Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with Company as though Agent
were not Agent hereunder and under the other Loan Documents. Each of the parties
to this Agreement acknowledges that Anglo-American Financial and its affiliates
is a party to the DK Loan Agreement and may have rights, obligations and duties
thereunder and may act as an agent or collateral agent thereunder, and each
party waives and agrees not to claim any conflict of interest based upon those
activities. With respect to its Loans made or renewed by it and any Note issued
to it, Agent shall have the same rights and powers under this Agreement and the
other Loan Documents as any Lender and may exercise the same as though it were
not Agent, and the terms "Lender" and "Lenders" shall include Agent in its
individual capacity.
9.12 SUCCESSOR AGENTS.
Each of Agent and Collateral Agent may resign as Agent or
Collateral Agent, as the case may be, upon 30 days notice to Agent in the case
of Collateral Agent and to Lenders in the case of Agent. In addition, at any
time after repayment in full of the DK Loan Obligations and any Permitted
Refinancing Indebtedness, Collateral Agent may be removed by Agent or the
Required Lenders by giving notice of such removal to Collateral Agent. If Agent
or Collateral Agent shall resign as Agent or Collateral Agent, as the case may
be, or if Collateral Agent shall be removed, under this Agreement and the other
Loan Documents, then the Required Lenders shall appoint from among Lenders a
successor agent or collateral agent for Lenders, which successor agent or
collateral agent, except if an Event of Default shall have occurred and be
continuing, shall be approved by Company (which approval shall not be
unreasonably withheld), whereupon, effective upon acceptance of its appointment
as successor agent or collateral agent, such successor agent or collateral agent
shall succeed to the rights, powers and duties of Agent or Collateral Agent, as
the case may be, and the terms "Agent" and "Collateral Agent" shall mean such
successor agent or collateral agent, as the case may be, and the former Agent's
or Collateral Agent's rights, powers and duties as Agent or Collateral Agent, as
the case may be, shall be terminated, without any other or further act or deed
on the part of such former Agent or Collateral Agent or any of the parties to
this Agreement or any holders of the Notes. If the Required Lenders fail to
appoint a successor or collateral agent for Lenders as provided above within 30
days after the resignation of Agent or Collateral Agent or removal of Collateral
Agent as aforesaid, then Agent or Collateral Agent, as the case may be, may
appoint a successor agent or collateral agent for Lenders, which successor agent
or collateral agent, except if an Event of Default shall have occurred and be
continuing, shall be approved by Company (which approval shall not be
unreasonably withheld), whereupon, effective upon acceptance of its appointment
as successor agent or collateral agent, such successor agent or collateral agent
shall succeed to the rights, powers and duties of Agent or Collateral Agent, as
the case may be, and the terms "Agent" and "Collateral Agent" shall mean such
successor agent or collateral agent and the former Agent's or Collateral Agent's
rights, powers and duties as Agent or Collateral Agent, as the case may be,
shall be terminated, without any other or further act or deed on the part of
such former Agent or Collateral Agent or any of the parties to this Agreement or
any holders of the Notes. After any retiring Agent's or Collateral Agent's
resignation as Agent or Collateral Agent, as
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the case may be, the provisions of this Section 9 shall inure and survive to its
benefit as to any actions taken or omitted to be taken (or any matter related
thereto) by it while it was Agent or Collateral Agent under this Agreement and
the other Loan Documents. Notwithstanding anything herein to the contrary, the
resignation of Agent or Collateral Agent or removal of Collateral Agent shall
not be effective unless and until a successor agent or collateral agent has been
appointed and has accepted such appointment. The retiring Collateral Agent shall
take all steps necessary to transfer to any new Collateral Agent all Liens in
favor of Collateral Agent, and all Collateral then in Collateral Agent's
physical possession.
9.13 CHANGE OF AGENT'S OFFICE. The Agent acts initially through
Anglo-American Financial, but at any time may change the office through which it
acts as Agent to any office, branch or affiliate of Anglo-American Financial by
giving prompt subsequent notice of such change to each of the other parties to
this Agreement. Upon such transfer, each reference in this Agreement to
"Anglo-American Financial", when referring to the Agent, shall be deemed to
refer to such other office, branch or affiliate.
SECTION 10
MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS.
Neither this Agreement, any Note, any other Loan Document, nor
any terms hereof or thereof may be amended, supplemented or modified except in
accordance with the provisions of this Section. With the prior written consent
of the Required Lenders, Agent and Company may, from time to time, enter into
written amendments, supplements or modifications hereto and to the Notes and the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the Notes, or the other Loan Documents or changing in any manner the rights
of Lenders or of Company hereunder or thereunder or waiving, on such terms and
conditions as Agent may specify in such instrument, any of the requirements of
this Agreement or the Notes or the other Loan Documents or any Default or Event
of Default and its consequences; provided, however, that no such waiver and no
such amendment, supplement or modification shall (a) reduce the amount of the
Obligations or extend the maturity of the Obligations, or reduce the rate or
extend the time of payment of interest thereon, or reduce the amount or extend
the time of payment of any fee payable to any Lender hereunder or change the
amount of any Lender's Commitments, reduces the amount or postpones the due date
of any amount payable in respect of, in each case without the consent of Lender
affected thereby, or (b) amend, modify or waive any provision of this Section or
reduce the percentage specified in the definition of Required Lenders, or
consent to the assignment or transfer by Company of any of its rights and
obligations under this Agreement and the other Loan Documents, or release and/or
subordinate the Liens with respect to any Collateral in excess of 5% of the
aggregate value of the
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Collateral on a Book Value basis during the term of this Agreement (except as
expressly required or provided for hereunder, including as provided in Section
7.3(n), or in the Security Documents or as otherwise required by law), or
release any Subsidiary from its Guarantee, or amend, modify or waive the
provisions of Sections 2.1, 2.6, 2.9, 2.11, 2.13, 2.17, 2.18, 2.19, 2.22, 3.2,
3.4, 3.5, 5.2 or 10.5 (or any of the defined terms used in such Sections) or any
provision hereof or of any other Loan Document which, by its terms, shall be
taken or permitted only with the consent of all Lenders, or extend the Maturity
Date, in each case without the written consent of all Lenders, or (c) amend,
modify or waive any provision of Section 9, without the written consent of the
then Agent or Collateral Agent affected thereby. Any such waiver and any such
amendment, supplement or modification shall apply equally to each of Lenders and
shall be binding upon Company, Lenders, Agent, Collateral Agent and all future
holders of the Notes. In the case of any waiver, Company, Lenders, Agent and
Collateral Agent shall be restored to their former position and rights hereunder
and under the outstanding Notes and any other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Default or Event of Default,
or impair any right consequent thereon.
10.2 NOTICES.
All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by telecopy), and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or five Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
the recipient has confirmed receipt; provided that any notice, request or demand
to or upon Agent, Collateral Agent or Lenders shall not be effective until
received. For the purposes hereof, the addresses of the parties hereto (until a
notice of change thereof is delivered as provided in this Section 10.2) shall be
as set forth under each party's name on the signature pages hereof.
10.3 NO WAIVER: CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising, on the part
of Agent, Collateral Agent or any Lender, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made hereunder and in any
document, certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
Notes.
10.5 PAYMENT OF EXPENSES AND TAXES.
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Company agrees (a) to pay or reimburse Agent, Collateral
Agent, and each Lender for all its out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement, the Notes, the
Intercreditor Agreement, and the other Loan Documents and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation (1)
the reasonable fees and disbursements of counsel to Agent, counsel to Collateral
Agent, and the several counsels to Lenders and the reasonable allocated costs of
in-house counsel to Agent, in-house counsel to Collateral Agent, and the several
in-house counsel to Lenders and (2) the fees and expenses of all appraisers,
engineers and other consultants in connection with the Loan Documents, all
recording costs, search fees and filing fees, (b) to pay or reimburse each
Lender, Agent, and Collateral Agent for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the Notes, the Intercreditor Agreement, the other Loan Documents and
any such other documents, including fees and disbursements of counsel to Agent,
counsel to Collateral Agent, and to the several counsel to Lenders, and the
reasonable allocated costs of in-house counsel to Agent and in-house counsel to
Collateral Agent, (c) to pay, indemnify, and hold each Lender, Agent, and
Collateral Agent harmless from, any and all recording and filing fees, any and
all Florida documentary stamp taxes and Florida intangible personal property
taxes and any and all other stamp, excise and other taxes (other than any taxes
which are determined based solely upon the income or revenues of any such
Lender, Agent or Collateral Agent), if any, which may be payable or determined
to be payable in connection with the execution and delivery of, or consummation
of any of the transactions contemplated by this Agreement, including any and all
advances of the Loans pursuant hereto, the Notes, the other Loan Documents, and
any such other documents, and any and all liabilities with respect to, or
resulting from any delay in paying any of such fees and taxes, (d) to pay the
costs of furnishing all opinions of counsel for Company, or obtaining technical
assistance advisories, required hereunder, (e) to pay the costs of obtaining any
required consents, amendments, waivers or other modifications to the agreements
governing the DK Loan Obligations, the Secured Agreement Obligations, and any
other agreements, (f) to pay the costs and expenses incurred to continue the
perfection of any Liens in favor of Agent and Collateral Agent pursuant to any
of the Security Documents, including the costs of title searches, title
insurance premiums, UCC searches and UCC filing charges, and (g) to pay,
indemnify, and hold each Lender, Agent and Collateral Agent harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the Notes, the Intercreditor
Agreement, the other Loan Documents, the other Secured Debt Documents, and any
such other documents (all the foregoing, collectively, the "indemnified
liabilities"); provided, that Company shall have no obligation hereunder to
Agent, Collateral Agent or any Lender with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of Agent, Collateral
Agent or such Lender, as the case may be. The agreements in this Section shall
survive repayment of the Notes and all other amounts payable hereunder.
10.6 SUCCESSORS AND ASSIGNS: PARTICIPATIONS; PURCHASING LENDERS.
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(a) This Agreement shall be binding upon and inure to the
benefit of Company, Lenders, Agent, Collateral Agent, all future holders of the
Notes and their respective successors and assigns, except that Company may not
assign or transfer any of its rights or obligations under this Agreement and the
other Loan Documents without the prior written consent of each Lender.
(b) Any Lender may, in accordance with applicable law and
with the prior written consent of the Agent, at any time sell to one or more
Persons, including, without limitation, those listed on Schedule 10.6 hereto
("Participants") participating interests in any Loan owing to such Lender, any
Note held by such Lender, any Commitment of such Lender or any other interest of
such Lender hereunder and under the other Loan Documents. In the event of any
such sale by a Lender of participating interest to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement and the other Loan Documents, and Company and
Agent shall continue to deal solely, and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and the other
Loan Documents. Company agrees that if amounts outstanding under this Agreement
and the Notes are due or unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note; provided that such
Participant shall only be entitled to such right of setoff if it shall have
agreed in the agreement pursuant to which it shall have acquired its
participating interest to share with Lenders the proceeds thereof as provided in
Section 10.7. Company also agrees that each Participant shall be entitled to the
benefits of Sections 2.12, 2.13 and 10.5 with respect to its participation in
the Commitments and the Loans outstanding from time to time; provided, that no
Participant shall be entitled to receive any greater amount pursuant to such
Sections than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such Participant had no such transfer occurred. Participants shall not be
entitled to require the applicable Lender to take or omit to take any action
hereunder except with respect to amendments or waivers resulting in (i) the
extension of the regularly scheduled maturity dates of any portion of the
principal of or interest on a Loan in which such Participant is participating,
(ii) a reduction of the principal amount of, or the rate of interest (except in
connection with a waiver of the applicability of any post-default increase in
interest rates or margins) or fees payable on the Loans in which such
participant is participating, (iii) the release of a substantial portion of the
Collateral or any of the Guarantees (except as otherwise expressly provided in
the Loan Documents) or (iv) an increase in the Commitments in which such
Participant is participating.
(c) Any Lender may, in accordance with applicable law, at
any time sell to any Lender or any Affiliate thereof or to one or more Persons
("Purchasing Lenders") all or any part of its rights and obligations under this
Agreement, the Notes and other Loan Documents pursuant to a Assignment and
Assumption Agreement, substantially in the form of Exhibit 10.6, executed by
such Purchasing Lender and such transferor Lender, and delivered to Agent for
its acceptance
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and recording in the Register. Upon such execution, delivery, acceptance and
recording, from and after the Transfer Effective Date determined pursuant to
such Assignment and Assumption Agreement, (i) the Purchasing Lender thereunder
shall be a party hereto and, to the extent provided in such Assignment and
Assumption Agreement, have the rights and obligations of a Lender hereunder and
under the other Loan Documents, and (ii) the transferor Lender thereunder shall,
to the extent provided in such Assignment and Assumption Agreement, be released
from its obligations under this Agreement and under the other Loan Documents
(and, in the case of a Assignment and Assumption Agreement covering all or the
remaining portion of a transferor Lender's rights and obligations under this
Agreement and under the other Loan Documents, such transferor Lender shall cease
to be a party hereto and thereto). Such Assignment and Assumption Agreement
shall be deemed to amend this Agreement to the extent, and only to the extent,
necessary to reflect the addition of such Purchasing Lender and the resulting
adjustment of Commitment and Loan percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement, the Notes and other Loan Documents. At
the request of Purchasing Lender, Company and Agent shall negotiate in good
faith with Purchasing Lender to accommodate Purchasing Lender's reasonable
requests with respect to the timing of the obligations of Company, Agent and
Lenders set forth in Section 2.3. On or prior to the Transfer Effective Date
determined pursuant to such Assignment and Assumption Agreement, Company, at its
own expense, shall execute and deliver to Agent in exchange for the surrendered
Note(s), new renewal Note(s) to the order of such Purchasing Lender in an amount
equal to the Commitment assumed by it pursuant to such Assignment and Assumption
Agreement and, if the transferor Lender has retained a Commitment hereunder, new
Note(s) to the order of the transferor Lender in an amount equal to the
Commitment retained by it. Such new Note(s) shall be dated the Transfer
Effective Date and shall otherwise be in the form of the Note(s) replaced
thereby. The Note(s) replaced by such new Note(s), marked "renewed," shall be
attached to such new Note(s); and a copy thereof shall be sent to Company.
(d) Agent shall maintain at its address referred to in
Section 10.2 a copy of each Assignment and Assumption Agreement delivered to it
and a register (the "Register") for the recordation of the names and addresses
of Lenders and the Commitments of, and principal amount of the Loans owing to,
each Lender from time to time. The entries in the Register shall be conclusive,
in the absence of manifest error, and Company, Agent, Collateral Agent and
Lenders may treat each Person whose name is recorded in the Register as the
owner of the Loans recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by Company or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a Assignment and Assumption
Agreement executed by a transferor Lender and Purchasing Lender, Agent shall (i)
promptly accept such Assignment and Assumption Agreement, (ii) forward a copy of
such Assignment and Assumption Agreement to Company and (iii) on the Transfer
Effective Date determined pursuant thereto record the information contained
therein in the Register and give notice of such acceptance and recordation to
Lenders and Company.
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(f) Subject to Section 10.16, Company authorizes each
Lender to disclose to any Participant or Purchasing Lender (each, a
"Transferee") and any prospective Transferee any and all financial information
in such Lender's possession concerning Company and its Affiliates which has been
delivered to such Lender by or on behalf of Company pursuant to this Agreement
or which has been delivered to such Lender by or on behalf of Company in
connection with such Lender's credit evaluation of Company and its Affiliates
prior to becoming a party to this Agreement; provided, however, that such
Transferee agrees in writing to be bound by the terms of Section 10.16.
(g) If, pursuant to this Section 10.6, any interest in
this Agreement or any Note is transferred to any Purchasing Lender which is
organized under the laws of any jurisdiction other than the United States or any
state thereof, Company will not be required to pay any increased withholding
taxes of the United States or any political subdivision thereof unless, prior to
the date of transfer, the transferor Lender shall cause such Purchasing Lender
to comply with the requirements of Section 2.13(b).
(h) Nothing herein shall prohibit any Lender from
pledging or assigning any Note to any Federal Reserve Bank in accordance with
applicable law.
(i) Notwithstanding the foregoing provisions of this
Section 10.6, no holder of any Note shall transfer such Note in a manner which
would violate any Requirement of Law.
10.7 ADJUSTMENTS; SET-OFF.
(a) If any Lender (a "Benefitted Lender") shall at any
time receive any payment of all or part of its Loans owing to it, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in the last paragraph of Section 8.1, or otherwise), in a greater
proportion than any such payment to or collateral received by, any other Lender,
if any, in respect of such other Lender's Loans owing to it, or interest
thereon, or fees due to it hereunder, such benefitted Lender shall purchase for
cash from the other Lenders such portion of each such other Lenders' Loans, or
make such payment on account of such fees, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Company agrees, that each Lender so purchasing a
portion of another Lender's Loan owing to it may exercise all rights of payment
(including rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of Lenders
provided by law, each Lender shall have the right, without prior notice to
Company, any such notice being expressly waived by Company to the extent
permitted by applicable law, upon any Obligations (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against
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such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender to or
for the credit or the account of Company. Each Lender agrees promptly to notify
Company and Agent after any such set-off and application made by such Lender;
provided that the failure to give such notice shall not affect the validity of
such set-off and application.
10.8 APPOINTMENT OF AGENT AS COMPANY'S LAWFUL ATTORNEY.
Company irrevocably designates, makes, constitutes and
appoints Agent (and all Persons designated by Agent) as Company's true and
lawful attorney (and agent-in-fact) coupled with an interest, with the power to
sign the name of Company on any instruments, documents and agreements, including
security agreements, pledge agreements, mortgages, and financing statements, as
deemed by Agent as necessary or reasonably required by Agent to grant, perfect,
maintain and continue the Liens in the Collateral or to monitor or administer
the Loans, together with any and all amendments, modifications, extensions,
substitutions and renewals thereof and deliver any of such instruments,
documents and agreements to such persons as Agent, in its sole discretion, may
elect, and in such event copies thereof shall be delivered to Company.
10.9 COUNTERPARTS.
This Agreement may be executed by one or more of the parties
to this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with Company and Agent.
10.10 SEVERABILITY.
Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10.11 INTEGRATION.
This Agreement, together with the other Loan Documents,
represents the entire agreement of Company, Agent, Collateral Agent and Lenders
and supersedes all prior agreements with respect to the subject matter hereof or
thereof, and there are no promises, undertakings, representations or warranties
by Agent, Collateral Agent or any Lender relative to subject matter hereof or
thereof not expressly set forth or referred to herein or in the other Loan
Documents.
10.12 GOVERNING LAW.
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THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS AND TO THE
EXTENT EXPRESSLY PROVIDED TO THE CONTRARY IN SUCH OTHER LOAN DOCUMENT WITH
RESPECT TO SUCH OTHER LOAN DOCUMENT), AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
10.13 SUBMISSION TO JURISDICTION; WAIVERS.
COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO
WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN
RESPECT THEREOF, TO THE NONEXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK,, AND APPELLATE COURTS FROM ANY THEREOF, AND AGREES THAT
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT, THE NOTES OR ANY
OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN ANY OF THE AFORESAID COURTS, AS
AGENT, COLLATERAL AGENT OR ANY LENDER MAY ELECT IN ITS SOLE DISCRETION;
(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 COMPANY AT
ITS ADDRESS SET FORTH ON THE SIGNATURE PAGES HEREOF OR AT SUCH OTHER ADDRESS OF
WHICH AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT TO SUE IN ANY OTHER JURISDICTION;
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(e) WAIVES (I) PRESENTMENT, DEMAND AND PROTEST AND NOTICE
OF PRESENTMENT, PROTEST, DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE,
SETTLEMENT, EXTENSION OR RENEWAL OF THE NOTES AND ALL OTHER LOAN DOCUMENTS AND
HEREBY RATIFIES AND CONFIRMS WHATEVER LENDERS, AGENT OR COLLATERAL AGENT MAY DO
IN THIS REGARD; (II) ALL RIGHTS TO NOTICE OF A HEARING PRIOR TO LENDERS' OR
AGENT'S OR COLLATERAL AGENT'S ATTACHMENT OR LEVY UPON THE COLLATERAL, AND ANY
BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDERS,
AGENT OR COLLATERAL AGENT TO EXERCISE ANY OF LENDERS' OR AGENT'S OR
COLLATERAL AGENT'S REMEDIES; AND (III) THE BENEFIT OF ALL
VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND
(f) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING
REFERRED TO IN THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES.
10.14 ACKNOWLEDGMENTS.
Each party hereto hereby acknowledges that;
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement, the Notes, and the other Loan
Documents;
(b) none of Agent, Collateral Agent or any Lender has any
fiduciary relationship to Company, and the relationship between Agent and
Lenders, on one hand, and Company, on the other hand, is solely that of creditor
and debtor, and
(c) no joint venture exists among Lenders or among
Company and Lenders.
10.15 WAIVERS OF ANY JURY TRIAL.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE
ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. The
scope of this waiver is intended to be all encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of this
Agreement, including contract claims, tort claims, breach of duty claims, and
all other common law and statutory claims. Each party hereto acknowledges that
this waiver is a material inducement to enter into a business relationship, that
each has already belied on this waiver in entering into this Agreement, and that
each will continue to rely on this waiver in entering into any further
documentation related to the transactions contemplated hereby and otherwise in
their related future dealings. Each party hereto further warrants and represents
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<PAGE>
that it has reviewed this waiver with its legal counsel and that it knowingly
and voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OTHER DOCUMENTS
OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. In
the event of litigation, this Agreement may be filed as a written consent to a
trial by the court.
10.16 CONFIDENTIALITY.
Each Lender agrees to take normal and reasonable precautions
and exercise due care to maintain the confidentiality of all non-public
information provided to it by Company or any of its Subsidiaries, or by Agent or
Collateral Agent on Company's behalf, in connection with this Agreement or any
other Loan Document and agrees and undertakes that neither it nor any of its
Affiliates shall use any such information for any purpose or in any manner other
than pursuant to the terms contemplated by this Agreement. Any Lender may
disclose such information (a) at the request of any regulatory authority or in
connection with an examination of such Lender by any such authority; (b)
pursuant to subpoena or other court process; (c) when required to do so in
accordance with the provisions of any applicable law; (d) at the express
direction of any other agency of any State of the United States of America or of
any other jurisdiction, in which such Lender conducts its business; (e) to such
Lender's independent auditors and other professional advisors; (f) following an
Event of Default, in connection with the sale or other realization on the
collateral under the Security Documents; (g) in connection with any litigation
or dispute between (i) such Lender and (ii) Company and/or any Subsidiary; and
(h) in connection with any litigation or dispute involving such Lender if the
disclosure is determined by such Lender to be necessary for the defense or
protection of such Lender's rights and/or interests. Each Lender further agrees,
upon receipt by such Lender of a request to disclose any information to a
Governmental Authority or courts (other than governmental bank examiners and
independent auditors of such Lender), to notify Company of such request and to
permit, to the extent practicable, Company to seek a protective order with
respect thereto; provided however that no Lender shall be requested to notify
Company of any such request if (i) it is not permitted to do so by applicable
law and regulations, (ii) it is requested not to notify Company by any Person
acting or purporting to act on behalf of a Governmental Authority, or (iii) it
otherwise reasonably believes that it is not permitted to so notify Company.
10.17 FURTHER ASSURANCES.
Company shall, and shall cause its Subsidiaries to, promptly
(a) cure any defects in the execution and delivery of Loan Documents and (b)
execute and deliver, or cause to be executed and delivered, all such other
documents, agreements and instruments as Agent may reasonable request to further
evidence and more fully describe the collateral for the Loan to correct any
omissions in the Loan Documents, to perfect, protect or preserve any liens
created under any of the Loan Documents, or to make any recordings, file any
notices, or obtain any consents, as may be necessary or appropriate in
connection therewith.
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<PAGE>
10.18 CONTROLLING AGREEMENT.
In the event of any conflict between the terms and provisions
of this Agreement and the terms and provisions of any other Loan Document, the
terms and provisions of this Agreement shall control.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
ATLANTIC GULF COMMUNITIES
CORPORATION
By: ___________________________
Name:
Title:
Notice Address:
2601 South Bayshore Drive, 9th Floor
Miami, Florida 33133-5461
Telecopy: (305) 859-4623
Attention: Chief Financial Officer
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<PAGE>
ANGLO-AMERICAN FINANCIAL
as Agent and as a Lender
By____________________________
Name:
Title:
Notice Address:
675 Berkmar Court
Charlottesville, Virginia 22901
Telecopy: (804) 817-5970
Attention:
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<PAGE>
GENERAL MOTORS EMPLOYEES
GLOBAL GROUP PENSION TRUST,
as a Lender
By MAGTEN ASSET MANAGEMENT CORP., as
Attorney-in-Fact
By____________________________
Name:
Title:
Notice Address:
35 East 21st Street - 5th Floor
New York, New York 10010
Telecopy: (212) 505-0484
Attention:
WITH A COPY TO:
Richards Spears Kibbe & Orbe
One Chase Manhattan Plaza
New York, New York 10005-1413
Telecopy: (212) 530-1801
Attention: Jonathan Kibbe, Esq.
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<PAGE>
M.H. DAVIDSON & CO., LLC,
as Collateral Agent
By: _____________________________
Name:
Title:
Notice Address:
885 Third Avenue
New York, New York 10022
Telecopy: (212)-371-4318
Attention: Daniel Zwirn
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<PAGE>
TERM LOAN AGREEMENT
DATED AS OF DECEMBER 31, 1998
SCHEDULE 2.1
COMMITMENTS
- - --------------------------------------------------------------------------------
LENDER COMMITMENT
================================================================================
Anglo-American Financial $ 11,115,384.62
================================================================================
General Motors Employees Global $ 15,384,615.38
Group Pension Trust
================================================================================
Total (All Lenders) $ 26,500,000.00
- - --------------------------------------------------------------------------------
<PAGE>
Schedule 10.6
INITIAL PARTICIPANTS
FOOTBRIDGE LIMITED TRUST
<PAGE>
EXHIBIT 2.2
FORM OF TERM NOTE
$______________ New York, New York
January __, 1999
FOR VALUE RECEIVED, ATLANTIC GULF COMMUNITIES
CORPORATION, a corporation organized and existing under the laws of the State of
Delaware (the "BORROWER") hereby promises to pay to the order of [NAME OF
LENDER] (the "LENDER"), the principal amount of __________________ DOLLARS
($______________) on February 1, 2002 or on such earlier date as shall be the
Maturity Date (as defined in the Agreement defined below).
The Borrower also promises to pay interest on the principal
amount hereof from time to time outstanding, in like funds and manner, at the
rates and on the dates and computed in accordance with the Agreement (as defined
below).
This Term Note is one of the Notes referred to in the Term
Loan Agreement dated as of December 31, 1998 by and among the Borrower, the
lenders from time to time party thereto (including the Lender), Anglo- American
Financial, as Agent for the lenders thereunder (in such capacity, the " AGENT"),
and M.H. Davidson & Co., LLC, as Collateral Agent for the lenders thereunder (as
amended, supplemented or otherwise modified from time to time, the "AGREEMENT")
and is entitled to the benefits thereof and of certain security arrangements as
contemplated therein. Except as otherwise expressly defined in this Term Note,
terms defined in the Agreement and used herein shall have their respective
defined meanings when used herein. As provided in the Agreement, this Term Note
is subject to voluntary prepayment and to mandatory prepayment on the terms and
conditions provided therein.
Both principal and interest in respect hereof shall be paid to
the Agent, for the account of the Lender, in Dollars, in immediately available
funds and in the manner provided in the Agreement, without set-off, counterclaim
or deduction of any kind, at the office of the Agent specified on the signature
page of the Agreement or at such other place as the Agent may notify the
Borrower from time to time.
In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Term Note may be declared to be or shall become automatically due and payable in
the manner and with the effect provided in the Agreement.
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<PAGE>
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Term Note.
THIS TERM NOTE SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
ATLANTIC GULF COMMUNITIES
CORPORATION
By: ______________________________
Name:
Title:
-x-
<PAGE>
LOANS
Date Loan Principal Unpaid
Made or Amount Type of Interest Amount Paid Principal Notation
Converted of Loan Loan Period or Prepaid Amount Made By
- - --------- --------- ------- -------- ----------- --------- --------
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<PAGE>
EXHIBIT 10.6
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of ___________, ____ between [ASSIGNOR]
"Assignor") and [ASSIGNEE] ("Assignee").
W I T N E S S E T H:
WHEREAS, this Assignment and Assumption Agreement (this
"Agreement") relates to the Loan Agreement, dated as of December 31, 1998 (as
amended and in effect from time to time, the "Loan Agreement") among Atlantic
Gulf Communities Corporation, a Delaware corporation, formerly known as General
Development Corporation ("Company"), the lenders parties thereto ("Lenders"),
Anglo-American Financial, a New York limited partnership, as agent for Lenders
(together with its successors in such capacity, "Agent"), and M. H. Davidson &
Co., LLC, a New York limited liability company ("MHD"), as collateral agent for
Lenders (together with its successors in such capacity ("Collateral Agent").
WHEREAS, Assignor has made a term loan to the Borrower under
the Loan Agreement, which is outstanding on the date hereof in the aggregate
principal amount of $____________ (the "Loan"); and
WHEREAS, Assignor proposes to assign [a portion of] the Loan
[in an aggregate amount equal to $_________] (the "Assigned Amount"), together
with all of the rights of the Assignor under the Loan Agreement to the extent of
the Assigned Amount, and Assignee proposes to accept such assignment from
Assignor and assume the corresponding obligations from Assignor to the extent of
the Assigned Amount, on the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual agree ments contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Loan
Agreement.
SECTION 2. ASSIGNMENT. Assignor hereby assigns and sells to
Assignee, without recourse, representation or warranty of any kind, the Assigned
Amount, together with all of the rights of Assignor under the Loan Agreement to
the extent of the Assigned Amount, and Assignee hereby accepts such assignment
from Assignor and assumes all of the obligations of Assignor under the Loan
Agreement to the extent of the Assigned Amount. Upon the execution and delivery
hereof by Assignor, Assignee and Agent and the payment of the amounts specified
in Section 3 required to be paid on the date hereof Assignee shall, as of such
date (the "Assignment Date"), (i) shall hold a Loan in an aggregate principal
amount equal to the Assigned
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<PAGE>
Amount, (ii) succeed to the rights and be obligated to perform the obligations
of a Lender under the Loan Agreement with a Loan in an amount equal to the
Assigned Amount, and (iii) the Loan of Assignor shall, as of the date hereof, be
reduced by a like amount and Assignor released from its obligations under the
Loan Agreement to the extent such obligations have been assumed by Assignee. The
assignment provided for herein shall be without recourse to Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment
and sale contemplated in Section 2 hereof, Assignee shall pay to Assignor on the
date hereof in federal funds the amount heretofore agreed between them in a
letter dated __________.(1) It is understood that interest and fees with respect
to the Assigned Amount accrued to the Assignment Date are for the account of
Assignor and interest and fees with respect to the Assigned Amount accruing from
and including the Assignment Date are for the account of Assignee. Each of
Assignor and Assignee hereby agrees that if it receives any amount under the
Loan Agreement which is for the account of the other party hereto, it shall
receive the same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such other party.
SECTION 4. CONSENT OF AGENT. This Agreement is conditioned
upon the consent of the Company and Agent pursuant to Section 10.6(c) of the
Loan Agreement. The execution of this Agreement by Agent is evidence of such
consent. Pursuant to Section 10.6(c) the Company agrees to execute and deliver
new Notes payable to the order of [Assignor and] Assignee to evidence the
assignment and assumption provided for herein.
SECTION 5. NON-RELIANCE ON ASSIGNOR. Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, (i) the solvency, financial condition, or statements of the
Company, the Subsidiaries, the Unrestricted Subsidiaries or any other Person,
(ii) the validity, binding effect, value, sufficiency, effectiveness or the
enforceability of the obligations of the Company, the Subsidiaries, the
Unrestricted Subsidiaries or any other Person in respect of the Loan Agreement,
any Note, the Subsidiary Guarantees, the Security Documents or any other Loan
Document, (iii) the validity, perfection or priority of any Liens purported to
be created by the Security Documents or the value, validity, existence or title
to any of the Collateral. Assignee acknowledges that it has, independently and
without reliance on Assignor, and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial condition of the
Company, the Subsidiaries, the Unrestricted Subsidiaries and all other relevant
Persons.
SECTION 6. APPOINTMENT OF AGENTS. Assignee irrevocably
appoints and authorizes each of Agent and the Collateral Agent to take such
actions, as agent on its behalf and
- - ---------------------
(1)Amount may combine principal together with accrued interest and breakage
compensation, if any, to be paid by Assignee. It may be preferable in an
appropriate case to specify these amounts separately, or generically or by
formula, rather than as a fixed sum.
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<PAGE>
to exercise such powers under the Loan Agreement, the Notes, the Subsidiary
Guarantees, the Security Documents and any other Loan Documents as are delegated
to the respective Agent by the terms of the Loan Agreement, the Notes, the
Subsidiary Guarantees, the Security Documents and any other Loan Documents
together with all such powers as are reasonably incidental thereto.
SECTION 7. CONFIDENTIALITY. By executing this Agreement,
Assignee confirms and agrees that it will keep all non-public information
furnished by or on behalf of the Company in connection with this Agreement and
the Loan Agreement and the transactions contemplated hereby and thereby
confidential in accordance with Section 10.16 of the Loan Agreement.
SECTION 8. WITHHOLDING TAXES. Assignee represents and
warrants that on the Assignment Date it is entitled to receive any payments to
be made to it hereunder and under the Loan Agreement without the withholding of
any Tax and shall provide the Company and Agent with Internal Revenue Service
Form 1001 or 4224, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Assignee is entitled to benefits
under an income tax treaty to which the United States is a party which reduces
the rate of withholding tax on payments of interest to zero or certifying that
the income receivable pursuant to this Agreement and the Loan Agreement is
effectively connected with the conduct of a trade or business in the United
States. From time to time thereafter Assignee shall, whenever required to do so
by applicable law (but only to the extent that Assignee remains lawfully able to
do so), provide the Company or Agent with Internal Revenue Service Form 1001 or
4224, as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that Assignee is entitled to benefits under an income tax
treaty to which the United States is a party which reduces the rate of
withholding tax on payments of interest or certifying that the income receivable
pursuant to this Agreement and the Loan Agreement is effectively connected with
the conduct of a trade or business in the United States.
SECTION 9. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 10. COUNTERPARTS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date first
above written.
Address for notices: [ASSIGNOR]
[
[
Telephone:
Facsimile: By ________________________________
Title:
Address for payments:
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<PAGE>
[
[
Address for notices: [ASSIGNEE]
[
[
Telephone:
Facsimile: By ________________________________
Title:
Address for payments:
[
[
Agent hereby consents to the assignment and
assumption provided for in this Agreement:
ANGLO-AMERICAN FINANCIAL,
as Agent
By _______________________________
Title:
-xv-
FIRST AMENDMENT TO AMENDED AND
RESTATED SECURED AGREEMENT
This First Amendment to Amended and Restated Secured Agreement, dated
as of December 31, 1998 ("AMENDMENT") is entered into by and between Atlantic
Gulf Communities Corporation, a Delaware corporation ("COMPANY"), certain
Subsidiaries of the Company ("ORIGINAL SUBSIDIARIES"), AP-AGC, LLC, a Delaware
limited liability company ("OBLIGEE") and M.H. Davidson & Co., LLC, a New York
limited liability company ("MHD"), as successor collateral agent ("SUCCESSOR
COLLATERAL AGENT") to (a) The Bank of New York, a New York banking corporation,
as prior collateral agent with respect to SP Sub Collateral ("BNY"), and (b)
Foothill Capital Corporation, a California corporation, as prior collateral
agent with respect to Collateral other than SP Sub Collateral ("FOOTHILL").
RECITALS
The Company, Original Subsidiaries, Obligee, BNY and Foothill are
parties to that certain Secured Agreement dated as of February 7, 1997 and
amended and restated as of May 15, 1997 (as heretofore amended, supplemented or
otherwise modified, the "SECURED AGREEMENT"). Capitalized terms used herein but
not otherwise defined herein shall have the meanings assigned to them in the
Secured Agreement.
The Company is refinancing certain of its institutional indebtedness.
In connection therewith, (1) the Company, MHD (as agent and collateral agent)
and the Revolving Loan Banks are entering into the Revolving Loan Agreement and
(2) the Company, Anglo American (as agent and a member of the Anglo American
Lender Group thereunder), the other members of the Anglo American Lender Group
and MHD (as collateral agent thereunder) are entering into the Anglo American
Loan Agreement (collectively, the "Senior Loan Agreements"). The Revolving Loan
Banks and the Anglo American Lender Group are collectively referred to herein as
the "Senior Lenders." It is a condition precedent to the consummation of the
transactions contemplated in the Senior Loan Agreements that the Obligee (a)
execute and deliver the Intercreditor Agreement and (b) take such other actions
and deliver such other documents, agreements and instruments as are reasonably
requested by the Company and the Senior Lenders in connection with the
consummation of the transactions contemplated in the Senior Loan Agreements.
Capitalized terms used herein but not otherwise defined herein or in the Secured
Agreement shall have the meanings assigned to them in the Revolving Loan
Agreement.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be bound hereby, agree as follows:
A. Amendments, Acknowledgments, Consents and Waivers.
<PAGE>
1. AMENDMENT OF SECTION 1 OF THE SECURED AGREEMENT. Section 1 of
the Secured Agreement is amended as follows:
a. The following definitions are deleted in their
entirety: AG Asia, Beige Book, Borrowing Base, Foothill Debt, Foothill Loan
Documents, Net Operating Cash Flow, Section 365(j) Property, Secured Floating
Rate Note Agreement, Secured Floating Rate Notes, Special Purpose Subsidiary,
Special Purpose Subsidiary Security Documents, SP Sub Collateral and Unsold
Housing Inventory.
b. Insert the word "net" before the word "income on the
first line of the Annual Net Income definition.
c. The definition of Collateral Agent is amended and
restated in its entirety to as follows:
"From and after December 31, 1998, MHD, solely in its capacity
as collateral agent for the Obligee under the Security Documents and
its successors in such capacity."
d. The definition of Intercreditor Agreement is amended
and restated in its entirety as follows:
"the Intercreditor Agreement, dated as of December 31, 1998, by
and between the Obligee, Collateral Agent, the Anglo American Lender
Group, the collateral agent for the Anglo American Lender Group, the
Revolving Loan Banks and the collateral agent for the Revolving Loan
Banks, as from time to time amended, supplemented or otherwise modified
in accordance with the terms thereof."
e. The definition of Investment Agreement is amended and
restated in its entirety as follows:
"the Investment Agreement, dated as of February 7, 1997, as
amended and restated as of May 15, 1997, and further amended as of
December 31, 1998, by and between the Company and the Obligee, as from
time to time amended, supplemented or otherwise modified in accordance
with the terms thereof."
f. The definition of Reverse Stock Split is amended and
restated in its entirety as follows:
"as defined in Section 1.1 of the Anglo American Loan
Agreement."
g. The definition of Revolving Loan Agreement is amended
and restated in its entirety as follows:
2
<PAGE>
"The Third Amended and Restated Revolving Loan Agreement, dated
as of December 31, 1998, by and among the Company, the Revolving Loan
Banks and MHD as agent and collateral agent thereunder pursuant to
which the Revolving Loan Banks have agreed to make certain loans to the
Company, as from time to time amended, supplemented or otherwise
modified in accordance with the terms thereof."
h. The definition of Revolving Loan Bank is changed to
"Revolving Loan Banks" and is amended and restated in its entirety as follows:
"the lenders party to the Revolving Loan Agreement and their
respective successors and assigns"
i. The definition of "Secured Instrument Documents" is
amended to include the Promissory Notes.
j. The definition of "Subsidiaries" is amended to
include, in addition to the Original Subsidiaries, the following:
"AG-NTC, Inc., a Florida corporation; West Bay Holding
Corporation, a Florida corporation; Aspen Springs Ranch Holding
Company, a Florida corporation; Aspen Springs Ranch, Inc., a Colorado
corporation; Aspen Springs Ranch Acquisition Corp., a Colorado
corporation; Atlantic Gulf Water's Edge, Inc., a Florida corporation;
Atlantic Gulfshore Natures Cove, Inc., a Florida corporation; Grand
Oaks Development Corporation, a Florida corporation; and Saxon-DeBary,
Inc., a Florida corporation."
k. The following definitions are added to the Secured
Agreement:
i. "Anglo American": Anglo American Financial,
a New York limited partnership.
ii. "Anglo American Lender Group": the lenders
party to the Anglo American Loan Agreement and their respective successors and
assigns
iii. "Anglo American Notes": as defined in
Section 2.7 of the Anglo American Loan Agreement.
iv. "Anglo American Loan Agreement": the Term
Loan Agreement, dated as of December 31, 1998, by and among the Company, the
Anglo American Lender Group, Anglo American as agent thereunder and MHD as
collateral agent thereunder, as from time to time amended, supplemented or
otherwise modified in accordance with the terms thereof.
3
<PAGE>
v. "Anglo American Loan Obligations": means the
Obligations, as defined in the Anglo American Loan Agreement.
vi. "Anglo American Loans": means the Loans as
defined in the Anglo American Loan Agreement.
vii. "MHD": means M.H. Davidson & Co., LLC, a New
York limited liability company.
viii. "Promissory Notes": means, jointly and
severally, (a) that certain Promissory Note dated as of December 31, 1998 in the
original principal amount of Eight Hundred Fifty Thousand and No/100 Dollars
($850,000.00), executed by the Company, as Maker, to and for the benefit of
Obligee, as Holder, and (b) that certain Promissory Note dated as of December
31, 1998, in the original principal amount of One Million and No/100 Dollars
($1,000,000.00), executed by the Company, as Maker, to and for the benefit of
Obligee, as Holder.
2. AMENDMENT OF SECTION 3.1 OF THE SECURED AGREEMENT. Add at the
end of Section 3.1 the following new sentence:
"Notwithstanding anything in this Section 3.1 to the contrary,
from and after the effective date of the Intercreditor Agreement, the
continuing Lien(s) granted to the Obligee under this Section 3.1 shall
be subject to the Intercreditor Agreement and shall have the priority
in and to the Collateral specified for the Obligee therein."
3. AMENDMENT OF SECTION 3.2 OF THE SECURED AGREEMENT. Add at the
end of Section 3.2 the following new clause (g):
"(g) Notwithstanding anything in this Section 3.2 to the
contrary, from and after the effective date of the Intercreditor
Agreement, the continuing Lien(s) granted to the Obligee under Section
3.1 shall be subject to the Intercreditor Agreement and shall have the
priority in and to the Collateral specified for the Obligee therein."
4. DELETION OF SECTION 3.3. Delete the text of Section 3.3 in its
entirety and insert in lieu thereof "[intentionally omitted]"
5. AMENDMENT OF SECTION 3.5 OF THE SECURED AGREEMENT.
a. Delete the references to "Except with respect to the
SP Sub Collateral," at the beginning of the first sentences of Sections 3.5(b)
and (c).
b. Section 3.5(d) is amended and restated in its
entirety to read as follows:
4
<PAGE>
"The defined terms and operative provisions of the Anglo
American Loan Agreement with respect to Mezzanine Property Under Development,
MPUD Holding Company, MPUD Subsidiary and MPUD Subsidiary Group(s) are
incorporated herein by reference and expressly made a part hereof."
6. DELETE SECTIONS 3.7 AND 8.1(Q) OF THE SECURED AGREEMENT.
Delete Sections 3.7 and 8.1(q) of the Secured Agreement in their entirety.
7. AMENDMENT OF SECTION 6 THE SECURED AGREEMENT. Delete Sections
6.1 through 6.16 of the Secured Agreement in their entirety and insert in lieu
thereof the language in Attachment A hereto.
8. AMENDMENT OF SECTION 7 OF THE SECURED AGREEMENT. Delete
Sections 7.1 through 7.19 in their entirety and insert in lieu thereof the
language in Attachment B hereto.
9. AMENDMENT OF SECTION 8.1 OF THE SECURED AGREEMENT. Add the
following to the end of Section 8.1 of the Secured Agreement:
"...; and
(r) any increase in the rate of interest or the
amount or number of fees payable under the Revolving Loan
Agreement."
10. AMENDMENT OF SECTION 9.2 OF THE SECURED AGREEMENT. Substitute
MHD in the place of The Bank of New York and Foothill Capital Corporation as
Collateral Agent.
11. AMENDMENT OF SECTION 10.2 OF THE SECURED AGREEMENT. Change the
address for copies of all notices to the Company to "Brownstein Hyatt Farber &
Strickland, P.C., 410 17th Street, Suite 2200, Denver, Colorado 80202,
Attention: John L. Ruppert, Esq., Telecopy: (303) 534-6335" and change the
address for copies of all notices to the Collateral Agent to "M.H. Davidson &
Co., LLC, 885 Third Avenue, New York, New York 10022."
12. CONFORMING AMENDMENTS. Notwithstanding anything in the Secured
Agreement to the contrary, from and after the date hereof, the Secured Agreement
shall be interpreted consistently with the terms of this Amendment, and all
provisions contained therein and terms thereof that are inconsistent with the
terms and provisions hereof shall be null and void and no longer of any force
and effect.
13. DEFAULTS. The Obligee hereby waives any and all Defaults that
would result under the Secured Agreement upon the execution and delivery of the
Senior Loan Agreements and the consummation of the transactions contemplated
therein.
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14. EXCLUSIONS. The entities listed on ATTACHMENT C hereto are
members of MPUD Subsidiary Groups and, so long as they continue to be members of
an MPUD Subsidiary Group, shall not be co-makers or guarantors of the Secured
Obligations.
B. Representations and Warranties.
1. After giving effect to the provisions hereof, no Defaults have
occurred and are continuing under the Secured Instrument Documents.
2. Each party hereto represents and warrants to the other party
hereto that (a) it has the full corporate power and authority to enter into and
perform its obligations hereunder and each transaction contemplated hereby and
(b) the execution and delivery by such party of this Amendment and each other
document contemplated hereby and its performance of its obligations hereunder
and thereunder have been duly authorized by all necessary corporate proceedings
on the part of such party.
C. Miscellaneous.
1. This Amendment may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
2. Except as herein specifically amended, all terms, covenants
and provisions of the Secured Agreement shall remain in full force and effect
and shall be performed by the parties hereto in accordance therewith. All
references to the "Agreement" or the "Secured Agreement" contained in the
Secured Agreement or in the Schedules or Exhibits shall henceforth refer to the
Secured Agreement as amended by this Amendment.
3. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND PERFORMED ENTIRELY WITHIN SUCH STATE.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first written above.
ATLANTIC GULF COMMUNITIES
CORPORATION, a Delaware corporation;
AG Title Corporation, a Florida corporation;
AGC CL-Limited Partner, Inc., a Florida
corporation; AGC Homes, Inc., a Florida
corporation; AGC Sanctuary Corporation, a
Florida corporation; AG Sanctuary of
Orlando, Inc., a Florida corporation; Atlantic
Gulf Communities Management
Corporation, a Florida corporation; Atlantic
6
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Gulf Commercial Realty, Inc., a Florida
corporation; Atlanti Gulf Receivables
Corporation, a Florida corporation; Atlantic
Gulf Communities Service Corporation, a
Florida corporation; Atlantic Gulf of Tampa,
Inc.,, a Florida corporation; Atlantic Gulf
Realty, Inc., a Florida corporation; Atlantic
Gulf Utilities, Inc., a Florida corporation;
Cumberland Cove, Inc., a Tennessee
corporation; Environmental Quality
Laboratory, Inc., a Florida corporation; EQL
Environmental Services, Inc., a Florida
corporation Five Star Homes, Inc., a Florida
corporation; General Development Resorts,
Inc., a Florida corporation; General
Development Utilities, Inc., a Florida
corporation; Hunter Trace Development
Corporation, a Florida corporation; Lakeside
Development of Orlando, Inc., a Florida
corporation; Ocean Grove, Inc., a Florida
corporation; Panther Creek Corp., a North
Carolina corporation; Regency Island
Dunes, Inc., a Florida corporation; Sabal
Trace Development Corporation, a Florida
corporation; Sunset lakes Development
corporation, a Florida corporation; Town &
Country II, Inc., a Florida corporation;
Windsor Palms Corporation, a Florida
corporation; AGC-SP, Inc., a Delaware
corporation; Las Olas Tower at River Walk,
Inc., a Florida corporation, f/k/a AGC-SP2,
Inc.; West Frisco Development Corporation,
a Florida corporation, f/k/a AGC-SP3, Inc.;
Waterford-Orlando, Inc., a Florida
corporation, f/k/a AGC-SP1, Inc; AGC-SP4,
Inc., a Florida corporation; AGC-SP5, Inc., a
Florida corporation; AG-NTC, Inc., a
Florida corporation; West Bay Holding
Corporation, a Florida corporation; Aspen
Springs Ranch Holding Company, a Florida
corporation; Aspen Springs Ranch, Inc., a
Colorado corporation; Aspen Springs Ranch
Acquisition Corp., a Colorado corporation;
Atlantic Gulf Water's Edge, Inc., a Florida
7
<PAGE>
corporation; Atlantic Gulfshore Natures
Cove, Inc., a Florida corporation; Grand
Oaks Development Corporation, a Florida
corporation; and Saxon-DeBary, Inc., a
Florida corporation
By:
-----------------------------------
Name:
---------------------------
Title:
--------------------------
M.H. Davidson & Co., LLC, a New York
limited liability company, in its capacity as
Collateral Agent
By:
-----------------------------------
Thomas L. Kempner, Jr., a
Managing Member
8
<PAGE>
SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED
SECURED AGREEMENT DATED AS OF DECEMBER 31, 1998
AP-AGC,LLC.,a Delaware limited liability
company
By: Kronus Property, Inc., its Manager
By:
----------------------------
Ricardo Koenigsberger
Vice President
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ATTACHMENT A
6.1 FINANCIAL STATEMENTS.
Furnish to Obligee:
(a) as soon as available, but in any event not later than
90 days after the end of each fiscal year of Company, a copy of the consolidated
balance sheet of Company and its consolidated Subsidiaries (including
Unrestricted Subsidiaries) as at the 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, 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 Obligee;
(b) as soon as available, but in any event not later than
90 days after the end of each fiscal year of Company, a copy of the
consolidating balance sheet of Company and its consolidated Subsidiaries
(including Unrestricted Subsidiaries) as at the end of such year and the related
consolidating statements of income and retained earnings and of cash flows for
such year, setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly stated in all
material respects;
(c) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly periods of each
fiscal year of Company, the unaudited consolidated and consolidating balance
sheet of Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) as at the end of such quarter and the related unaudited
consolidated and consolidating statements of income and retained earnings and of
cash flows of Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) for such quarter and the portion of the fiscal year through the
end of such quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being fairly stated
in all material respects when considered in relation to the consolidated and
consolidating financial statements of Company and its consolidated Subsidiaries
(subject to normal year-end audit adjustments);
(d) as soon as available, but in any event not later than
30 days after the end of each calendar month, the unaudited consolidated balance
sheet of Company and its consolidated Subsidiaries (including Unrestricted
Subsidiaries) as at the end of such month and the related unaudited consolidated
statements of income and retained earnings and of cash flows of Company and its
consolidated Subsidiaries (including Unrestricted Subsidiaries) for such month,
setting forth in each case in comparative form the figures for such month as set
forth on the Business Plan and, with a comparison to the same calendar month of
the preceding fiscal year,
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certified by a Responsible Officer as being fairly stated in all material
respects when considered in relation to the consolidated financial statements of
Company and its consolidated Subsidiaries (including Unrestricted Subsidiaries)
(subject to nominal year-end audit adjustments); and
(e) as soon as available, but in any event not later than
45 days after the end of each fiscal quarter, projections by Company of the
operating cash flow budget of Company and its Subsidiaries for (i) the following
two fiscal quarters, prepared on a monthly basis and (ii) the two fiscal
quarters thereafter, prepared on a quarterly basis, certified by a Responsible
Officer as being prepared in good faith on the basis of the assumptions stated
therein, which assumptions were reasonabl in light of conditions existing at the
time of delivery thereof and represented, at the time of delivery, Company's
best estimate of its future financial performance;
in each case, all such financial statements to be complete and correct in all
material respects and to be prepared in reasonable detail and (except in the
case of cash flows in (d) and (e) above) in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION.
(a) Furnish to 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;
(ii) concurrently with the delivery of the
financial statements referred to in Sections 6.1(a), (b) and (c), a
certificate of a Responsible Officer stating that, to the best of such
Responsible Officer's knowledge, Company and each Subsidiary during
such period has observed or performed the covenants of Section 7.1,
7.2, 7.3, 7.6, 7.8, 7.9, 7.15, 7.16, 7.17, 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 Company proposes to take with respect thereto;
(iii) within five Business Days after the same are
sent, copies of all financial statements and reports which Company
sends to its stockholders and, within five Business Days after the same
are filed, copies of all financial statements and reports
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which Company may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority;
(iv) within 10 Business Days after the same are
delivered, copies of all financial statements and all material reports,
management letters or other financial information prepared for its
Board of Directors; and
(v) promptly, such additional financial and
other information as Obligee may from time to time reasonably request
(which may include, without limitation, new appraisals and detailed
ongoing information as to the real estate underlying any Commercial
Receivables which are not Eligible Commercial Receivables, absorption,
sales and other related matters). In addition, the Company shall
deliver to Obligee a copy of each report, certificate or other document
or information delivered to the Revolving Loan Banks (or successors or
assigns) or the Anglo American Loan Group (or successors or assigns) or
agents pursuant to the Revolving Loan Agreement and the Anglo American
Loan Agreement (or any Permitted Refinancing Indebtedness, as defined
in section 7.2(b) below), concurrently with the delivery thereof to
such Persons, including all annexes or attachments thereto.
6.3 PAYMENT OF OBLIGATIONS.
Pay, discharge or otherwise satisfy at or before maturity or
before they become delinquent, as the case may be, all its obligations of
whatever nature, except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, and reserves in conformity
with GAAP with respect thereto have been provided on the books of Company or its
Subsidiaries, as the case may be, or where the terms of this Agreement or the
Reorganization Plan would prohibit such payment, discharge or satisfaction.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
Subject to Sections 7.5, 7.6, 7.7 and 7.9, (a) continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business and (b) comply with all
Contractual Obligations and Requirements of Law, except to the extent that
failure to comply therewith is not reasonably likely to, in the aggregate, have
a Material Adverse Effect.
6.5 MAINTENANCE OF PROPERTY; INSURANCE.
Keep all property useful and necessary in its business in good
working order and condition; maintain with financially sound and reputable
insurance companies insurance on all its property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business; and furnish to
Obligee, upon written request, full information as to the insurance carried.
Such insurance in any
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<PAGE>
event shall include, without limitation, all replacement costs associated with
building collapse, whether caused by earthquake or structural defects or
otherwise, on all Real Property of the Borrower and each of its Subsidiaries.
Each such policy of insurance shall name Collateral Agent as a loss payee
thereunder and shall provide for at least thirty days prior written notice to
Agent of any material modification or cancellation of such policies. On the date
hereof and on each anniversary thereafter, Company and its Subsidiaries shall
submit to Obligee certificates of insurance evidencing compliance with this
Section 6.5.
6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; APPRAISALS.
Keep proper books of records and account in which full, true
and correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities; and permit representatives of Obligee, with respect to Company and
its Subsidiaries, to visit and inspect any of the Collateral and related
properties and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonabl be desired and to discuss the
business, operations, properties and financial and other condition of Company
and its Subsidiaries with officers and employees of Company and such
Subsidiaries and with its independent certified public accountants. From time to
time, if Obligee determines that obtaining appraisals is necessary or
appropriate, Obligee will either cause its personnel to appraise, or obtain
appraisal reports from appraisers satisfactory to Obligee, stating the then
current fair market values of all or any portion of the Real Property. Anything
herein to the contrary notwithstanding, Company shall not be obligated to
reimburse Obligee with respect to, or to obtain, appraisals of the same
particular item of Real Property that occur more frequently than once in any 6
consecutive month period, unless an Event of Default has occurred and is
continuing or there has occurred a material adverse change in the value of the
Collateral, in which case Company shall be obligated to reimburse Obligee with
respect to as many appraisals as Obligee deems necessary to conduct.
6.7 NOTICES.
Promptly give notice to 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 Company or, to the knowledge of Company, any of its
Subsidiaries or (ii) litigation, investigation or proceeding which may exist at
any time between Company or, to the knowledge of Company, any of its
Subsidiaries and any Governmental Authority, which in either case, if not cured
or if adversely determined, as the case may be, would have a Material Adverse
Effect;
(c) any litigation or proceeding affecting Company or, to
the knowledge of Company, any of its Subsidiaries in which the amount involved
is $250,000 or more and, not covered by insurance or in which injunctive or
similar relief is sought;
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(d) as soon as possible and in any event within 30 days
after Company knows or has reason to know thereof, the occurrence or expected
occurrence of any event or condition described in Section 4.12 which could
reasonably be expected to result in liability of Company or any Commonly
Controlled Entity in excess of $100,000 and which is not reflected in the
financial statements most recently delivered to 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 Company proposes to take with respect thereto.
6.8 ENVIRONMENTAL LAWS.
(a) Comply with, and use its best efforts to insure
compliance by all tenants and subtenants, if any, with, all Environmental Laws
and obtain and comply with and maintain, and insure that all tenants and
subtenants obtain and comply with and maintain, any and all licenses, approvals,
registrations or permits required by Environmental Laws, except in each case to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect;
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not reasonably be expected to have a
Material Adverse Effect, and develop and maintain a system, satisfactory to
Obligee, for performing periodic environmental compliance reviews with respect
to all of its properties, and for reporting such reviews to Obligee; and
(c) Defend, indemnify and hold harmless Obligee, and its
respective employees, agents, officers and directors, from and against any and
all claims, demands, penalties, fines, liabilities, settlements, damages, costs
and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to, the violation of or
noncompliance with any Environmental Laws applicable to the real property owned
or operated by Company or any of its Subsidiaries, or any orders, requirements
or demands of Governmental Authorities related thereto, including attorney's and
consultant's fees, investigation and laboratory fees, court costs and litigation
expenses, except to the extent that any of the foregoing arise out of the gross
negligence or willful misconduct of the party seeking indemnification therefor.
The agreements in this Section shall survive the payment of the Secured
Instruments and all other amounts payable hereunder.
6.9 BUSINESS PLAN.
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Furnish to the Obligee on or before the tenth day following
approval by Company's Board of Directors, but in no event later than December 31
of each fiscal year and within 10 days (after approval by Company's Board of
Directors, if applicable) of any amendment, modification or update thereto, a
Business Plan of Company and its Subsidiaries for the next succeeding fiscal
year in a form and in substance satisfactory to 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 Company.
Company and its Subsidiary shall at all times conduct their business
substantially in accordance with the Business Plan and shall not materially
modify or deviate from such Business Plan without the prior written approval of
Obligee.
6.10 AUTHORIZATIONS; TRANSACTION DOCUMENTS .
(a) Company will, and will cause each of its Subsidiaries
to use its good faith diligent best efforts to promptly obtain and maintain in
full force and effect, all licenses, consents, permits, authorizations and
filings (collectively, "Governmental Approvals") necessary to develop, lease or
own all of its properties, and, upon obtaining the foregoing, Company will, and
will cause each of its Subsidiaries to, maintain the Governmental Approvals in
full force and effect and comply wit the terms thereof, except only to the
extent that failure to maintain the Governmental Approvals and comply therewith
is not reasonably likely to have a Material Adverse Effect or result in any
liability to the owners or lessees thereof or to Obligee or Collateral Agent (at
any time prior to Obligee or Collateral Agent taking title to any of the
Collateral pursuant to any exercise of remedies provided for herein or in the
other Transaction Documents).
(b) Comply with, and cause the Subsidiaries to comply
with, all of the Transaction Documents.
6.11 DIVIDENDS FROM SUBSIDIARIES.
Cause the Subsidiaries to pay dividends to 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 and Mezzanine Property Under
Development may be used to pay all costs associate with development of the same
phase or additional phases of the same project, including reasonable reserves
for such anticipated costs during the period commencing on the date of sale to
the date 180 days after the date of sale (excluding any costs which are an
allocated share of corporate general and administrative expenses of Company or
any Subsidiary), and (b) from single phase projects comprising Subsidiary
Property Under Development and Mezzanine Property Under Development to the
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extent units, lots or tracts may be sold in accordance with applicable laws and
regulations prior to completion of the projects may be used to pay all costs
associated with development of such project (excluding any costs which are an
allocated share of corporate general and administrative expenses of Company or
any other Subsidiary), in either case until the conclusion of the project, at
and following which time all such proceeds shall be distributed to Company. For
purposes hereof, "conclusion of the project" shall mean the completion of
structure or infrastructure development of the project (or, with multi-phase
projects: (i)(y) the final phase of the project, or (z) the sale of
substantially all units thereon; and (ii) the payment of the Indebtedness and
Guarantee Obligations in respect of Subsidiary Property Under Development and
Mezzanine 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 Obligee such supplemental title reports on
the Real Property subject to the Deeds of Trust and Mortgages as Obligee may
reasonably request from time to time; provided Company shall not be required to
provide such supplemental reports more than once per quarter.
(b) No later than 60 days after the Issuance Date,
Company shall deliver to Obligee such third party appraisals, environmental
reports, surveys, and ALTA title policies, as would have complied with the
provisions of Section 5.1(k) if delivered on the Issuance Date with respect to
all Real Property to the extent such reports were not required by Obligee to be
delivered on or prior to the Issuance Date.
(c) Without limiting the generality of Section 4.10,
Company shall cause all assessments and taxes, whether real, personal or
otherwise, due or payable by, or imposed, levied, or assessed against any Real
Property located in Tennessee and Texas to be paid in full before delinquency or
before the expiration of any extension period and promptly shall execute and
deliver to Obligee appropriate certificates attesting to the payment thereof or
deposit with respect thereto; provided, however, that in the case of Real
Property with a fair market value less than or equal to the assessments or taxes
with respect thereto, the Company may decide not to pay such assessments or
taxes. At any time during the existence of an Event of Default, Obligee shall
have the right to require the execution and delivery of a tax servicing contract
in respect of the Real Property located in Tennessee and Texas, in form and
substance satisfactory to Obligee, among Company, Collateral Agent and a tax
servicing firm satisfactory to Collateral Agent.
6.13 COMPLIANCE WITH LAWS.
Company shall, and shall cause each of its Subsidiaries to
comply with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority, noncompliance with which would or could be
reasonably expected to cause a Material Adverse Effect.
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6.14 OTHER NOTICES.
Promptly give notice to 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 Obligee may
request.
6.15 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, Company
shall continue to maintain Company's cash management system substantially as
such system exists on the date hereof and shall continue to concentrate the
funds of Company into the Company Operating Account except to the extent that
such funds reasonably are required to be held in other accounts for permitted
uses by Company, and except to the extent tha such funds are invested in
investments permitted by Section 7.9.
6.16 INDEMNIFICATION BY COMPANY.
Company agrees to and does hereby indemnify, hold harmless and defend
Obligee from and against all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever which are imposed on, incurred by, or asserted against
Obligee in any way relating to or arising out of any failure of Company to
comply with the terms of, or complete, the Reorganization Plan.
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ATTACHMENT B
7.1 MAINTENANCE OF CONSOLIDATED NET WORTH.
Permit Consolidated Net Worth at any time to be less than the
amounts set forth below (hereinafter referred to as the "Minimum Consolidated
Net Worth") the sum of: (a) (i) through December 31, 1999, $35,000,000; and (ii)
at any time thereafter, $35,000,000; and (b) 50% of the Annual Net Income for
the prior fiscal year; provided, however, that the amount determined under this
clause (b) shall never be less than zero.
To demonstrate compliance with the Minimum Consolidated Net
Worth covenant set forth in this Section, Company shall furnish to 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 for such date
calculated in accordance with this Section 7.1, and the calculation upon which
it is based; and (ii) within 90 days of the close of each fiscal year, a
certificate of a Responsible Officer setting forth Minimum Consolidated Net
Worth as of the date calculated in accordance with this Section 7.1 and the
calculation upon which it is based, reflecting in such annual certificate any
addition to the Minimum Consolidated Net Worth that Company is required to
maintain resulting from the Annual Net Income for the fiscal year then ended,
but only as calculated under clause (ii) of this Section 7.1.
7.2 LIMITATION OF INDEBTEDNESS.
Create, incur, assume or suffer to exist any Indebtedness,
except:
(a) Indebtedness in respect of the Company under or in
respect of the Transaction Documents;
(b) Indebtedness in respect of (i) Revolving Loans and
the Anglo American Loans, (ii) up to $39,500,000 aggregate principal amount of
replacement indebtedness for the Revolving Loans, and (iii) up to $31,500,000
aggregate principal amount of replacement indebtedness for the Anglo American
Loans; provided that any such replacement indebtedness is on terms no less
favorable than the terms of the Revolving Loan Agreement or Anglo American Loan
Agreement, as the case may be ("PERMITTED REFINANCING INDEBTEDNESS").
(c) unsecured Indebtedness in respect of the Unsecured
Note (as defined in the Anglo American Loan Agreement);
(d) Indebtedness of Company in respect of Apollo's 20%
Profits Interest (as defined in the Anglo American Loan Agreement);
(e) Indebtedness of Company not otherwise permitted
hereunder and
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Indebtedness of its Subsidiaries which is recourse to the Company,
at any time outstanding, whether incurred in connection with Subsidiary Property
Under Development, Mezzanine Property Under Development or otherwise, not
exceeding $90,000,000 (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;
(f) Indebtedness of Company to any Subsidiary; or of any
Subsidiary to Company; provided that (i) such intercompany Indebtedness shall
not be evidenced by any promissory note or other instrument, and (ii) all
Indebtedness of Subsidiaries to Company shall not exceed an aggregate principal
amount of $10,000,000 at any time, of which no more than $5,000,000 in the
aggregate may be Indebtedness of MPUD Subsidiary Group members, SPUD
Subsidiaries, Venture Subsidiaries and Unrestricted Subsidiaries;
(g) [intentionally omitted]
(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") or in connection
with Mezzanine Property Under Development of the Subsidiary (any Subsidiary
incurring such Indebtedness shall be referred to in this Section 7.2(h) as an
"MPUD Subsidiary"); provided that (i) neither Company nor any Subsidiary other
than that SPUD Subsidiary or MPUD Subsidiary, as the case may be, is liable for
such Indebtedness in respect of that Subsidiary Property Under Development or
Mezzanine Property Under Development, as the case may be, directly or pursuant
to a Guarantee Obligation or otherwise, and (ii) such outstanding Indebtedness
permitted pursuant to this Section 7.2(h) shall not exceed in the aggregate
$180,000,000 minus other outstanding Indebtedness of Company and Subsidiaries
permitted pursuant to Section 7.2(e); and (iii) the shares of capital stock and
other ownership interests of such MPUD Subsidiary shall at all times be owned
solely by a single MPUD Holding Company;
(i) [intentionally omitted]
(j) [intentionally omitted];
(k) Indebtedness of Subsidiaries for the development of
infrastructure, common areas, or recreational facilities owing to
quasi-governmental entities such as community development and special districts
to the extent financed through the issuance of industrial revenue bonds or other
similar public financing; provided that (except for Liens permitted pursuant to
Section 7.3(q)) there is no direct or indirect recourse to Company with respect
to such Indebtedness (other than inchoate Liens arising by operation of law in
respect of such Indebtedness) and such Indebtedness shall not exceed $75,000,000
in the aggregate at any one time outstanding; provided further that Company
shall give Obligee prior written notice of the incurrence of any such
Indebtedness under this Section 7.2(k); and
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Anything to the contrary notwithstanding, in no event shall Company or any
Subsidiary co-make, endorse, guarantee (except to the extent permitted under
Section 7.4(c)), or otherwise become liable or have any recourse with respect to
any Indebtedness of any of the Unrestricted Subsidiaries.
7.3 LIMITATION ON LIENS.
Create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired,
except for:
(a) Liens securing Indebtedness permitted by Section
7.2(a);
(b) Liens (senior to the Lien granted hereunder in right
of priority with respect to the Collateral) securing Indebtedness permitted by
Section 7.2(b), so long as the Intercreditor Agreement remains in full force and
effect;
(c) intentionally omitted;
(d) intentionally omitted;
(e) Liens for taxes (i) which are not yet delinquent or
(ii) which are, not in an aggregate amount, as to Company and all Subsidiaries,
of greater than $1,000,000 or (iii) which are being contested in good faith by
appropriate proceedings; provided that adequate reserves with respect thereto
are maintained on the books of Company or its Subsidiaries, as the case may be,
in conformity with GAAP;
(f) carriers, warehousemen's, mechanics's, materialmen's,
repairmen's or other like Liens arising in the ordinary course of business which
do not remain unsatisfied or undischarged for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
(g) pledges or deposits in connection with workers
compensation, unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(h) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(i) easements, rights-of-way, restrictions, development
orders, plats, and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount and which do not
in any case materially detract from the value of the
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property subject thereto or materially interfere with the ordinary conduct of
the business of Company or such Subsidiary;
(j) Liens granted by Company or any Subsidiary, as
lessee, in the ordinary course of business on leased equipment, leasehold
improvements and furnishings;
(k) Liens created, incurred or assumed in connection with
the acquisition of, or the refinancing or any subsequent refinancing of
Indebtedness incurred in connection with property, plant and equipment acquired
after the date hereof and attaching only to the property, plant and equipment
being acquired or refinanced;
(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 Company or Subsidiaries upon Real
Property and related Personal Property which is Subsidiary Property Under
Development and which is either financed by Indebtedness incurred by
Subsidiaries pursuant to Section 7.2(e) or 7.2(h), or contributed by Company to
a Subsidiary pursuant to Section 7.9(g);
(o) Liens granted by Company or Subsidiaries upon Real
Property and related Personal Property which is Mezzanine Property Under
Development and which is either financed by Indebtedness incurred by
Subsidiaries pursuant to Section 7.2(e) or (h), or contributed by Company to a
Subsidiary pursuant to Section 7.9(g); and
(p) intentionally omitted;
(q) inchoate Liens solely arising by operation of law in
respect of Indebtedness incurred pursuant to Section 7.2(k).
7.4 LIMITATION ON GUARANTEE OBLIGATIONS.
Create, incur, assume or suffer to exist any Guarantee
Obligation, except: (a) the Guarantee Obligations listed on Schedule 4.17; (b)
Guarantee Obligations made in the ordinary course of its business by Company of
obligations (other than Indebtedness) of any of its Subsidiaries, which
obligations are otherwise permitted under this Agreement; (c) Guarantee
Obligations by Company of Indebtedness of any Subsidiary, Unrestricted
Subsidiary or Joint Venture; provided, however, that any outstanding Guarantee
Obligations permitted under this Section 7.4(c) in respect of Indebtedness of
any Unrestricted Subsidiary or Joint Venture shall reduce on a dollar-for-dollar
basis the $90,000,000 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
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exceed $90,000,000 in the aggregate; provided further, that Company may not
incur any Guarantee Obligation with respect to Indebtedness of any Subsidiary
permitted pursuant to Section 7.2(h); and (d) Guarantee Obligations of the
Subsidiaries of Company in respect of the Revolving Loan Obligations and the
Anglo American Loan Obligations, so long as the Intercreditor Agreement remains
in full force and effect.
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7.5 LIMITATIONS ON FUNDAMENTAL CHANGES.
Except to the extent such merger, consolidation, or
amalgamation is of a Subsidiary with and into Company, or between or among
wholly owned Subsidiaries, enter into any merger, consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets; provided that
Company or any Subsidiary may convey, sell, assign, transfer or have condemned
or otherwise disposed of assets to the extent permitted by Section 7.6 so long
as the proceeds of any such sale are applied in accordance with this Agreement.
7.6 LIMITATION ON SALE OF ASSETS.
So long as no Default or Event of Default has occurred and is
continuing or would result therefrom (unless the Permitted Sale Asset is the
subject of a binding written contract of sale with an unaffiliated third party
entered into prior to the first date on which the applicable Default or Event of
Default occurred)), convey, sell, lease, assign, transfer or otherwise dispose
of any of its property, business or assets (including receivables and leasehold
interests), whether now owned or hereafter acquired, except the following
("Permitted Sale Assets"):
(a) raw land;
(b) homes or homesites in the ordinary course of its
business;
(c) obsolete or worn out property disposed of in the
ordinary course of business;
(d) Commercial Real Estate;
(e) the sale or discount without recourse of Commercial
Receivables or Homesite Contract Receivables in the ordinary course of business;
(f) [intentionally omitted];
(g) sales or other transfers of any partnership interests
or joint venture interests in entities that are not wholly owned, collectively,
by Company and its Subsidiaries; and
(h) transactions permitted under Section 7.5.
Upon any permitted sale as aforesaid, Collateral Agent shall execute releases of
Collateral Agent's Lien upon the Collateral included in any such sale; provided
that there exists no Default or Event of Default hereunder and no Default or
Event of Default would result therefrom; and
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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 Obligee.
7.7 LIMITATION ON DIVIDENDS.
Declare or pay any dividend (other than dividends payable
solely in common stock or preferred stock of Company) on, or, except for the
Reverse Stock Split (as defined in the Anglo American Loan Agreement), make any
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any Capital Stock of Company including 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
Company) or in obligations of Company or any Subsidiary, except for: (a)
dividends declared and paid by any Subsidiary to Company or any Subsidiary, and
(b) dividends to the extent permitted by Section 4.14 of the Intercreditor
Agreement.
7.8 INTENTIONALLY OMITTED.
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) (i) loans and advances to employees of Company or its
Subsidiaries for travel, entertainment and relocation expenses and for advances
on salary prior to, and otherwise payable during, an employee's vacation, in the
ordinary course of business in an aggregate amount for Company and its
Subsidiaries not to exceed $500,000 at any one time outstanding and (ii) the
loans to J. Larry Rutherford, the President and Chief Executive Officer of the
Company, evidenced by the obligations described on Schedule 7.9(c);
(d) investments by Company in any Subsidiary (other than
Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary Group members and
Unrestricted Subsidiaries) or by any Subsidiary in Company or any other
Subsidiary (other than Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary
Group members and Unrestricted Subsidiaries) in connection with cash management
procedures in the ordinary course of business;
(e) (i) loans by Company to its Subsidiaries (other than
Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary Group members and
Unrestricted Subsidiaries) or by any
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Subsidiary to Company to the extent such Indebtedness is permitted pursuant to
Section 7.2(f); and (ii) capital contributions to Subsidiaries (other than
Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary Group members and
Unrestricted Subsidiaries) so long as Company or its Subsidiary making the
capital contribution receives stock equal to the value of the capital
contributed as determined in accordance with GAAP; provided, that Collateral
Agent's Lien shall continue against such stock received by Company or its
Subsidiary as aforesaid, which Lien shall be evidenced by any and all documents
and filings as may be required by Collateral Agent and Obligee;
(f) extensions of credit to purchasers in connection with
sales of assets permitted under this Agreement; and
(g) capital contributions to Venture Subsidiaries for the
purpose of making investments in Joint Ventures, to SPUD Subsidiaries, to MPUD
Group members and to Unrestricted Subsidiaries so long as Company or its
Subsidiary making the capital contribution receives stock, partnership
interests, joint venture interests, or beneficial interests, respectively, equal
to the value of the capital contributed as determined in accordance with GAAP
(and upon any permitted capital contribution as aforesaid, Collateral Agent
shall execute releases of Collateral Agent's Lien upon any Collateral
contributed); provided, (i) that no Default or Event of Default exists hereunder
or would result therefrom, (ii) that Collateral Agent's Lien shall continue
against such stock or other interests received by Company or its Subsidiary as
aforesaid, which Lien shall be evidenced by any and all documents and filings as
may be required by Collateral Agent and Obligee, and (iii) from and after the
Effective Date, the aggregate "net amount" of such capital contributions shall
be limited to $35,000,000 in the aggregate for all enterprises and projects, and
$15,000,000 for any single enterprise or project. For purposes of this Section
7.9(g), the "net amount" shall be equal to the aggregate amount of all capital
contributions less any dividends paid to the Company and/or Subsidiaries, as the
case may be, by the Venture Subsidiaries, SPUD Subsidiaries, MPUD Subsidiary
Group members and/or Unrestricted Subsidiaries.
7.10 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OR RENEWALS
OF DEBT INSTRUMENTS.
(a) Make any optional payment or optional prepayment on,
or optional redemption of, any Indebtedness or Guarantee Obligation except: (i)
payments on the Revolving Loans, the Anglo American Loans, the Secured
Instrument and/or the Unsecured Note or (ii) so long as no Event of Default has
occurred and is continuing or would result therefrom, payments made pursuant to
Indebtedness permitted pursuant to Section 7.2(e), (f), (g) (but exclusive of
Indebtedness permitted pursuant thereto consisting of intercompany Indebtedness
among Company and its Subsidiaries and Financing Leases), (h), or (k);
(b) Amend, modify, or change, or consent or agree to any
amendment, modification or change to any of the terms of the Revolving Loan
Obligations, the Anglo American Loan Obligations, the Secured Instrument and/or
the Unsecured Note or any other
25
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agreement executed in connection with the foregoing or otherwise in connection
with any Indebtedness or Guarantee Obligation (other than: (1) Indebtedness
permitted to be incurred pursuant to subsections 7.2(e) and (f) (but exclusive
of Indebtedness permitted pursuant thereto consisting of intercompany
Indebtedness among Company and its Subsidiaries and Financing Leases), (h), and
(k); and (2) other than any such amendment, modification, or change to any such
other Indebtedness which would extend the maturity or reduce the amount of any
payment of principal thereof or which would reduce the rate or the amount of
interest payable or extend the date for payment of interest thereon; but in the
case of either (1) or (2), solely to the extent the amendment, modification, or
change to any such Indebtedness is not prohibited by any other provision in this
Agreement or the other Loan Documents or in the Intercreditor Agreement);
provided that Company shall not agree to any renewal, extension, refinancing or
replacement of the Revolving Loan Obligations, the Anglo American Loan
Agreements and Permitted Refinancing Indebtedness; and
(c) Amend any subordination provisions of any instrument
governing any Indebtedness or Guarantee Obligation (except for amendments
pursuant to this Agreement and the Security Documents, the Revolving Loan
Agreement and the security documents in respect thereof, the Anglo American Loan
Agreement and the security documents in respect thereof and Permitted
Refinancing Indebtedness and the security documents in respect thereof).
7.11 TRANSACTIONS WITH AFFILIATES.
Enter into any transaction, including any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate (other than any Subsidiary of Company), unless such transaction is
otherwise permitted under this Agreement, is in the ordinary course of Company's
or such Affiliate's business and is upon fair and reasonable terms no less
favorable to Company or such Affiliate, as the case may be, than it would obtain
in a comparable arms length transaction with a Person not an Affiliate.
7.12 SALE AND LEASEBACK.
Enter into any Sale and Leaseback to the extent the aggregate
Book Value of all assets sold and leased under all such transactions exceeds
$2,000,000 during the term of this Agreement.
7.13 FISCAL YEAR.
Permit the fiscal year of Company to end on a day other than
December 31.
7.14 LIMITATION ON NEGATIVE PLEDGE CLAUSES.
Enter into any agreement, other than any Secured Debt
Documents, industrial revenue bonds, community development district financing,
purchase money mortgages, Financing Leases, or agreements executed in connection
with Indebtedness or Guarantee
26
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Obligations incurred in connection with Subsidiary Property Under Development
and/or Mezzanine Property Under Development permitted by this Agreement (in
which cases, any prohibition or limitation shall only be effective against the
assets finance thereby), with any Person other than Lenders pursuant hereto
which prohibits or limits the ability of Company or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired.
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7.15 DEVIATION FROM BUSINESS PLAN.
After the Revolving Loan Obligations, Anglo American Loan
Obligations and any Permitted Refinancing Indebtedness have been paid in full,
allow the total actual Net Cash Flow for any fiscal quarter, including major
asset dispositions, to deviate from the quarterly Net Cash Flow projected under
the Business Plan for such year by a negative margin equal to or greater than 50
percent or $5,000,000, whichever is greater.
7.16 [INTENTIONALLY OMITTED].
7.17 LIMITATION ON BANK ACCOUNTS.
So long as any Obligations or Commitments are outstanding, and
after the Revolving Loan Obligations, the Anglo American Loan Obligations and/or
any Permitted Refinancing Indebtedness have been paid in full, allow cash and
Cash Equivalents maintained in Bank Accounts of Company and Subsidiaries other
than in the Cash Collateral Account and the restricted accounts set forth in
Schedule 7.17 (including any beneficial interest therein), less the amount of
checks outstanding to pay current expenses in the ordinary course of business or
to prepay expenses to be incurred in the immediately subsequent three-month
period consistent with past practices, to exceed $5,000,000 in the aggregate at
any time.
7.18 VENTURE SUBSIDIARIES AND JOINT VENTURES.
(a) Cause, suffer, or permit any Venture Subsidiary to
have any asset or revenues other than the Joint Venture interests owned by such
Venture Subsidiary as disclosed on Schedule 4.14(B) and the revenues arising
from such revenue.
(b) Cause, suffer, or permit any Venture Subsidiary to
create, incur, assume, or suffer to exist any Lien (other than Liens in favor of
the Collateral Agent) upon any of such Venture Subsidiary's property, assets, or
revenues, whether now owned or hereafter acquired (including the Joint Venture
interests owned by such Venture Subsidiary as disclosed on Schedule 4.14(B) and
the revenues arising from such revenue).
7.19 EMPLOYEE BENEFITS.
(a) Fail to comply in all material respects with the
applicable provisions of ERISA and the Code to the extent that such failure,
individually or in the aggregate, results or could reasonably be expected to
result in a Material Adverse Effect, and (b) fail to furnish the Obligee as soon
as possible after, and in any event within 10 days after any Responsible Officer
of the Company or any Commonly Controlled Entity knows or has reason to know
that any ERISA Event has occurred that, along or together with any other ERISA
Events that, individually or in the aggregate, have occurred could reasonably be
expected to result in a Material Adverse Effect to the Company and/or the
Subsidiaries, a statement by a Responsible
28
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Officer of the Company setting forth details as to such ERISA Event and the
action, if any, that the Company and/or the Subsidiaries propose to take with
respect thereto.
7.20 CHARTER DOCUMENTS.
Amend or modify the Series A Statement or the Series B
Statement or any other provision of its charter, certificate of incorporation or
other organizational documents relating to preferred stock (whether now
outstanding or hereafter issued) without obtaining the prior written consent of
Obligee.
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ATTACHMENT C
FIRST AMENDMENT TO
AMENDED AND RESTATED INVESTMENT AGREEMENT
This First Amendment to Amended and Restated Investment Agreement,
dated as of December 31, 1998 ("AMENDMENT") is entered into by and between
ATLANTIC GULF COMMUNITIES CORPORATION, a Delaware corporation ("COMPANY"), and
AP-AGC, LLC, a Delaware limited liability company ("INVESTOR").
RECITALS
The Company and Investor are parties to that certain Investment
Agreement dated as of February 7, 1997, amended as of March 20, 1997, and
amended and restated as of May 15, 1997 (as heretofore amended, supplemented or
otherwise modified, the "INVESTMENT AGREEMENT"). Capitalized terms used and not
otherwise defined in this Amendment shall have the respective meanings assigned
to them in the Investment Agreement.
The Company is refinancing certain of its institutional indebtedness.
In connection therewith, (1) the Company, M. H. Davidson & Co., LLC, a New York
limited liability company ("MHD") (as agent and collateral agent) and the
Revolving Loan Banks are entering into the Revolving Loan Agreement and (2) the
Company, Anglo American (as agent and a member of the Anglo American Lender
Group thereunder), the other members of the Anglo American Lender Group and MHD
(as collateral agent thereunder) are entering into the Anglo American Loan
Agreement (collectively, the "SENIOR LOAN AGREEMENTS"). The Revolving Loan Banks
and the Anglo American Lender Group are collectively referred to herein as the
"SENIOR LENDERS." It is a condition precedent to the consummation of the
transactions contemplated in the Senior Loan Agreements that the Obligee (a)
execute and deliver the Intercreditor Agreement and (b) take such other actions
and deliver such other documents, agreements and instruments as are reasonably
requested by the Company and the Senior Lenders in connection with the
consummation of the transactions contemplated in the Senior Loan Agreements.
Capitalized terms used and not otherwise defined in this Amendment or in the
Investment Agreement shall have the respective meanings assigned to them in the
Secured Agreement.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be bound hereby, agree as follows:
A. Amendments, Acknowledgments, Consents and Waivers
1. AMENDMENT OF SECTION 1.1. The definition of Major Transaction
contained within Section 1.1 of the Investment Agreement is amended to include
as clause (xiv) thereof the Apollo
1
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Beach Project and the Substitute Project, each as defined in that certain
Promissory Note to be dated as of January 26, 1998, in the original principal
amount of One Million and No/100 Dollars ($1,000,000), executed by Company, as
Maker, to and for the benefit of Investor, as Holder.
2. AMENDMENT OF SECTION 6.1(a). From and after the date hereof,
Section 6.1(a) of the Investment Agreement is hereby amended and restated in its
entirety as follows:
Subject to the requirements of the Act and the Exchange Act,
all Registrable Securities, the Warrants and the Promissory
Note shall be freely transferable.
3. INCLUSION OF ADDITIONAL SHARES AS REGISTRABLE SECURITIES. The
Company hereby acknowledges that the 500,000 shares of Company common stock,
$.10 par value per share, issued to the Investor or its designee on or about the
date hereof shall constitute Registrable Securities for purposes of Article VIII
of the Investment Agreement.
4. DELETION OF SP SUBSIDIARY CONCEPT. From and after the date
hereof, (a) all references to the "SP Subsidiary" are deleted from the
Investment Agreement and (b) Section 6.14 of the Investment Agreement is amended
and restated in its entirety as follows:
"Intentionally omitted."
5. CHANGE OF NOTICE. Copies of all notices sent to the Company
pursuant to the terms of the Investment agreement shall be sent to:
Brownstein Hyatt Farber & Strickland, P.C.
410 17th Street, Suite 2200
Denver, Colorado 80202
Telecopy: (303) 623-1956
Attention: John L. Ruppert, Esq.
6. MAJOR TRANSACTION. The Investor acknowledges that all three of
the Investor Designees on the Company's Board of Directors approved the terms of
the Senior Loan Agreements and the consummation of the transactions contemplated
therein at a duly convened special telephonic meeting of the Board of Directors
of the Company held on Monday, January 25, 1999, and accordingly, the
restrictions of Section 6.7(f) of the Investment Agreement have been satisfied.
7. CONFORMING AMENDMENTS. Notwithstanding anything in the
Investment Agreement to the contrary, from and after the date hereof, the
Investment Agreement shall be interpreted consistently with the terms of this
Amendment, and all provisions contained therein
2
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and terms thereof that are inconsistent with the terms and provisions hereof
shall be null and void and no longer of any force and effect.
8. WAIVER OF DEFAULTS. The Investor hereby waives any and all
Defaults, including, without limitation, those Defaults under Section 6.4 of the
Investment Agreement relating to the redemption or repurchase of the Preferred
Shares, that would result under the Investment Agreement upon the execution and
delivery of the Senior Loan Agreements and the consummation of the transactions
contemplated therein.
9. RESIGNATION OF SP SUBSIDIARY DIRECTOR DESIGNATED BY THE
INVESTOR. Effective as of January 25, 1999, (a) Mr. Koenigsberger agrees to
resign as a member of the board of directors of the entities identified on
Schedule A hereto (the "SP Entities") (each a "Resignation") and (b) each of the
SP Entities accepts Mr. Koenigsberger's Resignation from its board of directors.
B. Representations and Warranties.
1. After giving effect to the provisions hereof, no Defaults have
occurred and are continuing under the Investment Agreement.
2. Each party hereto represents and warrants to the other party
hereto that (a) it has the full corporate power and authority to enter into and
perform its obligations hereunder and each transaction contemplated hereby and
(b) the execution and delivery by such party of this Amendment and each other
document contemplated hereby and its performance of its obligations hereunder
and thereunder have been duly authorized by all necessary corporate proceedings
on the part of such party.
C. Miscellaneous
1. This Amendment may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
2. Except as herein specifically amended, all terms, covenants
and provisions of the Investment Agreement shall remain in full force and effect
and shall be performed by the parties hereto in accordance therewith. All
references to the "Agreement" or the "Investment Agreement" contained in the
Investment Agreement or in the Schedules or Exhibits shall henceforth refer to
the Investment Agreement as amended by this Amendment.
3. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND PERFORMED ENTIRELY WITHIN SUCH STATE.
3
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REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first written above.
ATLANTIC GULF COMMUNITIES
CORPORATION, a Delaware corporation
By:________________________________
Name:___________________________
Title:__________________________
AP-AGC, LLC., a Delaware limited liability
company
By: Kronus Property, Inc., its Manager
By:__________________________
Ricardo Koenigsberger
Vice President
5
INTERCREDITOR AGREEMENT
This INTERCREDITOR AGREEMENT is made and executed as of
December 31, 1998 by and among the SECURED AGREEMENT OBLIGEES (as hereinafter
defined), the DK LENDERS (as hereinafter defined), the ANGLO AMERICAN LENDERS
(as hereinafter defined), and M.H. DAVIDSON & CO., LLC, a New York limited
liability company, as Collateral Agent on behalf of the Secured Agreement
Obligees, the DK Lenders and the Anglo American Lenders (in such capacity, the
"COLLATERAL AGENT").
The foregoing capitalized terms and the capitalized terms in
the following Recitals are defined in SECTION 1 hereof.
RECITALS
A. The DK Lenders and the Collateral Agent are parties
to the DK Loan Documents, and, pursuant thereto, the DK Loan Obligations are
secured by 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 such Subsidiaries now
or hereafter have any rights, and wheresoever located, and all proceeds thereof:
i. the Subsidiary Stock;
ii. the Homesite Contracts Receivable;
iii. the Commercial Receivables;
iv. the Real Property; and
v. 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 DK Loan
Obligations or upon the distribution of any Trust Property to the Company or a
Subsidiary, such property shall, automatically, become subject to the Liens
securing the DK Loan Obligations.
B. The Secured Agreement Obligees and the Collateral
Agent are parties to the Secured Agreement Documents, and, pursuant thereto, the
Secured Agreement Obligations are secured by 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 such
<PAGE>
2
Subsidiaries now or hereafter have any rights, and wheresoever located, and all
proceeds thereof:
i. the Subsidiary Stock;
ii. the Homesite Contracts Receivable;
iii. the Commercial Receivables;
iv. the Real Property; and
v. 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 Agreement
Obligations or upon the distribution of any Trust Property to the Company or a
Subsidiary, such property shall, automatically, become subject to the Liens
securing the Secured Agreement Obligations.
C. The Anglo American Lenders and the Collateral Agent
are parties to the Anglo American Loan Documents, and, pursuant thereto, the
Anglo American Loan Obligations are secured by 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 such Subsidiaries now or hereafter have any rights, and
wheresoever located, and all proceeds thereof:
i. the Subsidiary Stock;
ii. the Homesite Contracts Receivable;
iii. the Commercial Receivables;
iv. the Real Property; and
v. 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 Anglo American
Loan Obligations or upon the distribution of any Trust Property to the Company
or a Subsidiary, such property shall, automatically, become subject to the Liens
securing the Anglo American Loan Obligations.
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3
D. From and after the issuance of the Preferred Stock,
as defined in the Investment Agreement, the collateral securing the obligations
of the Company and Subsidiaries in respect of the Secured Agreement Documents
shall secure certain of the obligations of the Company and the Subsidiaries to
the holder of the Preferred Stock under the Investment Instruments, including
any obligations to redeem or repurchase such Preferred Stock.
E. The DK Loan Obligations, the Anglo American Loan
Obligations, and the Secured Agreement Obligations are guaranteed by the
Subsidiaries pursuant to the Guarantees (PROVIDED that such Subsidiaries may in
fact be co-makers or co-obligors with respect to certain of the Obligations,
which distinction is not intended to affect the priorities, subordinations, or
turnover provisions contained herein).
F. The relative priorities of the Liens securing the DK
Loan Obligations, the Anglo American Loan Obligations, and the Secured Agreement
Obligations, as among the parties hereto, are intended to be established
pursuant to this Agreement.
G. Except as otherwise expressly stated below in this
paragraph, this Agreement amends and restates in its entirety that certain
Intercreditor Agreement dated as of June 23, 1998, among the Company, Foothill
Capital Corporation and The Bank of New York (as the predecessor SP Sub
Collateral Agent) (the "Old Intercreditor Agreement"), except that the
provisions of the Old Intercreditor Agreement with respect to the transition of
the role of the SP Sub Collateral Agent from The Bank of New York to M.H.
Davidson & Co., LLC (including SECTION 3.11 of the Old Intercreditor Agreement)
shall remain in full force and effect and shall not be superseded hereby, and
except that any provisions of the Old Intercreditor Agreement that by their
terms survive termination thereof (such as any indemnities in favor of the
Collateral Agent provided for in SECTION 3.6 of the Old Intercreditor Agreement)
shall remain in full force and effect and shall not be superseded hereby.
AGREEMENT
In consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
(a) DEFINED TERMS. As used in this Agreement,
the following terms shall have the following meanings:
"AGENCY FUNDS" has the meaning set forth in SECTION 3.1
hereof.
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4
"AGREEMENT" means this Intercreditor Agreement, as amended,
supplemented or otherwise modified from time to time.
"ANGLO AMERICAN EVENT OF DEFAULT" means a defined "Event of
Default" under the Anglo American Loan Documents.
"ANGLO AMERICAN FINANCIAL" means Anglo-American Financial, a
New York limited partnership.
"ANGLO AMERICAN LENDER GROUP" means the Anglo American
Lenders, and the Anglo American Representative and the Collateral Agent when and
to the extent acting on behalf thereof.
"ANGLO AMERICAN LENDERS" means the lenders party to the Anglo
American Loan Documents and their respective successors and assigns.
"ANGLO AMERICAN LOAN DOCUMENTS" means, collectively, (i) the
Term Loan Agreement, and (ii) the "Loan Documents" as defined in the Term Loan
Agreement, each of the foregoing as from time to time amended, supplemented or
otherwise modified in accordance with the terms hereof and thereof.
"ANGLO AMERICAN LOAN OBLIGATIONS" means (i) the Term Loans
outstanding under the Anglo American Loan Documents; (ii) all interest
(including default interest and all interest accruing after the commencement of
an Insolvency or Receivership Proceeding), fees, prepayment premiums and late
payment fees now or hereafter payable with respect thereto; (iii) all existing
and future guaranty obligations relating to the foregoing; and (iv) all other
fees (including, without limitation, attorneys' and paralegals' fees and
expenses) and other amounts now or hereafter payable to the Anglo American
Lenders, or any of them, or their agents under or in respect of the Anglo
American Loan Documents.
"ANGLO AMERICAN REPRESENTATIVE" means Anglo American
Financial, whom each of the Anglo American Lenders hereby appoints as its
official representative for purposes of (a) the receipt for and on behalf of the
Anglo American Lenders hereunder of any notice hereunder from the Secured
Agreement Obligee Representative or the DK Representative, and (b) the giving to
the Secured Agreement Obligee Representative or the DK Representative of any
notice by and on behalf of the Anglo American Lenders. Unless the Secured
Agreement Obligee Representative and the DK Representative shall have been
notified otherwise in accordance with SECTION 4.1, the Secured Agreement Obligee
Representative and the DK Representative may presume that Anglo American
Financial at all times continues to be the Anglo American Representative.
<PAGE>
5
"BANK ACCOUNTS" means 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
interests 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 is excused by the terms of
the DK Loan Documents, the Anglo American Loan Documents, and the Secured
Agreement Documents).
"BLOCKAGE PERIOD" means a Dividend Blockage Period, a
Non-Payment Blockage Period, a Payment Blockage Period, or any of them. If a
Dividend Blockage Period or a Payment Blockage Period commences during a
Non-Payment Blockage Period, or VICE-VERSA , then the combined period is a
"Blockage Period."
"BUSINESS DAY" means any day excluding Saturday, Sunday and
any day which either is a legal holiday under the laws of the State of New York
or is a day on which banking institutions located in the State of New York are
authorized or required by law or other governmental action to close.
"CAPITAL STOCK" means any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation) and any and all warrants or options to purchase any of the
foregoing.
"CASH COLLATERAL ACCOUNT COLLATERAL" means the collateral held
in any Cash Collateral Account.
"CASH COLLATERAL ACCOUNTS" means any and all accounts that the
Collateral Agent may from time to time require to be established and maintained
with financial institutions reasonably satisfactory to it and pledged to the
Collateral Agent (for the benefit of the Secured Parties) pursuant to cash
collateral account agreements in form and substance reasonably satisfactory to
it.
"CASH EQUIVALENTS" means (i) 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, (ii) time deposits and certificates of deposit having maturities
of not more than 90 days from the date of acquisition issued by any domestic
commercial bank, or non-domestic commercial bank provided that such non-domestic
commercial bank shall have offices in the United States, having capital and
surplus in excess of $500,000,000.00, (iii) repurchase obligations with a term
of not more than 30 days for
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6
underlying securities of the types described in clauses (i) and (ii) entered
into with any bank meeting the qualifications specified in clause (ii) above,
and (iv) 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 $500,000,000.00 (or any holding company
thereof) and, in any such case, maturing within 90 days after the date of
acquisition.
"CLAIMS DISBURSEMENT ACCOUNT" means 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.
"COLLATERAL" means collectively, the property and interests in
property securing the DK Loan Obligations, the Anglo American Loan Obligations,
and the Secured Agreement Obligations pursuant to the Secured Debt Documents.
"COLLATERAL AGENT" means M.H. Davidson & Co., LLC, or its
successors or assigns, as collateral agent for the DK Lenders, pursuant to the
DK Loan Documents, M.H. Davidson & Co., LLC, or its successors or assigns, as
collateral agent for the Anglo American Lenders, pursuant to the Anglo American
Loan Documents, and M.H. Davidson & Co., LLC, or its successors or assigns, as
collateral agent for the Secured Agreement Obligees, pursuant to the Secured
Agreement.
"COLLATERAL AND SUBSIDIARY CLAIMS" has the meaning set forth
in Section 2.17 hereof.
"COMBINED PLAN" means a plan of reorganization or the
equivalent in a Combined Proceeding that provides for treatment of claims
against (a) one or more AG Entities, and (b) one or more SP Sub Entities.
"COMBINED PROCEEDING" means, collectively, Insolvency or
Receivership Proceedings involving, collectively, (a) one or more AG Entities,
and (b) one or more SP Sub Entities, which proceedings are combined or
consolidated for the purposes of proposing, confirming, or carrying out a plan
of reorganization or the equivalent, or otherwise administer or distribute,
pursuant to one plan or the equivalent, Collateral securing the DK Loan
Obligations, the Anglo American Loan Obligations and the Secured Agreement
Obligations, whether or not such proceedings are formally "substantively
consolidated" for all purposes.
"COMMERCIAL REAL ESTATE" means 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.
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7
"COMMERCIAL RECEIVABLES" means 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.
"COMPANY" means Atlantic Gulf Communities Corporation, a
Delaware corporation.
"CONDEMNATION AWARDS" means any and all proceeds (including,
without limitation, proceeds in the form of promissory notes or other agreements
for the payment of proceeds) from (i) the taking by eminent domain, condemnation
or otherwise, or acquisition pursuant to contract, of any property of Company or
any Subsidiary by the United States of America, the State of Florida or any
political subdivision thereof, or any agency, department, bureau, board,
commission or instrumentality of any of them, including without limitation any
awards and/or other compensation awarded to or for the benefit of, or received
by or on behalf of, Company or any of its Subsidiaries, whether as a result of
litigation, arbitration, settlement or otherwise, or (ii) any sale by the
Company or any of its Subsidiaries of a water and utility system to a Person,
whether now owned or hereafter created or acquired.
"DESIGNATED JUNIOR INDEBTEDNESS" means: (a) prior to the time,
if any, that all DK Loan Obligations have been paid in full, the Secured
Agreement Obligations owing by the Obligors and the Anglo American Loan
Obligations owing by the Obligors, and each of them; and (b) at and after the
time, if any, that all DK Loan Obligations have been paid in full, the Secured
Agreement Obligations owing by the Obligors.
"DESIGNATED SENIOR INDEBTEDNESS" means: (a) prior to the time,
if any, that all DK Loan Obligations have been paid in full, the DK Loan
Obligations owing by the Obligors; and (b) at and after the time, if any, that
all DK Loan Obligations have been paid in full, the Anglo American Loan
Obligations owing by the Obligors.
"DETERMINATION EVENT" means the occurrence of any of the
following:
(i) acceleration of any of the Obligations; or
(ii) enforcement of a Lien by the Collateral
Agent; or
(iii) the commencement of an Insolvency or
Receivership Proceeding.
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8
"DIVIDEND" has the meaning set forth in Section 4.14(a)
hereof.
"DIVIDEND BLOCKAGE NOTICE" means a written notice from the
Representative of the Senior Creditor Group, stating in substance that an Event
of Default has occurred and is continuing under the Secured Debt Documents with
respect to the Designated Senior Indebtedness, and that the Senior Creditor
Group is exercising its right to block the payment of dividends that would
otherwise be permissible pursuant to this Agreement, including, without
limitation, the redemption and/or repurchase of the Preferred Stock and all
interest, prepayment premiums and late fees now or hereafter payable with
respect thereto. The foregoing notwithstanding, the giving of a Dividend
Blockage Notice shall be deemed to be the giving of a Non-Payment Default
Subordination Notice to the Anglo American Representative and the Default
Secured Agreement Obligee Representative for all purposes of this Agreement, and
the giving by the Representative of the Senior Creditor Group of a Payment
Default Subordination Notice or a Non-Payment Default Subordination Notice to
the Anglo American Representative and the Secured Agreement Obligee
Representative shall be deemed to be the giving of a Dividend Blockage Notice
for all purposes of this Agreement.
"DIVIDEND BLOCKAGE PERIOD" means any period commencing on any
date as of which a Dividend Blockage Notice is deemed to have been duly given,
in accordance with the notice provisions of SECTION 4.1 of this Agreement, to
the Secured Agreement Obligee Representative, and continuing until the earliest
of (a) the date that no Events of Default exist under the Secured Debt Documents
with respect to the Designated Senior Indebtedness, (b) the date that such
Dividend Blockage Notice is withdrawn or rescinded in writing by the
Representative of the Senior Creditor Group, and (c) the date that the
Designated Senior Indebtedness is paid in full.
"DK EVENT OF DEFAULT" means a defined "Event of Default" under
the DK Loan Documents.
"DK LENDER GROUP" means the DK Lenders, and the DK
Representative and the Collateral Agent when and to the extent acting on behalf
thereof.
"DK LENDERS" means the lenders party to the DK Loan Documents
and their respective successors and assigns.
"DK LOAN DOCUMENTS" means, collectively, (i) the Revolving
Loan Agreement, and (ii) the "Loan Documents" as defined in the Revolving Loan
Agreement, each of the foregoing as from time to time amended, supplemented or
otherwise modified in accordance with the terms hereof and thereof.
"DK LOAN LETTER OF CREDIT OBLIGATIONS" means at any time, the
sum of (i) the maximum amount which is, or at any time hereafter may become,
available to be
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9
drawn under letters of credit (or guarantees in respect of letters of credit)
issued and outstanding under or in connection with the Revolving Loan Agreement,
PLUS (ii) the aggregate amount of all drawings under any such letters of credit
(or guarantees in respect of letters of credit) honored by the issuing banks
thereof but not reimbursed, PLUS (iii) the aggregate amount of any cash
collateral deposited by the DK Lenders in substitution for any such letters of
credit or guarantees in respect thereof.
"DK LOAN OBLIGATIONS" means (i) the Revolving Loans
outstanding under the DK Loan Documents, including, without limitation, any DK
Loan Letter of Credit Obligations; (ii) all interest (including default interest
and all interest accruing after the commencement of an Insolvency or
Receivership Proceeding, whether or not allowed as a claim in an Insolvency or
Receivership Proceeding), letter of credit fees, prepayment premiums and late
payment fees now or hereafter payable with respect thereto; (iii) all existing
and future guaranty obligations relating to the foregoing; and (iv) all other
fees (including, without limitation, attorneys' and paralegals' fees and
expenses) and other amounts now or hereafter payable to the DK Lenders, or any
of them, or their agents under or in respect of the DK Loan Documents.
"DK REPRESENTATIVE" means M.H. Davidson & Co., LLC, whom each
of the DK Lenders hereby appoints as its official representative for purposes of
(a) the receipt for and on behalf of the DK Lenders hereunder of any notice
hereunder from the Secured Agreement Obligee Representative or the Anglo
American Representative, and (b) the giving to the Secured Agreement Obligee
Representative or the Anglo American Representative of any notice by and on
behalf of the DK Lenders. Unless the Secured Agreement Obligee Representative
and the Anglo American Representative shall have been notified otherwise in
accordance with SECTION 4.1, the Secured Agreement Obligee Representative and
the Anglo American Representative may presume that M.H. Davidson & Co., LLC, or
its successors or assigns, at all times continues to be the DK Representative.
"ENFORCEMENT ACTION" means, with respect to any Secured Party
and any Collateral, but subject nonetheless to the provisions of the immediately
succeeding sentence, such Secured Party's: repossessing, selling, leasing or
otherwise disposing of all or any part of such Collateral, or exercising
notification or collection rights with respect to all or any portion thereof, or
attempting or agreeing to do so; commencing the enforcement with respect to such
Collateral of any of the default remedies under any of such Secured Party's
Secured Debt Documents, the UCC or other applicable laws; appropriating, setting
off, or applying any part or all of such Collateral in the possession of, or
coming into the possession of, such Secured Party or its agent or bailee, to
such Secured Party's Obligations; or commencing or prosecuting any judicial
action to garnish, attach, levy upon, or obtain a statutory or judicial lien
upon all or any portion thereof. In addition, "Enforcement Action" includes: (i)
the making of any demand for payment by the Secured Agreement Obligee Group on
the Company or any
<PAGE>
10
of its Subsidiaries or the giving of notice to them of the acceleration of any
Obligation, in each case except after 15 days prior written notice of such
proposed demand for payment or notice of acceleration shall have been given by
the Secured Agreement Obligee to the DK Representative and the Anglo American
Representative, (ii) the commencement by or on behalf of the Secured Agreement
Obligee Group of any legal proceeding against the Company or any of its
Subsidiaries to collect any Obligation, (iii) the institution of, or joinder in
the institution of, any Insolvency or Receivership Proceeding by the Secured
Agreement Obligee Group against the Company or any of its Subsidiaries, (iv) the
making of any demand for payment by the Anglo American Lender Group on the
Company or any of its Subsidiaries or the giving of notice to them of the
acceleration of any Obligation, in each case except after 15 days prior written
notice of such proposed demand for payment or notice of acceleration shall have
been given by the Anglo American Representative to the DK Representative (other
than in the case of an acceleration which shall occur automatically pursuant to
the Anglo American Loan Documents, as to which only contemporaneous notice to
the DK Representative shall be required), (v) the commencement by or on behalf
of the Anglo American Lender Group of any legal proceeding against the Company
or any of its Subsidiaries to collect any Obligation, and (vi) the institution
of, or joinder in the institution of, any Insolvency or Receivership Proceeding
by the Anglo American Lender Group against the Company or any of its
Subsidiaries (but shall not preclude the filing of a proof of claim in any such
proceeding). Anything to the contrary in this definition notwithstanding,
"Enforcement Action" shall not include the giving to the Company or any
Subsidiary of the Company of any notice, including, without limitation, a
Repurchase Notice, or the making on the Company or any Subsidiary of the Company
of any demand, including, without limitation, a demand for payment, in each
instance if and to the extent necessary to cause the repurchase obligations of
such Person in respect of the Preferred Stock or other payment obligation of
such Person to the Secured Agreement Obligee Group to mature and become
enforceable (PROVIDED that the Representative of the Senior Creditor Group shall
have received 15 days' prior written notice of the giving of such Repurchase
Notice or of such proposed demand for payment, and PROVIDED that the giving of
any such notice, or the making of any such demand, shall not supersede any
subordination of Liens or claims provided for in this Agreement, and, PROVIDED,
FURTHER, that any obligation provided for in this Agreement to disgorge or turn
over any payment or transfer received in violation of any provision of this
Agreement subordinating any Lien or claim shall continue to be applicable
notwithstanding the giving of any such notice or the making of any such demand).
"EVENT OF DEFAULT" means a Secured Agreement Event of Default,
an Anglo American Event of Default, or a DK Event of Default, as the context
requires.
"EXCLUDED PROPERTY" means (i) the Capital Stock of General
Development Acceptance Corporation and GDV Financial Corporation, (ii) 34% of
the Capital Stock of AG Asia, (iii) all money or property now or hereafter
deposited into a
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11
Reserve Account pursuant to the Reorganization Plan (exclusive of the residual,
remainder or beneficial interests of the Company and its Subsidiaries therein),
(iv) 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 (v) the Trust Property.
"EXCLUDED SUBSIDIARIES" means the Subsidiaries of the Company
listed in Schedule 1 attached hereto.
"EXTRAORDINARY REIMBURSEMENT PAYMENT" means any payment by any
Obligor to any Anglo American Lender or the Anglo American Representative on
account of any fee, reimbursement of costs or expenses, or reimbursement of
amounts payable pursuant to any indemnity, to the extent, in each case, that it
is extraordinary in amount or made other than in the ordinary course of business
of such Obligor; PROVIDED that a scheduled payment of interest or fees with
respect to the Anglo American Loan Obligations shall not be construed to be an
Extraordinary Reimbursement Payment.
"GUARANTEES" means the collective reference to the Guarantees
made by the Subsidiaries of the Company for purposes of guaranteeing the payment
and performance of the DK Loan Obligations, the Anglo American Loan Obligations,
and the Secured Agreement Obligations, respectively, pursuant to the DK Loan
Documents, the Anglo American Loan Documents, and the Secured Agreement
Documents, respectively, as in effect on the date hereof and as hereafter
created, as amended, supplemented or otherwise modified from time to time. If
and to the extent any Subsidiary of the Company is in fact a co-maker or
co-obligor of the Company with respect to any Obligation of the Company, as
opposed to being a guarantor with respect thereto, for all purposes of this
Agreement such Subsidiary of the Company that is a co-maker or co-obligor shall
be treated as if it is a guarantor of the Obligations in question, including,
without limitation, for the purposes of applying any priority, subordination, or
turnover provisions hereof that are applicable with respect to Guarantees,
obligations or payments thereunder, or rights against or obligations of
Subsidiaries of the Company that have guarantied Obligations of the Company,
and, in such context, all references herein to Guarantees shall refer to any
Secured Debt Documents evidencing any Obligation of any such co-maker or
co-obligor.
"HOMESITE CONTRACTS RECEIVABLE" means 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
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12
arising therefrom, reserves and credit balances arising thereunder and cash and
non-cash proceeds of any and all of the foregoing.
"HOMESITE PROGRAM" has the meaning set forth in Article I of
the Reorganization Plan.
"INSOLVENCY OR RECEIVERSHIP PROCEEDING" means any case,
proceeding or other action, voluntary or involuntary, (i) under any existing or
future law of any jurisdiction, domestic or foreign, relating to the bankruptcy,
insolvency, reorganization or similar relief of debtors, commenced for purposes
of having an order of relief entered with respect to the Company or any
Subsidiary, seeking to adjudicate the Company or any Subsidiary bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding up,
liquidation, dissolution, composition or other relief with respect to the
Company or any Subsidiary or its debts, including, without limitation, any case
or proceeding filed by or against the Company or any Subsidiary pursuant to
Title 11 of the United States Code (the "United States Bankruptcy Code"), or
(ii) seeking appointment of a receiver, trustee, custodian or other similar
official for the Company or any Subsidiary or for all or any substantial part of
its assets, or any proceeding or event in which the Company or any of its
Subsidiaries shall make a general assignment for the benefit of its creditors.
"INVESTMENT AGREEMENT" means that certain Investment Agreement
dated as of February 7, 1997, amended as of March 20, 1997, and amended and
restated as of May 15, 1997, by and between the Company and the Secured
Agreement Obligees, providing among other things for the execution and delivery
of the Secured Agreement and the issuance of the Preferred Stock, as amended
concurrently herewith.
"INVESTMENT INSTRUMENTS" means the Investment Agreement, the
Preferred Stock, the certificate of designation of preferences and rights
relating to the Preferred Stock, and all other documents, instruments, and
agreements executed in connection therewith, each as from time to time amended,
supplemented or otherwise modified in accordance with the terms hereof and
thereof.
"INVESTMENTS" means 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.
"JOINT VENTURE" shall have the meaning ascribed to such term
in the Revolving Loan Agreement.
"JUNIOR CREDITOR GROUP" means: (a) prior to the time, if any,
that all DK Loan Obligations have been paid in full, the Secured Agreement
Obligee Group and the Anglo American Lender Group, and each of them; and (b) at
and after the time,
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13
if any, that all DK Loan Obligations have been paid in full, the Secured
Agreement Obligee Group.
"LIEN" means any mortgage, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
"LIEN RELEASE EVENT" has the meaning set forth in Section
2.17(a) hereof.
"NON-PAYMENT BLOCKAGE PERIOD" means, with respect to any
NonPayment Default Subordination Event, the period from and including the date
of receipt by the Representative(s) of the Junior Creditor Group of a
Non-Payment Default Subordination Notice relating thereto until the first to
occur of (a) the 180th day after receipt of such Non-Payment Default
Subordination Notice; PROVIDED, HOWEVER, that if, on or before such date, the
Senior Creditor Group has (i) accelerated the Designated Senior Indebtedness,
and (ii) has commenced and diligently and in good faith is pursuing a judicial
proceeding to collect the Designated Senior Indebtedness or has given notice of
a non-judicial sale of collateral securing the Designated Senior Indebtedness
and diligently is pursuing such non-judicial remedies to effect the foreclosure
and sale of such collateral, then such period shall continue unless and until
the Senior Creditor Group either rescinds such acceleration in writing, or
abandons, terminates, or fails diligently to pursue such judicial proceeding, or
abandons, terminates, or fails diligently to pursue such non-judicial remedies
to realize upon its collateral other than by reason of the commencement of an
Insolvency or Receivership Proceeding in which the Senior Creditor Group is
diligently and in good faith pursuing its available remedies, (b) the date on
which all of the Designated Senior Indebtedness shall have been paid in full,
(c) the date on which such Non-Payment Default Subordination Event shall have
been waived or cured (if susceptible of cure), in each case in accordance with
the relevant Secured Debt Documents, or (d) the date on which the Secured
Creditors to whose benefit such Non-Payment Blockage Period runs shall expressly
waive the benefit thereof in writing.
"NON-PAYMENT DEFAULT SUBORDINATION EVENT" shall have the
meaning specified in SECTION 2.16(b).
"NON-PAYMENT DEFAULT SUBORDINATION NOTICE" shall mean a
written notice from or on behalf of the Representative of the Senior Creditor
Group of the existence of a Non-Payment Default Subordination Event and
specifically designating
<PAGE>
14
such notice as a "Non-Payment Default Subordination Notice." The foregoing
notwithstanding, the giving of a Dividend Blockage Notice shall be deemed to be
the giving of a Non-Payment Default Subordination Notice to the Anglo American
Representative and the Secured Agreement Obligee Representative for all purposes
of this Agreement, and the giving by the Representative of the Senior Creditor
Group of a Payment Default Subordination Notice or a Non-Payment Default
Subordination Notice to the Anglo American Representative and the Secured
Agreement Obligee Representative shall be deemed to be the giving of a Dividend
Blockage Notice for all purposes of this Agreement.
"NON-PAYMENT STANDSTILL PERIOD" means, with respect to any
NonPayment Default Subordination Event, the period from and including the date
of receipt by the Representative(s) of the Junior Creditor Group of a
Non-Payment Default Subordination Notice relating thereto until the first to
occur of (a) the 180th day after receipt of such Non-Payment Default
Subordination Notice; PROVIDED, HOWEVER, that if, on or before such date, the
Senior Creditor Group has (i) accelerated the Designated Senior Indebtedness,
and (ii) has commenced and is diligently and in good faith pursuing a judicial
proceeding to collect the Designated Senior Indebtedness or has given notice of
a non-judicial sale of collateral securing the Designated Senior Indebtedness
and is diligently pursuing such non-judicial remedies to effect the foreclosure
and sale of such collateral, then such period shall continue unless and until
the Senior Creditor Group either rescinds such acceleration in writing, or
abandons, terminates, or fails to diligently pursue such judicial proceeding, or
abandons, terminates, or fails to diligently pursue such non-judicial
proceedings to realize upon its collateral other than by reason of the
commencement of an Insolvency or Receivership Proceeding in which the Senior
Creditor Group is diligently pursuing its available remedies, (b) the date on
which all of the Designated Senior Indebtedness shall have been paid in full,
(c) the date on which such Non-Payment Default Subordination Event shall have
been waived or cured (if susceptible of cure), in each case in accordance with
the relevant Secured Debt Documents, or (d) the date on which the Secured
Creditors to whose benefit such Non-Payment Standstill Period runs shall
expressly waive the benefit thereof in writing.
"NOTES" means collectively, (i) that certain $850,000
promissory note dated as of December 31, 1998, made by the Company to the order
of the Secured Agreement Obligees, and (ii) that certain $1,000,000 promissory
note dated as of December 31, 1998, made by the Company to the order of the
Secured Agreement Obligees.
"OBLIGATIONS" means, collectively, the DK Loan Obligations,
the Anglo American Loan Obligations and the Secured Agreement Obligations.
<PAGE>
15
"OBLIGORS" means the Company and each and every one of its
Subsidiaries, and each of them, together with their respective successors and
assigns.
"OLD INTERCREDITOR AGREEMENT" has the meaning specified in
RECITAL G hereof.
"PAID IN FULL" has the meaning specified in SECTION 2.16.
"PAYMENT BLOCKAGE PERIOD" means, with respect to any Payment
Default Subordination Event, the period from and including the date of receipt
by the Representative(s) of the Junior Creditor Group of a Payment Default
Subordination Notice relating thereto until the first to occur of (a) the 180th
day after receipt of such Payment Default Subordination Notice; PROVIDED,
HOWEVER, that if, on or before such date, the Senior Creditor Group has (i)
accelerated the Designated Senior Indebtedness, and (ii) has commenced and
diligently and in good faith is pursuing a judicial proceeding to collect the
Designated Senior Indebtedness or has given notice of a non-judicial sale of
collateral securing the Designated Senior Indebtedness and diligently is
pursuing such non-judicial remedies to effect the foreclosure and sale of such
collateral, then such period shall continue unless and until the Senior Creditor
Group either rescinds such acceleration in writing, or abandons, terminates, or
fails diligently to pursue such judicial proceeding, or abandons, terminates, or
fails diligently to pursue such non-judicial remedies to realize upon its
collateral other than by reason of the commencement of an Insolvency or
Receivership Proceeding in which the Senior Creditor Group is diligently and in
good faith pursuing its available remedies, (b) the date on which all of the
Designated Senior Indebtedness shall have been paid in full, (c) the date on
which such Payment Default Subordination Event shall have been waived or cured
(if susceptible of cure), in each case in accordance with the relevant Secured
Debt Documents, or (d) the date on which the Secured Creditors to whose benefit
such Payment Blockage Period runs shall expressly waive the benefit thereof in
writing.
"PAYMENT DEFAULT SUBORDINATION EVENT" shall have the meaning
specified in SECTION 2.16(a).
"PAYMENT DEFAULT SUBORDINATION NOTICE" shall mean a written
notice from or on behalf of the Representative of the Senior Creditor Group of
the existence of a Payment Default Subordination Event and specifically
designating such notice as a "Payment Default Subordination Notice."
"PAYMENT STANDSTILL PERIOD" means, with respect to any Payment
Default Subordination Event, the period from and including the date of receipt
by the Representative(s) of the Junior Creditor Group of a Payment Default
Subordination Notice relating thereto until the first to occur of (a) the 180th
day after receipt of such Payment Default Subordination Notice; PROVIDED,
HOWEVER, that if, on or before such
<PAGE>
16
date, the Senior Creditor Group has (i) accelerated the Designated Senior
Indebtedness, and (ii) has commenced and diligently and in good faith is
pursuing a judicial proceeding to collect the Designated Senior Indebtedness or
has given notice of a non-judicial sale of collateral securing the Designated
Senior Indebtedness and diligently is pursuing such non-judicial remedies to
effect the foreclosure and sale of such collateral, then such period shall
continue unless and until the Senior Creditor Group either rescinds such
acceleration in writing, or abandons, terminates, or fails diligently to pursue
such judicial proceeding, or abandons, terminates, or fails diligently to pursue
such non-judicial remedies to realize upon its collateral other than by reason
of the commencement of an Insolvency or Receivership Proceeding in which the
Senior Creditor Group is diligently and in good faith pursuing its available
remedies, (b) the date on which all of the Designated Senior Indebtedness shall
have been paid in full, (c) the date on which such Payment Default Subordination
Event shall have been waived or cured (if susceptible of cure), in each case in
accordance with the relevant Secured Debt Documents, or (d) the date on which
the Secured Creditors to whose benefit such Payment Standstill Period runs shall
expressly waive the benefit thereof in writing.
"PERMITTED PAYMENTS" has the meaning set forth in Section 2.7
hereof.
"PERSON" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.
"PERSONAL PROPERTY" means the following personal property of
the Company or any Subsidiary (exclusive of Homesite Contracts Receivable and
Commercial Receivables of the Company or any Subsidiary):
(i) the Bank Accounts;
(ii) the Investments;
(iii) any and all accounts, contract rights, chattel paper,
instruments and documents, including, without limitation, any right to payment
for goods sold or leased or services rendered, whether now owned or hereafter
acquired;
(iv) 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;
(v) any and all general intangibles, whether now owned
or hereafter created or acquired, including, without limitation, all choices in
action, causes of action, rights in and to any and all Condemnation Awards,
corporate or other business
<PAGE>
17
records, deposit accounts, invention, designs, patents, patent applications,
trademarks, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, tax refund claims, computer programs, any
other intellectual property, all claims under guaranties, security interests or
other security to secure payment of any accounts by an account debtor, all
rights to indemnification and all other intangible property of every kind and
nature, including, without limitation, (i) the interests, if any, of the Company
or any Subsidiary in payments, proceeds, residuals and remainders from, or as
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
choices 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;
(vi) any and all goods which are, or may at any time be,
goods held for sale or lease or furnished under contracts of service or raw
materials, work-in-process or materials used or consumed in business,
wheresoever located and whether now owned or hereafter created or acquired,
including, without limitation, all such property the sale or other disposition
of which has given rise to accounts and which has been returned to or
repossessed or stopped in transit;
(vii) all monies, cash, residues and property of any kind,
now or at any time hereafter in the possession or under the control of any of
the Collateral Agent, DK Lenders, Anglo American Lenders, Secured Agreement
Obligees or any bailee, agent, or representative of any of them;
(viii) all accessions to, all substitutions for, and all
replacements, products and proceeds of, the foregoing, including, without
limitation, proceeds of insurance policies insuring the aforesaid property and
documents covering the aforesaid property, all property received wholly or
partly in trade or exchange for such property, and all rents, revenues, issues,
profits and proceeds arising from the sale, lease, license, encumbrance,
collection or any other temporary or permanent disposition of such items or any
interest therein whether or not they constitute "proceeds" as defined in the
Uniform Commercial Code; and
(ix) all books, records, documents and ledger receipts
pertaining to any of the foregoing, including, without limitation, customer
lists, credit files, computer records, computer programs, storage media and
computer software used or acquired in connection with generating, processing and
storing such books and records or otherwise used or acquired in connection with
documenting information pertaining to the aforesaid property.
<PAGE>
18
"PREFERRED STOCK" means the Series A Cumulative Redeemable
Convertible Preferred Stock, liquidation preference $1,000 per share, of the
Company issued pursuant to the Investment Agreement.
"REAL PROPERTY" means 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 PLAN" means the 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.
"REORGANIZATION PROCEEDING" means the cases commenced on April
6 and April 12, 1990 under Chapter 11 of Title 11 of the United States Code in
the Bankruptcy Court by GDC (Case 90-12231-BKC-AJC), General Development
Financial Services, Inc. (Case 90-12232-BKC-AJC), General Development Resorts,
Inc. (Case 90-12233 BKC-AJC), Town and Country II, Inc. (formerly Florida
Residential Communities, Inc.) (Case 90-12234-BKC-AJC), Five Star Homes Group,
Inc. (Case 90-12235-BKC-AJC), Five Star Homes, Inc. (Case #90-12338-BKC-AJC),
GDV Financial Corporation (Case #90-12236-BKC-AJC) and Environmental Quality
Laboratory, Inc. (Case #90-12237-BKC-AJC).
"REDEMPTION NOTICE" shall have the meaning ascribed to such
term in Section 5(c) of Annex A to the Amended and Restated Certificate of
Incorporation of the Company.
"REPURCHASE NOTICE" shall have the meaning ascribed to such
term in Section 8(a) of Annex A to the Amended and Restated Certificate of
Incorporation of the Company.
"REPRESENTATIVE" means, with respect to the DK Lenders, the DK
Representative, with respect to the Anglo American Lenders, the Anglo American
Representative, with respect to the Secured Agreement Obligees, the Secured
Agreement Obligee Representative, and with respect to the Senior Creditor Group,
(a) prior to the time, if any, that all DK Loan Obligations have been paid in
full, the DK Representative and (b) at and after the time, if any, that all DK
Loan Obligations have been paid in full, the Anglo American Representative.
"RESERVE ACCOUNTS" means: the Disbursement Account (as defined
in Section 8.4 of the Reorganization Plan); the Disputed Claims Reserve Account
(as defined in Section 8.7 of the Reorganization Plan); any reserve of
securities,
<PAGE>
19
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.
"RESTATEMENT" has the meaning set forth in Section 2.9(a)
hereof.
"REVOLVING LOAN AGREEMENT" means the Third Amended and
Restated Revolving Loan Agreement dated as of December 31, 1998 by and among the
Company, the financial institutions listed on the signature pages thereof (the
"Revolving Loan Banks"), M.H. Davidson & Co., LLC, a New York limited liability
company, as agent for the Revolving Loan Banks, and M.H. Davidson & Co., LLC, a
New York limited liability company, as collateral agent for the Revolving Loan
Banks, pursuant to which the Revolving Loan Banks have agreed to make certain
loans to the Company, together with all amendments, modifications, extensions,
substitutions and renewals thereof made in accordance with the terms hereof and
thereof.
"REVOLVING LOAN COMMITMENTS" means the collective obligations
of the lenders (as defined in the Revolving Loan Agreement) party to the
Revolving Loan Agreement to make advances of Loans pursuant to the Revolving
Loan Agreement, whether or not the conditions precedent therefor are met and as
the same may be increased pursuant to SECTION 2.9(a) hereof.
"REVOLVING LOANS" means the "Loans," the "Letters of Credit,"
and the "L/C Guarantees" (or any substitute cash collateral) outstanding from
time to time under (and as defined in) the Revolving Loan Agreement.
"SALE COLLATERAL" means any real or personal property acquired
as a result of a "credit bid" at a foreclosure or bankruptcy sale of any
Collateral.
"SECURED AGREEMENT" means that certain Secured Agreement
(originally entitled "Secured Note Agreement") dated as of February 7, 1997,
amended and restated as of May 15, 1997, executed by and among the Company, the
Secured Agreement Obligees and the Collateral Agent, as amended, supplemented or
otherwise
<PAGE>
20
modified from time to time in accordance with the terms hereof and thereof, as
amended concurrently herewith.
"SECURED AGREEMENT DOCUMENTS" means the Secured Agreement, the
"Transaction Documents" as defined in the Secured Agreement, the Investment
Instruments, and any and all instruments, documents and agreements executed in
connection therewith, as amended, supplemented or otherwise modified from time
to time in accordance with the terms hereof and thereof.
"SECURED AGREEMENT EVENT OF DEFAULT" means a defined "Event of
Default" under the Secured Agreement or the Investment Instruments, as the case
may be, or related Secured Debt Documents.
"SECURED AGREEMENT OBLIGATIONS" means: (i) any indebtedness
and obligations now or hereafter owing to the Secured Agreement Obligees under
or in connection with the Secured Agreement Documents, including, without
limitation, redemption and repurchase obligations with respect to the Preferred
Stock; (ii) all interest, prepayment premiums, dividends and late payment fees
now or hereafter payable with respect thereto; (iii) all existing and future
guaranty obligations relating to the foregoing; (iv) all other fees (including,
without limitation, attorneys' and paralegals' fees and expenses) and other
amounts now or hereafter payable to the Secured Agreement Obligees, or any of
them, or their agents under or in respect of the Secured Agreement Documents;
and (v) all obligations of the Company to the Secured Agreement Obligees under
or with respect to the Notes (whether for principal, interest, fees, costs,
expenses, or otherwise) and all obligations of any Subsidiary of the Company
with respect thereto (whether pursuant to a guaranty thereof, as a co-maker
thereof or co-obligor with respect thereto, or otherwise).
"SECURED AGREEMENT OBLIGEE GROUP" means the Secured Agreement
Obligees, and the Secured Agreement Obligee Representative and the Collateral
Agent when and to the extent acting on behalf thereof.
"SECURED AGREEMENT OBLIGEE REPRESENTATIVE" means AP-AGC, LLC,
a Delaware limited liability company, whom each of the Secured Agreement
Obligees hereby appoints as its official representative for purposes of (a) the
receipt for and on behalf of the Secured Agreement Obligees hereunder of any
notice hereunder from the DK Representative or the Anglo American
Representative, and (b) the giving to the DK Representative or the Anglo
American Representative of any notice by and on behalf of the Secured Agreement
Obligees. Unless the DK Representative and the Anglo American Representative
shall have been notified otherwise in accordance with SECTION 4.1, the DK
Representative and the Anglo American Representative may presume that AP-AGC,
LLC, a Delaware limited liability company, at all times continues to be the
Secured Agreement Obligee Representative.
<PAGE>
21
"SECURED AGREEMENT OBLIGEES" means the holders of the
indebtedness outstanding under the Secured Agreement Documents or the Preferred
Stock, and their respective successors and assigns. On the date hereof, the
Secured Agreement Obligee is AP-AGC, LLC.
"SECURED CREDITORS" means the DK Lender Group, the Anglo
American Lender Group, and the Secured Agreement Obligee Group.
"SECURED DEBT DOCUMENTS" means, collectively, the DK Loan
Documents, the Anglo American Loan Documents, and the Secured Agreement
Documents, each as amended, supplemented or otherwise modified from time to time
in accordance with the terms hereof and thereof.
"SECURED PARTIES" means, individually and collectively, the DK
Lender Group, the Anglo American Lender Group, the Secured Agreement Obligee
Group, and their respective successors and assigns.
"SENIOR CREDITOR GROUP" means: (a) prior to the time, if any,
that all DK Loan Obligations have been paid in full, the DK Lender Group; and
(b) at and after the time, if any, that all DK Loan Obligations have been paid
in full, the Anglo American Lender Group.
"SERIES B STOCK" has the meaning set forth in Section 4.14
hereof.
"SP SUB" means AGC-SP, INC., a Delaware corporation, and any
successor entity thereto with which SP Sub combines, merges, or consolidates.
"SP SUB ENTITIES" means SP Sub and any, each, and every
Subsidiary of SP Sub.
"STANDSTILL PERIOD" means a Non-Payment Standstill Period, a
Payment Standstill Period, or both. If a Payment Standstill Period commences
during a NonPayment Standstill Period, or VICE-VERSA, then the combined period
is a "Standstill Period."
"SUBORDINATED OBLIGATIONS" has the meaning set forth in
SECTION 2.16.
"SUBSIDIARY" means as to any Person, a corporation,
partnership, trust (exclusive of any trust created in connection with a Reserve
Account), or other entity of which shares of stock, partnership interests,
beneficial interests or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership,
<PAGE>
22
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 shall not mean, include, or refer to Unrestricted
Subsidiaries (other than the SP Sub Entities, which shall be Subsidiaries unless
otherwise expressly indicated), the Excluded Subsidiaries, or the Joint
Ventures. To the extent that any SP Sub Entity is a joint venturer or partner of
a Joint Venture, with respect to which Joint Venture neither the Company nor any
Subsidiary of the Company other than SP Sub or any Subsidiary of SP Sub is a
joint venturer or partner, such Joint Venture shall be considered a Subsidiary
of SP Sub for purposes of this Agreement.
"SUBSIDIARY STOCK" means the Capital Stock of any and all
Subsidiaries (including the Excluded Subsidiaries and the Unrestricted
Subsidiaries).
"TERM LOAN" means the "Term Loan" (in the original principal
amount of $30,000,000) outstanding from time to time under (and as defined in)
the Term Loan Agreement.
"TERM LOAN AGREEMENT" means the Term Loan Agreement dated as
of December 31, 1998 by and among the Company, the financial institutions listed
on the signature pages thereof (the "Term Lenders"), Anglo American Financial,
as agent for the Term Lenders, and M.H. Davidson & Co., LLC, a New York limited
liability company, as collateral agent for the Term Lenders, pursuant to which
the Term Lenders have agreed to make the Term Loans to the Company, together
with all amendments, modifications, extensions, substitutions and renewals
thereof made in accordance with the terms hereof and thereof.
"TRUST PROPERTY" means the real property held in trust
pursuant to (i) 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; (ii) 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; (iii) 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 (iv) Trust
Agreement No. 2, dated as of May 31, 1991, by and between Jake Gamble, Esq., as
Trustee for the benefit of the Company and Cumberland Cove, Inc., the
Beneficiaries.
<PAGE>
23
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code of
the State of New York, as amended from time to time.
"UNRESTRICTED SUBSIDIARIES" means the Subsidiaries of the
Company listed in Schedule 2 attached hereto.
SECTION 2. INTERCREDITOR PROVISIONS
2.1 PRIORITY OF LIENS. (a) Irrespective of the time,
order or method of attachment, perfection, filing or recording of any Lien in
any Collateral granted or to be granted to the Secured Parties, or any of them,
and notwithstanding anything to the contrary contained in any Secured Debt
Document or in any other document pertaining to the transactions contemplated
therein or any provision of the Uniform Commercial Code or other applicable law,
but subject to the provisions of SECTION 2.4 hereof, the Secured Parties agree,
as among themselves, that the Liens of the Secured Parties upon the Collateral
shall have the priorities and shall rank as described in the following charts:
================================================================================
OBLIGATIONS ALL COLLATERAL
================================================================================
DK Loan Obligations FIRST PRIORITY
- - --------------------------------------------------------------------------------
Anglo American Loan Obligations SECOND PRIORITY
- - --------------------------------------------------------------------------------
Secured Agreement Obligations THIRD PRIORITY
================================================================================
PROVIDED, HOWEVER, in the event that any new Liens are granted to a Secured
Party by a judicial authority in an Insolvency or Receivership Proceeding, the
priority of the Liens of the parties hereto shall be subject to the applicable
court order entered in such Insolvency or Reorganization Proceeding.
For the purpose of the foregoing allocation of priorities, any
claim of a right of setoff shall be treated in all respects as a security
interest, and no claimed right of setoff shall be asserted to defeat or diminish
the rights or priorities provided for herein.
2.2 PAYMENTS ON OR AFTER DETERMINATION EVENT. It is
agreed that, on or after a Determination Event, any and all proceeds of
Collateral, whether from sale, exchange, foreclosure, the collection of proceeds
of insurance or proceeds from the exercise of rights of eminent domain or
condemnation or the enforcement of any Lien,
<PAGE>
24
or any other disposition of Collateral (including, without limitation, proceeds
in the form of Sale Collateral), shall be applied as follows:
FIRST, to the payment of all costs and expenses of the
applicable Secured Party incurred in connection with the enforcement of any Lien
or exercise of remedies with respect to such Collateral permitted hereunder;
SECOND, to payment of amounts owed to the Collateral Agent on
account of its fees in connection with this Agreement for acting on behalf of
the Secured Parties holding the senior lien in the Collateral to which such
proceeds relate;
THIRD, to payment of any costs, expenses, or liabilities
incurred by the Collateral Agent in performance of its duties hereunder on
behalf of the Secured Parties holding the senior lien in the Collateral to which
such proceeds relate, to the extent such costs, expenses, or liabilities are not
otherwise provided for;
FOURTH, to the Secured Parties, with the proceeds of
Collateral distributed in the order of ranking and priority of their Liens
pursuant to SECTION 2.1 hereof, with amounts to be applied to the payment of
amounts payable to each Secured Party outstanding at the time of such
application in the order provided until exhausted prior to application toward
amounts payable to the subordinate Secured Party; PROVIDED, HOWEVER, that to the
extent the outstanding DK Loan Obligations include DK Loan Letter of Credit
Obligations comprising amounts available to be drawn under issued and
outstanding letters of credit pursuant to the Revolving Loan Agreement, the
Collateral which, pursuant to this paragraph FOURTH, would be applied to the
payment of the amount of such DK Loan Letter of Credit Obligations if such
amounts were drawn and immediate reimbursement thereof were required shall be
deposited into and held in such Cash Collateral Accounts as the DK Lenders may
require as further security for such outstanding DK Loan Letter of Credit
Obligations, and as further security for all other Obligations secured by such
Collateral, until the contingent obligations represented by such DK Loan Letter
of Credit Obligations either mature and are paid or are retired without the
contingency occurring. To the extent that such DK Loan Letter of Credit
Obligations mature and become reimbursable by the Company or any Subsidiary to
the DK Lenders, such cash collateral shall be distributed to the DK Lenders on
account of such DK Loan Letter of Credit Obligations. To the extent that such DK
Loan Letter of Credit Obligations are retired without such reimbursement
obligation occurring, such cash collateral shall be reapplied in the applicable
sequence described above as if such cash collateral had been received at the
time of the retirement of such DK Loan Letter of Credit Obligations; and
FIFTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
<PAGE>
25
2.3 SHARING OF PROCEEDS ON AND AFTER A DETERMINATION
EVENT, OR OTHERWISE. The Secured Parties agree among themselves that, in the
event any Secured Party shall obtain a payment of proceeds of Collateral,
including, without limitation, proceeds from the setoff of Bank Account
liabilities, on and after a Determination Event which would otherwise be subject
to distribution as provided in SECTION 2.2, or if any Secured Party shall
otherwise receive a payment of proceeds to which it is not entitled pursuant to
the express terms of this Agreement, any such proceeds shall be immediately
remitted or transferred to the Collateral Agent for application as herein
provided, and the Secured Parties further agree to make such other adjustments
from time to time, as shall be equitable to the end that all Secured Parties
share such proceeds in accordance with their respective priorities as provided
for herein. The Secured Parties further agree among themselves that if any such
payment shall be rescinded or must otherwise be restored, each Secured Party
which shall have shared the proceeds thereof shall return its share of such
proceeds to each Secured Party whose payment shall have been rescinded or
otherwise restored. Anything in this Agreement to the contrary notwithstanding,
(a) unless and until the DK Loan Obligations shall have been paid in full and
satisfied, from and after a Determination Event, neither the Anglo American
Lenders nor the Secured Agreement Obligees may take or receive from the Company,
and the Company will not make, give or permit, directly or indirectly, by
set-off, redemption, purchase or in any other manner, any payment, prepayment,
collateral, security or guarantee, for the whole or any part of the Subordinated
Obligations (other than the execution and delivery of the relevant Secured Debt
Documents applicable thereto) and (b) unless and until the Anglo American Loan
Obligations shall have been paid in full and satisfied, from and after a
Determination Event, the Secured Agreement Obligees may not take or receive from
the Company, and the Company will not make, give or permit, directly or
indirectly, by set-off, redemption, purchase or in any other manner, any
payment, prepayment, collateral, security or guarantee, for the whole or any
part of the Secured Agreement Obligations (other than the execution and delivery
of the relevant Secured Debt Documents applicable thereto); PROVIDED, HOWEVER,
that the foregoing shall not preclude (x) the making of any demand for payment
by the Anglo American Lender Group on the Company or any of its Subsidiaries or
the giving of notice to them of the acceleration of any Obligation, in each
case, after 15 days prior written notice of such proposed demand for payment or
notice of acceleration shall have been given by the Anglo American
Representative to the DK Representative, or (y) the giving of the Repurchase
Notice (as provided for in the Secured Agreement Documents) by the Secured
Agreement Obligee Group to the Company or any subsidiary of the Company after 15
days prior written notice to the Representative of the Senior Creditor Group by
the Representative of the Secured Agreement Obligees, PROVIDED, that the giving
of any such notice shall not (i) permit the Company to effectuate any such
redemption, purchase, demand or acceleration or make any payment in respect
thereof, or (ii) permit the commencement by or on behalf of the Anglo American
Lender Group or the Secured Agreement Obligee Group of any legal proceeding
against the Company or any
<PAGE>
26
of its Subsidiaries to collect any proceeds from such redemption, purchase,
demand or acceleration until the DK Loan shall have been paid in full, and
PROVIDED FURTHER, that the giving of such notice shall not supersede any
subordination of Liens or claims provided for in this Agreement, and PROVIDED
FURTHER that any obligation provided for in this Agreement to disgorge or turn
over any payment or transfer received in violation of any provision of this
Agreement subordinating any Lien or claim shall continue to be applicable
notwithstanding the giving of any such notice.
2.4 INTERESTS IN COLLATERAL.
(a) REQUIREMENT THAT LIENS BE PERFECTED. In the
event that any Lien of any Secured Party, or group of Secured Parties, on all or
any part of the Collateral is voluntarily released (or, in the case of the
Notes, the Lien securing the Notes is unperfected), then the Secured Party whose
Lien has been released (or, in the case of the Notes, is unperfected), shall not
share with the other Secured Parties in the proceeds of such Collateral pursuant
to the terms of this Agreement. The effect and operation of this SECTION 2.4
shall not impair or diminish or be construed to impair or diminish any rights of
a Secured Party against either the Company or any Subsidiary. Without limiting
the effect of the foregoing, any Secured Party whose Lien has been released, is
unperfected or deemed invalid or unenforceable, may, subject to the rights of
the other Secured Parties hereunder, exercise its remedies as against the
Company or any Subsidiary, as appropriate, including in respect of the
Collateral (to the extent enforceable), or take other action not inconsistent
with the terms or intent of this Agreement against the Company or any
Subsidiary, as appropriate, or their property.
(b) NONDISTURBANCE. In no event shall any party
hereto institute, or join as a party in the institution of or knowingly finance
or otherwise assist in the commencement or prosecution of, any action, suit or
proceeding contesting in any manner, or raising any defense to, the validity,
perfection, priority (as set forth herein) or enforceability of any Lien of any
Secured Party or alleging the avoidability thereof.
2.5 PAYMENTS ON GUARANTEES. The Secured Parties agree
among themselves that, in the event that any such Secured Party receives a
payment on a Guarantee on or after a Determination Event in violation of the
priorities provided for in SECTION 2.16, such payments shall be immediately
remitted or transferred to the Collateral Agent for distribution in accordance
with the relative payment priorities set forth in SECTION 2.16.
2.6 DETERMINATION OF RELATIVE INTERESTS. The Collateral
Agent shall, in determining the relative interests of the Secured Parties
hereunder, be entitled to rely on the representations of the Secured Parties as
to the amount of the respective Obligations and interests of the Secured Parties
therein. By execution hereof, the
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27
Secured Parties agree to promptly respond to any request from the Collateral
Agent for information necessary to assist it in the determination of their
respective interests hereunder, subject to any applicable confidentiality
limitations.
2.7 TURNOVER AND DIRECTION TO COLLATERAL AGENT. Subject
to any rights of subrogation provided for in SECTION 2.16, by execution of this
Agreement, except for payments or proceeds of Collateral received by (i) the DK
Lenders and/or the Anglo American Lenders in respect of current interest and
amortization provided for in the Revolving Loan Agreement and the Term Loan
Agreement, as applicable, on the date hereof, and (ii) the Secured Agreement
Obligees in respect of (x) current interest on the Notes or (y) the 20% Profits
Interest (as defined in the Revolving Loan Agreement) (all such payments or
proceeds of Collateral being hereinafter referred to as the "Permitted
Payments"), (a) the DK Lenders hereby agree to pay over to the Collateral Agent
promptly upon receipt, any and all payment, proceeds of Collateral or other
amounts referenced in SECTIONS 2.2, 2.3, OR 2.5 for application by the
Collateral Agent to the Obligations as herein provided; (b) the Anglo American
Lenders hereby agree to pay over to the Collateral Agent promptly upon receipt,
any and all payment, proceeds of Collateral or other amounts referenced in
SECTIONS 2.2, 2.3, OR 2.5 for application by the Collateral Agent to the
Obligations as herein provided; (c) the Secured Agreement Obligees hereby agree
to pay over to the Collateral Agent promptly upon receipt, any and all payments,
proceeds of Collateral or other amounts referenced in SECTIONS 2.2, 2.3, OR 2.5
for application by the Collateral Agent to the Obligations as herein provided;
and (d) the DK Lenders, the Anglo American Lenders, and Secured Agreement
Obligees hereby direct the Collateral Agent, on and after receipt of proceeds as
provided in CLAUSES (a), (b) AND (c) OF THIS SECTION 2.7 to apply such proceeds
to the Obligations as herein provided.
2.8 CREDIT BIDDING. The Secured Parties hereby agree
that: (a) except with the unanimous consent of the DK Lender Group and the Anglo
American Lender Group, the Anglo American Lender Group shall not "credit bid"
for any Collateral at a foreclosure or bankruptcy sale, until the net cash
proceeds of such foreclosure or sale shall be sufficient to satisfy the DK Loan
Obligations in full; and (b) except with the unanimous consent of the Secured
Parties, the Secured Agreement Obligee Group shall not "credit bid" for any
Collateral at a foreclosure or bankruptcy sale.
2.9 MODIFICATIONS OF SECURED DEBT DOCUMENTS, INCREASES IN
OBLIGATIONS.
(a) The DK Lenders may enter into amendments,
modifications, supplements, renewals, replacements, restatements, or extensions
(hereinafter individually and collectively, a "Restatement") of the DK Loan
Documents, without in any way affecting their respective rights and obligations
under
<PAGE>
28
this Agreement, but only to the extent that (1) the aggregate principal amount
of the loans so renewed, extended or replaced does not at any time exceed the
principal amount of the DK Loan Obligations in effect prior to such renewal,
extension or replacement, (2) any and all letters of credit and letter of credit
guarantees that remain outstanding under or in connection with the DK Loan
Documents may remain outstanding under the new facility or may be replaced by
new letters of credit or letter of credit guarantees under the renewed, extended
or replacement credit facility do not exceed the aggregate stated amount of all
letters of credit and letter of credit guarantees that were outstanding under
the DK Loan Documents, as the same may have been reduced, (3) the final maturity
of all such loans as so renewed, extended or replaced is no later than the
Maturity Date, as defined in the Term Loan Agreement (the expiry date of the
letters of credit and letter of credit guarantees under or in connection with
the DK Loan Documents may not be renewed), (4) the internal rate of return of
such renewal, extension or replacement facility is no greater than the internal
rate of return of the DK Loan Obligations as in effect prior to such renewal,
extension or replacement (calculated at the ordinary, pre-default interest
rate), (5) such renewed, extended or replacement credit facility is otherwise on
commercially reasonable terms, and (6) this Agreement shall remain in full force
and effect with respect to the renewed, extended or replacement credit facility.
(b) The Secured Agreement Obligees may enter into
amendments, modifications, supplements, renewals, replacements, restatements, or
extensions of the Secured Agreement Documents, without in any way affecting
their respective rights and obligations under this Agreement; PROVIDED that the
Secured Agreement Obligees shall not, without the prior written consent of 51%
of the DK Lenders and of 60% of the Anglo American Lenders: (i) increase their
aggregate commitments to extend credit to the Company or its Subsidiaries
pursuant to the Secured Agreement Documents in excess of the levels in effect as
of the date hereof; or (ii) increase their aggregate commitments to purchase
Preferred Stock in excess of the levels in effect as of the date hereof, EXCEPT
that, so long as no Event of Default has occurred and is continuing under the DK
Loan Documents or the Anglo American Loan Documents, or, if such an Event of
Default has occurred and is continuing but the DK Representative and the Anglo
American Representative have given their consent to such commitments and/or
purchases in the sole discretion of the DK Representative and the Anglo American
Representative, then the Secured Agreement Obligees may without upper dollar
limit increase their aggregate commitments to purchase Preferred Stock, may
without upper dollar limit purchase additional Preferred Stock, or may without
upper dollar limit purchase or commit to purchase other preferred stock of the
Company that is substantially identical to the Preferred Stock in rights and
preferences, and that is subject to the intercreditor provisions hereof or other
substantially identical intercreditor provisions; or (iii) increase the rate or
amount of interest, fees or other earnings on the Secured Agreement Obligations,
or (iv) modify the maturity date or payment terms thereof, including, without
limitation, by providing for the amortization
<PAGE>
29
of the outstanding principal balance or any portion thereof prior to payment in
full of the Designated Senior Indebtedness.
(c) The Anglo American Lenders may enter into
amendments, modifications, supplements, renewals, replacements, restatements, or
extensions of the Anglo American Loan Documents, without in any way affecting
their respective rights and obligations under this Agreement; PROVIDED that the
Anglo American Lenders shall not, without the written consent of 51% of the
Secured Agreement Obligees and of 51% of the DK Lenders (i) increase the
aggregate outstanding principal of the Term Loan or otherwise make additional
loans to the Company or any Subsidiary of the Company that would constitute
Anglo American Loan Obligations hereunder in excess of $5,000,000; or (ii)
modify the maturity date or payment terms thereunder, including, without
limitation, by providing for the amortization of the outstanding principal
balance or any portion thereof prior to payment in full of the DK Loan
Obligations.
(d) If at any time any Secured Debt Document is
amended in a manner which violates this SECTION 2.9 (any such amendment being
hereinafter referred to as a "Non-Complying Amendment"), such Non-Complying
Amendment shall be disregarded for all purposes of this Agreement and, for
purposes of applying the various provisions of this Agreement, the relevant
Secured Debt Document shall be deemed to read as it did immediately prior to
such Non-Complying Amendment, giving effect, however, to any subsequent
amendment thereto which is not a Non-Complying Amendment.
Except as expressly prohibited above pursuant to this SECTION 2.9, the Secured
Parties may grant extensions of time of payment or performance of the
Obligations in which they hold an interest, and make compromises, including
releases of Collateral, and settlements with the Company and Subsidiaries, and
may otherwise amend or modify the Secured Debt Documents to which they are a
party, without the consent of the other Secured Parties, without affecting the
agreements hereunder, except as expressly provided pursuant to SECTION 2.4
hereof.
2.10 AGREEMENT TO SUBORDINATE AND RELEASE.
(a) REQUIRED SUBORDINATIONS AND RELEASES. Each
of the Secured Parties hereby agrees, for the benefit of the other Secured
Parties and not for the benefit of the Company or any Subsidiary of the Company
or any Person claiming by, through, or under the Company or any Subsidiary of
the Company or any other Person, to execute such subordinations and releases of
its Lien upon the Collateral necessary to effectuate the priorities in the
Collateral provided for in this Agreement and/or to the extent expressly
required pursuant to the terms and provisions of their respective Secured Debt
Documents. Each of the Secured Agreement Obligees, the Anglo American Lenders,
and the Collateral Agent (acting in its capacity as the agent
<PAGE>
30
of the Secured Agreement Obligees and the Anglo American Lenders) hereby further
agrees, (i) for the benefit of the DK Lenders and the Collateral Agent (acting
in its capacity as the agent of the DK Lenders), to execute such subordinations
and releases of their Liens upon any item of Collateral if and to the extent
that the DK Lenders and the Collateral Agent (acting in its capacity as the
agent of the DK Lenders) expressly subordinate or release, as the case may be,
in writing, their Liens upon such item of Collateral, and (ii) at and after the
time, if any, that all DK Loan Obligations have been paid in full, for the
benefit of the Anglo American Lenders and the Collateral Agent (acting in its
capacity as the agent of the Anglo American Lenders), to execute such
subordinations and releases of their Liens upon any item of Collateral if and to
the extent that the Anglo American Lenders and the Collateral Agent (acting in
its capacity as the agent of the Anglo American Lenders) expressly subordinate
or release, as the case may be, in writing, their Liens upon such item of
Collateral. In addition, the Secured Agreement Obligees hereby direct the
Collateral Agent, to execute and deliver, in the place and stead of the Secured
Agreement Obligees and on their behalf, with full authority, any and all
instruments of subordination required to evidence the third priority Lien of the
Secured Agreement Obligees in the Collateral provided for in this Agreement.
(b) SALES OF COLLATERAL. For the sole and
exclusive benefit of the DK Lenders and their successors and assigns and not for
the benefit of the Company or any Subsidiary of the Company or any Person
claiming by, through, or under the Company or any Subsidiary of the Company or
any other Person, the Secured Agreement Obligees and the Anglo American Lenders
hereby agree that sales of Collateral by the Company and Subsidiaries permitted
under the DK Loan Documents shall be permitted by the Secured Agreement Obligees
and the Anglo American Lenders and the Liens securing the Secured Agreement
Obligations and the Anglo American Loan Obligations upon such Collateral shall
be released at the time of such sales notwithstanding that, at the time of any
sale of such Collateral, there shall exist a default under the Secured Agreement
Documents or the Anglo American Loan Documents. From and after the time, if any,
that all DK Loan Obligations have been paid in full, the Secured Agreement
Obligees hereby further agree that sales of Collateral by the Company and
Subsidiaries permitted under the Anglo American Loan Documents shall be
permitted by the Secured Agreement Obligees and the Liens securing the Secured
Agreement Obligations upon such Collateral shall be released at the time of such
sales notwithstanding that, at the time of any sale of such Collateral, there
shall exist a default under the Secured Agreement Documents.
2.11 LIMITATIONS ON ENFORCEMENT ACTIONS; NOTICES.
(a) CERTAIN ENFORCEMENT ACTIONS. Anything herein
to the contrary notwithstanding, the following CLAUSES (i), (ii), (iii), AND
(iv) of this SUBSECTION (a) shall be applicable only until such time, if any, as
all DK Loan
<PAGE>
31
Obligations have been paid in full, and the following CLAUSES (v) AND (vi) of
this SUBSECTION (A) shall be applicable only at and after such time, if any, as
all DK Loan Obligations have been paid in full.
(i) If the Secured Agreement Obligee
Representative shall have received a Payment Default Subordination Notice from
or on behalf of the Representative of the Senior Creditor Group, then during the
Payment Standstill Period the Secured Agreement Obligee Group shall be
prohibited from taking any Enforcement Action with respect to any Obligor or any
Collateral until the Payment Standstill Period shall cease to be in effect.
(ii) If the Secured Agreement Obligee
Representative shall have received a Non-Payment Default Subordination Notice
from or on behalf of the Representative of the Senior Creditor Group, then
during the Non-Payment Standstill Period the Secured Agreement Obligee Group
shall be prohibited from taking any Enforcement Action with respect to any
Obligor or any Collateral until the NonPayment Standstill Period shall cease to
be in effect; PROVIDED, HOWEVER, that, subject to the consent of the
Representative of the Senior Creditor Group, if the Secured Agreement Obligee
Group shall have initiated an Enforcement Action prior to the commencement of
such Non-Payment Standstill Period at a time when the Secured Agreement Obligee
Group had been entitled to do so, then the Secured Agreement Obligee Group shall
not be prevented during such Non-Payment Standstill Period from taking any steps
with respect to such pending Enforcement Action as are required by law or are
reasonably required to avoid material prejudice to the rights of the Secured
Agreement Obligee Group; PROVIDED, FURTHER, HOWEVER, that any proceeds which may
be payable by reason thereof shall be immediately remitted or transferred to the
Collateral Agent for distribution in accordance with the relative payment
priorities set forth in Section 2.16. Upon the termination of any Non-Payment
Standstill Period, the Secured Agreement Obligee Group may, at the sole election
thereof, exercise any and all remedies with respect to the Secured Agreement
Obligations owing by the Obligors or any Collateral available to the Secured
Agreement Obligee Group under this Agreement or applicable law; PROVIDED,
HOWEVER, at the conclusion of such elapsed period, one or more Events of Default
under the Secured Agreement Documents remain in existence and have not been
cured, waived, or rescinded; PROVIDED FURTHER, HOWEVER, that, in any event, any
such Enforcement Action taken by the Secured Agreement Obligee Group shall be
subject to all prior rights of the DK Lender Group and the Anglo American Lender
Group in the Collateral.
(iii) If the Anglo American
Representative shall have received a Payment Default Subordination Notice from
or on behalf of the DK Representative, then during the Payment Standstill
Period, the Anglo American Lender Group shall be prohibited from taking any
Enforcement Action with respect to any Obligor or any Collateral until the
Payment Standstill Period shall cease to be in effect.
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32
(iv) If the Anglo American Lender
Representative shall have received a Non-Payment Default Subordination Notice
from or on behalf of the DK Representative, then during the Non-Payment
Standstill Period the Anglo American Lender Group shall be prohibited from
taking any Enforcement Action with respect to any Obligor or any Collateral
until the Non-Payment Standstill Period shall cease to be in effect; PROVIDED,
HOWEVER, that, subject to the consent of the Representative of the Senior
Creditor Group, if the Anglo American Lender Group shall have initiated an
Enforcement Action prior to the commencement of such Non-Payment Standstill
Period at a time when the Anglo American Lender Group had been entitled to do
so, then the Anglo American Lender Group shall not be prevented during such
Non-Payment Standstill Period from taking any steps with respect to such pending
Enforcement Action as are required by law or are reasonably required to avoid
material prejudice to the rights of the Anglo American Lender Group; PROVIDED,
FURTHER, HOWEVER, that any proceeds which may be payable by reason thereof shall
be immediately remitted or transferred to the Collateral Agent for distribution
in accordance with the relative payment priorities set forth in Section 2.16.
Upon the termination of any NonPayment Standstill Period, the Anglo American
Lender Group may, at the sole election thereof, exercise any and all remedies
with respect to the Anglo American Loan Obligations owing by the Obligors or any
Collateral available to the Anglo American Lender Group under this Agreement or
applicable law; PROVIDED, HOWEVER, at the conclusion of such elapsed period, one
or more Events of Default under the Anglo American Loan Documents remain in
existence and have not been cured, waived, or rescinded; PROVIDED FURTHER,
HOWEVER, that, in any event, any such Enforcement Action taken by the Anglo
American Lender Group shall be subject to all prior rights of the DK Lender
Group in the Collateral.
(v) If the Secured Agreement Obligee
Representative shall have received a Payment Default Subordination Notice from
or on behalf of the Anglo American Representative, then during the Payment
Standstill Period the Secured Agreement Obligee Group shall be prohibited from
taking any Enforcement Action with respect to any Obligor or any Collateral
until the Payment Standstill Period shall cease to be in effect.
(vi) If the Secured Agreement Obligee
Representative shall have received a Non-Payment Default Subordination Notice
from or on behalf of the Anglo American Representative, then during the
Non-Payment Standstill Period the Secured Agreement Obligee Group shall be
prohibited from taking any Enforcement Action with respect to any Obligor or any
Collateral until the Non-Payment Standstill Period shall cease to be in effect;
PROVIDED, HOWEVER, that, subject to the consent of the Anglo American
Representative, if the Secured Agreement Obligee Group shall have initiated an
Enforcement Action prior to the commencement of such Non-Payment Standstill
Period at a time when the Secured Agreement Obligee Group had been entitled to
do so, then the Secured Agreement Obligee Group shall not be prevented
<PAGE>
33
during such Non-Payment Standstill Period from taking any steps with respect to
such pending Enforcement Action as are required by law or are reasonably
required to avoid material prejudice to the rights of the Secured Agreement
Obligee Group. Upon the termination of any Non-Payment Standstill Period, the
Secured Agreement Obligee Group may, at the sole election thereof, exercise any
and all remedies with respect to the Secured Agreement Obligations owing by the
Obligors or any Collateral available to the Secured Agreement Obligee Group
under this Agreement or applicable law; PROVIDED, HOWEVER, at the conclusion of
such elapsed period, one or more Events of Default under the Secured Agreement
Documents remain in existence and have not been cured, waived, or rescinded;
PROVIDED FURTHER, HOWEVER, that, in any event, any such Enforcement Action taken
by the Secured Agreement Obligee Group shall be subject to all prior rights of
the Anglo American Lender Group in the Collateral.
(vii) The foregoing to the contrary
notwithstanding: (w) The Anglo America Lender Group shall not be subject to a
Standstill Period unless the Secured Agreement Obligee Group also is subject to
a Standstill Period; (x) No Standstill Period shall exceed 365 days in duration
unless, during all periods in excess of 365 days, (A) the maturity of the
Obligations owed to the Senior Creditor Group has been accelerated (or such
Obligations otherwise are due and payable according to their terms), and (B) the
Senior Creditor Group has commenced and is diligently and in good faith pursuing
a judicial proceeding to collect the Designated Senior Indebtedness or has given
notice of a non-judicial sale of Collateral securing the Designated Senior
Indebtedness and is diligently pursuing such non-judicial remedies to effect the
foreclosure and sale of such Collateral, unless prevented by the commencement of
an Insolvency or Receivership Proceeding in which the Senior Creditor Group is
diligently pursuing its available remedies; and (y) In the event that any
Secured Party having a senior priority Lien with respect to any Collateral
pursuant to this Agreement commences to enforce such Lien pursuant to any
judicial proceeding, a Secured Party holding a subordinate Lien upon such
Collateral may not join in any such judicial proceeding for purposes of
enforcing its Lien against such Collateral or participate in any public or
private sale of such Collateral without the prior written consent of the
Representative of the Senior Creditor Group.
(b) CURE OF CROSS-DEFAULT; DE-ACCELERATION.
(i) If a Secured Agreement Event of
Default exists that is premised solely on the existence of a DK Event of
Default, and if such DK Event of Default is cured on a timely basis, waived, or
rescinded, then that Secured Agreement Event of Default likewise automatically
shall be cured, waived, or rescinded. The immediately foregoing sentence
notwithstanding, if, at the time of such cure, waiver, or rescission, other
Secured Agreement Events of Default also exist that are not premised solely on
the existence of a DK Event of Default, such other Secured Agreement Events of
Default shall not automatically be cured, waived, or rescinded
<PAGE>
34
pursuant to the provisions of the immediately foregoing sentence; provided that
this sentence shall not limit any right, if any, of any Obligor to cure such
other Secured Agreement Events of Default, or cause them to be rescinded,
elsewhere provided for in this Agreement, in the Secured Agreement or the
Investment Instruments, as the case may be, and related Secured Debt Documents,
or pursuant to applicable law. If the maturity of the Secured Agreement
Obligations or any of them has been accelerated, and if, thereafter, all
existing Secured Agreement Events of Default have been cured, waived, or
rescinded, and all amounts that then would have been due the Secured Agreement
Obligees, had no acceleration occurred, have been paid in full, then such
acceleration automatically shall be rescinded and the originally scheduled
maturity of the Secured Agreement Obligations automatically shall be reinstated
as if the prior acceleration never had occurred. If the Collateral Agent on
behalf of the Secured Agreement Obligees is taking Enforcement Action against
Collateral in accordance with the terms and provisions of this Agreement,
premised on the existence of one or more Events of Default, and if all such
Events of Default are cured, waived, or rescinded, then the Collateral Agent on
behalf of the Secured Agreement Obligees promptly shall suspend further
Enforcement Action to the extent that it may practicably do so without incurring
liability and without breaching enforceable commitments it has already entered
into in connection with such Enforcement Action (such as, by way of
illustration, but not by way of limitation, enforceable agreements to dispose of
Collateral). The provisions of this SECTION 2.11(b)(i) shall not be applicable
during the pendency of an Insolvency or Receivership Proceeding, other than an
involuntary proceeding under the United States Bankruptcy Code in which no order
for relief has been entered. This paragraph is entered into for the sole and
exclusive benefit of the DK Lender Group and the Secured Agreement Obligee
Group, and their respective successors and assigns, and not for the benefit of
the Company or any Subsidiary of the Company or any Person claiming by, through,
or under the Company or any Subsidiary of the Company or any other Person.
(ii) If a Secured Agreement Event of
Default exists that is premised solely on the existence of an Anglo American
Event of Default, and if such Anglo American Event of Default is cured on a
timely basis, waived, or rescinded, then that Secured Agreement Event of Default
likewise automatically shall be cured, waived, or rescinded. The immediately
foregoing sentence notwithstanding, if, at the time of such cure, waiver, or
rescission, other Secured Agreement Events of Default also exist that are not
premised solely on the existence of an Anglo American Event of Default, such
other Secured Agreement Events of Default shall not automatically be cured,
waived, or rescinded pursuant to the provisions of the immediately foregoing
sentence; provided that this sentence shall not limit any right, if any, of any
Obligor to cure such other Secured Agreement Events of Default, or cause them to
be rescinded, elsewhere provided for in this Agreement, in the Secured Agreement
or the Investment Instruments, as the case may be, and related Secured Debt
Documents, or pursuant to applicable law. If the maturity of the Secured
Agreement
<PAGE>
35
Obligations or any of them has been accelerated, and if, thereafter, all
existing Secured Agreement Events of Default have been cured, waived, or
rescinded, and all amounts that then would have been due the Secured Agreement
Obligees, had no acceleration occurred, have been paid in full, then such
acceleration automatically shall be rescinded and the originally scheduled
maturity of the Secured Agreement Obligations automatically shall be reinstated
as if the prior acceleration never had occurred. If the Collateral Agent on
behalf of the Secured Agreement Obligees is taking Enforcement Action against
Collateral in accordance with the terms and provisions of this Agreement,
premised on the existence of one or more Events of Default, and if all such
Events of Default are cured, waived, or rescinded, then the Collateral Agent on
behalf of the Secured Agreement Obligees promptly shall suspend further
Enforcement Action to the extent that it may practicably do so without incurring
liability and without breaching enforceable commitments it has already entered
into in connection with such Enforcement Action (such as, by way of
illustration, but not by way of limitation, enforceable agreements to dispose of
Collateral). The provisions of this SECTION 2.11(b)(ii) shall not be applicable
during the pendency of an Insolvency or Receivership Proceeding, other than an
involuntary proceeding under the United States Bankruptcy Code in which no order
for relief has been entered. This paragraph is entered into for the sole and
exclusive benefit of the Anglo American Lender Group and the Secured Agreement
Obligee Group, and their respective successors and assigns, and not for the
benefit of the Company or any Subsidiary of the Company or any Person claiming
by, through, or under the Company or any Subsidiary of the Company or any other
Person.
(iii) If a DK Event of Default exists
that is premised solely on the existence of a Secured Agreement Event of
Default, and if such Secured Agreement Event of Default is cured on a timely
basis, waived, or rescinded, then that DK Event of Default likewise
automatically shall be cured, waived, or rescinded. The immediately foregoing
sentence notwithstanding, if, at the time of such cure, waiver, or rescission,
other DK Events of Default also exist that are not premised solely on the
existence of a Secured Agreement Event of Default, such other DK Events of
Default shall not automatically be cured, waived, or rescinded pursuant to the
provisions of the immediately foregoing sentence; provided that this sentence
shall not limit any right, if any, of any Obligor to cure such other DK Events
of Default, or cause them to be rescinded, elsewhere provided for in this
Agreement, in the DK Loan Documents and related Secured Debt Documents, or
pursuant to applicable law. If the maturity of the DK Loan Obligations or any of
them has been accelerated, and if, thereafter, all existing DK Events of Default
have been cured, waived, or rescinded, and all amounts that then would have been
due the DK Lenders, had no acceleration occurred, have been paid in full, then
such acceleration automatically shall be rescinded and the originally scheduled
maturity of the DK Loan Obligations automatically shall be reinstated as if the
prior acceleration never had occurred. If the Collateral Agent on behalf of the
DK Lenders is taking Enforcement Action against Collateral in accordance with
the terms and provisions of this Agreement, premised on the existence of one or
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36
more Events of Default, and if all such Events of Default are cured, waived, or
rescinded, then the Collateral Agent on behalf of the DK Lenders promptly shall
suspend further Enforcement Action to the extent that it may practicably do so
without incurring liability and without breaching enforceable commitments it has
already entered into in connection with such Enforcement Action (such as, by way
of illustration, but not by way of limitation, enforceable agreements to dispose
of Collateral). The provisions of this SECTION 2.11(b)(iii) shall not be
applicable during the pendency of an Insolvency or Receivership Proceeding,
other than an involuntary proceeding under the United States Bankruptcy Code in
which no order for relief has been entered. This paragraph is entered into for
the sole and exclusive benefit of the DK Lender Group and the Secured Agreement
Obligee Group, and their respective successors and assigns, and not for the
benefit of the Company or any Subsidiary of the Company or any Person claiming
by, through, or under the Company or any Subsidiary of the Company or any other
Person.
(iv) If a DK Event of Default exists
that is premised solely on the existence of an Anglo American Event of Default,
and if such Anglo American Event of Default is cured on a timely basis, waived,
or rescinded, then that DK Event of Default likewise automatically shall be
cured, waived, or rescinded. The immediately foregoing sentence notwithstanding,
if, at the time of such cure, waiver, or rescission, other DK Events of Default
also exist that are not premised solely on the existence of an Anglo American
Event of Default, such other DK Events of Default shall not automatically be
cured, waived, or rescinded pursuant to the provisions of the immediately
foregoing sentence; provided that this sentence shall not limit any right, if
any, of the Company or any Subsidiary to cure such other DK Events of Default,
or cause them to be rescinded, elsewhere provided for in this Agreement, in the
DK Loan Documents and related Secured Debt Documents, or pursuant to applicable
law. If the maturity of the DK Loan Obligations or any of them has been
accelerated, and if, thereafter, all existing DK Events of Default have been
cured, waived, or rescinded, and all amounts that then would have been due the
DK Lenders, had no acceleration occurred, have been paid in full, then such
acceleration automatically shall be rescinded and the originally scheduled
maturity of the DK Loan Obligations automatically shall be reinstated as if the
prior acceleration never had occurred. If the Collateral Agent on behalf of the
DK Lenders is taking Enforcement Action against Collateral in accordance with
the terms and provisions of this Agreement, premised on the existence of one or
more Events of Default, and if all such Events of Default are cured, waived, or
rescinded, then the Collateral Agent on behalf of the DK Lenders promptly shall
suspend further Enforcement Action to the extent that it may practicably do so
without incurring liability and without breaching enforceable commitments it has
already entered into in connection with such Enforcement Action (such as, by way
of illustration, but not by way of limitation, enforceable agreements to dispose
of Collateral). The provisions of this SECTION 2.11(b)(iv) shall not be
applicable during the pendency of an Insolvency or Receivership Proceeding,
other than an involuntary
<PAGE>
37
proceeding under the United States Bankruptcy Code in which no order for relief
has been entered. This paragraph is entered into for the sole and exclusive
benefit of the DK Lender Group and the Anglo American Lender Group, and their
respective successors and assigns, and not for the benefit of the Company or any
Subsidiary of the Company or any Person claiming by, through, or under the
Company or any Subsidiary of the Company or any other Person.
(v) If an Anglo American Event of
Default exists that is premised solely on the existence of a Secured Agreement
Event of Default, and if such Secured Agreement Event of Default is cured on a
timely basis, waived, or rescinded, then that Anglo American Event of Default
likewise automatically shall be cured, waived, or rescinded. The immediately
foregoing sentence notwithstanding, if, at the time of such cure, waiver, or
rescission, other Anglo American Events of Default also exist that are not
premised solely on the existence of a Secured Agreement Event of Default, such
other Anglo American Events of Default shall not automatically be cured, waived,
or rescinded pursuant to the provisions of the immediately foregoing sentence;
provided that this sentence shall not limit any right, if any, of the Company or
any Subsidiary to cure such other Anglo American Events of Default, or cause
them to be rescinded, elsewhere provided for in this Agreement, in the Anglo
American Loan Documents and related Secured Debt Documents, or pursuant to
applicable law. If the maturity of the Anglo American Loan Obligations or any of
them has been accelerated, and if, thereafter, all existing Anglo American
Events of Default have been cured, waived, or rescinded, and all amounts that
then would have been due the Anglo American Lenders, had no acceleration
occurred, have been paid in full, then such acceleration automatically shall be
rescinded and the originally scheduled maturity of the Anglo American Loan
Obligations automatically shall be reinstated as if the prior acceleration never
had occurred. If the Collateral Agent on behalf of the Anglo American Lenders is
taking Enforcement Action against Collateral in accordance with the terms and
provisions of this Agreement, premised on the existence of one or more Events of
Default, and if all such Events of Default are cured, waived, or rescinded, then
the Collateral Agent on behalf of the Anglo American Lenders promptly shall
suspend further Enforcement Action to the extent that it may practicably do so
without incurring liability and without breaching enforceable commitments it has
already entered into in connection with such Enforcement Action (such as, by way
of illustration, but not by way of limitation, enforceable agreements to dispose
of Collateral). The provisions of this SECTION 2.11(b)(v) shall not be
applicable during the pendency of an Insolvency or Receivership Proceeding,
other than an involuntary proceeding under the United States Bankruptcy Code in
which no order for relief has been entered. This paragraph is entered into for
the sole and exclusive benefit of the Anglo American Lender Group and the
Secured Agreement Obligee Group, and their respective successors and assigns,
and not for the benefit of the Company or any Subsidiary of the Company or any
Person claiming by, through, or under the Company or any Subsidiary of the
Company or any other Person.
<PAGE>
38
(vi) If an Anglo American Event of
Default exists that is premised solely on the existence of a DK Event of
Default, and if such DK Event of Default is cured on a timely basis, waived, or
rescinded, then that Anglo American Event of Default likewise automatically
shall be cured, waived, or rescinded. The immediately foregoing sentence
notwithstanding, if, at the time of such cure, waiver, or rescission, other
Anglo American Events of Default also exist that are not premised solely on the
existence of a DK Event of Default, such other Anglo American Events of Default
shall not automatically be cured, waived, or rescinded pursuant to the
provisions of the immediately foregoing sentence; provided that this sentence
shall not limit any right, if any, of any Obligor to cure such other Anglo
American Events of Default, or cause them to be rescinded, elsewhere provided
for in this Agreement, in the Anglo American Loan Documents and related Secured
Debt Documents, or pursuant to applicable law. If the maturity of the Anglo
American Obligations or any of them has been accelerated, and if, thereafter,
all existing Anglo American Events of Default have been cured, waived, or
rescinded, and all amounts that then would have been due the Anglo American
Lenders, had no acceleration occurred, have been paid in full, then such
acceleration automatically shall be rescinded and the originally scheduled
maturity of the Anglo American Obligations automatically shall be reinstated as
if the prior acceleration never had occurred. If the Collateral Agent on behalf
of the Anglo American Lenders is taking Enforcement Action against Collateral in
accordance with the terms and provisions of this Agreement, premised on the
existence of one or more Events of Default, and if all such Events of Default
are cured, waived, or rescinded, then the Collateral Agent on behalf of the
Anglo American Lenders promptly shall suspend further Enforcement Action to the
extent that it may practicably do so without incurring liability and without
breaching enforceable commitments it has already entered into in connection with
such Enforcement Action (such as, by way of illustration, but not by way of
limitation, enforceable agreements to dispose of Collateral). The provisions of
this SECTION 2.11(b)(vi) shall not be applicable during the pendency of an
Insolvency or Receivership Proceeding, other than an involuntary proceeding
under the United States Bankruptcy Code in which no order for relief has been
entered. This paragraph is entered into for the sole and exclusive benefit of
the DK Lender Group and the Anglo American Lender Group, and their respective
successors and assigns, and not for the benefit of the Company or any Subsidiary
of the Company or any Person claiming by, through, or under the Company or any
Subsidiary of the Company or any other Person.
(c) NOTICE OF SALE. The Secured Parties each
agree to give the other written notice of the time and place of any public sale
or the time after which any private sale or other intended disposition is to be
made by any of them of any Collateral which is not Real Property. This agreement
is intended, in part, to constitute a request for notice and a written notice of
a claim by each party hereto to the other of an interest in the Collateral in
accordance with the provisions of Sections 9-504 and 9- 505 of the Uniform
Commercial Code; PROVIDED, HOWEVER, that, to the extent permitted
<PAGE>
39
by law, no Secured Party shall suffer any liability whatsoever for any failure
(other than a wilful failure) to send such notification.
(d) NOTICES TO OTHER SECURED PARTIES. Subject to
SECTION 2.11(a) hereof, each Secured Party shall endeavor, in good faith, to
provide each other Secured Party with notice (in accordance with the notice
provisions hereof) of the acceleration of its respective Obligations; PROVIDED,
HOWEVER, that no Secured Party shall suffer any liability whatsoever for any
failure (other than a wilful failure) to send such notification.
(e) NOTICES PRIOR TO COMMENCING CERTAIN
ENFORCEMENT ACTIONS. Anything herein to the contrary notwithstanding, but
subject nonetheless to the limitations on Enforcement Actions imposed under
Section 2.11(a) above, (i) the Secured Agreement Obligee Group shall not take
any Enforcement Action against the Collateral or the Notes without giving at
least ten (10) Business Days prior written notice to the DK Representative and
the Anglo American Representative, and (ii) the Anglo American Lender Group
shall not take any Enforcement Action against the Collateral without giving at
least ten (10) Business Days prior written notice to the DK Representative and
the Secured Agreement Obligee Representative. Any failure to give any such
notice shall not give rise to any rights in favor of the Company or any
Subsidiary of the Company or any Person claiming by, through or under the
Company or any Subsidiary of the Company.
2.12 WAIVER OF MARSHALING. Each party to this Agreement
hereby waives any right to require another party hereto to marshal any security
or collateral or otherwise to compel another party hereto to seek recourse
against or satisfaction of the indebtedness owed to it from one source before
seeking recourse or satisfaction from another source.
2.13 CREDIT FOR REMITTED COLLATERAL PROCEEDS. For
purposes of the allocation of proceeds of Collateral pursuant to SECTION 2.2,
Obligations owed to a Secured Party shall be deemed increased to include any
amounts by which such Obligations were reduced as a result of the receipt of
proceeds of Collateral that the Secured Party has remitted to the Collateral
Agent for payment or distribution to another Secured Party in accordance with
the terms hereof.
2.14 EFFECT OF DISPOSITIONS OF COLLATERAL ON JUNIOR
LIENS. The parties agree that (a) any collection, exchange, sale, or other
disposition of Collateral comprising Personal Property, Homesite Contracts
Receivable, Commercial Receivables and Subsidiary Stock pursuant to the Uniform
Commercial Code by the party having the senior priority in such Collateral shall
be free and clear of the equal or junior Liens of the other parties hereto in
such Collateral (the proceeds of any such collection, exchange, sale, or other
disposition to be applied in accordance with SECTION
<PAGE>
40
2.2), (b) any collection, exchange, sale, or other disposition of Collateral
comprising Personal Property, Homesite Contracts Receivable, Commercial
Receivables and Subsidiary Stock pursuant to the Uniform Commercial Code by a
party that does not have the senior priority Lien in such Collateral shall be
subject to the senior Liens in such Collateral; (c) any foreclosure sale of
Collateral comprising Real Property by the party having the senior priority in
such Collateral shall be free and clear of the equal or junior Liens of the
other parties hereto in such Collateral (the proceeds of any such collection,
exchange, sale, or other disposition to be applied in accordance with SECTION
2.2); and (d) any foreclosure sale of Collateral comprising Real Property by a
party that does not have the senior Lien in such Collateral shall be subject to
the senior Liens in such Collateral.
2.15 MUTUAL CONSENTS. Each of the DK Lenders, the Anglo
American Lenders, and the Secured Agreement Obligees hereby consents to the
execution and delivery by the Company and its Subsidiaries and the Secured
Parties party thereto of the Secured Debt Documents executed and delivered on or
before the date hereof, and to the transactions contemplated thereby.
2.16 PAYMENT SUBORDINATION BY SECURED AGREEMENT OBLIGEES.
Anything in this Agreement or the relevant Secured Debt Documents to the
contrary notwithstanding, except to the extent of the Permitted Payments duly
and properly received by any party prior to the occurrence of a Determination
Event, each member of the Junior Creditor Group hereby covenants and agrees that
the Designated Junior Indebtedness, including the payment of principal, premium,
or interest, including all expenses, fees, interest, indemnification, and other
amounts now or hereafter payable under the relevant Secured Debt Documents by
the Obligors (all of the foregoing, the "SUBORDINATED OBLIGATIONS") shall be
subordinate and junior, to the extent set forth below, and subject in right of
payment to the prior payment in full of all Designated Senior Indebtedness.
Moreover, as between the Anglo American Loan Obligations and the Secured
Agreement Obligations, the Secured Agreement Obligations shall be subordinate
and junior to the extent set forth below, and subject in right of payment to the
prior payment in full of the Anglo American Obligations.
The expression "payment in full" or "paid in full" or any
similar term or phrase when used in any provision of this Agreement with respect
to Designated Senior Indebtedness (or the Anglo American Loan Obligations in
relation to the Secured Agreement Obligations) shall mean the payment in full of
all such Designated Senior Indebtedness in cash (or in other forms of
consideration affirmatively consented to by the holders of such Designated
Senior Indebtedness in their sole discretion), or, in the case of Designated
Senior Indebtedness consisting of contingent obligations in respect of letters
of credit or other reimbursement obligations, the setting apart of cash (or
other property affirmatively consented to by the holders of such Designated
Senior Indebtedness in their sole discretion) sufficient to discharge such
portion of Designated
<PAGE>
41
Senior Indebtedness in an account for the exclusive benefit of the holders
thereof, in which account such holders shall be granted by the Obligors a first
priority perfected security interest in a manner reasonably acceptable to such
holders.
(a) If (i) the Obligors shall default in any
payment on any Designated Senior Indebtedness when the same becomes due and
payable, whether at maturity or at a date fixed for payment or prepayment or by
declaration or acceleration or otherwise, after any applicable grace period (a
"Payment Default Subordination Event") and (ii) the Junior Creditor Group's
Representative(s) shall have received a Payment Default Subordination Notice,
then the Obligors shall not make and no member of the Junior Creditor Group
shall accept or receive from any Obligor any direct or indirect payment (in
cash, assets, securities, by setoff, or otherwise) on account of the Designated
Junior Indebtedness (or on account of the purchase, redemption, or other
acquisition of the Designated Junior Indebtedness) during the Payment Blockage
Period; PROVIDED, HOWEVER, that in the case of any payment on or in respect of
any Designated Junior Indebtedness (other than the redemption or repurchase of
the Preferred Stock pursuant to a Redemption Notice or a Repurchase Notice,
which redemption or repurchase shall not be permitted under any circumstances
until the DK Loan Obligations and the Anglo American Loan Obligations shall have
been paid in full) that would (in the absence of any such Payment Default
Subordination Notice) have been due and payable on any date (a "Scheduled
Payment Date") during such Payment Blockage Period, the provisions of this
SUBSECTION (A) shall not prevent the making of such payment (a "Scheduled
Payment") on or after the date immediately following the termination of such
Payment Blockage Period. The foregoing provisions of this SUBSECTION (A) to the
contrary notwithstanding, the failure by the Obligors to make a Scheduled
Payment on a Scheduled Payment Date during a Payment Blockage Period shall
nevertheless constitute an Event of Default under the relevant Secured Debt
Documents of the Junior Creditor Group, at the time and in the manner provided
therein. Supplementing the foregoing, if the Representative of the Senior
Creditor Group shall fail to send a Payment Default Subordination Notice to the
Representative of the Junior Creditor Group following the occurrence of a
Payment Default Subordination Event, the Anglo American Representative may send
notice to the Representative of the DK Lender requesting the sending of such
notice, whereupon unless the Representative of the Senior Creditor Group shall
elect to send such notice within five (5) days after the receipt of such
request, such Payment Default Subordination Notice may be sent by the Anglo
American Representative.
In the event that, notwithstanding the foregoing, the Obligors
shall make any payment to any member of the Junior Creditor Group prohibited by
the foregoing provisions of this SUBSECTION (A), or if any member of the Junior
Creditor Group shall otherwise receive any direct or indirect payment to which
it is not entitled pursuant to the express terms of this Agreement, then and in
such event such payment shall be segregated by such member and held in trust for
the benefit of and immediately shall be
<PAGE>
42
paid over to the Representative of the Designated Senior Indebtedness for
application against the Designated Senior Indebtedness remaining unpaid until
both the DK Loan Obligations and the Anglo American Loan Obligations are paid in
full. Any Payment Default Subordination Notice shall be deemed received by the
Representative(s) of the Junior Creditor Group upon the earlier of: (x) the date
of actual receipt by the Representative(s) of the Junior Creditor Group of such
Payment Default Subordination Notice in writing, or (y) the date on which the
Representative of the Senior Creditor Group shall have telephonically notified
the Representative(s) of the Junior Creditor Group of the occurrence of a
Payment Default Subordination Event and indicated that it was sending a written
Payment Default Subordination Notice to the Representative(s) of the Junior
Creditor Group, which such Payment Default Subordination Notice may be sent by
messenger, overnight courier service, telefacsimile, or certified mail return
receipt requested, but if such written Payment Default Subordination Notice is
not received by the Representative(s) of the Junior Creditor Group within five
(5) Business Days of the date of the telephonic notice then such Payment Default
Subordination Notice shall be deemed never to have been given.
(b) Except under circumstances when the terms of
SUBSECTIONS (a) OR (c) are applicable, if (i) there shall occur an Event of
Default under any provision of the relevant Secured Debt Documents (a
"Non-Payment Default Subordination Event"), and (ii) the Junior Creditor Group's
Representative(s) shall have received a Non-Payment Default Subordination
Notice, then the Obligors shall not make and no member of the Junior Creditor
Group shall accept or receive from any Obligor any direct or indirect payment
(in cash, assets, securities, by setoff, or otherwise) on account of the
Designated Junior Indebtedness (or on account of the purchase, redemption, or
other acquisition of the Designated Junior Indebtedness) during the Non-Payment
Blockage Period; PROVIDED, HOWEVER, that in the case of any Scheduled Payment on
or in respect of any Designated Junior Indebtedness (other than the redemption
or repurchase of the Preferred Stock pursuant to a Redemption Notice or a
Repurchase Notice, which redemption or repurchase is prohibited under the terms
of the DK Loan Documents and the Anglo American Loan Documents until the
Designated Senior Indebtedness shall have been paid in full) that would (in the
absence of any such Non-Payment Default Subordination Notice) have been due and
payable on any Scheduled Payment Date during such Non-Payment Blockage Period,
the provisions of this SUBSECTION (b) shall not prevent the making of such
Scheduled Payment on or after the date immediately following the termination of
such NonPayment Blockage Period. Supplementing the foregoing, if the
Representative of the Senior Creditor Group shall fail to send a Non-Payment
Default Subordination Notice to the Representative of the Junior Creditor Group
following the occurrence of a NonPayment Default Subordination Event, the Anglo
American Representative may send notice to the Representative of the DK Lender
requesting the sending of such notice, whereupon unless the Representative of
the Senior Creditor Group shall elect to send
<PAGE>
43
such notice within five (5) days after the receipt of such request, such
Non-Payment Default Subordination Notice may be sent by the Anglo American
Representative.
In the event that, notwithstanding the foregoing, the Obligors
shall make any payment to any member of the Junior Creditor Group prohibited by
the foregoing provisions of this SUBSECTION (b), or if any member of the Junior
Creditor Group shall otherwise receive any direct or indirect payment to which
it is not entitled pursuant to the express terms of this Agreement, then and in
such event such payment shall be segregated by such member and held in trust for
the benefit of and immediately shall be paid over to the Representative of the
Designated Senior Indebtedness for application against the Designated Senior
Indebtedness remaining unpaid until the DK Loan Obligations and the Anglo
American Loan Obligations are paid in full. Any NonPayment Default Subordination
Notice shall be deemed received by the Representative(s) of the Junior Creditor
Group upon the earlier of: (x) the date of actual receipt by the
Representative(s) of the Junior Creditor Group of such NonPayment Default
Subordination Notice in writing, or (y) the date on which the Representative of
the Senior Creditor Group shall have telephonically notified the
Representative(s) of the Junior Creditor Group of the occurrence of a
Non-Payment Default Subordination Event and indicated that it was sending a
written Non-Payment Default Subordination Notice to the Representative(s) of the
Junior Creditor Group, which such Non-Payment Default Subordination Notice may
be sent by messenger, overnight courier service, telefacsimile, or certified
mail return receipt requested, but if such written Non-Payment Default
Subordination Notice is not received by the Representative(s) of the Junior
Creditor Group within five (5) Business Days of the date of the telephonic
notice then such Non-Payment Default Subordination Notice shall be deemed never
to have been given.
(c) In the event of the institution of any
Insolvency or Receivership Proceeding relative to any of the Obligors, then (i)
all Designated Senior Indebtedness shall first be paid in full before any direct
or indirect payment or distribution is made by or on behalf of the Obligors on
the Subordinated Obligations; (ii) any payment or distribution of any kind or
character, whether in cash, property or securities, by set-off or otherwise, to
which the Junior Creditor Group would be entitled but for the provisions of this
SUBSECTION (c) shall be paid or delivered by the Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver, a liquidating
trustee, or otherwise, directly to the Representative of the Senior Creditor
Group, to the extent necessary to make payment in full of all Designated Senior
Indebtedness remaining unpaid; and (iii) no vote by the Junior Creditor Group in
respect of its claims with respect to the Obligations, and no exercise of rights
and remedies by the Junior Creditor Group, shall be in contravention of any
express provision of this Agreement, the provisions of which shall continue to
be applicable throughout the course of any such Insolvency or Receivership
Proceeding. In the event that, notwithstanding the foregoing provisions of this
SUBSECTION (c) the Junior Creditor
<PAGE>
44
Group shall have received any such payment or distribution of any kind or
character, whether in cash, property or securities, by setoff or otherwise,
before all Designated Senior Indebtedness is paid in full, then and in such
event such payment or distribution shall be segregated and held in trust for the
benefit of and immediately shall be paid over to the Representative of the
Senior Creditor Group for application to the payment of all Designated Senior
Indebtedness remaining unpaid until all such Designated Senior Indebtedness
shall have been paid in full. Nothing in this paragraph shall prohibit the
holders of the Designated Junior Indebtedness from receiving and retaining cash,
property, or securities from any Person other than the Obligors with respect to
their claims in any Insolvency or Receivership Proceeding of any Person other
than the Obligors. Notwithstanding any contrary provision of this Agreement, but
without limiting any provision of this Agreement that otherwise expressly would
PERMIT a payment or distribution to be received or retained by a Person, for
purposes of this ARTICLE 2, the words "cash, property, or securities" as used
with respect to distributions to the Junior Creditor Group shall not be deemed
to include, and the Junior Creditor Group shall be entitled to receive and
retain all distributions of, (a) common stock of the Company, (b) preferred
stock of the Company, or (c) debt securities of the Company or any Subsidiary of
the Company or any other Person provided for by a Combined Plan if the following
criteria, as applicable, are satisfied: (A) such stock or securities are
subordinated to the Designated Senior Indebtedness to at least the same extent
as the Designated Junior Indebtedness is subordinated to the Designated Senior
Indebtedness as provided in this SECTION 2.16; (B) any such common stock shall
not be entitled to receive or retain dividends of any Obligor, and shall not be
subject to mandatory redemption or repurchase obligations of any Obligor, other
than dividends payable solely in common stock, until the Designated Senior
Indebtedness is paid in full; (C) any such preferred stock shall not be entitled
to receive or retain dividends of any Obligor, and shall not be subject to
mandatory redemption or repurchase obligations of any Obligor, other than
dividends payable solely in either common stock or preferred stock subject to
the same restrictions as the preferred stock with respect to which such
dividends are paid, and other than mandatory redemption obligations
substantially equivalent to those with respect to the Preferred Stock as to
which any resulting claims or liens are subordinated to those with respect to
the Designated Senior Indebtedness to at least the same extent as the Designated
Junior Indebtedness is subordinated to the Senior Designated Indebtedness as
provided in this SECTION 2.16, until the Designated Senior Indebtedness is paid
in full; (D) any such debt securities shall not by their terms provide for any
payments or amortization to or for the benefit of the holders thereof from the
assets or properties of any Obligor, other than payments solely in common stock
or preferred stock of the type described above in the foregoing CLAUSES (A)
THROUGH (C), prior to the time that the Designated Senior Indebtedness is
scheduled to be paid in full pursuant to the terms of the Combined Plan or any
evidences of indebtedness issued pursuant to the Combined Plan to the holders of
the Designated Senior Indebtedness; and (E) no debt securities may be received
or retained by the Junior Creditor Group if the Senior Creditor Group has
received on account of
<PAGE>
45
its claims in the Combined Plan any equity of any Person, other than truly DE
MINIMIS amounts of equity, and other than equity the acceptance of which was
affirmatively consented to by the Senior Creditor Group in its sole discretion.
(d) If the Junior Creditor Group does not file
legally sufficient proof(s) of claim (or the equivalent thereof), in their
legally required form, with respect to their claims (including, for all purposes
of this subsection (d), with respect to any interests included within the
Designated Junior Indebtedness) subject to the subordination provisions of this
Agreement, in any Insolvency or Receivership Proceeding of any of the Obligors,
prior to 15 days before the expiration of time to file such proof of claim (or
the equivalent thereof), then the Representative of the Senior Creditor Group
shall have the right (but not the obligation) in such proceeding, and hereby
irrevocably is appointed lawful attorney of the Junior Creditor Group for the
purpose of enabling the Representative of the Senior Creditor Group to file and
prosecute such proof of claim (or the equivalent thereof), and collect, receive
and give receipt for the payments and distributions in respect of the Designated
Junior Indebtedness that are made in such proceeding and that are required to be
paid or delivered to the Senior Creditor Group as provided in SUBSECTION (c),
and to prove all claims therefor, to execute and deliver all documents in such
proceeding, and to pursue the rights and remedies respecting such claims
(including the right to vote in connection with one or more proposed plans of
reorganization), in each case, in name of the Junior Creditor Group or otherwise
in respect of such claims, as the Representative of the Senior Creditor Group
reasonably may determine to be necessary or appropriate, PROVIDED, THAT, the
Representative of the Senior Creditor Group shall act in a commercially
reasonable manner and shall notify the Representative(s) of the Junior Creditor
Group prior to commencing the first of any such actions. The Representative of
the Senior Creditor Group shall be entitled to take any of the actions specified
in this SUBSECTION (d) for the benefit of the Senior Creditor Group.
(e) Anything in CLAUSES (a), (b) OR (c) of this
SECTION 2.16 to the contrary notwithstanding, no Member of the Junior Creditor
Group shall be entitled to receive or retain from or for the account of any
Obligor any payment of principal with respect to the Anglo American Loan
Obligations, the Notes or the Secured Agreement Obligations (including, without
limitation, any payment for or in respect of the redemption or repurchase of the
Preferred Stock or dividends thereon (other than dividends in the form of common
stock or preferred stock if all of the criteria in clauses (A) through (E) of
Section 2.16(c) are satisfied)), or any Extraordinary Reimbursement Payment with
respect to the Anglo American Loan Obligations or the Secured Agreement
Obligations, prior to payment in full of the Designated Senior Indebtedness,
without the prior written consent of the Representative of the Senior Creditor
Group, which the Representative of the Senior Creditor Group may grant or
withhold in its sole discretion.
<PAGE>
46
In the event that, notwithstanding the foregoing, any Anglo
American Lender or Secured Agreement Obligee shall receive any payment from or
for the account of any Obligor prohibited by the foregoing provisions of this
SUBSECTION (e), then and in such event such payment shall be segregated by such
recipient and held in trust for the benefit of the DK Lender Group and
immediately shall be paid over to the DK Representative for application against
the DK Loan Obligations remaining unpaid until such DK Loan Obligations are paid
in full.
No right of the Senior Creditor Group to enforce subordination
as herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of any of the Obligors or by any
non-compliance by any of the Obligors with the terms, provisions, and covenants
of this Agreement or the relevant Secured Debt Documents, regardless of any
knowledge thereof the Senior Creditor Group may have or be otherwise charged
with.
Without in any way limiting the generality of the foregoing
paragraph, the Senior Creditor Group may, at any time and from time to time,
without the consent of or notice to the Junior Creditor Group, without incurring
responsibility and without impairing or releasing the subordination provided in
this SECTION 2.16 or the obligations to the Senior Creditor Group, do any one or
more of the following (so long as the taking of such actions or omissions are
not otherwise prohibited pursuant to Section 2.9): (a) change the manner, place
or terms of payment or extend the time of payment of, or renew, amend, modify,
or alter, any Designated Senior Indebtedness or any instrument evidencing the
same to the extent in respect of such Designated Senior Indebtedness, or any
agreement evidencing, governing, creating, guaranteeing or securing any
Designated Senior Indebtedness to the extent in respect of such Designated
Senior Indebtedness; (b) sell, exchange, release, or otherwise deal with any
property pledged, mortgaged or otherwise securing Designated Senior Indebtedness
on which the Liens of the Senior Creditor Group has priority over the Liens of
the Junior Creditor Group thereon; (c) release any Person liable in any manner
for the collection of Designated Senior Indebtedness; (d) fail or delay in the
perfection of Liens on Collateral securing the Designated Senior Indebtedness,
and (e) exercise, waive or refrain from exercising any rights against any of the
Obligors in respect of the Designated Senior Indebtedness or any of the
Collateral.
The provisions of this SECTION 2.16 are for the purpose of
defining the relative rights of the Senior Creditor Group on the one hand, and
the Junior Creditor Group on the other hand, and nothing herein shall impair, as
between any of the Obligors and the Junior Creditor Group, the obligation of
such Obligor, which is unconditional and absolute, to pay to the Junior Creditor
Group the principal thereof and premium, if any, and interest thereon in
accordance with their terms and the provisions hereof, nor, except as expressly
set forth in this SECTION 2.16 or in SECTION 2.11 or elsewhere in this Agreement
solely for the benefit of the Senior
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47
Creditor Group, shall anything herein prevent the Junior Creditor Group from
exercising all remedies otherwise permitted by applicable law or hereunder upon
default hereunder or under the relevant Secured Debt Documents (including the
right to demand payment and sue for performance hereof and of the relevant
Secured Debt Documents and to accelerate the maturity thereof as provided
therein), subject to the rights, if any, of the Senior Creditor Group under this
SECTION 2.16 and/or under SECTION 2.11 or elsewhere in this Agreement.
If a claim is made upon any member of the Senior Creditor
Group for repayment or recovery of any amount (a "Voidable Transfer") on account
of any Designated Senior Indebtedness under any state or federal law, whether by
reason of preference, fraudulent conveyance, or otherwise and if member of the
Senior Creditor Group repays all or a portion of such amounts by reason of (a)
any judgment, decree, or order of any court or administrative body having
jurisdiction over such member of the Senior Creditor Group, or (b) any
settlement or compromise of any claim effected by such member of the Senior
Creditor Group based upon the reasonable advice of counsel, then, as to the
amount that has been repaid, the provisions of this SECTION 2.16 automatically
shall be reinstated and restored and the amount so repaid shall constitute
Designated Senior Indebtedness entitled to the benefits of this SECTION 2.16 as
of the date first received as if such Voidable Transfer never had been made. The
foregoing provisions of this SECTION 2.16 shall constitute a continuing offer to
all Persons who, in reliance upon such provisions, become members of the Senior
Creditor Group holding Designated Senior Indebtedness, and such provisions are
made for the benefit of, and may be enforced directly by, members of the Senior
Creditor Group, who hereby are expressly stated to be intended beneficiaries of
this SECTION 2.16.
Any other provision of this Agreement to the contrary
notwithstanding, upon payment by any Secured Creditor (the "Paying Secured
Creditor") to any other Secured Creditor (the "Payee Secured Creditor") of any
Designated Senior Indebtedness pursuant to any of the provisions of this
Agreement, then in addition to any other rights of subrogation that the Paying
Secured Creditor may have by operation of law, the Paying Secured Creditor shall
automatically be subrogated and shall succeed to all of the rights of the Payee
Secured Creditor to receive payments or distributions of assets of the Obligors
with respect to the Designated Senior Indebtedness so paid (and any security
therefor) until all of the Designated Junior Indebtedness shall be paid in full.
For purposes of such subrogation and succession, payments to the Payee Secured
Creditor of any cash, assets, stock or obligations which the Paying Secured
Creditor paid over to the Payee Secured Creditor shall, as between any of the
Obligors, its creditors (other than the Senior Creditor Group), and the Junior
Creditor Group, at the option of the Paying Secured Creditor, be deemed to be a
payment of the Designated Senior Indebtedness or the Designated Junior
Indebtedness and, accordingly, such Paying Secured Creditor shall have rights
under one or the other of such instruments, but not both. The foregoing
notwithstanding, no Secured Agreement Obligee may
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48
exercise any of its rights in respect of such subrogation or succession until
the DK Lenders have received payment in full of all DK Loan Obligations and the
Anglo American Lenders have received payment in full of all Anglo American Loan
Obligations, and no Anglo American Lender may exercise any of its rights in
respect of such subrogation or succession until the DK Lenders have received
payment in full of all DK Loan Obligations, and any payments to the Paying
Secured Creditor in respect of the obligations subject to such subrogation or
succession shall be subject to the priorities set forth in Section 2.1 and the
payment provisions of this Agreement.
Anything in this SECTION 2.16 to the contrary notwithstanding,
the Anglo American Lender Group shall not be subject to a Blockage Period unless
the Secured Agreement Obligee Group also is subject to a Blockage Period.
2.17 TERMINATION OF AGREEMENT AS TO SECURED AGREEMENT
OBLIGEE UPON RELEASE OF COLLATERAL. (a) Anything in Section 2.4(a) hereof to the
contrary notwithstanding, the Secured Agreement Obligee may, at its sole and
absolute discretion, exercisable at any time upon delivery of written notice to
the Collateral Agent, the DK Representative, and the Anglo American
Representative, release its claims against the Collateral, the Subsidiaries, the
SP Entities, the Joint Ventures and the property and assets thereof
(collectively, the "Collateral and Subsidiary Claims") and all rights of setoff
under all instruments and documents evidencing or securing the Secured Agreement
Obligations (including, all claims of any kind against the Subsidiaries and SP
Entities under any Guarantees and/or as co-makers of that certain Secured
Evidence of Joint and Several Repurchase Obligation dated June 24, 1997 made by
the Company and certain of the Subsidiaries and SP Entities for the benefit of
AP-AGC, LLC) and its Lien upon the Collateral (whether voluntarily or
involuntarily as a result of the commencement of a proceeding under the United
States Bankruptcy Code), whereupon upon the receipt by the Representative of the
Senior Creditor Group of evidence that all Guarantees, notes and other security
documents of the Company, the Subsidiaries and the SP Sub Entities in favor of
the Secured Agreement Obligee have been irrevocably terminated and all
mortgages, pledges and Uniform Commercial Code financing statements of the
Company, the Subsidiaries and the SP Sub Entities in favor of the Secured
Agreement Obligee have been released to the reasonable satisfaction of the DK
Loan Representative and the Anglo American Representative, the provisions of
this Agreement, including, without limitation, the provisions of Sections 2.3
(except as provided in Section 2.17(c) below), 2.9, 2.11 and 2.16, shall become
null and void and of no further force and effect as they relate to the Secured
Agreement Obligee (except as provided in Section 2.16(c)); provided that this
Agreement shall continue in effect, and the Collateral Agent, the DK Lenders and
the Anglo American Lenders shall be entitled to rely upon the terms and
provisions of this Agreement with respect to their respective rights and
obligations theretofore and thereafter accruing, and no such termination shall
affect or impair any rights theretofore accrued and inuring to the benefit of
the Collateral Agent, the DK Lenders and/or the Anglo
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49
American Lenders against each other or the Secured Agreement Obligees in respect
of matters or events arising prior to such termination, and no such termination
shall excuse any breach of this Agreement theretofore occurring. If and to the
extent the Secured Agreement Obligee shall so elect to release and terminate its
Collateral and Subsidiary Claims, rights of setoff and Lien upon the Collateral,
as aforesaid, or if, as a result of the commencement of a proceeding under the
United States Bankruptcy Code, the Collateral and Subsidiary Claims, rights of
setoff and Lien of the Secured Agreement Obligee shall be so released and
terminated to the reasonable satisfaction of the DK Loan Representative and the
Anglo American Loan Representative, then and in either such event (each, a "Lien
Release Event"), neither the Collateral Agent, any DK Lender, nor any Anglo
American Lender shall thereafter allege that the Secured Agreement Obligee is
not entitled to proceed as an unsecured creditor of the Company based upon the
existence of this Agreement or upon the Secured Agreement Obligee's prior Lien.
(b) In no event shall any party hereto
institute, or join as a party in the institution of or knowingly finance or
otherwise assist in the commencement or prosecution of, any action, suit or
proceeding contesting in any manner, or raising any defense to, the validity or
enforceability of any unsecured claim of the Secured Agreement Obligees against
the Company arising out of the redemption or repurchase of the Preferred Stock,
following notice to the Collateral Agent, the DK Representative and the Anglo
American Representative of the occurrence of a Lien Release Event.
(c) Notwithstanding any release of Lien and the
termination of this Agreement as to the Secured Agreement Obligee upon or by
reason of a Lien Release Event, the provisions of Section 2.3 (to the extent of
the obligation to disgorge or pay over any payment or any transfer received in
violation of any provision of this Agreement prior to the occurrence of the Lien
Release Event), Sections 2.4(b) and 2.4(c), Section 2.7 (to the extent any such
payment to the Secured Agreement Obligee results from a Dividend declared by the
Company's Board of Directors at a time when any director, employee or designee
of Secured Agreement Obligee was serving as a director on the Board of Directors
of the Company), Section 2.18 (to the extent any such payment to the Secured
Agreement Obligee was made at a time when any director, employee or designee of
Secured Agreement Obligee was serving as a director on the Board of Directors of
the Company) and Section 4.14 hereof shall survive such release and termination
and shall remain in effect until the payment in full of the Designated Senior
Indebtedness.
(d) If at the time that the Collateral Agent
shall be required to disburse any proceeds of the Collateral to any of the
Secured Parties pursuant to this Agreement, the Lien of the Notes shall be
determined not to have been perfected, then and in that event the provisions of
this Agreement shall become null and void and of no
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50
further force and effect as they relate to the Notes and the Secured Agreement
Obligee may proceed as an unsecured creditor of the Company with respect
thereto; provided that the surviving provisions identified in subsection 2.17(c)
above in the case of a Lien Release Event shall similarly survive in respect of
the payment of any portion of the proceeds of the Collateral on the Notes and
the Collateral Agent, the DK Lenders and the Anglo American Lenders shall be
entitled to rely upon the terms and provisions of this Agreement with respect
thereto.
2.18 PAYMENTS ON NOTES. Anything herein to the contrary
notwithstanding, no payment of other than current interest and the 20% Profits
Interest (as defined in the Revolving Loan Agreement) may be made on the Notes
under any circumstances until the DK Loan Obligations and the Anglo American
Loan Obligations shall have been paid in full.
SECTION 3. COLLATERAL AGENCY PROVISIONS
3.1 DECLARATION OF AGENCY. The Secured Parties hereby
appoint the Collateral Agent as administrative agent of the Secured Parties with
respect to the proceeds of all Collateral, and as in accordance with the
provisions of this Agreement. The Collateral Agent hereby declares and agrees
that it holds and will hold as agent for the Secured Parties under this
Agreement all sums and property received by the Collateral Agent pursuant to
this Agreement (such sums and property are hereinafter referred to as the
"AGENCY FUNDS"), under and subject to the conditions set forth in this SECTION 3
and for the benefit of the Secured Parties as provided herein. The Company and
its Subsidiaries and Secured Parties each hereby agree that all of the
Obligations and rights to payment set forth in clauses "First" through and
including "Fifth" of SECTION 2.2 hereof are to be secured by the Agency Funds
and that all of the Agency Funds are to be administered by the Collateral Agent,
subject to the further covenants, conditions, uses and purposes set forth in
this SECTION 3. M.H. Davidson & Co., LLC hereby acknowledges that it has
succeeded as Collateral Agent and accepts such appointment, and, by its
acknowledgment hereto, The Bank of New York acknowledges that it has resigned as
the SP Sub Collateral Agent (as defined in the Old Intercreditor Agreement). The
parties hereto waive any notice requirement in connection with such resignation
and succession, and hereby expressly consent thereto.
3.2 GENERAL AUTHORITY OF THE COLLATERAL AGENT. The
Collateral Agent and any officer or agent thereof may, from time to time in the
Collateral Agent's discretion, take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to carry out the terms and conditions of this Agreement and accomplish
the purposes hereof and thereof.
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51
3.3 REMEDIES NOT EXCLUSIVE.
(a) No remedy conferred upon or reserved to the
Collateral Agent herein is intended to be exclusive of any other remedy or
remedies, but every such remedy shall be cumulative and shall be in addition to
every other remedy conferred herein or now or hereafter existing at law or in
equity or by statute.
(b) No delay or omission by the Collateral Agent
to exercise any right, remedy or power hereunder shall impair any such right,
remedy or power or shall be construed to be a waiver thereof, and every right,
power and remedy given by this Agreement to the Collateral Agent may be
exercised from time to time and as often as may be deemed expedient by the
Collateral Agent.
(c) If the Collateral Agent shall have proceeded
to enforce any right, remedy or power under this Agreement and the proceeding
for the enforcement thereof shall have been discontinued or abandoned for any
reason or shall have been determined adversely to the Collateral Agent, then the
Collateral Agent and the Secured Parties shall, subject to any determination in
such proceeding, severally and respectively be restored to their former
positions and rights hereunder and in all other respects, and thereafter all
rights, remedies and powers of the Collateral Agent shall continue as though no
such proceeding had been taken.
(d) All rights of action and of asserting claims
upon or under this Agreement may be enforced by the Collateral Agent without the
possession of any instrument evidencing any Obligation or the production thereof
at any trial or other proceeding relative thereto, and any suit or proceeding
instituted by the Collateral Agent shall be brought in its name as Collateral
Agent and any recovery of judgment shall be administered as part of the Agency
Funds.
3.4 LIMITATION ON COLLATERAL AGENT'S DUTY IN RESPECT OF
COLLATERAL. Beyond their duties as to the custody thereof expressly provided
herein and to account to the Secured Parties for moneys and other property
received by it hereunder, the Collateral Agent shall not have any duty to the
Company or any Subsidiary or to the Secured Parties as to any Collateral, or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.
3.5 COMPENSATION AND EXPENSES. By its acknowledgment
below, the Company agrees to pay, or cause the Subsidiaries to pay, from time to
time upon demand, all of the reasonable fees, costs and expenses of any kind or
nature whatsoever of the Collateral Agent (including, without limitation, the
reasonable fees and disbursements of its subagents (as hereinafter defined),
counsel and such special counsel, accountants or other experts as the Collateral
Agent elects to retain, in each case determined on the basis of hourly charges
at normal hourly rates) incurred or
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52
required to be advanced in connection with the preservation, protection or
defense of the Collateral Agent's rights under this Agreement and in and to the
Agency Funds. If, after demand, the Company or Subsidiaries fail to pay such
fees, costs and expenses, the Secured Parties, on a pro rata basis based upon
their respective shares of the Obligations, agree to make such payment to the
Collateral Agent; PROVIDED that, to the extent that such fees, costs and
expenses can be reasonably allocated to Collateral in which particular Secured
Parties have a senior lien, or to actions taken on behalf of particular Secured
Parties, the Collateral Agent shall collect such amounts only from such Secured
Parties, among themselves on a pro rata basis, based on their respective shares
of the Obligations owed to such Secured Parties. No payment of fees, costs, or
expenses by a Secured Party, pursuant to SECTION 2.2 hereof or otherwise, shall
relieve the Company or any Subsidiary of the Company of liability therefor.
3.6 INDEMNIFICATION.
(i) Each of the Secured Parties agrees to
and does hereby indemnify, hold harmless, and defend the Collateral Agent in its
capacity as such, or any subagent of the Collateral Agent in its capacity as
such (in each case to the extent not reimbursed by the Company and Subsidiaries
or from the Collateral, and without limiting the obligation of the Company and
Subsidiaries to do so), based, except as otherwise provided below, on such
Secured Party's pro rata share of the outstanding Obligations, from and against
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, and disbursements of any kind or nature whatsoever which
are imposed on, incurred by, or asserted against the Collateral Agent in its
capacity as such, or any subagent of the Collateral Agent in its capacity as
such, in any way relating to or arising out of this Agreement or the Secured
Debt Documents, or as a result of any action taken or omitted to be taken by the
Collateral Agent pursuant to the provisions of this Agreement or of the Secured
Debt Documents, unless arising from the gross negligence or willful misconduct
of the Collateral Agent; PROVIDED that, to the extent that such indemnified
amount can be reasonably allocated to Collateral in which particular Secured
Parties have a senior lien, or to actions taken on behalf of particular Secured
Parties, the Collateral Agent shall collect such indemnified amounts only from
such Secured Parties, among themselves on a pro rata basis, based on their
respective shares of the Obligations owed to such Secured Parties.
(ii) The agreements in this SECTION 3.6
shall survive the termination of the other provisions of this Agreement.
3.7 EXCULPATORY PROVISIONS.
(a) The Collateral Agent makes no
representations as to the value or condition of the Agency Funds or any part
thereof, or as to the title of the Company or Subsidiaries thereto or as to the
Collateral, or as to the accuracy,
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53
sufficiency, completeness, or truthfulness of any warranty or representation
made by the Company or any Subsidiary thereof, or as to the validity, execution
(except its own execution), enforceability, attachment, perfection, priority,
legality or sufficiency of this Agreement, or the Obligations, or any lien or
security interest in the Collateral, and the Collateral Agent shall incur no
liability or responsibility in respect of any such matters. The Collateral Agent
shall not be responsible for insuring the Collateral or for the payment of
taxes, charges or assessments or discharging the liens upon the Collateral or
otherwise as to the maintenance of the Collateral. The Collateral Agent shall
not have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants, or conditions of this Agreement or any of the
Secured Debt Documents on the part of any Person party thereto or to inspect the
Collateral or any asset of the Company or any Subsidiary thereof, and shall not
have any duty to take actions to perfect liens or security interests, or to
monitor, continue in effect, or renew the perfection thereof, or to file any
continuation statements in connection therewith, and may choose, without
incurring any liability hereunder, not to perfect (or take steps to reperfect or
continue in effect the perfection of) particular liens or security interests if
it deems such perfection not to be appropriate or cost-effective (for example,
by way of illustration but not by way of limitation, if such perfection would be
unduly expensive, complicated, time-consuming, or impractical), or if the
relative value of the affected Collateral is not deemed sufficient to warrant
taking the steps that would be necessary to perfect (or to reperfect or to
continue or monitor perfection), or if the Collateral Agent shall have agreed
with the Company or any Subsidiary thereof to refrain from perfecting a lien or
security interest absent defined conditions (such as the occurrence of an Event
of Default under a Secured Debt Document).
(b) Notwithstanding any other provision of this
Agreement, the Collateral Agent and its subagents shall not be personally liable
for any action taken or omitted to be taken by it or them in accordance with
this Agreement, except for its own gross negligence or willful misconduct.
(c) The Collateral Agent may accept deposits
from, lend money to, and generally engage in any kind of banking or trust
business with the Company and its Subsidiaries as if it were not the Collateral
Agent, but subject always to the terms and provisions of this Agreement.
(d) The Collateral Agent shall not be deemed to
have knowledge of any matter, fact, state of events, or thing, including,
without limitation, the existence or continuance of any Event of Default under
any Secured Debt Document, unless the Collateral Agent has received written
notice thereof from the Company, a Subsidiary of the Company, a Secured Party,
or a Representative, which notice, if it pertains to an Event of Default,
conspicuously shall state that such notice is a "Notice of Default."
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54
3.8 DELEGATION OF DUTIES. The Collateral Agent may
execute, exercise, or perform any of the rights, powers, privileges, duties,
responsibilities, or obligations set forth in this Agreement, in any Secured
Debt Document, or pursuant to applicable law, either directly or by or through
agents or attorneys-in-fact (hereinafter "subagents"). Any such subagent when
acting in such capacity and within the scope of its authority shall have all
rights and powers of the Collateral Agent, shall enjoy the full benefits and
protections of all provisions hereof applicable to the Collateral Agent
(including indemnities running to the Collateral Agent), and shall be subject to
any duties of the Collateral Agent hereunder insofar as they specifically
pertain to the rights being exercised by such subagent. To the extent that the
rights, powers, privileges, duties, responsibilities, or obligations of the
Collateral Agent have been delegated hereunder to a subagent, the Collateral
Agent may leave to such subagent the exercise or non-exercise and performance or
non-performance of such rights, powers, privileges, duties, responsibilities,
and obligations; it shall not be the duty or responsibility of the Collateral
Agent to oversee, direct, assist, monitor, evaluate, supervise, consult with, or
report upon or with respect to the actions or inaction of, any subagent in
connection with its exercise or non-exercise or performance or non-performance
of such rights, powers, privileges, duties, responsibilities, or obligations.
The Collateral Agent shall not be responsible for the negligence or misconduct
of any subagents selected by it if such selection itself was without gross
negligence or willful misconduct. The Collateral Agent shall be entitled to
advice of counsel concerning all matters pertaining to its powers and duties.
The parties recognize that a subagent may be legal counsel for the Collateral
Agent or one or more of the Secured Parties, and each party hereto waives any
conflict of interest and the right to disqualify a subagent from acting as legal
counsel for its clients as a result of such subagent acting in the capacity of a
subagent of the Collateral Agent.
3.9 RELIANCE BY COLLATERAL AGENT.
(a) The Collateral Agent may consult with
counsel, accountants or other experts, including counsel, accountants and
experts of the Company, and any opinion of counsel or opinion of accountants or
other experts shall be full and complete authorization and protection in respect
of any action taken, omitted or suffered by it hereunder, except for actions
constituting gross negligence or willful misconduct. The Collateral Agent shall
have the right at any time to seek instructions concerning the administration of
this Agreement from any court of competent jurisdiction.
(b) The Collateral Agent may rely, and shall be
fully protected in acting, upon any resolution, statement, certificate,
instrument, opinion report, notice, request, consent, order, bond or other paper
or document which it has no reason to believe to be other than genuine and to
have been signed or presented by the proper party or parties or, in the case of
cables, telecopies and telexes, to have been
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55
sent by the proper party or parties. In the absence of its gross negligence or
willful misconduct, the Collateral Agent may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Collateral Agent and conforming to
the requirements of this Agreement.
(c) The Collateral Agent shall not be under any
obligation to exercise any of the rights or powers vested in the Collateral
Agent by this Agreement or any Secured Debt Document unless the Collateral Agent
shall have been provided indemnity adequate, in the good faith judgment of the
Collateral Agent, to protect the Collateral Agent or its subagents against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind whatsoever which may be incurred
by it in connection therewith, including such reasonable advances as may be
requested by the Collateral Agent. In any event, the Collateral Agent shall not
be required to take any action that would, in its good faith judgment, violate
the terms of this Agreement, the Secured Debt Documents, or applicable law.
(d) The Collateral Agent may treat any Person
believed by it to be the holder of any claim with respect to any Obligation as
the holder thereof until the Collateral Agent receives and accepts a written
notification from such Person or its Representative, notifying the Collateral
Agent of the transfer or assignment of such claim to an assignee, which notice
shall identify the name and address of such assignee, and may treat any Person
believed by it to be the Representative of another Person or class of Persons
holding claims with respect to Obligations as the continuing Representative of
such other Person or class of Persons until the Collateral Agent receives and
accepts a notification from such Person that a new Representative has been
designated for such Person or class of Persons, which notice shall identify the
name and address of such new Representative.
3.10 LIMITATIONS AND DUTIES OF COLLATERAL AGENT.
(a) The Collateral Agent shall be obligated to
perform such duties and only such duties as are specifically set forth in this
Agreement. The Collateral Agent shall not, by reason of any term, provision, or
condition of this Agreement or any Secured Debt Document have a fiduciary
relationship with any Secured Party except to the extent expressly provided
herein, and its only obligation with respect to Collateral shall be as expressly
provided herein, and no implied covenants or obligations shall be read into this
Agreement or any Secured Debt Document against the Collateral Agent.
(b) The Collateral Agent shall not be under any
obligation to take any action which is discretionary with, or is not expressly
directed to be taken by,
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56
the Collateral Agent under the provisions hereof or of any Secured Debt Document
except upon the written direction of all of the Secured Parties holding a first
priority lien in the affected Collateral. Subject to all applicable terms,
provisions, and conditions hereof, including, without limitation, SECTION 3.9(c)
hereof, the Collateral Agent shall act on the instructions of the Secured
Parties holding a first priority lien in the affected Collateral, or their
Representative.
3.11 RESIGNATION OF A COLLATERAL AGENT.
(a) The Collateral Agent may at any time resign
as Collateral Agent hereunder by giving thirty (30) days' prior written notice
to the Secured Parties. Upon any such resignation, the retiring Collateral Agent
shall be discharged of the responsibilities hereby created, such resignation to
become effective (i) upon the appointment of a successor Collateral Agent by the
Secured Parties then holding the Designated Senior Indebtedness and (ii) the
acceptance of such appointment by such successor Collateral Agent; PROVIDED that
if a successor Collateral Agent has not been appointed and accepted such
appointment within forty-five (45) days after the Collateral Agent has given the
aforesaid written notice of resignation, the Collateral Agent may cause its
resignation to become effective notwithstanding the absence of a successor
Collateral Agent by assigning its rights and interests directly to the Secured
Parties, as their respective rights, priorities, and interests appear, in
accordance with the provisions of this Agreement, and, thereafter, any
references to the Collateral Agent shall refer to the Secured Parties
themselves, in accordance with their respective rights, priorities, and
interests as set forth herein; PROVIDED, FURTHER, that, notwithstanding any such
resignation, the resigning Collateral Agent shall continue to be entitled to the
benefits of any indemnities provided for herein that run to the benefit of the
Collateral Agent as to any matters that occurred prior to such resignation, or
that thereafter arise out of or are related to any such matters. Anything
hereinabove to the contrary notwithstanding, the Anglo American Representative
shall have the absolute unilateral right to discharge and replace M.H. Davidson
& Co., LLC as Collateral Agent hereunder, effective upon and at any time
following the payment in full of the DK Loan Obligations and the return of any
L/C Guarantees (as defined in the Revolving Loan Agreement) or cash collateral
substituted therefor.
(b) If at any time the Collateral Agent shall
resign, or otherwise become incapable of acting, the powers, duties, authority
and title of the predecessor Collateral Agent shall be terminated and canceled
without procuring the resignation of such predecessor and without any other
formality (except as may be required by applicable law) than appointment and
designation of a successor in writing duly acknowledged and delivered to the
predecessor by the Secured Parties. Such appointment and designation shall be
full evidence of the right and authority to make the same and of all the facts
therein recited, and this Agreement shall vest in such successor, without any
further act, deed or conveyance, all the estates, properties,
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57
rights, powers, trusts, duties, authority and title of its predecessor,
provided, however, that the predecessor Collateral Agent shall execute whatever
documents or instruments are necessary under applicable law to fully implement
and effectuate the foregoing.
(c) If at any time hereafter the DK Lender
Group, the Anglo American Lender Group, or the Secured Agreement Obligee Group
concludes that the use of a single collateral agent acting for all Secured
Parties with respect to any particular Collateral is no longer an acceptable
arrangement, the parties agree, at the sole expense of the Company, to cooperate
in restructuring the arrangement so that the separate lender groups are
represented by separate collateral agents, subject to intercreditor arrangements
that preserve the subordinations, priorities, and other substantive provisions
hereof as among the Secured Parties, provided that the terms of any such
documents or assignments entered into to facilitate or effect any such splitting
of the collateral agency function shall be reasonably satisfactory in form and
content to each lender group. Until any such replacement documents shall be
executed and delivered, the parties hereto shall remain subject to and bound by
the terms of this Agreement.
3.12 TERMINATION OF AGENCY. Upon (i) receipt by the
Collateral Agent of a written certificate signed by each of the Secured Parties
stating that all of the Obligations and other amounts owing to such Secured
Parties under the applicable Secured Debt Documents and hereunder have been paid
in full, or, in the case of commitments with respect thereto, terminated, and
(ii) payment in full of due and unpaid Collateral Agent's fees and any expenses
related to the termination and release, the Liens in the Agency Funds shall
terminate forthwith and all right, title and interest of the Collateral Agent in
and to the Agency Funds shall revert to the Secured Parties and their respective
successors and assigns.
3.13 ACCEPTANCE OF AGENCY. The Collateral Agent, for
itself and its successors, hereby accepts the agency created by this SECTION 3
upon the terms and conditions hereof.
3.14 BOOKS AND RECORDS. The Collateral Agent will keep
complete and accurate books and records of its activities and will render
periodic accountings to the Secured Parties as they may reasonably request.
3.15 NON-RELIANCE ON THE COLLATERAL AGENT. Each Secured
Party hereby acknowledges that it has, independently of and without reliance
upon the Collateral Agent, or any subagent of the Collateral Agent, and based
upon such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into any transactions to which it is or
may be a party with the Company or any Subsidiary thereof, and it shall,
independently of and without reliance upon the Collateral Agent or any subagent,
and based upon such documents and
<PAGE>
58
information as it shall deem appropriate at the time, continue to make its own
independent credit decisions in taking or omitting to take action under or in
connection with the Obligations, this Agreement, or the Secured Debt Documents.
Collateral Agent and its subagents shall not have any duty or responsibility to
provide any Secured Party with any credit or other information concerning the
affairs, financial condition, or business of the Company or any Subsidiary
thereof that may come into their possession.
3.16 NO JOINT VENTURE. Nothing contained in this
Agreement or any Secured Debt Document, and no action taken by any Secured
Party, Representative, or the Collateral Agent or any subagent of the Collateral
Agent, shall be deemed to constitute any group of such Persons to be a
partnership, association, joint venture, or other composite entity.
3.17 GENERAL APPLICABILITY OF COLLATERAL AGENCY
PROVISIONS CONTAINED IN THIS AGREEMENT. The collateral agency provisions
contained in this Agreement, including, without limitation, the provisions of
ARTICLE 3 of this Agreement, shall be generally applicable with respect to all
of the Collateral and with respect to all of the Secured Debt Documents to which
the Collateral Agent is a party or in which a Lien or security interest is
granted to the Collateral Agent. To the extent that any Secured Debt Document
contains collateral agency provisions, such provisions shall be supplemental to
the general provisions contained in this Agreement and shall be construed
consistently herewith to the extent practicable, but any inconsistency between
any Secured Debt Document and this Agreement shall be governed by the provisions
of this Agreement, and no Secured Debt Document shall impose upon the Collateral
Agent any duty, obligation, or responsibility not consistent with any disclaimer
or exculpatory provision contained in this Agreement.
SECTION 4. MISCELLANEOUS
4.1 NOTICES. Except as otherwise expressly provided
herein, all notices, consents, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by telecopy) and
shall be deemed to have been duly given or made (i) when delivered by hand or
(if telephone notice is permitted or required) by telephone, (ii) when
transmitted via telecopy (or other facsimile device) to the numbers herein
provided and the receipt of which is confirmed by telephone, (iii) the day
following the day on which the same has been delivered prepaid to a reputable
national overnight air courier service (with appropriate air bill or shipping
receipt and confirmation of delivery), or (iv) the fifth (5th) business day
following the day on which the same is deposited in the mail (certified mail,
return receipt requested and postage prepaid) to the applicable address as
provided on Schedule 3 hereof (or such other address as to which any such party
may give written notice to the other parties hereto).
<PAGE>
59
4.2 WAIVER. No failure or delay on the part of any
Secured Party in exercising any power or right under this Agreement, shall
operate as a waiver thereof, nor shall any single or partial exercise of any
other power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No waiver or approval by any Secured Party
under this Agreement shall be applicable to subsequent transactions, except as
may be otherwise stated in such waiver or approval.
4.3 NO REPRESENTATIONS; LIMITATION ON LIABILITY. Except
as specifically provided herein, none of the Secured Parties make to any other
Secured Party any representation, or assumes any responsibility, in respect of
the execution, construction or enforcement of any Secured Debt Document, trust
indenture or loan agreement, or any agreement or instrument of security or other
document executed by the Company or its Subsidiaries. Except as a result of the
breach by any Secured Party of any contractual obligation of that Secured Party
arising under this Agreement, none of the Secured Parties shall have any
liability to the other Secured Parties in respect of any Obligation or pursuant
to the terms of this Agreement, except for such Secured Party's own gross
negligence or willful misconduct.
4.4 CONFLICT. To the extent that there is a conflict or
inconsistency between any provision hereof, on the one hand, and any provision
of any Secured Debt Document, on the other hand, this Agreement shall control
and prevail as among the Secured Parties, and the Secured Debt Documents shall
control and prevail as to the Company and Subsidiaries.
4.5 SUCCESSORS AND ASSIGNS; REPLACEMENT OF CERTAIN LOANS.
(a) This Agreement shall be binding upon and
inure to the benefit of the Secured Parties and their respective successors and
assigns. Supplementing the foregoing, but not in limitation thereof, any Person
who shall hereafter be or become the holder of the Preferred Stock shall be
bound by the limitations on payment of dividends or other distributions on
account of the Preferred Stock (including, without limitation, in respect of the
redemption and repurchase obligations thereunder) provided for in this
Agreement.
(b) If any Person or Persons shall provide a
replacement for the Revolving Loan Commitments (as such amount may be increased
pursuant to SECTION 2.9(a) of this Agreement), on terms and conditions no less
favorable, taken as a whole, to the Company than those for the Revolving Loan
set forth in the DK Loan Documents on the date of replacement, then, provided
that such Person or Persons shall have executed an agreement acknowledging this
Agreement and agreeing to be bound by and to enjoy the benefits of the terms and
conditions hereof in the same manner as the DK Lender Group is bound hereby and
enjoys the benefits hereof from and after the effective date of such replacement
agreement, this Agreement shall be binding upon and
<PAGE>
60
inure to the benefit of such Person or Persons and its or their respective
successors and assigns.
(c) If any Person or Persons shall provide a
replacement for the facilities provided for in the Secured Agreement Documents,
on terms and conditions no less favorable, taken as a whole, to the Company and
its Subsidiaries than those for the Senior Note Documents on the date of
replacement, and subordinated to the DK Lender Group and the Anglo American
Lender Group on at least as favorable a basis as the Secured Agreement
Obligations, then, provided that such Person or Persons shall have executed an
agreement acknowledging this Agreement and agreeing to be bound by and to enjoy
the benefits of the terms and conditions hereof in the same manner as the
Secured Agreement Obligee Group is bound hereby and enjoys the benefits hereof,
this Agreement shall be binding upon and inure to the benefit of such Person or
Persons and its or their respective successors and assigns.
(d) If any Person or Persons shall provide a
replacement for the facilities provided for in the Anglo American Loan
Documents, on terms and conditions no less favorable, taken as a whole, to the
Company and its Subsidiaries than those for the Anglo American Loan Documents on
the date of replacement, and subordinated to the DK Lender Group on at least as
favorable a basis as the Anglo American Loan Obligations, then, provided that
such Person or Persons shall have executed an agreement acknowledging this
Agreement and agreeing to be bound by and to enjoy the benefits of the terms and
conditions hereof in the same manner as the Anglo American Lender Group is bound
hereby and enjoys the benefits hereof, this Agreement shall be binding upon and
inure to the benefit of such Person or Persons and its or their respective
successors and assigns.
4.6 AMENDMENTS, WAIVERS, RELEASES, ETC. This Agreement
shall not be amended or otherwise modified without the written consent of the
affected Secured Parties; PROVIDED, HOWEVER, no provision of SECTION 3 hereof
shall be amended without the written consent of the Collateral Agent. The
consent of the Company and Subsidiaries shall not be required in respect of any
amendment, modification, waiver, discharge or termination of any provision of
this Agreement, except SECTION 3.5 to the extent applicable to the Company and
Subsidiaries.
4.7 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 of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
<PAGE>
61
4.8 COUNTERPARTS. This Agreement may be executed by one
or more of the initial parties to this Agreement in any number of separate
counterparts, and all such counterparts taken together shall be deemed to
constitute one and the same instrument. Counterparts may be delivered by
facsimile, provided that any party delivering a counterpart in such manner
promptly thereafter shall deliver an original manually executed counterpart.
4.9 GOVERNING LAW. This Agreement and the rights and
obligations of the parties under this Agreement shall be governed by, and
construed and interpreted in accordance with the law of the State of New York
applicable to contracts made and to be performed in the State of New York.
4.10 SECURED PARTIES RIGHTS AS AGAINST THIRD PARTIES.
Nothing contained in this Agreement is intended to affect or limit, in any way
whatsoever, the Liens that each of the parties hereto has in the assets of the
Company and Subsidiaries insofar as the rights of the Company and Subsidiaries
and third parties are involved. The Secured Parties specifically reserve their
respective rights, Liens, and rights to assert Liens as against the Company and
Subsidiaries and any third parties.
4.11 ENTIRE AGREEMENT. This Agreement embodies the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements, understandings and
inducements, whether express or implied, oral or written with respect thereto.
4.12 CONSTRUCTION OF AGREEMENT. The parties hereto hereby
acknowledge that the wording of this Agreement reflects substantial negotiation
among the parties and that all parties participated in the drafting of this
Agreement. Consequently, the parties hereto hereby agree that the rule of CONTRA
PROFERENTUM shall not be applied in the construction of this Agreement.
4.13 RESOLUTION OF CONFLICTING RIGHTS AND REMEDIES.
(a) Prior to the time, if any, that the DK Loan
Obligations have been paid in full, to the extent that the Secured Debt
Documents, as they pertain to the Collateral, may provide conflicting rights and
remedies to the DK Lender Group, the Anglo American Lender Group, and the
Secured Agreement Obligee Group, or may purport to empower each to make
decisions or give directions or instructions to the Collateral Agent, the rights
and remedies of the DK Lender Group shall be paramount to, and shall take
precedence over, those of the Anglo American Lender Group and/or the Secured
Agreement Obligee Group, and the Collateral Agent may rely on directions or
instructions of the DK Representative with respect to the Collateral and
disregard conflicting instructions or directions from the Anglo American
Representative or the Secured Agreement Obligee Representative with respect to
the Collateral.
<PAGE>
62
(b) At and after the time, if any, that the DK
Loan Obligations have been paid in full, to the extent that the Secured Debt
Documents, as they pertain to the Collateral, may provide conflicting rights and
remedies to the Anglo American Lender Group and the Secured Agreement Obligee
Group, or may purport to empower each to make decisions or give directions or
instructions to the Collateral Agent, the rights and remedies of the Anglo
American Lender Group shall be paramount to, and shall take precedence over,
those of the Secured Agreement Obligee Group, and the Collateral Agent may rely
on directions or instructions of the Anglo American Representative with respect
to the Collateral and disregard conflicting instructions or directions from the
Secured Agreement Obligee Representative with respect to the Collateral.
4.14 COVENANTS OF THE SECURED AGREEMENT OBLIGEES. As a
material inducement to the entering into of this Agreement by the DK Lenders and
the Anglo American Lenders, the Secured Agreement Obligees hereby covenant and
agree that until the DK Loan Obligations and the Anglo American Loan Obligations
shall have been paid in full, neither the Secured Agreement Obligees nor any of
its or their directors, employees or designees serving as directors on the Board
of Directors of the Company from time to time, shall vote for or approve (by
Board resolution or action at a duly convened Board meeting) the declaration or
payment of any dividends on, or cause the Company to 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 all or any portion of
the Preferred Stock or, to the extent it may do so consistent with its fiduciary
duties, the Series B Cumulative Redeemable Convertible Preferred Stock of the
Company (the "Series B Stock") or for the making of any other distributions in
respect thereof, whether in cash or property (other than distributions or
dividends in the form of common stock or preferred stock if all of the criteria
in clauses (A) through (E) of Section 2.16(c) are satisfied) (any such payment
or dividend being hereinafter referred to as a "Dividend") or in obligations of
the Company, any Subsidiary or any SP Entities.
<PAGE>
63
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
The DK Lenders:
M.H. DAVIDSON & CO., LLC, as Agent
By:
-----------------------------------------
Name: Thomas L. Kempner, Jr.
Title: Managing Member
The Anglo American Lenders:
ANGLO AMERICAN FINANCIAL
By:
-----------------------------------------
Name:
Title:
and
GENERAL MOTORS EMPLOYEES GLOBAL
GROUP PENSION TRUST
By: Magten Asset Management Corp., as
attorney-in-fact
By:
--------------------------------------
Name:
Title: Managing Director
<PAGE>
64
The Secured Agreement Obligees:
AP-AGC, LLC, a Delaware limited liability company
By:
-----------------------------------------
Name: Ricardo Koenigsberger
Title: Vice President of Kronus
Property, Inc., the Manager
of AP-AGC, LLC
The Collateral Agent:
M.H. DAVIDSON & CO., LLC
By:
-----------------------------------------
Name: Thomas L. Kempner, Jr.
Title: Managing Member
<PAGE>
65
ACKNOWLEDGMENT BY THE COMPANY AND ITS SUBSIDIARIES
Each of the Company and the undersigned Subsidiaries of the
Company hereby acknowledges the foregoing Intercreditor Agreement, and agrees,
jointly and severally, to be bound by the terms, conditions, and provisions
thereof (including without limitation SECTION 3.5 thereof) applicable to it.
Each of the Company and the undersigned Subsidiaries of the Company agrees that
each Secured Party holding Collateral may serve as bailee for any other Secured
Party and each Secured Party is hereby authorized to turn such Collateral over
to such other Secured Party. The Company further agrees on its own behalf and on
behalf of its Subsidiaries, that the Intercreditor Agreement is solely for the
benefit of the Secured Parties and their successors or assigns and shall not
give the Company, its successors and assigns, or the Company's Subsidiaries or
their successors or assigns, or any other person, any rights vis-a-vis any
Secured Party. The Company hereby consents to the resignation of The Bank of New
York as the SP Sub Collateral Agent (as defined in the Old Intercreditor
Agreement) and the appointment of M.H. Davidson & Co., LLC, as the Collateral
Agent, and waives any notice requirements that otherwise might or would be
applicable in connection with such resignation and succession.
The Company and all of the undersigned Subsidiaries hereby
agree that on or after a Determination Event, any and all payments on any
Obligations and/or any Guarantees thereof to the DK Lenders, the Anglo American
Lenders, or the Secured Agreement Obligees (other than payments on Obligations
and/or Guarantees thereof that are identifiable proceeds of Collateral) shall be
made strictly in accordance with the priorities set forth in SECTION 2.16; and,
if any of the DK Lenders, the Anglo American Lenders, or the Secured Agreement
Obligees receives any payment on an Obligation and/or a Guarantee thereof that
is required to be remitted or transferred to the Collateral Agent for
distribution to other Secured Parties pursuant to SECTION 2.7 of the foregoing
Intercreditor Agreement, then the amount of the Obligations held by the Secured
Party receiving such payment from the Company or any Subsidiary shall be deemed
reduced only by the amount of payment on such Obligation and/or Guarantee
<PAGE>
66
thereof retained by such Secured Party and the Obligations of the other Secured
Parties receiving distributions from the Collateral Agent pursuant to SECTION
2.7 shall be deemed reduced by the amount of any such distribution.
The Company expressly acknowledges that it may not pay any
Dividend (as defined in Section 4.14 of the foregoing Intercreditor Agreement)
or other distributions on account of the Preferred Stock or the Series B Stock
(including, without limitation, in respect of the redemption and repurchase
obligations thereunder) to the holders of the Preferred Stock or the Series B
Stock pursuant to the terms of the DK Loan Documents and the Anglo American Loan
Documents; PROVIDED, HOWEVER, that the Company may pay "payment in kind"
dividends or common stock dividends to the holders of the Preferred Stock and
Series B Stock, if all of the criteria set forth in clauses (A) through (E) of
Section 2.16(c) of the foregoing Intercreditor Agreement are satisfied.
THE COMPANY:
ATLANTIC GULF COMMUNITIES CORPORATION, a
Delaware corporation
By:
-----------------------------------------
Name: John H. Fischer
Title: Vice President
SUBSIDIARIES:
AG TITLE CORPORATION, a Florida corporation
ATLANTIC GULF COMMERCIAL REALTY, INC., a
Florida corporation
ATLANTIC GULF COMMUNITIES MANAGEMENT
CORPORATION, a Florida corporation
ATLANTIC GULF COMMUNITIES SERVICE
CORPORATION, a Florida corporation
AGC HOMES, INC., a Florida corporation
ATLANTIC GULF DEVELOPMENT, INC.,
a Florida corporation
ATLANTIC GULF REALTY, INC., a Florida
corporation
COMMUNITY TITLE AGENCY, INCORPORATED,
a Florida corporation
CUMBERLAND COVE, INC., a Tennessee corporation
<PAGE>
67
ENVIRONMENTAL QUALITY LABORATORY,
INCORPORATED, a Florida corporation
FIVE STAR HOMES, INC., a Florida corporation
ATLANTIC GULF C.C. CORP., f/k/a/ C.C. VILLAGE
DEVELOPMENT CORPORATION, a Florida
corporation
GDV FINANCIAL CORPORATION, a Florida
corporation
GENERAL DEVELOPMENT ACCEPTANCE
CORPORATION, a Delaware corporation
GENERAL DEVELOPMENT AIR SERVICE, INC.,
a Florida corporation
GENERAL DEVELOPMENT COMMERCIAL CREDIT
CORPORATION, a Florida corporation
ATLANTIC GULF ENGINEERING COMPANY,
a Florida corporation
GENERAL DEVELOPMENT HEADQUARTERS
CORPORATION, a Florida corporation
GENERAL DEVELOPMENT RESORTS, INC.,
a Florida corporation
GENERAL DEVELOPMENT SALES CORPORATION,
a Florida corporation
GENERAL DEVELOPMENT SERVICE
CORPORATION, a Florida corporation
GENERAL DEVELOPMENT UTILITIES, INC.,
a Florida corporation
LAKESIDE DEVELOPMENT OF ORLANDO, INC.,
a Florida corporation
LONGWOOD UTILITIES, INC., a Florida corporation
REGENCY ISLAND DUNES, INC., a Florida
corporation
TOWN & COUNTRY II, INC., a Florida corporation
FRC INVESTMENTS, INC., a Florida corporation
XYZ INSURANCE, INC., a Florida
corporation
AGC CL LIMITED PARTNER, INC., a Florida
corporation
AGC SANCTUARY CORPORATION, a Florida
corporation
AG SANCTUARY OF ORLANDO, INC., a Florida
corporation
ATLANTIC GULF RECEIVABLES CORPORATION,
a Florida corporation
<PAGE>
68
ATLANTIC GULF OF TAMPA, INC., a Florida
corporation
ATLANTIC GULF UTILITIES, INC., a Florida
corporation
EQL ENVIRONMENTAL SERVICES, INC., a Florida
corporation
HUNTER TRACE DEVELOPMENT CORPORATION,
a Florida corporation
OCEAN GROVE,INC., a Florida corporation
PANTHER CREEK CORP., a North Carolina
corporation
SABAL TRACE DEVELOPMENT CORPORATION,
a Florida corporation
SUNSET LAKES DEVELOPMENT CORPORATION,
a Florida corporation
WEST BAY CLUB DEVELOPMENT CORPORATION,
f/k/a ESTERO POINTE DEVELOPMENT
CORPORATION, a Florida corporation
WINDSOR PALMS CORPORATION, a Florida
corporation
FOX CREEK DEVELOPMENT CORPORATION,
a Florida corporation
MAPLEWOOD DEVELOPMENT CORPORATION,
a Florida corporation
SUMMERCHASE DEVELOPMENT CORPORATION, a
Florida corporation
AGC-SP, INC., a Delaware corporation
WATERFORD-ORLANDO, INC.,
f/k/a AGC-SP1, INC., a Florida corporation
LAS OLAS TOWER AT RIVER WALK, INC.,
f/k/a AGC-SP2, INC., a Florida corporation
WEST FRISCO DEVELOPMENT CORPORATION,
f/k/a AGC-SP3, INC., a Florida
corporation
AGC-SP4, INC., a Florida corporation
AGC-SP5, INC., a Florida corporation
AG-NTC, INC., a Florida corporation
WEST BAY HOLDING CORPORATION, a Florida
corporation
WEST BAY REALTY, INC., a Florida corporation
ASPEN SPRINGS RANCH HOLDING COMPANY f/k/a
A.G. ASSISTED LIVING, INC., a Florida
corporation
<PAGE>
69
ASPEN SPRINGS RANCH, INC., a Colorado
corporation
ASPEN SPRINGS RANCH ACQUISITION
CORPORATION, a Colorado corporation
ATLANTIC GULF ASIA HOLDINGS, N.V., a company
organized under the laws of
Netherland Antilles
ATLANTIC GULF WATER'S EDGE, INC., a Florida
corporation
ATLANTIC GULFSHORE NATURES COVE, INC.,
a Florida corporation
GRAND OAKS DEVELOPMENT CORPORATION,
a Florida corporation
By:
-----------------------------------------
Name: John H. Fischer
Title: Vice President
<PAGE>
70
ACKNOWLEDGMENT BY THE BANK OF NEW YORK
The Bank of New York hereby acknowledges and consents to the
execution, delivery, and performance of the foregoing Intercreditor Agreement,
confirms its resignation as the SP Sub Collateral Agent, and confirms its
ongoing agreement to do such acts and things in connection with the transition
of the Collateral Agent function to M.H. Davidson & Co., LLC as are or may be
required by the Old Intercreditor Agreement.
THE BANK OF NEW YORK, by
The Bank of New York Trust
Company of Florida, N.A.,
as its agent
By:
-------------------------
Name:
Title:
<PAGE>
SCHEDULE 1
EXCLUDED SUBSIDIARIES
Name Jurisdiction of
Incorporation
- - --------------------------------------------------------------------------------
Atlantic Gulf Development, Inc. Florida
Atlantic Gulf C.C. Corp., f/k/a
C.C. Village Development Corporation Florida
Community Title Agency, Incorporated Florida
FRC Investments, Inc. Florida
GDV Financial Corporation Florida
General Development Acceptance Corporation Delaware
General Development Air Service, Inc. Florida
General Development Commercial Credit
Corporation Florida
General Development Headquarters
Corporation Florida
General Development Sales Corporation Florida
Atlantic Gulf Engineering Company Florida
XYZ Insurance, Inc. Florida
Fox Creek Development Corporation Florida
General Development Service Corporation Florida
Longwood Utilities, Inc. Florida
Maplewood Development Corporation Florida
Summerchase Development Corporation Florida
1-1
<PAGE>
SCHEDULE 2
UNRESTRICTED SUBSIDIARIES
None
2-1
<PAGE>
SCHEDULE 3
ADDRESSES FOR NOTICES
The DK Lenders:
DK Acquisition Partners, L.P.
885 Third Avenue, Suite 3300
New York, NY 10022
Attn: Daniel Zwirn
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attn: Mitchell S. Fishman, Esq.
With a copy to:
Annis, Mitchell, Cockey, Edwards & Roehn, P.A.
One Tampa City Center, Suite 2100
Tampa, Florida 33602
Attn: Stephen Szabo, Esq.
The Anglo American Lenders:
Anglo American Financial
675 Berkmar Court
Charlottesville, Virginia 22901
Attn: Mr. Robin Rodriguez
With a copy to:
Salans Hertzfeld Heilbronn Christy & Viener
620 Fifth Avenue
New York, New York 10020
Attn: William Mills, Esq.
and
General Motors Employees Global Group Pension Trust
c/o Magten Asset Management Corp.
35 East 21st Street - 5th Floor
3-1
<PAGE>
New York, New York 10010
with a copy to:
Richards Spears Kibbe & Orbe
One Chase Manhattan Plaza
New York, New York 10005-1413
Attn: Jonathan Kibbe, Esq.
The Secured Agreement Obligees:
AP-AGC, LLC
c/o Apollo Real Estate Advisors II, L.P.
Two Manhattanville Road
Purchase, New York 10577
Attn: Ron Solotruck
With a copy to:
Apollo Real Estate Advisors II, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: Rick Koenigsberger
With a copy to:
Wachtel, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Philip Mindlin, Esq.
The Collateral Agent:
M.H. Davidson & Co., LLC
885 Third Avenue, Suite 3300
New York, NY 10022
Attn: Daniel Zwirn
With a copy to:
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attn: Mitchell S. Fishman
3-2
<PAGE>
With a copy to:
Annis, Mitchell, Cockey, Edwards & Roehn, P.A.
One Tampa City Center, Suite 2100
Tampa, Florida 33602
Attn: Stephen Szabo, Esq.
The Company and its Subsidiaries:
Atlantic Gulf Communities Corporation
2601 South Bayshore Drive
Miami, Florida 33133-5461
Attn: Chief Financial Officer
With a copy to:
Brownstein Hyatt Farber & Strickland
410 17th St., Suite 2200
Denver, Colorado 80202-4468
Attn: John Ruppert, Esq.
3-3
AMENDMENT TO ATLANTIC GULF COMMUNITIES CORPORATION
EMPLOYEE STOCK OPTION PLAN
This Amendment to Atlantic Gulf Communities Corporation Employee Stock
Option Plan (this "Amendment") is entered into this 15th day of April 1998.
Reference is hereby made to the Atlantic Gulf Communities Corporation
Employee Stock Option Plan, dated as of April 6, 1993, as amended to date (the
"Plan"). Capitalized terms used herein and not otherwise defined have the
meanings given to them in the Plan.
The Board of Directors (the "Board") of Atlantic Gulf Communities
Corporation (the "Company") believes that is in the best interests of the
Company and its stockholders (the "Stockholders") to increase the total number
of shares of Common Stock with respect to which Options may be granted under the
Plan from 750,000 shares to 1,250,000 shares.
Accordingly, the first sentence of Section 6. of the Plan is hereby
amended and restated in its entirety to read as follows: "The total number total
of shares of Common Stock with respect to which Options may be granted shall not
exceed 1,250,000."
From and after the Effective Date of this Amendment, all references to
the Plan in the Plan and in any Option Agreement shall be to the Plan as amended
by this Amendment.
The Effective Date of this Amendment shall be the date on which this
Amendment is approved by the Stockholders in accordance with the applicable
provisions of the Delaware General Corporation Law, applicable federal and state
securities laws, the Internal Revenue Code of 1986, as amended, and Section 16
of the Plan, which date shall be no later than the twelve month anniversary of
the date of adoption of this Amendment by the Board. If the Stockholders do not
approve this Amendment within twelve months of the date of adoption of this
Amendment by the Board, then this Amendment shall be null and void AB INITIO and
of no force or effect.
From and the Effective Date of this Amendment, except as expressly
amended hereby, the provisions of the Plan shall remain in full force and
effect.
- - ---------------------------------------------------------
THE UNDERSIGNED, BEING THE SECRETARY OF ATLANTIC GULF COMMUNITIES
CORPORATION (THE "COMPANY"), HEREBY CERTIFIES THAT THE FOREGOING AMENDMENT TO
ATLANTIC GULF COMMUNITIES CORPORATION STOCK OPTION PLAN WAS ADOPTED BY THE BOARD
OF DIRECTORS OF THE COMPANY, EFFECTIVE AS OF APRIL 15, 1998.
By:
---------------------------------------
Joel K. Goldman
Secretary
ATLANTIC GULF COMMUNITIES CORPORATION
FIRST AMENDED AND RESTATED
1996 NON-EMPLOYEE DIRECTORS STOCK PLAN
1. PURPOSE
This First Amended and Restated Stock Plan for Non-Employee Directors
(this"Plan") is intended to provide a means by which individuals who serve as
directors of, but who are not employees of, Atlantic Gulf Communities
Corporation (the "Company") (the "Non-Employee Directors") will increase their
proprietary interest in the Company's success and progress as the owners of
additional common stock of the Company.
2. ADMINISTRATION
The Plan shall be administered by the Company's board of directors (the
"Board"). All questions of interpretation and application of the terms and
conditions of the Plan shall be subject to the Board's sole discretion, which
shall be binding on all Participants.
3. ELIGIBILITY
The only persons eligible to participate in the Plan shall be
Non-Employee Directors. Each Non-Employee Director (including the Chairman of
the Board, if he is a Non-Employee Director) who participates in the Plan is
hereinafter referred to as a Participant.
4. STOCK
(a) The stock subject to issuance under the Plan shall be the Company's
common stock, par value $.10 per share, either authorized but unissued or issued
and held in treasury (the "Common Stock").
(b) The aggregate number of shares which may be issued under the Plan
shall not exceed 150,000 shares of Common Stock, subject to adjustment as
provided in Section 4(c) below.
(c) In the event of any stock dividend, stock split, combination of
shares or other change in the capitalization of the Company, appropriate
adjustment shall be made in the number and kind of shares issuable under the
Plan and credited to a Participant's account as of the effective date thereof.
5. PARTICIPATION
(a) Each Non-Employee Director serving as such shall automatically
participate in the Plan.
<PAGE>
(b) A Non-Employee Director shall continue to participate in the Plan
until his or her resignation, nonreelection, death or disability.
6. CONTRIBUTIONS
a. During the period commencing on July 1, 1996 and ending on March 31,
1998, from and after the date of participation, (a) an annual retainer fee of
$25,000 which would otherwise be paid quarterly in advance, in cash, to each
Participant, other than the Chairman of the Board, for serving as a Non-Employee
Director and (b) an annual retainer fee of $25,000 which would otherwise be paid
quarterly, in advance, in cash, to the Chairman of the Board, provided the
Chairman is a Non-Employee Director, shall be retained by the Company and, in
lieu thereof, the Company shall issue Common Stock to the Participant, as
described below.
b. During the period commencing on April 1, 1998, from and after the
date of participation, (a) an annual retainer fee of $25,000 which would
otherwise be paid quarterly in advance, in cash, to each Participant, other than
the Chairman of the Board, for serving as a Non-Employee Director and (b) an
annual retainer fee of $25,000 which would otherwise be paid quarterly, in
advance, in cash, to the Chairman of the Board, provided the Chairman is a
Non-Employee Director (the "Non-Employee Chairman") , shall be paid as follows:
(i) $2,500 shall be paid quarterly, in advance, in cash, to each Non-Employee
Director and the Non-Employee Chairman and (ii) $3,750 shall be retained by the
Company and credited to an account in the name of each Non-Employee Director and
the Non-Employee Chairman (a Participant's "Account") and, in lieu of paying
such amount in cash, the Company shall issue Common Stock to the Participant, as
described below,
7. COMMON STOCK
Quarterly on January 1, April 1, July 1 and October 1, the cash balance
of each Participant's Account shall be divided by the last known closing price
of the Common Stock as reported by the NASDAQ National Market, as determined by
the Company's Treasurer. The Participant's Account shall thereupon be credited
with the equivalent number of whole shares of Common Stock so determined, and
the Company shall debit the cash balance of the Participant's Account by an
amount equal to the number of whole shares of Common Stock credited times the
aforementioned closing price per share described above. Any residual cash
balance shall remain in the Account.
8. DISTRIBUTIONS FROM THE PLAN
(a) As soon as practicable after the commencement of each quarter
period, a certificate shall be issued to each Participant for the number of
shares of Common Stock allocated to the Participant's Account in respect of the
particular quarter. Any cash amounts remaining in a Participant's Account after
the end of each quarter period shall be carried forward for subsequent Common
Stock issuances under the Plan during the next succeeding quarter period, unless
a
<PAGE>
Participant shall have terminated his participation in the Plan in which case
such cash balance shall be distributed to such terminated Participant.
(b) Prior to the issuance of any Common Stock to a Participant under
the Plan, the Participant will represent, warrant and agree that the Participant
will acquire and hold the Common Stock for his own account for investment and
not with the view to the resale or distribution thereof, except for resales or
distributions in accordance with federal and state securities laws, and that the
Participant will not, at any time or times, directly or indirectly, offer, sell,
distribute, pledge, or otherwise grant a security interest in or otherwise
dispose of or transfer all, any portion of or any interest in, any Common Stock
acquired under the Plan (or solicit an offer to buy, take in pledge or otherwise
acquire or receive, all or any portion thereof), except pursuant to either (i) a
registration statement on an appropriate form under the Securities Act of 1933,
as amended (the "Act"), which registration statement has become effective and is
current with respect to the Common Stock being offered or sold, or (ii) a
specific exemption from the registration requirements of the Act. If the Company
so requests, the availability of such exemption shall be the subject matter of
an option of counsel reasonably acceptable to the Company that no registration
under the Act is required with respect to such offer, sale, distribution,
pledge, grant or other disposition or transfer.
(c) Prior to the issuance of any Common Stock to a Participant under
the Plan, the Participant will acknowledge in writing the Participant's
understanding that (i) the Common Stock to be issued to the Participant under
the Plan will be issued pursuant to exemptions from the registration
requirements in the Act until such time as the Company shall file a registration
statement under the Act which has become effective and is current with respect
to the Common Stock being issued under the Plan and in this connection the
Company is relying in part on the Participant's representations; (ii) such
Common Stock must be held indefinitely unless it is registered or an exemption
from registration becomes available under the Act and the applicable securities
laws of any state; (iii) the Company is under no obligation to register such
Common Stock or to comply with any exemption from such registration, including
those portions of Rule 144 under the Act to be complied with by the issuer; (iv)
if Rule 144 is available for sales of such Common Stock, and there is no
assurance that the Participant will ever be able to sell under Rule 144, such
sales in reliance upon Rule 144 may be made only after the Common Stock has been
held for the requisite holding period and then only in limited amounts in
accordance with the conditions of that Rule, all of which must be met; and (v)
the Participant must, therefore, continue to bear the economic risks of the
investment in such shares for an indefinite period of time.
(d) At such time as a Participant shall cease to be a Non-Employee
Director for any reason other than death, the cash balance in such Participant's
Account at such time shall be distributed to such Participant as soon as
practicable after such termination of participation.
(e) In the event of the death of a Participant, any cash balance in the
deceased Participant's Account as of the end of the quarter period in which such
death shall occur shall be applied to the issuance of Common Stock under the
Plan. All whole shares of Common Stock
<PAGE>
credited to such Participant's Account and any remaining cash balance in such
Account shall be distributed as soon as practicable thereafter (i) to the
beneficiary designated by the Participant, or (ii) if no such designation shall
have been made or if a designated beneficiary does not survive the Participant,
to the Participant's estate. Any designation of beneficiary (which may be any
person, trust or other entity) may be made, revoked or amended solely by the
Participant at any time, which designation shall be effective upon receipt by
the Company's Secretary.
9. AGREEMENT BY PARTICIPANT REGARDING WITHHOLDING TAXES
No later than the date of issuance of any Common Stock under the Plan,
the Participant will pay to the Company or make arrangements satisfactory to the
Company regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the issuance of such Common Stock.
10. AMENDMENT OF THE PLAN
The Board may from time to time alter, amend, suspend or discontinue
the Plan except that the Plan provisions shall not be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code of 1986, as amended.
11. MISCELLANEOUS
(a) Nothing in this Plan shall be deemed to create any obligation on
the Board's part to nominate any Non-Employee Director for re-election by the
Company's stockholders or reappointment to the Board.
(b) Until the issuance of stock certificates, no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect
to the Common Stock issued under this Plan.
(c) None of the benefits under the Plan are subject to the claims of
creditors of Participants or their beneficiaries, nor are they subject to
attachment, garnishment or any other legal process. Neither a Participant or
such Participant's beneficiary may assign, sell, borrow on or otherwise encumber
a beneficial interest in the Plan nor shall any such benefits be in any manner
liable for or subject to the deeds, contracts, liabilities, engagements or torts
of any Participant or beneficiary.
12. EFFECTIVE DATE, APPROVAL OF COMPANY'S STOCKHOLDERS, AND TERMINATION
The Atlantic Gulf Communities Corporation Non-Employee Directors Stock
Plan (the "Predecessor Plan") was originally adopted by the Board on April 15,
1996, and ratified and approved by the stockholders of the Company on May 22,
1996. The Predecessor Plan took effect on and as of July 1, 1996.
<PAGE>
On April 15, 1998, the Board adopted this Plan, as the successor to the
Predecessor Plan. This Plan amends, restates and supercedes the Predecessor
Plan, in its entirety, effective on and as of April 1, 1998.
Unless terminated earlier by the Board, the Plan shall terminate on
July 1, 2003, and no Common Stock shall be thereafter the issued under the Plan.
13. GOVERNING LAW
This Plan (and the Predecessor Plan) and all determinations made and
actions taken pursuant to the Plan (and the Predecessor Plan) shall be
interpreted, construed and enforced in accordance with the laws of the State of
Delaware, including any questions of choice of law.
ATLANTIC GULF COMMUNITIES CORPORATION
FIRST AMENDED AND RESTATED
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. PURPOSE
This First Amended and Restated Stock Option Plan for Atlantic Gulf
Communities Corporation, a Delaware corporation (the "Company"), is intended to
provide incentive to non-employee directors of the Company by providing those
persons with opportunities to purchase shares of the Company's Common Stock
under stock options.
2. DEFINITIONS
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Affiliate" shall mean any entity controlling,
controlled by or under common control with the Company.
(b) "Apollo Director" shall mean an Outside Director who is
appointed by AP-AGC, LLC ("Apollo") (pursuant to the right granted to
it under that certain Amended and Restated Investment Agreement, dated
as of February 7, 1998, as amended, to appoint three (3) directors to
the Board) to serve a one-year term on the Board.
(c) "Board" shall mean the Company's board of directors.
(d) "Common Stock" shall mean the common stock of the
Company.
(e) "Fair Market Value" of a share of Common Stock on any
day shall be the closing sale quotation on the National Association of
Securities Dealers' National Market System as reported for such day by
the automated quotations system of the National Association of
Securities Dealers, Inc. or, if no such quotation is reported for such
day, the average of the high bid and low asked price of Common Stock as
reported for such day. If no quotation is made for the applicable day,
the Fair Market Value of a share of Common Stock on such day shall be
determined in the manner set forth in the preceding sentence using
quotations for the next preceding day for which there were quotations,
provided that such quotations shall have been made within the 10
"trading" days preceding the applicable day.
(f) "Plan" shall mean this First Amended and Restated
Non-Employee Directors' Stock Option Plan established by the Company.
<PAGE>
(g) "Option" shall mean any option issued under this Plan.
(h) "Optionee" shall mean any person to whom an Option is
granted under this Plan.
(i) "Outside Director" shall mean any member of the Board
who is not an employee of the Company or any Affiliate of the Company.
(j) "Termination of Service" shall mean termination of
service as a member of the Board.
3. GENERAL ADMINISTRATION
(a) This Plan shall be administered by the Board. The Board shall have
the authority (i) to exercise all of the powers granted to it under this Plan,
(ii) to construe, interpret and implement this Plan and any Option Agreements
executed pursuant to Section 7 below, (iii) to prescribe, amend and rescind
rules and regulations relating to this Plan, (iv) to make all determinations
necessary or advisable in administering this Plan, (v) to correct any defect,
supply any omission and reconcile any inconsistency in this Plan and (vi) to
amend this Plan to reflect changes in applicable law.
(b) The determination of the Board on all matters relating to this
Plan or any Option Agreement shall be final, binding and conclusive.
(c) No Board member shall be liable for any action or
determination made in good faith with respect to this Plan, including any
Option.
4. TERM OF PLAN
Options may be granted from time to time within a period of 10 years
from the date on which this Plan is adopted by the Board.
5. ELIGIBILITY AND GRANTING OF OPTIONS
(a) Each Outside Director on February 6, 1995 shall automatically be
granted on February 6, 1995 an Option to purchase 20,000 shares of Common Stock.
Such Options shall have the terms and be subject to the conditions set forth in
Section 7 below.
(b) Each Outside Director on February 6, 1995 shall automatically be
granted an Option to purchase 5,000 shares of Common Stock at the first meeting
of directors following each subsequent re-election or re-appointment of such
Outside Director to a new-three year term on the
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<PAGE>
Board. Such Options shall have the terms and be subject to the conditions set
forth in Section 7 below.
(c) Each person, other than an Apollo Director, who becomes an Outside
Director after February 6, 1995 shall automatically be granted an Option to
purchase 20,000 shares of Common Stock upon his or her first election or
appointment to the Board and (ii) an Option to purchase 5,000 shares of Common
Stock at the first meeting of directors following each subsequent re-election or
re-appointment of such director to the Board; however, if such non-Apollo
Outside Director is re-elected or re-appointed to a term on the Board of less
than three years, then such non-Apollo Outside Director shall automatically be
granted an Option to acquire a number of shares of Common Stock equal to (1)
5,000 multiplied by (2) a fraction (i) the numerator of which is the actual
number of full 12-month consecutive periods in such new term and (2) the
denominator of which is three (3). Such Options shall have the terms and be
subject to the conditions set forth in Section 7 below.
(d) Each Apollo Director shall automatically be granted (i) an Option
to purchase 20,000 shares of Common Stock upon his or her first appointment to
the Board and (ii) an Option to purchase 1,667 shares of Common Stock at the
first meeting of directors following each subsequent re-appointment of such
Apollo Director to the Board; provided, however, that each Apollo Director shall
automatically be granted an Option to purchase 1,666 shares of Common Stock at
the first meeting of directors following every third consecutive re-appointment
of such Apollo Director to a one-year term to the Board. It is the intent of the
Board that an Apollo Director who is re-appointed to three consecutive one-year
terms on the Board should receive Options to acquire the same number of shares
of Common Stock (i.e., 5,000) as a non-Apollo Director who is re-elected to a
three-year term. Such Options shall have the terms and be subject to the
conditions set forth in Section 7 below.
(e) An Option shall be granted hereunder to a person only if as of
each date of grant such person is an Outside Director.
(f) In the event that the number of shares of Common Stock
available for future Option grant(s) under the Plan is insufficient to make all
grants required to be made on any date, then all Outside Directors entitled to a
grant on such date shall share ratably in the number of Options on shares
available for grant under the Plan.
(g) The provisions of Section 5 and Section 7 may not be amended
more often than once every six months.
6. COMMON STOCK
(a) The stock subject to the Options shall be Common Stock.
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<PAGE>
(b) The total number of shares of Common Stock with respect to
which Options may be granted shall not exceed 350,000. Common Stock issued
pursuant to this Plan may be authorized but unissued Common Stock or authorized
and issued Common Stock held in the Company's treasury or acquired by the
Company for the purposes of this Plan. The Board may direct that any certificate
evidencing Common Stock pursuant to this Plan shall bear a legend setting forth
such restrictions on transferability as may apply to such shares.
(c) If there is any change in the number of outstanding shares of
Common Stock by reason of a stock dividend or distribution, stock split-up,
reverse stock split, recapitalization, combination or exchange of shares, or by
reason of any merger, consolidation, spinoff or other corporate reorganization
in which the Company is the surviving corporation, the number of shares of
Common Stock available for issuance both in the aggregate and with respect to
each outstanding Option, and the purchase price per share under each outstanding
Option, shall be equitably adjusted by the Board, whose determination shall be
final, binding and conclusive. In the event of any merger, consolidation or
combination of the Company with or into another corporation (other than a
merger, consolidation or combination in which the Company is the surviving
corporation and which does not result in any reclassification or other change in
the number of outstanding shares of Common Stock), each Optionee shall have the
right thereafter and during the term of each such Option to receive upon
exercise (subject to the provisions of the Option Agreement) of such Option, for
each share of Common Stock as to which the Option shall be exercised, the kind
and amount of shares of the surviving or new corporation, cash, securities,
evidence of indebtedness, other property or any combination thereof which would
have been received upon such merger, consolidation or combination by the holder
of one share of Common Stock immediately prior to such merger, consolidation or
combination.
(d) If any outstanding Option for any reason expires or is
terminated without having been exercised in full, the Common Stock allocable to
the unexercised portion of such Option shall (unless this Plan shall have been
terminated) become available for subsequent grants of Options.
7. TERMS AND CONDITIONS OF OPTIONS
Each Option granted shall be evidenced by an Option Agreement in such
form as the Board may from time to time approve. By accepting an Option, an
Optionee thereby agrees that the Option shall be subject to the provisions of
the applicable Option Agreement. Options shall comply with and be subject to the
following terms and conditions:
(a) OPTION PRICE. The Option Price for each Option shall be
100% of the Fair Market Value of the shares of Common Stock on the date of grant
of the Option.
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<PAGE>
(b) MEDIUM AND TIME OF PAYMENT. The Option Price shall be
paid in full, at the time of exercise, in cash or, with the Board's
approval, in Common Stock held by the Optionee for at least six months
having a Fair Market Value in the aggregate equal to such Option Price
or in a combination of cash and such shares.
(c) TERM AND EXERCISE OF OPTIONS.
(1) Except as provided in paragraph (3) of this
Section 7(c), each Option shall be fully vested and
exercisable on the date of grant of the Option.
(2) Except as provided in paragraph (3) of this
Section 7(c), Options shall be exercisable for 10 years from
the date of the grant. The exercise period shall be subject to
earlier termination as provided in Section 7(d) below. An
Option may be exercised, as to any or all full shares of
Common Stock as to which the Option is exercisable, by giving
written notice of such exercise to the Board.
(d) TERMINATION OF SERVICE; DEATH.
(1) If an Optionee's service terminates for any
reason other than dismissal for cause, as determined in the
Board's sole discretion, any outstanding Option held by the
Optionee shall be exercisable on the following terms and
conditions: (i) exercise may be made only to the extent that
the Optionee was entitled to exercise the Option on the
effective date of Termination of Service; and (ii) any
exercise must occur prior to the earlier of (x) 5:00 p.m.
(Eastern Time) on the 90th day after Termination of Service
or, in respect of death or disability, on the 180th day
thereafter, and (y) the expiration date of the Option. Any
such exercise of an Option following an Optionee's death or
adjudication of mental incapacity shall be made only by the
Optionee's executor or administrator or other duly appointed
representative, as the case may be, reasonably acceptable to
the Board unless the Optionee's will specifically disposes of
such Option, in which case such exercise shall be made only by
the recipient of such specific disposition. If an Optionee's
legal representative or the recipient of a specific
disposition under the Optionee's will is entitled to exercise
any Option pursuant to the preceding sentence, such
representative or recipient shall be bound by the provisions
of this Plan and the applicable Option Agreement which would
have applied to the Optionee.
(2) Except to the extent otherwise provided in
paragraph (1) of this Section 7(d) or in the applicable Option
Agreement, any portion of an Option not theretofore exercised
shall terminate upon the Optionee's Termination of Service for
any reason or without reason (including death).
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<PAGE>
(e) NONTRANSFERABILITY OF OPTIONS. Options shall not be
transferable other than by will or by the laws of descent and
distribution, and Options may be exercised, during the lifetime of the
Optionee, only by the Optionee or the Optionee's legal representative.
(f) RIGHTS AS A SHAREHOLDER. An Optionee or a transferee of
an Option shall have no rights as a shareholder with respect to any
Common Stock covered by his Option until the date of the issuance of a
stock certificate to him for such shares. No adjustments shall be made
for dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued,
except as provided in Section 6(c) above.
(g) OTHER PROVISIONS. The Option Agreements authorized
under this Plan shall contain such other provisions, including (i) the
imposition of restrictions upon the exercise of an Option and (ii) the
inclusion of any condition as the Board shall deem advisable, including
provisions with respect to compliance with federal and applicable state
securities laws.
8. AGREEMENT BY OPTIONEE REGARDING WITHHOLDING TAXES
No later than the date of exercise of any Option, the Optionee will pay
to the Company or make arrangements satisfactory to the Board regarding payment
of any federal, state or local taxes of any kind required by law to be withheld
upon the exercise of such Option. The Optionee may, with the Board's prior
approval, make such payment in whole or in part by surrendering Common Stock to
the Company, valued at its Fair Market Value on the date of surrender.
9. RESTRICTIONS
(a) If the Board shall at any time determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any Option, the issuance or purchase of Common
Stock or other rights thereunder, or the taking of any other action thereunder
(each such action being hereinafter referred to as a "Plan Action"), then such
Plan Action shall not be taken, in whole or in part, unless and until such
Consent shall have been effected or obtained to the Board's full satisfaction.
(b) The term "Consent" as used herein with respect to any Plan
Action means (i) any and all listings, registrations or qualifications in
respect thereof upon any inter-dealer quotation system of a registered national
securities association or any national securities exchange or under any federal,
state or local law, rule or regulation, (ii) any and all written agreements and
representations by the Optionee with respect to the disposition of Common Stock,
or with respect to any other matter, which the Board shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification, or to obtain an exemption from the requirement that any such
listing, qualification or registration be made, and (iii) any and all consents,
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<PAGE>
clearances and approvals in respect of a Plan Action by any governmental or
other regulatory bodies.
(c) In furtherance of the foregoing, at the time of any exercise
of an Option, the Board may, if it shall determine it necessary or desirable for
any reason, require the Optionee as a condition to the exercise thereof, to
deliver to the Board a written representation of the Optionee's present
intention to purchase the Common Stock for investment and not for distribution.
If such representation is required to be delivered, an appropriate legend may be
placed upon each certificate delivered to the Optionee upon his exercise of part
or all of an Option and a stop transfer order may be placed with the transfer
agent. Each such Option shall also be subject to the requirement that, if at any
time the Board determines, in its discretion, that either (i) the listing,
registration or qualification of Common Stock subject to an Option upon any
securities exchange or under any state, federal or foreign law, or (ii) the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the issue or purchase of
Common Stock thereunder, the Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Board. An
Optionee shall not have the power to require or oblige the Company to register
any Common Stock subject to an Option.
10. NATURE OF PAYMENTS
All Options granted shall be in consideration of services performed for
the Company by the Optionee.
11. OTHER PAYMENTS OR OPTIONS
Nothing contained in this Plan shall be deemed in any way to limit or
restrict the Company from granting any option to purchase Common Stock or making
any payment to any person under any other plan, arrangement or understanding,
whether now existing or hereafter in effect.
12. SECTION HEADINGS
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of said
sections.
13. AMENDMENT
(a) The Board may from time to time suspend, discontinue, revise
or amend this Plan in any respect whatsoever, provided that any amendment that
would materially increase the aggregate number of shares of Common Stock as to
which Options may be granted, materially increase the benefits accruing to
participants under this Plan, or materially modify the requirements as to
eligibility for participation in this Plan shall be subject to the approval of
the holders of a majority of the outstanding Common Stock voting at a meeting of
shareholders at
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<PAGE>
which a quorum is present. In addition, no such amendment shall materially
impair any rights or materially increase any obligations under any outstanding
Option without the consent of the Optionee (or, upon the Optionee's death or
adjudication of mental incapacity, the person having the right to exercise the
Option).
(b) The Board may amend any outstanding Option Agreement. However,
any such amendment that materially impairs the rights or materially increases
the obligations of an Optionee under an outstanding Option shall be made only
with the consent of the Optionee (or, upon the Optionee's death, the person
having the right to exercise the Option).
14. ADOPTION OF THIS PLAN
The Atlantic Gulf Communities Corporation Non-Employee Directors' Stock
Option Plan (the "Predecessor Plan") was originally adopted by the Board on
December 5, 1994, and ratified and approved by the stockholders of the Company,
in accordance with the requirements of Securities Exchange Act Rule 16b-3 on May
17, 1995. The Predecessor Plan took effect on and as of May 17, 1995.
On April 15, 1998, the Board amended the Predecessor Plan and adopted
this Plan, as the successor to the Predecessor Plan. This Plan amends, restates
and supercedes the Predecessor Plan, in its entirety, effective on and as of
April 15, 1998.
15. GOVERNING LAW
This Plan (and the Predecessor Plan) and all determinations made and
actions taken pursuant to the Plan (and the Predecessor Plan) shall be
interpreted, construed and enforced in accordance with the laws of the State of
Delaware, including any questions of choice of law.
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
UNITED STATES OF AMERICA
CASE NO. 95-979-CR-NESBITT
V.
GENERAL DEVELOPMENT ORDER GRANTING GOVERNMENT'S
CORPORATION MOTION FOR EARLY TERMINATION
______________________/ OF COMPLIANCE PROGRAM
AND SPECIAL MASTER
THIS CAUSE is before the Court upon the government's Motion for
Termination of Appointment of Special Master, filed September 2, 1998, and upon
the government's ORE TENUS Motion for Termination of Compliance Program.
At a hearing on the motions on November 12, 1998, the Court heard from
counsel for both the United States and the defendant's successor corporation,
Atlantic Gulf Community Corporation, as well as from the Special Master, Thomas
D. Wood, Sr., and Atlanta Gulf Vice President and in-house counsel, Thomas
Jeffrey. At the hearing, counsel for Atlantic Gulf joined in the Government's
motions.
For the reasons set forth in the Government's motion and amplified at
the hearing by Special Master Thomas Wood and counsel for the parties, the Court
finds that early termination of the Special Master and of the Compliance Program
is appropriate.
1
<PAGE>
FACTUAL BACKGROUND
On November 30, 1990, in conjunction with a plea agreement in a related
criminal proceeding before the Court, GDC agreed to resolve a civil complaint
arising under 18 U.S.C. ss.371 and 1345, (injunctions against fraud) by
consenting to the entry by the Court of a Final Judgment of Permanent Injunction
and other relief as to Defendant General Development Corporation. By Paragraph
4, Atlantic Gulf, as successor to GDC is bound by the terms and conditions of
the Final Judgment.(1)
The Final Judgment contains many provisions to ensure that any
customers and purchasers of homesites or houses from GDC receive accurate
representations and truthful information regarding value "whether for purposes
of sale, resale, financial, refinancing aor otherwise." In furtherance of the
Final Judgment's remedial provisions a Special Master was appointed to establish
and implement a Restitution Program for payment of funds to certain purchasers
of GDC houses in satisfaction of their claims related to GDC house purchases.
The Special Master's duties also included ensuring compliance by GDC with the
terms and conditions of the Final Judgment. Paragraph 14 of the Final Judgment
requires its terms and conditions, with the exception of the Restitution
Program, to remain in effect for ten (10) years from the date of entry, November
30, 1990.
Among the duties assigned to the Special Master were to examine the
books and records of GDC and to attend the meetings of its board of directors in
order to ensure its compliance with
- - ------------------------------------
(1) "General Development Corporation, its subsidiaries and affiliates
and their respective officers, agent, employees, SUCCESSORS AND ASSIGNS, and all
other persons in active concert or participation with them, directly or
indirectly, who receive actual notice of this Final Judgment, by personal
service or otherwise, are hereby permanently restrained and enjoined from
engaging in . . . . (certain prohibited acts recited in subparagraphs 4(a)
- - -(h)."
2
<PAGE>
the Court's order, to notify the Court of any failure by GDC to comply with the
Final Judgment, and to administer the Court-ordered restitution program.
EARLY TERMINATION IS APPROPRIATE
Since the appointment of the Special Master, Thomas D. Wood, Sr. on
November 30, 1990, Mr. Wood has served as monitor of the operations of GDC and
now Atlantic Gulf. As described more fully in Mr. Wood's Affidavit, attached to
the Government's motion, the Restitution program was completed in 1992 and all
qualified and approved claimants received their court-approved compensation for
loss after the Chapter 11 reorganization plan was approved by the United States
Bankruptcy Court.
On November 30, 1995, Atlantic Gulf's criminal probation period ended.
During that time frame, there were no reported incidents of violation by
Atlantic Gulf of any the terms and conditions of said probation. On July 25,
1996, this Court, by agreement of the parties, granted Atlantic Gulf partial
release from the subject Final Order.
According to Special Master Thomas Wood, there have been no compliance
violations of the Final Order since 1996; previously there had been relatively
minor matters which, according to Mr. Wood, were resolved satisfactorily to all
concerned parties. In addition, as reiterated at the hearing on this matter, the
entire Board of Directors has changed since the company was convicted in 1990.
Moreover, the Special Master reported that the business of Atlantic
Gulf has changed completely. the company is no longer in the business of
construction and sale of residential homes. According to the Special Master, all
out-of-state sales offices have been closed and all telemarketing sales
operations have been discontinued.
3
<PAGE>
The Special Master told the Court that he believes that the Court's
Final Judgment has succeeded in protecting the public from any improper sales
activity, and that the need to monitor the marketing and sales activity of the
former GDC has ended.
In summary, for the reasons stated in the Government's motion and at
the November 12th hearing, it appears that the purpose and mission of the
Special Master essentially have been completed. Moreover, for the same reasons,
it is appropriate to terminate the compliance program which has been in effect
since November 30, 1990. Accordingly, it is hereby
ORDERED AND ADJUDGED that the government's motions are GRANTED.
DONE AND ORDERED in Chambers at Miami, Florida this 9th day of
December, 1998.
/s/ LENORE C. NESBITT
--------------------------------
LENORE C. NESBITT
UNITED STATES DISTRICT JUDGE
Copies furnished to:
Lauren J. Priegues, AUSA
Robert C. Josefsberg, Esquire
Thomas D. Wood, Sr., Esquire
4
Atlantic Gulf Communities Corporation Exhibit to the 1998 Form 10-K
Exhibit (a) 21. Subsidiaries of the Company
SUBSIDIARIES OF ATLANTIC GULF COMMUNITIES CORPORATION AS OF 3/17/99
AG-NTC, Inc. (Florida)
AG Sanctuary of Orlando, Inc. (Florida)
AG Title Corporation (Florida)
AGC CL Limited Partner, Inc. (Florida)
AGC Homes, Inc. (Florida)
AGC Sanctuary Corporation (Florida)
AGC-SP, Inc. (Delaware)
AGC-SP4, Inc. (Florida)
AGC-SP5, Inc. (Florida)
Aspen Springs Ranch Acquisition Corp. (Colorado)
Aspen Springs Ranch Holding Company (Florida) - f/k/a A. G. Assisted Living,
Inc.
Aspen Springs Ranch, Inc. (Colorado)
Atlantic Gulfshore Natures Cove, Inc. (Florida)
Atlantic Gulf Asia Holdings N.V. (Netherlands Antilles)
Atlantic Gulf C.C. Corp. (Florida) - f/k/a C.C. Village Development Corporation
Atlantic Gulf Commercial Realty, Inc. (Florida)
Atlantic Gulf Communities Management Corporation (Florida)
Atlantic Gulf Communities Service Corporation (Florida)
Atlantic Gulf Development, Inc. (Florida)
Atlantic Gulf Engineering Company (Florida)
Atlantic Gulf of Tampa, Inc. (Florida)
Atlantic Gulf Realty, Inc. (Florida)
Atlantic Gulf Receivables Corporation (Florida)
Atlantic Gulf Utilities, Inc. (Florida)
Atlantic Gulf Water's Edge, Inc. (Florida)
Community Title Agency, Inc. (Florida)
Country Lakes Development Corporation (Florida) (STOCK ISSUED TO COUNTRY LAKES,
LP)
Cumberland Cove, Inc. (Tennessee)
Environmental Quality Laboratory, Incorporated (Florida)
EQL Environmental Services, Inc. (Florida)
Five Star Homes, Inc. (Florida)
Fox Creek Development Corporation (Florida)
FRC Investments, Inc. (Florida)
GDV Financial Corporation (Florida)
General Development Acceptance Corporation (Delaware)
General Development Air Service, Inc. (Florida)
General Development Commercial Credit Corp. (Florida)
General Development Headquarters Corp. (Florida)
General Development Resorts, Inc. (Florida)
General Development Sales Corporation (Florida)
General Development Service Corporation (Florida)
General Development Utilities, Inc, Inc. (Florida)
Grand Oaks Development Corporation (Florida)
Hunter Trace Development Corporation (Florida)
Lakeside Development of Orlando, Inc. (Florida)
Las Olas Tower at River Walk, Inc. (Florida) - fka AGC-SP2, Inc.
Longwood Utilities, Inc. (Florida)
<PAGE>
SUBSIDIARIES OF ATLANTIC GULF COMMUNITIES CORPORATION AS OF 3/17/99 (Continued)
Maplewood Development Corporation (Florida)
Miramar Rock, Inc. (Florida) (STOCK ISSUED TO SUNSET LAKES ASSOCIATES)
NT Development Corporation (Florida) (STOCK ISSUED TO COUNTRY LAKES, LP)
Ocean Grove, Inc. (Florida)
Panther Creek Corp. (North Carolina)
Regency Island Dunes, Inc. (Florida)
Sabal Trace Development Corporation (Florida)
Saxon-DeBary, Inc. (Florida)
Summerchase Development Corporation (Florida)
Sunset Lakes Development Corporation (Florida)
Town & Country II, Inc. (Florida)
Waterford-Orlando, Inc. (Florida) fka AGC-SP1, Inc.; fka Saxon Park Development
Corporation
West Bay Club Development Corporation (Florida) fka Estero Pointe Development
Corporation
West Bay Holding Corporation (Florida)
West Bay Realty, Inc. (Florida)
West Frisco Development Corporation (Florida) - fka AGC-SP3, Inc.
Windsor Palms Corporation (Florida)
XYZ Insurance, Inc. (Florida)
Atlantic Gulf Communities Corporation Exhibit to the 1998 Form 10-K Exhibit (c)
23, Accountant's Consent - Ernst & Young LLP
- - --------------------------------------------
Consent of Independent Certified Public Accountants
Ernst & Young LLP
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 33-78284, as amended by Amendments 1 and 2, and Form S-8 No.
33-78282 pertaining to the Company's Employee Stock Option Plan), of our report
dated March 11, 1999, with respect to the consolidated financial statements and
schedule of Atlantic Gulf Communities Corporation included in the Annual Report
(Form 10-K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
March 31, 1999
Miami, Florida
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 AND CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR THEN ENDED AND THE NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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<NAME> Atlantic Gulf Communities Corporation
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
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54,820
0
<COMMON> 1,194
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