SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996, OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
Commission file number 1-9393
Interstate General Company L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1488756
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Smallwood Village Center
St. Charles, Maryland 20602
----------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(301) 843-8600
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
10,256,785 Class A Units
------------------------
<PAGE>2
INTERSTATE GENERAL COMPANY L.P.
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION Page
Number
Item 1. Consolidated Financial Statements ------
Consolidated Statements of Income for
the Six Months Ended June 30, 1996 and
1995. (Unaudited) 3
Consolidated StatementS of Income for
the Three Months Ended June 30, 1996 and
1995. (Unaudited) 4
Consolidated Balance Sheets at June 30, 1996
(Unaudited) and December 31, 1995. 5
Consolidated Statement of Changes in
Partners' Capital for the Six
Months Ended June 30, 1996.
(Unaudited) 7
Consolidated Statements of Cash Flow for the
Six Months Ended June 30, 1996 and 1995.
(Unaudited) 8
Consolidated Statements of Cash Flow for the
Three Months Ended June 30, 1996 and 1995.
(Unaudited) 9
Notes to Consolidated Financial Statements. 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
and Six Month Periods Ended June 30, 1996 and 1995. 20
PART II OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Material Modifications of Rights of Registrant's 31
Securities
Item 3. Defaults Upon Senior Securities 31
Item 4. Submission of Matters to a Vote of Security Holders 31
Item 5. Other Information 31
Item 6. Exhibits and Reports on Form 8-K 32
Signatures 33
<PAGE>3
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30,
(In thousands, except per unit amounts)
(Unaudited)
1996 1995
----------- ------------
REVENUES:
Community development - land sales $ 10,160 $ 9,686
Homebuilding - home sales 5,717 5,846
Revenues from investment properties -
Equity in earnings from partnerships
and development fees 15,796 1,330
Apartment rental income 3,241 2,314
Management and other fees, substantially all
from related entities 3,270 2,192
Interest and other income 493 213
---------- ----------
Total revenues 38,677 21,581
---------- ----------
EXPENSES:
Cost of land sales 7,189 4,941
Cost of home sales 5,383 5,423
Selling and marketing 714 733
General and administrative 4,430 4,575
Rental apartment expenses 3,090 2,194
Depreciation and amortization 197 202
Interest expense 1,714 1,083
Wetlands litigation expenses 650 317
---------- ----------
Total expenses 23,367 19,468
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTEREST 15,310 2,113
PROVISION FOR INCOME TAXES 5,443 557
---------- ----------
INCOME BEFORE MINORITY INTEREST 9,867 1,556
Minority interest 475 165
---------- ----------
NET INCOME $ 9,392 $ 1,391
========== ==========
NET INCOME
GENERAL PARTNERS $ 94 $ 14
LIMITED PARTNERS 9,298 1,377
---------- ----------
$ 9,392 $ 1,391
========== ==========
NET INCOME PER UNIT $ .91 $ .13
========== ==========
WEIGHTED AVERAGE UNITS OUTSTANDING 10,257 10,253
========== ==========
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>4
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30,
(In thousands, except per unit amounts)
(Unaudited)
1996 1995
----------- ------------
REVENUES:
Community development - land sales $ 6,854 $ 4,986
Homebuilding - home sales 2,993 2,911
Revenues from investment properties -
Equity in earnings from partnerships
and development fees 444 636
Apartment rental income 2,120 1,167
Management and other fees, substantially all
from related entities 1,061 884
Interest and other income 320 116
---------- ----------
Total revenues 13,792 10,700
---------- ----------
EXPENSES:
Cost of land sales 4,493 2,208
Cost of home sales 2,690 2,678
Selling and marketing 358 355
General and administrative 1,671 2,243
Rental apartment expenses 1,968 1,099
Depreciation and amortization 112 110
Interest expense 497 553
Wetlands litigation expenses 650 317
---------- ----------
Total expenses 12,439 9,563
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTEREST 1,353 1,137
PROVISION FOR INCOME TAXES 620 150
---------- ----------
INCOME BEFORE MINORITY INTERESTS 733 987
Minority interest 403 (84)
---------- ----------
NET INCOME $ 330 $ 1,071
========== ==========
NET INCOME
GENERAL PARTNERS $ 3 $ 11
LIMITED PARTNERS 327 1,060
---------- ----------
$ 330 $ 1,071
========== ==========
NET INCOME PER UNIT $ .03 $ .10
========== ==========
WEIGHTED AVERAGE UNITS OUTSTANDING 10,257 10,257
========== ==========
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>5
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
A S S E T S
June 30, December 31,
1996 1995
----------- -----------
(Unaudited) (Audited)
CASH AND SHORT-TERM INVESTMENTS
Unrestricted $ 4,925 $ 3,476
Restricted 1,575 2,125
-------- --------
6,500 5,601
-------- --------
ASSETS RELATED TO COMMUNITY DEVELOPMENT
Land and development costs
Puerto Rico 31,882 33,088
St. Charles, Maryland 28,214 27,826
Other United States locations 14,790 15,522
Notes receivable on lot sales and other 5,913 3,122
-------- --------
80,799 79,558
-------- --------
ASSETS RELATED TO HOMEBUILDING PROJECTS
Homebuilding construction and land 2,029 3,254
Investment in joint venture 315 250
Receivables and other 300 315
-------- --------
2,644 3,819
-------- --------
ASSETS RELATED TO INVESTMENT PROPERTIES
Investment properties, net of accumulated
depreciation of $20,023 and $5,124 as of
June 30, 1996 and December 31, 1995,
respectively 40,490 23,348
Investment in residential rental partnerships 11,206 10,922
Other receivables, net of reserves of
$5 and $384 as of June 30, 1996
and December 31, 1995, respectively 2,034 2,452
-------- --------
53,730 36,722
-------- --------
OTHER ASSETS
Costs in excess of net assets acquired, less
accumulated amortization of $964 and $888
as of June 30, 1996 and December 31, 1995,
respectively 2,071 2,147
Deferred costs regarding waste technology and other 3,136 2,975
Property, plant and equipment, less accumulated
depreciation of $2,308 and $2,216 as of June 30,
1996 and December 31, 1995, respectively 1,203 1,271
-------- --------
6,410 6,393
-------- --------
Total assets $150,083 $132,093
======== ========
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>6
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND PARTNERS' CAPITAL
June 30, December 31,
1996 1995
----------- ------------
(Unaudited) (Audited)
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities $ 4,072 $ 5,719
Mortgages and notes payable 525 301
Accrued income tax liability - current 5,843 464
Accrued income tax liability - deferred 4,768 4,704
-------- --------
15,208 11,188
-------- --------
LIABILITIES RELATED TO COMMUNITY DEVELOPMENT
Recourse debt 35,027 47,841
Non-recourse debt 2,062 2,034
Accounts payable, accrued liabilities
and deferred income 4,797 3,752
-------- --------
41,886 53,627
-------- --------
LIABILITIES RELATED TO HOMEBUILDING
Recourse debt 946 981
Account payable, accrued liabilities
and deferred income 2,018 2,746
-------- --------
2,964 3,727
-------- --------
LIABILITIES RELATED TO INVESTMENT PROPERTIES
Recourse debt 1,241 1,322
Non-recourse debt 39,179 22,650
Accounts payable and accrued liabilities 2,995 1,670
-------- --------
43,415 25,642
-------- --------
Total liabilities 103,473 94,184
-------- --------
PARTNERS' CAPITAL
General partners' capital 4,379 4,292
Limited partners' capital-10,257 Units
issued and outstanding as of
June 30, 1996 and December 31, 1995 42,231 33,617
-------- --------
Total partners' capital 46,610 37,909
-------- --------
Total liabilities and partners' capital $150,083 $132,093
======== ========
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>7
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(In thousands)
(Unaudited)
General Limited
Partners' Partners'
Capital Capital Total
-------- --------- ---------
Balances, December 31, 1995 $ 4,292 $33,617 $37,909
Net income for the three
months ended March 31, 1996 91 8,971 9,062
------- ------- -------
Balances, March 31, 1996 $ 4,383 $42,588 $46,971
Net income for the three months
ended June 30, 1996 3 327 330
Distributions for the three months
ended June 30, 1996 (6) (616) (622)
Assets transferred at general
partner's basis (1) (68) (69)
------- ------- -------
Balances, June 30, 1996 $ 4,379 $42,231 $46,610
======= ======= =======
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>
<PAGE>8
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30,
(In thousands)
(Unaudited)
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,392 $ 1,391
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
Corporate 370 265
Investment properties 466 331
Provision for income taxes 64 557
Equity in earnings of partnerships (15,484) (764)
Increase in sponsor and developer fees
from partnerships (191) (182)
Decrease (increase) in
Homebuilding assets 1,240 1,472
Community development assets (1,241) (2,159)
Restricted cash 550 194
Increase in accounts payable,
accrued liabilities and deferred income 4,049 868
------- -------
Net cash (used in) provided by operating activities (785) 1,973
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in assets related to investment properties 15,986 135
Increase in investment in joint venture (65) --
Dispositions of other assets (387) (579)
------- -------
Net cash provided by (used in) investing activities 15,534 (444)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from debt financing 11,254 7,951
Payment of debt (23,932) (9,500)
Employee Unit options exercised -- 171
Distributions to Unitholders (622) --
------- -------
Net cash used in financing activities (13,300) (1,378)
------- -------
NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS 1,449 151
CASH AND SHORT-TERM INVESTMENTS, BEGINNING OF PERIOD 3,476 1,120
------- -------
CASH AND SHORT-TERM INVESTMENTS, JUNE 30 $ 4,925 $ 1,271
======= =======
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>9
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED JUNE 30,
(In thousands)
(Unaudited)
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ 330 $ 1,071
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
Corporate 165 133
Investment properties 296 165
Provision for income taxes 69 150
Equity in earnings of partnerships (302) (450)
Increase in sponsor and developer fees
from partnerships (87) (91)
Decrease (increase) in
Homebuilding assets 793 615
Community development assets (2,458) (1,020)
Restricted cash (39) 66
(Decrease) increase in accounts payable,
accrued liabilities and deferred income (2,122) 962
------- -------
Net cash (used in) provided by operating activities (3,355) 1,601
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in assets related
to investment properties 16,760 (256)
Increase in investment in joint venture (65) --
Dispositions of other assets (288) (535)
------- -------
Net cash provided by (used in) investing activities 16,407 (791)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from debt financing 8,233 4,770
Payment of debt (17,914) (5,428)
Distributions to Unitholders (622) --
------- -------
Net cash used in financing activities (10,303) (658)
------- -------
NET INCREASE IN CASH AND SHORT-TERM INVESTMENTS 2,749 180
CASH AND SHORT-TERM INVESTMENTS, MARCH 31 2,176 1,091
------- -------
CASH AND SHORT-TERM INVESTMENTS, JUNE 30 $ 4,925 $ 1,271
======= =======
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>10
INTERSTATE GENERAL COMPANY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
(1) BASIS OF PRESENTATION AND PRINCIPLES OF ACCOUNTING
The accompanying consolidated financial statements are unaudited but
include all adjustments (consisting of normal recurring adjustments) which the
Company's management considers necessary for a fair presentation of the results
of operations for the interim periods. Certain account balances in the 1995
financial statements have been reclassified to conform to the 1996
presentation. The operating results for the three and six month periods ended
June 30, 1996 are not necessarily indicative of the results that may be
expected for the year. Net income per unit is calculated based on weighted
average units outstanding. Outstanding options and warrants to purchase Units
do not have a material dilutive effect on the calculation of earnings per Unit.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial statements
prepared in accordance with Generally Accepted Accounting Principles ("GAAP")
have been condensed or omitted. While the Managing General Partner believes
that the disclosures presented are adequate to make the information not
misleading, it is suggested that these financial statements be read in
conjunction with the financial statements and the notes included in the
Partnership's Annual Report filed on Form 10-K for the year ended December 31,
1995.
(2) FINANCING, LIQUIDITY AND RELATED MATTERS
The Company has historically met its liquidity requirements principally
from cash flow generated by land and home sales, property management fees,
distributions from residential rental partnerships and from bank financing
providing funds for development and working capital.
The Company's cash flow has been adversely affected by a weak market for
residential lots and expenses related to the Clean Water Act litigation.
Concerns over job security and a rise in mortgage rates have contributed to a
slowdown in new home sales in the region. During the first six months of 1996,
new home sales in Charles County were down 10% below the same period in 1995.
Over the course of the Clean Water Act litigation through June 30, 1996, the
Company has incurred approximately $5.3 million in related legal and consulting
expenses. The Company has reserves of $550,000 to cover future estimated
expenses relating to appeal of the convictions. The monetary fines and
estimated remediation expenses arising from the sentence imposed on the Company
remain as unreserved contingent liabilities pending results of the appeal.
The Company's loan agreements contain certain restrictive covenants, cross
default provisions and material adverse change in financial condition clauses.
Signet Bank has issued a notice of default pertaining to $1.8 million of debt.
As a result of this notice of default, $18.5 million of the Company's bank debt
could be called into default.
The event of default and the potential for multiple loan defaults has
hindered the Company's ability to secure financing necessary for the
<PAGE>11
development of Fairway Village, the third of five villages in the Planned Unit
Development of St. Charles, Maryland. The Company's current inventory of
finished lots in St. Charles is anticipated to be sold during 1996, therefore,
the development of additional lots is necessary to provide inventory for sales
in 1997 and beyond.
During the first quarter of 1996, four apartment projects in Puerto Rico
were sold under the 1990 Low Income Housing Preservation and Resident
Homeownership Act ("LIHPRHA"). This sale, after taxes, generated approximately
$11.4 million of cash. Approximately $9.2 million of cash proceeds was pledged
to curtail bank debt and the remainder was used to pay legal fees related to
the wetlands convictions and support operations. As a result of the debt
curtailments, the FDIC loan was paid off and NationsBank has a first lien on
commercial properties in St. Charles which will have the effect of improving
the Company's cash flow as the release prices under the NationsBank agreement
are less than that of the FDIC.
In addition to its traditional sources of liquidity, the Company has
retained a consultant to pursue a capital transaction.
(3) INVESTMENT IN RESIDENTIAL RENTAL PARTNERSHIPS
As of June 30, 1996, IGC manages and is a general partner in 25 real
estate partnerships which own 28 apartment projects in Puerto Rico, Maryland,
Virginia and Washington, D.C. IGC is also a limited partner in many of these
partnerships. The apartment projects are financed by non-recourse mortgages.
Of the 5,641 rental units in the various partnerships, the Federal Housing
Administration ("FHA") provides subsidies for low and moderate income tenants
in 4,453 units.
The Company acquired a controlling interest in four partnerships in
conjunction with the 1994 purchase of partnership interests from IBC, by
purchasing IBC's remaining 1.1% limited partnership interest in those
partnerships. The terms were consistent with the original agreement and
resulted in a charge to capital of $69,000 for the difference in IBC's book
basis, and IGC's basis of the receivables satisfied. The affect on the
Company's consolidated balance sheet was a $17,689,000 increase to assets and
liabilities.
As of June 30, 1996, IGC holds a controlling interest in seven of the
partnerships. The results of operations, assets and liabilities of these
partnerships are included in the accompanying consolidated financial
statements. The Company's investment in the remaining partnerships are
accounted for under the equity method. The combined condensed statements of
income for the three and six month periods ended June 30, 1996 and 1995 shown
below include the operating results of all 25 partnerships. The results of
operations for the four projects sold pursuant to LIHPRHA are not included.
These four partnerships that produced $4.5 million of revenue, $300,000 of net
income and $63,000 of cash flow for the year ended 1995 were sold for $52.7
million and generated a gain of $38.1 million. As a result of this sale, IGC
received $16.4 million in cash and recognized earnings of $14.6 million.
<PAGE>
<PAGE>12
HOUSING PARTNERSHIPS'
COMBINED CONDENSED STATEMENTS OF INCOME (1)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1995 1996 1995
------- ------- ------- -------
(In thousands) (In thousands)
Operating income $10,421 $10,202 $20,670 $20,408
------- ------- ------- -------
Operating expenses
Depreciation 1,642 1,594 3,267 3,183
Other 8,700 8,630 17,430 17,194
------- ------- ------- -------
10,342 10,224 20,697 20,377
------- ------- ------- -------
Net income $ 79 $ (22) $ (27) $ 31
======= ======= ======= =======
(1) The income and expenses of three partnerships are also included in
the Company's consolidated statements of income for the three and six
month periods ended June 30, 1996 and 1995. The income and expenses
of four partnerships during the period April 1, 1996 to June 30, 1996
are also included in the Company's consolidated statements of income
for the three and six month periods ended June 30, 1996. The total
income and expenses included above that relate to these partnerships
are as follows:
Income Expenses
------ --------
Three months ended June 30, 1996 $2,120,307 $2,152,229
Three months ended June 30, 1995 $2,165,306 $2,095,302
Six months ended June 30, 1996 $4,258,692 $4,299,560
Six months ended June 30, 1995 $4,319,879 $4,170,265
The FHA, Puerto Rico Housing Finance Corporation ("PRHFC"), State and
District of Columbia housing agencies and the partnership agreements require
that the accumulation of cash in the partnerships be sufficient to liquidate
all current liabilities before distributions to partners are permitted. Most
of the partnership agreements provide that IGC receive a zero to 5% interest in
profits, losses and cash flow from operations until such time as the limited
partners have received cash distributions equal to their capital contributions.
Thereafter, IGC generally shares in 50% of cash distributions from operations.
(4) OPERATIONS DISTRIBUTED TO UNITHOLDERS
On February 6, 1995, IGC distributed to its unitholders its 99% limited
partnership interest in Equus (the "Equus Distribution"). IGC and its wholly
owned subsidiary, Equus Management Company ("EMC"), retained the 1% general
partner interest and continue to manage Equus. For a transitional period
following completion of the Equus Distribution, IGC will provide certain
administrative services and support to Equus pursuant to a Master Support and
Services Agreement (the "Support Agreement"). Equus will reimburse IGC for
costs incurred in providing these services. IGC accounts for its investment on
the equity method of accounting.
<PAGE>13
(5) DEBT
The Company's outstanding debt is collateralized primarily by land,
housing and other land improvements, receivables, and investments in
partnerships. The following table summarizes the indebtedness of IGC:
Stated Outstanding Balance at:
Maturity Interest June 30, December 31,
Description by Lender Date Rate* 1996 1995
- ------------------------- -------------- -------- ------------- ------------
(In thousands)
Non-recourse debt:
Community Development 02-01-24 to 6.85%-9.875% $31,756 $22,650
Administration (1) 10-01-28
GMAC 10-01-19 (15) 2,361 --
Reilly Mortgage 04-01-20 (16) 5,062 --
Supra & Co. (8) 08-02-09 P + 1.5% 2,062 2,034
------- -------
Total non-recourse 41,241 24,684
------- -------
Recourse debt:
Citibank (6,12) Demand (9) 1,241 1,334
NationsBank 05-31-98 P + 1%-1.5% 8,872 10,725
(2,4,11,12)
Washington Savings From 11-29-96 8%-10% 447 682
(2,3,11) to 03-11-97
Riggs National Bank (2) 09-15-96 P + 1.5% 1,280 1,205
1st National Bank of 09-14-96 to P + 1.5%-10.25% 678 765
St. Mary's (2,3,13) 12-29-97
Signet Bank (2,3,10) 09-01-96 P + 1.5% 1,836 3,325
FDIC (2,4,14) 09-30-96 P + 1% -- 6,546
Virginia First 11-16-96 P + 1.5% 346 339
Savings (3)
Wachovia Bank & Trust 11-30-96 P + 1% 73 227
(2,3,11)
Purchase money 10-28-97 10% 1,000 1,000
mortgage (2)
Banco Santander (2,12) 03-01-98 P + 1% 2,334 --
FirstBank (2,12) 12-31-97 P + 1.5% 13,063 17,370
Banco Popular (2,7,12) 12-05-98 P + 1.5% 4,000 4,000
General (5) From 10-26-96 7.4%-11.5% 523 566
to 05-16-00
Citibank (2,12) 05-05-96 Eurodollar -- 2,361
+ 2.5%
R&G Premier (2,12) 04-31-99 P + 1.5% 2,046 --
------- -------
Total recourse 37,739 50,445
------- -------
Total debt $78,980 $75,129
======= =======
*P = The prime lending interest rate.
<PAGE>
<PAGE>14
Balance Sheet Classification
- ----------------------------
Outstanding Balance at:
June 30, December 31,
1996 1995
------------ ------------
Mortgages and notes payable - Recourse debt $ 525 $ 301
Related to community development -
Recourse debt 35,027 47,841
Non-recourse debt 2,062 2,034
Related to homebuilding projects - Recourse debt 946 981
Related to investment properties -
Recourse debt 1,241 1,322
Non-recourse debt 39,179 22,650
------- -------
Total debt $78,980 $75,129
======= =======
(1) Collateralized by apartment projects and secured by FHA or the Maryland
Housing Fund.
(2) Collateralized by community development assets.
(3) Collateralized by homebuilding assets.
(4) Collateralized by investment in residential rental partnerships.
(5) Collateralized by other assets.
(6) Collateralized by letter of credit.
(7) Collateralized by a secondary interest in Equus Units owned by Interstate
Business Corporation ("IBC").
(8) Minority partner in Puerto Rico land development subsidiary.
(9) The interest rate is not fixed to maturity and is renegotiated on a
periodic basis. The interest rate was 7.41% and 7.05% at June 30, 1996
and December 31, 1995, respectively.
(10) The financial institution granted a forbearance of the notice of default
it issued as a result of the wetlands litigation verdict. The
forbearance agreement required a principal curtailment on July 15, 1996,
which the Company has not fully met. The financial institution reissued
the notice of default on July 26, 1996.
(11) These loans contain certain covenants requiring the Company to remain in
compliance with applicable laws. Unless reversed on appeal, the wetlands
litigation verdict would result in a default of these covenants.
(12) These loans contain cross default provisions that could be triggered by
the events of default resulting from the wetlands litigation verdict.
(13) These loans contain a provision allowing the financial institution to
call the loan if there has been a material adverse change in the
Company's financial condition.
(14) Paid subsequent to year end.
(15) The note bears an interest rate of 7.75% which is reduced by an interest
subsidy pursuant to Section 236 guidelines.
(16) The note bears an interest rate of 7.5% which is reduced by an interest
subsidy pursuant to Section 236 guidelines.
<PAGE>
<PAGE>15
(6) RELATED PARTY TRANSACTIONS
IBC and James J. Wilson, Chief Executive Officer of the Company, have an
ownership interest in various entities to which IGC provided management or
support services during 1996 and 1995. These entities and their relationships
to IGC are as follows:
IBC or Affiliate IGC
-------------------- --------------------
Limited Limited
and Limited and Limited
General Liability General Liability
Partner Partner Partner Partner
------- ----------- ------- -----------
Chastleton .99% -- .01% --
Coachman's Limited Partnership
("Coachman's") 1% 49% 1% 49%
Santa Maria Associates,
S.E. ("Santa Maria") -- 99% -- 1%
El Monte Properties, S.E.
("El Monte") -- 99% -- 1%
G.L. Limited Partnership
("Rolling Hills") 1% 49% -- --
Village Lake Associates
Limited Partnership
("Village Lake") 99% 1% -- --
Capital Park Associates
("Capital Park") (a) -- -- --
Smallwood Village Associates
Limited Partnership ("SVA") 1% 51% -- --
Smallwood Village Office Building
Associates Limited Partnership
("SVOBA") 25% -- -- --
IBC, General Partner of IGC -- -- -- --
(a) An affiliate of IBC holds notes receivable that are secured by the
existing general partners' interest in the partnership.
<PAGE>
<PAGE>16
Transactions between the above entities and IGC are described in the
following tables.
REVENUE FOR THE SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1996
(In thousands)
-------------------------------------------------
Six Months Three Months
---------------------------------- ------------
Management Decrease
Fees and (Increase) Total Total
Interest in Reserve Recognized Recognized
---------- ---------- ---------- ----------
Chastleton (a,b,e) $ 36 $363 $399 $399
Coachman's (a,e) 18 42 60 60
Santa Maria 41 -- 41 28
El Monte` 55 -- 55 29
Rolling Hills (a) 45 -- 45 23
Village Lake (a) 11 -- 11 5
Capital Park 128 -- 128 61
SVA (d) 21 -- 21 9
SVOBA (d) 3 -- 3 1
IBC 20 -- 20 5
---- ---- ---- ----
$378 $405 $783 $620
==== ==== ==== ====
REVENUE FOR THE SIX AND THREE MONTH PERIODS ENDED
JUNE 30, 1995
(In thousands)
-------------------------------------------------
Six Months Three Months
---------------------------------- ------------
Management Decrease
Fees and (Increase) Total Total
Interest in Reserve Recognized Recognized
---------- ---------- ---------- ----------
Chastleton (a,b) $ 35 $(35) $ -- $ --
Coachman's (a,f) 24 304 328 --
Santa Maria 39 -- 39 19
El Monte` 48 -- 48 24
Rolling Hills (a,c) 37 352 389 24
Village Lake (a) 13 26 39 6
Capital Park 119 -- 119 61
SVA (d) 26 3 29 12
SVOBA (d) 3 -- 3 --
IBC 31 -- 31 16
---- ---- ------ ----
$375 $650 $1,025 $162
==== ==== ====== ====
<PAGE>17
OUTSTANDING RECEIVABLE BALANCE AT
(In thousands)
--------------------------------------------------------
June 30, 1996 December 31, 1995
--------------------------- ---------------------------
Receivable Receivable
(g) Reserve Balance (g) Reserve Balance
---------- ------- ------- ---------- ------- -------
Chastleton (e,h,i,k) $ 1 $ (1) $ -- $ 380 $(347) $ 33
Coachman's (e,j) 1 (1) -- 154 (37) 117
Santa Maria 13 -- 13 -- -- --
El Monte 20 -- 20 28 -- 28
Rolling Hills (e) 8 -- 8 283 -- 283
Village Lake (e) 1 (1) -- 51 -- 51
Capital Park 27 -- 27 28 -- 28
SVA -- -- -- 5 -- 5
SVOBA -- -- -- -- -- --
IBC (e) -- -- -- 346 -- 346
---- ---- ---- ------ ----- ----
$ 71 $ (3) $ 68 $1,275 $(384) $891
==== ==== ==== ====== ===== ====
(a) The management fee was reduced from 4.5% or 5% to 2.5% until the project
has positive cash flow and has paid all previously accrued management
fees.
(b) Management agreed that it would defer all management fees until Chastleton
had sufficient cash flow to fund operations and to subordinate 50% of its
management fee until IBC has recovered its operating advances.
(c) The performance of this project has improved and the project produced
positive cash flow during 1995 and 1996. The collection of the remaining
receivable balance is considered probable and reserves related to this
receivable aggregating $335,000 were recognized as income during the first
quarter of 1995.
(d) The management contracts for commercial projects owned by IBC were
terminated April 30, 1996. IBC became the new management agent effective
May 1, 1996.
(e) During the second quarter of 1996, IBC transferred its remaining 1.1%
limited partnership interest in four housing partnerships to IGC for its
market value of $69,000 as satisfaction of a note receivable. The balance
of this note receivable and other receivables were purchased by an
affiliate of IBC for a cash payment of $1,279,000. The collection of the
majority of these receivables had previously been questionable and
$413,000 had been reserved. This transaction resulted in income
recognition of these reserves during the second quarter of 1996.
(f) During the first quarter of 1995, IBC assigned a note receivable due from
Lakeside to IGC in satisfaction of past due receivables from Coachman's.
The collection of the majority of the Coachman's receivables had
previously been questionable and $328,000 had been reserved. This
transaction resulted in income recognition of these reserves during the
first quarter of 1995. The Company collected the $352,000 receivable due
from Lakeside during 1995.
(g) The outstanding receivable balances include unpaid management fees,
operating advances, reimbursement due for common expenses, and interest on
those balances.
(h) IGC is contingently liable under $4.6 million of letters of credit issued
by NationsBank collateralized by land, which secure additional bonds
issued for Chastleton.
<PAGE>18
(i) IBC has the funding obligation for operating deficits. In early 1996,
IGC, as general partner, funded $184,000 of cash deficits that were
satisfied in April 1996.
(j) IBC has the funding obligation for operating deficits. Since IGC equally
shares the general and limited partnership interest with IBC, IGC funded a
portion of the deficits.
IGC and affiliates lease office space from Smallwood Village Associates
Limited Partnership ("SVA"), one of IBC's commercial properties in which IGC's
executive offices are located. A total of 17,255 square feet of office space
is leased by IGC and affiliates at approximately $205,000 per year (subject to
adjustment for inflation). The leases expire in the years 1997 and 2005 and at
IGC's request, IBC has the obligation to sublease the space for the remainder
of the lease. During the three and six month periods ended June 30, 1996 and
1995, IGC's rent for its share of the leases was $32,000 and $48,000,
respectively, and $64,000 and $95,000, respectively.
IGC's Puerto Rico executive office has been located in the Doral Building
since November 1991 under a five-year lease providing for a first-year payment
of rent of approximately $187,000 and certain escalations for increases in the
CPI and pro-rata share of operating expenses in years two through five. Rental
expense for the executive office and certain other property in Puerto Rico
leased from affiliates was $115,000 and $110,000 for the six months ended June
30, 1996 and 1995, respectively. Rental expense for the three month periods
ended June 30, 1996 and 1995 was $57,000 and $44,000, respectively.
American Family Homes, a wholly owned subsidiary of IGC, leased 3000
square feet of commercial space from IBC which was used for one of its sales
centers. The lease expired December 31, 1995. Rent expense associated with
this lease during the three and six month periods ended June 30, 1995 was
approximately $6,000 and $16,000, respectively.
James J. Wilson, as a general partner of Interstate General Properties
S.E. ("IGP"), is entitled to priority distributions made by each housing
partnership in which IGP is the general partner. If IGP receives a
distribution which represents 1% or less of a partnership's total distribution,
Mr. Wilson receives the entire distribution. If IGP receives a distribution
which represents more than 1% of a partnership's total distribution, Mr. Wilson
receives the first 1% of such total.
IGC provides administrative support services to Equus Gaming Company L.P.
pursuant to a Master Support and Services Agreement. During the six months
ended June 30, 1996 and 1995, IGC earned $100,000 and $100,000, respectively,
in connection with such services. During the three month periods ended June
30, 1996 and 1995, IGC earned $50,000 and $50,000, respectively. IGC, as
general partner, has made operating advancements to Equus. The outstanding
balance of the advances and reimbursements due for support services as of June
30, 1996 and December 31, 1995 was $487,000 and $225,000, respectively.
In addition to the support provided Equus pursuant to the Support
Agreement, the Company provides management services and administrative support
to Equus' subsidiaries, HDA, Galapagos and S & E, and its major tenant, ECOC.
The administrative support is reimbursed as the services are rendered. The
management agreement with HDA continues into December 2004. Upon closing of an
HDA refinancing in December 1993, the management agreement was amended to
reduce the management fee to an annual fee of $250,000, adjusted annually
beginning in 1994 by the percentage increase in the Consumer Price Index
("CPI"). Prior to such amendment, IGC received a management fee equal to 5% of
<PAGE>19
HDA's rental income. The HDA management fees earned during the first six
months of 1996 and 1995 were $135,000 and $132,000 respectively. Management
fees for the three month periods ended June 30, 1996 and 1995 were $67,000 and
$66,000, respectively.
Pursuant to a consulting agreement effective December 15, 1993, ECOC has
retained as executive management three racing consultants employed by IGC.
ECOC reimburses all of IGC's payroll, bonus, fringe benefits and out-of-pocket
expenses associated with the employment of the consultants, and reimburses IGC
for other personnel who from time to time provide services to ECOC. Such
reimbursements are subject to certain limitations on increases in reimbursable
costs during the term of the consulting agreement. ECOC uses certain land
owned by Land Development Associates, S.E. ("LDA") for a sanitary landfill in
connection with its operation of the El Comandante Race Track. LDA has
authorized this use, but has reserved the right to terminate such use if it
conflicts with future development by LDA. Jorge Colon Nevares, a director of
IGMC, also serves as a director of ECOC and Thomas B. Wilson, one of the IBC
representatives on IGMC's board of directors, serves as ECOC's president.
On March 31, 1995, IGC sold two parcels in the Parque Escorial development
in Puerto Rico to Compri Caribe Development Corp. ("Compri"), a corporation
wholly owned by Jorge Colon Nevares, a director of the Company's managing
general partner for use in its operations. The terms of sale provided for a
sales price of $3,453,000, of which $693,000 was paid in cash, and the
remainder of which was satisfied by a note in the amount of $2,760,000. The
note is collateralized by the land parcels and bears interest at a rate of 10%
per annum commencing upon the completion of certain infrastructure
improvements. Monthly payments of principal and interest totalling $27,000 are
due monthly commencing May 1, 1995 with a balloon payment due at maturity on
April 1, 1998.
Concurrent with the transaction described above, the Company executed a
$3,397,000 contract of sale with Compri for three other land parcels in the
Parque Escorial development. On April 1, 1996, Compri made a 20% cash payment
and the remainder was satisfied by an interest bearing note collateralized by
the land parcels. The note bears interest at a rate of 10% per annum
commencing upon the completion of certain infrastructure improvements scheduled
to be completed in the third quarter of 1996, and is payable in thirty-five
monthly installments of $27,000, with a balloon payment due at maturity on
April 1, 1999. Until such time as the infrastructure improvements are
completed, the monthly installment will be applied to principal reduction in
full.
On September 8, 1995, the Company executed a Contract of Sale with Twenty
First Century Homes S.E. ("Twenty First Century") for two parcels of land in
the residential area of Parque Escorial Development for $3,520,000. Jorge
Colon Nevares, a director of IGC, holds a 50% ownership interest in Twenty
First Century. Closing occurred on June 27, 1996 for $2,720,000, which
reflected a price adjustment due to current market conditions. The price
reduction was equal to that given to the purchasers of two other parcels in the
residential area. A steep increase in on site construction costs to the
purchasers forced the reduction in the sales price of the land.
<PAGE>
<PAGE>20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion contains statements that may be considered
forward looking that involve a number of risk and uncertainties as discussed
herein and in the Company's SEC reports. Therefore, actual results could
differ materially.
The real estate industry is cyclical, and is especially sensitive to
fluctuations in economic activity and movements in interest rates. Residential
lot sales and sales of new homes are affected by market conditions for rental
properties and by the condition of the resale market for used homes, including
foreclosed homes in certain cities as well as the competitive supply of other
new homes for sale. An oversupply of rental real estate depresses rents and
reduces incentives for renters to purchase homes. An oversupply of resale
units depresses prices and reduces the margins available to builders on sales
of new homes. In addition, the slowing of the economy and its impact on
consumer spending, particularly in over built markets, can adversely impact
both commercial and residential development activity, including the demand for
housing.
The Company's homebuilding and community development sales continue to be
greatly influenced by consumer confidence, housing demand, prevailing market
interest rates, movements in such rates and expectations about future rates.
Even though the rates have remained fairly stable and an adequate supply is
available to the entry-level homebuyer, the economic uncertainties associated
with the federal budget and government furloughs during 1995 and 1996 came at a
time when supplies and competition were high in the Washington, D.C. market.
As a result, the profit margins in the region have continued to decline.
Management anticipates the growth of the Washington, D.C. metropolitan real
estate market to be adversely impacted by any future federal government
closings and cutbacks. This impact may be softened for St. Mary's and Charles
County due to the expansion of the Patuxent River Naval Air Station in St.
Mary's County. It is anticipated that this expansion will create 13,000 jobs
within the next few years. The Company has seen a significant increased
interest in its U.S. commercial land. The Puerto Rico residential and business
market has remained stable.
The following discussion and analysis covers changes in the results of
operations for the six and three month periods ended June 30, 1996 as compared
to the results for the six and three month periods ended June 30, 1995.
<PAGE>
<PAGE>21
The Company's net income for the six and three months ended June 30, 1996
and 1995 totalled $9.3 million versus $1.4 million and $252,000 versus
$1,071,000, respectively. A summary of these results by operation is as
follows:
For the Six Months For the Three Months
Ended June 30, Ended June 30,
-------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
(In thousands) (In thousands)
Community development $ 2,389 $ 4,490 $ 1,901 $ 2,822
Homebuilding (273) (220) 2 (82)
Investment properties and
asset management 19,217 3,642 1,657 1,588
Other income and expenses (6,498) (5,964) (2,610) (3,107)
------- ------- ------- -------
Net income before
provision for income tax 14,835 1,948 950 1,221
Provision for income tax 5,443 557 620 150
------- ------- ------- -------
Net income $ 9,392 $ 1,391 $ 330 $ 1,071
======= ======= ======= =======
<PAGE>
<PAGE>22
Community Development Operations
The following table presents selected community development financial data:
For the Six Months For the Three Months
Ended June 30, Ended June 30,
--------------------- --------------------
1996 1995 1996 1995
-------- -------- ------ ------
(In thousands, except units and percentages)
Lots Sold:
Commercial and business parks (acres)
St. Charles, Maryland 1 11 -- 10
Parque Escorial, Puerto Rico 4 5 4 2
Residential lots (units)
St. Charles, MD
Developed single-family lots 14 71 14 40
Montclair, Virginia
Semi-developed parcel 53 -- -- --
Parque Escorial, Puerto Rico 300 -- 160 --
Westbury, Maryland
Developed single-family lots 14 -- 14 --
Average Sales Price:
Commercial and business parks
(per acre)
St. Charles, Maryland $126 $325 -- $338
Parque Escorial, Puerto Rico $757 $666 $757 $ 33
Residential (per unit)
St. Charles, Maryland
Developed single-family lots $ 38 $ 40 $ 38 $ 39
Montclair, Virginia
Semi-developed parcel $ 15 -- -- --
Parque Escorial, Puerto Rico $ 17 -- $ 17 --
Westbury, Maryland
Developed single-family lots $ 23 -- $ 23 --
Average Gross Profit Margin:
Commercial and business parks
St. Charles, Maryland 57% 69% -- 69%
Parque Escorial, Puerto Rico 49% 46% 51% 26%
Residential lots
St. Charles, Maryland
Developed single-family lots 32% 38% 32% 38%
Montclair, Virginia
Semi-developed parcel -- -- -- --
Parque Escorial, Puerto Rico 29% -- 29% --
Westbury, Maryland
Developed single-family lots (1%) -- (1)% --
Sales revenue $10,160 $9,686 $6,854 $4,986
Cost of sales 7,189 4,941 4,493 2,208
------- ------ ------ ------
Gross profit $ 2,971 29% $4,745 49% $2,361 34% $2,778 56%
------- ------
Selling and marketing 107 90 57 40
Minority interest 475 165 403 (84)
------- ------ ------ ------
Operating profit $ 2,389 23% $4,490 46% $1,901 27% $2,822 57%
======= ====== ====== ======
Interest expense included
in cost of sales $ 201 $ 410 $ 194 $ 275
======= ====== ====== ======
<PAGE>23
Land sales increased 5% to $10.2 million for the six months ended June 30,
1996 from $9.7 million for this same period in 1995. Land sales increased 38%
to $6.9 million for the three months ended June 30, 1996 from $5.0 million for
the same period in 1995. The sales in the three and six months ended June 30,
1996 were primarily residential sales, whereas over 69% of the sales during the
comparable periods in 1995 were generated from commercial land sales. The new
home sales in Charles County, Maryland for the first six months of 1996 were
down 10% from the same period in 1995. This decline is the primary reason why
the residential lot sales in St. Charles were 80% lower in the first six months
of 1996 than the same period in 1995.
Gross profit margins from community development decreased to 29% from 49%
during the first six months of 1996. Gross profits from community development
decreased to 34% for the three month period ended June 30, 1996 from 56% for
the same period in 1995. The decline in the gross profit margins is
attributable primarily to the mix of sales as described above. The commercial
property in St. Charles typically generates gross profit margins that range
from 50% to 80%, whereas the gross profit margins on the residential lot sales
in St. Charles range from 25% to 50%. As a result of the Company's efforts to
close out the Westbury and Montclair projects, the lots have been sold at
breakeven or minimal losses. The commercial property in Puerto Rico generates
a gross profit margin that ranges from 40% to 54% and the new residential lots
are currently providing 29%. The ranges in gross profit margins are created by
the differences in location, size and condition of the property and current
market conditions. The gross margins for the St. Charles residential lots will
continue to average at the low end as the remaining lots in Westlake Village
are sold. Management expects residential lot sales in Fairway to begin in 1997
which should raise the overall gross margin average for residential lot sales.
The lots in Puerto Rico are close in location and very similar. Their margins
should remain stable and increase as the market conditions allow sales price
increases.
Minority partner interest increased $310,000 from $165,000 to $475,000
during the six months ended June 30, 1996 and $487,000 from $(84,000) to
$403,000 during the three months ended June 30, 1996 in comparison with this
same periods in 1995. A minority interest shares in 20% of the profits from
the Puerto Rico land sales. The increases or decreases are a direct reflection
of the volume and type of the Puerto Rico lot sales as described in detail on
the preceding charts.
<PAGE>
<PAGE>24
Homebuilding Operations
The following table presents selected homebuilding data:
For the Six Months For the Three Months
Ended June 30, Ended June 30,
--------------------------- -------------------------
1996 1995 1996 1995
------------ ------------ ----------- ------------
(In thousands, except units and percentages)
Units Settled:
Semi-Custom 34 41 20 19
Tract 21 15 8 9
---- ---- ---- ----
55 56 28 28
==== ==== ==== ====
Net New Orders:
Semi-Custom 69 42 20 12
Tract 6 18 2 9
---- ---- ---- ----
75 60 22 21
==== ==== ==== ====
Units Backlog:
Semi-Custom 73 82 73 82
Tract 9 8 9 8
---- ---- ---- ----
82 90 82 90
==== ==== ==== ====
Unit backlog under
construction:
Semi-custom 29 29 29 29
Tract 10 17 10 17
---- ---- ---- ----
39 46 39 46
==== ==== ==== ====
Average Sales Price:
Semi-Custom
(excludes lots) $ 99 $ 89 $ 108 $ 84
Tract $ 113 $ 147 $ 105 $ 145
Backlog $10,303 $10,566 $10,303 $10,566
Backlog average
sales price $ 126 $ 117 $ 126 $ 117
Home sales $ 5,717 $ 5,846 $ 2,993 $ 2,911
Cost of sales 5,383 5,423 2,690 2,678
------- ------- ------- -------
Gross profit 334 6% 423 7% 303 10% 233 8%
------- ------- ------- -------
Selling and marketing 607 643 301 315
------- ------- ------- -------
Operating loss $ (273) (5%) $ (220) (4%) $ 2 0% $ (82) (3%)
======= ======= ======= =======
<PAGE>25
Revenues from home sales decreased 2% to $5.7 million for the six months
ended June 30, 1996 from $5.8 million for same period of 1995. The primary
reasons for this decrease were the 23% decrease in the average sales price of
the tract homes sold during the first six months of 1996 through a close out
program and a 36% reduction in the number of semi-custom homes sold during the
first quarter of 1996 as compared to the same periods in 1995. This decline
was offset in part by the 40% increase of tract home sales in the first six
months of 1996 that were generated by the close out programs as compared to the
1995 period. Home sales increased 3% to $3.0 million for the three months
ended June 30, 1996 from $2.9 million for the same period of 1995. This
increase was attributable primarily to the increase in the average sales price
of the semi-custom homes to $108,000 in the 1996 period as compared to $84,000
in the comparable 1995 period.
Gross profits as a percentage of homebuilding revenues for a particular
period are a function of various factors including volume, pricing, efficiency
of homebuilding operations, and financing costs (including costs of subsidizing
customer financing, if any). The gross profit margins earned during the first
six months of 1996 decreased to 6% from the 7% achieved during the same 1995
period. This decline in the gross profit margin during the first six months of
1996 was attributable primarily to the effect of the close out sale of the
tract homebuilding inventory at reduced sales prices offset in part by a
$300,000 reduction in construction overhead during the first six months of 1996
as compared to the same period in 1995.
The gross profit margins increased to 10% during the second quarter of
1996 compared to the 8% earned during the second quarter of 1995. This
increase is primarily attributable to $178,000 decrease in construction
overhead and increase in the average semi-custom homes sales price during the
second quarter of 1996 as compared to the same period of 1995. The increase
was offset in part by the lower gross profit margins earned during 1996 on the
tract homes sold through a close out program.
Investment Properties and Asset Management
Six Months Ended
June 30,
-----------------------------
1996 1995
---- ----
(In thousands)
Apartment rental revenues $ 3,241 $ 2,314
Apartment operating expenses 3,090 2,194
------- ------
Apartment operating income 151 120
Equity in earnings from partnerships
and development fees 15,796 1,330
Management and other fees 3,270 2,192
------- ------
Total operating profit $19,217 $3,642
======= ======
<PAGE>
<PAGE>26
Three Months Ended
June 30,
-----------------------------
1996 1995
---- ----
(In thousands)
Apartment rental revenues $ 2,120 $ 1,167
Apartment operating expenses 1,968 1,099
------- ------
Apartment operating income 152 68
Equity in earnings from partnerships
and development fees 444 636
Management and other fees 1,061 884
------- -------
Total operating profit $ 1,657 $ 1,588
======= =======
Apartment rental revenues increased $927,000 or 40% during the first six
months of 1996 as compared to this same period during 1995 and $953,000 or 81%
during the three months ended June 30, 1996 as compared to this same period
during 1995. These increases were primarily attributable to the consolidation
of four partnerships on April 1, 1996 when the Company acquired their
controlling interest.
Equity in earnings from partnerships and development fees increased $14.5
million during the six months ended June 30, 1996 versus this same period in
1995, due primarily to the $14.6 million earned on the LIHPRHA sale. Equity in
earnings from partnerships and development fees decreased $192,000 or 30%
during the three months ended June 30, 1996 versus this same period in 1995.
This decrease was primarily due to the elimination of equity recorded for the
four newly consolidated partnerships and to the elimination of equity recorded
for the four partnerships whose properties were included in the LIHPRHA sale.
Revenues from management fees increased $1.1 million or 49% during the
first six months of 1996 in comparison with the same period of the prior year.
This was due primarily to $1,362,000 of special management fees earned in 1996
from the LIHPRHA transaction and a $275,000 recognition of reserved management
fees, offset by the elimination of $78,000 of fees earned from the four newly
consolidated partnerships, and by the 1995 recognition of $469,000 of reserved
management fees. Management and other fees increased $177,000 or 20% during
the three months ended June 30, 1996 as compared to this same period in 1995.
This increase was due primarily to the $275,000 recognition of reserved
management fees offset by the elimination of the fees earned from the four
newly consolidated partnerships.
<PAGE>
<PAGE>27
Other Income and Expenses
For the Six Months
Ended June 30,
---------------------------
1996 1995
---------- ----------
(In thousands)
Interest and other income $ 493 $ 213
General and administrative (4,430) (4,575)
Depreciation and amortization (197) (202)
Interest expense (1,714) (1,083)
Wetland litigation expenses (650) (317)
------- -------
$(6,498) $(5,964)
======= =======
For the Three Months
Ended June 30,
---------------------------
1996 1995
---------- ----------
(In thousands)
Interest and other income $ 320 $ 116
General and administrative (1,671) (2,243)
Depreciation and amortization (112) (110)
Interest expense (497) (553)
Wetland litigation expenses (650) (317)
------- -------
$(2,610) $(3,107)
======= =======
Interest and other income increased $280,000 or 131% during the six months
ended June 30, 1996 in comparison with this same period in 1995. Interest and
other income increased $204,000 or 176% during the three month period ended
June 30, 1996 versus the comparable period in 1995. These increases consisted
primarily of interest earned on notes receivable from land sales that resulted
from an increase in the balance of notes receivable.
General and administrative expenses decreased $145,000 or 3% during the
first six months of 1996 as compared to the first six months of 1995. This
decrease is primarily attributable to a $116,000 reduction of consulting fees,
$99,000 reduction of salaries and wages and a $205,000 overall reduction of
office expenses. This reduction was offset by the $165,000 of non-recurring
costs pursuant to an employment agreement, the $74,000 change in accrued
incentive compensation as a result of the change in the market price of IGC's
and Equus' Units and the net change of allowance for doubtful accounts. General
and administrative expenses decreased $572,000 or 25% during the three month
period ended June 30, 1996 as compared to this same period in 1995. This
decrease is primarily attributable to a $157,000 reduction in office and travel
expenses, the $163,000 reduction of costs pursuant to an employment agreement,
$131,000 reduction of salaries, and other reductions and timing differences of
legal and consulting fees.
Depreciation and amortization expense declined $5,000 or 2% during the
first six months of 1996 as compared to this same period in 1995. Depreciation
and amortization increased $2,000 or 2% during the three months ended June 30,
1996 as compared to the three month period ended June 30, 1995.
<PAGE>28
Interest expense increased $631,000 or approximately 58% during the six
months ended June 30, 1996 versus the comparable period of 1995. This increase
is primarily a result of accrued loan fees of $500,000 and a 2% increase in the
interest rate on approximately $10,000,000 of debt during the first quarter of
1996 that was triggered by certain events of default. Interest expense
decreased $56,000 or 10% during the three months ended June 30, 1996 versus
this same period in 1995. This decrease was due primarily to a reduction in
the Company's outstanding debt obligations during the 1996 period.
Provision for Income Tax. The provision for Puerto Rico income taxes
during the six months ended June 30, 1996 increased to $5,443,000 compared to
$557,000 during the first six months of 1995. This increase was due primarily
to the recognition of taxable income in 1996, resulting from distributions
received from partnerships in Puerto Rico that sold their apartment projects.
No taxable income of a similar magnitude was generated by the Company during
the first six months of 1995.
The provision for income taxes during the three months ended June 30, 1996
increased to $620,000 compared to $150,000 for the three months ended June 30,
1995. This increase was due primarily to the recognition of taxable income
during the three months ended June 30, 1996 resulting from the sale of land in
Puerto Rico.
FINANCING, LIQUIDITY AND RELATED MATTERS
The Company has historically met its liquidity requirements principally
from cash flow generated by land and home sales, property management fees,
distributions from residential rental partnerships and from bank financing
providing funds for development and working capital.
The Company's cash flow has been adversely affected by a weak market for
residential lots and expenses related to the Clean Water Act litigation.
Concerns over job security and a rise in mortgage rates have contributed to a
slowdown in new home sales in the region. During the first six months of 1996,
new home sales in Charles County were down 10% below the same period in 1995.
Over the course of the Clean Water Act litigation through June 30, 1996, the
Company has incurred approximately $5.3 million in related legal and consulting
expenses. The Company has reserves of $550,000 to cover future estimated
expenses relating to appeal of the convictions. The monetary fines and
estimated remediation expenses arising from the sentence imposed on the Company
remain as unreserved contingent liabilities pending results of the appeal.
The Company's loan agreements contain certain restrictive covenants, cross
default provisions and material adverse change in financial condition clauses.
Signet Bank has issued a notice of default pertaining to $1.8 million of debt.
As a result of this notice of default, $18.5 million of the Company's bank debt
could be called into default.
The event of default and the potential for multiple loan defaults has
hindered the Company's ability to secure financing necessary for the
development of Fairway Village, the third of five villages in the Planned Unit
Development of St. Charles, Maryland. The Company's current inventory of
finished lots in St. Charles is anticipated to be sold during 1996, therefore,
the development of additional lots is necessary to provide inventory for sales
in 1997 and beyond.
During the first quarter of 1996, four apartment projects in Puerto Rico
were sold under the 1990 Low Income Housing Preservation and Resident
<PAGE>29
Homeownership Act ("LIHPRHA"). This sale, after taxes, generated approximately
$11.4 million of cash. Approximately $9.2 million of cash proceeds was pledged
to curtail bank debt and the remainder was used to pay legal fees related to
the wetlands convictions and support operations. As a result of the debt
curtailments, the FDIC loan was paid off and NationsBank has a first lien on
commercial properties in St. Charles which will have the effect of improving
the Company's cash flow as the release prices under the NationsBank agreement
are less than that of the FDIC.
In addition to its traditional sources of liquidity, the Company has
retained a consultant to pursue a capital transaction.
<PAGE>
<PAGE>30
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In 1994, the Company filed two claims against Charles County, Maryland and
its County Commissioners in the Maryland Tax Court, a state administrative
agency, seeking compensation for school sites that it previously had deeded to
the County. The actions seek to enforce an agreement settling litigation
between the parties that was entered into in 1989 and also rights pursuant to
Charles County law. Under the terms of the settlement agreement, the County
agreed to credit the Company for school sites contributed and also agreed to
repay to the Company any excess school impact fees paid. The Company seeks
$5.5 million, equal to the fair market value of the school sites. The
Company's claims have not yet been decided by the Tax Court.
In a separate proceeding, the Company filed suit in 1990 against Charles
County and the County Commissioners in the Circuit Court for Charles County to
enforce a provision of the same settlement agreement that required the County
to conduct an appropriate water and sewer connection fee study as the basis on
which to set such fees for the St. Charles Communities. On June 22, 1992,
judgment was rendered in favor of the Company. The judgment requires the
County to conduct the appropriate water and sewer connection fee study. In
1995, the Court of Special Appeals of Maryland affirmed the judgment. The
County has indicated that it is now in the course of conducting a water and
sewer connection fee study. The adequacy of the study will be subject to
review by the Company and, if necessary, the courts.
In March 1990, the Company received a notice (the "Notice") from the U.S.
Army Corps of Engineers (the "Corps") asserting that unauthorized fill
materials had been placed in portions of an approximately five acre parcel in
Charles County, Maryland (the "Site") owned by the Company and claimed by the
Corps to constitute wetlands subject to regulation pursuant to the Clean Water
Act. Following receipt of the Notice, the Company ceased development of the
Site and remediated a portion of the Site in accordance with instructions
issued by the Corps. The Company also commenced discussions with the Corps
regarding mitigation plans that would preserve some commercial value for the
Site and filed suit against the Corps claiming that a prohibition of
development on the entire Site would constitute a governmental taking for which
the Company would be entitled to compensation.
In November 1993, the Company believed that it had an agreement in
principle with the Corps that would settle the Company's claim and permit
commercial development of a portion of the Site. However, in early 1994, the
Company became aware that this matter had been referred to the U.S. Attorney
for the District of Maryland. After conducting a lengthy investigation of the
Company's wetlands practices in St. Charles, in October 1995 a grand jury
convened by the U.S. Attorney charged that certain of the Company's practices
with respect to four parcels, including the Site, constituted criminal
violations of Section 404 of the Clean Water Act. The indictment charged each
of IGC, its affiliate, St. Charles Associates, L.P. ("SCA"), and the Company's
Chairman, James J. Wilson. During the course of the U.S. Attorney's
investigation, the Corps issued additional violation notices relating to
filling portions of other parcels claimed by the Corps to be protected wetlands
and in October 1995 filed a civil action in the U.S. District Court for the
District of Maryland charging the Company and Mr. Wilson with violations of the
Clean Water Act. Of the approximately 4,400 acres developed by the Company in
St. Charles, approximately 70 acres are the subject of the civil and criminal
charges.
<PAGE>31
On February 29, 1996, each of IGC, SCA and Mr. Wilson were convicted on
four counts of felony violations of Section 404 of the Clean Water Act. On
June 17, 1996 the Court sentenced IGC and SCA to probation for five years and
imposed fines of $2,000,000 on IGC and $1,000,000 on SCA. The fines are
payable in unspecified installments within a period of two years as directed by
the U.S. Probation Officer. The Court also ordered IGC and SCA to comply with
a Wetlands Restitution/Mitigation Plan as directed by the Corps and the U.S.
Probation Officer. The definitive plan has not been presented to the Company,
however the Company expects that the plan will involve a conservation easement
covering between 40 and 100 acres in the vicinity of the St. Charles Towne
Center and other remediation activities requiring estimated costs of $2
million. The Court sentenced Mr. Wilson to a period of twenty-one months
incarceration and imposed a $1,000,000 fine payable in six months. He was also
placed on supervised release for one year and ordered to comply with the
Wetlands Restitution/Mitigation Plan. The Court denied Mr. Wilson's request
for bail pending appeal and ordered him to report to a federal correctional
facility within sixty days. Following the conviction the U.S. Environmental
Protection Agency ("EPA") commenced a suspension and debarment proceeding
against IGC and Mr. Wilson. EPA has expressed willingness to settle the
proceeding without suspension or debarment under an agreement requiring the
Company and Mr.Wilson to implement an environmental law compliance program, the
terms of which are being negotiated.
Management believes the Company and Mr. Wilson have many strong arguments
to present on appeal of the criminal convictions. Promptly following
sentencing, the Company and Mr. Wilson filed notices of appeal with the United
States Court of Appeals for the Fourth Circuit. On July 16, 1996 a three judge
panel of the Fourth Circuit unanimously granted Mr. Wilson's motion for bail
pending appeal. The Fourth Circuit has set an initial briefing schedule during
the early Fall but has not scheduled oral argument. The U.S. Attorney has
agreed to suspend prosecution of the civil action until the Fourth Circuit has
ruled on the appeals.
ITEM 2. MATERIAL MODIFICATIONS OF RIGHTS OF REGISTRANT'S SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As a result of the wetlands litigation verdict, Signet Bank issued a
notice of default on its loan. The Company agreed to meet certain terms and
conditions as specified by the bank in exchange for forbearance of the default.
One of these terms required a mandatory principal payment on July 15, 1996 that
the Company has not fully met. Signet Bank issued another notice of default.
The outstanding loan balance as of June 30, 1996 was $1,836,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
<PAGE>
<PAGE>32
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Securities and Exchange Commission Section
601 of Regulation S-K.
Exhibit
No. Description of Exhibit Reference
- ------- ----------------------------------------- --------------------------
10(a) Agreement of Purchase and Sale between Filed herewith
Interstate Business Corporation and
Interstate General Company L.P. dated
June 12, 1996 for the Partnership
Interests in:
Wakefield Terrace Associates
Wakefield Third Age Associates
Palmer Apartments Associates
Headen House Associates Limited Partnership
10(b) Second Amendment to Employment Agreement Filed herewith
between Interstate General Company L.P.
and Edwin L. Kelly dated May 20, 1994
10(c) Agreement of Purchase and Sale between Filed herewith
A.P.S. Associates Limited Partnership,
Interstate General Company L.P. and
St. Charles Associates L.P. dated
April 3, 1996
10(d) Agreement between H&C Trading, LLC and Filed herewith
Interstate General Company L.P. dated
August 6, 1996.
(b) None.
<PAGE>
<PAGE>33
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERSTATE GENERAL COMPANY L.P.
-------------------------------
(Registrant)
By: Interstate General Management
Corporation
Managing General Partner
Dated: August 14, 1996 By: /s/ James J. Wilson
--------------- -----------------------------
James J. Wilson
Chairman, President and Chief
Executive Officer
Dated: August 14, 1996 By: /s/ John E. Hans
--------------- -----------------------------
John E. Hans
Senior Vice President and
Chief Financial Officer
<PAGE>
<PAGE>34
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
10(a) Agreement of Purchase and Sale between Interstate Business
Corporation and Interstate General Company L.P. dated June 12,
1996 for the Partnership Interests in:
Wakefield Terrace Associates
Wakefield Third Age Associates
Palmer Apartments Associates
Headen House Associates Limited Partnership
10(b) Second Amendment to Employment Agreement between Interstate
General Company L.P. and Edwin L. Kelly dated May 20, 1994
10(c) Agreement of Purchase and Sale between A.P.S. Associates Limited
Partnership, Interstate General Company L.P. and St. Charles
Associates L.P. dated April 3, 1996.
10(d) Agreement between H&C Trading, LLC and Interstate General
Company L.P. dated August 6, 1996.
<PAGE>1
EXHIBIT 10(a)
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT is made as of the 12th day of June, 1996, by and between
Seller and Purchaser (such parties being hereinafter defined).
ARTICLE I
Definitions
As used in this Agreement, unless the context otherwise requires or it is
otherwise herein expressly provided, the following terms shall have the
following meanings:
1.1 IBC PROPERTY:
(a) A one and one tenth percent (1.1%) share of the
limited partnership interests in Wakefield
Terrace Associates limited partnership, a
Maryland limited partnership;
(b) A one and one tenth percent (1.1%) share of the
limited partnership interests in Wakefield Third
Age Associates limited partnership, a Maryland
limited partnership;
(c) A one and one tenth percent (1.1%) share of the
limited partnership interests in Palmer
Apartments Associates limited partnership, a
Maryland limited partnership;
(d) A one and one tenth percent (1.1%) share of the
limited partnership interests in Headen House
Associates limited partnership, a Maryland
limited partnership;
1.2 PURCHASER: Interstate General Company, L.P., a Delaware limited
partnership, its assignees, designees or nominees,
with an address at:
222 Smallwood Village Center
St. Charles, MD 20602
1.3 SELLER: Interstate Business Corporation, a corporation
organized and existing under the laws of Delaware,
with an address at:
222 Smallwood Village Center
St. Charles, MD 20602
1.4 SETTLEMENT: The consummation of the sale and purchase provided for
in this Agreement to occur as provided in Article VII
hereof.
1.5 IBC PARTNERSHIPS: Each of Wakefield Terrace Associates Limited
Partnership, Wakefield Third Age Associates Limited
Partnership, Palmer Apartments Associates Limited
Partnership, Headen House Associates Limited
Partnership.
<PAGE>2
1.6 IBC PARTNERSHIP
AGREEMENTS: Each of the Partnership Agreements under which each of
the IBC Partnerships is currently organized.
1.7 EXISTING IBC
INDEBTEDNESS: The outstanding principal and accrued interest payable
by Seller to Purchaser as of the date of the
Settlement in the amount of $69,502.00 identified on
Exhibit A hereto.
1.8 PURCHASE PRICE: $69,502.00
ARTICLE II
Sale and Purchase
2.1 Purchase. For and in consideration of the mutual promises,
covenants, representations, warranties, and agreements contained herein:
(a) Seller shall sell and convey and Purchaser shall purchase the IBC
Property; and
(b) in consideration therefor, Purchaser shall release and discharge
that portion of the Existing IBC Indebtedness equal to the Purchase Price.
2.2 Effect of Settlement on Existing IBC Indebtedness. Subject to the
condition that Seller complies with all of its obligations hereunder, upon
Settlement, the Existing IBC Indebtedness shall be discharged to the extent of
the Purchase Price.
ARTICLE III
Representations and Warranties of Seller
Seller represents and warrants to Purchaser that as of the date of the
execution of this Agreement, and as of the date of Settlement:
3.1 Legal Status. Seller is a corporation organized, validly existing,
and in good standing under the laws of Delaware and subject to the performance
by Seller of its obligations under Section 6.1 hereof, (i) Seller has the power
to enter into this Agreement and to consummate the transactions provided for
herein; (ii) the undersigned officers of Seller have full power, authority and
legal right to enter into this Agreement on behalf of Seller; and (iii) no
other party has any right, title or interest in any of the IBC Property.
3.2 Compliance with Other Instruments, etc. Neither the entering into of
this Agreement nor the consummation of the transactions contemplated hereby
will constitute or result in a violation or breach by Seller of its Articles of
Incorporation, by-laws and other corporate documents, or, subject to the
performance by Seller of its obligations under Section 6.1 hereof, of any
contract or other instrument to which it is a party, or to which it is subject
or by which it or any of its assets or properties may be bound.
3.3 Compliance with Laws, etc. Neither the entering into of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in a violation or breach by Seller of any judgment, order,
writ, injunction or decree issued against or imposed upon it, or result,
<PAGE>3
subject to the performance by Seller of its obligations under Section 6.1
hereof, in a violation of any applicable law, order, rule or regulation of any
governmental authority. There is no action, suit, proceeding or investigation
pending in any court or before or by any federal, district, county, or
municipal department, commission, board, bureau, agency or other governmental
instrumentality. which would prevent the consummation of the transactions
contemplated by this Agreement or which would become a cloud on the title to
the IBC Property or any portion thereof or which questions the validity or
enforceability of the transactions contemplated by this Agreement or any action
taken pursuant hereto. No approval, consent, order or authorization of, or
designation, registration or filing (other than for recording purposes) with
any governmental authority is required in connection with the due and valid
execution and delivery of this Agreement by Seller and its compliance with the
provisions hereof and the consummation of the transactions contemplated hereby
except as provided in Section 6.1 hereof.
3.4 The IBC Property.
(a) The percentages of partnership interests of each of the IBC
Partnerships and the persons or entities owning the same are, and shall be
immediately prior to Settlement, as set forth on Exhibit B hereto.
(b) Seller shall have delivered to the Purchaser at or prior to
Settlement copies of all of the documents, agreements and other items and
materials required to be delivered by Seller hereunder and there have not been
and will not be pending as of Settlement any changes thereto or amendments
thereof without the prior written approval of Purchaser.
(c) The partnership interests as shown on Exhibit B are fully paid
and non-assessable. Seller has good and marketable title to the IBC Property
and, subject to performance by Seller of its obligations under Section 6.1
hereof, has the sole and entire right, power, capacity and authority to
(i) enter into this Agreement and to sell, deliver, convey, assign and transfer
all right, title and interest in and to the IBC Property, free and clear of any
option, call, contract, commitment, demand, lien, claim, pledge, charge,
security interest, or encumbrance whatsoever, and (ii) to vest in Purchaser
good and marketable title to the IBC Property, free and clear of all liens,
encumbrances and adverse claims whatsoever. Seller has not granted any option
or otherwise made any commitment to any person to sell, exchange, transfer or
dispose of any of the IBC Property, other than as set forth in this Agreement.
(d) Except as set forth in Schedule 3.4(d) hereto, there will not be
pending or threatened on the Settlement date any litigation, proceeding or
investigation which may result in any material adverse change in the financial
condition, assets, liabilities or business of the Seller, or in the final
valuation of the IBC Property, and Seller does not know of any basis for any
such litigation, proceeding or investigation.
(e) To the best of Seller's knowledge, Seller is not in violation of
any order, judgment, law, statute, regulation or ordinance.
(f) Neither the execution and delivery of this Agreement nor the
sale of the IBC Property hereunder will, subject to the performance by Seller
of its obligations under Section 6.1 hereof, violate any provision of, or
result in the acceleration of any obligation under, any security, mortgage,
note, debenture, loan, lease, agreement, instrument, order, judgment or decree
to which either the Seller or any of the IBC Partnerships is a party or by
which either the Sellers or any of the IBC Partnerships is bound.
<PAGE>4
(g) The board of directors of Seller has duly approved the
transactions contemplated by this Agreement and has authorized the execution
and delivery of this Agreement by the officers of Seller who are executing this
Agreement and have all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions provided for herein.
(h) There are no actions or proceedings pending or threatened to
liquidate, reorganize or dissolve the Seller or any of the IBC Partnerships.
(i) Between the date hereof and Settlement, Purchaser or its agents
shall be given complete and unlimited access to the records of Seller relating
to the IBC Property.
(j) All federal, state and local income, withholding, sales,
franchise and other taxes due or payable by the Seller with respect to the IBC
Property have been paid by the Seller and all returns due with respect thereto
have been filed. Seller does hereby indemnify and hold harmless Purchaser
against any loss, cost, damage or expense arising from nonpayment of any taxes
whatsoever owed by the Seller or which may be assessed against the Seller for
periods prior to Settlement.
(k) No representation, warranty or covenant by Seller or in this
Agreement, or any statement, certificate or schedule made, furnished or to be
furnished to Purchaser pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to make
the statements contained therein not misleading.
(l) Notwithstanding any investigation or audit conducted before or
after Settlement, and notwithstanding any facts or circumstances which any
party may have obtained or discovered as a result of such investigation, audit
or otherwise, the parties shall be entitled to rely upon the representations
and warranties set forth herein.
3.5 Violations. To the best of Seller's knowledge, there are no
violations of, and Seller has received no notice or other record of any
violations of, any federal, district or municipal laws, ordinances, orders,
regulations and requirements affecting the IBC Property or any portion thereof.
3.6 Full Disclosure. Seller knows of no materially adverse fact
affecting or threatening to affect the IBC Property which has not been
disclosed to Purchaser in this Agreement.
3.7 Completeness of Representations. No representation or warranty made
by Seller in this Agreement or as provided herein contains any untrue statement
of a material fact or omits to state any material fact necessary to make the
statements contained herein not false or misleading.
ARTICLE IV
Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller that as of the date of the
execution of this Agreement, and as of the date of Settlement:
4.1 Legal Status. (i) Purchaser is a limited partnership organized,
validly existing, and in good standing under the laws of Delaware;
<PAGE>5
(ii) Purchaser has the power to enter into this Agreement and to perform its
obligations as provided for herein; and (iii) the undersigned have full power,
authority and legal right to enter into this Agreement on behalf of Purchaser,
and to consummate the transaction provided for herein.
4.2 Compliance with Other Instruments, etc. Neither the entering into of
this Agreement nor the consummation of the transactions contemplated hereby
will constitute or result in a violation or breach by Purchaser of its limited
partnership agreement or other corporate documents, or, subject to the
performance by Seller of its obligations under Section 6.1 hereof, of any
contract or other instrument to which it is a party, or to which it is subject
or by which it or any of its assets or properties may be bound.
4.3 Compliance with Laws, etc. Neither the entering into of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in a violation or breach by Purchaser of any judgment,
order, writ, injunction or decree issued against or imposed upon it, or will
result, subject to the performance by Seller of its obligation under Section
6.1 hereof, in a violation of any applicable law, order, rule or regulation of
any governmental authority. Except as set forth in Schedule 3.4(d) hereto,
there is no action, suit, proceeding or investigation pending in any court or
before or by any federal, district, county, or municipal department,
commission, board, bureau, agency or other governmental instrumentality which
would prevent the consummation of the transactions contemplated by this
Agreement or which questions the validity or enforceability of the transaction
contemplated by this Agreement or any action taken pursuant hereto. No
approval, consent, order or authorization of, or designation, registration or
filing (other than for recording purposes) with any governmental authority is
required in connection with the due and valid execution and delivery of this
Agreement by Purchaser and its compliance with the provisions hereof and
consummation of the transactions contemplated hereby except as provided in
Section 6.1 hereof.
4.4 No violation. Except as set forth in Schedule 3.4(d) hereto,
the Purchaser is not in violation of any order, judgment, law, statute,
regulation or ordinance.
4.5 Authorization. The general partners of Purchaser have duly approved
the transactions contemplated by this Agreement and have authorized the
execution and delivery of this Agreement by the undersigned on behalf of
Purchaser.
4.6 No Liquidation. There are no actions or proceedings pending or
threatened to liquidate, reorganize or dissolve the Purchaser.
ARTICLE V
Survival of Representations and Warranties; Further Assurances
5.1 Survival and Merger. The representations and warranties set forth in
Article III and IV of this Agreement shall be deemed to have been made again on
and as of the date of Settlement and shall then be true and correct and shall
remain operative and shall survive the Settlement and the execution, delivery
and recordation of the Instruments of Conveyance and shall not be merged
therein. Purchaser shall have the right to exercise any and all legal and
equitable rights and remedies for any breach of Seller's representations and
warranties hereunder which are disclosed after Settlement.
<PAGE>6
5.2 Further assurances; Hold Harmless.
(a) Seller agrees that, upon request of Purchaser, it shall (or
direct its officers and employees to, if applicable) execute and deliver all
documents, and take any other actions which may in the reasonable opinion of
Purchaser be necessary or desirable to protect or record the right or title of
Purchaser to the IBC Property, or to aid in the prosecution or defense of any
rights arising therefrom, all without further consideration.
(b) Seller agrees to indemnify and hold harmless Purchaser at all
times after the Settlement against and with respect to: (i) any breach by
Seller of any of its obligations, representations or warranties hereunder,
(ii) any cost, expense or damages incurred by Purchaser in connection with
perfecting its right and title to the IBC Property, (iii) any claim asserted by
any of the IBC Partnerships against Purchaser for any unsatisfied obligation of
Seller to any such IBC Partnership, (iv) any failure to obtain the consent or
the approval in Section 6.1 hereof or (vi) any claim asserted by HUD (defined
below), other government agency or any lending institution arising from
consummation of the transactions contemplated hereby.
ARTICLE VI
Covenants and Conditions of Settlement
The obligations of the Purchaser hereunder shall be subject to the
fulfillment of the following conditions, and the Seller agrees to fulfill such
conditions:
6.1 Instruments of Conveyance. Seller shall execute and deliver to the
Purchaser appropriate assignments of the IBC Property. Such assignments shall
be substantially in form and substance equivalent to the Assignment and
Assumption Agreements attached hereto as Exhibit C. The assignments
contemplated herein shall be expressly subject, if required, to the approval of
the U.S. Department of Housing and Urban Development ("HUD), or other
governmental agency or lending institution (provided, however, that such
approval need not be received prior to Settlement hereunder), and shall, as
required, require that the assignee thereunder expressly assume any applicable
Regulatory Agreement or similar instrument. Seller shall obtain all such
approvals, if required, by August 12, 1996.
6.2 Property Information. Promptly upon execution and delivery of this
Agreement, Seller shall deliver to Purchaser such information as is requested
by Purchaser with respect to the IBC Property.
6.3 Original Documents. At Settlement, Seller shall deliver to Purchaser
all original documents pertaining to the IBC Property which it has in its
possession.
6.4 Certification. In the event Seller shall have complied with any of
the foregoing provisions relating to furnishing information to Purchaser
relating to the IBC Property, a certification by Seller that such documentation
is true, correct, and complete as of the date of Settlement shall be deemed to
satisfy such requirements.
6.5 Satisfaction of Liens. Any and all liens, of any type whatsoever,
with respect to the IBC Property, or as to which it may be subject, shall have
been satisfied or otherwise released of record by Seller, prior to Settlement,
<PAGE>7
or provision satisfactory to Purchaser shall have been made by Seller for its
full and complete release.
6.6 Settlement Representations and Warranties. At Settlement, each of
the representations and warranties of the Seller contained in this Agreement is
deemed to have been made again on and as at the Settlement and shall be true
and correct in all material respects as at the Settlement. Seller shall
indemnify and hold harmless Purchaser from and against all loss, damages, costs
or expenses (including reasonable attorney's fees) resulting from or in any way
related to any breach thereof.
6.7 Purchaser Consents. To the extent required under the IBC Partnership
Agreements, but subject to performance by Seller of its obligations under
Section 6.1 hereof, upon Settlement, Purchaser, in its capacity a general
partner of the IBC Partnerships (or, as the case may be, in its capacity as
general partner of Interstate General Properties Limited Partnership S.E.
which, in turn, is general partner of certain of the IBC Partnerships) shall be
deemed hereby to have consented to the transfers of the IBC Property.
ARTICLE VII
Settlement
7.1 Settlement. Settlement shall take place in the office of the
Purchaser's designated legal counsel at ________ on the day established by this
Agreement. Settlement hereunder shall occur no later than June 12, 1996.
ARTICLE VIII
Default and Termination
8.1 Purchaser's Default. If the transaction herein contemplated shall
not be consummated on the date of Settlement because of the Purchaser's
default, then Seller may exercise any and all legal and equitable rights or
remedies available to it, including, without limitation, the right to specific
performance and/or recovery of damages.
8.2 Seller's Default. If the transactions herein contemplated shall not
be consummated on the date of Settlement because of Seller's default, then
Purchaser may exercise any and all legal and equitable rights or remedies
available to it, including, without limitation, the right to specific
performance and/or recovery of damages.
ARTICLE IX
Recision and Reformation
9.1 Reformation in Certain Events. If (i) the approval referred to in
Section 6.1 hereof with respect to any portion of the IBC Property is not
obtained if required or (ii) in the opinion of counsel to Purchaser, any such
approvals that are obtained are insufficient to vest in Purchaser free and
clear title to any portion of the IBC Property, or (iii) HUD or any
governmental agency or lending institution commences or threatens to commence a
legal proceeding arising from the consummation of the transactions contemplated
<PAGE>8
hereby in which HUD or such other agency or institution either asserts rights
in any portion of the IBC Property or claims which, in the reasonable opinion
of Purchaser, may materially reduce the value of any portion of the IBC
Property (any such event being referred to herein as a "Transfer Defect"), then
Purchaser, at its option, may rescind to purchase the sale of such portion of
the IBC Property. Promptly upon receipt of notice of such recision, the
Existing IBC Indebtedness shall be reinstated in the principal amount equal to
the Appraised Value of such portion of the IBC Property.
9.2 Recision. If, as a result of one or more Transfer Defects, Purchaser
determines that it is unable to obtain substantially all of the benefits of
ownership of the IBC Property or otherwise is deprived of any material
inducement to its willingness to enter into and perform this Agreement,
Purchaser, by notice to Seller, may rescind the purchase and sale of the IBC
Property. In such event the Existing IBC Indebtedness shall no longer be
deemed to be discharged and Seller shall remain obligated to pay the Existing
IBC Indebtedness and any interest accrued thereon from the date of Settlement.
9.3 Procedures. Upon any recision in accordance with Section 9.1 or 9.2
hereof, Purchaser and Seller shall execute any such documents and take any such
action as shall be determined by either to be necessary or desirable to restore
the benefits of ownership of any affected portion of the IBC Property to the
status quo immediately preceding the Settlement. Seller shall bear all costs
and expenses of any such recision.
ARTICLE X
General Provisions
10.1 Modifications and Waivers. No modification, waiver, amendment,
discharge or change of this Agreement, except as otherwise provided herein,
shall be valid unless the same is in writing and signed by the party against
which the enforcement of such modification, waiver, amendment, discharge or
change is sought. This Agreement contains the entire agreement between the
parties relating to the transactions contemplated hereby, and all prior or
contemporaneous agreements, understandings, representations and statements,
oral or written, are merged herein.
10.2 Successors and Assigns. All terms of this Agreement shall be binding
upon, and inure to the benefit of and be enforceable by the parties hereto and
their respective legal representatives, successors and assigns.
10.3 Governing Law. This Agreement is intended to be performed in the
State of Maryland and shall be construed and enforced in accordance with the
internal laws thereof.
10.4 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, or by recognized air courier, or if sent by registered or
certified mail, return receipt requested, and postage prepaid, to a party at
its address set forth above, or at such other address as such party may specify
from time to time by written notice to the other party.
10.5 Exhibits. All exhibits and schedules referred to herein and attached
hereto are incorporated by reference into this Agreement.
<PAGE>9
10.6 Severability. If any provision of this Agreement or any application
thereof shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions hereof and
any other application thereof shall not in any way be affected or impaired, and
such remaining provisions shall continue in full force and effect.
10.7 Construction. Each party hereto and its counsel has reviewed and
revised (or requested revisions of) this Agreement, and the normal rule of
construction that any ambiguities are to be resolved against the drafting party
shall not be applicable in the construction and interpretation of this
Agreement.
10.8 Time Periods. Any time period hereunder which expires on, or any
date hereunder which occurs on, a Saturday, Sunday or legal United States
holiday, shall be deemed to be postponed to the next business day. The first
day of any time period hereunder which runs "from" or "after" a given day shall
be deemed to occur on the day subsequent to that given day.
10.9 Captions. The captions of this Agreement are inserted for
convenience of reference only and do not define, describe or limit the scope or
the intent of this Agreement or any term hereof.
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.11 Remedies Cumulative. Notwithstanding anything else herein to
the contrary, the remedies of each party provided for herein shall be
cumulative. The existence of any one remedy shall not impair the right of any
party to seek and obtain any other remedy available to such party hereunder or
otherwise under applicable law or equity.
10.12 Broker's Fees. Purchaser and Seller each hereby warrant and
represent to the each other that they have not dealt with any broker or agent
in connection with the transactions contemplated herein. Each party hereto
hereby indemnifies and holds harmless the other party from and against any and
all claims, demands, causes of action, loss, damage, liabilities, costs and
expenses (including reasonable attorney's fees) arising from any inaccuracy or
breach of the foregoing warranty and representation.
10.13 Expenses. Seller shall bear all costs of the transactions
contemplated by this Agreement including the cost of the Appraisals, except for
the fees and expenses of Purchaser's counsel in negotiating this Agreement,
which shall be borne by Purchaser.
<PAGE>
<PAGE>10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
SELLER:
ATTEST INTERSTATE BUSINESS CORPORATION
/s/ Paula S. Biggs By /s/ J. Michael Wilson
_____________________________ ___________________________________
Name Paula S. Biggs Name J. Michael Wilson
------------------------ -----------------------------------
Its [Assistant] Secretary Its President
-----------------------------------
PURCHASER:
INTERSTATE GENERAL COMPANY, L.P.
ATTEST By: Interstate General Management
Corporation, general partner
/s/ Steven Rigelsky By /s/ John E. Hans
- ----------------------------- ----------------------------------
Name Steven Rigelsky Name John E. Hans
------------------------ ----------------------------------
Its [Vice President] Its Senior Vice President
----------------------------------
<PAGE>
<PAGE>11
Exhibit A
APPRAISED VALUE OF INTERSTATE BUSINESS CORP'S PARTNERSHIP INTEREST
Wakefield Wakefield
Terrace Third Age Palmer House Total
--------- --------- ------- ------- --------
Estimated fair market value $ 7,600 $ 3,600 $ 8,000 $10,400 $ 29,600
Outstanding mortgage (5,177) (2,415) (4,394) (4,776) (16,762)
------- ------- ------- ------- --------
Cash available for distribution $ 2,423 $ 1,185 $ 3,606 $ 5,624 $ 12,838
======= ======= ======= ======= ========
Priority of distribution
Working capital loans IGC $ 6 $ 3 $ 6 $ 7 $ 22
IBC --
Unrecoverable receivable IGC --
IBC --
Long term receivables IGC 105 89 391 334 919
IBC --
Unrecovered capital IGC --
IBC 310 68 -- -- 378
Other 298 65 363
Distributions IGC 852 480 1,605 2,642 5,579
IBC 435 245 818 1,347 2,845
Other 417 235 786 1,294 2,732
------- ------- ------- ------- --------
$ 2,423 $ 1,185 $ 3,606 $ 5,624 $ 12,838
======= ======= ======= ======= ========
Recap:
IGC
Working capital loans $ 6 $ 4 $ 6 $ 7 $ 23
Working capital loans
unrecoverable --
Long term receivables 105 89 391 334 919
Unrecovered capital -- -- -- -- --
Distributions 852 479 1,605 2,642 5,578
JJW share (17) (10) (32) (53) (112)
------- ------- ------- ------- --------
$ 946 $ 562 $ 1,970 $ 2,930 $ 6,408
======= ======= ======= ======= ========
IBC
Working capital loans -- -- -- -- --
Working capital loans
unrecoverable -- -- -- -- --
Long term receivables -- -- -- -- --
Unrecovered capital 310 68 -- -- 378
Distributions 434 245 818 1,347 2,844
------- ------- ------- ------- --------
$ 744 $ 313 $ 818 $ 1,347 $ 3,222
======= ======= ======= ======= ========
97.8% 97.8% 97.8% 97.8% 49.9%
$ 728 $ 306 $ 801 $1,319 $ 3,153
Balance $ $ 16 $ 7 $ 18 $ 29 $ 69
% 1.1% 1.1% 1.1% 1.1%
<PAGE>12
Exhibit B
INTERSTATE BUSINESS CORPORATION
LIMITED PARTNERSHIP OWNERSHIP INTERESTS
Partnership Ownership
Wakefield Terrace Associates Limited Partnership 1.1%
Wakefield Third Age Associates Limited Partnership 1.1%
Palmer Apartments Associates Limited Partnership 1.1%
Headen House Associates Limited Partnership 1.1%
<PAGE>
<PAGE>13
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
AND AMENDMENT TO THE AGREEMENT OF
LIMITED PARTNERSHIP OF
WAKEFIELD TERRACE ASSOCIATES
This Agreement is made as of the 12th day of June, 1996, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC") and
Interstate General Properties Limited Partnership S.E., a Maryland Limited
Partnership ("IGP").
WHEREAS, IGP is the sole general partner of Wakefield Terrace
Associates, a Maryland Limited Partnership, (the "Partnership"); and
WHEREAS, IBC is the successor in interest to King Charles, Inc. and
has previously assigned to IGC a 49.9% share of the limited partnership
interests in the Partnership; and
WHEREAS, IBC wishes to assign its remaining 1.1% share of the limited
partnership interests in the Partnership to IGC and IGP wishes to amend the
Agreement of Limited Partnership of the Partnership as amended (the
"Partnership Agreement") to reflect the assignment of limited partnership
interest from IBC to IGC.
W I T N E S S E T H :
In consideration of the mutual promises of the parties hereto and of
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending legally to be bound hereby
agree as follows:
1. Assignment. IBC does hereby sell, transfer, assign, and convey
to IGC all of its right, title and interest in and to a 1.1% share of the
limited partnership interests including but not limited to IBC's interest in
the capital or income of the Partnership attributable to that 1.1% share of the
limited partnership interests in the Partnership.
2. Acceptance of Assignment. IGC does hereby accept the assignment
as provided for in Section 1.
3. Amendment of Partnership Agreement. The Partnership Agreement
is hereby amended to substitute IGC for IBC as the owner of a 1.1% share of the
limited partnership interests in the Partnership.
4. Effective Date. This agreement shall be effective as of
June 12, 1996, subject to the receipt of final HUD approval of the assignment
of the partnership interest, being conveyed hereby, to the extent HUD
determines that its approval is required. IBC will, if necessary, obtain the
final HUD consent by August 12, 1996. In the event of any Partnership
distributions, IBC will make payments to IGC in amounts necessary to afford to
IGC economic benefits equivalent to full ownership of the partnership interests
being conveyed hereby. This assignment is given pursuant to and is subject to
the provisions of the Agreement of Purchase and Sale of even date herewith
between IGC and IBC (the "Sales Agreement").
<PAGE>14
5. Representations and Warranties of the IBC.
(a) IBC represents and warrants that it is a corporation in
good standing, duly organized, and existing under the laws of the State of
Delaware, that it has the lawful authority to enter into and perform this
agreement and by proper action has duly authorized the execution, delivery and
performance of this agreement, and that upon execution and delivery of this
agreement by IBC, IGC, and IGP, this agreement will be valid and binding on IBC
and enforceable against IBC in accordance with its terms. IBC also represents
and warrants that it has made no assignment or attempted assignment of the 1.1%
share of the limited partnership interests in the Partnership other than the
assignment contemplated by this agreement and that, on June 12, 1996, provided
this agreement has been executed by IBC, IGC, and IGP good and marketable title
to the 1.1% share of the limited partnership interests in the Partnership will
be assigned in accordance with the terms of this agreement to IGC.
(b) IGC represents and warrants that it is a limited
partnership in good standing, duly organized, and existing under the laws of
the State of Delaware, that it has the lawful authority to enter into and
perform this agreement and by proper action has duly authorized the execution
and delivery of this agreement, and that upon execution and delivery of this
agreement by IBC, IGC, and IGP this agreement will be valid and binding on IGC
and enforceable against IGC in accordance with its terms.
(c) IGP represents and warrants that it is a limited
partnership in good standing, duly organized and existing under the laws of the
State of Maryland, that it has the lawful authority to enter into and perform
this Agreement and by proper action has duly authorized the execution and
delivery of this Agreement, and upon execution and delivery of this Agreement,
by IBC, IGC and IGP, this Agreement will be valid and binding on IGP and
enforceable against IGP in accordance with its terms.
6. Governing Law. This agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
7. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute a single agreement.
8. Headings. The headings in this agreement are for convenience
only and do not constitute a part of the agreement.
9. Agreement Entire. Except as provided in the Sales Agreement,
this agreement sets forth all (and it is intended by the parties hereto to be
an integration of all) of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
matters contained herein, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, expressed or
implied, among them other than as set forth herein.
10. Binding Effect. This agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and assigns.
Any conflict between this agreement and the Sales Agreement shall be resolved
in favor of the Sales Agreement.
11. Notices. All notices pertaining to the matters covered by this
agreement shall be sent by certified or registered mail, with return receipt
<PAGE>15
requested, and first class postage prepaid, (1) if to IGC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602, (2) if to IBC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. (3) if to IGP, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. Notices shall be deemed given on
the date they are mailed.
12. Gender and Number. Use of any gender herein shall be deemed to
be or include the other genders and the use of the singular shall be deemed to
be or include the plural (and vice versa) where appropriate.
13. Severability. If any provisions of this agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid and unenforceable, the remainder of this agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, and shall be enforced.
IN WITNESS WHEREOF the parties hereto have signed this agreement
under seal as of the 12th day of June, 1996.
Interstate Business Corporation
Attest /s/ Paula S. Biggs By: /s/ J. Michael Wilson
------------------ ----------------------------
Name: Paula S. Biggs Name: J. Michael Wilson
------------------ ----------------------------
Its: Asst. Secretary Its: President
------------------ -----------------------------
Interstate General Company, L.P.
By: Interstate General
Management Corporation
General Partner
Attest /s/ Steven Rigelsky By: /s/ John E. Hans
------------------- ---------------------------
Name: Steven Rigelsky Name: John E. Hans
------------------- ---------------------------
Its: Vice President Its: Senior Vice President
------------------- ---------------------------
General Partner:
INTERSTATE GENERAL PROPERTIES
LIMITED PARTNERSHIP S.E.
By: INTERSTATE GENERAL COMPANY L.P.
General Partner
By: INTERSTATE GENERAL
MANAGEMENT CORPORATION
General Partner
Attest /s/ Steven Rigelsky By: /s/ John E. Hans
------------------- ---------------------------
Name: Steven Rigelsky Name: John E. Hans
------------------- ---------------------------
Its: Vice President Its: Senior Vice President
------------------- ---------------------------
<PAGE>16
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
AND AMENDMENT TO THE AGREEMENT OF
LIMITED PARTNERSHIP OF
WAKEFIELD THIRD AGE ASSOCIATES
This Agreement is made as of the 12th day of June, 1996, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC") and
Interstate General Properties Limited Partnership S.E., a Maryland Limited
Partnership ("IGP").
WHEREAS, IGP is the sole general partner of Wakefield Third Age
Associates, a Maryland Limited Partnership, (the "Partnership"); and
WHEREAS, IBC is the successor in interest to King Charles, Inc. and
has previously assigned to IGC a 49.9% share of the limited partnership
interests in the Partnership; and
WHEREAS, IBC wishes to assign the remaining 1.1% share of the limited
partnership interests in the Partnership to IGC and IGP wishes to amend the
Partnership Agreement of the Partnership (the "Partnership Agreement") to
reflect the assignment of limited partnership interest from IBC to IGC.
W I T N E S S E T H :
In consideration of the mutual promises of the parties hereto and of
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending legally to be bound hereby
agree as follows:
1. Assignment. IBC does hereby sell, transfer, assign, and convey
to IGC all of its right, title and interest in and to a 1.1% share of the
limited partnership interests including but not limited to IBC's interest in
the capital or income of the Partnership attributable to that 1.1% share of the
limited partnership interests in the Partnership.
2. Acceptance of Assignment. IGC does hereby accept the assignment
as provided for in Section 1.
3. Amendment of Partnership Agreement. The Partnership Agreement
is hereby amended to substitute IGC for IBC as the owner of a 1.1% share of the
limited partnership interests in the Partnership.
4. Effective Date. This agreement shall be effective as of
June 12, 1996, subject to the receipt of final HUD approval of the assignment
of the partnership interest, being conveyed hereby, to the extent HUD
determines that its approval is required. IBC will, if necessary, obtain the
final HUD consent by August 12, 1996. In the event of any Partnership
distributions, IBC will make payments to IGC in amounts necessary to afford to
IGC economic benefits equivalent to full ownership of the partnership interests
being conveyed hereby. This assignment is given pursuant to and is subject to
the provisions of the Agreement of Purchase and Sale of even date herewith
between IGC and IBC (the "Sales Agreement").
<PAGE>17
5. Representations and Warranties of the IBC.
(a) IBC represents and warrants that it is a corporation in
good standing, duly organized, and existing under the laws of the State of
Delaware, that it has the lawful authority to enter into and perform this
agreement and by proper action has duly authorized the execution, delivery and
performance of this agreement, and that upon execution and delivery of this
agreement by IBC, IGC, and IGP, this agreement will be valid and binding on IBC
and enforceable against IBC in accordance with its terms. IBC also represents
and warrants that it has made no assignment or attempted assignment of the 1.1%
share of the limited partnership interests in the Partnership other than the
assignment contemplated by this agreement and that, on June 12, 1996, provided
this agreement has been executed by IBC, IGC, and IGP good and marketable title
to the 1.1% share of the limited partnership interests in the Partnership will
be transferred in accordance with the terms of this agreement to IGC.
(b) IGC represents and warrants that it is a limited
partnership in good standing, duly organized, and existing under the laws of
the State of Delaware, that it has the lawful authority to enter into and
perform this agreement and by proper action has duly authorized the execution
and delivery of this agreement, and that upon execution and delivery of this
agreement by IBC, IGC and IGP, this agreement will be valid and binding on IGC
and enforceable against IGC in accordance with its terms.
(c) IGP represents and warrants that it is a limited
partnership in good standing, duly organized and existing under the laws of the
State of Maryland, that it has the lawful authority to enter into and perform
this Agreement and by proper action has duly authorized the execution and
delivery of this Agreement, and upon execution and delivery of this Agreement,
by IBC, IGC and IGP, this Agreement will be valid and binding on IGP and
enforceable against IGP in accordance with its terms.
6. Governing Law. This agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
7. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute a single agreement.
8. Headings. The headings in this agreement are for convenience
only and do not constitute a part of the agreement.
9. Agreement Entire. Except as provided in the Sales Agreement,
this agreement sets forth all (and it is intended by the parties hereto to be
an integration of all) of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
matters contained herein, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, expressed or
implied, among them other than as set forth herein.
10. Binding Effect. This agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and assigns.
Any conflict between this agreement and the Sales Agreement shall be resolved
in favor of the Sales Agreement.
11. Notices. All notices pertaining to the matters covered by this
agreement shall be sent by certified or registered mail, with return receipt
<PAGE>18
requested, and first class postage prepaid, (1) if to IGC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602, (2) if to IBC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. (3) If to IGP, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. Notices shall be deemed given on
the date they are mailed.
12. Gender and Number. Use of any gender herein shall be deemed to
be or include the other genders and the use of the singular shall be deemed to
be or include the plural (and vice versa) where appropriate.
13. Severability. If any provisions of this agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid and unenforceable, the remainder of this agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, and shall be enforced.
IN WITNESS WHEREOF the parties hereto have signed this agreement
under seal as of the 12th day of June, 1996.
Interstate Business Corporation
Attest /s/ Paula S. Biggs By: /s/ J. Michael Wilson
------------------ ----------------------------
Name: Paula S. Biggs Name: J. Michael Wilson
------------------ ----------------------------
Its: Asst. Secretary Its: President
------------------ -----------------------------
Interstate General Company, L.P.
By: Interstate General
Management Corporation
General Partner
Attest /s/ Steven Rigelsky By: /s/ John E. Hans
------------------- ---------------------------
Name: Steven Rigelsky Name: John E. Hans
------------------- ---------------------------
Its: Vice President Its: Senior Vice President
------------------- ---------------------------
General Partner:
INTERSTATE GENERAL PROPERTIES
LIMITED PARTNERSHIP S.E.
By: INTERSTATE GENERAL COMPANY L.P.
General Partner
By: INTERSTATE GENERAL
MANAGEMENT CORPORATION
General Partner
Attest /s/ Steven Rigelsky By: /s/ John E. Hans
------------------- ---------------------------
Name: Steven Rigelsky Name: John E. Hans
------------------- ---------------------------
Its: Vice President Its: Senior Vice President
------------------- ---------------------------
<PAGE>19
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
AND AMENDMENT TO THE AGREEMENT OF
LIMITED PARTNERSHIP OF
PALMER APARTMENTS ASSOCIATES
This Agreement is made as of the 12th day of June, 1996, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC") and
Interstate General Properties Limited Partnership S.E., a Maryland Limited
Partnership ("IGP").
WHEREAS, IGP is the sole general partner of Palmer Apartments
Associates, a Maryland Limited Partnership, (the "Partnership"); and
WHEREAS, IBC is the successor in interest to King Charles, Inc. and
has previously assigned to IGC a 49.9% share of the limited partnership
interests in the Partnership; and
WHEREAS, IBC wishes to assign its remaining 1.1% share of the limited
partnership interests in the Partnership to IGC and IGP wishes to amend the
Agreement of Limited Partnership of the Partnership as amended (the
"Partnership Agreement") to reflect the assignment of limited partnership
interests from IBC to IGC.
W I T N E S S E T H :
In consideration of the mutual promises of the parties hereto and of
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending legally to be bound hereby
agree as follows:
1. Assignment. IBC does hereby sell, transfer, assign, and convey
to IGC all of its right, title and interest in and to a 1.1% share of the
limited partnership interests including but not limited to IBC's interest in
the capital or income of the Partnership attributable to that 1.1% share of the
limited partnership interests in the Partnership.
2. Acceptance of Assignment. IGC does hereby accept the assignment
as provided for in Section 1.
3. Amendment of Partnership Agreement. The Partnership Agreement
is hereby amended to substitute IGC for IBC as the owner of a 1.1% share of the
limited partnership interests in the Partnership.
4. Effective Date. This agreement shall be effective as of
June 12, 1996, subject to the receipt of final HUD approval of the assignment
of the partnership interest, being conveyed hereby, to the extent HUD
determines that its approval is required. IBC will, if necessary, obtain the
final HUD consent by August 12, 1996. In the event of any Partnership
distributions, IBC will make payments to IGC in amounts necessary to afford to
IGC economic benefits equivalent to full ownership of the partnership interests
being conveyed hereby. This assignment is given pursuant to and is subject to
the provisions of the Agreement of Purchase and Sale of even date herewith
between IGC and IBC (the "Sales Agreement").
<PAGE>20
5. Representations and Warranties of the IBC.
(a) IBC represents and warrants that it is a corporation in
good standing, duly organized, and existing under the laws of the State of
Delaware, that it has the lawful authority to enter into and perform this
agreement and by proper action has duly authorized the execution, delivery and
performance of this agreement, and that upon execution and delivery of this
agreement by IBC, IGC and IGP, this agreement will be valid and binding on IBC
and enforceable against IBC in accordance with its terms. IBC also represents
and warrants that it has made no assignment or attempted assignment of the 1.1%
share of the limited partnership interests in the Partnership other than the
assignment contemplated by this agreement and that, on June 12, 1996, provided
this agreement has been executed by IBC, IGC, and IGP good and marketable title
to the 1.1% share of the limited partnership interests in the Partnership will
be assigned in accordance with the terms of this agreement to IGC.
(b) IGC represents and warrants that it is a limited
partnership in good standing, duly organized, and existing under the laws of
the State of Delaware, that it has the lawful authority to enter into and
perform this agreement and by proper action has duly authorized the execution
and delivery of this agreement, and that upon execution and delivery of this
agreement by IBC, IGC, and IGP, this agreement will be valid and binding on IGC
and enforceable against IGC in accordance with its terms.
(c) IGP represents and warrants that it is a limited
partnership in good standing, duly organized and existing under the laws of the
State of Maryland, that it has the lawful authority to enter into and perform
this Agreement and by proper action has duly authorized the execution and
delivery of this Agreement, and upon execution and delivery of this Agreement,
by IBC, IGC and IGP, this Agreement will be valid and binding on IGP and
enforceable against IGP in accordance with its terms.
6. Governing Law. This agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
7. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute a single agreement.
8. Headings. The headings in this agreement are for convenience
only and do not constitute a part of the agreement.
9. Agreement Entire. Except as provided in the Sales Agreement,
this agreement sets forth all (and it is intended by the parties hereto to be
an integration of all) of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
matters contained herein, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, expressed or
implied, among them other than as set forth herein.
10. Binding Effect. This agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and assigns.
Any conflict between this agreement and the Sales Agreement shall be resolved
in favor of the Sales Agreement.
11. Notices. All notices pertaining to the matters covered by this
agreement shall be sent by certified or registered mail, with return receipt
<PAGE>21
requested, and first class postage prepaid, (1) if to IGC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602, (2) if to IBC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. (3) if to IGP, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. Notices shall be deemed given
on the date they are mailed.
12. Gender and Number. Use of any gender herein shall be deemed to
be or include the other genders and the use of the singular shall be deemed to
be or include the plural (and vice versa) where appropriate.
13. Severability. If any provisions of this agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid and unenforceable, the remainder of this agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, and shall be enforced.
IN WITNESS WHEREOF the parties hereto have signed this agreement under
seal as of the 12th day of June, 1996.
Interstate Business Corporation
Attest /s/ Paula S. Biggs By: /s/ J. Michael Wilson
------------------ ----------------------------
Name: Paula S. Biggs Name: J. Michael Wilson
------------------ ----------------------------
Its: Asst. Secretary Its: President
------------------ -----------------------------
Interstate General Company, L.P.
By: Interstate General
Management Corporation
General Partner
Attest /s/ Steven Rigelsky By: /s/ John E. Hans
------------------- ---------------------------
Name: Steven Rigelsky Name: John E. Hans
------------------- ---------------------------
Its: Vice President Its: Senior Vice President
------------------- ---------------------------
General Partner:
INTERSTATE GENERAL PROPERTIES
LIMITED PARTNERSHIP S.E.
By: INTERSTATE GENERAL COMPANY L.P.
General Partner
By: INTERSTATE GENERAL
MANAGEMENT CORPORATION
General Partner
Attest /s/ Steven Rigelsky By: /s/ John E. Hans
------------------- ---------------------------
Name: Steven Rigelsky Name: John E. Hans
------------------- ---------------------------
Its: Vice President Its: Senior Vice President
------------------- ---------------------------
<PAGE>22
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
OF
HEADON HOUSE ASSOCIATES, LIMITED PARTNERSHIP
This Agreement is made as of the 12th day of June, 1996, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC").
WHEREAS, IGC is the successor in interest of Interstate General
Properties Limited Partnership S.E., and as such is the sole general partner of
Headon House Associates Limited Partnership a Maryland Limited Partnership,
(the "Partnership"); and
WHEREAS, IBC is the successor in interest to King Charles, Inc. and
has previously assigned to IGC a 49.9% share of the limited partnership
interests in the Partnership; and
WHEREAS, IBC wishes to assign its remaining 1.1% share of the limited
partnership interests in the Partnership to IGC.
W I T N E S S E T H :
In consideration of the mutual promises of the parties hereto and of
other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto intending legally to be bound hereby
agree as follows:
1. Assignment. IBC does hereby sell, transfer, assign, and convey
to IGC all of its right, title and interest in and to a 1.1% share of the
limited partnership interests including but not limited to IBC's interest in
the capital or income of the Partnership attributable to that 1.1% share of the
limited partnership interests in the Partnership.
2. Acceptance of Assignment. IGC does hereby accept the assignment
as provided for in Section 1.
3. Effective Date. This agreement shall be effective as of
June 12, 1996, subject to the receipt of final HUD approval of the assignment
of the partnership interest, being conveyed hereby, to the extent HUD
determines that its approval is required. IBC will, if necessary, obtain the
final HUD consent by August 12, 1996. In the event of any Partnership
distributions, IBC will make payments to IGC in amounts necessary to afford to
IGC economic benefits equivalent to full ownership of the partnership interests
being conveyed hereby. This assignment is given pursuant to and is subject to
the provisions of the Agreement of Purchase and Sale of even date herewith
between IGC and IBC (the "Sales Agreement").
4. Representations and Warranties of the IBC.
(a) IBC represents and warrants that it is a corporation in
good standing, duly organized, and existing under the laws of the State of
Delaware, that it has the lawful authority to enter into and perform this
agreement and by proper action has duly authorized the execution, delivery and
performance of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IBC and
<PAGE>23
enforceable against IBC in accordance with its terms. IBC also represents and
warrants that it has made no assignment or attempted assignment of the 1.1%
share of the limited partnership interests in the Partnership other than the
assignment contemplated by this agreement and that, on June 12, 1996, provided
this agreement has been executed by IBC and IGC, good and marketable title to
the 1.1% share of the limited partnership interests in the Partnership will be
assigned in accordance with the terms of this agreement to IGC.
(b) IGC represents and warrants that it is a limited
partnership in good standing, duly organized, and existing under the laws of
the State of Delaware, that it has the lawful authority to enter into and
perform this agreement and by proper action has duly authorized the execution
and delivery of this agreement, and that upon execution and delivery of this
agreement by IBC and IGC, this agreement will be valid and binding on IGC and
enforceable against IGC in accordance with its terms.
5. Governing Law. This agreement shall be construed in accordance
with and governed by the laws of the State of Maryland.
6. Counterparts. This agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute a single agreement.
7. Headings. The headings in this agreement are for convenience
only and do not constitute a part of the agreement.
8. Agreement Entire. Except as provided in the Sales Agreement,
this agreement sets forth all (and it is intended by the parties hereto to be
an integration of all) of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
matters contained herein, and there are no promises, agreements, conditions,
understandings, warranties or representations, oral or written, expressed or
implied, among them other than as set forth herein.
9. Binding Effect. Except as provided in the Sales Agreement, this
agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, personal and legal
representatives, successors and assigns. Any conflict between this agreement
and the Sales Agreement shall be resolved in favor of the Sales Agreement.
10. Notices. All notices pertaining to the matters covered by this
agreement shall be sent by certified or registered mail, with return receipt
requested, and first class postage prepaid, (1) if to IGC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602, (2) if to IBC, to 222 Smallwood
Village Center, St. Charles, Maryland 20602. Notices shall be deemed given on
the date they are mailed.
11. Gender and Number. Use of any gender herein shall be deemed to
be or include the other genders and the use of the singular shall be deemed to
be or include the plural (and vice versa) where appropriate.
12. Severability. If any provisions of this agreement, or the
application thereof to any person or circumstance, shall for any reason and to
any extent be invalid and unenforceable, the remainder of this agreement and
the application of such provision to other persons or circumstances shall not
be affected thereby, and shall be enforced.
<PAGE>24
IN WITNESS WHEREOF the parties hereto have signed this agreement under
seal as of the 12th day of June, 1996.
Interstate Business Corporation
Attest /s/ Paula S. Biggs By: /s/ J. Michael Wilson
------------------ ----------------------------
Name: Paula S. Biggs Name: J. Michael Wilson
------------------ ----------------------------
Its: Asst. Secretary Its: President
------------------ -----------------------------
Interstate General Company, L.P.
By: Interstate General
Management Corporation
General Partner
Attest /s/ Steven Rigelsky By: /s/ John E. Hans
------------------- ---------------------------
Name: Steven Rigelsky Name: John E. Hans
------------------- ---------------------------
Its: Vice President Its: Senior Vice President
------------------- ---------------------------
<PAGE>
<PAGE>25
Schedule 3.4(d)
See the attached excerpt from the Annual Report on Form 10-K of
Interstate General Company L.P. (the "Company") for the Year Ended
December 31, 1995. Seller is a general partner of the Company.
Reclassifications
- -----------------
Certain amounts presented for 1994 in the Consolidated Balance Sheet and
for 1994 and 1993 in the Consolidated Statements of Income and Cash Flows have
been reclassified to conform with the 1995 presentation.
(2) GOING CONCERN AND RELATED MATTERS
In March 1990, the Company received a notice (the "Notice") from the U.S.
Army Corps of Engineers (the "Corps") asserting that unauthorized fill
materials had been placed in portions of an approximately five-acre parcel in
Charles County, Maryland (the "Site") owned by the Company and claimed by the
Corps to constitute wetlands subject to regulation pursuant to the Clean Water
Act. Following receipt of the Notice, the Company ceased development of the
Site and remediated a portion of the Site in accordance with instructions
issued by the Corps. The Company also commenced discussions with the Corps
regarding mitigation plans that would preserve some commercial value for the
Site and filed suit against the Corps claiming that a prohibition of
development on the entire Site would constitute a governmental taking for which
the Company would be entitled to compensation.
In November 1993, the Company believed that it had an agreement in
principle with the Corps that would settle the Company's claim and permit
commercial development of a portion of the Site. However, in early 1994, the
Company became aware that this matter had been referred to the U.S. Attorney
for the District of Maryland. After conducting a lengthy investigation of the
Company's wetlands practices in St. Charles, in October 1995 a grand jury
convened by the U.S. Attorney charged that certain of the Company's practices
with respect to four parcels, including the Site, constituted criminal
violations of Section 404 of the Clean Water Act. The indictment charged each
of IGC, its affiliate, St. Charles Associates, L.P. ("SCA"), and the Company's
Chairman, James J. Wilson. During the U.S. Attorney's investigation, the Corps
issued additional violation notices relating to filling portions of other
parcels claimed by the Corps to be protected wetlands. In October 1995 the
government filed a civil action in the U.S. District Court for the District of
Maryland charging the Company and Mr. Wilson with violations of the Clean Water
Act. Of the approximately 4,400 acres developed by the Company in St. Charles,
approximately 70 acres are the subject of the civil and criminal charges.
On February 29, 1996, each of IGC, SCA and Mr. Wilson were convicted on
four counts of felony violations of Section 404 of the Clean Water Act.
Sentencing is expected to occur in June 1996. On March 12, 1996, IGC and SCA
received service of process with respect to the civil action. Maximum
statutory penalties possible against each of IGC and SCA under the criminal
action are $50,000 per day for each of four felony violations or,
alternatively, twice the pecuniary gain realized by the Company from any
illegal action. The maximum statutory penalty possible under the civil action
is $25,000 per day for each of nine separate violations. Because the
investigation with regard to the sentencing is ongoing, the Company cannot
determine from what point in time these fines could be assessed. In the civil
<PAGE>26
action, the U.S. Attorney also seeks to enjoin the Company from engaging in
future illegal wetlands practices.
During 1994 and 1995, the Company recognized approximately $4.6 million in
legal and consulting expenses relating to these matters. Such expenses include
a reserve available to cover future anticipated costs of the criminal and civil
actions, including costs of appealing the criminal convictions. The amount of
any fine in the current case cannot be estimated with certainty and as such the
total costs incurred may exceed the amount reserved.
Management believes the Company and Mr. Wilson have many strong arguments
to present on appeal of the criminal convictions. Accordingly, the Company and
Mr. Wilson will appeal the criminal convictions and will continue to defend
vigorously against charges in the civil action.
The Company's loan agreements contain certain restrictive covenants, cross
default provisions and material adverse change in financial condition clauses.
As a result of the Company's conviction on four felony counts of the Clean
Water Act, Signet Bank issued a notice of default by the Company of certain
loan agreement covenants pertaining to $3.3 million of debt. Negotiations of
the terms and conditions of a forbearance agreement are in process. In
addition, a $2.2 million payment was due NationsBank on March 31, 1996.
Negotiations are in process to modify certain terms and conditions of the
loans. Management expects to finalize these amendments and make the principal
curtailment in April 1996. As a result of this notice of default, past due
payment, and unless and until the criminal convictions are reversed on appeal,
$47.3 million of the Company's bank debt could be called into default.
The uncertainty with respect to the amount of penalties has hindered the
Company's ability to secure financing and bonds necessary for the development
of Fairway Village, the third of five villages in the Planned Unit Development
of St. Charles, Maryland. The Company's current inventory of finished lots in
St. Charles is anticipated to be sold during 1996, therefore, the development
of additional lots is necessary to provide inventory for sales in 1997 and
beyond.
As a result of the uncertainty regarding the magnitude of fines, events of
default, multiple loan defaults and uncertainty regarding the ability to obtain
future financing, which may cause the Company to have negative cash flow in
1996, there is substantial doubt about the Company's ability to continue as a
going concern.
The Company has historically met its liquidity requirements principally
from cash flow generated by land and home sales, property management fees,
distributions from HDA and residential rental partnerships and from bank
financing providing funds for development and working capital.
As discussed in Note 4, the Company no longer receives distributions from
HDA, as a result of the Company's distribution of Equus Units representing a
99% limited partnership interest in Equus to IGC Unitholders in February 1995.
In addition, under the terms of IGC's loans, most of the cash generated by U.S.
home and lot sales and distributions from partnerships, including distributions
from partnership refinancings, will be used to further reduce bank loans and
meet debt service requirements. As mentioned above, project financings have
been delayed by the inability to determine the penalties related to the
Company's felony convictions. Given these factors, the Company's ability to
generate cash for overhead, development and other uses is limited.
<PAGE>27
During the first quarter of 1996, four apartment projects in Puerto Rico
were sold under the 1990 Low Income Housing Preservation and Resident
Homeownership Act ("LIHPRHA"). The Company will retain the management
contracts on the four apartments. This sale, after taxes, generated
approximately $11.5 of cash. Approximately $10.2 million of cash proceeds is
pledged to curtail bank debt and the remainder will be used to pay legal fees
related to the wetlands convictions and support operations. As a result of the
debt curtailments, the FDIC loan will be paid off and NationsBank will have a
first lien on commercial properties in St. Charles which will have the effect
of improving the Company's cash flow as the release prices under the
NationsBank agreement are less than that of the FDIC.
During 1995, the Company negotiated loan extensions with NationsBank and
Signet Bank. NationsBank has agreed to extend the maturity of its loans until
May 1998. Under the agreement, the extension of the maturity beyond November
30, 1995 was contingent upon a mandatory principal curtailment of $2.2 million
which will be made with the proceeds of the LIHPRHA sale. Signet Bank agreed
to extend the maturity of its loans until September 1996. The balance of the
Signet loans as of December 31, 1995 is $3.3 million. The Company anticipates
it will pay off these loans prior to their maturity with the proceeds from the
sale of commercial and residential land which secure the loans.
<PAGE>1
Exhibit 10(b)
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT BETWEEN
INTERSTATE GENERAL COMPANY L.P. AND EDWIN L. KELLY
DATED MAY 20, 1994
The agreement between Interstate General Company L.P. (the "Company"), a
Delaware limited partnership, and Edwin L. Kelly (the "Executive") dated May
20, 1994 is hereby amended as follows:
In addition to the position and duties described in Section 3 of the
Agreement, this section will be modified to include the following, the
Executive will concentrate his efforts on the sale of Montclair,
Brandywine and Westbury Phase I and the completion of the planning,
engineering and approval process for Pomfret, Middletown Road and Westbury
II properties to increase their value to prospective purchasers or for
development by the Company.
The notification letter of March 29, 1996 is hereby withdrawn.
All other terms and conditions of the May 20, 1994 agreement, as amended,
remain.
In witness hereof, the parties have executed this amendment on June 17, 1996.
Interstate General Company L.P. Interstate General Company L.P.
By: Interstate General By: Interstate General
Management Corporation, Management Corporation,
Its Managing General Partner Its Managing General Partner
By: /s/ James J. Wilson By: /s/ John E. Hans
--------------------------- ----------------------------
James J. Wilson John E. Hans
/s/ Edwin L. Kelly
---------------------------------
Edwin L. Kelly
<PAGE>1
Exhibit 10(c)
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT is made effective for all purposes as of the 3rd day of
April, 1996, by and between Purchaser, IGC, and SCA (such parties being
hereinafter defined).
ARTICLE I
Definitions
As used in this Agreement, unless the context otherwise requires or it is
otherwise herein expressly provided, the following terms shall have the
following meanings:
1.1 PURCHASE PRICE: One Million Two Hundred Seventy-Eight Thousand Eight
Hundred Ninety-Seven Dollars ($1,278,897.00).
1.2 PURCHASER: A.P.S. Associates Limited Partnership, a Delaware
limited partnership, its assignees, designees or
nominees, with an address at:
222 Smallwood Village Center
St. Charles, MD 20602
1.3 IGC: Interstate General Company, L.P. a Delaware limited
partnership, with an address at:
222 Smallwood Village Center
St. Charles, MD 20602
1.4 SCA: St. Charles Associates L.P., a Maryland limited
partnership, with an address at:
222 Smallwood Village Center
St. Charles, MD 20602
1.5 SETTLEMENT: The consummation of the sale and purchase provided
for in this Agreement to occur as provided in Article
VII hereof.
1.6 IGC PROPERTY: Accounts receivable (payable to IGC) from each of the
entities listed on Exhibit A.
1.7 SCA PROPERTY: Accounts receivable (payable to SCA) from IBC. The
amount of receivables payable to SCA by IBC is
evidenced by a Note dated September 28, 1989 (the
"SCA Note"), and is particularly described on Exhibit
B hereto.
1.8 SCA COLLATERAL: The partnership interests assigned, and rights of the
assignee, under:
That certain Assignment And Pledge of Partnership
Interest (VLA) dated as of April 1, 1992 by and
between SCA and IBC (the "VLA Assignment");
<PAGE>2
and
That certain Assignment And Pledge of Partnership
Interest (SMA) dated as of April 1, 1992 by and
between SCA and IBC, as amended by that certain First
Amendment To Assignment of Partnership Interests
(SMA) dated as of April 1, 1992 (the "SMA
Assignment").
The SCA collateral evidences, inter alia, a lien
securing the repayment of the SCA Note.
1.9 IBC: Interstate Business Corporation, a Delaware
corporation.
ARTICLE II
Sale and Purchase; Assignment of Collateral
2.1 Sale and Purchase. For and in consideration of the mutual promises,
covenants, representations, warranties, and agreements contained herein, IGC
shall sell and convey the IGC Property to Purchaser, and SCA shall sell and
convey the SCA Property, and assign and endorse the SCA Note, to Purchaser, and
Purchaser shall purchase the IGC Property and the SCA Property.
2.2 Assignment of SCA Collateral. For and in consideration of the mutual
promises, covenants, representations, warranties, and agreements contained
herein, SCA shall assign to Purchaser, and Purchaser shall accept SCA's
assignment of, all of its right, title and interest in and to the SCA
Collateral.
ARTICLE III
Representations and Warranties of IGC and SCA
IGC represents and warrants to Purchaser that as of the date of the
execution of this Agreement, and as of the date of Settlement:
3.1 Legal Status. IGC is a limited partnership organized, validly
existing, and in good standing under the laws of Delaware and subject to the
performance by IGC of its obligations under Section 6.1 hereof, (i) IGC has the
power to enter into this Agreement and to consummate the transactions provided
for herein; (ii) the undersigned officer of Interstate General Management
Corporation, the general partner of IGC, has full power, authority and legal
right to enter into this Agreement on behalf of IGC; and (iii) no other party
has any right, title or interest in any of the IGC Property.
3.2 Compliance with Other Instruments, etc. Except as set forth in
Exhibit E, neither the entering into of this Agreement nor the consummation of
the transactions contemplated hereby will constitute or result in a violation
or breach by IGC of its Articles of Incorporation, by-laws and other corporate
documents, or, subject to the performance by IGC of its obligations under
Section 6.1 hereof, of any contract or other instrument to which it is a party,
or to which it is subject or by which it or any of its assets or properties may
be bound.
<PAGE>3
3.3 Compliance with Laws. etc. Neither the entering into of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in a violation or breach by IGC of any judgment, order.
writ, injunction or decree issued against or imposed upon it, or result,
subject to the performance by IGC of its obligations under Section 6.1 hereof,
in a violation of any applicable law, order, rule or regulation of any
governmental authority. Except as described in Exhibit D hereto, there is no
action, suit, proceeding or investigation pending in any court or before or by
any federal, district, county, or municipal department, commission, board,
bureau, agency or other governmental instrumentality which would prevent the
consummation of the transactions contemplated by this Agreement or which would
become a cloud on the title to the IGC Property or any portion thereof or which
questions the validity or enforceability of the transactions contemplated by
this Agreement or any action taken pursuant hereto. No approval, consent,
order or authorization of, or designation, registration or filing (other than
for recording purposes) with any governmental authority is required in
connection with the due and valid execution and delivery of this Agreement by
IGC and its compliance with the provisions hereof and the consummation of the
transactions contemplated hereby except as provided in Section 6.1 hereof.
3.4 The IGC Property.
(a) The receivables listed on Exhibit A hereto constitute the valid
and binding legal obligations of the entities listed thereon, and are due and
owing to IGC without offset, counterclaim or defense of any kind.
(b) Except as set forth in Exhibit E, neither the execution and
delivery of this Agreement nor the sale of the IGC Property hereunder will,
subject to the performance by IGC of its obligations under Section 6.1 hereof,
violate any provision of, or result in the acceleration of any obligation
under, any security, mortgage, note, debenture, loan, lease, agreement,
instrument, order, judgment or decree to which IGC is a party or by which IGC
is bound.
(c) The board of directors of Interstate General Management
Corporation, the general partner of IGC, has duly approved the transactions
contemplated by this Agreement and has authorized the execution and delivery of
this Agreement by the officers of Interstate General Management Corporation who
are executing this Agreement.
(d) There are no actions or proceedings pending or threatened to
liquidate, reorganize or dissolve IGC.
(e) Between the date hereof and Settlement, Purchaser or its agents
shall be given complete and unlimited access to the records of IGC relating to
the IGC Property.
(f) All federal, state and local income, withholding, sales,
franchise and other taxes due or payable by IGC with respect to the IGC
Property have been paid by IGC and all returns due with respect thereto have
been filed. IGC does hereby indemnify and hold harmless Purchaser against any
loss, cost, damage or expense arising from nonpayment of any taxes whatsoever
owed by IGC or which may be assessed against IGC for periods prior to
Settlement.
<PAGE>4
(g) No representation, warranty or covenant by IGC or in this
Agreement, or any statement, certificate or schedule made, furnished or to be
furnished to Purchaser pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to make
the statements contained therein not misleading.
(h) Notwithstanding any investigation or audit conducted before or
after Settlement, and notwithstanding any facts or circumstances which any
party may have obtained or discovered as a result of such investigation, audit
or otherwise, the parties shall be entitled to rely upon the representations
and warranties set forth herein.
3.5 Full Disclosure. IGC knows of no materially adverse fact affecting
or threatening to affect the IGC Property which has not been disclosed to
Purchaser in this Agreement.
3.6 Completeness of Representations. No representation or warranty made
by IGC in this Agreement or as provided herein contains any untrue statement of
a material fact or omits to state any material fact necessary to make the
statements contained herein not false or misleading.
SCA represents and warrants to Purchaser that as of the date of the
execution of this Agreement, and as of the date of Settlement:
3.7 Legal Status. SCA is a limited partnership organized, validly
existing, and in good standing under the laws of Maryland and subject to the
performance by SCA of its obligations under Section 6.1 hereof, (i) SCA has the
power to enter into this Agreement and to consummate the transactions provided
for herein; (ii) the undersigned officer of Interstate General Management
Corporation, general partner of IGC, which is the general partner of SCA, has
full power, authority and legal right to enter into this Agreement on behalf of
SCA; and iii) no other party has any right, title or interest in any of the SCA
Property.
3.8 Compliance with Other Instruments, etc. Neither the entering into of
this Agreement nor the consummation of the transactions contemplated hereby
will constitute or result in a violation or breach by SCA of its Articles of
Incorporation, by-laws and other corporate documents, or, subject to the
performance by SCA of its obligations under Section 6.1 hereof, of any contract
or other instrument to which it is a party, or to which it is subject or by
which it or any of its assets or properties may be bound.
3.9 Compliance with Laws, etc. Neither the entering into of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in a violation or breach by SCA of any judgment, order,
writ, injunction or decree issued against or imposed upon it, or result,
subject to the performance by SCA of its obligations under Section 6.1 hereof,
in a violation of any applicable law, order, rule or regulation of any
governmental authority. Except as described in Exhibit D hereto, there is no
action, suit, proceeding or investigation pending in any court or before or by
any federal, district, county, or municipal department, commission, board,
bureau, agency or other governmental instrumentality which would prevent the
consummation of the transactions contemplated by this Agreement or which would
become a cloud on the title to the SCA Property or any portion thereof or which
questions the validity or enforceability of the transactions contemplated by
this Agreement or any action taken pursuant hereto. No approval, consent, order
<PAGE>5
or authorization of, or designation, registration or filing (other than for
recording purposes) with any governmental authority is required in connection
with the due and valid execution and delivery of this Agreement by SCA and its
compliance with the provisions hereof and the consummation of the transactions
contemplated hereby except as provided in Section 6.1 hereof.
3.10 The SCA Property.
(a) The receivables listed on Exhibit B hereto constitute the valid
and binding legal obligations of the partnerships listed thereon, and are due
and owing to SCA without offset, counterclaim or defense of any kind.
(b) Neither the execution and delivery of this Agreement nor the
sale of the SCA Property hereunder will, subject to the performance by SCA of
its obligations under Section 6.1 hereof, violate any provision of, or result
in the acceleration of any obligation under, any security, mortgage, note,
debenture, loan, lease, agreement, instrument, order, judgment or decree to
which SCA is a party or by which SCA is hound.
(c) The board of directors of Interstate General Management
Corporation, the general partner of IGC, which is the general partner of SCA,
has duly approved the transactions contemplated by this Agreement and has
authorized the execution and delivery of this Agreement by the officers of
Interstate General Management Corporation who are executing this Agreement.
(d) There are no actions or proceedings pending or threatened to
liquidate, reorganize or dissolve SCA.
(e) Between the date hereof and Settlement, Purchaser or its agents
shall be given complete and unlimited access to the records of SCA relating to
the SCA Property.
(f) All federal, state and local income, withholding, sales,
franchise and other taxes due or payable by SCA with respect to the SCA
Property have been paid by SCA and all returns due with respect thereto have
been filed. SCA does hereby indemnify and hold harmless Purchaser against any
loss, cost, damage or expense arising from nonpayment of any taxes whatsoever
owed by SCA or which may be assessed against SCA for periods prior to
Settlement.
(g) No representation, warranty or covenant by SCA or in this
Agreement, or any statement, certificate or schedule made, furnished or to be
furnished to Purchaser pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, nor omits or will omit to state a material fact necessary to
make the statements contained therein not misleading.
(h) Notwithstanding any investigation or audit conducted before or
after Settlement, and notwithstanding any facts or circumstances which any
party may have obtained or discovered as a result of such investigation, audit
or otherwise, the parties shall be entitled to rely upon the representations
and warranties set forth herein.
3.11 The SCA Collateral.
(a) The VLA Assignment and the SMA Assignment are fully enforceable
by the assignee thereunder, and by such assignee's successors and assigns, are
fully enforceable in accordance with their respective terms.
<PAGE>6
(b) SCA's interest under the VLA Assignment and the SMA Assignment
is freely assignable and, upon assignment of the same to Purchaser, may be
fully enforced by Purchaser with the same force and effect as if Purchaser were
originally named as assignee therein.
(c) IBC has no claims, offsets, counterclaims or defenses to the
full enforcement of the VLA Assignment and the SMA Assignment.
(d) None of the parties to the VLA Assignment or the SMA Assignment
are in default of their obligations thereunder.
3.12 Full Disclosure. SCA knows of no materially adverse fact
affecting or threatening to affect the SCA Property which has not been
disclosed to Purchaser in this Agreement.
3.13 Completeness of Representations. No representation or warranty
made by SCA in this Agreement or as provided herein contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements contained herein not false or misleading.
ARTICLE IV
Representations and Warranties of Purchaser
Purchaser represents and warrants to each of IGC and SCA that, as of the
date of the execution of this Agreement, and as of the date of Settlement:
4.1 Legal Status. (i) Purchaser is a limited partnership organized,
validly existing, and in good standing under the laws of Delaware; (ii)
Purchaser has the power to enter into this Agreement and to perform its
obligations as provided for herein; and (iii) the undersigned officer of
Advance Power Systems, Inc., a general partner of Purchaser, has full power,
authority and legal right to enter into this Agreement on behalf of Purchaser,
and to consummate the transaction provided for herein.
4.2 Compliance with Other Instruments, etc. Neither the entering into of
this Agreement nor the consummation of the transactions contemplated hereby
will constitute or result in a violation or breach by Purchaser of its limited
partnership agreement or other corporate documents, or, subject to the
performance by IGC and SCA of their obligations under Section 6.1 hereof, of
any contract or other instrument to which it is a party, or to which it is
subject or by which it or any of its assets or properties may be bound.
4.3 Compliance with Laws, etc. Neither the entering into of this
Agreement nor the consummation of the transactions contemplated hereby will
constitute or result in a violation or breach by Purchaser of any judgment,
order, writ, injunction or decree issued against or imposed upon it, or will
result, subject to the performance by IGC and SCA of their obligations under
Section 6.1 hereof, in a violation of any applicable law, order, rule or
regulation of any governmental authority. There is no action, suit, proceeding
or investigation pending in any court or before or by any federal, district,
county, or municipal department, commission, board, bureau, agency or other
governmental instrumentality which would prevent the consummation of the
transactions contemplated by this Agreement or which questions the validity or
enforceability of the transaction contemplated by this Agreement or any action
taken pursuant hereto. No approval, consent, order or authorization of, or
designation, registration or filing (other than for recording purpose with any
<PAGE>7
governmental authority is required in connection with the due and valid
execution and delivery of this Agreement by Purchaser and its compliance with
the provisions hereof and consummation of the transactions contemplated hereby
except as provided in Section 6.1 hereof.
4.4 No violation. The Purchaser is not in violation of any order,
judgment, law, statute, regulation or ordinance.
4.5 Authorization. The general partners of Purchaser have duly approved
the transactions contemplated by this Agreement and have authorized the
execution and delivery of this Agreement by the undersigned on behalf of
Purchaser.
4.6 No Liquidation. There are no actions or proceedings pending or
threatened to liquidate, reorganize or dissolve the Purchaser.
ARTICLE V
Survival of Representations and Warranties; Further Assurances,
5.1 Survival and Merger, The representations and warranties set forth in
Article III and IV of this Agreement shall be deemed to have been made again on
and as of the date of Settlement and shall then be true and correct and shall
remain operative and shall survive the Settlement and the execution, delivery
and recordation of the Instruments of Conveyance and shall not be merged
therein. Purchaser, IGC and SCA shall each have the right to exercise any and
all legal and equitable rights and remedies for any breach of the foregoing
representations and warranties hereunder which are disclosed after Settlement.
5.2 Further Assurances: Hold Harmless,
(a) IGC and SCA each agree that, upon request of Purchaser, it shall
(or direct its officers and employees to, if applicable) execute and deliver
all documents, and take any other actions which may in the reasonable opinion
of Purchaser be necessary or desirable to evidence, perfect, protect or record
the right or title of Purchaser to the IGC Property and the SCA Property, or to
aid in the prosecution or defense of any rights arising therefrom, all without
further consideration.
(b) IGC agrees to indemnify and hold harmless Purchaser at all times
after the Settlement against and with respect to: (i) any breach by IGC of any
of its obligations, representations or warranties hereunder, (ii) any cost,
expense or damages incurred by Purchaser in connection with perfecting its
right and title to the IGC Property, (iii) any claim asserted against Purchaser
for any unsatisfied obligation of IGC in connection with the IGC Property, (iv)
any failure to obtain the approvals referred to in Section 6.1 hereof and (v)
any claim asserted by any government agency or any lending institution arising
from consummation of the transactions contemplated hereby.
(c) SCA agrees to indemnify and hold harmless Purchaser at all times
after the Settlement against and with respect to: (i) any breach by SCA of any
of its obligations, representations or warranties hereunder, (ii) any cost,
expense or damages incurred by Purchaser in connection with perfecting its
right and title to the SCA Property, (iii) any claim asserted against Purchaser
for any unsatisfied obligation of SCA in connection with the SCA Property, (iv)
any failure to obtain the consents the approvals referred to in Section 6.1
hereof and (v) any claim asserted by any government agency or any lending
institution arising from consummation of the transactions contemplated hereby.
<PAGE>8
ARTICLE VI
Covenants and Conditions of Settlement
The obligations of the Purchaser hereunder shall be subject to the
fulfillment of the following conditions, and IGC and SCA jointly and severally
agree to fulfill such conditions:
6.1 Instruments of Conveyance. IGC and SCA shall execute and deliver to
the Purchaser appropriate assignments of the IGC Property and the SCA Property.
Such assignments shall be substantially in form and substance equivalent to the
Assignments attached hereto as Exhibit C. The assignments contemplated herein
may be subject to the approval of any regulatory or governmental agencies
having jurisdiction over IGC or SCA (provided, however, that such approval need
not be received prior to Settlement hereunder). IGC and SCA shall obtain all
such approvals by N/A, 1996.
6.2 Original Documents. At Settlement, IGC and SCA shall deliver to
Purchaser all original documents pertaining to the IGC Property and the SCA
Property which each of IGC and SCA has in its possession.
6.3 Satisfaction of Liens. Except as contemplated in Section 6.1, any and
all liens, of any type whatsoever, with respect to the IGC Property and the SCA
Property, or as to which they may be subject, shall have been satisfied or
otherwise released of record by IGC and SCA, prior to Settlement, or provision
satisfactory to Purchaser shall have been made by IGC and SCA for their full
and complete release.
6.4 Settlement Representations and Warranties. At Settlement, each of the
representations and warranties of IGC and SCA contained in this Agreement is
deemed to have been made again on and as at the Settlement and shall be true
and correct in all material respects as at the Settlement. IGC and SCA shall,
jointly and severally, indemnify and hold harmless Purchaser from and against
all loss, damages, costs or expenses (including reasonable attorney's fees)
resulting from or in any way related to any breach thereof.
ARTICLE VII
Settlement
7.1 Settlement. Settlement shall take place in the office of the
Purchaser's designated legal counsel at 10:00 a.m. on the day established by
this Agreement. Settlement hereunder shall occur no later than August 19, 1996.
ARTICLE VIII
Default and Termination
8.1 Purchaser Default. If the transaction herein contemplated shall not
be consummated on the date of Settlement because of the Purchaser's default,
then IGC and SCA may exercise any and all legal and equitable rights or
remedies available to them, including, without limitation, the right to
specific performance and/or recovery of damages.
<PAGE>9
8.2 IGC or SCA Default. If the transactions herein contemplated shall
not be consummated on the date of Settlement because of one or more defaults
hereunder by IGC or SCA, or both, then Purchaser may exercise any and all legal
and equitable rights or remedies available to it, including, without
limitation, the right to specific performance and/or recovery of damages.
ARTICLE IX
Recision and Reformation
9.1 Reformation in Certain Events. If (i) any of the approvals referred
to in Section 6.1 hereof with respect to any portion of the IGC Property or the
SCA Property is not obtained or (ii) in the opinion of counsel to Purchaser,
any such approvals that are obtained are insufficient to vest in Purchaser free
and clear title to any portion of the IGC Property and the SCA Property, or
(iii) any governmental agency commences or threatens to commence a legal
proceeding arising from the consummation of the transactions contemplated
hereby in which such agency either asserts rights in any portion of the IGC
Property or the SCA Property, or claims which, in the reasonable opinion of
Purchaser, may materially reduce the value of any portion of the IGC Property
or the SCA Property (any such event being referred to herein as a "Transfer
Defect"), then Purchaser, at its option, may rescind its agreement to purchase
such portion of the IGC Property or the SCA Property, as the case may be.
Promptly upon receipt of notice of such recision, the Purchase Price will be
reduced by the value (as shown on Exhibits A and B hereto) of the portion of
the IGC Property or SCA Property as to which the Purchaser has rescinded this
Agreement, and the remainder of the IGC Property and the SCA Property shall be
purchased and sold in accordance with the terms hereof.
9.2 Recision. If, as a result of one or more Transfer Defects, Purchaser
determines that it is unable to obtain substantially all of the benefits of
ownership of the IGC Property and the SCA Property, or otherwise is deprived of
any material inducement to its willingness to enter into and perform this
Agreement, Purchaser, by notice to IGC and SCA, may rescind this Agreement,
following which notice this Agreement shall be null and void and of no further
force or effect.
ARTICLE X
General Provisions
10.1 Modifications and Waivers. No modification, waiver, amendment,
discharge or change of this Agreement, except as otherwise provided herein,
shall be valid unless the same is in writing and signed by the party against
which the enforcement of such modification, waiver, amendment, discharge or
change is sought. This Agreement contains the entire agreement between the
parties relating to the transactions contemplated hereby, and all prior or
contemporaneous agreements, understandings, representations and statements,
oral or written, are merged herein.
10.2 Successors and Assigns. All terms of this Agreement shall be binding
upon, and inure to the benefit of and be enforceable by the parties hereto and
their respective legal representatives, successors and assigns.
10.3 Governing Law. This Agreement is intended to be performed in the
State of Maryland and shall be construed and enforced in accordance with the
internal laws thereof.
<PAGE>10
10.4 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally, or by recognized air courier or if sent by registered or
certified mail, return receipt requested, and postage prepaid, to a party at
its address set forth above, or at such other address as such party may specify
from time to time by written notice to the other party.
10.5 Exhibits. All exhibits and schedules referred to herein and attached
hereto are incorporated by reference into this Agreement.
10.6 Severability. If any provision of this Agreement or any application
thereof shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions hereof and
any other application thereof shall not in any way be affected or impaired, and
such remaining provisions shall continue in full force and effect.
10.7 Construction. Each party hereto and its counsel has reviewed and
revised (or requested revisions of) this Agreement, and the normal rule of
construction that any ambiguities are to be resolved against the drafting party
shall not be applicable in the construction and interpretation of this
Agreement.
10.8 Time Periods. Any time period hereunder which expires on, or any
date hereunder which occurs on, a Saturday, Sunday or legal United States
holiday, shall be deemed to be postponed to the next business day. The first
day of any time period hereunder which runs "from" or 'after" a given day shall
be deemed to occur on the day subsequent to that given day.
10.9 Captions. The captions of this Agreement are inserted for
convenience of reference only and do not define, describe or limit the scope or
the intent of this Agreement or any term hereof.
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.11 Broker's Fees. Purchaser, IGC and SCA each hereby warrant and
represent to the each other that they have not dealt with any broker or agent
in connection with the transactions contemplated herein. Each party hereto
hereby indemnifies and holds harmless the other party from and against any and
all claims, demands, causes of action, loss, damage, liabilities, costs and
expenses (including reasonable attorney's fees) arising from any inaccuracy or
breach of the foregoing warranty and representation.
<PAGE>11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
IGC:
WITNESS INTERSTATE GENERAL COMPANY, L.P.
By: Interstate General Management Corporation, its
general partner
/s/ Martha Haupt By: /s/ John E. Hans
- ------------------- -----------------------------------------
Name Martha Haupt Name John E. Hans
Its Senior Vice President
SCA:
WITNESS ST. CHARLES ASSOCIATES, L.P.
By: Interstate General Company, L.P., its general
partner
By: Interstate General Management Corporation,
its general partner
/s/ Martha Haupt By: /s/ John E. Hans
- ------------------- -----------------------------------------
Name Martha Haupt Name John E. Hans
Its Senior Vice President
PURCHASER:
A.P.S. ASSOCIATES LIMITED PARTNERSHIP
WITNESS By: Advance Power Systems, Inc., its general partner
/s/ Paula S. Biggs By: /s/ Michael Wilson
- ------------------- -----------------------------------------
Name Paula S. Biggs Name Michael Wilson
Its Vice President
<PAGE>
<PAGE>12
Exhibit A
Receivables Assigned by IGCLP
to Wilson Family Limited Partnership
Working
Management Capital Back-
Fees Loans Interest Charges Total
---------- -------- -------- -------- ----------
Chastleton $381,301 $183,536 $ 39,177 $ 604,014
Coachman's 30,479 103,040 23,136 16,371 173,026
Rolling Hills 144,593 4,221 148,815
Village Lake 58,789 1,885 60,674
IBC 17,616 17,616
SVA 748 748
SVOBA 70 70
IBC CP 641 641
-------- -------- -------- -------- ----------
$615,162 $286,576 $ 23,136 $ 80,728 $1,005,603
======== ======== ======== ======== ==========
<PAGE>
<PAGE>13
Exhibit B
Receivables Assigned by SCA
to Wilson Family Limited Partnership
IBC $ 273,294
---------
$ 273,294 (1)
=========
(1) The outstanding principal balance of this note receivable is $301,780.
The balance of the note receivable and accrued interest will be satisfied
by a transfer of partnership interests.
<PAGE>1
Exhibit 10(d)
H&C Trading, LLC
127 Peachtree Street, Ste 1010
Atlanta, Georgia 30303
(770) 487-7605
Fax 487-7796
August 6, 1996
Interstate General Company, LP ("IGC")
222 Smallwood Village Center
St. Charles, MD 20602
Re: Private Placement of Securities
This letter constitutes our proposal (the "Agreement") for H&C Trading LLC
("Advisor") to act as your financial advisor with regard to a potential
financing of Interstate General Company LP ("IGC" or the "Company") based on
our knowledge through association of our principal Joel H. Cowan and
information provided by the Company.
The following terms of the financing are being considered:
* The amount should be $25-30 million.
* The form should be equity or near equity (recognizing the limitations
imposed on certain investors by your LP structure).
* The board will be composed of a minority appointed by the Wilson
interests; a minority appointed by the new investors; and at least two
independent directors agreeable to both investors and Wilson interests.
You will make available, at your expense, appropriate experts, including
representatives of Arthur Andersen and Covington & Burling.
The term of this engagement will last for six months from execution
subject to specific progress within 45 days, evidenced by written
communications from the Company to a prospective client. The arrangement is
extendible for so long as specific investor negotiations are continuing. Fee
for Advisor's services will be 1.5% of the funds invested hereby subject to
reduction to no less than 1% to the extent that another investment banker,
approved by you, is also involved, and the combined fees thereby exceed 3%.
Out of pocket expenses incurred by Advisor in this engagement will be
reimbursed.
You acknowledge that Advisor's principal, Mr. Joel H. Cowan, is a director
of the Company's manager and thus has an inherent conflict.
The Advisor agrees to keep confidential all material non-public material
information provided to us by the Company, except as provided by law or as
contemplated by the terms of the Agreement. Prior to disclosing any non-public
information by reason of a requirement of law, we would advise you of such
intention and afford you a reasonable time to take steps to resist such a
disclosure. Information furnished to prospective investors will be done only
with the execution of such confidentiality agreements as your counsel may
direct.
<PAGE>2
The Company agrees to indemnify and hold the Advisor, its directors,
officers, agents, employees, and legal representatives (each an "Indemnified
Person") harmless from and against any and all losses, actions, claims,
damages, and liabilities whatsoever of third parties as and when incurred
(except those caused by an Indemnified Person's own gross negligence or willful
misconduct related to or arising out of this engagement. Neither termination
or completion of this engagement shall affect the provisions of this paragraph,
which shall remain operative and in full force and effect. Shall a claim for
indemnification be made, but it is found that such indemnification may not be
enforceable in such case, then the Company, on the one hand, and the Advisor,
on the other hand, shall contribute to the losses, actions, claims, damages,
and liabilities to which the Indemnified Persons may be subject in accordance
with the relative benefits received by the Company, on the one hand, and the
Advisor on the other hand, in connection with the matters contemplated by the
Agreement. If indemnification is unavailable or insufficient, the Advisor and
any other Indemnified Person will not, in any event, be required to pay as a
result of any such case, claim, action or liability, an amount, in the
aggregate, in excess of the amount of fees the Advisor has received for this
engagement. It shall be a condition of this indemnification that we (a) give
the Company prompt written notice of any such claim or action, (b) permit the
Company to defend against such claim or action with attorneys of their choosing
and at their sole expense and (c) cooperate in said defense. Notwithstanding
the foregoing, the Company shall have no obligation to indemnify the Advisor or
any of the Indemnified Persons to the extent that such indemnification would be
contrary to the terms of the Company's Partnership Agreement or other
applicable law.
The benefits of this Agreement shall inure to the respective successors
and assignees of the parties and of the Indemnified Persons, and the
obligations and liabilities assumed in this Agreement by the parties shall be
binding upon their successors and assigns.
The validity and interpretation of this Agreement shall be governed by,
and construed and enforced in accordance with, the substantive laws of the
State of Delaware. This agreement represents the entire agreement of the
parties and it may not be modified or amended except in writing and signed by
the parties.
If you agree to the terms of this Agreement, please sign the enclosed copy
of this letter and return it to us.
Very truly yours,
H&C Trading LLC
/s/ Joel H. Cowan
-------------------------
Joel H. Cowan
President
Agreed to this 12th day of August, 1996:
Interstate General Company, LP
/s/ James J.Wilson
- ------------------------------------
James J. Wilson
Chairman, President, & CEO
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] JUN-30-1996
[CASH] 6,500<F1>
[SECURITIES] 0
[RECEIVABLES] 8,599
[ALLOWANCES] (448)
[INVENTORY] 76,915
[CURRENT-ASSETS] 0
[PP&E] 3,511
[DEPRECIATION] 2,308
[TOTAL-ASSETS] 150,083
[CURRENT-LIABILITIES] 0
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 0
[OTHER-SE] 46,610
[TOTAL-LIABILITY-AND-EQUITY] 150,083
[SALES] 15,877
[TOTAL-REVENUES] 38,677
[CGS] 12,572
[TOTAL-COSTS] 16,376
[OTHER-EXPENSES] 5,177
[LOSS-PROVISION] 100
[INTEREST-EXPENSE] 1,714
[INCOME-PRETAX] 15,310
[INCOME-TAX] 5,443
[INCOME-CONTINUING] 9,392
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 9,392
[EPS-PRIMARY] .91
[EPS-DILUTED] .91
<FN>
<F1>Balance includes $1,575 of restricted cash.
</FN>
</TABLE>
