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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) May 13, 1998
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PGI INCORPORATED
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(Exact name of registrant as specified in its charter)
Florida 001-06471 59-0867335
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(State or other Commission File Number (IRS Employer
jurisdiction of Identification No.)
incorporation)
212 S. Central, Suite 100, St. Louis, Missouri 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 512-8650
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On May 13, 1998, Sugarmill Woods, Inc.("Sugarmill Woods"), a wholly-owned
subsidiary of PGI Incorporated (the "Company"), sold approximately 4,890 acres
of undeveloped real property (the "PGI Property") located in Citrus County and
Hernando County Florida. This real estate, together with the approximately 350
acres of undeveloped real property located in Citrus County, Florida sold by
Love-PGI Partners, L.P. ("L-PGI"), is referred to collectively hereinafter as
the "Property". The Property was sold to the Board of Trustees of the Internal
Improvement Trust Fund of the State of Florida (the "Purchaser"), for
$14,759,335 (the "Total Purchase Price"). The amount received by Sugarmill
Woods for the PGI Property was $13,446,835 before closing adjustments (the "PGI
Purchase Price"). L-PGI holds 1,875,000 (93.7%) of the Company's outstanding
Class A Cumulative Preferred Stock which constitutes 56.5% of the Company's
outstanding voting capital stock.
The sale was made pursuant to that certain Option Agreement for Sale
and Purchase dated January 31, 1997 by and among Sugarmill Woods, L-PGI,
and The Nature Conservancy (the "Option Agreement"), as the same was
subsequently amended by that certain First Amendment to Option Agreement
for Sale and Purchase by and among the aforementioned parties and dated
effective August 28, 1997 (the "First Amendment"), as subsequently amended by
the Second Amendment to Option Agreement for Sale and Purchase by and among
the aforementioned parties and dated October 1, 1997 (the "Second Amendment")
as subsequently amended orally (the Option Agreement as amended by the First
Amendment, the Second Amendment and the oral amendments being referred to
collectively hereinafter as the Option Agreement as Amended"). The Purchaser
was the assignee of The Nature Conservancy's rights under the Option
Agreement as Amended (the "Conservancy").
The Total Purchase Price was based on two appraisals and was the result
of intense and prolonged negotiations. The Company is confident that its
wholly-owned subsidiary received the highest price for the PGI Property that
the Conservancy (which, as stated above, assigned its rights under the Option
Agreement as amended to the Purchaser) was willing to pay.
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There is no material relationship among the Company, Sugarmill Woods or
any of their affliates and the Purchaser or the Conservancy, although certain
affiliates of the Company and Sugarmill Woods may be deemed to have benefited
from the sale of the Property to the Purchaser as described below.
On March 28, 1996, the Company's former primary lender, First Union
National Bank of Florida ("First Union"), assigned to PGIP, L.L.C. ("PGIP")
all of First Union's right, title and interest in and to the loan documents
evidencing and securing First Union's credit agreements with the Company, and
the Company's subsidiaries, Sugarmill Woods, Burnt Store Marina, Inc., and
Gulf Coast Credit Corporation in exchange for approximately $5,548,000. At
the time of the assignment, the Company owed First Union $9,007,000 in
principal and accrued interest (the "First Mortgage Indebtedness").
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PGIP was formed by Messrs. Love and Schiffer, the Company's only
directors and executive officers, to purchase the First Mortgage Indebtedness
and to accept the assignment from First Union of the first mortgage as
security for the repayment of the First Mortgage Indebtedness.
The largest investor in PGIP is Love Savings Holding Company ("LSHC")
which holds an approximate 75% interest in, and is a manager of PGIP.
Messrs. Love and Schiffer own approximately 52% of all the issued and
outstanding voting stock of LSHC and serve as the directors and officers of
LSHC. Messrs. Love, Schiffer and LSHC are the managers of PGIP. The holders
of the remaining limited liability company interests do not have any
affiliation with PGI, LSHC, L-PGI or Love-1989 Florida Partners, L.P.
As the purchaser of the loan documents from First Union, PGIP obtained
a first mortgage (the "First Mortgage") on the PGI Property. PGIP accepted
assignment of the credit agreements, which were in default and with respect
to which the maturity of the First Mortgage Indebtedness secured by the first
mortgage had been accelerated, and advised the Company that so long as the
Company were to market and sell its remaining undeveloped land with
satisfactory efforts and results, including payments to PGIP out of the
proceeds received from the sale of such undeveloped land, PGIP would not
proceed with enforced collection of the principal and interest comprising the
First Mortgage Indebtedness.
The disposition of the cash from the sale, which includes the payments to
PGIP, is set forth below:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
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<S> <C> <C>
Gross Sale Proceeds of 5,240 Acres $14,759,335
Amount Allocable to L-PGI's 350 Acres (1,312,500)
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Gross Proceeds from sale of PGI Property 13,446,835
Expenses of Sale (435,876)
Real Estate Tax Escrow (557,069)
Accrued Tax Adjustment for 1998 (72,345)
Legal Fees Relating to Property Sold (229,139)
First Mortgage Principal ($7,529,756 6,529,756
Less: $1.0m remaining)<F1>
First Mortgage Interest 3,832,437
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Payoff of First Mortgage to PGIP (10,362,193)
<FN>
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<F1> At closing, the Company and PGIP executed an escrow agreement (the
"Escrow Agreement"). The Escrow Agreement provides that $1,000,000
of the PGI Purchase Price would not be used to repay the First Mortgage
Indebtedness, so that $1,000,000 (the "Remaining
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<CAPTION>
DESCRIPTION AMOUNT
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<S> <C>
Escrow Agreement with PGIP<F1> (1,000,000)
Judgment (110,108)
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Funds to Sugarmill Woods, Inc. $ 680,105
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</TABLE>
The use of proceeds as set forth above resulted in a payment of first
mortgage principal and interest to PGIP of $10,362,193. After payment of its
debts and liabilities, PGIP made cash distributions to its members in
accordance with its Operating Agreement. LSHC, which holds approximately 75%
of the PGIP limited liability company interests, received approximately
$2,505,097 in excess of its investment in PGIP. Because Messrs. Love and
Schiffer, the Company's only directors and executive officers, together own
52% of LSHC, they could be deemed to have "profited" by an aggregate of
approximately $1,302,650. The amount of profit to LSHC and Messrs. Love and
Schiffer is based on the use of proceeds set forth above. It could increase
upon payment of the remaining $1 million mortgage amount and interest and by
an additional amount up to ten percent of PGIP's profit over a specified
minimum rate of return based upon the incentive arrangements that PGIP has
with its members.
A portion of the PGI Property sold by the Company to the Purchaser was
also encumbered by a second mortgage in favor of Love-1989 Florida Partners,
L.P., ("Love-1989"), securing the indebtedness owed to Love-1989 represented
by subordinated debentures issued by the Company (the "Debentures"). The
general partner of Love-1989 is Love Investment Company, which is owned by
Mr. Love, Love family members and trusts, the Estate of Martha Love Symington
and Mr. Schiffer. Messrs. Love and Schiffer, caused Love-1989 to release its
second mortgage on the PGI Property and Messrs. Love and Schiffer, in their
capacities as directors of the Company, caused the Company to grant to
Love-1989 a substitute second mortgage on the Retained
[FN]
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Indebtedness") of the First Mortgage Indebtedness would remain in place. The
$1,000,000 was placed in escrow with PGIP as the escrow agent. Pursuant to the
Escrow Agreement, the escrowed funds are to be paid out (i) as requested by PGI
and agreed to by PGIP, or (ii) as deemed necessary and appropriate by PGIP, in
either case, to protect PGIP's interest in the Retained Acreage (as hereinafter
defined), including PGIP's right to receive principal and interest under the
First Mortgage securing the Remaining Indebtedness, or (iii) to PGIP to pay any
other obligations owed to PGIP by the Company. The real estate owned by the
Company which was not sold to the Purchaser (approximately 370 acres) (the
"Retained Acreage") remains subject to the First Mortgage.
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Acreage, behind the First Mortgage held by PGIP.
Final Note
The Company is filing this Current Report on Form 8-K in the interest of
full and fair disclosure. Filing this report is not, nor shall it be deemed to
be, an admission by the Company that the sale of the PGI Property constituted
the sale of a significant amount of assets of the Company other than in the
ordinary course of business. The Company believes that the sale of the PGI
Property was consistent with the Company's purpose of acquiring, owning,
selling, and conveying real property and had the same goal and effect as the
Company's historical bulk sales and sales of homes and homesites to residential
purchasers.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PGI INCORPORATED
By: /s/ Laurence A. Schiffer
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Laurence A. Schiffer
Vice Chairman of the Board, President and Chief
Executive Officer
Date: May 28, 1998
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EXHIBIT INDEX
These Exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
Exhibit No. Description
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<C> <S>
1 Omitted-Inapplicable
2 Option Agreement as Amended, incorporated by reference to
the Company's Proxy Statement dated December 10, 1997 and
filed with the Securities and Exchange Commission on
December 8, 1997, relating to its Annual Meeting of
Shareholders held on December 22, 1997.
10 Omitted - Inapplicable
16 Omitted - Inapplicable
17 Omitted - Inapplicable
20 Omitted - Inapplicable
23 Omitted - Inapplicable
24 Omitted - Inapplicable
27 Omitted - Inapplicable
99 Omitted - Inapplicable
</TABLE>
