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, 1997, OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
Commission file number 1-9393
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, 1997 and
1996. (Unaudited) 3
Consolidated Statements of Income for
the Three Months Ended June 30, 1997 and
1996. (Unaudited) 4
Consolidated Balance Sheets at June 30, 1997
(Unaudited) and December 31, 1996. 5
Consolidated Statements of Cash Flow for the
Six Months Ended June 30, 1997 and 1996.
(Unaudited) 7
Consolidated Statements of Cash Flow for the
Three Months Ended June 30, 1997 and 1996.
(Unaudited) 8
Notes to Consolidated Financial Statements. 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Three
and Six Month Periods Ended June 30, 1997 and 1996. 18
PART II OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Material Modifications of Rights of Registrant's 22
Securities
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
<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)
1997 1996
---------- ----------
REVENUES
Community development - land sales
to non-affiliates $ 2,619 $ 4,154
to affiliates 3,000 6,006
Homebuilding - home sales 3,712 5,717
Equity in earnings from partnerships,
developer fees and gains from transfer
of partnership interest 1,259 15,758
Investment in gaming properties 549 --
Rental property revenues 4,300 3,241
Management and other fees, substantially
all from related entities 2,269 3,270
Interest and other income 488 531
---------- ----------
Total revenues 18,196 38,677
---------- ----------
EXPENSES
Cost of land sales, including purchases
from affiliates of $1,659 and $3,304 3,555 7,189
Cost of home sales 3,612 5,374
Selling and marketing 571 674
General and administrative 3,532 4,213
Interest expense 1,817 2,938
Rental properties operating expense 1,768 1,400
Depreciation and amortization 1,089 712
Wetlands litigation expenses 68 650
Write-off of deferred project costs 6 217
---------- ----------
Total expenses 16,018 23,367
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTEREST 2,178 15,310
PROVISION FOR INCOME TAXES 112 5,443
---------- ----------
INCOME BEFORE MINORITY INTEREST 2,066 9,867
MINORITY INTEREST 13 475
---------- ----------
NET INCOME $ 2,053 $ 9,392
========== ==========
NET INCOME PER UNIT $ .20 $ .91
========== ==========
NET INCOME
General Partners $ 21 $ 94
Limited Partners 2,032 9,298
---------- ----------
$ 2,053 $ 9,392
========== ==========
WEIGHTED AVERAGE UNITS OUTSTANDING 10,257 10,257
========== ==========
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)
1997 1996
---------- ----------
REVENUES
Community development - land sales
to non-affiliates $ 1,170 $ 848
to affiliates 3,000 6,006
Homebuilding - home sales 1,838 2,993
Equity in earnings from partnerships,
developer fees and gains from transfer
of partnership interest 842 430
Investment in gaming properties 549 --
Rental property revenues 2,142 2,120
Management and other fees, substantially
all from related entities 926 1,061
Interest and other income 342 334
---------- ----------
Total revenues 10,809 13,792
---------- ----------
EXPENSES
Cost of land sales, including purchases
from affiliates of $1,659 and $3,657 2,612 4,493
Cost of home sales 1,827 2,685
Selling and marketing 327 339
General and administrative 1,871 1,577
Interest expense 895 1,200
Rental properties operating expense 933 968
Depreciation and amortization 512 432
Wetlands litigation expenses 68 650
Write-off of deferred project costs 1 95
---------- ----------
Total expenses 9,046 12,439
---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTEREST 1,763 1,353
PROVISION FOR INCOME TAXES -- 620
---------- ----------
INCOME BEFORE MINORITY INTEREST 1,763 733
MINORITY INTEREST (35) 403
---------- ----------
NET INCOME $ 1,798 $ 330
========== ==========
NET INCOME PER UNIT $ .18 $ .03
========== ==========
NET INCOME
General Partners $ 18 $ 3
Limited Partners 1,780 327
---------- ----------
$ 1,798 $ 330
========== ==========
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,
1997 1996
----------- -----------
(Unaudited) (Audited)
CASH AND CASH EQUIVALENTS
Unrestricted $ 1,575 $ 2,212
Restricted 900 988
-------- --------
2,475 3,200
ASSETS RELATED TO COMMUNITY DEVELOPMENT -------- --------
Land and development costs
Puerto Rico 35,468 34,034
St. Charles, Maryland 26,691 26,980
Other United States locations 15,146 16,256
Notes receivable on lot sales and other,
substantially all due from affiliates 6,606 5,815
-------- --------
83,911 83,085
ASSETS RELATED TO INVESTMENT PROPERTIES -------- --------
Operating properties, net of accumulated
depreciation of $21,164 and $20,658 as of June
30, 1997 and December 31, 1996, respectively 38,724 39,219
Investment in unconsolidated rental property
partnerships 8,180 11,723
Other receivables, net of reserves of
$4 and $121 as of June 30, 1997
and December 31, 1996, respectively 711 1,290
-------- --------
47,615 52,232
-------- --------
ASSETS RELATED TO HOMEBUILDING
Homebuilding construction and land 1,578 2,016
Investment in joint venture 452 275
Receivables and other 119 200
-------- --------
2,149 2,491
OTHER ASSETS -------- --------
Goodwill, less accumulated amortization of
$1,115 and $1,039 as of June 30, 1997
and December 31, 1996, respectively 1,919 1,995
Deferred costs regarding waste technology and
other projects, receivables and other, net of
reserves of $0 and $69 as of June 30,
1997 and December 31, 1996 4,914 4,336
Property, plant and equipment, less accumulated
depreciation of $2,593 and $2,425 as of June
30, 1997 and December 31, 1996, respectively 1,163 1,229
-------- --------
7,996 7,560
-------- --------
Total assets $144,146 $148,568
======== ========
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,
1997 1996
----------- -----------
(Unaudited) (Audited)
LIABILITIES RELATED TO COMMUNITY DEVELOPMENT
Recourse debt $ 30,652 $ 34,077
Non-recourse debt 2,258 2,153
Accounts payable, accrued liabilities
and deferred income 5,151 4,829
-------- --------
38,061 41,059
-------- --------
LIABILITIES RELATED TO INVESTMENT PROPERTIES
Recourse debt 1,004 1,139
Non-recourse debt 39,308 39,508
Accounts payable and accrued liabilities 2,912 3,202
-------- --------
43,224 43,849
-------- --------
LIABILITIES RELATED TO HOMEBUILDING
Recourse debt 242 502
Accounts payable, accrued liabilities
and deferred income 2,271 2,544
-------- --------
2,513 3,046
-------- --------
OTHER LIABILITIES
Accounts payable and accrued liabilities 3,627 4,078
Notes payable and capital leases 650 630
Accrued income tax liability - current 3,086 3,979
Accrued income tax liability - deferred 4,338 5,333
-------- --------
11,701 14,020
-------- --------
Total liabilities 95,499 101,974
-------- --------
PARTNERS' CAPITAL
General partners' capital 4,399 4,378
Limited partners' capital-10,257 Units
issued and outstanding as of
June 30, 1997 and December 31, 1996 44,248 42,216
-------- --------
Total partners' capital 48,647 46,594
-------- --------
Total liabilities and partners' capital $144,146 $148,568
======== ========
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>7
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30,
(In thousands)
(Unaudited)
1997 1996
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,053 $ 9,392
Adjustments to reconcile net income
to net cash provided by
(used by) operating activities:
Depreciation and amortization 1,089 712
Provision for deferred income taxes (995) 64
Equity in earnings from gaming properties (549) --
Equity in earnings from unconsolidated
partnerships and developer fees (1,259) (15,758)
Distributions from unconsolidated partnerships 4,967 14,845
Cost of sales-community development
and homebuilding 7,167 12,563
Development and construction expenditures (6,764) (9,788)
Equity in loss from homebuilding joint venture 48 19
Write-off of deferred project cost 6 217
Changes in notes and accounts receivable, due
from affiliates changed $(313) and $(1,918) (731) (2,358)
Changes in accounts payable, accrued
liabilities and deferred income (1,036) 4,714
------- --------
Net cash provided by operating activities 3,996 14,622
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in assets related to unconsolidated
rental property partnerships (165) 560
Change in restricted cash 88 550
(Additions to) rental operating properties, net (350) (528)
(Acquisitions) of other assets, net (86) (480)
Contributions to homebuilding joint venture (225) (84)
------- --------
Net cash (used in) investing activities (738) 18
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from debt financing 3,321 11,363
Payment of debt (7,216) (23,932)
Distributions to Unitholders -- (622)
-------- -------
Net cash (used in) financing activities (3,895) (13,191)
-------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (637) 1,449
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,212 3,476
-------- -------
CASH AND CASH EQUIVALENTS, JUNE 30, $ 1,575 $ 4,925
======== =======
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>8
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED JUNE 30,
(In thousands)
(Unaudited)
1997 1996
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,798 $ 330
Adjustments to reconcile net income
to net cash provided by
(used by) operating activities:
Depreciation and amortization 512 432
Provision for deferred income taxes (1,139) 69
Equity in earnings from gaming properties (549) --
Equity in earnings from unconsolidated
partnerships and developer fees (842) (430)
Distributions from unconsolidated partnerships 4,636 14,567
Cost of sales-community development
and homebuilding 4,439 7,179
Development and construction expenditures (4,554) (6,071)
Equity in loss from homebuilding joint venture 27 19
Write-off of deferred project cost 1 95
Changes in notes and accounts receivable, due
from affiliates changed $(605) and $(1,580) (846) (1,989)
Changes in accounts payable, accrued
liabilities and deferred income (989) (1,603)
------- --------
Net cash provided by operating activities 2,494 12,598
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in assets related to unconsolidated
rental property partnerships (199) 1,247
Change in restricted cash 214 (39)
(Additions to) rental operating properties, net (205) (426)
(Dispositions) of other assets, net 210 (354)
Contributions to homebuilding joint venture (1) (84)
------- --------
Net cash (used in) investing activities 19 344
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from debt financing 2,032 8,343
Payment of debt (4,084) (17,914)
Distribution to Unitholders -- (622)
-------- -------
Net cash (used in) financing activities (2,052) (10,193)
-------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 461 2,749
CASH AND CASH EQUIVALENTS, MARCH 31, 1,114 2,176
-------- -------
CASH AND CASH EQUIVALENTS, JUNE 30, $ 1,575 $ 4,925
======== =======
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>9
INTERSTATE GENERAL COMPANY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(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 1996 financial statements have been reclassified to conform to the 1997
presentation. The operating results for the six months ended June 30, 1997
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, warrants to purchase Units and Unit
Appreciation Rights do not have a material dilutive effect on the
calculation of earnings per Unit and therefore are not presented.
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, 1996.
(2) FINANCING AND CASH MANAGEMENT MATTERS
Because of the terms of its debt agreements, substantially all of the
cash generated by the Company has gone to pay down recourse debt, see
Consolidated Statements of Cash Flow, and as a result the Company's
liquidity has been restricted. In order to enhance its results of
operations and cash flow, the Company has refinanced certain assets,
reduced expenses and developed a restructuring plan.
During August 1997, the Company closed in escrow a refinancing of
substantially all of the U.S. assets with a $20,000,000 loan with an
affiliate of Banc One. The loan will retire $6,400,000 of debt outstanding
to NationsBank, past due taxes and other obligations and will provide
development funds for the first section of Fairway Village. The loan terms
also set aside $5,000,000 for fines and remediation work should the
Company's appeal of its wetlands violations conviction be unsuccessful.
The release prices for land sales will be reduced under the new loan,
resulting in increased cash available for operating needs. The loan will
be released from escrow upon NationsBank releasing certain collateral that
currently secures the Company's indebtedness to NationsBank. The
NationsBank indebtedness includes a $4.2 million standby letter of credit
that secures the Chastleton Notes (described in Note 5) (the "Chastleton
L/C"). IBC has undertaken to replace the Chastleton L/C with a letter of
credit on which IGC will not be an obligor. IBC is negotiating the terms
of this transaction with NationsBank. IBC will bear all of the costs of
replacing the Chastleton L/C and releasing the collateral, except (i) costs
of repaying the Company's outstanding indebtedness to NationsBank, and (ii)
pending completion of the restructuring (described in Note 6), the Company
<PAGE>10
may post as collateral for the Chastleton L/C its partnership interests in
three Puerto Rico apartment partnerships and in its interest in a
partnership that owns development land in Prince George's County, Maryland.
In April 1997, the Company financed two substantially debt-free
apartment projects owned by non-consolidated partnerships. These
financings provided the Company approximately $5,000,000 which was utilized
to meet debt obligations, a portion of the tax payment due and other
financial commitments. These financings have provided the Company with the
financial strength needed to retire old obligations and proceed with its
development plans.
The Company has development projects in various phases. Substantially
all of the projects currently under construction have sufficient
development loans in place to complete the construction. The Company
intends to finance new construction with new development loans and working
capital.
Management is currently planning to restructure the Company and
simultaneously raise new capital, the proceeds of which would be used to
pay down the Company's community development bank debt and provide working
capital for ongoing community development needs. Management hopes to
accomplish this restructuring, discussed further in the Registrant's 1996
Form 10-K, during 1997.
(3) INVESTMENT IN UNCONSOLIDATED PARTNERSHIPS
Housing Partnerships
The following information summarizes financial data and principal
activities of unconsolidated housing partnerships which the Company
accounts for under the equity method. The information is presented to show
the effect of the sale of four apartment projects and the elimination of
four apartment projects that are currently included in the Company's
consolidated financial statements (in thousands).
Partnership Status
---------------------------------------
Equity Equity Properties
Method at Method to Sold
June 30, March 31, March 15,
1997 1996 1996 Total
--------- --------- ---------- -----
SUMMARY FINANCIAL POSITION:
Total Assets
June 30, 1997 $140,155 $-- $-- $140,155
December 31, 1996 141,107 -- -- 141,107
Total Non-Recourse Debt
June 30, 1997 (a) 145,273 -- -- 145,273
December 31, 1996 136,468 -- -- 136,468
Total Other Liabilities
June 30, 1997 24,040 -- -- 24,040
December 31, 1996 23,678 -- -- 23,678
Total Equity
June 30, 1997 (a) (29,159) -- -- (29,159)
December 31, 1996 (19,038) -- -- (19,038)
Company's Investment
June 30, 1997 (a) 7,637 -- -- 7,637
December 31, 1996 11,425 -- -- 11,425
<PAGE>11
Partnership Status
---------------------------------------
Equity Equity Properties
Method at Method to Sold
June 30, March 31, March 15,
1997 1996 1996 Total
--------- --------- ---------- -----
SUMMARY OF OPERATIONS:
Total Revenue
Three Months Ended June 30, 1997 8,081 -- -- 8,081
Three Months Ended June 30, 1996 8,175 -- -- 8,175
Six Months Ended June 30, 1997 (a) 16,298 -- -- 16,298
Six Months Ended June 30, 1996 16,285 1,018 1,103 18,406
Net Income (Loss)
Three Months Ended June 30, 1997 (392) -- -- (392)
Three Months Ended June 30, 1996 181 -- -- 181
Six Months Ended June 30, 1997 (a) (241) -- -- (241)
Six Months Ended June 30, 1996 14 135 109 258
Company's recognition of equity in
earnings and developer fees
Three Months Ended June 30, 1997 841 -- -- 841
Three Months Ended June 30, 1996 455 2 -- 457
Six Months Ended June 30, 1997 1,258 -- -- 1,258
Six Months Ended June 30, 1996 953 267 -- 1,220
SUMMARY OF OPERATING CASH FLOWS:
Cash flows from operating activities
Three Months Ended June 30, 1997 2,371 -- -- 2,371
Three Months Ended June 30, 1996 2,696 -- -- 2,696
Six Months Ended June 30, 1997 2,811 -- -- 2,811
Six Months Ended June 30, 1996 3,743 220 387 4,350
Company's share of cash flows
from operating activities
Three Months Ended June 30, 1997 873 -- -- 873
Three Months Ended June 30, 1996 1,061 -- -- 1,061
Six Months Ended June 30, 1997 1,174 -- -- 1,174
Six Months Ended June 30, 1996 1,358 134 170 1,662
Company's share of operating
cash distributions
Three Months Ended June 30, 1997 4,636 -- -- 4,636
Three Months Ended June 30, 1996 28 -- -- 28
Six Months Ended June 30, 1997 4,967 -- -- 4,967
Six Months Ended June 30, 1996 153 154 -- 307
SUMMARY OF 1996 SALES TRANSACTION:
Six Months Ended June 30, 1996
Gain on Sale $ -- $ -- $39,934 $39,934
Company's Equity and Earnings
Recognition -- -- 14,538 14,538
Total Distribution of Sales
Proceeds -- -- 36,235 36,235
Company's Share of
Sales Proceeds Distribution -- -- 15,165 15,165
(a) Two substantially debt free complexes were refinanced to
provide condominium conversion construction funds and
<PAGE>12
distributions to their owners. The operating revenue, net
income and cash flows are reduced while these units are under
construction. The Company will receive 50% of the profits
generated from the condominium sales and has guaranteed these
loans, which cannot exceed $23,200,000.
Equity method at June 30, 1997: The unconsolidated rental properties
partnerships as of June 30, 1997 include 19 partnerships owning 4,563
rental units in 22 apartment complexes. The Company holds a general
partner interest in these partnerships and generally shares in zero to 5%
of 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.
Lakeside Apartments was placed in service in 1996. The remaining
complexes owned by Alturas Del Senorial Associates Limited Partnership,
Bannister Associates Limited Partnership, Bayamon Gardens Associates
Limited Partnership, Brookside Gardens, Carolina Associates Limited
Partnership, Chastleton Apartments Associates, Coachman's Limited
Partnership, Colinas de San Juan Associates Limited Partnership, Crossland
Associates Limited Partnership, Essex Apartments Associates, Huntington
Associates Limited Partnership, Jardines de Caparra Associates Limited
Partnership, Monserrate Associates Limited Partnership, Monte de Oro
Associates Limited Partnership, New Center Associates Limited Partnership,
San Anton Associates Limited Partnership, Turabo Limited Dividend
Partnership and Valle del Sol Limited Partnership were placed in service
prior to 1995.
Equity method to March 31, 1996: On April 1, 1996, the Company
acquired a controlling interest in four partnerships owning 596 rental
units, Wakefield Third Age L.P., Wakefield Terrace Associates L.P., Palmer
Apartments L.P. and Headen House Associates L.P. Effective April 1, 1996,
the results of operations and balance sheets of these partnerships are
consolidated in the accompanying financial statements.
Properties sold March 15, 1996: In March 1996, the Company completed
the sale of four Puerto Rico apartment properties. The four properties,
Las Americas I, Las Americas II, Las Lomas and Monacillos, totaling 918
units were purchased by non-profit organizations with financing provided by
HUD through capital grants authorized by the Low Income Housing
Preservation and Resident Homeownership Act ("LIHPRHA"). The Company
retained the management contract for these properties.
<PAGE>13
Homebuilding Joint Venture
The Company holds a 50% joint venture interest in Escorial Builders
S.E. Escorial Builders was formed in 1995 to purchase lots from the
Company and construct homes for resale. During 1996 and 1997, it purchased
98 and 118 lots, respectively. The profit on these lots are deferred until
sold by Escorial Builders to a third party. The Company's share of the
losses generated from the pre-sales activity and its investment are
included with the Company's homebuilding operations in the accompanying
financial statement. The table summarizes Escorial Builders' financial
information (in thousands):
Total Total Total Company's
Assets Liabilities Equity Investment
------ ----------- ------ ----------
Summary of Financial Position:
June 30, 1997 $10,828 $9,924 $904 $452
December 31, 1996 5,586 5,047 539 275
Total Net Company's Share
Revenues (Loss) of Net (Loss)
-------- ------ ---------------
Summary of Operations:
June 30, 1997 $ -- $(95) $(48)
June 30, 1996 -- (39) (19)
Company's Share of
--------------------------
Cash Flows Cash Flows
From From Operating
Operating Operating Cash
Activities Activities Distributions
---------- ---------- -------------
Summary of Operating Cash Flows:
June 30, 1997 $(5,630) $(2,815) $--
June 30, 1996 (2,465) (1,232) --
<PAGE>14
(4) DEBT
Debt
The Company's outstanding debt is collateralized primarily by land,
land improvements, housing, receivables, investments in partnerships, and
rental properties. The following table summarizes the indebtedness of IGC
(in thousands):
Outstanding
Maturity Interest ----------------------
Dates Rates June 30, December 31,
From/To From/To 1997 1996
-------- --------- --------- ------------
Related to community development:
Recourse debt Demand/ 9.0%/ $30,652 $34,077
10-28-99 10.0%
Non-recourse debt 08-02-09 P+1.5% 2,258 2,153
Related to investment properties:
Recourse debt Demand 7.35%/ 1,004 1,139
Non-recourse debt 10-01-19/ 6.85%/ 39,308 39,508
10-01-28 8.500%
Related to homebuilding projects:
Recourse debt 08-19-97/ 9.0%/ 242 502
12-21-97 10.0%
General:
Recourse debt Demand/ 7.4%/ 650 630
02-01-01 12.00% ------- -------
Total debt $74,114 $78,009
======= =======
*P = Prime lending interest rate.
As of June 30, 1997, the $30,652,000 of recourse debt related to
community development assets is fully collateralized by substantially all
of the community development assets. Approximately $6,412,000 of this
amount is further secured by investments in apartment rental partnerships.
Principal and interest payments of $1,395,000 on $6,412,000 of debt
outstanding to NationsBank are past due (discussed in Note 4).
As of June 30, 1997, recourse investment property debt is secured by a
letter of credit issued to the Company pursuant to the terms of a sales
contract. The non-recourse investment properties debt is collateralized by
apartment projects and secured by FHA or the Maryland Housing Fund.
Mortgage notes payable of $7,306,000 have stated interest rates of 7.5% and
7.75%. After deducting interest payments provided by HUD, the effective
interest rate over the life of the loan is 1%.
The homebuilding debt is secured by the construction in progress of
two homes.
<PAGE>15
(5) RELATED PARTY TRANSACTIONS
Certain officers, directors and a general partner, IBC, of the Company
have ownership interests in various entities that conducted business with
IGC during the last three years. IBC and these officers, and directors and
their ownership or relationship with the entities engaged in business with
IGC are reflected below:
Partner, Officer or
Director Ownership or Relationship
- ------------------------- --------------------------------------------
IBC, general partner Partner of Chastleton Apartments Associates
("Chastleton"), Coachmans Limited Partnership
("Coachmans"), El Monte Properties S.E. ("El
Monte"), G.L. Limited Partnership ("Rolling
Hills"), Smallwood Village Associates
("SVA"), Smallwood Village Office Building
Associates ("SVOBA"), Village Lake L.P.
("Village Lake"), Equus Gaming Company L.P.
("Equus"); owner of Equus Management Company
("EMC"), Darby Station Limited Partnership
("Darby Station"); member of Deer Valley
Limited Liability Company ("Deer Valley")
James J. Wilson ("JJW"), Shareholder of Wilson Securities Corporation,
Chief Executive Officer ("WSC"); Officer and Director of CP Capitol
and Chairman of the Board Corporation ("CP"), owned by WSC, holder of
of IGC's managing general notes receivable that are secured by the
partner existing general partners' interest in
Capital Park
James M. Wilson ("JMW"), Shareholder, Officer and Director of IBC,
Chief Financial Officer and Advanced Power Systems, Inc. ("APS") and WSC,
Director of IGC's managing Partner of SVOBA; Officer of CP; manager of
general partner Deer Valley
Thomas B. Wilson ("TBW"), Shareholder, Officer and Director of IBC,
Director of IGC's managing APS and WSC; President and Chief Operating
general partner Officer of El Comandante Operating Company
("ECOC"); manager of Deer Valley
Jorge Colon-Nevares, Partner of Twenty First Century Homes S.E.
Director of IGC's managing ("Twenty First Century"); owner of Compri
general partner Caribe Development Corp. ("Compri")
<PAGE>16
Management Services
The management services provided to the related parties described
above are summarized below (in thousands):
REVENUE FOR THE SIX AND THREE MONTH PERIODS ENDED JUNE 30,
---------------------------------------------------------
Three
Six Months Months
---------------------------------------------- ----------
Management Decrease
Related Fees and (Increase) Total Total
Party Interest in Reserve Recognized Recognized
------------- ---------- ---------- ---------- ----------
1997:
Chastleton (c) IBC $ 38 $ 36 $ 74 $ 37
Coachman's (c) IBC 13 15 28 28
Santa Maria WSC 37 -- 37 25
El Monte IBC 51 -- 51 25
Rolling Hills (c) IBC 45 53 98 98
Village Lake (c) IBC 12 16 28 28
Capital Park JJW, JMW 74 -- 74 37
----- ----- ----- -----
$ 270 $ 120 $ 390 $ 278
===== ===== ===== =====
1996:
Chastleton IBC $ 36 $363 $399 $399
Coachman's IBC 18 42 60 60
Santa Maria WSC 41 -- 41 28
El Monte IBC 55 -- 55 29
Rolling Hills IBC 45 -- 45 23
Village Lake IBC 11 -- 11 5
Capital Park JJW, JMW 128 -- 128 61
SVA and SVOBA IBC, JMW, TBW 24 -- 24 10
IBC JMW, TBW 20 -- 20 5
----- ----- ------ -----
$ 378 $ 405 $ 783 $ 620
===== ===== ====== =====
OUTSTANDING RECEIVABLE AT (b)
--------------------------------------------------------------
June 30, 1997 December 31, 1996
------------------------------ ------------------------------
Receivable (a) Reserve Balance Receivable (a) Reserve Balance
-------------- ------- ------- -------------- ------- -------
Chastleton (c) $ 10 $ -- $ 10 $ 47 $ (36) $ 11
Coachman's (c) 4 -- 4 26 (15) 11
Santa Maria 10 -- 10 46 -- 46
El Monte 6 -- 6 40 -- 40
Rolling Hills (c) 24 -- 24 65 (53) 12
Village Lake (c) 12 -- 12 27 (16) 11
Capital Park 25 -- 25 23 -- 23
SVA 15 -- 15 2 -- 2
------ ----- ------ ------ ----- ------
$ 106 $ -- $ 106 $ 276 $(120) $ 156
====== ===== ====== ====== ===== ======
<PAGE>17
(a) The outstanding receivable balances include unpaid management
fees, operating advances, reimbursement due for common
expenses, and interest on those balances.
(b) The aggregate maximum outstanding balance due from these
entities for management and related services at any one time
during the first six months of 1997 and during 1996 was
$297,000 and $1,025, respectively.
(c) During the second quarter of 1997, an affiliate of IBC
purchased the management fees receivable due from Chastleton,
Coachman's, Rolling Hills, and Village Lake for a cash payment
of $190,000. The collection of these receivables had
previously been questionable and they had been fully reserved.
This transaction resulted in income recognition of $190,000.
Office Space Rent
IGC rents executive office space and other property from affiliates
both in the United States and Puerto Rico pursuant to leases that expire
through 2001. Rental expense, net of sublease income, for the six months
ended June, 1997 and 1996 was $66,000 and $64,000, respectively.
In management's opinion, all leases with affiliated persons are on
terms at least as favorable to IGC as that generally available from
unaffiliated persons for comparable property.
Land and Other Sales
The outstanding balance of the two notes receivable for land sales to
Compri as of June 30, 1997 and December 31, 1996 were $3,245,000 and
$3,544,000, respectively. Certain offsite improvements were not completed
as scheduled, prompting a renegotiation of the notes' terms. The Company
agreed to postpone the commencement of interest on two of the notes until
this work is completed or Compri begins construction. During the second
quarter of 1997, the Company established an additional $263,000 discount on
these notes.
In the first six months of 1997, IGC collected the note receivable
balance for land sales to Darby Station that had an outstanding balance of
$1,200,000 at December 31, 1996.
On June 30, 1997, the Company sold 374 acres to Deer Valley for
$3,000,000 and recognized profit of $1,341,000. As payment for this
parcel, the Company received a 20% downpayment and a note receivable for
$2,400,000. Pursuant to the terms of the sales agreement, Deer Valley
agreed to assume the $3,000,000 loan that encumbered this property and
other parcels of land. Upon execution by the lender agreeing to release
the Company of its obligations with respect to this loan, the note
receivable from Deer Valley will be considered paid in full and the
downpayment refunded. Concurrently, IBC, Deer Valley's owner, will make a
$600,000 payment on an outstanding obligation due the Company.
Operations Distributed to Unitholders
The Company's 99% limited partnership interest in Equus was
distributed to its unitholders in February 1995 (the "Equus Distribution").
Since that time through April 1996, the Company continued to manage and
provided certain reimbursable administrative services and support to Equus.
The outstanding receivable balance for these services provided Equus Gaming
<PAGE>18
Company L.P. pursuant to a Master Support and Service Agreement as of June
30, 1997 and December 31, 1996 were $10,000 and $416,000, respectively.
Pursuant to the Transfer Control Agreement effective December 31, 1996
(the "Transfer Agreement"), IGC transferred its remaining interests in and
control over EMC, Equus and Housing Development Associates ("HDA") to IBC.
This included the transfer to IBC of the Company's general partner interest
in Equus, an obligation subject to the approval of Nasdaq Stock Market. In
addition, the Transfer Agreement calls for IGC to issue 75,000 IGC Units to
Equus to satisfy the outstanding employee option and incentive rights to
the employees that were transferred to EMC. As a result of this
transaction and payment of the amounts due IGC, the Company recognized
earnings equal to the negative basis of its investment in Equus.
Other
As of June 30, 1997 and December 31, 1996, IGC owed IBC $40,000 and
$54,000 of unpaid minority interest distributions. During the first six
months of 1997, IGC paid APS the $54,000 collected on a receivable that was
previously sold to APS.
As of June 30, 1997 and December 31, 1996, the outstanding balance due
from IBC related to the pass through of taxable gains was $681,000 and
$881,000, respectively.
In 1994, the Company acquired HDA's minority partner interest. As a
result of this transaction, the Company obtained a note receivable,
including accrued interest, due from ECOC. At June 30, 1997 and December
31, 1996, the outstanding balance due from ECOC was $285,000 and $277,000,
respectively.
During the second quarter of 1997, IGC sold to IBC its 49% limited
partner interest and 90% of its 1% general partner interest in Coachman's.
This transaction resulted in income recognition of $576,000.
(6) COMPANY RESTRUCTURING
Management, together with its advisors, is continuing to develop the
restructuring plan described in the Registrant's 1996 Form 10-K.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations for the Six Months Ended June 30, 1997 and 1996
General. Historically, the Company's financial results have been
significantly affected by the cyclical nature of the real estate industry.
Accordingly, the Company's historical financial statements may not be
indicative of future results. For further information about certain
factors which may affect future income and cash flow, see "Additional
Prospective Information" below.
Community Development Operations. Community development land sales
revenue decreased 45% to $5,619,000 during the first six months of 1997
compared to the first six months of 1996 primarily due to a decrease of
residential lot sales in Puerto Rico. Since these lots are sold to
homebuilders in bulk, there are fewer sales transactions. The timing of
these sales cause fluctuations when comparing quarterly results. The U.S.
<PAGE>19
residential lot sales volume has continued to be unfavorably impacted by
the competitive market conditions and the delay of new development in the
next village, Fairway.
Even though the sales revenues were down, the gross margin during the
first six months of 1997 increased to 37% compared to 29% in the 1996
period. This increase is primarily due to the mix of sales. U.S.
commercial land produce the highest sales prices but require less
development than the business park and residential land. During the 1996
period, 11% of the sales were lots sold at book value as the Company
continued its efforts to reduce its inventory in saturated market areas and
there were no commercial sales. During the comparable 1997 period, there
were no lot sales at book value and 9% of the sales were commercial
parcels. In addition, during the 1997 period, 53% of the sales revenue was
generated by an undeveloped bulk parcel with a low acquisition cost.
Homebuilding Operations. Revenues from home sales have continued to
decline as the Company phased out its tract homebuilding and competition
increased. The number of homes sold decreased 35% during the first six
months of 1997 as compared to the first six months of 1996 primarily due to
the phase out of its tract homebuilding operations. The gross profit
margins decreased to 3% during the first six months of 1997 as compared to
6% in the comparable 1996 period. During the six months ended June 30,
1997, the Company closed seven homes that incurred additional costs to cure
non-reoccurring construction problems.
Rental Property Revenues and Operating Results. Rental property
revenues and operating expense include the results of operations of three
consolidated apartment projects for the first three months of 1996 and
seven partnerships for the second quarter of 1996 and the first and second
quarter of 1997. The additional four partnerships became majority-owned in
April 1996 through acquisitions of additional limited partnership units.
Equity in Earnings from Partnerships and Developer Fees. Equity in
earnings decreased to $1,259,000 during the first six months of 1997 from
$15,758,000 during the first six months of 1996. This decrease was
primarily due to the $14,538,000 earned on the LIHPRHA sale during the 1996
period and the elimination of the equity in earnings in the four
partnerships consolidated during the 1997 period.
Management and Other Fees. Management and other fees decreased 31% in
the first six months of 1997 compared to 1996. This was due primarily to
special management fees of $1,362,000 earned in the first quarter of 1996
from the LIHPRHA transaction and $619,000 earned from the refinancing of
two apartment complexes in the first six months of 1997.
Interest Expense. Interest expense decreased $1,121,000 during the
first six months of 1997 compared to the same period in 1996. The $500,000
of loan fees incurred during the first six months of 1996 and a $7,874,000
decrease in outstanding debt contributed to this decrease. In addition,
the amount of debt associated with assets not under development was lower
during the 1997 period as compared to the same period in 1996.
General and Administrative Expense. General and administrative
expenses decreased by $681,000 in the first six months of 1997 compared to
the same period in 1996 as a result of management's continued focus on cost
efficiency and the reduction of these expenses.
<PAGE>20
Results of Operations for the Three Months Ended June 30, 1997 and 1996
Community Development Operations. Community development land sales
revenue decreased 39% to $4,170,000 during the three months ended June 30,
1997 compared to the same period in 1996 primarily due to a decrease in
residential lot sales in Puerto Rico as discussed above.
The gross profit margins increased during the three months ended June
30, 1997 to 37% compared to 34% in 1996 due to the mix of sales. The gross
profit margins on the residential and commercial land have remained stable.
Homebuilding Operations. Revenues from home sales decreased 39%
during the second quarter of 1997 compared to the same period in 1996. The
number of homes sold decreased 32% in the second three months of 1997
compared to 1996. These reductions were primarily due to the phase out of
the tract homebuilding operations. The gross profit margins decreased
during the second three months of 1997 to .6% compared to 10% earned during
the same period in 1996. During the six months ended June 30, 1997, the
Company incurred additional costs to cure non-reoccurring construction
problems on seven homes.
Rental Property Revenues and Operating Results. The rental properties
income increased 5% during the three months ended June 30, 1997 as compared
to the same period in 1996 primarily due to reduced vacancies during the
1997 period.
Equity in Earnings from Partnerships and Developer Fees. Equity in
earnings increased to $412,000 during the second three months of 1997
compared to the same period in 1996. This increase was primarily due to
the income recognition from the sale of substantially all of the Company's
ownership interest in Coachman's.
Management and Other Fees. Management and other fees decreased 13% or
$136,000 in the second three month period ended June 30, 1997 as compared
to the 1996 period. During the 1996 period a greater amount of reserved
management fees were recovered than during the same period in 1997. The
termination of the management contracts for HDA and the commercial projects
owned by IBC also contributed to this decrease, which was offset in part by
special management fees earned from the supervision of the condominium
conversions during the 1997 period.
Interest Expense. Interest expense decreased $305,000 in the second
quarter of 1997 compared to the same period in 1996 primarily due to a
$7,874,000 decrease in outstanding debt from June 30, 1996 to June 30,
1997.
General and Administrative Expense. General and administrative
expenses increased $294,000 in the second three months of 1997 compared to
1996. This increase is primarily attributable to the increased discount
established on the Compri note receivable as discussed in Note 5 to the
accompanying financial statements.
Liquidity and Capital Resources
See Note 2 on page 9 of this Form 10-Q.
<PAGE>21
Additional Prospective Information
The following discussion contains statements that may be considered
forward looking that involve a number of risks 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
overbuilt 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. In addition, Charles County was targeted
as a new growth area. New developers and homebuilders attracted to this
area built-up their inventories in anticipation of this growth. As a
result, the local market's inventories remain high and profit margins are
thin.
The housing markets in St. Mary's and Charles County are anticipated
to be favorably impacted by the expansion of the Patuxent River Naval Air
Warfare Center in St. Mary's County. This expansion will create 13,000
jobs within the next few years. Management anticipates the light
industrial and business park land sales to increase after the absorption of
the excess inventory in the region. Currently, the Company has seen
increased interest in its U.S. commercial land. The Puerto Rico
residential and commercial market has remained stable.
Traditionally, the Company has realized the value of its land assets
by selling parcels in fee simple transactions, by taking back notes or
through option agreements on residential lots in which lot prices escalate
at predetermined rates. On occasion, it also has participated in joint
ventures by contributing land at its appraised value in exchange for a
combination of cash at settlement and/or a percentage of the partnership's
cash flow. As a result of its restructuring as disclosed in its latest
Form 10-K, the Company may find joint ventures as the best strategy to
maximize long-term returns, especially on its commercial land.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material changes in the legal proceeding described
in the Registrant's 1996 Form 10-K.
<PAGE>22
ITEM 2. MATERIAL MODIFICATIONS OF RIGHTS OF REGISTRANT'S SECURITIES
Principal and interest payments of $1,395,000 on $6,412,000 of debt
are past due. The Company expects to complete the refinancing of this debt
by August 31, 1997. The $6,412,000 was subsequently paid in full.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
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) Real Estate Sales Contract between Filed herewith
American Family Homes, Inc. and Deer
Valley Limited Liability Company dated
June 30, 1997
10(b) Agreement of Purchase and Sale between Filed herewith
Interstate Business Corporation and
Interstate General Company L.P. dated
June 30, 1997 for the Partnership
Interest in:
Coachman's Limited Partnership
10(c) Agreement of Purchase and Sale between Filed herewith
A.P.S. Associates Limited Partnership
and Interstate General Company L.P.
dated June 30, 1997
(b) None.
<PAGE>23
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, 1997 By: /s/ James J. Wilson
----------------- -----------------------------
James J. Wilson
Chairman and Chief
Executive Officer
Dated: August 14, 1997 By: /s/ J. Michael Wilson
----------------- -----------------------------
J. Michael Wilson
Vice Chairman, Chief Financial
Officer and Director
Dated: August 14, 1997 By: /s/ Cynthia L. Hedrick
----------------- -----------------------------
Cynthia L. Hedrick
Vice President and Controller
<PAGE>
<PAGE>24
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
10(a) Real Estate Sales Contract between American Family Homes,
Inc. and Deer Valley Limited Liability Company dated June
30, 1997
10(b) Agreement of Purchase and Sale between Interstate Business
Corporation and Interstate General Company L.P. dated June
30, 1997 for the Partnership Interest in Coachman's Limited
Partnership
10(c) Agreement of Purchase and Sale between A.P.S. Associates
Limited Partnership and Interstate General Company L.P.
dated June 30, 1997
<PAGE>1
Exhibit 10(a)
REAL ESTATE SALES CONTRACT
THIS CONTRACT, made as of this 30th day of June, 1997, by and between
American Family Homes, Inc. ("Seller") and Deer Valley Limited Liability
Company, or assigns ("Purchaser").
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants of Seller
and Purchaser and for other good and valuable consideration, the receipt
and sufficiency of which Seller acknowledges, Seller and Purchaser agree as
follows:
1. Agreement of Sale and Purchase. Seller agrees to sell and
convey to Purchaser and Purchaser agrees to purchase from Seller, in fee
simple absolute, under terms and conditions set forth below, all that
parcel of land containing 373.663 acres located on the West side of
Middletown Road and the East side of Mill Hill Road, Charles County,
Maryland, and known as the Middletown Property, hereinafter collectively
referred to as the Property, more particularly described and shown as
Exhibit A, attached hereto and made a part hereof.
2. Purchase Price. The Purchase Price for the Property is Three
Million Dollars ($3,000,000.00) (the "Purchase Price"), which Purchase
Price shall be paid by Purchaser's assumption of Seller's obligations under
the loan documents evidencing and securing that certain loan (the "Loan")
in the original principal amount of $4,000,000.00, made by Banco Popular de
Puerto Rico (the "Lender") to Seller on or about December 5, 1995. The
Loan is secured by, inter alia, the Property.
3. Payment of Purchase Price. The total purchase price for the
property shall be paid as follows:
Assumption of Three Million Dollar ($3,000,000.00) debt of
Banco Popular, currently encumbering this property and the
release of Interstate General Company L.P. from the debt and
the release of the Pomfret property from this debt. The
balance of the purchase price, if any, will be paid in cash
within thirty (30) days of the receipt of the updated
appraisal.
4. Title. The Property purchased hereunder shall be conveyed by
Seller with good and marketable title of record and in fact, in fee simple,
free and clear of all liens and encumbrances of any kind, except for the
Banco Popular Deed of Trust assumed above and except covenants, conditions,
easements and restrictions of record. At Closing, conveyance of the
Property to the Purchaser shall be effected by a good and sufficient
special warranty deed.
5. Settlement. The Purchaser agrees to settle on the Property no
later than June 30, 1997. Settlement on the land shall take place at the
offices of the Purchaser's choosing. TIME IS OF THE ESSENCE.
6. Failure to Deliver Title. Should Seller be unable to deliver
title in accordance with the provisions of this Agreement or any extension
of time agreed upon by the parties, it is agreed that Purchaser's liability
shall terminate; provided, however, that if the defects of title are of
<PAGE>2
such nature that they can readily be remedied by legal action, such action
shall be promptly undertaken by Seller, at its expense, and the time of
Closing extended for a period not to exceed sixty (60) days for such
action.
7. Use of Property. Purchaser represents and warrants that it is
acquiring the Property for the purpose of developing it for residential
units. The property is transferred hereunder in "As-Is" condition as of
the date of this Agreement. Seller makes no warranty as to the property's
use or condition.
8. Seller's Representations and Warranties.
A. Seller represents and warrants that (I) it is the owner of
record and in fact, legally and beneficially, of the Property, (ii)
it has the right to sell said Property without the agreement of any
other person and (iii) it has title that is good and marketable, and
not subject to any liens, encumbrances, leases, covenants,
conditions, restrictions, rights of way, easements or other matters
affecting title which would interfere with Purchaser's intended
development of the Property.
9. Purchaser's Representations and Warranties.
A. Purchaser is a corporation duly organized and
validly existing under the laws of the State of Maryland and is
qualified to do business in the State of Maryland.
B. Purchaser and its officers have full right and
authority to execute this Purchase Agreement.
10. Adjustments and Costs. Taxes, metropolitan district charges,
front footage or other benefit charges or assessments charged on an annual
or other periodic basis by any State, County, District, Commission or any
agency or subdivision thereof shall be adjusted and prorated to the date of
Closing, except that assessments for improvements existing in or on the
Property prior to the date of Closing, whether or not levied or even if
payable thereafter, shall be paid by the Seller. The cost of all
documentary stamps, transfer taxes, or other taxes on the act of transfer
or conveyance required to be paid in full in connection with the transfer
of the Property shall be shared equally. Costs of recordation and title
examination shall be shared equally. Any special Farmland Assessment,
rezoning tax, recapture tax or successor tax shall be paid in full by
Seller.
11. Risk of Loss. The risk of loss or damage to the Property by
fire or other casualty until the deed of conveyance is recorded is assumed
by the Seller.
12. Nondiscrimination.
A. Purchaser agrees that neither it nor anyone authorized to
act for it will refuse to sell or rent, after the making of a bona fide
offer, or refuse to negotiate for the sale or rental of, or otherwise make
unavailable or deny a Lot covered by this Agreement to any person because
of race, color, religion, sex or national origin. This covenant shall also
be included in the final deed of conveyance, shall run with the land and
shall remain in effect without any limitations in time.
<PAGE>3
B. Seller and Purchaser agree that any restrictive covenant
on the Property relating to race, color, religion, sex, or national origin
is recognized as being illegal and void and is specifically disclaimed.
13. Sole Agreement. This Agreement represents the complete
understanding between the parties hereto and supersedes all prior
negotiations, representations or agreements, either written or oral, as to
the matters described herein. This Agreement may be amended only by a
written instrument signed by both parties. No requirements, obligations,
remedy or provision of this Agreement shall be deemed to have been waived,
unless so waived expressly in writing, and any such waiver of any provision
shall not be considered a waiver of any right to enforce such provision
thereafter.
14. Time of the Essence. Time shall be considered of the essence
of this Agreement.
15. Serveability. If any provision of this Agreement shall be held
violative of any applicable law or unenforceable for any reason, the
invalidity or unenforceability of any such provision shall not invalidate
or render unenforceable any other provision hereof which shall remain in
full force and effect.
16. Assignment. Purchaser shall not have the right to assign this
Agreement without the consent of Seller, which consent shall not be
unreasonably withheld.
17. Successors, Assigns and Survival. The covenants, agreements
and conditions herein contained shall inure to the benefits of and bind the
successors and acceptable assigns of the parties hereto. All
representation, warranties, covenants and agreements set forth herein shall
remain operative and shall survive the Closing on the Property and the
execution and delivery of the Deed and shall not be merged therein.
18. Notice. All notices authorized or required herein shall be in
writing and shall be sent by registered or certified mail, return receipt
requested, to Seller or Purchaser at their respective address as set forth
below:
Seller: American Family Homes, Inc.
222 Smallwood Village Center
St. Charles, Maryland 20602
Attention: Edwin L. Kelly
Purchaser: Deer Valley Limited Liability Company
222 Smallwood Village Center
St. Charles, Maryland 20602
Attention: J. Michael Wilson
President
19. Commissions. No real estate commissions are involved in
respect to the sale and purchase of the Property described herein.
20. Governing Law. This Agreement shall be governed by the laws of
the State of Maryland.
<PAGE>4
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under their respective seals as of the day and year first above written.
WITNESS: AMERICAN FAMILY HOMES, INC.
/s/ Martha Haupt By: /s/ Edwin L. Kelly
- ----------------- ----------------------------
Edwin L. Kelly
Director, Vice Chairman
WITNESS: DEER VALLEY LIMITED LIABILITY COMPANY
/s/ Martha Haupt
- ----------------- By: /s/ J. Michael Wilson
----------------------------
J. Michael Wilson
President
<PAGE>5
Exhibit A
Property Description
Parcel 1:
BEGINNING for the same at a white stone fixed on the West side of the
public road leading from Billingsley to Bolton, marking the corner of the
land of John W. F. Bealle heirs, the land formerly owned by Elizabeth Ann
Hamilton, more recently owned by Clarence Atwood Hammond and now owned by
John Sollars, the land formerly owned by Allison Bealle and more recently
owned by J. B. Mattingly and James L. Hicks; thence running with the lines
of the Sollars land South 64 deg. 30 min. East 630 feet to a stone there
fixed; thence South 60 deg. East 612 feet to a cedar stake and iron rod;
thence North 51 deg. 30 min. East 915 feet to an iron rod there fixed;
thence South 48 deg. East 975 feet to an iron road there fixed; thence
South 73 deg. East 298 feet to a stone fixed on the Southeast edge of an
old road, the corner of James Wilson Young lot, formerly part of the JOhn
Hofman land known as "Friend's Hazard"; thence with said land, that is to
say the former John Hofman tract South 49 deg. West 2312 feet to a stone
there fixed, identified by John W. Marshall as a corner of this land, the
said Hofman land and the land of Anthony Winkler; thence with said Winkler
land North 86 deg. West 1207 feet to a stone fixed at the foot of a large
pine tree on the East side of the public road leading to Billingsley to
Bolton, a corner of the land formerly owned by J. B. Mattingly and J. Levi
Cox; thence with the line of said land North 3 deg. 45 min. East 2182 feet
to the point of beginning, containing ninety-five (95) acres, more or less.
and
Parcel "A", containing 2.037 acres, more or less, on a Plat thereof
entitled "Parcel 'A' Osborn" as recorded among the Land Records of Charles
County, Maryland, in Plat Book 32, Folio 130.
Being all of the same land which by Deed dated February 10, 1987, and
recorded among the Land Records of Charles County, Maryland, in Liber 1194,
at Folio 091, was granted unto St. Charles Associates Limited Partnership.
Parcel 2:
Lying and being in the Sixth Election District of Charles County, Maryland.
BEGINNING for the same at an iron pipe found on the northeasterly side of
Mill Hill Road, 60 feet wide, thence binding on said Mill Hill Road for the
following two courses and distances, (1) North 19 deg. 04'16" West, 126.37
feet; (2) North 35 deg. 36'56" West, 537.71 feet to the southwesterly
corner of Lot 1 as shown on the Plat entitled, "Land of Walter C. Ullman,
Jr.", and recorded among the Land Records of Charles County, Maryland in
Plat Book 35, Folio 74; thence binding on the southerly and easterly
outline of said Plat for the following two courses and distances; (3) North
54 deg. 23'04" East, 300.00 feet; (4) North 35 deg. 36'56" West, 451.37
feet to a point on the third or North 77 deg. 17'19" East, 971.16 foot line
of Schedule A described in a Deed dated June 27, 1973 from Charles A.
Ullman, et al, to Imaginative Builders Inc. and recorded among the Land
Records of Charles County, Maryland, in Liber 300, at Folio 160, thence
binding on the third through the fifth lines thereof for the following
three courses and distances; (5) North 65 deg. 26'36" East, 664.73 feet to
a pipe found; (6) North 34 deg. 08'06" West, 427.89 feet to a pipe found;
<PAGE>6
(7) North 67 deg. 14'17" East, 731.68 feet to a pipe found, binding on the
southeasterly outline of the land of Aaron Roemer described in a Deed dated
July 25, 1963 from Sylvia Ward, Trustee, et al, to Aaron Roemer and
recorded among the aforementioned Land Records in Liber No. 1165, at Folio
453; thence continuing on said Roemer land, (8) North 66 deg. 33'22" East,
2143.36 feet to a pipe found at the end of the first or south 72 deg.
08'48" West, 989.75 foot line of a Deed dated November 16, 1981 from George
M. Berry, Jr., et al, to Lester R. Miller, et al, and recorded among the
aforesaid Land Records on Liber 830, at Folio 79; thence binding reversely
on said line, (9) North 64 deg. 01'48" East, 990.23 feet to a pipe found at
the end of the sixth or North 11 deg. 54'16" West, 650.03 foot line of a
Deed dated December 18, 1969 from Delia E. Berry, et al, to the Southern
Maryland Hardwood Lumber Co., Inc. and recorded among the aforementioned
Land Records in Liber 213, at Folio 399; thence binding reversely on the
sixth through the third lines of said Deed for the following four courses
and distances, (10) South 20 deg. 01'27" East, 650.16 feet; (11) South 19
deg. 11'51" East, 191.31 feet; (12) South 14 deg. 10'21" East, 269.95 feet;
(13) South 17 deg. 21'56" East, 1227.12 feet to a pipe found at the
beginning of the second or South 78 deg. 33'West, 756.29 foot line of
Parcel No. 2 described in a Deed dated March 10, 1969 from Lula Bell Reece,
to John Scott Reece, Jr. and recorded among the aforementioned Land Records
in Liber No. 203, at Folio 277; thence binding on said line, (14) South 71
deg 33'05" West, 759.87 feet to a concrete monument found on the northeast
side of an old roadway; thence binding on said roadway for the following
nine courses and distances, (15) South 38 deg. 58'28" East, 94.974 feet;
(16) South 47 deg. 06'26" East, 135.75 feet; (17) South 57 deg. 23'09"
East, 367.29 feet; (18) South 45 deg. 28'41" East, 127.56 feet; (19) South
31 deg. 22'28" East, 163.59 feet; (20) South 48 deg. 45'46" East, 129.21
feet; (21) South 61 deg. 42'17" East, 116.37 feet; (22) South 45 deg.
41'44" East, 140.44 feet; (23) South 30 deg. 58'39" East, 95.03 feet;
thence crossing said old road land binding on the outline of the land of
Hester Henderson for the following two courses and distances, (24) South 35
deg. 09'24" West, 437.84 feet; (25) South 15 deg. 48' 34" West, 195.97 feet
to a point on the twelfth or South 78 deg. 58'27" East, 169.27 foot line of
a Deed dated March 29, 1978 from Alberta Blair to Billy E. Stark, et ux and
recorded among the aforementioned Land Records in Liber No. 565, at Folio
231, thence binding reversely on the twelfth through the seventh lines
thereof for the following six courses and distances; (26) North 85 deg.
56'13" West, 154.07 feet to a pipe found; (27) North 82 deg. 33'57" West,
294.13 feet to a pipe found; (28) North 72 deg. 33'56" West, 174.91 feet to
a pipe found; (29) South 74 deg. 07'09" West, 104.64 feet to a pipe found;
(30) North 85 deg. 48'37" West, 259.88 feet; (31) South 51 deg. 50'36"
West, 490.06 feet to a pipe found; thence binding further on the land of
Charles Ullman, (32) North 74 deg. 18'49" West, 626.22 feet to a pipe found
at the end of the tenth or South 26 deg. 39'24" West, 271.97 foot line of
the aforementioned Deed of Imaginative Builders, Inc.; thence binding
reversely on the second or South 66 deg. 26'30" East, 2604.16 foot line of
a Deed dated April 20, 1967 from Collins-Frizgerald, Inc. to A.M.S. Trading
Company, Inc. and recorded among the aforementioned Land Records in Liber
No. 188, at Folio 74, (33) North 73 deg. 05'19" West, 1264.58 feet to an
axle found at the beginning of the North 67 deg. 15' West, 1090.00 foot
line of the Plat of the Land of "Leroy S. Tice, J.", recorded among the
Land Records of Charles County in Plat Book No. 35, at Folio 129; thence
binding on said Plat, (34) North 73 deg. 51'09" West, 1080.21 feet to the
point of BEGINNING.
<PAGE>7
Saving and excepting therefrom three (3.00) acres of land described in a
Deed dated April 2, 1984 from Charles A. Ullman, et al, to William C.
Simpson, Sr., et ux and recorded among the aforementioned Land Records in
Liber No. 1021, at Folio 186, being subject to a 50 foot wide access right
of way being more fully shown and described on a Plat entitled, "Land of
Charles A. Ullman, et al." and recorded among the Land Records of Charles
County, Maryland, in Plat Book 33, at Folio 30.
Containing a net acreage of 281.56 acres of land, more or less.
And further saving and excepting therefrom Parcel Lettered A, containing
46.13652 acres, more or less, as shown on the Plat of Subdivision entitled
"Parcel 'A' St. Charles Associates Limited Partnership", recorded among the
Land Records of Charles County, Maryland, in Plat Book 43, at Folio 182.
Being a part of the land obtained by St. Charles Associates Limited
Partnership by a Deed dated September 24, 1987, and recorded among the Land
Records of Charles County, Maryland, in Libert 1246, at Folio 505.
Parcel 3:
That piece or pacel of land situated on the Northwest side of "Middletown
Road" leading from Middletown to Maryland Rout 228, containing 16.563
acres, more or less, as more particularly described by courses and
distances in a deed from Alberta Blair, recorded among the Land Records of
Charles County, Maryland in Liber 565, Folio 231, reference to which is
hereby made for the purpose of incorporating herein the description therein
contained, to the same extent as if herein repeated.
and
That piece or parcel of land situated on the Northwest side of "Middleton
Road" leading from Middletown to Maryland Route 228, containing 1.00 acre,
mor or less, as more particularly described by courses and distances in a
deed from Charles R. Blair and Shirley F. Blair, recorded among the Land
Records of Charles County, Maryland, in Liber 565, Folio 233, reference to
which is hereby made for the purpose of incorporating herein the
description therein contained, to the same extent as if herein repeated.
Being all of the land obtained by St. Charles Associates Limited
Partnership, by a Deed dated August 26, 1987, and recorded among the Land
Records of Charles County, Maryland, in Liber 1239, at Folio 475.
Parcel 4:
All those three contiguous lots, tracts, pieces, parcels or subdivisions of
lands and premises, situate, lying and being near what was formerly Berry
Post Office, in the Sixth Election District of Charles County, Maryland,
and according to a survey made by Herbert R. Crowder, dated July 25, 1967,
is more particularly described as follows:
BEGINNING at an iron pipe found at the northeast corner of the land
conveyed to Bennie Huston and Susie May Huston in Liber 164, Folio 370,
said iron pipe being on the westerly side of Middletown Road (30 feet
wide), thence running with said land of Huston.
North 80 deg. 47'00" West 720.23 feet to an iron pipe found, a corner of
Huston and the residue of the land now or formerly Isaac Cramer; thence
running with said land nor or formerly Cramer.
<PAGE>8
North 80 deg. 56'30" West 779.52 feet to a Stone found, a corner of the
land conveyed to Walter R. DePorter and Amy E. DePorter in Liber 155, Folio
243; thence running with said land.
North 50 deg. 50'12" East 1370.12 feet to an iron rod found, a corner
common to the said land of DePorter and running with said land of Webb.
South 75 deg. 25'04" East 566.15 feet to an iron pipe found on the westerly
side of Middletown Road; thence with said road
South 09 deg. 26'05" West 605.81 feet; thence
South 04 deg. 45'08" West 364.46 feet to the beginning, containing 23.6397
acres, being the property conveyed to Elza C. Huffaker and Marjorie D.
Huffaker in Liber 126, Folio 230, and lying in the Sixth Election District
of Charles County, Maryland.
Being all of the land obtained by St. Charles Associates Limited
Partnership by a Deed dated September 15, 1987, and recorded among the Land
Records of Charles County, Maryland, in Libert 1243, at Folio 513.
Said Parcels 1 through 4, lying and being in the Sixth Election District of
Charles County, Maryland.
<PAGE>1
Exhibit 10(b)
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT is made as of the 30th day of June, 1997, 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 is
otherwise herein expressly provided, the following terms shall have the
following meanings:
1.1 IGC PROPERTY: (a) A forty-nine percent (49%) share of the
limited partnership interests in Coachman's
Limited Partnership, a Maryland limited
partnership; and
(b) A nine-tenths percent (0.9%) share of the
general partnership interests in Coachman's
Limited Partnership, a Maryland limited
partnership;
1.2 PURCHASER: 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
1.3 SELLER: 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
1.4 SETTLEMENT: The consummation of the sale and purchase provided
for in this Agreement to occur as provided in
Article VII hereof.
1.5 IGC PARTNERSHIP: Coachman's Limited Partnership.
1.6 IGC PARTNERSHIP
AGREEMENT: The Partnership Agreement under which the IGC
Partnership is currently organized.
1.7 APPRAISED VALUE: In respect to the IGC Property means the value of
such property as set forth in Exhibit A hereto.
1.8 APPRAISER: Robert A. Stanger & Co., Inc.
<PAGE>2
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
IGC Property; and
(b) in consideration therefor, Purchaser shall pay to the Seller
the amount of One Dollar ($1.00) (the "Purchase Price").
2.2 Appraisal. The Appraiser has determined that the Purchase Price
exceeds the amount which would be distributed to Seller as a Limited and
General Partner of the IGC Partnership in the context of liquidation of its
Partnership. A copy of the appraisal is attached as Exhibit A hereto.
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 limited partnership, organized,
validly existing, and in good standing under the laws of Delaware and
subject to the performance of 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's general partner have full power, authority and legal
right to enter into this Agreement on behalf of Seller; and (iii) no other
party has any rights, title or interest in any of the IGC Property.
3.2 Compliance with Other Instruments, etc. Neither the entering
into this Agreement nor the consummation of the transactions contemplated
hereby will constitute or result in a violation or breach by Seller of its
limited partnership agreement, 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, 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 government instrumentality, which would prevent the
consummation of the transactions contemplated by this Agreement or which
would become a cloud on the title of 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
<PAGE>3
hereto. No approval, consent, order or authorization of, or designation
of, 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 IGC Property.
(a) The percentages of partnership interest of the IGC
Partnership 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 IGC
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 IGC
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 IGC
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 IGC Property, other than as set forth in this Agreement.
(d) 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 final valuation of the IGC Property, and
Seller does not know of any basis for any such litigation, proceeding or
investigation.
(e) Except as disclosed to the Purchaser 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 IGC 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 the IGC Partnership is a
party or by which either the Sellers or the IGC Partnership is bound.
(g) The board of directors of the managing general partner 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.
<PAGE>4
(h) There are no actions or proceedings pending or threatened to
liquidate, reorganize or dissolve the Seller or IGC Partnership.
(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 IGC Property.
(j) All federal, state and local income, withholding, sales,
franchise and other taxes due or payable by the Seller with respect to the
IGC 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 IGC Property or any portion
thereof.
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 corporation 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 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.
<PAGE>5
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
result, subject to the performance by Purchaser 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 government instrumentality, which would prevent the
consummation of the transactions contemplated by this Agreement or which
would become a cloud on the title of 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
of, 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. The Purchaser is not in violation of any order,
judgment, law, statute, regulation or ordinance.
4.5 Authorization. The Board of Directors 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.
5.2 Further assurances; Hold Harmless.
(a) Seller agrees that, upon request of Purchaser, it shall (or
direct the officers and employees of its general partner 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 IGC Property, or to aid in
the prosecution or defense of any rights arising therefrom, all without
further consideration.
<PAGE>6
(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 IGC Property,
(iii) any claim asserted by any of the IGC Partnerships against Purchaser
for any unsatisfied obligation of Seller to any such IGC Partnership,
(iv) any loss or claim arising from any act or failure to act by Seller in
its capacity as general partner of IGC Partnership, (v) any failure to
obtain the consents or the approval referred to 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 IGC Property. Such
assignments shall be substantially in form and substance equivalent to the
Assignment of Partnership Interest and Amendment to the Agreement of
Limited Partnership 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 applicable regulatory 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 and complete such refinancing by
July 31, 1997.
6.2 Property Information. Promptly upon execution and delivery of
this Agreement, Seller shall deliver to Purchaser such information as is
required by Purchaser with respect to the IGC Property.
6.3 Original Documents. At Settlement, Seller shall deliver to
Purchaser all original documents pertaining to the IGC 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 IGC 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 IGC Property, or as to which it may be
subject, shall have been satisfied or otherwise released of record by
Seller, prior to Settlement, or provision satisfactory to Purchaser shall
have been made by Seller for its full and complete release.
<PAGE>7
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 IGC
Partnership Agreement, 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 IGC Partnership shall be deemed to have
consented to the transfers of the IGC Property.
6.8 Conversion of General Partnership Interest. IGC agrees, as soon
as practicable, to obtain approval of HUD to convert Seller's .1% general
partnership interest into a .1% limited partnership interest, and upon such
approval Seller's general partnership interest shall be so converted.
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 June 30,
1997.
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 transaction 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 approvals referred to
in Section 6.1 hereof with respect to any portion of the IGC 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, 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 hereby in which HUD or such other agency or
institution either asserts rights in any portion of the IGC Property or
<PAGE>8
claims which, in the reasonable opinion of Purchaser, may materially reduce
the value of any portion of the IGC Property (any such event being referred
to herein as a "Transfer Defect"), then Purchaser, at its option, may
rescind to purchase the sale of the IGC Property. Promptly upon receipt of
notice of such recision, the Purchase Price shall be returned by the Seller
to the Purchaser.
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 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 IGC Property. In such event the Purchase Price shall be
refunded to the Purchaser by the Seller.
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 the IGC 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.
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
<PAGE>9
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>10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
PURCHASER:
ATTEST INTERSTATE BUSINESS CORPORATION
/s/ Paula S. Biggs By /s/ James Michael Wilson
_____________________________ ___________________________________
Name Paula S. Biggs Name James Michael Wilson
------------------------ -----------------------------------
Its [Assistant] Secretary Its President
-----------------------------------
SELLER:
INTERSTATE GENERAL COMPANY, L.P.
ATTEST By: Interstate General Management
Corporation, general partner
/s/ Paul Resnik By /s/ Edwin L. Kelly
- ----------------------------- ----------------------------------
Name Paul Resnik Name Edwin L. Kelly
------------------------ ----------------------------------
Its [Assistant] Secretary Its President
----------------------------------
<PAGE>
<PAGE>11
Exhibit A
ROBERT A STANGER & CO., INC. 1124 Broad Street
FINANCIAL AND MANAGEMENT CONSULTANTS Shrewsbury, NJ 07702-4314
(908) 389-3600
Fax: (908) 389-1751
(908) 544-0779
June 23, 1997
Independent Members of the
Board of Directors of
Interstate General Company L.P.
222 Smallwood Village Center
St. Charles, Maryland 20602
Gentlemen:
You have advised us that Interstate Business Corporation ("IBC")
intends to enter into a transaction (the "Transaction") with Interstate
General Company L.P. ("IGC") whereby IBC will acquire the general partner
and limited partner interests (the "Coachmans Interest") in Coachmans, L.P.
(the "Partnership") held by IGC, and that the purchase price shall be one
dollar. You have further advised us that the assets of Coachmans, L.P.
include a 104 unit apartment complex based in St. Charles, Maryland, and
other non-real estate assets with an aggregate value of approximately
$200,000. Furthermore, you have advised us that the property is subject to:
i) a first mortgage (the "First Mortgage") with a principal balance
outstanding as of June 15, 1997 of approximately $5,885,000; ii) a working
capital loan (the "Working Capital Loan") due to IBC with an outstanding
balance of approximately $1,308,000; and iii) other liabilities of
approximately $211,000.
The independent members of the Board of Directors of IGC (the
"Independent Directors") have requested that Robert A. Stanger & Co., Inc.
("Stanger") provide its opinion as to the fairness, from a financial point
of view, of the Consideration offered to IGC in the Transaction.
Stanger, founded in 1978, has provided information, research,
investment banking and consulting services to clients located throughout
the United States, including major New York Stock Exchange member firms and
insurance companies and over seventy companies engaged in the management
and operation of partnerships. The investment banking activities of
Stanger include financial advisory services, asset and securities
valuations, industry and company research and analysis, litigation support
and expert witness services, and due diligence investigations in connection
with both publicly registered and privately placed securities transactions.
Stanger, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection
with mergers, acquisitions, and reorganizations and for estate, tax,
corporate and other purposes. In particular, Stanger's valuation practice
principally involves partnerships, partnership securities and the assets
typically owned through partnerships including, but not limited to, real
estate, oil and gas reserves, cable television systems, and equipment
leasing assets.
<PAGE>12
In arriving at the opinion set forth below, we have:
1. Reviewed the financial statements of the Partnership for the year
ended December 31, 1996 and for the quarter ended March 31, 1997;
2. Reviewed the summary appraisal report prepared as of December 31,
1996 by Stanger and including the apartment project known as
Coachman's Landing;
3. Conducted such other inquiries as we deemed appropriate.
To evaluate the fairness from a financial point of view of the
consideration, we observed that: i) the appraised value of the real estate
asset of the Partnership known as Coachman's Landing was $6,560,000 as of
December 31, 1996, as determined by Stanger; ii) the value of the non-real
estate assets of the Partnership as determined by management of IGC was
approximately $200,000; iii) the aggregate liabilities of the Partnership
approximates $7,404,000 and include the balance outstanding on the First
Mortgage of approximately $5,885,000, the Working Capital Loan of
approximately $1,308,000, and other liabilities of approximately $211,000;
iv) the total liabilities of $7,404,000 exceed the value of the underlying
assets of approximately $6,760,000 by approximately $644,000; v) the First
Mortgage and the Working Capital Loan are senior to, in all respects,
distributions to Limited and General Partners of the Partnership; and vi)
the Consideration exceeds the amount which would be distributed to IGC as a
Limited Partner and General Partner of the Partnership in the context of a
liquidation of the Partnership.
In rendering this opinion, we have not made an independent evaluation
or appraisal of the non-real estate assets and liabilities of the
Partnership. We have also relied on the assurance of IGC and the
Partnership that: the calculations made to determine allocations, within
the Partnership, between the General Partners, and Limited Partners are
consistent with the Partnership's partnership agreement; that any financial
projections of pro forma statements or adjustments provided to us were
reasonably prepared or adjusted on bases consistent with actual historical
experience or reflected the best currently available estimates and good
faith judgments; that no material changes have occurred in the value of the
Partnership's real estate asset between the date of the appraisal and the
date of this Opinion; and that IGC and the Partnership are not aware of any
information or facts regarding the Partnership that would cause the
information supplied to us to be incomplete or misleading.
We have not been requested to, and therefore did not: (i) select the
method of determining the Consideration offered; (ii) make any
recommendation to IGC with respect to whether to accept or reject the
Transaction; or (iii) express any opinion as to the business decision to
accept or reject the Transaction, alternatives to the Transaction or tax
factors resulting from the Transaction. Our opinion is based on business,
economic, real estate and securities markets, and other conditions as could
be evaluated as of the date of our analysis and addresses the Transaction
in the context of information available as of the date of our analysis.
Events occurring after that date may materially affect the assumptions used
in preparing the opinion.
<PAGE>13
Based upon and subject to the foregoing, and in reliance thereon, it
is our opinion that as of the date of this letter the Consideration offered
in the Transaction is fair to IGC from a financial point of view.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis of summary description. We
have advised the Independent Members and IGC that our entire analysis must
be considered as a whole and that selecting portions of our analysis and
the factors considered by us, without considering all analyses and factors,
could create an incomplete view of the evaluation process underlying this
opinion.
Sincerely,
Robert A. Stanger & Co., Inc.
Shrewsbury, New Jersey
June 23, 1997
<PAGE>
<PAGE>14
Exhibit B
OWNERSHIP INTEREST IN COACHMAN'S LIMITED PARTNERSHIP
GENERAL PARTNERSHIP INTEREST PERCENTAGE
- ---------------------------- ----------
Interstate Business Corporation 1%
Interstate General Company L.P. 1%
LIMITED PARTNERSHIP INTEREST
- ----------------------------
Interstate Business Corporation 49%
Interstate General Company L.P. 49%
<PAGE>
<PAGE>15
Exhibit C
ASSIGNMENT OF PARTNERSHIP INTEREST
AND AMENDMENT TO THE CERTIFICATE OF
LIMITED PARTNERSHIP OF
COACHMAN'S LIMITED PARTNERSHIP
This Agreement is made as of the 30th day of June, 1997, by and
between Interstate Business Corporation, a Delaware corporation ("IBC") and
Interstate General Company L.P., a Delaware Limited Partnership ("IGC").
WHEREAS, IGC is a 1% general partner and a 49% limited partner in
Coachman's Limited Partnership, a Maryland Limited Partnership, (the
"Partnership"); and
WHEREAS, IBC is a 1% general partner and a 49% limited partner in
the Partnership; and
WHEREAS, IGC wishes to assign its 49% limited partnership
interest and 90% of its general partnership interest in the Partnership to
IBC and to amend the Certificate of Limited Partnership of the
Partnership as amended and restated (the "Partnership Certificate") to
reflect the assignment of the general and limited partnership interest from
IGC to IBC.
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. IGC does hereby sell, transfer, assign, and
convey to IBC all of its right, title and interest in and to 90% of its
general partnership interest and its full 49% limited partnership interest
including but not limited to IGC's interest in the capital or income of the
Partnership attributable to the .9% general partnership interest and the
49% limited partnership interest in the Partnership.
2. Acceptance of Assignment. IBC does hereby accept the
assignment as provided for in Section 1 and by this agreement becomes the
owner of the additional .9% general partnership interest and the 49%
limited partnership interest in the Partnership.
3. Amendment of Partnership Certificate. The Partnership
Certificate is hereby amended to substitute IBC for IGC as the owner of an
additional .9% general partnership interest and the 49% limited partnership
interest in the Partnership.
4. Effective Date. This agreement shall be effective as of
June 30, 1997. IBC and IGC do hereby agree that as between themselves all
rights and obligations created pursuant to this agreement shall be created
as of June 30, 1997, notwithstanding the provisions of any other agreements
to which such parties may be bound which require that the consent of
persons or entities other than IBC and IGC be obtained prior to the
transfer of the limited partnership interest in the Partnership. (The
parties understand that a transfer of partnership interests may require HUD
<PAGE>16
approval.) In confirmation of this agreement IBC and IGC agree that IBC
may sue IGC in law, or in equity, to require IGC to pay over to it any
distributions, whether such distributions are in the nature of capital or
income, made by the Partnership to IGC in respect of the .9% general
partnership interest and the 49% limited partnership interest in the
Partnership. All provisions dealing with the rights and obligations by and
between IBC and IGC in respect of the .9% general partnership interest and
the 49% limited partnership interest in the Partnership shall take effect
as of June 30, 1997, notwithstanding the failure of any other parties to
approve this agreement prior to such date.
5. Representations and Warranties of IGC and IBC.
(a) 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, 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 IGC and enforceable against IGC in accordance
with its terms. IGC also represents and warrants that it has made no
assignment or attempted assignment of the .9% general partnership interest
and the 49% limited partnership interest in the Partnership other than the
assignment contemplated by this agreement and that, on June 30, 1997,
provided this agreement has been executed by IBC and IGC, good and
marketable title to the .9% general partnership interest and the 49%
limited partnership interest in the Partnership will be assigned in
accordance with the terms of this agreement to IBC.
(b) 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 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 IBC and enforceable against IBC 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. 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.
<PAGE>17
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.
11. 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.
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 30th day of June, 1997.
MANAGING GENERAL PARTNER:
INTERSTATE GENERAL COMPANY, L.P.
By: INTERSTATE GENERAL MANAGEMENT
CORPORATION
General Partner
ATTEST:
By: /s/ Paul Resnik By: /s/ Edwin L. Kelly
----------------------- ---------------------------
Print Name: Paul Resnik Print Name: Edwin L. Kelly
--------------- -------------------
Title: Asst. Secretary Title: President
------------------ ------------------------
[CORPORATE SEAL]
GENERAL PARTNER:
INTERSTATE BUSINESS CORPORATION
ATTEST:
By: /s/ Paula S. Biggs By: /s/ J. Michael Wilson
----------------------- ---------------------------
Print Name: Paula S. Biggs Print Name: J. Michael Wilson
--------------- -------------------
Title: Asst. Secretary Title: President
------------------ ------------------------
[CORPORATE SEAL]
<PAGE>18
WITHDRAWING LIMITED PARTNER:
INTERSTATE GENERAL COMPANY, L.P.
By: INTERSTATE GENERAL MANAGEMENT
CORPORATION
General Partner
ATTEST:
By: /s/ Paul Resnik By: /s/ Edwin L. Kelly
----------------------- ---------------------------
Print Name: Paul Resnik Print Name: Edwin L. Kelly
--------------- -------------------
Title: Asst. Secretary Title: President
------------------ ------------------------
[CORPORATE SEAL]
LIMITED PARTNER:
INTERSTATE BUSINESS CORPORATION
ATTEST:
By: /s/ Paula S. Biggs By: /s/ J. Michael Wilson
----------------------- ---------------------------
Print Name: Paula S. Biggs Print Name: J. Michael Wilson
--------------- -------------------
Title: Asst. Secretary Title: President
------------------ ------------------------
[CORPORATE SEAL]
STATE OF MARYLAND )
) ss:
COUNTY OF CHARLES )
I, Martha Haupt, a Notary Public in and for the jurisdiction
aforesaid, hereby certify that Edwin L. Kelly, who is personally well known
to me to be the person who executed the foregoing instrument as President
of Interstate General Management Corporation, General Partner of Interstate
General Company L.P., Managing General Partner in the foregoing instrument,
personally appeared before me and acknowledged that he executed the
foregoing instrument in his capacity as such officer for the uses and
purposes therein contained.
WITNESS my hand and notarial seal this 26th day of June, 1997.
/s/ Martha Haupt
---------------------------------
Notary Public
My Commission Expires: 02-01-01
<PAGE>19
STATE OF MARYLAND )
) ss:
COUNTY OF CHARLES )
I, Mary Louise Sanders, a Notary Public in and for the jurisdiction
aforesaid, hereby certify that James Michael Wilson, who is personally well
known to me to be the person who executed the foregoing instrument as
President of Interstate Business Corporation, General Partner in the
foregoing instrument, personally appeared before me and acknowledged that
he executed the foregoing instrument in his capacity as such officer for
the uses and purposes therein contained.
WITNESS my hand and notarial seal this 26th day of June, 1997.
/s/ Mary L. Sanders
---------------------------------
Notary Public
My Commission Expires: 01-10-01
STATE OF MARYLAND )
) ss:
COUNTY OF CHARLES )
I, Martha Haupt, a Notary Public in and for the jurisdiction
aforesaid, hereby certify that Edwin L. Kelly, who is personally well known
to me to be the person who executed the foregoing instrument as President
of Interstate General Management Corporation, General Partner of Interstate
General Company L.P., Withdrawing Limited Partner in the foregoing
instrument, personally appeared before me and acknowledged that he executed
the foregoing instrument in his capacity as such officer for the uses and
purposes therein contained.
WITNESS my hand and notarial seal this 26th day of June, 1997.
/s/ Martha Haupt
---------------------------------
Notary Public
My Commission Expires: 02-01-01
STATE OF MARYLAND )
) ss:
COUNTY OF CHARLES )
I, Mary Louise Sanders, a Notary Public in and for the jurisdiction
aforesaid, hereby certify that James Michael Wilson, who is personally well
known to me to be the person who executed the foregoing instrument as
President of Interstate Business Corporation, Limited Partner in the
foregoing instrument, personally appeared before me and acknowledged that
he executed the foregoing instrument in his capacity as such officer for
the uses and purposes therein contained.
WITNESS my hand and notarial seal this 26th day of June, 1997.
/s/ Mary L. Sanders
---------------------------------
Notary Public
My Commission Expires: 01-10-01
<PAGE>1
Exhibit 10(c)
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT is made effective for all purposes as of the 30th day
of June, 1997, by and between Purchaser and IGC (such parties being
hereinafter defined).
ARTICLE I
Definitions
As used in this Agreement, unless the context otherwise requires or is
otherwise herein expressly provided, the following terms shall have the
following meanings:
1.1 PURCHASE PRICE: One Hundred Ninety Thousand One Hundred Fifty-five
Dollars (190,155.00)
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 SETTLEMENT: The consummation of the sale and purchase provided
for in this Agreement to occur as provided in
Article VII hereof.
1.5 IGC PROPERTY: Management fees receivable (payable to IGC) from
each of the entities listed on Exhibit A.
ARTICLE II
Sale and Purchase
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
Purchaser shall purchase the IGC Property.
ARTICLE III
Representations and Warranties of IGC
IGC represents and warrants to Purchaser that as of the date of the
execution of this Agreement, and as of the date of Settlement:
<PAGE>2
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 D, 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.
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 C 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 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 management fees 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 D, neither tha 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, violated 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
<PAGE>3
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) 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.
(f) 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.
(g) 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.
ARTICLE IV
Representations and Warranties of Purchaser
Purchaser represents and warrants to IGC 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 Advanced 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 of its obligations under
Section 6.1 hereof, of any contract or other instrument to which it is a
<PAGE>4
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
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. 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
government instrumentality which would prevent the consummation of the
transactions contemplated by this Agreement 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 of, 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 the 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 and IGC 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 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 evidence protect or
record the right or title of Purchaser to the IGC Property, or to aid in
the prosecution or defense of any rights arising therefrom, all without
further consideration.
<PAGE>5
(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.
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 agrees to fulfill such
conditions:
6.1 Instruments of Conveyance. Seller shall execute and deliver to
the Purchaser an appropriate assignment of the IGC Property. Such
assignment shall be substantially in form and substance equivalent to the
Assignment attached hereto as Exhibit B. The assignment contemplated
herein may be subject to the approval of any regulatory or governmental
agencies having jurisdiction over IGC (provided, however, that such
approval need not be received prior to settlement hereunder). IGC shall
obtain all such approvals by ______________________, 1997.
6.2 Satisfaction of Liens. Except as contemplated in Section 6.1,
any and all liens, of any type whatsoever, with respect to the IGC
Property, or as to which it may be subject, shall have been satisfied or
otherwise released of record by IGC, prior to Settlement, or provision
satisfactory to Purchaser shall have been made by IGC for its full and
complete release.
6.3 Settlement Representations and Warranties. At Settlement, each
of the representations and warranties of IGC 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 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.
ARTICLE VII
Settlement
7.1 Settlement. Settlement shall take place in the office of the
Purchaser's designated legal counsel as of the effective date established
by this Agreement.
<PAGE>6
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 IGC 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.
8.2 Seller's Default. If the transaction herein contemplated shall
not be consummated on the date of Settlement because of one or more default
hereunder by IGC, 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 approvals referred to
in Section 6.1 hereof with respect to any portion of the IGC 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, 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 claims
which, in the reasonable opinion of Purchaser, may materially reduce the
value of any portion of the IGC Property (any such event being referred to
herein as a "Transfer Defect"), then Purchaser, at its option, may rescind
to purchase the sale of the IGC Property. Promptly upon receipt of notice
of such recision, the Purchase Price will be reduced by the value (as shown
on Exhibit A hereto) of the portion of the IGC Property as to which the
Purchaser has rescinded this Agreement, and the remainder of the IGC
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 or otherwise is deprived of any
material inducement to its willingness to enter into and perform this
Agreement, Purchaser, by notice to IGC, 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
<PAGE>7
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.
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 applications 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 and IGC each hereby warrant and
represent to the 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>8
IN WITNESS WHEREOF, the parties hereto have executed this agreement
the day and year first above written.
IGC:
INTERSTATE GENERAL COMPANY L.P.
By: Interstate General Management
Corporation, its general
partner
ATTEST
/s/ Cynthia L. Hedrick By: /s/ Edwin L. Kelly
_____________________________ _________________________________
Name: Cynthia L. Hedrick Name: Edwin L. Kelly
---------------------- ---------------------------------
Its: President
---------------------------------
PURCHASER:
A.P.S. ASSOCIATES LIMITED
PARTNERSHIP
ATTEST By: Advanced Power Systems, Inc.,
its general partner Corporation,
its General Partner
/s/ Paula S. Biggs By: /s/ J. Michael Wilson
- ----------------------------- ---------------------------------
Name: Paula S. Biggs Name: J. Michael Wilson
------------------------ ---------------------------------
Its: President
---------------------------------
<PAGE>
<PAGE>9
Exhibit A
INTERSTATE GENERAL COMPANY L.P.
MANAGEMENT FEES RECEIVABLE
AT JUNE 30, 1997
CHASTLETON $ 38,120
COACHMAN'S 28,218
ROLLING HILLS (GLLP) 97,308
VILLAGE LAKE 26,509
--------
$190,155
<PAGE>
<PAGE>10
Exhibit B
ASSIGNMENT
This ASSIGNMENT (the "Assignment") is made effective for all
purposes as of this 30th day of June, 1997, by and between Interstate
General Company L.P., a Delaware limited partnership ("Assignor") and the
A.P.S. Associates Limited Partnership, a Delaware limited partnership
("Assignee").
WITNESSETH:
WHEREAS, Assignor is entitled to receive payment of management
fees described on Exhibit A hereto (the "Management Fees"); and
WHEREAS, Assignor has, pursuant to the terms of that certain
Agreement of Purchase and Sale of even date herewith, for legally
sufficient consideration, agreed to assign all of its right, title and
interest in and to the Management Fees to Assignee; and
WHEREAS, Assignee has agreed to accept such assignment.
NOW, THEREFORE, in consideration of the sum of Ten Dollars
($10.00) and other good and valuable consideration, in hand paid, the
receipt and legal sufficiency of which are hereby acknowledged by the
undersigned, the parties hereto agree as follows:
1. The foregoing recitals, and all exhibits hereto, are herein
fully incorporated by this reference.
2. Assignor does hereby sell, transfer, set over and convey
unto Assignee all of Assignor's right, title and interest in and to the
Management Fees.
3. Assignee hereby accepts the foregoing assignment.
4. This Assignment may be executed in counterparts, each of
which shall be deemed an original, and all of which taken together shall
constitute one assignment.
5. This Assignment shall be fully effective as of the date
first hereinabove set forth to transfer to the Assignee all of the
Assignor's right, title and interest in and to the Management Fees.
<PAGE>11
IN WITNESS WHEREOF, Assignor and Assignee have caused this
Assignment to be executed by their duly authorized representatives, all
effective as of the day and year first above written.
ASSIGNOR:
INTERSTATE GENERAL COMPANY L.P.
By: Interstate General Management
Company, its general partner
By /s/ Edwin L. Kelly
-----------------------------
Name Edwin L. Kelly
Its President
ASSIGNEE:
A.P.S. ASSOCIATES LIMITED PARTNERSHIP
By: Advanced Power Systems, Inc., its
general partner
By /s/ J. Michael Wilson
-------------------------------
Name J. Michael Wilson
Its President
<PAGE>
<PAGE>12
Exhibit C
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 to claim 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 to repay to the Company any excess school
impact fees paid. The Company seeks $5,500,000, 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 its County Commissioners in the Circuit Court for
Charles County to enforce another provision of the 1989 settlement
agreement. The Company claims that the County has failed 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, which was affirmed in 1995 by the
Court of Special Appeals of Maryland. The judgment requires the County to
conduct the appropriate water and sewer connection fee study. 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 1994, the U.S. Attorney for the District of Maryland ("U.S.
Attorney") commenced a federal grand jury investigation regarding actions
by IGC in developing certain parcels in St. Charles, Maryland. The parcels
were identified by the U.S. Army Corps of Engineers (the "Corps") as
wetlands within its regulatory jurisdiction. In October 1995, the grand
jury issued an indictment charging IGC, SCA and IGC's Chairman, James J.
Wilson, with four felony and four misdemeanor counts of violations of
Section 404 (wetlands) of the U.S. Clean Water Act. The charges related to
discharge of fill materials into wetlands within the Corps' regulatory
jurisdiction without a permit. The violations were charged to have
occurred on four parcels totaling approximately 50 acres out of the
approximately 4,400 acres IGC had developed in St. Charles. At the same
time, the U.S. Attorney filed a civil action charging nine separate civil
violations of the U.S. Clean Water Act. On February 29, 1996, IGC, SCA and
Mr. Wilson were convicted on the four felony counts. On June 17, 1996, Mr.
Wilson was sentenced to 21 months imprisonment, one year of supervised
release and a $1,000,000 fine. IGC and SCA were jointly fined $3,000,000,
placed on probation for five years and ordered to implement a wetlands
restoration and mitigation plan, which the Company's engineers estimate
would cost $2,000,000. The civil action was dismissed without prejudice.
Appeals were filed with the U.S. Court of Appeals for the Fourth Circuit
("Appeals Court"), and Mr. Wilson's prison sentence was stayed pending the
outcome of the appeals. The Appeals Court heard the oral arguments on
March 3, 1997, and a ruling is expected during the second quarter of 1997.
Management believes the Company and Mr. Wilson have numerous substantial
grounds for the appeal.
<PAGE>
<PAGE>13
Exhibit D
1. IGCLP has assigned to NationsBank, N.A. (the "Bank") a security
interest in the Management Fees set forth on Exhibit A as a receivable
from Chastleton (the "Chastleton Management Fees") pursuant to that
certain Assigment and Pledge of Management Fees (Real Estate
Partnerships/IGC), dated July _____ [sic], 1994, between IGCLP and the
Bank (the "Management Fees Assignment").
2. IGCLP has assigned to the Bank a security interest in the Management
Fees set forth on Exhibit A as a receivable from Coachman's
("Coachman's Management Fees") pursuant to the Management Fees
Assignment.
The parties agree that the purchase and sale of the Chastleton Management
Fees and the Coachman's Management Fees pursuant to this Agreement is
conditioned upon the consent to the Bank to such purchase and sale by the
Bank. If such consent is not received within ten (10) business days of the
date hereof, this Agreement and any assignments made pursuant to this
Agreement shall be rescinded and made null and void with respect to the
Chastleton Management Fees and the Coachman's Management Fees, and IGC
shall return to Purchaser that portion of the Purchase Price which is
attributable to the Chastleton Management Fees and the Coachman's
Management Fees, as set forth on Exhibit A.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,475<F1>
<SECURITIES> 0
<RECEIVABLES> 8,645
<ALLOWANCES> (4)
<INVENTORY> 78,883
<CURRENT-ASSETS> 0
<PP&E> 3,756
<DEPRECIATION> 2,593
<TOTAL-ASSETS> 144,146
<CURRENT-LIABILITIES> 0
<BONDS> 74,114
0
0
<COMMON> 0
<OTHER-SE> 48,647
<TOTAL-LIABILITY-AND-EQUITY> 144,146
<SALES> 9,331
<TOTAL-REVENUES> 18,196
<CGS> 7,167
<TOTAL-COSTS> 7,738
<OTHER-EXPENSES> 8,274
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 1,817
<INCOME-PRETAX> 2,165
<INCOME-TAX> 112
<INCOME-CONTINUING> 2,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,053
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<FN>
<F1>Balance includes $900 of restricted cash.
</FN>
</TABLE>
